Good afternoon. My name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter and Fiscal Year End 2016 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 Miss. Candace Formacek, Vice President and Treasurer. Miss. Formacek, you may begin your conference.

Thank you, Jason, and thank you all 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, 2016. 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 failure 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, 2015, as well as our Form 10-K for the fiscal year-ended March 31, 2016, 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, government regulations, changes in currency, industry consolidation and evaluation and changes in market structures or sources. Finally, some of the information I have for you today is based on unaudited allocations and subject to reclassification. In an effort to provide useful information to investors, our comments today may include non-GAAP financial measures. For details on this measures including reconciliations to the most…

Yes, ma’am. [Operator Instructions] And your first question comes from the line of Ann Gurkin of Davenport.

Good evening, everyone. Can you hear me?

Hey, Ann. How are you doing?

Yes, fine.

Hi.

I want to start with some questions from comments stated in the press release, what you were just referencing Candace, about the supply and demand. Do you think the industry is currently in balance, where are we at this point? I was little confused by the comment.

Well, just to clarify the comments, we were talking about that relate to Brazil have to do particularly with that market there otherwise what we are saying is that we are seeing total production volumes being much more imbalance and they have for the last two years. But they are within of course the total leaf composition there might be styles or types that have either an undersupply or an oversupply that could effect certain locations.

But overall the global supply and demand of leaf moving along the path you’re expecting, any surprises putting Brazil aside?

Yes. I would say yes, it is moving in the right direction as we would expect Brazil is just a little bit of an anomaly caused by pricing and the decreased production due to El Nino, just would’ve disrupted that market a little bit.

And with respect to Brazil, it is the volume at a level where it causes fixed cost to increase at a significant amount in Brazil?

I’m sorry. I missed you, what you said in the second half of that. Can you just repeat it?

Smaller Brazilian crop does that cause a significant increase in your fixed costs in Brazil?

Well, I think it's hard to say…

There’s definitely some increase, I just don’t know if it’s significant.

Yes, I think it's still early to tell for that, but obviously throughput matters.

Okay. And then in that same commentary about customer inventory composition and duration, I'm not sure what that means, I would think they would be tightening at this point. Is that what you're saying or can you help me understand that statement?

I think the point with that Ann is that, yes, they may be tightening, but because we don't have a window on what their durations include in terms of types and styles and that can certainly affect their demand in the coming year. So as we're moving out of the over supply situation there could be a rebalancing of requirements that might affect different origins or types.

Historically, it’s a favorable backdrop for the leaf industry given more balanced scenario and smaller inventory levels or shorter durations in customers, right.

Well, I think it could be. It really is that – the point is to say that we – there is an element that we don't have insight into, so we want to be sort of cautious and waiting to see how that rolls out in comparison with wet crops we have accessible to us this year.

That’s great. And then can you quantify the carryover and the potential crop from Q4 to Q1?

We're not quantifying that we’ll definitely have a better view on it for you next quarter. There's a little bit that has to do with sort of the late shipment timing in general and for some pieces about that that didn't quite hit the shipping requirements or get on the boat, didn't leave in time, a little bit of logistics, some of it is the change in the business model in North America with Philip Morris International, they – some of that style of tobacco ships later in the fourth quarter and we’ll fall over into next year.

And I’m thinking – from the fourth quarter results I mean that our guys did a good job of shipping in the fourth quarter and we didn't really unlike a lot of our previous quarters we didn't really run into any logistic issues.

That’s true, it’s not major.

You have a lot to move, that’s great. And then I wanted to ask you about the Philip Morris business, I was expecting more of it to come through in Q1 of fiscal 2017, so maybe I was just off of my timing, but is there anything there?

Well, that is part of when we expect to see some of that, yes.

I guess, I didn’t expect as much to be realized this quarter, but that’s why…

I am sorry…

In Q4…

Yes.

It split between those…

It just split between those…

Well, I didn’t know that, okay. And then worldwide uncommitted tobacco level numbers, did you have that Candace?

I do. This is a 3/31/2016 measurement, it’s a 115 million kilos is what the estimated worldwide unsold.

And then the SG&A improvement was certainly very, very impressive this year. How should we think about that level for 2017? Are there more savings to be realized?

Well, and we’re always on the look out for ways to improve our savings. There is not a particular plan that we’re announcing. And as you know, there’re a lot of chunky costs that can move in and not of SG&A that are unpredictable. But I would say other than that you know we’re at a good level considering the volumes.

Currency clearly helps.

Yes, that’s true.

Yes.

You have to consider that strong dollar impact in some origins.

And the gross margin improvement was certainly impressive this year, how do I think about that for 2017? You think can you help me with that?

Well, again, we don’t predict the gross margins with that. I think we feel like there are certainly some currency elements that affect those and – but we’re seeing a movement out of what has been an oversupplied season. So, again, no prediction here, but we feel good about what we achieved this year.

Great. And then with the FDA deeming regulations, does that have any reached down into your businesses like Amerinet?

It may, it may reach down to Amerinet, but we don’t think it will be significant. It’s not going to be a…

And it’s very early to tell…

Tremendous burden. And then, as far as the regulations themselves, there’s still a lot more to come. So, it’s not really much to react on in general. I guess from our point of view, it’s again all indirect effects and not direct effects except for the Amerinet and again that shouldn’t be onerous.

Okay. And then what tax rate today is for 2017?

Always 34%, Ann.

Got to check. Okay, that’s great.

These are broken record, right.

Okay, that’s okay. I like the new website, it looks great.

Thank you.

Thank you.

And that’s all I have. Congrats on a great year. Good job. Thank you.

Thanks.

Thanks. I appreciate it.

Thank you, Ann. I appreciate it.

And we have no further questions at this time.

That’s good. Thank you all for joining us today.