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What changed in UNIVERSAL CORP /VA/'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of UNIVERSAL CORP /VA/'s 2024 and 2025 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 2025 report.

+345 added−339 removedSource: 10-K (2025-05-30) vs 10-K (2024-05-29)

Top changes in UNIVERSAL CORP /VA/'s 2025 10-K

345 paragraphs added · 339 removed · 264 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeShank’s offers a diversified portfolio of over 2,400 botanical extracts, distillates, natural flavors, and colors for industrial and private label customers worldwide, and is known for significant vanilla expertise. Shank’s is also equipped to offer customers custom bottling and packaging for their products. Shank’s employs more than 200 people at their 191,000 square foot manufacturing campus in Lancaster, Pennsylvania.
Biggest changeUniversal Ingredients–Shank’s is also equipped to offer customers custom bottling and packaging for their products. Universal Ingredients–Shank’s employs more than 300 people at their 194,000 square foot manufacturing campus in Lancaster, Pennsylvania. In fiscal year 2025, Universal completed a major expansion project at the Lancaster, Pennsylvania facility. The project added an industry-leading combination of extraction, blending, and aseptic packaging.
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 and appropriate ALP. As part of our ALP program, we train contracted farmers on the ALP Code principles and monitor their adherence through multiple in-person visits during the tobacco growing season.
Agricultural Labor Practices ( “ ALP ” ) Throughout the world, we work side-by-side with our contracted farmers to produce a sustainable tobacco crop that adheres to GAP and appropriate ALP. As part of our ALP program, we train contracted farmers on the ALP Code principles and monitor their adherence through multiple in-person visits during the tobacco growing season.
Processing leaf tobacco includes grading in the factories, blending, removing of non-tobacco material, separating of leaf from the stems, drying, packing to precise moisture targets for proper aging primarily in corrugated cardboard cases, as well as temporarily storing packed tobacco. This generally requires investments in factories and machinery in the geographic areas where tobacco is grown.
Processing leaf tobacco includes grading in the factories, blending, removing of non-tobacco material, separating of leaf from the stems, drying, packing to precise moisture targets for proper aging primarily in corrugated cardboard cases, as well as temporarily storing packed tobacco. Processing generally requires investments in factories and machinery in the geographic areas where tobacco is grown.
In addition, our oriental tobacco joint venture, Socotab, L.L.C. ("Socotab") has operations in Bulgaria, Greece, the Republic of North Macedonia, and Türkiye. We also operate in major dark tobacco producing countries, including the United States, the Dominican Republic, Ecuador, Indonesia, Paraguay, the Philippines, and Brazil.
In addition, our oriental tobacco joint venture, Socotab, L.L.C. (“Socotab”), has operations in Bulgaria, Greece, the Republic of North Macedonia, and Türkiye. We also operate in major dark tobacco producing countries, including the United States, the Dominican Republic, Ecuador, Indonesia, Paraguay, the Philippines, and Brazil.
Customers expect a sustainable supply of compliant, traceable, competitively priced products, and we meet this demand through our investment in GAP training for farmers which encompasses crop quality, environmental stewardship, and agricultural labor standards. • Diversified sources. We operate in over 30 countries on five continents and maintain a presence in all major tobacco origin markets.
Customers expect a sustainable supply of compliant, traceable, competitively priced products, and we seek to meet this demand through our investment in GAP training for farmers which encompasses crop quality, environmental stewardship, and agricultural labor standards. • Diversified sources. We operate in over 30 countries on five continents and maintain a presence in all major tobacco origin markets.
Human Capital Management Workforce Overview Our employees are among our most important resources, and we 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 agriproducts.
Human Capital Management Workforce Overview Our employees are among our most important resources, and we rely on them to execute our business plan with integrity and efficiency. We believe that 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 agriproducts.
Our Board of Directors also adopted our Code of Conduct and Anti-Corruption Compliance Manual to promote ethical behavior throughout the Company and address violations of ethical standards. The Code and Manual have been translated into 16 languages and apply directly to all officers, directors, and non-seasonal employees in the Universal family of companies.
Our Board of Directors also adopted our Code of Conduct (the “Code”) and Anti-Corruption Compliance Manual (the “Manual”) to promote ethical behavior throughout the Company and address violations of ethical standards. The Code and Manual have been translated into 16 languages and apply directly to all officers, directors, and non-seasonal employees in the Universal family of companies.
Our compliance hotline is available to all our employees and any other interested parties 24 hours a day, 7 days a week, by internet or phone. The Board of Directors oversees our global compliance program and receives reports from our Chief Compliance Officer at each scheduled Board of Directors meeting.
Our compliance hotline is available to all our employees and any other interested parties 24 hours a day, 7 days a week, by internet or phone. The Board of Directors oversees our global compliance program and receives reports from our Chief Compliance Officer at each quarterly Board of Directors meeting.
Sustainability As a global agricultural company, the success of our business is linked to the health and resiliency of the environments in which we operate, and we have a fundamental responsibility to our stakeholders to set high standards of social and environmental performance to support a sustainable supply chain.
Sustainability As a global agricultural company, we believe that the success of our business is linked to the health and resiliency of the environments in which we operate, and we have a fundamental responsibility to our stakeholders to set high standards of social and environmental performance to support a sustainable supply chain.
Management of liquidity, borrowings, 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. Seasonality Our tobacco operations are seasonal in nature.
We believe management of liquidity, borrowings, 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. Seasonality Our tobacco operations are seasonal in nature.
We conduct our flue-cured and burley 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.
We conduct our 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.
As we are dedicated to promoting a sustainable farmer base, Universal provides significant agronomic support throughout a season, including educational programs in such matters as good agricultural practices("GAP"), the reduction of non-tobacco related materials, product traceability, environmental sustainability, agricultural labor standards, and social responsibility.
As we are dedicated to promoting a sustainable farmer base, Universal provides significant agronomic support throughout a growing season, including educational programs in such matters as good agricultural practices (“GAP”), the reduction of non-tobacco related materials, product traceability, environmental sustainability, agricultural labor standards, and social responsibility.
Our ability to market most styles and grades of leaf to a diverse customer base, and the efficiencies we offer customers due to our operational expertise and established infrastructure, are also key to our success.
We believe that our ability to market most styles and grades of leaf to a diverse customer base, and the efficiencies we offer customers due to our operational expertise and established infrastructure, are also key to our success.
Our expatriate hires represent less than 0.4% of our workforce, and they are hired due to their essential professional knowledge necessary for 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.
Our expatriate hires represent less than 0.3% of our workforce, and they are hired due to their essential professional knowledge necessary for the operation of our business. 9 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 also maximize supply chain efficiencies by balancing product purchases against indicated customer demand and maintaining global procurement and production operations. 5 • Strong local management .
We also aim to maximize supply chain efficiencies by balancing product purchases against indicated customer demand and maintaining global procurement and production operations. 5 • Strong local management .
In addition, our Corporate Governance Guidelines, Code of Conduct, and charters for the Audit Committee, the Compensation Committee, the Executive Committee, the Finance and Pension Investment Committee, and the Nominating and Corporate Governance Committee are available free of charge to shareholders and the public through the “Investors-Governance” section of our website.
In addition, our Corporate Governance Guidelines, Code of Conduct, and charters for the Audit Committee, the Compensation and Human Resources Committee, the Executive Committee, the Finance and Pension Investment Committee, and the Nominating, Governance and Risk Committee are available free of charge to shareholders and the public through the “Investors-Governance” section of our website.
Their top products are not-from-concentrate apple juice as well as apple, blueberry, concord grape, and raspberry juice concentrates. FruitSmart is well positioned to benefit from growing consumer preferences for better-for-you premium ingredients, including custom blends, not-from-concentrate and dry products, and strong growth in targeted end markets including ciders, purees and nutraceuticals.
Its top products are not-from-concentrate apple juice as well as apple, blueberry, concord grape, and raspberry juice concentrates. We believe that FruitSmart is well positioned to benefit from growing consumer preferences for better-for-you premium ingredients, including custom blends, not-from-concentrate and dry products, and strong growth in targeted end markets including ciders, purees and nutraceuticals.
Our principal competitor is Pyxus International, Inc. (“Pyxus”) (formerly Alliance One International, Inc.), and we consider ourselves and Pyxus to be the only global leaf suppliers based on our worldwide scope of operations.
Our principal competitor is Pyxus International, Inc. (“Pyxus”), and we consider ourselves and Pyxus to be the only global leaf suppliers based on our worldwide scope of operations.
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.
These programs often include safety and technical job skill training as well as programs focused on soft skills such as effective communication. Development of leadership skills is also a priority and is specialized for different levels of employees.
Additionally, we utilize other health and safety initiatives to ensure our facilities remain safe for our employees. We established health and safety Key Performance Indicators ("KPIs") across our tobacco factory and agronomy operations. Each factory carries out an in-depth data analysis of prior data and implements KPIs for improvement and monitoring.
Additionally, we utilize other health and safety initiatives to ensure our facilities remain safe for our employees. We established health and safety metrics across our tobacco factory and agronomy operations. Each factory carries out an in-depth data analysis of prior data and implements health and safety metrics for improvement and monitoring.
We consistently disclose our operational activities and sustainable practices in a transparent manner through our annual Sustainability Report which can be found on our website. Our Nominating and Corporate Governance Committee has primary oversight of our Environmental, Social, and Governance ("ESG") programs.
We consistently disclose our operational activities and sustainable practices in a transparent manner through our annual Sustainability Report, which can be found on our website. Our Nominating, Governance and Risk Committee has primary oversight of our sustainability programs.
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 are a multinational and multicultural organization, with employees and operations located around the world, and we are committed to maintaining an inclusive workplace. Only around 4.8% of our employees are located in the United States. Almost all of our employees are from the same country in which our related operations are located.
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, 2024, we employed more than 27,000 employees, operating in over 30 different countries across five continents. Approximately 60% of our employees are seasonal and approximately 40% are full-time employees.
We strive to foster an inclusive workplace; attract, retain, and develop talented personnel; and keep our employees safe and healthy. As of March 31, 2025, we employed more than 28,500 employees, operating in over 30 different countries across five continents. Approximately 60% of our employees are seasonal and approximately 40% are full-time employees.
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.
The Compensation and Human Resources Committee oversees administration of the Company’s human resource programs and 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.
To date, governmental provisions regulating the discharge of material into the environment have not had a material effect upon our capital expenditures, earnings, or competitive position. See Item 1A, “Risk Factors” for a discussion of government regulations and other factors that may affect our business. 11
To date, governmental provisions regulating the discharge of material into the environment have not had a material effect upon our capital expenditures, earnings, or competitive position. See Item 1A, “Risk Factors” for a discussion of government regulations and other factors that could have a material adverse effect on our business. G. Information About Our Executive Officers See Item 10.
Almost 50% of our employees are female and more than 20% of our managers are female. Globally, Universal has twelve collective bargaining agreements in place, covering approximately 52% 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, 2024.
Almost 50% of our employees are female and more than 20% of our managers are female. Globally, Universal has 13 collective bargaining agreements in place, covering approximately 40% of our workforce. The sizeable seasonal nature of our global workforce makes these numbers fluctuate throughout the year.
We produce a wide spectrum of fruit and vegetable juices, concentrates, dehydrated products, botanical extracts, flavorings, and innovative, value-added ingredients utilizing products and capabilities across the entire Universal Ingredients platform. We strategically invested in established companies with strong financial records.
A variety of value-added manufacturing processes are then used in these businesses to convert such raw materials. We produce a wide spectrum of fruit and vegetable juices, concentrates, dehydrated products, botanical extracts, flavorings, and innovative, value-added ingredients utilizing products and capabilities across the entire Universal Ingredients platform. We strategically invested in established companies with strong financial records.
These businesses operate in different markets (fruits, vegetables, and flavors) and offer value-added services that can apply broadly to multiple parts of our Ingredients Operations to better meet our customers’ needs for unique, plant-based ingredients.
These businesses operate in different markets (fruits, vegetables, and flavors) and offer value-added services that can apply broadly to multiple parts of our Ingredients Operations to better meet our customers’ needs for unique, plant-based ingredients. By diversifying our portfolio in the ingredients space through the acquisitions of FruitSmart, Inc. (“FruitSmart”), Silva International, Inc.
This platform team is tasked with becoming subject matter experts on the entire suite of products to help leverage the full potential of the ingredients portfolio and drive earnings growth.
The commercial sales team consists of seasoned sales professionals who work closely with the research and development team. This platform team is tasked with becoming subject matter experts on the entire suite of products to help leverage the full potential of the ingredients portfolio and drive earnings growth.
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.
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.
In addition to corporate audits, we encourage this regional cross-auditing to promote a collaborative framework and drive our employee safety programs forward. Legal compliance is a fundamental aspect of our health and safety practices. Universal companies adhere to full compliance with health and safety laws and regulations and cooperate with local authorities to maintain strong health and safety programs.
In addition to corporate audits, we encourage this regional cross-auditing to promote a collaborative framework and drive our employee safety programs forward. Legal compliance is a fundamental aspect of our health and safety practices.
By diversifying our portfolio in the ingredients space through the acquisitions of FruitSmart, Silva, and Shank’s, we are positioned to deliver deeply customizable products and services to our customers. FruitSmart supplies a broad set of juices, concentrates, pomaces, purees, fruit fibers, seeds, seed powders, and other value-added products to food, beverage, and flavor companies throughout the United States and internationally.
(“Silva”), and Shank’s Extracts, LLC d/b/a Universal Ingredients–Shank’s (“Universal Ingredients–Shank’s”), we are positioned to deliver customizable products and solutions to our customers. FruitSmart supplies a broad set of juices, concentrates, pomaces, purees, fruit fibers, seeds, seed powders, and other value-added products to food, beverage, and flavor companies throughout the United States and internationally.
Universal Corporation’s primary subsidiaries are Universal Leaf Tobacco Company, Incorporated ("Universal Leaf"), which is associated with our Tobacco Operations segment, and Universal Global Ventures, Incorporated, which is associated with our Ingredients Operations segment. See Exhibit 21, “Subsidiaries of the Registrant,” for additional subsidiary information. Additional Information Our website address is www.universalcorp.com.
Our primary subsidiaries are Universal Leaf Tobacco Company, Incorporated (“Universal Leaf”), which is associated with our Tobacco Operations segment, and Universal Global Ventures, Incorporated, which is associated with our Ingredients Operations segment. Additional Information Our website address is www.universalcorp.com.
We continue to further strengthen our approach to sustainability throughout the organization in alignment with recognized best practices, regulatory compliance, and shareholder interests. As a global agriproducts supplier operating in numerous countries around the world, we primarily focus our sustainability efforts on our own operations and the farmers in our supply chain with whom we contract for raw materials.
We are a global agriproducts supplier operating in numerous countries around the world, and we primarily focus our sustainability efforts on our own operations and the farmers in our supply chain with whom we contract for raw materials.
We generated approximately $2.7 billion in consolidated revenues and earned $222.0 million in total operating income and $226.3 million in total segment operating income in fiscal year 2024. Universal Corporation is a holding company that operates through numerous directly and indirectly owned subsidiaries.
We generated approximately $2,947.3 million in consolidated revenues and earned $232.8 million in total operating income and $252.5 million in total segment operating income in fiscal year 2025. We are a holding company that operates through numerous directly and indirectly owned subsidiaries.
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 Nominating, Governance and Risk Committee and our Compensation and Human Resources Committee both have important roles with respect to human capital management. The Nominating, Governance and Risk Committee oversees and reviews our sustainability programs, which include important policies and practices related to human rights, prohibitions against discrimination, employee health and safety, and other policies related to our workforce.
FruitSmart is headquartered in the Yakima Valley in Washington State and has approximately 200 employees. FruitSmart operates two separate manufacturing facilities: one that produces liquid products and one that produces dry products.
FruitSmart is headquartered in the Yakima Valley in Washington State and has approximately 200 employees. FruitSmart operates two separate manufacturing facilities: one that produces liquid products and one that produces dry products. In fiscal year 2025, FruitSmart embarked on several automation projects that utilize robotics to increase efficiency, enhance capacity, and increase health and safety protocols.
We believe our Tobacco Operations will continue to produce solid financial returns and enhance shareholder value through the following key operating principles: • Strategic market position. By working closely with both our customers and our suppliers throughout the year, we ensure the consistent delivery of a product that meets our customers' needs and cultivate a strong, sustainable supplier base.
By working closely with both our customers and our suppliers throughout the year, we seek to ensure the consistent delivery of a product that meets our customers' needs and cultivate a strong, sustainable supplier base.
For the fiscal year ended March 31, 2024, each of Imperial Brands plc and Philip Morris International, Inc., including their respective affiliates, accounted for 10% or more of our revenues.
Sales to our top five customers, with whom we have long-standing relationships, have accounted for more than 50% of our consolidated revenues for each of the past three fiscal years. For the fiscal year ended March 31, 2025, each of Imperial Brands plc and Philip Morris International, Inc., including their respective affiliates, accounted for 10% or more of our revenues.
The food and beverage market is segmented into many different categories including retailers, food service providers, consumer packaged goods companies, beverage companies, and many others. Silva, our company that provides custom dehydrated vegetables, also has a large presence in the pet food market.
The food and beverage market is segmented into many different categories including retailers, food service providers, consumer packaged goods companies, and beverage companies. Silva also has a large presence in the pet food market. With our most recent investments in our Lancaster, Pennsylvania facility, we will be focusing heavily on the food service, beverage and casual dining markets.
Ingredients Operations Similar to the tobacco side of our business, our Ingredients Operations source raw materials globally to provide our customers with a consistent, high-quality, and stable supply of plant-based ingredients. A variety of value-added manufacturing processes are then used in these businesses to convert such raw materials.
In addition, our customers value the security of supply that we can provide due to our strong relationships with our farmer base and our global footprint. 6 Ingredients Operations Similar to the tobacco side of our business, our Ingredients Operations source raw materials globally to provide our customers with a consistent, high-quality, and stable supply of plant-based ingredients.
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.
We pride ourselves on a culture that respects co-workers and values concern for others. The recent name change of the Compensation Committee to the Compensation and Human Resources Committee reflects the importance of human capital management to the Company.
Our major customers increasingly require these services, and we believe our 6 programs increase the quality and value of the products and services we offer. In addition, our customers value the security of supply that we can provide due to our strong relationships with our farmer base and our global footprint.
Our major customers increasingly require these services, and we believe our programs increase the quality and value of the products and services we offer.
Rather, we support consumer product manufacturers by selling them transformed agriproducts and performing related services for them.
Rather, we support consumer product manufacturers by selling them transformed agriproducts and performing related services for them. Our business strategy focuses on three pillars: maximizing and optimizing our Tobacco Operations segment, growing our Ingredients Operations segment, and strengthening our organization.
With our 7 most recent investments in our Lancaster, Pennsylvania facility, we will be focusing heavily on the food service, beverage and casual dining markets. Our investment in the research and development function in Lancaster, Pennsylvania, supports our ability to meet the demands of such a large and diverse group of customers.
Our investment in the research and development function in Lancaster, Pennsylvania, supports our ability to meet the demands of such a large and diverse group of customers. 7 Competition Universal Ingredients serves the human and pet food markets as well as the beverage market, one of the largest industrial categories in the United States.
We recognize three primary environmental responsibilities throughout our global footprint: responsible consumption of water and natural resources; responsible forestry management; and minimizing greenhouse gas emissions. In fiscal year 2024, Universal continued making progress towards our sustainability goals as outlined in our annual Sustainability Report. We made progress towards our operational emissions targets.
We recognize three primary environmental responsibilities throughout our global footprint: responsible consumption of water and natural resources; responsible forestry management; and minimizing greenhouse gas emissions. Recent Initiatives Universal released our 2024 Sustainability Report in December 2024, highlighting our efforts in strengthening supply chain resiliency, maintaining our strong partnerships with our farming communities, and advancing energy efficiency.
Silva also has longstanding relationships with suppliers and their farmers around the world and maintains strong quality control procedures to ensure a consistent, high-quality supply of ingredients. Silva’s manufacturing facility was recently expanded and enhanced.
Silva also has longstanding relationships with suppliers and their farmers around the world and maintains strong quality control procedures to ensure a consistent, high-quality supply of ingredients. Universal Ingredients–Shank’s offers a diversified portfolio of over 2,400 botanical extracts, distillates, natural flavors, and colors for industrial and private label customers worldwide, and is known for significant vanilla expertise.
As part of our commitment to a robust supply chain, our policies require our suppliers and partners to uphold healthy and safe work environments in compliance with all relevant regulations. D. Research and Development We did not expend material amounts for research and development during the fiscal years ended March 31, 2024, 2023, or 2022. E.
Universal companies seek to adhere to full compliance with health and safety laws and regulations and cooperate with local authorities to maintain strong health and safety programs. As part of our commitment to a robust supply chain, our policies require our suppliers and partners to uphold healthy and safe work environments in compliance with all relevant regulations. D.
Our newly created research and development function includes highly trained food scientists that are skilled in the creation of various food and beverages to showcase the value of our ingredients. The commercial sales team consists of seasoned sales professionals that work closely with the research and development team.
Our research and development function includes highly trained food scientists and professionals who are skilled in the creation of various food and beverages to showcase the value of our ingredients. Some examples of the concepts developed by our research and development group include ready-to-drink teas and coffees, carbonated soft drinks, nutritional smoothies, and bakery items.
We also continued monitoring for our social supply chain targets, and for the second year in a row, we substantially met our personal protective equipment distribution, child labor elimination, farm labor accommodation, and farm labor payment goals for our contracted tobacco growers. 8 For a discussion of recent developments and trends in our businesses, along with factors that may affect our businesses see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 1A, “Risk Factors.” C.
For a discussion of recent developments and trends in our businesses, along with factors that could have a material adverse effect on our businesses see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 1A, “Risk Factors.” C.
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Recognizing that leaf tobacco is a mature industry, we have been positioning our company for the future by investing in and growing Universal Ingredients, our plant-based ingredients platform, while leveraging our position as the leading global leaf tobacco supplier to maximize opportunities in the leaf tobacco business.
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In our Tobacco Operations segment, we continue to look for opportunities to increase our sales volumes and market share, expand services across our customers’ supply chains, participate in the evolution of next generation products, and improve operating efficiency.
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In fiscal year 2024, we continued to enhance and increase the capabilities of Universal Ingredients to drive value creation. We have been achieving operational synergies across the platform among our acquired businesses, including 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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In our Ingredients Operations segment, we seek opportunities to grow Universal Ingredients, our plant-based ingredients platform, both organically and through disciplined acquisitions to provide customers with a solutions-based portfolio of value-added product offerings. Under our corporate pillar, we continue to pursue strategies and initiatives to strengthen and support our organization for the future.
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We have also made considerable progress on our vision to provide a total solutions-based portfolio of value-added product offerings to our customers. Additionally, we intend to continue to enhance our product offerings over the longer term by leveraging Universal’s existing global sourcing capabilities, strong relationships with our farmer base, sustainability practices, and agronomic expertise.
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These strategies and initiatives are expected to focus on efficient financial management, effective human capital management, optimal utilization of technology and operational synergies between our business segments. Our goal is to drive excellence across the company and position Universal for long-term success and value creation.
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Sales to our largest customers, with whom we have long-standing relationships, have accounted for approximately 60% of our consolidated revenues for each of the past three fiscal years. Our largest customers are Altria Group Inc., British American Tobacco plc, China Tobacco International, Inc., Imperial Brands plc, Japan Tobacco, Inc., and Philip Morris International, Inc.
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We believe our Tobacco Operations will continue to produce solid financial returns and enhance shareholder value through the following key operating principles: • Strategic market position.
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In 2023, FruitSmart implemented several projects to improve refrigeration efficiency and installed a central refrigeration control system that substantially reduced year-over-year energy use – an approximately 15% decrease on average per month.
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The investment also added refrigerated storage and enhanced capabilities to support additional customer demand and growth into new product categories and markets. To support Universal Ingredients, we have invested in building out our sales, marketing and product development teams focused on creating value across the entire platform. This platform-level support enables us to deliver unique, custom products to our customers.
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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 the growing savory and pet food end markets.
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We continue to further strengthen our approach to sustainability throughout the organization in alignment with recognized best practices, regulatory compliance, and shareholder interests.
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In May 2023, Universal announced a major expansion project at the Lancaster facility. Upon completion, the project is expected to add an industry-leading combination of extraction, blending, and aseptic packaging. The investment will also offer refrigerated storage and enhanced capabilities to support additional customer demand and growth into new product categories and markets.
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Responsible business practices are integrated into Universal’s business strategy. As disclosed in our 2024 Sustainability Report, we continued to support our supply chain sustainability goals and substantially met our existing targets of zero child labor, appropriate labor accommodations, farm worker minimum wage payments, and personal protective equipment access.
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The expansion project is expected to be fully operational by the second half of fiscal 2025. To support Universal Ingredients, we have invested in an Ingredients Operations commercial team and a fully staffed product research and development group. This platform-level support enables us to deliver unique, custom products to our customers.
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Our leaf technicians made over 1.8 million visits to more than 175,000 contracted farmers to maintain our visibility and traceability in our supply chain.
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No customer accounted for more than 10% of our Ingredients Operations segment revenues in fiscal year 2024. Competition Universal Ingredients serves the human and pet food markets as well as the beverage market, one of the largest industrial categories in the United States.
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Our operations continue to enhance transparency and collaboration with our stakeholders by reporting to the Sustainable Tobacco Program and training over 175,000 farmers on GAP and ALP to advance environmental and human rights best practices throughout our contracted farmer base. 8 Universal’s climate transition plan includes reducing fossil fuel use, purchasing renewable forms of electricity, and enhancing operational efficiencies throughout our operations and value chain.
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We also entered into a virtual power purchase agreement, which will generate renewable electricity equal to our North American footprint beginning in 2026, and entered an emissions reduction agreement expected to provide benefits to tobacco growing areas in the Philippines, which will offset a portion of our emissions in Asia beginning in 2025.
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These actions support the Company’s goal of reaching net-zero greenhouse gas (“GHG”) emissions across the value chain by 2050. Universal is actively transitioning to cleaner fuels around the world. Diesel and coal fuels are being replaced with electricity and biomass where possible to reduce our GHG emissions footprint.
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Renewable energy plays a significant role in our journey to net-zero, so we have developed plans to purchase Renewable Energy Credits where possible and have signed a Virtual Power Purchase Agreement (“VPPA”) for solar-powered energy that we expect to reduce our total scope 1 and 2 emissions in North America by 45%.
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Research and Development While we invest in research and development activities in both our Tobacco Operations and Ingredients Operations segments, these costs as a portion of global expenditures were not material during the fiscal years ended March 31, 2025, 2024, or 2023. E. Intellectual Property We hold no material patents, licenses, franchises, or concessions. F.
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“Directors, Executive Officers, and Corporate Governance” of this Annual Report. 11

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

88 edited+24 added−8 removed35 unchanged
Biggest changeFurthermore, the failure to execute on internal succession plans or to effectively transfer knowledge from exiting employees to others in the organization could adversely affect our business and results of operations. Even if we succeed in hiring new personnel to fill vacancies, lengthy training and orientation periods might be required before new employees are able to achieve necessary productivity levels.
Biggest changeEven if we succeed in hiring new personnel to fill vacancies, lengthy training and orientation periods may be required before new employees are able to achieve necessary productivity levels. Any failure by us to attract, develop, retain, motivate, and maintain good relationships with qualified individuals could have a material adverse effect on our business and results of operations.
Production of tobacco in a given year may be significantly affected by such factors as: • demographic shifts that change the number of farmers or the amount of land available to grow tobacco, • decisions by farmers to grow crops other than leaf tobacco, 12 • volume of annual tobacco plantings and yields realized by farmers, • availability of crop inputs, • weather and natural disasters, including any adverse weather conditions that may result from climate change, and • crop infestation and disease.
Production of tobacco in a given year may be significantly affected by such factors as: • demographic shifts that change the number of farmers or the amount of land available to grow tobacco, • decisions by farmers to grow crops other than leaf tobacco, • volume of annual tobacco plantings and yields realized by farmers, 12 • availability of crop inputs, • weather and natural disasters, including any adverse weather conditions that may result from climate change, and • crop infestation and disease.
The timing of the cultivation and delivery of tobacco is dependent upon a number of factors, including weather and other natural events, and our processing schedules and results of operations can be significantly altered by these factors. In addition, the potential impact of climate change is uncertain and may vary by geographic region.
The timing of the cultivation and delivery of tobacco is dependent upon a number of factors, including weather and other natural events, and our processing schedules and our results of operations can be significantly altered by these factors. In addition, the potential impact of climate change is uncertain and may vary by geographic region.
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 adverse effect on our business, financial condition, results of operations, and the demand for our products and services.
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.
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 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.
These factors may also limit the ability to accurately forecast our future performance and increase the risk of an investment in our common stock or other securities. Our financial results, particularly our year-over-year quarterly comparisons, may be significantly affected by variations in tobacco growing seasons and fluctuations in crop sizes.
These factors could also limit the ability to accurately forecast our future performance and increase the risk of an investment in our common stock or other securities. Our financial results, particularly our year-over-year quarterly comparisons, may be significantly affected by variations in tobacco growing seasons and fluctuations in crop sizes.
Damages or disruption to raw material supplies or our manufacturing or distribution capabilities due to weather, climate change, natural disaster, fire, terrorism, cyber-attack, pandemics, governmental restrictions or mandates, strikes, import/export restrictions, political instability or military conflict, or other factors could impair our ability to produce or sell our plant-based ingredients products.
Damages or disruption to raw material supplies or our manufacturing or distribution capabilities due to weather, climate change, natural disaster, fire, terrorism, cyber-attack, pandemics, governmental restrictions or mandates, strikes, import/export restrictions, tariffs, political instability or military conflict, or other factors could impair our ability to produce or sell our plant-based ingredients products.
The occurrence of any of these events may adversely affect our expected benefits of any acquisitions and may have a material adverse effect on our financial condition, results of operations or cash flows. We may be adversely impacted if our information technology systems fail to perform adequately, including with respect to cybersecurity issues.
The occurrence of any of these events could adversely affect the expected benefits of any acquisitions and could have a material adverse effect on our financial condition, results of operations or cash flows. We may be adversely impacted if our information technology systems fail to perform adequately, including with respect to cybersecurity issues.
Since individual shipments may represent significant amounts of revenue, our quarterly and annual financial results may vary significantly depending on the timing of needs and shipping instructions of our customers and the availability of transportation services. These fluctuations result in varying volumes and sales in given periods, which also reduce the comparability of financial results.
Since individual shipments may represent significant amounts of revenue, our quarterly and annual financial results could vary significantly depending on the timing of needs and shipping instructions of our customers and the availability of transportation services. These fluctuations result in varying volumes and sales in given periods, which also reduce the comparability of our financial results.
Political or economic instability in those countries may impede or disrupt our ability to meet our customers’ needs in or source raw materials from 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.
Political or economic instability in those countries could impede or disrupt our ability to meet our customers’ needs in or our ability to source raw materials from 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.
We have substantial capital investments in South America and Africa, and the performance of our operations in those regions can materially affect our earnings. Our customers’ operations are subject to similar uncertainties and risks relating to the political stability of the foreign governments in the countries in which their operations are located.
We have substantial capital investments in South America and Africa, and the performance of our operations in those regions can materially affect our earnings. 16 Our customers’ operations are subject to similar uncertainties and risks relating to the political stability of the foreign governments in the countries in which their operations are located.
Due to their lower cost structures, they often can offer prices on products and services that are lower than our prices. Some of our customers also directly source leaf tobacco from farmers to meet some of their raw material needs.
Due to their lower cost structures, they often offer prices on products and services that are lower than our prices. Some of our customers also directly source leaf tobacco from farmers to meet some of their raw material needs.
If such an event is also widespread, it could affect our ability to acquire the quantity of tobacco or plant-based ingredients required by our customers or could prevent or impair our ability to process or ship products as planned.
If such an event is also widespread, it could affect our ability to acquire the quantity of tobacco or plant-based ingredients required by our customers or could prevent or 13 impair our ability to process or ship products as planned.
Our ability to realize the anticipated benefits from acquisitions will depend, in part, on successfully integrating each business with our Company as well as improving operating performance and profitability through our management efforts and capital investments.
In addition, our ability to realize the anticipated benefits from acquisitions will depend, in part, on successfully integrating each business with our Company as well as improving operating performance and profitability through our management efforts and capital investments.
Our commitment to sustainability remains at the core of our business, and we continue to implement what we believe are responsible ESG practices. Government regulations, however, could result in new or more stringent forms of ESG oversight and disclosures.
Our commitment to sustainability remains at the core of our business, and we continue to implement what we believe are responsible sustainability practices. Government regulations, however, could result in new or more stringent forms of sustainability oversight and disclosures.
There can be no assurance that such financings would be available to us on reasonable terms or that any future issuances of securities in connection with acquisitions will not be dilutive to our shareholders.
There can be no assurance that such financings would be available to us on reasonable terms or that any future issuances of equity securities in connection with any future acquisitions will not be dilutive to our shareholders.
The Conference of the Parties (“COP”), 15 which is the governing body of the WHO FCTC and is comprised of all Parties to the Convention, meets every two years to consider amendments to the agreement and track progress in the implementation of the treaty’s 38 articles.
The Conference of the Parties (“COP”), which is the governing body of the WHO FCTC and is comprised of all Parties to the Convention, meets every two years to consider amendments to the agreement and track progress in the implementation of the treaty’s 38 articles.
The risks to a successful integration and improvement of operating performance and profitability include, among others, failure to implement our business plan, unanticipated issues in integrating operations with ours, unanticipated changes in laws and regulations, regulatory, environmental and permitting issues, unfavorable customer reactions, the effect on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002, and difficulties in fully identifying and evaluating potential liabilities, risks and operating issues.
The risks to a successful integration and improvement of operating performance and profitability include failure to implement our business plan, unanticipated issues in integrating operations with ours, unanticipated changes in laws and regulations, regulatory, environmental and permitting issues, unfavorable customer reactions, the effect on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002, and difficulties in fully identifying and evaluating potential liabilities, risks and operating issues.
Despite our programs, the extent to which governmental actions will impact our business, financial condition, results of operations and demand for our products and services will depend on future developments, which are highly uncertain and cannot be predicted. Continuous changes in bilateral, multilateral, and international trade agreements also have the potential to disrupt or impact Universal operations.
Despite our programs, the extent to which governmental actions will impact our business, financial condition, results of operations and demand for our products and services will depend on future developments, which are highly uncertain and cannot be predicted. Changes in bilateral, multilateral, and international trade agreements also have the potential to disrupt or impact our operations.
Increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers, with respect to our ESG considerations may impose additional costs on us or expose us to additional risks. Governments, the non-governmental community, and industry increasingly understand the importance of implementing comprehensive environmental, labor, and governance practices.
Increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers, with respect to our sustainability considerations may impose additional costs on us or expose us to additional risks. Governments, the non-governmental community, and industry increasingly understand the importance of implementing comprehensive environmental, labor, and governance practices.
Low investment performance by our defined benefit pension plan assets and changes in pension plan valuation assumptions may increase our pension expense and may require us to fund a larger portion of our pension obligations, thus diverting funds from other potential uses. We sponsor domestic defined benefit pension plans that cover certain eligible employees.
Low investment performance by our defined benefit pension plan assets and changes in pension plan valuation assumptions could increase our pension expense and could require us to fund a larger portion of our pension obligations, thus diverting funds from other potential uses. We sponsor domestic defined benefit pension plans that cover certain eligible employees.
Our customers’ expectations and their demand for leaf tobacco are influenced by a number of factors, including: • trends in the global consumption of cigarettes, • trends in consumption of cigars and other tobacco products, • trends in consumption of alternative tobacco products, such as electronic nicotine delivery systems ("ENDS") and non-combustible products, • levels of competition among our customers, and • regulatory and governmental factors.
Our customers’ expectations and their demand for leaf tobacco are influenced by a number of factors, including: • trends in the global consumption of cigarettes, • trends in consumption of cigars and other tobacco products, • trends in consumption of alternative tobacco products, such as electronic nicotine delivery systems (“ENDS”) and non-combustible products, • levels of competition among our customers, and • regulatory and governmental factors.
While we may identify opportunities for acquisitions and investments to support our growth strategy, as well as divestiture opportunities, our due diligence examinations and positions that we may take with respect to appropriate valuations for acquisitions and divestitures and other transaction terms and conditions may hinder our ability to successfully complete business transactions to achieve our strategic goals.
While we may identify opportunities for acquisitions and investments to support our growth strategy, as well as divestiture opportunities, our due diligence examinations and positions that we may take with respect to appropriate valuations for acquisitions or divestitures and other transaction terms and conditions could hinder our ability to successfully complete business transactions to achieve our strategic goals.
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 European Union has recently adopted 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.
We compete with other acquisitive entities for suitable acquisition candidates. This competition may increase the price for acquisitions and reduce the number of acquisition candidates available to us. As a result, our ability to acquire businesses in the future, and to acquire such businesses on favorable terms, may be limited.
We compete with other acquisitive entities for suitable acquisition candidates. This competition could increase the price for acquisitions and reduce the number of acquisition candidates available to us. As a result, our ability to acquire businesses in the future, and to acquire such businesses on favorable terms, could be limited.
Certain recommendations by the WHO, through the FCTC, may also cause shifts in customer usage of certain styles of tobacco. In countries such as Canada and Brazil and in the European Union, efforts have been taken to eliminate certain ingredients from the manufacturing process for tobacco products.
Certain recommendations by the WHO, through the FCTC, could also cause shifts in customer usage of certain styles of tobacco. In countries such as Canada and Brazil and in the European Union, efforts have been taken to eliminate certain ingredients from the manufacturing process for tobacco products.
These uncertainties and risks, which include undeveloped or antiquated commercial law, the expropriation, indigenization, or nationalization of assets, and the authority to revoke or refuse to renew business licenses and work permits, may adversely impact our ability to effectively manage our operations in those countries.
These uncertainties and risks, which include undeveloped or antiquated commercial law, the expropriation, indigenization, or nationalization of assets, and the authority to revoke or refuse to renew business licenses and work permits, could adversely impact our ability to effectively manage our operations in those countries.
Many of these materials and inputs are subject to price fluctuations from a number of factors, including but not limited to changes in crop sizes, crop qualities, crop disease, product scarcity, fertilizer costs, energy costs, labor costs, currency fluctuations, import and export requirements (including tariffs), adverse weather events, pandemic illness, political instability or military conflict, and other factors that may be beyond our control.
Many of these materials and inputs are subject to price fluctuations from a number of factors, including changes in crop sizes, crop qualities, crop disease, product scarcity, fertilizer costs, energy costs, labor costs, currency fluctuations, import and export requirements (including tariffs), adverse weather events, pandemic illness, political instability or military conflict, and other factors that may be beyond our control.
In the event that such regulation is enacted and is more aggressive than the sustainability measures that we and our suppliers are currently undertaking to monitor our emissions and improve energy and resource efficiency, we may experience significant increases in our material and production costs.
In the event that such regulation is enacted and is more aggressive than the sustainability measures that we and our suppliers are currently undertaking to monitor our emissions and improve energy and resource efficiency, we could experience significant increases in our material and production costs.
The loss of one of those large customers or a significant decrease in their demand for our products or services could significantly decrease our sales of products or services, which would have a material adverse effect on our results of operations.
The loss of one of our large customers or a significant decrease in their demand for our products or services could significantly decrease our sales of products or services, which could have a material adverse effect on our results of operations.
If we are unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we may suffer financial and 14 reputational damage, be subject to litigation, or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers, or employees.
If we are unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we could suffer financial and reputational damage, be subject to litigation, or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers, or employees.
The most significant year-end assumptions we used to estimate pension expense for fiscal year 2024 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 2025 were the discount rate, the expected long-term rate of return on plan assets, and the mortality rates.
The WHO, through the FCTC, has specifically issued policy options and recommendations to promote crop diversification initiatives and alternatives to growing leaf tobacco in countries whose economies depend upon tobacco production.
For example, the WHO, through the FCTC, has specifically issued policy options and recommendations to promote crop diversification initiatives and alternatives to growing leaf tobacco in countries whose economies depend upon tobacco production.
If certain countries were to follow these policy recommendations and seek to eliminate or significantly reduce leaf tobacco production, we could encounter difficulty in sourcing leaf tobacco from these regions to fill customer requirements, which could have an adverse effect on our results of operations.
If certain countries were to follow these policy recommendations and seek to eliminate or significantly reduce leaf tobacco production, we could encounter difficulty in sourcing leaf tobacco from these regions to fill customer requirements, which could have a material adverse effect on our results of operations.
In a contract market our obligation is to purchase the entire tobacco plant, which encompasses many leaf styles, therefore, we also have a risk that not all of that production will be readily marketable at prices that support acceptable margins. In addition, in many foreign countries where we purchase tobacco directly from farmers, we provide them with financing.
In a contract market our obligation is to purchase the entire tobacco plant, which encompasses many leaf styles, therefore, we also have a risk that not all of that production will be readily marketable at prices that support acceptable margins. In addition, in many countries where we purchase tobacco directly from farmers, we provide them with financing for crop advances.
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.
In addition, other factors could affect the marketability of our products, including, among other things, the presence of excess residues of crop protection agents or non-crop related materials.
These may lead to increased expenditures for environmental controls, land use restrictions, reporting, and other conditions which could have an adverse effect on our performance and results of operations. In addition, a number of governments are considering due diligence procedures to ensure strict compliance with environmental, labor, and government regulations.
These may lead to increased expenditures for environmental controls, land use restrictions, reporting, and other conditions which could have a material adverse effect on our business and results of operations. In addition, a number of governments are considering due diligence procedures to ensure strict compliance with environmental, labor, and government regulations.
The failure of third parties on which we rely, including those third parties who supply our raw materials, packaging, capital equipment and other necessary operation materials, to meet their obligations to us, or significant disruptions in their ability to do so, may negatively impact our operations, as well as require additional resources to restore our supply chain.
The failure of third parties on which we rely, including those third parties who supply our raw materials, packaging, capital equipment and other necessary operation materials, to meet their obligations to us, or significant disruptions in their ability to do so, could negatively impact our operations, as well as require us to use additional resources and incur additional expenses to restore our supply chain.
In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and the issuance of debt or equity securities.
Additionally, in order to finance any future acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and the issuance of debt or equity securities.
For example, numerous foreign jurisdictions in which we operate have enacted or are in the process of enacting legislation to adopt the Global Anti-Base Erosion ("Pillar Two") model rules issued by the Organization for Economic Co-operation and Development (the “OECD”).
For example, multiple countries in which we operate have enacted or are in the process of enacting legislation to adopt the Global Anti-Base Erosion Model Rules (Pillar Two) issued by the Organization for Economic Co-operation and Development (the “OECD”).
If a weather event or other event is particularly severe, such as a volcanic eruption, major drought, hurricane, cyclone, typhoon, windstorm, or extreme temperatures or precipitation, the affected crop could be destroyed or damaged to an extent that it would be less desirable to our customers, which would result in a reduction in operating results.
If a weather event or other event is particularly severe, such as a volcanic eruption, major drought, hurricane, cyclone, typhoon, windstorm, or extreme temperatures or precipitation, the affected crop could be destroyed or damaged to an extent that it would be less desirable to our customers.
If the tobacco does not meet such market requirements, we may not be able to fill all of our customers’ orders, and such failure would have an adverse effect on profitability and results of operations.
If the tobacco does not meet such market requirements, we may not be able to fill all of our customers’ orders, and such failure could have a material adverse effect on our profitability and results of operations.
We conduct a significant portion of our operations internationally, so political and economic uncertainties in particular countries could have an adverse effect on our performance and results of operations.
We conduct a significant portion of our operations internationally, so political and economic uncertainties in particular countries could have a material adverse effect on our business and results of operations.
A number of such measures are included in the WHO Framework Convention on Tobacco Control (“FCTC”), which entered into force on February 27, 2005, and currently has 183 Parties to the Convention.
A number of such measures are included in the World Health Organization (“WHO”) Framework Convention on Tobacco Control (“FCTC”), which entered into force on February 27, 2005, and currently has 183 Parties to the Convention.
If a particular crop is viewed as expensive in U.S. dollar terms, it may be less attractive in the world market. This could negatively affect the profitability of that crop and our results of operations. In tobacco markets that are primarily domestic, the local currency is the functional currency.
If a particular crop is viewed as expensive in U.S. dollar terms, it may be less attractive in the world market. This could have a material adverse effect on the profitability of that crop and our results of operations. In tobacco markets that are primarily domestic, the local currency is the functional currency.
Any significant change in these factors could cause a material imbalance in the supply of and demand for tobacco, which would affect our results of operations. Our financial results will vary according to tobacco growing conditions, customer requirements, and other factors.
Any significant change in these factors could cause a material imbalance in the supply of and demand for tobacco, which could have a material adverse effect on our results of operations. Our financial results will vary according to tobacco growing conditions, customer requirements, and other factors.
A disruption in transportation services, as a result of climate change or otherwise, may also significantly impact our results of operations. Further, the timing of customer orders and shipments may vary and may require us to keep tobacco in inventory and may also result in variations in quarterly and annual financial results.
A disruption in transportation services, as a result of climate change or otherwise, could also significantly impact our results of operations. Further, the timing of customer orders and shipments may vary and could require us to keep tobacco in inventory for longer than we initially anticipated and also result in variations in quarterly and annual financial results.
The effect of differences in the cost of tobacco is generally not realized in our earnings until the tobacco is sold, which often occurs in a quarter or fiscal year subsequent to the recognition of the related remeasurement gains or losses.
The effect of differences in the cost of tobacco is generally not realized in our earnings until the tobacco is sold, which often occurs in a quarter or fiscal year subsequent to the recognition of the related remeasurement gains or losses. The difference in timing could affect our profitability in a given quarter or fiscal year.
In addition, if we are unable to supply leaf tobacco to our customers’ locations or otherwise 16 conduct business with our customers due to political stability or interference in their countries of operation, or if we incur increased cost related to such challenges, our performance and results of operations could suffer.
In addition, if we are unable to supply leaf tobacco to our customers’ locations or otherwise conduct business with our customers due to political stability or interference in their countries of operation, or if we incur increased costs related to such challenges, our performance and results of operations could be materially and adversely affected.
However, a significant decrease in worldwide tobacco consumption brought about by existing or future laws and regulations would reduce demand for tobacco products and could have a material adverse effect on our results of operations. Government actions can have a significant effect on the sourcing of leaf tobacco.
However, a significant decrease in worldwide tobacco consumption brought about by existing or future laws and regulations would reduce demand for tobacco products, which could have a material adverse effect on our results of operations.
Due to general uncertainty regarding the timing, content, and extent of any such regulatory changes in the United States or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition, and results of operations. Changes in tax laws in the countries where we do business may adversely affect our results of operations.
Due to general uncertainty regarding the timing, content, and extent of any such regulatory changes in the United States or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition, and results of operations.
Our efforts to deter, identify, mitigate, or eliminate future cyber threats may require significant additional expense and may not be successful. The inability for us to attract, develop, retain, motivate, and maintain good relationships with our workforce, including key personnel, could negatively impact our business and our profitability.
Our efforts to deter, identify, mitigate, or eliminate future cyber threats could require us to incur significant additional expense and may not be successful. The inability for us to attract, develop, retain, motivate, and maintain good relationships with our workforce, including key personnel, could have a material adverse effect on our business and our profitability.
This competition for both the sale and purchase of leaf, both with smaller leaf tobacco suppliers and direct sourcing, could reduce the volume of the leaf we handle and could negatively impact our financial results. Our financial results can be significantly affected by changes in the balance of supply and demand for leaf tobacco.
This competition for both the sale and purchase of leaf, both with smaller leaf tobacco suppliers and direct sourcing, could reduce the volume of the leaf we handle and could have a material adverse effect on our financial results. Our financial results can be significantly affected by changes in the balance of supply and demand for leaf tobacco.
The possible effects, as described in various public accounts, could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations and the supply and demand for leaf tobacco. Our operations also rely on dependable and efficient transportation services.
The possible effects of climate change could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels that could increase our costs and adversely impact our business operations and the supply and demand for leaf tobacco. Our operations also rely on dependable and efficient transportation services.
We have such personnel in our senior executive leadership as well as in other key areas throughout our U.S. and international operations such as procurement, manufacturing, and sales, all of which are critical to our future growth and profitability. Changes in labor markets and other socioeconomic and demographic changes have increased the competition for hiring and retaining talent.
We have such personnel in our senior executive leadership as well as in other key areas throughout our U.S. and international operations such as procurement, manufacturing, and sales. Changes in labor markets and other socioeconomic and demographic changes have increased the competition for hiring and retaining talent.
To the extent that we do not replace any lost volumes of leaf tobacco with leaf tobacco from other sources, or we incur increased costs related to such replacement, our financial condition or results of operations, or both, would suffer.
To the extent that we do not replace any lost volumes of leaf tobacco with leaf tobacco from other sources, or we incur increased costs related to such replacement, our financial condition or results of operations, or both, could be materially and adversely affected.
The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes.
The efficient operation of our business depends on our information technology systems. We rely on our information technology systems, some of which are managed by third parties, to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other business processes.
Fluctuations in foreign currency exchange rates may affect our results of operations. We account for most of our tobacco operations and all of our ingredients companies using the U.S. dollar as the functional currency. The international tobacco trade generally is conducted in U.S. dollars, and we finance most of our tobacco operations in U.S. dollars.
Fluctuations in foreign currency exchange rates could have a material adverse effect on our results of operations. We account for most of our tobacco operations and all of our ingredients companies using the U.S. dollar as the functional currency. The international tobacco trade generally is conducted in U.S. dollars, and we finance most of our tobacco operations in U.S. dollars.
We account for currency remeasurement gains or losses on those advances as period costs, and they are usually accompanied by offsetting increases or decreases in the purchase cost of tobacco, which is priced in the local currency.
Our purchases of tobacco are generally made in local currency, and we also provide farmer advances that are denominated in the local currency. We account for currency remeasurement gains or losses on those advances as period costs, and they are usually accompanied by offsetting increases or decreases in the purchase cost of tobacco, which is priced in the local currency.
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.
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.
The competition among leaf tobacco suppliers and dealers is based on the ability to meet customer requirements in the buying, processing, and financing of tobacco, and on the price charged for products and services. We believe that we consistently meet our customers’ requirements and charge competitive prices.
The competition among leaf tobacco suppliers and dealers is based on the ability to meet customer requirements in the buying, processing, and financing of tobacco, and on the price charged for products and services.
For example, some trade proposals have included provisions that could effectively allow governments to regulate tobacco products differently than other products. These carve outs could negatively impact the industry and impact requirements for leaf tobacco.
For example, some trade proposals have included provisions that could effectively allow governments to regulate tobacco products differently than other products. These carve outs could negatively impact the industry and impact requirements for leaf tobacco, which could have a material adverse effect on our business and our results of operations.
The increasing concern over climate change may result in more regional, federal, foreign and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases.
Legal, regulatory, or other market measures to address climate change could negatively affect our business operations. The increasing concern over climate change may result in more regional, federal, foreign or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases.
As a result, climate change or increased concern over climate change could negatively affect our business or operations. Our plant-based ingredients business is subject to industry-specific risks which could adversely affect our operating results.
As a result, climate change or increased concern over climate change could have a material adverse effect on our business or results of operations. Our plant-based ingredients business is subject to industry-specific risks which could have a material adverse effect on our results of operations.
Our inability to operate our networks and security information systems as a result of such events, even for a short period of time, may result in significant expenses or operating disruptions.
Cyber-attacks, data breaches or other breaches of our information security systems could cause equipment failures or disruptions to our operations. Our inability to operate our networks and security information systems as a result of such events, even for a short period of time, could result in significant expenses or operating disruptions.
If some of the current efforts are successful, we could have increased barriers in meeting our customers’ requirements, which could have an adverse effect on our performance and results of operations. A variety of government actions can have a significant effect on the sourcing and production of leaf tobacco.
Government actions on the sourcing of leaf tobacco could result in increased barriers in meeting our customers’ requirements, which could have a material adverse effect on our performance and results of operations. A variety of government actions may have a significant effect on the sourcing and production of leaf tobacco.
Changes in market interest rates expose us to changes in cash flows for floating rate instruments and to changes in fair value for fixed rate instruments. We normally maintain a proportion of our debt in both variable and fixed interest rates to manage this exposure, and from time to time we may enter hedge agreements to swap the interest rates.
We normally maintain a proportion of our debt in both variable and fixed interest rates to manage this exposure, and from time to time we may enter hedge agreements to swap the interest rates.
At the end of fiscal year 2024, the projected benefit obligation ("PBO") of our qualified U.S. pension plan was $205 million and plan assets were $215 million.
At the end of fiscal year 2025, the projected benefit obligation (“PBO”) of our qualified U.S. pension plan was approximately $150 million and plan assets were approximately $160 million.
We may not be able to increase prices to fully offset inflationary and other pressures on costs, such as raw products, packing materials, labor, energy, and distribution costs. As a supplier of leaf tobacco and plant-based ingredients, we source our raw materials globally and rely on labor, energy, packing materials, and distribution resources to produce and distribute our products.
As a supplier of leaf tobacco and plant-based ingredients, we source our raw materials globally and rely on labor, energy, packing materials, and distribution resources to produce and distribute our products.
To the extent that we have net monetary assets or liabilities in local currency, and those balances are not hedged, we may have currency remeasurement gains or losses that will affect our results of operations. Changes in interest rates may affect our results of operations. We generally use both fixed and floating interest rate debt to finance our operations.
To the extent that we have net monetary assets or liabilities in local currency, and those balances are not hedged, we may have currency remeasurement gains or losses that could materially affect our results of operations. 18 Changes in interest rates could have a material adverse effect on our results of operations.
Major shifts in customer requirements for leaf tobacco supply may significantly affect our operating results. If our customers significantly alter their requirements for tobacco volumes from certain regions, we may have to change our production facilities and alter our fixed asset base in certain origins.
Major shifts in customer requirements for leaf tobacco supply could significantly affect our operating results. If our customers significantly alter their requirements for tobacco volumes from certain regions, we may have to alter our fixed asset base in certain regions. Permanent or long-term reduction in demand for tobacco from regions where we have operations may trigger restructuring and impairment charges.
We operate in the United States and many foreign countries and are subject to the tax laws of many jurisdictions. Changes in tax laws or the interpretation of tax laws can affect our earnings, as can the resolution of various pending and contested tax issues.
Changes in tax laws or the interpretation of tax laws can affect our earnings, as can the resolution of various pending and contested tax issues.
A significant event impacting the condition or quality of a large amount of any of the crops that we buy could make it difficult for us to sell these products or to fill customers’ orders. 13 Legal, regulatory, or other market measures to address climate change could negatively affect our business operations.
A significant event impacting the condition or quality of a large amount of any of the crops that we buy could make it difficult for us to sell these products or to fill customers’ orders, which could have a material adverse effect on our results of operations.
We try to pass along to our customers some or all cost increases through increases in the sales prices of our products. To the extent that price increases are not sufficient to offset the cost increases or we experience reductions in sales volumes, our business results and financial condition may be adversely affected.
To the extent that price increases are not sufficient to offset the cost increases or we experience reductions in sales volumes due to tariffs or other factors outside of our control, our business results and financial condition may be materially and adversely affected. Weather and other conditions can affect the marketability of our products.
Epidemics, pandemics or similar public health concerns could cause a widespread health crisis and significantly disrupt the U.S. and global economies, markets and supply chains.
Epidemics, pandemics or similar widespread public health concerns could have a material adverse effect on our business, financial condition, results of operations and demand for our products and services. Epidemics, pandemics or similar public health concerns could cause a widespread health crisis and significantly disrupt the U.S. and global economies, markets and supply chains.
Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change.
Tobacco and other agricultural crops are subject to vagaries of weather and the environment that can, in some cases, change the quality or size of the crops. Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change.
For those jurisdictions that have legislation with an effective enactment date of January 1, 2024, these rules will apply beginning with our fiscal year 2025 reporting year. We are evaluating the impact of these new rules and will continue to monitor potential and enacted tax changes in the countries in which we operate.
For those jurisdictions that have legislation with an effective enactment date of January 1, 2024, these rules apply beginning with the current fiscal reporting year. We continue to evaluate, interpret, and apply the new rules and will review any subsequent changes that may be retroactive.
The difference in timing could affect our profitability in a given quarter or fiscal year. 17 We have used currency hedging strategies to reduce our foreign currency exchange rate risks in some markets.
We have used currency hedging strategies to reduce our foreign currency exchange rate risks in some markets.
Our plant-based ingredients business is subject to risks posed by food spoilage or food contamination; shifting consumer preferences; federal, state, and local food processing regulations; product tampering; and product liability claims. If one or more of these risks were to materialize, our revenues and operating results could be adversely affected, and our reputation might be damaged.
Our plant-based ingredients business is subject to risks applicable to the food and beverage industry such as those posed by food spoilage or food contamination; shifting consumer preferences; federal, state, and local food processing regulations; product tampering; and product liability claims.
In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures, security breaches or intrusions (including theft of confidential data), and viruses. Cyber-attacks, data breaches or other breaches of our information security systems may cause equipment failures or disruptions to our operations.
The failure of our information technology systems (including those managed or provided to us by third parties) to perform as we anticipate could disrupt our business and have a material adverse effect on our results of operations. 14 In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures, security breaches or intrusions (including theft of confidential data), and viruses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, our Incident Response Policy outlines procedures pursuant to which cybersecurity incidents or risks are escalated within the Company, and, as applicable, timely reported to the Audit Committee and Board.
Biggest changeIn addition, our Incident Response Policy outlines procedures pursuant to which cybersecurity incidents or risks are escalated within the Company, and, as applicable, timely reported to the Audit Committee and Board. Management Oversight Our Information Security Program is a comprehensive framework of policies, procedures, and guidelines designed to ensure the security, availability, and confidentiality of our systems.
The Information Security Steering Team will advise the General Counsel and Audit Committee of the threat as well as other third parties or authorities who are required to be notified pursuant to applicable law or contract. 19
The Information Security Steering Team will advise the General Counsel and Audit Committee of the threat as well as other third parties or authorities who are required to be notified pursuant to applicable law or contract. 20
Our Chief Information Officer and Corporate Director of Information Technology Security, in coordination with our Information Technology Department and other appropriate personnel, are responsible for assessing and managing our risks from cybersecurity threats.
Our Chief Information Officer (CIO) and Corporate Director of Information Technology Security (CDIS), in coordination with our Information Technology Department and other appropriate personnel, are responsible for assessing and managing our risks from cybersecurity threats.
We also provide employees with educational materials about emerging cybersecurity threats and update employees when our information security policies are amended. We regularly evaluate our Information Security Program based on software vendor assessments and reports, insurance underwriter evaluations, and internal and external audits, including, without limitation, customer audits.
We also provide employees with educational materials about emerging cybersecurity threats and update employees when our information security policies are amended. 19 We regularly evaluate our Information Security Program based on software vendor assessments and reports, insurance underwriter evaluations, and internal and external audits, including customer audits.
We also have adopted a cybersecurity incident response and recovery plan to enable us to properly respond to cybersecurity incidents that may affect the function and security of the Company, our IT assets, customer and employee data, information resources, and business operations.
We also have adopted a cybersecurity incident response and recovery plan to enable us to respond to cybersecurity incidents that may affect the function and security of the Company, our information technology assets, customer and employee data, information resources, and business operations.
We have adopted cyber and data security policies, which address matters including user access, incident response, third-party compliance, personal devices, and data privacy. These policies are reviewed 18 annually, including by our independent auditor. We also maintain insurance covering certain costs that may be incurred in connection with cybersecurity incidents, should they occur.
We have adopted cyber and data security policies, that address matters including user access, incident response, third-party compliance, personal devices, and data privacy. These policies are reviewed annually. We also maintain insurance covering certain costs that may be incurred in connection with cybersecurity incidents, should they occur.
Management has determined that no cybersecurity incidents that we have experienced to date have resulted in, or are reasonably likely to result in, a material impact to its financial condition, results of operations, or business strategy. For additional information on risks from cybersecurity threats and potential related impacts on the Company, please see Item 1A – Risk Factors.
Management has determined that no cybersecurity incidents that we have experienced to date have resulted in, or are reasonably likely to result in, a material adverse effect on our financial condition, results of operations, or business strategy. For additional information on risks from cybersecurity threats and potential related impacts on the Company, please see Item 1A.
Cybersecurity Governance Board Oversight The Board of Directors is ultimately responsible for our Information Security Program, and it has delegated to the Audit Committee primary oversight responsibility for this program. The Audit Committee periodically reviews the program and information security, cybersecurity, and technology risks.
“Risk Factors.” Cybersecurity Governance Board Oversight The Board of Directors is ultimately responsible for our Information Security Program, and it has delegated to the Audit Committee primary oversight responsibility for this information security and technology (including cybersecurity) risk management program. The Audit Committee periodically reviews the program and information security, cybersecurity, and technology risks.
The Chief Information Officer has served in various roles in information technology and information security for over 25 years, has been in his current role for more than 10 years, and holds a degree in Computer Science.
The CIO has served various roles in information technology and information security for over 25 years, including Corporate Director, Technology & IS Strategy and Director of Applications and Technology, has been in his current role for more than 10 years, and holds a BS degree in Computer Science.
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Management Oversight The Information Security Program is overseen by our Information Security Steering Team, which provides cross-functional program oversight and maintenance and includes members from the Information Technology, Internal Audit, Legal, and Risk Management Departments. This team is also responsible for developing, implementing, and maintaining our information security policies and procedures.
Added
However, we rely on our third-party partners to implement effective information security programs commensurate with the risk associated with the nature of their business relationships to us and cannot ensure in all circumstances their efforts will be successful.
Removed
The Corporate Director of Information Technology Security has served in various roles in information technology and information security for over 30 years, has been in his current role for more than 15 years, and has been trained in multiple cybersecurity subjects.
Added
Our CIO has various industry certifications, including being a Microsoft Certified Professional (MCP) and holding the Project Management Professional (PMP) certification, offered by the Project Management Institute (PMI). The program is led by our CDIS, who operates under the direction of the CIO.
Added
With over 30 years of experience in IT and cybersecurity, the CDIS heads our global Information Security team and the Security Steering team. This multidisciplinary team comprises experts from IT, Infosec, Legal, Audit, and Risk. The CDIS brings extensive expertise across a diverse array of platforms, services, and technologies.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe 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.
Biggest changeThe Lancaster, Pennsylvania 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.
We believe that the properties currently utilized in our tobacco operations are maintained in good operating condition and are suitable and adequate for our purposes at our current volumes. In addition to our significant properties listed above, we own other processing facilities in the following countries: Germany, Guatemala, Italy, the Netherlands, Poland, and the United States.
We believe that the properties currently utilized in our tobacco operations are maintained in good operating condition and are suitable and adequate for our purposes at our current volumes. In addition to our significant properties listed above, we own other processing facilities in the following countries: Guatemala, Italy, the Netherlands, Poland, and the United States.
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.
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 194,000 (1) Owned by an unconsolidated subsidiary.
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. 20 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. 21 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, 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.
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 Türkiye. 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, should one or more of these matters be resolved in a manner adverse to our current expectation, the effect on our results of operations for a particular fiscal reporting period could be material.
Biggest changeHowever, should one or more of these matters be resolved in a manner adverse to our current expectation, the effect on our results of operations for a particular fiscal reporting period could be material. For additional information regarding litigation and other legal matters to which we are a party, see Note 15 to the consolidated financial statements in Item 8.
Item 3. Legal Proceedings Some of our subsidiaries are involved in other litigation or legal matters incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, we are vigorously defending the matters and do not currently expect that any of them will have a material adverse effect on our business or financial position.
Item 3. Legal Proceedings Some of our subsidiaries are involved in litigation or legal matters incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, we are vigorously defending the matters and do not currently expect that any of them will have a material adverse effect on our business or financial position.
Removed
For additional information regarding litigation and other legal matters to which we are a party, see Note 16 – Commitments, Contingencies, and Other Matters to our accompanying consolidated financial statements, which are incorporated by reference into this Item.
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“Financial Statements and Supplementary Data” (“Item 8”), which is incorporated by reference into this Item.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis 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.
Biggest change(3) A stock repurchase plan, which was authorized by our Board of Directors, became effective and was publicly announced on November 7, 2024. 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, 2026, subject to market conditions and other factors.
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, 2024.
See Notes 8 and 13 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, 2025.
Common 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, 2024 — $ — — $ 95,255,674 February 1-29, 2024 — — — 95,255,674 March 1-31, 2024 — — — 95,255,674 Total — $ — — $ 95,255,674 (1) Repurchases are based on the date the shares were traded.
Common 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, 2025 — $ — — $ 100,000,000 February 1-28, 2025 — — — 100,000,000 March 1-31, 2025 — — — 100,000,000 Total — $ — — $ 100,000,000 (1) Repurchases are based on the date the shares were traded.
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, 2024. At May 21, 2024, there were 831 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. Based on our March 31, 2025 financial statements, we were in compliance with all of these financial covenants at March 31, 2025. At May 29, 2025, there were 790 holders of record of our common stock.
Removed
(3) A stock repurchase plan, which was authorized by our Board of Directors, became effective and was publicly announced on November 3, 2022.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe continued monitoring our social supply chain targets, and for the second year in a row, substantially met our personal protective equipment distribution, farm labor accommodation, child labor elimination, and farm labor payment goals for our contracted tobacco growers. 25 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) 2024 2023 As Reported: Consolidated operating income $ 222,009 $ 181,072 Value-added tax settlement costs (1) 4,754 — Restructuring and impairment costs (2) 3,523 — Adjusted operating income (Non-GAAP) $ 230,286 $ 181,072 Adjusted Net Income and Adjusted Diluted Earnings Per Share Reconciliation Fiscal Year Ended March 31, (in thousands except for per share amounts) 2024 2023 As Reported: Net income attributable to Universal Corporation $ 119,598 $ 124,052 Value-added tax settlement costs (1) 4,754 — Restructuring and impairment costs (2) 3,523 — Interest expense for value-added tax settlement (1) 245 — Interest income related to final income tax ruling at a foreign subsidiary (3) — (4,980) 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 8,522 (6,796) Income tax benefit on final tax ruling at a foreign subsidiary (3)(4) — (24,256) Income tax expense from sale of operations in Tanzania — 1,132 Income tax benefit from Non-GAAP adjustments to income before income taxes (4) (1,010) — Total of income tax impacts for Non-GAAP adjustments to income before income taxes and Non-GAAP adjustment to income taxes (4) (1,010) (23,124) As adjusted: Net income attributable to Universal Corporation (Non-GAAP) $ 127,110 $ 94,132 As reported: Diluted earnings per share $ 4.78 $ 4.97 Adjusted: Diluted earnings per share (Non-GAAP) $ 5.08 $ 3.77 (1) In the fourth quarter of fiscal year 2024, the Company utilized a voluntary government-sponsored value-added tax program in Brazil to settle a previously contested assessment.
Biggest changeUniversal has trained over 175,000 farmers on Good Agricultural Practices and Agricultural Labor Practices to advance environmental and human rights best practices throughout our contracted farmer base. 26 Other Items 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) 2025 2024 As Reported: Consolidated operating income $ 232,797 $ 222,009 Value-added tax settlement costs (1) — 4,754 Restructuring and impairment costs (2) 10,573 3,523 Adjusted operating income (Non-GAAP) $ 243,370 $ 230,286 Adjusted Net Income and Adjusted Diluted Earnings Per Share Reconciliation Fiscal Year Ended March 31, (in thousands except for per share amounts) 2025 2024 As Reported: Net income attributable to Universal Corporation $ 95,047 $ 119,598 Value-added tax settlement costs (1) — 4,754 Restructuring and impairment costs (2) 10,573 3,523 Pension settlement charge (3) 14,101 — Interest expense for value-added tax settlement (1) — 245 Total of Non-GAAP adjustments to income before income taxes 24,674 8,522 Income tax benefit from value-added tax settlement (1)(4) — (498) Income tax benefit from restructuring and impairment costs (2)(4) (132) (512) Income tax benefit from pension settlement charge (3)(4) (3,257) — Total of income tax impacts for Non-GAAP adjustments to income before income taxes and Non-GAAP adjustment to income taxes (4) (3,389) (1,010) As adjusted: Net income attributable to Universal Corporation (Non-GAAP) $ 116,332 $ 127,110 As reported: Diluted earnings per share $ 3.78 $ 4.78 Adjusted: Diluted earnings per share (Non-GAAP) $ 4.63 $ 5.08 (1) In the fourth quarter of fiscal year 2024, the Company utilized a voluntary government-sponsored value-added tax program in Brazil to settle a previously contested assessment.
On a year-to-year basis, we are also susceptible to fluctuations in leaf supply due to crop sizes and leaf demand as manufacturers adjust inventories or respond to changes in cigarette markets. We currently believe that the supply of flue-cured tobaccos and burley tobaccos are in an undersupply relative to anticipated demand.
On a year-to-year basis, we are also susceptible to fluctuations in leaf supply due to crop sizes and leaf demand as manufacturers adjust inventories or respond to changes in cigarette markets. We currently believe that the supply of flue-cured tobaccos and burley tobaccos are in an undersupply position relative to anticipated demand.
Our investments in our research and development function and in our Lancaster facility expansion are intended to provide us with the capabilities to service the entire beverage market whether it is enhancing flavors, providing juice concentrates, or developing future innovations.
Our investments in our research and development function and in our Lancaster, Pennsylvania facility expansion are intended to provide us with the capabilities to service the entire beverage market whether it is enhancing flavors, providing juice concentrates, or developing future innovations.
Deferred tax assets generally represent items that can be used as 31 a tax deduction or credit in future tax returns for which we have already recorded the tax benefit in our financial statements.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in future tax returns for which we have already recorded the tax benefit in our financial statements.
Changes in market and economic conditions, local tax laws, and other related factors are considered each reporting period, and adjustments to the accounts are made based on management’s best judgment. 33 OTHER INFORMATION REGARDING TRENDS AND MANAGEMENT’S ACTIONS Our financial performance depends on our ability to obtain an appropriate price for our products and services, to secure the product volumes and qualities desired by our customers, and to maintain efficient, competitive operations.
Changes in market and economic conditions, local tax laws, and other related factors are considered each reporting period, and adjustments to the accounts are made based on management’s best judgment. 35 OTHER INFORMATION REGARDING TRENDS AND MANAGEMENT’S ACTIONS Our financial performance depends on our ability to obtain an appropriate price for our products and services, to secure the product volumes and qualities desired by our customers, and to maintain efficient, competitive operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding of, and should be read in conjunction with, Part I, Item 1, “Business” and Item 8, “Financial Statements and Supplementary Data.” For information on risks and uncertainties related to our business that may make past performance not indicative of future results, or cause actual results to differ materially from any forward-looking statements, see “General,” and Part I, Item 1A, “Risk Factors.” OVERVIEW Universal Corporation is a global business-to-business agriproducts company with over 100 years of experience supplying products and innovative solutions to meet our customers’ evolving needs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding of, and should be read in conjunction with, Item 1, “Business” and Item 8, “Financial Statements and Supplementary Data.” For information on risks and uncertainties related to our business that may make past performance not indicative of future results, or cause actual results to differ materially from any forward-looking statements, see Item 1A, “Risk Factors.” OVERVIEW Universal Corporation is a global business-to-business agriproducts company with over 100 years of experience supplying products and innovative solutions to meet our customers’ evolving needs.
On May 10, 2016, the FDA released “deeming” regulations to extend FDA oversight over all tobacco products, including electronic nicotine delivery systems, cigars, hookah tobacco, pipe tobacco, dissolvables, and “novel and future products.” Additionally, Congress extended FDA’s authority to include regulation of tobacco products using synthetically manufactured nicotine in addition to naturally derived nicotine in March 2022.
On May 10, 2016, the FDA released “deeming” regulations to extend FDA oversight over all tobacco products, including electronic nicotine delivery systems, cigars, hookah tobacco, pipe tobacco, dissolvables, and “novel and future products.” Additionally, the U.S. Congress extended the FDA’s authority to include regulation of tobacco products using synthetically manufactured nicotine in addition to naturally derived nicotine in March 2022.
However, over 80% of both the flue-cured tobacco grown outside of China and the worldwide burley tobacco production is sourced from the top ten growing areas for each type of tobacco. We believe that these moves to reduce sourcing areas and concentrate on major tobacco export markets are another way for the industry to increase efficiency and to reduce costs.
However, over 80% of both the flue-cured tobacco grown outside of China and the worldwide burley tobacco production is sourced from the top 10 growing areas for each type of tobacco. We believe that these moves to reduce sourcing areas and concentrate on major tobacco export markets are another way for the industry to increase efficiency and to reduce costs.
We have established grower networks and agricultural support infrastructure in origins where we source tobacco, and we also have strong, mature sustainability programs in those origins. We believe that ingredients produced in a sustainable manner will grow in importance to our customers and, as a result, will favor suppliers who are able to deliver these products. 39
We have established grower networks and agricultural support infrastructure in origins where we source tobacco, and we also have strong, mature sustainability programs in those origins. We believe that ingredients produced in a sustainable manner will grow in importance to our customers and, as a result, will favor suppliers who are able to deliver these products. 41
See Note 13 to the consolidated financial statements in Item 8 for additional information on pension and other postretirement benefit plans. Other Estimates and Assumptions Other management estimates and assumptions are routinely required in preparing our financial statements, including the determination of valuation allowances on accounts receivable and the fair value of long-lived assets.
See Note 12 to the consolidated financial statements in Item 8 for additional information on pension and other postretirement benefit plans. Other Estimates and Assumptions Other management estimates and assumptions are routinely required in preparing our financial statements, including the determination of valuation allowances on accounts receivable and the fair value of long-lived assets.
Inventory write-downs in fiscal years 2024, 2023, and 2022 were $9.2 million, $14.0 million, and $19.9 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 2025, 2024, and 2023 were $19.9 million, $9.2 million, and $14.0 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.
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.
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 2023.
Vertical Integration As we continue to grow Universal Ingredients, we will explore and develop targeted opportunities to vertically integrate certain plant-based ingredients from our tobacco growing areas to capitalize on our strengths and capabilities there.
Vertical Integration As we continue to grow Universal Ingredients, we intend to explore and develop targeted opportunities to vertically integrate certain plant-based ingredients from our tobacco growing areas to capitalize on our strengths and capabilities there.
With our heavy investments in the new capabilities at our Lancaster location, we will be able to serve a broader audience of customers looking for new trends within the beverage sector. The beverage market can be segmented into several smaller subcategories, including alcoholic beverages, non-alcoholic beverages, coffees, and juices.
With our significant investments in the new capabilities at our Lancaster, Pennsylvania location, we will be able to serve a broader audience of customers looking for new trends within the beverage sector. The beverage market can be segmented into several smaller subcategories, including alcoholic beverages, non-alcoholic beverages, coffees, and juices.
In essence, product development is not just about creating new products; it's about sustaining a brand's relevance and growth in an ever-changing industry. We have invested in research and development staff at our Lancaster, Pennsylvania facility and are able to offer solutions for our customers’ dynamic product needs.
In essence, product development is not just about creating new products; it is also about sustaining a brand’s relevance and growth in an ever-changing industry. We have invested in research and development staff at our Lancaster, Pennsylvania facility and are able to offer solutions for our customers’ dynamic product needs.
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. 32 As of March 31, 2024, the effect of the indicated increase or decrease in the selected pension and other postretirement benefit valuation assumptions is shown below.
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. 34 As of March 31, 2025, the effect of the indicated increase or decrease in the selected pension and other postretirement benefit valuation assumptions is shown below.
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 $139 million, net of allowances, at March 31, 2024.
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, 2025.
In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 17. "Operating Segments" to the consolidated financial statements in Item 8. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits.
In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 16 to the consolidated financial statements in Item 8. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits.
In 2017, then Commissioner of the FDA, Scott Gottlieb, announced a new regulatory approach for the regulation of tobacco products that embraced the placement of each product somewhere along a “continuum of risk”. This comprehensive plan on nicotine use sought to facilitate an adult tobacco consumer’s switch from combustible cigarettes to less risky products found lower on the continuum.
In 2017, the FDA announced a new regulatory approach for the regulation of tobacco products that embraced the placement of each product somewhere along a “continuum of risk”. This comprehensive plan on nicotine use sought to facilitate an adult tobacco consumer’s switch from combustible cigarettes to less risky products found lower on the continuum.
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, 2024, the gross balance of recoverable tax credits (primarily VAT) totaled approximately $72 million, and the related valuation allowance totaled approximately $21 million.
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, 2025, the gross balance of recoverable tax credits (primarily VAT) totaled approximately $64 million, and the related valuation allowance totaled approximately $21 million.
While the impact of this cultural trend on our business is uncertain, the global acceptance of stringent regulations could reduce demand for tobacco products and have a material adverse effect on our results of operation.
While the impact of this cultural trend on our business is uncertain, the global acceptance of stringent regulations could reduce demand for tobacco products, which could have a material adverse effect on our business and results of operations.
Outstanding Debt and Other Financing Arrangements We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt. We also consider our net debt plus shareholders' equity to be our net capitalization.
We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt. We also consider our net debt plus shareholders’ equity to be our net capitalization.
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. 38 Beverages The beverage category for Universal Ingredients will remain a strategic initiative moving forward within the retail and food service space.
We believe that 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. 40 Beverages The beverage category for Universal Ingredients will remain a strategic initiative moving forward within the retail and food service space.
Interest payments on $727 million of variable rate debt were estimated based on rates as of March 31, 2024. 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.
Interest payments on $765 million of variable rate debt were estimated based on rates as of March 31, 2025. 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.
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 ERISA-regulated pension plan during the next year.
The ABO and PBO are calculated on the basis of certain assumptions that are outlined in Note 12 to the consolidated financial statements in Item 8. We expect to make no contributions to our ERISA-regulated pension plan 30 during the next fiscal year.
A reconciliation of adjusted operating income (loss) to consolidated operating (income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other Items below.
Reconciliations of adjusted operating income (loss) to consolidated operating (income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other Items below.
The Company's participation in the settlement program eliminates any future litigation regarding the matter. (2) Restructuring and impairment costs are included in consolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income available to Universal Corporation, and Adjusted diluted earnings per share. See Note 4 for additional information.
The Company ’ s participation in the settlement program eliminates any future litigation regarding the matter. (2) Restructuring and impairment costs are included in consolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income available to Universal Corporation, and Adjusted diluted earnings per share. See Note 3 for additional information.
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. 26 LIQUIDITY AND CAPITAL RESOURCES Overview In fiscal year 2024, 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 that will become effective and be adopted by the Company in future reporting periods. 28 LIQUIDITY AND CAPITAL RESOURCES Overview In fiscal year 2025, our liquidity was sufficient to meet our needs.
The global pet food market size was over $100 billion in 2023, according to industry projections. With "family" increasingly being redefined to include pets, there are rising opportunities within the market. We believe that consumers will value human-grade ingredients and healthy and gourmet offerings for their pets.
The global pet food market size was over $125 billion in 2024, according to industry projections. With “family” increasingly being redefined to include pets, there are rising opportunities within the market. We believe that consumers will value human-grade ingredients and healthy and gourmet offerings for their pets.
When tobacco is sold for export, VAT is normally not assessed. In countries where our tobacco sales are predominantly for export markets, we often do not generate enough VAT collections on downstream sales to fully offset our VAT payments. In those situations, we can accumulate unused VAT credits.
In countries where our tobacco sales are predominantly for export markets, we often do not generate enough VAT collections on downstream sales to fully offset our VAT payments. In those situations, we can accumulate unused VAT credits.
The Tobacco Act additionally prohibited characterizing flavors with the exception of menthol in cigarettes, restricted youth access to tobacco products, banned advertising claims regarding certain tobacco products, and established the Center for Tobacco Products. 36 Over the past decade, the FDA has focused on establishing the scientific foundation and regulatory framework for regulating tobacco products in the United States.
The Tobacco Act additionally prohibited characterizing flavors with the exception of menthol in cigarettes, restricted youth access to tobacco products, banned advertising claims regarding certain tobacco products, and established the Center for Tobacco Products. 38 Since the enactment of the Tobacco Act, the FDA has focused on establishing the scientific foundation and regulatory framework for regulating tobacco products in the United States.
At March 31, 2024, the fair value of those open contracts was a net asset of approximately $0.1 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 $0.2 million at March 31, 2024.
At March 31, 2025, the fair value of those open contracts was a net liability of approximately $5.2 million. We also had other forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $1.1 million at March 31, 2025.
As of March 31, 2024, we had $405 million available under the committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $425 million in uncommitted lines of credit, of which approximately $135 million were unused and available to support seasonal working capital needs.
As of March 31, 2025, we had $270 million available under the committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $466 million in uncommitted lines of credit, of which approximately $271 million were unused and available to support seasonal working capital needs.
At March 31, 2024, the fair value of our open interest rate hedge swaps was a net asset of approximately $7 million.
At March 31, 2025, the fair value of our open interest rate hedge swaps was a net asset of approximately $2 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. References to net debt, net capitalization, and net debt to net capitalization ratio are also references to non-GAAP financial measures.
In the event that the carrying value of the reporting unit exceeds its fair value, an impairment of the reporting unit's goodwill is recognized, up to the amount of goodwill allocated to that reporting unit.
The quantitative goodwill assessment consists of comparing the fair value of each reporting unit to the carrying value of that reporting unit. In the event that the carrying value of the reporting unit exceeds its fair value, an impairment of the reporting unit’s goodwill is recognized, up to the amount of goodwill allocated to that reporting unit.
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, 2023, filed with the SEC on May 25, 2023.
“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, 2024, filed with the SEC on May 29, 2024.
We believe that our financial resources are adequate to support our capital and liquidity needs for at least the next twelve months. Our seasonal borrowing requirements primarily relate to purchasing tobacco crops in South America and Africa and can increase during the buying season for those crops by close to $400 million.
We believe that our financial resources are adequate to support our anticipated capital and liquidity needs for the upcoming next 12 months and beyond. Our seasonal borrowing requirements primarily relate to purchasing tobacco crops in South America and Africa and can increase during the buying season for those crops by up to $400 million.
During fiscal years 2024 and 2023, we invested $66.0 million and $54.7 million, respectively, in our property, plant, and equipment. Capital expenditures in fiscal year 2024 included investments to expand Universal Ingredients' manufacturing capabilities in Lancaster. Depreciation expense was approximately $47.1 million and $44.8 million, respectively, in fiscal years 2024 and 2023.
During fiscal years 2025 and 2024, we invested $66.6 million and $66.0 million, respectively, in our property, plant, and equipment. Capital expenditures in fiscal years 2025 and 2024 included investments to expand Universal Ingredients’ manufacturing capabilities in Lancaster, Pennsylvania. Depreciation expense was approximately $48.7 million and $47.1 million, respectively, in fiscal years 2025 and 2024.
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 6.46% and 6.66%, respectively, as of March 31, 2024.
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 5.96% and 6.16%, respectively, as of March 31, 2025.
There has been an increase in the level of direct purchasing, sorting, processing, and other value-added services that we provide our customers, notably in the United States, 34 Mexico, Brazil, Poland, Guatemala, the Dominican Republic, and the Philippines. We believe this increase acknowledges the efficiencies and services that we bring to the entire supply chain.
There has been an increase in the level of direct purchasing, sorting, processing, and other value-added services that we provide our customers, notably in the United States, Mexico, Brazil, Poland, Guatemala, the Dominican Republic, and the Philippines.
Africa, Asia, North America, and South 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.
Africa, Asia, North America, and South 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.
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 at March 31, 2024, were approximately $215 million. The accumulated benefit obligation (“ABO”) and PBO were both approximately $200 million and $205 million, 28 respectively as of March 31, 2024.
For additional information, see Note 10 to the consolidated financial statements in Item 8. Pension Funding The funds supporting our ERISA-regulated U.S. defined benefit pension plan at March 31, 2025, were approximately $160 million. The accumulated benefit obligation (“ABO”) and PBO were approximately $140 million and $150 million, respectively, as of March 31, 2025.
Congress passed the Family Smoking Prevention and Tobacco Control Act (the "Tobacco Act”). This legislation authorizes the U.S. Food and Drug Administration (“FDA”) to regulate the manufacturing and marketing of tobacco products.
United States FDA’s Continued Enforcement of the Tobacco Control Act In 2009, the U.S. Congress passed the Family Smoking Prevention and Tobacco Control Act (the “Tobacco Act”). This legislation authorizes the U.S. Food and Drug Administration (“FDA”) to regulate the manufacturing and marketing of tobacco products.
Currently, we have interest rate swap agreements that convert the variable benchmark SOFR rates on $310 million of our two outstanding term loans to fixed rates.
Derivatives From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. Currently, we have interest rate swap agreements that convert the variable benchmark SOFR rates on $310 million of our two outstanding term loans to fixed rates.
(4) The income tax effect of Non-GAAP adjustments was determined based on the timing and nature of the specific Non-GAAP adjustments and their relevant jurisdictional income tax rates (foreign, state, and local) and the applicable U.S. federal income tax rates. The Company considers current and deferred income tax rates to calculate the impact to income taxes for the Non-GAAP adjustments.
(4) The income tax effect of Non-GAAP adjustments was determined based on the timing and nature of the specific Non-GAAP adjustments and their relevant jurisdictional income tax rates (foreign, state, and local) and the applicable U.S. federal income tax rates.
Uncommitted inventories at March 31, 2023, were $91.1 million, which represented 11% of tobacco inventory. 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 and purchases 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 and purchases of new crops, as well as the receipt of customer orders.
Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. We currently plan to spend approximately $55 to $65 million in fiscal year 2025 on capital projects for maintenance of our facilities and other investments to grow and improve our businesses, including the completion of the Universal Ingredients expansion project.
Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. We currently plan to spend approximately $45 to $55 million in fiscal year 2026 on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.
At the tenth Conference of the Parties held in February 2024, the FCTC worked diligently to consider amendments to the agreement and track progress in the treaty’s implementation, particularly as it relates to environmental impacts and novel/emerging products.
At the tenth Conference of the Parties held in February 2024, the FCTC considered amendments to the agreement and track progress in the treaty’s implementation, particularly as it relates to environmental impacts and novel/emerging products. The eleventh Conference of the Parties is scheduled for November 2025.
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.
We believe this increase acknowledges the efficiencies and services that we bring to the entire supply chain. 36 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 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, 2024, 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. Based on our March 31, 2025 financial statements, we were in compliance with all financial covenants of our debt agreements as of March 31, 2025. We have no long-term debt maturing until fiscal year 2028.
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 increased in fiscal year 2024 by about 20% to 1.7 billion kilos compared to fiscal year 2023, when production levels were 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 2025 by about 5% to 1.8 billion kilos, compared to fiscal year 2024.
We have also invested in Universal Ingredients' infrastructure with the expansion of our Lancaster, Pennsylvania facility which we expect to be fully operational in the second half of fiscal year 2025. This expansion will further enhance our product offerings and production capabilities.
We have also invested in Universal Ingredients’ infrastructure with the expansion of our Lancaster, Pennsylvania facility which we completed in fiscal year 2025. This expansion further enhances our product offerings and production capabilities.
Pension and Other Postretirement Benefit Plans The measurement of our pension and other postretirement benefit obligations and costs at the end of each fiscal year requires that we make various assumptions that are used by our outside actuaries in estimating the present value of projected future benefit payments to all plan participants.
For additional disclosures on income taxes, see Notes 1 and 5 to the consolidated financial statements in Item 8. 33 Pension and Other Postretirement Benefit Plans The measurement of our pension and other postretirement benefit obligations and costs at the end of each fiscal year requires that we make various assumptions that are used by our outside actuaries in estimating the present value of projected future benefit payments to all plan participants.
During the fiscal year ended March 31, 2024, we spent $66.0 million on capital projects, and we returned $83.1 million to shareholders in the form of dividends and share repurchases. At March 31, 2024, cash balances totaled $55.6 million.
During the fiscal year ended March 31, 2025, we spent $62.6 million on capital projects, and we returned $79.7 million to shareholders in the form of dividends. At March 31, 2025, cash balances totaled $260.1 million.
We will continue to make disciplined investments to take advantage of growth opportunities in tobacco and in our ingredients business. Through these actions, we believe we will be able to deliver enhanced shareholder value through earnings growth and the generation of free cash flow despite operating in a mature tobacco industry.
Through these actions, we believe we will be able to deliver enhanced shareholder value through earnings growth and the generation of free cash flow despite operating in a mature tobacco industry. As we look ahead, we intend to continue to evaluate opportunities to return capital to shareholders.
FINANCIAL HIGHLIGHTS Fiscal Year Ended March 31, Change (in millions of dollars, except per share data) 2024 2023 $ % Consolidated Results Sales and other operating revenue $ 2,748.6 $ 2,569.8 $ 178.7 7 % Cost of goods sold 2,212.5 2,111.5 100.9 5 % Gross profit margin 19.50 % 17.83 % --- 167 bps Selling, general and administrative expenses 310.6 277.2 33.4 12 % Restructuring and impairment costs 3.5 — 3.5 100 % Operating income (as reported) 222.0 181.1 40.9 23 % Adjusted operating income (Non-GAAP)* 230.3 181.1 49.2 27 % Diluted earnings per share (as reported) 4.78 4.97 (0.19) (4) % Adjusted diluted earnings per share (Non-GAAP)* 5.08 3.77 1.31 35 % Segment Results Tobacco operations sales and other operating revenues $ 2,438.8 $ 2,258.3 $ 180.5 8 % Tobacco operations operating income 222.4 172.9 49.5 29 % Ingredients operations sales and other operating revenues 309.8 311.6 (1.8) (1) % Ingredients operations operating income 3.9 10.6 (6.6) (63) % *See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below.
FINANCIAL HIGHLIGHTS Fiscal Year Ended March 31, Change (in millions of dollars, except per share data) 2025 2024 $ % Consolidated Results Sales and other operating revenue $ 2,947.3 $ 2,748.6 $ 198.7 7 % Cost of goods sold 2,398.6 2,212.5 186.2 8 % Gross profit margin 18.6 % 19.5 % --- -90 bps Selling, general and administrative expenses 305.3 310.6 (5.3) (2) % Restructuring and impairment costs 10.6 3.5 7.1 200 % Operating income (as reported) 232.8 222.0 10.8 5 % Adjusted operating income (Non-GAAP)* 243.4 230.3 13.1 6 % Diluted earnings per share (as reported) 3.78 4.78 (1.00) (21) % Adjusted diluted earnings per share (Non-GAAP)* 4.63 5.08 (0.45) (9) % Segment Results Tobacco operations sales and other operating revenues $ 2,608.7 $ 2,438.8 $ 169.9 7 % Tobacco operations operating income 240.2 222.4 17.8 8 % Ingredients operations sales and other operating revenues 338.6 309.8 28.8 9 % Ingredients operations operating income 12.3 3.9 8.4 212 % *See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below.
Goodwill A majority of our consolidated goodwill balance relates to our reporting unit in Brazil and the acquisitions of FruitSmart, Silva, and Shank's.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.
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.
That amount was about $70.1 million higher than the $4.6 million we used in fiscal year 2023, largely due to accelerated tobacco purchasing in Brazil which led to higher working capital requirements in fiscal year 2024.
That amount was about $401.6 million higher than the $74.6 million we used in fiscal year 2024, primarily on lower working capital requirements in fiscal year 2025, due to accelerated tobacco purchasing in Brazil in fiscal year 2024.
As we look ahead, we will continually evaluate opportunities to return capital to shareholders. Share Activity Our Board of Directors approved our current share repurchase program in November 2022. The program authorizes the purchase of up to $100 million of our common stock through November 15, 2024.
Share Activity Our Board of Directors approved our current share repurchase program in November 2024. The program authorizes the purchase of up to $100 million of our common stock through November 15, 2026.
In fiscal year 2024, we continued to enhance and increase the capabilities across our two segments: Tobacco Operations and Ingredients Operations. • Our Tobacco Operations maintained its position as the leading global leaf tobacco supplier, and primarily focuses on procuring and processing flue-cured, burley, dark air-cured, and oriental leaf tobacco for consumer product manufacturers. • Our Ingredients Operations specializes in sourcing and processing vegetable and fruit ingredients, flavorings, and botanical extracts for consumer packaged goods manufacturers, retailers, and food and beverage companies.
This segment primarily focuses on procuring and processing flue-cured, burley, dark air-cured, and oriental leaf tobacco for consumer product manufacturers. • Our Ingredients Operations segment specializes in sourcing and processing vegetable and fruit ingredients, flavorings, and botanical extracts for consumer packaged goods manufacturers, retailers, and food and beverage companies.
While we cannot predict the extent or speed at which the efforts of the FCTC will reduce tobacco consumption, a proliferation of national laws and regulations spurred by the recommendations of the FCTC would likely reduce demand for both tobacco products and leaf. United States FDA’s Continued Enforcement of the Tobacco Control Act In 2009, the U.S.
While we cannot predict the extent or speed at which the efforts of the FCTC will reduce tobacco consumption, a proliferation of national laws and regulations spurred by the recommendations of the FCTC would likely reduce demand for both tobacco products and leaf, which could have a material adverse effect on our business and results of operations.
Items subject to VAT vary from jurisdiction to jurisdiction, as do the rates at which the tax is assessed. When we sell tobacco to customers in the country of origin, we generally collect VAT on those sales. We are normally permitted to offset our VAT payments against those collections and remit only the incremental VAT collections to the tax authorities.
In some countries, VAT is a national tax, and in other countries it is assessed at the state level. Items subject to VAT vary from jurisdiction to jurisdiction, as do the rates at which the tax is assessed. When we sell tobacco to customers in the country of origin, we generally collect VAT on those sales.
(in thousands of dollars) Effect on 2024 Projected Benefit Obligation Increase (Decrease) Effect on 2025 Annual Expense Increase (Decrease) Changes in Assumptions for Pension Benefits Discount Rate: 1% increase $ (22,803) $ (1,455) 1% decrease 27,464 2,391 Expected Long-Term Return on Plan Assets: 1% increase — (2,358) 1% decrease — 2,357 Changes in Assumptions for Other Postretirement Benefits Discount Rate: 1% increase (1,459) (104) 1% decrease 1,695 130 Healthcare Cost Trend Rate: 1% increase 110 33 1% decrease (102) (31) 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 2025 Projected Benefit Obligation Increase (Decrease) Effect on 2026 Annual Expense Increase (Decrease) Changes in Assumptions for Pension Benefits Discount Rate: 1% increase $ (18,193) $ (753) 1% decrease 22,062 2,214 Expected Long-Term Return on Plan Assets: 1% increase — (1,850) 1% decrease — 1,850 Changes in Assumptions for Other Postretirement Benefits Discount Rate: 1% increase (1,316) (95) 1% decrease 1,529 132 Healthcare Cost Trend Rate: 1% increase 22 8 1% decrease (19) (10) 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.
Capital Allocation Our capital allocation strategy focuses on four strategic priorities: • Strengthening and investing for growth in our leaf tobacco business; • Increasing our strong dividend; • Exploring growth opportunities for our plant-based ingredients platform; and • Returning excess capital through share repurchases. 27 We have been positioning our company for the future by investing in and growing our Universal Ingredients platform, while leveraging our position as the leading global leaf tobacco supplier to maximize opportunities in the leaf tobacco business.
Capital Allocation Our capital allocation strategy focuses on four strategic priorities: • Strengthening and investing for growth in our leaf tobacco business; • Increasing our strong dividend; • Exploring growth opportunities for our plant-based ingredients business; and • Returning excess capital through share repurchases.
Based on our periodic earnings forecasts, we project the upcoming year’s taxable income to help us evaluate our ability to realize deferred tax assets. For additional disclosures on income taxes, see Notes 1 and 6 to the consolidated financial statements in Item 8.
Based on our periodic earnings forecasts, we project the upcoming year’s taxable income to help us evaluate our ability to realize deferred tax assets.
During fiscal year 2024, we purchased 100,000 shares of common stock at an aggregate cost of $4.7 million (average price per share $47.44). At March 31, 2024, our available authorization under our current share repurchase program was $95.3 million, and approximately 24.6 million common shares were outstanding.
We did not repurchase any shares of common stock in fiscal year 2025. At March 31, 2025, our available authorization under our current share repurchase program was $100 million, and approximately 24.7 million common shares were outstanding.
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, 2024. 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, 2025.
Based on this quantitative assessment, the Company determined there was no impairment of goodwill for any of its reporting units as of March 31, 2024. 30 In fiscal year 2023, as permitted under ASC 350, we elected to base our initial assessment of potential impairment on qualitative factors.
Based on this quantitative assessment, the Company determined there was no impairment of goodwill for any of its reporting units as of March 31, 2024.
At each reporting period, we must make estimates and assumptions in determining the valuation allowance for advances to farmers. At March 31, 2024, the gross 29 balance of advances to tobacco suppliers totaled approximately $162 million, and the related valuation allowance totaled approximately $20 million.
At each reporting period, we must make estimates and assumptions in determining the valuation allowance for advances to farmers.
In some cases, proposed legislation seeks to significantly increase existing taxes on tobacco products or impose new taxes on products that have not been subject to tax (e.g. ENDS products and liquid nicotine). Increases in product taxation may reduce the affordability of, and demand for, tobacco products, which will affect requirements for leaf tobacco by tobacco product manufacturers.
Further legislation proposing new or increased taxes on tobacco products is likely to continue. In some cases, proposed legislation seeks to significantly increase existing taxes on tobacco products or impose new taxes on products that have not been subject to tax (e.g., ENDS products and liquid nicotine).
Recoverable Value-Added Tax Credits In many foreign countries, we pay significant amounts of value-added tax (“VAT”) on purchases of unprocessed and processed tobacco, crop inputs, packing materials, and various other goods and services. In some countries, VAT is a national tax, and in other countries it is assessed at the state level.
At March 31, 2025, the gross balance of advances to tobacco suppliers totaled approximately $189 million, and the related valuation allowance totaled approximately $18 million. 31 Recoverable Value-Added Tax Credits In many foreign countries, we pay significant amounts of value-added tax (“VAT”) on purchases of unprocessed and processed tobacco, crop inputs, packing materials, and various other goods and services.
Net debt increased by $245.4 million to $996.2 million during the fiscal year ended March 31, 2024. The increase reflects higher working capital requirements. Net debt as a percentage of net capitalization was approximately 41% at March 31, 2024, up from 35% at March 31, 2023.
Net debt decreased by $179.6 million to $816.6 million during the fiscal year ended March 31, 2025. The decrease in net debt reflects lower working capital requirements. Net debt as a percentage of net capitalization was 36% at March 31, 2025, down from 41% at March 31, 2024.
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.
As part of this regulatory scheme, the FDA approved the first “heat-not-burn”, “very-low nicotine cigarette”, “electronic nicotine delivery system”, and “nicotine pouch” premarket tobacco applications to permit the sale of these products within the United States.
Global burley tobacco production at about 430 million kilos in fiscal year 2024, also increased compared to the burley crops grown in our fiscal year 2023. Flue-cured tobacco production grown outside of China is projected to decrease by about 5%, and the global burley tobacco crop is projected to increase by about 3% in fiscal year 2025.
Flue-cured tobacco production grown outside of China is projected to increase by about 20%, and the global burley tobacco crop is projected to increase by about 35% in fiscal year 2026.
It is also expected that if these bans are adopted, they will be challenged in the legal system so it is not possible at this time to predict when and if these bans will become effective.
It is also expected that should this ban be adopted, it would be challenged in the legal system making it difficult to predict when and if this proposed rule would become effective.
Regardless of the type, it is generally understood that most novel products on the market contain less leaf tobacco than combustible cigarettes. Therefore, the market-driven rise of novel products alongside a regulatory scheme designed to facilitate an adult tobacco consumer’s switch from combustible cigarettes could affect global leaf demand.
Therefore, the market-driven rise of novel products alongside a regulatory scheme designed to facilitate an adult tobacco consumer’s switch from combustible cigarettes could affect global leaf demand. It is presently difficult to predict whether this will result in a decrease or an increase in requirements for leaf tobacco production in the long or short terms.
While this is not a new trend, it continues to offer us opportunities as we bring supply chain efficiencies to the leaf markets.
Focus on Cost Management Manufacturers naturally seek to mitigate raw materials cost increases, and they place increased emphasis on cost containment as they address declining demand. While this is not a new trend, it continues to offer us opportunities as we bring supply chain efficiencies to the leaf markets.
If our estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could 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. Goodwill A majority of our consolidated goodwill balance relates to our reporting unit in Brazil and the acquisitions of FruitSmart, Silva, and Universal Ingredients–Shank’s.
As permitted under Accounting Standards Codification Topic 350 (“ASC 350”), at March 31, 2024, we utilized a quantitative assessment to evaluate goodwill for impairment. The quantitative goodwill assessment consists of comparing the fair value of each reporting unit to the carrying value of that reporting unit.
The Company elected to bypass the qualitative assessment and perform a quantitative assessment of goodwill impairment at March 31, 2024. The quantitative goodwill assessment consists of comparing the fair value of each reporting unit to the carrying value of that reporting unit.

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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 changeIn addition, we periodically enter into forward contracts to hedge balance sheet exposures. See Note 11 to the consolidated financial statements in Item 8 for additional information about our hedging activities. In certain tobacco markets that are primarily domestic, we use the local currency as the functional currency. Examples of these markets are Poland and the Philippines.
Biggest changeWe have entered forward currency exchange contracts to hedge against the effects of currency movements on purchases of tobacco to reduce the volatility of costs. In addition, we periodically enter into forward contracts to hedge balance sheet exposures. See Note 11 to the consolidated financial statements in Item 8 for additional information about our hedging activities.
We do not utilize derivatives for speculative purposes, and we do not enter into market risk-sensitive instruments for trading purposes. Derivatives are transaction-specific so that a specific debt instrument, forecast purchase, contract, or invoice determines the amount, maturity, and other specifics of the hedge. We routinely review counterparty risk as part of our derivative program. 40
We do not utilize derivatives for speculative purposes, and we do not enter into market risk-sensitive instruments for trading purposes. Derivatives are transaction-specific so that a specific debt instrument, forecast purchase, contract, or invoice determines the amount, maturity, and other specifics of the hedge. We routinely review counterparty risk as part of our derivative program. 42
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, 2024 measurement date, a 1% decrease in the discount rate would have increased the projected benefit obligation (“PBO”) for pensions by $27 million and increased annual pension expense by $2 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, 2025 measurement date, a 1% decrease in the discount rate would have increased the projected benefit obligation (“PBO”) for pensions by $22 million and increased annual pension expense by $2 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.
Conversely, a 1% increase in the discount rate would have reduced the PBO by $18 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 $5.1 million and $19.0 million in fiscal years 2024 and 2022, respectively, and net remeasurement gains of $3.9 million in fiscal year 2023.
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 $6.1 million and $5.1 million in fiscal years 2025 and 2024, respectively, and net remeasurement gains of $3.9 million in fiscal year 2023.
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 $727 million at March 31, 2024.
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 $765 million at March 31, 2025.
Hedging Risk Hedging interest rate exposure using swaps and hedging foreign currency exchange rate exposure using forward contracts are specifically contemplated to manage risk in keeping with management's policies.
In each case, reported earnings are affected by the translation of the local currency into the U.S. dollar. Hedging Risk Hedging interest rate exposure using swaps and hedging foreign currency exchange rate exposure using forward contracts are specifically contemplated to manage risk in keeping with management’s policies.
In other markets, such as Western Europe, where export sales are primarily in local currencies, we also use the local currency as the functional currency. In each case, reported earnings are affected by the translation of the local currency into the U.S. dollar.
In certain tobacco markets that are primarily domestic, we use the local currency as the functional currency. Examples of these markets are Poland and the Philippines. In other markets, such as Western Europe, where export sales are primarily in local currencies, we also use the local currency as the functional currency.
We recognized net foreign currency transaction losses of $3.2 million and $8.8 million in fiscal years 2024 and 2023, respectively, and net foreign currency transaction gains of $18.0 million in fiscal year 2022.
We recognized net foreign currency transaction losses of $2.2 million, $3.2 million, and $8.8 million in fiscal years 2025, 2024, and 2023, respectively. In addition to foreign exchange gains and losses, we are exposed to changes in the cost of tobacco due to changes in the value of the local currency in relation to the U.S. dollar.
Removed
In addition to foreign exchange gains and losses, we are exposed to changes in the cost of tobacco due to changes in the value of the local currency in relation to the U.S. dollar. We have entered forward currency exchange contracts to hedge against the effects of currency movements on purchases of tobacco to reduce the volatility of costs.

Other UVV 10-K year-over-year comparisons