Standard Commercial (NYSE:STW)
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Standard Commercial Corporation Announces Earnings
WILSON, N.C., Nov. 8 /PRNewswire-FirstCall/ -- Standard Commercial Corporation
(NYSE:STW) today reported income from continuing operations for the quarter and
six months period ending September 30, 2004 was $5.1 million and $2.9 million,
respectively, versus $10.8 million and $20.6 million for the respective prior
year periods. As previously disclosed, the Company discontinued its tobacco
operations in Italy during the September 30, 2004 quarter. Net loss including
discontinued operations was $20.1 million and $25.0 million for the quarter and
six months period ended September 30, 2004 versus $14.3 million and $7.7
million, respectively, in the prior year.
Robert E. Harrison, Chairman and Chief Executive Officer said, "Despite the
strong gain in volume shipped compared to last year, this quarter suffered due
to the mix of tobaccos that was sold. Shipping delays in Africa and certain
oriental markets significantly impacted profitability. Indications are for a
more normalized shipping pattern for the balance of the year. As we have said
before, the weather and our customers influence shipping schedules and as such,
quarter-to-quarter comparisons can be distorted. We continue to concentrate on
refocusing our business for the future by eliminating unprofitable operations
as previously discussed regarding our Italian tobacco operation. We expect the
disposal of our remaining wool units to be complete by the end of the fiscal
year."
"Supply and demand remain relatively balanced, however, the large crops in
Brazil and Malawi might negatively impact trading conditions for uncommitted
inventory. Due to this uncertainty, combined with higher inventory holding
costs caused by shipping delays and the $2.4 million after tax charge relating
to the EU statement of objections fine recorded in this quarter, we are
revising our guidance for our full year diluted earnings per share from
continuing operations to approximately $1.60 per share."
Comparison of the quarter ended September 30, 2004 to the quarter ended
September 30, 2003
Sales. Sales for the three months ended September 30, 2004 increased by 24.4%
to $233.4 million from $187.6 million in the prior year period. The volume of
tobacco sold during the current quarter increased by 21.8% over the prior year
quarter. This was mainly due to increased shipments from Brazil, India, Russia,
Turkey, Zimbabwe and Spain. Shipments from Thailand were lower during the
current quarter due to delayed customer delivery schedules. In addition, we
exited the Greek and Honduran markets during the prior year quarter.
Gross Profit. Gross profit for the quarter ended September 30, 2004 was $33.0
million versus $34.6 million in the prior year period. Gross margins were down
from 18.5% to 14.1% primarily due to higher tobacco and operating costs in
Zimbabwe, India, China, Thailand and Argentina and sales mix in our African
operations.
Selling, General and Administrative Expenses. SG&A expenses for the quarter
were higher by $4.3 million. This was mainly due to a charge of $2.4 million
accrued for fines relating to European Commission investigation in Spain and an
increase in legal and professional expenses of $1.1 million related to this and
other matters.
Interest Expense. Interest expense for the current quarter was higher by $1.3
million due to both increased average borrowings and higher average interest
rates.
Income taxes. Income tax charges or credits as a percentage of pretax income
can vary due to differences in tax rates and relief available in areas where
profits are earned or losses are incurred. As a result, the effective tax rate
for the quarter was 30% versus 27% for the prior year quarter.
Loss from Discontinued Operations. The tobacco operating loss for the three
months to September 30, 2004 was $8.3 million versus a profit of $3.4 million
in the prior year quarter. The charge recorded in the current quarter for the
discontinued tobacco operation was $14.8 million. The wool operating loss for
the quarter was $2.1 million versus $2.0 million in the prior year period. The
charge recorded in the prior year quarter to discontinue the wool operation was
$26.6 million. The basic loss per share for the discontinued operations for the
quarter was $1.84, the same as the prior year period.
Comparison of the six months ended September 30, 2004 to the six months ended
September 30, 2003
Sales. Sales for the six months ended September 30, 2004 increased by 15.2% to
$405.9 million from $352.3 million in the prior year period. The volume of
tobacco sold during the current six months increased by 12.4% over the prior
year period. This was mainly due to increased shipments from Brazil, India,
Russia, Turkey and Spain. Shipments from Thailand and Malawi were lower during
the current six months due to delayed customer delivery schedules and a
shortage of containers used for shipping tobacco in Malawi. As previously
stated, we exited Greece and Honduras in the prior year.
Gross Profit. Gross profit for the six months ended September 30, 2004 was
$53.4 million versus $67.7 million in the prior year period. Gross margins
were down from 19.2% to 13.2% primarily due to higher tobacco and operating
costs in Brazil, Zimbabwe, India, China, Thailand, Argentina and Turkey.
Selling, General and Administrative Expenses. SG&A expenses for the current
six months were higher by $8.1 million. This was mainly due to a charge of
$2.4 million accrued for fines relating to European Commission investigation in
Spain, increase in legal and professional expenses of $1.5 million related to
this and other matters, increases in compensation expense of $0.9 million,
higher communication and rental expense of $0.8 million and other normal
inflationary increases.
Interest Expense. Interest expense for the current six months was higher by
$3.9 million due to increased borrowings and higher interest rates, as well as
payment of $1.0 million for the May 2004 early retirement of the 8-7/8% senior
note issue.
Income taxes. Income tax charges or credits as a percentage of pretax income
can vary due to differences in tax rates and relief available in areas where
profits are earned or losses are incurred. The effective tax rate for the six
months was 17% versus 32% for the prior year period.
Loss from Discontinued Operations. The operating loss for discontinued tobacco
operations for the six months to September 30, 2004 was $10.0 million versus a
profit of $2.6 million in the prior year period. The charge recorded in the
current six months for the discontinued tobacco operation was $14.8 million.
The wool operating loss for the current six months was $3.2 million versus $4.2
million in the prior year period. The charge recorded in the prior year period
to discontinue the wool operation was $26.6 million. The basic loss per share
for the discontinued operations for the six months was $2.04 versus $2.08 in
the prior year period.
Readers of this news release should note that comments contained herein that
are not purely statements of historical fact may be deemed to be
forward-looking. Any such forward-looking statement is based upon management's
current knowledge and assumptions about future events. The Company's actual
results could vary materially from those expected due to many factors, many of
which the Company cannot control. These include changes in demand for and
supply of leaf tobacco and wool, weather and shipping schedules, changes in
general economic conditions, political and terrorist risks and changes in
government regulations. Additional information on factors that may affect
management's expectations or Standard Commercial's financial results can be
found in the Company's filings with the Securities and Exchange Commission.
STANDARD COMMERCIAL is an independent leaf tobacco dealer and operates in over
thirty countries.
NOTE: Robert E. Harrison, Standard's Chairman, President & CEO, will host an
AT&T teleconference to go over this announcement and answer questions at 8:30am
EST on Tuesday, November 9, 2004. U.S. investors may participate by dialing
(866) 205-3921. Participants outside the U.S. should dial (612) 332-0634.
Playback available November 9, through November 16. For playback in the U.S.
dial (800) 475-6701; outside the U.S., dial (320) 365-3844. The playback
access code will be 754513.
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In thousands, except per share data; unaudited)
Second quarter ended Six months ended
September 30 September 30
2004 2003* 2004 2003*
Sales $233,390 $187,561 $405,868 $352,344
Cost of sales
- materials, services
and supplies 197,634 150,493 346,630 279,798
- interest 2,763 2,463 5,808 4,846
Gross Profit 32,993 34,605 53,430 67,700
Selling, general and
administrative expenses 23,923 19,655 45,378 37,311
Other interest expense 2,508 1,231 6,183 2,329
Other income (expense) - net 375 587 788 997
Income (loss) before taxes 6,937 14,306 2,657 29,057
Income tax benefit (expense) (2,053) (3,918) (458) (9,189)
Income (loss) after taxes 4,884 10,388 2,199 19,868
Minority interests 64 71 331 139
Equity in earnings of affiliates 150 367 400 567
Income from continuing operations 5,098 10,826 2,930 20,574
Loss from discontinued operations,
net of income tax benefit (charge)
of $66 and $353 three months to
Sept 30, 2004 and 2003; $(42) and
$965 six months to Sept 30, 2004
and 2003 (25,237) (25,135) (27,918) (28,271)
Net income (loss) (20,139) (14,309) (24,988) (7,697)
Retained earnings at beginning
of period 143,383 173,256 149,428 167,495
Common stock dividends (1,201) (1,192) (2,397) (2,043)
Retained earnings at end of
period $122,043 $157,755 $122,043 $157,755
Earnings (loss) per common share
Basic:
From continuing operations $0.37 $0.79 $0.21 $1.52
From discontinued operations (1.84) (1.84) (2.04) (2.08)
Net $(1.47) $(1.05) $(1.83) $(0.56)
Average shares outstanding 13,709 13,619 13,693 13,578
Diluted:
From continuing operations $0.37 $0.75 $0.21 $1.43
From discontinued operations (1.84) (1.65) (2.03) (1.86)
Net $(1.47) $(0.90) $(1.82) $(0.43)
Average shares outstanding 13,733 15,222 13,716 15,174
Dividend declared per
common share $0.0875 $0.0875 $0.175 $0.15
*Certain amounts reclassified to comply with the current period
presentation as a result of discontinuing the Italian tobacco operations.
DATASOURCE: Standard Commercial Corporation
CONTACT: Timothy S. Price of Standard Commercial Corporation,
+1-252-291-5507
Web site: http://www.sccgroup.com/