Q4 2026 Universal Corp Earnings Call

May 29, 2026

Speaker #1: Thank you for standing by. My name is Jale, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation's fourth quarter fiscal year 2026 earnings call.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad.

Operator: Thank you for standing by. My name is Jill, and I'll be your Conference Operator today. At this time, I would like to welcome everyone to the Universal Corporation's Q4 fiscal year 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Wushuang Ma, Vice President and Treasurer. You may begin.

Speaker #1: If you would like to withdraw your question, simply press star 1 again. I would now like to turn the conference over to Wu Shma, Vice President and Treasurer.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad.

Speaker #1: You may begin.

Speaker #2: Good morning. I'm thank you for joining us. With me today are President Wigner, our Chairman, President, and CEO, and Steve Diehl, our recently appointed Chief Financial Officer.

Speaker #1: If you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Wushuang Ma, Vice President and Treasurer.

Speaker #2: During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future.

Speaker #1: You may begin.

Speaker #2: These are representative as of today only. Actual results, performance, or achievements could differ materially from the anticipated results prospects, performance, or achievements expressed or implied by such forward-looking statements.

Speaker #2: Good morning, and thank you for joining us. With me today are Preston Wigner, our Chairman, President, and CEO, and Steve Diehl, our recently appointed Chief Financial Officer.

Wushuang Ma: Good morning, and thank you for joining us. With me today are Preston Wigner, our Chairman, President, and CEO, and Steve Dill, our recently appointed Chief Financial Officer. During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. These are representative as of today only. Actual results, performance, or achievements could differ materially from the anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. We assume no obligation to update any forward-looking statements except as required by law. For information on some of the risks and uncertainties related to these forward-looking statements, please refer to the reports we file with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release.

Speaker #2: During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future.

Speaker #2: And we assume no obligation to update any forward-looking statements except as required by law. For information on some of the risks and uncertainties related to these forward-looking statements, please refer to the report we filed with the ICC and under cautionary statements regarding forward-looking statements in our current earnings press release.

Speaker #2: These are representative as of today only. Actual results, performance, or achievements could differ materially from the anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements.

Speaker #2: And we assume no obligation to update any forward-looking statements, except as required by law. For information on some of the risks and uncertainties related to these forward-looking statements, please refer to the reports we file with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release.

Speaker #2: Finally, some of the information we have revealed today may be based on unaudited allocations and may be subject to reclassification. Our comments, they may also include certain non-GAAP financial measures.

Speaker #2: For details regarding these measures, including reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials.

Speaker #2: Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments today may also include certain non-GAAP financial measures.

Wushuang Ma: Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments today may also include certain non-GAAP financial measures. For details regarding these measures, including the reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through 29 August 2026, and by telephone through 12 June 2026. This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call. I would like now to turn the call over to Preston.

Speaker #2: This call is being webcast live and will be available for replay on our website through August 29th, 2026. And via telephones through June 12th, 2026.

Speaker #2: For details regarding these measures, including a reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials.

Speaker #2: This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaimed responsibility for any recording, replay, or distribution of any transcription on this call.

Speaker #2: This call is being webcast live and will be available for replay on our website through August 29, 2026, and via telephone through June 12, 2026.

Speaker #2: I would like now to turn the call over to President.

Speaker #3: Thank you, Wush. Good morning, everyone, and thank you for joining us today. Our fiscal year 2026 performance reflected solid execution across much of our business, operating in a market environment that shifted meaningfully from the prior year.

Speaker #2: This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call.

Speaker #3: We saw oversupply in certain tobacco styles and continued market headwinds in our ingredients business, which impacted volumes and margins. Amidst these challenges, our teams around the globe demonstrated the resilience of our tobacco operations.

Speaker #2: I would like now to turn the call over to Preston.

Speaker #3: Thank you, Wushuang. Good morning, everyone. And thank you for joining us today. Our fiscal year 2026 performance reflected solid execution across much of our business, operating in a market environment that shifted meaningfully from the prior year.

Preston Wigner: Thank you, Wush. Good morning, everyone, thank you for joining us today. Our fiscal year 2026 performance reflected solid execution across much of our business, operating in a market environment that shifted meaningfully from the prior year. We saw oversupply in certain tobacco styles and continuing market headwinds in our ingredients business, which impacted volumes and margins. Amidst these challenges, our teams around the globe demonstrated the resilience of our tobacco operations, and we continue to focus on the progress we are making to support the long-term growth of our ingredients operations.

Speaker #3: And we continue to focus on the progress we're making to support the long-term growth of our ingredients operations. However, our financial results for the fourth quarter and fiscal year were impacted by a non-cash goodwill impairment related to our universal ingredients shanks operation, and by inventory write-downs primarily related to non-wrapper, dark air-cured tobacco.

Speaker #3: We saw oversupply in certain tobacco styles and continued market headwinds in our Ingredients business, which impacted volumes and margins. Amidst these challenges, our teams around the globe demonstrated the resilience of our tobacco operations, and we continue to focus on the progress we are making to support the long-term growth of our Ingredients operations.

Speaker #3: We remain confident in our tobacco and ingredients strategies, and the steps we have taken to adapt to current market conditions and position the business for the future.

Speaker #3: However, our financial results for the fourth quarter and fiscal year were impacted by a non-cash goodwill impairment related to our universal ingredients shanks operation, and by inventory write-downs primarily related to non-wrapper, dark air-cured tobacco.

Preston Wigner: However, our financial results for the Q4 and fiscal year were impacted by a non-cash goodwill impairment related to our Universal Ingredients - Shank's operation and by inventory write-downs primarily related to non-wrapper dark air-cured tobacco. We remain confident in our tobacco and ingredient strategies and the steps we have taken to adapt to current market conditions and position the business for the future. With more than 100 years of operating experience and a market-leading position, our leaf tobacco business has demonstrated its durability across market cycles. At the same time, we believe our ingredients strategy, which focuses on innovation and solution-based products, is well-aligned with customer needs and long-term value creation. We have invested over several years to build a scalable ingredients platform with necessary capacity and capabilities, and we believe the platform is well-positioned for future growth.

Speaker #3: With more than 100 years of operating experience in a market-leading position, our leaf tobacco business has demonstrated its durability across market cycles. At the same time, we believe our ingredients strategy, which focuses on innovation and solution-based products, is well aligned with customer needs and long-term value creation.

Speaker #3: We remain confident in our tobacco and ingredients strategies, as well as the steps we have taken to adapt to current market conditions and position the business for the future.

Speaker #3: We have invested over several years to build a scalable ingredients platform with necessary capacity and capabilities, and we believe the platform is well positioned for future growth.

Speaker #3: Supporting both these priorities is our continued advancements in sustainability. Which remains an increasingly important expectation across our global value chain. During the fourth fiscal quarter, universal advanced from an A-minus to an A-rating in the carbon disclosure projects supplier engagement assessment.

Speaker #3: We have invested over several years to build a scalable ingredients platform with the necessary capacity and capabilities, and we believe the platform is well positioned for future growth.

Preston Wigner: Supporting both these priorities is our continued advancements in sustainability, which remains an increasingly important expectation across our global value chain. During Q4, Universal advanced from an A- to an A rating in the Carbon Disclosure Project Supplier Engagement Assessment. In addition, we were recognized as a CDP supplier engagement leader and named to CDP's Supplier Engagement A List, underscoring the strengths of our governance, emissions management, and collaboration with suppliers. Strong financial discipline and leadership are critical to executing across both our operating segments. In February, we announced the appointment of Steve Diel, our Chief Financial Officer, effective 1 April. Steve has been with Universal since 2018 and has more than 25 years of experience across finance, corporate development, and business strategy. He is a trusted Universal leader with significant financial expertise, a deep understanding of our operations, and a proven record of strategic execution.

Speaker #3: In addition, we are recognized as a CDP supplier engagement leader and named to CDP's supplier engagement A-list underscoring the strengths of our governance, emissions management, and collaboration with suppliers.

Speaker #3: Strong financial discipline and leadership are critical to executing across both our operating segments. In February, we announced the appointment of Steve Diehl, our Chief Financial Officer, effective April 1.

Speaker #3: In addition, we are recognized as a CDP Supplier Engagement Leader and named to CDP's Supplier Engagement A List, underscoring the strengths of our governance, emissions management, and collaboration with suppliers.

Speaker #3: Steve has been with Universal since 2018 and has more than 25 years of experience across finance, corporate development, and business strategy. He is a trusted universal leader with significant financial expertise, a deep understanding of our operations, and a proven record of strategic execution.

Speaker #3: Strong financial discipline and leadership are critical to executing across both of our operating segments. In February, we announced the appointment of Steve Diehl as our Chief Financial Officer, effective April 1.

Speaker #3: With that, I'll now turn the call over to Steve to review our financial results in more detail.

Speaker #3: Steve has been with Universal since 2018 and has more than 25 years of experience across finance, corporate development, and business strategy. He is a trusted Universal leader with significant financial expertise, a deep understanding of our operations, and a proven record of strategic execution.

Speaker #2: Thank you, Preston. Good morning, everyone. As Preston mentioned, during fiscal year 2026, our flu-cured and burly tobacco portfolio performed well but results were significantly impacted by two areas of our businesses, which I'll discuss during a review of consolidated and segment results.

Speaker #3: With that, I'll now turn the call over to Steve to review our financial results in more detail.

Preston Wigner: With that, I'll now turn the call over to Steve to review our financial results in more detail.

Speaker #2: Thank you, Preston. Good morning, everyone. As Preston mentioned, during fiscal year 2026, our flue-cured and burley tobacco portfolio performed well, but results were significantly impacted by two areas of our business, which I'll discuss during a review of consolidated and segment results.

Steven S. Diel: Thank you, Preston. Good morning, everyone. As Preston mentioned, during fiscal year 2026, our flue-cured and burley tobacco portfolio performed well, but results were significantly impacted by two areas of our businesses, which I'll discuss during a review of consolidated and segment results. For Q4, consolidated revenue was $715 million, up 2% from the same quarter of last year. For the full year, consolidated revenue was $2.9 billion, down slightly from the previous exceptional fiscal year. For the quarter, operating loss was $15 million as compared to an operating income of $43 million for the same quarter of last year. For the full year, operating income was $169 million, down $64 million as compared to fiscal year 2025. Lower operating income was mainly driven by two areas.

Speaker #2: For the fourth quarter, consolidated revenue was $715 million up 2% from the same quarter of last year. For the full year, consolidated revenue was $2.9 billion, down slightly from the previous exceptional fiscal year.

Speaker #2: For the quarter, operating loss was $15 million, as compared to an operating income of $43 million, for the same quarter of last year. And for the full year, operating income was $169 million, down 64 million dollars, as compared to fiscal year 2025.

Speaker #2: For the fourth quarter, consolidated revenue was $715 million, up 2% from the same quarter last year. For the full year, consolidated revenue was $2.9 billion, down slightly from the previous exceptional fiscal year.

Speaker #2: For the quarter, operating loss was $15 million, as compared to operating income of $43 million for the same quarter of last year. And for the full year, operating income was $169 million, down $64 million as compared to fiscal year 2025.

Speaker #2: Lower operating income was mainly driven by two areas: first, the shanks business within our ingredients segment experienced lower profitability and recorded a $41 million non-cash goodwill impairment.

Speaker #2: And I'll address both of these items in more detail later. Second, higher inventory write-downs in our non-wrapper, dark air-cured tobacco business combined with weaker performance.

Speaker #2: Lower operating income was mainly driven by two areas. First, the Shanks business within our Ingredients segment experienced lower profitability and recorded a $41 million non-cash goodwill impairment.

Steven S. Diel: First, the Shank's business within our ingredient segment experienced lower profitability and recorded a $41 million non-cash goodwill impairment, and I'll address both of these items in more detail later. Second, higher inventory write-downs in our non-wrapper dark air-cured tobacco business, combined with weaker performance. For the Q4, net loss attributable to Universal was $43 million as compared to net income of $9 million for the same quarter of last year. For the full year, net income was $33 million, down from $95 million for fiscal year 2025. Lower net income was again mainly the result of the non-cash charges I just mentioned, as well as weaker performance at Shank's and our dark air-cured tobacco business. In terms of segment results, tobacco segment revenue was $632 million for the Q4 of fiscal 2026, up 3% versus the same quarter last year.

Speaker #2: For the fourth quarter, net loss attributable to Universal was $43 million, as compared to net income of $9 million, for the same quarter of last year.

Speaker #2: And I'll address both of these items in more detail later. Second, higher inventory write-downs in our non-wrapper, dark air-cured tobacco business combined with weaker performance.

Speaker #2: For the full year, net income was $33 million, down from $95 million for fiscal year 2025. Lower net income was again mainly the result of the non-cash charges I just mentioned, as well as weaker performance at shanks and our dark air-cured tobacco business.

Speaker #2: For the fourth quarter, net loss attributable to Universal was $43 million, as compared to net income of $9 million for the same quarter of last year.

Speaker #2: In terms of segment results, tobacco segment revenue was $632 million for the fourth quarter of fiscal 2026, up 3% versus the same quarter of last year.

Speaker #2: For the full year, revenue was $2.6 billion, down slightly, as compared to fiscal year 2025. Segment operating income was $27 million, for the fourth quarter of fiscal year 2026, as compared to $46 million for the same quarter of last year.

Speaker #2: In terms of segment results, tobacco segment revenue was $632 million for the fourth quarter of fiscal 2026, up 3% versus the same quarter of last year.

Speaker #2: For the full year, segment operating income was $212 million, as compared to $240 million for fiscal year 2025. Lower segment operating income was mainly the result of lower profitability and higher inventory write-downs of non-wrapper, dark air-cured tobaccos.

Steven S. Diel: For the full year, revenue was $2.6 billion, down slightly as compared to fiscal year 2025. Segment operating income was $27 million for Q4 of fiscal year 2026, as compared to $46 million for the same quarter of last year. For the full year, segment operating income was $212 million as compared to $240 million for fiscal year 2025. Lower segment operating income was mainly the result of lower profitability and higher inventory write-downs of non-wrapper dark air-cured tobaccos. Specifically, for fiscal year 2026, total inventory write-downs for our tobacco operations segment were $43 million as compared to $19 million during fiscal year 2025, and an average of $14 million across the five years from fiscal year 2021 through 2025. Now turning to the ingredients operating segment.

Speaker #2: Specifically, for fiscal year 2026, total inventory write-downs for our tobacco operations segment were $43 million, as compared to $19 million during fiscal year 2025, and an average of $14 million across the five years from fiscal year 2021 through 2025.

Speaker #2: For the full year, segment operating income was $212 million, compared to $240 million for fiscal year 2025. Lower segment operating income was mainly the result of reduced profitability and higher inventory write-downs of non-wrapper, dark air-cured tobaccos.

Speaker #2: Now, turning to the ingredients operating segment, segment revenue was $83 million, for the fourth quarter of fiscal year 2026, as compared to $90 million for the same quarter of last year.

Speaker #2: For the full year, revenue was $348 million, up 3%, as compared to fiscal year 2025. Segment operating income was $2 million, for the fourth quarter of fiscal year 2026, as compared to $4 million for the same quarter of last year.

Speaker #2: Now, turning to the Ingredients operating segment, segment revenue was $83 million for the fourth quarter of fiscal year 2026, as compared to $90 million for the same quarter last year.

Steven S. Diel: Segment revenue was $83 million for Q4 of fiscal year 2026, as compared to $90 million for the same quarter of last year. For the full year, revenue was $348 million, up 3% as compared to fiscal year 2025. Segment operating income was $2 million for Q4 of fiscal year 2026 as compared to $4 million for the same quarter of last year. For the full year, segment operating income was $3 million as compared to $12 million for fiscal year 2025. Despite significant industry headwinds, our FruitSmart and Silva businesses performed in line with expectations. Lower operating income for the segment was mainly the result of Shank's performance and driven by higher fixed and operating costs related to the recent growth investments as we build our new product pipeline. Regarding liquidity and capital structure.

Speaker #2: For the full year, segment operating income was $3 million, as compared to $12 million for fiscal year 2025. Despite significant industry headwinds, our Fruitsmart and Silva businesses performed in line with expectations: lower operating income for the segment was mainly the result of shanks performance and driven by higher fixed and operating costs related to the recent growth investments, as we build our new product pipeline.

Speaker #2: For the full year, revenue was $348 million, up 3% as compared to fiscal year 2025. Segment operating income was $2 million for the fourth quarter of fiscal year 2026, as compared to $4 million for the same quarter last year.

Speaker #2: For the full year, segment operating income was $3 million, as compared to $12 million for fiscal year 2025. Despite significant industry headwinds, our fruits, mart, and silva businesses performed in line with expectations. Lower operating income for the segment was mainly the result of Shanks' performance and driven by higher fixed and operating costs related to the recent growth investments, as we build our new product pipeline.

Speaker #2: Regarding liquidity and capital structure, as of March 31, 2026, our net debt was $845 million, compared to $817 million at the same point last year.

Speaker #2: The increase was mainly the result of higher working capital usage associated with purchasing and selling a significantly larger tobacco crop. Our liquidity availability—which includes cash and availability under our committed and uncommitted credit lines—totaled over $1.2 billion.

Speaker #2: Regarding liquidity and capital structure, as of March 31, 2026, our net debt was $845 million, compared to $817 million at the same point last year.

Steven S. Diel: As of 31 March 2026, our net debt was $845 million compared to $817 million at the same point last year. The increase was mainly the result of higher working capital usage associated with purchasing and selling a significantly larger tobacco crop. Our liquidity availability, which includes cash and availability under our committed and uncommitted credit lines, totaled over $1.2 billion. I'll briefly shift to an introduction as Universal's new CFO. As Preston mentioned, I joined Universal in 2018, coinciding with the company's rollout of the enhanced capital allocation strategy. Since then, I've been closely involved in developing and executing that strategy, including the formation of Universal Ingredients platform through three acquisitions and the continued investment in its commercial and operational capabilities.

Speaker #2: Now, I'll briefly shift to an introduction as Universal's new CFO. As Preston mentioned, I joined Universal in 2018, coinciding with the company's rollout of the enhanced capital allocation strategy.

Speaker #2: Since then, I've been closely involved in developing and executing that strategy, including the formation of Universal Ingredients platform through three acquisitions and commercial and operational capabilities.

Speaker #2: Now, I'll briefly shift to an introduction as UNIVERSAL's new CFO. As Preston mentioned, I joined UNIVERSAL in 2018, coinciding with the company's rollout of the enhanced capital allocation strategy.

Speaker #2: At the same time, I have led our financial planning and analysis function, supporting the company through a full supply-demand cycle and leaf tobacco, the complexities of COVID, and the evolving macroeconomic environment that followed.

Speaker #2: Since then, I've been closely involved in developing and executing that strategy, including the formation of the UNIVERSAL Ingredients platform through three acquisitions and continued investment in its commercial and operational capabilities.

Speaker #2: Because of these experiences, I have a clear perspective on both the durability of our core business and the importance of financial discipline as we invest in growth.

Speaker #2: At the same time, I have led our Financial Planning and Analysis function, supporting the company through a full supply-demand cycle in leaf tobacco, the complexities of COVID, and the evolving macroeconomic environment that followed.

Steven S. Diel: At the same time, I have led our financial planning and analysis function, supporting the company through a full supply-demand cycle in leaf tobacco, the complexities of COVID, and the evolving macroeconomic environment that followed. Because of these experiences, I have a clear perspective on both the durability of our core business and the importance of financial discipline as we invest in growth. I am greatly honored to take on the role of chief financial officer. Universal combines a resilient market-leading leaf tobacco business with an adjacent ingredients platform that has a strong core product and customer base, expanding capabilities, and a long runway for growth. My priority is to deliver dependable free cash flow and balance sheet strength through disciplined capital allocation. This approach underpins our commitment to durable shareholder value across agricultural and economic cycles.

Speaker #2: I am greatly honored to take on the role of Chief Financial Officer. Universal combines a resilient, market-leading leaf tobacco business with an adjacent ingredients platform that has a strong core product and customer base expanding capabilities, and a long runway for growth.

Speaker #2: Because of these experiences, I have a clear perspective on both the durability of our core business and the importance of financial discipline as we invest in growth.

Speaker #2: My priority is to deliver dependable free cash flow and balance sheet strength through disciplined capital allocation. This approach underpins our commitment to durable shareholder value, across agricultural and economic cycles.

Speaker #2: I am greatly honored to take on the role of Chief Financial Officer. UNIVERSAL combines a resilient, market-leading leaf tobacco business with an adjacent ingredients platform that has a strong core product and customer base, expanding capabilities and a long runway for growth.

Speaker #2: Now, before I hand the call back to Preston, I would like to address the non-cash goodwill impairment related to shanks. When we acquired shanks in October of 2021, we recorded approximately $41 million of goodwill.

Speaker #2: In accordance with US GAAP, this goodwill was assessed periodically and no indications of impairment were identified prior to fiscal year 2026. Since acquiring the business, we have invested in growth.

Speaker #2: Now, before I hand the call back to Preston, I would like to address the non-cash goodwill impairment related to Shank's. When we acquired Shank's in October of 2021, we recorded approximately $41 million of goodwill.

Steven S. Diel: Now, before I hand the call back to Preston, I would like to address the non-cash goodwill impairment related to Shank's. When we acquired Shank's in October 2021, we recorded approximately $41 million of goodwill. In accordance with U.S. GAAP, this goodwill was assessed periodically, and no indications of impairment were identified prior to fiscal year 2026. Since acquiring the business, we have invested in growth, both in the form of capital expenditures to build new production capabilities and in commercial and R&D human capital. During fiscal 2026, market conditions pressured revenues and profitability for both core products and new product development. As a relatively new player in this space, converting customer interest into sustained revenue and margin growth can be a lengthy process. As of March 31, 2026, we were behind in executing our commercial strategy amidst the market headwinds.

Speaker #2: Both in the form of capital expenditures to build new production capabilities and in commercial and R&D human capital. During fiscal 2026, market conditions, pressured revenues, and profitability for both core products and new product development.

Speaker #2: In accordance with US GAAP, this goodwill was assessed periodically, and no indications of impairment were identified prior to fiscal year 2026. Since acquiring the business, we have invested in growth.

Speaker #2: As a relatively new player in this space, converting customer interest into sustained revenue and margin growth can be a lengthy process. And as of March 31, 2026, we were behind in executing our commercial strategy amidst the market headwinds.

Speaker #2: Both in the form of capital expenditures to build new production capabilities and in commercial and R&D human capital. During fiscal 2026, market conditions pressured revenues and profitability for both core products and new product development.

Speaker #2: In response, management, together with a third-party consultant, conducted evaluation analysis and concluded that a non-cash goodwill impairment was appropriate. To improve execution, we have recently implemented a leadership-level organizational realignment at shanks.

Speaker #2: The focus is on strengthening commercial execution, improving facility utilization, and enhancing financial and operational efficiency. Strategically, shanks remains a key component of our ingredients platform, given its underutilized capacity and technical capabilities and role in supporting innovation, and solutions-based offerings.

Steven S. Diel: In response, management, together with a third-party consultant, conducted an evaluation analysis and concluded that a non-cash goodwill impairment was appropriate. To improve execution, we have recently implemented a leadership-level organizational realignment at Shank's. The focus is on strengthening commercial execution and improving facility utili—

Speaker #2: As CFO, I will focus on strengthening the execution and financial discipline across the company, ensuring we convert strategic intent into financial performance. And on growing revenue and margins, controlling costs, and deploying capital effectively to support growth, both organically and through future accretive acquisition opportunities.

Speaker #2: I'll now turn the conversation back to Preston.

Speaker #1: Thank you, Steve. As we look ahead to fiscal year 2027, our leaf tobacco business brings over $100 years of experience operating through complex and evolving global environments.

Speaker #1: Combined with our broad geographic diversification, and longstanding customer relationships, this positions us well to manage ongoing oversupply and current market dynamics. In ingredients, our strategy is centered on clean label, healthy, organic, and solution-based products, and remains aligned with our customers' priorities.

Speaker #1: We will continue to support our customers as we work together to navigate the persistent market headwinds. Our ingredients focus remains on disciplined execution, including leveraging the investments we have made to strengthen commercial effectiveness, achieving operational efficiencies, and improving financial performance.

Speaker #1: We enter fiscal year 2027 focused on maximizing and optimizing our tobacco business, growing our ingredients business, and strengthening our company for the next 100 years.

Speaker #1: This strategic approach strengthens the durability of our business and positions us to navigate market cycles and volatility while continuing to deliver long-term value to our shareholders, like our recent announcement of our 56th consecutive annual dividend increase.

Speaker #1: Thank you again for joining us today. We will now open the call for questions.

Speaker #2: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Speaker #2: If you would like to withdraw your question, simply press star one again. If you're listening via loudspeaker on your device, please remember to pick up your handset and remove yourself from mute before asking your question.

Speaker #2: Your first question comes from the line of Daniel Harriman of Sidoty. Your line is open.

Speaker #3: Thank you. Hey, guys. Good morning and Steve. Congratulations on the new role. I'll start with two questions today, and then I'll get back into the queue.

Speaker #3: But Preston, can you just talk about your confidence level that we'll get inventory normalization during fiscal 2027? I know uncommitted inventories were 27%, I believe.

Speaker #3: And then I wanted to see if there's any additional write-down risk in non-wrapper dark air-cured tobacco. And then if we set aside the impairment and the tobacco inventory write-downs, it appears that the overall business is operating at a high level.

Speaker #3: So I was just wondering if you could speak about the underlying trends and flu-cured burly and the ingredients platform outside of shanks. And kind of what that tells you about the setup for fiscal 27.

Speaker #3: Thanks.

Speaker #2: All right. Thanks, Daniel. I'll start with the inventory. Yeah. So that inventory number we disclosed, that's as of March 31st. 2026. And leading into that, we've had some buying early days of buying, but buying in Brazil.

Speaker #2: So some of that is what we bought in Brazil. But we've already seen movement from March 31st, just over the last two months. We're confident that we will be within our range for uncommitted inventory between 10 and 20 percent during the fiscal year.

Speaker #2: And we'll have a much better update and a much better view of things for our first quarter call in a couple of months. But at the moment, we're pleased where things are going and, like I said, we're confident we'll be within that range during the fiscal year.

Speaker #2: For the dark write-downs, we've taken those write-downs in particular in the fourth quarter. Sort of a thorough review of inventory on hand and market dynamics, all of that goes into sort of the accounting side of how we evaluate and determine write-downs to take.

Speaker #2: That was a thorough review at the end of the fiscal year based on current market dynamics, and going into this year, we feel comfortable that inventory positions are good, that we're working closely with our customers to make sure we have the volumes and the quality in particular that they need of non-wrapper and of wrapper tobaccos.

Speaker #2: And we'll monitor it throughout the year. And there's an accounting side to it where we always assess no matter what the tobacco style, we assess our inventory positions and values through the accounting rules.

Speaker #2: And we'll continue to do that during the year. But at the moment, given the extent of the fourth quarter write-downs, we're comfortable where we are right now with current market dynamics.

Speaker #3: Yeah. Just to follow on from the accounting side of that, we record inventory at the lower of cost or what we estimate as net realizable value.

Speaker #3: And that's where, as Preston said, we did a deep dive into our inventories in Q4 to come up with the estimates that we did.

Speaker #3: So we feel good about going into this coming year.

Speaker #2: Yeah. Thank you. Other question is a little more about view of fiscal year 27. And on both ingredients and the tobacco side in particular, flu-cured and burly.

Speaker #2: So on the tobacco side, it's very early in the season for us. Markets are really just starting in Brazil. We are buying in Africa and our footprint buying has started recently.

Speaker #2: The oversupply which carries over from the transition this past fiscal year 26 from undersupply to balanced oversupply all at one time. Based on really large crops, feeds into this year where we also see large crops really across the world, flu-cured and burly.

Speaker #2: Even though it's early days, we have a lot of experience with our strong local teams in managing crops in any type of market cycle, including oversupply.

Speaker #2: The key for us is our geographic footprint where we can mitigate risks from one origin to another. Based on current conditions, our really sort of broad portfolio of customers that require all the styles flu-cured and burly and all the origins where we are and we're all we're in all the strategic origins.

Speaker #2: And maybe most importantly, a lot of deep experience in knowing how to buy and how to buy the right grades at the right price.

Speaker #2: And when we look at the undersupply years, there were places in the undersupply years where we were really forced and the market was forced to pay really high prices for practically all grades because it was such an undersupply.

Speaker #2: And oversupply, we have more flexibility. We have access to the tobacco we need. The larger crops give us also some additional benefits like third-party processing.

Speaker #2: Because of larger crops being handled by others, and we could be more I'd say more intentional, more strategic in more efficient in how we buy.

Speaker #1: It was such an undersupply. And with oversupply, we have more flexibility. We have access to the tobacco we need. The larger crops give us also some additional benefits, like third-party processing.

Speaker #2: So we know we're buying the right grades at the right prices. And then we can move them and try to protect margins with oversupply and with customers who have built up durations over the past few years with their large purchases.

Speaker #1: Because of larger crops being handled by others, and we could be more—I'd say more intentional, more strategic in more efficient in how we buy.

Speaker #2: It's very important that we're buying correctly. But we're also keeping in close contact with our customers so we know their demands, they know their needs, and we can plan accordingly.

Speaker #1: So we know we're buying the right grades at the right prices. Then we can move them and try to protect margins, even with oversupply and with customers who have built up durations over the past few years through their large purchases.

Speaker #2: And that will continue throughout the year. But so far, that's been going well. And we are encouraged where we are despite lots of market dynamics.

Speaker #1: It's very important that we're buying correctly, but we're also keeping in close contact with our customers so we know their demands, they know their needs, and we can plan accordingly.

Speaker #2: And it's early. So we'll continue that good work. But on the tobacco side, we feel good. We are experienced and we're entering it with the right strategies on the ingredient side.

Speaker #1: And that will continue throughout the year. So far, that's been going well, and we are encouraged by where we are, despite lots of market dynamics.

Speaker #2: Also encouraged we've very happy with the strategy of ingredients. And with shanks as an important part of that is Steve had mentioned. We see inflationary pressure in some of the other market headwinds persisting into this year.

Speaker #1: And it's early, so we'll continue that good work. But on the tobacco side, we feel good. We are experienced, and we're entering it with the right strategies.

Speaker #2: So we will continue to navigate those and I think for things example like tariffs, I think we had a good job of navigating a lot of the direct impacts of tariffs this past year.

Speaker #1: On the ingredient side, also encouraged. We're very happy with the strategy of ingredients. And with shanks as an important part of that, as Steve had mentioned, we see inflationary pressure and some of the other market headwinds persisting into this year.

Speaker #2: To minimize the costs that are going into our inventory. And taking advantage of opportunities we had where maybe domestic sourcing gave us opportunities versus others who are sourcing overseas and paying those higher tariffs.

Speaker #1: So, we will continue to navigate those, and I think for things, for example, like tariffs, I think we did a good job of navigating a lot of the direct impacts of tariffs this past year, to minimize the costs that are going into our inventory.

Speaker #2: With maybe more normalized tariffs this year and it'll also be fluid with tariffs. But if tariffs remain lower this year, or even go away, I am optimistic that that will reduce some inflationary pressure that our customers feel with their own sales and products.

Speaker #1: And taking advantage of opportunities we had, where maybe domestic sourcing gave us opportunities versus others who are sourcing overseas and paying those higher tariffs.

Speaker #2: And certainly on the tariff side, impacts on their business from tariffs that are more direct to them. But that will give us opportunities to increase the volumes we would otherwise have sold to those customers this past year with those headwinds.

Speaker #1: With maybe more normalized tariffs this year, and it'll also be fluid with tariffs. But if tariffs remain lower this year, or even go away, I am optimistic that that will reduce some inflationary pressure that our customers feel with their own sales and products.

Speaker #2: And with the increased volumes, focus on increased profitability and cost absorption. So I'm happy with where we are, happy with our strategy. I'm really excited about what we're doing with Universal Ingredients and where it can go.

Speaker #1: And certainly on the tariff side, impacts on their business from tariffs that are more direct to them. But that will give us opportunities to increase the volumes we would otherwise have sold to those customers this past year with those headwinds.

Speaker #2: And we're putting in the hard work. And we're absolutely committed to growing our ingredients business. In particular in shanks, executing these initiatives so that we're operating as efficiently and as profitably as we can as we can operate this year.

Speaker #1: And with the increased volumes, we're focused on increased profitability and cost absorption. So I'm happy with where we are, happy with our strategy. I'm really excited about what we're doing with Universal Ingredients and where it can go.

Wush Ma: Good morning, and thank you for joining us. With me today are Preston Wigner, our Chairman, President, and CEO, and Steve Diel, our recently appointed Chief Financial Officer. During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. These are representative as of today only. Actual results, performance, or achievements could differ materially from the anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. We assume no obligation to update any forward-looking statements except as required by law. For information on some of the risks and uncertainties related to these forward-looking statements, please refer to the reports we file with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release.

Speaker #1: And we're putting in the hard work, and we're absolutely committed to growing our ingredients business—in particular, in shanks—executing these initiatives so that we're operating as efficiently and as profitably as we can operate this year.

Speaker #3: Thanks, guys. I really appreciate it.

Speaker #2: Sure.

Speaker #4: And again, if you have a question, please press star one on your telephone keypad to raise your hand and join the queue. We have a follow-up question from the line of Daniel Herman of Sadoti.

Speaker #2: Thanks, guys. I really appreciate it.

Speaker #1: Sure.

Speaker #3: And again, if you have a question, please press star one on your telephone keypad to raise your hand and join the queue. We have a follow-up question from the line of Daniel Harriman of Sidoti.

Speaker #4: Please go ahead.

Speaker #3: Hey, guys. I'm back. I guess I'll follow up with one more if there are no other questions. Sorry about that.

Speaker #2: Yeah, no problem.

Speaker #3: Steve, kind of like I mentioned, congratulations on the role and I understand that you're not at all new to Universal and you're not new to financial management.

Speaker #3: Please go ahead.

Speaker #3: Or really corporate development. But can you just kind of remind us of the company's capital allocation priorities and how you see the balance breaking down in the coming year, maybe between the dividend, leverage, and then continued investment in ingredients?

Speaker #2: Hey, guys. I'm back. I guess I'll follow up with one more, if there are no other questions. Sorry about that.

Wush Ma: Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments today may also include certain non-GAAP financial measures. For details regarding these measures, including the reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through August 29, 2026, and by telephone through June 12, 2026. This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call. I would now like to turn the call over to Preston.

Speaker #1: Yeah, no problem.

Speaker #2: Steve, as I mentioned, congratulations on the role. I understand that you're not at all new to Universal, and you're not new to financial management.

Speaker #5: Sure. Thank you, Daniel. I really appreciate it. It's great to speak with you today. Yeah. So our capital allocation strategy, which we announced right around the time I joined the company in 2018, it really has four pillars.

Speaker #2: Or really, corporate development. But can you just kind of remind us of the company’s capital allocation priorities, and how you see the balance breaking down in the coming year—maybe between the dividend, leverage, and then continued investment in ingredients?

Speaker #5: Strengthening and investing for growth in our leaf tobacco business. Increasing our strong dividend. And exploring growth opportunities for our plant-based ingredients business. And then finally, returning excess capital through share repurchases.

Speaker #1: Sure. Thank you, Daniel. I really appreciate it. It's great to speak with you today. Yeah. So our capital allocation strategy, which we announced right around the time I joined the company in 2018, really has four pillars.

Speaker #5: So that strategy hasn't changed. It's still consistent. As far as the dividend goes, we are a strong cash-generating company. And our dividend payout ratio on our reported net income this year is over 100%.

Speaker #1: Strengthening and investing for growth in our leaf tobacco business, increasing our strong dividend, and exploring growth opportunities for our plant-based ingredients business. And then, finally, returning excess capital through share repurchases.

Speaker #5: But if you look back kind of over the last five years on an adjusted net income basis, it's been below 75%. So we feel really good about our positioning and our ability to continue to fund the dividend going forward.

Speaker #1: So, that strategy hasn't changed; it's still consistent. As far as the dividend goes, we are a strong cash-generating company, and our dividend payout ratio on our reported net income this year is over 100%.

Speaker #5: That said, our board certainly reviews and management with the board reviews our capital allocation strategy regularly. And could make decisions based on new information that comes along.

Speaker #1: But if you look back, kind of over the last five years, on an adjusted net income basis, it’s been below 75%. So we feel really good about our positioning and our ability to continue to fund the dividend going forward.

Speaker #5: But as we sit here now, we see no change. And from the ingredients, kind of M&A strategy standpoint, no change there. We have not acquired any businesses since shanks in 2021.

Speaker #1: That said, our board certainly reviews—and management with the board reviews—our capital allocation strategy regularly, and could make decisions based on new information that comes along.

Speaker #5: We've invested in organic growth. We are now in kind of the phase of realizing the returns on that investment and earning the right for future growth.

Speaker #1: But as we sit here now, we see no change, and from the ingredients kind of M&A strategy standpoint, no change there. We have not acquired any businesses since Shanks in 2021.

Speaker #5: And so as we kind of pull through this current expansion at shanks and get new volumes through that facility to really leverage the cost structure that we have in place and the R&D and commercial people that we put in place, that's our focus now.

Speaker #1: We've invested in organic growth. We are now in the phase of realizing the returns on that investment and earning the right for future growth.

Speaker #5: And once we achieve that, we will be back in and investing in new opportunities for growth.

Speaker #1: And so, as we kind of pull through this current expansion at Shanks and get new volumes through that facility to really leverage the cost structure that we have in place, and the R&D and commercial people that we put in place, that's our focus now.

Speaker #2: Yeah, Daniel, if I can add on to that, in particular, the top of our priorities, which is investing in our tobacco business. We've got such a strong tobacco business.

Speaker #2: And even this year, if you take away the write-downs, primarily the dark air cured non-wrapper write-downs, the rest of the business performed really well.

Speaker #1: And once we achieve that, we will be back in and investing in new opportunities for growth.

Speaker #3: Daniel, if I can add on to that—in particular, at the top of our priorities is investing in our tobacco business. We've got such a strong tobacco business.

Preston Wigner: Supporting both these priorities is our continued advancements in sustainability, which remains an increasingly important expectation across our global value chain. During the fourth fiscal quarter, Universal advanced from an A- to an A rating in the Carbon Disclosure Project Supplier Engagement Assessment. In addition, we were recognized as a CDP supplier engagement leader and named to CDP's Supplier Engagement A List, underscoring the strengths of our governance, emissions management, and collaboration with suppliers. Strong financial discipline and leadership are critical to executing across both our operating segments. In February, we announced the appointment of Steve Diel, our Chief Financial Officer, effective 1 April. Steve has been with Universal since 2018 and has more than 25 years of experience across finance, corporate development, and business strategy. He is a trusted Universal leader with significant financial expertise, a deep understanding of our operations, and a proven record of strategic execution.

Speaker #2: And our tobacco business is so strong. We see lots of opportunities in terms of market share growth, volume growth, other opportunities for services that we see lots of opportunities to continue to invest in tobacco at the same time.

Speaker #3: And even this year, if you take away the write-downs—primarily the dark air-cured non-wrapper write-downs—the rest of the business performed really well.

Speaker #2: We're absolutely committed to investing in what we need to grow. Ingredients as well. So we've our capital allocation strategy hasn't changed. I don't see it changing.

Speaker #3: And our tobacco business is so strong. We see lots of opportunities in terms of market share growth, volume growth, and other opportunities for services. We see lots of opportunities to continue to invest.

Speaker #2: Because I think it's the right strategy for us to grow the company as a whole. But both sides really have good opportunities going forward.

Speaker #3: In tobacco, at the same time, we're absolutely committed to investing in what we need to grow ingredients as well. So, our capital allocation strategy hasn't changed.

Speaker #2: I'm really happy with it. With the priorities that we have in continuing to invest in tobacco.

Speaker #3: Steve, seeing that you came to Universal at the beginning of the rollout with ingredients and where you are now, can you and you talked about this a little bit in the prepared remarks, but could you just kind of talk us through what that experience has shown you and prepared you and how you think you will use that in the CFO role?

Speaker #3: I don't see it changing, because I think it's the right strategy for us to grow the company as a whole. But both sides really have good opportunities going forward.

Speaker #3: I'm really happy with it, with the priorities that we have, and continuing to invest in tobacco.

Speaker #2: Steve, seeing that you came to Universal at the beginning of the rollout with ingredients and where you are now, and you talked about this a little bit in the prepared remarks, but could you just kind of talk us through what that experience has shown you and prepared you, and how you think you will use that in the CFO role?

Speaker #3: And then maybe how that how you incorporate that view into the long-term value proposition of the ingredients platform that some other people like us may not have a view on.

Preston Wigner: With that, I'll now turn the call over to Steve to review our financial results in more detail.

Steve Diel: Thank you, Preston. Good morning, everyone. As Preston mentioned, during fiscal year 2026, our flue-cured and burley tobacco portfolio performed well, but results were significantly impacted by two areas of our businesses, which I'll discuss during a review of consolidated and segment results. For Q4, consolidated revenue was $715 million, up 2% from the same quarter of last year. For the full year, consolidated revenue was $2.9 billion, down slightly from the previous exceptional fiscal year. For the quarter, operating loss was $15 million as compared to an operating income of $43 million for the same quarter of last year. For the full year, operating income was $169 million, down $64 million as compared to fiscal year 2025. Lower operating income was mainly driven by two areas.

Speaker #5: Yes. So I mean, coming in to the role, as a public company, CFO, my number one priority is to maximize long-term shareholder value by driving profitable growth, securing strict regulatory compliance, and optimizing capital allocation.

Speaker #2: And then maybe how you incorporate that view into the long-term value proposition of the ingredients platform, that some other people like us may not have a view on.

Speaker #1: Yes. So, I mean, coming into the role as a public company CFO, my number one priority is to maximize long-term shareholder value by driving profitable growth, securing strict regulatory compliance, and optimizing capital allocation.

Speaker #5: So I think achieving that falls into kind of four main categories. All that are underpinned by human capital management. First is on financial stewardship.

Speaker #5: So I must continue to build on the strong culture that we have here at Universal around compliance, financial reporting, tax, audit, all the nuts and bolts of finance.

Speaker #1: So, I think achieving that falls into four main categories, all of which are underpinned by human capital management. First is financial stewardship.

Speaker #5: Second is kind of taking that to the next level around financial excellence. So this is about continuous improvement. All the areas like budgeting, forecasting, capital structure optimization, tax strategies, cost management, capital decision-making, and in order to do all of this, we just need to make sure I need to make sure that we have the right people and the right systems and tools in place to achieve that.

Speaker #1: So I must continue to build on the strong culture that we have here at Universal around compliance, financial reporting, tax, audit—all the nuts and bolts of finance.

Steve Diel: First, the Shank's business within our ingredient segment experienced lower profitability and recorded a $41 million non-cash goodwill impairment, and I'll address both of these items in more detail later. Second, higher inventory write-downs in our non-wrapper dark air-cured tobacco business, combined with weaker performance. For the Q4, net loss attributable to Universal was $43 million as compared to net income of $9 million for the same quarter of last year. For the full year, net income was $33 million, down from $95 million for fiscal year 2025. Lower net income was again mainly the result of the non-cash charges I just mentioned, as well as weaker performance at Shank's and our dark air-cured tobacco business. In terms of segment results, tobacco segment revenue was $632 million for the Q4 of fiscal 2026, up 3% versus the same quarter last year.

Speaker #1: Second is kind of taking that to the next level around financial excellence. So, this is about continuous improvement. All the areas, like budgeting, forecasting, capital structure optimization, tax strategies, cost management, capital decision-making—and in order to do all of this, we just need to make sure, I need to make sure, that we have the right people and the right systems and tools in place to achieve that.

Speaker #5: Third is around supporting Preston and the board on executing the strategy that we decided upon. And maximizing in the four areas that I just talked about, maximizing and optimizing tobacco, growing ingredients, strengthening for the future, and committing to the dividend.

Speaker #5: And so this includes not only ensuring that the strategy and vision flow through the finance organization, but partnering with the other resource groups and operations around the world to make that happen.

Speaker #1: Third is around supporting Preston and the Board on executing the strategy that we've decided upon, and maximizing in the four areas that I just talked about: maximizing and optimizing tobacco, growing ingredients, strengthening for the future, and committing to the dividend.

Speaker #5: And that kind of brings it to the fourth and final category of telling the story around the strategy. So Universal, I believe, is uniquely positioned in the agri-product space as a market-leading leaf tobacco processor.

Speaker #1: And so this includes not only ensuring that the strategy and vision flow through the finance organization, but also partnering with the other resource groups and operations around the world to make that happen.

Speaker #5: We have over 100 years of proven performance combined with developing an ingredients business positioned for long-term growth and value creation. And I'm excited to engage with potential investors and other external shareholders to tell that story.

Speaker #1: And that kind of brings us to the fourth and final category of telling the story around the strategy. So, Universal, I believe, is uniquely positioned in the agri-product space as a market-leading leaf tobacco processor.

Steve Diel: For the full year, revenue was $2.6 billion, down slightly as compared to fiscal year 2025. Segment operating income was $27 million for Q4 of fiscal year 2026, as compared to $46 million for the same quarter of last year. For the full year, segment operating income was $212 million as compared to $240 million for fiscal year 2025. Lower segment operating income was mainly the result of lower profitability and higher inventory write-downs of non-wrapper dark air-cured tobaccos. Specifically, for fiscal year 2026, total inventory write-downs for our tobacco operations segment were $43 million as compared to $19 million during fiscal year 2025, and an average of $14 million across the five years from fiscal year 2021 through 2025. Now turning to the ingredients operating segment.

Speaker #1: We have over 100 years of proven performance, combined with a developing ingredients business positioned for long-term growth and value creation. And I'm excited to engage with potential investors and other external shareholders to tell that story.

Speaker #3: With no further questions, that concludes our Q&A session. I will now turn the conference back over to Preston Wigner for closing remarks.

Speaker #2: Thank you, JL. Thank you for joining our call today. We look forward to speaking with you during our fiscal year 2027 first quarter call in the coming months.

Speaker #3: With no further questions, that concludes our Q&A session. I will now turn the conference back over to Preston Wigner for closing remarks.

Speaker #4: Thank you, JL. Thank you for joining our call today. We look forward to speaking with you during our fiscal year 2027 first quarter call in the coming months.

Steve Diel: Segment revenue was $83 million for Q4 of fiscal year 2026, as compared to $90 million for the same quarter of last year. For the full year, revenue was $348 million, up 3% as compared to fiscal year 2025. Segment operating income was $2 million for Q4 of fiscal year 2026, as compared to $4 million for the same quarter of last year. For the full year, segment operating income was $3 million, as compared to $12 million for fiscal year 2025. Despite significant industry headwinds, our FruitSmart and Silva businesses performed in line with expectations. Lower operating income for the segment was mainly the result of Shank's performance and was driven by higher fixed and operating costs related to the recent growth investments as we build our new product pipeline. Regarding liquidity and capital structure.

Steve Diel: As of March 31, 2026, our net debt was $845 million, compared to $817 million at the same point last year. The increase was mainly the result of higher working capital usage associated with purchasing and selling a significantly larger tobacco crop. Our liquidity availability—which includes cash and availability under our committed and uncommitted credit lines—totaled over $1.2 billion. I'll briefly shift to an introduction as Universal's new CFO. As Preston mentioned, I joined Universal in 2018, coinciding with the company's rollout of the enhanced capital allocation strategy. Since then, I've been closely involved in developing and executing that strategy, including the formation of Universal Ingredients platform through three acquisitions and the continued investment in its commercial and operational capabilities.

Steve Diel: At the same time, I have led our financial planning and analysis function, supporting the company through a full supply-demand cycle in leaf tobacco, the complexities of COVID, and the evolving macroeconomic environment that followed. Because of these experiences, I have a clear perspective on both the durability of our core business and the importance of financial discipline as we invest in growth. I am greatly honored to take on the role of Chief Financial Officer. Universal combines a resilient, market-leading leaf tobacco business with an adjacent ingredients platform that has a strong core product and customer base, expanding capabilities, and a long runway for growth. My priority is to deliver dependable free cash flow and balance sheet strength through disciplined capital allocation. This approach underpins our commitment to durable shareholder value across agricultural and economic cycles.

Steve Diel: Now, before I hand the call back to Preston, I would like to address the non-cash goodwill impairment related to Shank's. When we acquired Shank's in October 2021, we recorded approximately $41 million of goodwill. In accordance with U.S. GAAP, this goodwill was assessed periodically, and no indications of impairment were identified prior to fiscal year 2026. Since acquiring the business, we have invested in growth, both in the form of capital expenditures to build new production capabilities and in commercial and R&D human capital. During fiscal 2026, market conditions pressured revenues and profitability for both core products and new product development. As a relatively new player in this space, converting customer interest into sustained revenue and margin growth can be a lengthy process. As of March 31, 2026, we were behind in executing our commercial strategy amidst the market headwinds.

Steve Diel: In response, management, together with a third-party consultant, conducted evaluation analysis and concluded that a non-cash goodwill impairment was appropriate. To improve execution, we have recently implemented a leadership-level organizational realignment at Shank’s. The focus is on strengthening commercial execution, improving facility utili—