Good evening. My name is Brian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation Fiscal Year 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Ms. Formacek, you may begin your conference.

Thank you, Brian, and thank you for joining us. George Freeman, our Chairman, President and CEO; and David Moore, our Chief Financial Officer are here with me today and they will join me in answering questions after these brief remarks. This call is being webcast live and will be available on our website and on telephone taped replay. It will remain on our website through August 4, 2015. If you are listening to this call after that date or if you are reading a transcription, we have not authorized such recording or transcription. It has been made available to you without our permission, review or approval. We take no responsibility for such presentation. Any transcription, inaccuracies or omissions or failures to present available updates are the responsibility of the party who is providing it to you. Before I begin to discuss our results, I caution you that we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. For information on some of the factors that can affect our estimates, I urge you to read our 10-K for the year ended March 31, 2014, as well as our Form 10-K for the fiscal year ended March 31, 2015, which we expect to file with the SEC later this week. The factors that can affect our estimates include such things as customer-mandated timing of shipments, weather conditions, political and economic environment, changes in currency, industry consolidation and evolution and changes in market structure or sources. Finally, some of the information I have for you today is based on un-audited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may include non-GAAP financial measures. For details on these measures including reconciliations to the most comparable…

[Operator Instructions] And our first question comes from the line of Ann Gurkin.

Hello everyone. How is everybody?

Hey.

Hi Ann. How you doing?

Fine. I wanted to start first by congratulating on a strong finish to your fiscal year. It’s nice to see with all the challenges out there.

Thank you very much.

Want to start North America if I could, that was stronger than the Q4 and Candace reviewed some of the reasons. Was there anything else in there, any kind of timing of issues or is it really picking up some extra processing, maybe some improved mix like Candace reviewed? Is there anything else we should think about that North American number?

I think this was the main…

Yeah, that’s one of the main reasons. Yeah.

Yes, there, Ann. Yes.

And should we think about that continuing in fiscal ’16? Is there any reason that shouldn’t continue?

I think the biggest thing to think of in ’16 for North America is the PMI arrangement that we announced earlier.

Okay. All right. And then on that topic, I guess, can I get some more detail on Brazil and the Dominican Republic? Is it supply chain processing business in Brazil, or are you getting some customer -- I’m sorry, contracts back? Can you talk about what percentage of the business you are now processing again in Brazil that went to your customers and can you give me anymore details on the Brazil and then an update on Dominican Republic?

Well, I guess, you saw that Alliance announced that -- I recall that there is just similar things is what happened in the U.S. was happening in Brazil and obviously did at that in early.

Those arrangements too, Ann, were a bit smaller, so you didn’t see a specific press release from us on those.

Those were just in early for you.

In the similar vein of range of processing.

And the same for Dominican Republic?

It’s not big volume. There is more of a -- not a F.O.B market but a full service market.

Great. Well, congratulations. That’s good to see. Proud to see that trend. And then I guess your trend is a bit more across the storage. In terms of supply and durations and inventory levels with customers and I’m just curios, given strong Q1 volumes in the U.S. and maybe down but down as much volumes maybe in Europe and Russia weak but maybe not as dry as people thought. I’m just curios as to your comments on inventory levels given that data coming through.

Yeah. I think you’ve characterized it well but I think there is no -- we sensed there is nowhere near the level of concern of our, from our customers as there was, let’s say a year ago. There is decline in western markets but it seems to be meeting their, sort of in line with their expectations. While I think it’s fair to say a year ago, it was exceeding their expectations and the surprise is always for the people and perhaps make them react strongly.

Okay. And so these comments are after you’ve had conversations with customers in terms of planning out processes, timings over the next year or two years, is that fair?

Yes.

Yeah. And I what we tried to show in release, Ann, was that we are not seeing the similar delays in customer orders that you saw last year during this time. It is still early in the year of course. We do expect shipping instructions to be weighted more towards the second half and we also tried to point out that the global leaf inventory volumes are high. So despite what maybe happening on customer retail side, we still see that as an element that will influence potentially supply-demand this year.

And Candace, you have a worldwide uncommitted leaf inventory number for me?

I do. And that would be 131 million kilos is our estimate at 3/31/15. It’s large.

Okay. And then I know you said it’s, I think in line but what’s -- is it towards upper end, middle, lower, can you give me a range?

Sorry. I’m sorry. I missed your question.

Your uncommitted inventory level.

Our uncommitted is -- we didn’t give it. It’s a little bit lower than last year at this time in our normal range.

We didn’t close.

Yeah. You’ll see a lot more detail on that when the K comes out but we’re very happy with those levels.

Yes.

Okay. That’s great. That’s all I have. Thank you all very much. That’s great.

Thank you.

You are welcome.

[Operator Instructions] Our next question comes from the line of Bryan Hunt.

Good afternoon.

Hey, Bryan. How you doing?

Hi, George, Candace. I only have two questions that weren’t touched on by Ann. One is as you start to add these services with your customers and become more vertically integrated, can you talk about the potential impact to profitability?

Well, it’s all good.

I’m sure it adds dollars but are you picking up margin percentage as well?

Well, what we believe that these moves do give us, Bryan, is additional throughput and through economies of scale, that’s one area and way in which we can approve our efficiencies. It also helps to better allocate leafs across the board to all customers, which gives better access to all the leaf purchases, in cases where we would move into direct purchasing.

And Bryan, as you know, they are very basic level. I mean, where the more risk we take on, the more reward we get. So going to an F.O.B. model is more risky and more profitable than providing services where you don’t have any crop risk and someone else has taken title to the green tobacco. So it runs the gamut.

When I think about your position in the merchant leaf market, being able to source tobacco globally and have great traceability, how is your position improving your opportunity to take on more of these responsibilities relative to maybe say a player that is just on a local market. I mean, are you seeing those local market players lose out?

I believe so. We can’t predict the future but I think that’s exactly what we’re saying that compliant leaf is going to become soon to be -- and inevitably regulated world is going to be required and compliant being traceable and done the right way. I mean, I think it inures to our benefits and beyond. It inures to our similar competition of which there is only one.

Got you. Could you also -- kind of switching gears and looking at – you’ve mentioned in your prepared comments and your press release, there are certain markets that are going to experience material declines and production year-over-year. Could you kind of outline where you see the biggest drop-offs in production for the upcoming crop season relative to a year ago?

We actually have just posted, Bryan, our quarterly leaf production reports. You can find this online.

Very good. I’ll look around, maybe I should...

Okay. Yeah. But we’re looking at …

I don’t know, if I can set up a notification or I get pinged every time it comes out.

I don’t know. We can look into that.

No.

But highlights …

Yes. But it’s mainly in -- I’ll call in the non-core market in flue-cured. Again, I think, we’re saying that tobaccos grown in a lot of countries and so we see, in this notion we call it reduced complexity. We see that the smaller marginal areas will suffer more than the major production areas. I think you can even see it. I think on the burley side we see a shift from the -- sort of shift from the Americas to Africa.

But in general you’ll see in the report that most of the major regions are indicating lower level for next year. So sort of an overall average total flue-cured and burley ex-China about 10% down little bit more in burley on a percentage basis than flue-cured. And this is what we saw also last quarter and is not unexpected in an oversupply situation to see in this following year.

Got you. And then lastly, when I think about maybe the quality of what’s lingering out there in the market as well as the type of tobacco there's lingering out there in the market. We had heard that there is material overhang of tobacco out of China and are you hearing that as well or are you seeing that as well in and in terms of maybe price —due to the overhang, is it more on the burley side or the flue-cured side? Thanks. That’s it for me.

Definitely on flue-cured but unless I comment about it.

Yes. It is hard to say there are definitely conversations that talked about that. We do see this world stock levels being very high. I think regardless of the source typically *when you have oversupply we do have more filler qualities as opposed to the stronger leaf quality and so that is the kind of leaf that we would expect to need to work through the system to get back into a global balance eventually.

And do you think the balance will be achieved by the end of this year based on kind of the outlook for production?

It is early to say, it’s hard to say. It may not. It may take another year, but it is all moving in the right direction.

Very good. I appreciate your time.

No problem. Sure. Thank you.

And we have a follow-up question from the line of Ann Gurkin.

Thank you. I have some more questions. Thank you. Talking about leaf production, its look like there is a decline in burley in China. I'm just curious what’s behind that number? And does that make that Chinese more likely to come and purchase on the global market in a more consistent manner?

No. The Chinese don’t really use much burley. So I’m not -- I'm sort of don’t even….

Out of the total that’s pretty small.

Yes. That pretty small.

Margin of error might be.

Okay. And then for 2016, can you help me with thoughts* about SG&A. What we should use for that and the tax rate also?

David, you can talk?

Well, Ann, the tax rate is going to be in the neighborhood 34 to 35.5, sort of, a normal statutory tiebreak. Most of the things that affected this year’s tax rate were one-off items. We don't anticipate having that kind of magnitude next year.

Yes. But I think on the SG&A and I know that I give you a similar answer quite often. We do kind of see a large chunky movement from time to time. I think the best way to think about it is to compare where we were this year with last year. Some of the benefits you see in that improvement and the level of costs there were relative to some particularly high costs we had last year.

Right.

So that maybe gives you a sense for maybe a bit more normalcy in some areas. But there is always -- there are many difficult to predict items that hit that area.

And percentage wise, it didn’t really change that much from year-to-year.

Okay. And then in terms of your new business Carolina Food Ingredients, is that starting up now? Is that fair?

It is. We are still building, but what we think. Early fall, we should be operating I think on the -- from my understanding, on the juice side. You can't sell any juice until you produced it. So it will be a certain on the juice portion. There will be a certain lag from completion until sales. It will have to quite be in a food item. It will have to qualify with all the quality programs of the purchasers.

And it’s *all going fine. The top winner put us behind a little bit on construction schedule. So time wise* just slipped a little bit later into the year.

Okay. That’s great. Thank you.

Thank you.

[Operator Instruction] And we have no further questions at this time.

Great. Thank you so much. Thanks for joining us today.