UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 1, 2006
UNIVERSAL CORPORATION
(Exact name of registrant as specified in its charter)
| Virginia | 1-652 | 54-0414210 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification Number) |
| 1501 North Hamilton Street | ||
| Richmond, Virginia | 23230 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(804) 359-9311
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01. Completion of Acquisition or Disposition of Assets.
On September 1, 2006, Universal Corporation (the “Company”) completed the sale of the non-tobacco businesses managed by its wholly owned subsidiary, Deli Universal, Inc. (“Deli’) to NVDU Acquisition B.V. (“NVDU”), a newly formed entity owned by NIBC Principal Investments, NPM Capital N.V., and managers of the businesses that were sold. NIBC Principal Investments is a part of NIBC Bank N.V., a Netherlands-based merchant bank. NPM Capital N.V. is a part of SHV Holdings, N.V., a Netherlands-based private company. The total value of the transaction was approximately $547 million and was determined by arm’s-length negotiations between the parties. After selling and other expenses, Universal realized a net value of approximately $517 million, consisting of net cash proceeds of $391 million and the assumption of $126 million of debt with the acquired businesses by NVDU. These amounts represent refinements of earlier estimates. The value of the transaction is subject to adjustment based on final agreement on the accounts of the businesses as of September 1, 2006, in accordance with the terms of the Purchase and Sale Agreement between the parties dated July 6, 2006, which the Company has previously filed as an Exhibit to a Current Report on Form 8-K filed on July 11, 2006.
Deli’s non-tobacco businesses include lumber and building products distribution and agri-products operations, including rubber and food trading, tea, and sunflower seeds. Universal retained its dried fruits and nuts business in the United States and London.
Item 8.01. Other Events.
The Company filed a press release on September 1, 2006, announcing the completion of the sale described in Item 2.01 above. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Consolidated Financial Statements for
Universal Corporation
On September 1, 2006, Universal Corporation (“Universal” or the “Company”) completed the sale of the non-tobacco businesses managed by its wholly owned subsidiary, Deli Universal, Inc. (“Deli”), to NVDU Acquisition B.V. (“NVDU”), a newly formed entity owned by NIBC Principal Investments, NPM Capital N.V., and managers of the businesses that were sold. NIBC Principal Investments is a part of NIBC Bank N.V., a Netherlands-based merchant bank. NPM Capital N.V. is a part of SHV Holdings, N.V., a Netherlands-based private company. The total value of the transaction was approximately $547 million. After selling and other expenses, Universal realized a net value of approximately $517 million, consisting of net cash proceeds of $391 million and the assumption of $126 million of debt with the acquired businesses by NVDU. The value of the transaction is subject to adjustment based on final agreement on the accounts of the businesses as of the closing date.
Unaudited pro forma condensed consolidated financial information for Universal, giving effect to the sale, is set forth below as follows:
| • | Unaudited pro forma condensed consolidated balance sheet as of June 30, 2006, giving effect to the sale as if it had occurred on June 30, 2006; and |
| • | Unaudited pro forma condensed consolidated statements of income for the three months ended June 30, 2006, and the fiscal year ended March 31, 2006, giving effect to the sale as if it had occurred on April 1, 2005, which was the beginning of the fiscal year ended March 31, 2006. |
The pro forma adjustments, which are more fully described in the Notes to Pro Forma Condensed Consolidated Financial Statements, are based on available information and assumptions that the Company’s management believes are reasonable as of the date of this filing.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with Universal’s historical consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2006, and in its Quarterly Report on Form 10-Q for the three months ended June 30, 2006. The unaudited pro forma condensed consolidated financial information presented herein is for informational purposes only and is not intended to represent or be indicative of the consolidated financial position or results of operations that would have been reported had the sale of Deli’s non-tobacco businesses been completed as of the dates presented. The information is also not intended to be representative of Universal’s future financial position or results of operations. Since the pro forma condensed consolidated statements of income reflect the results from continuing operations, they do not include the loss on the sale of Deli’s non-tobacco operations.
Universal Corporation
Pro Forma Condensed Consolidated Balance Sheet
June 30, 2006
(Unaudited)
| Pro Forma Adjustments | ||||||||||||||
| (in thousands of dollars) | Historical Consolidated |
Deconsolidate Deli Universal Non-Tobacco Businesses |
Sale of Deli Universal |
Pro Forma Consolidated | ||||||||||
| (Note 1) | (Note 2) | |||||||||||||
| ASSETS |
||||||||||||||
| Current assets |
||||||||||||||
| Cash and cash equivalents |
$ | 93,518 | $ | (6,864 | ) | $ | 86,654 | |||||||
| Accounts receivable, net |
473,246 | (246,847 | ) | 226,399 | ||||||||||
| Advances to suppliers, net |
143,517 | (2,192 | ) | 141,325 | ||||||||||
| Inventories-at lower of cost or market: |
— | |||||||||||||
| Tobacco |
812,489 | 812,489 | ||||||||||||
| Lumber and building products |
178,622 | (178,622 | ) | — | ||||||||||
| Agri-products |
148,707 | (87,830 | ) | 60,877 | ||||||||||
| Other |
55,441 | 55,441 | ||||||||||||
| Other current assets |
136,323 | (9,213 | ) | 127,110 | ||||||||||
| Total current assets |
2,041,863 | (531,568 | ) | — | 1,510,295 | |||||||||
| Investment in Deli Universal, Inc. non-tobacco businesses |
— | 420,733 | (420,733 | ) | — | |||||||||
| Property, plant and equipment, net |
577,355 | (176,523 | ) | 400,832 | ||||||||||
| Goodwill and other intangibles |
142,750 | (36,576 | ) | 106,174 | ||||||||||
| Other noncurrent assets |
343,990 | (17,253 | ) | 326,737 | ||||||||||
| Total assets |
$ | 3,105,958 | $ | (341,187 | ) | $ | (420,733 | ) | $ | 2,344,038 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||||
| Current liabilities |
||||||||||||||
| Notes payable and overdrafts |
$ | 487,850 | $ | (143,031 | ) | $ | (128,535 | ) | $ | 216,284 | ||||
| Accounts payable |
381,379 | (140,102 | ) | 241,277 | ||||||||||
| Customer advances and deposits |
187,189 | (125 | ) | 187,064 | ||||||||||
| Current portion of long-term obligations |
8,534 | 8,534 | ||||||||||||
| Other current liabilities |
48,952 | (16,837 | ) | 32,115 | ||||||||||
| Total current liabilities |
1,113,904 | (300,095 | ) | (128,535 | ) | 685,274 | ||||||||
| Long-term obligations |
761,520 | (262,000 | ) | 499,520 | ||||||||||
| Other long-term liabilities |
233,199 | (38,065 | ) | 195,134 | ||||||||||
| Total liabilities |
2,108,623 | (338,160 | ) | (390,535 | ) | 1,379,928 | ||||||||
| Minority interests |
17,374 | (3,027 | ) | 14,347 | ||||||||||
| Shareholders’ equity |
979,961 | — | (30,198 | ) | 949,763 | |||||||||
| Total liabilities and shareholders’ equity |
$ | 3,105,958 | $ | (341,187 | ) | $ | (420,733 | ) | $ | 2,344,038 | ||||
See accompanying notes to pro forma condensed consolidated financial statements.
Universal Corporation
Pro Forma Condensed Consolidated Statement of Income
Three Months Ended June 30, 2006
(Unaudited)
| Pro Forma Adjustments |
||||||||||||
| (in thousands, except per share amounts) | Historical Consolidated |
Sale of Deli Universal |
Pro Forma Consolidated |
|||||||||
| (Note 3) | ||||||||||||
| Sales and other operating revenues |
$ | 943,209 | $ | (418,521 | ) | $ | 524,688 | |||||
| Costs and expenses |
||||||||||||
| Cost of goods sold |
786,934 | (351,387 | ) | 435,547 | ||||||||
| Selling, general and administrative expenses |
112,480 | (42,071 | ) | 70,409 | ||||||||
| Restructuring and impairment costs |
12,289 | — | 12,289 | |||||||||
| Operating income |
31,506 | (25,063 | ) | 6,443 | ||||||||
| Equity in pretax earnings (loss) of unconsolidated affiliates |
(3,088 | ) | (452 | ) | (3,540 | ) | ||||||
| Interest expense |
18,151 | (6,912 | ) | 11,239 | ||||||||
| Income from continuing operations before income taxes and other items |
10,267 | (18,603 | ) | (8,336 | ) | |||||||
| Income taxes |
13,191 | (6,511 | ) | 6,680 | ||||||||
| Minority interests |
(576 | ) | (567 | ) | (1,143 | ) | ||||||
| Income (loss) from continuing operations |
(2,348 | ) | (11,525 | ) | (13,873 | ) | ||||||
| Dividends on convertible perpetual preferred stock |
(3,547 | ) | — | (3,547 | ) | |||||||
| Income (loss) from continuing operations available to common shareholders |
$ | (5,895 | ) | $ | (11,525 | ) | $ | (17,420 | ) | |||
| Weighted average common shares outstanding: |
||||||||||||
| Basic |
25,748 | 25,748 | ||||||||||
| Diluted |
25,748 | 25,748 | ||||||||||
| Income (loss) from continuing operations per common share: |
||||||||||||
| Basic |
$ | (0.23 | ) | $ | (0.68 | ) | ||||||
| Diluted |
$ | (0.23 | ) | $ | (0.68 | ) | ||||||
See accompanying notes to pro forma condensed consolidated financial statements.
Universal Corporation
Pro Forma Condensed Consolidated Statement of Income
Fiscal Year Ended March 31, 2006
(Unaudited)
| Pro Forma Adjustments |
||||||||||||
| (in thousands, except per share amounts) | Historical Consolidated |
Sale of Deli Universal |
Pro Forma Consolidated |
|||||||||
| (Note 3) | ||||||||||||
| Sales and other operating revenues |
$ | 3,511,332 | $ | (1,401,285 | ) | $ | 2,110,047 | |||||
| Costs and expenses |
||||||||||||
| Cost of goods sold |
2,932,170 | (1,198,827 | ) | 1,733,343 | ||||||||
| Selling, general and administrative expenses |
417,346 | (151,118 | ) | 266,228 | ||||||||
| Restructuring and impairment costs |
57,463 | — | 57,463 | |||||||||
| Operating income |
104,353 | (51,340 | ) | 53,013 | ||||||||
| Equity in pretax earnings of unconsolidated affiliates |
15,263 | (1,123 | ) | 14,140 | ||||||||
| Interest expense |
81,293 | (24,018 | ) | 57,275 | ||||||||
| Income from continuing operations before income taxes and other items |
38,323 | (28,445 | ) | 9,878 | ||||||||
| Income taxes |
34,403 | (9,956 | ) | 24,447 | ||||||||
| Minority interests |
(4,020 | ) | (232 | ) | (4,252 | ) | ||||||
| Income (loss) from continuing operations |
7,940 | (18,257 | ) | (10,317 | ) | |||||||
| Dividends on convertible perpetual preferred stock |
— | — | — | |||||||||
| Income (loss) from continuing operations available to common shareholders |
$ | 7,940 | $ | (18,257 | ) | $ | (10,317 | ) | ||||
| Weighted average common shares outstanding: |
||||||||||||
| Basic |
25,707 | 25,707 | ||||||||||
| Diluted |
25,957 | 25,707 | ||||||||||
| Income (loss) from continuing operations per common share: |
||||||||||||
| Basic |
$ | 0.31 | $ | (0.40 | ) | |||||||
| Diluted |
$ | 0.31 | $ | (0.40 | ) | |||||||
See accompanying notes to pro forma condensed consolidated financial statements.
Universal Corporation
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2006
| (1) | This pro forma adjustment reflects the deconsolidation of the assets and liabilities of the non-tobacco businesses managed by Deli Universal, Inc. (“Deli”), and presents those businesses as if they had been accounted for under the equity method of accounting. The resulting investment in the Deli non-tobacco businesses reflects Universal’s equity in and intercompany loans to those entities. |
| (2) | This pro forma adjustment reflects the sale of the above-referenced businesses, including the following: |
| a. | Net cash received of approximately $391 million, representing gross cash proceeds from the sale of $421 million, less $16 million of selling expenses and $14 million of other net costs related to the transaction. Consistent with the Company’s intent to use the proceeds to repay debt, the pro forma adjustment reflects the utilization of the $391 million net cash received to reduce the specific borrowings that would have been repaid at June 30, 2006, of which $129 million were reported in “notes payable and overdrafts” and $262 million in “long-term obligations”; |
| b. | An after-tax loss of approximately $28 million, consisting of a pretax loss of $23 million that provided no related income tax benefit and $5 million in income tax expense resulting from the write-off of deferred income tax assets recorded in Universal’s consolidated accounts that will not be realized as a result of the transaction. In addition to the effect of the after-tax loss, shareholders’ equity was further reduced by $2 million to reflect the net effect of (1) the net income of the businesses sold for the period from June 30, 2006, to the September 1, 2006, closing date, and (2) the reversal of net accumulated other comprehensive income (loss) balances related to the businesses sold. |
As noted, the proceeds included in the pro forma condensed consolidated balance sheet are equal to the actual net cash received at the closing date. The value of the transaction is subject to adjustment based on final agreement on the balance sheets of the divested businesses as of the closing date.
Pro Forma Condensed Consolidated Statements of Income for the Three Months Ended June 30, 2006, and the Fiscal Year Ended March 31, 2006
| (3) | This pro forma adjustment reflects the elimination of the revenues and expenses of the Deli non-tobacco businesses for the three months ended June 30, 2006, and the fiscal year ended March 31, 2006, giving effect to the sale of those businesses as if it had occurred on April 1, 2005. The pro forma adjustment to interest expense reflects the reduction in consolidated interest expense due to the assumption of debt in the transaction, as well as the Company’s use of the net cash proceeds to repay outstanding debt. |
Since the pro forma condensed consolidated statements of income reflect results from continuing operations, they do not include the loss on the sale of the businesses.
| (c) | Exhibits |
| Exhibit No. | Description | |
| 99.1 | Press Release issued by Universal Corporation, dated September 1, 2006.* |
| * | Filed herewith |
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 hereunto duly authorized.
| UNIVERSAL CORPORATION | ||||
| Date: September 8, 2006 | By: | /s/ Preston D. Wigner | ||
| Preston D. Wigner | ||||
| General Counsel and Secretary | ||||
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Press Release issued by Universal Corporation, dated September 1, 2006.* |
| * | Filed herewith |