Universal Corp
NYSE:UVV
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Ladies and gentlemen, thank you for standing by, and welcome to Universal Corporation First Quarter Fiscal Year 2021 Earnings Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the call over to your speaker today, Ms. Candace Formacek, Vice President and Treasurer. Please go ahead.
Thank you, Grace, and thank you all for joining us. George Freeman, our Chairman, President and CEO; Airton Hentschke, our Chief Operating Officer; and Johan Kroner, our Chief Financial Officer, are here with me today and will join me in answering questions after these brief remarks.
This call is being webcast live and will be available on our website and on telephone taped replay. It will remain on our website through November 5, 2020. Other than the replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. This call is copyrighted and may not be used without our permission.
Before I begin to discuss our results, I caution you that we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future and are representative as of today only. Actual results could differ materially from projected or estimated results, and we assume no obligation to update any forward-looking statements. This is a particular note during the current ongoing COVID-19 pandemic when the length and severity of the crisis and resultant economic and business impacts are so difficult to predict. For information on some of the factors that can affect our estimates, I urge you to read our 10-K for the year ended March 31, 2020, and the Form 10-Q for the most recently ended fiscal quarter. Such risks and uncertainties include, but are not limited to, the ongoing COVID-19 pandemic, customer-mandated timing of shipments, weather conditions, political and economic environment, government regulation and taxation, changes in exchange rates and interest rates, industry consolidation and evolution and changes in market structure or sources.
Finally, some of the information I have for you today is based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may include non-GAAP financial measures. For details on these measures, including reconciliations to the most comparable GAAP measures, please refer to our current earnings press release.
Our fiscal year 2021 is off to a slow but respectable start as nearly all of our origins continue to make good progress in moving through their various tobacco growing and processing activities. The first fiscal quarter is generally the weakest of our fiscal year given seasonal timing. This fiscal year, as a result of the COVID-19 pandemic, or COVID, we are also experiencing later openings of the tobacco buying seasons and slower processing due to social distancing and other local government safety requirements. We’ve also had some slower receipts of customer shipping instructions and orders. However, to date, we have not seen a material impact to our supply chain or seasonal planting or harvesting requirements.
Despite COVID-related slowdowns, tobacco volumes in the first quarter of fiscal year 2021 exceeded those of the first quarter of fiscal year 2020. Volumes shipped out of Brazil in the quarter ended June 30, 2020, included inventory that had been uncommitted at March 31, 2020, reducing our overall uncommitted inventory levels. As of June 30, 2020, our uncommitted inventory levels had declined significantly from fiscal year-end 2020 levels and at 20.5% are now just outside our target range. A large portion of the shipped Brazilian volume, however, was lower-margin carryover crop, which impacted results for the quarter.
Results for the quarter ended June 30, 2020, were also impacted by several nonrecurring items, including an adjustment to a contingent consideration for the acquisition of FruitSmart, interest expense associated with the disputed foreign tax matter and an income tax benefit from issuance of final tax regulations for dividends paid by foreign subsidiaries.
Turning to the details. Reported net income was $7.3 million or $0.29 per diluted share for the first quarter of fiscal year 2021, which ended on June 30, 2020. Those results were up $5.2 million compared with net income of $2.1 million or $0.08 per diluted share for the first quarter of fiscal year 2020. Excluding certain nonrecurring items detailed in Other Items in today’s earnings release, net income and diluted earnings per share declined by $4.3 million and $0.17, respectively, for the quarter ended June 30, 2020, compared to the prior fiscal year.
Operating income of $8.5 million for the quarter ended June 30, 2020 increased by $1 million, compared to operating income of $7.5 million for the quarter ended June 30, 2019. Revenues $315.8 million for the quarter ended June 30, 2020, increased by $18.9 million or 6% on higher total sales volumes, offset in part by lower sales and leaf prices as well as a less favorable mix. In the regions, the other regions segment operating loss of $4.3 million for the quarter ended June 30, 2020 was $0.5 million greater than prior year’s first quarter operating loss of $3.8 million. Although volumes in Brazil increased in the first quarter of fiscal year 2021 compared to the prior year, a large portion of the sales consisted of previously uncommitted inventories of lower-margin carryover crop tobacco.
In addition, some volumes in Brazil that were expected to be shipped in the quarter were delayed on limited vessel availability at the port due to COVID pandemic. For the first quarter of fiscal year 2021, compared to the same quarter in the prior fiscal year, lower results in Brazil were partially offset by increases in Asia, largely due to higher volumes in the Philippines and higher volumes in Africa on carryover crop shipments delayed into the first quarter of fiscal 2021.
Operating income for the North America segment for the quarter ended June 30, 2020 of $1 million was flat compared to the first quarter of the prior fiscal year as higher carryover volumes from the United States and lower expenses in Mexico due to timing offset lower processing volumes in Guatemala, partly due to delays resulting from COVID restrictions. The other tobacco operations segment operating income of $7.6 million for the quarter ended June 30, 2020 declined compared to operating income of $10.5 million for this segment in the same period last year.
Results from our dark tobacco operations were lower on reduced volumes in part due to delays from COVID and lower costs in the prior year. In the first quarter of fiscal year 2021, results for the Oriental joint venture were flat, while operating income for the segment benefited from the acquisition in January 2020 at FruitSmart, our new fruit and vegetable processing business compared to the same quarter of last year.
And other items, the interest expense for the quarter ended June 30, 2020 increased by $2.8 million to $6.8 million compared with the same quarter in the prior year, largely on a non-recurring interest expense item associated with an uncertain tax matter at a foreign subsidiary. Selling, general and administrative costs for the first quarter of fiscal year 2021 decreased by $1.7 million compared to the same period in the prior year, as benefits from positive net foreign currency remeasurement and exchange variances, primarily in Indonesia and lower travel costs were offset, in part, by selling, general and administrative costs for the FruitSmart business acquired in the fourth quarter of fiscal year 2020.
Looking forward, we have seen some reductions in projected global crop sizes for both burley and flue-cured tobaccos for crop year 2020. We believe that these reflect a positive adjustment to market conditions and that Burley tobacco remains in a balanced supply position and that flue-cured tobacco is now in a slight oversupply position. We are also continuing to see very strong demand for natural wrapper tobaccos.
We are prudently monitoring COVID developments around the world and are projecting that our sales volumes for fiscal year 2021 will be weighted to the back half of the fiscal year, in part, due to COVID related processing slowdowns and later customer mandated shipment timing. We also have experienced some increased volatility in foreign currency rates, which we believe is related to the uncertainties from COVID.
We are proud of the success we continue to achieve while operating safely in more than 30 countries around the world, during a time of unprecedented and disparate challenges. We believe our commitment to strong local management is our key – in our key operating areas has enabled us to react quickly and effectively to these new conditions. Our business is also built on relationships. Having these strong relationships with our customers and suppliers has allowed us to make the new remote interactions work well.
We’re thankful for the hard work of our employees and the continued support of our customers, growers, and other partners, during these challenging times. As we move forward in fiscal year 2021, we are focused on keeping our employees safe and running our business efficiently, while positioning both our tobacco and non-tobacco businesses for future success. As part of our capital allocation strategy, we have made and will continue to explore disciplined investments in both tobacco opportunities, and non-tobacco businesses that we believe will be able to deliver shareholder value.
At this time, we are available to take your questions. I turn the call back to you, Grace. Thank you.
Thank you. [Operator Instructions] Presenters, there are no questions at this time. You may proceed.
Okay. Thank you very much, Grace, and thank you all for joining us on our call today. Goodbye.
Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining. You may now all disconnect.