STW Standard Commercial

Standard Commercial Corporation Announces Fiscal 2004 Earnings WILSON, N.C., June 3 /PRNewswire-FirstCall/ -- Standard Commercial Corporation (NYSE:STW) today announced that for the fiscal year ended March 31, 2004, income from continuing operations was $32.5 million versus $44.0 million in the prior year. Basic earnings per share from continuing operations was $2.39 versus $3.26 in the prior year. A loss on discontinued operations of $46.2 million versus the prior year's loss of $6.1 million was recorded as the Company is exiting the wool business. Net income was a loss of $13.6 million due to charges recorded to exit the wool business versus a profit of $37.9 million in the prior year. Basic loss per share was $1.00 versus basic earnings of $2.81 in the prior year. Sales. Sales for the twelve months ended March 31, 2004, decreased by $24.5 million, to $780 million. All the operations in Asia reported increased sales, including Indonesia, which had its factory go online in October, 2003. Increased sales in South America were driven by increased volumes, sales and processing revenues in Argentina, while Brazilian sales were flat due to a smaller crop. In Africa, sales revenue gains were achieved in Kenya/Congo while sales in Zimbabwe continued to decline as the crop size shrinks as a result of the prolonged political and economic turmoil. Sales growth was also achieved in Italy. Sales declined in Malawi, Spain, Turkey, the U.S. and the value added products group in Russia. Gross Profit and Cost of Sales. Gross profit for the twelve-month period of $114.8 million was down 19.7% from the prior period. This was due primarily to more difficult trading conditions, the start-up of our growing projects in Zambia and Mozambique, the new Indonesian facility coming on-line, a different sales mix and reduced margins in European tobaccos due to the appreciation of the Euro against the US Dollar. Selling, General and Administrative Expenses. SG&A expenses were down $2.4 million, or 3.2%, compared to the prior year. The decrease in SG&A was largely due to the non-recurring payment of the $7.0 million settlement of the DeLoach case in the U.S. last year. This decrease was partially offset by the effect of the weak dollar against other currencies in which certain expenses were incurred of $1.6 million, start-up costs for the Indonesian operations of $0.8 million, expenses related to the implementation of the Sarbanes-Oxley Act of $0.3 million, higher legal and professional fees of $0.7 million and higher pension and medical expenses of $0.8 million. Interest Expense and Other Income (Expense), Net. Interest expense was lower due to reduced long-term debt levels as a result of our debt buy-back program and lower interest rates. Other income (expense), net was $0.9 million lower than the prior year due to lower interest income and lower gains on the sales of assets. Income Taxes, Minority Interest and Equity in Earnings of Affiliates. Income tax charges or credits as a percentage of pretax income can vary due to differences in tax rates and relief available in areas where profits are earned or losses are incurred. The effective tax rate decreased to 26.0% from 36.2% in the prior year. This was due to the payment of withholding 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. Equity in earnings of affiliates was higher than the prior year primarily due to the Kyrgyzstan joint venture. Income from Continuing Operations. Income from continuing operations was $32.5 million versus $44.0 million in the prior year. This decrease is attributable to more difficult trading conditions in certain areas, start-up costs associated with various growing projects and the continued weakening of the US dollar which has had a significant impact on margins. Loss from Discontinued Operations. As previously disclosed, the Company has made the decision to exit the wool business. During the last quarter, the operations in Argentina and Australia were sold. The French mill closed in April, 2004 and negotiations are progressing for the sale of the remaining wool operations. The assets and liabilities of the Wool Division have been reclassified as "held for sale" and shown separately in the consolidated balance sheet, with the exception of $45.5 million of wool debt guaranteed by the Company which will be included in consolidated debt until the disposition is complete. The wool operating loss for the fiscal year was $12.9 million versus a loss of $0.3 million in the prior year. In addition to the operating losses, an estimated loss on disposition of $26.6 million was recorded in the second fiscal quarter and an additional estimated loss of $6.7 million was recorded in the last quarter due to changes in pension losses in Germany and severance costs in France and Germany and the writeoff of intercompany loans for the specialty fibers unit which is being liquidated. The combined effects of the losses and the disposal charge are reported as Loss from Discontinued Operations. The total loss for discontinued operations for the current year was $46.2 million. The basic loss per share for the discontinued operations was $3.39, versus a loss of $0.45 in the prior year. Net Income. The consolidated net loss was $13.6 million, primarily due to the charges taken to exit the wool business, versus the prior year net income of $37.9 million. Refinancing Activity. On April 2, 2004, the Company issued $150 million in 8.0% senior notes due 2012, and replaced its $210 million primary global revolving credit facility with a new three-year unsecured $150 million global facility with similar terms and conditions. The proceeds from the senior note issue were used to retire the remaining $65.2 million of our senior notes due 2005, and the remaining $45.1 of our convertible subordinated debentures due 2007; with the balance applied to our short-term global revolver. This extends the Company's debt maturity profile and provides a financing source for future operations. Robert E. Harrison, Chairman, President and Chief Executive Officer said, "We are pleased that our operations in South America continue to anchor our overall performance. Despite a smaller crop in Brazil, both Argentina and Brazil combined to increase regional earnings by about 9% versus the prior year. Leaf trading conditions were and are being negatively impacted by higher costs in Europe stemming from the unfavorable impact of the strong Euro. Margins remain under pressure globally from our customers as they continue to cope with the effects of higher taxation, ongoing litigation and related expenses. Additionally, we have accelerated our flue-cured growing projects in Africa resulting in higher start-up costs and incurred increased expenses to improve our processing efficiency in the U.S. Overall we were solidly profitable with our earnings from continuing operations slightly better than our February earnings guidance, however, we intend to continue to evaluate our tobacco operations to ensure that we adapt to the changes in our industry and position our Company appropriately. "We are committed to growing our business by selectively investing in new projects in Africa, South America and Asia. Our new facility in Indonesia had a successful start-up and customer response has been positive. We intend to continue to develop this area and leverage our strengths in this key 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. Our operations in Argentina and Australia were sold in the fourth quarter. We expect to close sales deals for our U.K./Chile wool operations and are in discussions with a prospective purchaser for our other European wool operations. The divestiture process is expected to be substantially completed by September, 2004, but the financial impact has largely been recognized. The remaining disposition is expected to be cash flow neutral." Because of the seasonal nature of the Company's business, 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, movements in foreign exchange rates, changes in timing of shipments, 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 Friday, June 4. To log in with AT&T prior to the teleconference U.S. investors may participate by dialing 800-553-0288 international investors should dial 612-332-0718. Playback will be available June 4, through June 11. For playback in the U.S. dial 800-475-6701; international investors dial 320-365-3844. The playback access code will be 734293. STANDARD COMMERCIAL CORPORATION CONSOLIDATED BALANCE SHEETS MARCH 31, 2004 AND 2003 (IN THOUSANDS, EXCEPT SHARE DATA) 2004 2003 ASSETS Cash $27,675 $26,570 Receivables 202,686 169,550 Inventories 292,334 216,272 Assets of discontinued operations 95,128 142,981 Prepaid expenses 4,998 2,300 Marketable securities 1,334 1,234 Current assets 624,155 558,907 Property, plant and equipment 169,285 146,861 Investment in affiliates 9,480 7,421 Goodwill 9,003 9,003 Other assets 34,096 26,108 TOTAL ASSETS $846,019 $748,300 LIABILITIES Short-term borrowings $253,847 $182,103 Current portion of long-term debt 8,476 5,107 Accounts payable and accrued liabilities 145,894 135,444 Liabilities of discontinued operations 31,383 29,164 Taxes accrued 12,859 10,170 Current liabilities 452,459 361,988 Long-term debt 91,814 78,672 Convertible subordinated debentures 45,051 45,051 Retirement and other benefits 14,348 13,871 Deferred income taxes 1,594 4,753 Total liabilities 605,266 504,335 MINORITY INTERESTS 2,000 1,840 SHAREHOLDERS' EQUITY: Preferred stock, $1.65 par value Authorized shares-1,000,000; none issued Common stock, $0.20 par value Authorized shares-100,000,000; issued - 16,298,557 and 16,110,750 at March 31, 2004 and 2003, respectively 3,260 3,222 Additional paid-in capital 111,796 108,453 Unearned restricted stock plan compensation (3,176) (2,991) Treasury stock at cost, 2,617,707 shares at March 31, 2004 and 2003 (4,250) (4,250) Accumulated other comprehensive income (18,305) (29,804) Retained earnings 149,428 167,495 Total shareholders' equity 238,753 242,125 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $846,019 $748,300 STANDARD COMMERCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED MARCH 31, 2004, 2003 AND 2002 (IN THOUSANDS, EXCEPT PER SHARE DATA) 2004 2003 2002 SALES $780,044 $804,514 $780,385 COST OF SALES: Materials, services and supplies 650,442 649,874 633,771 Interest 14,796 11,615 13,624 Gross profit 114,806 143,025 132,990 Selling, general and administrative expenses 72,581 74,967 65,641 Other interest expense 2,780 4,307 8,529 Other income/(expense)-net 2,791 3,707 1,254 Income before income taxes 42,236 67,458 60,074 Income taxes 10,982 24,387 22,771 Income after income taxes 31,254 43,071 37,303 Minority interests (77) 49 - Equity in earnings/(loss) of affiliates 1,343 846 (287) Income from continuing operations 32,520 43,966 37,016 Income/(loss) from discontinued operations (46,158) (6,085) (17,219) Net income (13,638) 37,881 19,797 EARNINGS PER COMMON SHARE: Basic: From continuing operations $2.39 $3.26 $2.78 From discontinued operations (3.39) (0.45) (1.29) Net $(1.00) $2.81 $1.49 Average shares outstanding 13,611 13,459 13,324 Diluted: From continuing operations $2.28 $3.06 $2.61 From discontinued operations (3.04) (0.40) (1.14) Net $(0.76) $2.66 $1.47 Average shares outstanding 15,176 15,081 15,138 Note: Total depreciation and amortization expense $18,025 $16,886 $17,250 DATASOURCE: Standard Commercial Corporation CONTACT: Timothy S. Price of Standard Commercial Corporation, +1-252-291-5507 Web site: http://www.sccgroup.com/

Copyright