Universal Corporation
02/09/2026 | Press release | Distributed by Public on 02/09/2026 07:16
Quarterly Report for Quarter Ending DECEMBER 31, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 2025 (the "2025 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 2025 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 references 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.
Results of Operations
Overview
Universal delivered solid performance in the quarter and nine months ended December 31, 2025. Revenue was down 2% and 8% and operating income was down 3% and 21%, respectively, in the nine months and quarter ended December 31, 2025, on challenging comparisons to very strong tobacco operations performance in the same periods in the prior fiscal year. Our tobacco operations generated segment operating income of $185.0 million and $84.0 million, respectively, for the nine months and quarter ended December 31, 2025. Tobacco shipments progressed smoothly, and customer demand remained firm in the nine months and quarter ended December 31, 2025, for most tobacco styles. As tobacco market dynamics evolve toward oversupply, we believe our long track record in sourcing and local expertise in our operating regions position us well to navigate the environment effectively and optimize results under a range of conditions.
In our Universal Ingredients business, we maintained revenue growth for the nine months ended December 31, 2025, in the face of challenging market conditions with softer customer demand and tariff impacts. Results for the quarter ended December 31, 2025, reflected market headwinds and higher fixed costs from the significant investments we have made. We remain focused on converting customer interest into sales and advancing the growth of our solutions-based portfolio.
During the quarter ended December 31, 2025, we also refinanced, extended the maturity of, and upsized our credit facility by $250 million, enhancing liquidity and financial flexibility to advance our strategic priorities.
| FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, | Change | Nine Months Ended December 31, | Change | ||||||||||||||||||||||||||||||||
| (in millions of dollars, except per share data) | 2025 | 2024 | % | 2025 | 2024 | % | |||||||||||||||||||||||||||||
| Consolidated Results | |||||||||||||||||||||||||||||||||||
| Sales and other operating revenue | $ | 861.3 | $ | 937.2 | (8) | % | $ | 2,209.2 | $ | 2,245.0 | (2) | % | |||||||||||||||||||||||
| Cost of goods sold | $ | 701.7 | $ | 743.6 | (6) | % | $ | 1,795.7 | $ | 1,812.4 | (1) | % | |||||||||||||||||||||||
| Gross profit margin percentage | 18.5 | % | 20.7 | % | -220 bps | 18.7 | % | 19.3 | % | -60 bps | |||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 76.9 | $ | 89.5 | (14) | % | $ | 228.3 | $ | 232.0 | (2) | % | |||||||||||||||||||||||
| Restructuring and impairment costs | $ | 0.7 | $ | - | 100 | % | $ | 1.8 | $ | 10.6 | (83) | % | |||||||||||||||||||||||
| Operating income | $ | 82.0 | $ | 104.1 | (21) | % | $ | 183.4 | $ | 190.0 | (3) | % | |||||||||||||||||||||||
| Adjusted operating income (non-GAAP)* | $ | 82.7 | $ | 104.1 | (21) | % | $ | 185.2 | $ | 200.6 | (8) | % | |||||||||||||||||||||||
| Net income attributable to Universal Corporation | $ | 33.2 | $ | 59.6 | (44) | % | $ | 75.9 | $ | 85.7 | (11) | % | |||||||||||||||||||||||
| Adjusted net income attributable to Universal Corporation (non-GAAP)* | $ | 34.0 | $ | 59.6 | (43) | % | $ | 77.7 | $ | 96.2 | (19) | % | |||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | 1.32 | $ | 2.37 | (44) | % | $ | 3.02 | $ | 3.41 | (11) | % | |||||||||||||||||||||||
| Adjusted diluted earnings (loss) per share (non-GAAP)* | $ | 1.35 | $ | 2.37 | (43) | % | $ | 3.09 | $ | 3.83 | (19) | % | |||||||||||||||||||||||
| Segment Results | |||||||||||||||||||||||||||||||||||
| Tobacco operations sales and other operating revenues | $ | 779.9 | $ | 853.9 | (9) | % | $ | 1,944.1 | $ | 1,996.1 | (3) | % | |||||||||||||||||||||||
| Tobacco operations operating income | $ | 84.0 | $ | 102.6 | (18) | % | $ | 185.0 | $ | 194.4 | (5) | % | |||||||||||||||||||||||
| Ingredients operations sales and other operating revenues | $ | 81.3 | $ | 83.3 | (2) | % | $ | 265.2 | $ | 249.0 | 7 | % | |||||||||||||||||||||||
| Ingredients operations operating income (loss) | $ | (0.1) | $ | 3.7 | (103) | % | $ | 1.4 | $ | 7.9 | (82) | % | |||||||||||||||||||||||
| *See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below. | |||||||||||||||||||||||||||||||||||
Quarter Ended December 31, 2025, compared to Quarter Ended December 31, 2024
Consolidated Results
Revenue decreased by 8%, or $75.9 million, compared to the quarter ended December 31, 2024, primarily driven by lower tobacco sales volumes and prices as well as ingredients product mix.
Operating income decreased by 21%, or $22.1 million, in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, on a 8% decrease in tobacco sales volumes and higher inventory write-downs, primarily with respect
to dark air-cured tobacco, of $6.2 million, partially offset by favorable foreign currency comparisons of $7.9 million and lower sales commissions of $2.7 million.
Selling, general, and administrative expenses were down by 14%, or $12.6 million, primarily due to favorable foreign currency comparisons of $7.9 million, lower sales commissions of $2.7 million, and lower compensation costs of $3.3 million in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024.
Adjusted operating income was down by $21.4 million and adjusted net income attributable to Universal Corporation was down by $25.7 million in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, largely on lower tobacco sales volumes and higher inventory write-downs, partially offset by favorable foreign currency comparisons.
Tobacco Operations Segment
Revenue decreased by 9%, or $73.9 million, for the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, primarily on an 8% decrease in tobacco sales volumes due to lower sales of certain types of tobacco as well as the timing of tobacco shipments. Operating income for the Tobacco Operations segment decreased by 18%, or $18.5 million, for the third quarter of fiscal year 2026, compared to third quarter of fiscal year 2025, on lower tobacco sales volumes and higher tobacco inventory write-downs, primarily dark air-cured tobacco, of $6.1 million. Selling, general, and administrative expenses were lower by $9.6 million for the segment mainly due to favorable foreign currency comparisons of $7.8 million and lower sales commissions of $2.6 million in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024.
Ingredients Operations Segment
Revenue for the Ingredients Operations segment decreased by 2%, or $2.0 million, for the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, on product mix and market headwinds, including weakness in the consumer-package-goods sector and tariff impacts. Operating income for the segment decreased by 103%, or $3.8 million, on higher fixed costs, including depreciation from our expanded Universal Ingredients production facility, market headwinds, product mix, and higher inventory write-downs.
Additional Items
Cost of goods sold decreased by 6%, or $41.9 million, in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, largely on lower tobacco sales volumes and ingredients product mix.
Interest expense was down by 11%, or $2.0 million, in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, on lower interest rates and debt balances.
Restructuring and impairment costs of $0.7 million in the quarter ended December 31, 2025.
The consolidated effective tax rate for the three months ended December 31, 2025, was 37.8%. The consolidated tax rate for the three months ended December 31, 2024, was 23.0%. The consolidated effective tax rate for the three months ended December 31, 2025, was higher than the consolidated tax rate for the three months ended December 31, 2024, due to the impact of certain withholding taxes on dividends from foreign subsidiaries and the mix of domestic and foreign earnings.
Nine Months Ended December 31, 2025, compared to Nine Months Ended December 31, 2024
Consolidated Results
Revenue decreased by 2%, or $35.8 million, in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on lower tobacco sales volumes, partially offset by higher third-party tobacco processing volumes in our Tobacco Operations segment and a favorable product mix in our Ingredients Operations segment.
Operating income decreased by 3%, or $6.6 million, in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on lower sales volumes in our Tobacco Operations segment and higher fixed costs and market headwinds, including broader softness in the consumer-packaged-goods sector, in our Ingredients Operations segment, partially offset by favorable foreign currency comparisons.
Selling, general, and administrative expenses were down 2%, or $3.7 million, primarily due to favorable foreign currency comparisons of $10.0 million and lower tobacco sales commissions of $6.6 million partially offset by higher compensation costs of $2.8 million, legal and professional fees of $4.1 million, and provisions for farmer advances of $2.2 million in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024.
Adjusted operating income and adjusted net income attributable to Universal Corporation were down by $15.4 million and $18.4 million, respectively, in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on lower sales volumes in our Tobacco Operations segment and higher fixed costs and market headwinds, including broader softness in the consumer-packaged-goods sector, in our Ingredients Operations segment, partially offset by favorable foreign currency comparisons.
Tobacco Operations Segment
Revenue decreased by 3%, or $52.0 million, for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on a 4% decline in tobacco sales volumes on lower sales of certain types of tobacco, partially offset by increased third-party tobacco processing revenue. Operating income for the Tobacco Operations segment decreased by 5%, or $9.4 million, for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, largely on lower tobacco sales volumes due to lower sales of certain types of tobacco. Selling, general, and administrative expenses were lower by approximately $5.0 million for the segment mainly due to favorable foreign currency comparisons of $9.5 million and lower tobacco sales commissions of $6.5 million, which were partially offset by higher compensation costs of $4.3 million, legal and professional fees of $1.6 million, and provisions for farmer advances of $2.2 million in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024. Uncommitted tobacco inventory levels remained in our target range at about 17% of total tobacco inventory as of December 31, 2025.
Ingredients Operations Segment
Revenue for the Ingredients Operations segment increased by 7%, or $16.2 million, for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on increased sales driven by organic growth. Operating income for the segment decreased by 82%, or $6.5 million, due to product mix and higher fixed costs, including depreciation from our expanded Universal Ingredients production facility, as well an increase in inventory write-downs of $3.9 million. Market headwinds, including broader softness in the consumer-packaged-goods sector and tariff impacts, also impacted the segment in the nine months ended December 31, 2025.
Additional Items
Cost of goods sold decreased by 1%, or $16.7 million, in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, largely due to lower sales volumes in our Tobacco Operations segment.
Interest expense was down by 10%, or $5.8 million, in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on lower interest rates and debt balances.
Restructuring and impairment costs of $1.8 million in the nine months ended December 31, 2025, compared to $10.6 million in the nine months ended December 31, 2024, were primarily related to the consolidation of the Company's European tobacco sheet operations.
The consolidated effective tax rate for the nine months ended December 31, 2025, was 31.6%. The consolidated tax rate for the nine months ended December 31, 2024, was 25.9%. The consolidated effective tax rate for the nine months ended December 31, 2025, was higher than the consolidated tax rate for the nine months ended December 31, 2024, due to the impact of certain withholding taxes on dividends from foreign subsidiaries and the mix of domestic and foreign earnings.
Sustainability
During the quarter ended December 31, 2025, Universal published its Fiscal Year 2025 Sustainability Report, highlighting progress across key environmental and supply chain priorities. In fiscal year 2025, the Company increased renewable electricity consumption nearly sixfold year over year, with 17.7% of global electricity sourced from renewable energy, supporting its science-based emissions targets and commitment to achieve net-zero greenhouse gas emissions across the value chain by 2050.
The Company also continued to enhance supply chain transparency and farmer engagement through MobiLeafTM, its digital farm data platform, and maintained direct relationships with more than 200,000 contracted farmers worldwide.
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 | |||||||||||||||||||||||
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| As Reported: Consolidated operating income | $ | 81,950 | $ | 104,076 | $ | 183,412 | $ | 190,037 | |||||||||||||||
|
Restructuring and impairment costs(1)
|
711 | - | 1,833 | 10,573 | |||||||||||||||||||
| As Adjusted operating income (non-GAAP) | $ | 82,661 | $ | 104,076 | $ | 185,245 | $ | 200,610 | |||||||||||||||
| Adjusted Net Income Attributable to Universal Corporation and Adjusted Diluted Earnings Per Share Reconciliation | |||||||||||||||||||||||
|
(in thousands except for per share amounts)
|
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| As Reported: Net income attributable to Universal Corporation | $ | 33,249 | $ | 59,639 | $ | 75,915 | $ | 85,709 | |||||||||||||||
|
Restructuring and impairment costs(1)
|
711 | - | 1,833 | 10,573 | |||||||||||||||||||
| Total of non-GAAP adjustments to income before income taxes | 711 | - | 1,833 | 10,573 | |||||||||||||||||||
| Non-GAAP adjustments to income taxes | |||||||||||||||||||||||
|
Income tax benefit from restructuring and impairment costs(1)(2)
|
- | - | (35) | (132) | |||||||||||||||||||
| Total of income tax impacts for non-GAAP adjustments to income before income taxes | - | - | (35) | (132) | |||||||||||||||||||
| As adjusted: Net income attributable to Universal Corporation (non-GAAP) | $ | 33,960 | $ | 59,639 | $ | 77,713 | $ | 96,150 | |||||||||||||||
| As reported: Diluted earnings per share | $ | 1.32 | $ | 2.37 | $ | 3.02 | $ | 3.41 | |||||||||||||||
| As adjusted: Diluted earnings per share (non-GAAP) | $ | 1.35 | $ | 2.37 | $ | 3.09 | $ | 3.83 | |||||||||||||||
(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 available to Universal Corporation, and Adjusted diluted earnings per share.
(2) 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.
The following table reconciles total debt to net debt and net capitalization:
| Net Debt and Net Capitalization Reconciliation | ||||||||||||||||||||
| December 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | |||||||||||||||||
| Add: Notes payable and overdrafts | $ | 462,248 | $ | 538,526 | $ | 455,039 | ||||||||||||||
| Add: Long-term obligations | 616,585 | 617,780 | 617,918 | |||||||||||||||||
| Add: Current portion of long-term obligations | - | - | - | |||||||||||||||||
| Total Debt | 1,078,833 | 1,156,306 | 1,072,957 | |||||||||||||||||
| Add: Customer advances and deposits | 1,667 | 3,362 | 3,763 | |||||||||||||||||
| Less: Cash and cash equivalents | 85,227 | 215,108 | 260,115 | |||||||||||||||||
| Net Debt (non-GAAP) | $ | 995,273 | $ | 944,560 | $ | 816,605 | ||||||||||||||
| Add: Total Universal Corporation shareholders' equity | 1,482,808 | 1,450,610 | 1,458,556 | |||||||||||||||||
| Net Capitalization (non-GAAP) | $ | 2,478,081 | $ | 2,395,170 | $ | 2,275,161 | ||||||||||||||
| Net Debt/Net Capitalization (non-GAAP) | 40 | % | 39 | % | 36 | % | ||||||||||||||
Liquidity and Capital Resources
Overview
Our liquidity and operating capital resource requirements are predominantly short term in nature and primarily relate to working capital for tobacco crop purchases. Working capital needs are seasonal within each geographic region. The geographic dispersion and the timing of working capital needs permit us to predict our general level of cash requirements, although tobacco crop 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 geographic area follows a cycle of buying, processing, and shipping tobacco to customers, and in many regions, we also provide agricultural materials to 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 crop financing. Despite a predominance of short-term needs, we maintain a portion of our total debt as long-term to reduce liquidity risk. We also periodically have large cash balances that we utilize to meet our working capital requirements.
After significant seasonal working capital investment in our tobacco operations in the first half of our fiscal year, we generally see tobacco inventory levels and other working capital items decrease in the second half of the fiscal year as tobacco crops in Africa, South America, and the United States are being shipped. Our working capital needs followed this pattern in the nine months ended December 31, 2025, and we funded these working capital needs using a combination of cash on hand, short-term borrowings, customer advances, account receivables factoring, and operating cash flows. In contrast, in the nine months ended December 31, 2024, certain tobacco purchases that would have typically been made in fiscal year 2025 had been made in fiscal year 2024 due to market conditions, which reduced required working capital investments in the nine months ended December 31, 2024.
Operating Activities
Net cash used by our operations was $58.0 million during the nine months ended December 31, 2025. That amount was $226.3 million higher than during the same period in fiscal year 2025, primarily on lower working capital requirements in the nine months ended December 31, 2024. Tobacco inventory levels at December 31, 2025, were up $66.0 million, compared to December 31, 2024 levels, on larger crop sizes. 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 December 31, 2025, our uncommitted tobacco inventories were $165.9 million, or about 17% of total tobacco inventory, compared to $164.0 million, or about 20% of our tobacco inventory as of March 31, 2025, and $94.3 million, or about 10% of our tobacco inventory as of December 31, 2024.
Our balance sheet accounts reflected seasonal patterns in the nine months ended December 31, 2025, on deliveries of tobacco crops by farmers in Africa, South America, and the United States. Cash and cash equivalents were down $174.9 million
from March 31, 2025 levels, on seasonal working capital needs. Accounts receivable were down $54.4 million from March 31, 2025 levels largely on the timing of collections on receivables. Accounts receivable--unconsolidated affiliates increased by $55.2 million from March 31, 2025 levels, on larger tobacco crop sizes.
Accounts receivable and notes payable and overdrafts were down $78.5 million and $76.3 million, respectively, as of December 31, 2025, compared to December 31, 2024, largely due to accounts receivable factoring. Accounts receivable--unconsolidated affiliates were $61.8 million higher as of December 31, 2025, compared to the same period in the prior fiscal year, on larger tobacco crop sizes. Cash and cash equivalents were down $129.9 million as of December 31, 2025, compared to December 31, 2024, due to a higher of use of cash and cash equivalents to fund working capital needs in fiscal year 2026.
Investing Activities
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 months ended December 31, 2025 and 2024, we invested approximately $40.3 million and $54.9 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $33.0 million and $36.1 million for the nine months ended December 31, 2025 and 2024, respectively. 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 to $55 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 December 31, 2025, we did not purchase any shares of common stock. As of December 31, 2025, our available authorization under our current share repurchase program was $100 million.
Financing Activities
At December 31, 2025, we had $1.1 billion in total debt outstanding, a decrease of $77.5 million compared to December 31, 2024. 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 increased by $50.7 million to $995.3 million at December 31, 2025, compared to December 31, 2024. Net debt as a percentage of net capitalization was 40% at December 31, 2025, up from 39% at December 31, 2024, and up from 36% at March 31, 2025.
On December 9, 2025, we entered into a new bank credit agreement that replaced our then-existing bank credit agreement dated December 15, 2022. The new unsecured bank credit agreement established a funded $275 million five-year term loan, a funded $345 million seven-year term loan, and a five-year committed revolving loan facility of $780 million. Both term loans were fully funded at closing, require no amortization, and are prepayable without penalty prior to maturity. A $275 million term five-year term loan and a $530 million revolving credit facility, both of which would have matured in December 2027, as well as a $375 million seven-year term loan, which would have matured in December 2029, were terminated and replaced in conjunction with the execution of the new bank credit agreement. Our obligations under the new bank credit agreement are guaranteed by our subsidiary, Universal Ingredients, Inc. The financial covenants under the new bank credit agreement require us to maintain certain levels of tangible net worth and observe restrictions on debt levels. Under applicable accounting guidance, a significant portion of the replacement of the term loans was accounted for as a debt modification rather than a debt extinguishment.
As of December 31, 2025, we had $85.2 million in cash and cash equivalents, $595 million available under our committed revolving credit facility that will mature in December 2030, and we, together with our consolidated affiliates, had approximately $237 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 December
31, 2025 financial statements, we were in compliance with all financial covenants of our debt agreements as of December 31, 2025. We have no long-term debt maturing until fiscal year 2031.
Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-fiscal year. Available capital resources from our cash balances, committed revolving credit facility, and uncommitted credit lines are expected to exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months and beyond.
Derivatives
From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At December 31, 2025, the fair value of our outstanding interest rate swap agreements was a liability of about $1.3 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 December 31, 2025, the fair value of our open hedges for forecasted tobacco purchases and crop inputs was a net asset of approximately $0.2 million. We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net asset of approximately $0.8 million as of December 31, 2025.
Critical Accounting Estimates
A summary of our critical accounting policies is included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2025 Form 10-K. Our critical accounting policies have not changed from those reported in the 2025 Form 10-K.
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