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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 | SEPTEMBER 30, 2024 |
| 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. Yes o No þ
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 | þ | 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 April 17, 2025, the total number of shares of common stock outstanding was 24,715,625.

UNIVERSAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS

Item No. |  | Page
| PART I - FINANCIAL INFORMATION |
1. | Financial Statements | 3
2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 26
3. | Quantitative and Qualitative Disclosures About Market Risk | 34
4. | Controls and Procedures | 35
| PART II - OTHER INFORMATION |
1. | Legal Proceedings | 37
1A. | Risk Factors | 37
2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38
5. | Other Information | 38
6. | Exhibits | 39
| Signatures | 40

2

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 September 30, |  | Six Months Ended September 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
|  | (Unaudited) |  | (Unaudited)
Sales and other operating revenues |  | $ | 710,762 |  |  | $ | 638,484 |  |  | $ | 1,307,812 |  |  | $ | 1,156,206 |
Costs and expenses |  |  |  |  |  |  |  |
Cost of goods sold |  | 567,617 |  |  | 506,767 |  |  | 1,068,746 |  |  | 937,977 |
Selling, general and administrative expenses |  | 63,836 |  |  | 73,806 |  |  | 142,532 |  |  | 149,283 |
Restructuring and impairment costs |  | 10,573 |  |  | 2,599 |  |  | 10,573 |  |  | 2,599 |
Operating income |  | 68,736 |  |  | 55,312 |  |  | 85,961 |  |  | 66,347 |
Equity in pretax earnings (loss) of unconsolidated affiliates |  | (642) |  |  | (713) |  |  | (502) |  |  | (4,879) |
Other non-operating income (expense) |  | 461 |  |  | 728 |  |  | 925 |  |  | 1,453 |
Interest income |  | 295 |  |  | 953 |  |  | 1,103 |  |  | 2,318 |
Interest expense |  | 21,273 |  |  | 17,053 |  |  | 42,007 |  |  | 32,596 |
Income (loss) before income taxes and other items |  | 47,577 |  |  | 39,227 |  |  | 45,480 |  |  | 32,643 |
Income taxes |  | 13,608 |  |  | 8,439 |  |  | 14,335 |  |  | 7,016 |
Net income (loss) |  | 33,969 |  |  | 30,788 |  |  | 31,145 |  |  | 25,627 |
Less: net loss (income) attributable to noncontrolling interests in subsidiaries |  | (8,029) |  |  | (2,660) |  |  | (5,075) |  |  | 437 |
Net income (loss) attributable to Universal Corporation |  | $ | 25,940 |  |  | $ | 28,128 |  |  | $ | 26,070 |  |  | $ | 26,064 |
Earnings per share: |  |  |  |  |  |  |  |
Basic |  | $ | 1.04 |  |  | $ | 1.13 |  |  | $ | 1.05 |  |  | $ | 1.05 |
Diluted |  | $ | 1.03 |  |  | $ | 1.12 |  |  | $ | 1.04 |  |  | $ | 1.04 |
Weighted average common shares outstanding: |  |  |  |  |  |  |  |
Basic |  | 24,946,632 |  |  | 24,869,697 |  |  | 24,911,681 |  |  | 24,855,974 |
Diluted |  | 25,135,973 |  |  | 25,015,369 |  |  | 25,101,295 |  |  | 24,997,899 |
Total comprehensive income (loss), net of income taxes |  | $ | 33,531 |  |  | $ | 28,549 |  |  | $ | 25,181 |  |  | $ | 27,754 |
Less: comprehensive (income) loss attributable to noncontrolling interests |  | (8,026) |  |  | (2,541) |  |  | (4,682) |  |  | 700 |
Comprehensive income (loss) attributable to Universal Corporation |  | $ | 25,505 |  |  | $ | 26,008 |  |  | $ | 20,499 |  |  | $ | 28,454 |
Dividends declared per common share |  | $ | 0.81 |  |  | $ | 0.80 |  |  | $ | 1.62 |  |  | $ | 1.60 |

See accompanying notes.
3

UNIVERSAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

|  | September 30, |  | September 30, |  | March 31,
|  | 2024 |  | 2023 |  | 2024
|  | (Unaudited) |  | (Unaudited) |  |
ASSETS |  |  |  |  |  |
Current assets |  |  |  |  |  |
Cash and cash equivalents |  | $ | 80,118 |  |  | $ | 99,683 |  |  | $ | 55,593 |
Accounts receivable, net |  | 537,602 |  |  | 368,924 |  |  | 525,262 |
Advances to suppliers, net |  | 139,766 |  |  | 105,637 |  |  | 139,064 |
Accounts receivable—unconsolidated affiliates |  | 66,646 |  |  | 55,409 |  |  | 5,385 |
Inventories—at lower of cost or net realizable value: |  |  |  |  |  |
Tobacco |  | 1,070,655 |  |  | 1,086,240 |  |  | 1,070,580 |
Other |  | 211,476 |  |  | 212,268 |  |  | 193,518 |
Prepaid income taxes |  | 20,771 |  |  | 23,918 |  |  | 19,484 |
Other current assets |  | 84,884 |  |  | 95,634 |  |  | 93,655 |
Total current assets |  | 2,211,918 |  |  | 2,047,713 |  |  | 2,102,541 |
Property, plant and equipment |  |  |  |  |  |
Land |  | 25,972 |  |  | 26,262 |  |  | 26,244 |
Buildings |  | 330,407 |  |  | 316,180 |  |  | 323,969 |
Machinery and equipment |  | 705,246 |  |  | 705,977 |  |  | 693,868 |
|  | 1,061,625 |  |  | 1,048,419 |  |  | 1,044,081 |
Less accumulated depreciation |  | (685,883) |  |  | (691,811) |  |  | (678,201) |
|  | 375,742 |  |  | 356,608 |  |  | 365,880 |
Other assets |  |  |  |  |  |
Operating lease right-of-use assets |  | 32,487 |  |  | 36,318 |  |  | 32,510 |
Goodwill, net |  | 213,872 |  |  | 213,856 |  |  | 213,869 |
Other intangibles, net |  | 63,263 |  |  | 74,475 |  |  | 68,883 |
Investments in unconsolidated affiliates |  | 78,774 |  |  | 70,618 |  |  | 76,289 |
Deferred income taxes |  | 15,526 |  |  | 16,192 |  |  | 15,181 |
Pension asset |  | 12,293 |  |  | 10,650 |  |  | 11,857 |
Other noncurrent assets |  | 41,711 |  |  | 35,342 |  |  | 50,229 |
|  | 457,926 |  |  | 457,451 |  |  | 468,818 |
Total assets |  | $ | 3,045,586 |  |  | $ | 2,861,772 |  |  | $ | 2,937,239 |

See accompanying notes.
4

UNIVERSAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

|  | September 30, |  | September 30, |  | March 31,
|  | 2024 |  | 2023 |  | 2024
|  | (Unaudited) |  | (Unaudited) |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |
Current liabilities |  |  |  |  |  |
Notes payable and overdrafts |  | $ | 579,132 |  |  | $ | 301,379 |  |  | $ | 417,217 |
Accounts payable |  | 87,106 |  |  | 70,737 |  |  | 108,727 |
Accounts payable—unconsolidated affiliates |  | 174 |  |  | 166 |  |  | 1,621 |
Customer advances and deposits |  | 6,837 |  |  | 166,505 |  |  | 17,179 |
Accrued compensation |  | 29,266 |  |  | 26,772 |  |  | 39,766 |
Income taxes payable |  | 7,948 |  |  | 4,494 |  |  | 7,477 |
Current portion of operating lease liabilities |  | 10,325 |  |  | 10,469 |  |  | 10,356 |
Accrued expenses and other current liabilities |  | 128,634 |  |  | 120,623 |  |  | 109,015 |
Current portion of long-term debt |  | — |  |  | — |  |  | — |
Total current liabilities |  | 849,422 |  |  | 701,145 |  |  | 711,358 |
Long-term debt |  | 617,641 |  |  | 617,086 |  |  | 617,364 |
Pensions and other postretirement benefits |  | 36,734 |  |  | 42,378 |  |  | 43,251 |
Long-term operating lease liabilities |  | 19,038 |  |  | 22,804 |  |  | 19,302 |
Other long-term liabilities |  | 28,425 |  |  | 15,769 |  |  | 27,902 |
Deferred income taxes |  | 36,322 |  |  | 45,082 |  |  | 39,139 |
Total liabilities |  | 1,587,582 |  |  | 1,444,264 |  |  | 1,458,316 |
Shareholders’ equity |  |  |  |  |  |
Universal Corporation: |  |  |  |  |  |
Preferred stock: |  |  |  |  |  |
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 24,715,625 shares issued and outstanding at September 30, 2024 (24,558,493 at September 30, 2023 and 24,573,408 at March 31, 2024) |  | 349,064 |  |  | 339,241 |  |  | 345,596 |
Retained earnings |  | 1,158,658 |  |  | 1,119,615 |  |  | 1,173,196 |
Accumulated other comprehensive loss |  | (87,156) |  |  | (74,667) |  |  | (81,585) |
Total Universal Corporation shareholders' equity |  | 1,420,566 |  |  | 1,384,189 |  |  | 1,437,207 |
Noncontrolling interests in subsidiaries |  | 37,438 |  |  | 33,319 |  |  | 41,716 |
Total shareholders' equity |  | 1,458,004 |  |  | 1,417,508 |  |  | 1,478,923 |
Total liabilities and shareholders' equity |  | $ | 3,045,586 |  |  | $ | 2,861,772 |  |  | $ | 2,937,239 |

See accompanying notes.
5

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

|  | Six Months Ended September 30,
|  | 2024 |  | 2023
|  | (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |
Net income (loss) |  | $ | 31,145 |  |  | $ | 25,627 |
Adjustments to reconcile net income (loss) to net cash used by operating activities: |  |  |  |
Depreciation and amortization |  | 29,420 |  |  | 29,009 |
Net provision for losses (recoveries) on advances to suppliers |  | (5,562) |  |  | 3,835 |
Inventory writedowns |  | 5,231 |  |  | 2,870 |
Stock-based compensation expense |  | 6,583 |  |  | 5,711 |
Foreign currency remeasurement (gain) loss, net |  | 1,334 |  |  | 7,528 |
Foreign currency exchange contracts |  | 3,225 |  |  | 2,563 |
Deferred income taxes |  | 153 |  |  | (3,560) |
Equity in net loss (income) of unconsolidated affiliates, net of dividends |  | 404 |  |  | 3,135 |
Restructuring and impairment costs |  | 10,573 |  |  | 2,599 |
Restructuring payments |  | (350) |  |  | (806) |
Other, net |  | (217) |  |  | 1,012 |
Changes in operating assets and liabilities, net: |  |  |  |
Accounts and notes receivable |  | (63,420) |  |  | 46,724 |
Inventories |  | (21,682) |  |  | (269,422) |
Other assets |  | 9,029 |  |  | 10,235 |
Accounts payable |  | (22,066) |  |  | (18,874) |
Accrued expenses and other current liabilities |  | (19,970) |  |  | 4,680 |
Income taxes |  | (1,238) |  |  | (5,995) |
Customer advances and deposits |  | (10,005) |  |  | 163,663 |
Net cash provided (used) by operating activities |  | (47,413) |  |  | 10,534 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |
Purchase of property, plant and equipment |  | (38,796) |  |  | (32,630) |
Proceeds from sale of business, net of cash held by the business |  | — |  |  | 3,757 |
Proceeds from sale of property, plant and equipment |  | 1,412 |  |  | 713 |
Net cash used by investing activities |  | (37,384) |  |  | (28,160) |
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |
Issuance of short-term debt, net |  | 161,611 |  |  | 105,649 |
Dividends paid to noncontrolling interests |  | (8,960) |  |  | (5,845) |
Repurchase of common stock |  | — |  |  | (4,744) |
Dividends paid on common stock |  | (39,646) |  |  | (39,108) |
Other |  | (3,716) |  |  | (2,963) |
Net cash provided (used) by financing activities |  | 109,289 |  |  | 52,989 |
Effect of exchange rate changes on cash, restricted cash and cash equivalents |  | 33 |  |  | (370) |
Net increase (decrease) in cash, restricted cash and cash equivalents |  | 24,525 |  |  | 34,993 |
Cash, restricted cash and cash equivalents at beginning of year |  | 55,593 |  |  | 64,690 |
Cash, restricted cash and cash equivalents at end of period |  | $ | 80,118 |  |  | $ | 99,683 |

See accompanying notes.
6

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 Quarterly Report on 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, 2024, as amended by Amendment No. 1 thereto (the “2024 Annual Report on Form 10-K”).
Accounting Pronouncements to be Adopted in Future Years
In November 2023, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires additional disclosures about profitability measures utilized by the chief operating decision maker and significant segment expenses. ASU 2023-07 also requires all annual disclosures regarding profit or loss and assets to be included in interim disclosures. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim periods in fiscal years beginning after December 15, 2024, although early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its segment disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires additional disclosures reconciling the rates of different categories of income tax (i.e. federal, state, foreign, etc.) and a disaggregation of taxes paid and refunded. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and for interim periods in fiscal years beginning after December 15, 2025, although early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its income tax disclosures.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires additional disclosures about certain types of costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027, although early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.
NOTE 2. RESTRUCTURING AND IMPAIRMENT COSTS
Universal regularly 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.
Tobacco Operations
During the six months ended September 30, 2024, the Company began consolidating its European sheet tobacco operations into the Company's facility in the Netherlands, by initiating a wind-down of activities at its sheet facility in Germany, incurring $10.5 million of restructuring and impairment costs. Additionally, during the six months ended September 30, 2024, the Company also incurred $0.1 million of termination and impairment costs in other areas of the Tobacco Operations segment.
During the six months ended September 30, 2023, the Company incurred $1.8 million of restructuring and impairment costs for its Global Labs Services ("GLS") facility in Wilson, NC. GLS provided testing for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette liquids and vapors, and had capabilities for testing non-tobacco products. The restructuring and impairment costs were net of approximately $0.2 million of income from the sale of GLS processes and procedures to a third-party buyer. Additionally, during the six months ended September 30, 2023, the Company also incurred $0.8 million of termination and impairment costs in other areas of the Tobacco Operations segment.
7

A summary of the restructuring and impairment costs recorded for the three and six months ended September 30, 2024 and 2023 were as follows:

|  | Three Months Ended September 30, |  | Six Months Ended September 30,
(in thousands) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Restructuring costs: |  |  |  |  |  |  |  |
Employee termination benefits |  | $ | 4,342 |  |  | $ | 1,403 |  |  | $ | 4,342 |  |  | $ | 1,403 |
Other |  | 1,372 |  |  | (182) |  |  | 1,372 |  |  | (182) |
Total restructuring costs |  | 5,714 |  |  | 1,221 |  |  | 5,714 |  |  | 1,221 |
Impairment costs: |  |  |  |  |  |  |  |
Property, plant and equipment |  | 4,859 |  |  | 1,378 |  |  | 4,859 |  |  | 1,378 |
Total impairment costs |  | 4,859 |  |  | 1,378 |  |  | 4,859 |  |  | 1,378 |
Total restructuring and impairment costs |  | $ | 10,573 |  |  | $ | 2,599 |  |  | $ | 10,573 |  |  | $ | 2,599 |

NOTE 3. 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 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. 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.
Ingredients Sales
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 beverages and both human and pet food. The contracts for ingredients with customers create a performance obligation to transfer the manufactured finished goods to the customer. Transaction prices for the sale of ingredients are primarily based on negotiated fixed prices, but the Company does have cost-plus contracts with certain customers. 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.
8

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 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, logistics, sorting, 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 September 30, |  | Six Months Ended September 30,
(in thousands of dollars) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Tobacco sales |  | $ | 601,590 |  |  | $ | 525,534 |  |  | $ | 1,089,821 |  |  | $ | 940,890 |
Ingredients sales |  | 76,543 |  |  | 78,397 |  |  | 157,237 |  |  | 149,055 |
Processing revenue |  | 14,080 |  |  | 18,830 |  |  | 28,749 |  |  | 37,894 |
Other sales and revenue from contracts with customers |  | 16,155 |  |  | 13,046 |  |  | 28,964 |  |  | 24,338 |
Total revenue from contracts with customers |  | 708,368 |  |  | 635,807 |  |  | 1,304,771 |  |  | 1,152,177 |
Other operating sales and revenues |  | 2,394 |  |  | 2,677 |  |  | 3,041 |  |  | 4,029 |
Consolidated sales and other operating revenues |  | $ | 710,762 |  |  | $ | 638,484 |  |  | $ | 1,307,812 |  |  | $ | 1,156,206 |

Other operating sales and revenues consists principally of interest on advances to suppliers and dividend payments from deconsolidated affiliates.
NOTE 4. 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 September 30, 2024, 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 Brazilian operating subsidiary pays VAT when tobaccos grown outside the state of Rio Grande do Sul are transferred to the factory for processing. The subsidiary has received assessments for additional VAT plus interest and penalties from tax authorities for the state of Parana based on audits of the subsidiary’s VAT filings for specified periods. 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 $10 million. Those amounts are based on the exchange rate for the Brazilian currency at September 30, 2024. Management of the operating subsidiary and outside counsel believe that errors were made by the tax authorities in determining all or significant portions of this assessment and that various defenses support the subsidiary’s positions.
Management of the subsidiary and outside counsel challenged the full amount of the Parana assessment claim. A significant portion of the Parana assessment was based on positions taken by the tax authorities that management and outside
9

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 September 30, 2024 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 September 30, 2024.
The process for reaching a final resolution to the assessment is expected to be lengthy, and management is not currently able to predict when the case will be concluded. Should the subsidiary ultimately be required to pay any tax, interest, or penalties in the 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 $151 million at September 30, 2024, $127 million at September 30, 2023, and $162 million at March 31, 2024. The related valuation allowances totaled $11 million at September 30, 2024, $20 million at September 30, 2023, and $20 million at March 31, 2024, and were estimated based on the Company’s historical loss information and crop projections. The allowances were decreased by net recoveries of $5.6 million in the six-month period ended September 30, 2024 and increased by net provisions of approximately $3.8 million in the six-month period ended September 30, 2023. These net recoveries and provisions 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
10

be sold or transferred. At September 30, 2024, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $63 million ($61 million at September 30, 2023 and $72 million at March 31, 2024). The related valuation allowances totaled approximately $21 million at September 30, 2024 and 2023, and March 31, 2024. The net balances are reported in other current assets and other noncurrent assets in the consolidated balance sheets.
Stock Repurchase Program
A stock repurchase program, which was authorized by the Company's Board of Directors, became effective and was publicly announced on November 2, 2022. This stock repurchase program authorized the purchase of up to $100 million in common stock in open market or privately negotiated transactions through November 15, 2024, subject to market conditions and other factors. The program had $95 million of remaining capacity for repurchases of common stock at September 30, 2024.
This stock repurchase program was replaced on November 6, 2024 when the Company's Board of Directors authorized a new stock repurchase program up to $100 million in common stock through November 15, 2026, subject to market conditions and other factors.
NOTE 5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:

|  | Three Months Ended September 30, |  | Six Months Ended September 30,
(in thousands, except share and per share data) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Basic Earnings (Loss) Per Share |  |  |  |  |  |  |  |
Numerator for basic earnings (loss) per share |  |  |  |  |  |  |  |
Net income (loss) attributable to Universal Corporation |  | $ | 25,940 |  |  | $ | 28,128 |  |  | $ | 26,070 |  |  | $ | 26,064 |
Denominator for basic earnings (loss) per share |  |  |  |  |  |  |  |
Weighted average shares outstanding |  | 24,946,632 |  |  | 24,869,697 |  |  | 24,911,681 |  |  | 24,855,974 |
Basic earnings (loss) per share |  | $ | 1.04 |  |  | $ | 1.13 |  |  | $ | 1.05 |  |  | $ | 1.05 |
Diluted Earnings (Loss) Per Share |  |  |  |  |  |  |  |
Numerator for diluted earnings (loss) per share |  |  |  |  |  |  |  |
Net income (loss) attributable to Universal Corporation |  | $ | 25,940 |  |  | $ | 28,128 |  |  | $ | 26,070 |  |  | $ | 26,064 |
Denominator for diluted earnings (loss) per share: |  |  |  |  |  |  |  |
Weighted average shares outstanding |  | 24,946,632 |  |  | 24,869,697 |  |  | 24,911,681 |  |  | 24,855,974 |
Effect of dilutive securities |  |  |  |  |  |  |  |
Employee and outside director share-based awards |  | 189,341 |  |  | 145,672 |  |  | 189,614 |  |  | 141,925 |
Denominator for diluted earnings (loss) per share |  | 25,135,973 |  |  | 25,015,369 |  |  | 25,101,295 |  |  | 24,997,899 |
Diluted earnings (loss) per share |  | $ | 1.03 |  |  | $ | 1.12 |  |  | $ | 1.04 |  |  | $ | 1.04 |

NOTE 6. 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 various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes.
Numerous countries in which Company operates have enacted or are in the process of enacting legislation to adopt a global minimum effective tax rate described in the Global Anti-Base Erosion framework rules, or Pillar Two, issued by the Organization for Economic Co-operation and Development (“OECD”). The Pillar Two legislation includes establishing a 15% global minimum tax rate on a country-by-country basis and is effective for the Company's fiscal year 2025. The Company
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performed an assessment of the potential impact on income taxes from enactment of the Pillar Two legislation. Based on the assessment, the Company does not anticipate a material impact to the consolidated financial statements from the Pillar Two legislation in fiscal year 2025.
Three and six months ended September 30, 2024
The Company's consolidated effective income tax rate for the three and six months ended September 30, 2024 was 28.6% and 31.5%, respectively.
Three and six months ended September 30, 2023
The Company's consolidated effective income tax rate for the three and six months ended September 30, 2023 was 21.5% respectively.
NOTE 7. GOODWILL AND OTHER INTANGIBLES
The Company's changes in goodwill at September 30, 2024 and 2023 consisted of the following:

(in thousands of dollars) | Six Months Ended September 30,
| 2024 |  | 2023
Balance at beginning of fiscal year | $ | 213,869 |  |  | $ | 213,922 |
Foreign currency translation adjustment | 3 |  |  | (66) |
Balance at end of period | $ | 213,872 |  |  | $ | 213,856 |

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 September 30, 2024 and 2023 and at March 31, 2024:

(in thousands, except useful life) |  |  |  |  | September 30, 2024
| Useful Life (years) |  | Gross Carrying Value |  | Accumulated Amortization |  | Net Carrying Value
Customer relationships | 11 | — | 13 |  | $ | 86,500 |  |  | $ | (29,289) |  |  | $ | 57,211 |
Trade names |  | 5 |  |  | 11,100 |  |  | (9,375) |  |  | 1,725 |
Developed technology |  | 13 |  |  | 9,300 |  |  | (5,838) |  |  | 3,462 |
Noncompetition agreements | 4 | — | 5 |  | 4,000 |  |  | (3,200) |  |  | 800 |
Other |  | 5 |  |  | 826 |  |  | (761) |  |  | 65 |
Total intangible assets |  |  |  |  | $ | 111,726 |  |  | $ | (48,463) |  |  | $ | 63,263 |

|  |  |  |  | September 30, 2023
| Useful Life (years) |  | Gross Carrying Value |  | Accumulated Amortization |  | Net Carrying Value
Customer relationships | 11 | — | 13 |  | $ | 86,500 |  |  | $ | (21,559) |  |  | $ | 64,941 |
Trade names |  | 5 |  |  | 11,100 |  |  | (7,155) |  |  | 3,945 |
Developed technology |  | 13 |  |  | 9,300 |  |  | (5,492) |  |  | 3,808 |
Noncompetition agreements | 4 | — | 5 |  | 4,000 |  |  | (2,250) |  |  | 1,750 |
Other |  | 5 |  |  | 708 |  |  | (677) |  |  | 31 |
Total intangible assets |  |  |  |  | $ | 111,608 |  |  | $ | (37,133) |  |  | $ | 74,475 |

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|  |  |  |  | March 31, 2024
| Useful Life (years) |  | Gross Carrying Value |  | Accumulated Amortization |  | Net Carrying Value
Customer relationships | 11 | — | 13 |  | $ | 86,500 |  |  | $ | (25,424) |  |  | $ | 61,076 |
Trade names |  | 5 |  |  | 11,100 |  |  | (8,265) |  |  | 2,835 |
Developed technology |  | 13 |  |  | 9,300 |  |  | (5,665) |  |  | 3,635 |
Noncompetition agreements | 4 | — | 5 |  | 4,000 |  |  | (2,725) |  |  | 1,275 |
Other |  | 5 |  |  | 782 |  |  | (720) |  |  | 62 |
Total intangible assets |  |  |  |  | $ | 111,682 |  |  | $ | (42,799) |  |  | $ | 68,883 |

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 and six months ended September 30, 2024 and 2023 was:

(in thousands of dollars) | Three Months Ended September 30, |  | Six Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Amortization Expense | $ | 2,852 |  |  | $ | 2,786 |  |  | $ | 5,664 |  |  | $ | 5,613 |

Amortization expense for the developed technology intangible asset is recorded in cost of goods sold in the consolidated 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 September 30, 2024, the expected future amortization expense for intangible assets is as follows:

Fiscal Year (in thousands of dollars) |
2025 (excluding the six months ended September 30, 2024) | $ | 5,427 |
2026 | 9,279 |
2027 | 8,077 |
2028 | 8,077 |
2029 and thereafter | 32,403 |
Total expected future amortization expense | $ | 63,263 |

NOTE 8. 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 (used) by operating activities.
Cash Flow Hedging Strategy for Interest Rate Risk
In 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 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 September 30, 2024, the total notional amount of the interest rate swaps was $310 million, which corresponded to a portion of the aggregate outstanding balance of the term loans.
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Previously, the Company had receive-floating/pay-fixed interest rate swap agreements that were designated and qualified as cash flow hedges for two non-amortizing bank loans that were repaid concurrent with closing on the new bank credit 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 terminated concurrent with the inception of the new swap agreements. The fair value of the previous swap agreements, approximately $11.8 million, was received from the counterparties in December 2022 upon termination and is being amortized from accumulated other comprehensive loss into earnings as a reduction of interest expense through the original maturity dates of those agreements.
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. Additionally, the Company initiated a strategy in Brazil and Mexico to hedge a portion of the forecasted local currency-denominated operating costs in fiscal year 2025 by entering into derivative contracts to buy the local currencies and sell the U.S. dollar.
The aggregate U.S. dollar notional amounts of forward and option contracts entered into for these purposes during the six-month periods in fiscal years 2025 and 2024 was as follows:

|  | Six Months Ended September 30,
(in millions of dollars) |  | 2024 |  | 2023
Tobacco purchases |  | $ | 97.0 |  |  | $ | 30.3 |
Processing costs |  | 15.2 |  |  | 4.9 |
Operating costs |  | 28.9 |  |  | — |
Total |  | $ | 141.1 |  |  | $ | 35.2 |

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 initially 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 Company de-designates ineffective tobacco purchases and crop input sales hedges to selling, general, and administrative expense when the forecasted tobacco purchases or crop input sales are no longer expected to occur.
The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of September 30, 2024 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
Tobacco purchases | 2023 | Brazil | 2025
Tobacco purchases | 2025 | Brazil | 2026
Crop input sales | 2024 | Brazil | 2025
Crop input sales | 2025 | Brazil | 2026

Forward contracts related to processing costs and operating 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.
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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 September 30, 2024 and 2023, and March 31, 2024, were approximately $88.5 million, $101.1 million, and $20.9 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.
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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 September 30, |  | Six Months Ended September 30,
(in thousands of dollars) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Cash Flow Hedges - Interest Rate Swap Agreements |  |  |  |  |  |  |  |
Derivative |  |  |  |  |  |  |  |
Effective Portion of Hedge |  |  |  |  |  |  |  |
Gain (loss) recorded in accumulated other comprehensive loss |  | $ | (8,969) |  |  | $ | 7,968 |  |  | $ | (6,346) |  |  | $ | 18,064 |
Gain (loss) reclassified from accumulated other comprehensive loss into earnings |  | $ | 1,514 |  |  | $ | 1,417 |  |  | $ | 2,989 |  |  | $ | 2,626 |
Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings |  | $ | 688 |  |  | $ | 1,569 |  |  | $ | 1,377 |  |  | $ | 3,139 |
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings |  | Interest expense
Ineffective Portion of Hedge |  |  |  |  |  |  |  |
Gain (loss) recognized in earnings |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Location of gain (loss) recognized in earnings |  | Selling, general and administrative expenses
Hedged Item |  |  |  |  |  |  |  |
Description of hedged item |  | Floating rate interest payments on term loans
Cash Flow Hedges - Foreign Currency Exchange Contracts |  |  |  |  |  |  |  |
Derivative |  |  |  |  |  |  |  |
Effective Portion of Hedge |  |  |  |  |  |  |  |
Gain (loss) recorded in accumulated other comprehensive loss |  | $ | 2,685 |  |  | $ | (61) |  |  | $ | (2,552) |  |  | $ | 2,019 |
Gain (loss) reclassified from accumulated other comprehensive loss into earnings |  | $ | 12 |  |  | $ | 3,334 |  |  | $ | 604 |  |  | $ | 4,140 |
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings |  | Cost of goods sold
Ineffective Portion and Early De-designation of Hedges |  |  |  |  |  |  |  |
Gain (loss) recognized in earnings |  | $ | — |  |  | $ | (772) |  |  | $ | — |  |  | $ | 1,138 |
Location of gain (loss) recognized in earnings |  | Selling, general and administrative expenses
Hedged Item |  |  |  |  |  |  |  |
Description of hedged item |  | Forecast purchases of tobacco in Brazil
Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts |  |  |  |  |  |  |  |
Gain (loss) recognized in earnings |  | $ | (2,352) |  |  | $ | 1,717 |  |  | $ | (589) |  |  | $ | (769) |
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 and the crop input sales in Brazil, a net hedge loss of approximately $3.3 million remained in accumulated other comprehensive loss at September 30, 2024. That balance reflects gains and losses on contracts related to the 2025 and 2023 Brazil crops, and the 2025 and 2024 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through September 30, 2024. 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
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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 September 30, 2024 and 2023, and March 31, 2024:

|  | 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
(in thousands of dollars) |  |  | September 30, 2024 |  | September 30, 2023 |  | March 31, 2024 |  |  | September 30, 2024 |  | September 30, 2023 |  | March 31, 2024
Derivatives Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  | Other non-current assets |  | $ | — |  |  | $ | 12,361 |  |  | $ | 6,706 |  |  | Other long-term liabilities |  | $ | 2,629 |  |  | $ | — |  |  | $ | — |
Foreign currency exchange contracts |  | Other current assets |  | — |  |  | — |  |  | 77 |  |  | Accounts payable and accrued expenses |  | 3,626 |  |  | — |  |  | 9 |
Total |  |  |  | $ | — |  |  | $ | 12,361 |  |  | $ | 6,783 |  |  |  |  | $ | 6,255 |  |  | $ | — |  |  | $ | 9 |
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts |  | Other current assets |  | $ | 144 |  |  | $ | 1,081 |  |  | $ | 245 |  |  | Accounts payable and accrued expenses |  | $ | 3,344 |  |  | $ | 14 |  |  | $ | 12 |
Total |  |  |  | $ | 144 |  |  | $ | 1,081 |  |  | $ | 245 |  |  |  |  | $ | 3,344 |  |  | $ | 14 |  |  | $ | 12 |

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 9. 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, and forward foreign currency exchange contracts. 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.

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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 September 30, 2024 and 2023, and at March 31, 2024, 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:

|  | September 30, 2024
|  |  |  | Fair Value Hierarchy |  |
(in thousands of dollars) |  | NAV |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 148 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 148 |
Trading securities associated with deferred compensation plans |  | — |  |  | 12,376 |  |  | — |  |  | — |  |  | 12,376 |
Foreign currency exchange contracts |  | — |  |  | — |  |  | 144 |  |  | — |  |  | 144 |
Total financial assets measured and reported at fair value |  | $ | 148 |  |  | $ | 12,376 |  |  | $ | 144 |  |  | $ | — |  |  | $ | 12,668 |
Liabilities |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  | $ | — |  |  | $ | — |  |  | $ | 2,629 |  |  | $ | — |  |  | $ | 2,629 |
Foreign currency exchange contracts |  | — |  |  | — |  |  | 6,970 |  |  | — |  |  | 6,970 |
Total financial liabilities measured and reported at fair value |  | $ | — |  |  | $ | — |  |  | $ | 9,599 |  |  | $ | — |  |  | $ | 9,599 |

|  | September 30, 2023
|  |  |  | Fair Value Hierarchy |  |
(in thousands of dollars) |  | NAV |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 145 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 145 |
Trading securities associated with deferred compensation plans |  | — |  |  | 11,238 |  |  | — |  |  | — |  |  | 11,238 |
Interest rate swap agreements |  | — |  |  | — |  |  | 12,361 |  |  | — |  |  | 12,361 |
Foreign currency exchange contracts |  | — |  |  | — |  |  | 1,081 |  |  | — |  |  | 1,081 |
Total financial assets measured and reported at fair value |  | $ | 145 |  |  | $ | 11,238 |  |  | $ | 13,442 |  |  | $ | — |  |  | $ | 24,825 |
Liabilities |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts |  | $ | — |  |  | $ | — |  |  | $ | 14 |  |  | $ | — |  |  | $ | 14 |
Total financial liabilities measured and reported at fair value |  | $ | — |  |  | $ | — |  |  | $ | 14 |  |  | $ | — |  |  | $ | 14 |

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|  | March 31, 2024
|  |  |  | Fair Value Hierarchy |  |
(in thousands of dollars) |  | NAV |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 145 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 145 |
Trading securities associated with deferred compensation plans |  | — |  |  | 12,409 |  |  | — |  |  | — |  |  | 12,409 |
Interest rate swap agreements |  | — |  |  | — |  |  | 6,706 |  |  | — |  |  | 6,706 |
Foreign currency exchange contracts |  | — |  |  | — |  |  | 322 |  |  | — |  |  | 322 |
Total financial assets measured and reported at fair value |  | $ | 145 |  |  | $ | 12,409 |  |  | $ | 7,028 |  |  | $ | — |  |  | $ | 19,582 |
Liabilities |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts |  | $ | — |  |  | $ | — |  |  | $ | 21 |  |  | $ | — |  |  | $ | 21 |
Total financial liabilities measured and reported at fair value |  | $ | — |  |  | $ | — |  |  | $ | 21 |  |  | $ | — |  |  | $ | 21 |

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.
Long-term Debt
The following table summarizes the fair and carrying value of the Company’s long-term debt, and if applicable any current portion, at each of the balance sheet dates September 30, 2024, and 2023 and March 31, 2024:

(in millions of dollars) | September 30, 2024 |  | September 30, 2023 |  | March 31, 2024
Fair market value of long term obligations | $ | 615 |  |  | $ | 615 |  |  | $ | 618 |
Carrying value of long term obligations | $ | 620 |  |  | $ | 620 |  |  | $ | 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.
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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.
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.
Consolidation of tobacco sheet operations
As discussed in Note 2, the Company initiated a plan to consolidate the European Sheet tobacco operations into the Company's facility in the Netherlands. The Company is in the process of winding down its operations in Germany, resulting in an impairment charge of $4.9 million for the long-lived assets in the three-month period ended September 30, 2024, to reduce their carrying value to fair value. The long-lived assets primarily consist of a processing facility, machinery and equipment, and administrative offices. As part of the wind-down, the Company also recognized other impairment charges associated with inventory, certain accounts receivable and other assets during the three-month period ended September 30, 2024.
NOTE 10. 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
|  | Three Months Ended September 30, |  | Three Months Ended September 30,
(in thousands of dollars) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Service cost |  | $ | 1,319 |  |  | $ | 1,286 |  |  | $ | 23 |  |  | $ | 24 |
Interest cost |  | 2,882 |  |  | 2,898 |  |  | 264 |  |  | 266 |
Expected return on plan assets |  | (3,607) |  |  | (3,888) |  |  | (14) |  |  | (16) |
Net amortization and deferral |  | 174 |  |  | 203 |  |  | (160) |  |  | (191) |
Net periodic benefit cost |  | $ | 768 |  |  | $ | 499 |  |  | $ | 113 |  |  | $ | 83 |

|  | Pension Benefits |  | Other Postretirement Benefits
|  | Six Months Ended September 30, |  | Six Months Ended September 30,
(in thousands of dollars) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Service cost |  | $ | 2,641 |  |  | $ | 2,568 |  |  | $ | 47 |  |  | $ | 49 |
Interest cost |  | 5,754 |  |  | 5,799 |  |  | 535 |  |  | 530 |
Expected return on plan assets |  | (7,214) |  |  | (7,776) |  |  | (28) |  |  | (32) |
Net amortization and deferral |  | 348 |  |  | 406 |  |  | (320) |  |  | (380) |
Net periodic benefit cost |  | $ | 1,529 |  |  | $ | 997 |  |  | $ | 234 |  |  | $ | 167 |

During the six months ended September 30, 2024, the Company made contributions of approximately $1.4 million to its pension plans. Additional contributions of $1.5 million are expected during the remaining six months of fiscal year 2025.
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NOTE 11. STOCK-BASED COMPENSATION
The Company's shareholders approved the Universal Corporation 2023 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 fiscal year. The Compensation Committee administers the 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.
RSUs awarded prior to fiscal year 2022 vest 5 years after the grant date and those awarded beginning with 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 vest 1 year after the grant date. Restricted shares vest upon the individual’s retirement from service as a director.
During the six-month periods ended September 30, 2024 and 2023, the Company issued the following stock-based awards, representing the regular annual grants to officers and outside directors of the Company:

|  | Six Months Ended September 30,
|  | 2024 |  | 2023
RSUs: |  |  |  |
Number granted |  | 96,230 |  |  | 93,300 |
Grant date fair value |  | $ | 47.81 |  |  | $ | 51.34 |
PSUs: |  |  |  |
Number granted |  | 62,085 |  |  | 54,700 |
Grant date fair value |  | $ | 38.23 |  |  | $ | 43.01 |

Fair value expense for stock-based compensation 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 the award is recognized as expense at the date of grant. The Company accounts for forfeitures of stock-based awards as they occur. For the six-month periods ended September 30, 2024 and 2023, the Company recorded total stock-based compensation expense of approximately $6.6 million and $5.7 million, respectively. The Company expects to recognize stock-based compensation expense of approximately $0.9 million during the remaining six months of fiscal year 2025.
NOTE 12. OPERATING SEGMENTS
The Company conducts operations across two reportable operating segments, Tobacco Operations and Ingredients Operations.
The Tobacco Operations segment activities involve contracting, procuring, processing, packing, storing, and shipping 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 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 manufacturing of cigars, pipe tobacco, and smokeless tobacco products. Some of these tobacco types are also increasingly used in the manufacture of next generation tobacco products that are intended to provide consumers with an alternative to traditional combustible products. The Tobacco Operations segment also provides physical and chemical
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product 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, botanical extracts, and flavorings. 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 supplies a broad set of juices, concentrates, pomaces, purees, fruit fibers, seeds, seed powders, and other value-added products to food, beverage, and flavor companies throughout the United States and internationally. Silva procures dehydrated vegetables, fruits, and herbs from around the world and specializes in processing natural materials into custom designed dehydrated vegetable and fruit-based ingredients for a variety of end products. Shank's offers a diversified portfolio of botanical extracts, distillates, natural flavors, and color for industrial and private label customers worldwide, and is known for their significant vanilla expertise. Shank's is also equipped to offer customers custom bottling and packaging for their products.
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 September 30, |  | Six Months Ended September 30,
(in thousands of dollars) |  | 2024 |  | 2023 |  | 2024 |  | 2023
SALES AND OTHER OPERATING REVENUES |  |  |  |  |  |  |  |
Tobacco Operations |  | $ | 630,212 |  |  | $ | 554,653 |  |  | $ | 1,142,167 |  |  | $ | 998,561 |
Ingredients Operations |  | 80,550 |  |  | 83,831 |  |  | 165,645 |  |  | 157,645 |
Consolidated sales and other operating revenues |  | $ | 710,762 |  |  | $ | 638,484 |  |  | $ | 1,307,812 |  |  | $ | 1,156,206 |
OPERATING INCOME (LOSS) |  |  |  |  |  |  |  |
Tobacco Operations |  | $ | 77,334 |  |  | $ | 52,387 |  |  | $ | 91,788 |  |  | $ | 61,270 |
Ingredients Operations |  | 1,333 |  |  | 4,811 |  |  | 4,244 |  |  | 2,797 |
Segment operating income |  | 78,667 |  |  | 57,198 |  |  | 96,032 |  |  | 64,067 |
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1) |  | 642 |  |  | 713 |  |  | 502 |  |  | 4,879 |
Restructuring and impairment costs (2) |  | (10,573) |  |  | (2,599) |  |  | (10,573) |  |  | (2,599) |
Consolidated operating income |  | $ | 68,736 |  |  | $ | 55,312 |  |  | $ | 85,961 |  |  | $ | 66,347 |

(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 2 for additional information.
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NOTE 13. 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 six months ended September 30, 2024 and 2023:

|  | Six Months Ended September 30,
(in thousands of dollars) |  | 2024 |  | 2023
Foreign currency translation: |  |  |  |
Balance at beginning of year |  | $ | (44,815) |  |  | $ | (44,233) |
Other comprehensive income (loss) attributable to Universal Corporation: |  |  |  |
Net gain (loss) on foreign currency translation |  | 3,933 |  |  | (3,481) |
Less: Net (gain) loss on foreign currency translation attributable to noncontrolling interests |  | 393 |  |  | 263 |
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes |  | 4,326 |  |  | (3,218) |
Balance at end of period |  | $ | (40,489) |  |  | $ | (47,451) |
Foreign currency hedge: |  |  |  |
Balance at beginning of year |  | $ | (616) |  |  | $ | 4,899 |
Other comprehensive income (loss) attributable to Universal Corporation: |  |  |  |
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $515 and $(53)) |  | (911) |  |  | (812) |
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $145 and $908) (1) |  | (507) |  |  | (2,817) |
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes |  | (1,418) |  |  | (3,629) |
Balance at end of period |  | $ | (2,034) |  |  | $ | 1,270 |
Interest rate hedge: |  |  |  |
Balance at beginning of year |  | $ | 8,488 |  |  | $ | 5,253 |
Other comprehensive income (loss) attributable to Universal Corporation: |  |  |  |
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $1,779 and $(4,769)) |  | (4,567) |  |  | 13,295 |
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $1,224 and $1,522) (2) |  | (3,142) |  |  | (4,243) |
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes |  | (7,709) |  |  | 9,052 |
Balance at end of period |  | $ | 779 |  |  | $ | 14,305 |
Pension and other postretirement benefit plans: |  |  |  |
Balance at beginning of year |  | $ | (44,642) |  |  | $ | (42,976) |
Other comprehensive income (loss) attributable to Universal Corporation: |  |  |  |
Amortization included in earnings (net of tax expense (benefit) of $0 and $(33))(3) |  | (770) |  |  | 185 |
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes |  | (770) |  |  | 185 |
Balance at end of period |  | $ | (45,412) |  |  | $ | (42,791) |
Total accumulated other comprehensive loss at end of period |  | $ | (87,156) |  |  | $ | (74,667) |

(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 8 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 8 for additional information.
(3) This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 10 for additional information.
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NOTE 14. 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 and six months ended September 30, 2024 and 2023 is as follows:

|  | Three Months Ended September 30, 2024 |  | Three Months Ended September 30, 2023
(in thousands of dollars) |  | Universal Corporation |  | Non-controlling Interests |  | Total |  | Universal Corporation |  | Non-controlling Interests |  | Total
Balance at beginning of three-month period |  | $ | 1,413,457 |  |  | $ | 30,042 |  |  | $ | 1,443,499 |  |  | $ | 1,380,720 |  |  | $ | 32,459 |  |  | $ | 1,413,179 |
Changes in common stock |  |  |  |  |  |  |  |  |  |  |  |
Repurchase of common stock |  | — |  |  | — |  |  | — |  |  | (1,373) |  |  | — |  |  | (1,373) |
Accrual of stock-based compensation |  | 1,942 |  |  | — |  |  | 1,942 |  |  | 1,852 |  |  | — |  |  | 1,852 |
Withholding of shares from stock-based compensation for grantee income taxes |  | (318) |  |  | — |  |  | (318) |  |  | — |  |  | — |  |  | — |
Dividend equivalents on RSUs |  | 288 |  |  | — |  |  | 288 |  |  | 317 |  |  | — |  |  | 317 |
Changes in retained earnings |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | 25,940 |  |  | 8,029 |  |  | 33,969 |  |  | 28,128 |  |  | 2,660 |  |  | 30,788 |
Cash dividends declared |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  | (20,020) |  |  | — |  |  | (20,020) |  |  | (19,647) |  |  | — |  |  | (19,647) |
Repurchase of common stock |  | — |  |  | — |  |  | — |  |  | (3,371) |  |  | — |  |  | (3,371) |
Dividend equivalents on RSUs |  | (288) |  |  | — |  |  | (288) |  |  | (317) |  |  | — |  |  | (317) |
Other comprehensive income (loss) |  | (435) |  |  | (3) |  |  | (438) |  |  | (2,120) |  |  | (119) |  |  | (2,239) |
Other changes in noncontrolling interests |  |  |  |  |  |  |  |  |  |  |  |
Dividends paid to noncontrolling shareholders |  | — |  |  | (630) |  |  | (630) |  |  | — |  |  | (1,681) |  |  | (1,681) |
Balance at end of period |  | $ | 1,420,566 |  |  | $ | 37,438 |  |  | $ | 1,458,004 |  |  | $ | 1,384,189 |  |  | $ | 33,319 |  |  | $ | 1,417,508 |

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|  | Six Months Ended September 30, 2024 |  | Six Months Ended September 30, 2023
(in thousands of dollars) |  | Universal Corporation |  | Non-controlling Interests |  | Total |  | Universal Corporation |  | Non-controlling Interests |  | Total
Balance at beginning of year |  | $ | 1,437,207 |  |  | $ | 41,716 |  |  | $ | 1,478,923 |  |  | $ | 1,397,088 |  |  | $ | 39,864 |  |  | $ | 1,436,952 |
Changes in common stock |  |  |  |  |  |  |  |  |  |  |  |
Repurchase of common stock |  | — |  |  | — |  |  | — |  |  | (1,373) |  |  | — |  |  | (1,373) |
Accrual of stock-based compensation |  | 6,583 |  |  | — |  |  | 6,583 |  |  | 5,711 |  |  | — |  |  | 5,711 |
Withholding of shares from stock-based compensation for grantee income taxes |  | (3,715) |  |  | — |  |  | (3,715) |  |  | (2,963) |  |  | — |  |  | (2,963) |
Dividend equivalents on RSUs |  | 600 |  |  | — |  |  | 600 |  |  | 619 |  |  | — |  |  | 619 |
Changes in retained earnings |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | 26,070 |  |  | 5,075 |  |  | 31,145 |  |  | 26,064 |  |  | (437) |  |  | 25,627 |
Cash dividends declared |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  | (40,008) |  |  | — |  |  | (40,008) |  |  | (39,357) |  |  | — |  |  | (39,357) |
Repurchase of common stock |  | — |  |  | — |  |  | — |  |  | (3,371) |  |  | — |  |  | (3,371) |
Dividend equivalents on RSUs |  | (600) |  |  | — |  |  | (600) |  |  | (619) |  |  | — |  |  | (619) |
Other comprehensive income (loss) |  | (5,571) |  |  | (393) |  |  | (5,964) |  |  | 2,390 |  |  | (263) |  |  | 2,127 |
Other changes in noncontrolling interests |  |  |  |  |  |  |  |  |  |  |  |
Dividends paid to noncontrolling shareholders |  | — |  |  | (8,960) |  |  | (8,960) |  |  | — |  |  | (5,845) |  |  | (5,845) |
Balance at end of period |  | $ | 1,420,566 |  |  | $ | 37,438 |  |  | $ | 1,458,004 |  |  | $ | 1,384,189 |  |  | $ | 33,319 |  |  | $ | 1,417,508 |

NOTE 15. SUBSEQUENT EVENTS
Pension De-Risking
In March 2025, the Company's management undertook a de-risking strategy for the Company-sponsored qualified defined benefit pension plan that covers certain domestic employees and retirees. The Company purchased an annuity for a limited group of retirees currently receiving benefit payments. The annuity purchase and transfer of risk to a third-party insurance company resulted in de-recognition of approximately $45 million of projected benefit obligation. The transaction triggered settlement accounting that requires immediate recognition of a portion of the accumulated other comprehensive losses associated with the defined benefit plan. The Company expects to recognize a non-cash settlement charge of approximately $15 million in the fourth quarter of fiscal year 2025.
Debt Covenant Consents
Due to the delays resulting from the previously disclosed investigation of the embezzlement at the Company's subsidiary in Mozambique, the Company was unable to timely file its quarterly reports on Form 10-Q for the second and third quarters of fiscal year 2025 with the Securities and Exchange Commission ("SEC"). The delayed filings resulted in the Company obtaining lender consents (the "Consents") under its Credit Agreement, dated December 15, 2022, among the Company, the lenders party thereto from time to time, and JP Morgan Chase Bank, N.A., as Administrative Agent (the "Credit Agreement"). The Consents provided for, among other things, an extension until June 16, 2025 to file the second and third quarter financial statements with the SEC and resulted in approximately $1.4 million of additional selling, general, and administrative costs. Based on the Company's September 30, 2024 financial statements and its December 31, 2024 financial statements, it was in compliance with the financial covenants in the Credit Agreement, as of the end of each of the second and third quarters of fiscal year 2025.
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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 ("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 (the "SEC") 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: 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, 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 international conflicts; 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 ingredients 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; general economic, political, market, and weather conditions; and our failure to maintain effective internal control over financial reporting. 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, 2024, as amended by Amendment No.1 thereto ("2024 Form 10-K"), and Item 1A, "Risk Factors" of this Form 10-Q. 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 2024 Form 10-K .
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. Any references to 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) are references to 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 to the extent these non-GAAP financial measures are referenced. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 12. "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, can provide investors with important information that is useful in understanding our business results and trends.
Any references to net debt, net capitalization, and net debt to net capitalization ratio are also references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with GAAP and should not be considered substitutes for total debt, total capitalization, total debt to total capitalization ratio, or any other operating or financial performance measures calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. A reconciliation of net debt to total debt and net capitalization to total capitalization are provided
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in Other Items below to the extent these non-GAAP financial measures are referenced. We believe these non-GAAP measures are meaningful indicators of liquidity and financial position.
Results of Operations
Overview
Universal Corporation had a strong second quarter and first half of fiscal year 2025. Revenues and operating income increased by 11% and 24%, respectively, for the quarter, and by 13% and 30%, respectively, for the six months ended September 30, 2024, compared to the same periods in the prior fiscal year. These increases were driven by strong tobacco sales volumes and prices. Higher results for our Tobacco Operations segment in both the quarter and six months ended September 30, 2024, compared to the same periods in fiscal year 2024, were primarily driven by strong customer demand and larger, higher quality, and better yielding crops in Africa. Accelerated shipment timing requested by certain customers and sales of carryover crop tobacco also contributed to the improved results for the Tobacco Operations segment in the quarter and six months ended September 30, 2024. We also continued to grow our Universal Ingredients’ market presence in the quarter and six months ended September 30, 2024, and saw increased interest from new and existing customers, despite higher food costs creating pricing pressures. We expect our newly expanded ingredients facility to support increases in production and meaningfully contribute to our fiscal year 2026 results.

FINANCIAL HIGHLIGHTS |  |  |  |  |  |  |  |  |  |  |
| Three Months Ended September 30, |  | Change |  | Six Months Ended September 30, |  | Change
(in millions of dollars, except per share data) | 2024 |  | 2023 |  | % |  | 2024 |  | 2023 |  | %
Consolidated Results |  |  |  |  |  |  |  |  |  |  |
Sales and other operating revenue | $ | 710.8 |  |  | $ | 638.5 |  |  | 11 | % |  | $ | 1,307.8 |  |  | $ | 1,156.2 |  |  | 13 | %
Cost of goods sold | $ | 567.6 |  |  | $ | 506.8 |  |  | 12 | % |  | $ | 1,068.7 |  |  | $ | 938.0 |  |  | 14 | %
Gross profit margin percentage | 20.1 | % |  | 20.6 | % |  | -50 bps |  | 18.3 | % |  | 18.9 | % |  | -60 bps
Selling, general and administrative expenses | $ | 63.8 |  |  | $ | 73.8 |  |  | (14) | % |  | $ | 142.5 |  |  | $ | 149.3 |  |  | (5) | %
Restructuring and impairment costs | $ | 10.6 |  |  | $ | 2.6 |  |  | 307 | % |  | $ | 10.6 |  |  | $ | 2.6 |  |  | 307 | %
Operating income | $ | 68.7 |  |  | $ | 55.3 |  |  | 24 | % |  | $ | 86.0 |  |  | $ | 66.3 |  |  | 30 | %
Adjusted operating income (Non-GAAP)* | $ | 79.3 |  |  | $ | 57.9 |  |  | 37 | % |  | $ | 96.5 |  |  | $ | 68.9 |  |  | 40 | %
Net income attributable to Universal Corporation | $ | 25.9 |  |  | $ | 28.1 |  |  | (8) | % |  | $ | 26.1 |  |  | $ | 26.1 |  |  | — | %
Adjusted net income attributable to Universal Corporation (Non-GAAP)* | $ | 36.4 |  |  | $ | 30.3 |  |  | 20 | % |  | $ | 36.5 |  |  | $ | 28.2 |  |  | 29 | %
Diluted earnings (loss) per share | $ | 1.03 |  |  | $ | 1.12 |  |  | (8) | % |  | $ | 1.04 |  |  | $ | 1.04 |  |  | — | %
Adjusted diluted earnings (loss) per share (Non-GAAP)* | $ | 1.45 |  |  | $ | 1.21 |  |  | 20 | % |  | $ | 1.46 |  |  | $ | 1.13 |  |  | 29 | %
Segment Results |  |  |  |  |  |  |  |  |  |  |
Tobacco operations sales and other operating revenues | $ | 630.2 |  |  | $ | 554.7 |  |  | 14 | % |  | $ | 1,142.2 |  |  | $ | 998.6 |  |  | 14 | %
Tobacco operations operating income | $ | 77.3 |  |  | $ | 52.4 |  |  | 48 | % |  | $ | 91.8 |  |  | $ | 61.3 |  |  | 50 | %
Ingredients operations sales and other operating revenues | $ | 80.6 |  |  | $ | 83.8 |  |  | (4) | % |  | $ | 165.6 |  |  | $ | 157.6 |  |  | 5 | %
Ingredients operations operating income (loss) | $ | 1.3 |  |  | $ | 4.8 |  |  | (72) | % |  | $ | 4.2 |  |  | $ | 2.8 |  |  | 52 | %

*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below.
Quarter Ended September 30, 2024, compared to Quarter Ended September 30, 2023
Consolidated Results
Revenues and operating income increased by 11%, or $72.3 million, and 24%, or $13.4 million, respectively, in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, driven by improved performance in the Tobacco Operations segment.
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Selling, general, and administrative expenses decreased by 14%, or $10.0 million, largely on approximately $7.3 million of lower net provisions for farmer advances in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023.
Adjusted operating income was up 37%, or $21.4 million, and adjusted net income attributable to Universal Corporation was up 20%, or $6.1 million, in the second quarter of fiscal year 2025, compared to the same period in the prior fiscal year, on strong performance in the Tobacco Operations segment.
Tobacco Operations Segment
Revenues and operating income for the Tobacco Operations segment increased by 14%, or $75.6 million, and 48%, or $24.9 million, respectively, for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. Tobacco Operations segment results reflect continued strong customer demand; an approximately 17% increase in the tobacco average sales price; larger, higher quality, better yielding crops from Africa; and accelerated shipment timing per certain customers’ requests. Uncommitted tobacco inventory levels remained low at about 10% at September 30, 2024.
Ingredients Operations Segment
Revenues and operating income for the Ingredients Operations segment decreased by 4%, or $3.3 million, and 72%, or $3.5 million, respectively, for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, on unfavorable comparisons to last fiscal year's strong second fiscal quarter results. Sales volumes for some of the products in the Ingredients Operations segment were higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. However, customer pressure due to the inflationary environment impacted demand and pricing for certain products in the Ingredients Operations segment in the quarter ended September 30, 2024.
Additional Items
Cost of goods sold increased 12%, or $60.9 million, in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, largely on higher tobacco sales prices, reflecting strong customer demand, and larger, higher quality, and better yielding African crops.
Interest expense was up $4 million in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, on higher notes payable and overdrafts of approximately $278 million.
Restructuring and impairment costs of $10.6 million in the quarter ended September 30, 2024, related to the previously announced consolidation of our European sheet operations.
The consolidated effective tax rate for the three months ended September 30, 2024, was 29%. The consolidated tax for the three months ended September 30, 2023 was 22%. The consolidated effective tax rate for the quarter ended September 30, 2024, was higher than the consolidated tax rate for the quarter ended September 30, 2023, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes coupled with a minimal income tax benefit of $0.1 million associated with the $10.6 million of restructuring and impairment costs recognized for the consolidation of the sheet operations in fiscal year 2025.
Six Months Ended September 30, 2024, compared to Six Months Ended September 30, 2023
Consolidated Results
Revenues and operating income for the first half of fiscal year 2025 increased 13%, or $151.6 million, and 30%, or $19.6 million, respectively, compared to the first half of fiscal year 2024, driven primarily by improved performance in the Tobacco Operations segment.
Selling, general, and administrative expenses decreased by 5%, or $6.8 million, largely on $9.4 million of lower net provisions for farmer advances, but partially offset by higher sales commissions of $3.3 million in the six months ended September 30, 2024, compared to the six months ended September 30, 2023.
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Adjusted operating income increased by 40%, or $27.6 million, and adjusted net income attributable to Universal Corporation increased by 29%, or $8.3 million, for the six months ended September 30, 2024, compared to the six months ended September 30, 2023, largely on strong performance in the Tobacco Operations segment.
Tobacco Operations Segment
Revenues for the Tobacco Operations segment increased by 14%, or $143.6 million, and operating income for the segment increased by 50%, or $30.5 million, in the six months ended September 30, 2024, compared to the six months ended September 30, 2023. Tobacco Operations segment results reflected continued strong customer demand; an approximately 13% increase in the tobacco average sales price; an approximately 2% increase in total tobacco sales volumes; larger, higher quality, better yielding crops from Africa; and accelerated shipment timing per certain customers’ requests. In addition, our tobacco procurement and marketing efforts have been successful in the six months ended September 30, 2024, despite negative impacts from adverse weather on certain tobacco crops, mainly in South America and North America this fiscal year.
Ingredients Operations Segment
Revenues and operating income for the Ingredients Operations segment increased by 5%, or $8.0 million, and 52%, or $1.4 million, respectively, in the six months ended September 30, 2024, compared to the six months ended September 30, 2023. Results for the Ingredients Operations segment reflected increased sales volumes for some products, including some sales of new products, as well as lower inventory write-downs of approximately $1.8 million compared to the six months ended September 30, 2023. However, customer pressure due to the inflationary environment impacted demand and pricing for certain products in the Ingredients Operations segment in the six months ended September 30, 2024.
Additional Items
Cost of goods sold increased 14%, or $130.8 million, in the six months ended September 30, 2024, compared to the six months ended September 30, 2023, largely on higher tobacco sales volumes and prices, reflecting strong customer demand and larger, higher quality, and better quality crops in Africa.
Restructuring and impairment costs of $10.6 million in the six months ended September 30, 2024, related to the previously announced consolidation of the Company’s European tobacco sheet operations.
The consolidated effective tax rate for the six months ended September 30, 2024, was 32%. The consolidated effective tax rate for the six months ended September 30, 2023, was 22%. The consolidated effective tax rate for the six months ended September 30, 2024, was higher than the consolidated tax rate for the six months ended September 30, 2023, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes coupled with a minimal income tax benefit of $0.1 million associated with the $10.6 million of restructuring and impairment costs recognized for the consolidation of the sheet operations in fiscal year 2025.
Sustainability
Universal continually looks to set new standards for social and environmental performance. The Company completed a thorough assessment of its sustainability practices and performance through EcoVadis, a leading global third-party platform for business sustainability ratings. As a result of the assessment, EcoVadis ranked Universal in the 91st percentile of the companies rated globally in the prior 12 months. The assessment included 21 sustainability criteria across four core themes: Environment, Labor & Human Rights, Ethics, and Sustainable Procurement.
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Other Items
Reconciliation of Certain Non-GAAP Financial Measures
The following table sets forth certain non-recurring items included in reported results to reconcile adjusted net income to net income attributable to Universal Corporation:

Adjusted Operating Income Reconciliation |
| Three Months Ended September 30, |  | Six Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
As Reported: Consolidated operating income | $ | 68,736 |  |  | $ | 55,312 |  |  | $ | 85,961 |  |  | $ | 66,347 |
Restructuring and impairment costs(1) | 10,573 |  |  | 2,599 |  |  | 10,573 |  |  | 2,599 |
As Adjusted operating income (Non-GAAP) | $ | 79,309 |  |  | $ | 57,911 |  |  | $ | 96,534 |  |  | $ | 68,946 |
Adjusted Net Income Attributable to Universal Corporation and Adjusted Diluted Earnings Per Share Reconciliation
(in thousands except for per share amounts) | Three Months Ended September 30, |  | Six Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
As Reported: Net income attributable to Universal Corporation | $ | 25,940 |  |  | $ | 28,128 |  |  | $ | 26,070 |  |  | $ | 26,064 |
Restructuring and impairment costs(1) | 10,573 |  |  | 2,599 |  |  | 10,573 |  |  | 2,599 |
Total of Non-GAAP adjustments to income before income taxes | 10,573 |  |  | 2,599 |  |  | 10,573 |  |  | 2,599 |
Non-GAAP adjustments to income taxes |  |  |  |  |  |  |
Income tax benefit from restructuring and impairment costs(2) | (132) |  |  | (465) |  |  | (132) |  |  | (465) |
Total of income tax impacts for Non-GAAP adjustments to income before income taxes | (132) |  |  | (465) |  |  | (132) |  |  | (465) |
As adjusted: Net income attributable to Universal Corporation (Non-GAAP) | $ | 36,381 |  |  | $ | 30,262 |  |  | $ | 36,511 |  |  | $ | 28,198 |
As reported: Diluted earnings per share | $ | 1.03 |  |  | $ | 1.12 |  |  | $ | 1.04 |  |  | $ | 1.04 |
As adjusted: Diluted earnings per share (Non-GAAP) | $ | 1.45 |  |  | $ | 1.21 |  |  | $ | 1.46 |  |  | $ | 1.13 |

(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.
(2) The income tax effect of Non-GAAP adjustments was determined based on the timing and nature of the specific Non-GAAP adjustments and their relevant jurisdictional income tax rates (foreign, state, and local) and the applicable U.S. federal income tax rates. The Company considers current and deferred income tax rates to calculate the impact to income taxes for the Non-GAAP adjustments.
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The following table reconciles total debt to net debt and net capitalization:

Net Debt and Net Capitalization Reconciliation |  |  |  |  |  |
|  | September 30, |  | September 30, |  | March 31,
(in thousands) |  | 2024 |  | 2023 |  | 2024
Add: Notes payable and overdrafts |  | $ | 579,132 |  |  | $ | 301,379 |  |  | $ | 417,217 |
Add: Long-term obligations |  | 617,641 |  |  | 617,086 |  |  | 617,364 |
Add: Current portion of long-term obligations |  | — |  |  | — |  |  | — |
Total Debt |  | 1,196,773 |  |  | 918,465 |  |  | 1,034,581 |
Add: Customer advances and deposits |  | 6,837 |  |  | 166,505 |  |  | 17,179 |
Less: Cash and cash equivalents |  | 80,118 |  |  | 99,683 |  |  | 55,593 |
Net Debt (Non-GAAP) |  | $ | 1,123,492 |  |  | $ | 985,287 |  |  | $ | 996,167 |
Add: Total Universal Corporation shareholders' equity |  | 1,420,566 |  |  | 1,384,189 |  |  | 1,437,207 |
Net Capitalization (Non-GAAP) |  | $ | 2,544,058 |  |  | $ | 2,369,476 |  |  | $ | 2,433,374 |
Net Debt/Net Capitalization (Non-GAAP) |  | 44 | % |  | 42 | % |  | 41 | %

Liquidity and Capital Resources
Overview
The first half of our fiscal year is usually a period of significant working capital investment in Africa, South America, and the United States as tobacco crops are delivered by farmers. Due to market conditions in Brazil, we made the strategic decision in the quarter ended March 31, 2024, to accelerate tobacco purchases there. Therefore, some of our working capital investments for the Brazil crop that typically would have been made in our fiscal year 2025, were made in our fiscal year 2024, reducing required working capital investments in the six months ended September 30, 2024. We funded our working capital needs in the six months ended September 30, 2024, using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows. Tobacco sales are expected to be more heavily weighted to the second half of fiscal year 2025.
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 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 to customers, 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.
Operating Activities
Net cash used by our operations was $47.4 million during the six months ended September 30, 2024. The net use of cash was $57.9 million more than during the same period in fiscal year 2024, primarily on lower customer advances and deposits largely offset by lower working capital requirements in the six months ended September 30, 2024, due to accelerated tobacco purchases in Brazil in our fiscal year 2024. Customer advances and deposits were lower in the six months ended September 30, 2024, compared to the same period in the prior fiscal year, primarily due to a customer arrangement providing for a higher amount of advances on tobacco crop purchases in fiscal year 2024 that was not repeated in fiscal year 2025. Tobacco inventory levels were $1.1 billion at September 30, 2024. Tobacco inventory levels were $15.6 million below September 30, 2023 levels, primarily on the timing of tobacco crop purchases and shipments. 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. As of September 30, 2024, our uncommitted tobacco inventories were $108.0 million, or about 10% of total tobacco inventory, compared to $181.1 million, or about 17% of our tobacco inventory as of March 31, 2024, and $130.2 million, or about 12% of our tobacco inventory as of September 30, 2023. While we target committed
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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 six months ended September 30, 2024, on deliveries of tobacco crops by farmers in Africa, South America, and the United States. Accounts receivable increased by $12.3 million from March 31, 2024 levels, on tobacco crop shipments offset in part by collections on receivables. Accounts receivable—unconsolidated affiliates were up $61.3 million from March 31, 2024 levels, on the timing of tobacco crop purchases and shipments. Notes payable and overdrafts were up $161.9 million from March 31, 2024 levels, on seasonal working capital needs.
Accounts receivable were up $168.7 million at September 30, 2024, compared to the same period in the prior fiscal year, on higher sales of carryover crop tobacco as well as the timing of tobacco crop shipments. Advances to suppliers at September 30, 2024 were $34.1 million higher, compared to the same period in the prior fiscal year, on larger tobacco volumes in certain regions. Notes payable and overdrafts were up $277.8 million compared to September 30, 2023 levels, in part due to lower customer advances available to fund working capital needs. Customer advances and deposits were $159.7 million lower at September 30, 2024, compared to September 30, 2023, primarily due to a customer arrangement providing for a higher amount of advances on tobacco crop purchases in fiscal year 2024 that was not repeated in the first quarter of fiscal year 2025.
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 ingredients business; 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 six months ended September 30, 2024 and 2023, we invested about $38.8 million and $32.6 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $23.8 million and $23.4 million for the six months ended September 30, 2024 and 2023, 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 $50 to $60 million over the next twelve months on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.
On November 7, 2024, we announced that our Board of Directors had approved a new share repurchase program, which replaced the share repurchase program expiring November 15, 2024, for the purchase of up to $100 million of our common stock through November 15, 2026. Under the new 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 September 30, 2024, we did not purchase any shares of common stock. As of September 30, 2024, approximately 24.7 million shares of our common stock were outstanding.
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 44% at September 30, 2024, up from the September 30, 2023 level of approximately 42%, and up from the March 31, 2024 level of approximately 41%. As of September 30, 2024, we had $80.1 million in cash and cash equivalents, and our short-term debt totaled $579.1 million. As discussed in Note 15. "Subsequent Event" to the consolidated financial statements, we obtained lender consents for our committed revolving credit facility (the "Consents"). The Consents provided for, among other things, an extension to file until June 16, 2025, the second and third quarter financial statements with the SEC. Based on our September 30, 2024 financial statements and our December 31, 2024 financial statements, we were in compliance with the financial covenants in the committed revolving credit facility as of the end of each of the second and third fiscal quarters.
As of September 30, 2024, we had $330 million available under the committed revolving credit facility that will mature in December 2027, and we had approximately $57 million in available, uncommitted credit lines. We have no long-term debt maturing until fiscal year 2028.
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Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-fiscal year. Available capital resources from our cash balances, committed revolving 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 September 30, 2024, the fair value of our outstanding interest rate swap agreements was a liability of about $2.6 million, and the notional amount swapped was $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, as well as our net monetary balance sheet exposures in local currency. We generally account for our hedges of forecasted tobacco purchases as cash flow hedges. At September 30, 2024, the fair value of our open hedges for forecasted tobacco purchases was a net liability of approximately $3.6 million. We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $3.2 million at September 30, 2024.
Critical Accounting Estimates
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 2024 Form 10-K. Our critical accounting policies have not changed from those reported in the 2024 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 $889 million at September 30, 2024. Although a hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately $8.9 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
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the Company’s management, the effectiveness of the Company’s 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, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, concluded that, as a result of the material weakness in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective.
Management’s Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of the consolidated financial statements. Due to inherent limitations, internal control over financial reporting may not prevent or detect all errors or misstatements in the financial statements, and even control procedures that are determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions.
As required by Exchange Act Rule 13a-15(c), the Company’s Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2024. The evaluation was based on the criteria set forth in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”). Based on its original assessment, the Company’s management previously concluded that the Company’s internal control over financial reporting was effective at the reasonable assurance level as of March 31, 2024.
However, for the reasons discussed below, the Company’s management recently conducted a reevaluation of the effectiveness of the Company’s internal control over financial reporting based on the 2013 COSO Framework. Based on this reassessment, the Company’s management concluded that the Company’s internal control over financial reporting was not effective at the reasonable assurance level as of March 31, 2024, due to the material weakness described below. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.
As previously disclosed, in August 2024, shortly before filing the Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, the Company’s management was made aware of embezzlement by a former senior finance employee at the Company’s Mozambique subsidiary, Mozambique Leaf Tobacco Ltda. (“MLT”). The Company promptly commenced an internal investigation regarding these allegations and related matters. As previously reported, with the assistance of outside advisors, the Company’s internal investigation identified approximately $7 million in the aggregate of unauthorized payments during fiscal years 2022 through 2025. The Company has identified approximately $16.7 million in the aggregate of unauthorized payments during fiscal years 2016 through 2025.
As result of the discovery of the embezzlement, the Company’s management reassessed the design and effectiveness of its internal control over financial reporting. This reassessment identified certain control activities at MLT that were deficient in that they had failed to prevent or detect the embezzlement in a timely manner. Additionally, the Company’s management concluded that it was unable to rely on controls performed at MLT due to the lack of competence and integrity of certain individuals at MLT executing those controls. The Company’s management concluded that these control deficiencies collectively constituted a material weakness in the Company’s internal control over financial reporting as of March 31, 2024. While these deficiencies did not result in a material misstatement of the Company’s consolidated financial statements for the fiscal year ended March 31, 2024 or the quarter ended June 30, 2024, there is a reasonable possibility that these deficiencies could have resulted in a material misstatement of the Company’s annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
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Additionally, the conclusions by the Company’s management relating to the Controls and Procedures included in Item 4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (the “Q1 Form 10-Q”) should no longer be relied upon due to the material weakness described above.
Notwithstanding the material weakness, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s consolidated financial statements included in the original Form 10-K and the Q1 Form 10-Q were fairly stated in all material respects in accordance with generally accepted accounting principles in the United States of America for each of the periods presented. Therefore, no restatement of any prior period financial statements was required.
Remediation Plan
To remediate the material weakness described above, the Company implemented the following remediation steps at MLT:
1.Discontinue employment of the employee who perpetrated the embezzlement in Mozambique and the employee’s supervisor and replace those individuals.
2.Require recurring remedial internal control training to all internal control performers and owners, including journal entry review and reconciliation procedures.
3.Design and implement additional internal controls of banking systems access.
The Company believes these measures, once they have operated effectively for a sufficient period of time, will remediate the control deficiencies identified and strengthen its internal control over financial reporting. However, there may not be sufficient time for the Company to remediate the material weakness or, if remediated, to test the operating effectiveness of the remediated controls as of the Company’s next fiscal year end. As the Company continues to evaluate, and works to improve, its internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. The Company cannot assure you, however, when it will remediate such weakness, nor can it be certain whether additional actions will be required or the costs of any such actions. Moreover, the Company cannot assure you that additional material weaknesses will not arise in the future.
Changes in Internal Control Over Financial Reporting
Except for the material weakness and implementation of the remediation plan described above, there were no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s 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
With the exception of the additional risk factors discussed below, there are no material changes to the risk factors previously disclosed in our 2024 Form 10-K. In evaluating our risks, readers should carefully consider the risk factors discussed below and in our 2024 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 SEC.
We have identified a material weakness in our internal control over financial reporting and, if we are not able to remediate the material weakness, or if we identify additional material weaknesses in the future or otherwise fail to design and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent misstatements due to fraud or error.
Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting as of March 31, 2024. As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “Original Form 10-K”), based on that evaluation, the Company concluded that its internal control over financial reporting was effective as of March 31, 2024. However, as disclosed in Amendment No. 1 to the Original Form 10-K, for the reasons discussed below, the Company’s management conducted a reevaluation of the effectiveness of the Company’s internal control over financial reporting. Based on this reassessment, the Company’s management concluded that the Company’s internal control over financial reporting was not effective as of March 31, 2024.
As previously disclosed, in August 2024, shortly before filing the Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, the Company’s management was made aware of embezzlement by a former senior finance employee at the Company’s Mozambique subsidiary, Mozambique Leaf Tobacco Ltda. (“MLT”). As result of the discovery of the embezzlement, the Company’s management reassessed the effectiveness of its internal control over financial reporting. This reassessment identified certain control activities at MLT that were deficient in that they had failed to prevent or detect the embezzlement in a timely manner. Additionally, the Company’s management concluded that it was unable to rely on controls performed at MLT due to the lack of competence and integrity of certain individuals at MLT executing those controls. The Company’s management concluded that these control deficiencies collectively constituted a material weakness in the Company’s internal control over financial reporting as of March 31, 2024. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.
While this material weakness did not result in a material misstatement of the Company’s consolidated financial statements, these deficient control activities had not been remediated as of March 31, 2024, and there is a reasonable possibility that they could have resulted in a material misstatement in the Company’s annual or interim consolidated financial statements that would not be prevented or detected. The Company, under the oversight of the Audit Committee, has taken steps to implement its remediation plan. However, the material weakness will not be considered remediated until the enhanced controls operate for a sufficient period of time and management has concluded, through testing, that the related controls are effective. Furthermore, the Company cannot give any assurance that the measures it takes will remediate the material weakness.
The Company cannot give any assurance that additional material weaknesses will not arise in the future. Any failure to remediate the material weakness, or the development of new material weaknesses in the Company’s internal control over financial reporting, could result in material misstatements in the Company’s financial statements and cause it to fail to meet our reporting and financial obligations, which in turn could have a negative impact on its financial condition, results of operations or cash flows, restrict its ability to access the capital markets, require significant resources to correct the material weaknesses or deficiencies, subject the Company to fines, penalties or judgments, harm our reputation or otherwise cause a decline in investor confidence and cause a decline in the market price of the Company’s stock.
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The Company is no longer eligible to use a Form S-3 registration statement, which could impair its capital-raising activities.
As a result of the Company’s failure to timely file its Form 10-Q for the quarter ended September 30, 2024, and the Form 10-Q for the quarter ended December 31, 2024 with the SEC, it is no longer eligible to use a Form S-3 registration statement. Further, as a result of the late Form 10-Q filing for the quarter ended September 30, 2024 and the late Form 10-Q filing for the quarter ended December 31, 2024, the Company is also no longer a “well-known seasoned issuer,” as such term is used in the SEC’s regulations, which otherwise would allow it to, among other things, file automatically effective Form S-3 registration statements. The Company’s eligibility to use a Form S-3 registration statement may not be restored until March 1, 2026, and then only if it has not had any other filing delinquency that would preclude Form S-3 eligibility and satisfies all other requirements for Form S-3 eligibility. During any period when the Company is not eligible to use Form S-3 or qualify as a “well-known seasoned issuer,” its capital-raising ability may be impaired. Under these circumstances, the Company would be required to conduct its offering on an exempt basis, such as in accordance with Rule 144A, or file a registration statement on Form S-1. Using a Form S-1 registration statement for a public offering would likely take significantly longer than using a registration statement on Form S-3 and increase the Company’s transaction costs, and could, to the extent it is not able to conduct offerings using alternative methods, adversely impact the Company’s ability to raise capital or complete acquisitions of other companies in a timely manner.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY
The following table sets forth repurchased shares of our common stock during the three-month period ended September 30, 2024:

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)
July 1-31, 2024 |  | — |  |  | $ | — |  |  | — |  |  |  |  |  |  |  |  | $ | 95,255,674 |
August 1-31, 2024 |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  | 95,255,674 |
September 1-30, 2024 |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  | 95,255,674 |
Total |  | — |  |  | $ | — |  |  | — |  |  |  |  |  |  |  |  | $ | 95,255,674 |

(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 program, which was authorized by the Company's Board of Directors, became effective and was publicly announced on November 3, 2022. This stock repurchase program authorized the purchase of up to $100 million in common stock in open market or privately negotiated transactions through November 15, 2024, subject to market conditions and other factors. The program had $95 million of remaining capacity for repurchases of common stock at September 30, 2024. This stock repurchase program was replaced on November 6, 2024 when the Company's Board of Directors authorized a new stock repurchase program up to $100 million in common stock through November 15, 2026, 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 provisions 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 September 30, 2024.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, 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, as amended).
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ITEM 6. EXHIBITS

10.2 |  | Consulting Agreement with George C. Freeman, III.*
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: | April 21, 2025 |  | /s/ Johan C. Kroner
|  |  | Johan C. Kroner, Senior Vice President and Chief Financial Officer
|  |  | (Principal Financial Officer)
Date: | April 21, 2025 |  | /s/ Scott J. Bleicher
|  |  | Scott J. Bleicher, Vice President and Controller
|  |  | (Principal Accounting Officer)

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