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What changed in UNIVERSAL CORP /VA/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UNIVERSAL CORP /VA/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+259 added−254 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-27)

Top changes in UNIVERSAL CORP /VA/'s 2023 10-K

259 paragraphs added · 254 removed · 182 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+16 added−10 removed65 unchanged
Biggest changeSustainability efforts with respect to our supply chain also address environmental impacts, while also emphasizing important issues such as appropriate agricultural labor practices and other components of industry-recognized GAP. Agricultural Labor Practices Throughout the world, we work side-by-side with our contracted farmers to produce a sustainable tobacco crop that adheres to GAP, including appropriate agricultural labor practices.
Biggest changeAgricultural Labor Practices Throughout the world, we work side-by-side with our contracted farmers to produce a sustainable tobacco crop that adheres to GAP, including appropriate agricultural labor practices. We are committed to extending our human rights standards to our contracted farmers and their workers, so we monitor each contracted farmer for safe and fair working conditions on their farms.
Our processing of leaf tobacco includes grading in the factories, blending, removal of non-tobacco material, separation of leaf from the stems, drying, packing to precise moisture targets for proper aging, as well as temporary storage. This generally requires investments in factories and machinery in areas where the tobacco is grown.
Our processing of leaf tobacco includes grading in the factories, blending, removal of non-tobacco material, separation of leaf from the stems, drying, packing to precise moisture targets for proper aging, as well as temporary storage. This generally requires investments in factories and machinery in areas where tobacco is grown.
We estimate that over the last five years we have handled, through leaf sales or processing, on average between 25% and 35% of the annual production of such tobaccos in Africa, between 35% and 45% and the United States, and between 15% and 25% in Brazil.
We estimate that over the last five years we have handled, through leaf sales or processing, on average between 25% and 35% of the annual production of such tobaccos in Africa, between 35% and 45% in the United States, and between 15% and 25% in Brazil.
Shank’s has a strong presence within the botanical extracts, flavorings, and bottling marketplace, with significant vanilla expertise. In addition to pure vanilla extract products, Shank’s offers a robust portfolio of over 2,400 other extracts, distillates, natural flavors and colors for industrial and private label customers worldwide.
Shank’s has a strong presence within the botanical extracts, flavorings, and bottling marketplace, with significant vanilla expertise. In addition to pure vanilla extract products, Shank’s offers a robust portfolio of over 2,400 other botanical extracts, distillates, natural flavors and colors for industrial and private label customers worldwide.
As crops progress through the growing season, customers will inspect the crop, and a customer’s early indications may be refined based upon emerging crop qualities and quantities and market pricing 6 expectations. Ultimately, purchase agreements specifying quantity, quality, grade and price are executed, leading to inventory allocations of harvested green or processed leaf that we have acquired.
As crops progress through the growing season, customers will inspect the crop, and a customer’s early indications may be refined based upon emerging crop qualities and quantities and market pricing expectations. Ultimately, purchase agreements specifying quantity, quality, grade and price are executed, leading to inventory allocations of harvested green or processed leaf that we have acquired.
We conduct our leaf tobacco business in varying degrees in a number of countries, including Bangladesh, Brazil, Canada, the Dominican Republic, Ecuador, France, Germany, Guatemala, Hungary, India, Indonesia, Italy, Malawi, Mexico, Mozambique, the Netherlands, Paraguay, the People’s Republic of China, the Philippines, Poland, Russia, Singapore, South Africa, Spain, Switzerland, the United Arab Emirates, the United States, and Zimbabwe.
We conduct our leaf tobacco business in varying degrees in a number of countries, including Bangladesh, Brazil, Canada, the Dominican Republic, Ecuador, France, Germany, Guatemala, Hungary, India, Indonesia, Italy, Malawi, Mexico, Mozambique, the Netherlands, Paraguay, the People’s Republic of China, the Philippines, Poland, the Republic of South Africa, Singapore, Spain, Switzerland, the United Arab Emirates, the United States, and Zimbabwe.
Silva’s manufacturing facility was recently expanded and enhanced. As a result, the business is well positioned to take advantage of increasing demand for natural and clean-label products across the end markets it serves, including within the attractive and growing savory and pet food end markets. 8 Shank’s produces botanical extracts, flavorings and has bottling capabilities.
Silva’s manufacturing facility was recently expanded and enhanced. As a result, the business is well positioned to take advantage of increasing demand for natural and clean-label products across the end markets it serves, including within the attractive and growing savory and pet food end markets. Shank’s produces botanical extracts, flavorings and has bottling capabilities.
As part of our ALP program, we train contracted farmers on the ALP Code requirements and we monitor their compliance through multiple in-person farm visits during the growing season. The significant investment of time and resources we commit each year to our ALP program evidences the importance of sustainable labor practices to our business.
As part of our ALP program, we train contracted farmers on the ALP Code requirements and we monitor their compliance through multiple in-person farm visits during the tobacco growing season. The significant investment of time and resources we commit each year to our ALP program evidences the importance of sustainable labor practices to our business.
Customers expect a sustainable supply of compliant, traceable, competitively-priced product, and we believe that we lead in delivering these products. Among other initiatives, we invest in training farmers in good agricultural practices ("GAP") that encompass crop quality, sustainability, environmental stewardship and agricultural labor standards. 5 • Diversified sources.
Customers expect a sustainable supply of compliant, traceable, competitively priced product, and we believe that we lead in delivering these products. Among other initiatives, we invest in training farmers in good agricultural practices ("GAP") that encompass crop quality, sustainability, environmental stewardship and agricultural labor standards. • Diversified sources.
Sustainability efforts with respect to our facilities around the world involve the adoption and implementation of policies and procedures related to environmental impacts, workforce protections and programs such as those we address in “Human Capital Management” below, and other important considerations.
Sustainability efforts with respect to our facilities around the world involve the adoption and implementation of policies and procedures related to environmental impacts, 8 workforce protections and programs such as those we address in “Human Capital Management” below, and other important considerations.
The majority of these seasonal advances and loan guarantees mature in one year or less upon the farmers’ delivery of contracted tobaccos. Most advances to farmers are denominated in local currency, which is a source of foreign currency exchange rate risk.
The majority of these seasonal advances and loan guarantees mature in one year or less upon the farmers’ delivery of 6 contracted tobaccos. Most advances to farmers are denominated in local currency, which is a source of foreign currency exchange rate risk.
We also support our employees outside of work through a variety of initiatives and strongly believe that our success relies on the prosperity of the communities in which we operate. We fund various programs that enhance local economies and cultures.
We support our employees outside of work through a variety of initiatives and strongly believe that our success relies on the prosperity of the communities in which we operate. We fund various programs that enhance local communities, economies and cultures.
For the fiscal year ended March 31, 2022, each of British American Tobacco plc, Imperial Brands plc, and Philip Morris International, Inc., including their respective affiliates, accounted for 10% or more of our revenues. The loss of, or substantial reduction in business from, any of these customers could have a material adverse effect on our results.
For the fiscal year ended March 31, 2023, each of British American Tobacco plc, Imperial Brands plc, and Philip Morris International, Inc., including their respective affiliates, accounted for 10% or more of our revenues. The loss of, or substantial reduction in business from, any of these customers could have a material adverse effect on our results.
Human Capital Management Workforce Overview We believe our employees are among our most important resources and rely on them to execute our business plan with integrity and efficiency. Investing in human capital is critical to our continued success. Our employees enable us to be a leading global supplier of leaf tobacco and other agri-products.
Human Capital Management Workforce Overview Our employees are among our most important resources and rely on them to execute our business plan with integrity and efficiency. Investing in human capital is critical to our continued success. Our employees enable us to be a leading global supplier of leaf tobacco and other agri-products.
As more fully described in Note 1 and Note 4 to the consolidated financial statements in Item 8 of this Annual Report, we recognize revenue from the sale of tobacco when we complete our contractual performance obligation for the transfer of the tobacco, which is generally when title and risk of loss is transferred to our customer.
As more fully described in Note 1 and Note 3 to the consolidated financial statements in Item 8 of this Annual Report, we recognize revenue from the sale of tobacco when we complete our contractual performance obligation for the transfer of the tobacco, which is generally when title and risk of loss is transferred to our customer.
We also believe that our customers value the security of supply that we are able to provide due to our strong relationships with our farmer base and our global footprint. Ingredients Operations Our ingredients businesses provide our business-to-business customers with a broad range of plant-based ingredients for both human and pet consumption.
Our customers value the security of supply that we are able to provide due to our strong relationships with our farmer base and our global footprint. Ingredients Operations Our ingredients businesses provide our business-to-business customers with a broad range of plant-based ingredients for both human and pet consumption.
We provide comprehensive training, technical support in the field, and crop analytics through ongoing research and development. We believe that our major customers increasingly require these services and that our programs increase the quality and value of the products and services we offer.
We provide comprehensive training, technical support in the field, and crop analytics through ongoing research and development. Our major customers increasingly 7 require these services, and we believe our programs increase the quality and value of the products and services we offer.
We have longstanding relationships with all of these customers. We had commitments from customers for approximately $694 million of the tobacco in our inventories at March 31, 2022. Based upon historical experience, we usually expect that about 90% of such orders will be delivered during the following fiscal year.
We have longstanding relationships with all of these customers. We had commitments from customers for approximately $743 million of the tobacco in our inventories at March 31, 2023. Based upon historical experience, we usually expect that about 90% of such orders will be delivered during the following fiscal year.
We pair our improved health and safety management system with a strong database reporting tool to allow all Universal facilities to track their local occupational health and safety performance and that of the entire company. These reports allow our global teams to analyze the insights collected from our health and safety system immediately.
We pair our improved health and safety management system with a strong database reporting tool to allow all Universal facilities to track their local occupational health and safety performance and that of the entire company. These reports allow our global teams to analyze the insights collected from our health and safety system immediately to support compliance and promote continuous improvement.
Competition varies depending on the market or country involved. The number of competitors varies from country to country, but there is competition in most areas to buy and sell the available tobacco. Our principal competitor is Pyxus International, Inc. (“Pyxus”) (formerly Alliance One International, Inc.). Pyxus operates in some of the countries where we operate.
The number of competitors varies from country to country, but there is competition in most areas to buy and sell the available tobacco. Our principal competitor is Pyxus International, Inc. (“Pyxus”) (formerly Alliance One International, Inc.). Pyxus operates in some of the countries where we operate.
We strive to foster a diverse and inclusive workplace; attract, retain, and develop talented personnel; and keep our employees safe and healthy. As of March 31, 2022, we employed more than 25,000 employees, located in over 30 different countries across five continents. Approximately 55% of our employees are seasonal and approximately 45% of our employees are full time.
We strive to foster a diverse and inclusive workplace; attract, retain, and develop talented personnel; and keep our employees safe and healthy. As of March 31, 2023, we employed more than 28,000 employees, operating in over 30 different countries across five continents. Approximately 60% of our employees are seasonal and approximately 40% are full-time employees.
Through our plant-based ingredients platform, we provide a variety of value-added manufacturing processes to produce high-quality, specialty vegetable- and fruit-based ingredients as well as botanical extracts and flavorings for human and pet food end markets. We do not manufacture any direct to consumer products.
Through our plant-based ingredients platform, we provide a variety of value-added manufacturing processes to produce high-quality, specialty vegetable- and fruit-based ingredients as well as botanical extracts and flavorings for human and pet food end markets. We do not manufacture any direct-to-consumer products. Rather, we support consumer product manufacturers by selling them agri-products and performing related services for them.
The Nominating and Corporate Governance Committee oversees and reviews our ESG programs, which include important policies and practices related to human rights, diversity and inclusion, prohibitions against discrimination, and other policies related to our workforce as well as our Board of Directors.
The Nominating and Corporate Governance Committee oversees and reviews our ESG programs, which include important policies and practices related to human rights, diversity and inclusion, prohibitions against discrimination, employee health and safety, and other policies related to our workforce.
Our Board of Directors further evidenced our commitment to sustainability by amending our Nominating and Corporate Governance Committee charter to give the Committee oversight of our Environmental, Social and Governance ("ESG") programs. Our commitment to sustainability encompasses a wide array of programs and initiatives.
In the same year, our Board of Directors further evidenced our commitment to sustainability by amending our Nominating and Corporate Governance Committee charter to give the Committee oversight of our Environmental, Social and Governance ("ESG") programs.
For the fiscal year ended March 31, 2022, our Tobacco Operations segment accounted for 87% of our revenues and 90% of our segment operating income.
For the fiscal year ended March 31, 2023, our Tobacco Operations segment accounted for 88% of our revenues and 94% of our segment operating income.
Government Regulation, Environmental Matters, and Other Matters Our business is subject to general governmental regulation in the United States and in foreign jurisdictions where we conduct business. Such regulation includes, but is not limited to, matters relating to environmental protection.
Intellectual Property We hold no material patents, licenses, franchises, or concessions. F. Government Regulation, Environmental Matters, and Other Matters Our business is subject to general governmental regulation in the United States and in foreign jurisdictions where we conduct business. Such regulation includes, but is not limited to, matters relating to environmental protection.
More than 48% of our employees are female and almost 17% of our managers are female. Globally, Universal has twelve collective bargaining agreements in place, covering approximately 56% of our workforce. The sizeable seasonal nature of our global workforce makes these numbers fluctuate throughout the year.
Almost 50% of our employees are female and more than 18% of our managers are female. Globally, Universal has twelve collective bargaining agreements in place, covering approximately 57% of our workforce. The sizeable seasonal nature of our global workforce makes these numbers fluctuate throughout the year. The above percentages reflect our workforce on March 31, 2023.
Delays in the delivery of orders can result from such factors as truck and container availability, port access and capacity, vessel scheduling, and changing customer requirements for shipment.
Most of our products require shipment via trucks and oceangoing vessels to reach customer destinations. Delays in the delivery of orders can result from such factors as truck and container availability, port access and capacity, vessel scheduling, and changing customer requirements for shipment.
Environmental Impacts Universal is committed to abiding by environmental laws and regulations, monitoring our supply chain activities, and cooperating with supply chain partners to implement strategies that mitigate and reduce environmental impacts that may be associated with our business. We recognize three primary environmental risks related to our global footprint: water usage; emissions; and waste.
Environmental Impacts Universal is committed to abiding by environmental laws and regulations, monitoring our supply chain activities, and cooperating with supply chain partners to implement strategies that mitigate and reduce environmental impacts that may be associated with our business.
Development of leadership skills remains a top priority and is specialized for all level of employees. For example, members of management in our global operations participate in our succession planning programs, which include the identification of employees who are offered development opportunities for career advancement.
For example, members of management in our global operations participate in our succession planning programs, which include the identification of employees who are offered development opportunities for career advancement.
Through various operating subsidiaries and unconsolidated affiliates located in tobacco-growing origins around the world, we contract, purchase, process, and sell flue-cured, burley, and dark air-cured tobaccos, as well as oriental tobaccos.
Rather, we support consumer product manufacturers by selling them processed leaf tobacco and performing related services for them. Through various operating subsidiaries and unconsolidated affiliates located in tobacco-growing origins around the world, we contract, purchase, process, and sell flue-cured, burley, and dark air-cured tobaccos, as well as oriental tobaccos.
Its top five products are apple juice concentrate, not from concentrate apple juice, concord grape, raspberry, and blueberry juice concentrates. The business is headquartered in the Yakima Valley of the state of Washington, where it has approximately 200 employees and two manufacturing facilities: one produces liquid products and one produces dry products.
The business is headquartered in the Yakima Valley of the state of Washington, where it has approximately 200 employees and two manufacturing facilities: one produces liquid products and one produces dry products.
Health and Safety The health and safety of our employees is at the forefront of our business efforts. We are committed to the prevention of injury and illness in the workplace through strong health and safety management, employee empowerment and accountability, and strict compliance with health and safety regulations.
We are committed to the prevention of injury and illness in the workplace through strong health and safety management, employee empowerment and accountability, and strict compliance with health and safety regulations. Our programs are designed to influence our Company’s culture through employee engagement and leadership behavior.
The Compensation Committee has oversight of compensation, benefits, and retention and development processes, including an annual review of the Company's succession planning and leadership development program. We are committed to protecting the human rights of our employees and have policies in place to support this effort, including relating to whistleblowing, harassment, equal employment and compliance with local labor laws.
We are committed to protecting the human rights of our employees and have policies in place to support this effort, including those relating to whistleblowing, harassment, equal employment and compliance with local labor laws.
(“FruitSmart”), acquired on January 1, 2020, Silva International, Inc. (“Silva”), acquired on October 1, 2020, and Shank’s. We generated approximately $2.1 billion in consolidated revenues and earned $160.3 million in total operating income and $174.3 million in total segment operating income in fiscal year 2022. Universal Corporation is a holding company that operates through numerous directly and indirectly owned subsidiaries.
We generated approximately $2.6 billion in consolidated revenues and earned $181.1 million in total operating income and $183.5 million in total segment operating income in fiscal year 2023. Universal Corporation is a holding company that operates through numerous directly and indirectly owned subsidiaries.
Rather, we support consumer product manufacturers by selling them agri-products and performing related services for them . Recognizing that leaf tobacco is a mature industry, we have been positioning our company for the future by investing in and strengthening our plant-based ingredients platform, while maintaining our position as the leading global leaf tobacco supplier.
Recognizing that leaf tobacco is a mature industry, we have been positioning our company for the future by investing in and strengthening our plant-based ingredients platform, while maintaining our position as the leading global leaf tobacco supplier. In fiscal year 2023, we continued to enhance and increase the capabilities of our plant-based ingredients platform.
In some markets, including Brazil, Italy, the Philippines, Poland, and the United States, we process tobacco that is owned by our customers, and we recognize the revenue for that service when the processing is completed. 7 Competition Competition among leaf tobacco suppliers is based on the ability to meet customer specifications in the growing, buying, processing, and financing of tobacco, and on the prices charged for products and services.
In some markets, including Brazil, Italy, the Philippines, Poland, and the United States, we process tobacco that is owned by our customers, and we recognize the revenue for that service when the processing is completed.
FruitSmart supplies a broad set of juices, concentrates, pomaces, purees, fruit fibers, seed and seed powders, and other value-added products to food, beverage and flavor companies throughout the United States and internationally. FruitSmart processes apples, grapes, blueberries, raspberries, cherries, blackberries, pears, cranberries and strawberries as well as other fruits and vegetables.
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, seed and seed powders, and other value-added products to food, beverage and flavor companies throughout the United States and internationally.
Our Nominating and Corporate Governance Committee and our Compensation Committee both have important roles with respect to human capital management.
We pride ourselves on a culture that respects co-workers and values concern for others. Our Nominating and Corporate Governance Committee and our Compensation Committee both have important roles with respect to human capital management.
With respect to our leaf tobacco business, we generate our revenues from product sales of processed, packed tobacco that we source, from processing fees for tobacco owned by third parties, and from fees for other services.
Management of liquidity, interest expense, and capital costs provides us with a competitive advantage, affords us flexibility when responding to customer requirements and market changes, and allows us to enhance shareholder value. 5 With respect to our leaf tobacco business, we generate our revenues from product sales of processed, packed tobacco that we source, from processing fees for tobacco owned by third parties, and from fees for other services.
Sustainability We believe we have a fundamental responsibility to our stakeholders to set high standards of social and environmental performance to support a sustainable supply chain and operations. In 2018, Universal celebrated 100 years in business. Our 100 year anniversary was an opportunity to look back at our accomplishments, and to look forward to our future.
Sustainability We have a fundamental responsibility to our stakeholders to set high standards of social and environmental performance to support a sustainable supply chain and operations.
In addition to corporate audits, we encourage this regional cross-auditing to promote a collaborative framework and drive our employee safety programs forward. We continue to closely monitor developments related to the ongoing COVID-19 pandemic and have taken and continue to take steps intended to mitigate the potential risks to us.
In addition to corporate audits, we encourage this regional cross-auditing to promote a collaborative framework and drive our employee safety programs forward. Our commitment to our employees’ health and safety was effectively demonstrated in our global response to the COVID-19 pandemic.
Procuring leaf tobacco involves contracting with, providing agronomy support to, and financing farmers in many origins. We do not manufacture cigarettes or other consumer tobacco products. Rather, we support consumer product manufacturers by selling them processed leaf tobacco and performing related services for them.
Description of Business Tobacco Operations Our primary business is contracting, procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to manufacturers of consumer tobacco products throughout the world. Procuring leaf tobacco involves contracting with, providing agronomy support to, and financing farmers in many origins. We do not manufacture cigarettes or other consumer tobacco products.
The above percentages reflect our workforce on March 31, 2022. 9 We are a multinational and multicultural organization, with employees and operations located around the world, and we are committed to creating a diverse and inclusive workplace. Less than 6% of our employees are located in the United States.
We are a multinational and multicultural organization, with employees and operations located around the world, and we are committed to maintaining a diverse and inclusive workplace. Only around 5% of our employees are located in the United States. Almost all of our employees are from the same country in which our operations are located.
We provide employees with a range of development opportunities that vary by location and seniority of employees, such as online training, live classes, and mentoring to assist with career advancement. These programs often include safety and technical job skill training as well as soft-skill programs focused on communication and change management.
Talent Development and Training Employee training and development of both technical and leadership skills are integral aspects of our human capital strategy. We provide employees with a range of development opportunities that vary by location and seniority of employees, such as online training, live classes, and mentoring to assist with career advancement.
These benefits vary depending on the location, seniority and employment status of our employees, and can include medical insurance, long-term disability insurance, retirement benefits, and similar programs. We periodically review and adjust our employees’ total compensation and benefits when necessary to ensure that they are competitive within our industry and are aligned with our performance.
In addition, we believe employee benefits are an essential component of our total compensation package. Each of our global operations provides benefits that are designed to attract and retain our employees. These benefits vary depending on the location, seniority and employment status of our employees, and can include medical insurance, long-term disability insurance, retirement benefits, and similar programs.
Universal Corporation’s Board of Directors’ Role in Human Capital Management Our Board of Directors believes that human capital management is an important component of our continued growth and success and is essential to our ability to attract, retain, and develop talented and skilled employees. We pride ourselves on a culture that respects co-workers and values concern for others.
Our expatriate hires represent less than 0.5% of our workforce, and they are hired due to their essential professional knowledge necessary to the operation of our business. 9 Universal Corporation’s Board of Directors’ Role in Human Capital Management Our Board of Directors believes that human capital management is an important component of our continued growth and success and is essential to our ability to attract, retain, and develop talented and skilled employees.
Ultimately, we recognize our impact extends beyond the workplace and are proud to engage as both active corporate citizens and leaders in our neighborhoods, communities, and countries. 10 Talent Development and Training Employee training and development of both technical and leadership skills are integral aspects of our human capital strategy.
Ultimately, we recognize our impact extends beyond the workplace and are proud to engage as both active corporate citizens and leaders in our neighborhoods, communities, and countries. We publicly disclose additional information about our community support activities each year in our Sustainability Report.
In fiscal year 2020, several environmental projects and programs were expanded and implemented to further minimize our environmental footprint, including GAP program initiatives to address environmental risks on contracted farms. In addition, we publicly committed to meet a science-based greenhouse gas emissions reduction target of 30% for our Company by 2030 through the Science Based Targets Initiative.
We recognize three primary environmental responsibilities throughout our global footprint: responsible consumption of water and resources, responsible forestry management, and minimizing greenhouse gas emissions. In fiscal year 2023, several environmental projects and programs were expanded and implemented to further minimize our environmental footprint, including GAP program initiatives to address environmental risks on contracted farms.
No customer accounted for more than 10% of our Ingredients Operations segment revenues in fiscal year 2022. FruitSmart, Silva, and Shank's are the primary operations for the Ingredients Operations segment. In December 2020, we announced the wind-down of Carolina Innovative Food Ingredients, Inc.
No customer accounted for more than 10% of our Ingredients Operations segment revenues in fiscal year 2023.
Research and Development We did not expend material amounts for research and development during the fiscal years ended March 31, 2022, 2021, or 2020. E. Intellectual Property We hold no material patents, licenses, franchises, or concessions. F.
Universal was committed to employee protection and limiting the physical and mental impacts of the pandemic as much as possible on our global workforce. D. Research and Development We did not expend material amounts for research and development during the fiscal years ended March 31, 2023, 2022, or 2021. E.
For example, we have taken precautions with regard to employee and facility hygiene, imposed travel limitations on our employees, directed certain employee groups to work remotely whenever possible, and continue to assess protocols designed to protect our employees, customers, and the public. D.
Management at all levels of the Company closely monitored developments and took steps intended to mitigate the potential risks to our employees, including taking precautions with regard to employee and facility hygiene, imposing travel limitations on our employees, and directing certain employee groups to work remotely whenever possible.
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In fiscal year 2022, we continued to make progress towards building and enhancing our plant-based ingredients platform. On October 4, 2021, we acquired Shank’s Extracts, LLC (“Shank’s”), a specialty ingredient botanical extract and flavorings company with bottling and packaging capabilities. We have been integrating and exploring opportunities for synergies between our acquired businesses, FruitSmart, Inc.
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We have been achieving operational synergies across the platform among our acquired businesses, FruitSmart, Inc. (“FruitSmart”), acquired on January 1, 2020, Silva International, Inc. (“Silva”), acquired on October 1, 2020, and Shank’s Extracts, LLC (“Shank’s”), acquired on October 4, 2021.
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Description of Business Given the significant and strategic investments in our plant-based ingredients platform, we evaluated our operating segments for financial reporting purposes during the quarter ended December 31, 2020. Based on our evaluation, we determined that we conduct our operations across two primary reportable operating segments, Tobacco Operations and Ingredients Operations.
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We have also made considerable progress on our vision for the segment, providing a total solution-based approach for our customers that utilizes our broad spectrum of capabilities in fruits, vegetables and botanical extracts and flavorings.
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The segments reflect how we manage our Company, allocate resources, and assess business performance. Prior period segment information has been recast retrospectively to reflect these changes. Tobacco Operations Our primary business is contracting, procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to manufacturers of consumer tobacco products throughout the world.
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Competition Competition among leaf tobacco suppliers is based on the ability to meet customer specifications in the growing, buying, processing, and financing of tobacco, and on the prices charged for products and services. Competition varies depending on the market or country involved.
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Management of liquidity, interest expense, and capital costs provides us with a competitive advantage, affords us flexibility when responding to customer requirements and market changes, and allows us to enhance shareholder value.
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We have been achieving operational synergies across the platform among our businesses and have also made considerable progress on our vision for the segment, providing a total solution-based approach to plant-based ingredients to our customers that utilizes our broad spectrum of capabilities in fruits, vegetables and botanical extracts and flavorings.
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However, we expect a lower percentage of such orders will be delivered in fiscal year 2023 due to COVID-related logistical challenges. Most of our products require shipment via trucks and oceangoing vessels to reach customer destinations.
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FruitSmart processes apples, grapes, blueberries, raspberries, cherries, blackberries, pears, cranberries and strawberries as well as other fruits and vegetables. Its top five products are apple juice concentrate, not from concentrate apple juice, concord grape, raspberry, and blueberry juice concentrates.
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(“CIFI”), a greenfield operation that primarily manufactured both dehydrated and liquid sweet potato products having determined that CIFI is not a strategic fit for the long-term objectives of our plant-based ingredients platform. Sales of remaining inventory, the sale of the CIFI manufacturing facility, and certain administrative activities at CIFI continued into fiscal year 2022.
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Universal is proud of the commitment we made to stakeholders in 2019 to report annually on sustainability topics that impact our business so stakeholders could better understand how we meet the high standards we set.
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We believe sustainability is a key component of our past and future success, and we highlighted our 100 year anniversary by publishing a Sustainability Review to promote our commitment to sustainability. Since then we have produced annual sustainability reports, and we have committed to continuing our annual sustainability reporting.
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Since that time, we have made strategic acquisitions, witnessed a global pandemic, and further strengthened our approach to sustainability at the corporate level while continuing to report annually on sustainability. Our commitment to sustainability encompasses a wide array of programs and initiatives.
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Almost all of our employees are from the same country in which our operations are located. Our expatriate hires represent less than 0.5% of our workforce, and they are hired due to their essential professional knowledge necessary to the operation of our business.
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Sustainability efforts with respect to our supply chain emphasize important issues related to the countries and communities in which we operate. Some of the most important issues include the protection of farm worker rights through appropriate agricultural labor practices, and the monitoring and reduction of environmental impacts through compliance with industry-recognized GAP” programs and our own environmental programs and initiatives.
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Employee Benefits In addition to offering competitive base salaries and wages, the Compensation Committee believes employee benefits are an essential component of our total compensation package. Each of our global operations provides benefits that are designed to attract and retain our employees.
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In addition, we continued to work towards our Company’s science-based greenhouse gas emissions reduction target of 30% by 2030 through the Science Based Targets Initiative.
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It is paramount that our employees who operate our businesses are safe and informed. We have assessed and regularly update our existing business continuity plans for our business in the context of this pandemic.
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The Compensation Committee has oversight of compensation, benefits, and retention and development processes of senior management, including an annual review of the Company's succession planning and leadership development program.
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Employee Compensation and Benefits We offer our employees competitive base salaries and wages, and we have a salary administration process where we regularly review and adjust our employees’ total compensation and benefits when warranted to ensure they are competitive in our industry and are aligned with our performance.
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In the United States, benefits to our employees include medical, dental, disability and life insurance, flexible spending accounts, and a 401(k) Retirement Plan with a 5% match and immediate vesting.
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We provide a health care advocacy service to assist our employees with various medical needs as they make these decisions, and we provide a mental health and financial counseling program for our employees and their families.
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We also offer other benefits which may vary by location, but which include performance, holiday, attendance and other bonus opportunities, a tuition assistance program (offering assistance up to 75%) as well as a 501(c)(3) matching gift program to benefit communities in which our employees work and reside.
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These programs often include safety and technical job skill training as well as soft-skill programs focused on communication and change management. Development of leadership skills is also a priority and is specialized for different levels of employees.
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To further develop leadership skills, we also maintain specific leadership programs for aspiring leaders and new supervisors, managers and directors. 10 Health and Safety The health and safety of our employees is at the forefront of our business efforts.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePolitical or economic instability in those countries, such as the ongoing conflict in Ukraine, may impede or disrupt our ability to meet our customers’ leaf tobacco needs in those impacted countries. If the political situation in any of the countries where we conduct business were to deteriorate significantly, our ability to recover assets located there could be impaired.
Biggest changeIf the political situation in any of the countries where we conduct business were to deteriorate significantly, our ability to recover assets located there could be impaired.
The extent to which the COVID-19 pandemic or any future pandemic or disease outbreak will impact our business, financial condition, results of operations, and demand for our products and services will depend on future developments including the ongoing geographic spread of the health crisis, the impact of disease mutations, the severity and duration of the health crisis, and the type and duration of actions that may be taken by various governmental authorities in response to the COVID-19 pandemic or any future pandemic or disease outbreak and the impact on the U.S. and the global economies, markets, and supply chains.
The extent to which any pandemic or disease outbreak will impact our business, financial condition, results of operations, and demand for our products and services will depend on future developments including the ongoing geographic spread of the health crisis, the impact of disease mutations, the severity and duration of the health crisis, and the type and duration of actions that may be taken by various governmental authorities in response to the pandemic or disease outbreak and the impact on the U.S. and the global economies, markets, and supply chains.
We also periodically have large cash balances and may receive deposits from tobacco customers, both of which we use to fund seasonal purchases of tobacco, reducing our financing needs. Decreases in short-term interest rates could reduce the income we derive from those investments. Changes in interest rates also affect expense related to our defined benefit pension plan, as described below.
We also periodically have large cash balances and may receive deposits from tobacco customers, both of which we use to fund seasonal purchases of tobacco, reducing our financing needs. Decreases in short-term interest rates could reduce the income we derive from those investments. Changes in interest rates also affect expenses related to our defined benefit pension plan, as described below.
In addition, other factors can affect the marketability of our products, including, among other things, the presence of excess residues of crop protection agents or non-tobacco related materials.
In addition, other factors can affect the marketability of our products, including, among other things, the presence of excess residues of crop protection agents or non-crop related materials.
The European Union has recently proposed broad due diligence reporting requirements for all industries operating within Europe. The United States has called for a broader and more robust approach to labor compliance in foreign jurisdictions, which could include some of our strategic origins.
The European Union has recently advanced broad due diligence reporting requirements for all industries operating within Europe. The United States has called for a broader and more robust approach to labor compliance in foreign jurisdictions, which could include some of our strategic origins.
The ultimate impact of the COVID-19 pandemic or any future pandemic or disease outbreak on our business, financial condition, results of operations and the demand for our products and services in the future is uncertain, and it is impossible to predict whether any impacts we have experienced to date would continue or worsen in the future.
The ultimate impact of any future pandemic or disease outbreak on our business, financial condition, results of operations and the demand for our products and services in the future is uncertain, and it is impossible to predict whether any impacts we have experienced to date would continue or worsen in the future.
The most significant year-end assumptions we used to estimate pension expense for fiscal year 2022 were the discount rate, the expected long-term rate of return on plan assets, and the mortality rates.
The most significant year-end assumptions we used to estimate pension expense for fiscal year 2023 were the discount rate, the expected long-term rate of return on plan assets, and the mortality rates.
COVID-19, and other adverse public health developments in countries and states where we operate, therefore, could have a material and adverse effect on our business, financial condition, results of operations and the demand for our products and services.
Adverse public health developments in countries and states where we operate, therefore, could have a material and adverse effect on our business, financial condition, results of operations and the demand for our products and services.
In addition, some trade proposals have included provisions that could effectively allow governments to regulate tobacco products differently than other products.
For example, some trade proposals have included provisions that could effectively allow governments to regulate tobacco products differently than other products.
At the end of fiscal year 2022, the projected benefit obligation ("PBO") of our qualified U.S. pension plan was $237 million and plan assets were $250 million.
At the end of fiscal year 2023, the projected benefit obligation ("PBO") of our qualified U.S. pension plan was $205 million and plan assets were $215 million.
Epidemics, pandemics or similar widespread public health concerns, such as COVID-19, could adversely affect our business, financial condition, results of operations and demand for our products and services.
Epidemics, pandemics or similar widespread public health concerns, such as COVID-19, could adversely affect our business, financial condition, results of operations and demand for our products and services. Epidemics, pandemics or similar public health concerns, such as COVID-19, could cause a widespread health crisis and significantly disrupt the U.S. and global economies, markets and supply chains.
Operating Factors In areas where we purchase leaf tobacco directly from farmers, we bear the risk that the tobacco we receive will not meet quality and quantity requirements.
Our business continuity plans and other safeguards, however, may not be effective to mitigate the results of epidemics, pandemics, or similar widespread health concerns. Operating Factors In areas where we purchase leaf tobacco directly from farmers, we bear the risk that the tobacco we receive will not meet quality and quantity requirements.
Removed
Since January 2020, the COVID-19 outbreak, characterized as a pandemic by the World Health Organization ("WHO") on March 11, 2020, has caused, and could possibly continue to cause a widespread health crisis and significantly disrupt the U.S. and global economies, markets and supply chains.
Added
Political or economic instability in those countries, such as the ongoing conflict in Ukraine, may impede or disrupt our ability to meet our customers’ needs in or source raw materials from those impacted countries.
Removed
In addition, we have taken and will continue to take precautionary measures, including through consultation with governmental authorities and union representatives, intended to help minimize the risk of the COVID-19 pandemic to our employees, including implementing work-from-home protocols, instituting mandatory stay-at-home policies for those who are ill or significantly exposed to COVID-19, acquiring personal protective equipment (PPE), increasing sanitation and special sanitation of work areas, mandating social distancing (particularly among our employees engaged in manual processes), altering work arrangements to maintain social distancing and limiting visitors and non-employees at our facilities.
Removed
Our business continuity plans and other safeguards, however, may not be effective to mitigate the results of the COVID-19 pandemic.
Removed
The impact of the COVID-19 pandemic and any worsening of the global business and economic environment as a result may also exacerbate the following risk factors discussed below in this Form 10-K, any of which could have a material effect on us. This situation remains fluid and additional impacts may arise that we are not aware of currently.
Removed
For example, the World Trade Organization’s resolution on the Large Civil Aircraft Dispute between the United States and the European Union resulted in both bodies imposing tariffs on a variety of products, including leaf tobacco. While these tariffs have been temporarily lifted and negotiations continue, drastic changes in global trade remains a risk to our results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIngredients Operations Our ingredients business involves, among other things, storing and processing both fresh and dehydrated plant-based ingredients and storing processed finished goods. We operate processing facilities in three U.S. locations. We believe that the properties currently utilized in our ingredients operations are maintained in good operating condition and are suitable and adequate for current level of business.
Biggest changeWe operate processing facilities in three U.S. locations. We believe that the properties currently utilized in our ingredients operations are maintained in good operating condition and are suitable and adequate for current level of business.
In addition, we have an ownership interest in a processing plant in Mexico and have access to processing facilities in other areas, such as India, the People’s Republic of China, and South Africa.
In addition, we have an ownership interest in a processing plant in Mexico and have access to processing facilities in other areas, such as India, the People’s Republic of China, and the Republic of South Africa.
We lease headquarters office space of about 50,000 square feet at 9201 Forest Hill Avenue in Richmond, Virginia, which we believe is adequate for our current needs. Tobacco Operations Our tobacco business involves, among other things, storing and processing green tobacco and storing processed tobacco. We operate processing facilities in major tobacco growing areas.
We lease headquarters office space of about 50,000 square feet at 9201 Forest Hill Avenue in Richmond, Virginia, which we believe is adequate for our current needs. 19 Tobacco Operations Our tobacco business involves, among other things, storing and processing green tobacco and storing processed tobacco. We operate processing facilities in major tobacco growing areas.
Socotab L.L.C., an oriental tobacco joint venture in which we own a noncontrolling interest, owns tobacco processing plants in Bulgaria, Macedonia, and Turkey. 19 Except for the Lancaster, Pennsylvania facility, the facilities described above are engaged primarily in processing tobaccos used by manufacturers in the production of cigarettes.
Socotab L.L.C., an oriental tobacco joint venture in which we own a noncontrolling interest, owns tobacco processing plants in Bulgaria, the Republic of North Macedonia, and Turkey. Except for the Lancaster, Pennsylvania facility, the tobacco facilities described above are engaged primarily in processing tobaccos used by manufacturers in the production of cigarettes.
Properties We own the following significant properties (greater than 500,000 square feet): Location Principal Use Building Area (Square Feet) Tobacco Operations: United States Nash County, North Carolina Factory and storages 1,323,000 Lancaster, Pennsylvania Factory and storages 793,000 Brazil Santa Cruz Factory and storages 2,386,000 Malawi Lilongwe Factory and storages 942,000 Mozambique Tete Factory and storages 770,000 Philippines Agoo, La Union Factory and storages 770,000 Reina Mercedes, Isabela Factory and storages 759,000 Tanzania Morogoro Factory and storages 895,000 Zimbabwe Harare (1) Factory and storages 1,445,000 Ingredients Operations: United States Momence, Illinois Factory and storages 407,000 Grandview, Washington Factory and storages 125,000 Prosser, Washington Factory and storages 335,000 Lancaster, Pennsylvania Factory and storages 191,000 (1) Owned by an unconsolidated subsidiary.
Properties We own the following significant properties: Location Principal Use Building Area (Square Feet) Tobacco Operations: United States Nash County, North Carolina Factory and storages 1,323,000 Lancaster, Pennsylvania Factory and storages 793,000 Brazil Santa Cruz Factory and storages 2,386,000 Malawi Lilongwe Factory and storages 942,000 Mozambique Tete Factory and storages 770,000 Philippines Agoo, La Union Factory and storages 770,000 Reina Mercedes, Isabela Factory and storages 759,000 Zimbabwe Harare (1) Factory and storages 1,445,000 Ingredients Operations: United States Momence, Illinois Factory and storages 407,000 Grandview, Washington Factory and storages 125,000 Prosser, Washington Factory and storages 335,000 Lancaster, Pennsylvania Factory and storages 191,000 (1) Owned by an unconsolidated subsidiary.
The Lancaster facility, as well as facilities in Brazil, the Dominican Republic, Indonesia, and Paraguay, process tobaccos used in making cigar, pipe, and smokeless products, as well as components of certain “roll-your-own” products.
The Lancaster facility, as well as facilities in Brazil, the Dominican Republic, Indonesia, and Paraguay, process tobaccos used in making cigar, pipe, and smokeless products, as well as components of certain “roll-your-own” products. Ingredients Operations Our ingredients business involves, among other things, storing and processing both fresh and dehydrated plant-based ingredients and storing processed finished goods.
Removed
As discussed in Note 4 to the consolidated financial statements in Item 8, due to changes that have affected the Company's operations in Tanzania, an impairment charge was recorded during the third quarters of fiscal year 2022 and 2019 to reduce the carrying values of the factory and storages in Morogoro, Tanzania to their estimated fair values.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCommon Stock 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) January 1-31, 2022 — $ — — $ 100,000,000 February 1-28, 2022 58,264 52.41 58,264 96,946,661 March 1-31, 2022 — — — 96,946,661 Total 58,264 $ — 58,264 $ 96,946,661 (1) Repurchases are based on the date the shares were traded.
Biggest changeCommon Stock 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) January 1-31, 2023 — $ — — $ 100,000,000 February 1-28, 2023 — — — 100,000,000 March 1-31, 2023 — — — 100,000,000 Total — $ — — $ 100,000,000 (1) Repurchases are based on the date the shares were traded.
This stock repurchase plan authorizes the purchase of up to $100 million in common and/or preferred stock in open market or privately negotiated transactions through November 15, 2022 or when we have exhausted the funds authorized for the program, subject to market conditions and other factors. 21
This stock repurchase plan authorizes the purchase of up to $100 million in common and/or preferred stock in open market or privately negotiated transactions through November 15, 2024 or when we have exhausted the funds authorized for the program, subject to market conditions and other factors. 21
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 March 31, 2022. At May 24, 2022, there were 919 holders of record of our common stock.
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 March 31, 2023. At May 23, 2023, there were 919 holders of record of our common stock.
(3) A stock repurchase plan, which was authorized by our Board of Directors, became effective and was publicly announced on November 5, 2020.
(3) A stock repurchase plan, which was authorized by our Board of Directors, became effective and was publicly announced on November 3, 2022.
See Notes 9 and 14 to the consolidated financial statements in Item 8 for more information on debt covenants and equity securities. Purchases of Equity Securities As indicated in the following table, we repurchased shares of our common stock during the three-month period ended March 31, 2022.
See Notes 9 and 14 to the consolidated financial statements in Item 8 for more information on debt covenants and equity securities. Purchases of Equity Securities As indicated in the following table, we did not repurchase shares of our common stock during the three-month period ended March 31, 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeSelected Financial Data Fiscal Year Ended March 31, 2022 2021 2020 2019 2018 (in thousands, except share and per share data, ratios, and number of shareholders) Summary of Operations Sales and other operating revenues $ 2,103,601 $ 1,983,357 $ 1,909,979 $ 2,227,153 $ 2,033,947 Operating income $ 160,315 $ 147,810 $ 126,367 $ 161,169 $ 170,825 Segment operating income (1) $ 174,335 $ 169,199 $ 138,121 $ 186,772 $ 179,950 Net income $ 103,604 $ 96,314 $ 78,003 $ 110,134 $ 116,168 Net income attributable to Universal Corporation (2) $ 86,577 $ 87,410 $ 71,680 $ 104,121 $ 105,662 Earnings available to Universal Corporation common shareholders $ 86,577 $ 87,410 $ 71,680 $ 104,121 $ 105,662 Return on beginning common shareholders’ equity 6.6 % 7.0 % 5.4 % 7.8 % 8.2 % Earnings per share attributable to Universal Corporation common shareholders: Basic $ 3.50 $ 3.55 $ 2.87 $ 4.14 $ 4.18 Diluted $ 3.47 $ 3.53 $ 2.86 $ 4.11 $ 4.14 Financial Position at Year End Current ratio 3.37 5.31 5.53 6.26 5.94 Total assets $ 2,586,345 $ 2,341,924 $ 2,120,921 $ 2,133,184 $ 2,168,632 Long-term debt $ 518,547 $ 518,172 $ 368,764 $ 368,503 $ 369,086 Working capital $ 1,229,287 $ 1,262,201 $ 1,212,218 $ 1,334,397 $ 1,321,323 Total Universal Corporation shareholders’ equity $ 1,340,543 $ 1,307,299 $ 1,246,665 $ 1,337,087 $ 1,342,429 General Number of common shareholders 928 962 1,000 1,028 1,131 Weighted average common shares outstanding: Basic 24,764,177 24,656,009 24,982,259 25,129,192 25,274,975 Diluted 24,922,896 24,788,566 25,106,351 25,330,437 25,508,144 Dividends per share of common stock (annual) $ 3.12 $ 3.08 $ 3.04 $ 3.00 $ 2.18 Book value per common share $ 54.60 $ 53.33 $ 51.05 $ 53.50 $ 53.85 (1) We evaluate the performance of our segments based on segment operating income, which is operating income after allocated overhead expenses (excluding significant non-recurring charges or credits), plus equity in the pretax earnings of unconsolidated affiliates.
Biggest changeSelected Financial Data Fiscal Year Ended March 31, 2023 2022 2021 2020 2019 (in thousands, except share and per share data, ratios, and number of shareholders) Summary of Operations Sales and other operating revenues $ 2,569,824 $ 2,103,601 $ 1,983,357 $ 1,909,979 $ 2,227,153 Operating income $ 181,072 $ 160,315 $ 147,810 $ 126,367 $ 161,169 Segment operating income (1) $ 183,455 $ 174,335 $ 169,199 $ 138,121 $ 186,772 Net income $ 130,236 $ 103,604 $ 96,314 $ 78,003 $ 110,134 Net income attributable to Universal Corporation (2) $ 124,052 $ 86,577 $ 87,410 $ 71,680 $ 104,121 Return on beginning common shareholders’ equity 9.3 % 6.6 % 7.0 % 5.4 % 7.8 % Earnings per share attributable to Universal Corporation common shareholders: Basic $ 5.01 $ 3.50 $ 3.55 $ 2.87 $ 4.14 Diluted $ 4.97 $ 3.47 $ 3.53 $ 2.86 $ 4.11 Financial Position at Year End Current ratio 4.08 3.37 5.31 5.53 6.26 Total assets $ 2,639,182 $ 2,586,345 $ 2,341,924 $ 2,120,921 $ 2,133,184 Long-term debt $ 616,809 $ 518,547 $ 518,172 $ 368,764 $ 368,503 Working capital $ 1,360,903 $ 1,229,287 $ 1,262,201 $ 1,212,218 $ 1,334,397 Total Universal Corporation shareholders’ equity $ 1,397,088 $ 1,340,543 $ 1,307,299 $ 1,246,665 $ 1,337,087 General Number of common shareholders 885 928 962 1,000 1,028 Weighted average common shares outstanding: Basic 24,773,710 24,764,177 24,656,009 24,982,259 25,129,192 Diluted 24,943,841 24,922,896 24,788,566 25,106,351 25,330,437 Dividends per share of common stock (annual) $ 3.16 $ 3.12 $ 3.08 $ 3.04 $ 3.00 Book value per common share $ 56.90 $ 54.60 $ 53.33 $ 51.05 $ 53.50 (1) We evaluate the performance of our segments based on segment operating income, which is operating income after allocated overhead expenses (excluding significant non-recurring charges or credits), plus equity in the pretax earnings of unconsolidated affiliates.
On a combined basis, the net effect of these items decreased net income by $7.8 million, or $0.32 per diluted share. 22 • Fiscal Year 2021 – $22.6 million of restructuring and impairment costs, primarily related to the termination of operations at CIFI, as well as other restructurings and impairments in the Tobacco operations segment.
On a combined basis, the net effect of these items decreased net income by $7.8 million, or $0.32 per diluted share. • Fiscal Year 2021 – $22.6 million of restructuring and impairment costs, primarily related to the termination of operations at CIFI, as well as other restructurings and impairments in the Tobacco operations segment.
We reversed a portion of the contingent consideration liability for the FruitSmart acquisition, as a result of certain performance metrics that did not meet the required threshold stipulated in the purchase agreement that increased net income by $2.5 million, or $0.10 per diluted share.
We reversed a portion of the contingent consideration liability for the FruitSmart acquisition, as a result of certain performance metrics that did not meet the required threshold 22 stipulated in the purchase agreement that increased net income by $2.5 million, or $0.10 per diluted share.
The reduction of income tax expense increased diluted earnings per share by $0.30. On a combined basis, the net effect of these items decreased net income by $8.7 million, or $0.34 per diluted share. • Fiscal Year 2018 – a $4.5 million reduction of income tax expense from the enactment of the Tax Cuts and Jobs Act in December 2017.
The reduction of income tax expense increased diluted earnings per share by $0.30. On a combined basis, the net effect of these items decreased net income by $8.7 million, or $0.34 per diluted share. 23
Segment operating income is a non-GAAP measure. See Note 17 to the consolidated financial statements in Item 8 of this Annual Report for information on reportable operating segments.
Segment operating income is a non-GAAP measure. See Note 17 to the consolidated financial statements in Item 8 of this Annual Report for information on reportable operating segments. (2) We hold less than a 100% financial interest in certain consolidated subsidiaries, and a portion of net income is attributable to the noncontrolling interests in those subsidiaries.
(2) We hold less than a 100% financial interest in certain consolidated subsidiaries, and a portion of net income is attributable to the noncontrolling interests in Significant items included in the operating results in the above table are as follows: • Fiscal Year 2022 – $10.5 million of restructuring and impairment costs, primarily related to the impairment of assets in Tanzania as well as other restructurings in the Tobacco operations segment.
On a combined basis, the net effect of these items increased net income by $29.9 million, or $1.20 per diluted share. • Fiscal Year 2022 – $10.5 million of restructuring and impairment costs, primarily related to the impairment of assets in Tanzania as well as other restructurings in the Tobacco operations segment.
Removed
The reduction in income tax expense increased diluted earnings per share by $0.18. 23
Added
Significant items included in the operating results in the above table are as follows: • Fiscal Year 2023 – Final judgement on a lawsuit against the government in Brazil resulted in the refund of taxes paid in prior years, as well as interest proceeds on the overpayment, increasing net income by $29.2 million and diluted earnings per share by $1.18.
Added
Sale of the idled tobacco operations in Tanzania resulted in a reversal of interest expense for a previously recognized uncertain tax position and an increase in income taxes, increasing net income by $0.7 million and diluted earnings per share by $0.02.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWithout these income tax benefits, the consolidated effective tax rate for the fiscal year ended March 31, 2021, would have been approximately 29.2%. 28 Reconciliation of Certain Non-GAAP Financial Measures The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to Universal Corporation: Adjusted Operating Income Reconciliation Fiscal Year Ended March 31, (in thousands) 2022 2021 As Reported: Consolidated operating income $ 160,315 $ 147,810 Purchase accounting adjustments (1) 3,057 2,800 Transaction costs for acquisitions (2) 2,310 3,915 Fair value adjustment to contingent consideration for FruitSmart acquisition (3) (2,532) (4,173) Restructuring and impairment costs (4) 10,457 22,577 Adjusted operating income $ 173,607 $ 172,929 Adjusted Net Income and Diluted Earnings Per Share Reconciliation (in thousands except for per share amounts) Fiscal Year Ended March 31, (all amounts reported net of income taxes) 2022 2021 As Reported: Net income attributable to Universal Corporation $ 86,577 $ 87,410 Purchase accounting adjustments (1) 2,415 2,800 Transaction costs for acquisitions (2) 2,195 3,915 Fair value adjustment to contingent consideration for FruitSmart acquisition (3) (2,532) (4,173) Restructuring and impairment costs (4) 7,879 17,800 Interest expense related to an uncertain tax matter at a foreign subsidiary (470) 1,849 Income tax benefit from dividend withholding tax liability reversal (5) (1,686) (4,421) Adjusted Net income attributable to Universal Corporation $ 94,378 $ 105,180 As reported: Diluted earnings per share $ 3.47 $ 3.53 Adjusted: Diluted earnings per share $ 3.79 $ 4.25 (1) The Company recognized an increase in cost of goods sold in the third quarters of fiscal year 2022 and 2021, relating to the expensing of fair value adjustments to inventory associated with the acquisition accounting for Shank's (effective October 4, 2021) and Silva (effective October 1, 2020).
Biggest changeWithout these income tax benefits, the adjusted effective tax rate for the fiscal year ended March 31, 2022, would have been 29.2%. 27 Reconciliation of Certain Non-GAAP Financial Measures The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to Universal Corporation: Adjusted Operating Income Reconciliation Fiscal Year Ended March 31, (in thousands) 2023 2022 2021 As Reported: Consolidated operating income $ 181,072 $ 160,315 $ 147,810 Purchase accounting adjustments (1) — 3,057 2,800 Transaction costs for acquisitions (2) — 2,310 3,915 Fair value adjustment to contingent consideration for FruitSmart acquisition (3) — (2,532) (4,173) Restructuring and impairment costs (4) — 10,457 22,577 Adjusted operating income (Non-GAAP) $ 181,072 $ 173,607 $ 172,929 Adjusted Net Income and Adjusted Diluted Earnings Per Share Reconciliation Fiscal Year Ended March 31, (in thousands except for per share amounts) 2023 2022 2021 As Reported: Net income attributable to Universal Corporation $ 124,052 $ 86,577 $ 87,410 Purchase accounting adjustments (1) — 3,057 2,800 Transaction costs for acquisitions (2) — 2,310 3,915 Fair value adjustment to contingent consideration for FruitSmart acquisition (3) — (2,532) (4,173) Restructuring and impairment costs (4) — 10,457 22,577 Interest (income) expense related to final income tax rulings (fiscal years 2023 and 2022) and settlement (fiscal years 2021) at foreign subsidiaries (5) (4,980) (470) 1,849 Interest expense reversal on uncertain tax position from sale of operations in Tanzania (1,816) — — Total of Non-GAAP adjustments to income before income taxes (6,796) 12,822 26,968 Income tax benefit on final tax rulings (fiscal years 2023 and 2022) and dividends paid from foreign subsidiaries (fiscal year 2021) (5) (24,256) (1,686) (4,421) Income tax expense from sale of operations in Tanzania 1,132 — — Income tax benefit from Non-GAAP adjustments to income before income taxes (6) — (2,181) (4,290) Total of income tax impacts for Non-GAAP adjustments to income before income taxes and Non-GAAP adjustment to income taxes (23,124) (3,867) (8,711) Impact to net income attributable to noncontrolling interests in subsidiaries from Non-GAAP adjustments — (1,154) (487) As adjusted: Net income attributable to Universal Corporation (Non-GAAP) $ 94,132 $ 94,378 $ 105,180 As reported: Diluted earnings per share $ 4.97 $ 3.47 $ 3.53 Adjusted: Diluted earnings per share $ 3.77 $ 3.79 $ 4.25 (1) The Company recognized an increase in cost of goods sold in the third quarters of fiscal year 2022 and 2021, relating to the expensing of fair value adjustments to inventory associated with the acquisition accounting for Shank's (effective October 4, 2021) and Silva (effective October 1, 2020).
In addition, we are able to offer manufacturers a complete range of services from the field to the delivery of the packed product that benefit from our efficiencies. These services include such things as buying station optimization, processing and blending to specific customer specifications or 37 needs, storage of green or packed leaf tobacco, and logistical services.
In addition, we are able to offer 37 manufacturers a complete range of services from the field to the delivery of the packed product that benefit from our efficiencies. These services include such things as buying station optimization, processing and blending to specific customer specifications or needs, storage of green or packed leaf tobacco, and logistical services.
Domestic leaf tobacco inventories have built up in China over the last several years as China’s domestic leaf production has exceeded their domestic needs for the local cigarette market. China is continuing to 38 demonstrate efforts to re-align their domestic leaf production and inventories to balance their needs, and inventories have started to come down.
Domestic leaf tobacco inventories have built up in China over the last several years 38 as China’s domestic leaf production has exceeded their domestic needs for the local cigarette market. China is continuing to demonstrate efforts to re-align their domestic leaf production and inventories to balance their needs, and inventories have started to come down.
As part of this regulatory scheme, the FDA approved the first “heat-not-burn” and “very-low nicotine” premarket tobacco applications to permit the sale of these products within the United States. Furthermore, FDA approved their first modified risk tobacco products applications to permit certain products in the heat-not-burn and smokeless categories to make modified exposure or risk claims.
As part of this regulatory scheme, the FDA approved the first “heat-not-burn” and “very-low nicotine” premarket tobacco applications to permit the sale of these products within the United States. Furthermore, the FDA approved their first modified risk tobacco products applications to permit certain products in the heat-not-burn and smokeless categories to make modified exposure or risk claims.
If our estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired. Goodwill We review the carrying value of goodwill for potential impairment on an annual basis and at any time that events or business conditions indicate that it may be impaired.
If our estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired. 33 Goodwill We review the carrying value of goodwill for potential impairment on an annual basis and at any time that events or business conditions indicate that it may be impaired.
These determinations require significant management judgment, and changes in any given quarterly or annual reporting period could affect our consolidated income tax rate. Tax regulations require items to be included in taxable income in the tax return at different times, and in some cases in different amounts, than the items are reflected in the financial statements.
These determinations require significant management judgment, and changes in any given quarterly or annual reporting period could affect our consolidated income tax rate. 34 Tax regulations require items to be included in taxable income in the tax return at different times, and in some cases in different amounts, than the items are reflected in the financial statements.
Early retirement assumptions are based on our actual experience. Mortality rates are based on standard industry group annuity mortality tables which are updated to reflect projected improvements in life expectancy. 35 • Healthcare cost trend rates – For postretirement medical plan obligations and costs, we make assumptions on future inflationary increases in medical costs.
Early retirement assumptions are based on our actual experience. Mortality rates are based on standard industry group annuity mortality tables which are updated to reflect projected improvements in life expectancy. • Healthcare cost trend rates – For postretirement medical plan obligations and costs, we make assumptions on future inflationary increases in medical costs.
This method of cost accounting is referred to as the specific cost or specific identification method. We write down inventory for changes in net realizable value based upon assumptions related to future demand and market conditions if the indicated value is below cost.
This method of cost accounting is referred to as the specific cost or specific identification method. We write down inventory for changes in net realizable value based upon assumptions related to 32 future demand and market conditions if the indicated value is below cost.
(5) The Company recognized income tax benefits related to a favorable final income tax ruling at a foreign subsidiary (fiscal year 2022) and final U.S. tax regulations on certain dividends paid by foreign subsidiaries (fiscal year 2021).
The Company recognized income tax benefits related to a favorable final income tax ruling at a foreign subsidiary (fiscal year 2022) and final U.S. tax regulations on certain dividends paid by foreign subsidiaries (fiscal year 2021).
It is impossible to predict the ultimate impact these developing regulations will have on our business, but any reduction in the demand for our customer’s products will adversely impact the demand for leaf tobacco.
It is impossible to predict the ultimate impact these developing regulations will have on our business, but any reduction in the demand for our customer’s products will adversely affect the demand for leaf tobacco.
We incorporate credit risk in determining the fair values of our financial assets and financial liabilities, but that risk did not materially affect the fair values of any of those assets or liabilities at March 31, 2022. We estimate the fair value of acquisition-related contingent consideration obligations by applying an income approach model that utilizes probability-weighted discounted cash flows.
We incorporate credit risk in determining the fair values of our financial assets and financial liabilities, but that risk did not materially affect the fair values of any of those assets or liabilities at March 31, 2023. We estimate the fair value of acquisition-related contingent consideration obligations by applying an income approach model that utilizes probability-weighted discounted cash flows.
Specifically, we have expertise in tobacco seed development, crop production methods, crop sourcing, processing, and manufacturing of reconstituted sheet tobacco, which is beneficial to our customers as they continue to develop alternative tobacco products. We also are able to provide high quality, traceable and sustainable liquid nicotine through our subsidiary, AmeriNic.
Specifically, we have expertise in tobacco seed development, crop production methods, crop sourcing, processing, and manufacturing of reconstituted sheet tobacco, which is beneficial to our customers as they continue to develop alternative tobacco products. We also are able to provide high quality liquid nicotine through our subsidiary, AmeriNic.
As permitted under Accounting Standards Codification Topic 350 (“ASC 350”), at March 31, 2022 and 2021, we elected to base our initial assessment of potential impairment on qualitative factors. Those factors did not indicate any impairment of our recorded goodwill in fiscal year 2022.
As permitted under Accounting Standards Codification Topic 350 (“ASC 350”), at March 31, 2023 and 2022, we elected to base our initial assessment of potential impairment on qualitative factors. Those factors did not indicate any impairment of our recorded goodwill in fiscal year 2023.
The financial covenants under our committed revolving credit facility require us to maintain certain levels of tangible net worth and observe restrictions on debt levels. As of March 31, 2022, we were in compliance with all covenants of our debt agreements.
The financial covenants under our committed revolving credit facility require us to maintain certain levels of tangible net worth and observe restrictions on debt levels. As of March 31, 2023, we were in compliance with all covenants of our debt agreements.
We have also seen some reductions in sourcing from lower-volume tobacco growing origins by both global leaf suppliers and major manufacturers. Flue-cured tobacco is produced in about 70 countries around the world, and burley tobacco is grown in about 45 countries.
We have also seen some reductions in sourcing from lower-volume tobacco growing origins by both global leaf suppliers and major manufacturers. Flue-cured tobacco is produced in about 65 countries around the world, and burley tobacco is grown in about 45 countries.
The ABO and PBO are calculated on the basis of certain assumptions that are outlined in Note 13 to the consolidated financial statements in Item 8. We expect to make no contributions to our pension plans during the next year.
The ABO and PBO are calculated on the basis of certain assumptions that are outlined in Note 13 to the consolidated financial statements in Item 8. We expect to make no contributions to our pension plan during the next year.
Global Acceptance of the Continuum of Risk in the Regulation of Novel Tobacco Products As novel tobacco products, such as e-cigarettes and heat-not-burn devices, emerge in the global market, governments are tasked with developing the appropriate, science-based approach to regulation.
Global Acceptance of the Continuum of Risk in the Regulation of Novel Tobacco Products As novel tobacco products, such as e-cigarettes and heat-not-burn devices, emerge in the global market, governments are tasked with developing the appropriate, science-driven approach to regulation.
We continue to support both governmental and industry efforts to eradicate illicit trade. 40 Ingredients Operations Trends Following our capital allocation strategy, we have made disciplined investments within our leaf business to take advantage of growth opportunities in tobacco as well as in plant-based ingredients businesses and markets that could utilize our assets and capabilities.
We continue to support both governmental and industry efforts to eradicate illicit trade. 40 Ingredients Operations Trends Following our capital allocation strategy, we have made disciplined investments within our leaf business to take advantage of growth opportunities in tobacco as well as in our plant-based ingredients platform that utilize our assets and capabilities.
We also have an active, undenominated universal shelf registration filed with the SEC in November 2020 that provides for future issuance of additional debt or equity securities. We have no long-term debt maturing until fiscal year 2024. 31 Derivatives From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates.
We also have an effective, undenominated universal shelf registration filed with the SEC in November 2020 that provides for future issuance of additional debt or equity securities. We have no long-term debt maturing until fiscal year 2028. Derivatives From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates.
Although less than 5% of cigarettes manufactured worldwide are consumed in the United States, the FDA is widely considered a global leader in the “science-based” regulation of tobacco products. The FDA operates in stark contrast to the WHO’s “emotion based” approach to nicotine use.
Although less than 5% of cigarettes manufactured worldwide are consumed in the United States, the FDA is widely considered a global leader in the “science-driven” regulation of tobacco products. The FDA operates in stark contrast to the WHO’s “politically driven” approach to nicotine use.
As a result, we expect that near term global demand for leaf tobacco will continue to slowly decline in line with declining global cigarette consumption. Our sales consist primarily of flue-cured, burley, and dark air-cured tobaccos. Flue-cured and burley tobaccos, along with oriental tobaccos, are used in American-blend cigarettes which are primarily smoked in Western Europe and the United States.
We expect that near term global demand for leaf tobacco will slowly decline in line with global cigarette consumption. Our sales consist primarily of flue-cured, burley, and dark air-cured tobaccos. Flue-cured and burley tobaccos, along with oriental tobaccos, are used in American-blend cigarettes which are primarily smoked in Western Europe and the United States.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on May 28, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on May 27, 2022.
Inventory write-downs in fiscal years 2022, 2021, and 2020 were $19.9 million, $13.5 million, and $10.3 million, respectively. Advances to Tobacco Suppliers In many sourcing origins, we provide tobacco growers with agronomy services and seasonal crop advances of, or for, seed, fertilizer, and other supplies.
Inventory write-downs in fiscal years 2023, 2022, and 2021 were $14.0 million, $19.9 million, and $13.5 million, respectively. Advances to Tobacco Suppliers In many sourcing origins, we provide tobacco growers with agronomy services and seasonal crop advances of, or for, seed, fertilizer, and other supplies.
Currently, we have interest rate swap agreements that convert the variable benchmark LIBOR rates on $370 million of our two outstanding term loans entered to fixed rates.
Currently, we have interest rate swap agreements that convert the variable benchmark SOFR rates on $310 million of our two outstanding term loans entered to fixed rates.
English-blend cigarettes which use flue-cured tobacco are mainly smoked in the United Kingdom and Asia and other emerging markets. Industry data shows that consumption of American-blend cigarettes was flat for the three years ended in 2021.
English-blend cigarettes which use flue-cured tobacco are mainly smoked in the United Kingdom and Asia and other emerging markets. Industry data shows that consumption of American-blend cigarettes was declining for the five years ended in 2022.
At each reporting period, we must make estimates and assumptions in determining the valuation allowance for advances to farmers. At March 31, 2022, the gross balance of advances to tobacco suppliers totaled approximately $153 million, and the related valuation allowance totaled approximately $19 million.
At each reporting period, we must make estimates and assumptions in determining the valuation allowance for advances to farmers. At March 31, 2023, the gross balance of advances to tobacco suppliers totaled approximately $199 million, and the related valuation allowance totaled approximately $24 million.
Interest payments on $333.0 million of variable rate debt were estimated based on rates as of March 31, 2022. We have entered into interest rate swaps that effectively convert the interest payments on $370.0 million of the outstanding balance of our two bank term loans from variable to fixed.
Interest payments on $506 million of variable rate debt were estimated based on rates as of March 31, 2023. We have entered into interest rate swaps that effectively convert the interest payments on $310 million of the outstanding balance of our two bank term loans from variable to fixed.
In accordance with ASC 805, “ Business Combinations ”, we generally recognize the identifiable assets acquired and the liabilities assumed at their fair values as of the date of acquisition.
Business Combinations From time to time, we may enter into business combinations. In accordance with ASC 805, “ Business Combinations ”, we generally recognize the identifiable assets acquired and the liabilities assumed at their fair values as of the date of acquisition.
Accounting Pronouncements See "Accounting Pronouncements" in Note 1 to the consolidated financial statements in Item 8 of this Annual Report for a discussion of recent accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") that will become effective and be adopted by the Company in future reporting periods. 29 LIQUIDITY AND CAPITAL RESOURCES Overview In fiscal year 2022, we generated $44.9 million in cash flows from our operating activities, and our liquidity was sufficient to meet our needs.
Accounting Pronouncements See "Accounting Pronouncements" in Note 1 to the consolidated financial statements in Item 8 of this Annual Report for a discussion of recent accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") that will become effective and be adopted by the Company in future reporting periods. 29 LIQUIDITY AND CAPITAL RESOURCES Overview In fiscal year 2023, our liquidity was sufficient to meet our needs.
We continue to monitor industry developments regarding next generation products, including consumer acceptance and regulation, and will adapt accordingly. Leaf Tobacco Supply Although flue-cured tobacco crops grown outside of China increased in fiscal year 2022 by about 4% to 1.7 billion kilos compared to fiscal year 2021, production levels remain below historical averages.
We continue to monitor industry developments regarding next generation products, including consumer acceptance and regulation, and will adapt accordingly. Leaf Tobacco Supply Flue-cured tobacco crops grown outside of China decreased in fiscal year 2023 by about 5% to 1.6 billion kilos compared to fiscal year 2022, with production levels below historical averages.
In 2012 the WHO Framework Convention on Tobacco Control adopted an illicit trade protocol which has been so far ratified by only one third of its 182 parties.
In 2012, the WHO FCTC adopted an illicit trade protocol which has been so far ratified by only one third of its 182 parties.
As of March 31, 2021, we had $330 million available under a committed revolving credit facility that will mature in December 2023, and we, together with our consolidated affiliates, had approximately $283 million in uncommitted lines of credit, of which approximately $200 million were unused and available to support seasonal working capital needs.
As of March 31, 2023, we had $500 million available under the committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $350 million in uncommitted lines of credit, of which approximately $183 million were unused and available to support seasonal working capital needs.
In the fiscal year ended March 31, 2022, the Company recognized a $1.7 million income tax benefit related to a final tax ruling at a foreign subsidiary and a $1.2 million benefit due to finalizing the prior year U.S. tax return.
For the fiscal year ended March 31, 2022, our effective tax rate on pre-tax income was 27.2%. In the fiscal year ended March 31, 2022, we recognized a $1.7 million income tax benefit related to a final tax ruling at a foreign subsidiary and a $1.2 million benefit due to finalizing the prior year U.S. tax return.
Recognizing that leaf tobacco is a mature industry, we have also been positioning our company for the future by investing in and strengthening our plant-based ingredients platform, while maintaining our position as the leading global leaf tobacco supplier. In fiscal year 2022, we continued to make progress towards building and enhancing our plant-based ingredients platform.
Recognizing that leaf tobacco is a mature industry, we have been positioning our company for the future by investing in and strengthening our plant-based ingredients platform, while maintaining our position as the leading global leaf tobacco supplier. In fiscal year 2023, we continued to enhance and increase the capabilities of our plant-based ingredients platform.
We will continue to monitor and evaluate this complex and evolving situation. 25 RESULTS OF OPERATIONS 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.
RESULTS OF OPERATIONS 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.
We were also named a 2021 Supplier Engagement Leader by CDP, earning recognition for our work in engaging our suppliers on climate change.
In addition, we were named a Supplier Engagement Leader by CDP for the second consecutive year, earning recognition for our work in engaging our suppliers on climate change.
Despite a predominance of short-term needs for working capital, we maintain a portion of our total debt as long-term to reduce liquidity risk. We also periodically may have large cash balances that we utilize to meet our working capital requirements. We believe that our financial resources are adequate to support our capital needs for at least the next twelve months.
Despite a predominance of short-term needs for working capital, we maintain a portion of our total debt as long-term to reduce liquidity risk. We also periodically may have large cash balances that we utilize to meet our working capital requirements.
Excluding restructuring and impairment costs and certain other non-recurring items, detailed in Other Items below, net income and diluted earnings per share decreased by $10.8 million and $0.46, respectively, for the year ended March 31, 2022, compared to the year ended March 31, 2021.
Excluding certain non-recurring items detailed in Other Items below, net income and diluted earnings per share decreased by $0.2 million and $0.02, respectively, for the fiscal year ended March 31, 2023, compared to the fiscal year ended March 31, 2022.
Adjusted operating income, detailed in Other Items below, of $173.6 million increased by $0.7 million for the year ended March 31, 2022, compared to adjusted operating income of $172.9 million for the year ended March 31, 2021.
Adjusted operating income, detailed in Other Items below, of $181.1 million increased by $7.5 million for the fiscal year ended March 31, 2023, compared to adjusted operating income of $173.6 million for the fiscal year ended March 31, 2022.
These estimates can also affect our supplemental information disclosures, including information about contingencies, risks, and financial condition. We believe, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to GAAP, and are consistently applied. However, changes in the assumptions used could result in a material adjustment to the financial statements.
We believe, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to GAAP, and are consistently applied. However, changes in the assumptions used could result in a material adjustment to the financial statements.
Significant judgment is required in determining the effective tax rate and evaluating our tax position. We are subject to the tax laws of many jurisdictions, and could be subject to a tax audit in each of these jurisdictions, which could result in adjustments to tax expense in future periods.
We are subject to the tax laws of many jurisdictions, and could be subject to a tax audit in each of these jurisdictions, which could result in adjustments to tax expense in future periods.
Our working capital requirements in fiscal year 2022 were higher than those in fiscal year 2021 mainly due to tobacco shipment timing and higher green leaf tobacco prices. We continued our financial policies and returned funds to shareholders.
Our working capital requirements in fiscal year 2023 were significantly higher than those in fiscal year 2022 mainly due to increased costs, including higher leaf tobacco costs. We continued our financial policies and disciplines and returned funds to shareholders.
With the swap agreements in place, the effective interest rates on $220 million of the five-year term loan and $295 million of the seven-year term loan were 3.36% and 3.84%, respectively, as of March 31, 2022.
With the swap agreements in place, the effective interest rates on $275 million of the five-year term loan and $345 million of the seven-year term loan were 6.11% and 6.31%, respectively, as of March 31, 2023.
Consolidated revenues increased by $120.2 million to $2.1 billion for the year ended March 31, 2022, compared to the year ended March 31, 2021, on the addition of the businesses acquired in the Ingredients Operations segment and lower tobacco sales volumes partially offset by higher average sales prices in the Tobacco Operations segment.
Consolidated revenues increased by $466.2 million to $2.6 billion for the fiscal year ended March 31, 2023, compared to the fiscal year 2022, on higher tobacco sales volumes and prices as well as the addition of the business acquired in October 2021 in the Ingredients Operations segment.
Operating income of $160.3 million for the year ended March 31, 2022, increased by $12.5 million, compared to operating income of $147.8 million for the year ended March 31, 2021.
Operating income of $181.1 million for the fiscal year ended March 31, 2023, increased by $20.8 million, compared to operating income of $160.3 million for the fiscal ended March 31, 2022.
We currently plan to spend approximately $40 to $50 million in fiscal year 2023 on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.
We currently plan to spend approximately $65 to $75 million in fiscal year 2024 on capital projects for maintenance of our facilities and other investments to grow and improve our businesses, including significant investments in our plant-based ingredients platform.
As the leading global leaf tobacco supplier, we continually monitor for issues and opportunities that may impact the supply of and demand for leaf tobacco, the volumes of leaf tobacco that we handle, and the services we provide. We have also been building a plant-based ingredients platform and monitor issues and opportunities that may impact these businesses as well.
As the leading global leaf tobacco supplier, we continually monitor for issues and opportunities that may impact the supply of and demand for leaf tobacco, the volumes of leaf tobacco that we handle, and the services we provide.
These businesses provide value-added agricultural processing, part of the agricultural value chain where we possess significant business expertise. We consider the agricultural value chain to consist of agricultural inputs, crop production, agricultural processing, manufacture and distribution, and retail sales.
We consider the agricultural value chain to consist of agricultural inputs, crop production, agricultural processing, manufacture and distribution, and retail sales.
Interest expense for fiscal year 2022, increased by $2.8 million to $27.7 million, compared to fiscal year 2021, largely on higher average debt balances and interest rates. For fiscal year 2022, the Company’s effective tax rate on pre-tax income was 27.2%.
Interest expense for the fiscal year ended March 31, 2023, compared to the fiscal year ended March 31, 2022, increased by $21.6 million to $49.3 million largely on higher debt balances and interest rates. For the fiscal year ended March 31, 2023, our effective tax rate on pre-tax income was 8.3%.
In determining the appropriate valuation allowance to record in a given jurisdiction, we must make various estimates and assumptions about factors affecting the ultimate recovery of the VAT credits.
In determining the appropriate valuation allowance to record in a given jurisdiction, we must make various estimates and assumptions about factors affecting the ultimate recovery of the VAT credits. At March 31, 2023, the gross balance of recoverable tax credits (primarily VAT) totaled approximately $64 million, and the related valuation allowance totaled approximately $22 million.
We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, provide investors with important information that is useful in understanding our business results and trends.
We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, provide investors with important information that is useful in understanding our business results and trends. 24 Fiscal Year Ended March 31, 2023, Compared to the Fiscal Year Ended March 31, 2022 Executive Summary Fiscal year 2023 was a good year for Universal.
We continue to monitor developments affecting our employees, customers and operations. Cash Flow Our operations generated about $44.9 million in operating cash flows in fiscal year 2022. That amount was about $175.5 million lower than the $220.4 million we generated in fiscal year 2021, largely due to higher working capital requirements in fiscal year 2022.
Cash Flow Our operations used about $10.6 million in operating cash flows in fiscal year 2023. That amount was about $55.4 million higher than the $44.9 million we generated in fiscal year 2022, largely due to higher working capital requirements in fiscal year 2023.
At March 31, 2022, the fair value of those open contracts was a net asset of approximately $7.8 million. We also had other forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net asset of approximately $13.0 million at March 31, 2022.
We also had other forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net asset of approximately $0.9 million at March 31, 2023. For additional information, see Note 11 to the consolidated financial statements in Item 8.
Changes in the discount rate from year to year generally have the largest impact on our projected benefit obligation and annual expense, and the effects may be significant, particularly over successive years where the discount rate moves in the same direction.
Changes in the discount rate from year to year generally have the largest impact on our projected benefit obligation and annual expense, and the effects may be significant, particularly over successive years where the discount rate moves in the same direction. 35 As of March 31, 2023, the effect of the indicated increase or decrease in the selected pension and other postretirement benefit valuation assumptions is shown below.
We also enter derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecast purchases of tobacco, related processing costs, and crop input sales in Brazil, as well as our net monetary asset exposure in local currency there. We generally account for our hedges of forecast tobacco purchases as cash flow hedges.
At March 31, 2023, the fair value of our open interest rate hedge swaps was a net liability of approximately $3 million. 31 We also enter derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecast purchases of tobacco, related processing costs, and crop input sales in Brazil, as well as our net monetary asset exposure in local currency there.
Tobacco Operations Segment operating income for the Tobacco Operations segment decreased by $11.1 million to $157.8 million for the year ended March 31, 2022, compared to the year ended March 31, 2021.
Tobacco Operations Operating income for the Tobacco Operations segment increased by $15.1 million to $172.9 million for the fiscal year ended March 31, 2023, compared to the fiscal year ended March 31, 2022.
Generally, our capital spending on maintenance projects is at a level below depreciation expense in order to maintain strong cash flow. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year.
Depreciation expense was approximately $44.8 million and $41.3 million, respectively, in fiscal years 2023 and 2022. Generally, our capital spending on maintenance projects is at a level below depreciation expense. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year.
Fiscal Year Ended March 31, 2021, Compared to the Fiscal Year Ended March 31, 2020 For a comparison of our performance and financial metrics for the fiscal years ended March 31, 2021 and March 31, 2020, see “Part II, Item 7.
The Company considers current and deferred income tax rates to calculate the impact to income taxes for the Non-GAAP adjustments. 28 Fiscal Year Ended March 31, 2022, Compared to the Fiscal Year Ended March 31, 2021 For a comparison of our performance and financial metrics for the fiscal years ended March 31, 2022 and March 31, 2021, see “Part II, Item 7.
During the fiscal year ended March 31, 2022, we spent $53.2 million on capital projects and $102.5 million on the acquisition of a new business, and we returned $79.5 million to shareholders in the form of dividends and share repurchases. At March 31, 2022, cash balances totaled $81.6 million.
During the fiscal year ended March 31, 2023, we spent $54.7 million on capital projects, and we returned $80.8 million to shareholders in the form of dividends and share repurchases. At March 31, 2023, cash balances totaled $64.7 million.
However, most of the cigarettes consumed in China and the leaf tobacco used in those cigarettes are produced domestically. Therefore, we normally view the Chinese market independently when evaluating worldwide leaf tobacco supply and demand.
South America, Asia, Africa, and North America will remain key sourcing regions for flue-cured and burley tobaccos. China is a significant cigarette market. However, most of the cigarettes consumed in China and the leaf tobacco used in those cigarettes are produced domestically. Therefore, we normally view the Chinese market independently when evaluating worldwide leaf tobacco supply and demand.
In April 2022, FDA released two proposed rules to advance product standards intended to ban menthol in cigarettes and characterizing flavors in cigars. The flavored tobacco product category accounts for a significant percentage of the U.S. market, and these product standards would likely impact future leaf demand if adopted.
The flavored tobacco product category accounts for a significant percentage of the U.S. market, and these product standards would likely impact future leaf demand if adopted.
We look forward to attaining new achievements with our sustainability programs in fiscal year 2023. 26 FINANCIAL HIGHLIGHTS Fiscal Year Ended March 31, Change (in millions of dollars, except per share data) 2022 2021 $ % Consolidated Results Sales and other operating revenue $ 2,103.6 $ 1,983.4 $ 120.2 6 % Cost of goods sold 1,694.7 1,597.4 97.3 6 % Gross Profit Margin 19.44 % 19.46 % --- -2 bps Selling, general and administrative expenses 240.7 219.8 20.9 10 % Restructuring and impairment costs 10.5 22.6 (12.1) (54) % Operating income (as reported) 160.3 147.8 12.5 8 % Adjusted operating income (non-GAAP)* 173.6 172.9 0.7 0 % Diluted earnings per share (as reported) 3.47 3.53 (0.06) (2) % Adjusted diluted earnings per share (non-GAAP)* 3.79 4.25 (0.46) (11) % Segment Results Tobacco operations sales and other operating revenues $ 1,835.8 $ 1,841.8 $ (6.0) 0 % Tobacco operations operating income 157.8 168.8 (11.1) (7) % Ingredients operations sales and other operating revenues 267.8 141.5 126.3 89 % Ingredients operations operating income 16.6 0.4 16.2 4,418 % *See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below Net income for the year ended March 31, 2022, was $86.6 million, or $3.47 per diluted share, compared with $87.4 million, or $3.53 per diluted share, for the year ended March 31, 2021.
We are excited about the opportunities within our operations to improve our environmental performance and look forward to continuing to achieve our sustainability goals in fiscal year 2024. 25 FINANCIAL HIGHLIGHTS Fiscal Year Ended March 31, Change (in millions of dollars, except per share data) 2023 2022 $ % Consolidated Results Sales and other operating revenue $ 2,569.8 $ 2,103.6 $ 466.2 22 % Cost of goods sold 2,111.5 1,694.7 416.9 25 % Gross profit margin 17.83 % 19.44 % --- -161 bps Selling, general and administrative expenses 277.2 240.7 36.5 15 % Restructuring and impairment costs — 10.5 (10.5) (100) % Operating income (as reported) 181.1 160.3 20.8 13 % Adjusted operating income (Non-GAAP)* 181.1 173.6 7.5 4 % Diluted earnings per share (as reported) 4.97 3.47 1.50 43 % Adjusted diluted earnings per share (Non-GAAP)* 3.77 3.79 (0.02) (1) % Segment Results Tobacco operations sales and other operating revenues $ 2,258.3 $ 1,835.8 $ 422.5 23 % Tobacco operations operating income 172.9 157.8 15.1 10 % Ingredients operations sales and other operating revenues 311.6 267.8 43.8 16 % Ingredients operations operating income 10.6 16.6 (6.0) (36) % *See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below.
For additional information, see Note 11 to the consolidated financial statements in Item 8. Pension Funding The funds supporting our ERISA-regulated U.S. defined benefit pension plan during fiscal year 2022 were approximately $250 million. The accumulated benefit obligation (“ABO”) and PBO were both approximately $231 million and $237 million, respectively as of March 31, 2022.
Pension Funding The funds supporting our ERISA-regulated U.S. defined benefit pension plan during fiscal year 2023 were approximately $215 million. The accumulated benefit obligation (“ABO”) and PBO were both approximately $200 million and $205 million, respectively as of March 31, 2023.
Our ingredients businesses provide our business-to-business customers with a broad variety of plant-based ingredients for both human and pet consumption. A variety of value-added manufacturing processes are used in these businesses to convert raw materials into a wide spectrum of fruit and vegetable juices, concentrates, dehydrated products, and botanical extracts and flavorings.
A variety of value-added manufacturing processes are used in these businesses to convert raw materials into a wide spectrum of fruit and vegetable juices, concentrates, dehydrated products, and botanical extracts and flavorings. These businesses provide value-added agricultural processing, part of the agricultural value chain where we possess significant business expertise.
(in thousands of dollars) Effect on 2022 Projected Benefit Obligation Increase (Decrease) Effect on 2023 Annual Expense Increase (Decrease) Changes in Assumptions for Pension Benefits Discount Rate: 1% increase $ (29,959) $ (2,582) 1% decrease 36,753 2,921 Expected Long-Term Return on Plan Assets: 1% increase — (2,461) 1% decrease — 2,461 Changes in Assumptions for Other Postretirement Benefits Discount Rate: 1% increase (2,006) (159) 1% decrease 2,365 181 Healthcare Cost Trend Rate: 1% increase 153 43 1% decrease (141) (41) A 1% increase or decrease in the salary scale assumption would not have a material effect on the projected benefit obligation or on annual expense for the Company's pension benefits.
(in thousands of dollars) Effect on 2023 Projected Benefit Obligation Increase (Decrease) Effect on 2024 Annual Expense Increase (Decrease) Changes in Assumptions for Pension Benefits Discount Rate: 1% increase $ (23,431) $ (1,396) 1% decrease 28,246 2,445 Expected Long-Term Return on Plan Assets: 1% increase — (2,394) 1% decrease — 2,393 Changes in Assumptions for Other Postretirement Benefits Discount Rate: 1% increase (1,526) (110) 1% decrease 1,776 138 Healthcare Cost Trend Rate: 1% increase 109 30 1% decrease (101) (28) A 1% increase or decrease in the salary scale assumption would not have a material effect on the projected benefit obligation or on annual expense for the Company's pension benefits.
Revenues for the Ingredients Operations segment increased by $126.3 million to $267.8 million for the year ended March 31, 2022, compared to the year ended March 31, 2021, primarily on the addition of the revenues for the acquired businesses as well as increased sales prices.
Revenues for the Ingredients Operations segment increased by $43.8 million to $311.6 million for fiscal year 2023, compared to fiscal year 2022, largely on the addition of the revenues for the acquired business as well as higher sales volumes and prices for the existing businesses.
In some markets the tobacco purchased directly by manufacturers is processed by the global leaf suppliers. Although we operate in a mature industry, where demand for the end products outside of China has been declining at a compound annual rate of about 0.6% over the last three years, our mission is to remain the leading global leaf tobacco supplier.
Although we operate in a mature industry, where global consumption of cigarettes outside of China has been relatively flat and consumption of American-blend cigarettes have been declining at a compound annual growth rate of about 1.8% over the last five years, our primary mission is to remain the leading global leaf tobacco supplier.
Under the current authorization, 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.
The program authorizes the purchase of up to $100 million of our common stock through November 15, 2024. Under the current authorization, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates.
In addition, the segment saw strong sales of organic-based products, certain dehydrated products, and botanical extracts and flavorings. Selling, general, and administrative expenses for the segment increased in fiscal year 2022, compared to fiscal year 2021, on the addition of the acquired businesses.
Selling, general, and administrative expenses for the segment also increased in the fiscal year 2023, compared to the fiscal year 2022, on the addition of Shank’s.
Uncommitted inventories at March 31, 2021, were $139.2 million, which represented 22% of tobacco inventory. The level of these uncommitted inventories is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.
While we target committed tobacco inventory levels of 80% or more of total tobacco inventory, the level of these uncommitted inventories is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.
Silva is well positioned to take advantage of increasing demand for natural and clean-label products across the end markets it serves, including within the attractive and growing savory and pet food end markets. Industry estimates project annual growth of about 5% over the next several years for the pet food market in the U.S. 41
Our platform is well positioned to take advantage of increasing demand in the pet food end market as well as for other natural and clean-label products across the end markets it serves.
Tobacco inventories of $822.5 million at March 31, 2022, were up $181.9 million compared to inventory levels at the end of the prior fiscal year, mainly due to delayed tobacco shipments and higher green leaf tobacco prices.
Tobacco inventories of $833.9 million at March 31, 2023, were up $11.4 million compared to inventory levels at the end of the prior fiscal year, in part due to higher green leaf tobacco prices. Advances to suppliers were up $41.0 million at March 31, 2023, from prior year levels largely on higher crop input costs.
The acquisition expanded our plant-based ingredients platform adding valuable capabilities, including flavors and botanical extracts, custom packaging, bottling, and product development. As we look ahead, we will continually evaluate opportunities to return capital to shareholders. At the same time, we remain committed to maintaining our investment grade credit rating and extending our 52-year history of dividend increases.
As we look ahead, we will continually evaluate opportunities to return capital to shareholders. At the same time, we remain committed to maintaining our investment grade credit rating and extending our 53-year history of dividend increases. Share Activity Our Board of Directors approved our current share repurchase program in November 2022.
In fiscal year 2022, the evaluation of the contingent consideration for the FruitSmart acquisition resulted in the reduction of the remaining $2.5 million of contingent consideration of the original $6.7 million liability recorded in fiscal year 2020. 34 Income Taxes Our consolidated effective income tax rate is based on our expected taxable income, tax laws and statutory tax rates, prevailing foreign currency exchange rates, and tax planning opportunities in the various jurisdictions in which we operate.
Income Taxes Our consolidated effective income tax rate is based on our expected taxable income, tax laws and statutory tax rates, prevailing foreign currency exchange rates, and tax planning opportunities in the various jurisdictions in which we operate. Significant judgment is required in determining the effective tax rate and evaluating our tax position.
We have partially funded our tobacco purchases in some origins with short-term advances to farmers and other suppliers, which totaled approximately $130 million, net of allowances, at March 31, 2022. 32 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS In preparing the financial statements in accordance with GAAP, we are required to make estimates and assumptions that have an impact on the assets, liabilities, revenue, and expense amounts reported.
The amounts shown above are estimates since actual quantities purchased will depend on crop yield, and prices will depend on the quality of the tobacco delivered. We have partially funded our tobacco purchases in some origins with short-term advances to farmers and other suppliers, which totaled approximately $171 million, net of allowances, at March 31, 2023.
Selling, general, and administrative expenses for the Tobacco Operations segment were higher in the year ended March 31, 2022, compared to the year ended March 31, 2021, primarily due to unfavorable foreign currency exchange comparisons, mainly remeasurement, offset in part by the effects of currency hedging activities.
Selling, general, and administrative expenses for the Tobacco Operations segment were higher in fiscal year 2023, compared to fiscal year 2022, primarily due to higher compensation costs; higher provisions on advances to suppliers, in part due to weather-related lower crop yields; and unfavorable foreign currency comparisons.
In addition, these crops are projected to revert back to lower production levels, decreasing by about 4% to 1.7 billion kilos in fiscal year 2023. Global burley tobacco production also remains below historical levels and decreased by about 10% to about 398 million kilos in fiscal year 2022.
Global burley tobacco production was also below historical levels in fiscal year 2023, and at about 353 million kilos, decreased by 12% compared to the burley crops grown in our fiscal year 2022.
Through these actions, we believe that will be able to deliver enhanced shareholder value through earnings growth and the generation of free cash flow despite operating in a mature industry. In line with our capital allocation strategy, we acquired Shank’s for approximately $100 million on October 4, 2021.
We will continue to make disciplined investments within our leaf business and taking advantage of growth opportunities in tobacco as well as in our plant-based ingredients platform. Through these actions, we believe that will be able to deliver enhanced shareholder value through earnings 30 growth and the generation of free cash flow despite operating in a mature industry.
Burley volumes are forecast to increase slightly to about 404 million kilos in fiscal year 2023. We estimate that as of March 31, 2022, industry uncommitted flue-cured and burley inventories, excluding China were at historically low levels, totaling about 62 million kilos, a decrease of about 34% from March 31, 2021 levels.
We estimate that as of March 31, 2023, industry uncommitted flue-cured and burley inventories, excluding China were at historically low levels. At this time, we believe that both flue-cured tobacco and burley tobacco supply are in undersupply positions.
One of the markets our plant-based ingredients business serve is the growing Global Health and Wellness Foods Market. According to industry estimates this market is projected to grow at an annual rate of 4%-6% over the next several years. In addition, with the COVID-19 pandemic, there has been and continues to be strong consumer demand for healthy foods.
According to industry estimates this market is projected to grow at an annual rate of over 10% from 2022 to 2031. In addition, the COVID-19 pandemic had a positive impact on the global health and wellness market as many consumers focused on mental and physical health. This focus is driving strong consumer demand for healthy foods.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe recognized net foreign currency transaction gains of $18.0 million in fiscal year 2022, and net foreign currency transaction losses of $1.4 million in fiscal year 2021, and $2.9 million in fiscal year 2020.
Biggest changeWe recognized net foreign currency transaction losses of $8.8 million in fiscal year 2023, and net foreign currency transaction gains of $18.0 million in fiscal year 2022, and $1.4 million of net foreign currency losses in fiscal year 2021.
Although a hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately $3.3 million, that amount would be at least partially mitigated by changes in charges to customers. In addition, changes in interest rates affect the calculation of our pension plan liabilities.
Although a hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately $3.1 million, that amount would be at least partially mitigated by changes in charges to customers. In addition, changes in interest rates affect the calculation of our pension plan liabilities.
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 $333 million at March 31, 2022.
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 $506 million at March 31, 2023.
As rates decrease, the liability for the present value of amounts expected to be paid under the plans increases. Rate changes also affect expense. As of the March 31, 2022 measurement date, a 1% decrease in the discount rate would have increased the projected benefit obligation (“PBO”) for pensions by $37 million and increased annual pension expense by $3 million.
As rates decrease, the liability for the present value of amounts expected to be paid under the plans increases. Rate changes also affect expense. As of the March 31, 2023 measurement date, a 1% decrease in the discount rate would have increased the projected benefit obligation (“PBO”) for pensions by $28 million and increased annual pension expense by $2 million.
Conversely, a 1% increase in the discount rate would have reduced the PBO by $30 million and reduced annual pension expense by $3 million.
Conversely, a 1% increase in the discount rate would have reduced the PBO by $23 million and reduced annual pension expense by $1 million.
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. We recognized net remeasurement losses of $19.0 million in fiscal year 2022, $8.5 million of net remeasurement gains in fiscal year 2021, and $16.4 million of net remeasurement losses in fiscal year 2020.
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. We recognized net remeasurement gains of $3.9 million in fiscal year 2023, $19.0 million of net remeasurement losses in fiscal year 2022, and $8.5 million of net remeasurement gains in fiscal year 2021.

Other UVV 10-K year-over-year comparisons