Standard Commercial Corporation Announces Earnings, Wool Exit and
Lowers Estimate for Full Year WILSON, N.C., Nov. 5
/PRNewswire-FirstCall/ -- Standard Commercial Corporation today
announced that for the quarter ended September 30, 2003, income
from continuing operations was $14.3 million versus $16.6 million
in the prior year's quarter. The recent quarter was impacted by the
timing of shipments in the first fiscal quarter of this year. For
the six months year to date, income from continuing operations was
$23.2 million and level with the prior year. Basic earnings per
share from continuing operations for the quarter was $1.05 versus
$1.23 per share in the prior year period. Basic earnings per share
from continuing operations for the current six months was $1.71
versus $1.73 in the prior year's period. The Company has made the
decision to exit the wool business. The assets and liabilities of
the Wool Division have been reclassified as held for sale and shown
separately in the consolidated balance sheets with the exception of
$59.6 million of wool debt that is guaranteed by the Company which
will remain in consolidated debt totals until the disposition is
complete. The wool trading loss for the quarter and six months was
$2.0 million and $4.2 million respectively, versus a loss of $1.5
million and $3.3 million in the prior year periods. In addition to
the trading losses, a disposal charge of $26.6 million was recorded
in the September quarter. The combined effects of the losses and
the disposal charge are reported as Loss from Discontinued
Operations. The basic loss per share for the discontinued
operations for the quarter and six months was $2.10 and $2.27
respectively, versus a loss of $0.11 and $0.25 in the prior year
periods. Tobacco sales for the quarter ended September 30, 2003
were $210.1 million, an increase of 3.1% from $203.7 million a year
earlier. For the six months sales were up 7.6% from $356.9 million
to $384.2 million. Volumes for the current quarter were down 2.8%
and for the six months were up 4.1%. The average sales value per
kilo for the current quarter and six months was up 6.4% and 4.4%
respectively over the prior year periods. Shipments for the quarter
and six months from Malawi, Zimbabwe and Spain were lower than
prior year periods due to the reduction in the quantity of tobacco
available for marketing, but shipments from Italy, Argentina,
Brazil, Kenya, China and Thailand were higher.Gross profit for the
quarter and six months was $37.5 million and $70.7 million versus
$42.1 million and $71.4 million respectively in the prior year
periods. The variances were mainly due to sales mix and reduced
margins in European tobaccos due to a strong Euro against the US
Dollar. Selling, general and administrative expenses for the
quarter and six months were higher than the prior year mainly due
to normal inflationary increases, higher personnel expenses and
legal/professional fees and the effect of a weak dollar against
other currencies in which certain expenses were incurred. The
reduction in the current quarter and six months other income
(expense) -- net was mainly due to reduced interest income. The
effective tax rate decreased to 23.1% and 29.7% in the current
quarter and six months from 32.5% and 38% in the corresponding
periods a year earlier. This was due to the payment of with-holding
taxes on dividends from subsidiary companies during the September
2002 quarter and six months periods. The combined net loss for the
quarter and six months, including the loss on discontinued
operations, was $14.3 million and $7.7 million or $1.05 and $0.56
per basic share versus net income for the quarter and six months
after the discontinued operations in the prior year periods of
$15.1 million and $19.9 million respectively. Robert E. Harrison,
Chairman, President and Chief Executive Officer said, "We have made
the strategic decision to exit wool and accordingly have taken a
charge for what we believe will be the ultimate cost to discontinue
the remaining operations. We are actively engaged in sales
discussions with various prospective buyers. Exiting wool should
enable us to sharpen our focus and concentrate our resources on our
core tobacco business where we are strategically well positioned
and have the ability to earn solid returns. In line with that
sharper focus we have also made the decision to exit our tobacco
operations in Greece and Honduras where a combination of weak
demand, market structure and competition failed to produce the
necessary economies of scale to generate a fair return to our
shareholders. The costs associated with these exits will occur in
subsequent periods as the current crop is only just being packed."
Harrison added, "Overall, we are pleased with the tobacco results
which for the six months were level with the prior year's record
achievements. However, due to tighter leaf trading conditions in
Brazil and Malawi and volume and margin pressures in Russia, along
with the unfavorable impact the strong Euro is having on our
European operations, we now believe that operating results for the
second half of our fiscal year will be lower than originally
thought. Consequently, we are looking at the range for the full
year now being between $2.65 and $2.85 per basic share from
continuing operations. The investments we have made in leaf
processing in recent years are expected to continue to generate
increasing returns as our customers seek new sources of leaf at
good value. Our newest facility in Indonesia opened this past month
and is off to a good start, building a strong business base in that
country. We continue to believe there are additional opportunities
to invest in the tobacco industry that should provide growth
opportunities for our shareholders." Because of the seasonal nature
of the Company's businesses, results for the periods reported are
not necessarily indicative of results for other interim periods or
the full year. Readers of this news release should note that
comments contained herein that are not purely statements of
historical fact may be deemed to be forward- looking. Any such
forward-looking statement is based upon management's current
knowledge and assumptions about future events. The Company's actual
results could vary materially from those expected due to many
factors, many of which the Company cannot control. These include
changes in timing of shipments, weather, demand for and supply of
leaf tobacco and wool, tobacco litigation or legislation, customer
consolidations, changes in general economic conditions, political
risks and changes in government regulations. Additional information
on factors that may affect management's expectations or Standard
Commercial's financial results can be found in the Company's
filings with the Securities and Exchange Commission. The Company
assumes no obligation to update any of these forward-looking
statements. NOTE: The Company will hold a teleconference hosted by
R. E. Harrison, Chairman, President and Chief Executive Officer, to
go over this announcement and answer questions at 8:30 am EDT on
Thursday, November 6. To log in with AT&T prior to the
teleconference U.S. investors may participate by dialing
888-423-3281; international investors should dial 651-291-0278.
Playback will be available November 6, through November 13. For
playback in the U.S. dial 800-475-6701; international investors
dial 320-365-3844. The playback access code will be 705484.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (In
thousands, except per share data; unaudited) Second quarter Six
months ended ended September 30 September 30 2003 2002* 2003 2002*
Sales - tobacco $210,081 $203,715 $384,169 $356,904 Cost of sales -
materials, services and supplies 169,876 157,909 308,248 279,319 -
interest 2,669 3,670 5,243 6,192 Gross profit 37,536 42,136 70,678
71,393 Selling, general and administrative expenses 18,859 18,122
37,308 34,109 Other interest expense 1,284 822 2,422 2,094 Other
income (expense) - net 582 1,315 999 1,984 Income before taxes
17,975 24,507 31,947 37,174 Income taxes (4,146) (7,961) (9,502)
(14,109) Income after taxes 13,829 16,546 22,445 23,065 Minority
interests 71 -- 139 -- Equity in earnings of affiliates 367 100 567
100 Income from continuing operations 14,267 16,646 23,151 23,165
Loss from discontinued operations, net of tax (28,576) (1,524)
(30,848) (3,299) Net income (loss) (14,309) 15,122 (7,697) 19,866
Retained earnings at beginning of period 173,256 136,888 167,495
132,812 Common stock dividends (1,192) (843) (2,043) (1,511)
Retained earnings at end of period $157,755 $151,167 $157,755
$151,167 Earnings (loss) per common share Basic: From continuing
operations $1.05 $1.23 $1.71 $1.73 From discontinued operations
(2.10) (0.11) (2.27) (0.25) Net $(1.05) $1.12 $(0.56) $1.48 Average
shares outstanding 13,619 13,483 13,578 13,426 Diluted: From
continuing operations $0.97 $1.14 $1.60 $1.61 From discontinued
operations (1.87) (0.10) (2.03) (0.22) Net $(0.90) $1.04 $(0.43)
$1.39 Average shares outstanding 15,222 15,100 15,174 15,081
Dividend declared per common share $0.0875 $0.0625 $0.15 $0.1125 *
Restated to comply with the current period presentation. STANDARD
COMMERCIAL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands,
except share data) September 30 March 31 2003 2002* 2003*
(unaudited) ASSETS Cash $ 16,565 $ 10,603 $ 26,570 Receivables
189,177 156,329 169,550 Inventories 267,828 256,291 216,272 Assets
of discontinued operations (Note 1) 110,612 133,369 146,139 Prepaid
expenses 4,890 5,756 2,300 Marketable securities 1,243 1,019 1,234
Current assets 590,315 563,367 562,065 Property, plant and
equipment 157,089 135,946 146,861 Investment in affiliates 7,988
6,641 7,421 Goodwill 9,003 9,003 9,003 Other assets 35,210 25,316
26,108 Total assets $799,605 $740,273 $751,458 LIABILITIES
Short-term borrowings (Note 1) $243,574 $226,228 $182,103 Current
portion of long-term debt (Note 1) 7,974 4,953 5,107 Accounts
payable and accrued liabilities 119,507 88,113 135,444 Liabilities
of discontinued operations (Note 1) 25,132 28,527 32,322 Taxes
accrued 14,793 13,634 10,170 Current liabilities 410,980 361,455
365,146 Long-term debt (Note 1) 83,850 95,977 78,672 Convertible
subordinated debentures 45,051 45,051 45,051 Retirement and other
benefits 15,297 16,567 13,871 Deferred income taxes 4,434 3,824
4,753 Total liabilities 559,612 522,874 507,493 MINORITY INTERESTS
1,807 -- 1,840 SHAREHOLDERS' EQUITY Preferred stock, $1.65 par
value; authorized shares 1,000,000 Issued none Common stock, $0.20
par value; authorized shares 100,000,000 Issued 16,237,947 (Sept.
02 - 16,101,397; Mar 03 - 16,110,750) 3,248 3,220 3,222 Additional
paid-in capital 110,634 108,260 108,453 Unearned restricted stock
plan compensation (3,984) (3,657) (2,991) Treasury shares,
2,617,707 (4,250) (4,250) (4,250) Retained earnings 157,755 151,167
167,495 Accumulated other comprehensive income (25,217) (37,341)
(29,804) Total shareholders' equity 238,186 217,399 242,125 Total
liabilities and shareholders' equity $799,605 $740,273 $751,458 *
Restated to comply with the current period presentation. The
accompanying note is an integral part of these financial statement.
Note 1 Discontinued Operations During the last quarter of fiscal
2002 the Company decided to close and dispose of wool units in
South Africa, New Zealand, Argentina and the specialty fibers
business in Holland. By September 30, 2003 the sale of the
Companies in South Africa and New Zealand and the trade assets of
Argentina and specialty fibers units had been completed. Despite
the decision in fiscal 2002 to shrink our wool division and focus
on its core markets while also reducing divisional overheads,
trading conditions remained difficult, resulting in continual
losses. This is particularly true in the initial processing stages
for the apparel industry. Given the continuing uncertainty of an
adequate turnaround leading to acceptable returns for our
shareholders, we have taken the strategic decision to focus on our
core tobacco operations. Accordingly, we have decided to exit all
of our remaining wool operations. These operations are in
Australia, UK, Chile, France and Germany. We are currently in
discussions with various prospective purchasers for these
operations and have identified these assets as held for sale. The
wool operating units are available for immediate sale and the
expectation is that the exit plan will be completed without
significant changes. We expect to complete the process of
selling/liquidating these units in the next twelve months. These
wool units are expected to incur additional operating losses until
final disposition. Once disposed, we will not retain a financial
interest and we have not identified any significant contingent
liabilities that would delay or significantly alter the plan of
disposition. The Company will continue to guarantee the debt of the
wool units until disposition, at which time we will no longer
provide any guarantees for the obligations or commitments of the
wool units. We have accounted for the sale of the wool units as
discontinued operations, in accordance with the provisions of SFAS
No 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." The results for all periods presented are included in the
consolidated financial statements as discontinued operations. As
noted above, since the existing debt of the wool units is
guaranteed by the Company, we have not included any such debt in
liabilities of discontinued operations. The wool trading loss for
the quarter and six months excluding the loss to discontinue the
operations was $2.0 and $4.2 million respectively versus $1.5 and
$3.3 million in the prior year periods. The charge recorded in the
current quarter and for the six months to discontinue the wool
operation was $26.6 million. The basic loss per share for the
discontinued operations for the quarter and six months was $2.10
and $2.27 respectively versus a loss of $0.11 and $0.25 in the
prior year periods. The estimated loss to discontinue the wool
operations of $26.6 million has been recorded during the quarter
ended September 30, 2003 as the carrying amount of the net assets
of the wool units exceeded the fair value less estimated disposal
costs. The fair value has been determined based on current
negotiations with prospective purchasers and comparisons with other
industry transactions. Revenues and the assets and liabilities for
these units are as follows: Quarter ended Six months ended
September 30 September 30 2003 2002 2003 2002 (In thousands)
Revenues $38,719 $41,453 $81,301 $96,392 September 30 March 31 2003
2002 2003 (In thousands) Receivables $39,311 $42,858 $45,697
Inventory 66,665 62,237 69,998 Other assets 4,636 28,274 30,444
Assets $110,612 $133,369 $146,139 Accounts payable and other
liabilities 25,132 28,527 32,322 Net assets available for sale
$85,480 $104,842 $113,817 Wool debt guaranteed by the Company not
included in discontinued operations. September 30 March 31 2003
2002 2003 Bank borrowings $58,658 $61,756 $74,894 Current portion
of long-term debt 791 821 698 Total current 59,449 62,577 75,592
Long-term portion of long-term debt 178 1,328 248 Total debt
guaranteed $59,627 $63,905 $75,840 DATASOURCE: Standard Commercial
Corporation CONTACT: Robert A. Sheets of Standard Commerical
Corporation, +1-252-291-5507 Web site: http://www.sccgroup.com/
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