UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE QUARTERLY PERIOD ENDED	JUNE 30, ~~2022~~2023
		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: 001-00652

UNIVERSAL CORPORATION

(Exact name of registrant as specified in its charter)


Virginia			54-0414210
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

9201 Forest Hill Avenue,	Richmond,	Virginia	23235
(Address of principal executive offices)			(Zip Code)

804-359-9311

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of Exchange on which registered
Common Stock, no par value	UVV	New York Stock Exchange

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. Yesþ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~August 1, 2022,~~July 31, 2023, the total number of shares of common stock outstanding was ~~24,602,321.~~24,636,600.

UNIVERSAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS


Item No.	Item No.		Page	Item No.		Page
		PART I - FINANCIAL INFORMATION			PART I - FINANCIAL INFORMATION
1.	1.	Financial Statements	3	1.	Financial Statements	3
2.	2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29	2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
3.	3.	Quantitative and Qualitative Disclosures About Market Risk	36	3.	Quantitative and Qualitative Disclosures About Market Risk	31
4.	4.	Controls and Procedures	37	4.	Controls and Procedures	32
		PART II - OTHER INFORMATION			PART II - OTHER INFORMATION
1.	1.	Legal Proceedings	38	1.	Legal Proceedings	33
1A.	1A.	Risk Factors	38	1A.	Risk Factors	33
2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	38	2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
5.				5.	Other Information	33
6.	6.	Exhibits	39	6.	Exhibits	34

		Signatures	40		Signatures	35

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNIVERSAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except share and per share data)


		Three Months Ended June 30,						Three Months Ended June 30,
			2022		2021				2023		2022
		(Unaudited)						(Unaudited)
Sales and other operating revenues	Sales and other operating revenues		$	429,822	$	350,029	Sales and other operating revenues		$	517,722	$	429,822
Costs and expenses	Costs and expenses						Costs and expenses
Cost of goods sold	Cost of goods sold		350,104		287,556		Cost of goods sold		431,210		350,104
Selling, general and administrative expenses	Selling, general and administrative expenses		66,452		49,844		Selling, general and administrative expenses		75,477		66,452

Restructuring and impairment costs			—		2,024

Operating income	Operating income		13,266		10,605		Operating income		11,035		13,266
Equity in pretax earnings (loss) of unconsolidated affiliates	Equity in pretax earnings (loss) of unconsolidated affiliates		(553)		609		Equity in pretax earnings (loss) of unconsolidated affiliates		(4,166)		(553)
Other non-operating income (expense)	Other non-operating income (expense)		(62)		48		Other non-operating income (expense)		725		(62)
Interest income	Interest income		237		73		Interest income		1,365		237
Interest expense	Interest expense		6,724		6,208		Interest expense		15,543		6,724
Income before income taxes and other items			6,164		5,127
Income (loss) before income taxes and other items							Income (loss) before income taxes and other items		(6,584)		6,164
Income taxes	Income taxes		3,363		1,215		Income taxes		(1,423)		3,363
Net income			2,801		3,912
Net income (loss)							Net income (loss)		(5,161)		2,801
Less: net loss (income) attributable to noncontrolling interests in subsidiaries	Less: net loss (income) attributable to noncontrolling interests in subsidiaries		4,029		2,445		Less: net loss (income) attributable to noncontrolling interests in subsidiaries		3,097		4,029
Net income attributable to Universal Corporation			$	6,830	$	6,357
Net income (loss) attributable to Universal Corporation							Net income (loss) attributable to Universal Corporation		$	(2,064)	$	6,830

Earnings per share:
Earnings (loss) per share:							Earnings (loss) per share:
Basic	Basic		$	0.28	$	0.26	Basic		$	(0.08)	$	0.28
Diluted	Diluted		$	0.27	$	0.26	Diluted		$	(0.08)	$	0.27

Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic		24,769,015		24,694,489		Basic		24,842,171		24,769,015
Diluted	Diluted		24,935,554		24,852,151		Diluted		24,842,171		24,935,554

Total comprehensive income (loss), net of income taxes	Total comprehensive income (loss), net of income taxes		$	(1,283)	$	12,746	Total comprehensive income (loss), net of income taxes		$	(795)	$	(1,283)
Less: comprehensive (income) loss attributable to noncontrolling interests	Less: comprehensive (income) loss attributable to noncontrolling interests		4,358		2,416		Less: comprehensive (income) loss attributable to noncontrolling interests		3,241		4,358
Comprehensive income (loss) attributable to Universal Corporation	Comprehensive income (loss) attributable to Universal Corporation		$	3,075	$	15,162	Comprehensive income (loss) attributable to Universal Corporation		$	2,446	$	3,075

Dividends declared per common share	Dividends declared per common share		$	0.79	$	0.78	Dividends declared per common share		$	0.80	$	0.79

See accompanying notes.

UNIVERSAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)


		June 30,		June 30,		March 31,			June 30,		June 30,		March 31,
		2022		2021		2022			2023		2022		2023
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
ASSETS	ASSETS							ASSETS
Current assets	Current assets							Current assets
Cash and cash equivalents	Cash and cash equivalents	$	86,566	$	84,688	$	81,648	Cash and cash equivalents	$	80,518	$	86,566	$	64,690
Accounts receivable, net	Accounts receivable, net	319,114		279,900		385,437		Accounts receivable, net	375,564		319,114		402,073
Advances to suppliers, net	Advances to suppliers, net	99,875		70,377		129,838		Advances to suppliers, net	111,176		99,875		170,801
Accounts receivable—unconsolidated affiliates	Accounts receivable—unconsolidated affiliates	48,512		52,047		4,540		Accounts receivable—unconsolidated affiliates	73,286		48,512		12,210
Inventories—at lower of cost or net realizable value:	Inventories—at lower of cost or net realizable value:							Inventories—at lower of cost or net realizable value:
Tobacco	Tobacco	1,080,362		874,381		822,513		Tobacco	1,100,722		1,080,362		833,876
Other	Other	198,966		140,249		194,161		Other	198,730		198,966		202,907
Prepaid income taxes	Prepaid income taxes	11,370		17,804		13,095		Prepaid income taxes	21,640		11,370		16,493

Other current assets	Other current assets	90,380		85,016		116,779		Other current assets	93,153		90,380		99,840
Total current assets	Total current assets	1,935,145		1,604,462		1,748,011		Total current assets	2,054,789		1,935,145		1,802,890

Property, plant and equipment	Property, plant and equipment							Property, plant and equipment
Land	Land	23,872		23,439		23,959		Land	24,930		23,872		24,926
Buildings	Buildings	294,179		293,734		293,935		Buildings	312,014		294,179		311,138
Machinery and equipment	Machinery and equipment	669,967		661,753		668,451		Machinery and equipment	705,045		669,967		689,220
		988,018		978,926		986,345			1,041,989		988,018		1,025,284
Less accumulated depreciation	Less accumulated depreciation	(642,918)		(627,279)		(641,227)		Less accumulated depreciation	(685,042)		(642,918)		(674,122)
		345,100		351,647		345,118			356,947		345,100		351,162
Other assets	Other assets							Other assets
Operating lease right-of-use assets	Operating lease right-of-use assets	41,099		31,281		40,243		Operating lease right-of-use assets	36,890		41,099		40,505
Goodwill, net	Goodwill, net	213,902		173,041		213,998		Goodwill, net	213,893		213,902		213,922
Other intangibles, net	Other intangibles, net	89,352		69,905		92,571		Other intangibles, net	77,290		89,352		80,101
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	75,188		85,064		81,006		Investments in unconsolidated affiliates	73,466		75,188		76,184
Deferred income taxes	Deferred income taxes	14,532		18,013		11,616		Deferred income taxes	15,187		14,532		13,091
Pension asset	Pension asset	12,704		11,764		12,667		Pension asset	10,516		12,704		9,984
Other noncurrent assets	Other noncurrent assets	52,356		50,916		41,115		Other noncurrent assets	48,681		52,356		51,343
		499,133		439,984		493,216			475,923		499,133		485,130

Total assets	Total assets	$	2,779,378	$	2,396,093	$	2,586,345	Total assets	$	2,887,659	$	2,779,378	$	2,639,182

See accompanying notes.

UNIVERSAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)


		June 30,		June 30,		March 31,			June 30,		June 30,		March 31,
		2022		2021		2022			2023		2022		2023
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities	Current liabilities							Current liabilities
Notes payable and overdrafts	Notes payable and overdrafts	$	454,659	$	153,337	$	182,639	Notes payable and overdrafts	$	359,832	$	454,659	$	195,564
Accounts payable and accrued expenses		235,618		158,013		272,042
Accounts payable								Accounts payable	88,362		121,702		83,213
Accounts payable—unconsolidated affiliates	Accounts payable—unconsolidated affiliates	88		18		5,308		Accounts payable—unconsolidated affiliates	1,495		88		5,830
Customer advances and deposits	Customer advances and deposits	19,438		9,307		13,724		Customer advances and deposits	103,436		19,438		3,061
Accrued compensation	Accrued compensation	15,933		18,576		27,281		Accrued compensation	20,890		15,933		33,108
Income taxes payable	Income taxes payable	5,708		5,919		7,427		Income taxes payable	5,620		5,708		3,274
Current portion of operating lease liabilities	Current portion of operating lease liabilities	10,568		7,998		10,303		Current portion of operating lease liabilities	10,673		10,568		11,404
Accrued expenses and other current liabilities								Accrued expenses and other current liabilities	127,564		113,916		106,533
Current portion of long-term debt	Current portion of long-term debt	—		—		—		Current portion of long-term debt	—		—		—
Total current liabilities	Total current liabilities	742,012		353,168		518,724		Total current liabilities	717,872		742,012		441,987

Long-term debt	Long-term debt	518,798		518,297		518,547		Long-term debt	616,948		518,798		616,809
Pensions and other postretirement benefits	Pensions and other postretirement benefits	51,528		55,622		52,890		Pensions and other postretirement benefits	42,725		51,528		42,769
Long-term operating lease liabilities	Long-term operating lease liabilities	28,727		20,826		29,617		Long-term operating lease liabilities	23,343		28,727		25,540
Other long-term liabilities	Other long-term liabilities	30,024		59,815		34,464		Other long-term liabilities	29,160		30,024		32,512
Deferred income taxes	Deferred income taxes	48,230		46,810		47,334		Deferred income taxes	44,432		48,230		42,613
Total liabilities	Total liabilities	1,419,319		1,054,538		1,201,576		Total liabilities	1,474,480		1,419,319		1,202,230

Shareholders’ equity	Shareholders’ equity							Shareholders’ equity
Universal Corporation:	Universal Corporation:							Universal Corporation:
Preferred stock:	Preferred stock:							Preferred stock:
Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized, none issued or outstanding	Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized, none issued or outstanding	—		—		—		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 24,605,889 shares issued and outstanding at June 30, 2022 (24,577,254 at June 30, 2021 and 24,550,019 at March 31, 2022)		332,520		327,471		330,662
Common stock, no par value, 100,000,000 shares authorized 24,636,600 shares issued and outstanding at June 30, 2023 (24,605,889 at June 30, 2022 and 24,555,361 at March 31, 2023)								Common stock, no par value, 100,000,000 shares authorized 24,636,600 shares issued and outstanding at June 30, 2023 (24,605,889 at June 30, 2022 and 24,555,361 at March 31, 2023)	338,445		332,520		337,247
Retained earnings	Retained earnings	1,081,309		1,074,586		1,094,192		Retained earnings	1,114,822		1,081,309		1,136,898
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(88,066)		(98,232)		(84,311)		Accumulated other comprehensive loss	(72,547)		(88,066)		(77,057)
Total Universal Corporation shareholders' equity	Total Universal Corporation shareholders' equity	1,325,763		1,303,825		1,340,543		Total Universal Corporation shareholders' equity	1,380,720		1,325,763		1,397,088
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	34,296		37,730		44,226		Noncontrolling interests in subsidiaries	32,459		34,296		39,864
Total shareholders' equity	Total shareholders' equity	1,360,059		1,341,555		1,384,769		Total shareholders' equity	1,413,179		1,360,059		1,436,952

Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	2,779,378	$	2,396,093	$	2,586,345	Total liabilities and shareholders' equity	$	2,887,659	$	2,779,378	$	2,639,182

See accompanying notes.

UNIVERSAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

Three Months Ended June 30,
2022 2021
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,801 $ 3,912
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization 14,129 12,058
Net provision for losses (recoveries) on advances to suppliers (42) (328)
Foreign currency remeasurement (gain) loss, net (968) 506
Foreign currency exchange contracts 9,920 1,127
Restructuring and impairment costs — 2,024
Restructuring payments — (1,776)
Other, net 7,001 (2,726)
Changes in operating assets and liabilities, net (258,612) (141,720)
Net cash provided (used) by operating activities (225,771) (126,923)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (15,070) (14,428)
Proceeds from sale of business, net of cash held by the business 1,168 —
Proceeds from sale of property, plant and equipment 292 1,589
Net cash used by investing activities (13,610) (12,839)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt, net 271,663 49,439
Dividends paid to noncontrolling interests (5,145) (980)
Dividends paid on common stock (19,155) (18,876)
Other (1,892) (2,432)
Net cash provided (used) by financing activities 245,471 27,151
Effect of exchange rate changes on cash, restricted cash and cash equivalents (1,172) 78
Net decrease in cash, restricted cash and cash equivalents 4,918 (112,533)
Cash, restricted cash and cash equivalents at beginning of year 87,648 203,221
Cash, restricted cash and cash equivalents at end of period $ 92,566 $ 90,688
Supplemental Information:
Cash and cash equivalents $ 86,566 $ 84,688
Restricted cash (Other noncurrent assets) 6,000 6,000
Total cash, restricted cash and cash equivalents $ 92,566 $ 90,688


	Three Months Ended June 30,
	2023		2022
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(5,161)	$	2,801
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization	14,754		14,129

Net provision for losses (recoveries) on advances to suppliers	1,382		(42)
Inventory writedowns	2,327		4,853
Stock-based compensation expense	3,859		3,682
Foreign currency remeasurement (gain) loss, net	1,530		(968)
Foreign currency exchange contracts	7,803		9,920
Deferred income taxes	(2,406)		(3,377)
Equity in net loss (income) of unconsolidated affiliates, net of dividends	2,630		443




Other, net	5		1,400
Changes in operating assets and liabilities, net:
Accounts and notes receivable	23,457		68,032
Inventories	(263,171)		(281,844)
Other assets	4,240		(16,739)
Accounts payable	(1,110)		(50,200)
Accrued expenses and other current liabilities	7,833		16,529
Income taxes	(2,336)		(581)
Customer advances and deposits	100,473		6,191
Net cash used by operating activities	(103,891)		(225,771)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(17,960)		(15,070)
Proceeds from sale of business, net of cash held by the business	—		1,168

Proceeds from sale of property, plant and equipment	326		292

Net cash used by investing activities	(17,634)		(13,610)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt, net	163,804		271,663


Dividends paid to noncontrolling interests	(4,164)		(5,145)




Dividends paid on common stock	(19,398)		(19,155)

Other	(2,893)		(1,892)
Net cash provided (used) by financing activities	137,349		245,471

Effect of exchange rate changes on cash, restricted cash and cash equivalents	4		(1,172)
Net increase (decrease) in cash, restricted cash and cash equivalents	15,828		4,918
Cash, restricted cash and cash equivalents at beginning of year	64,690		87,648

Cash, restricted cash and cash equivalents at end of period	$	80,518	$	92,566

Supplemental Information:
Cash and cash equivalents	$	80,518	$	86,566
Restricted cash (Other noncurrent assets)	—		6,000
Total cash, restricted cash and cash equivalents	$	80,518	$	92,566

See accompanying notes.

UNIVERSAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Universal Corporation, which together with its subsidiaries is referred to herein as “Universal” or the “Company,” is a global business-to-business agri-products supplier to consumer product manufacturers. The Company is the leading global leaf tobacco supplier and provides high-quality plant-based ingredients to food and beverage end markets. Because of the seasonal nature of the Company’s business, the results of operations for any fiscal quarter will not necessarily be indicative of results to be expected for other quarters or a full fiscal year. All adjustments necessary to state fairly the results for the period have been included and were of a normal recurring nature. This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022.~~

~~The extent to which the ongoing COVID-19 pandemic will impact the Company's financial condition, results of operations and demand for its products and services will depend~~2023 (the “2023 Annual Report on future developments, which are highly uncertain and cannot be predicted. Such developments may include the ongoing geographic spread and mutations of COVID-19, the severity of the pandemic, the duration of the COVID-19 outbreak and the type and duration of actions that may be taken by various governmental authorities in response to the COVID-19 pandemic and the impact on the U.S. and the global economies, markets and supply chains. At June 30, 2022, it is not possible to predict the overall impact of the ongoing COVID-19 pandemic on the Company's business, financial condition, results of operations and demand for its products and services.Form 10-K”).

~~NOTE 2. ACCOUNTING PRONOUNCEMENTS~~

~~Pronouncements to be Adopted in Future Periods~~

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions related to contract modifications and hedge accounting to address the transitions from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance permits an entity to consider contract modification due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. ASU 2020-04 also temporarily allows hedge relationships to continue without de-designation upon changes due to reference rate reform. The standard is effective upon issuance and can be applied as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact that the guidance will have on its consolidated financial statements.

~~NOTE 3. BUSINESS COMBINATION~~

~~Acquisition of Shank's Extracts, LLC~~

~~On October 4, 2021, the Company acquired 100% of the capital stock of Shank's Extracts, LLC. (“Shank's”), a flavors and extracts~~ ~~processing company~~, for approximately $100 million in cash and $2.4 million of additional working capital on-hand at the date of acquisition. The acquisition of Shank's diversifies the Company's product offerings and generates new opportunities for its plant-based ingredients platform.

A portion of the goodwill recorded as part of the acquisition was attributable to the assembled workforce of Shank's. The goodwill and intangibles recognized for the Shank's acquisition are deductible for U.S. income tax purposes. The transaction was treated as an asset acquisition for U.S. Federal tax purposes, resulting in a step-up of tax basis to fair value. The Company determined the Shank's operations are not material to the Company’s consolidated results. Therefore, pro forma information is not presented.

~~For the fiscal year~~ ended March 31, 2022, the Company incurred $2.3 million of acquisition-related transaction costs for the purchase of Shank's. The acquisition-related costs were expensed as incurred and recorded in selling, general, and administrative expense on the consolidated statements of income.

In November 2021, the Company acquired the land and buildings utilized by Shank's operations for $13.3 million. The purchase of the land and buildings resulted in the elimination of the $8.5 million operating lease right-of-use asset and lease liability recognized on the acquisition date for Shank's.

~~The following table summarizes the final purchase price allocation of the assets acquired and liabilities assumed for the Shank's acquisition.~~

~~(in thousands of dollars)~~

~~Shank's~~

~~October 4, 2021~~

~~Assets~~

~~Cash and cash equivalents~~

~~754~~

~~Accounts receivable, net~~

~~6,643~~

~~Inventory~~

~~15,792~~

~~Other current assets~~

~~415~~

~~Property, plant and equipment (net)~~

~~11,000~~

~~Operating lease right-of-use assets~~

~~8,531~~

~~Intangibles~~

~~Customer relationships~~

~~24,000~~

~~Developed technology~~

~~4,500~~

~~Non-compete agreements~~

~~3,000~~

~~Goodwill~~

~~41,061~~

~~Total assets acquired~~

~~115,696~~

~~Liabilities~~

~~Accounts payable and accrued expenses~~

~~6,159~~

~~Customer advances and deposits~~

~~351~~

~~Accrued compensation~~

~~655~~

~~Current portion of operating lease liabilities~~

~~8,531~~

~~Total liabilities assumed~~

~~15,696~~

~~Total assets acquired and liabilities assumed~~

~~100,000~~

~~NOTE 4. RESTRUCTURING AND IMPAIRMENT COSTS~~

Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes. Restructuring and impairment costs are periodically incurred in connection with those activities.

~~There were no restructuring and impairment costs incurred for the three months ended June 30, 2022.~~

~~Tobacco Operations~~

During the three months ended June 30, 2021, the Company incurred $1.5 million of termination and impairment costs associated with restructuring of tobacco buying and administrative operations in Africa.

~~Ingredients Operations~~

During the three months ended June 30, 2021, the Company incurred $0.5 million of impairment costs on property, plant, and equipment associated with wind-down of our subsidiary, Carolina Innovative Food Ingredients, Inc. (“CIFI”), a sweet potato processing operation located in Nashville, North Carolina that was announced in fiscal year 2021.

NOTE 5.2. 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. Shipping and handling costs under sales contracts with customers are treated as fulfillment costs and included in the transaction price. 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 origins 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 tobaccos 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.~~ 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

~~In recent fiscal years, the~~The Company has diversified operations through the acquisition of established companies that offer customers a wide range of both liquid and dehydrated fruit and vegetable ingredient products, flavors, and 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. 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 ~~Operating~~ 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, 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 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:


		Three Months Ended June 30,						Three Months Ended June 30,
(in thousands of dollars)	(in thousands of dollars)		2022		2021		(in thousands of dollars)		2023		2022

Tobacco sales	Tobacco sales		$	320,017	$	270,264	Tobacco sales		$	415,356	$	320,017
Ingredient sales	Ingredient sales		77,546		51,888		Ingredient sales		70,658		77,546
Processing revenue	Processing revenue		19,492		16,696		Processing revenue		19,064		19,492
Other sales and revenue from contracts with customers	Other sales and revenue from contracts with customers		12,067		10,765		Other sales and revenue from contracts with customers		11,292		12,067
Total revenue from contracts with customers	Total revenue from contracts with customers		429,122		349,613		Total revenue from contracts with customers		516,370		429,122
Other operating sales and revenues	Other operating sales and revenues		700		416		Other operating sales and revenues		1,352		700
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues		$	429,822	$	350,029	Consolidated sales and other operating revenues		$	517,722	$	429,822

Other operating sales and revenues consists principally of interest on advances to ~~suppliers.~~suppliers and dividend payments from deconsolidated affiliates.

NOTE 6.3. OTHER CONTINGENT LIABILITIES AND OTHER MATTERS

Other Contingent Liabilities

Other Contingent Liabilities (Letters of credit)

The Company had other contingent liabilities totaling approximately $1 million at June 30, ~~2022,~~2023, primarily related to outstanding letters of credit.

Value-Added Tax Assessments in Brazil

As further discussed below, 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 operating subsidiary there pays VAT when tobaccos grown in the states of Santa Catarina and Parana are transferred to its factory in the state of Rio Grande do Sul for processing. The subsidiary has received assessments for additional VAT plus interest and penalties from tax authorities for the states of Santa Catarina and Parana based on audits of the subsidiary’s VAT filings for specified periods. In June 2011, tax authorities for the state of Santa Catarina issued assessments for tax, interest, and penalties for periods from 2006 through 2009 totaling approximately $9$10 million. In September 2014, tax authorities for the state of Parana issued an assessment for tax, interest, and penalties for periods from 2009 through 2014 totaling approximately $11 million. Those amounts are based on the exchange rate for the Brazilian currency at June 30, ~~2022.~~2023. Management of the operating subsidiary and outside counsel believe that errors were made by the tax authorities for both states in determining all or significant portions of these assessments and that various defenses support the subsidiary’s positions.

With respect to the Santa Catarina assessments, the subsidiary took appropriate steps to contest the full amount of the claims. As of June 30, ~~2022,~~2023, a portion of the subsidiary’s arguments had been accepted, and the outstanding assessment had been reduced. The reduced assessment, together with the related accumulated interest through the end of the current reporting period, totaled approximately $9$10 million (at the June 30, ~~2022~~2023 exchange rate). The subsidiary is continuing to contest the full remaining amount of the assessment. While the range of reasonably possible loss is zero up to the full $9$10 million remaining assessment with interest, based on the strength of the subsidiary’s defenses, no loss within that range is considered probable at this time and no liability has been recorded at June 30, ~~2022.~~2023.

With respect to the Parana assessment, management of the subsidiary and outside counsel challenged the full amount of the claim. A significant portion of the Parana assessment was based on positions taken by the tax authorities that management and outside counsel believe deviate significantly from the underlying statutes and relevant case law. In addition, under the law, the subsidiary’s tax filings for certain periods covered in the assessment were no longer open to any challenge by the tax authorities. In December 2015, the Parana tax authorities withdrew the initial claim and subsequently issued a new assessment covering the same tax periods, reflecting a substantial reduction from the original assessment. In fiscal year 2020, the Parana tax authorities acknowledged the statute of limitations related to claims prior to December 2010 had expired and reduced the assessment to $3 million (at the June 30, ~~2022~~2023 exchange rate). Notwithstanding the reduced assessment, management and outside counsel continue to believe that the new assessment is not supported by the underlying statutes and relevant case law and have

challenged the full amount of the claim. The range of reasonably possible loss is considered to be zero up to the full $3 million assessment. However, based on the strength of the subsidiary's defenses, no loss within that range is considered probable at this time and no liability has been recorded at June 30, ~~2022.~~2023.

In both states, the process for reaching a final resolution to the assessments is expected to be lengthy, and management is not currently able to predict when either case will be concluded. Should the subsidiary ultimately be required to pay any tax, interest, or penalties in either case, the portion paid for tax would generate VAT credits that the subsidiary may be able to recover.

Other Legal and Tax Matters

Various subsidiaries of the Company are involved in 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.

Advances to Suppliers

In many sourcing origins where the Company operates, it provides agronomy services and seasonal advances of seed, seedlings, fertilizer, and other supplies to tobacco farmers for crop production, or makes seasonal cash advances to farmers for the procurement of those inputs. These advances are 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 origins, 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 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 suppliers totaled $138 million at June 30, 2023, $120 million at June 30, 2022, ~~$92~~and $199 million at March 31, 2023. The related valuation allowances totaled $26 million at June 30, ~~2021, and $153 million at March 31, 2022. The related valuation allowances totaled~~2023, $17 million at June 30, 2022, ~~$18 million at June 30, 2021,~~ and ~~$19~~$24 million at March 31, ~~2022,~~2023, and were estimated based on the Company’s historical loss information and crop projections. The allowances were increased by net provisions of approximately $1.4 million in the three-month periods ended June 30, 2023 and decreased by net recoveries of ~~approximately~~ $42 ~~thousand and $328~~ thousand in the three-month periods ended June 30, ~~2022 and 2021, respectively.~~2022. These net ~~recoveries~~provisions and ~~provisions~~recoveries are included in selling, general, and administrative expenses in the consolidated statements of income. Interest on advances is recognized in earnings upon the farmers’ delivery of tobacco in payment of principal and interest.

Recoverable Value-Added Tax Credits

In many foreign countries, the Company’s local operating subsidiaries pay significant amounts of 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 predominately 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 June 30, ~~2022,~~2023, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately ~~$77~~$76 million ($6177 million at June 30, ~~2021,~~2022, and ~~$67~~$64 million at March 31, ~~2022)~~2023), and the related valuation allowances totaled approximately $22 million ($1922 million at June 30, ~~2021,~~2022, and ~~$21~~$22 million at March 31, ~~2022)~~2023). The net balances are reported in other current assets and other noncurrent assets in the consolidated balance sheets.

~~Long-Term Debt~~

At June 30, 2022, the Company had a $225 million five-year term loan maturing December 2023 and a $295 million seven-year term loan maturing December 2025. Under the senior unsecured bank credit facility, $150 million of terms loans bear interest at variable rates plus a margin based on the Company's credit metrics and interest payments remained unhedged at June 30, 2022. The Company maintains receive-floating/pay-fixed interest rates swap agreements for a portion of the outstanding five and seven-year term loans. See Note 11 for additional information on outstanding interest rate swap agreements.

Shelf Registration and Stock Repurchase Plan

In November 2020 the Company filed an undenominated automatic universal shelf registration statement with the U.S. Securities and Exchange Commission to provide for the future issuance of an undefined amount of securities as determined by the Company and offered in one or more prospectus supplements prior to issuance.

A stock repurchase plan, which was authorized by the Company's Board of Directors, became effective and was publicly announced on November ~~5, 2020.~~2, 2022. This stock repurchase plan ~~authorizes~~authorized the purchase of up to $100 million in common and/or preferred stock in open market or privately negotiated transactions through November 15, ~~2022~~2024 or when funds for the program have been exhausted, subject to market conditions and other factors. The program had ~~$97~~$100 million of remaining capacity for repurchases of common and/or preferred stock at June 30, ~~2022.~~2023.

Sale of Idled Tanzania Operations

During the three months ended June 30, 2022, the Company entered into a sales agreement to sell all outstanding shares of common stock, which included all properties, of the idled companies in Tanzania for $8.5 million. The Company had received ~~$1.3~~$5.7 million ~~when~~of the ~~transaction closed in~~$8.5 million sales agreement as of June ~~2022.~~30, 2023. The remaining $2.8 million outstanding proceeds ~~will be~~were received in ~~installments by June~~July 2023.

Restricted Cash Release of Deferred Proceeds from Acquisition of Silva International, Inc.

During the three months ended December 31, 2022, the Company released $6.0 million, held in a third-party escrow account, to one of Silva's selling shareholders. The amounts were held in escrow since the date of acquisition, as the employee had a post-combination service requirement with forfeitable payment provisions. Therefore, under ASC Topic 805, "Business Combinations," the amounts held in escrow were treated as a contingent consideration arrangement and expensed as compensation expense in selling, general, and administrative expense on the consolidated statements of income. As of December 31, 2022, all amounts have been released to the selling shareholder, who remains employed by the Company, and expensed in the Company's consolidated statements of income.

NOTE 7.4. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended June 30,
(in thousands, except share and per share data) 2022 2021
Basic Earnings Per Share
Numerator for basic earnings per share
Net income attributable to Universal Corporation $ 6,830 $ 6,357
Denominator for basic earnings per share
Weighted average shares outstanding 24,769,015 24,694,489
Basic earnings per share $ 0.28 $ 0.26
Diluted Earnings Per Share
Numerator for diluted earnings per share
Net income attributable to Universal Corporation $ 6,830 $ 6,357
Denominator for diluted earnings per share:
Weighted average shares outstanding 24,769,015 24,694,489
Effect of dilutive securities
Employee and outside director share-based awards 166,539 157,662
Denominator for diluted earnings per share 24,935,554 24,852,151
Diluted earnings per share $ 0.27 $ 0.26


	Three Months Ended June 30,
(in thousands, except share and per share data)		2023		2022

Basic Earnings (Loss) Per Share
Numerator for basic earnings (loss) per share
Net income (loss) attributable to Universal Corporation		$	(2,064)	$	6,830




Denominator for basic earnings (loss) per share
Weighted average shares outstanding		24,842,171		24,769,015

Basic earnings (loss) per share		$	(0.08)	$	0.28

Diluted Earnings (Loss) Per Share
Numerator for diluted earnings (loss) per share



Net income (loss) attributable to Universal Corporation		$	(2,064)	$	6,830

Denominator for diluted earnings (loss) per share:
Weighted average shares outstanding		24,842,171		24,769,015
Effect of dilutive securities

Employee and outside director share-based awards		—		166,539
Denominator for diluted earnings per share		24,842,171		24,935,554

Diluted earnings (loss) per share		$	(0.08)	$	0.27

NOTE 8.5. INCOME TAXES

The Company operates in the United States and many foreign countries and is subject to the tax laws of many 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~~various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes.

Three months ended June 30, 2023

The Company's consolidated effective income tax rate for the three months ended June 30, 2023 was a benefit of 21.6%.

Three months ended June 30, 2022

The Company's consolidated effective income tax rate for the three months ended June 30, 2022 was 54.6%. ~~The consolidated effective income tax rate for~~In the three months ended June 30, 2022, ~~was affected by~~ the ~~sale of the~~Company sold its idled Tanzania operations ~~that resulted in~~and recognized $1.1 million of ~~additional~~ income taxes. Without this item, ~~them~~the consolidated effective income tax rate for the three months ended June 30, 2022 would have been approximately 36.2%.

Additionally, the sale of the Company's idled Tanzania operations resulted in a $1.8 million reduction to consolidated interest expense related to the removal of an uncertain tax position.

The Company's consolidated effective income tax rate for the three months ended June 30, 2021 was 23.7%. There were no discrete items that impacted the income tax provision for the three months ended June 30, 2021.

NOTE 9.6. GOODWILL AND OTHER INTANGIBLES

The Company's changes in goodwill at June 30, ~~2022~~2023 and ~~2021~~2022 consisted of the following:


(in thousands of dollars)	(in thousands of dollars)	Three Months Ended June 30,				(in thousands of dollars)	Three Months Ended June 30,
		2022		2021			2023		2022
Balance at beginning of fiscal year	Balance at beginning of fiscal year	$	213,998	$	173,051	Balance at beginning of fiscal year	$	213,922	$	213,998

Foreign currency translation adjustment	Foreign currency translation adjustment	(96)		(10)		Foreign currency translation adjustment	(29)		(96)

Balance at end of period	Balance at end of period	$	213,902	$	173,041	Balance at end of period	$	213,893	$	213,902

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 June 30, ~~2022~~2023 and ~~2021~~2022 and at March 31, ~~2022:~~2023:


(in thousands, except useful life)	(in thousands, except useful life)				June 30, 2022						(in thousands, except useful life)				June 30, 2023
		Useful Life (years)			Gross Carrying Value		Accumulated Amortization		Net Carrying Value			Useful Life (years)			Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Customer relationships	Customer relationships	11	—	13	$	86,500	$	(11,895)	$	74,605	Customer relationships	11	—	13	$	86,500	$	(19,626)	$	66,874
Trade names	Trade names		5		11,100		(4,380)		6,720		Trade names		5		11,100		(6,600)		4,500
Developed technology	Developed technology	3	—	13	9,300		(4,260)		5,040		Developed technology		13		9,300		(5,406)		3,894
Noncompetition agreements	Noncompetition agreements	4	—	5	4,000		(1,063)		2,937		Noncompetition agreements	4	—	5	4,000		(2,013)		1,987
Other	Other		5		690		(640)		50		Other		5		737		(702)		35
Total intangible assets	Total intangible assets				$	111,590	$	(22,238)	$	89,352	Total intangible assets				$	111,637	$	(34,347)	$	77,290


					June 30, 2021										June 30, 2022
		Useful Life (years)			Gross Carrying Value		Accumulated Amortization		Net Carrying Value			Useful Life (years)			Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Customer relationships	Customer relationships	11	—	13	$	62,500	$	(4,710)	$	57,790	Customer relationships	11	—	13	$	86,500	$	(11,895)	$	74,605
Trade names	Trade names		5		11,100		(2,160)		8,940		Trade names		5		11,100		(4,380)		6,720
Developed technology	Developed technology		3		4,800		(2,400)		2,400		Developed technology	3	—	13	9,300		(4,260)		5,040
Noncompetition agreements	Noncompetition agreements		5		1,000		(300)		700		Noncompetition agreements	4	—	5	4,000		(1,063)		2,937
Other	Other		5		777		(702)		75		Other		5		690		(640)		50
Total intangible assets	Total intangible assets				$	80,177	$	(10,272)	$	69,905	Total intangible assets				$	111,590	$	(22,238)	$	89,352

March 31, 2022
Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value
Customer relationships(1)
11 — 13 $ 86,500 $ (9,963) $ 76,537
Trade names 5 11,100 (3,825) 7,275
Developed technology(1)
3 — 13 9,300 (3,773) 5,527
Noncompetition agreements(1)
4 — 5 4,000 (825) 3,175
Other 5 736 (679) 57
Total intangible assets $ 111,636 $ (19,065) $ 92,571

~~(1)~~On October 4, 2021, the Company acquired 100% of the capital stock of Shank's for approximately $100 million in cash and $2.4 million of additional working capital on-hand at the date of acquisition. The Shank's acquisition resulted in $31.5 million of intangible assets. See Note 3 for additional information.


				March 31, 2023
	Useful Life (years)			Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Customer relationships	11	—	13	$	86,500	$	(17,693)	$	68,807
Trade names		5		11,100		(6,045)		5,055
Developed technology	3	—	13	9,300		(5,319)		3,981
Noncompetition agreements	4	—	5	4,000		(1,775)		2,225
Other		5		721		(688)		33
Total intangible assets				$	111,621	$	(31,520)	$	80,101

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 three months ended June 30, ~~2022~~2023 and ~~2021~~2022 was:


(in thousands of dollars)	(in thousands of dollars)	Three Months Ended June 30,			(in thousands of dollars)				Three Months Ended June 30,
00			2022			2021
										2023		2022
Amortization Expense	Amortization Expense		$	3,173		$	2,403	Amortization Expense		$	2,827	$	3,173

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 other intangible assets is recorded in selling, general, and administrative expenses in the consolidated statements of income.

As of June 30, ~~2022,~~2023, the expected future amortization expense for intangible assets is as follows:


Fiscal Year (in thousands of dollars)	Fiscal Year (in thousands of dollars)			Fiscal Year (in thousands of dollars)
2023 (excluding the three months ended June 30, 2022)		$	9,263
2024		11,268
2024 (excluding the three months ended June 30, 2023)				2024 (excluding the three months ended June 30, 2023)	$	8,452
2025	2025	11,812		2025	11,049
2026	2026	8,452		2026	9,232
2027 and thereafter		48,557
2027				2027	8,077
2028 and thereafter				2028 and thereafter	40,480
Total expected future amortization expense	Total expected future amortization expense	$	89,352	Total expected future amortization expense	$	77,290

~~NOTE 10. 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 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:~~

(in thousands of dollars) June 30, 2022 June 30, 2021 March 31, 2022
Assets
   Operating lease right-of-use assets $ 41,099 $ 31,281 $ 40,243
Liabilities
    Current portion of operating lease liabilities $ 10,568 $ 7,998 $ 10,303
    Long-term operating lease liabilities 28,727 20,826 29,617
          Total operating lease liabilities $ 39,295 $ 28,824 $ 39,920

~~The following table sets forth the location and amount of operating lease costs included in the Company's consolidated statement of income:~~

Three Months Ended June 30,
(in thousands of dollars) 2022 2021
Income Statement Location
   Cost of goods sold $ 2,704 $ 2,578
   Selling, general, and administrative expenses 2,503 2,305
          Total operating lease costs(1)
$ 5,207 $ 4,883

~~(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:~~

(in thousands of dollars) June 30, 2022
Maturity of Operating Lease Liabilities
2023 (excluding the three months ended June 30, 2022) $ 9,459
2024 10,714
2025 8,523
2026 5,285
2027 4,075
2028 and thereafter 8,558
Total undiscounted cash flows for operating leases $ 46,614
Less: Imputed interest (7,319)
Total operating lease liabilities $ 39,295

~~As of June 30, 2022, the Company had no leases that have not yet commenced.~~

~~The following table sets forth supplemental information related to operating leases:~~

Three Months Ended June 30,
(in thousands, except lease term and incremental borrowing rate) 2022 2021
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities $ 3,290 $ 2,777
Right-of-use assets obtained in exchange for new operating leases 4,527 2,741
Weighted Average Remaining Lease Term (years) 5.31 5.44
Weighted Average Collateralized Incremental Borrowing Rate 5.81 % 4.12 %

NOTE ~~11.~~7. 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 and option foreign currency exchange 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 ~~February 2019,~~December 2022, 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 ~~2018.~~2022. Although no significant ineffectiveness is expected with this hedging strategy, the effectiveness of the interest rate swaps is evaluated on a quarterly basis. At June 30, ~~2022,~~2023, the total notional amount of the interest rate swaps was ~~$370~~$310 million, which corresponded ~~with~~to a portion of the ~~original~~aggregate outstanding balance of the term loans. During the third quarter of fiscal year 2021, the Company converted $150 million from the balance in its revolving credit line into the existing term loans, splitting the balance equally between them. At June 30, 2022, the Company is not hedging the interest payments on the additional $150 million of term loans. The increase to the principal balance of the term loans does not have an impact to the effectiveness analysis of the interest rate swap agreements.

Previously, the Company had receive-floating/pay-fixed interest rate swap agreements that were designated and qualified as cash flow hedges for two ~~outstanding~~ non-amortizing bank loans that were repaid concurrent with closing on the new bank credit ~~facility.~~facility in December 2022. Those swap agreements, which had an aggregate notional amount of $370 million corresponding to a portion of the principal balance on the repaid loans, were ~~subsequently~~ terminated ~~in February 2019~~ concurrent with the inception of the new swap agreements. The fair value of the previous swap agreements, approximately ~~$5.4~~$11.8 million, was received from the counterparties in December 2022 upon termination and ~~was~~is being amortized from accumulated other comprehensive loss into earnings as a reduction of interest expense through the original maturity dates of those agreements. ~~As of June 30, 2022, the entire deferred gain has been amortized.~~

Cash Flow Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Sales of Crop Inputs, Forecast Purchases of Tobacco, and Related Processing Costs

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~~periodically enters into hedges for a portion of ~~the~~ tobacco purchases in Africa.

The aggregate U.S. dollar notional amount of forward and option contracts entered into for these purposes during the three-month periods in fiscal years ~~2023~~2024 and ~~2022~~2023 was as follows:


		Three Months Ended June 30,					Three Months Ended June 30,
(in millions of dollars)	(in millions of dollars)	2022		2021		(in millions of dollars)	2023		2022

Tobacco purchases	Tobacco purchases	$	—	$	42.0	Tobacco purchases	$	30.3	$	—
Processing costs	Processing costs	1.0		10.2		Processing costs	4.9		1.0
Crop input sales	Crop input sales	—		20.8		Crop input sales	—		—
Total	Total	$	1.0	$	73.0	Total	$	35.2	$	1.0

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. All 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 table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of June 30, ~~2022~~2023 for cash flows hedges of tobacco purchases and crop input sales are expected to be recognized in earnings.

Hedging Program

Crop Year

Geographic Location(s)

Fiscal Year Earnings

Hedging Program

Crop Year

Geographic Location(s)

Fiscal Year Earnings

Tobacco purchases

2023

Brazil

2024

Tobacco purchases

2023

Brazil

2024

Tobacco purchases

2022

Brazil, Africa

2023

Tobacco purchases

2022

Brazil

2024

Tobacco purchases

2021

Brazil

2023

Crop input sales

2023

Brazil

2024

Crop input sales

2024

Brazil

2025

Crop input sales

2022

Brazil

2023

Crop input sales

2023

Brazil

2024

Forward contracts related to processing 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 value-added taxes, 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 June 30, ~~2022~~2023 and ~~2021,~~2022, and March 31, ~~2022,~~2023, were approximately $83.0 million, $110.1 million, ~~$16.7 million,~~ and ~~$59.5~~$42.8 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.

1815

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:


		Three Months Ended June 30,					Three Months Ended June 30,
(in thousands of dollars)	(in thousands of dollars)		2022		2021			(in thousands of dollars)	2023		2022

Cash Flow Hedges - Interest Rate Swap Agreements	Cash Flow Hedges - Interest Rate Swap Agreements							Cash Flow Hedges - Interest Rate Swap Agreements
Derivative	Derivative							Derivative
Effective Portion of Hedge	Effective Portion of Hedge							Effective Portion of Hedge
Gain (loss) recorded in accumulated other comprehensive loss	Gain (loss) recorded in accumulated other comprehensive loss		$	3,901	$	(1,396)		Gain (loss) recorded in accumulated other comprehensive loss	$	10,096	$	3,901
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings		$	(1,605)	$	(2,223)		Gain (loss) reclassified from accumulated other comprehensive loss into earnings	$	1,209	$	(1,605)
Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings	Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings		$	—	$	353		Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings	$	1,570	$	—
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings		Interest expense					Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Interest expense
Ineffective Portion of Hedge	Ineffective Portion of Hedge							Ineffective Portion of Hedge
Gain (loss) recognized in earnings	Gain (loss) recognized in earnings		$	—	$	—		Gain (loss) recognized in earnings	$	—	$	—
Location of gain (loss) recognized in earnings	Location of gain (loss) recognized in earnings		Selling, general and administrative expenses					Location of gain (loss) recognized in earnings	Selling, general and administrative expenses
Hedged Item	Hedged Item							Hedged Item
Description of hedged item	Description of hedged item		Floating rate interest payments on term loan					Description of hedged item	Floating rate interest payments on term loans

Cash Flow Hedges - Foreign Currency Exchange Contracts	Cash Flow Hedges - Foreign Currency Exchange Contracts							Cash Flow Hedges - Foreign Currency Exchange Contracts
Derivative	Derivative							Derivative
Effective Portion of Hedge	Effective Portion of Hedge							Effective Portion of Hedge
Gain (loss) recorded in accumulated other comprehensive loss	Gain (loss) recorded in accumulated other comprehensive loss		$	(947)	$	8,233		Gain (loss) recorded in accumulated other comprehensive loss	$	2,080	$	(947)
Gain (loss) reclassified from accumulated other comprehensive loss into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings		$	957	$	(516)		Gain (loss) reclassified from accumulated other comprehensive loss into earnings	$	806	$	957
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings		Cost of goods sold					Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Cost of goods sold
Ineffective Portion and Early De-designation of Hedges	Ineffective Portion and Early De-designation of Hedges							Ineffective Portion and Early De-designation of Hedges
Gain (loss) recognized in earnings	Gain (loss) recognized in earnings		$	(1,125)	$	668		Gain (loss) recognized in earnings	$	1,910	$	(1,125)
Location of gain (loss) recognized in earnings	Location of gain (loss) recognized in earnings		Selling, general and administrative expenses					Location of gain (loss) recognized in earnings	Selling, general and administrative expenses
Hedged Item	Hedged Item							Hedged Item
Description of hedged item	Description of hedged item		Forecast purchases of tobacco in Brazil and Africa					Description of hedged item	Forecast purchases of tobacco in Brazil and Africa

Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts	Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts							Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts
Gain (loss) recognized in earnings	Gain (loss) recognized in earnings		$	(1,007)	$	4,604		Gain (loss) recognized in earnings	$	(2,486)	$	(1,007)
Location of gain (loss) recognized in earnings	Location of gain (loss) recognized in earnings		Selling, general and administrative expenses					Location of gain (loss) recognized in earnings	Selling, general and administrative expenses

For the 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 in Brazil and Africa, ~~and~~as well as the crop input sales in Brazil, a net hedge gain of approximately ~~$4.8~~$6.3 million remained in accumulated other comprehensive loss at June 30, ~~2022.~~2023. That balance reflects gains and losses on contracts related to the 2023 ~~2022,~~ and ~~2021~~2022 Brazil crops, ~~the 2022 Africa crop,~~ and the ~~2022~~2024 and 2023 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through June 30, ~~2022.~~2023. 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.

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 June 30, ~~2022~~2023 and ~~2021,~~2022, and March 31, ~~2022:~~2023:


		Derivatives in a Fair Value Asset Position														Derivatives in a Fair Value Liability Position															Derivatives in a Fair Value Asset Position														Derivatives in a Fair Value Liability Position
		Balance Sheet Location		Fair Value as of												Balance Sheet Location		Fair Value as of													Balance Sheet Location		Fair Value as of												Balance Sheet Location		Fair Value as of
(in thousands of dollars)	(in thousands of dollars)		June 30, 2022			June 30, 2021				March 31, 2022							June 30, 2022			June 30, 2021				March 31, 2022		(in thousands of dollars)						June 30, 2023			June 30, 2022				March 31, 2023							June 30, 2023			June 30, 2022				March 31, 2023

Derivatives Designated as Hedging Instruments	Derivatives Designated as Hedging Instruments																											Derivatives Designated as Hedging Instruments
Interest rate swap agreements	Interest rate swap agreements		Other non-current assets			$	4,345			$	—			$	—		Other long-term liabilities			$	—			$	24,892			$	1,161	Interest rate swap agreements		Other non-current assets			$	5,810			$	4,345			$	—		Other long-term liabilities			$	—			$	—			$	3,077

Foreign currency exchange contracts	Foreign currency exchange contracts	Other current assets		1,158				5,423				10,957				Accounts payable and accrued expenses		393				2,063				3,200		Foreign currency exchange contracts			Other current assets		2,227				1,158				7,102				Accounts payable and accrued expenses		1,674				393				890
Total	Total			$	5,503			$	5,423			$	10,957					$	393			$	26,955			$	4,361	Total					$	8,037			$	5,503			$	7,102					$	1,674			$	393			$	3,967

Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments																											Derivatives Not Designated as Hedging Instruments
Foreign currency exchange contracts	Foreign currency exchange contracts	Other current assets		$	7,531			$	3,124			$	13,111			Accounts payable and accrued expenses		$	12			$	88			$	64	Foreign currency exchange contracts			Other current assets		$	787			$	7,531			$	1,320			Accounts payable and accrued expenses		$	2,841			$	12			$	435
Total	Total			$	7,531			$	3,124			$	13,111					$	12			$	88			$	64	Total					$	787			$	7,531			$	1,320					$	2,841			$	12			$	435

Substantially all of the Company's foreign exchange derivative instruments 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 ~~12.~~8. 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 acquisition-related contingent consideration obligations. 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.

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 June 30, ~~2022~~2023 and ~~2021,~~2022, and at March 31, ~~2022,~~2023, 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:


		June 30, 2022											June 30, 2023
				Fair Value Hierarchy											Fair Value Hierarchy
(in thousands of dollars)	(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total		(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total

Assets	Assets											Assets
Money market funds	Money market funds	$	334	$	—	$	—	$	—	$	334	Money market funds	$	566	$	—	$	—	$	—	$	566
Trading securities associated with deferred compensation plans	Trading securities associated with deferred compensation plans	—		11,666		—		—		11,666		Trading securities associated with deferred compensation plans	—		11,884		—		—		11,884
Interest rate swap agreements	Interest rate swap agreements	—		—		4,345		—		4,345		Interest rate swap agreements	—		—		5,810		—		5,810
Foreign currency exchange contracts	Foreign currency exchange contracts	—		—		8,689		—		8,689		Foreign currency exchange contracts	—		—		3,014		—		3,014
Total financial assets measured and reported at fair value	Total financial assets measured and reported at fair value	$	334	$	11,666	$	13,034	$	—	$	25,034	Total financial assets measured and reported at fair value	$	566	$	11,884	$	8,824	$	—	$	21,274

Liabilities	Liabilities											Liabilities

Foreign currency exchange contracts	Foreign currency exchange contracts	$	—	$	—	$	405	$	—	$	405	Foreign currency exchange contracts	$	—	$	—	$	4,515	$	—	$	4,515
Total financial liabilities measured and reported at fair value	Total financial liabilities measured and reported at fair value	$	—	$	—	$	405	$	—	$	405	Total financial liabilities measured and reported at fair value	$	—	$	—	$	4,515	$	—	$	4,515


		June 30, 2021											June 30, 2022
				Fair Value Hierarchy											Fair Value Hierarchy
(in thousands of dollars)	(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total		(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total

Assets	Assets											Assets
Money market funds	Money market funds	$	1,992	$	—	$	—	$	—	$	1,992	Money market funds	$	334	$	—	$	—	$	—	$	334
Trading securities associated with deferred compensation plans	Trading securities associated with deferred compensation plans	—		15,735		—		—		15,735		Trading securities associated with deferred compensation plans	—		11,666		—		—		11,666

Interest rate swap agreements												Interest rate swap agreements	—		—		4,345		—		4,345
Foreign currency exchange contracts	Foreign currency exchange contracts	—		—		8,547		—		8,547		Foreign currency exchange contracts	—		—		8,689		—		8,689
Total financial assets measured and reported at fair value	Total financial assets measured and reported at fair value	$	1,992	$	15,735	$	8,547	$	—	$	26,274	Total financial assets measured and reported at fair value	$	334	$	11,666	$	13,034	$	—	$	25,034

Liabilities	Liabilities											Liabilities

Acquisition-related contingent consideration obligations - long term		$	—	$	—	$	—	$	2,532	2,532
Interest rate swap agreements		—		—		24,892		—		24,892

Foreign currency exchange contracts	Foreign currency exchange contracts	—		—		2,151		—		2,151		Foreign currency exchange contracts	$	—	$	—	$	405	$	—	$	405
Total financial liabilities measured and reported at fair value	Total financial liabilities measured and reported at fair value	$	—	$	—	$	27,043	$	2,532	$	29,575	Total financial liabilities measured and reported at fair value	$	—	$	—	$	405	$	—	$	405

2118


		March 31, 2022											March 31, 2023
				Fair Value Hierarchy											Fair Value Hierarchy
(in thousands of dollars)	(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total		(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total

Assets	Assets											Assets
Money market funds	Money market funds	$	334	$	—	$	—	$	—	$	334	Money market funds	$	400	$	—	$	—	$	—	$	400
Trading securities associated with deferred compensation plans	Trading securities associated with deferred compensation plans	—		13,655		—		—		13,655		Trading securities associated with deferred compensation plans	—		11,698		—		—		11,698

Foreign currency exchange contracts	Foreign currency exchange contracts	—		—		24,068		—		24,068		Foreign currency exchange contracts	—		—		8,422		—		8,422
Total financial assets measured and reported at fair value	Total financial assets measured and reported at fair value	$	334	$	13,655	$	24,068	$	—	$	38,057	Total financial assets measured and reported at fair value	$	400	$	11,698	$	8,422	$	—	$	20,520

Liabilities	Liabilities											Liabilities

Interest rate swap agreements	Interest rate swap agreements	$	—	$	—	$	1,161	$	—	$	1,161	Interest rate swap agreements	$	—	$	—	$	3,077	$	—	$	3,077
Foreign currency exchange contracts	Foreign currency exchange contracts	—		—		3,264		—		3,264		Foreign currency exchange contracts	—		—		1,325		—		1,325
Total financial liabilities measured and reported at fair value	Total financial liabilities measured and reported at fair value	$	—	$	—	$	4,425	$	—	$	4,425	Total financial liabilities measured and reported at fair value	$	—	$	—	$	4,402	$	—	$	4,402

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.

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.

Foreign currency exchange contracts

The fair values of forward and option 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 and option foreign currency exchange contracts are classified within Level 2 of the fair value hierarchy.

~~Acquisition-related contingent consideration obligations~~

The Company estimates the fair value of acquisition-related contingent consideration obligations by applying an income approach model that utilizes probability-weighted discounted cash flows. The Company acquired ~~FruitSmart, Inc. in fiscal year 2020 and recognized a contingent consideration liability of $6.7 million on the date of acquisition.~~ Each period the Company evaluates the fair value of the acquisition-related contingent consideration obligations. During the year ended March 31, 2021, the evaluation resulted in a reduction of $4.2 million of contingent consideration of the original ~~$6.7 million~~ liability recorded. During the year ended March 31, 2022, the evaluation of the contingent liability resulted in a reduction of the remaining $2.5 million contingent consideration recorded. Significant judgment is applied to this model and therefore the acquisition-related contingent consideration obligation was classified within Level 3 of the fair value hierarchy.

~~A reconciliation of the change in the balance of the acquisition-related contingent consideration obligation (Level 3) for the three months ended June 30, 2022 and 2021 is provided below.~~

(in thousands of dollars) Three Months Ended June 30,
2022 2021
Balance beginning of year $ — $ 2,532
Change in fair value of contingent consideration liability 0 —
Balance at end of period $ — $ 2,532

Long-term Debt

The following table summarizes the fair and carrying value of the Company’s long-term debt, ~~including the~~and if applicable any current portion, at each of the balance sheet dates June 30, ~~2022,~~2023, and ~~2021~~2022 and March 31, ~~2022:~~2023:


(in millions of dollars)	(in millions of dollars)	June 30, 2022		June 30, 2021		March 31, 2022		(in millions of dollars)	June 30, 2023		June 30, 2022		March 31, 2023
Fair market value of long term obligations	Fair market value of long term obligations	$	517	$	517	$	517	Fair market value of long term obligations	$	620	$	517	$	621
Carrying value of long term obligations	Carrying value of long term obligations	$	520	$	520	$	520	Carrying value of long term obligations	$	620	$	520	$	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.

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 also 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.

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.

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.

NOTE ~~13.~~9. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The Company sponsors several defined benefit pension plans covering eligible U.S. salaried employees and certain foreign and other employee groups. These plans provide retirement benefits based primarily on employee compensation and years of service. The Company also sponsors defined benefit plans that provide postretirement health and life insurance benefits for eligible U.S. employees attaining specific age and service levels, although postretirement life insurance is no longer provided for active employees.

The components of the Company’s net periodic benefit cost were as follows:


		Pension Benefits				Other Postretirement Benefits					Pension Benefits				Other Postretirement Benefits
		Three Months Ended June 30,				Three Months Ended June 30,					Three Months Ended June 30,				Three Months Ended June 30,
(in thousands of dollars)	(in thousands of dollars)	2022		2021		2022		2021		(in thousands of dollars)	2023		2022		2023		2022

Service cost	Service cost	$	1,545	$	1,650	$	32	$	47	Service cost	$	1,282	$	1,545	$	25	$	32
Interest cost	Interest cost	2,335		2,259		241		239		Interest cost	2,901		2,335		264		241
Expected return on plan assets	Expected return on plan assets	(3,324)		(3,385)		(19)		(22)		Expected return on plan assets	(3,888)		(3,324)		(16)		(19)

Net amortization and deferral	Net amortization and deferral	1,001		976		(172)		(115)		Net amortization and deferral	203		1,001		(189)		(172)
Net periodic benefit cost	Net periodic benefit cost	$	1,557	$	1,500	$	82	$	149	Net periodic benefit cost	$	498	$	1,557	$	84	$	82

During the three months ended June 30, ~~2022,~~2023, the Company made contributions of approximately ~~$0.9~~$0.3 million to its pension plans. Additional contributions of ~~$3.3~~$3.6 million are expected during the remaining nine months of fiscal year ~~2023.~~2024.

NOTE ~~14.~~10. STOCK-BASED COMPENSATION

~~Universal’s~~The Company's shareholders have approved the ~~Executive~~Universal Corporation 2017 Stock Incentive Plan (“Plan”) under which officers, directors, 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. The Company’s practice is to award grants of stock-based compensation to officers on an annual basis at the first regularly-scheduled meeting of the Compensation 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 year. The Compensation Committee administers the Company’s Plan consistently, following previously defined guidelines. In recent years, the Compensation Committee has awarded only grants of RSUs and PSUs. Awards of restricted stock, RSUs, and PSUs are currently outstanding under the Plan.

RSUs awarded prior to fiscal year 2022 vest 5 years after the grant date and those awarded beginning in fiscal year 2022 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 date as the original RSU grant. The PSUs vest at the end of a performance period of three years that begins with the year of the grant, are paid out in shares of common stock shortly after 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. The Company’s outside directors receive RSUs following the annual meeting of shareholders. RSUs awarded to outside directors ~~prior to fiscal year 2020 vest 3 years after the grant date and those granted beginning in fiscal year 2020~~ vest 1 year after the grant date. Restricted shares vest upon the individual’s retirement from service as a director.

During the three-month periods ended June 30, 2023 and 2022, ~~and 2021, Universal~~the Company issued the following stock-based awards, representing the regular annual grants to officers and outside directors of the Company:


		Three Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2023		2022

RSUs:	RSUs:					RSUs:
Number granted	Number granted	65,405		58,160		Number granted	71,750		65,405
Grant date fair value	Grant date fair value	$	63.69	$	57.41	Grant date fair value	$	52.02	$	63.69

PSUs:	PSUs:					PSUs:
Number granted	Number granted	48,315		48,650		Number granted	57,400		48,315
Grant date fair value	Grant date fair value	$	54.46	$	47.95	Grant date fair value	$	43.01	$	54.46

Fair value expense for restricted stock units 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 all non-forfeitable awards is recognized as expense

at the date of grant. As a result, Universal typically incurs higher stock compensation expense in the first quarter of each fiscal year when grants are awarded to officers than in the other three quarters. For PSUs, the Company generally recognizes fair value expense ratably over the performance and vesting period based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures. The Company accounts for forfeitures of stock-based awards as they occur. For the three-month periods ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded total stock-based compensation expense of approximately ~~$3.7~~$3.9 million and ~~$3.0~~$3.7 million, respectively. The Company expects to recognize stock-based compensation expense of approximately ~~$3.6~~$3.7 million during the remaining nine months of fiscal year ~~2023.~~2024.

NOTE ~~15.~~11. OPERATING SEGMENTS

The Company conducts operations across two reportable operating segments, Tobacco Operations and Ingredients Operations.

The Tobacco Operations segment activities involve selecting, procuring, processing, packing, storing, shipping, and financing 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 increasingly used in the manufacture of non-combustible 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 and smoke 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, flavors, and botanical extracts. Customers for the Ingredients Operations segment include large multinational food and beverage companies, smaller independent manufacturers, and retail organizations. FruitSmart, Silva, and Shank's are the primary operations for the Ingredients Operations segment. FruitSmart manufactures fruit and vegetable juices, purees, concentrates, essences, fibers, seeds,

seed oils, and seed powders. Silva is primarily a dehydrated product manufacturer of fruit and vegetable based flakes, dices, granules, powders, and blends. Shank's manufactures flavors and botanical extracts and also offers bottling and custom packaging for customers.

The Company currently evaluates the performance of its segments based on operating income after allocated overhead expenses, plus equity in the pretax earnings (loss) of unconsolidated affiliates. Operating results for the Company’s reportable segments for each period presented in the consolidated statements of income and comprehensive income were as follows.


		Three Months Ended June 30,						Three Months Ended June 30,
(in thousands of dollars)	(in thousands of dollars)		2022		2021		(in thousands of dollars)		2023		2022

SALES AND OTHER OPERATING REVENUES	SALES AND OTHER OPERATING REVENUES						SALES AND OTHER OPERATING REVENUES
Tobacco Operations	Tobacco Operations		$	348,063	$	293,843	Tobacco Operations		$	443,908	$	348,063
Ingredients Operations	Ingredients Operations		81,759		56,186		Ingredients Operations		73,814		81,759
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues		$	429,822	$	350,029	Consolidated sales and other operating revenues		$	517,722	$	429,822

OPERATING INCOME
OPERATING INCOME (LOSS)							OPERATING INCOME (LOSS)
Tobacco Operations	Tobacco Operations		$	8,116	$	8,889	Tobacco Operations		$	8,883	$	8,116
Ingredients Operations	Ingredients Operations		4,597		4,349		Ingredients Operations		(2,014)		4,597
Segment operating income	Segment operating income		12,713		13,238		Segment operating income		6,869		12,713
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1)	Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1)		553		(609)		Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1)		4,166		553
Restructuring and impairment costs (2)			—		(2,024)

Consolidated operating income	Consolidated operating income		$	13,266	$	10,605	Consolidated operating income		$	11,035	$	13,266

(1)Equity in pretax earnings (loss) of unconsolidated affiliates is included in segment operating income (Tobacco Operations), but is reported below consolidated operating income and excluded from that total in the consolidated statements of income and comprehensive income.

~~(2)~~Restructuring and impairment costs are excluded from segment operating income, but are included in consolidated operating income in the consolidated statements of income and comprehensive income. See Note 4 for additional information.

2622

NOTE ~~16.~~12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) attributable to the Company for the three months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended June 30,					Three Months Ended June 30,
(in thousands of dollars)	(in thousands of dollars)	2022		2021		(in thousands of dollars)	2023		2022
Foreign currency translation:	Foreign currency translation:					Foreign currency translation:
Balance at beginning of year	Balance at beginning of year	$	(40,965)	$	(35,135)	Balance at beginning of year	$	(44,233)	$	(40,965)
Other comprehensive income (loss) attributable to Universal Corporation:	Other comprehensive income (loss) attributable to Universal Corporation:					Other comprehensive income (loss) attributable to Universal Corporation:
Net gain (loss) on foreign currency translation	Net gain (loss) on foreign currency translation	(6,888)		1,719		Net gain (loss) on foreign currency translation	(568)		(6,888)

Less: Net (gain) loss on foreign currency translation attributable to noncontrolling interests	Less: Net (gain) loss on foreign currency translation attributable to noncontrolling interests	329		(29)		Less: Net (gain) loss on foreign currency translation attributable to noncontrolling interests	144		329
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	(6,559)		1,690		Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	(424)		(6,559)
Balance at end of period	Balance at end of period	$	(47,524)	$	(33,445)	Balance at end of period	$	(44,657)	$	(47,524)

Foreign currency hedge:	Foreign currency hedge:					Foreign currency hedge:
Balance at beginning of year	Balance at beginning of year	$	3,579	$	(414)	Balance at beginning of year	$	4,899	$	3,579
Other comprehensive income (loss) attributable to Universal Corporation:	Other comprehensive income (loss) attributable to Universal Corporation:					Other comprehensive income (loss) attributable to Universal Corporation:
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $25 and $(1,566))		(1,611)		5,698
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $218 and $(108)) (1)		(508)		284
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $(15) and $25)						Net gain (loss) on derivative instruments (net of tax (expense) benefit of $(15) and $25)	91		(1,611)
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $188 and $218) (1)						Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $188 and $218) (1)	(627)		(508)
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	(2,119)		5,982		Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	(536)		(2,119)
Balance at end of period	Balance at end of period	$	1,460	$	5,568	Balance at end of period	$	4,363	$	1,460

Interest rate hedge:	Interest rate hedge:					Interest rate hedge:
Balance at beginning of year	Balance at beginning of year	$	(860)	$	(19,480)	Balance at beginning of year	$	5,253	$	(860)
Other comprehensive income (loss) attributable to Universal Corporation:	Other comprehensive income (loss) attributable to Universal Corporation:					Other comprehensive income (loss) attributable to Universal Corporation:
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $(819) and $293)		3,082		(1,103)
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $(337) and $(392)) (2)		1,268		1,477
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $(2,666) and $(819))						Net gain (loss) on derivative instruments (net of tax (expense) benefit of $(2,666) and $(819))	7,431		3,082
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $734 and $(337)) (2)						Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $734 and $(337)) (2)	(2,045)		1,268
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	4,350		374		Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	5,386		4,350
Balance at end of period	Balance at end of period	$	3,490	$	(19,106)	Balance at end of period	$	10,639	$	3,490

Pension and other postretirement benefit plans:	Pension and other postretirement benefit plans:					Pension and other postretirement benefit plans:
Balance at beginning of year	Balance at beginning of year	$	(46,065)	$	(52,008)	Balance at beginning of year	$	(42,976)	$	(46,065)
Other comprehensive income (loss) attributable to Universal Corporation:	Other comprehensive income (loss) attributable to Universal Corporation:					Other comprehensive income (loss) attributable to Universal Corporation:

Amortization included in earnings (net of tax expense (benefit) of $(144) and $(175))(3)		573		759
Amortization included in earnings (net of tax expense (benefit) of $(14) and $(144))(3)						Amortization included in earnings (net of tax expense (benefit) of $(14) and $(144))(3)	84		573
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	573		759		Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes	84		573
Balance at end of period	Balance at end of period	$	(45,492)	$	(51,249)	Balance at end of period	$	(42,892)	$	(45,492)

Total accumulated other comprehensive loss at end of period	Total accumulated other comprehensive loss at end of period	$	(88,066)	$	(98,232)	Total accumulated other comprehensive loss at end of period	$	(72,547)	$	(88,066)

(1) Gain (loss) on foreign currency cash flow hedges related to forecast purchases of tobacco and crop input sales is reclassified from accumulated other comprehensive income (loss) to cost of goods sold when the tobacco is sold to customers. See Note 117 for additional information.

(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 underlying debt, or as amortized to interest expense over the period to original maturity for terminated swap agreements. See Note 117 for additional information.

(3) This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 139 for additional information.

2723

NOTE ~~17.~~13. CHANGES IN SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS IN SUBSIDIARIES

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 is as follows:


		Three Months Ended June 30, 2022						Three Months Ended June 30, 2021							Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(in thousands of dollars)	(in thousands of dollars)	Universal Corporation		Non-controlling Interests		Total		Universal Corporation		Non-controlling Interests		Total		(in thousands of dollars)	Universal Corporation		Non-controlling Interests		Total		Universal Corporation		Non-controlling Interests		Total

Balance at beginning of three-month period	Balance at beginning of three-month period	$	1,340,543	$	44,226	$	1,384,769	$	1,307,299	$	41,126	$	1,348,425	Balance at beginning of three-month period	$	1,397,088	$	39,864	$	1,436,952	$	1,340,543	$	44,226	$	1,384,769

Changes in common stock	Changes in common stock													Changes in common stock

Accrual of stock-based compensation	Accrual of stock-based compensation	3,682		—		3,682		2,966		—		2,966		Accrual of stock-based compensation	3,859		—		3,859		3,682		—		3,682
Withholding of shares from stock-based compensation for grantee income taxes	Withholding of shares from stock-based compensation for grantee income taxes	(2,090)		—		(2,090)		(2,432)		—		(2,432)		Withholding of shares from stock-based compensation for grantee income taxes	(2,963)		—		(2,963)		(2,090)		—		(2,090)
Dividend equivalents on RSUs	Dividend equivalents on RSUs	266		—		266		264		—		264		Dividend equivalents on RSUs	302		—		302		266		—		266

Changes in retained earnings	Changes in retained earnings													Changes in retained earnings
Net income		6,830		(4,029)		2,801		6,357		(2,445)		3,912
Net income (loss)														Net income (loss)	(2,064)		(3,097)		(5,161)		6,830		(4,029)		2,801
Cash dividends declared	Cash dividends declared													Cash dividends declared

Common stock	Common stock	(19,447)		—		(19,447)		(19,170)		—		(19,170)		Common stock	(19,710)		—		(19,710)		(19,447)		—		(19,447)

Dividend equivalents on RSUs	Dividend equivalents on RSUs	(266)		—		(266)		(264)		—		(264)		Dividend equivalents on RSUs	(302)		—		(302)		(266)		—		(266)

Other comprehensive income (loss)	Other comprehensive income (loss)	(3,755)		(329)		(4,084)		8,805		29		8,834		Other comprehensive income (loss)	4,510		(144)		4,366		(3,755)		(329)		(4,084)

Other changes in noncontrolling interests	Other changes in noncontrolling interests													Other changes in noncontrolling interests
Dividends paid to noncontrolling shareholders	Dividends paid to noncontrolling shareholders	—		(5,145)		(5,145)		—		(980)		(980)		Dividends paid to noncontrolling shareholders	—		(4,164)		(4,164)		—		(5,145)		(5,145)
Other	Other	—		(427)		(427)		—		—		—		Other	—		—		—		—		(427)		(427)
Balance at end of period	Balance at end of period	$	1,325,763	$	34,296	$	1,360,059	$	1,303,825	$	37,730	$	1,341,555	Balance at end of period	$	1,380,720	$	32,459	$	1,413,179	$	1,325,763	$	34,296	$	1,360,059

2824

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, the terms “we,” “our,” “us” or “Universal” or the “Company” refer to Universal Corporation together with its subsidiaries. This Quarterly Report on Form 10-Q and the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Among other things, these statements relate to the Company’s financial condition, results of operation, and future business plans, operations, opportunities, and prospects. In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission and in reports to shareholders. These forward-looking statements are generally identified by the use of words such as we “expect,” “believe,” “anticipate,” “could,” “should,” “may,” “plan,” “will,” “predict,” “estimate,” and similar expressions or words of similar import. These forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results, performance, or achievements to be materially different from any anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: impacts of the COVID-19 ~~pandemic;~~pandemic and new subvariants; success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; product purchased not meeting quality and quantity requirements; our reliance on a few large customers; our ability to maintain effective information systems and safeguard confidential information; anticipated levels of demand for and supply of our products and services; costs incurred in providing these products and ~~services;~~services including increased transportation costs and delays attributed to global supply chain challenges; timing of shipments to customers; higher inflation rates; changes in market structure; government regulation and other stakeholder expectations; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from the conflict in Ukraine; product taxation; industry consolidation and evolution; changes in exchange rates and interest rates; impacts of regulation and litigation on our customers; industry-specific risks related to our plant-based ingredient businesses; exposure to certain regulatory and financial risks related to climate change; changes in estimates and assumptions underlying our critical accounting policies; the promulgation and adoption of new accounting standards; new government regulations and interpretation of existing standards and regulations; and general economic, political, market, and weather conditions. For a further description of factors that may cause actual results to differ materially from such forward-looking statements, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022.~~2023. We caution investors not to place undue reliance on any forward-looking statements as these statements speak only as of the date when made, and we undertake no obligation to update any forward-looking statements made in this report. This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022.~~2023.

Results of Operations

Amounts described as net income (loss) and earnings (loss) per diluted share in the following discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries. Adjusted operating income (loss), adjusted net income (loss) attributable to Universal Corporation, adjusted diluted earnings (loss) per share, and the total for segment operating income (loss) referred to in this discussion are non-GAAP financial measures. These measures are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for operating income (loss), net income (loss) attributable to Universal Corporation, diluted earnings (loss) per share, cash from operating activities or any other operating or financial performance measure calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. A reconciliation of adjusted operating income (loss) to consolidated operating (income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other Items below. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note ~~15.~~11. "Operating Segments" to the consolidated financial statements. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits. We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, provide investors with important information that is useful in understanding our business results and trends.

Overview

WeOur tobacco operations performed well and are ~~pleased with~~off to a good start for our ~~start to~~ fiscal year 2023. In the quarter ended June 30, 2022, we continued to effectively navigate increased costs, particularly rising prices for green leaf tobacco, and shipping constraints. We succeeded in getting a significant amount of carryover tobacco shipped out of Brazil, and our plant-based ingredients platform continued to exceed our expectations.

~~Results~~2024. Segment operating income was higher for our Tobacco Operations segment ~~were down modestly~~ in the quarter ended June 30, ~~2022,~~2023, compared to the quarter ended June 30, ~~2021, largely on unfavorable foreign currency comparisons due to~~2022, even though we did not have the ~~strong U.S. dollar.~~benefit of large shipments of carryover tobacco from certain origins that we had in first quarter of fiscal year 2023. Demand for leaf tobacco from our customers remains strong, and ~~flue-cured, burley, oriental,~~our level of uncommitted tobacco inventory was 16% of tobacco inventory at June 30, 2023. We are forecasting increased leaf tobacco production in fiscal year 2024,

compared to fiscal year 2023, and ~~wrapper~~believe that even with that increased production, leaf tobacco will remain in an undersupply position.

We are ~~also~~

~~anticipating a reduction~~pleased with the ongoing progress we are making to integrate our plant-based ingredients platform, and we continue to execute on our strategy to invest in ~~African burley tobacco crop sizes~~and expand the platform’s capabilities for future growth in existing and new products. For the quarter ended June 30, 2023, the platform faced soft demand, due to ~~weather conditions there. While~~high customer inventory levels, and our earnings for the platform were below our expectations. We believe that many of our customers are continuing to draw down on their raw materials inventories after building inventories to protect against prior supply chain uncertainties. These inventory challenges have been more extensive and persistent in duration than we ~~were able~~had forecasted. In addition, the expansion of the platform’s capabilities has added to ~~ship~~our costs, while a ~~greater amount of carryover tobacco out of Brazil~~sharp drop in certain new crop raw material prices resulted in inventory write-downs in the quarter ended June 30, ~~2022,~~2023. We continue to believe the inventory challenges are temporary and expect excess inventory levels held by our customers to eventually work down. One of the main objectives of our current investments in our plant-based ingredients platform is to expand our portfolio to include more value-added products for our customers. We believe that we are well-positioned to capitalize on demand from our customers, and that with the investments we are making, we are a stronger partner for current and future customers due to the expanded range of capabilities and products that we can offer them. We are encouraged by ongoing customer engagements regarding existing business and new business opportunities.

Our costs, notably interest costs and prices for green leaf tobacco, remained high in the quarter ended June 30, 2023, compared to the quarter ended June 30, ~~2021, we continue to face a challenging logistical environment. We are also continuing to see increased~~2022. Interest costs ~~for leaf tobacco across virtually all markets.~~

~~Our Ingredients Operations segment performed well~~were more than double on higher interest rates in the first quarter of fiscal year 2024, compared to the same quarter in fiscal year 2023. ~~Sales for all~~Our debt balances, the sum of ~~our businesses in this segment~~notes payable and overdrafts and long-term obligations, were uprelatively flat in the quarter ended June 30, ~~2022,~~2023, compared to the same quarter ~~ended June 30, 2021, with strong volumes for both human~~in the prior fiscal year, as working capital requirements to fund larger tobacco crops and ~~pet food product categories. In our Ingredients Operations segment, we are also seeing rising costs for raw materials and the impact of~~ higher freight costs. Synergies captured across the plant-based ingredients platform continue to make good progress. Our businesses are working together on new product development and strategies to serve the platform’s diverse customers which utilize our portfolio of plant-based ingredients and botanical extracts and flavorings offerings. Results for the Ingredients Operations segment for the quarter ended June 30, 2022, include our October 2021 purchase of Shank’s Extracts, LLC (“Shank’s”).green tobacco prices were partially offset by increased customer deposits.

~~Our elevated borrowing levels reflect our acquisition of Shank’s as well as higher tobacco inventory levels, largely due~~We continue to higher green leaf tobacco prices and tobacco shipment timing. We expect our seasonal borrowing levels to decrease in the second half of our fiscal year in line with our tobacco crop shipments, which are weighted to that period.

~~At Universal, we are committed to providing~~make transparency around our sustainability efforts and ~~goals.~~goals a priority. We recently completed our annual submission to the global non-profit organization CDP regarding climate change, forestry, and water risk to provide more information on our achievements in these areas to our stakeholders. We ~~are also excited~~continue to ~~announce that we have engaged a~~work with third ~~party~~parties to ~~aid in analyzing~~verify our emissions and ~~communicating~~establish our ~~climate change policy as well as~~pathway to ~~provide independent, third party verification~~net zero through the identification and prioritization of high-impact projects throughout our ~~results.~~footprint.


FINANCIAL HIGHLIGHTS	FINANCIAL HIGHLIGHTS											FINANCIAL HIGHLIGHTS
		Three Months Ended June 30,						Change					Three Months Ended June 30,						Change
(in millions of dollars, except per share data)	(in millions of dollars, except per share data)	2022			2021			$		%		(in millions of dollars, except per share data)	2023			2022			$		%

Consolidated Results	Consolidated Results											Consolidated Results
Sales and other operating revenue	Sales and other operating revenue	$	429.8		$	350.0		$	79.8	23	%	Sales and other operating revenue	$	517.7		$	429.8		$	87.9	20	%
Cost of goods sold	Cost of goods sold	$	350.1		$	287.6		$	62.5	22	%	Cost of goods sold	$	431.2		$	350.1		$	81.1	23	%
Gross Profit Margin	Gross Profit Margin	18.5		%	17.8		%			70 bps		Gross Profit Margin	16.7		%	18.5		%			-183 bps
Selling, general and administrative expenses	Selling, general and administrative expenses	$	66.5		$	49.8		$	16.6	33	%	Selling, general and administrative expenses	$	75.5		$	66.5		$	9.0	14	%
Restructuring and impairment costs		$	—		$	2.0		$	(2.0)	(100)	%
Operating income (as reported)		$	13.3		$	10.6		$	2.7	25	%
Adjusted operating income (non-GAAP)*		$	13.3		$	12.6		$	0.6	5	%
Diluted earnings per share (as reported)		$	0.27		$	0.26		$	0.01	4	%
Adjusted diluted earnings per share (non-GAAP)*		$	0.25		$	0.30		$	(0.05)	(17)	%

Operating income (loss)												Operating income (loss)	$	11.0		$	13.3		$	(2.2)	(17)	%

Diluted earnings (loss) per share (as reported)												Diluted earnings (loss) per share (as reported)	$	(0.08)		$	0.27		$	(0.35)	(130)	%
Adjusted diluted earnings (loss) per share (non-GAAP)*												Adjusted diluted earnings (loss) per share (non-GAAP)*	$	(0.08)		$	0.25		$	(0.33)	(132)	%
Segment Results	Segment Results											Segment Results
Tobacco operations sales and other operating revenues	Tobacco operations sales and other operating revenues	$	348.1		$	293.8		$	54.2	18	%	Tobacco operations sales and other operating revenues	$	443.9		$	348.1		$	95.8	28	%
Tobacco operations operating income	Tobacco operations operating income	$	8.1		$	8.9		$	(0.8)	(9)	%	Tobacco operations operating income	$	8.9		$	8.1		$	0.8	9	%
Ingredients operations sales and other operating revenues	Ingredients operations sales and other operating revenues	$	81.8		$	56.2		$	25.6	46	%	Ingredients operations sales and other operating revenues	$	73.8		$	81.8		$	(7.9)	(10)	%
Ingredient operations operating income		$	4.6		$	4.3		$	0.2	6	%
Ingredient operations operating income (loss)												Ingredient operations operating income (loss)	$	(2.0)		$	4.6		$	(6.6)	(144)	%

*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below.

Net ~~income~~loss for the quarter ended June 30, ~~2022,~~2023, was ~~$6.8~~$(2.1) million, or ~~$0.27~~$(0.08) per diluted share, compared with ~~$6.4~~net income of $6.8 million, or ~~$0.26~~$0.27 per diluted share, for the quarter ended June 30, ~~2021.~~2022. Excluding ~~restructuring and impairment costs and~~ certain other non-recurring items, detailed in Other Items below, net income and diluted earnings per share decreased by ~~$1.2~~$8.2 million and ~~$0.05,~~$0.33, respectively, for the quarter ended June 30, ~~2022,~~2023, compared to the quarter ended June 30, ~~2021.~~2022. Operating income of $11.0 million for the quarter

ended June 30, 2023, decreased by $2.2 million, compared to operating income of $13.3 million for the quarter ended June 30, 2022, increased by $2.7 million, compared to operating income of $10.6 million for the quarter ended June 30, 2021. Adjusted operating income, detailed in Other Items below, of $13.3 million increased by $0.6 million for the first quarter of fiscal year 2023, compared to adjusted operating income of $12.6 million for the first quarter of fiscal year 2022.

Consolidated revenues increased by ~~$79.8~~$87.9 million to ~~$429.8~~$517.7 million for the three months ended June 30, ~~2022,~~2023, compared to the same period in fiscal year ~~2022,~~2023, on higher ~~carryover~~ tobacco sales ~~volumes~~prices and ~~prices as well as the addition of Shank’s~~a favorable product and geographic mix in ~~October 2021 in the Ingredients~~our Tobacco Operations segment.

Tobacco Operations

The first fiscal quarter is historically a slow quarter for our tobacco businesses. Operating income for the Tobacco Operations segment ~~decreased~~increased by $0.8 million to ~~$8.1~~$8.9 million for the quarter ended June 30, ~~2022,~~2023, compared with the quarter ended June 30, ~~2021.~~2022. Although tobacco sales volumes were ~~up modestly,~~down, Tobacco Operations segment ~~results were down~~operating income was up largely on ~~unfavorable foreign currency comparisons due to the strong U.S. dollar~~a more favorable product and geographic mix in the quarter ended June 30, ~~2022,~~2023, compared to the same quarter in the prior fiscal year, when a large amount of carryover tobacco crops were shipped. Prices for green leaf tobacco in the quarter ended June 30, 2023, were also higher than in the quarter ended June 30, 2022. Carryover crop shipments were significantly lower in Brazil in the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022. In Europe, sales volumes and revenues were up due to shipment timing and a favorable product mix in the quarter ended June 30, 2023, compared to the same quarter in the prior fiscal year. Carryover crop shipments were ~~higher~~up in ~~Brazil~~North America due to shipment timing in the quarter ended June 30, ~~2022, compared to the same quarter in the prior fiscal year, largely due to increased shipping availability. In Africa, carryover shipments were down in the quarter ended June 30, 2022,~~2023, compared to the quarter ended June 30, ~~2021,~~2022. Results for our oriental tobacco joint venture were down significantly in the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, on ~~smaller crops grown in fiscal year 2022.~~unfavorable foreign currency comparisons and higher interest expenses. Selling, general, and administrative expenses for the Tobacco Operations segment were higher in the quarter ended June 30, ~~2022,~~2023, compared to June 30, ~~2021,~~2022, primarily on ~~unfavorable foreign currency comparisons.~~higher compensation costs and higher provisions on advances to suppliers following adverse weather conditions in Africa. Revenues for the Tobacco Operations segment of ~~$348.1~~$443.9 million for the quarter ended June 30, ~~2022,~~2023, were up ~~$54.2~~$95.8 million, compared to the same period in the prior fiscal year, on higher tobacco sales ~~volumes~~prices and ~~prices.~~a favorable product and geographic mix.

Ingredients Operations

Operating ~~income~~loss for the Ingredients Operations segment was $(2.0) million for the quarter ended June 30, 2023, compared to operating income of $4.6 million for the quarter ended June 30, ~~2022, compared to $4.3 million for the quarter ended June 30, 2021. Results for the segment improved year-over-year on the inclusion of the October 2021 Shank’s acquisition.~~2022. Sales for all of our businesses in this segment were updown in the quarter ended June 30, ~~2022,~~2023, compared to the quarter ended June 30, ~~2021, with continued strong volumes~~2022, on lower demand due to our customers continuing to carry high inventory levels. Prices for ~~both human~~some key raw materials were down in the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022. Inventory write-downs for the Ingredients Operations segment were higher in the quarter ended June 30, 2023, compared to the same quarter in the prior fiscal year, on the changes in customer demand and ~~pet food product categories.~~new crop raw material prices. Selling, general, and administrative expenses for this segment increased in the quarter ended June 30, ~~2022,~~2023, compared to the same quarter in the prior fiscal year, largely on ~~the addition of Shank’s as well as~~ higher labor ~~costs. In the quarter ended June 30, 2022, the allocation of corporate overhead charges to the Ingredients Operations segment was also up, compared to the quarter ended June 30, 2021.~~costs and investments in product development capabilities. Revenues for the Ingredients Operations segment of ~~$81.8~~$73.8 million for the quarter ended June 30, ~~2022,~~2023, were ~~up $25.6~~down $7.9 million compared to the quarter ended June 30, ~~2021,~~2022, largely on ~~the addition of the revenues for Shank’s as well as higher~~lower sales ~~volumes and prices.~~volumes.

Other Items

Cost of goods sold in the quarter ended June 30, ~~2022,~~2023, increased by ~~22%~~23% to ~~$350.1~~$431.2 million, compared with the same period in the prior fiscal year, ~~consistent with the similar percentage increase in revenues for the current period.~~largely due to higher green tobacco costs. Selling, general, and administrative costs for the quarter ended June 30, ~~2022,~~2023, increased by ~~$16.6~~$9.0 million to ~~$66.5~~$75.5 million, compared to the same period in the prior fiscal year, primarily on ~~additional~~weakening of the U.S. dollar, increased compensation costs, ~~from the acquisition of Shank’s in the Ingredients Operations segment~~ and unfavorable foreign currency comparisons as well as inflationary increases in compensation and travel costs. Unfavorable foreign currency comparisons were approximately $6.6 million in the quarter ended June 30, 2022, comparedhigher provisions on advances to ~~the quarter ended June 30, 2021.~~suppliers. Interest expense for the quarter ended June 30, ~~2022,~~2023, increased by ~~$0.5~~$8.8 million to ~~$6.7~~$15.5 million on increased costs from higher ~~debt balances and~~ interest ~~rates, partially offset by a $1.8 million interest expense accrual reversal related to the sale of our previously idled operations in Tanzania.~~rates.

For the three months ended June 30, 2023, our consolidated effective income tax rate on pre-tax loss was a benefit of 21.6%. For the three months ended June 30, 2022, ~~the Company’s~~our consolidated effective income tax rate on pre-tax income was 54.6%. The consolidated effective income tax rate for the three months ended June 30, 2022, was affected by the sale of our idled Tanzania operations which resulted in $1.1 million of additional income taxes. Without this item, the consolidated effective income tax rate for the three months ended June 30, 2022, would have been approximately 36.2%. Additionally, the sale of our idled Tanzania operations resulted in a $1.8 million reduction to consolidated interest expense related to an uncertain tax position.

~~For the three months ended June 30, 2021, the Company’s effective tax rate on pre-tax income was 23.7%.~~

Reconciliation of Certain Non-GAAP Financial Measures

The following ~~tables set~~table sets forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to Universal Corporation:

Adjusted Operating Income Reconciliation
Three Months Ended June 30,
(in thousands) 2022 2021
As Reported: Consolidated operating income $ 13,266 $ 10,605
Restructuring and impairment costs(1)
— 2,024
Adjusted operating income $ 13,266 $ 12,629
Adjusted Net Income and Diluted Earnings Per Share
(in thousands and reported net of income taxes) Three Months Ended June 30,
2022 2021
As Reported: Net income available to Universal Corporation $ 6,830 $ 6,357
Restructuring and impairment costs(1)
— 1,005
Interest expense reversal on uncertain tax position and income tax from sale of operations in Tanzania (684) —
Adjusted net income available to Universal Corporation $ 6,146 $ 7,362
As reported: Diluted earnings per share $ 0.27 $ 0.26
As adjusted: Diluted earnings per share $ 0.25 $ 0.30

~~(1)~~Restructuring and impairment costs are included in Consolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income available to Universal Corporation, and Adjusted diluted earnings per share. See Note 4 for additional information.












Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share Reconciliation

(in thousands)	Three Months Ended June 30,
		2023		2022
As Reported: Net income (loss) available to Universal Corporation		$	(2,064)	$	6,830






Interest expense reversal on uncertain tax position and income tax from sale of operations in Tanzania		—		(1,816)

Total of Non-GAAP adjustments to income (loss) before income taxes		$	—	$	(1,816)

Non-GAAP adjustments to income taxes
Income tax expense from sale of operations in Tanzania		—		1,132

Total of income tax impacts for Non-GAAP adjustments to income (loss) before income taxes and Non-GAAP adjustment to income taxes		—		1,132

As adjusted: Net income (loss) attributable to Universal Corporation (Non-GAAP)		$	(2,064)	$	6,146
As reported: Diluted earnings (loss) per share		$	(0.08)	$	0.27
As adjusted: Diluted earnings (loss) per share		$	(0.08)	$	0.25

~~COVID-19 Pandemic Impact~~

On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) a pandemic. Foreign governmental organizations and governmental organizations in the United States have taken various actions to combat the spread of COVID-19 and its subsequent variants, including imposing stay-at-home orders, closing “non-essential” businesses and their operations, and restricting international travel. We continue to closely monitor developments related to the COVID-19 pandemic and have taken and continue to take steps intended to mitigate the potential risks and impacts to us. It is paramount that our employees who operate our businesses are safe and informed. We have assessed and regularly update our existing business continuity plans for our business in the context of this pandemic. For example, we took precautions during the pandemic with regard to employee and facility hygiene, imposed travel limitations on our employees, implemented work-from-home procedures, and we continue to assess and reevaluate protocols designed to protect our employees, customers and the public.

We continue to work with our suppliers to mitigate the impacts to our supply chain due to the pandemic. To date, we have not experienced a material impact to our supply chain, although the COVID-19 pandemic resulted in delays in certain operations during fiscal year 2021. Since March 2020, we have at times also experienced increased volatility in foreign currency exchange rates, which we believe has in part related to the uncertainties from COVID-19, as well as actions taken by governments and central banks in response to COVID-19. We are currently seeing and monitoring some logistical constraints around worldwide vessel and container availability and increased costs stemming from the COVID-19 pandemic.

We believe we currently have sufficient liquidity to meet our current obligations and our business operations remain fundamentally unchanged other than shipping delays, which could continue to impact quarterly comparisons. This remains, however, a rapidly evolving situation, and we cannot predict the extent, resurgence, or duration of the COVID-19 pandemic, the effects of it on the global, national or local economy, including the impacts on our ability to access capital, or its effects on our business, financial position, results of operations, and cash flows. We continue to monitor developments affecting our employees, customers and operations. We will take additional steps and reevaluate current protocols to address the spread of COVID-19 and its impacts, as necessary, and remain thankful for the hard work of our employees and the continued support of our customers, growers, and other partners during these challenging times.

Liquidity and Capital Resources

Overview

Our first fiscal quarter is usually a period of significant working capital investment in both Africa and South America as tobacco crops are delivered by farmers.We funded our working capital needs in the quarter ended June 30, ~~2022,~~2023, using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows. We are expecting higher and longer duration working capital needs in fiscal year 2023 compared to historical levels due to increased costs, specifically higher leaf tobacco costs, and tobacco shipment timing.Tobacco ~~crop~~ shipments are expected to be weighted to the second half of our fiscal year.

Our liquidity and operating capital resource requirements are predominantly short term in nature and primarily relate to working capital for tobacco crop purchases. Working capital needs are seasonal within each geographic region. The geographic dispersion and the timing of working capital needs permit us to predict our general level of cash requirements, although tobacco crop ~~size,~~sizes, prices paid to farmers, shipment and delivery timing, and currency fluctuations affect requirements each year. Peak working capital requirements are generally reached during the first and second fiscal quarters. Each geographic area follows a cycle of buying, processing, and shipping tobacco, and in many regions, we also provide agricultural materials to farmers during the growing season. The timing of the elements of each cycle is influenced by such factors as local weather conditions and individual customer shipping requirements, which may change the level or the duration of crop financing. Despite a predominance of short-term needs, we maintain a portion of our total debt as long-term to reduce liquidity risk. We also periodically have large cash balances that we utilize to meet our working capital requirements.

To date, COVID-19 has not had a significant impact on our operations, and we currently anticipate our current cash balances, cash flows from operations, and our available sources of liquidity will be sufficient to meet our cash requirements for at least the next twelve months. This continues, however, to be a rapidly evolving situation, and we cannot predict the extent, resurgence, or duration of the ongoing COVID-19 pandemic, the effects of it on the global, national or local economy, including the impacts on our ability to access capital, or its effects on our business, financial position, results of operations, and cash flows. We continue to monitor developments affecting our employees, customers and operations.

Operating Activities

WeNet cash used ~~$225.8 million in net cash flows from~~by our operations was $103.9 million during the quarter ended June 30, ~~2022.~~2023. That amount was ~~$98.8~~$121.9 million ~~higher~~lower than during the same period in fiscal year ~~2022.~~2023. Our working capital needs to fund our operations in the quarter ended June 30, ~~2022,~~2023, were ~~higher,~~lower, compared to the quarter ended June 30, ~~2021,~~2022, primarily on higher customer advances and deposits partially offset by increased tobacco purchase volumes and higher green tobacco ~~costs as well as~~prices. Customer advances and deposits were up $84.0 million in the first quarter of fiscal year 2024, compared to the same period of fiscal year 2023, due to a customer arrangement providing for a higher amount of advances on tobacco ~~shipment and purchase timing.~~purchases in fiscal year 2024. Tobacco inventory levels increased by ~~$258.0~~$266.8 million from March 31, ~~2022~~2023 levels to $1.1 billion at June 30, ~~2022,~~2023, on seasonal leaf ~~purchases.~~purchases of larger tobacco crops. Tobacco inventory levels were ~~$206.1~~$20.4 million above June 30, ~~2021 levels, mainly due to higher green tobacco costs and tobacco shipment timing.~~2022 levels. We generally do not purchase material quantities of tobacco on a speculative basis.However, when we contract directly with tobacco farmers, we are often obligated to buy all stalk positions, which may contain less marketable leaf styles.At June 30, ~~2022,~~2023, our uncommitted tobacco inventories

were $175.2 million, or about 16% of total tobacco inventory, compared to $91.1 million, or about 11% of our March 31, 2023 tobacco inventory, and $164.3 million, or about 15% of ~~total tobacco inventory, compared to $130.1 million, or about 16% of our March 31, 2022 tobacco inventory, and $158.6 million, or about 18% of~~ our June 30, ~~2021~~2022 tobacco inventory.While we target committed inventory levels of 80% or more of total tobacco inventory, the level of these uncommitted inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.

Our balance sheet accounts reflected seasonal patterns in the quarter ended June 30, ~~2022,~~2023, on deliveries of tobacco crops by farmers in both South America and Africa.Accounts receivable decreased by ~~$66.3~~$26.5 million from March 31, ~~2022~~2023 levels, as we used collections on receivables to fund seasonal working capital needs.Advances to suppliers were ~~$99.9~~$111.2 million at June 30, ~~2022,~~2023, a reduction of ~~$30.0~~$59.6 million from March 31, ~~2022,~~2023, as tobacco crops were delivered in payment on some of those balances, net of new advances on ~~current~~upcoming tobacco crops.Accounts receivable—unconsolidated affiliates were up ~~$44.0~~$61.1 million in the three months ended June 30, ~~2022,~~2023, on the timing of tobacco crop purchases and shipments.Notes payable and overdrafts were up ~~$272.0~~$164.3 million from March 31, ~~2022~~2023 levels, on ~~increased notes payable usage rather than cash on hand to fund~~ seasonal working capital needs. ~~Cash balances available at March 31, 2022, were reduced~~Customer advances and deposits increased by $100.4 million in the three months ended June 30, 2023, due to ~~the Shank's acquisition and working capital requirements~~a customer arrangement providing for a higher amount of advances on tobacco crop purchases in fiscal year ~~2022.~~2024.

Accounts receivable were up ~~$39.2~~$56.5 million for the quarter ended June 30, ~~2022,~~2023, compared to the same quarter in the prior fiscal year, on larger tobacco crops and the timing of tobacco crop ~~purchases and shipments as well as higher leaf tobacco costs.Advances to suppliers~~shipments. Accounts receivable—unconsolidated affiliates were up ~~$29.5~~$24.8 million atin the three months ended June 30, 2023, on larger tobacco crop sizes. Notes payable and overdrafts were down $94.8 million compared to June 30, 2022 ~~compared to at June 30, 2021, partly~~levels, in part due to higher ~~crop input costs.Inventories—Other~~customer advances available to fund working capital needs. Accounts payable were ~~also up in~~down $33.3 million for the quarter ended June 30, ~~2022,~~2023 compared to the quarter ended June 30, ~~2021, on our acquisition of Shank’s.Notes payable and overdrafts were up $301.3 million compared to June 30, 2021 levels, on higher tobacco inventory costs and the acquisition of Shank’s in October 2021.Accounts payable and accrued expenses were up $77.6 million for the quarter ended June 30,~~ 2022, ~~compared to the quarter ended June 30, 2021,~~ primarily on the timing tobacco ~~purchases.~~purchases in fiscal year 2023.

Investing Activities

Our capital allocation strategy focuses on four strategic priorities: strengthening and investing for growth in our leaf tobacco business; increasing our strong dividend; exploring growth opportunities for our plant-based ingredients ~~platform that utilize our assets and capabilities;~~platform; and returning excess capital to our shareholders. In deciding where to invest capital resources, we look for opportunities where we believe we can earn an adequate return as well as leverage our assets and expertise or enhance our farmer base. Our capital expenditures are generally limited to those that add value, replace or maintain equipment, increase efficiency, or position us for future growth. During the ~~quarters~~quarter ended June 30, ~~2022~~2023 and ~~2021,~~2022, we invested about ~~$15.1~~$18.0 million and ~~$14.4~~$15.1 million, respectively, in our property, plant and equipment. Depreciation expense was approximately ~~$10.9~~$11.9 million and ~~$9.7~~$10.9 million for the ~~three months~~quarter ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. In addition, from time to time, we undertake projects that require capital expenditures when we identify opportunities to improve efficiencies, invest in sustainability projects, add value for our customers, and position ourselves for future growth. We currently expect to spend approximately ~~$40~~$65 to ~~$50~~$75 million over the next twelve months on capital projects for maintenance of our facilities and other investments, including significant investments in our plant-based ingredients platform, to grow and improve our businesses.

Our Board of Directors approved our current share repurchase program in November ~~2020.~~ 2022. The program authorizes the purchase of up to $100 million of our common stock through November 15, ~~2022.~~2024. Under the ~~current authorization,~~program, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates. Repurchases of shares under the repurchase program may vary based on management discretion, as well as changes in cash flow generation and availability. During the three months ended June 30, ~~2022,~~2023, we did not purchase any shares of common stock. As of June 30, ~~2022,~~2023, approximately 24.6 million shares of our common stock were outstanding, and our available authorization under our current share repurchase program was ~~about $96.9~~$100 million.

Financing Activities

We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt. We also consider our net debt plus shareholders' equity to be our net capitalization. Net debt as a percentage of net capitalization was approximately ~~41%~~42% at June 30, ~~2022,~~2023, up slightly from the June 30, ~~2021~~2022 level of approximately ~~31%~~41%, ~~largely~~primarily on ~~higher debt balances due in part to the Shank’s acquisition in October 2021 as well as~~ higher working capital requirements, and up from the March 31, ~~2022~~2023 level of approximately ~~32%~~35%. As of June 30, ~~2022,~~2023, we had ~~$86.6~~$80.5 million in cash and cash equivalents, our short-term debt totaled ~~$454.7~~$359.8 million, and we were in compliance with all covenants of our debt agreements, which require us to maintain certain levels of tangible net worth and observe restrictions on debt levels.

As of June 30, ~~2022,~~2023, we had ~~$155~~$480 million available under athe committed revolving credit facility that will mature in December ~~2023,~~2027, and we had about ~~$84~~$59 million in ~~unused,~~available, uncommitted credit lines. We also maintain an effective, undenominated universal shelf registration statement that provides for future issuance of additional debt or equity securities. We have no long-term debt maturing until fiscal year ~~2024.~~ 2028.

Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-year. Available capital resources from our cash balances, committed credit facility, and uncommitted credit lines exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months.

Derivatives

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At June 30, ~~2022,~~2023, the fair value of our outstanding interest rate swap agreements was an asset of about ~~$4.3~~$5.8 million, and the notional amount swapped was ~~$370~~$310 million. We entered into these agreements to eliminate the variability of cash flows in the interest

payments on a portion of our variable-rate term loans. Under the swap agreements we receive variable rate interest and pay fixed rate interest. The swaps are accounted for as cash flow hedges.

We also use derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecasted purchases of tobacco, related processing costs, and crop input sales in Brazil, as well as our net monetary balance sheet exposures in local currency there.We generally account for our hedges of forecasted tobacco purchases as cash flow hedges.At June 30, ~~2022,~~2023, the fair value of our open hedges was a net asset of about ~~$0.8~~$0.6 million.

Critical Accounting Estimates

~~We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net asset of approximately $7.5 million at June 30, 2022.~~

A summary of our critical accounting policies is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the period ended March 31, 2023. Our critical accounting policies have not changed from those reported in the 2023 Annual Report on Form 10-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currency

The international leaf tobacco trade generally is conducted in U.S. dollars, thereby limiting foreign exchange risk to that which is related to leaf purchase and production costs, overhead, and income taxes in the source country. We also provide farmer advances that are directly related to leaf purchases and are denominated in the local currency. Any currency gains or losses on those advances are usually offset by decreases or increases in the cost of tobacco, which is priced in the local currency. However, the effect of the offset may not occur until a subsequent quarter or fiscal year. Most of our tobacco operations are accounted for using the U.S. dollar as the functional currency. Because there are no forward foreign exchange markets in many of our major countries of tobacco origin, we often manage our foreign exchange risk by matching funding for inventory purchases with the currency of sale, which is usually the U.S. dollar, and by minimizing our net local currency monetary position in individual countries. We are vulnerable to currency remeasurement gains and losses to the extent that monetary assets and liabilities denominated in local currency do not offset each other. In addition to foreign exchange gains and losses, we are exposed to changes in the cost of tobacco due to changes in the value of the local currency in relation to the U.S. dollar. We routinely enter forward currency exchange contracts to hedge against the effects of currency movements on purchases of tobacco to reduce the volatility of costs. In addition, from time-to-time we enter forward contracts to hedge balance sheet exposures.

In certain tobacco markets that are primarily domestic, we use the local currency as the functional currency. Examples of these markets are Poland and the Philippines. In other markets, such as Western Europe, where export sales have been primarily in local currencies, we also use the local currency as the functional currency. In each case, reported earnings are affected by the translation of the local currency into the U.S. dollar.

Interest Rates

We generally use both fixed and floating interest rate debt to finance our operations. Changes in market interest rates expose us to changes in cash flows for floating rate instruments and to changes in fair value for fixed-rate instruments. We normally maintain a proportion of our debt in both variable and fixed interest rates to manage this exposure, and from time to time we may enter hedge agreements to swap the interest rates. In addition, our customers may pay market rates of interest for inventory purchased on order, which could mitigate a portion of the floating interest rate exposure. We also periodically have large cash balances and may receive deposits from customers, both of which we use to fund seasonal purchases of tobacco, reducing our financing needs. Excluding the portion of our bank term loans that have been converted to fixed-rate borrowings with interest rate swaps, debt carried at variable interest rates was approximately ~~$605~~$670 million at June 30, ~~2022.~~2023. Although a hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately ~~$6.0~~$6.7 million, that amount would be at least partially mitigated by changes in charges to customers.

Derivatives Policies

Hedging interest rate exposure using swaps and hedging foreign exchange exposure using forward contracts are specifically contemplated to manage risk in keeping with management's policies. We may use derivative instruments, such as swaps, forwards, or futures, which are based directly or indirectly upon interest rates and currencies to manage and reduce the risks inherent in interest rate and currency fluctuations. When we use foreign currency derivatives to mitigate our exposure to exchange rate fluctuations, we may choose not to designate them as hedges for accounting purposes, which may result in the effects of the derivatives being recognized in our earnings in periods different from the items that created the exposure.

We do not utilize derivatives for speculative purposes, and we do not enter into market risk-sensitive instruments for trading purposes. Derivatives are transaction specific so that a specific debt instrument, forecast purchase, contract, or invoice determines the amount, maturity, and other specifics of the hedge. We routinely review counterparty risk as part of our derivative program.

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ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file under the ~~Securities~~ Exchange Act, ~~of 1934 (the “Exchange Act”)~~, ~~as amended,~~ is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.

We have excluded Shank's, our wholly-owned subsidiary we acquired on October 4, 2021, which is included in our Consolidated Financial Statements, from our assessment of internal control over financial reporting as of June 30, 2022. Shank's represented 4% of consolidated total assets as of June 30, 2022 and 3% of consolidated sales and other operating revenues for the three months ending June 30, 2022. Our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of other members of management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, management concluded that our disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other Legal Matters

Some of our subsidiaries are involved in litigation or legal matters incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, we are vigorously defending them and do not currently expect that any of them will have a material adverse effect on our business or financial position. However, should one or more of these matters be resolved in a manner adverse to our current expectation, the effect on our results of operations for a particular fiscal reporting period could be material.

ITEM 1A. RISK FACTORS

As of the date of this report, there are no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended March 31, ~~2022~~2023 (the ~~"2022~~"2023 Annual Report on Form 10-K"). In evaluating our risks, readers should carefully consider the risk factors discussed in our ~~2022~~2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or operating results, in addition to the other information set forth in this report and in our other filings with the Securities and Exchange Commission.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As indicated in the following table, we did not repurchase shares of our common stock during the three-month period ended June 30, ~~2022:~~2023:

Period (1)

Total Number of Shares Repurchased

Average Price Paid Per Share (2)

Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs (3)

Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3)

April 1-30, ~~2022~~2023

—

~~96,946,661~~100,000,000

May 1-31, ~~2022~~2023

—

~~96,946,661~~100,000,000

June 1-30, ~~2022~~2023

—

~~96,946,661~~100,000,000

Total

—

~~96,946,661~~100,000,000

(1)Repurchases are based on the date the shares were traded. This presentation differs from the consolidated statement of cash flows, where the cost of share repurchases is based on the date the transactions were settled.

(2)Amounts listed for average price paid per share include broker commissions paid in the transactions.

(3)A stock repurchase plan, which was authorized by ~~our~~the Company's Board of Directors, became effective and was publicly announced on November ~~5, 2020.~~3, 2022. This stock repurchase plan ~~authorizes~~authorized the purchase of up to $100 million in common and/or preferred stock in open market or privately negotiated transactions through November 15, ~~2022~~2024 or when ~~we have exhausted the~~ funds ~~authorized~~ for the program have been exhausted, subject to market conditions and other factors.

Our current dividend policy anticipates the payment of quarterly dividends in the future. However, the declaration and payment of dividends to holders of common stock is at the discretion of the Board of Directors and will be dependent upon our future earnings, financial condition, and capital requirements. Under certain of our credit facilities, we must meet financial covenants relating to minimum tangible net worth and maximum levels of debt. If we were not in compliance with them, these financial covenants could restrict our ability to pay dividends. We were in compliance with all such covenants at June 30, ~~2022.~~2023.

ITEM 5. OTHER INFORMATION

During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

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ITEM 6. EXHIBITS



31.1						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.*

32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.*

101						Interactive Data File (submitted electronically herewith).*

						101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section and shall not be part of any registration or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________

*Filed herewith

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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.


		UNIVERSAL CORPORATION
		(Registrant)

Date:	August ~~3, 2022~~2, 2023	/s/ Johan C. Kroner
		Johan C. Kroner, Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date:	August ~~3, 2022~~2, 2023	/s/ Scott J. Bleicher
		Scott J. Bleicher, Vice President and Controller
		(Principal Accounting Officer)

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(in thousands of dollars)	June 30, 2022
Maturity of Operating Lease Liabilities
2023 (excluding the three months ended June 30, 2022)	$	9,459
2024	10,714
2025	8,523
2026	5,285
2027	4,075
2028 and thereafter	8,558
Total undiscounted cash flows for operating leases	$	46,614
Less: Imputed interest	(7,319)
Total operating lease liabilities	$	39,295


	Three Months Ended June 30,
(in thousands, except lease term and incremental borrowing rate)		2022			2021

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities		$	3,290		$	2,777
Right-of-use assets obtained in exchange for new operating leases		4,527			2,741

Weighted Average Remaining Lease Term (years)		5.31			5.44

Weighted Average Collateralized Incremental Borrowing Rate		5.81		%	4.12		%