Good afternoon. My name is Jerome and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter Fiscal Year 2019 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 Ms. Candace Formacek, Vice President and Treasurer, the floor is yours.

Thank you, Jerome, 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 November 7, 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, 2018, as well as our Form 10-Q for the year-ended June 30, 2018 which was filed with the SEC today. 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 comparable GAAP measures, please…

[Operator Instructions] Your question comes from the line of Ann Gurkin from Davenport & Company. Your line is now open.

Good evening, everyone.

Hi, how are you doing?

Good, congrats on a great start to the year, very nice.

Thank you very much.

Just want to ask some questions. If we think about the outlook for the North American segment for the full year, can you talk about the timing and the shipments, like what's an underlying number? Or how should we think about quarterly progression for the North American segment for the year?

Not sure – well, it's a bit early to call, Ann. The crop needed rain, and now it's had a lot of rain. The crop is probably going to come in a bit later than normal. And it's – we run the facilities at peak, so the whole season probably going to run a bit behind. And then the transport issue in terms of availability of crops in the U.S. to move tobacco is going to still be a problem as well, which will slow it down. It may not create a problem herein like it did last year, but it could slow down the deliveries.

So if we think about shipment volumes, is it skewed? Obviously, more to the first half than the second half, is that how I should think about?

Well, I would say, Ann, typically, that region would have fewer volumes in the first half and more towards the second half. But as it was this year, it can be very affected by carryover between the fourth fiscal quarter of the prior year and the current year. So you always have to sort of look at what that takes into consideration.

Okay. Great. And then in terms of margins, it's certainly a nice margin for the North American segment this quarter. I would not imagine that continues given the mix and the carryover, but how should we think about the progression? Can you help me at all with kind of the back half outlook? If you can share that at all, margin, volume kind of for North America? Just trying to get sort of an underlying kind of number year-over-year…

Well, I don't know that there was anything we particularly reported in this quarter that was unusual for them. Obviously, you will see changes from quarter-to-quarter as the crop comes up in different areas. So it's a little bit hard to state on a quarterly basis.

Okay. And then the same question. For SG&A – overall, SG&A for the company, I always ask this, how do we think about it for the full year, how do think we would back up that $10 million currency remeasurement? And is that a good underlying number to think about to run for the full year? Can you help me at all with that?

Well, I think, Ann, as we usually remind you that is a big number. That's one of the reasons we like to put what that amount is. It was actually in this year, there were some losses in the current period versus gains in the prior year, same period. So that total between the two ran us into that $10 million. So of course, when you pull that out from any comparable year, that's a better baseline to what we would have going forward. And I think tip otherwise, we've seen fairly stable percentages, unless there's a big change in currency that might in a particular quarter affect one region or the other.

And I would think the overall level of SG&A in the first quarter is probably at a more normal level than last year where it's just low.

Okay, that’s great. And then can I assume in that worldwide uncommitted lease inventory number update?

I do. I do. The worldwide unsold flue-cured and burley is – this is June 30, is 82 million kilos, which is down about 4 million or 5% from the 3/31 level.

All right. And then are you all call up in the tariffs at all? Can you talk about that? And can you also talk about any kind of implications from the Zimbabwe political unrest, anything there?

We haven't – on Zimbabwe, we haven't heard anything. I know there are some issues in Hawaii. But to my knowledge, it hadn't affected business. I mean, they're pretty used to dealing with political issues in Zimbabwe. On the tariffs, the…

I believe that it – the U.S. tariffs, it will likely impact our U.S.-China business.

Yes.

But it probably will not be material.

Okay, great.

And that was Johan, if you didn't know.

Welcome, Johan. And then at the Annual Meeting, George, you talked about the strategy to capitalize on core competencies. Can you give us any more detail behind that, that strategy? How far or how do you define adjacent businesses? How far out are you willing to go? People may be hired to support this strategy. Can you just flush that out a little bit?

Yes. Well, we have hired some people with experience in M&A. And he – it's a he –regarding Steve [ph] deal. He is beginning the process, I would say. I don't want to rig the system, but it's clearly – as I view it, is we have strength in ag. We have strengths in logistic. We have certain country knowledge. Clearly, some of the things we've looked at in the – and done – sort of done trials with is vanillas, stevia and ground nuts. We – so I would think that it's probably going to be something ag-related, non-commodity ag-related with a value-added component. But it could be something else, but – if I had to guess right now, that's what I would say it is.

Okay. That helps. And then I noticed that you put out 2019 crop outlook. So the burley numbers are relatively flat versus last year. Is that going to start creating more of an oversupply? Or how do you think about that number? I know the crops – it hasn't been grown yet. But like – I was just kind of interested in your thoughts on the outlook for the kind of the supply/demand balance for burley going forward.

Do you mean, Ann, for crop year 2019 versus the current crop year?

2019, yes, right.

Well, we – Africa hasn't gone into the ground yet. So I think clearly, that we're seeing the African burley volumes come up a little bit. We may change what we plant next year, depending on how that all shakes out.

And the truth, Ann, historically, this company has always been – done better when you had a slight oversupply because it kicks the markets comp, and you have a better selectivity of the tobaccos you buy, the field and owners that you have.

Great. And then sorry, one more question, the quality of the crops this year that you have been – that you have sold and delivered to customers, can you comment on the quality of that crop?

I mean, I think Brazil has pretty good quality and boy, with that exchange rate, the prices…

The burley in Brazil is of a very good quality. I think the – that the flue-cured is okay.

Okay, that’s great. David, all the best to you. Thank you.

Thank you.

Thank you all for your question. Thanks.

Have a good evening.

Thank you. [Operator Instructions] At this time, we don't have any further question on queue. Presenters, you may continue.

Okay, great, Jerome. Thank you so much. We thank you all for joining our call today. Good night.