Standard Commercial Corporation Announces Third Quarter Earnings
and Lowers Fiscal Year Estimate WILSON, N.C., Feb. 9
/PRNewswire-FirstCall/ -- Standard Commercial Corporation today
announced that for the quarter ended December 31, 2003, income from
continuing operations was $6.4 million versus $12.0 million in the
prior year's quarter. The recent quarter was impacted by the
accelerated timing of shipments in the first half of this fiscal
year. For the nine months year to date, income from continuing
operations was $29.6 million versus $35.1 million for the prior
year nine months period. Basic earnings per share from continuing
operations for the quarter was $0.47 versus $0.89 per share in the
prior year period. Basic earnings per share from continuing
operations for the current nine months was $2.18 versus $2.61 in
the prior year's period. As previously disclosed, the Company has
made the decision to exit the wool business. The assets and
liabilities of the Wool Division have been reclassified as held for
sale and shown separately in the consolidated balance sheets with
the exception of $58.2 million of wool debt guaranteed by the
Company which will be included in consolidated debt until the
disposition is complete. The wool trading lossfor the quarter and
nine months was $2.8 million and $7.0 million respectively, versus
a loss of $1.3 million and $4.6 million in the prior year periods.
In addition to the trading losses, a disposal charge of $26.6
million was recorded in the September quarter. The combined effects
of the losses and the disposal charge are reported as Loss from
Discontinued Operations. The basic loss per share for the
discontinued operations for the quarter and nine months was $0.20
and $2.47 respectively, versus aloss of $0.10 and $0.34 in the
prior year periods. Sales for the quarter ended December 31, 2003
were $191.0 million, a decrease of 9.7% from $211.5 million a year
earlier. Volume was down 8.3% and the average sales value per kilo
was down 3.6% versusthe prior year period. Shipments for the
quarter from Brazil, China, Italy, Kenya and Zimbabwe were lower
than prior year period due to increased shipments in earlier
quarters and reduced quantities available from Brazil and Zimbabwe
due to lower crops. Gross profit for the quarter was $28.4 million
versus $35.2 million in the prior year period. The variance was
mainly due to the lower volumes, sales mix and reduced margins in
European tobaccos due to approximately 21% appreciation of Euro
against the US dollar. Selling, general and administrative expenses
for the quarter were higher than the prior year period mainly due
to normal inflationary increases ($0.8 million), higher pension and
medical expenses ($0.4 million), legal/professional fees ($0.6
million) and the effect of a weak dollar against other currencies
in which certain expenses were incurred ($0.7 million). For the
nine months, sales were up 1.2% from $568.4 million to $575.2
million as volume was level when comparing with the prioryear
period. For the nine months lower shipments from Greece, Spain, the
US and Zimbabwe were offset by increased shipments from Argentina,
Italy, Thailand and Turkey. Gross profit for the nine months was
$99.1 million versus $106.6 million in the prior year period. The
variance was due to sales mix in general and reduced margins in
European tobaccos due to the appreciation of Euro against the US
dollar. Selling, general and administrative expenses were higher
than the prior year mainly due to normal inflationary increases
($2.5 million), higher pension and medical expenses ($0.8 million),
legal/professional fees ($0.8 million), expenses from new
operations in Indonesia and Malawi ($0.5 million) and the effect of
a weak dollar against other currencies in which certain expenses
were incurred ($2.0 million). Other income (expense) - net for the
nine months was down mainly due to reduced interest income and the
fact that the prior period nine months included insurance
recoveries. The effective taxrate decreased to 30.1% and 29.8% in
the current quarter and nine months from 35.2% and 37.0% in the
corresponding periods a year earlier. This was due to the payment
of with-holding taxes on dividends from subsidiary companies in the
prior year periods and variances in tax rates in areas where
profits are earned or losses are incurred. The net income for the
quarter and net loss for the nine months after the discontinued
operations was $3.6 million and $4.1 million or $0.27 and $0.29 per
basic share versus net income for the quarter and nine months after
the discontinued operations in the prior year periods of $10.6
million and $30.5 million or basic earnings per share of $0.79 and
$2.27 respectively. Robert E. Harrison, Chairman, President
andChief Executive Officer said, "Third quarter tobacco results
were lower than the prior year. Leaf trading conditions are being
impacted by higher costs in Europe stemming from the unfavorable
impact of the strong Euro. Additionally, we have accelerated our
flue-cured growing projects in Africa resulting in higher start-up
costs and are incurring increased expenses to improve our
processing efficiency in the U.S. Consequently, we are lowering our
guidance for the fiscal year to approximately $2.25 per share from
continuing operations. We are committed to growing our business by
selectively investing in new projects in Africa, South America and
Asia. Our new facility in Indonesia is providing a springboard for
further growth opportunities in this key market and region. We
believe there are additional opportunities to invest in the tobacco
industry that should provide growth opportunities for our
shareholders." Harrison added, "The process of exiting the wool
business continues and we are pleased with the progress to date. We
expect to close separate deals for our Australian and UK/Chile wool
operations and are in active discussions with a prospective
purchaser for our other European wool operations. The divestiture
process is expected to be completed in fiscal 2005, but the
financial impact has largely been recognized." Because of the
seasonal nature of the Company's businesses, results for the
periods reported are not necessarily indicative of results for
other interim periods or the full year. Readers of this news
release should note that comments contained herein that are not
purely statements of historical fact may be deemed to be forward-
looking. Any such forward-looking statement is based upon
management's current knowledge and assumptions about future events.
The Company's actual results could vary materially from those
expected due to many factors, many of which the Company cannot
control. These include demand for and supply of leaf tobacco and
wool, changes in timing of shipments, movements in foreign exchange
rates, weather, tobacco litigation or legislation, customer
consolidations, changes in general economic conditions, political
risks and changes in government regulations. Additional information
on factors that may affect management's expectations or Standard
Commercial's financial results can be found in the Company's
filings with the Securities and Exchange Commission. The Company
assumes no obligation to update any of these forward- looking
statements. STANDARD COMMERCIAL is the third largest independent
leaf tobacco dealer in the world and operates in over thirty
countries. NOTE: The Company will hold a teleconference hosted by
R. E. Harrison, Chairman, President and Chief Executive Officer, to
go over this announcement and answer questions at 8:30 am EDT on
Tuesday, February 10. To log in with AT&T prior to the
teleconference U.S. investors may participate by dialing
800-450-0819; international investors should dial 612-332-0923.
Playback will be available February 10, through February 17. For
playback in the U.S. dial 800-475-6701; international investors
dial 320-365-3844. The playback access code will be 720770.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (In
thousands,except per share data; unaudited) Third quarter ended
Nine months ended December 31 December 31 2003 2002* 2003 2002*
Sales - tobacco $ 191,016 $211,455 $ 575,185 $568,359 Cost of sales
- materials, services and supplies 159,274 172,920 467,522 452,239
- interest 3,343 3,372 8,586 9,564 Gross profit 28,399 35,163
99,077 106,556 Selling, general and administrative expenses 19,610
16,588 56,918 50,697 Other interest expense 615 1,182 3,037 3,276
Other income (expense) - net 1,177 1,089 2,176 3,073 Income before
taxes 9,351 18,482 41,298 55,656 Income taxes (2,818) (6,508)
(12,320) (20,617) Income after taxes 6,533 11,974 28,978 35,039
Minority interests (192) - (53) - Equity in earnings of affiliates
105 - 672 100 Incomefrom continuing operations 6,446 11,974 29,597
35,139 Loss from discontinued operations, net of tax (2,815)
(1,337) (33,663) (4,636) Net income (loss) 3,631 10,637 (4,066)
30,503 Retained earnings at beginning of period 157,755 151,167
167,495 132,812 Common stock dividends (1,192) (843) (3,235)
(2,354) Retained earnings at end of period $160,194 $160,961
$160,194 $160,961 Earnings (loss) per common share Basic: From
continuing operations $0.47 $0.89 $2.18 $2.61 From discontinued
operations (0.20) (0.10) (2.47) (0.34) Net $0.27 $0.79 $(0.29)
$2.27 Average shares outstanding 13,631 13,489 13,595 13,447
Diluted: From continuing operation s$0.46 $0.83 $2.05 $2.44 From
discontinued operations (0.19) (0.09) (2.21) (0.31) Net $0.27 $0.74
$(0.16) $2.13 Average shares outstanding 15,246 15,088 15,188
15,079 Dividend declared per common share $0.0875 $0.0625 $0.2375
$0.175 * Certain amounts reclassified to comply with the current
period presentation as a result of discontinuing the wool
operations. STANDARD COMMERCIAL CORPORATION CONSOLIDATED BALANCE
SHEETS (In thousands, except share data) December 31 March 31 2003
2002*2003* (unaudited) ASSETS Cash $ 22,031 $31,918 $26,570
Receivables 194,369 168,753 169,550 Inventories 280,154 247,701
216,272 Assets of discontinued operations 104,629 137,937 142,981
Prepaid expenses 6,634 5,242 2,300 Marketable securities 1,179
1,191 1,234 Current assets 608,996 592,742 558,907 Property, plant
and equipment 166,085 143,502 146,861 Investment in affiliates
8,094 6,641 7,421 Goodwill 9,003 9,003 9,003 Other assets 36,167
26,739 26,108 Total assets $828,345 $778,627 $748,300 LIABILITIES
Short-term borrowings $271,575 $256,206 $182,103 Current portion of
long-term debt 8,508 5,679 5,107 Accounts payable and accrued
liabilities 114,587 95,465 135,444 Liabilities of discontinued
operations 22,416 26,436 29,164 Taxes accrued 15,190 14,888 10,170
Current liabilities 432,276 398,674 361,988 Long-term debt 83,154
78,914 78,672 Convertible subordinated debentures 45,051 45,051
45,051 Retirement and other benefits 15,536 16,640 13,871 Deferred
income taxes 4,316 3,894 4,753 Total liabilities 580,333 543,173
504,335 MINORITY INTERESTS 2,008 1,890 1,840 SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value; authorized shares 1,000,000,
Issued none Common stock, $0.20 par value; authorized shares
100,000,000, Issued 16,256,022 (Dec. 02 - 16,109,404; Mar 03 -
16,110,750) 3,251 3,222 3,222 Additional paid-in capital 111,001
108,391 108,453 Unearned restricted stock plan compensation (3,628)
(3,313) (2,991) Treasury shares, 2,617,707 (4,250) (4,250) (4,250)
Retained earnings 160,194 160,961 167,495 Accumulated other
comprehensive loss (20,564) (31,447) (29,804) Total shareholders'
equity 246,004 233,564 242,125 Total liabilities and shareholders'
equity $828,345 $778,627 $748,300 * Certain amounts reclassified to
comply with the current period presentation as a result of
discontinuing the wool operations. DATASOURCE: Standard Commercial
Corporation CONTACT: Keith Merrick of Standard Commercial
Corporation, +1-252-291-5507 Web site: http://www.sccgroup.com/
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