STW Standard Commercial

Standard Commercial Corporation Announces Earnings WILSON, N.C., Feb. 8 /PRNewswire-FirstCall/ -- Standard Commercial Corporation (NYSE:STW) today reported income from continuing operations for the quarter and nine months period ended December 31, 2004 was $11.1 million and $14.0 million, respectively, versus $6.9 million and $27.5 million for the respective prior year periods. As previously disclosed, the Company discontinued its tobacco operations in Italy during the second quarter of the current fiscal year. Net income including discontinued operations was $6.4 million for the quarter and a net loss of $18.6 million for the nine months period ended December 31, 2004 versus $3.6 million net income and $4.1 million net loss, respectively, in the prior year. Robert E. Harrison, Chairman and Chief Executive Officer said, "We are pleased with the improvement in our results for this quarter after a tough start to the year. As we anticipated, shipping patterns began to normalize in the most recent quarter and resulted in a 27.4% increase in volumes shipped on a quarter over quarter basis and a corresponding increase in sales of 32.8%. Importantly, our gross margin percentage was up nearly one percentage point from 15.5% to 16.3% on a comparative basis as the mix of tobaccos shipped was more indicative of our global business base. We expect the improved shipping pattern will continue for the balance of the year and that freight issues in Malawi will ease." "We also continue to make progress in refocusing our business on our core tobacco operations. In January 2005, we sold our UK and Chile wool operations and expect to complete the sale of substantially all of our remaining wool interests by March 31, 2005." Comparison of the quarter ended December 31, 2004 to the quarter ended December 31, 2003 Sales. Sales for the three months ended December 31, 2004 increased by 32.8% to $244.7 million from $184.3 million in the prior year period. The volume of tobacco sold during the current quarter increased by 27.4% over the prior year quarter. This was mainly due to increased shipments from Brazil, Thailand, Turkey and Argentina. Shipments from Zimbabwe and the USA were lower during the quarter primarily due to smaller crops and lower shipments from Malawi were due to a shortage of shipping containers. Gross Profit. Gross profit for the quarter ended December 31, 2004 was $39.8 million versus $28.5 million in the prior year period. Gross margins as a percentage of sales increased from 15.5% to 16.3% primarily due to increases in Malawi, Thailand, India, Indonesia, Turkey and Brazil. These increases were partially offset by decreases of margins in China, USA and Argentina. Selling, General and Administrative Expenses. SG&A expenses for the quarter were higher by $3.8 million. This was due to an increase in legal and professional expenses of $2.0 million, relating to the proposed merger with Dimon Incorporated and to Sarbanes-Oxley expenses, compensation of $0.8 million, insurance of $0.6 million and communication costs and rent expenses of $0.4 million. Interest Expense. Interest expense for the current quarter was higher by $2.6 million due to both increased average borrowings and higher average rates. Income taxes. Income tax expense as a percentage of pretax income can vary due to differences in the projected levels of pre-tax income for the year in tax jurisdictions with higher or lower tax rates and adjustments due to the resolution of reviews of certain taxing authorities. We favorably resolved certain outstanding items with certain tax authorities which resulted in an effective tax rate for the quarter of 18.5%. The effective tax rate for the prior year quarter was 31.9%. Income from Continuing Operations. Income from continuing operations was $11.1 million for the current quarter versus $6.9 million in the prior year quarter. Loss from Discontinued Operations. The tobacco operating loss for the three months ended December 31, 2004 was $3.7 million versus $0.5 million in the prior year quarter. The wool operating loss for the quarter was $0.9 million versus $2.8 million in the prior year period. The basic loss per share for the discontinued operations for the quarter was $0.34 versus $0.24 as the prior year period. Net Income. The consolidated net income for the quarter was $6.4 million versus $3.6 million in the prior year period. Comparison of the nine months ended December 31, 2004 to the nine months ended December 31, 2003 Sales. Sales for the nine months ended December 31, 2004 increased by 21.2% to $650.6 million from $536.6 million in the prior year period. The volume of tobacco sold during the current nine months increased by 17.3% over the prior year period. This was mainly due to increased shipments from Brazil, India, Thailand, Russia, Turkey and Spain. Shipments from Kenya, Congo and Argentina were lower during the current nine months due to delayed customer delivery schedules. Shipments from Zimbabwe and the USA were lower primarily due to smaller crops. Lower shipments from Malawi were due to a shortage of containers. Gross Profit. Gross profit for the nine months ended December 31, 2004 was $93.2 million versus $96.2 million in the prior year period. Gross margins were down from 17.9% to 14.3% primarily due to higher tobacco and operating costs in Kenya, Zimbabwe, China, India, Thailand, Turkey, USA, Argentina and Brazil. These decreases in percentages are offset by increases in Indonesia and Malawi. Selling, General and Administrative Expenses. SG&A expenses for the current nine months were higher by $11.9 million. This was mainly due to a charge of $2.4 million accrued for fines relating to the European Commission investigation in Spain, increase in legal and professional expenses of $3.5 million, relating to the European Commission investigation in Spain, Sarbanes-Oxley and expenses related to the proposed merger with Dimon Incorporated, increases in compensation of $5.4 million, higher communication costs and rental expense of $1.2 million and other normal inflationary increases. Interest Expense. Interest expense for the current nine months was higher by $6.5 million due to both increased average borrowings and higher interest rates, as well as payment of $1.0 million for the May 2004 early retirement of the 8-7/8% senior notes. Income taxes. Income tax expense as a percentage of pretax income can vary due to differences in the projected levels of pre-tax income for the year in tax jurisdictions with higher or lower tax rates and adjustments due to the resolution of reviews of certain taxing authorities. We favorably resolved certain outstanding items with certain tax authorities which resulted in an effective tax rate for the nine months of 18.3%. The effective tax rate for the prior year nine months was 31.7%. Income from Continuing Operations. For the current nine months income from continuing operations was $14.0 million versus $27.5 million in the prior year period. Loss from Discontinued Operations. The operating loss for the discontinued tobacco operation for the nine months ended December 31, 2004 was $13.7 million versus a profit of $2.1 million in the prior year period. The charge recorded in the current nine months for the discontinued tobacco operation was $14.8 million. No tax benefit on the losses to discontinue the Italian operation was recorded due to the uncertainty of our ability to ultimately receive a tax benefit. The wool operating loss for the current nine months was $4.1 million versus $7.0 million in the prior year period. The charge recorded in the prior year period to discontinue the wool operation was $26.6 million. The basic loss per share for the discontinued operations for the current nine months was $2.38 versus $2.32 in the prior year period. Net Loss. The consolidated net loss for the current nine months was $18.6 million versus a loss of $4.1 million in the prior year period. Because of the seasonal nature of the Company's business, results for interim periods are not necessarily indicative of business trends or results to be expected for the full year. Readers of this news release should note that comments contained herein that are not purely statements of historical fact may be deemed to be forward- looking. Any such forward-looking statement is based upon management's current knowledge and assumptions about future events. The Company's actual results could vary materially from those expected due to many factors, many of which the Company cannot control. These include changes in demand for and supply of leaf tobacco and wool, weather and shipping schedules, changes in general economic conditions, political and terrorist risks and changes in government regulations. Additional information on factors that may affect management's expectations or Standard Commercial's financial results can be found in the Company's filings with the Securities and Exchange Commission. In connection with the proposed merger of Standard Commercial Corporation and DIMON, the parties have filed a joint proxy statement/prospectus and other relevant documents concerning the merger with the U.S. Securities and Exchange Commission. STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Interested parties may obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Standard Commercial Corporation and DIMON without charge at the SEC's Internet site ( http://www.sec.gov/ ). Copies of the proxy statement/prospectus can also be obtained, without charge, by directing a request to Standard Commercial Corporation, 2201 Miller Road, Post Office Box 450, Wilson, North Carolina 27894-0450, Attention: Investor Relations, (252) 291-5507. The respective directors and executive officers of Standard Commercial Corporation and DIMON and other persons may be deemed to be "participants" in the solicitation of proxies in respect of the proposed merger. Information regarding Standard Commercial Corporation's directors and executive officers is available in its proxy statement filed with the SEC on June 23, 2004. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. STANDARD COMMERCIAL is an independent leaf tobacco dealer and operates in over thirty countries. NOTE: Robert E. Harrison, Standard's Chairman, President & CEO, will host an AT&T teleconference to go over this announcement and answer questions at 8:30 am EST on Wednesday, February 9, 2005. U.S. investors may participate by dialing (800) 553-5275. Participants outside the U.S. should dial (612) 332-0932. Playback available February 9, through February 16. For playback in the U.S. dial (800) 475-6701; outside the U.S., dial (320) 365- 3844. The playback access code will be 770004. STANDARD COMMERCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (In thousands, except per share data; unaudited) Third quarter ended Nine months ended December 31 December 31 2004 2003* 2004 2003* Sales $244,746 $184,268 $650,614 $536,612 Cost of sales - materials, services and supplies 201,725 152,647 548,355 432,445 - interest 3,232 3,080 9,040 7,926 Gross Profit 39,789 28,541 93,219 96,241 Selling, general and administrative expenses 22,703 18,900 68,081 56,211 Other interest expense 3,200 581 9,383 2,910 Other income (expense) - net (48) 1,233 740 2,230 Income before taxes 13,838 10,293 16,495 39,350 Income tax benefit (expense) (2,557) (3,279) (3,015) (12,468) Income after taxes 11,281 7,014 13,480 26,882 Minority interests (516) (192) (185) (53) Equity in earnings of affiliates 300 105 700 672 Income from continuing operations 11,065 6,927 13,995 27,501 Loss from discontinued operations, net of income tax benefit (charge) of $(77) and $1,879 three months to Dec 31, 2004 and 2003; $(119) and $2,844 nine months to Dec 31, 2004 and 2003 (4,664) (3,296) (32,582) (31,567) Net income (loss) 6,401 3,631 (18,587) (4,066) Retained earnings at beginning of period 122,043 157,755 149,428 167,495 Common stock dividends (1,202) (1,192) (3,599) (3,235) Retained earnings at end of period $127,242 $160,194 $127,242 $160,194 Earnings (loss) per common share Basic: From continuing operations $ 0.81 $ 0.51 $ 1.02 $ 2.03 From discontinued operations (0.34) (0.24) (2.38) (2.32) Net $ 0.47 $0.27 $(1.36) $ (0.29) Average shares outstanding 13,738 13,631 13,708 13,595 Diluted: From continuing operations $0.81 $0.49 $ 1.02 $ 1.92 From discontinued operations (0.34) (0.22) (2.37) (2.08) Net $ 0.47 $0.27 $(1.35) $ (0.16) Average shares outstanding 13,762 15,246 13,732 15,188 Dividend declared per common share $ 0.0875 $ 0.0875 $ 0.2625 $ 0.2375 *Certain amounts reclassified to comply with the current period presentation as a result of discontinuing the Italian tobacco operations. DATASOURCE: Standard Commercial Corporation CONTACT: Timothy S. Price of Standard Commercial Corporation, +1-252-291-5507 Web site: http://www.sccgroup.com/

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