Universal Corporation Annual Report 2022

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FY2022 Annual Report · Universal Corporation

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A N N U A L
R E P O R T

A B O U T U S

For over 100 years, Universal Corporation has been finding innovative solutions to serve our

customers and meet their agri-products needs. We built a global presence, solidified long-

term relationships with customers and suppliers, adapted to changing agricultural practices,

embraced state of the art technology, and emerged as the recognized industry leader.

Today, we are a global business-to-business agri-products supplier to consumer product

manufacturers, operating in over 30 countries on five continents, that sources and processes

leaf tobacco and plant-based ingredients. We strive to be the supplier of choice for our

customers by leveraging our farmer base, our commitment to a sustainable supply chain,

and our ability to provide high-quality, customized, traceable, value-added agri-products

essential for our customers’ requirements. Tobacco has been our principal focus since our

founding in 1918, and we are the leading global leaf tobacco supplier. Through our plant-

based ingredients platform, we provide a variety of value-added manufacturing processes

to produce high-quality, specialty vegetable- and fruit-based ingredients as well as botanical

extracts and flavorings for the food and beverage end markets.

Universal Corporation has a long history of operating with integrity, honesty, and a focus on

quality. We are a vital link in the leaf tobacco supply chain, providing expertise in working

with large numbers of farmers, efficiently selling various qualities of leaf to a broad global

customer base, adapting to meet evolving customer needs, and delivering products that

meet stringent quality and regulatory specifications. Going forward, we will build on our

history by seeking opportunities in both tobacco and plant-based ingredients to leverage

our assets and expertise. We will continue our commitment to leadership in setting industry

standards, operating with transparency, providing products that are responsibly-sourced,

and investing in and strengthening the communities where we operate.

F I N A N C I A L H I G H L I G H T S

in thousands, except per share data

March 31, 2022

March 31, 2021

March 31, 2020

Fiscal Year Ended

OPERATIONS
Sales and other operating revenues
Operating income
Segment operating income
Net income
Net income attributable to Universal Corporation

PER COMMON SHARE
Net income attributable to Universal Corporation
common shareholders—diluted*

Dividends declared
Market price at year end

AT YEAR END
Working capital
Total Universal Corporation shareholders’ equity

$ 2,103,601
160,315
174,335
103,604
86,577

$ 1,983,357
147,810
169,199
96,314
87,410

$ 1,909,979
126,367
138,121
78,003
71,680

3.47
3.12
58.07

3.53
3.08
58.99

2.86
3.04
44.21

$ 1,229,287
1,340,543

$ 1,262,201
1,307,299

$ 1,212,218
1,246,665

Net Income Per Diluted Share*

Dividends Declared

in dollars

Operating Income

in millions of dollars

1
1
.
4

4
1
.
4

7
4
.
3

3
5
.
3

6
8
.
2

2
1
.
3

8
0
.
3

4
0
.
3

0
0
.
3

8
1
.
2

3
.
0
6
1

8
.
7
4
1

4
.
6
2
1

2
.
1
6
1

8
.
0
7
1

300

240

180

120

* Attributable to Universal Corporation common shareholders after deducting amounts attributable

to non-controlling interests in consolidated subsidiaries.

B O A R D O F D I R E C T O R S
Universal Corporation

George C. Freeman, III 1 * 2

Lennart R. Freeman 1 3 4

Michael T. Lawton 1 3 * 4

Thomas H. Tullidge, Jr. 2 3 5

Chairman, President and

Retired President and

Retired Executive

Chief Strategy Officer,

Chief Executive Officer

Chief Executive Officer,

Vice President and

Legal and Finance

Universal Corporation

North American Division,

Chief Financial Officer

Cary Street Partners

Swedish Match AB

Domino’s Pizza, Inc.

Financial LLC

Diana F. Cantor 2 4 5 *

Thomas H. Johnson 1 4 * 5

Robert C. Sledd 2 * 3 5

Jacqueline T. Williams 2 3 5

Partner

Chief Executive Officer

Managing Partner

Alternative Investment

The Taffrail Group, LLC

Pinnacle Ventures, LLC

Management, LLC

Retired Director,

Ohio Department

of Commerce

1 Executive Committee

Compensation Committee

* Committee Chairman

2 Finance and Pension

Investment Committee

5 Nominating and Corporate
Governance Committee

Lead Independent Director

3 Audit Committee

D I R E C T O R S *
Universal Leaf Tobacco Company, Inc.

| Universal Global Ventures, Inc.

George C. Freeman, III

Candace C. Formacek

Cesar A. Bünecker

Steven S. Diel

Chairman, President and

Senior Vice President and

Managing Director,

Director,

Chief Executive Officer

Treasurer

South America

Universal Global Ventures, Inc.

Airton L. Hentschke

Preston D. Wigner

Domenico Cardinali

Kent DeVries

Executive Vice President and

Senior Vice President,

Managing Director,

President,

Chief Operating Officer

General Counsel and

Europe

Silva International, Inc.

Assistant Secretary

Johan C. Kroner

J. Patrick O’Keefe

Clayton G. Frazier

Wayne D. Lutomski

Executive Vice President and

Senior Vice President,

Managing Director,

Chief Financial Officer

Universal Global Ventures, Inc.

North America

President,

FruitSmart, Inc.

Theodore G. Broome

Paul G. Beevor

Rory E. Micklem

Gregory P. Robertson

Executive Vice President and

Managing Director,

President,

Sales Director

Asia

Africa

Shank’s Extracts, LLC.

Catherine H. Claiborne

Friedrich G. Bossert

Jonathan R. Wertheimer

Senior Vice President,

Managing Director,

Administration and Secretary

Dark Air-Cured

President,

Socotab, L.L.C.

* Universal Leaf Tobacco Company, Inc. titles unless otherwise noted.

O F F I C E R S
Universal Corporation

George C. Freeman, III

Scott J. Bleicher

Candace C. Formacek

Harvard B. Smith

Chairman, President and

Vice President and

Chief Executive Officer

Controller

Treasurer

Chief Compliance Officer

Airton L. Hentschke

Catherine H. Claiborne

Joseph W. Hearington, Jr.

Preston D. Wigner

Senior Vice President and

Vice President and

Chief Operating Officer

Assistant Secretary

Vice President,

Internal Auditing

Vice President, General

Counsel and Secretary

Johan C. Kroner

Steven S. Diel

Senior Vice President and

Vice President,

Beth Ann Luther

Vice President,

Chief Financial Officer

Business Development

Taxes

Jennifer S. Rowe

Assistant Vice President,

Capital Markets

C H A I R M E N E M E R I T U S

Henry H. Harrell
Allen B. King

T O O U R S H A R E H O L D E R S

Throughout fiscal year 2022, we demonstrated the strength of Universal’s operations and the resilience of our

business model in the face of ongoing industry and macro challenges. Thanks to the dedication of our team,

Universal remains the preferred supplier for our customers. We continue our commitment to a sustainable

supply chain to offer our customers a unique value proposition — high-quality, customized, traceable,

value-added agri-products — that is essential to their needs.

We continue to position ourselves for growth through diligently managing our businesses

while investing in our future despite external challenges ranging from logistical

constraints to inflationary pressures. In fiscal 2022, we reported:

• Net income attributable to Universal Corporation of $86.6 million, or $3.47 per

diluted share, compared to $87.4 million, or $3.53 per diluted share, for fiscal year

2021. Excluding restructuring and impairment costs and certain other non-recurring items,

net income and diluted earnings per share declined by $10.8 million and $0.46, respectively,

compared to fiscal year 2021.

• Operating income of $160.3 million, compared to operating income of $147.8 million for fiscal year 2021.

• Segment operating income of $174.3 million, an increase of $5.1 million, compared to the same period in fiscal

year 2021.

• Consolidated revenues of $2.1 billion, an increase of $120.2 million, compared to the same period in the prior fiscal

year, primarily driven by the acquired businesses in the Ingredients Operations segment and higher average sales

prices in the Tobacco Operations segment partially offset by lower tobacco sales volumes.

The acquisition of Shank’s Extracts LLC (“Shank’s”), which we completed in October 2021, marked another important

step forward in our efforts to identify and execute on opportunities that broaden and enhance our plant-based

ingredients platform. With Shank’s as part of our platform, we have bolstered our offerings for customers by adding

botanical extracts and flavorings.

Exploring opportunities for our plant-based ingredients platform continues to be an important growth strategy for

Universal, and we are also strengthening and investing in our tobacco operations. Opportunities still exist in our tobacco

business, and we continue to see strong customer demand. As we move forward, we are focused on expanding the

services we provide to our tobacco customers, while driving supply chain efficiencies to ensure we remain the leading

global leaf tobacco supplier.

For more than 100 years, we have been finding innovative solutions to meet our customers needs. To build on

this track record and consistent with our stated capital allocation strategy, we will continue to pursue additional

growth both in our tobacco and plant-based ingredients operations. At the same time, we remain committed to

consistently returning capital to our shareholders, and we were excited to announce our 52nd annual

dividend increase.

In addition to executing on our financial and operational objectives, we continue to prioritize implementing

targets and taking actions that are aligned with our sustainability goals and those of our customer base. In 2021,

Universal was recognized as a Supplier Engagement Leader by CDP, a non-profit that runs a global disclosure

system that reports environmental impacts for investors, companies, cities, states and regions. To learn more about

the important work we are doing around agricultural labor practices and environmental reporting and our overall

commitment to sustainability, visit our website to read our most recent annual Sustainability Report, which we

published in December 2021.

We are successfully executing on our strategy and becoming a better and stronger company despite the dynamic

market in which we operate. I have a deep sense of appreciation for our incredible team at Universal and am humbled

by and grateful for the support of our customers, farmers and other partners, and of course our shareholders, during

these challenging times.

George C. Freeman, III
Chairman, President and Chief Executive Officer

P A R T N E R I N G W I T H O U R S U P P L Y C H A I N

At Universal, we provide our customers with a reliable, long-term supply of responsibly-sourced products from

geographically diverse growing areas around the world. In conducting our businesses, we are committed to setting

high standards of social and environmental performance and working in partnership with our suppliers to reinforce

the sustainability of supply chains. Some of the ways we engage with our supply chain include promoting Good

Agricultural Practices (GAP), investing in capital projects that support operating goals and targets, and setting high

standards of environmental performance.

PROMOTING GOOD AGRICULTURAL PRACTICES

We continue to invest significant resources in the programs and infrastructure needed to work with tobacco farmers and

continue to enhance monitoring to demonstrate due diligence in our supply chain. Our Good Agricultural Practices

(GAP) focus on farm-level implementation of best practices that address farmer profitability and balance social

and environmental impacts. Universal provides comprehensive training, field technical support, and crop

analytics supported by ongoing research and development on GAP specific to each supplying origin.

Our commitment to supply chain due diligence is reinforced through MobiLeaf™, our proprietary

mobile platform that captures and shares data in real-time. Universal management teams review

monitoring data and performance in order to fine-tune our local actions in support of GAP and

farmer success.

INVESTMENTS THAT SUPPORT OPERATING GOALS AND TARGETS

In 2021, Universal publicly committed to environmental and supply chain goals to reinforce our commitment

to a sustainable supply chain. Universal management is implementing strategies to efficiently and effectively

meet those goals and uphold our stakeholder commitments while also supporting global goals for a sustainable

planet. Universal is an essential link in the tobacco supply chain and must invest in our farmers and businesses to meet

our goals and targets.

To appropriately monitor and manage the metrics associated with our goals and targets we have implemented

effective management systems. Globally, eleven of our tobacco processing plants are ISO certified, covering

approximately 70% of our total processed tobacco volumes. Our ISO certifications cover quality and

environmental procedures with ISO 9001 and ISO 14001 respectively, with some operations having an

additional certification for health and safety through ISO 45001.

Our ingredients businesses operate in alignment with the Global Food Safety Initiative (GFSI).

FruitSmart, Silva, and Shank’s use BRC, FSSC, and SQF certification programs, respec-

tively, to audit the performance of their organizations.

SETTING HIGH STANDARDS OF ENVIRONMENTAL PERFORMANCE

Universal’s goals and targets communicate our environmental performance

expectations to our global operations and supply chain. Within our

P A R T N E R I N G W I T H O U R S U P P L Y C H A I N

own operations we are committed to reducing emissions, decreasing the waste

sent to landfills, and increasing resilience in our water infrastructure. Our

operations are diligently identifying opportunities to meet these goals,

and we are excited to share our progress. We are happy to report

that we succeeded in achieving our waste goal early because our

new acquisitions, FruitSmart and Silva, already responsibly

disposed of their processing by-products through reuse.

We will continue to evaluate our operations and set

ambitious goals to achieve.

SCORE: A

ON SUPPLIER ENGAGEMENT

Universal is also committed to environmental performance

in our supply chain. Certain types of tobacco require additional

direct energy inputs in the curing process. Through our review of sup-

ply chain greenhouse gas emissions, we have found that Scope 3 emissions

associated with curing tobacco is the largest source of emissions in our supply

chain. Universal is working diligently to ensure that these energy inputs come from

traceable and sustainable sources, such as managed agroforestry projects and

biomass operations. Additionally, Universal is working with our farmers to replace

or upgrade their curing infrastructure to increase curing fuel efficiency.

A w ard e d by C D P

2021
SUPPLIER
ENGAGEMENT
LEADER
A w ard e d by C D P

P E R F O R M A N C E G R A P H
Comparison of 5 Year Cumulative Total Return*

*$100 invested on 3/31/17 in stock or index, including reinvestment of dividends. Fiscal year ending March 31.

The performance graph compares the cumulative total shareholder return on Universal Corporation common stock

for the last five fiscal years with the cumulative total return for the same period of the Standard & Poor’s Smallcap

600 Stock Index and the peer group index. The peer group represents Pyxus International, Inc. (formerly Alliance One

International, Inc.). The graph assumes that $100 was invested in Universal Corporation common stock at March 31,

2017, and in each of the comparative indices, in each case with dividends reinvested.

CUMULATIVE TOTAL RETURN UNIVERSAL CORPORATION COMMON STOCK

2017

2018

2019

2020

2021

2022

At March 31

Universal Corporation

$ 100.00

71.09

88.52

71.59

S&P Smallcap 600

Peer Group

100.00

112.68

202.72

114.44

185.91

84.81

24.20

$ 102.12

$ 106.42

165.66

33.46

167.70

11.28

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MARCH 31, 2022
OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________TO_______________

Commission File Number: 001-00652
UNIVERSAL CORPORATION
(Exact name of registrant as specified in its charter)

Virginia
(State or Other Jurisdiction of
Incorporation or Organization)

54-0414210
(I.R.S. Employer
Identification Number)

9201 Forest Hill Avenue, Richmond, Virginia 23235

(Address of Principal Executive Offices)

(Zip Code)

804-359-9311
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s) Name of each exchange on which registered

Common Stock, no par value

UVV

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act.
Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth
company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☑
Smaller reporting company ☐

Accelerated filer

☐
Emerging growth company ☐

Non-accelerated filer

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates, based upon the closing sales price on the
New York Stock Exchange of the registrant's common stock on September 30, 2021, the last business day of the registrant's most recently completed
second fiscal quarter, was approximately $1.2 billion.

As of May 24, 2022, the total number of shares of common stock outstanding was 24,557,980.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the registrant's 2021 Proxy Statement for the 2022 Annual Meeting of
Stockholders, which will be filed no later than 120 days after the close of the registrant's fiscal year ended March 31, 2022.

2022

UNIVERSAL CORPORATION
FORM 10-K
TABLE OF CONTENTS

PART I

Business .....................................................................................................................................................

Risk Factors ...............................................................................................................................................

Unresolved Staff Comments .....................................................................................................................

Properties ...................................................................................................................................................

Legal Proceedings .....................................................................................................................................

Mine Safety Disclosures ............................................................................................................................

PART II

Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities .................................................................................................

Selected Financial Data .............................................................................................................................

Management's Discussion and Analysis of Financial Condition and Results of Operations ....................

Item No.

1A.

1B.

7A.

Quantitative and Qualitative Disclosures About Market Risk ..................................................................

9A.

9B.

10.

11.

12.

13.

14.

15.

16.

Financial Statements and Supplementary Data .........................................................................................

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ..................

Controls and Procedures ............................................................................................................................

Other Information ......................................................................................................................................

PART III

Directors, Executive Officers, and Corporate Governance .......................................................................

Executive Compensation ...........................................................................................................................

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .

Certain Relationships and Related Transactions, and Director Independence ..........................................

Principal Accounting Fees and Services ...................................................................................................

PART IV

Exhibits, Financial Statement Schedules ...................................................................................................

Form 10-K Summary .................................................................................................................................

Schedule II - Valuation and Qualifying Accounts ....................................................................................

Exhibit Index .............................................................................................................................................

Signatures ..................................................................................................................................................

Page

100

101

104

Forward-Looking Statements

This Annual Report on Form 10-K, which we refer to herein as our Annual Report, contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Among other things, these statements relate to Universal Corporation’s financial
condition, results of operations and future business plans, operations, opportunities, and prospects. In addition, Universal
Corporation and its representatives may make written or oral forward-looking statements from time to time, 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: impacts of the COVID-19 pandemic; success in pursuing strategic investments or acquisitions and
integration of new businesses and the impact of these new businesses on future results; product purchased not meeting quality and
quantity requirements; reliance on a few large customers; its ability to maintain effective information technology systems and
safeguard confidential information; anticipated levels of demand for and supply of our products and services; costs incurred in
providing these products and services; timing of shipments to customers; changes in market structure; government regulation and
other stakeholder expectations; economic and political conditions in the countries in which we and our customers operate,
including the ongoing impacts from the conflict in Ukraine; product taxation; industry consolidation and evolution; changes in
exchange rates and interest rates; impacts of regulation and litigation on our customers; industry-specific risks related to its plant-
based ingredient businesses; exposure to certain regulatory and financial risks related to climate change; changes in estimates and
assumptions underlying its critical accounting policies; the promulgation and adoption of new accounting standards, new
government regulations and interpretation of existing standards and regulations; and general economic, political, market, and
weather conditions. For a description of factors that may cause actual results to differ materially from such forward-looking
statements, see Item 1A, “Risk Factors.” 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. In addition, the discussion of the impact of current trends on our business in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Other Information Regarding Trends and Management’s Actions” in
Item 7 should be read carefully in connection with evaluating our business and the forward-looking statements contained in this
Annual Report.

General

This Annual Report uses the terms “Universal,” “the Company,” “we,” “us,” and “our” to refer to Universal Corporation
and its subsidiaries when it is not necessary to distinguish among Universal Corporation and its various operating subsidiaries or
when any distinction is clear from the context in which it is used.

See the “Results of Operations” section in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in Item 7 for a discussion of adjusted operating income (loss), adjusted net income (loss) attributable to Universal
Corporation, adjusted diluted earnings (loss) per share, and segment operating income (loss), non-GAAP financial measures that
we refer to in this Annual Report on Form 10-K and consider useful in understanding our business results and trends.

Item 1. Business

The Company

Overview

PART I

We are a global business-to-business agri-products supplier to consumer product manufacturers, operating in over 30
countries on five continents. We strive to be the supplier of choice for our customers by leveraging our farmer base, our
commitment to a sustainable supply chain, and our ability to provide high-quality, customized, traceable, value-added agri-
products essential for our customers’ requirements. We find innovative solutions to serve our customers and have been meeting
their agri-product needs for more than 100 years. Our principal focus since our founding in 1918 has been tobacco, and we are the
leading global leaf tobacco supplier. The largest portion of our business involves procuring and processing flue-cured, burley, and
dark air-cured leaf tobacco for manufacturers of consumer tobacco products. Through our plant-based ingredients platform, we
provide a variety of value-added manufacturing processes to produce high-quality, specialty vegetable- and fruit-based ingredients
as well as botanical extracts and flavorings for human and pet food end markets. We do not manufacture any direct to consumer
products. Rather, we support consumer product manufacturers by selling them agri-products and performing related services for
them.

Recognizing that leaf tobacco is a mature industry, we have been positioning our company for the future by investing in
and strengthening our plant-based ingredients platform, while maintaining our position as the leading global leaf tobacco supplier.
In fiscal year 2022, we continued to make progress towards building and enhancing our plant-based ingredients platform. On
October 4, 2021, we acquired Shank’s Extracts, LLC (“Shank’s”), a specialty ingredient botanical extract and flavorings company
with bottling and packaging capabilities. We have been integrating and exploring opportunities for synergies between our
acquired businesses, FruitSmart, Inc. (“FruitSmart”), acquired on January 1, 2020, Silva International, Inc. (“Silva”), acquired on
October 1, 2020, and Shank’s.

We generated approximately $2.1 billion in consolidated revenues and earned $160.3 million in total operating income
and $174.3 million in total segment operating income in fiscal year 2022. Universal Corporation is a holding company that
operates through numerous directly and indirectly owned subsidiaries. Universal Corporation’s primary subsidiaries are Universal
Leaf Tobacco Company, Incorporated ("Universal Leaf"), which is associated with our Tobacco Operations segment, and
Universal Global Ventures, Incorporated, which is associated with our Ingredients Operations segment. See Exhibit 21,
“Subsidiaries of the Registrant,” for additional subsidiary information.

Additional Information

Our website address is www.universalcorp.com. We post regulatory filings on this website as soon as reasonably
practicable after they are electronically filed with or furnished to the SEC. These filings include annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, Section 16 reports on Forms 3, 4, and 5, and any
amendments to those reports filed with or furnished to the SEC. Access to these filings on our website is available free of charge.
Copies are also available, without charge, from Universal Corporation Investor Relations, 9201 Forest Hill Avenue, Richmond,
VA 23235. Reports filed with the SEC may be viewed at www.sec.gov. We also post our press releases on our website.
Information on our website is not deemed to be incorporated by reference into this Annual Report.

In addition, our Corporate Governance Guidelines, Code of Conduct, and charters for the Audit Committee, the
Compensation Committee, the Executive Committee, the Finance and Pension Investment Committee, and the Nominating and
Corporate Governance Committee are available free of charge to shareholders and the public through the “Corporate Governance”
section of our website. Printed copies of the foregoing are available to any shareholder upon written request to our Treasurer at
the address set forth on the cover of this Annual Report or may be requested through our website, www.universalcorp.com.

Description of Business

Given the significant and strategic investments in our plant-based ingredients platform, we evaluated our operating
segments for financial reporting purposes during the quarter ended December 31, 2020. Based on our evaluation, we determined
that we conduct our operations across two primary reportable operating segments, Tobacco Operations and Ingredients
Operations. The segments reflect how we manage our Company, allocate resources, and assess business performance. Prior period
segment information has been recast retrospectively to reflect these changes.

Tobacco Operations

Our primary business is contracting, procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale
to manufacturers of consumer tobacco products throughout the world. Procuring leaf tobacco involves contracting with, providing
agronomy support to, and financing farmers in many origins. We do not manufacture cigarettes or other consumer tobacco
products. Rather, we support consumer product manufacturers by selling them processed leaf tobacco and performing related
services for them. Through various operating subsidiaries and unconsolidated affiliates located in tobacco-growing origins around
the world, we contract, purchase, process, and sell flue-cured, burley, and dark air-cured tobaccos, as well as oriental tobaccos.
Flue-cured, burley, and oriental tobaccos are used principally in the manufacture of cigarettes as well as in shisha, while dark air-
cured tobaccos are used mainly in the manufacture of cigars, natural wrapped cigars and cigarillos, smokeless, and pipe tobacco
products. Some of these tobacco types are also increasingly used in the manufacture of next generation tobacco products that are
intended to provide consumers with a reduced-risk alternative to traditional combustible tobacco products. We also provide value-
added services to our customers, including blending, chemical and physical testing of tobacco, service cutting for select
manufacturers, manufacturing reconstituted leaf tobacco, and managing just-in-time inventory.

Several important operating factors characterize our Company and our primary business, leaf tobacco:

•

Experience dealing with large numbers of farmers,

Expertise in delivering a sustainable supply of compliant, traceable, competitively-priced leaf tobacco,

Capability to meet unique customer requirements for style, volume and quality,

Longstanding customer, farmer and community relationships,

Presence in all major leaf tobacco sourcing areas, and

Financial strength and flexibility.

In addition to our leaf tobacco business, we are involved in other smaller-scale tobacco opportunities. Our wholly-owned
subsidiary, AmeriNic, Inc., produces liquid nicotine for next generation tobacco products. AmeriNic’s products are manufactured
under stringent United States Pharmacopeia standards. Global Laboratory Services, Inc., another wholly-owned subsidiary,
provides testing for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette
liquids and vapors, and has capabilities for testing non-tobacco products. Analytical services include chemical compound testing
in finished tobacco products and mainstream smoke. We also have a U.S. based business that recycles waste materials from
tobacco production.

We believe that by following several key operating principles in our tobacco operations we can continue to produce good

financial returns and enhance shareholder value. These key operating principles are:

•

Strategic market position. We work closely with both our customers and our suppliers to ensure that we deliver a
product that meets our customers' needs while cultivating a strong, sustainable supplier base. We balance product
purchases against indicated customer demand and maintain global procurement and production operations to
maximize supply chain efficiencies.

Strong local management. Having strong local management in all of our key supply origins allows us to identify
and react to constantly shifting market conditions. Empowered and experienced local management, coupled with
global coordination, affords us the flexibility and knowledge necessary to adapt quickly in order to continually
deliver high quality, competitively-priced products and services.

• Compliant products. Customers expect a sustainable supply of compliant, traceable, competitively-priced product,
and we believe that we lead in delivering these products. Among other initiatives, we invest in training farmers in
good agricultural practices ("GAP") that encompass crop quality, sustainability, environmental stewardship and
agricultural labor standards.

• Diversified sources. Our business is reliant on a strong and resilient supply chain, which enables us to deliver a
stable supply of quality products to our customers. We operate in over 30 countries on five continents and maintain a
presence in all major flue-cured, burley, oriental, and dark air-cured tobacco origin markets. This global presence
allows us to meet our customers' diverse product requirements while minimizing the effects of adverse crop
conditions and other localized supply disruptions.

•

Financial strength. Financial strength is critical and enables us to fund our global operations efficiently and to
facilitate investment when suitable opportunities arise. Management of liquidity, interest expense, and capital costs
provides us with a competitive advantage, affords us flexibility when responding to customer requirements and
market changes, and allows us to enhance shareholder value.

With respect to our leaf tobacco business, we generate our revenues from product sales of processed, packed tobacco that
we source, from processing fees for tobacco owned by third parties, and from fees for other services. Sales to our largest
customers, with whom we have longstanding relationships, have accounted for more than 60% of our consolidated revenues for
each of the past three fiscal years. Our sales consist primarily of flue-cured, burley, and dark air-cured tobaccos. For the fiscal
year ended March 31, 2022, our Tobacco Operations segment accounted for 87% of our revenues and 90% of our segment
operating income.

We conduct our leaf tobacco business in varying degrees in a number of countries, including Bangladesh, Brazil,
Canada, the Dominican Republic, Ecuador, France, Germany, Guatemala, Hungary, India, Indonesia, Italy, Malawi, Mexico,
Mozambique, the Netherlands, Paraguay, the People’s Republic of China, the Philippines, Poland, Russia, Singapore, South
Africa, Spain, Switzerland, the United Arab Emirates, the United States, and Zimbabwe. In addition, our oriental tobacco joint
venture, Socotab, L.L.C. ("Socotab") has operations in Bulgaria, Greece, the Republic of North Macedonia, and Turkey.

Because unprocessed, or “green,” leaf tobacco is a perishable product, timely processing is an essential service to our
customers. Our processing of leaf tobacco includes grading in the factories, blending, removal of non-tobacco material, separation
of leaf from the stems, drying, packing to precise moisture targets for proper aging, as well as temporary storage. This generally
requires investments in factories and machinery in areas where the tobacco is grown. Processed tobacco that has been properly
packed can be stored by customers for a number of years prior to use, but most processed tobacco is used within two to three
years.

We are a major purchaser and processor in the primary exporting regions for flue-cured and burley tobacco throughout
the world. Africa, Brazil, and the United States produce approximately two-thirds of the flue-cured and burley tobacco grown
outside of China. We estimate that over the last five years we have handled, through leaf sales or processing, on average between
25% and 35% of the annual production of such tobaccos in Africa, between 35% and 45% and the United States, and between
15% and 25% in Brazil. These percentages can change from year to year based on the size, price, and quality of the crops. We
participate in the procurement, processing, storage, and sale of oriental tobacco through ownership of a 49% equity interest in
Socotab, a leading supplier of oriental tobaccos. In addition, we maintain a presence, and in certain cases, a leading presence, in
all other major tobacco growing regions in the world. We believe that our leading position in the leaf tobacco industry is based on
our volumes handled, our operating presence in all of the major sourcing areas, our ability to meet customer style, volume, and
quality requirements, our experience in dealing with large numbers of farmers, our expertise in delivering a sustainable supply of
compliant, traceable, competitively-priced leaf tobacco, our long-standing relationships with customers, our development of
processing equipment and technologies, and our financial position which enables us to make strategic investments in our business.
The efficiencies that we offer our customers, due to our established network of operational expertise and infrastructure on the
ground and our ability to market most styles and grades of leaf to a diverse customer base, are also key to our success.

We also have a leading position in worldwide dark tobacco markets. Our dark tobacco operations are located in most of
the major producing countries and in other smaller markets. We operate in major dark tobacco producing countries, including the
United States, the Dominican Republic, Ecuador, Indonesia, Paraguay, the Philippines, and Brazil. Dark tobaccos are typically
used in the manufacture of cigars, pipe tobacco, and smokeless tobacco products, and as components of certain “roll-your-own”
cigarette products.

Sales are made by our sales force and, to a much smaller degree, through the use of commissioned agents. Most
customers are long-established tobacco product manufacturers. Customer contract arrangements vary around the world and
include negotiated pricing as well as cost plus arrangements. Discussions of a customer’s longer-term needs may begin as early as
one to two years in advance of a particular crop purchase. These discussions are key to our future crop production planning. Prior
to planting each year, we use early customer indications for type, style, processing, and volume requirements for the upcoming
season’s crop to help us determine our farmer contracting and grower input needs in our origins. We work with our farmers and
customers continually throughout the crop season. As crops progress through the growing season, customers will inspect the crop,
and a customer’s early indications may be refined based upon emerging crop qualities and quantities and market pricing

expectations. Ultimately, purchase agreements specifying quantity, quality, grade and price are executed, leading to inventory
allocations of harvested green or processed leaf that we have acquired.

In the majority of the countries where we operate, we contract directly with tobacco farmers or tobacco farmer
cooperatives. In most countries outside the United States and the European Union, we advance seed or seedlings, fertilizer, and
other agricultural inputs to farmers. These advances are repaid by farmers with the tobacco they produce. We are dedicated to
promoting a sustainable farmer base and provide our farmers with agronomy support. Our GAP programs educate farmers in such
matters as the reduction of non-tobacco related materials, product traceability, environmental sustainability, agricultural labor
standards, and social responsibility.

Our foreign operations are subject to international business risks, including unsettled political conditions, expropriation,
import and export restrictions, exchange controls, and currency fluctuations. During the tobacco season in many of the countries
listed above, we advance funds, guarantee local loans, or do both, each in substantial amounts, for the eventual purchase of
tobacco. The majority of these seasonal advances and loan guarantees mature in one year or less upon the farmers’ delivery of
contracted tobaccos. Most advances to farmers are denominated in local currency, which is a source of foreign currency exchange
rate risk. Most tobacco sales are denominated in U.S. dollars, which reduces our foreign currency exchange risk after the tobacco
has been purchased. See Item 1A, “Risk Factors” for more information about our foreign currency exchange and other
international business risks.

Seasonality

Our tobacco operations are seasonal in nature. Tobacco in Brazil is usually purchased from January through July, while
buying in Malawi, Mozambique, Zimbabwe, and other African countries typically begins around April and continues through
November. Farmers begin to sell U.S. flue-cured tobacco in late July, and the marketing season lasts for approximately four
months.

We normally operate each of our tobacco processing plants for seven to nine months of the year. During this period for
each region, inventories of green tobacco, inventories of processed tobacco, and trade accounts receivable normally reach peak
levels in succession. We normally finance this expansion of current assets with cash, short-term borrowings from banks, and
customer advances, and these funding sources normally reach their peak usage in each region during its respective purchasing or
processing period. Our balance sheet at our fiscal year end reflects seasonal expansions in working capital in South America and
Central America. Our financial performance is also impacted by the seasonality of our business. Due to global tobacco growing
cycles, as well as customer shipment preferences, we typically ship a larger portion of our volumes in the second half of our fiscal
year. Changes in customer shipment schedules or changes in crop timing in a season can shift recognition of revenue in a given
fiscal year or between fiscal years.

Customers

A material part of our tobacco business is dependent upon a few customers. Our largest customers are Altria Group Inc.,
British American Tobacco plc, China Tobacco International, Inc., Imperial Brands plc, Japan Tobacco, Inc., Philip Morris
International, Inc., and Swedish Match AB. In the aggregate, these customers have accounted for more than 60% of our
consolidated revenues for each of the past three fiscal years. For the fiscal year ended March 31, 2022, each of British American
Tobacco plc, Imperial Brands plc, and Philip Morris International, Inc., including their respective affiliates, accounted for 10% or
more of our revenues. The loss of, or substantial reduction in business from, any of these customers could have a material adverse
effect on our results. We have longstanding relationships with all of these customers.

We had commitments from customers for approximately $694 million of the tobacco in our inventories at March 31,
2022. Based upon historical experience, we usually expect that about 90% of such orders will be delivered during the following
fiscal year. However, we expect a lower percentage of such orders will be delivered in fiscal year 2023 due to COVID-related
logistical challenges. Most of our products require shipment via trucks and oceangoing vessels to reach customer destinations.
Delays in the delivery of orders can result from such factors as truck and container availability, port access and capacity, vessel
scheduling, and changing customer requirements for shipment.

As more fully described in Note 1 and Note 4 to the consolidated financial statements in Item 8 of this Annual Report,
we recognize revenue from the sale of tobacco when we complete our contractual performance obligation for the transfer of the
tobacco, which is generally when title and risk of loss is transferred to our customer. Individual shipments may be large, and since
the customer typically specifies shipping dates, our financial results may vary significantly between reporting periods due to
timing of sales. In some markets, including Brazil, Italy, the Philippines, Poland, and the United States, we process tobacco that is
owned by our customers, and we recognize the revenue for that service when the processing is completed.

Competition

Competition among leaf tobacco suppliers is based on the ability to meet customer specifications in the growing, buying,
processing, and financing of tobacco, and on the prices charged for products and services. Competition varies depending on the
market or country involved. The number of competitors varies from country to country, but there is competition in most areas to
buy and sell the available tobacco. Our principal competitor is Pyxus International, Inc. (“Pyxus”) (formerly Alliance One
International, Inc.). Pyxus operates in some of the countries where we operate. However, we are the only global leaf tobacco
supplier with operations in the Dominican Republic, Ecuador, Hungary, Italy, Mexico, Mozambique, Paraguay, the Philippines,
and Poland and that participates in the sale and production of dark air-cured tobaccos. We also have reconstituted tobacco sheet
facilities and operations that handle dark air-cured tobacco and other tobaccos. We consider ourselves and Pyxus to be the only
global leaf suppliers based on our worldwide scope of operations. Most of our major customers are partially vertically integrated,
and thus also compete with us for the purchase of leaf tobacco in several of the major markets.

In most major leaf tobacco markets, smaller competitors are very active. These competitors typically have lower
overhead requirements and provide less support to customers and farmers. Due to their lower cost structures, they can often offer
a price on products that is lower than our price. However, we believe that we provide quality controls and farm programs that add
value for our customers in an increasingly regulated world and make our products highly desirable. Our GAP support an approach
to farming that is focused on sustainability, employing sound field production and labor management practices that meet our
customers’ needs, promote farmer profitability, and reflect environmental sensitivity. We provide comprehensive training,
technical support in the field, and crop analytics through ongoing research and development. We believe that our major customers
increasingly require these services and that our programs increase the quality and value of the products and services we offer. We
also believe that our customers value the security of supply that we are able to provide due to our strong relationships with our
farmer base and our global footprint.

Ingredients Operations

Our ingredients businesses provide our business-to-business customers with a broad range of plant-based ingredients for
both human and pet consumption. A variety of value-added manufacturing processes are used in these businesses to convert raw
materials into a wide spectrum of fruit and vegetable juices, concentrates, dehydrated products, botanical extracts, and flavorings.
Our plant-based ingredients platform serves the Food and Beverage market, one of the largest industrial categories in the United
States. There are thousands of companies represented in this segment and hundreds that offer similar or competitive types of
products. We distinguish ourselves in this market by offering high-quality, customized product solutions with global sourcing
capabilities and by having strong, long-standing customer relationships. Customers of our ingredients businesses include large
multinational food and beverage companies, as well as smaller independent entities. No customer accounted for more than 10% of
our Ingredients Operations segment revenues in fiscal year 2022. FruitSmart, Silva, and Shank's are the primary operations for the
Ingredients Operations segment. In December 2020, we announced the wind-down of Carolina Innovative Food Ingredients, Inc.
(“CIFI”), a greenfield operation that primarily manufactured both dehydrated and liquid sweet potato products having determined
that CIFI is not a strategic fit for the long-term objectives of our plant-based ingredients platform. Sales of remaining inventory,
the sale of the CIFI manufacturing facility, and certain administrative activities at CIFI continued into fiscal year 2022.

FruitSmart supplies a broad set of juices, concentrates, pomaces, purees, fruit fibers, seed and seed powders, and other
value-added products to food, beverage and flavor companies throughout the United States and internationally. FruitSmart
processes apples, grapes, blueberries, raspberries, cherries, blackberries, pears, cranberries and strawberries as well as other fruits
and vegetables. Its top five products are apple juice concentrate, not from concentrate apple juice, concord grape, raspberry, and
blueberry juice concentrates. The business is headquartered in the Yakima Valley of the state of Washington, where it has
approximately 200 employees and two manufacturing facilities: one produces liquid products and one produces dry products.
FruitSmart is well-positioned to capitalize on recent shifts in market dynamics and consumer behavior including a secular shift
towards health and wellness, favoring natural clean-label ingredient producers and the rise of fruit as a natural clean-label
sweetener alternative to processed sugar. FruitSmart also stands to benefit from growing consumer interest in better-for-you
premium ingredients, including custom blends, not-from-concentrate and dry products, and strong growth in targeted end markets
utilizing FruitSmart products, including ciders, purees and nutraceuticals.

Silva procures over 60 types of dehydrated vegetables, fruits and herbs from over 20 countries around the world. In
addition to sourcing, the company specializes in processing natural materials into custom designed dehydrated vegetable and fruit-
based ingredients for a variety of end products. Its top five ingredient product categories are vegetable blends, peppers, spinach,
carrots, and pumpkin. Headquartered in Momence, Illinois, Silva employs over 200 people and has a 380,000 square foot
manufacturing facility. Silva has established a reputation as the ‘go-to’ provider for ‘clean,’ natural, specialty dehydrated
vegetable and fruit-based ingredients due to its unique competencies and significant capacity to source, process and manufacture
materials. Silva also has longstanding relationships with farmers and suppliers around the world and maintains strong quality
control procedures, ensuring consistent, high-quality supply. Silva’s manufacturing facility was recently expanded and enhanced.
As a result, the business is well positioned to take advantage of increasing demand for natural and clean-label products across the
end markets it serves, including within the attractive and growing savory and pet food end markets.

Shank’s produces botanical extracts, flavorings and has bottling capabilities. Shank’s has a strong presence within the
botanical extracts, flavorings, and bottling marketplace, with significant vanilla expertise. In addition to pure vanilla extract
products, Shank’s offers a robust portfolio of over 2,400 other extracts, distillates, natural flavors and colors for industrial and
private label customers worldwide. Shank’s employs more than 200 people and has a 191,000 square foot manufacturing campus
in Lancaster, Pennsylvania. The acquisition of Shank’s added flavors, custom packaging and bottling, and product development
capabilities to our plant-based ingredients platform.

Sustainability

We believe we have a fundamental responsibility to our stakeholders to set high standards of social and environmental
performance to support a sustainable supply chain and operations. In 2018, Universal celebrated 100 years in business. Our 100
year anniversary was an opportunity to look back at our accomplishments, and to look forward to our future. We believe
sustainability is a key component of our past and future success, and we highlighted our 100 year anniversary by publishing a
Sustainability Review to promote our commitment to sustainability. Since then we have produced annual sustainability reports,
and we have committed to continuing our annual sustainability reporting. Our Board of Directors further evidenced our
commitment to sustainability by amending our Nominating and Corporate Governance Committee charter to give the Committee
oversight of our Environmental, Social and Governance ("ESG") programs.

Our commitment to sustainability encompasses a wide array of programs and initiatives. As a global agri-products
supplier operating in numerous countries around the world, we primarily focus our sustainability efforts on our own operations
and the farmers from whom we purchase leaf tobacco and other food materials. Sustainability efforts with respect to our facilities
around the world involve the adoption and implementation of policies and procedures related to environmental impacts,
workforce protections and programs such as those we address in “Human Capital Management” below, and other important
considerations. Sustainability efforts with respect to our supply chain also address environmental impacts, while also emphasizing
important issues such as appropriate agricultural labor practices and other components of industry-recognized GAP.

Agricultural Labor Practices

Throughout the world, we work side-by-side with our contracted farmers to produce a sustainable tobacco crop that
adheres to GAP, including appropriate agricultural labor practices. Our global Agricultural Labor Practices (“ALP”) program
code, or ALP Code, consists of seven principles that set forth human rights requirements for our contracted farmers to meet. The
ALP Code requires the progressive elimination of child labor; adherence to income and work hour requirements; fair treatment of
workers so they are free from abuse; prohibition of forced labor; safe working environments; recognition and respect of workers’
rights to freedom of association and collective bargaining; and compliance with local employment laws. As part of our ALP
program, we train contracted farmers on the ALP Code requirements and we monitor their compliance through multiple in-person
farm visits during the growing season. The significant investment of time and resources we commit each year to our ALP program
evidences the importance of sustainable labor practices to our business.

Environmental Impacts

Universal is committed to abiding by environmental laws and regulations, monitoring our supply chain activities, and
cooperating with supply chain partners to implement strategies that mitigate and reduce environmental impacts that may be
associated with our business. We recognize three primary environmental risks related to our global footprint: water usage;
emissions; and waste. In fiscal year 2020, several environmental projects and programs were expanded and implemented to
further minimize our environmental footprint, including GAP program initiatives to address environmental risks on contracted
farms. In addition, we publicly committed to meet a science-based greenhouse gas emissions reduction target of 30% for our
Company by 2030 through the Science Based Targets Initiative.

For a discussion of recent developments and trends in our businesses, along with factors that may affect our businesses
see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 1A, “Risk
Factors.”

Human Capital Management

Workforce Overview

We believe our employees are among our most important resources and rely on them to execute our business plan with
integrity and efficiency. Investing in human capital is critical to our continued success. Our employees enable us to be a leading
global supplier of leaf tobacco and other agri-products. We strive to foster a diverse and inclusive workplace; attract, retain, and
develop talented personnel; and keep our employees safe and healthy.

As of March 31, 2022, we employed more than 25,000 employees, located in over 30 different countries across five
continents. Approximately 55% of our employees are seasonal and approximately 45% of our employees are full time. More than
48% of our employees are female and almost 17% of our managers are female. Globally, Universal has twelve collective
bargaining agreements in place, covering approximately 56% of our workforce. The sizeable seasonal nature of our global
workforce makes these numbers fluctuate throughout the year. The above percentages reflect our workforce on March 31, 2022.

We are a multinational and multicultural organization, with employees and operations located around the world, and we
are committed to creating a diverse and inclusive workplace. Less than 6% of our employees are located in the United States.
Almost all of our employees are from the same country in which our operations are located. Our expatriate hires represent less
than 0.5% of our workforce, and they are hired due to their essential professional knowledge necessary to the operation of our
business.

Universal Corporation’s Board of Directors’ Role in Human Capital Management

Our Board of Directors believes that human capital management is an important component of our continued growth and
success and is essential to our ability to attract, retain, and develop talented and skilled employees. We pride ourselves on a
culture that respects co-workers and values concern for others.

Our Nominating and Corporate Governance Committee and our Compensation Committee both have important roles
with respect to human capital management. The Nominating and Corporate Governance Committee oversees and reviews our
ESG programs, which include important policies and practices related to human rights, diversity and inclusion, prohibitions
against discrimination, and other policies related to our workforce as well as our Board of Directors. The Compensation
Committee has oversight of compensation, benefits, and retention and development processes, including an annual review of the
Company's succession planning and leadership development program.

We are committed to protecting the human rights of our employees and have policies in place to support this effort,
including relating to whistleblowing, harassment, equal employment and compliance with local labor laws. Our Board of
Directors also adopted our Code of Conduct and Anti-Corruption Compliance Manual to promote ethical behavior throughout the
Company and address violations of ethical standards. The Code and Manual have been translated into 17 languages and apply
directly to all officers, directors and non-seasonal employees in the Universal family of companies. The Board of Directors also
adopted our Human Rights Policy, which defines the high ethical and social standards we implement across our global operations.
We support these rights and programs through compliance communications, face-to-face and online training, and through an
anonymous compliance hotline that we maintain globally. Our compliance hotline is available to all our employees and any other
interested parties 24 hours a day, 7 days a week, by internet or phone. The Board of Directors oversees our global compliance
program and receives reports from our Chief Compliance Officer at each scheduled Board of Directors meeting.

Employee Benefits

In addition to offering competitive base salaries and wages, the Compensation Committee believes employee benefits are
an essential component of our total compensation package. Each of our global operations provides benefits that are designed to
attract and retain our employees. These benefits vary depending on the location, seniority and employment status of our
employees, and can include medical insurance, long-term disability insurance, retirement benefits, and similar programs. We
periodically review and adjust our employees’ total compensation and benefits when necessary to ensure that they are competitive
within our industry and are aligned with our performance.

We also support our employees outside of work through a variety of initiatives and strongly believe that our success
relies on the prosperity of the communities in which we operate. We fund various programs that enhance local economies and
cultures. For example, in numerous locations we support projects designed to impact our employees and their families such as
establishing health clinics and wellness programs to assist our employees, administering after school care for schoolchildren, or
funding local cultural events. Ultimately, we recognize our impact extends beyond the workplace and are proud to engage as both
active corporate citizens and leaders in our neighborhoods, communities, and countries.

Talent Development and Training

Employee training and development of both technical and leadership skills are integral aspects of our human capital
strategy. We provide employees with a range of development opportunities that vary by location and seniority of employees, such
as online training, live classes, and mentoring to assist with career advancement. These programs often include safety and
technical job skill training as well as soft-skill programs focused on communication and change management. Development of
leadership skills remains a top priority and is specialized for all level of employees. For example, members of management in our
global operations participate in our succession planning programs, which include the identification of employees who are offered
development opportunities for career advancement.

Health and Safety

The health and safety of our employees is at the forefront of our business efforts. We are committed to the prevention of
injury and illness in the workplace through strong health and safety management, employee empowerment and accountability, and
strict compliance with health and safety regulations. We pair our improved health and safety management system with a strong
database reporting tool to allow all Universal facilities to track their local occupational health and safety performance and that of
the entire company. These reports allow our global teams to analyze the insights collected from our health and safety system
immediately.

Additionally, we utilize other health and safety initiatives to ensure our facilities remain safe for our employees. We
established health and safety Key Performance Indicators (KPIs) across our tobacco factory and agronomy operations. Each
factory carries out an in-depth data analysis of prior data and implements KPIs for improvement and monitoring. By giving
employees a goal to achieve and monitor, they will be more engaged in what they do and better able to help us succeed. Our
“fresh eyes” approach to workplace safety involves inviting colleagues from different facilities to share in cross-auditing tasks. In
addition to corporate audits, we encourage this regional cross-auditing to promote a collaborative framework and drive our
employee safety programs forward.

We continue to closely monitor developments related to the ongoing COVID-19 pandemic and have taken and continue
to take steps intended to mitigate the potential risks to us. It is paramount that our employees who operate our businesses are safe
and informed. We have assessed and regularly update our existing business continuity plans for our business in the context of this
pandemic. For example, we have taken precautions with regard to employee and facility hygiene, imposed travel limitations on
our employees, directed certain employee groups to work remotely whenever possible, and continue to assess protocols designed
to protect our employees, customers, and the public.

Research and Development

We did not expend material amounts for research and development during the fiscal years ended March 31, 2022, 2021,

or 2020.

Intellectual Property

We hold no material patents, licenses, franchises, or concessions.

Government Regulation, Environmental Matters, and Other Matters

Our business is subject to general governmental regulation in the United States and in foreign jurisdictions where we
conduct business. Such regulation includes, but is not limited to, matters relating to environmental protection. To date,
governmental provisions regulating the discharge of material into the environment have not had a material effect upon our capital
expenditures, earnings, or competitive position. See Item 1A, “Risk Factors” for a discussion of government regulations and other
factors that may affect our business.

Item 1A. Risk Factors

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 results 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.

Epidemics, pandemics or similar widespread public health concerns, such as COVID-19, could adversely affect our business,
financial condition, results of operations and demand for our products and services.

Since January 2020, the COVID-19 outbreak, characterized as a pandemic by the World Health Organization ("WHO")
on March 11, 2020, has caused, and could possibly continue to cause a widespread health crisis and significantly disrupt the U.S.
and global economies, markets and supply chains. The ultimate impact of the COVID-19 pandemic or any future pandemic or
disease outbreak on our business, financial condition, results of operations 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 the COVID-19 pandemic or any future pandemic or disease outbreak will impact our business,
financial condition, results of operations, and demand for our products and services will depend on future developments including
the ongoing geographic spread of the health crisis, the impact of disease mutations, the severity and duration of the health crisis,
and the type and duration of actions that may be taken by various governmental authorities in response to the COVID-19
pandemic or any future pandemic or disease outbreak and the impact on the U.S. and the global economies, markets, and supply
chains. COVID-19, and other adverse public health developments in countries and states where we operate, therefore, could have
a material and adverse effect on our business, financial condition, results of operations and the demand for our products and
services. 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, liquidity and capital markets. In addition, we have taken and will
continue to take precautionary measures, including through consultation with governmental authorities and union representatives,
intended to help minimize the risk of the COVID-19 pandemic to our employees, including implementing work-from-home
protocols, instituting mandatory stay-at-home policies for those who are ill or significantly exposed to COVID-19, acquiring
personal protective equipment (PPE), increasing sanitation and special sanitation of work areas, mandating social distancing
(particularly among our employees engaged in manual processes), altering work arrangements to maintain social distancing and
limiting visitors and non-employees at our facilities. Our business continuity plans and other safeguards, however, may not be
effective to mitigate the results of the COVID-19 pandemic.

The impact of the COVID-19 pandemic and any worsening of the global business and economic environment as a
result may also exacerbate the following risk factors discussed below in this Form 10-K, any of which could have a
material effect on us. This situation remains fluid and additional impacts may arise that we are not aware of currently.

Operating Factors

In areas where we purchase leaf tobacco directly from farmers, we bear the risk that the tobacco we receive will not meet quality
and quantity requirements.

When we contract directly with tobacco farmers or tobacco farmer cooperatives, which is the method we use to purchase
tobacco in most countries, we bear the risk that the tobacco delivered may not meet customer quality and quantity requirements. If
the tobacco does not meet such market requirements, we may not be able to fill all of our customers’ orders, and such failure
would have an adverse effect on profitability and results of operations. In a contract market our obligation is to purchase the entire
tobacco plant, which encompasses many leaf styles, therefore, we also have a risk that not all of that production will be readily
marketable at prices that support acceptable margins. In addition, in many foreign countries where we purchase tobacco directly
from farmers, we provide them with financing. Unless we receive marketable tobacco that meets the quality and quantity
specifications of our customers, we bear the risk that we will not be able to fully recover our crop advances or recover them in a
reasonable period of time.

The leaf tobacco industry is competitive, and we are heavily reliant on a few large customers.

We are one of two major independent global competitors in the leaf tobacco industry, both of whom are reliant upon a
few large customers. The loss of one of those large customers or a significant decrease in their demand for our products or
services could significantly decrease our sales of products or services, which would have a material adverse effect on our results
of operations. The competition among leaf tobacco suppliers and dealers is based on the ability to meet customer requirements in
the buying, processing, and financing of tobacco, and on the price charged for products and services. We believe that we
consistently meet our customers’ requirements and charge competitive prices. Since we rely upon a few significant customers, the
consolidation or failure of any of these large customers, or a significant increase in their vertical integration, could contribute to a
significant decrease in our sales of products and services.

We compete for both the purchase and sale of leaf with smaller leaf tobacco suppliers in some of the markets where we
conduct business. Some of these smaller leaf tobacco suppliers operate in more than one country. Since they typically provide
little or no support to farmers, these leaf tobacco suppliers typically have lower overhead requirements than we do. Due to their
lower cost structures, they often can offer prices on products and services that are lower than our prices. Our customers also
directly source leaf tobacco from farmers to meet some of their raw material needs. Direct sourcing provides our customers with
some qualities and quantities of leaf tobacco that they prefer not to use in their existing blends and that may be offered for sale.
This competition for both the sale and purchase of leaf, both with smaller leaf tobacco suppliers and direct sourcing, could reduce
the volume of the leaf we handle and could negatively impact our financial results.

Our financial results can be significantly affected by changes in the balance of supply and demand for leaf tobacco.

With respect to our leaf tobacco operations, our financial results can be significantly affected by changes in the overall
balance of worldwide supply and demand for leaf tobacco. The demand for leaf tobacco, which is based upon customers’
expectations of their future requirements, can change from time to time depending upon factors affecting the demand for their
products. Our customers’ expectations and their demand for leaf tobacco are influenced by a number of factors, including:

•

trends in the global consumption of cigarettes,

trends in consumption of cigars and other tobacco products,

trends in consumption of alternative tobacco products, such as electronic nicotine delivery systems ("ENDS") and
non-combustible products,

levels of competition among our customers, and

regulatory and governmental factors.

The world supply of leaf tobacco at any given time is a function of current tobacco production, inventories held by
manufacturers, and the stocks of leaf tobacco held by leaf tobacco suppliers. Production of tobacco in a given year may be
significantly affected by such factors as:

•

demographic shifts that change the number of farmers or the amount of land available to grow tobacco,

decisions by farmers to grow crops other than leaf tobacco,

volume of annual tobacco plantings and yields realized by farmers,

availability of crop inputs,

weather and natural disasters, including any adverse weather conditions that may result from climate change, and

crop infestation and disease.

Any significant change in these factors could cause a material imbalance in the supply of and demand for tobacco, which

would affect our results of operations.

Our financial results will vary according to tobacco growing conditions, customer requirements, and other factors. These factors
may also limit the ability to accurately forecast our future performance and increase the risk of an investment in our common
stock or other securities.

Our financial results, particularly our year-over-year quarterly comparisons, may be significantly affected by variations
in tobacco growing seasons and fluctuations in crop sizes. The timing of the cultivation and delivery of tobacco is dependent upon
a number of factors, including weather and other natural events, and our processing schedules and results of operations can be
significantly altered by these factors. In addition, the potential impact of climate change is uncertain and may vary by geographic
region. The possible effects, as described in various public accounts, could include changes in rainfall patterns, water shortages,
changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business
operations and the supply and demand for leaf tobacco. Our operations also rely on dependable and efficient transportation
services. A disruption in transportation services, as a result of climate change or otherwise, may also significantly impact our
results of operations.

Further, the timing of customer orders and shipments may vary and may require us to keep tobacco in inventory and may
also result in variations in quarterly and annual financial results. We base sales recognition on meeting our performance obligation
under our contract with the customer, which generally occurs with the passage of ownership of the tobacco. Since individual
shipments may represent significant amounts of revenue, our quarterly and annual financial results may vary significantly
depending on the timing of needs and shipping instructions of our customers and the availability of transportation services. These
fluctuations result in varying volumes and sales in given periods, which also reduce the comparability of financial results.

Major shifts in customer requirements for leaf tobacco supply may significantly affect our operating results.

If our customers significantly alter their requirements for tobacco volumes from certain regions, we may have to change
our production facilities and alter our fixed asset base in certain origins. Permanent or long-term reduction in demand for tobacco
from origins where we have operations may trigger restructuring and impairment charges. We may also need to make significant
capital investments in other regions to develop the needed infrastructure to meet customer supply requirements.

We may not be able to increase prices to fully offset inflationary and other pressures on costs, such as raw products, packing
materials, labor, energy, and distribution costs.

As a supplier of leaf tobacco and plant-based ingredients, we source our raw materials globally and rely on labor, energy,
packing materials, and distribution resources to produce and distribute our products. Many of these materials and inputs are
subject to price fluctuations from a number of factors, including but not limited to changes in crop sizes, crop qualities, crop
disease, product scarcity, fertilizer costs, energy costs, labor costs, currency fluctuations, import and export requirements
(including tariffs), adverse weather events, pandemic illness (such as the COVID-19 pandemic), political instability or military
conflict such as the ongoing conflict in Ukraine, and other factors that may be beyond our control. We try to pass along to our
customers some or all cost increases through increases in the sales prices of our products. To the extent that price increases are not
sufficient to offset the cost increases or we experience reductions in sales volumes, our business results and financial condition
may be adversely affected.

Weather and other conditions can affect the marketability of our products.

Tobacco and other agricultural crops are subject to vagaries of weather and the environment that can, in some cases,
change the quality or size of the crops. Severe weather conditions may occur with higher frequency or may be less predictable in
the future due to the effects of climate change. If a weather event or other event is particularly severe, such as a volcanic eruption,
major drought, hurricane, cyclone, typhoon, windstorm, or temperature or precipitation extreme, the affected crop could be
destroyed or damaged to an extent that it would be less desirable to our customers, which would result in a reduction in operating
results. If such an event is also widespread, it could affect our ability to acquire the quantity of tobacco or plant-based ingredients
required by our customers or could prevent or impair our ability to process or ship products as planned. In addition, other factors
can affect the marketability of our products, including, among other things, the presence of excess residues of crop protection
agents or non-tobacco related materials. A significant event impacting the condition or quality of a large amount of any of the
crops that we buy could make it difficult for us to sell these products or to fill customers’ orders.

Legal, regulatory or other market measures to address climate change could negatively affect our business operations.

The increasing concern over climate change may result in more regional, federal, foreign and/or global legal and
regulatory requirements to reduce or mitigate the effects of greenhouse gases. In the event that such regulation is enacted and is
more aggressive than the sustainability measures that we and our suppliers are currently undertaking to monitor our emissions and
improve energy and resource efficiency, we may experience significant increases in our material and production costs. Our
suppliers would likely pass all or a portion of their increased costs along to us. We may not be able to pass any resulting cost
increases to our customers. Furthermore, we may be required to make additional investments of capital to maintain compliance
with new laws and regulations. As a result, climate change or increased concern over climate change could negatively affect our
business or operations.

Our plant-based ingredients business is subject to industry-specific risks which could adversely affect our operating results.

Our plant-based ingredients business is subject to risks posed by food spoilage or food contamination; shifting consumer
preferences; federal, state, and local food processing regulations; product tampering; and product liability claims. If one or more
of these risks were to materialize, our revenues and operating results could be adversely affected, and our reputation might be
damaged.

Disruption of our supply chain for our plant-based ingredients operations could adversely affect our business.

Damages or disruption to raw material supplies or our manufacturing or distribution capabilities due to weather, climate
change, natural disaster, fire, terrorism, cyber-attack, pandemics (such as the COVID-19 pandemic), governmental restrictions or
mandates, strikes, import/export restrictions, political instability or military conflict such as the ongoing conflict in Ukraine, or
other factors could impair our ability to produce or sell our plant-based ingredient products. Many of our plant-based ingredient
product lines are manufactured at a single location or require raw materials that are currently sourced from a limited number of
regions. The failure of third parties on which we rely, including those third parties who supply our raw materials, packaging,
capital equipment and other necessary operation materials, to meet their obligations to us, or significant disruptions in their ability
to do so, may negatively impact our operations, as well as require additional resources to restore our supply chain.

We may not be successful in pursuing strategic investments or acquisitions or realize the expected benefits of those transactions
because of integration difficulties and other challenges.

While we may identify opportunities for acquisitions and investments to support our growth strategy, as well as
divestiture opportunities, our due diligence examinations and positions that we may take with respect to appropriate valuations for
acquisitions and divestitures and other transaction terms and conditions may hinder our ability to successfully complete business
transactions to achieve our strategic goals. We compete with other acquisitive entities for suitable acquisition candidates. This
competition may increase the price for acquisitions and reduce the number of acquisition candidates available to us. As a result,
our ability to acquire businesses in the future, and to acquire such businesses on favorable terms, may be limited. Our ability to
realize the anticipated benefits from acquisitions will depend, in part, on successfully integrating each business with our Company
as well as improving operating performance and profitability through our management efforts and capital investments. The risks
to a successful integration and improvement of operating performance and profitability include, among others, failure to
implement our business plan, unanticipated issues in integrating operations with ours, unanticipated changes in laws and
regulations, regulatory, environmental and permitting issues, unfavorable customer reactions, the effect on our internal controls
and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002, and difficulties in fully identifying and
evaluating potential liabilities, risks and operating issues. In order to finance such acquisitions, we may need to obtain additional
funds either through public or private financings, including bank and other secured and unsecured borrowings and the issuance of
debt or equity securities. There can be no assurance that such financings would be available to us on reasonable terms or that any
future issuances of securities in connection with acquisitions will not be dilutive to our shareholders. The occurrence of any of
these events may adversely affect our expected benefits of any acquisitions and may have a material adverse effect on our
financial condition, results of operations or cash flows.

We may be adversely impacted if our information technology systems fail to perform adequately, including with respect to
cybersecurity issues.

The efficient operation of our business depends on our information technology systems. We rely on our information
technology systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, and other
business processes. The failure of our information technology systems (including those provided to us by third parties) to perform
as we anticipate could disrupt our business and affect our results of operations.

In addition, our information technology systems may be vulnerable to damage or interruption from circumstances
beyond our control, including fire, natural disasters, systems failures, security breaches or intrusions (including theft of
confidential data), and viruses. Cyber attacks, data breaches or other breaches of our information security systems may cause
equipment failures or disruptions to our operations. Our inability to operate our networks and security information systems as a
results of such events, even for a short period of time, may result in significant expenses or operating disruptions. If we are unable
to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we may 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. 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 may require significant
additional expense and may not be successful.

The inability for us to attract, develop, retain, motivate, and maintain good relationships with our workforce, including key
personnel, could negatively impact our business and our profitability.

Our future success depends on our ability to attract, develop, retain, motivate, and maintain good relationships with
qualified personnel, particularly those who have extensive expertise in leaf tobacco or plant-based ingredients operations and who
may also have long service with our Company. We have such personnel in our senior executive leadership as well as in other key
areas throughout our U.S. and international operations such as procurement, manufacturing, and sales, all of which are critical to
our future growth and profitability.

Changes in labor markets as a result of COVID-19 and other socioeconomic and demographic changes, have increased
the competition for hiring and retaining talent. As a result of this competition, we may be unable to continue to attract, develop,
retain, motivate, and maintain good relationships with suitably qualified individuals at acceptable compensation levels who have
the managerial, operational, and technical knowledge and experience to meet our needs. Furthermore, the failure to execute on
internal succession plans or to effectively transfer knowledge from exiting employees to others in the organization could
adversely affect our business and results of operations. Even if we succeed in hiring new personnel to fill vacancies, lengthy
training and orientation periods might be required before new employees are able to achieve necessary productivity levels. Any
failure by us to attract, develop, retain, motivate, and maintain good relationships with qualified individuals could adversely affect
our business and results of operations.

We are dependent on a seasonal workforce to meet our operational needs.

Our tobacco operations depend in part on our ability to attract, train, motivate and retain qualified employees, many of
whom are seasonal employees. We seek to manage seasonal wages and the timing of the hiring process to ensure the appropriate
workforce is in place for peak and low seasons. Many of our tobacco 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 and our financial results could be negatively impacted.

Regulatory and Governmental Factors

Government efforts to regulate the production and consumption of tobacco products could have a significant impact on the
businesses of our leaf tobacco customers, which would, in turn, affect our results of operations.

Governments continue their efforts to reduce the consumption of tobacco products globally by advancing regulations
that, among other things, restrict or prohibit tobacco product use, advertising and promotion, increase taxes on tobacco products,
limit nicotine levels in tobacco products, or eliminate the use of characterizing flavors.

A number of such measures are included in the WHO Framework Convention on Tobacco Control (“FCTC”), which
entered into force on February 27, 2005, and currently has 182 Parties to the Convention. The Conference of the Parties (“COP”),
which is the governing body of the WHO FCTC and is comprised of all Parties to the Convention, meets every two years to
consider amendments to the agreement and track progress in the implementation of the treaty’s 38 articles. 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.

We also cannot predict the extent or speed at which the efforts of governments or non-governmental agencies to reduce
tobacco consumption might affect the business of our primary customers. However, a significant decrease in worldwide tobacco
consumption brought about by existing or future laws and regulations would reduce demand for tobacco products and could have
a material adverse effect on our results of operations.

Government actions can have a significant effect on the sourcing of leaf tobacco. If some of the current efforts are successful, we
could have increased barriers in meeting our customers’ requirements, which could have an adverse effect on our performance
and results of operations.

A variety of government actions can have a significant effect on the sourcing and production of leaf tobacco. If some of
the current proposed efforts are successful, we could have increased barriers to meeting our customers’ requirements, which could
have an adverse effect on our performance and results of operations.

The WHO, through the FCTC, has specifically issued policy options and recommendations to promote crop
diversification initiatives and alternatives to growing leaf tobacco in countries whose economies depend upon tobacco production.
If certain countries were to follow these policy recommendations and seek to eliminate or significantly reduce leaf tobacco
production, we could encounter difficulty in sourcing leaf tobacco from these regions to fill customer requirements, which could
have an adverse effect on our results of operations.

Certain recommendations by the WHO, through the FCTC, may also cause shifts in customer usage of certain styles of
tobacco. In countries such as Canada and Brazil and in the European Union, efforts have been taken to eliminate certain
ingredients from the manufacturing process for tobacco products. The FCTC and national governments have also discussed
formulating a strategy to place limitations on the level of nicotine allowed in tobacco and tobacco smoke. 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 have the ability to 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 operations and demand for our products and services will depend on future
developments, which are highly uncertain and cannot be predicted.

Continuous changes in bilateral, multilateral, and international trade agreements also have the potential to disrupt or
impact Universal operations. For example, the World Trade Organization’s resolution on the Large Civil Aircraft Dispute
between the United States and the European Union resulted in both bodies imposing tariffs on a variety of products, including leaf
tobacco. While these tariffs have been temporarily lifted and negotiations continue, drastic changes in global trade remains a risk
to our results of operations. In addition, some trade proposals have included provisions that could effectively allow governments
to regulate tobacco products differently than other products. These carve outs could negatively impact the industry and impact
requirements for leaf tobacco.

We conduct a significant portion of our operations internationally, so political and economic uncertainties in particular countries
could have an adverse effect on our performance and results of operations.

Our international operations are subject to uncertainties and risks relating to the political stability of certain foreign
governments, principally in developing countries and emerging markets, as well as to the effects of changes in the trade policies
and economic regulations of foreign governments. These uncertainties and risks, which include undeveloped or antiquated
commercial law, the expropriation, indigenization, or nationalization of assets, and the authority to revoke or refuse to renew
business licenses and work permits, may adversely impact our ability to effectively manage our operations in those countries. We
have substantial capital investments in South America and Africa, and the performance of our operations in those regions can
materially affect our earnings.

Our customers’ operations are subject to similar uncertainties and risks relating to the political stability of the foreign
governments in the countries in which their operations are located. Political or economic instability in those countries, such as the
ongoing conflict in Ukraine, may impede or disrupt our ability to meet our customers’ leaf tobacco needs in those impacted
countries.

If the political situation in any of the countries where we conduct business were to deteriorate significantly, our ability to
recover assets located there could be impaired. To the extent that we do not replace any lost volumes of leaf tobacco with leaf
tobacco from other sources, or we incur increased costs related to such replacement, our financial condition or results of
operations, or both, would suffer. In addition, if we are unable to supply leaf tobacco to our customers’ locations or otherwise
conduct business with our customers due to political stability or interference in their countries of operation, or if we incur
increased cost related to such challenges, our performance and results of operations could suffer.

Increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers,
with respect to our ESG considerations may impose additional costs on us or expose us to additional risks.

Governments, the non-governmental community, and industry increasingly understand the importance of implementing
comprehensive environmental, labor, and governance practices. Our commitment to sustainability remains at the core of our
business, and we continue to implement what we believe are responsible ESG practices. Government regulations, however, could
result in new or more stringent forms of ESG oversight and disclosures. These may lead to increased expenditures for
environmental controls, land use restrictions, reporting, and other conditions which could have an adverse effect on our
performance and results of operations.

In addition, a number of governments are considering due diligence procedures to ensure strict compliance with
environmental, labor, and government regulations. The European Union has recently proposed 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.

Changes in tax laws in the countries where we do business may adversely affect our results of operations.

Through our subsidiaries, we are subject to the tax laws of many jurisdictions. Changes in tax laws or the interpretation
of tax laws can affect our earnings, as can the resolution of various pending and contested tax issues. In most jurisdictions, we
regularly have audits and examinations by the designated tax authorities, and additional tax assessments are common. We believe
that we comply with applicable tax laws in the jurisdictions where we operate, and we vigorously contest all significant tax
assessments where we believe we are in compliance with the tax laws.

Financial Factors

Failure of our customers or suppliers to repay extensions of credit could materially impact our results of operations.

In our tobacco operations, we extend credit to both suppliers and customers. A significant bad debt provision related to
amounts due could adversely affect our results of operations. In addition, crop advances to leaf tobacco farmers are generally
secured by the farmers’ agreement to deliver green tobacco. In the event of crop failure, delivery failure, or permanent reductions
in crop sizes, full recovery of advances may never be realized, or otherwise could be delayed until future crops are delivered. See
Notes 1 and 16 to the consolidated financial statements in Item 8 for more information on these extensions of credit.

Fluctuations in foreign currency exchange rates may affect our results of operations.

We account for most of our tobacco operations using the U.S. dollar as the functional currency. The international tobacco
trade generally is conducted in U.S. dollars, and we finance most of our tobacco operations in U.S. dollars. Although this
generally limits foreign exchange risk to the economic risk that is related to leaf purchase and production costs, overhead, and
income taxes in the source country, significant currency movements could materially impact our results of operations. Changes in
exchange rates can make a particular leaf tobacco crop more or less expensive in U.S. dollar terms. If a particular crop is viewed
as expensive in U.S. dollar terms, it may be less attractive in the world market. This could negatively affect the profitability of

that crop and our results of operations. In tobacco markets that are primarily domestic, the local currency is the functional
currency. In addition, the local currency is the functional currency in other leaf tobacco markets, such as Western Europe, where
export sales have been denominated primarily in local currencies. In these markets, reported earnings are affected by the
translation of the local currency into the U.S. dollar. See Item 7A, “Qualitative and Quantitative Disclosure About Market Risk”
for additional discussion related to foreign currency exchange risk.

Our purchases of tobacco are generally made in local currency, and we also provide farmer advances that are
denominated in the local currency. We account for currency remeasurement gains or losses on those advances as period costs, and
they are usually accompanied by offsetting increases or decreases in the purchase cost of tobacco, which is priced in the local
currency. The effect of differences in the cost of tobacco is generally not realized in our earnings until the tobacco is sold, which
often occurs in a quarter or fiscal year subsequent to the recognition of the related remeasurement gains or losses. The difference
in timing could affect our profitability in a given quarter or fiscal year.

We have used currency hedging strategies to reduce our foreign currency exchange rate risks in some markets. In
addition, where we source tobacco in countries with illiquid or nonexistent forward foreign exchange markets, we often manage
our foreign exchange risk by matching funding for tobacco inventory purchases with the currency of sale and by minimizing our
net investment in these countries. To the extent that we have net monetary assets or liabilities in local currency, and those
balances are not hedged, we may have currency remeasurement gains or losses that will affect our results of operations.

Changes in interest rates may affect our results of operations.

We generally use both fixed and floating interest rate debt to finance our operations. Changes in market interest rates
expose us to changes in cash flows for floating rate instruments and to changes in fair value for fixed rate instruments. We
normally maintain a proportion of our debt in both variable and fixed interest rates to manage this exposure, and from time to time
we may enter hedge agreements to swap the interest rates. In addition, our customers may pay market rates of interest for leaf
tobacco inventory purchased on order, which could mitigate a portion of the floating interest rate exposure on short-term
borrowings. To the extent we are unable to match these interest rates, a decrease in interest rates could increase our net financing
costs. We also periodically have large cash balances and may receive deposits from tobacco customers, both of which we use to
fund seasonal purchases of tobacco, reducing our financing needs. Decreases in short-term interest rates could reduce the income
we derive from those investments. Changes in interest rates also affect expense related to our defined benefit pension plan, as
described below.

Low investment performance by our defined benefit pension plan assets and changes in pension plan valuation assumptions may
increase our pension expense and may require us to fund a larger portion of our pension obligations, thus diverting funds from
other potential uses.

We sponsor domestic defined benefit pension plans that cover certain eligible employees. 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 2022 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 2022, the projected benefit obligation ("PBO") of our qualified U.S. pension plan was $237 million and plan
assets were $250 million. For a discussion regarding how our financial statements can be affected by pension plan valuation
assumptions, see “Critical Accounting Estimates – Pension and Other Postretirement Benefit Plans” in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and in Note 13 to the consolidated financial
statements in Item 8. 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 to 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.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

We own the following significant properties (greater than 500,000 square feet):

Location

Tobacco Operations:

Principal Use

Building Area
(Square Feet)

United States
Nash County, North Carolina ........................................................................... Factory and storages
Lancaster, Pennsylvania .................................................................................... Factory and storages

Brazil
Santa Cruz ......................................................................................................... Factory and storages

Malawi
Lilongwe ........................................................................................................... Factory and storages

Mozambique
Tete ................................................................................................................... Factory and storages

Philippines
Agoo, La Union ................................................................................................ Factory and storages
Reina Mercedes, Isabela ................................................................................... Factory and storages

Tanzania
Morogoro .......................................................................................................... Factory and storages

Zimbabwe
Harare (1)

........................................................................................................... Factory and storages

Ingredients Operations:

United States
Momence, Illinois ............................................................................................. Factory and storages
Grandview, Washington ................................................................................... Factory and storages
Prosser, Washington ......................................................................................... Factory and storages
Lancaster, Pennsylvania .................................................................................... Factory and storages

(1) Owned by an unconsolidated subsidiary.

1,323,000
793,000

2,386,000

942,000

770,000

770,000
759,000

895,000

1,445,000

407,000

125,000

335,000

191,000

We lease headquarters office space of about 50,000 square feet at 9201 Forest Hill Avenue in Richmond, Virginia, which

we believe is adequate for our current needs.

Tobacco Operations

Our tobacco business involves, among other things, storing and processing green tobacco and storing processed tobacco.
We operate processing facilities in major tobacco growing areas. In addition, we require tobacco storage facilities that are in close
proximity to the processing facilities. We own most of the tobacco storage facilities, but we lease additional space as needs arise.
We believe that the properties currently utilized in our tobacco operations are maintained in good operating condition and are
suitable and adequate for our purposes at our current volumes.

In addition to our significant properties listed above, we own other processing facilities in the following countries:
Germany, Guatemala, Italy, the Netherlands, Poland, and the United States. In addition, we have an ownership interest in a
processing plant in Mexico and have access to processing facilities in other areas, such as India, the People’s Republic of China,
and South Africa. Socotab L.L.C., an oriental tobacco joint venture in which we own a noncontrolling interest, owns tobacco
processing plants in Bulgaria, Macedonia, and Turkey.

Except for the Lancaster, Pennsylvania facility, the facilities described above are engaged primarily in processing
tobaccos used by manufacturers in the production of cigarettes. The Lancaster facility, as well as facilities in Brazil, the
Dominican Republic, Indonesia, and Paraguay, process tobaccos used in making cigar, pipe, and smokeless products, as well as
components of certain “roll-your-own” products.

As discussed in Note 4 to the consolidated financial statements in Item 8, due to changes that have affected the
Company's operations in Tanzania, an impairment charge was recorded during the third quarters of fiscal year 2022 and 2019 to
reduce the carrying values of the factory and storages in Morogoro, Tanzania to their estimated fair values.

Ingredients Operations

Our ingredients business involves, among other things, storing and processing both fresh and dehydrated plant-based
ingredients and storing processed finished goods. We operate processing facilities in three U.S. locations. We believe that the
properties currently utilized in our ingredients operations are maintained in good operating condition and are suitable and
adequate for current level of business.

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures

Not applicable.

Item 4a. Information about Executive Officers

Information about our executive officers is incorporated by reference from Part III, Item 10 of this Form 10-K.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Equity

Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “UVV.”

Our current dividend policy anticipates the payment of quarterly dividends in the future. However, the declaration and
payment of dividends to holders of common stock is at the discretion of the Board of Directors and will be dependent upon our
future earnings, financial condition, and capital requirements. Under certain of our credit facilities, we must meet financial
covenants relating to minimum tangible net worth and maximum levels of debt. If we were not in compliance with them, these
financial covenants could restrict our ability to pay dividends. We were in compliance with all such covenants at March 31, 2022.
At May 24, 2022, there were 919 holders of record of our common stock. See Notes 9 and 14 to the consolidated financial
statements in Item 8 for more information on debt covenants and equity securities.

Purchases of Equity Securities

As indicated in the following table, we repurchased shares of our common stock during the three-month period ended

March 31, 2022.

Common Stock

Total Number
of Shares
Repurchased

Average
Price Paid
Per Share (2)

Total Number of
Shares
Repurchased as
Part of Publicly
Announced Plans
or Programs

(3)

Dollar Value of
Shares that May Yet
Be Purchased Under
the Plans or
Programs (3)

Period (1)

January 1-31, 2022 .......................................................................................

— $

February 1-28, 2022 .....................................................................................

March 1-31, 2022 .........................................................................................

58,264

—

Total ..............................................................................................................

58,264 $

—

52.41

—

— $

100,000,000

58,264

—

96,946,661

58,264 $

96,946,661

(1)

(2)

(3)

Repurchases are based on the date the shares were traded. This presentation differs from the consolidated statement of cash flows, where the cost of share
repurchases is based on the date the transactions were settled.

Amounts listed for average price paid per share include broker commissions paid in the transactions.

A stock repurchase plan, which was authorized by our Board of Directors, became effective and was publicly announced on November 5, 2020. This stock

repurchase plan authorizes the purchase of up to $100 million in common and/or preferred stock in open market or privately negotiated transactions through

November 15, 2022 or when we have exhausted the funds authorized for the program, subject to market conditions and other factors.

Item 6. Selected Financial Data

Fiscal Year Ended March 31,

2022

2021

2020

2019

2018

(in thousands, except share and per share data, ratios, and
number of shareholders)

Summary of Operations

Sales and other operating revenues ..................................................................... $ 2,103,601

$ 1,983,357

$ 1,909,979

$ 2,227,153

$ 2,033,947

Operating income ................................................................................................ $ 160,315

$ 147,810

$ 126,367

$ 161,169

$ 170,825

Segment operating income

............................................................................ $ 174,335

(1)

Net income .......................................................................................................... $ 103,604

Net income attributable to Universal Corporation

(2)

......................................... $

86,577

Earnings available to Universal Corporation common shareholders .................. $

86,577

$ 169,199

$ 138,121

$ 186,772

$ 179,950

96,314

87,410

78,003

$ 110,134

$ 116,168

71,680

$ 104,121

$ 105,662

71,680

$ 104,121

$ 105,662

Return on beginning common shareholders’ equity ...........................................

6.6 %

7.0 %

5.4 %

7.8 %

8.2 %

Earnings per share attributable to

Universal Corporation common shareholders:

Basic .............................................................................................................. $

Diluted ........................................................................................................... $

3.50

3.47

3.55

3.53

2.87

2.86

4.14

4.11

4.18

4.14

Financial Position at Year End

Current ratio ........................................................................................................

3.37

5.31

5.53

6.26

5.94

Total assets .......................................................................................................... $ 2,586,345

$ 2,341,924

$ 2,120,921

$ 2,133,184

$ 2,168,632

Long-term debt .................................................................................................... $ 518,547

$ 518,172

$ 368,764

$ 368,503

$ 369,086

Working capital ................................................................................................... $ 1,229,287

$ 1,262,201

$ 1,212,218

$ 1,334,397

$ 1,321,323

Total Universal Corporation shareholders’ equity .............................................. $ 1,340,543

$ 1,307,299

$ 1,246,665

$ 1,337,087

$ 1,342,429

General

Number of common shareholders .......................................................................

928

962

1,000

1,028

1,131

Weighted average common shares outstanding:

Basic ................................................................................................................

24,764,177

24,656,009

24,982,259

25,129,192

25,274,975

Diluted .............................................................................................................

24,922,896

24,788,566

25,106,351

25,330,437

25,508,144

Dividends per share of common stock (annual) .................................................. $

3.12

Book value per common share ............................................................................ $

54.60

3.08

53.33

3.04

51.05

3.00

53.50

2.18

53.85

(1)

We evaluate the performance of our segments based on segment operating income, which is operating income after allocated overhead expenses (excluding
significant non-recurring charges or credits), plus equity in the pretax earnings of unconsolidated affiliates. Segment operating income is a non-GAAP
measure. See Note 17 to the consolidated financial statements in Item 8 of this Annual Report for information on reportable operating segments.

(2)

We hold less than a 100% financial interest in certain consolidated subsidiaries, and a portion of net income is attributable to the noncontrolling interests in

Significant items included in the operating results in the above table are as follows:

•

Fiscal Year 2022 – $10.5 million of restructuring and impairment costs, primarily related to the impairment of assets
in Tanzania as well as other restructurings in the Tobacco operations segment. The restructuring and impairment
costs reduced net income by $7.9 million, or $0.32 per diluted share. We incurred $2.3 million of transaction costs
associated with the acquisition of Shank's that were only partially tax-deductible, reducing net income by $2.2
million and diluted earnings per share by $0.09. We recognized a $3.1 million expense in cost of goods sold relating
to the expensing of a fair value adjustment to inventory associated with the initial acquisition accounting for Shank's
that reduced diluted earnings per share by $0.10. We reversed a portion of the contingent consideration liability for
the FruitSmart acquisition, as a result of certain performance metrics that did not meet the required threshold
stipulated in the purchase agreement that increased net income by $2.5 million, or $0.10 per diluted share. We
recognized a benefit from a final income tax ruling as at a foreign subsidiary that increased interest income by $0.5
million and decreased income taxes by $1.7 million, respectively. The increase in interest income and reduction in
income tax expense for the final income tax ruling at a foreign subsidiary increased diluted earnings per share by
$0.09. On a combined basis, the net effect of these items decreased net income by $7.8 million, or $0.32 per diluted
share.

•

Fiscal Year 2021 – $22.6 million of restructuring and impairment costs, primarily related to the termination of
operations at CIFI, as well as other restructurings and impairments in the Tobacco operations segment. The
restructuring and impairment costs included employee termination benefits, as well as impairment charges related to
certain property, plant, equipment, as well as other current and noncurrent assets. The restructuring and impairment
costs reduced net income by $17.8 million, or $0.72 per diluted share. We incurred $3.9 million of non-tax
deductible transaction costs associated with the acquisition of Silva that reduced diluted earnings per share by $0.16.
We recognized a $2.8 million expense in cost of goods sold relating to the expensing of a fair value adjustment to
inventory associated with the initial acquisition accounting for Silva that reduced diluted earnings per share by
$0.11. We reversed a portion of the contingent consideration liability for the FruitSmart acquisition, as a result of
certain performance metrics that did not meet the required threshold stipulated in the purchase agreement that
increased net income by $4.2 million, or $0.17 per diluted share. We recognized an income tax settlement charge
related to operations at a foreign subsidiary that reduced net income by $1.8 million, or $0.08 per diluted share. In
addition, we benefited from an income tax benefit of $4.4 million related to final U.S. tax regulations on certain
dividends paid by foreign subsidiaries. The reduction in income tax expense increased diluted earnings per share by
$0.18. On a combined basis, the net effect of these items decreased net income by $17.8 million, or $0.72 per diluted
share.

Fiscal Year 2020 – $7.5 million of restructuring and impairment costs, primarily related to our tobacco operations in
North Carolina and Africa. The restructuring and impairment costs included employee termination benefits, as well
as impairment charges related to certain property, plant, equipment, and noncurrent assets. The restructuring and
impairment costs reduced net income by $6.3 million, or $0.25 per diluted share. We incurred $4.7 million of non-
tax deductible transaction costs associated with the acquisition of FruitSmart that reduced diluted earnings per share
by $0.19. We recognized a $2.7 million expense in cost of goods sold relating to the expensing of a fair value
adjustment to inventory associated with the initial acquisition accounting for FruitSmart, that reduced net income by
$2.1 million, or $0.08 per diluted share. Additionally, income tax expense included $2.8 million for the settlement of
an income tax matter related to a foreign subsidiary that reduced diluted earnings per share by $0.11. On a combined
basis, the net effect of these items decreased net income by $15.9 million, or $0.63 per diluted share.

Fiscal Year 2019 – $20.3 million of restructuring and impairment costs, primarily related to our operations in
Tanzania. The restructuring and impairment costs included employee termination benefits, as well as impairment
charges related to certain property, plant, equipment, and goodwill. The restructuring and impairment costs reduced
net income by $16.5 million, or $0.64 per diluted share. In addition, we benefited from a $7.8 million reduction in
income tax expense for the reversal of amounts previously recorded for dividend withholding taxes on distributed
and undistributed retained earnings of a foreign subsidiary following the resolution of uncertainties with the local
country taxing authorities with respect to the inclusion of the tax under a tax holiday applicable to the subsidiary.
The reduction of income tax expense increased diluted earnings per share by $0.30. On a combined basis, the net
effect of these items decreased net income by $8.7 million, or $0.34 per diluted share.

•

Fiscal Year 2018 – a $4.5 million reduction of income tax expense from the enactment of the Tax Cuts and Jobs Act
in December 2017. The reduction in income tax expense increased diluted earnings per share by $0.18.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding
of, and should be read in conjunction with, Part I, Item 1, “Business” and Item 8, “Financial Statements and Supplementary
Data.” For information on risks and uncertainties related to our business that may make past performance not indicative of
future results, or cause actual results to differ materially from any forward-looking statements, see “General,” and Part I, Item
1A, “Risk Factors.”

OVERVIEW

Universal Corporation is a global business-to-business agri-products supplier to consumer product manufacturers,
operating in over 30 countries on five continents, that sources and processes leaf tobacco and plant-based ingredients. Tobacco
has been our principal focus since our founding in 1918, and we are the leading global leaf tobacco supplier. Through our plant-
based ingredients platform, we provide a variety of value-added manufacturing processes to produce high-quality, specialty
vegetable and fruit-based ingredients as well as botanical extracts and flavorings to food and beverage end markets. We have been
finding innovative solutions to serve our customers and meet their agri-product needs for more than 100 years. We derive most of
our revenues from sales of processed tobacco to manufacturers of tobacco products throughout the world and from fees and
commissions for specific services. We hold a strategic position in the world leaf tobacco markets where we work closely with
both our customers and farmers to ensure that we deliver a compliant product that meets our customers' needs while promoting a
strong supplier base. We adapt to meet changes in customer requirements as well as broader changes in the leaf tobacco markets,
while continuing to provide the stability of supply and high level of service that distinguishes us in the marketplace. We believe
that we have successfully met the needs of both our customers and suppliers while adapting to changes in leaf tobacco markets.

Recognizing that leaf tobacco is a mature industry, we have also been positioning our company for the future by
investing in and strengthening our plant-based ingredients platform, while maintaining our position as the leading global leaf
tobacco supplier. In fiscal year 2022, we continued to make progress towards building and enhancing our plant-based ingredients
platform. On October 4, 2021, we acquired Shank’s, a specialty ingredient botanical extracts and flavorings company with
bottling and packaging capabilities. We have been integrating and exploring opportunities for synergies between our acquired
businesses, FruitSmart acquired on January 1, 2020, Silva acquired on October 1, 2020, and Shank’s.

Given our significant and strategic investments in our plant-based ingredients platform, we evaluated our operating
segments for financial reporting purposes during the quarter ended December 31, 2020. Based on our evaluation, we determined
that we conduct our operations across two primary reportable operating segments, Tobacco Operations and Ingredients
Operations. The revised segments reflect how we manage the Company, allocate resources, and assess business performance.
Prior period segment information has been recast retrospectively to reflect these changes.

COVID-19 Pandemic Impact

On March 11, 2020, the WHO declared COVID-19 a pandemic. Foreign governmental organizations and governmental
organizations in the United States have taken various actions to combat the spread of COVID-19 and its subsequent variants,
including imposing stay-at-home orders, closing “non-essential” businesses and their operations, and restricting international
travel. We continue to closely monitor developments related to the COVID-19 pandemic and have taken and continue to take
steps intended to mitigate the potential risks and impacts to us. It is paramount that our employees who operate our businesses are
safe and informed. We have assessed and regularly update our existing business continuity plans for our business in the context of
this pandemic. For example, we have taken precautions during the pandemic with regard to employee and facility hygiene,
imposed travel limitations on our employees, implemented work-from-home procedures, and we continue to assess and reevaluate
protocols designed to protect our employees, customers and the public.

We continue to work with our suppliers to mitigate the impacts to our supply chain due to the pandemic. To date, we
have not experienced a material impact to our supply chain, although the COVID-19 pandemic resulted in delays in certain
operations during fiscal year 2021. Since March 2020, we have at times also experienced increased volatility in foreign currency
exchange rates, which we believe is in part related to the continued uncertainties from COVID-19, as well as actions taken by
governments and central banks in response to COVID-19. We are currently seeing and monitoring some logistical constraints
around worldwide vessel and container availability and increased costs stemming from the COVID-19 pandemic.

We believe we currently have sufficient liquidity to meet our current obligations and our business operations remain
fundamentally unchanged other than shipping delays, which could continue to impact quarterly comparisons. This is, however, a
rapidly evolving situation, and we cannot predict the extent, resurgence, or duration of the COVID-19 pandemic, the effects of it
on the global, national or local economy, including the impacts on our ability to access capital, or its effects on our business,
financial position, results of operations, and cash flows. We continue to monitor developments affecting our employees,
customers and operations. We will take additional steps and reevaluate current protocols to address the spread of COVID-19 and
its impacts, as necessary, and remain thankful for the hard work of our employees and the continued support of our customers,
growers, and other partners during these challenging times.

The Conflict in Ukraine

We are closely monitoring the tragic situation in Ukraine. Since Russia initiated its current military operations in Ukraine
in 2022, business globally has been directly or indirectly impacted. The region is an important supplier of fertilizer, oil, gas, and
agricultural products for export to countries around the world, and disruptions in those exports have created or contributed to
various economic and commercial challenges including increased energy costs, increased fertilizer costs, and other inflationary
impacts. In addition, business in Ukraine, Russia and the surrounding region has been impacted by the temporary suspension of
business operations by companies due to safety and security concerns, the divestiture of assets and businesses in the region by
their international owners, and government imposition of sanctions targeting Russia and others, including “luxury goods”
sanctions that prohibit the supply of tobacco and tobacco products to Russia.

We do not have manufacturing facilities or material subsidiaries in Ukraine or Russia. We do, however, have a number
of customers that have historically conducted business there, and some of those customers have previously disclosed the
temporary suspension of operations in Ukraine or the divestiture of assets in Russia. We have worked closely with those
customers to monitor and understand the impacts the conflict in Ukraine has had on their operations. In some cases we have
worked with customers to suspend tobacco orders until such time that customers believe it is safe to reopen their facilities in
Ukraine, and in other cases we have coordinated with customers to cancel orders for tobacco destined to Russia and ship some or
all of that tobacco to other countries in which those customers have operations that need those quantities and qualities of tobacco.

At this time, we have not experienced any material direct impact on our business from the ongoing Ukraine conflict. We
are unable, however, to estimate the duration or extent of any potential impact on our business from the continuation or potential
escalation of the conflict. Such future impacts could be direct, such as the impact of continued or increased governmental
prohibitions against shipping tobacco and tobacco products to Russia, or they could be indirect, such as contributing to or
increasing costs and other inflationary pressures impacting our global operations and those of our supply chain around the world.
We will continue to monitor and evaluate this complex and evolving situation.

RESULTS OF OPERATIONS

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. 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) referred to in this discussion are non-GAAP financial measures. These measures are not
financial measures calculated in accordance with 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. A reconciliation of adjusted operating income (loss) to consolidated operating
(income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to
Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other
Items below. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated
operating income (loss) in Note 17. "Operating Segments" to the consolidated financial statements in Item 8. Management
evaluates the consolidated Company and segment performance excluding certain significant charges or credits. We believe these
non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, provide
investors with important information that is useful in understanding our business results and trends.

Fiscal Year Ended March 31, 2022, Compared to the Fiscal Year Ended March 31, 2021

Executive Summary

Our fiscal year 2022 results were generally comparable to those in fiscal year 2021. During fiscal year 2022, we
continued to face a very challenging logistical environment in many of our key tobacco regions. Strong performance from our
Ingredients Operations segment offset some challenges that reduced results in our Tobacco Operations segment.

We believe our plant–based ingredients platform is coming together nicely and is exceeding our expectations. With the
acquisition of Shank’s, we are now positioned to offer our customers a broad range of products, from fruit and vegetable juices,
concentrates, and dehydrated ingredients to botanical extracts and flavorings. In fiscal year 2022, the Ingredients Operations
segment saw increased demand for organic-based products and continued strong volumes for human and pet food categories as
well as for vanilla extracts.

Ongoing shipping constraints reduced our Tobacco Operations segment results for the year ended March 31, 2022, as a
result of continued limitations in worldwide shipping availability stemming from the COVID-19 pandemic. Due to the logistical
constraints in fiscal year 2021, we had carryover tobacco volumes which shipped in fiscal year 2022. Similar logistical constraints
impacted fiscal year 2022 which led to an even larger amount of tobacco volumes, reflecting a difference of about $70 million in
revenue, which did not ship in fiscal year 2022, compared to the carryover volumes from fiscal year 2021. Tobacco shipment
volumes in fiscal year 2022 were also reduced due to smaller African burley crops.

We experienced volatile tobacco and currency markets in Brazil during the fourth quarter of fiscal year 2022.
Appreciation of the Brazilian currency coupled with strong demand for leaf tobacco led to unprecedented increases in green prices
for leaf tobacco and earlier purchasing of the 2022 Brazilian crop, resulting in disruptions to market dynamics. To fulfill our
customers’ orders, leaf tobacco purchases from our contracted farmers this season have been at the prevailing inflated market
price for all leaf tobacco regardless of the quality of leaf tobacco. This resulted in larger inventory write downs in fiscal year
2022, compared to fiscal year 2021.

As we move into fiscal year 2023, we are seeing strong demand for our plant-based ingredients and tobacco products.
We believe leaf tobacco supply for flue-cured, burley, dark air-cured, and oriental tobaccos to be in an undersupply position. At
the same time, we continue to see opportunities to increase market share and expand the supply chain services we provide our
customers. We expect continued logistical constraints as well as higher costs, particularly freight, raw materials, labor, fertilizer,
and energy, in both our tobacco and ingredients businesses. We are actively working to mitigate these challenges, and we are
confident that we can deliver another good year.

We remain focused on returning value to our shareholders and promoting sustainability in our operations. We are
extremely proud to deliver value to our shareholders through dividend increases such as our 52nd annual dividend increase
announced on May 25, 2022. Increasing our strong dividend remains one of the strategic priorities of our capital allocation
strategy. We have also achieved some important milestones in our sustainability efforts in fiscal year 2022, notably releasing
goals and targets around agricultural labor practices and environmental performance and publishing our 2021 Sustainability
Report in December. We were also named a 2021 Supplier Engagement Leader by CDP, earning recognition for our work in
engaging our suppliers on climate change. We look forward to attaining new achievements with our sustainability programs in
fiscal year 2023.

FINANCIAL HIGHLIGHTS

(in millions of dollars, except per share data)

2022

2021

Fiscal Year Ended March 31,

Change

Consolidated Results

Sales and other operating revenue ..................................................... $ 2,103.6

$ 1,983.4

Cost of goods sold ............................................................................

1,694.7

1,597.4

Gross Profit Margin ..........................................................................

19.44 %

19.46 %

Selling, general and administrative expenses ....................................

Restructuring and impairment costs ..................................................

Operating income (as reported) .........................................................

Adjusted operating income (non-GAAP)* ........................................

Diluted earnings per share (as reported) ............................................

Adjusted diluted earnings per share (non-GAAP)* ..........................

240.7

10.5

160.3

173.6

3.47

3.79

219.8

22.6

147.8

172.9

3.53

4.25

Segment Results

Tobacco operations sales and other operating revenues ................... $ 1,835.8

$ 1,841.8

Tobacco operations operating income ...............................................

Ingredients operations sales and other operating revenues ...............

Ingredients operations operating income ..........................................

157.8

267.8

16.6

168.8

141.5

0.4

*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below

120.2

97.3

---

20.9

(12.1)

12.5

0.7

(0.06)

(0.46)

(6.0)

(11.1)

126.3

16.2

6 %

-2 bps

10 %

(54) %

8 %

0 %

(2) %

(11) %

0 %

(7) %

89 %

4,418 %

Net income for the year ended March 31, 2022, was $86.6 million, or $3.47 per diluted share, compared with $87.4
million, or $3.53 per diluted share, for the year ended March 31, 2021. Excluding restructuring and impairment costs and certain
other non-recurring items, detailed in Other Items below, net income and diluted earnings per share decreased by $10.8 million
and $0.46, respectively, for the year ended March 31, 2022, compared to the year ended March 31, 2021. Operating income of
$160.3 million for the year ended March 31, 2022, increased by $12.5 million, compared to operating income of $147.8 million
for the year ended March 31, 2021. Adjusted operating income, detailed in Other Items below, of $173.6 million increased by
$0.7 million for the year ended March 31, 2022, compared to adjusted operating income of $172.9 million for the year ended
March 31, 2021.

Consolidated revenues increased by $120.2 million to $2.1 billion for the year ended March 31, 2022, compared to the
year ended March 31, 2021, on the addition of the businesses acquired in the Ingredients Operations segment and lower tobacco
sales volumes partially offset by higher average sales prices in the Tobacco Operations segment.

Tobacco Operations

Segment operating income for the Tobacco Operations segment decreased by $11.1 million to $157.8 million for the year
ended March 31, 2022, compared to the year ended March 31, 2021. Tobacco Operations segment results declined largely due to
tobacco shipment timing as well as some tobacco inventory write downs, partially offset by increased value-added services to
customers in fiscal year 2022, compared to fiscal year 2021. Africa sales volumes were lower in fiscal year 2022, compared to
fiscal year 2021, on smaller burley crops as well as slower shipment timing. Sales volumes for Brazil were lower for the year
ended March 31, 2022, compared to the year ended March 31, 2021, in part due to lack of vessel and container availability. In
addition, inventory write downs resulting from volatile market conditions in Brazil negatively impacted results for the year ended
March 31, 2022. In Asia, although trading volumes were down on higher freight costs, our operations saw a more favorable
product mix, as well as increased value-added services for customers during the year ended March 31, 2022, compared to the year
ended March 31, 2021. Our operations in Europe experienced significantly higher energy costs in fiscal year 2022, compared to
fiscal year 2021. Selling, general, and administrative expenses for the Tobacco Operations segment were higher in the year ended
March 31, 2022, compared to the year ended March 31, 2021, primarily due to unfavorable foreign currency exchange
comparisons, mainly remeasurement, offset in part by the effects of currency hedging activities. Revenues for the Tobacco
Operations segment of $1.8 billion for the year ended March 31, 2022, were relatively flat, compared to the year ended March 31,
2021, as higher tobacco sales prices largely offset lower sales volumes. Our uncommitted tobacco inventory levels, about 16% of
tobacco inventory at March 31, 2022, remained well within our target range.

Ingredients Operations

Segment operating income for the Ingredients Operations segment was $16.6 million for the year ended March 31, 2022,
compared to segment operating income of $0.4 million for the year ended March 31, 2021. Results for the segment include our
October 2020 acquisition of Silva and our October 2021 acquisition of Shank’s. For the year ended March 31, 2022, our
Ingredients Operations saw strong volumes in both human and pet food categories as well as some rebound in demand from
sectors that have been impacted by the ongoing COVID-19 pandemic. In addition, the segment saw strong sales of organic-based
products, certain dehydrated products, and botanical extracts and flavorings. Selling, general, and administrative expenses for the
segment increased in fiscal year 2022, compared to fiscal year 2021, on the addition of the acquired businesses. Revenues for the
Ingredients Operations segment increased by $126.3 million to $267.8 million for the year ended March 31, 2022, compared to
the year ended March 31, 2021, primarily on the addition of the revenues for the acquired businesses as well as increased sales
prices.

Other Items

Cost of goods sold in the year ended March 31, 2022, increased by 6% to $1.7 billion, compared with the year ended
March 31, 2021, as a result of the acquisitions in our Ingredients Operations segment as well as variances in sales prices and
volumes shipped in the Tobacco Operations segment. Selling, general, and administrative costs for fiscal year 2022, increased by
$20.9 million to $240.7 million, compared to fiscal year 2021, on additional costs from the acquisitions in the Ingredients
Operations segment combined with unfavorable foreign currency comparisons. In fiscal year 2022, foreign currency comparisons
were approximately $8.1 million unfavorable, compared to fiscal year 2021, mainly due to currency remeasurement variances in
Brazil, the Philippines, and Indonesia, partially offset by the effects of currency hedging programs. Interest expense for fiscal year
2022, increased by $2.8 million to $27.7 million, compared to fiscal year 2021, largely on higher average debt balances and
interest rates.

For fiscal year 2022, the Company’s effective tax rate on pre-tax income was 27.2%. In the fiscal year ended March 31,
2022, the Company recognized a $1.7 million income tax benefit related to a final tax ruling at a foreign subsidiary and a $1.2
million benefit due to finalizing the prior year U.S. tax return. Without these income tax benefits, the adjusted effective tax rate
for the fiscal year ended March 31, 2022, would have been 29.2%.

For fiscal year 2021, the Company’s consolidated effective tax rate was 23.4%. For the fiscal year ended March 31,
2021, income tax expense included benefits of $4.4 million for final tax regulations regarding the treatment of dividends paid by
foreign subsidiaries and $2.9 million due to amending and finalizing prior year U.S. tax returns. Without these income tax
benefits, the consolidated effective tax rate for the fiscal year ended March 31, 2021, would have been approximately 29.2%.

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

(in thousands)

As Reported: Consolidated operating income
Purchase accounting adjustments(1)
Transaction costs for acquisitions(2)
Fair value adjustment to contingent consideration for FruitSmart acquisition(3)
Restructuring and impairment costs(4)

Fiscal Year Ended March 31,

2022

2021

160,315 $

147,810

3,057

2,310

(2,532)

10,457

2,800

3,915

(4,173)

22,577

Adjusted operating income

173,607 $

172,929

Adjusted Net Income and Diluted Earnings Per Share Reconciliation

(in thousands except for per share amounts)

(all amounts reported net of income taxes)

As Reported: Net income attributable to Universal Corporation
Purchase accounting adjustments(1)
Transaction costs for acquisitions(2)
Fair value adjustment to contingent consideration for FruitSmart acquisition(3)
Restructuring and impairment costs(4)

Interest expense related to an uncertain tax matter at a foreign subsidiary
Income tax benefit from dividend withholding tax liability reversal(5)

Adjusted Net income attributable to Universal Corporation

As reported: Diluted earnings per share

Adjusted: Diluted earnings per share

Fiscal Year Ended March 31,

2022

2021

86,577 $

87,410

2,415

2,195

(2,532)

7,879

(470)

(1,686)

2,800

3,915

(4,173)

17,800

1,849

(4,421)

94,378 $

105,180

3.47 $

3.79 $

3.53

4.25

(1)

(2)

(3)

(4)

(5)

The Company recognized an increase in cost of goods sold in the third quarters of fiscal year 2022 and 2021, relating to the expensing of fair value
adjustments to inventory associated with the acquisition accounting for Shank's (effective October 4, 2021) and Silva (effective October 1, 2020). The
adjustment related to the Silva acquisition is not deductible for U.S. income tax purposes.

The Company incurred selling, general, and administrative expenses for due diligence and other transaction costs associated with the acquisitions of Shank's
and Silva. A portion of these costs is not deductible for U.S. income tax purposes.

The Company reversed the contingent consideration liability for the FruitSmart acquisition, as a result of certain performance metrics that did not meet the
required threshold stipulated in the purchase agreement.

Restructuring and impairment costs are included in Consolidated operating income in the consolidated statements of income, but excluded for purposes of
Adjusted operating income, Adjusted net income available to Universal Corporation, and Adjusted diluted earnings per share. See Note 4 for additional
information.

The Company recognized income tax benefits related to a favorable final income tax ruling at a foreign subsidiary (fiscal year 2022) and final U.S. tax
regulations on certain dividends paid by foreign subsidiaries (fiscal year 2021).

Fiscal Year Ended March 31, 2021, Compared to the Fiscal Year Ended March 31, 2020

For a comparison of our performance and financial metrics for the fiscal years ended March 31, 2021 and March 31,
2020, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our
Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on May 28, 2021.

Accounting Pronouncements

See "Accounting Pronouncements" in Note 1 to the consolidated financial statements in Item 8 of this Annual Report for
a discussion of recent accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") that will
become effective and be adopted by the Company in future reporting periods.

LIQUIDITY AND CAPITAL RESOURCES

Overview

In fiscal year 2022, we generated $44.9 million in cash flows from our operating activities, and our liquidity was
sufficient to meet our needs. Our working capital requirements in fiscal year 2022 were higher than those in fiscal year 2021
mainly due to tobacco shipment timing and higher green leaf tobacco prices. We continued our financial policies and returned
funds to shareholders.

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 and our
committed revolving credit facility. 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 predict our general level of cash requirements,
although tobacco crop size, 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 regions 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 capital needs for at least the next twelve months. Our
seasonal borrowing requirements primarily relate to purchasing tobacco crops in South America and Africa and can increase from
March to September by more than $350 million. The funding required can vary significantly depending upon such factors as crop
sizes, the price of leaf, 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 expect to spend around $40 to $50 million during fiscal year 2023 for capital expenditures to maintain our facilities
and invest in opportunities to grow and improve our businesses. We have no long-term debt maturing until fiscal year 2024.

To date, the COVID-19 pandemic has not had a material impact on our operations, although we are continuing to see
logistical constraints around worldwide vessel and container availability and increased costs stemming from the COVID-19
pandemic. We currently anticipate our current cash balances, cash flows from operations, and our available sources of liquidity
will be sufficient to meet our cash requirements for at least the next twelve months. This is, however, a rapidly evolving situation,
and we cannot predict the extent, resurgence, or duration of the COVID-19 pandemic, the effects of it on the global, national or
local economies, including the impacts on our ability to access capital, or its effects on our business, financial position, results of
operations, and cash flows. We continue to monitor developments affecting our employees, customers and operations.

Cash Flow

Our operations generated about $44.9 million in operating cash flows in fiscal year 2022. That amount was about $175.5
million lower than the $220.4 million we generated in fiscal year 2021, largely due to higher working capital requirements in
fiscal year 2022. During the fiscal year ended March 31, 2022, we spent $53.2 million on capital projects and $102.5 million on
the acquisition of a new business, and we returned $79.5 million to shareholders in the form of dividends and share repurchases.
At March 31, 2022, cash balances totaled $81.6 million.

Working Capital

Working capital at March 31, 2022, was about $1.2 billion, down about $32.9 million from last fiscal year's level, largely
on higher working capital usage due to tobacco shipment timing, higher green tobacco costs, and earlier purchasing of the 2022
Brazilian tobacco crop, offset in part by the acquisition of Shank’s. Tobacco inventories of $822.5 million at March 31, 2022,
were up $181.9 million compared to inventory levels at the end of the prior fiscal year, mainly due to delayed tobacco shipments
and higher green leaf tobacco prices. Other inventories were up $48.2 million at March 31, 2022, from prior year levels largely on
our acquisition of Shank’s in October 2021 and higher crop input costs. 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 decreased by approximately $9.1
million to $130.1 million, or about 16% of tobacco inventory, at March 31, 2022, which was within our target range.
Uncommitted inventories at March 31, 2021, were $139.2 million, which represented 22% of tobacco inventory. The level of
these uncommitted inventories is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.
Cash and cash equivalents were down $115.6 million at the end of fiscal year 2022, compared to balance at the end of fiscal year
2021, on higher working capital requirements due tobacco shipment timing and higher green leaf tobacco costs as well as the
Shank’s acquisition.

Capital Allocation

Our capital allocation strategy focuses on four strategic priorities:

•

Strengthening and investing for growth in our leaf tobacco business;

Increasing our strong dividend;

Exploring growth opportunities in plant-based ingredients businesses that utilize our assets and capabilities; and

Returning excess capital through share repurchases.

Our mission is to remain the leading global leaf tobacco supplier. We will continue to make disciplined investments
within our leaf business and taking advantage of growth opportunities in tobacco as well as in plant-based ingredients businesses
and markets that utilize our assets and capabilities. Through these actions, we believe that will be able to deliver enhanced
shareholder value through earnings growth and the generation of free cash flow despite operating in a mature industry.

In line with our capital allocation strategy, we acquired Shank’s for approximately $100 million on October 4, 2021. The
acquisition expanded our plant-based ingredients platform adding valuable capabilities, including flavors and botanical extracts,
custom packaging, bottling, and product development. As we look ahead, we will continually evaluate opportunities to return
capital to shareholders. At the same time, we remain committed to maintaining our investment grade credit rating and extending
our 52-year history of dividend increases.

Share Activity

Our Board of Directors approved our current share repurchase program in November 2020. The program authorizes the
purchase of up to $100 million of our common stock through November 15, 2022. 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 fiscal year 2022, we purchased 58,264 shares of common stock at an aggregate
cost of $3.1 million (average price per share $52.41). At March 31, 2022, our available authorization under our current share
repurchase program was $97 million, and approximately 24.6 million common shares were outstanding.

Capital Spending

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 2022 and 2021, we
invested $53.2 million and $66.2 million, respectively, in our property, plant, and equipment. In the third quarter of fiscal year
2022, we purchased the real property assets related to the Shank’s acquisition, for approximately $13 million. Depreciation
expense was approximately $41.3 million and $38.3 million, respectively, in fiscal years 2022 and 2021. Generally, our capital
spending on maintenance projects is at a level below depreciation expense in order to maintain strong cash flow. 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, add value for our
customers, and position ourselves for future growth. We currently plan to spend approximately $40 to $50 million in fiscal year
2023 on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.

Outstanding Debt and Other Financing Arrangements

We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer
advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt. We also
consider our net debt plus shareholders' equity to be our net capitalization. We financed the acquisition and real property assets of
Shank’s using cash-on-hand and borrowings under our committed revolving credit facility. Net debt increased by $202.3 million
to $633.3 million during the fiscal year ended March 31, 2022. The increase primarily reflects the Shank’s acquisition, tobacco
shipment timing, and earlier purchasing of the 2022 Brazilian tobacco crop. Net debt as a percentage of net capitalization was
approximately 32% at March 31, 2022, up from 25% at March 31, 2021.

As of March 31, 2021, we had $330 million available under a committed revolving credit facility that will mature in
December 2023, and we, together with our consolidated affiliates, had approximately $283 million in uncommitted lines of credit,
of which approximately $200 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. As of March 31, 2022, we were in compliance with all covenants of our debt agreements. We also have
an active, undenominated universal shelf registration filed with the SEC in November 2020 that provides for future issuance of
additional debt or equity securities. We have no long-term debt maturing until fiscal year 2024.

Derivatives

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. Currently,
we have interest rate swap agreements that convert the variable benchmark LIBOR rates on $370 million of our two outstanding
term loans entered to fixed rates. With the swap agreements in place, the effective interest rates on $220 million of the five-year
term loan and $295 million of the seven-year term loan were 3.36% and 3.84%, respectively, as of March 31, 2022. 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, 2022, the fair value of our open interest rate hedge swaps was a net liability of
approximately $1 million.

We also enter derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to
forecast purchases of tobacco, related processing costs, and crop input sales in Brazil, as well as our net monetary asset exposure
in local currency there. We generally account for our hedges of forecast tobacco purchases as cash flow hedges. At March 31,
2022, the fair value of those open contracts was a net asset of approximately $7.8 million. We also had other forward contracts
outstanding that were not designated as hedges, and the fair value of those contracts was a net asset of approximately $13.0
million at March 31, 2022. For additional information, see Note 11 to the consolidated financial statements in Item 8.

Pension Funding

The funds supporting our ERISA-regulated U.S. defined benefit pension plan during fiscal year 2022 were
approximately $250 million. The accumulated benefit obligation (“ABO”) and PBO were both approximately $231 million and
$237 million, respectively as of March 31, 2022. The ABO and PBO are calculated on the basis of certain assumptions that are
outlined in Note 13 to the consolidated financial statements in Item 8. We expect to make no contributions to our pension plans
during the next year. It is our policy to regularly monitor the performance of the funds and to review the adequacy of our funding
and plan contributions.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect
on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.

Contractual Obligations

Our contractual obligations as of March 31, 2022, were as follows:

(in thousands of dollars)

Total

2023

2024-2025

2026-2027

After 2027

Notes payable and long-term debt

..........................................................................

(1)

$ 761,645 $ 204,803 $ 253,338 $ 303,504 $

—

Operating lease obligations ..........................................................................................

57,370

16,069

22,528

10,053

8,720

Inventory purchase obligations:

Tobacco .....................................................................................................................

722,822

598,506

113,316

11,000

Agricultural materials ................................................................................................

Other purchase obligations ..........................................................................................

64,692

67,437

64,692

56,682

—

7,355

—

3,400

—

Total ...........................................................................................................................

$ 1,673,966 $ 940,752 $ 396,537 $ 327,957 $

8,720

(1)

Includes interest payments. Interest payments on $333.0 million of variable rate debt were estimated based on rates as of March 31, 2022. We have entered

into interest rate swaps that effectively convert the interest payments on $370.0 million of the outstanding balance of our two bank term loans from variable

to fixed. The fixed rate has been used to determine the contractual interest payments for all periods.

In addition to principal and interest payments on notes payable and long-term debt, our contractual obligations include
operating lease payments, inventory purchase commitments, and capital expenditure commitments. Operating lease obligations
represent minimum payments due under leases for various production, storage, distribution, and other facilities, as well as
vehicles and equipment. Tobacco inventory purchase obligations primarily represent contracts to purchase tobacco from farmers.
The amounts shown above are estimates since actual quantities purchased will depend on crop yield, and prices will depend on the
quality of the tobacco delivered. We have partially funded our tobacco purchases in some origins with short-term advances to
farmers and other suppliers, which totaled approximately $130 million, net of allowances, at March 31, 2022.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

In preparing the financial statements in accordance with GAAP, we are required to make estimates and assumptions that
have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect our supplemental
information disclosures, including information about contingencies, risks, and financial condition. We believe, given current facts
and circumstances, that our estimates and assumptions are reasonable, adhere to GAAP, and are consistently applied. However,
changes in the assumptions used could result in a material adjustment to the financial statements. Our critical accounting estimates
and assumptions are in the following areas:

Inventories

Inventories of tobacco are valued at the lower of cost or net realizable value with cost determined under the specific cost
method. Raw materials are clearly identified at the time of purchase. Other inventories consist primarily of unprocessed and
processed food and vegetable ingredients, extracts, seed, fertilizer, packing materials, and other supplies. We track the costs
associated with raw materials in the final product lots, and maintain this identification through the time of sale. We also capitalize
direct and indirect costs related to processing raw materials. This method of cost accounting is referred to as the specific cost or
specific identification method. We write down inventory for changes in net realizable value based upon assumptions related to
future demand and market conditions if the indicated value is below cost. Future demand assumptions can be impacted by
changes in customer sales, changes in customers’ inventory positions and policies, competitors’ pricing policies and inventory
positions, and varying crop sizes and qualities. Market conditions that differ significantly from those assumed by management
could result in additional write-downs. We experience inventory write-downs routinely. Inventory write-downs in fiscal years
2022, 2021, and 2020 were $19.9 million, $13.5 million, and $10.3 million, respectively.

Advances to Tobacco Suppliers

In many sourcing origins, we provide tobacco growers with agronomy services and seasonal crop advances of, or for,
seed, fertilizer, and other supplies. These advances are short term in nature and are customarily repaid upon delivery of tobacco to
us. In several origins, we have also made long-term advances to tobacco farmers to finance curing barns and other farm
infrastructure. In some years, due to low crop yields and other factors, individual farmers may not deliver sufficient volumes of
tobacco to repay maturing advances. In those cases, we may extend repayment of the advances into the following crop year. We
will incur losses whenever we are unable to recover the full amount of the loans and advances. At each reporting period, we must
make estimates and assumptions in determining the valuation allowance for advances to farmers. At March 31, 2022, the gross
balance of advances to tobacco suppliers totaled approximately $153 million, and the related valuation allowance totaled
approximately $19 million.

Recoverable Value-Added Tax Credits

In many foreign countries, we pay significant amounts of value-added tax (“VAT”) on purchases of unprocessed and
processed tobacco, crop inputs, packing materials, and various other goods and services. In some countries, VAT is a national tax,
and in other countries it is assessed at the state level. Items subject to VAT vary from jurisdiction to jurisdiction, as do the rates at
which the tax is assessed. When we sell tobacco to customers in the country of origin, we generally collect VAT on those sales.
We are normally permitted to offset our VAT payments against those collections and remit only the incremental VAT collections
to the tax authorities. When tobacco is sold for export, VAT is normally not assessed. In countries where our tobacco sales are
predominately for export markets, we often do not generate enough VAT collections on downstream sales to fully offset our VAT
payments. In those situations, we can accumulate unused VAT credits. Some jurisdictions have procedures that allow companies
to apply for refunds of unused VAT credits from the tax authorities, but the refund process often takes an extended period of time
and it is not uncommon for refund applications to be challenged or rejected in part on technical grounds. Other jurisdictions may
permit companies to sell or transfer unused VAT credits to third parties in private transactions, although approval for such
transactions must normally be obtained from the tax authorities, limits on the amounts that can be transferred may be imposed,
and the proceeds realized may be heavily discounted from the face value of the credits. Due to these factors, in some countries we
can accumulate significant balances of VAT credits over time. We review these balances on a regular basis, and we record
valuation allowances on the credits to reflect amounts that we do not expect to recover, as well as discounts anticipated on credits
we expect to sell or transfer. In determining the appropriate valuation allowance to record in a given jurisdiction, we must make
various estimates and assumptions about factors affecting the ultimate recovery of the VAT credits. At March 31, 2022, the gross
balance of recoverable tax credits (primarily VAT) totaled approximately $67 million, and the related valuation allowance totaled
approximately $21 million.

Business Combinations

From time to time, we may enter into business combinations. In accordance with ASC 805, “Business Combinations”,
we generally recognize the identifiable assets acquired and the liabilities assumed at their fair values as of the date of acquisition.
We measure goodwill as the excess of consideration transferred, which we also measure at fair value, over the net of the
acquisition date fair values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting
requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as
of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation allowances,
liabilities including those related to debt, pensions and other postretirement plans, uncertain tax positions, contingent
consideration and contingencies. This method also requires us to refine these estimates over a measurement period not to exceed
one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the measurement of the amounts recognized as of that date. If we are required to adjust provisional amounts
that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a
material impact on our financial condition and results of operations.

Significant estimates and assumptions in estimating the fair value of developed technology, customer relationships, and
other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. If the subsequent
actual results and updated projections of the underlying business activity change compared with the assumptions and projections
used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain
acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives
change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired.

Goodwill

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. As permitted under Accounting Standards Codification Topic 350 (“ASC
350”), at March 31, 2022 and 2021, we elected to base our initial assessment of potential impairment on qualitative factors. Those
factors did not indicate any impairment of our recorded goodwill in fiscal year 2022. In fiscal years prior to basing our initial
assessment on qualitative factors, we followed the quantitative approach in ASC 350 in assessing the fair value of our goodwill,
which involved the use of discounted cash flow models (Level 3 of the fair value hierarchy under GAAP). Under our current
qualitative assessment, we would also use those discounted cash flow models to measure any expected impairment indicated by
the assessment. The calculations in these models are not based on observable market data from independent sources and therefore
require significant management judgment with respect to operating earnings growth rates and the selection of an appropriate
discount rate. Significant adverse changes in our operations or our estimates of future cash flows for a reporting unit with
recorded goodwill, such as those caused by unforeseen events or changes in market conditions, could result in an impairment
charge. A majority of our consolidated goodwill balance relates to our reporting unit in Brazil and the acquisitions of FruitSmart
(January 1, 2020), Silva (October 1, 2020), and Shank's (October 4, 2021).

Fair Value Measurements

We hold various financial assets and financial liabilities that are required to be measured and reported at fair value in our
financial statements, including money market funds, trading securities associated with deferred compensation plans, interest rate
swaps, forward foreign currency exchange contracts, and guarantees of bank loans to tobacco growers. We follow the relevant
accounting guidance in determining the fair values of these financial assets and liabilities. Money market funds are valued based
on net asset value (“NAV”), which is used as a practical expedient to measure the fair value of those funds (not classified within
the fair value hierarchy). Quoted market prices (Level 1 of the fair value hierarchy) are used in most cases to determine the fair
values of trading securities. Interest rate swaps and forward foreign currency exchange contracts are valued based on dealer
quotes using discounted cash flow models matched to the contractual terms of each instrument (Level 2 of the fair value
hierarchy). We incorporate credit risk in determining the fair values of our financial assets and financial liabilities, but that risk
did not materially affect the fair values of any of those assets or liabilities at March 31, 2022. We estimate the fair value of
acquisition-related contingent consideration obligations by applying an income approach model that utilizes probability-weighted
discounted cash flows. Each period we evaluate the fair value of the acquisition-related contingent consideration obligations.
Significant judgment is applied to this model and therefore acquisition-related contingent consideration obligation is classified
within Level 3 of the fair value hierarchy. In fiscal year 2022, the evaluation of the contingent consideration for the FruitSmart
acquisition resulted in the reduction of the remaining $2.5 million of contingent consideration of the original $6.7 million liability
recorded in fiscal year 2020.

Income Taxes

Our consolidated effective income tax rate is based on our expected taxable income, tax laws and statutory tax rates,
prevailing foreign currency exchange rates, and tax planning opportunities in the various jurisdictions in which we operate.
Significant judgment is required in determining the effective tax rate and evaluating our tax position. We are subject to the tax
laws of many jurisdictions, and could be subject to a tax audit in each of these jurisdictions, which could result in adjustments to
tax expense in future periods. In the event that there is a significant, unusual, or one-time item recognized in our results, the tax
attributed to that discrete item would be recorded at the same time as the item.

Our consolidated income tax expense and effective tax rate are heavily dependent on the tax rates of the individual
countries in which we operate, the mix of our pretax earnings from those countries, and the prevailing rates of exchange of their
local currencies with the U.S. dollar. The mix of pretax earnings and local currency exchange rates in particular can change
significantly between annual and quarterly reporting periods based on crop sizes, market conditions, and economic factors. Our
effective tax rate can be volatile from year-to-year and from quarter-to-quarter as result of these factors.

We have no undistributed earnings of consolidated foreign subsidiaries that are classified as permanently or indefinitely
reinvested. We assume that all undistributed earnings of our foreign subsidiaries will be repatriated back to their parent entities in
the U.S. where the funds are best placed to meet our cash flow requirements. In addition, we strive to mitigate economic, political,
and currency risk by following a disciplined annual approach to the distribution of excess capital back to the U.S. Based on these
assumptions, in our income tax expense for each reporting period we fully provide for all applicable foreign country withholding
taxes that are expected to be due on these distributions.

Our accounting for uncertain tax positions requires that we review all significant tax positions taken, or expected to be
taken, in income tax returns for all jurisdictions in which we operate. In this review, we must assume that all tax positions will
ultimately be audited, and either accepted or rejected based on the applicable tax regulations by the tax authorities for those
jurisdictions. We must recognize in our financial statements only the tax benefits associated with tax positions that are “more
likely than not” to be accepted upon audit, at the greatest amount that is considered “more likely than not” to be accepted. These
determinations require significant management judgment, and changes in any given quarterly or annual reporting period could
affect our consolidated income tax rate.

Tax regulations require items to be included in taxable income in the tax return at different times, and in some cases in
different amounts, than the items are reflected in the financial statements. As a result, our effective tax rate reflected in the
financial statements is different than that reported in our tax returns. Some of these differences are permanent, such as expenses
that are not tax deductible, while others are related to timing issues, such as differences in depreciation methods. Timing
differences create deferred tax assets and liabilities. Deferred tax liabilities generally represent tax expense recognized in our
financial statements for which payment has been deferred or income taxes related to expenses that have not yet been recognized in
the financial statements, but have been deducted in our tax return. Deferred tax assets generally represent items that can be used as
a tax deduction or credit in future tax returns for which we have already recorded the tax benefit in our financial statements. We
record valuation allowances for deferred tax assets when the amount of estimated future taxable income is not likely to support
the use of the deduction or credit. Determining the amount of such valuation allowances requires significant management
judgment, including estimates of future taxable income in multiple tax jurisdictions where we operate. Based on our periodic
earnings forecasts, we project the upcoming year’s taxable income to help us evaluate our ability to realize deferred tax assets.

For additional disclosures on income taxes, see Notes 1 and 6 to the consolidated financial statements in Item 8.

Pension and Other Postretirement Benefit Plans

The measurement of our pension and other postretirement benefit obligations and costs at the end of each fiscal year
requires that we make various assumptions that are used by our outside actuaries in estimating the present value of projected
future benefit payments to all plan participants. Those assumptions take into consideration the likelihood of potential future events
such as salary increases and demographic experience. The assumptions we use may have an effect on the amount and timing of
future contributions to our plans. The plan trustee conducts an independent valuation of the fair value of pension plan assets. The
significant assumptions used in the calculation of our pension and other postretirement benefit obligations are:

•

Discount rate – The discount rate is based on investment yields on a hypothetical portfolio of actual long-term
corporate bonds rated AA that align with the cash flows for our benefit obligations.

Salary scale – The salary scale assumption is based on our long-term actual experience for salary increases, the near-
term outlook, and expected inflation.

Expected long-term return on plan assets – The expected long-term return on plan assets reflects asset allocations
and investment strategy adopted by the Finance and Pension Investment Committee of the Board of Directors.

Retirement and mortality rates – Retirement rates are based on actual plan experience along with our near-term
outlook. Early retirement assumptions are based on our actual experience. Mortality rates are based on standard
industry group annuity mortality tables which are updated to reflect projected improvements in life expectancy.

•

Healthcare cost trend rates – For postretirement medical plan obligations and costs, we make assumptions on future
inflationary increases in medical costs. These assumptions are based on our actual experience, along with third-party
forecasts of long-term medical cost trends.

From one fiscal year to the next, the rates we use for each of the above assumptions may change based on market
developments and other factors. The discount rate reflects prevailing market interest rates at the end of the fiscal year when the
benefit obligations are actuarially measured and will increase or decrease based on market patterns. The expected long-term return
on plan assets may change based on changes in investment strategy for plan assets or changes in indicated longer-term yields on
specific classes of plan assets. In addition to the changes in actuarial assumptions from year to year, actual plan experience
affecting our net benefit obligations, such as actual returns on plan assets and actual mortality experience, will differ from the
assumptions used to measure the obligations. The effects of these changes and differences increase or decrease the obligation we
record for our pension and other postretirement benefit plans, and they also create gains and losses that are accumulated and
amortized over future periods, thus affecting the expense we recognize for these plans over those periods. Changes in the discount
rate from year to year generally have the largest impact on our projected benefit obligation and annual expense, and the effects
may be significant, particularly over successive years where the discount rate moves in the same direction.

As of March 31, 2022, the effect of the indicated increase or decrease in the selected pension and other postretirement

benefit valuation assumptions is shown below. The effect assumes no change in benefit levels.

(in thousands of dollars)

Changes in Assumptions for Pension Benefits

Discount Rate:

Effect on
2022 Projected
Benefit
Obligation
Increase
(Decrease)

Effect on
2023 Annual
Expense
Increase
(Decrease)

1% increase .....................................................................................................................................................................

(29,959) $

1% decrease .....................................................................................................................................................................

36,753

Expected Long-Term Return on Plan Assets:

1% increase .....................................................................................................................................................................

1% decrease .....................................................................................................................................................................

Changes in Assumptions for Other Postretirement Benefits

Discount Rate:

1% increase .....................................................................................................................................................................

1% decrease .....................................................................................................................................................................

Healthcare Cost Trend Rate:

1% increase .....................................................................................................................................................................

1% decrease .....................................................................................................................................................................

—

(2,006)

2,365

153

(141)

(2,582)

2,921

(2,461)

2,461

(159)

181

(41)

A 1% increase or decrease in the salary scale assumption would not have a material effect on the projected benefit
obligation or on annual expense for the Company's pension benefits. See Note 13 to the consolidated financial statements in Item
8 for additional information on pension and other postretirement benefit plans.

Other Estimates and Assumptions

Other management estimates and assumptions are routinely required in preparing our financial statements, including the
determination of valuation allowances on accounts receivable and the fair value of long-lived assets. Changes in market and
economic conditions, local tax laws, and other related factors are considered each reporting period, and adjustments to the
accounts are made based on management’s best judgment.

OTHER INFORMATION REGARDING TRENDS

AND MANAGEMENT’S ACTIONS

Our financial performance depends on our ability to obtain an appropriate price for our products and services, to secure
the product volumes and quality desired by our customers, and to maintain efficient, competitive operations. As the leading global
leaf tobacco supplier, we continually monitor for issues and opportunities that may impact the supply of and demand for leaf
tobacco, the volumes of leaf tobacco that we handle, and the services we provide. We have also been building a plant-based
ingredients platform and monitor issues and opportunities that may impact these businesses as well.

Tobacco Operations Trends

We believe that a key factor to perform successfully in the tobacco industry is our ability to provide customers with the
quality of leaf and the level of service they desire on a global basis at competitive prices, while maintaining stability of supply.
We add significant value to the leaf tobacco supply chain, providing expertise in dealing with large numbers of farmers,
efficiently selling various qualities of leaf produced in each crop to a broad global customer base, and delivering products and
services produced in a sustainable manner that meet stringent quality and regulatory specifications. We also make the tobacco
markets more efficient and provide crop development guidance at the farm level. As part of our commitment to our customers, we
adapt our business model to meet their evolving needs and monitor new product developments in the tobacco industry to identify
areas where we can provide additional value to them.

Mature Leaf Tobacco Markets

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, 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, where demand for the end products outside of China has been declining at a compound annual
rate of about 0.6% over the last three years, our mission is to remain 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.

We continually explore options to capitalize on the strengths of our core competencies and seek growth opportunities
related to leaf tobacco and our operations around the world. For example, we have expanded our leaf purchasing, processing,
value-added services, and grower support services in multiple origins in response to customer demand. We have increased our
product offerings to meet demand for natural wrappers in the United States and Europe and shisha (water pipe) style leaf tobacco
for customers in the Middle East and North Africa (MENA) region. As we look at ingredients investments and explore new
growth opportunities within tobacco, Universal is dedicated to remaining the leading global leaf tobacco supplier and building on
our strong history.

Focus on Cost Management

Manufacturers naturally seek to mitigate raw materials cost increases, and they are placing increased emphasis on cost
containment as they address declining demand. While this is not a new trend, it continues to offer opportunities to us as we bring
supply chain efficiencies to the leaf markets. We believe that global leaf suppliers add efficiencies to the markets through
economies of scale, as well as through the vital role played in finding buyers for all styles and qualities of leaf tobacco, which
achieves overall cost reductions. To understand our business, it is important to note that tobacco is not a commodity product.
Flavor and smoking characteristics as well as chemistries of tobacco vary based on the type of tobacco, the region where the
tobacco is grown, and the position of the leaf on the stalk of the plant. Many different styles and grades of tobacco may be
produced in a single tobacco crop. A particular manufacturer may only want and have use for certain leaves of a plant. The leaf
tobacco supplier plays a vital role in the industry by finding buyers for all of the leaf grades and styles of tobacco produced in a
farmer’s crop. This role helps to improve leaf utilization.

In addition to bringing supply chain efficiencies to the leaf tobacco markets, we bring operational efficiencies to the
industry, which in turn help reduce costs. These efficiencies include economical utilization of processing capacity, an established
and scalable global network of agronomists and technicians helping to maintain a stable, productive, and sustainable farmer base,
as well as agronomic and production improvements to optimize leaf yields and qualities. In addition, we are able to offer
manufacturers a complete range of services from the field to the delivery of the packed product that benefit from our efficiencies.
These services include such things as buying station optimization, processing and blending to specific customer specifications or

needs, storage of green or packed leaf tobacco, and logistical services. In recent years, there has been an increase in the level of
direct purchasing, sorting, processing, and other value-added services that we provide our customers, notably in the United States,
Mexico, Brazil, Poland, Guatemala, the Dominican Republic, and the Philippines. We believe this increase acknowledges the
efficiencies and services that we bring to the entire supply chain.

We have also seen some reductions in sourcing from lower-volume tobacco growing origins by both global leaf suppliers
and major manufacturers. Flue-cured tobacco is produced in about 70 countries around the world, and burley tobacco is grown in
about 45 countries. However, over 80% of both the flue-cured tobacco grown outside of China and the worldwide burley tobacco
production is sourced from the top ten growing areas for each type of tobacco. We believe that these moves to reduce sourcing
areas and concentrate on major tobacco export markets are another way for the industry to increase efficiency and to reduce costs.
We have contributed to cost reduction and elimination of excess capacity in the supply chain through the closure or realignment
of programs in Argentina, Canada, Germany, Italy, Hungary, Malawi, Nicaragua, Switzerland, Tanzania, and Zambia. We
maintain a strong presence in all of the major tobacco sourcing areas and believe that any growth in these areas would favor
global leaf suppliers such as ourselves. In the future, we expect that increased regulations requiring stringent monitoring and
testing of leaf chemistry and compliant sourcing documentation will place greater emphasis on major sourcing areas.

Importance of Compliant Leaf

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. 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 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™, our proprietary mobile device platform that captures and shares
data in real-time, embedding sustainability throughout our supply chain and providing monitoring of GAP 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.

Growth of Alternative Tobacco Products

Most of the major tobacco product manufacturers have been developing next generation and modified risk products.
These include ENDS, oral tobacco and nicotine products, and heated tobacco products. ENDS use liquid nicotine, which is
predominately derived from leaf tobacco, and heated tobacco products use leaf tobacco. Oral tobacco and nicotine products may
use liquid nicotine or leaf tobacco. At this time, it is unclear how these new products will affect demand for leaf tobacco.
However, as our customers have been developing these products, we have been working with them to make sure we are able to
meet their needs for both their traditional and new products. This is consistent with our commitment to efficiently and effectively
adapt our business model to meet our customers’ evolving needs. Specifically, we have expertise in tobacco seed development,
crop production methods, crop sourcing, processing, and manufacturing of reconstituted sheet tobacco, which is beneficial to our
customers as they continue to develop alternative tobacco products. We also are able to provide high quality, traceable and
sustainable liquid nicotine through our subsidiary, AmeriNic. We continue to monitor industry developments regarding next
generation products, including consumer acceptance and regulation, and will adapt accordingly.

Leaf Tobacco Supply

Although flue-cured tobacco crops grown outside of China increased in fiscal year 2022 by about 4% to 1.7 billion kilos
compared to fiscal year 2021, production levels remain below historical averages. In addition, these crops are projected to revert
back to lower production levels, decreasing by about 4% to 1.7 billion kilos in fiscal year 2023. Global burley tobacco production
also remains below historical levels and decreased by about 10% to about 398 million kilos in fiscal year 2022. Burley volumes
are forecast to increase slightly to about 404 million kilos in fiscal year 2023. We estimate that as of March 31, 2022, industry
uncommitted flue-cured and burley inventories, excluding China were at historically low levels, totaling about 62 million kilos, a
decrease of about 34% from March 31, 2021 levels. At this time, we believe that both flue-cured tobacco and burley tobacco
supply are in undersupply positions.

We also forecast that oriental and dark air-cured tobacco production will decrease by about 21% and increase by about
4%, respectively, in fiscal year 2023. We believe both oriental tobaccos and dark air-cured tobaccos are in undersupply positions.
Over the long term, we believe that global tobacco production will continue to move in line with slightly declining total demand.
South America, Asia, Africa, and North America will remain key sourcing regions for flue-cured and burley tobaccos.

China is a significant cigarette market. However, most of the cigarettes consumed in China and the leaf tobacco used in
those cigarettes are produced domestically. Therefore, we normally view the Chinese market independently when evaluating
worldwide leaf tobacco supply and demand. Domestic leaf tobacco inventories have built up in China over the last several years
as China’s domestic leaf production has exceeded their domestic needs for the local cigarette market. China is continuing to

demonstrate efforts to re-align their domestic leaf production and inventories to balance their needs, and inventories have started
to come down. These efforts could influence global supply/demand in the short term.

Leaf Tobacco Demand

Industry data shows that over the past three years, world consumption of cigarettes outside of China fell at a compound
annual rate of about 0.6%. We believe that growth in world consumption of cigarettes outside of China peaked several years ago
and is declining. As a result, we expect that near term global demand for leaf tobacco will continue to slowly decline in line with
declining 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 flat for the three years ended in 2021.
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
undersupply relative to anticipated demand. However, inventories held by our customers may 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.

Pricing

Factors that affect green tobacco prices include global supply and demand, market conditions, production costs, foreign
exchange rates, and competition from other crops. 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.

Global Regulation of Tobacco Products

Public Acceptance of Increased Global Regulation on Tobacco Products

Diminishing social acceptance of tobacco use and increasing pressure from anti-smoking groups have cultivated a
political environment that accepts greater regulations on tobacco products, particularly in the United States and the European
Union. While the impact of this cultural trend on our business is uncertain, the global acceptance of stringent regulations could
reduce demand for tobacco products and have a material adverse effect on our results of operation.

Strengthened Global Cooperation in the Regulation on Tobacco Products

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.
As the tenth Conference of the Parties approaches in November 2023, the FCTC is working diligently to consider amendments to
the agreement and track progress in the treaty’s implementation.

While we cannot predict the extent or speed at which the efforts of the FCTC will reduce tobacco consumption, a
proliferation of national laws and regulations spurred by the recommendations of the FCTC would likely reduce demand for both
tobacco products and leaf.

United States FDA’s Continued Enforcement of the Tobacco Control Act

In 2009, the U.S. Congress passed the Family Smoking Prevention and Tobacco Control Act (the "Tobacco Act”). This
legislation authorizes the U.S. Food and Drug Administration (“FDA”) to regulate the manufacturing and marketing of tobacco
products. The Tobacco Act additionally prohibited characterizing flavors in cigarettes, restricted youth access to tobacco products,
banned advertising claims regarding certain tobacco products, and established the Center for Tobacco Products.

Over the past decade, 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, Congress extended 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 April 2022, FDA released two proposed rules to advance product standards intended to ban
menthol in cigarettes and characterizing flavors in cigars. The flavored tobacco product category accounts for a significant
percentage of the U.S. market, and these product standards would likely impact future leaf demand if adopted. It is also expected
that if these bans are adopted, they will be challenged in the legal system so it is not possible at this time to predict when and if
these bans become effective.

Although less than 5% of cigarettes manufactured worldwide are consumed in the United States, the FDA is widely
considered a global leader in the “science-based” regulation of tobacco products. The FDA operates in stark contrast to the
WHO’s “emotion based” approach to nicotine use. The WHO is reluctant to accept one nicotine product as more/less risky than
another, and their suggested solution is either rigorous regulation or outright prohibition. The continued implementation and
enforcement of the Tobacco Act in the United States is likely to influence the tobacco control measures considered by other
countries and international bodies, including the WHO. It is impossible to predict the ultimate impact these developing regulations
will have on our business, but any reduction in the demand for our customer’s products will adversely impact the demand for leaf
tobacco.

Global Acceptance of the Continuum of Risk in the Regulation of Novel Tobacco Products

As novel tobacco products, such as e-cigarettes and heat-not-burn devices, emerge in the global market, governments are
tasked with developing the appropriate, science-based approach to regulation. In 2017, then Commissioner of the FDA, Scott
Gottlieb, announced a new regulatory approach for the regulation of tobacco products that embraced the placement of each
product somewhere along a “continuum of risk”. This comprehensive plan on nicotine use sought to facilitate an adult tobacco
consumer’s switch from combustible cigarettes to less risky products found lower on the continuum. As part of this regulatory
scheme, the FDA approved the first “heat-not-burn” and “very-low nicotine” premarket tobacco applications to permit the sale of
these products within the United States. Furthermore, FDA approved their first modified risk tobacco products applications to
permit certain products in the heat-not-burn and smokeless categories to make modified exposure or risk claims. Although the
WHO FCTC does not include specific harm-reduction provisions in the language of 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.

Regardless of the type, it is generally understood that most novel products on the market contain less leaf tobacco than
combustible cigarettes. Therefore, the market-driven rise of novel products alongside a regulatory scheme designed to facilitate an
adult tobacco consumer’s switch from combustible cigarettes could affect global leaf demand. It is presently difficult to predict
whether this will result in a decrease or an increase in requirements for leaf tobacco production in the long or short terms. Since
they are marketed as replacements for combustible tobacco products, the question remains whether novel products will replace
traditional cigarettes in the future, add to the market, or have a balancing effect.

Increased Taxation

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 may reduce the affordability of, and demand for, tobacco products, which will affect requirements for leaf tobacco by
tobacco product manufacturers.

Illicit Trade

Illicit trade is another factor which influences demand for legally and sustainably produced leaf tobacco. The WHO
estimates that one in every ten cigarettes consumed globally is illicit. Individual governments like the United States, European
Union, and Brazil have initiated substantial steps in combating illicit trade. In 2012 the WHO Framework Convention on Tobacco
Control adopted an illicit trade protocol which has been so far ratified by only one third of its 182 parties. We continue to support
both governmental and industry efforts to eradicate illicit trade.

Ingredients Operations Trends

Following our capital allocation strategy, we have made disciplined investments within our leaf business to take
advantage of growth opportunities in tobacco as well as in plant-based ingredients businesses and markets that could utilize our
assets and capabilities. Through these actions, we believe that we will be able to deliver enhanced shareholder value despite
operating in the mature leaf tobacco industry.

We made significant strategic investments in our plant-based ingredients platform in fiscal years 2020, 2021, and 2022.
We acquired FruitSmart in January 2020, Silva in October 2020, and Shank's in October 2021. Our ingredients businesses provide
our business-to-business customers with a broad variety of plant-based ingredients for both human and pet consumption. A
variety of value-added manufacturing processes are used in these businesses to convert raw materials into a wide spectrum of fruit
and vegetable juices, concentrates, dehydrated products, and botanical extracts and flavorings. These businesses provide value-
added agricultural processing, part of the agricultural value chain where we possess significant business expertise. We consider
the agricultural value chain to consist of agricultural inputs, crop production, agricultural processing, manufacture and
distribution, and retail sales. We are pleased with the ongoing integration of our plant-based ingredients platform, and we are
ahead of our capital allocation strategy objectives. With the acquisition of Shank’s, we are able to expand the products that we
offer by adding Shank’s portfolio of high-quality botanical extracts and flavorings to our plant-based ingredients platform.

One of the markets our plant-based ingredients business serve is the growing Global Health and Wellness Foods Market.
According to industry estimates this market is projected to grow at an annual rate of 4%-6% over the next several years. In
addition, with the COVID-19 pandemic, there has been and continues to be strong consumer demand for healthy foods.
FruitSmart is seeing growing consumer interest in better-for-you premium ingredients, including custom blends, not-from-
concentrate and dry products. It is also seeing strong growth in targeted end markets utilizing FruitSmart products, including
ciders, purees and nutraceuticals. Silva is well positioned to take advantage of increasing demand for natural and clean-label
products across the end markets it serves, including within the attractive and growing savory and pet food end markets. Industry
estimates project annual growth of about 5% over the next several years for the pet food market in the U.S.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We generally use both fixed and floating interest rate debt to finance our operations. Changes in market interest rates
expose us to changes in cash flows for floating rate instruments and to changes in fair value for fixed-rate instruments. We
normally maintain a proportion of our debt in both variable and fixed interest rates to manage this exposure, and from time to time
we may enter hedge agreements to swap the interest rates. In addition, our customers may pay market rates of interest for
inventory purchased on order, which could mitigate a portion of the floating interest rate exposure. We also periodically have
large cash balances and may receive deposits from customers, both of which we use to fund seasonal purchases of tobacco,
reducing our financing needs. Excluding the portion of our bank term loans that have been converted to fixed-rate borrowings
with interest rate swaps, debt carried at variable interest rates was approximately $333 million at March 31, 2022. Although a
hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately $3.3
million, that amount would be at least partially mitigated by changes in charges to customers.

In addition, changes in interest rates affect the calculation of our pension plan liabilities. As rates decrease, the liability
for the present value of amounts expected to be paid under the plans increases. Rate changes also affect expense. As of the
March 31, 2022 measurement date, a 1% decrease in the discount rate would have increased the projected benefit obligation
(“PBO”) for pensions by $37 million and increased annual pension expense by $3 million. Conversely, a 1% increase in the
discount rate would have reduced the PBO by $30 million and reduced annual pension expense by $3 million.

Currency Risk

The international leaf tobacco trade generally is conducted in U.S. dollars, thereby limiting foreign exchange risk to that
which is related to leaf purchase and production costs, overhead, and income taxes in the source country. We also provide farmer
advances that are directly related to leaf purchases and are denominated in the local currency. Any currency gains or losses on
those advances are usually offset by increases or decreases in the cost of tobacco, which is priced in the local currency. However,
the effect of the offset may not occur until a subsequent quarter or fiscal year. Most of our tobacco operations are accounted for
using the U.S. dollar as the functional currency. Because there are no forward foreign exchange markets in many of our major
countries of tobacco origin, we often manage our foreign exchange risk by matching funding for inventory purchases with the
currency of sale, which is usually the U.S. dollar, and by minimizing our net local currency monetary position in individual
countries. We are vulnerable to currency remeasurement gains and losses to the extent that monetary assets and liabilities
denominated in local currency do not offset each other. We recognized net remeasurement losses of $19.0 million in fiscal year
2022, $8.5 million of net remeasurement gains in fiscal year 2021, and $16.4 million of net remeasurement losses in fiscal year
2020. We recognized net foreign currency transaction gains of $18.0 million in fiscal year 2022, and net foreign currency
transaction losses of $1.4 million in fiscal year 2021, and $2.9 million in fiscal year 2020. In addition to foreign exchange gains
and losses, we are exposed to changes in the cost of tobacco due to changes in the value of the local currency in relation to the
U.S. dollar. We have entered forward currency exchange contracts to hedge against the effects of currency movements on
purchases of tobacco to reduce the volatility of costs. In addition, we periodically enter into forward contracts to hedge balance
sheet exposures. See Note 11 to the consolidated financial statements in Item 8 for additional information about our hedging
activities.

In certain tobacco markets that are primarily domestic, we use the local currency as the functional currency. Examples of
these markets are Poland and the Philippines. In other markets, such as Western Europe, where export sales are primarily in local
currencies, we also use the local currency as the functional currency. In each case, reported earnings are affected by the translation
of the local currency into the U.S. dollar.

Hedging Risk

Hedging interest rate exposure using swaps and hedging foreign currency exchange rate exposure using forward
contracts are specifically contemplated to manage risk in keeping with management's policies. We may use derivative
instruments, such as swaps, forwards, options, or futures, which are based directly or indirectly upon interest rates and currencies
to manage and reduce the risks inherent in interest rate and currency fluctuations. When we use foreign currency derivatives to
mitigate our exposure to exchange rate fluctuations, we may choose not to designate them as hedges for accounting purposes,
which may result in the effects of the derivatives being recognized in our earnings in periods different from the items that created
the exposure.

We do not utilize derivatives for speculative purposes, and we do not enter into market risk-sensitive instruments for
trading purposes. Derivatives are transaction-specific so that a specific debt instrument, forecast purchase, contract, or invoice
determines the amount, maturity, and other specifics of the hedge. We routinely review counterparty risk as part of our derivative
program.

Item 8. Financial Statements and Supplementary Data

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

(in thousands of dollars, except share and per share data)

2022

2021

2020

Sales and other operating revenues ............................................................................................................ $

2,103,601 $

1,983,357 $

1,909,979

Fiscal Year Ended March 31,

Costs and expenses

Cost of goods sold ..................................................................................................................................

1,694,675

1,597,354

1,553,167

Selling, general and administrative expenses .........................................................................................

240,686

219,789

222,902

Other income ..........................................................................................................................................

Restructuring and impairment costs .......................................................................................................

(2,532)

10,457

(4,173)

22,577

—

7,543

Operating income .......................................................................................................................................

160,315

147,810

126,367

Equity in pretax earnings of unconsolidated affiliates ...........................................................................

Other non-operating income (expense) ..................................................................................................

Interest income .......................................................................................................................................

6,095

2,687

917

2,985

(440)

325

4,211

986

1,581

Interest expense ......................................................................................................................................

27,747

24,954

19,854

Income before income taxes ......................................................................................................................

Income taxes ...........................................................................................................................................

142,267

38,663

Net income .................................................................................................................................................

103,604

Less: net income attributable to noncontrolling interests in subsidiaries .................................................

(17,027)

125,726

29,412

96,314

(8,904)

113,291

35,288

78,003

(6,323)

Net income attributable to Universal Corporation ..................................................................................... $

86,577 $

87,410 $

71,680

Earnings per share:

Basic ....................................................................................................................................................... $

Diluted .................................................................................................................................................... $

3.50 $

3.47 $

3.55 $

3.53 $

2.87

2.86

Weighted average common shares outstanding:

Basic .......................................................................................................................................................

24,764,177

24,656,009

24,982,259

Diluted ....................................................................................................................................................

24,922,896

24,788,566

25,106,351

See accompanying notes.

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands of dollars)

Fiscal Year Ended March 31,

2022

2021

2020

Net income .............................................................................................................................................. $

103,604 $

96,314 $

78,003

Other comprehensive income (loss):

Foreign currency translation, net of income taxes ...............................................................................

(6,367)

Foreign currency hedge, net of income taxes ......................................................................................

Interest rate hedge, net of income taxes ...............................................................................................

Pension and other postretirement benefit plans, net of income taxes ..................................................

Total other comprehensive income (loss), net of income taxes .....................................................

Total comprehensive income .........................................................................................................

Less: comprehensive income attributable to noncontrolling interests ....................................................

3,993

18,620

5,943

22,189

125,793

(16,490)

8,272

11,812

7,922

17,038

45,044

141,358

(9,388)

(3,066)

(11,850)

(26,468)

(14,766)

(56,150)

21,853

(6,079)

Comprehensive income attributable to Universal Corporation ............................................................... $

109,303 $

131,970 $

15,774

See accompanying notes.

UNIVERSAL CORPORATION
CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)

Current assets

ASSETS

March 31,

2022

2021

Cash and cash equivalents .................................................................................................................................................... $

81,648

197,221

Accounts receivable, net .......................................................................................................................................................

Advances to suppliers, net ....................................................................................................................................................

Accounts receivable—unconsolidated affiliates ..................................................................................................................

Inventories—at lower of cost or net realizable value:

Tobacco ..............................................................................................................................................................................

Other ...................................................................................................................................................................................

Prepaid income taxes ............................................................................................................................................................

Other current assets ..............................................................................................................................................................

385,437

129,838

4,540

822,513

194,161

13,095

116,779

367,482

121,618

584

640,653

145,965

15,029

66,806

Total current assets .............................................................................................................................................................

1,748,011

1,555,358

Property, plant and equipment

Land ......................................................................................................................................................................................

Buildings ..............................................................................................................................................................................

Machinery and equipment ....................................................................................................................................................

23,959

293,935

668,451

986,345

22,400

284,430

658,826

965,656

Less accumulated depreciation ..........................................................................................................................................

(641,227)

(616,146)

345,118

349,510

Other assets

Operating lease right-of-use assets .......................................................................................................................................

Goodwill, net ........................................................................................................................................................................

Other intangibles, net ...........................................................................................................................................................

Investments in unconsolidated affiliates ..............................................................................................................................

Deferred income taxes ..........................................................................................................................................................

Pension asset .........................................................................................................................................................................

Other noncurrent assets ........................................................................................................................................................

40,243

213,998

92,571

81,006

11,616

12,667

41,115

31,230

173,051

72,304

84,218

12,149

11,950

52,154

493,216

437,056

Total assets ......................................................................................................................................................................... $

2,586,345

2,341,924

UNIVERSAL CORPORATION
CONSOLIDATED BALANCE SHEETS—(Continued)

(in thousands of dollars)

Current liabilities

LIABILITIES AND SHAREHOLDERS’ EQUITY

March 31,

2022

2021

Notes payable and overdrafts ................................................................................................................................................ $

182,639 $

101,294

Accounts payable and accrued expenses ..............................................................................................................................

272,042

139,484

Accounts payable—unconsolidated affiliates .......................................................................................................................

Customer advances and deposits ..........................................................................................................................................

Accrued compensation ..........................................................................................................................................................

Income taxes payable ............................................................................................................................................................

Current portion of operating lease liabilities ........................................................................................................................

Current portion of long-term debt .........................................................................................................................................

5,308

13,724

27,281

7,427

10,303

—

1,282

8,765

29,918

4,516

7,898

—

Total current liabilities .................................................................................................................................................

518,724

293,157

Long-term debt .........................................................................................................................................................................

518,547

518,172

Pensions and other postretirement benefits ..............................................................................................................................

Long-term operating lease liabilities ........................................................................................................................................

Other long-term liabilities ........................................................................................................................................................

Deferred income taxes ..............................................................................................................................................................

52,890

29,617

34,464

47,334

57,637

19,725

59,814

44,994

Total liabilities .............................................................................................................................................................

1,201,576

993,499

Shareholders’ equity

Universal Corporation:

Preferred stock:

Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized,
none issued or outstanding ..............................................................................................................................................

—

Common stock, no par value, 100,000,000 shares authorized, 24,550,019 shares issued
and outstanding (24,514,867 at March 31, 2021) ...............................................................................................................

330,662

326,673

Retained earnings ...............................................................................................................................................................

1,094,192

1,087,663

Accumulated other comprehensive loss .............................................................................................................................

(84,311)

(107,037)

Total Universal Corporation shareholders' equity .......................................................................................................

1,340,543

1,307,299

Noncontrolling interests in subsidiaries ...................................................................................................................................

44,226

41,126

Total shareholders' equity ............................................................................................................................................

1,384,769

1,348,425

Total liabilities and shareholders' equity ..................................................................................................................... $

2,586,345

2,341,924

See accompanying notes.

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

Cash Flows From Operating Activities:

Fiscal Year Ended March 31,

2022

2021

2020

Net income ............................................................................................................................................... $

103,604 $

96,314 $

78,003

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization .............................................................................................................

Provision for losses (recoveries) on advances and guaranteed loans to suppliers ................................

Inventory write-downs ..........................................................................................................................

Stock-based compensation expense .....................................................................................................

Foreign currency remeasurement loss (gain), net .................................................................................

52,521

5,988

19,944

6,186

19,029

Foreign currency exchange contracts ...................................................................................................

(13,210)

Deferred income taxes ..........................................................................................................................

Equity in net income of unconsolidated affiliates, net of dividends ....................................................

Restructuring and impairment costs .....................................................................................................

Restructuring payments ........................................................................................................................

Change in estimated fair value of contingent consideration for FruitSmart acquisition ......................

Other, net ..............................................................................................................................................

Changes in operating assets and liabilities, net:

Accounts and notes receivable ...........................................................................................................

Inventories and other assets ................................................................................................................

Income taxes .......................................................................................................................................

Accounts payable and other accrued liabilities ..................................................................................

Customer advances and deposits ........................................................................................................

Net cash provided by operating activities ........................................................................................

Cash Flows From Investing Activities:

Purchase of property, plant and equipment ..........................................................................................

Purchase of business, net of cash held by the business ........................................................................

Proceeds from sale of property, plant and equipment ..........................................................................

Other .....................................................................................................................................................

(2,473)

(329)

10,457

(4,134)

(2,532)

513

(23,185)

(261,911)

6,644

123,102

4,668

44,882

(53,203)

(102,462)

13,004

—

44,733

5,534

13,463

6,106

(8,475)

(1,567)

(2,335)

(296)

22,577

(8,283)

(4,173)

(1,373)

(5,239)

43,199

(4,516)

26,171

(1,426)

220,414

(66,154)

(161,751)

11,436

(800)

38,379

937

10,319

5,631

16,422

499

(8,697)

1,101

7,543

(2,787)

—

(9,271)

16,267

(94,538)

10,927

(48,534)

(11,304)

10,897

(35,227)

(80,180)

8,547

495

Net cash used by investing activities ................................................................................................

(142,661)

(217,269)

(106,365)

Cash Flows From Financing Activities:

Issuance (repayment) of short-term debt, net .......................................................................................

Issuance of long-term debt ...................................................................................................................

Dividends paid to noncontrolling interests in subsidiaries ...................................................................

Repurchase of common stock ...............................................................................................................

Dividends paid on common stock ........................................................................................................

Debt issuance costs and other ...............................................................................................................

Net cash provided/(used) by financing activities .............................................................................

Effect of exchange rate changes on cash .................................................................................................

Net increase (decrease) in cash and cash equivalents ..............................................................................

Cash, restricted cash and cash equivalents at beginning of year .............................................................

79,286

—

(13,390)

(3,053)

(76,436)

(3,167)

(16,760)

(1,034)

(115,573)

203,221

29,396

150,000

(10,881)

—

(75,177)

(1,949)

91,389

1,257

95,791

107,430

Cash, Restricted Cash and Cash Equivalents at End of Year ........................................................... $

87,648 $

203,221 $

24,114

—

(6,251)

(33,457)

(75,368)

(3,184)

(94,146)

(512)

(190,126)

297,556

107,430

Supplemental Information:

Cash and cash equivalents ..................................................................................................................... $

81,648 $

197,221 $

107,430

Restricted cash (Other noncurrent assets) ..........................................................................................

6,000

—

Total cash, restricted cash and cash equivalents ................................................................................. $

87,648 $

203,221 $

107,430

Supplemental information—cash paid for:

Interest .................................................................................................................................................. $

27,113 $

24,198 $

Income taxes, net of refunds ................................................................................................................. $

33,010 $

36,443 $

19,376

30,984

See accompanying notes.

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands of dollars)

Fiscal Year Ended March 31, 2022

Universal Corporation Shareholders

Common
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Income
(Loss)

Non-
controlling
Interests

Total
Shareholders'
Equity

Balance at beginning of year ...................................................................................

$ 326,673 $ 1,087,663 $

(107,037) $ 41,126 $ 1,348,425

Changes in common stock

Repurchase of common stock ........................................................................

Accrual of stock-based compensation ............................................................

Withholding of shares from stock-based compensation for grantee income
taxes ................................................................................................................

Dividend equivalents on restricted stock units (RSUs) ..................................

(782)

6,187

(2,486)

1,070

Changes in retained earnings

Net income .....................................................................................................

Cash dividends declared on common stock ($3.12 per share) .......................

Repurchase of common stock ........................................................................

Dividend equivalents on restricted stock units (RSUs) ..................................

Other comprehensive income (loss)

Foreign currency translation, net of income taxes .........................................

Foreign currency hedge, net of income taxes .................................................

Interest rate hedge, net of income taxes .........................................................

Pension and other postretirement benefit plans, net of income taxes ............

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders ..............................................

—

86,577

(76,707)

(2,271)

(1,070)

—

17,027

—

(5,830)

(537)

3,993

18,620

5,943

—

(782)

6,187

(2,486)

1,070

103,604

(76,707)

(2,271)

(1,070)

(6,367)

3,993

18,620

5,943

—

(13,390)

Balance at end of year .............................................................................................

$ 330,662 $ 1,094,192 $

(84,311) $ 44,226 $ 1,384,769

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY—(Continued)

(in thousands of dollars)

Fiscal Year Ended March 31, 2021

Universal Corporation Shareholders

Common
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Income
(Loss)

Non-
controlling
Interests

Total
Shareholders'
Equity

Balance at beginning of year .....................................................................................

$ 321,502 $ 1,076,760 $

(151,597) $ 42,619 $ 1,289,284

Changes in common stock

Accrual of stock-based compensation ..............................................................

6,106

Withholding of shares from stock-based compensation for grantee income
taxes ..................................................................................................................

Dividend equivalents on restricted stock units (RSUs) ....................................

(1,949)

1,014

Changes in retained earnings

Net income ........................................................................................................

Cash dividends declared on common stock ($3.08 per share) .........................

Dividend equivalents on restricted stock units (RSUs) ....................................

Other comprehensive income (loss)

Foreign currency translation, net of income taxes ............................................

Foreign currency hedge, net of income taxes ...................................................

Interest rate hedge, net of income taxes ...........................................................

Pension and other postretirement benefit plans, net of income taxes ...............

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders ................................................

—

87,410

(75,493)

(1,014)

—

7,788

11,812

7,922

17,038

—

8,904

—

484

—

6,106

(1,949)

1,014

96,314

(75,493)

(1,014)

8,272

11,812

7,922

17,038

—

(10,881)

Balance at end of year ...............................................................................................

$ 326,673 $ 1,087,663 $

(107,037) $ 41,126 $ 1,348,425

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY—(Continued)

(in thousands of dollars)

Fiscal Year Ended March 31, 2020

Universal Corporation Shareholders

Common
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Income
(Loss)

Non-
controlling
Interests

Total
Shareholders'
Equity

Balance at beginning of year ....................................................................................

$ 326,600 $ 1,106,178 $

(95,691) $ 42,791 $ 1,379,878

Changes in common stock

Repurchase of common stock ..........................................................................

Accrual of stock-based compensation .............................................................

Withholding of shares from stock-based compensation for grantee income
taxes .................................................................................................................

Dividend equivalents on restricted stock units (RSUs) ...................................

(8,562)

5,631

(3,183)

1,016

Changes in retained earnings

Net income .......................................................................................................

Cash dividends declared on common stock ($3.04 per share) .........................

Repurchase of common stock ..........................................................................

Dividend equivalents on restricted stock units (RSUs) ...................................

Other comprehensive income (loss)

Foreign currency translation, net of income taxes ...........................................

Foreign currency hedge, net of income taxes ..................................................

Interest rate hedge, net of income taxes ...........................................................

Pension and other postretirement benefit plans, net of income taxes ..............

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders ...............................................

—

71,680

(75,187)

(24,895)

(1,016)

—

(2,822)

(11,850)

(26,468)

(14,766)

—

6,323

—

(244)

—

(8,562)

5,631

(3,183)

1,016

78,003

(75,187)

(24,895)

(1,016)

(3,066)

(11,850)

(26,468)

(14,766)

—

(6,251)

Balance at end of year ...............................................................................................

$ 321,502 $ 1,076,760 $

(151,597) $ 42,619 $ 1,289,284

UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY—(Continued)

Fiscal Year Ended March 31,

2022

2021

2020

Common Shares Outstanding:

Balance at beginning of year ..................................................................................................................

24,514,867

24,421,835

24,989,946

Issuance of common stock ......................................................................................................................

Repurchase of common stock .................................................................................................................

93,416

(58,264)

93,032

88,709

—

(656,820)

Balance at end of year ............................................................................................................................

24,550,019

24,514,867

24,421,835

See accompanying notes.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts are in thousands, except per share amounts or as otherwise noted.)

NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Universal Corporation, which together with its subsidiaries is referred to herein as “Universal” or the “Company,” is a
global business-to-business agri-products supplier to consumer product manufacturers. The Company is the leading global leaf
tobacco supplier and provides high-quality plant-based ingredients to food and beverage end markets. The Company conducts its
leaf tobacco business in over 30 countries, primarily in major tobacco-producing regions of the world.

The extent to which the ongoing COVID-19 pandemic will impact the Company's financial condition, results of
operations and demand for its products and services will depend on future developments, which are highly uncertain and cannot
be predicted. Such developments may include the ongoing geographic spread and mutations of COVID-19, the severity of the
pandemic, the duration of the COVID-19 outbreak and the type and duration of actions that may be taken by various
governmental authorities in response to the COVID-19 pandemic and the impact on the U.S. and the global economies, markets
and supply chains. At March 31, 2022, it is not possible to predict the overall impact of the ongoing COVID-19 pandemic on the
Company's business, financial condition, results of operations and demand for its products and services.

Consolidation

The consolidated financial statements include the accounts of Universal Corporation and all domestic and foreign
subsidiaries in which the Company maintains a controlling financial interest. Control is generally determined based on a voting
interest of greater than 50%, such that Universal controls all significant corporate activities of the subsidiary. All significant
intercompany accounts and transactions are eliminated in consolidation.

The equity method of accounting is used for investments in companies where Universal Corporation has a voting interest
of 20% to 50%. These investments are accounted for under the equity method because Universal exercises significant influence
over those companies, but not control. The Company received dividends totaling $4.3 million in fiscal year 2022, $2.9 million in
fiscal year 2021, and $3.9 million in fiscal year 2020, from companies accounted for under the equity method. Investments where
Universal has a voting interest of less than 20% are not significant and do not have readily determinable fair values. As such, the
Company has elected the alternate method of measuring these investments at cost, less any impairment. The Company's 49%
ownership interest in Socotab L.L.C. (“Socotab”), a leading supplier of oriental tobaccos with operations located principally in
Eastern Europe and Turkey, is the primary investment accounted for under the equity method. The investment in Socotab is an
important part of the Company's overall product and service arrangements with its major customers. The Company reviews the
carrying value of its investments in Socotab and its other unconsolidated affiliates on a regular basis and considers whether any
factors exist that might indicate an impairment in value that is other than temporary.

The Company's operations in Zimbabwe are deconsolidated under accounting requirements that apply under certain
conditions to foreign subsidiaries that are subject to foreign exchange controls and other government restrictions. The investment
in the Zimbabwe operations is accounted for at cost and was zero at March 31, 2022 and 2021. The Company has a net foreign
currency translation loss associated with the Zimbabwe operations of approximately $7.2 million, which remains a component of
accumulated other comprehensive loss at March 31, 2022. As a regular part of its reporting, the Company reviews the conditions
that resulted in the deconsolidation of the Zimbabwe operations to confirm that such accounting treatment is still appropriate.
Dividends from the Zimbabwe operations are recorded in income in the period received.

The Company holds less than a 100% financial interest in certain consolidated subsidiaries. The net income and
shareholders’ equity attributable to the noncontrolling interests in these subsidiaries are reported on the face of the consolidated
financial statements. There were no material changes in the Company’s ownership percentage in any of these subsidiaries during
fiscal years 2022, 2021, or 2020.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments in Unconsolidated Affiliates

The Company’s investments in its unconsolidated affiliates, which include its Zimbabwe operations, are non-marketable
securities. Universal reviews such investments for impairment whenever events or changes in circumstances indicate that the
carrying amount of an investment may not be recovered. For example, the Company would review such an investment for
impairment if the investee were to lose a significant customer, suffer a large reduction in sales margins, experience a major
change in its business environment, or undergo any other significant change in its normal business. In assessing the recoverability
of these investments, the Company follows the applicable accounting guidance in determining the fair value of the investments. In
most cases, this involves the use of undiscounted and discounted cash flow models (Level 3 of the fair value hierarchy under the
accounting guidance). If the fair value of an unconsolidated investee is determined to be lower than its carrying value, an
impairment loss is recognized. The determination of fair value using discounted cash flow models is normally not based on
observable market data from independent sources and therefore requires significant management judgment with respect to
estimates of future operating earnings and the selection of an appropriate discount rate. The use of different assumptions could
increase or decrease estimated future operating cash flows, and the discounted value of those cash flows, and therefore could
increase or decrease any impairment charge related to these investments. During the fiscal year ended March 31, 2022, the
Company recognized an immaterial impairment of an investment in an equity method investee in Africa.

In its consolidated statements of income, the Company reports its proportional share of the earnings of unconsolidated
affiliates accounted for on the equity method based on the pretax earnings of those affiliates, as permitted under the applicable
accounting guidance. All applicable foreign and U.S. income taxes are provided on these earnings and reported as a component of
consolidated income tax expense. For unconsolidated affiliates located in foreign jurisdictions, repatriation of the Company’s
share of the earnings through dividends is assumed in determining consolidated income tax expense.

The following table provides a reconciliation of (1) equity in the pretax earnings of unconsolidated affiliates, as reported
in the consolidated statements of income to (2) equity in the net income of unconsolidated affiliates, net of dividends, as reported
in the consolidated statements of cash flows for the fiscal years ended March 31, 2022, 2021, and 2020:

Fiscal Year Ended March 31,

2022

2021

2020

Equity in pretax earnings reported in the consolidated statements of income ...................... $

6,095 $

2,985 $

Less: Equity in income taxes ...............................................................................................

Equity in net income .............................................................................................................
Less: Dividends received on investments (1)

.......................................................................

(1,481)

4,614

(4,285)

180

3,165

(2,869)

4,211

(1,390)

2,821

(3,922)

Equity in net income, net of dividends, reported in the consolidated statements of cash

flows .................................................................................................................................. $

329 $

296 $

(1,101)

(1)

In accordance with the applicable accounting guidance, dividends received from unconsolidated affiliates accounted for on the equity method that represent a
return on capital (i.e., a return of earnings on a cumulative basis) are presented as operating cash flows in the consolidated statements of cash flows.

Earnings Per Share

The Company calculates basic earnings per share based on earnings available to common shareholders. The calculation
uses the weighted average number of common shares outstanding during each period. Diluted earnings per share is computed in a
similar manner using the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive
potential common shares include unvested restricted stock units and performance share units that are assumed to be fully vested
and paid out in shares of common stock.

Calculations of earnings per share for the fiscal years ended March 31, 2022, 2021, and 2020, are provided in Note 5.

Cash, Restricted Cash, and Cash Equivalents

All highly liquid investments with a maturity of three months or less at the time of purchase are classified as cash
equivalents. Restricted cash is associated with the acquisition of Silva International, Inc. ("Silva") and is recognized as a
component of other noncurrent assets at March 31, 2022 and 2021.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Advances to Tobacco Suppliers

In many sourcing origins where the Company operates, it provides agronomy services and seasonal advances of seed,
fertilizer, and other supplies to tobacco farmers for crop production, or makes seasonal cash advances to farmers for the
procurement of those inputs. These advances are typically short term, are repaid upon delivery of tobacco to the Company, and
are reported in advances to suppliers in the consolidated balance sheets. In several origins, the Company has made long-term
advances to tobacco farmers to finance curing barns and other farm infrastructure. In some years, due to low crop yields and other
factors, individual farmers may not deliver sufficient volumes of tobacco to fully repay their seasonal advances, and the Company
may extend repayment of those advances into future crop years. The long-term portion of advances is included in other noncurrent
assets in the consolidated balance sheets. Both the current and the long-term portions of advances to tobacco suppliers are
reported net of allowances recorded when the Company determines that amounts outstanding are not likely to be collected. Short-
term and long-term advances to tobacco suppliers totaled approximately $153 million at March 31, 2022 and $144 million at
March 31, 2021. The related valuation allowances totaled $19 million at March 31, 2022, and $18 million at March 31, 2021, and
were estimated based on the Company’s historical loss information and crop projections. The allowances were increased by net
provisions for estimated uncollectible amounts of approximately $6.0 million in fiscal year 2022, $5.5 million in fiscal year 2021,
and $1.0 million in fiscal year 2020. These net provisions are included in selling, general, and administrative expenses in the
consolidated statements of income. Interest on advances is recognized in earnings upon the farmers’ delivery of tobacco in
payment of principal and interest. Advances on which interest accrual had been discontinued totaled approximately $4 million at
both March 31, 2022 and 2021.

Inventories

Inventories are valued at the lower of cost or net realizable value. Raw materials primarily consist of unprocessed leaf
tobacco, which is clearly identified by type and grade at the time of purchase. The Company tracks the costs associated with this
tobacco in the final product lots, and maintains this identification through the time of sale. This method of cost accounting is
referred to as the specific cost or specific identification method. The predominant cost component of the Company’s inventories is
the cost of the unprocessed tobacco. Direct and indirect processing costs related to these raw materials are capitalized and
allocated to inventory in a systematic manner. The Company does not capitalize any interest or sales-related costs in inventory.
Freight costs are recorded in cost of goods sold. Other inventories consist primarily of unprocessed and processed food and
vegetable ingredients, extracts, seed, fertilizer, packing materials, and other supplies, and are valued using the specific cost
method.

Recoverable Value-Added Tax Credits

In many foreign countries, the Company’s local operating subsidiaries pay significant amounts of value-added tax
(“VAT”) on purchases of unprocessed and processed tobacco, crop inputs, packing materials, and various other goods and
services. In some countries, VAT is a national tax, and in other countries it is assessed at the state level. Items subject to VAT
vary from jurisdiction to jurisdiction, as do the rates at which the tax is assessed. When tobacco is sold to customers in the country
of origin, the operating subsidiaries generally collect VAT on those sales. The subsidiaries are normally permitted to offset their
VAT payments against the collections and remit only the incremental VAT collections to the tax authorities. When tobacco is sold
for export, VAT is normally not assessed. In countries where tobacco sales are predominately for export markets, VAT collections
generated on downstream sales are often not sufficient to fully offset the subsidiaries’ VAT payments. In those situations, unused
VAT credits can accumulate. Some jurisdictions have procedures that allow companies to apply for refunds of unused VAT
credits from the tax authorities, but the refund process often takes an extended period of time, and it is not uncommon for refund
applications to be challenged or rejected in part on technical grounds. Other jurisdictions may permit companies to sell or transfer
unused VAT credits to third parties in private transactions, although approval for such transactions must normally be obtained
from the tax authorities, limits on the amounts that can be transferred may be imposed, and the proceeds realized may be heavily
discounted from the face value of the credits. Due to these factors, local operating subsidiaries in some countries can accumulate
significant balances of VAT credits over time. The Company reviews these balances on a regular basis and records valuation
allowances on the credits to reflect amounts that are not expected to be recovered, as well as discounts anticipated on credits that
are expected to be sold or transferred. At March 31, 2022 and 2021, the aggregate balances of recoverable tax credits held by the
Company’s subsidiaries totaled approximately $67 million and $49 million, respectively, and the related valuation allowances
totaled approximately $21 million and $19 million, respectively. The net balances are reported in other current assets and other
noncurrent assets in the consolidated balance sheets.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Property, Plant and Equipment

Depreciation of property, plant and equipment is based upon historical cost and the estimated useful lives of the assets.
Depreciation is calculated primarily using the straight-line method. Buildings include processing and blending facilities, offices,
and warehouses. Machinery and equipment consists of processing and packing machinery and transport, office, and computer
equipment. Estimated useful lives range as follows: buildings - 15 to 40 years; processing and packing machinery - 3 to 11 years;
transport equipment - 3 to 10 years; and office and computer equipment - 3 to 12 years. Where applicable and material in amount,
the Company capitalizes related interest costs during periods that property, plant and equipment are being constructed or made
ready for service. No interest was capitalized in fiscal years 2022, 2021, or 2020.

Leases

The Company determines if an arrangement meets the definition of a lease at inception. The Company, as a lessee, enters
into operating leases for land, buildings, equipment, and vehicles. For all operating leases with terms greater than 12 months and
with fixed payment arrangements, a lease liability and corresponding right-of-use asset are recognized in the balance sheet for the
term of the lease by calculating the net present value of future lease payments. On the date of lease commencement, the present
value of lease liabilities is determined by discounting the future lease payments by the Company’s collateralized incremental
borrowing rate, adjusted for the lease term and currency of the lease payments. If a lease contains a renewal option that the
Company is reasonably certain to exercise, the Company accounts for the original lease term and expected renewal term in the
calculation of the lease liability and right-of-use asset. Certain of the Company’s leases include both lease and non-lease
components (e.g., common-area or other maintenance costs) which are accounted for as a single lease component, as the
Company has elected the practical expedient to group lease and non-lease components for real estate leases.

Goodwill and Other Intangibles

Goodwill and other intangibles are disclosed in Note 7. Goodwill principally consists of the excess of the purchase price
of acquired companies over the fair value of the net assets. Goodwill is carried at the lower of cost or fair value and is reviewed
for potential impairment on an annual basis as of the end of the fiscal year. Accounting Standards Codification Topic 350 (“ASC
350”) permits companies to base their initial assessments of potential goodwill impairment on qualitative factors, and the
Company elected to use that approach at March 31, 2022 and 2021. 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 as of those dates.

Reporting units are distinct operating subsidiaries or groups of subsidiaries that typically compose the Company’s
business in a specific country or location. Goodwill is allocated to reporting units based on the country or location to which a
specific acquisition relates, or by allocation based on expected future cash flows if the acquisition relates to more than one country
or location. The majority of the Company’s goodwill relates to its reporting unit in Brazil and reporting units in the Ingredients
operating segment. See Notes 2 and 7 for additional information. Significant adverse changes in the operations or estimated future
cash flows for a reporting unit with recorded goodwill could result in an impairment charge.

Other intangibles principally consists of finite lived intangible assets including customer-related intangibles, trade names,
developed technology, and noncompetition agreements. Intangible assets acquired in a business combination are recorded at fair
value using a discounted cash flow approach. A discounted cash flow approach to value intangible assets requires assumptions
about the timing, amount, and probability of future net cash flows, as well as the discount rate and market participant
considerations. Other intangibles are amortized on a straight-line basis over the intangible asset's economic life.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment, disclosed in Note 4 and Note 12, whenever events, changes in
business conditions, or other circumstances provide an indication that such assets may be impaired. Potential impairment is
initially assessed by comparing management’s undiscounted estimates of future cash flows from the use or disposition of the
assets to their carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge is recorded to
reduce the carrying value of the asset to its fair value determined in accordance with the accounting guidance. In many cases, this
involves the use of discounted cash flow models that are not based on observable market data from independent sources (Level 3
of the fair value hierarchy under the accounting guidance).

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes

The Company provides deferred income taxes on temporary differences between the book and tax basis of its assets and
liabilities. Those differences arise principally from employee benefit accruals, depreciation, deferred compensation, undistributed
earnings of unconsolidated affiliates, undistributed earnings of foreign subsidiaries, goodwill, intangibles, and valuation
allowances on farmer advances and VAT credits. Income taxes provided on pretax amounts recorded in accumulated other
comprehensive income (loss) are released when the related pretax amounts are reclassified to earnings. Additional disclosures
related to the Company's income taxes are disclosed in Note 6.

Fair Values of Financial Instruments

The fair value of the Company’s long-term debt, disclosed in Note 12, approximates the carrying amount since the
variable interest rates in the underlying credit agreement reflect the market interest rates that were available to the Company at
March 31, 2022. In periods when fixed-rate obligations are outstanding, fair values are estimated using market prices where they
are available or discounted cash flow models based on current incremental borrowing rates for similar classes of borrowers and
borrowing arrangements. The fair values of interest rate swap agreements designated as cash flow hedges and used to fix the
variable benchmark rate on outstanding long-term debt are determined separately and recorded in other long-term liabilities.
Except for interest rate swaps and forward foreign currency exchange contracts that are discussed below, the fair values of all
other assets and liabilities that qualify as financial instruments approximate their carrying amounts.

Derivative Financial Instruments

The Company recognizes all derivatives on the balance sheet at fair value. Interest rate swaps and forward foreign
currency exchange contracts are used from time to time to manage interest rate risk and foreign currency risk. The Company
enters into such contracts only with counterparties of good standing. The credit exposure related to non-performance by the
counterparties and the Company is considered in determining the fair values of the derivatives, and the effect has not been
material to the financial statements or operations of the Company. Additional disclosures related to the Company’s derivatives
and hedging activities are provided in Note 11.

Translation and Remeasurement of Foreign Currencies

The financial statements of foreign subsidiaries having the local currency as the functional currency are translated into
U.S. dollars using exchange rates in effect at period end for assets and liabilities and average exchange rates applicable to each
reporting period for results of operations. Adjustments resulting from translation of financial statements are reflected as a separate
component of other comprehensive income or loss. The financial statements of foreign subsidiaries having the U.S. dollar as the
functional currency, with certain transactions denominated in a local currency, are remeasured into U.S. dollars. The
remeasurement of local currency amounts into U.S. dollars creates remeasurement gains and losses that are included in earnings
as a component of selling, general, and administrative expenses. The Company recognized net remeasurement losses of $19.0
million and $16.4 million in fiscal years 2022 and 2020 , and net remeasurement gains of $8.5 million in fiscal year 2021.

Foreign currency transactions and forward foreign currency exchange contracts that are not designated as hedges
generate gains and losses when they are settled or when they are marked-to-market under the prescribed accounting guidance.
These transaction gains and losses are also included in earnings as a component of selling, general, and administrative expenses.
The Company recognized net foreign currency transaction gains of $18.0 million in fiscal year 2022 and net foreign currency
transaction losses of $1.4 million and $2.9 million in fiscal years 2021 and 2020, respectively.

Revenue Recognition

Revenue is recognized when the Company completes its performance obligation for the transfer of products and services
under its contractual arrangements with customers. For sales of tobacco, satisfaction of the performance obligation and
recognition of the corresponding revenue is based on the transfer of the ownership and control of the product to the customer,
which is substantially unchanged from the previous accounting guidance. A large percentage of the Company’s sales are to major
multinational manufacturers of consumer tobacco products. The Company works closely with those customers to understand and
plan for their requirements for volumes, styles, and grades of leaf tobacco from its various growing regions, and extensive
coordination is maintained on an ongoing basis to determine and satisfy their requirements for transfer of ownership and physical
shipment of processed tobacco. The customers typically specify, in sales contracts and in shipping documents, the precise terms
for transfer of title and risk of loss for the tobacco. Customer returns and rejections are not significant, and the Company’s sales
history indicates that customer-specific acceptance provisions are consistently met upon transfer of title and risk of loss.

While most of the Company’s revenue is derived from tobacco that is purchased from farmers, processed and packed in
its factories, and then sold to customers, some revenue is earned from processing tobacco owned by customers and from other
value-added services. The arrangements for processing services usually exist in specific markets where the customers contract
directly with farmers for leaf production, and they have accounted for less than 5% of total revenue on an annual basis through the

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

fiscal year ended March 31, 2022. Processing and packing of leaf tobacco is a short-duration process. Under normal operating
conditions, raw tobacco that is placed into the production line exits as processed and packed tobacco within one hour, and is then
later transported to customer-designated storage facilities. The revenue for these services is recognized when the performance
obligation is met upon the completion of processing, and the Company's operating history indicates that customer requirements
for processed tobacco are consistently met upon completion of processing.

The Company has diversified its operations through acquisition of established companies that offer customers a wide
range of both liquid and dehydrated fruit and vegetable ingredient products, as well as botanical extracts and flavors. These
operations procure raw materials from domestic and international growers and suppliers and through a variety of processing steps
(including sorting, cleaning, pressing, mixing, extracting, and blending), manufacture finished goods utilized in both human and
pet food. The contracts for food ingredients with customers create a performance obligation to transfer the manufactured finished
goods to the customer. Transaction prices for the sale of food ingredients are primarily based on negotiated fixed prices. At the
point in time that the customer obtains control over the finished product, which is typically aligned with physical shipment under
the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the
sale.

Additional disclosures related to the Company's revenue from contracts with customers are provided in Note 3.

Stock-Based Compensation

Share-based payments, such as grants of restricted stock units, performance share units, restricted stock, stock
appreciation rights, and stock options, are measured at fair value and reported as expense in the financial statements over the
requisite service period. Additional disclosures related to stock-based compensation are included in Note 15.

Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles in the United States
requires management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Accounting Pronouncements

Pronouncements Adopted in Fiscal Year 2021

The Company adopted FASB Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) effective April 1, 2020. ASU 2016-13 requires
companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a
broader range of reasonable and supportable information to inform credit loss estimates. The Company determined that the update
applied to trade receivables, but that there was no material impact to the consolidated financial statements from the adoption of
ASU 2016-13.

The Company adopted FASB Accounting Standards Update No. 2018-15, “Intangibles - Goodwill and Other - Internal-
Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That Is a Service Contract (a consensus of FASB Emerging Issues Task Force)” (“ASU 2018-15”) effective April 1, 2020. ASU
2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the
requirements for capitalizing implementation costs incurred for an internal-use software license. Under that model,
implementation costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are
incurred. Capitalized implementation costs are amortized over the term of the associated hosted cloud computing arrangement
service contract on a straight-line basis, unless another systematic and rational basis is more representative of the pattern in which
the entity expects to benefit from its right to access the hosted software. Capitalized implementation costs would then be assessed
for impairment in a manner similar to long-lived assets. There was no material impact to the consolidated financial statements
from the adoption of ASU 2018-15.

Pronouncements Adopted in Fiscal Year 2022

The Company adopted FASB issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740) -
Simplifying the Accounting for Income Taxes” (“ASU 2019-12”) effective April 1, 2021. ASU 2019-12 eliminates certain
exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim
period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity
method investments and foreign subsidiaries. The updated guidance also simplifies aspects of accounting for franchise taxes and
enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of
goodwill. There was no material impact to the consolidated financial statements from the adoption of ASU 2019-12.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pronouncements to be Adopted in Future Periods

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, “Reference Rate Reform (Topic 848) -
Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional
expedients and exceptions related to contract modifications and hedge accounting to address the transitions from the London
Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance permits an entity
to consider contract modification due to reference rate reform to be an event that does not require contract remeasurement at the
modification date or reassessment of a previous accounting determination. ASU 2020-04 also temporarily allows hedge
relationships to continue without de-designation upon changes due to reference rate reform. The standard is effective upon
issuance and can be applied as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact
that the guidance will have on its consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

NOTE 2. BUSINESS COMBINATIONS

Acquisition of Shank's Extracts, LLC

On October 4, 2021, the Company acquired 100% of the capital stock of Shank's Extract's, LLC (“Shank's”), a flavors
and extracts processing company, for approximately $100 million in cash and $2.4 million of additional working capital on-hand
at the date of acquisition. The acquisition of Shank's diversifies the Company's product offerings and generates new opportunities
for its plant-based ingredients platform.

The goodwill and intangibles recognized for the Shank's acquisition are deductible for U.S. income tax purposes. The

transaction was treated as an asset acquisition for U.S. Federal tax purposes, resulting in a step-up of tax basis to fair value.

For the fiscal year ended March 31, 2022, the Company incurred $2.3 million for acquisition-related transaction costs for
the purchase of Shank's. The acquisition-related costs were expensed as incurred and recorded in selling, general, and
administrative expense on the consolidated statements of income.

In November 2021, the Company acquired the land and buildings utilized by Shank's operations for $13.3 million. The
purchase of the land and buildings resulted in the elimination of the $8.5 million operating lease right-of-use asset and lease
liability recognized on the acquisition date for Shank's.

Acquisition of Silva International, Inc.

On October 1, 2020 the Company acquired 100% of the capital stock of Silva International, Inc. ("Silva"), a natural,
specialty dehydrated vegetable, fruit, and herb processing company serving global markets, for approximately $164 million in
cash and $5.9 million of additional working capital on-hand at the date of acquisition. The acquisition of Silva diversified the
Company's product offerings and generates new opportunities for its plant-based ingredients platform. The tax basis of the assets
acquired and liabilities assumed did not result in a step-up of tax basis and the related goodwill is not deductible for U.S. income
tax purposes.

The Company continues to employ one of Silva's selling shareholders and as stipulated in the Silva purchase agreement
has transferred $6.0 million to a third-party escrow account that may ultimately be earned by the selling shareholder upon
completion of a post-combination service period. Since the compensation agreement for the selling shareholder who remains
employed with the Company includes a post-combination service period, the Company excluded the entire $6.0 million in the
purchase price to be allocated. The $6.0 million in escrow is recognized as restricted cash in other noncurrent assets on the
consolidated balance sheet at March 31, 2022. The contingent consideration arrangement for the selling shareholder includes a
post-combination service requirement and forfeitable payment provisions, therefore under ASC Topic 805, “Business
Combinations,” must be treated as compensation expense and recognized ratably over the requisite service period in selling,
general, and administrative expense on the consolidated statements of income.

For the fiscal year ended March 31, 2021, the Company incurred $3.9 million for acquisition-related transaction costs for
the purchase of Silva. The acquisition-related costs were expensed as incurred and recorded in selling, general, and administrative
expense on the consolidated statements of income.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the final purchase price allocations of the assets acquired and liabilities assumed for the

Shank's and Silva acquisitions.

Assets

Shank's

Silva

October 4, 2021

October 1, 2020

Cash and cash equivalents .................................................................................................................. $

754 $

Accounts receivable, net .....................................................................................................................

Advances to suppliers, net ..................................................................................................................

Inventory .............................................................................................................................................

Other current assets .............................................................................................................................

Property, plant and equipment ...........................................................................................................

Operating lease right-of-use assets

Intangibles

Customer relationships .....................................................................................................................

Developed technology .....................................................................................................................

Trade names .....................................................................................................................................

Non-compete agreements .................................................................................................................

Goodwill .............................................................................................................................................

Total assets acquired .........................................................................................................................

Liabilities

Accounts payable and accrued expenses ............................................................................................
Customer advances and deposits .........................................................................................

Accrued compensation ........................................................................................................................

Income taxes payable ..........................................................................................................................

Current portion operating lease liabilities ...........................................................................................

Deferred income taxes ........................................................................................................................

Total liabilities assumed ...................................................................................................................

6,643

—

15,792

415

11,000

8,531

24,000

4,500

—

3,000

41,061

115,696

6,159

351

655

—

8,531

—

15,696

8,126

17,885

3,011

33,162

833

24,437

—

53,000

—

7,800

—

46,144

194,398

11,683

—

3,350

946

—

14,419

30,398

Total assets acquired and liabilities assumed ................................................................................. $

100,000 $

164,000

A portion of the goodwill recorded as part of the acquisitions was attributable to the assembled workforce of Shank's and
Silva, respectively. The Company determined the Shank's and Silva operations were not material to the Company’s consolidated
results. Therefore, pro forma information is not presented.

NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

The majority of the Company’s consolidated revenue consists of sales of processed leaf tobacco to customers. The
Company also earns revenue from processing leaf tobacco owned by customers and from various other services provided to
customers. Additionally, the Company has fruit and vegetable processing operations, as well as flavor and extract services that
provide customers with a range of food ingredient products. Payment terms with customers vary depending on customer
creditworthiness, product types, services provided, and other factors. Contract durations and payment terms for all revenue
categories generally do not exceed one year. Therefore, the Company has applied a practical expedient to not adjust the
transaction price for the effects of financing components, as the Company expects that the period from the time the revenue for a
transaction is recognized to the time the customer pays for the related good or service transferred will be one year or less. Below
is a description of the major revenue-generating categories from contracts with customers.

Tobacco Sales

The majority of the Company’s business involves purchasing leaf tobacco from farmers in the origins where it is grown,
processing and packing the tobacco in its factories, and then transferring ownership and control of the tobacco to customers. On a
much smaller basis, the Company also sources processed tobacco from third-party suppliers for resale to customers. The contracts
for tobacco sales with customers create a performance obligation to transfer tobacco to the customer. Transaction prices for the
sale of tobaccos are primarily based on negotiated fixed prices, but the Company does have a small number of cost-plus contracts
with certain customers. Cost-plus arrangements provide the Company reimbursement of the cost to purchase and process the

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

tobacco, plus a contractually agreed-upon profit margin. The Company utilizes the most likely amount methodology under the
accounting guidance to recognize revenue for cost-plus arrangements with customers. Shipping and handling costs under tobacco
sales contracts with customers are treated as fulfillment costs and included in the transaction price. Taxes assessed by government
authorities on the sale of leaf tobacco products are excluded from the transaction price. At the point in time that the customer
obtains control over the tobacco, which is typically aligned with physical shipment under the contractual terms with the customer,
the Company completes its performance obligation and recognizes the revenue for the sale.

Ingredient Sales

In recent fiscal years, the Company has diversified operations through acquisition of established companies that offer
customers a wide range of both liquid and dehydrated fruit and vegetable ingredient products, flavors, and extracts. These
operations procure raw materials from domestic and international growers and suppliers and through a variety of processing steps
including sorting, cleaning, pressing, mixing, extracting, and blending to manufacture finished goods utilized in both human and
pet food. The contracts for food ingredients with customers create a performance obligation to transfer the manufactured finished
goods to the customer. Transaction prices for the sale of food ingredients are primarily based on negotiated fixed prices. At the
point in time that the customer obtains control over the finished product, which is typically aligned with physical shipment under
the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the
sale.

Processing Revenue

Processing and packing of customer-owned tobacco and ingredients is a short-duration process. Processing charges are
primarily based on negotiated fixed prices per unit of weight processed. Under normal operating conditions, customer-owned raw
materials that are placed into the production line exits as processed and packed product and is then later transported to customer-
designated transfer locations. The revenue for these services is recognized when the performance obligation is satisfied, which is
generally when processing is completed. The Company’s operating history and contract analyses indicate that customer
requirements for processed tobacco and food ingredients products are consistently met upon completion of processing.

Other Sales and Revenue from Contracts with Customers

From time to time, the Company enters into various arrangements with customers to provide other value-added services
that may include blending, chemical and physical testing of products, storage, sorting, and tobacco cutting services for select
manufacturers. These other arrangements and operations are a much smaller portion of the Company’s business, and are separate
and distinct contractual agreements from the Company’s tobacco and food ingredients sales or third-party processing
arrangements with customers. The transaction prices and timing of revenue recognition of these items are determined by the
specifics of each contract.

Disaggregation of Revenue from Contracts with Customers

The following table disaggregates the Company’s revenue by significant revenue-generating category:

Fiscal Year Ended March 31,

2022

2021

2020

Tobacco sales ................................................................................................................................ $ 1,703,330

$ 1,715,066

$ 1,759,769

Ingredient sales ..............................................................................................................................

250,595

127,393

Processing revenue ........................................................................................................................

Other sales and revenue from contracts with customers ...............................................................

77,048

60,177

73,021

49,983

22,014

76,123

33,971

Total revenue from contracts with customers ............................................................................

2,091,150

1,965,463

1,891,877

Other operating sales and revenues ...............................................................................................

12,451

17,894

18,102

Consolidated sales and other operating revenues ....................................................................... $ 2,103,601

$ 1,983,357

$ 1,909,979

Other operating sales and revenues consists principally of interest on advances to tobacco suppliers and dividend income

from unconsolidated affiliates.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Major Customers

A material part of the Company’s business is dependent upon a few customers. The Company’s seven largest customers
are Altria Group, Inc, British American Tobacco plc, China Tobacco International, Inc., Imperial Brands plc, Japan Tobacco, Inc.,
Philip Morris International, Inc., and Swedish Match AB. In the aggregate, these customers have accounted for more than 60% of
consolidated revenue for each of the past three fiscal years. For the fiscal years ended March 31, 2022, 2021, and 2020, revenue
from Imperial Brands plc accounted for revenue of approximately $380 million, $340 million, and $320 million, respectively,
Philip Morris International, Inc. accounted for revenue of approximately $320 million, $460 million, and $500 million,
respectively, and British American Tobacco plc accounted for revenue of approximately $260 million, $210 million, and $190
million, respectively. These customers do business with various affiliates in the Company’s Tobacco Operations segment. The
loss of, or substantial reduction in business from, any of these customers could have a material adverse effect on the Company.

NOTE 4. RESTRUCTURING AND IMPAIRMENT COSTS

During the fiscal years ended March 31, 2022, 2021, and 2020 Universal recorded restructuring and impairment costs

related to business changes and various initiatives to adjust certain operations and reduce costs.

Fiscal Year Ended March 31, 2022

Tobacco Operations

As a result of efforts to exit the idled tobacco operations in Tanzania, the Company reevaluated the carrying values of
property, plant, and equipment associated with the Tanzania operations. During the fiscal year ended March 31, 2022, the
Company determined the carrying value exceeded the estimated fair value of those assets and recognized a $9.4 million
impairment charge. See Note 19 for additional information.

During the fiscal year ended March 31, 2022, the Company also incurred $2.2 million of termination costs for the

Tobacco Operations segment.

Ingredients Operations

During the fiscal year ended March 31, 2022, the Company recognized $1.2 million of net gains on the sale of the
remaining property, plant, and equipment associated with the wind-down of the CIFI operations that was announced in fiscal year
2021.

Fiscal Year Ended March 31, 2021

Tobacco Operations

During the fiscal year ended March 31, 2021, the Company incurred $4.4 million of termination and impairment costs
associated with the restructuring of tobacco buying and administrative operations in Africa, $1.2 million of combined termination
costs in other regions, and a $0.9 million charge for the liquidation of an idled service entity in Tanzania. Total restructuring and
impairments costs related to the Tobacco Operations segment were $6.5 million for the fiscal year ended March 31, 2021.

Ingredients Operations

In fiscal year 2021, the Company committed to a plan to wind-down its subsidiary, Carolina Innovative Food
Ingredients, Inc. (“CIFI”), a sweet potato processing operation located in Nashville, North Carolina. The CIFI operation was a
start-up project initially undertaken by the Company in fiscal year 2015. The decision to wind down CIFI was consistent with the
Company’s capital allocation strategy to focus on delivering shareholder value through building and enhancing a plant-based
ingredients platform, which includes integrating and exploring the synergies of recently acquired businesses, FruitSmart and
Silva. The Company determined that CIFI was not a strategic fit for the platform’s long-term objectives. CIFI’s single-product
focused processing facility and ongoing international pricing pressures, among other factors, created challenges that proved
insurmountable. As a result of the decision to wind down the CIFI operations, the Company paid termination benefits totaling
approximately $0.6 million to employees whose permanent positions were eliminated. In addition to the termination costs, the
Company recognized various other costs associated with the wind-down of the CIFI facility. These costs include impairments of
property, plant, and equipment (including the factory building), as well as inventory and supply write-downs. The total
restructuring and impairment charge incurred for the CIFI wind-down was $16.1 million for the fiscal year ended March 31, 2021.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fiscal Year Ended March 31, 2020

Tobacco Operations

In fiscal year 2020, the Company recorded restructuring and impairment costs totaling $7.5 million, primarily related to
$3.4 million of employee termination benefits for a voluntary workforce reduction at the Company's tobacco facilities in North
Carolina, $1.8 million of employee termination benefits for the Company’s operations in Africa, and a $2.2 million impairment
charge for machinery used by the Company's operations in Africa. Restructuring and impairment costs were also incurred in
connection with downsizing efforts at several other locations around the Company.

A summary of the restructuring and impairment costs incurred during the fiscal years ended March 31, 2022, 2021, and

2020 is as follows:

Restructuring Costs:

Fiscal Years Ended
March 31,

2022

2021

2020

Employee termination benefits ...............................................................................

2,174 $

5,237 $

Other restructuring costs .........................................................................................

Impairment Costs:

Property, plant, and equipment and other noncurrent assets ..................................

Total restructuring and impairment costs .............................................................

(24)

2,150

3,468

8,705

8,307

8,307 $

10,457 $

13,872

13,872 $

22,577 $

5,356

—

5,356

2,187

7,543

A reconciliation of the Company’s liability for employee termination benefits and other restructuring costs for fiscal

years 2020 through 2022 is as follows:

Employee
Termination
Benefits

Other Costs

Total

Balance at April 1, 2019 .......................................................................................................

$623

$223

$846

Fiscal Year 2020 Activity:

Costs charged to expense .......................................................................................................

5,356

Payments and write-offs .........................................................................................................

(2,564)

Balance at March 31, 2020 .....................................................................................................

3,415

Fiscal Year 2021 Activity:

Costs charged to expense .......................................................................................................

5,237

Payments and write-offs .........................................................................................................

(7,282)

Balance at March 31, 2021 .....................................................................................................

1,370

Fiscal Year 2022 Activity:

Costs charged to expense .......................................................................................................

2,174

Payments and write-offs .........................................................................................................

(3,544)

Balance at March 31, 2022 ..................................................................................................

$—

—

(223)

—

3,468

(2,855)

613

(24)

(589)

$—

5,356

(2,787)

3,415

8,705

(10,137)

1,983

2,150

(4,133)

$—

Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations
in response to business changes. The Company may incur additional restructuring and impairment costs in future periods as
business changes occur and additional cost savings initiatives are implemented.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 5. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

(in thousands, except share and per share data)

Basic Earnings Per Share

Numerator for basic earnings per share

Fiscal Year Ended March 31,

2022

2021

2020

Net income attributable to Universal Corporation ........................................................................... $

86,577 $

87,410 $

71,680

Denominator for basic earnings per share

Weighted average shares outstanding ...............................................................................................

24,764,177

24,656,009

24,982,259

Basic earnings per share .................................................................................................................. $

3.50 $

3.55 $

2.87

Diluted Earnings Per Share

Numerator for diluted earnings per share

Net income attributable to Universal Corporation ........................................................................... $

86,577 $

87,410 $

71,680

Denominator for diluted earnings per share:

Weighted average shares outstanding ...............................................................................................

24,764,177

24,656,009

24,982,259

Effect of dilutive securities

Employee and outside director share-based awards ......................................................................

158,719

132,557

124,092

Denominator for diluted earnings per share .....................................................................................

24,922,896

24,788,566

25,106,351

Diluted earnings per share ................................................................................................................ $

3.47 $

3.53 $

2.86

NOTE 6. INCOME TAXES

The Company operates in the United States and many foreign countries and is subject to the tax laws of many
jurisdictions. Changes in tax laws or the interpretation of tax laws can affect the Company’s earnings, as can the resolution of
pending and contested tax issues. The Company's consolidated effective income tax rate is affected by a number of factors,
including the mix of domestic and foreign earnings and the effect of exchange rate changes on local taxable income and deferred
taxes in foreign countries.

For fiscal years ended March 31, 2022, 2021, and 2020 the Company's U.S. federal statutory tax rate is 21.0%. The U.S.
tax system is primarily territorial based after the enactment of the Tax Cuts and Jobs Act of 2017. The U.S. tax law imposes a tax
on U.S. shareholders on certain low-taxed income earned by controlled foreign corporations, referred to as global intangible low-
taxed income ("GILTI”). The Company has made an accounting policy election to account for any additional tax resulting from
the GILTI provisions in the year in which it is incurred and has not recorded any deferred taxes on temporary book-tax differences
related to this income.

The Company continues to assume repatriation of all undistributed earnings of its consolidated foreign subsidiaries and
has therefore provided for expected foreign withholding taxes on the distribution of those earnings where applicable, net of any
U.S. tax credit attributable to those withholding taxes. The Company has asserted permanent reinvestment of the book basis of
certain foreign subsidiaries, and accordingly, no deferred income tax liability has been recorded for any potential taxable gain that
may be realized on a future disposition or liquidation of any of those subsidiaries. It is not practicable for the Company to quantify
any deferred income tax liability that would be attributable to those events.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Tax Expense

Income taxes for the fiscal years ended March 31, 2022, 2021, and 2020 consisted of the following:

Fiscal Year Ended March 31,

2022

2021

2020

Current

United States ...................................................................................................................... $

15,042 $

9,500 $

State and local ....................................................................................................................

Foreign ...............................................................................................................................

Deferred

United States ......................................................................................................................

State and local ....................................................................................................................

Foreign ...............................................................................................................................

265

25,828

41,135

(498)

1,568

(3,542)

(2,472)

621

21,626

31,747

(5,938)

(314)

3,917

(2,335)

2,001

41,892

43,985

3,735

(16)

(12,416)

(8,697)

Total ................................................................................................................................. $

38,663 $

29,412 $

35,288

Foreign taxes include any applicable U.S. tax expense on the earnings of foreign subsidiaries.

Consolidated Effective Income Tax Rate

A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:

Fiscal Year Ended March 31,

2022

2021

2020

U.S. federal statutory tax rate ................................................................................................

21.0 %

State income taxes, net of federal benefit .............................................................................

Foreign earnings taxed at rates other than the U.S. federal statutory tax rate .......................

Foreign dividend withholding taxes ......................................................................................

Changes in uncertain tax positions ........................................................................................

Other ......................................................................................................................................

1.0

3.7

2.3

(0.3)

(0.5)

Effective income tax rate .......................................................................................................

27.2 %

0.2

(0.9)

5.3

—

(2.2)

23.4 %

21.0 %

0.1

(2.0)

5.1

5.6

1.3

31.1 %

In fiscal year 2022, the Company recognized a $1.7 million benefit related to a final tax law ruling at a foreign

subsidiary.

Final United States GILTI regulations published in July 2020 significantly changed from the proposed regulations
published in 2019. The final regulations allow for an annual election for GILTI high-tax exclusion instead of a 5-year election and
permitted retroactive application to years beginning after December 31, 2017. Universal elected to apply the final regulations to
fiscal years 2019 and 2020 which resulted in a tax reduction of $2.7 million. In fiscal year 2021, the Company also recognized a
$4.4 million net tax benefit for final U.S. tax regulations issued for hybrid dividends paid by foreign subsidiaries.

During fiscal year 2020, the Company resolved a transfer pricing matter related to a foreign subsidiary. The resolution of
the uncertainty with the local country taxing authorities resulted in net additional current income tax expense of $2.8 million. The
additional income tax expense for fiscal year 2020 increased the effective tax rate for the year by 2.4%

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Components of Income Before Income Taxes

The U.S. and foreign components of income before income taxes were as follows:

Fiscal Year Ended March 31,

2022

2021

2020

United States ......................................................................................................................... $

74,553

30,060

Foreign ..................................................................................................................................

67,714

95,666

22,916

90,375

Total ................................................................................................................................... $

142,267

125,726

113,291

Deferred Income Tax Liabilities and Assets

Significant components of deferred tax liabilities and assets were as follows:

March 31,

2022

2021

Liabilities

Foreign withholding taxes .................................................................................................................................. $

19,353

21,711

Property, plant and equipment ...........................................................................................................................

Undistributed earnings .......................................................................................................................................

Operating lease right-of-use assets .....................................................................................................................

Goodwill and other intangible assets .................................................................................................................

Local currency exchange gains of foreign subsidiaries .....................................................................................

All other ..............................................................................................................................................................

10,567

3,004

6,621

34,584

4,094

3,414

Total deferred tax liabilities .......................................................................................................................... $

81,637 $

8,726

2,947

6,856

35,059

—

4,876

80,175

Assets

Employee benefit plans ...................................................................................................................................... $

16,138

17,199

Reserves and accruals .........................................................................................................................................

Deferred income .................................................................................................................................................

Operating lease right-of-use liabilities ...............................................................................................................

Currency translation losses of foreign subsidiaries ............................................................................................

Local currency exchange losses of foreign subsidiaries ....................................................................................

Interest rate swap ................................................................................................................................................

All other ..............................................................................................................................................................

Total deferred tax assets ................................................................................................................................

Valuation allowance ...........................................................................................................................................

9,844

4,127

6,538

2,173

595

302

9,384

49,101

(3,182)

7,603

3,521

6,718

2,173

450

5,178

8,568

51,410

(4,080)

Net deferred tax assets ................................................................................................................................... $

45,919

47,330

At March 31, 2022, the Company had no material net operating loss carryforwards in either its domestic or foreign

operations.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Combined Income Tax Expense (Benefit)

The combined income tax expense (benefit) allocable to continuing operations and other comprehensive income was as

follows:

Fiscal Year Ended March 31,

2022

2021

2020

Continuing operations ............................................................................................................ $

38,663 $

29,412 $

35,288

Other comprehensive loss ......................................................................................................

6,555

9,563

(14,392)

Total ................................................................................................................................. $

45,218

38,975

20,896

Uncertain Tax Positions

A reconciliation of the beginning and ending balance of the gross liability for uncertain tax positions is as follows:

Fiscal Year Ended March 31,

2022

2021

2020

Liability for uncertain tax positions, beginning of year ........................................................ $

2,437 $

2,377 $

5,625

Additions:

Related to tax positions for the current year ......................................................................

Related to tax positions for prior years ..............................................................................

Reductions:

Due to lapses of statutes of limitations ...............................................................................

Due to tax settlements ........................................................................................................

Effect of currency rate changes ..........................................................................................

328

(56)

(814)

—

(135)

—

146

Liability for uncertain tax positions, end of year .................................................................. $

2,024 $

2,437 $

1,746

4,369

(81)

(8,948)

(334)

2,377

The liability for uncertain tax positions at March 31, 2022 includes approximately $2.0 million that could have an effect
on the consolidated effective tax rate if the tax benefits are recognized. The liability for uncertain tax positions includes $0.1
million related to tax positions for which it is reasonably possible that the amounts could change significantly before March 31,
2023. This amount reflects a possible decrease in the liability for uncertain tax positions that could result from the completion and
resolution of tax audits and the expiration of open tax years in various tax jurisdictions. The $0.8 million settlement in fiscal year
2022 represents the resolution of a tax matter with a local country taxing authority. The Company accrued $0.5 million of the
fiscal year 2022 settlement in prior fiscal years. The settlement in fiscal year 2020 represents the resolution of a tax matter with a
local country taxing authority that resulted in a $8.9 million settlement of which $4.5 million was accrued in prior fiscal years.

For the fiscal year ended March 31, 2021, the Company recognized $1.8 million as a component of interest expense
related to a settlement of an uncertain tax position at a foreign subsidiary. Amounts accrued or reversed for interest were not
material for fiscal years 2022 or 2020. Amounts accrued or reversed for penalties were not material for fiscal years 2022 through
2020, and liabilities recorded for penalties at March 31, 2022 and 2021 also were not material.

Universal and its subsidiaries file a U.S. federal consolidated income tax return, as well as returns in several U.S. states
and a number of foreign jurisdictions. As of March 31, 2022, the Company's earliest open tax year for U.S. federal income tax
purposes was its fiscal year ended March 31, 2018. Open tax years in U.S. federal, state and foreign jurisdictions range from 3 to
6 years.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 7. GOODWILL AND OTHER INTANGIBLES

The Company's changes in goodwill at March 31, 2022 and 2021 consisted of the following:

(in thousands)

Fiscal Year Ended March 31,

2022

2021

Balance at beginning of year .............................................................................................................................

173,051 $

126,826

Acquisition of business(1) (2)

..........................................................................................................................

Foreign currency translation adjustment .......................................................................................................

41,061

(114)

46,144

Balance at end of year .......................................................................................................................................

213,998 $

173,051

(1)

On October 4, 2021, the Company acquired 100% of the capital stock of Shank's for approximately $100 million in cash and $2.4 million of additional
working capital on-hand at the date of acquisition.. The Shank's acquisition resulted in $41.1 million of goodwill. See Note 2 for additional information.
(2) On October 1, 2020, the Company acquired 100% of the capital stock of Silva for approximately $164.0 million in cash and $5.9 million of working capital

on-hand at the date of acquisition. The Silva acquisition resulted in $46.1 million of goodwill. See Note 2 for additional information.

The Company's intangible assets primarily consist of capitalized customer-related intangibles, trade names, proprietary
developed technology and noncompetition agreements. The Company's intangible assets subject to amortization consisted of the
following at March 31, 2022 and 2021:

(in thousands, except useful life)

Fiscal Year Ended March 31,

2022

2021

Useful
Life
(Years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Value

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Value

................ 11 - 13

86,500 $

(9,963) $

76,537 $

62,500 $

(3,323) $

59,177

Customer relationships(1)(2)
Trade names(1)(2)
Developed technology(1)
Noncompetition agreements(1)

....................

...........

................................

Other ..................................................

11,100

9,300

4,000

736

(3,825)

(3,773)

(825)

(679)

7,275

5,527

3,175

11,100

4,800

1,000

760

(1,605)

(2,000)

(250)

(678)

9,495

2,800

750

Total intangible assets .......................

111,636 $

(19,065) $

92,571 $

80,160 $

(7,856) $

72,304

(1)

The Shank's acquisition resulted in $31.5 million of intangibles. See Note 2 for additional information.

(2) The Silva acquisition resulted in $60.8 million of intangibles. See Note 2 for additional information.

Intangible assets are amortized on a straight-line basis over the asset's estimated useful economic life as noted above.

The Company's amortization expense for intangible assets for the years ended March 31, 2022, 2021, and 2020:

(in thousands)

Fiscal Year Ended March 31,

2022

2021

2020

Amortization Expense ................................................................................ $

11,209 $

6,460 $

722

Amortization expense for the developed technology intangible asset is recorded in cost of goods sold in the consolidated
income statements of income. The amortization expense for the other intangible assets is recorded in selling, general, and
administrative expenses in the consolidated income statements of income.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of March 31, 2022, the expected future amortization expense for intangible assets is as follows:

Fiscal Year

2023 ............................................................................................................................................................................................ $

2024 ............................................................................................................................................................................................

2025 ............................................................................................................................................................................................

2026 ............................................................................................................................................................................................

2027 and thereafter .....................................................................................................................................................................

Total expected future amortization expense ............................................................................................................................... $

12,494

11,256

11,812

8,452

48,557

92,571

NOTE 8. CREDIT FACILITIES

Bank Credit Agreement

On December 20, 2018, the Company entered into a senior unsecured bank credit agreement that included a $430 million
five-year revolving credit facility (expiring December 20, 2023), a $150 million five-year term loan (due December 20, 2023),
and a $220 million seven-year term loan (due December 20, 2025). On December 17, 2020, the Company converted $150 million
from the balance in the revolving credit facility into the existing term loans, splitting the balance equally between them.
Additional information related to the term loans is provided in Note 9. Borrowings under the revolving credit facility bear interest
at a variable rate based on either (1) LIBOR plus a margin that is based on the Company's credit measures or (2) the higher of the
federal funds rate plus 0.5%, prime rate, or one-month LIBOR plus 1.0%, each plus a margin. In addition to interest, the Company
pays a facility fee on the revolving credit facility. $100 million was outstanding under the revolving credit facility at March 31,
2022. The credit agreement provides for an expansion of the facility under certain conditions to allow additional borrowings of up
to $200 million. The credit agreement includes financial covenants that require the Company to maintain a minimum level of
tangible net worth and observe limits on debt levels. The Company was in compliance with those covenants at March 31, 2022.

Short-Term Credit Facilities

The Company maintains short-term uncommitted lines of credit in the United States and in a number of foreign
countries. Foreign borrowings are generally in the form of overdraft facilities at rates competitive in the countries in which the
Company operates. Generally, each foreign line is available only for borrowings related to operations of a specific country. As of
March 31, 2022 and 2021, approximately $83 million and $101 million, respectively, were outstanding under these uncommitted
lines of credit. The weighted-average interest rates on short-term borrowings outstanding as of March 31, 2022 and 2021 were
approximately 2.7% and 4.2%, respectively. At March 31, 2022, the Company and its consolidated affiliates had unused
uncommitted lines of credit totaling approximately $200 million.

NOTE 9. LONG-TERM DEBT

The Company's long-term debt at March 31, 2022 and 2021 consisted of the following:

March 31,

2022

2021

Senior bank term loans ....................................................................................................................................... $

520,000

Less: current portion ...........................................................................................................................................

Less: unamortized debt issuance costs ...............................................................................................................

—

(1,453)

—

(1,828)

Long-term debt ............................................................................................................................................... $

518,547

518,172

As discussed in Note 8, on December 20, 2018, the Company entered into a bank credit agreement. The credit agreement
includes a five-year term loan maturing in December 2023 and a seven-year term loan maturing in December 2025. At inception,
the five-year and seven-year term loans had balances of $150 million and $220 million, respectively. On December 17, 2020, the
Company converted $150 million from the balance in the revolving credit facility, split equally between the two term loans. Both
term loans were fully funded at closing, require no amortization, and are prepayable without penalty prior to maturity. Under the
credit agreement, both term loans bear interest at variable rates plus a margin based on the Company's credit measures. Interest
payments on the additional $150 million of new term loans in fiscal year 2021 remain unhedged at March 31, 2022.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As discussed in Note 11, the Company had receive-floating/pay-fixed interest rate swap agreements in place with respect
to prior loans that were initially designated and carried over to hedge the variable interest payments on the new loans. Those swap
agreements were subsequently terminated in February 2019 and concurrently replaced with new interest rate swap agreements
that convert the variable benchmark rate to a fixed rate through December 20, 2023 for the five-year term loan and through
December 20, 2025 for the seven-year term loan. The proceeds received for the fair value of the terminated interest rate swap
agreements, approximately $5.4 million, was recognized in accumulated other comprehensive income, to be amortized into
earnings as a reduction of interest expense through their original maturity dates. At March 31, 2022, the entire gain from the
terminated interest rate swap agreements has been amortized into interest expense. With the swap agreements in place, the
effective interest rates on the original $150 million five-year loan balance and the original $220 million seven-year loan balance
were 4.19% and 4.51% at March 31, 2022, respectively. The weighted average effective interest rates, when taking into
consideration both the hedged and unhedged interest payments for all outstanding long-term debt, were 3.36% and 3.84% at
March 31, 2022 for the five-year and seven-year term loans, respectively. Changes in the effective interest rates could result from
a change in interest rates on the unhedged interest payments or a change in the Company's credit measures that impact the
applicable credit spreads specified in the underlying loan agreement.

Disclosures about the fair value of long-term debt are provided in Note 12.

Shelf Registration

In November 2020, the Company filed an undenominated automatic universal shelf registration statement with the U.S.
Securities and Exchange Commission to provide for the future issuance of an undefined amount of additional debt or equity
securities as determined by the Company and offered in one or more prospectus supplements prior to issuance.

NOTE 10. LEASES

The Company, as a lessee, enters into operating leases for land, buildings, equipment, and vehicles. For all operating
leases with terms greater than 12 months and with fixed payment arrangements, a lease liability and corresponding right-of-use
asset are recognized in the balance sheet for the term of the lease by calculating the net present value of future lease payments. On
the date of lease commencement, the present value of lease liabilities is determined by discounting the future lease payments by
the Company’s collateralized incremental borrowing rate, adjusted for the lease term and currency of the lease payments. If a
lease contains a renewal option that the Company is reasonably certain to exercise, the Company accounts for the original lease
term and expected renewal term in the calculation of the lease liability and right-of-use asset.

The following table sets forth the right-of-use assets and lease liabilities for operating leases included in the Company’s

consolidated balance sheet:

(in thousands)

Assets

March 31, 2022

March 31, 2021

Operating lease right-of-use assets ...............................................................................................

40,243

31,230

Liabilities

Current portion of operating lease liabilities ............................................................................

Long-term operating lease liabilities ........................................................................................

Total operating lease liabilities ..............................................................................................

10,303

29,617

39,920

7,898

19,725

27,623

The following table sets forth the location and amount of operating lease costs included in the Company's consolidated

statement of income:

(in thousands)

Income Statement Location

Fiscal Year Ended
March 31,

2022

2021

Cost of goods sold .........................................................................................................................

10,874 $

Selling, general, and administrative expenses ...............................................................................
Total operating lease costs(1)

..................................................................................................

9,676

20,550 $

12,903

9,408

22,311

(1)

Includes variable operating lease costs.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table reconciles the undiscounted cash flows to the operating lease liabilities in the Company’s

consolidated balance sheet:

(in thousands)

Maturity of Operating Lease Liabilities

March 31, 2022

2023 .......................................................................................................................................................................................

11,977

2024 .......................................................................................................................................................................................

2025 .......................................................................................................................................................................................

2026 .......................................................................................................................................................................................

2027 .......................................................................................................................................................................................

2028 and thereafter ................................................................................................................................................................

Total undiscounted cash flows for operating leases ....................................................................................................

Less: Imputed interest ..................................................................................................................................................

Total operating lease liabilities ..............................................................................................................................................

9,921

7,783

5,136

3,895

8,492

47,204

(7,284)

39,920

As of March 31, 2022, the Company had entered into no additional operating leases that have not yet commenced.

The following table sets forth supplemental information related to operating leases:

Fiscal Year Ended
March 31,

(in thousands, except lease term and incremental borrowing rate)

2022

2021

Supplemental Cash Flow Information

Cash paid for amounts included in the measurement of operating lease liabilities .........................

Right-of-use assets obtained in exchange for new operating leases ................................................

Weighted Average Remaining Lease Term (years) ....................................................................

12,018

22,506

5.51

12,855

10,970

5.57

Weighted Average Collateralized Incremental Borrowing Rate ..............................................

5.43 %

4.05 %

As part of the acquisition of Shank's, the Company recognized $8.5 million of operating lease right-of-use assets and
corresponding operating lease liabilities on the opening balance sheet related to leases of Shank's facilities. The facilities were
subsequently purchased in the three months ended December 31, 2021 and therefore excluded from the lease disclosures above.

NOTE 11. DERIVATIVES AND HEDGING ACTIVITIES

Universal is exposed to various risks in its worldwide operations and uses derivative financial instruments to manage two
specific types of risks – interest rate risk and foreign currency exchange rate risk. Interest rate risk has been managed by entering
into interest rate swap agreements, and foreign currency exchange rate risk has been managed by entering into forward foreign
currency exchange and option contracts. However, the Company’s policy also permits other types of derivative instruments. In
addition, foreign currency exchange rate risk is also managed through strategies that do not involve derivative instruments, such
as using local borrowings and other approaches to minimize net monetary positions in non-functional currencies. The disclosures
below provide additional information about the Company’s hedging strategies, the derivative instruments used, and the effects of
these activities on the consolidated statements of income and comprehensive income and the consolidated balance sheets. In the
consolidated statements of cash flows, the cash flows associated with all of these activities are reported in net cash provided by
operating activities.

Cash Flow Hedging Strategy for Interest Rate Risk

In February 2019, the Company entered into receive-floating/pay-fixed interest rate swap agreements that were
designated and qualify as hedges of the exposure to changes in interest payment cash flows created by fluctuations in variable
interest rates on two outstanding non-amortizing bank term loans that were funded as part of a new bank credit facility in
December 2018. Although no significant ineffectiveness is expected with this hedging strategy, the effectiveness of the interest
rate swaps is evaluated on a quarterly basis. At March 31, 2022, the total notional amount of the interest rate swaps was $370
million, which corresponded with the former original outstanding balance of the term loans. During the third quarter of fiscal year
2021, the Company converted $150 million from the balance in its revolving credit line into the existing term loans, splitting the
balance equally between them. At March 31, 2022, the Company is not hedging the interest payments on the additional $150

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

million of term loans. The increase to the principal balance of the term loans does not have an impact on the effectiveness analysis
of the interest rate swap agreements.

Previously, the Company had receive-floating/pay-fixed interest rate swap agreements that were designated and qualified
as cash flow hedges for two outstanding non-amortizing bank loans that were repaid concurrent with closing on the new bank
credit facility. Those swap agreements were subsequently terminated in February 2019 concurrent with the inception of the new
swap agreements. The fair value of the previous swap agreements, approximately $5.4 million, was received from the
counterparties upon termination and was amortized from accumulated other comprehensive loss into earnings as a reduction of
interest expense through the original maturity dates of those agreements. As of March 31, 2022, the entire deferred gain has been
amortized.

Cash Flow Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Forecast Purchases of Tobacco, Tobacco
Processing Costs, and Crop Input Sales

The majority of the tobacco production in most countries outside the United States where Universal operates is sold in
export markets at prices denominated in U.S. dollars. However, sales of crop inputs (such as seeds and fertilizers) to farmers,
purchases of tobacco from farmers and most processing costs (such as labor and energy) in those countries are usually
denominated in the local currency. Changes in exchange rates between the U.S. dollar and the local currencies where tobacco is
grown and processed affect the ultimate U.S. dollar sales of crop inputs and cost of processed tobacco. From time to time, the
Company enters into forward and option contracts to buy U.S. dollars and sell the local currency at future dates that coincide with
the sale of crop inputs to farmers. In the case of forecast purchases of tobacco and the related processing costs, the Company
enters into forward and option contracts to sell U.S. dollars and buy the local currency at future dates that coincide with the
expected timing of a portion of the tobacco purchases and processing costs. These strategies offset the variability of future U.S.
dollar cash flows for sales of crop inputs, tobacco purchases, and processing costs for the foreign currency notional amount
hedged. These hedging strategies have been used mainly for tobacco purchases, processing costs, and sales of crop inputs in
Brazil, although the Company has also entered into hedges for a portion of the tobacco purchases in Africa.

The aggregate U.S. dollar notional amount of forward and option contracts entered for these purposes during fiscal years

2022, 2021, and 2020 was as follows:

(in millions)

Fiscal Year Ended March 31,

2022

2021

2020

Tobacco purchases .................................................................................................................

134.7 $

101.3 $

123.2

Processing costs ......................................................................................................................

Crop input sales ......................................................................................................................

32.5

65.3

27.8

23.5

35.1

21.7

Total ...................................................................................................................................

232.5 $

152.6 $

180.0

Fluctuations in exchange rates and in the amount and timing of fixed-price orders from customers for their purchases
from individual crop years routinely cause variations in the U.S. dollar notional amount of forward contracts entered into from
one year to the next. Contracts related to tobacco purchases and crop input sales were designated and qualified as hedges of the
future cash flows associated with the forecast purchases of tobacco. As a result, changes in fair values of the forward contracts
have been recognized in comprehensive income as they occurred, but only recognized in earnings as a component of cost of goods
sold upon sale of the related tobacco to third-party customers. In fiscal year 2022, only non-deliverable forward contracts were
utilized for the sale of 2023 and 2022 crop year inputs. Premium payments for option contracts entered into for the sale of crop
inputs in fiscal year 2021 were expensed into earnings as incurred.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses

as of March 31, 2022 for cash flows hedges of tobacco purchases and crop input sales will be recognized in earnings.

Hedging Program

Tobacco purchases

Crop input sales

Crop Year

Geographic Location(s)

Fiscal Year Earnings

2023

2022

2021

2023

2022

Brazil

Brazil, Africa

Brazil

2024

2023

2024

2023

Forward contracts related to processing costs have not been designated as hedges, and gains and losses on those contracts

have been recognized in earnings on a mark-to-market basis.

Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Net Local Currency Monetary Assets and Liabilities of
Foreign Subsidiaries

Most of the Company’s foreign subsidiaries transact the majority of their sales in U.S. dollars and finance the majority of
their operating requirements with U.S. dollar borrowings, and therefore use the U.S. dollar as their functional currency. These
subsidiaries normally have certain monetary assets and liabilities on their balance sheets that are denominated in the local
currency. Those assets and liabilities can include cash and cash equivalents, accounts receivable and accounts payable, advances
to farmers and suppliers, deferred income tax assets and liabilities, recoverable VAT, operating lease liabilities, and other items.
Net monetary assets and liabilities denominated in the local currency are remeasured into U.S. dollars each reporting period,
generating gains and losses that the Company records in earnings as a component of selling, general, and administrative expenses.
The level of net monetary assets or liabilities denominated in the local currency normally fluctuates throughout the year based on
the operating cycle, but it is most common for monetary assets to exceed monetary liabilities, sometimes by a significant amount.
When this situation exists and the local currency weakens against the U.S. dollar, remeasurement losses are generated.
Conversely, remeasurement gains are generated on a net monetary asset position when the local currency strengthens against the
U.S. dollar. To manage a portion of its exposure to currency remeasurement gains and losses, the Company enters into forward
contracts to buy or sell the local currency at future dates coinciding with expected changes in the overall net local currency
monetary asset position of the subsidiary. Gains and losses on the forward contracts are recorded in earnings as a component of
selling, general, and administrative expenses for each reporting period as they occur, and thus directly offset the related
remeasurement losses or gains in the consolidated statements of income for the notional amount hedged. The Company does not
designate these contracts as hedges for accounting purposes. The contracts are generally arranged to hedge the subsidiary's
projected exposure to currency remeasurement risk for specified periods of time, and new contracts are entered as necessary
throughout the year to replace previous contracts as they mature. The Company is currently using forward currency contracts to
manage its exposure to currency remeasurement risk in Brazil. The total notional amounts of contracts outstanding at March 31,
2022 and 2021, were approximately $59.5 million and $16.6 million, respectively. To further mitigate currency remeasurement
exposure, the Company’s foreign subsidiaries may utilize short-term local currency financing during certain periods. This
strategy, while not involving the use of derivative instruments, is intended to minimize the subsidiary’s net monetary position by
financing a portion of the local currency monetary assets with local currency monetary liabilities, thus hedging a portion of the
overall position.

Several of the Company’s foreign subsidiaries transact the majority of their sales and finance the majority of their
operating requirements in their local currency, and therefore use their respective local currencies as the functional currency for
reporting purposes. From time to time, these subsidiaries sell tobacco to customers in transactions that are not denominated in the
functional currency. In those situations, the subsidiaries routinely enter into forward exchange contracts to offset currency risk for
the period of time that a fixed-price order and the related trade account receivable are outstanding with the customer. The
contracts are not designated as hedges for accounting purposes.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Effect of Derivative Financial Instruments on the Consolidated Statements of Income

The table below outlines the effects of the Company’s use of derivative financial instruments on the consolidated

statements of income for the fiscal years ended March 31, 2022, 2021, and 2020.

Fiscal Year Ended March 31,

2022

2021

2020

Cash Flow Hedges - Interest Rate Swap Agreements

Derivative

Effective Portion of Hedge

Gain (loss) recorded in accumulated other comprehensive loss ............................................

Gain (loss) reclassified from accumulated other comprehensive loss into earnings ............

Gain on terminated interest rate swaps amortized from accumulated other
comprehensive loss into earnings .......................................................................................

15,651 $

3,033 $

(32,389)

(8,907) $

(8,411) $

(1,577)

1,061 $

1,416 $

2,691

Location of gain (loss) reclassified from accumulated other comprehensive loss into
earnings ..............................................................................................................................

Interest expense

Ineffective Portion of Hedge

Gain (loss) recognized in earnings .........................................................................................

Location of gain (loss) recognized in earnings ......................................................................

Hedged Item

— $

—
$
Selling, general and administrative expenses

— $

Description of hedged item .......................................................................................................

Floating rate interest payments on term loans

Cash Flow Hedges - Forward Foreign Currency Exchange Contracts

Derivative

Effective Portion of Hedge

Gain (loss) recorded in accumulated other comprehensive loss ............................................

Gain (loss) reclassified from accumulated other comprehensive loss into earnings ............

13,879 $

(272) $

(13,646)

5,426 $

(13,926) $

1,108

Cost of goods sold

Ineffective Portion and Early De-designation of Hedges

Gain (loss) recognized in earnings .........................................................................................

Location of gain (loss) recognized in earnings ......................................................................

Hedged Item

Description of hedged item ......................................................................................................

Derivatives Not Designated as Hedges -
Forward Foreign Currency Exchange Contracts

Gain (loss) recognized in earnings .........................................................................................

Location of gain (loss) recognized in earnings ......................................................................

2,040 $

$
—
Selling, general and administrative expenses

— $

Forecast purchases of tobacco in
Brazil and Africa

16,732 $

$
Selling, general and administrative expenses

(872) $

(4,013)

For the outstanding interest rate swap agreements, the effective portion of the gain or loss on the derivative is recorded in

accumulated other comprehensive loss and any ineffective portion is recorded in selling, general and administrative expenses.

For the forward foreign currency exchange contracts designated as cash flow hedges of tobacco purchases in Brazil and
Africa, as well as the crop input sales in Brazil, a net hedge gain of approximately $5.6 million remained in accumulated other
comprehensive loss at March 31, 2022. That balance reflects gains and losses on contracts related to the 2023, 2022, and 2021
Brazil crops, the 2022 Africa crop, and the 2023 and 2022 Brazil crop input sales, less the amounts reclassified to earnings related
to tobacco sold through March 31, 2022. Based on the hedging strategy, as the gain or loss is recognized in earnings, it is expected
to be offset by a change in the direct cost for the tobacco or by a change in sales prices if the strategy has been mandated by the
customer. Generally, margins on the sale of the tobacco will not be significantly affected.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Effect of Derivative Financial Instruments on the Consolidated Balance Sheets

The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets

at March 31, 2022 and 2021:

Derivatives Designated as Hedging
Instruments

Interest rate swap agreements

Forward foreign currency exchange contracts

Total

Derivatives Not Designated as Hedging
Instruments

Forward foreign currency exchange contracts

Total

Derivatives in a Fair Value
Asset Position

Derivatives in a Fair Value
Liability Position

Balance
Sheet
Location

Fair Value as of March 31,

2022

2021

Balance
Sheet
Location

Fair Value as of March 31,

2022

2021

Other
non-current
assets

Other
current
assets

— $

—

10,957

10,957 $

1,137

13,111 $

435

Other
long-term
liabilities

Accounts
payable and
accrued
expenses

1,161 $

25,719

3,200

1,031

4,361 $

26,750

64 $

791

Substantially all of the Company's forward foreign currency exchange contracts are subject to master netting
arrangements, whereby the right to offset occurs in the event of default by a participating party. The Company has elected to
present these contracts on a gross basis in the consolidated balance sheets.

NOTE 12. FAIR VALUE MEASUREMENTS

Universal measures certain financial and nonfinancial assets and liabilities at fair value based on applicable accounting
guidance. The financial assets and liabilities measured at fair value include money market funds, trading securities associated with
deferred compensation plans, interest rate swap agreements, forward foreign currency exchange contracts, and guarantees of bank
loans to tobacco growers. The application of the fair value guidance to nonfinancial assets and liabilities primarily includes the
determination of fair values for goodwill and long-lived assets when indicators of potential impairment are present.

Under the accounting guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. The framework for measuring fair value
is based on a fair value hierarchy that distinguishes between observable inputs and unobservable inputs. Observable inputs are
based on market data obtained from independent sources. Unobservable inputs require the Company to make its own assumptions
about the value placed on an asset or liability by market participants because little or no market data exists. There are three levels
within the fair value hierarchy.

Level

Description

quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the
reporting date;

quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or
liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability;
and
unobservable inputs for the asset or liability.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As permitted under the accounting guidance, the Company uses net asset value per share ("NAV") as a practical
expedient to measure the fair value of its money market funds. The fair values for those funds are presented under the heading
"NAV" in the tables that follow in this disclosure. In measuring the fair value of liabilities, the Company considers the risk of
non-performance in determining fair value. Universal has not elected to report at fair value any financial instruments or any other
assets or liabilities that are not required to be reported at fair value under current accounting guidance.

Recurring Fair Value Measurements

At March 31, 2022 and 2021, the Company had certain financial assets and financial liabilities that were required to be
measured and reported at fair value on a recurring basis. These assets and liabilities are listed in the tables below and are classified
based on how their values were determined under the fair value hierarchy or the NAV practical expedient:

March 31, 2022

Fair Value Hierarchy

NAV

Level 1

Level 2

Level 3

Total

Assets

Money market funds .............................................................................................. $

334 $

— $

334

Trading securities associated with deferred compensation plans ..........................

—

13,655

—

13,655

Forward foreign currency exchange contracts ......................................................

—

24,068

—

24,068

Total financial assets measured and reported at fair value .................................. $

334 $ 13,655 $ 24,068 $

— $ 38,057

Liabilities

Interest rate swap agreements ................................................................................ $

— $

— $ 1,161 $

— $ 1,161

Forward foreign currency exchange contracts ......................................................

—

3,264

—

3,264

Total financial liabilities measured and reported at fair value ............................ $

— $

— $ 4,425 $

— $ 4,425

March 31, 2021

Fair Value Hierarchy

NAV

Level 1

Level 2

Level 3

Total

Assets

Money market funds .............................................................................................. $ 1,992 $

— $

— $ 1,992

Trading securities associated with deferred compensation plans ..........................

—

15,735

—

15,735

Forward foreign currency exchange contracts ......................................................

—

1,572

—

1,572

Total financial assets measured and reported at fair value ................................. $ 1,992 $ 15,735 $ 1,572 $

— $ 19,299

Liabilities

Acquisition-related contingent consideration obligations - long-term .................. $

— $

— $ 2,532 $ 2,532

Interest rate swap agreements ................................................................................

Forward foreign currency exchange contracts ......................................................

—

25,719

—

25,719

—

1,822

—

1,822

Total financial liabilities measured and reported at fair value ........................... $

— $

— $ 27,541 $ 2,532 $ 30,073

Money market funds

The fair value of money market funds, which are reported in cash and cash equivalents in the consolidated balance
sheets, is based on NAV, which is the amount at which the funds are redeemable and is used as a practical expedient for fair
value. These funds are not classified in the fair value hierarchy, but are disclosed as part of the fair value table above.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Trading securities associated with deferred compensation plans

Trading securities represent mutual fund investments that are matched to employee deferred compensation obligations.
These investments are bought and sold as employees defer compensation, receive distributions, or make changes in the funds
underlying their accounts. Quoted market prices (Level 1) are used to determine the fair values of the mutual funds.

Interest rate swap agreements

The fair values of interest rate swap agreements are determined based on dealer quotes using a discounted cash flow
model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is
not required in determining the fair values, interest rate swaps are classified within Level 2 of the fair value hierarchy.

Forward foreign currency exchange contracts

The fair values of forward foreign currency exchange contracts are also determined based on dealer quotes using a
discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and
significant judgment is not required in determining the fair values, forward foreign currency exchange contracts are classified
within Level 2 of the fair value hierarchy.

Acquisition-related contingent consideration obligations

The Company estimates the fair value of acquisition-related contingent consideration obligations by applying an income
approach model that utilizes probability-weighted discounted cash flows. The Company acquired FruitSmart, Inc.("FruitSmart")
in fiscal year 2020 and recognized a contingent consideration liability of $6.7 million on the date of acquisition. Each reporting
period the Company evaluates the fair value of the acquisition-related contingent consideration obligations. In the quarter ended
June 30, 2020, the evaluation resulted in the reduction of $4.2 million of contingent consideration of the original $6.7 million
liability recorded. In the quarter ended September 30, 2021, an evaluation of the contingent liability resulted in a reduction of the
remaining $2.5 million contingent liability recorded. Significant judgment is applied to this model and therefore the acquisition-
related contingent consideration obligation is classified within Level 3 of the fair value hierarchy.

A reconciliation of the change in the balance of the acquisition-related contingent consideration obligation (Level 3) for

the fiscal years ended March 31, 2022 and 2021 is provided below.

Fiscal Year Ended March 31,

2022

2021

Balance beginning of year ...................................................................................................................................... $

2,532 $

6,705

Change in fair value of contingent consideration liability .....................................................................................

(2,532)

(4,173)

Balance at end of year ........................................................................................................................................... $

— $

2,532

Long-term Debt

The following table summarizes the fair and carrying value of the Company’s long-term debt, including the current

portion at each of the balance sheet dates March 31, 2022 and 2021:

(in millions of dollars)

Fiscal Year Ended March 31,

2022

2021

Fair market value of long term obligations .............................................................................. $

Carrying value of long term obligations .................................................................................. $

517 $

520 $

517

520

The Company estimates the fair value of its long-term debt using Level 2 inputs which are based upon quoted market
prices for the same or similar obligations or on calculations that are based on the current interest rates available to the Company
for debt of similar terms and maturities. See Note 9 for more information regarding long-term debt.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Nonrecurring Fair Value Measurements

Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to long-lived assets, right-of-
use operating lease assets and liabilities, goodwill and intangibles, and other current and noncurrent assets. These assets and
liabilities fair values are evaluated for impairment when potential indicators of impairment exist. Accordingly, the nonrecurring
measurement of the fair value of these assets and liabilities are classified within Level 3 of the fair value hierarchy.

Acquisition Accounting for Business Combinations

The Company accounts for acquisitions qualifying under ASC 805, "Business Combinations," which requires, among
other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair
values of consideration transferred and net assets acquired are determined using a combination of Level 2 and Level 3 inputs as
specified in the fair value hierarchy in ASC 820, “Fair Value Measurements and Disclosures.” The Company believes that the fair
values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. The significant assumptions
used in determining the fair value include the discount rate and forecasted results (e.g., revenue growth rates and operating profit
margins).

Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events, changes in business conditions, or other

circumstances provide an indication that such assets may be impaired.

Assets Held for Sale

Tanzania

Due to business changes that affected the leaf tobacco market in Tanzania and the Company's operations there, an
impairment charge of the long-lived assets in Tanzania was recorded in fiscal year 2019 to reduce their carrying value to fair
value at March 31, 2019. As a result of efforts to sell the idled Tanzania operations, in the third quarter of fiscal year 2022 an
additional impairment charge of $9.4 million was recorded. The remaining assets held for sales consist principally of receivables
for VAT and the Company's office building, idled processing facility, and land. The aggregate fair value and carrying value of the
assets held for sale following the impairment adjustments is approximately $7 million at March 31, 2022.

NOTE 13. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Defined Benefit Plans

Description of Plans

The Company sponsors several defined benefit pension plans covering salaried and certain hourly employees in the
U.S., as well as certain foreign and other employee groups. These plans provide retirement benefits based primarily on employee
compensation and years of service. Plan assets consist primarily of equity and fixed income investments. The Company also
sponsors defined benefit plans that provide postretirement health and life insurance benefits for eligible U.S. employees and
retirees who have attained specific age and service levels, although postretirement life insurance benefits were discontinued
several years ago for all employees who were not already retired. The health benefits are funded by the Company as the costs of
those benefits are incurred. The plan design includes cost-sharing features such as deductibles and coinsurance. The life insurance
benefits are funded with deposits to a reserve account held by an insurance company. The Company has the right to amend or
discontinue its pension and other postretirement benefit plans at any time.

In the following disclosures, the term “accumulated benefit obligation” (“ABO”) represents the actuarial present value of
estimated future benefit payments earned by participants in the Company's defined benefit pension plans as of the balance sheet
date without regard to the estimated effect of future compensation increases on those benefits. The term does not apply to other
postretirement benefits. “Projected benefit obligation” refers to the projected benefit obligation (“PBO”) for pension benefits and
the accumulated postretirement benefit obligation (“APBO”) for other postretirement benefits. These amounts represent the
actuarial present value of estimated future benefit payments earned by participants in the benefit plans as of the balance sheet
date. For pension benefits, the PBO includes the estimated effect of future compensation increases on those benefits.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Actuarial Assumptions

Assumptions used for financial reporting purposes to compute net periodic benefit cost and benefit obligations for the

Company's primary defined benefit plans were as follows:

Pension Benefits

Other Postretirement
Benefits

March 31,

2022

2021

2022

2021

Actuarial present value of benefit obligation:

Accumulated benefit obligation ....................................................................... $

269,758

289,901

Projected benefit obligation .............................................................................

277,050

297,090 $

24,957 $

28,926

Change in projected benefit obligation:

Projected benefit obligation, beginning of year ............................................... $

297,090 $

287,082 $

28,926 $

30,282

Service cost ......................................................................................................

Interest cost ......................................................................................................

6,674

8,754

6,618

9,571

Effect of discount rate change .........................................................................

(18,010)

12,990

Foreign currency exchange rate changes .........................................................

Other ................................................................................................................

(1,160)

1,736

776

(3,626)

Benefit payments .............................................................................................

(18,034)

(16,321)

170

950

(1,549)

566

(1,245)

(2,861)

172

1,141

1,126

(283)

167

(3,679)

Projected benefit obligation, end of year ......................................................... $

277,050 $

297,090 $

24,957 $

28,926

Change in plan assets:

Plan assets at fair value, beginning of year ..................................................... $

270,349 $

238,450 $

3,033 $

3,369

Actual return on plan assets .............................................................................

Employer contributions ...................................................................................

864

6,147

39,757

8,472

Foreign currency exchange rate changes .........................................................

(3,313)

(9)

2,448

—

114

3,229

—

Benefit payments .............................................................................................

(18,034)

(16,321)

(2,861)

(3,679)

Plan assets at fair value, end of year ................................................................ $

256,013 $

270,349 $

2,706 $

3,033

Funded status:

Funded status of the plans, end of year ........................................................... $

(21,037)

(26,741)

(22,251) $

(25,893)

The Company funds its non-regulated U.S. pension plan, one of its foreign pension plans, and its postretirement medical
plans on a pay-as-you-go basis as the benefit payments are incurred. The unfunded PBO for those pension plans and
postretirement benefit plans was $33.3 million and $20.5 million, respectively, at March 31, 2022.

The funded status of the Company’s plans at the end of fiscal years 2022 and 2021 was reported in the consolidated

balance sheets as follows:

Pension
Benefits

March 31,

Other Postretirement
Benefits

March 31,

2022

2021

2022

2021

Noncurrent assets (included in Pension asset and other noncurrent assets) ....... $

12,667 $

11,950 $

— $

—

Current liability (included in Accounts payable and accrued expenses) ............

(1,135)

(4,896)

(1,930)

(2,051)

Noncurrent liability (reported as pensions and other postretirement benefits) ..

(32,569)

(33,795)

(20,321)

(23,842)

Amounts recognized in the consolidated balance sheets .................................... $

(21,037) $

(26,741) $

(22,251) $

(25,893)

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Additional information on the funded status of the Company’s plans as of the respective measurement dates for the fiscal

years ended March 31, 2022 and 2021, is as follows:

Pension
Benefits

March 31,

Other Postretirement
Benefits

March 31,

2022

2021

2022

2021

For plans with a projected benefit obligation in excess of plan assets:

Aggregate projected benefit obligation (PBO) ................................................ $

39,988 $

44,742 $

24,957 $

28,926

Aggregate fair value of plan assets .................................................................

6,284

6,051

2,706

3,033

For plans with an accumulated benefit obligation in excess of plan
assets:

Aggregate accumulated benefit obligation (ABO) ..........................................

Aggregate fair value of plan assets .................................................................

38,722

6,284

42,923

6,051

N/A

Net Periodic Benefit Cost

The components of the Company’s net periodic benefit cost were as follows:

Pension Benefits

Other Postretirement
Benefits

March 31,

2022

2021

2022

2021

Losses (gains) arising during the year ...............................................................

Amortization included in net periodic benefit cost during the year ..................

(1,727)

(3,598)

Net actuarial loss (gain), end of year ................................................................

67,280

Change in prior service cost (benefit):

Prior service cost (benefit), beginning of year ..................................................

(3,406)

Amortization included in net periodic benefit cost during the year ..................

1,919

Prior service cost (benefit), end of year ............................................................

(1,487)

(6,857)

72,605

(5,402)

1,996

(3,406)

520

450

247

(6,681)

(4,395)

(376)

175

(201)

(564)

188

(376)

(17,563)

(2,533)

Total amounts in accumulated other comprehensive loss

at end of year, before income taxes .............................................................. $

65,793 $

69,199 $

(6,882) $

(4,771)

Amounts in the above table reflect the Company and its consolidated subsidiaries. The accumulated other comprehensive
loss reported in the consolidated balance sheets also includes pension and other postretirement benefit amounts related to
ownership interests in unconsolidated affiliates.

The Company expects to recognize approximately $3.7 million of the March 31, 2022 net actuarial loss and $1.2 million

of the March 31, 2022 prior service benefit in net periodic benefit cost during fiscal year 2023.

Allocation of Pension Plan Assets

The Company has established, and periodically adjusts, target asset allocations for its investments in its U.S. ERISA-
regulated defined benefit pension plan, which represents 98% of consolidated plan assets and 86% of consolidated PBO at
March 31, 2022, to balance the needs of liquidity, total return, and risk control. The assets are required to be diversified across
asset classes and investment styles to achieve that balance. During the year, the asset allocation is reviewed for adherence to the
target policy and rebalanced to the targeted weights. The Company reviews the expected long-term returns of the asset allocation
each year to help determine whether changes are needed. The return is evaluated on a weighted-average basis in relation to
inflation. The assumed long-term rate of return used to calculate annual benefit expense is based on the asset allocation and
expected market returns for the respective asset classes.

The weighted–average target pension asset allocation and target ranges at the March 31, 2022 measurement date and the

actual asset allocations at the March 31, 2022 and 2021 measurement dates by major asset category were as follows:

Major Asset Category

Target
Allocation

Actual Allocation

March 31,

Range

2022

2021

Equity securities ......................................................................................
Fixed income securities (1)

......................................................................

Alternative investments ...........................................................................

29.0 % 19 % - 39%

66.0 % 56 % - 76%

5.0 % 0 % - 10%

31.1 %

63.8 %

5.1 %

32.0 %

64.1 %

3.9 %

Total ....................................................................................................

100.0 %

(1)

Actual amounts include high yield securities and cash balances held for the payment of benefits.

UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Universal makes regular contributions to its pension and other postretirement benefit plans. As previously noted, for
postretirement health benefits, contributions reflect funding of those benefits as they are incurred. The Company expects to make
no contributions to its ERISA regulated defined benefit pension plan and $2.3 million to its non-ERISA regulated pension plans in
fiscal year 2023.

Estimated future benefit payments to be made from the Company’s plans are as follows:

Fiscal Year

Pension
Benefits