Good day. My name is Ian and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter Fiscal Year-end 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 our host, Ms. Candace Formacek. Please begin.

Thank you, Ian, and thank you all for joining us George Freeman, our Chairman, President and CEO; and David Moore, our Chief Financial Officer, and Johan Kroner our Chief Financial Officer elect 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 website and on telephone taped replay. It will remain on our website through August 6, 2018. Other than the replay, we have not authorized and disclaimed responsibility for any recording, replay or distribution of any transcription of this call. The 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 year-ended March 31, 2018 which we expect to file with the SEC later this week. Such factors include, but are not limited to, customer-mandated timing of shipments, weather conditions, political and economic environment, government regulation and taxation, 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…

[Operator Instructions]. Our first question is from the line of Ann Gurkin from Davenport.

Congratulations on your release and your enhanced capital allocation strategy, and your dividend increase. Wanted to start with the capital allocation strategy. If you can give us any more detail on, first, beginning with the dividend increase, 36%, and you target 70% payout of net income. Are you setting a payout target? How should we think about the dividend going forward as earnings do fluctuate? If you could just give us some more detail there, that would be great.

Yes, Ann. We are not specifically stating that as a specific target. I think we -- in the coming weeks and months will be talking more about this enhanced capital strategy and there are many ways to return capital to our shareholders. We are just really pleased to be able to provide the increase that we have today.

As we noted in the release Ann, you know we're very proud of our history of raising the dividend we've done it for 47 consecutive years. And that's a tradition we value.

And Ann, I would say, we set out 10 years ago and recognized the need in a changing tobacco environment the strength in the balance sheet, we wanted to redeem the preferred stock. And given the financial crisis in 2008, we've really focused in on funding the defined benefit pension plan and having reached 96% funding ratio. You can then take risk out of that portfolio. And so, we've essentially accomplished those objectives, we're changing our focus a bit towards the future.

As we think about future dividend increases, how can we think about that profile?

We consider those dividend increases in every quarter, but as George said, we are committed to our history of having an annually increasing dividend amount. So, I think that's still appropriate.

Great. And in terms of share repurchases, is there any change into the philosophy behind corporate levels to buying back stocks?

No, I think we again sort of with David's philosophy, we've recognized that that is a means of returning earnings to our shareholders. I think if you look at the release, I think you can see the order of priority.

Great, okay, great. And then in terms of opportunities in adjacent industries, can you give us any more detail as to what that means?

Well Ann, we plan to be visiting with shareholders in the coming weeks and months to discuss the strategy in more detail. While we may be looking at adjacent industries and markets that utilize our assets and capabilities, I want to reiterate that our core business will continue to be tobacco related.

Okay. And then turning to some questions regarding your fiscal year. You've gained some market share, gained a multi-year processing commitment in Brazil. Are there more opportunities to increase market share and to increase or to pick up some more business going forward?

Yes indeed.

Great. And then I guess for us Oriental was stronger than expected. And Candance talked about it a little bit but how should we think about the Oriental business longer term or at least over the next several years? It's been getting better, is that still the expectation or is there anything I should think about?

We're still bullish on the Oriental tobacco business, so I don't see any big changes looming.

Okay. And then the burley crop, overall crop outlook was reduced still up but reduced from last quarter crop overall crop outlook. Anything else we should read into that?

I think it's up.

It's up 9% but it was up double digit on the last lease update.

Ann, I think there was a period where people were concerned initially about weather conditions, but a lot of that's improved the burley crops in Africa or the light have been growing up again.

Okay. Alright. And then David can you help at all with fiscal '19, how should we think about operating margins, how should we think about SG&A, how should we think about share repurchase, anything you can share?

I think George is right. We are discussing capital allocation and we sort of indicated a priority in the list. So, we don’t have any current intent or real plan that we’ve adopted on share repurchase as of today. I think in general flue-cured tobacco supply is probably in slight surplus, like burley is probably in balance. We are seeing a global shortage of wrapper tobaccos but the tobaccos are in the crop to help to meet that demand. So, it’s reasonable markets in which to operate.

And then SG&A expenses for fiscal ‘19 versus ‘18?

I think the biggest variable in all of that was probably the currency exchange rates. Other than that, there was always a lot of noise in it, but that currency exchange rate is just impossible to predict, particularly in this far out in advance.

And then Candace do you have worldwide uncommitted inventory level number?

Oh! Yes, I do.

Just about the same as last year Ann, maybe a few million lower.

It’s 86 million at 3/31 Ann, which is around 7 I think from October’s number, yes. And I want to also point out on your question when the K comes out, we do have some information on capital expenditure outlook there, as you’re asking about that.

And our next question is from the line of Steve Marascia from Capitol Securities.

I wanted to echo in and congrats about your dividend and your spending plans. A question for you guys. Where do you see the biggest challenge -- two challenges coming for your company in the next 12 months, is it from the supplier side, or the customer side, and if you can elaborate on with that how they might come to materialize?

Well, I don’t know, I want to note that the only thing that’s interesting, I mean everything in my mind is sort of as David pointed out relatively imbalance, Brazil is just proceeding slow and there’s big political issues occurring there. I don’t know -- I am not worried about that right now but I just know Brazil, tobacco is coming in slower than normal.

So, you think -- so politics potentially does have or the political situation down there might have an impact on the ability of them to get it out?

No, I don’t think, I think it basically could -- the exchange rate has been low.

It’s more an issue of timing of shipments.

Anything else you guys see as challenging?

Well, I guess if you look at cigarette production of course those numbers are coming down and we are holding steady but it’s taking a lot of work.

Yes, I think George is right. We have gained market share on the sales side. We picked up additional volume, service volumes and we continue to attract additional services that we did not otherwise have. The outlook remains sound.

And our next question is from the line of Bryan Hunt from Wells Fargo.

So, my first question is you mentioned gaining additional shares and or services. Do you feel like what's you're gaining is one from the sugar companies or deverticalizing or just aggregating a value chain, or is it more like the chess pieces being moved around the board between you and other players in the industry?

I think it's a combination of both of those.

Well that's great news. I guess so if we go back about a decade ago, when the industry had a shortage of burley and decided to tobacco to integrate, that was a worrisome point for everybody in the industry. So good news on that. And my second question is you all mentioned that the industry on flue-cured was a little oversupplied and burley was very balanced. Now when you make a statement is that taking into consideration inventory at your customers or is that just inventory amongst all the merchants?

We never have a perfect insight into what the manufacturers have in their duration. That's more just based on current crop supply versus current crop demand. And we're not carrying an appreciable amount of uncommitted inventory.

Very good. And then my last question is you mentioned shipping delays in Brazil. There is a lot of news today and yesterday about trucking and other transportation strikes across Brazil. Are those news items, are part of your transportation and are shipping delays out of Brazil or will that be incremental in terms of slowing the movement of tobacco around the country?

The delays as I'll call the delays were primarily here in good old U.S.A. we believe due to enforcement of some department of transportation rules. Brazil at this time is we're still receiving tobacco. So again, this is just adding to this market just slower than normal in Brazil.

Yeah, I may have confused you about Brazil. George was alluding to the markets beginning slower and given the nature of our business, if you start slow you sort of end slow. So, it to some extent it extends the shipping period, but that may not have any impact on the full fiscal year.

Very good. I appreciate your time and best of luck.

Thank you.

Thanks Bryan.

And at this time, I'm showing that we have no further audio questions. Presenters, I turn it back to you.

Thank you. And thank you all for joining us today.

Ladies and gentlemen this does conclude the fourth quarter and fiscal year-end 2018 earnings call. We thank you for your participation. You may now disconnect.