Good afternoon. My name is Ellie and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation First Quarter Fiscal Year 2018 Earnings 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. I would now like to turn the call over to Candace Formacek. You may begin your conference.

Thank you, Ellie, and thank you all for joining us today. George Freeman, our Chairman, President and CEO, and David Moore, our Chief Financial Officer, are here with me today and will join me in answering questions after these brief remarks. This call is being Webcast live and will be available on our Web-site and on telephone taped replay. It will remain on our Web-site through November 3, 2017. Other than the replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. This call is copyrighted and may not be used without our permission. 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 and are representative as of today only. Actual results could differ materially from projected or estimated results and we assume no obligation to update any forward-looking statements. 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, 2017 as well as our Form 10-Q for the first fiscal quarter of 2018. Such factors include, but are not limited to, customer-mandated timing of shipments, weather conditions, political and economic environment, government regulations, 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 unaudited 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 GAAP measures, please refer to our current earnings press release. Reported net income for the first quarter of…

[Operator Instructions] We do have a question from Ann Gurkin.

I want to start with the burley crop, and I know you make a statement, overall crop qualities are good, does that mean the quality of the crop is good for burley? Just want to make sure [indiscernible].

Yes, it's generally across the board, good crop quality.

Okay. And then are you going to have higher costs for processing that burley because of the reduced volume now?

Yes, there are higher unit costs for sure, I mean with last throughput through the factory.

Great, all right. And then if you can help me reconcile the statements between last press release and this one, and I realize you can't give a lot of detail, but if you can help at all with any insight, you talk about too early to determine additional purchases by customers in fiscal 2017 may impact their requirements in fiscal 2018, that's what you said last quarter, and then this time you said the purchases are essentially complete, and I think they were progressing as anticipated, can you just give me any other insight into those two statements?

I think when you look at that let's call it Southern Africa burley, I think the crops are a bit short, but I think the fact that people took advantage of the big crop last year and maybe bought some additional and it's kind of making the current shortage of burley sort of much more manageable.

Okay, so that references more burley or is that total purchases?

It's more burley, yes.

Okay, that's great, that helps a lot. And then I know SG&A was down, reflecting the currency remeasurement, but are there opportunities to reduce SG&A in fiscal 2018 versus fiscal 2017? I ask this every year.

Yes, and we always strive to [indiscernible]. That is true and of course you know the chunkiness that we see, the situation with the currency as we mentioned was sort of a positive benefit this year compared with a negative benefit last year, which overall was a larger swing. So there is definitely going to be that piece that's in there compared with the prior year.

Yes, that's a bigger swing to cause [indiscernible].

I agree.

But stripping that currency out, are there opportunities still in there?

I don't see any major other than currency. I don't see any.

Major driver, no.

Okay, that's great. Do you all have any comments related to the FDA's announcement last week, anything you've learned, any insights you want to share?

I mean I'll give you my opinion and that is that I am encouraged by it because I think it's a sign that we are going to see a regulatory regime based on science and less on emotion, and I think that's a way to good things. So I am encouraged.

And what are you hearing in terms of like a timeline, do you think it's a multiyear process, do you have anything [indiscernible]?

I think [indiscernible]. As all things involved with FDA, I think we are talking years and years.

I think, Ann, the regulations are just beginning to be developed, so it's kind of early to say when and the timing that will have on us, but from our standpoint because we are specialists in tobacco and we have research and development facilities, we are going to just continue to work closely with our customers on meeting their needs for the next generation products that would fit in with our ability just fine.

And if there is a continuum of risk put out there or some kind of framework introduced, how are you thinking about positioning Universal to operate in that kind of environment?

I mean I think I would just repeat what I just said, there is definitely opportunities when you are looking at whatever the products are that the customers need. There is certainly an element within chemistries and ability to do research and development and provide whatever they need in terms of sourcing for their new products and we are and will continue to work with them to be a supplier for those [indiscernible] products.

Are you supplying the heat-not-burn technology right now?

We won't get into the details but we are working with our customers on their next generation products for sure, Ann. I mean we are the lead tobacco supplier in the world.

Fantastic. And then I have one question, can I just get an update on your ingredients business?

The ingredient business is moving along, continues to be a minor element in our business, and that whole Special Services group was basically flat for the year. But it's going to start up and for sure continuing.

Okay, that's great. Thank you all very much. Appreciate it.

Your next question comes from Steven Marascia.

Actually Ann asked two of the questions I was going to ask, but I've got a couple of more for you. Following up on the SG&A, did you say basically that the reduction in SG&A was basically currency driven, and going forward for the next – sequentially forward and looking through the next three or four quarters, SG&A is going to be dependent upon currency movements or levels of currency movements?

The delta.

No, I wouldn't say quite that way. So let me be clear in what I meant. What she was asking about was SG&A in total and sort of year-over-year comparisons. What I was pointing out is that a large part of the SG&A reduction that we pointed to had to do with beneficial currency movements or gains in those net positions this year versus first quarter last year were losses. So that is an element of variance that we know now is in Q1. We really can't make a prediction about what will happen with currency going forward and we don't try to have that.

Okay. And the other question was, you guys had a pretty nice bump-up in your interest income, what produced that?

We did have some larger cash balances this year and I think interest rates are a tiny bit better. It's not a major part of our cash movement, but I believe that that's a part of it. And there are some other operating elements that often fall into that line item as well. Still relatively minor but always beneficial when it's going in the right direction.

It was just a nice jump, that's why I was asking, from last year's quarter. Okay, thank you very much.

And we have no further questions at this time.

Very good. Thank you all for joining us. We'll talk to you next time.

This concludes today's conference call. You may now disconnect.