Good evening. My name is Trisha and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation Second Quarter Fiscal Year 2018 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] I would now like to turn the call over to Ms. Candace Formacek, Vice President and Treasurer. Ma’am, you may begin the conference

Thank you, Trisha, 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 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 February 5, 2018. 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 second 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. Our results for the six months ended September 30,…

[Operator Instructions] And we have a question from Ann Gurkin.

Hi, everyone.

Hey, how are you doing?

Fine. I wanted to just start with your comments about increasing market share. I think, you’re talking about market share in terms of processing leaves for your customers or sourcing the leaves, or is it something else that defines that market share increase statement?

Well, I think it’s – again, our volumes are holding. So it’s mainly lamina sales. But our volumes are holding – are not dropping at the rate of the decline of combustible products.

Are you taking share from other smaller competitors or other competitors?

I’m not sure – I can’t – I couldn’t say where it’s coming from necessarily, but…

Okay.

We do feel confident and there are different types of projects and possibilities. And we are always talking with all of our customers and really feel good about where we’re able to maintain our current volumes and the opportunities that we’re seeing.

Okay. And then opportunities, what opportunities are in Universal enterprises like in the value-added space to add businesses? Are there opportunities to make acquisitions, joint ventures, and kind of roll that into after attending Altria’s Investor Day, as they outlined or rolled out a number of new product – potential new products that are more noncombustible like – can we kind of talk about how you could evolve that whole space maybe to parallel and mirror where your customers seem to be investing in innovations?

Well, I’ll start, Ann, just to say that, I think, this question is sort of the one that continues to roll around for us.

Correct.

We’re certainly involved with our customers on their future generation product requirements. All of these are in various states of development. We are experts in leaf. And as those are elements in many of these products, those are certainly discussions that we are having on an ongoing basis with them, and that involvement is something that we certainly expect. At this point, it’s not – there is not anything specific that we would be able to discuss on this call. But those are certainly elements of what these conversations are that we are having with them going forward.

Are you actively looking at opportunities for joint ventures or to make acquisitions, or can you comment on that?

I cannot comment on that. Yes.

We cannot comment, yes..

Okay. And lastly, for the share repurchase announcement – yes, go ahead.

No, just go ahead.

Go ahead, George. Sorry, I cut you off.

No, it’s okay. I will leave it to Candace.

Yes, sorry. I was just saying, when…

Okay.

When we are able – as you know, we usually don’t talk about these types of opportunities until it’s – we are able to discuss it publicly. And so you’ll hear as well as everyone.

Okay. And then congrats on the announcement about the share repurchase program, and what gives you the confidence right now to announce that program?

Well, Ann, we typically keep an open program. It’s one that is approved by our Board and it’s part of our normal procedure to make sure that we have an allocation available for those opportunities. We do focus heavily on the dividends as the primary way to reward our shareholders. But from time to time, we like to make sure that we take advantage of opportunistic periods where we might be able to make those share repurchases and our program gives us the availability to do that.

Great. And then, not to leave David out, but how about – I enjoyed all the commentary about the tax rate in the press release. So the tax rate for the full-year is still 34% to 35%?

Yes, I would probably make it, maybe 33% to 34% this year.

Okay.

We have three items in the first six months that produced the benefit of about $2 million. And that’s what drove the six-month breakdown to about 30%. But as that gets diluted as we make money in the second-half, it’s probably going to rise up. But I would – I mean, with that regard of the future tax code, I would still think 34%, 34.5% is probably a good long-term rate.

Great. And then can you give me any help with the SG&A for the year?

Well, Ann, we try to just focus on the areas, SG&A was improved, but there were some offsetting variances last year. And depending upon currency and other items, I would see that being in a fairly stable position though we always continue to work to improve our cost basis wherever we can.

Great. And then are there any updates for worldwide uncommitted leaf inventories, Candace?

The ones that we have for you still is as of 6/30 and that’s 87 million kilos, yes.

Great. Thank you all very much.

Thank you, Ann.

Thank you, Ann.

Thank you.

Thank you. [Operator Instructions] We now have a question from Steve Marascia from Capitol Securities.

Good afternoon, everybody, and congrats on a good quarter.

Thank you.

Thank you.

Thank you.

Two questions. One on one kind of dove tailing with Ann’s question about SG&A, which do you think would be the most important component of SG&A determining whether you guys maintain current levels going forward, or if it increases or decreases for the next 12 months, or four quarters, I should say?

Well, Steve, these are always difficult to predict. But I would say that typically you will see most frequently currency remeasurement gains and losses having an effect for us. There are a lot of drivers of that. Many of them are noncash in nature and those are typically able to be seen in our cash flows. We do – it’s always helpful if you’re looking at a comparison for a quarter or for a period to date to take a look at what happened in the prior year, because often we’re facing a balance of whether we are up or down based on what might have happened in the prior period.

Is that traditionally the highest component or what causes the variability in your SG&A results?

Well, when there is a large swing, that is often one of the reasons. I would not say that that’s necessarily the main component. But we do see – most of the variances we end up referencing tend to be chunky items that may or may not be repeated in the future and are hard to predict.

Yes, the one that’s most volatile on the variance.

Okay.

The one that’s very difficult to predict.

Sure. Yes, absolutely. And then final question, I don’t know if you can touch upon this. Looking at what the proposed tax bill is right as it stands now, have you guys – are you guys putting any comments about how might it affect you?

We would hope to tell us. I mean, these days, you never really know what they are going to pay us, what they are going to change. And to be quite frank with you, on this go around, we’ve been immersed in the quarter and reported.

Right.

We really haven’t had a chance to look at the latest though. And the latest, it seems every day somebody comes out with something that’s different that wasn’t in the previous thing. So we’ve not really had the time to analyze it.

But overall and if they do drop the corporate rate down to either 27% or 20%, I’m guessing, that would be a net benefit for you guys?

I more than would hope so.

Okay. All right. Thank you very much.

Thank you.

Thank you.

[Operator Instructions] And it appears there are no further questions.

Great. Thank you, Trisha, and thank you all for joining us on our call today. Have a good evening.

Have a nice evening.