UVV 10-K & 10-Q changes, risk factors and insider trading

The risks and uncertainties described below are those that we currently believe could materially adversely affect us. Other risks and uncertainties that we do not presently consider to be material or of which we are not presently aware may become important factors that affect us in the future. If any of the risks discussed below actually occur, our business, financial condition, operating resultsresults, or cash flows could be materially adversely affected. Accordingly, you should carefully consider the following risk factors, as well as other information contained in or incorporated by reference in this Annual Report.

•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

Additionally, the recent armed conflict involving Iran and related regional hostilities have contributed to heightened volatility and increases in logistical and supply chain costs, including fertilizer prices and fuel costs. While we try to mitigate some or all cost increases in the supply chain, we may not be successful in sufficiently mitigating the impacts of cost increases and may be required to absorb the cost increases. To the extent that price increases are not sufficient to offset the cost increasesincreases, 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.

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 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. 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. However, technology is increasingly complex and cyber-attacks are increasingly sophisticated and frequent. For example, the rapid evolution and increased adoption of AI technologies may intensify cybersecurity risks for us and our service providers, key suppliers, and customers. Bad actors use increasingly advanced methods, including AI-enabled social engineering and deepfakes, automated credential‑stuffing, and other techniques, to attempt to compromise systems and to steal or misuse personal information, confidential information and intellectual property. 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.

We have invested and expect to continue to invest in technology security initiatives, information technology risk management, and disaster recovery plans. As we adopt and integrate emerging technologies, we invest in protective capabilities and monitoring to address the new risks those technologies may create and the ways they may change our threat landscape. The cost and operational consequences of implementing, maintaining, and enhancing further data or system protection measures could increase significantly to overcome increasingly frequent, complex, and sophisticated cyber threats. Our efforts to deter, identify, mitigate, or eliminate future cyber threats could require us to incur significant additional expense and may not be successful.

Our operations depend in part on our ability to attract, train, motivatemotivate, and retain qualified employees, many of whom are seasonal employees. We seek to manage seasonal wages and the timing of the hiring process to have the appropriate workforce in place for peak and low seasons. Many of our operations are located in rural communities that may not have sufficient labor pools. If we are unable to hire sufficient personnel or successfully manage our seasonal workforce needs, we may not be able to meet our operational needs, which could have a material adverse effect on our financial results.

Epidemics, pandemicspandemics, 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, pandemicspandemics, or similar public health concerns could cause a widespread health crisis and significantly disrupt the U.S. and global economies, marketsmarkets, and supply chains. The ultimate impact of any future pandemic or disease outbreak on our business, financial condition, results of operationsoperations, and the demand for our products and services in the future is uncertain, and it is impossible to predict whether any impacts we have experienced to date would continue or worsen in the future. The 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. 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. These effects could include a negative impact on the availability of our employees, temporary closures of our facilities or the facilities of our business partners, customers, suppliers, third-party service providers or other vendors, and the interruption of domestic and global supply chains, distribution channels, liquidityliquidity, and capital markets. While we have business continuity plans and other safeguards in place to mitigate the results of adverse public health developments in the countries where we operate, the business continuity plans and safeguards may not be effective to mitigate the results of epidemics, pandemics, or similar widespread health concerns.

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. While the U.S. is a signatory of the FCTC, it is not currently a party to the agreement, as the agreement has not been submitted to, or ratified by, the U.S. Senate. The Conference of the Parties (“COP”),Parties, 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. It is not possible to predict how the signatories to the FCTC may choose to fulfill their obligations or the manner or the pace with which they may implement the FCTC articles, and they may take actions that could restrict or prohibit tobacco usage that could materially affect our business and our results of operations.

Certain recommendations by the WHO, through the FCTC, could also cause shifts in customer usage of certain styles of tobacco. InThe countriesFCTC, national governments, and regional blocs, 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. The FCTC and national governments have also discussed formulating a strategystrategies to place limitations on the level of nicotine allowed in tobacco and tobacco smoke.smoke and eliminate certain ingredients from the manufacturing process for tobacco products. Such decisions could cause a change in requirements for certain styles of tobacco in particular countries. Shifts in customer demand from one type of tobacco to another could create sourcing challenges as requirements move from one origin to another.

Regulations impacting our customers that change the requirements for leaf tobacco or restrict their ability to sell their products would inherently impact our business. We have established programs that begin at the farm level to assist our customers’ collection of raw material information to support leaf traceability and customer testing requirements, including the identification of nicotine levels. Additionally, given our global presence, we also can source different types and styles of tobacco for our customers should their needs change due to regulation. Despite our programs, the extent to which governmental actions will impact our business, financial condition, results of operationsoperations, and demand for our products and services will depend on future developments, which are highly uncertain and cannot be predicted.

Governments, the non-governmental community, and industry increasingly understand the importance of implementing comprehensive environmental, labor, and governance practices. Our commitment to sustainability remains at the core of our business, and we continue to implement what we believe are responsible sustainability practices. GovernmentIncreased government regulations, however, could result in new or more stringent forms of sustainability oversight and disclosures. 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 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. 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.

We operate globally and are subject to the tax laws of multiple jurisdictions in the United States and abroad. 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. 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 OrganizationOrganisation for Economic Co-operation and DevelopmentDevelopment. (theBased “OECD”).on Forour thosecurrent jurisdictionsanalysis, thatwe haveanticipate legislationsome exposure to a global minimum tax under Pillar Two, with antransitional effectivesafe-harbor enactmentprovisions date of January 1, 2024, these rules apply beginning withlimiting the currentimpact fiscalin reportingcertain year. We continue to evaluate, interpret, and apply the new rules and will review any subsequent changes that may be retroactive.jurisdictions. We will continue to monitor potential and enacted tax changes in the jurisdictions in which we operate. The impact of the changes in tax rules and regulations could have a material adverse effect on our effective tax rate.

We sponsor domestic defined benefit pension plans that cover certain eligible employees. Our results of operations may be positively or negatively affected by the amount of expense we record for these plans. U.S. generally accepted accounting principles (“GAAP”) require that we calculate expense for the plans using actuarial valuations. These valuations reflect assumptions about financial market and other economic conditions that may change based on changes in key economic indicators. The most significant year-end assumptions we used to estimate pension expense for fiscal year 20252026 were the discount rate, the expected long-term rate of return on plan assets, and the mortality rates. In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to shareholders’ equity through a reduction or increase to the “Pension and other postretirement benefit plans” component of Accumulated Other Comprehensive Loss. At the end of fiscal year 2025,2026, the projected benefit obligation (“PBO”) of our qualified U.S. pension plan was approximately $150 million and plan assets were approximately $160 million. Although GAAP expense and pension funding contributions are not directly related, key economic factors that affect GAAP expense can also affect the amount of cash we are required to contribute to our pension plans under requirements of the Employee Retirement Income Security Act (“ERISA”). Failure to achieve expected returns on plan assets could also result in an increase in the amount of cash we would be required to contribute to our pension plans. In order to maintain or improve the funded status of our plans, we may also choose to contribute more cash to our plans than required by ERISA regulations.

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. With operations in over 30 countries on five continents, we believe we are uniquely positioned to leverage our worldwide network to access a diverse, reliable supply of plant-based materials. This presence, combined with our supply chain expertise, integrated processing capabilities, and commitment to sustainability, enables us to deliver high-quality, customizable, and traceable value-added agriproducts essential to our customers’ success. We operate in two segments: Tobacco Operations and Ingredients Operations. Our Tobacco Operations 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, through the Universal Ingredients platform, produces and supplies a broad portfolio of products, including fruit and vegetable juices and concentrates, purees, dehydrated products, botanical extracts, flavorings, colorings, and other customized, value-added ingredient solutions to the food and beverage industry.

Selling, general, and administrative expenses were down by 2%, or $5.3$4.6 million, on $12.2$8.8 million of higherlower recoveriessales ofcommissions, farmer advances, the absence of $4.8 million in costs related to the settlement of a value-added tax settlement program in fiscal year 2024, and $3.5$5.1 million of lower compensation costs, and $3.5 million of favorable foreign currency comparisons, offset in part by $8.2$4.3 million of lower recoveries on advances to suppliers and $2.0 million of higher legalcustomer and professional fees and $7.2 million of higher sales commissions.claims.

Adjusted operating income was updown by 6%,13%, or $13.1$32.0 million, in fiscal year 2025,2026, compared to fiscal year 2024,2025, largely on strong performance in the Tobaccoinventory Operationswrite-downs. and Ingredients Operations segments. Adjusted netNet income attributable to Universal Corporation was down by 9%,66%, or $10.8$62.4 million, for fiscal year 2025,2026, compared to fiscal year 2024,2025, primarily on athe $14.1non-cash, milliongoodwill pensionimpairment settlement changecharge and a $13.4 millionthe increase in interestinventory expense on higher average debt balances, offset in part by $8.3 million in increased equity in pretax earnings from unconsolidated affiliates.write-downs.

Cost of goods sold increased by 8%,1%, or $186.2$13.8 million, in fiscal year 2025,2026, compared to fiscal year 2024,2025, largely on higher tobacco prices and a $10.5$32.2 million increase in inventory write-downs.write-downs partially offset by lower tobacco prices.

A non-cash, goodwill impairment charge of $41.1 million was recognized in fiscal year 2026. Restructuring and impairment costs of $10.6 million in fiscal year 2025 were related to the previously announced consolidation of the Company’s European tobacco sheet operations.

The consolidated effective tax rate for fiscal year 2026 was 45.5%. The consolidated effective tax rate for fiscal year 2025 was 26.6%. The consolidated effective tax rate for fiscal year 2024 was 19%. The consolidated effective tax rate for fiscal year 20252026 was higher than the consolidated tax rate for fiscal year 20242025 due to various factors, including the mix and timing of domestic and foreign earnings, discrete items,items including increased withholding taxes on undistributed earnings in Brazil, and the effecttax deductibility of exchangecertain rate changes on taxes coupled with an minimal income tax benefit associated with the restructuring and impairment costs recognized for the consolidation of the sheet operations in fiscal year 2025.items.

(21) Restructuring and impairment costs are included in consolidatedConsolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income availableattributable to Universal Corporation, and Adjusted diluted earnings per share. SeeThe Notethree 3months forended additionalMarch information.31, 2026, included a $41.1 impairment charge to write-off the full amount of goodwill associated with Shank's, a component of the Ingredients Operations segment.

In fiscal year 2025,2026, our liquidity was sufficient to meet our needs. We continued our financial policies and disciplines and returned funds to shareholders. DueOur working capital requirements were higher in fiscal year 2026, compared to marketfiscal conditionsyear in2025. Brazil, we made the strategic decision in the quarter ended March 31, 2024, to accelerate tobacco purchases there. Therefore, some of ourSome working capital investments for the Brazil crop that typically would have been madeexpected in our fiscal year 2025,2025 were made in our fiscal year 2024,2024 reducingdue requiredto market conditions, which reduced working capital requirements in fiscal year 2025.

Our liquidity and capital resource requirements are predominately short-term in nature and primarily relate to working capital for tobacco crop purchases, and our primary sources of liquidity are net cash flows provided by operating activities andactivities, our committed revolving credit facility.facility, and short-term, uncommitted credit lines. Working capital needs for tobacco crop purchases are seasonal within each geographic region. The geographic dispersion and the timing of working capital needs permit us to anticipate our general level of cash requirements, although tobacco crop size,sizes, prices paid to farmers, shipment and delivery timing, and currency fluctuations affect requirements each year. Peak working capital requirements are generally reached during the first and second fiscal quarters. Each tobacco production region follows a cycle of buying, processing, and shipping tobacco, and in many regionsregions, we also provide agricultural materials to tobacco farmers during the growing season. The timing of the elements of each cycle is influenced by such factors as local weather conditions and individual customer shipping requirements, which may change the level or the duration of tobacco crop financing. In contrast to our Tobacco Operations, working capital requirements for our Ingredients Operations tend to be lower and less seasonal. Despite a predominance of short-term needs for working capital, we maintain a portion of our total debt as long-term to reduce liquidity risk. We also periodically may have large cash balances that we utilize to meet our working capital requirements.

We believe that our financial resources are adequate to support our 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. The funding required can vary significantly depending upon such factors as crop sizes, the price of leaf,leaf tobacco, the relative strength of the U.S. dollar, and the timing of shipments and customer payments. We deal with this uncertainty by maintaining substantial credit lines and cash balances. In addition to our operating requirements for working capital, we make capital expenditures to maintain our facilities and invest in opportunities to grow and improve our businesses.

Our operations generated about $327.0$129.1 million in operating cash flows in fiscal year 2025.2026. That amount was about $401.6$197.9 million higherlower than the $74.6$327.0 million we usedgenerated in fiscal year 2024,2025, primarily on lower working capital requirements in fiscal year 2025, due to acceleratedcertain tobacco purchasingpurchases that would have typically been made in Brazilfiscal year 2025 having been made in fiscal year 2024. During the fiscal year ended March 31, 2025,2026, we spent $62.6$53.5 million on capital projects, and we returned $79.7$81.3 million to shareholders in the form of dividends. At March 31, 2025,2026, cash balances totaled $260.1$62.2 million.

Working capital at March 31, 2025, was about $1.4 billion, up about $14.8 million from last fiscal year’s level, as higher cash and account receivable balances largely offset lower tobacco inventory levels. Tobacco inventories of $806.3 million at March 31, 2025, were down $264.2 million compared to inventory levels at the end of the prior fiscal year, due to accelerated tobacco purchases in fiscal year 2024. Advances to suppliers were up $30.3 million at March 31, 2025, from prior year levels largely on higher crop costs in fiscal year 2025. We generally do not purchase material quantities of leaf tobacco on a speculative basis. However, when we contract directly with tobacco farmers, we are obligated to buy all stalk positions, which may contain less marketable leaf styles. Our uncommitted tobacco inventories decreasedincreased by approximately $17.2$58.3 million to $164.0$222.3 million, or about 20%27% of tobacco inventory, at March 31, 2025,2026, compared to March 31, 20242025 levels. Uncommitted inventories at March 31, 2024,2025, were $181.1$164.0 million, which represented 17%20% 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. Uncommitted tobacco levels were outside our target range at March 31, 2026, due to delayed customer purchase commitments, but we expect them to be within our range during fiscal year 2027.

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. Under the current authorization, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates. Repurchases of shares under the repurchase program may vary based on management discretion, as well as changes in cash flow generation and availability. We did not repurchase any shares of common stock in fiscal year 2025.2026. At March 31, 2025,2026, our available authorization under our current share repurchase program was $100 million, and approximately 24.7 million common shares were outstanding.million.

Our capital expenditures are generally limited to those that add value, replace or maintain equipment, increase efficiency, or position us for future growth. In deciding where to invest capital resources, we look for opportunities where we believe we can earn an adequate return, leverage our assets and expertise, and support our farmer base. During fiscal years 20252026 and 2024,2025, we invested $66.6$53.5 million and $66.0$62.6 million, respectively, in our property, plant, and equipment. Capital expenditures in fiscal yearsyear 2025 and 2024 included investments to expand Universal Ingredients’ manufacturing capabilities in Lancaster, Pennsylvania. Depreciation expense was approximately $48.7$44.2 million and $47.1$48.7 million, respectively, in fiscal years 20252026 and 2024.2025. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. We currently plan to spend approximately $45$55 to $55$65 million in fiscal year 20262027 on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.

At March 31, 2025,2026, we had $1.1$904.3 billionmillion in total debt outstanding, ana increasedecrease of $38.4$168.7 million, compared to March 31, 20242025 levels. 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. Net debt decreasedincreased by $179.6$28.9 million to $816.6$845.5 million during the fiscal year ended March 31, 2025.2026. The decreaseincrease in net debt reflects lowerhigher working capital requirements. Net debt as a percentage of net capitalization was 37% at March 31, 2026, up from 36% at March 31, 2025, down from 41% at March 31, 2024.2025.

As of March 31, 2025,2026, we had $270$730 million available under the committed revolving credit facility that will mature in December 2027,2030, and we, together with our consolidated affiliates, had approximately $466$702 million in uncommitted lines of credit, of which approximately $271$465 million were unused and available to support seasonal working capital needs. 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, 20252026 financial statements, we were in compliance with all financial covenants of our debt agreements as of March 31, 2025.2026. We have no long-term debt maturing until fiscal year 2028.2031.

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. With the swap agreements in place, the effective interest rates on the $275 million of the five-year term loan and the $345 million of the seven-year term loan were 5.96%5.57% and 6.16%,6.15%, respectively, as of March 31, 2025.2026. These agreements were entered into to eliminate the variability of cash flows in the interest payments on our variable rate five- and seven-year term loans and are accounted for as cash flow hedges. Under the swap agreements, we receive variable rate interest and pay fixed rate interest. At March 31, 2025,2026, the fair value of our open interest rate hedge swaps was a net asset of approximately $2$1 million.

We also enter derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecasted purchases of tobacco, related processing costs, and crop input sales in Brazil,sales, as well as our net monetary asset exposure in local currency there.currency. We generally account for our hedges of forecasted tobacco purchases as cash flow hedges. At March 31, 2025,2026, the fair value of those open contracts was a net liability of approximately $5.2$14 million.thousand. We also had other forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liabilityasset of approximately $1.1$0.2 million at March 31, 2025.2026. For additional information, see Note 10 to the consolidated financial statements in Item 8.

A majority of our consolidated goodwill balance relates to our reporting unit in Brazil and the acquisitions of FruitSmart, Silva,FruitSmart and Universal Ingredients–Shank’s.Silva. 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.

Accounting Standards Codification Topic 350 (“ASC 350”) permits companies to base initial assessments of potential goodwill impairment on qualitative factors, and the Company elected to use that approach at March 31, 2025.2026 for all entities with allocated goodwill with the exception of Universal Ingredients–Shank’s. For all entities, except Universal Ingredients–Shank’s, those factors did not indicate that it was more likely than not that the fair value of any of the reporting units was less than their respective carrying value, therefore no potential impairment of the Company’s recorded goodwill was noted at March 31, 2026. The Company elected to use the qualitative approach at March 31, 2025 for all entities. Those factors did not indicate that it was more likely than not that the fair value of any of the reporting units was less than their respective carrying value, therefore no potential impairment of the Company’s recorded goodwill was noted at March 31, 2025.

Leaf tobacco is sourced directly by product manufacturers, by global leaf suppliers such as ourselves, and by other smaller, mostly regional or local, leaf suppliers. We estimate that, of the flue-cured and burley tobacco grown outside of China in countries that are key export markets for tobacco, historically on average about a third is purchased directly by major manufacturers. Global leaf suppliers also usually purchase about a third of the tobacco, and the remainder is sourced by the smaller regional or local suppliers. In some markets the tobacco purchased directly by manufacturers is processed by the global leaf suppliers. Although we operate in a mature industry, we are committed to maintaining our strong position as the leading global leaf tobacco supplier. In recent years, we have been and believe that we will continue to be able to grow parts of our business and maintain performance despite declines in demand for leaf tobacco from product manufacturers. We have done this by continuing to increase our delivery of services, driving supply chain efficiencies, enhancing the range of services we provide to certain customers, including direct buying, agronomic support, and specialized processing services, and improving our market share. We intend to continue to work to expand our business while at the same time maintaining an appropriate return for the services we provide and believe that there are several longer-term trends in the industry, such as a focus on sustainability, that could provide additional opportunities for us both to offer additional services to our customers and to increase our market share.

As we have said for many years, the production of compliant leaf for the tobacco industry continues to grow in importance. To be considered compliant, leaf tobacco must be grown in a traceable, sustainable manner utilizing GAP as well as adhering to ALP principals and monitored for environmental and social impacts. We have long invested significant resources in the programs and infrastructure needed to work with growers to produce compliant leaf and continue to enhance our ability to monitor and demonstrate this compliance for our customers. Our GAP and ALP programs focus on implementing international principles of sustainability by encouraging and training our farmers to employ sound field production and labor management practices that promote farmer profitability and minimal environmental impact. To assist farmers, Universal provides comprehensive training, technical support in the field, and crop analytics through ongoing research and development. Our commitment to compliance is reinforced through MobiLeaf™,MobiLeafTM, our proprietary mobile device platform that captures and shares data in real-time, embedding sustainability throughout our supply chain and providing monitoring of GAP and ALP efforts, compliance with labor standards, and opportunities to enhance efficiencies. We believe that compliant leaf will continue to grow in importance to our customers and, as a result, will favor global suppliers who are able to deliver this product.

Flue-cured tobacco crops grown outside of China decreasedincreased in fiscal year 20252026 by about 5%28% to 1.82.4 billion kilos, compared to fiscal year 2024.2025. Global burley tobacco production at about 469722 million kilos in fiscal year 2025,2026, increased by about 6%54% compared to the burley crops grown in our fiscal year 2024.2025. We estimate that as of March 31, 2025,2026, industry uncommitted flue-cured and burley inventories, excluding China, continuedtotaled about 169 million kilos, compared to beabout 22 million kilos at lowMarch levels,31, and2025. We believe flue-cured and burley tobaccos were in undersupplyoversupply positions.positions as of March 31, 2026. Flue-cured tobacco production grown outside of China is projected to increasedecrease by about 20%,3%, and the global burley tobacco crop is projected to increasedecrease by about 35%16% in fiscal year 2026.2027. IfEven if these anticipated increasesdecreases in flue-cured and burley crop production are realized, we believe that both flue-cured and burley tobaccos will moveremain to a balanced, or possibly slightin oversupply position.positions.

We also forecast that oriental tobacco production will increase by about 9%21% and dark air-cured tobacco production will increase by about 6%2% in fiscal year 2026.2027. As of the date of the Annual Report, we believe oriental tobaccos are currently in an undersupply position but moving towards a more balanced position, and dark air-cured tobaccos are in a slightan oversupply position. Over the long term, we believe that global tobacco production will continue to move in line with slowly declining total demand. Africa, Asia, North America, and South America will remain key sourcing regions for flue-cured and burley tobaccos.

Industry data from the Nicotine Resource Consortium shows that over the five years ended in 2023,2024, world consumption of cigarettes outside of China declined at a compound annual rate of just over 1%, and consumption of American-blend cigarettes declined at a compound annual rate of aboutalmost 2%. We expect that near termnear-term global demand for leaf tobacco will slowly decline in line with global cigarette consumption.

Our sales consist primarily of flue-cured, burley, and dark air-cured tobaccos. Flue-cured and burley tobaccos, along with oriental tobaccos, are used in American-blend cigarettes, which are primarily smoked in Western Europe and the United States. 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. If demand for American-blend cigarettes declines at a higher rate than reductions in demand for English-blend cigarettes, there may be less demand for burley and oriental tobaccos and more demand for flue-cured tobacco. However, demand is affected by many factors, including regulation, product taxation, illicit trade, alternative tobacco products, and Chinese imports. To the extent that domestic leaf production and inventory durations in China do not meet requirements for Chinese cigarette blends, that tobacco could be sourced from other origins where we have major market positions. 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 undersupplyoversupply position relative to anticipated demand. However, inventoriesInventories held by our customers maycan also affect their near-term demand for leaf tobacco. We also sell oriental tobaccos, which are used in American-blend cigarettes, and dark tobaccos, which are used in cigars and other smokeless products. In recent years, we have seen increased demand for natural wrapper tobacco particularly for the European and U.S. machine-made cigar markets. While we expect demand for dark tobaccos used in cigar filler to be generally in line with supply, we are continuing to see strong demand for wrapper tobacco.

Factors that affect green tobacco prices include global supply and demand, market conditions, production costs, foreign exchange rates, and competition from other crops, among others. We work with farmers to maintain tobacco production and to secure product at price levels that are attractive to both the farmers and our customers. Our objective is to secure compliant tobacco that is produced in a cost-effective manner under a sustainable business model with the desired quality for our customers. In some areas, tobacco competes with agricultural commodity products for farmer production. In the past, leaf shortages in specific markets or on a worldwide basis have also led to green tobacco price increases.

The WHO Framework Convention on Tobacco Control (“FCTC”) was ratified in 2005 to become the world’s first international public health treaty. Since its inception, the FCTC has continued to strengthen international cooperation and collaboration in tobacco control by advancing the implementation of the treaty’s 38 articles and increasing global participation. At the tentheleventh Conference of the Parties held in FebruaryNovember 2024,2025, the FCTC considered amendments to the agreement and tracktracked progress in the treaty’s implementation, particularly as it relates to environmental impacts and novel/emerging products. The eleventhtwelfth Conference of the Parties is scheduled for November 2025.2027.

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. 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. The regulations require tobacco product manufacturers to register tobacco products that were on the market on February 15, 2007, and to seek FDA authorization to sell any products modified or introduced after such date. All submissions require manufacturers to list ingredients in their products. In January 2025, the FDA released a proposed rule to lower nicotine levels in cigarettes and certain combusted tobacco products to minimally or nonaddictive levels. This tobacco product standard would likely impact future leaf demand if adopted. 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.

As demand for novel tobacco products, such as e-cigarettes ande-cigarettes, heat-not-burn devices, emergeand nicotine pouches strengthens in the global market, governments are tasked with developing the appropriate, science-driven approach to regulation. 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. As part of this regulatory scheme, the FDA approved the first “heat-not-burn”, “very-low nicotine cigarette”, “electronic nicotine delivery system”, “flavored e-cigarette product”, and “nicotine pouch” premarket tobacco applications to permit the sale of these products within the United States. Furthermore, the FDA approved modified risk tobacco products applications to permit certain products in the heat-not-burn and smokeless categories to make modified exposure or risk claims. Although the WHO FCTC has not embracedendorsed the practical application of the harm-reduction language in the treaty, a growing number of countries have established tobacco control strategies incorporating a continuum of risk concept. In addition, the global tobacco product market is continuously diversifying to include a wide array of novel tobacco products to serve as alternatives to combustible cigarettes.

A number of governments, particularly federal and local governments in the United States and the European Union, impose excise or similar taxes on tobacco products. 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). Increases in product taxation could reduce the affordability of, and demand for, tobacco products, which will affect requirements for leaf tobacco requirements by tobacco product manufacturers.

Illicit trade is another factor that influences demand for legally and sustainably produced leaf tobacco. The WHO estimates that one in every 10 cigarettes consumed globally is illicit. Individual governments likeincluding the United States, European Union, and Brazil have initiated substantial steps in combating illicit trade. In 2012, the WHO FCTC adopted an illicit trade protocol that, to date, has been ratified by only 68 parties. We continue to support both governmental and industry efforts to eradicate illicit trade.

Unless the context otherwise requires, the terms “we,” “our,” “us,” or “Universal” or the “Company” refer to Universal Corporation together with its subsidiaries. This Quarterly Report on Form 10-Q ("Form 10-Q") and the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Among other things, these statements relate to the Company’s financial condition, results of operation, and future business plans, operations, opportunities, and prospects. In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission (the "SEC") and in reports to shareholders. These forward-looking statements are generally identified by the use of words such as we “expect,” “believe,” “anticipate,” “could,” “should,” “may,” “plan,” “will,” “predict,” “estimate,” and similar expressions or words of similar import. These forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results, performance, or achievements to be materially different from any anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: product purchased not meeting quality and quantity requirements; reliance on a few large customers; anticipated levels of demand for and supply of our products and services; tobacco growing conditions and customer requirements; major shifts in customer requirements for leaf tobacco; higher inflation rates, tariffs and other pressures on costs; weather and other conditions; exposure to certain legal, regulatory and financial risks related to climate change; industry-specific risks related to our plant-based ingredients businesses; disruption of our supply chain for our plant-based ingredients; success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; our ability to maintain effective information technology systems and safeguard confidential information; our inability to attract, develop, retain, motivate, and maintain good relationships with our workforce; our dependence on a seasonal workforce; epidemics, pandemics or similar widespread public health concerns; government efforts to regulate the production and consumption of tobacco products; government actions on the sourcing of leaf tobacco; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts; sustainability considerations from governments and other stakeholders; changes in tax laws in the countries where we do business; material weaknesses in our internal control over financial reporting; our inability to use a Form S-3 registration statement; failure of our customers or suppliers to repay extensions of credit; changes in exchange rates; changes in interest rates; and low investment performance by our defined benefit pension plan assets and changes in pension plan valuation assumptions. For a further description of factors that may cause actual results to differ materially from such forward-looking statements, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 20252026 (the "20252026 Form 10-K"). We caution investors not to place undue reliance on any forward-looking statements as these statements speak only as of the date when made, and we undertake no obligation to update any forward-looking statements made in this report, except as required by law. This Form 10-Q should be read in conjunction with our 20252026 Form 10-K.

Amounts described as net income (loss) and earnings (loss) per diluted share in the following discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries. Any referencesReferences to adjusted operating income (loss), adjusted net income (loss) attributable to Universal Corporation, adjusted diluted earnings (loss) per share, and the total for segment operating income (loss) are references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with generally accepted accounting principles ("GAAP") and should not be considered as substitutes for operating income (loss), net income (loss) attributable to Universal Corporation, diluted earnings (loss) per share, cash from operating activities or any other operating or financial performance measure calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. 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. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 12. "Operating Segments" to the consolidated financial statements. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits. We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, can 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. These measures are not financial measures calculated in accordance with GAAP and should not be considered substitutes for total debt, total capitalization, total debt to total capitalization ratio, or any other operating or financial performance measures calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of net debt to total debt and net capitalization to total capitalization are provided in Other Items below. We believe these non-GAAP measures are meaningful indicators of liquidity and financial position.

Quarter Ended DecemberJune 31,30, 2025,2026, compared to Quarter Ended DecemberJune 31,30, 20242025

Revenue decreased by 8%,12%, or $75.9$70.0 million, in the quarter ended June 30, 2026, compared to the quarter ended DecemberJune 31,30, 2024,2025, primarily driven by lower tobacco sales volumesvolumes, down 9%, and pricestobacco assales wellprices, asdown ingredients product mix.6%.

Selling, general, and administrative expenses were downup by 14%,2%, or $12.6$1.6 million, primarily due to favorableunfavorable foreign currency comparisons of $7.9$4.8 million and lower recoveries on advances to suppliers of $1.7 million, lowerpartially salesoffset commissions of $2.7 million, andby lower compensation costs of $3.3$3.0 million and lower legal and professional fees of $1.2 million in the quarter ended DecemberJune 31,30, 2025,2026, compared to the quarter ended DecemberJune 31,30, 2024.2025.

Adjusted operating income was down by $21.4$32.6 million and adjusted net income attributable to Universal Corporation was down by $25.7$14.6 million in the quarter ended DecemberJune 31,30, 2025,2026, compared to the quarter ended DecemberJune 31,30, 2024,2025, largely on on a less favorable product mix and lower tobacco sales volumes in the Tobacco Operations segment and highercontinued inventorymarket write-downs,headwinds partiallyand offsethigh byfixed favorablecosts foreignin currencythe comparisons.Ingredients Operations segment.

Our first fiscal quarter is historically a slow quarter for our tobacco business. Revenue decreased by 9%,13%, or $73.9$67.6 million, for the quarter ended DecemberJune 31,30, 2025,2026, compared to the quarter ended DecemberJune 31,30, 2024,2025, primarily on ana 8%9% decrease in tobacco sales volumes due to lower sales of certaincarryover types ofcrop tobacco asand wella as6% thedecrease timing ofin tobacco shipments.sales prices due to product mix and lower green tobacco prices. Operating income for the Tobacco Operations segment decreased by 18%,90%, or $18.5$32.2 million, for the thirdfirst quarter of fiscal year 2027, compared to the first quarter of fiscal year 2026, comparedon toa thirdless quarterfavorable product mix in Asia and lower sales of fiscalcarryover yearcrop 2025, on lower tobacco sales volumes and higher tobacco inventory write-downs, primarily dark air-cured tobacco, of $6.1 million.tobacco. Selling, general, and administrative expenses were lowerhigher by $9.6$1.3 million for the segment mainly due to favorableunfavorable foreign currency comparisons of $7.8$4.4 million and lower salesrecoveries commissionson advances to suppliers of $2.6$1.7 million, partially offset by lower legal and professional fees of $2.3 million in the quarter ended DecemberJune 31,30, 2025,2026, compared to the quarter ended DecemberJune 31,30, 2024.2025. Corporate overhead costs allocated to the segment were $2.2 million higher in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, due to a higher percentage allocation of the actual corporate overhead costs to the segment. The allocation of corporate overhead costs is based on projected annual financial and operational performance.

Cost of goods sold decreased by 6%,8%, or $41.9$38.9 million, in the quarter ended DecemberJune 31,30, 2025,2026, compared to the quarter ended DecemberJune 31,30, 2024,2025, largely on lower tobacco sales volumes and ingredientsgreen producttobacco mix.prices.

Interest expense was down by 11%,7%, or $2.0$1.3 million, in the quarter ended DecemberJune 31,30, 2025,2026, compared to the quarter ended DecemberJune 31,30, 2024,2025, on lower interest rates and debt balances.

Restructuring and impairment costs of $0.7$1.1 million in the quarter ended DecemberJune 31,30, 2025.

The consolidated effective tax rate for the three months ended DecemberJune 31,30, 2025,2026, was 37.8%.35%. The consolidated tax rate for the three months ended DecemberJune 31,30, 2024,2025, was 23.0%.27%. The consolidated effective tax rate for the three months ended DecemberJune 31,30, 2025,2026, was higher than the consolidated tax rate for the three months ended DecemberJune 31,30, 2024,2025, due to thevarious impactfactors, of certain withholding taxes on dividends from foreign subsidiaries andincluding the mix and timing of domestic and foreign earnings.earnings, discrete items including increased withholding taxes on undistributed earnings in Brazil, and the tax deductibility of certain items.

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 (loss) attributable to Universal Corporation to net income (loss) attributable to Universal Corporation:

(1) 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 (loss) available to Universal Corporation, and Adjusted diluted earnings (loss) per share.

Net cash used by our operations was $58.0$117.1 million during the nine monthsquarter ended DecemberJune 31,30, 2025.2026. That amount was $226.3$88.0 million higherlower than during the same period in fiscal year 2025,2026, primarily on lower working capital requirements in the nine months ended December 31, 2024.requirements. Tobacco inventory levels at DecemberJune 31,30, 2025,2026, were updown $66.0$54.2 million, compared to DecemberJune 31,30, 20242025 levels, on largerslower cropgreen sizes.tobacco purchases and lower green tobacco prices. We generally do not purchase material quantities of tobacco on a speculative basis, and we target committed inventory levels of 80% or more of total tobacco inventory. Our level of committed inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders. In addition, when we contract directly with tobacco farmers, we are often obligated to buy all stalk positions, which may contain less marketable leaf styles. As of DecemberJune 31,30, 2025,2026, our uncommitted tobacco inventories were $165.9$275.1 million, or about 17%24% of total tobacco inventory, compared to $164.0$222.3 million, or about 20%27% of our tobacco inventory as of March 31, 2025,2026, and $94.3$134.7 million, or about 10%11% of our tobacco inventory as of DecemberJune 30, 2025. Uncommitted tobacco levels as a percentage of total tobacco inventory came down from March 31, 2024.2026 levels in the quarter ended June 30, 2026, but remained elevated due to delayed customer purchase commitments. We expect our uncommitted tobacco inventory levels to be within our range of 20% or less of total tobacco inventory during fiscal year 2027.

Our balance sheet accounts reflected seasonal patterns in the nine monthsquarter ended DecemberJune 31,30, 2025,2026, on deliveries of tobacco crops by farmers in Africa,Africa and South America,America. andAccounts thereceivable Uniteddecreased States.by Cash and cash equivalents were down $174.9$215.8 million from March 31, 20252026 levels,levels on seasonalcollections workingon capitalreceivables, needs.partially Accountsoffset receivableby tobacco crop shipments. Advances to suppliers were down$102.9 $54.4million at June 30, 2026, a reduction of $74.3 million from March 31, 20252026, levelsas largelytobacco crops were delivered in payment on the timingsome of collectionsthose onbalances, receivables.net of new balances for upcoming tobacco crops. Accounts receivable--unconsolidated affiliates increased by $55.2$92.2 million from March 31, 20252026 levels, on larger tobacco crop sizes.purchases. Notes payable and overdrafts were up $279.4 million from March 31, 2026 levels on seasonal working capital needs.

Accounts receivable and notes payable and overdrafts were down $78.5$76.1 million andlower $76.3in million,the respectively,quarter asended ofJune December30, 31, 2025,2026, compared to Decemberthe 31,quarter 2024,ended June 30, 2025, on lower sales of carryover crop tobacco. Advances to suppliers were $23.7 million higher and accounts payable were $28.8 million lower at June 30, 2026, compared to June 30, 2025, largely dueon toslower accountspurchases receivableof factoring.green tobacco. Accounts receivable--unconsolidated affiliates were $61.8$23.2 million higherlower as of DecemberJune 31,30, 2025,2026, compared to the same period in the prior fiscal year, on largerthe timing of tobacco cropshipments. sizes.Notes Cashpayable and cash equivalentsoverdrafts were down $129.9$54.3 million as of DecemberJune 31,30, 2025,2026, compared to DecemberJune 31,30, 2024,2025, due to a higher of use of cash and cash equivalents to fundlower working capital needs in fiscal year 2026.requirements.

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 ingredients business; and returning excess capital to our shareholders. In deciding where to invest capital resources, we look for opportunities where we believe we can earn an adequate return as well as leverage our assets and expertise or enhance our farmer base. Our capital expenditures are generally limited to those that add value, replace or maintain equipment, increase efficiency, or position us for future growth. During the nine monthsquarters ended DecemberJune 31,30, 20252026 and 2024,2025, we invested approximately $40.3$15.9 million and $54.9$12.1 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $33.0 million and $36.1$11.0 million for each of the nine monthsquarters ended DecemberJune 31,30, 20252026 and 2024, respectively.2025. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. In addition, from time to time, we undertake projects that require capital expenditures when we identify opportunities to improve efficiencies, invest in sustainability projects, add value for our customers, and position ourselves for future growth. We currently expect to spend approximately $45$55 to $55$65 million over the next twelve months on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.

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. Under the current authorization, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates. Repurchases of shares under the repurchase program may vary based on management discretion, as well as changes in cash flow generation and availability. During the three months ended DecemberJune 31,30, 2025,2026, we didpurchased not purchase any51,741 shares of common stock.stock at an aggregate cost of $2.7 million (average price per share $53.06). As of DecemberJune 31,30, 2025,2026, our available authorization under our current share repurchase program was $100$97.3 million.

At DecemberJune 31,30, 2025,2026, we had $1.1$1.2 billion in total debt outstanding, a decrease of $77.5$55.5 million compared to DecemberJune 31,30, 2024.2025. 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. Net debt increaseddecreased by $50.7$51.6 million to $995.3$1.0 millionbillion at DecemberJune 31,30, 2025,2026, compared to DecemberJune 31,30, 2024.2025. Net debt as a percentage of net capitalization was 40%42% at DecemberJune 31,30, 2025,2026, upflat fromwith 39%42% at DecemberJune 31,30, 2024,2025, and up from 36%37% at March 31, 2025.2026.

As of DecemberJune 31,30, 2025,2026, we had $85.2$174 million in cash and cash equivalents, $595$635 million available under our committed revolving credit facility that will mature in December 2030, and we, together with our consolidated affiliates, had approximately $237$279 million in available, uncommitted credit lines. 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 DecemberJune 31,30, 20252026 financial statements, we were in compliance with all financial covenants of our debt agreements as of DecemberJune 31,30, 2025.2026. We have no long-term debt maturing until fiscal year 2031.

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At DecemberJune 31,30, 2025,2026, the fair value of our outstanding interest rate swap agreements was aan liabilityasset of about $1.3$5.0 million, and the notional amount swapped was $310 million. We entered into these agreements to eliminate the variability of cash flows in the interest payments on a portion of our variable-rate term loans. Under the swap agreements we receive variable rate interest and pay fixed rate interest. The swaps are accounted for as cash flow hedges.

We also use derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecasted purchases of tobacco, related processing costs, and crop input sales, as well as our net monetary balance sheet exposures in local currency. We generally account for our hedges of forecasted tobacco purchases as cash flow hedges. As of DecemberJune 31,30, 2025,2026, the fair value of our open hedges for forecasted tobacco purchases and crop inputs was a net assetliability of approximately $0.2$3.0 million. We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net assetliability of approximately $0.8$1.1 million as of DecemberJune 31,30, 2025.2026.