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May 22, 2008 at 12:00 AM EDT

Universal Corporation Announces Annual Results

RICHMOND, Va., May 22 /PRNewswire-FirstCall/ -- George C. Freeman, III, President and Chief Executive Officer of Universal Corporation (NYSE: UVV), announced strong results for the fiscal year that ended on March 31, 2008, despite a decline in fourth quarter results that was due in large part to earlier shipments this year that benefited the first three fiscal quarters. Income from continuing operations and net income for the fourth quarter of fiscal year 2008, which ended on March 31, 2008, was $9.9 million, or $0.23 per diluted share. Last year's results from continuing operations for the same quarter were $21.1 million, or $0.65 per diluted share. Results were significantly lower than last year's fourth quarter because of timing differences, as several regions completed their annual shipments earlier than last year. Fourth quarter earnings for fiscal year 2008 included about $9.6 million ($0.21 per diluted share) in restructuring costs, that included employee separation expense and pension curtailment losses on certain small defined benefit plans. Last year's fourth quarter results included impairment charges of about $15.1 million ($0.17 per diluted share), primarily related to the Company's decision to end its direct involvement in its African flue-cured growing projects. Revenues declined by $37 million to $467 million principally due to the change in shipment timing. Net income for last year's quarter, which included discontinued operations, totaled $19.5 million, or $0.59 per diluted share.

For the fiscal year ended March 31, 2008, results from continuing operations showed a marked improvement over the prior year, reflecting better results in most reportable segments, reduced net interest cost, and a lower effective tax rate. Income from continuing operations was $119.3 million, or $3.71 per diluted share, including the effect of $12.9 million ($0.25 per diluted share) in restructuring costs recognized throughout the fiscal year. Those charges included employee separation costs related to rationalizing operations in or related to Africa and Canada, as well as the pension curtailment losses recognized in the fourth quarter. For fiscal year 2007, the Company reported income from continuing operations of $80.4 million, or $2.52 per diluted share, including restructuring and impairment charges of $31 million ($0.93 per diluted share), primarily related to the value of Company-managed farming operations in Africa and other long-lived assets. Revenues for fiscal year 2008 increased by 6%, to $2.1 billion. Net income for the fiscal year, which includes results from discontinued operations, was $119.2 million, or $3.70 per diluted share, compared to $44.4 million, or $1.13 per diluted share, last year.

Mr. Freeman noted, "We are very pleased with our performance in fiscal year 2008, despite the lower fourth quarter results. We had anticipated many of the factors that affected the quarter. As we noted throughout the year, our previous quarters reflected income from earlier shipments. When we entered fiscal year 2008, we knew that we would be facing headwinds from smaller African burley crops and the reduction of the crop size in Canada. In addition, we recognized that comparisons would be negatively affected by the one-time sales of old crop burley in the United States and a Brazilian tax recovery in fiscal year 2007. More importantly, we also knew that it would take time and hard work to restore our profitability to former levels in each region. I am very encouraged at the progress we have made. We have weathered the smaller burley crops in Malawi and Mozambique, and we have continued to reduce our net debt levels and strengthen our balance sheet, as our efforts to improve cash flow have been successful.

"There is plenty of hard work in front of us. In the coming year, flue-cured crops should be adequate to meet demand, but available inventory has reached historic lows. We expect burley crops to be larger, but overall supply is still below demand with dealer uncommitted inventories at extremely low levels. Inventories in our African operations are currently very low as well, so the carryover shipments that we saw in the early part of fiscal year 2008 will not take place in fiscal year 2009. Farmer leaf production costs, and therefore the prices we pay for green tobacco, are increasing with the price of most other agricultural products. So we will continue to face higher costs in most of the major producing areas of the world. The weak U.S. dollar continues to exacerbate this trend in many areas. Although a variety of external and macro-economic factors are currently challenging us, we will work to ensure that our customers get the tobacco that they need and to deliver strong results to our shareholders.

"I would also like to salute Allen King's many years of contribution to Universal's growth and prosperity. During his tenure at the head of the Company, we experienced great change through the consolidation of our competition and our customers, and our refocus on our core tobacco business. He led us through these changes, and as our annual results show, we are a stronger company today. We have been enriched by his leadership over the years and wish him well in retirement."

Results for Reportable Operating Segments

Flue-cured and burley operations earned $11.7 million in the fourth fiscal quarter, compared to last year's performance of $38.4 million. Operating income for the North America segment improved by $3 million, or 22%, despite the absence of sales of old crop burley that benefited the prior year. The improvement reflected higher volumes shipped and processed during the period. These factors also caused a 20% increase in North American revenues over last year, to $114 million. The Other Regions segment reported a loss of $4 million for the quarter, primarily due to lower volumes. Shipments of the smaller African crops were completed earlier in fiscal year 2008 than last year as were shipments of South American, European, and Asian tobaccos. In addition, South American operations realized a $6 million gain on the sale of surplus timberland and an $8 million reduction of a valuation allowance for a Brazilian VAT tax. Those two benefits more than compensated for the $12 million incremental effect of an additional bad debt provision for farmer receivables there. Although African operations benefited from lower charges for farmer bad debts and inventory valuation, fourth quarter volumes were substantially lower as most of the shipments of this year's smaller crops from Mozambique and Malawi were completed earlier in the year. The Company also accrued an $8 million charge for an obligation established by recent Malawi court rulings that require employers to provide severance benefits in addition to company-sponsored pension benefits in employment termination situations. Revenues for the Other Regions segment were $239 million, which represented a decrease of $58 million related primarily to shipment timing.

For the year ended March 31, 2008, flue-cured and burley operations earned $178 million, up $6 million from last year. Results of the North America segment declined by $6 million, reflecting the absence of last year's sales of old crop burley and gains on asset sales. The effect of those one-time items was partially offset by higher volumes and margins from normal operations in fiscal year 2008. North America revenues decreased by $13 million, or 4%, primarily due to last year's U.S. old crop burley sales. Normal operating volumes in the United States increased over last year. The results of the Other Regions segment increased by $12 million, primarily due to increased volumes shipped from Europe and Asia, as well as the recognition of previously deferred income on volumes supplied to the Special Services group. However, in Africa the smaller crops in Malawi and Mozambique not only reduced volumes but also increased purchasing and processing unit costs in that region, outweighing the benefits of lower charges for farmer bad debts and inventory valuation this year. The $8 million charge for statutory severance benefits in Malawi also reduced results in this segment. Finally, South American results continued to be strong as currency transaction and remeasurement gains mitigated the higher green tobacco and operating costs caused by the weak U.S. dollar. During the year, the gain on the sale of timberland and the benefit from the reduction of the valuation allowance against recoverable Brazilian VAT taxes provided positive comparisons in the region. However, $8 million in additional bad debt provisions against farmer receivables this year and the absence of last year's $8.5 million benefit from the resolution of a revenue tax case more than offset those items. Total provisions for farmer bad debts for Africa and South America last year were $32 million and inventory valuation adjustments were $13 million. Current year amounts were $22 million and $3 million, respectively. Revenues of the Other Regions segment for the year increased by 7%, primarily due to higher sales prices in South America and Europe, where the Company experienced increased farmer prices and strong local currencies, and higher volumes in Europe and Asia.

The Other Tobacco Operations segment also showed substantial improvement for the fiscal year, but declined in the fourth quarter. The fiscal year improvement was due to the acceleration of shipments by the Special Services group to wind down most of its business that is being absorbed by regional operations. Dark tobacco operations were down only slightly in the quarter, but their comparison for the year was affected by higher volumes last year due to shipment timing and very strong Indonesian wrapper sales. Results for the oriental tobacco joint venture declined for both the quarter and the year, primarily due to significant currency remeasurement losses related to assets denominated in Turkish lira and U.S. dollars. The venture's functional currency is the euro, and both currencies weakened against the euro this year. Revenues for this segment increased by $2.0 million in the quarter and $59 million in the fiscal year as the Special Services group shipments occurred in the second and third quarters.

Other Items

Interest income for the year increased by $6.3 million to $17 million on larger average balances invested, which more than offset the effect of falling interest rates. Interest expense fell by nearly $12 million to $42 million due to the full year impact of debt reduction completed in fiscal year 2007 and lower interest rates.

The consolidated effective income tax rates for continuing operations for the three and twelve months ended March 31, 2008, were approximately 12% and 35%, respectively. The rate for the quarter is substantially lower than the 35% U.S. marginal corporate tax rate due primarily to a change in the Company's U.S. tax position due to higher U.S. income and a lower effective tax rate in Brazil, principally due to a prolonged period of strengthening of the local currency combined with sales of old crop inventories. Last year's rates were much higher than the statutory rate at 54% and 45% for the quarter and fiscal year, respectively. The higher rate was primarily due to excess foreign taxes in countries where the tax rate exceeds the U.S. tax rate, low tax benefits provided on a foreign subsidiary with an operating loss, high state income taxes due to improved earnings in the United States, and a limited income tax benefit provided on losses in Zambia.

The loss from discontinued operations in the fiscal year 2008 was inconsequential. For the fiscal year ended March 31, 2007, the loss from discontinued operations was $36 million, or $1.39 per diluted share. Results from discontinued operations for that year reflected the operating results and estimated effects of selling the Company's non-tobacco businesses, the largest part of which occurred in the second fiscal quarter of fiscal year 2007. During that quarter, Universal completed the sale of the non-tobacco businesses managed by its wholly owned subsidiary, Deli Universal Inc. The Company's financial statements now report the results and financial position of those businesses as discontinued operations for all periods.

Additional information

This information includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers that any statements contained herein regarding earnings and expectations for its performance are forward-looking statements based upon management's current knowledge and assumptions about future events, including anticipated levels of demand for and supply of its products and services; costs incurred in providing these products and services; timing of shipments to customers; changes in market structure; and general economic, political, market, and weather conditions. Actual results, therefore, could vary from those expected. A further list and description of these risks, uncertainties and other factors can be found in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 and in other documents the Company files with the Securities and Exchange Commission. This information should be read in conjunction with the Annual Report on Form 10-K for the year ended March 31, 2007.

At 5:00 p.m. (Eastern Time) today, the Company will host a conference call to discuss these results. Those wishing to listen to the call may do so by visiting www.universalcorp.com at that time. A replay of the webcast will be available at that site for three months. A taped replay of the call will also be available until August 4, 2008 by dialing (800) 642-1687. The confirmation number to access the replay is 48653749.

Headquartered in Richmond, Virginia, Universal Corporation is one of the world's leading tobacco merchants and processors and conducts business in more than 35 countries. Its revenues from continuing operations for the fiscal year ended March 31, 2008, were $2.1 billion. For more information on Universal Corporation, visit its web site at http://www.universalcorp.com.

    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME
    (In thousands of dollars, except per share data)

                              Three Months Ended         Fiscal Year Ended
                                   March 31,                 March 31,
                               2008        2007          2008         2007
                                  (Unaudited)               (Unaudited)

    Sales and other
     operating revenues      $467,181    $504,485    $2,145,822   $2,007,272

    Costs and expenses
      Cost of goods sold     390,972      416,229     1,715,724    1,563,522
      Selling, general
       and administrative
       expenses               60,125       44,632       225,670      249,269
      Restructuring and
       impairment costs        9,611       15,082        12,915       30,890

    Operating income           6,473       28,542       191,513      163,591
      Equity in pretax
       earnings of
       unconsolidated
       affiliates              6,269        8,933        13,500       14,235
      Interest income          3,861        3,657        17,178       10,845
      Interest expense         9,634       11,833        41,908       53,794

    Income before income
     taxes and other items     6,969       29,299       180,283      134,877
      Income taxes               862       15,923        63,799       61,126
      Minority interests,
       net of income taxes    (3,791)      (7,745)       (2,817)      (6,660)

    Income from
     continuing operations     9,898       21,121       119,301       80,411

    Loss from discontinued
     operations, net of
     income taxes                  -       (1,605)         (145)     (36,059)

    Net income                $9,898      $19,516      $119,156      $44,352

    Dividends on
     convertible perpetual
     preferred stock          (3,713)      (3,712)      (14,850)     (14,685)

    Earnings available
     to common shareholders   $6,185      $15,804      $104,306      $29,667

    Earnings (loss) per
     common share:
      Basic:
        From continuing
         operations            $0.23        $0.66         $3.83        $2.53
        From discontinued
         operations                -        (0.06)        (0.01)       (1.39)
        Net income             $0.23        $0.60         $3.82        $1.14

      Diluted:
        From continuing
         operations            $0.23        $0.65         $3.71        $2.52
        From discontinued
         operations                -        (0.06)        (0.01)       (1.39)
        Net income             $0.23        $0.59         $3.70        $1.13

    See accompanying notes.



    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (In thousands of dollars)

                                                       March 31,     March 31,
                                                         2008           2007
                                                     (Unaudited)
            ASSETS

    Current assets
      Cash and cash equivalents                       $186,070       $358,236
      Short-term investments                            58,889              -
      Accounts receivable, net                         231,107        261,106
      Advances to suppliers, net                       149,376        113,396
      Accounts receivable - unconsolidated
       affiliates                                       43,718         37,290
      Inventories - at lower of cost or market:
        Tobacco                                        602,945        595,901
        Other                                           42,562         40,577
      Prepaid income taxes                              17,696          8,760
      Deferred income taxes                             22,737         25,182
      Other current assets                              61,960         62,480
      Current assets of discontinued operations              -         42,437
        Total current assets                         1,417,060      1,545,365

    Property, plant and equipment
      Land                                              16,460         16,640
      Buildings                                        254,737        241,410
      Machinery and equipment                          519,695        512,586
                                                       790,892        770,636
        Less accumulated depreciation                 (456,059)      (410,478)
                                                       334,833        360,158

    Other assets
      Goodwill and other intangibles                   106,647        104,284
      Investments in unconsolidated affiliates         116,185        104,316
      Deferred income taxes                             49,632         81,003
      Other noncurrent assets                          109,755        133,696
                                                       382,219        423,299

        Total assets                                $2,134,112     $2,328,822

    See accompanying notes.



    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (In thousands of dollars)

                                                      March 31,      March 31,
                                                        2008           2007
                                                    (Unaudited)
            LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Notes payable and overdrafts                    $126,229       $131,159
      Accounts payable and accrued expenses            210,354        220,181
      Accounts payable-unconsolidated affiliates        10,343            644
      Customer advances and deposits                    21,030        133,608
      Accrued compensation                              25,484         18,519
      Income taxes payable                               8,886         11,549
      Current portion of long-term obligations               -        164,000
      Current liabilities of discontinued
       operations                                            -         13,314
        Total current liabilities                      402,326        692,974

    Long-term obligations                              402,942        398,952
    Pensions and other postretirement benefits          88,278        100,004
    Other long-term liabilities                         84,958         70,528
    Deferred income taxes                               36,795         29,809
        Total liabilities                            1,015,299      1,292,267

    Minority interests                                   3,182          5,822

    Shareholders' equity
      Series B 6.75% Convertible Perpetual
       Preferred Stock, no par value, 5,000,000
       shares authorized, 219,999 shares issued
       and outstanding (220,000 at
       March 31, 2007)                                 213,023        213,024
      Common stock, no par value, 100,000,000
       shares authorized, 27,162,150 shares
       issued and outstanding (25,948,599 at
       March 31, 2007)                                 206,436        176,453
    Retained earnings                                  711,655        682,232
    Accumulated other comprehensive loss               (15,483)       (40,976)
        Total shareholders' equity                   1,115,631      1,030,733

        Total liabilities and shareholders'
         equity                                     $2,134,112     $2,328,822

    See accompanying notes.



    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands of dollars)

                                                        Fiscal Year Ended
                                                            March 31,
                                                       2008           2007
                                                           (Unaudited)
    CASH FLOWS FROM OPERATING ACTIVITIES OF
     CONTINUING OPERATIONS:
      Net income                                    $119,156        $44,352
      Adjustments to reconcile net income to
       net cash provided by operating
       activities of continuing operations:
        Net loss (income) from discontinued
         operations                                      145         36,059
        Depreciation                                  41,383         46,423
        Amortization                                   1,857          1,882
        Provisions for losses on advances
         to suppliers                                 22,323         31,822
        Restructuring and impairment costs            12,915         30,890
        Other, net                                     7,593         (1,546)
        Changes in operating assets and
         liabilities, net                           (114,800)        56,052
          Net cash provided by operating
           activities of continuing operations        90,572        245,934

    CASH FLOWS FROM INVESTING ACTIVITIES OF
     CONTINUING OPERATIONS:
      Purchase of property, plant and equipment      (27,704)       (25,178)
      Purchase of short-term investments             (58,889)             -
      Proceeds from sale of businesses, less
       cash of businesses sold                        26,556        385,545
      Proceeds from sale of property, plant,
       and equipment and other                        23,206          7,302
      Other                                           12,846              -
          Net cash provided (used) by investing
           activities of continuing operations       (23,985)       367,669

    CASH FLOWS FROM FINANCING ACTIVITIES OF
     CONTINUING OPERATIONS:
      Repayment of short-term debt, net              (19,957)      (140,406)
      Repayment of long-term debt                   (164,000)      (208,530)
      Issuance of convertible perpetual
       preferred stock, net of issuance costs              -         19,478
      Issuance of common stock                        24,372         50,958
      Repurchase of common stock                     (16,700)             -
      Dividends paid on convertible
       perpetual preferred stock                     (14,850)       (14,685)
      Dividends paid on common stock                 (48,602)       (45,423)
      Other                                             (981)        (1,067)
          Net cash used by financing activities
           of continuing operations                 (240,718)      (339,675)

          Net cash provided by continuing
           operations                               (174,131)       273,928

    CASH FLOWS FROM DISCONTINUED OPERATIONS:
      Net cash provided by operating activities
       of discontinued operations                      6,495         50,477
      Net cash used by investing activities
       of discontinued operations                        (17)        (9,589)
      Net cash used by financing activities
       of discontinued operations                     (4,957)       (23,068)

        Net cash provided by discontinued
         operations                                    1,521         17,820

    Effect of exchange rate changes on cash              205             95
    Net increase (decrease) in cash and
     cash equivalents                               (172,405)       291,843
    Cash and cash equivalents of continuing
     operations at beginning of year                 358,236         62,486
    Cash and cash equivalents of discontinued
     operations at beginning of year                     239          4,146
    Less: Cash and cash equivalents of
     discontinued operations at end of year                -            239
    Cash and cash equivalents at end of year        $186,070       $358,236


    Significant non-cash items from investing activities of continuing
    operations for the year ended March 31, 2007, included the buyer's
    assumption of $153,560 of notes payable and overdrafts with the sale of
    businesses.

    See accompanying notes.



    NOTE 1.   BASIS OF PRESENTATION

Universal Corporation, with its subsidiaries ("Universal" or the "Company"), is one of the world's leading leaf tobacco merchants and processors. The Company previously had operations in lumber and building products and in agri-products. The lumber and building products businesses, along with a portion of the agri-products operations, were sold on September 1, 2006. In December 2006, the Company adopted a plan to sell the remaining agri-products operations. One of those agri-products businesses was sold in January 2007, another was sold in May 2007, and the assets of the remaining business were sold in October 2007. The lumber and building products operations and the agri-products operations are reported as discontinued operations for all periods in the accompanying financial statements.

Because of the seasonal nature of the Company's business, the results of operations for any fiscal quarter will not necessarily be indicative of results to be expected for other quarters or a full fiscal year. All adjustments necessary to state fairly the results for the period have been included and were of a normal recurring nature. Certain amounts in prior year statements have been reclassified to conform to the current year presentation. This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007. The Company expects to file its Annual Report on Form 10-K for the fiscal year ended March 31, 2008, on or before May 30, 2008.

NOTE 2. GUARANTEES AND OTHER CONTINGENT LIABILITIES

Guarantees of bank loans to growers for crop financing and construction of curing barns or other tobacco producing assets are industry practice in Brazil and support the farmers' production of tobacco there. At March 31, 2008, the Company's total exposure under guarantees issued by its operating subsidiary in Brazil for banking facilities of farmers in that country was approximately $218 million. About 70% of these guarantees expire within one year, and nearly all of the remainder expire within five years. The subsidiary withholds payments due to the farmers on delivery of tobacco and forwards those payments to the third-party banks. Failure of farmers to deliver sufficient quantities of tobacco to the subsidiary to cover their obligations to third-party banks could result in a liability for the subsidiary under the related guarantee; however, in that case, the subsidiary would have recourse against the farmers. The maximum potential amount of future payments that the Company's subsidiary could be required to make as of March 31, 2008, was the face amount, $218 million, plus any unpaid accrued interest ($203 million plus unpaid accrued interest as of March 31, 2007). The fair value liability recorded for the guarantees was approximately $13 million and $10 million at March 31, 2008 and 2007, respectively. In addition to these guarantees, the Company has other contingent liabilities totaling approximately $59 million, primarily related to a bank guarantee that bonds an appeal of a 2006 fine in the European Union.

Various subsidiaries of the Company are involved in litigation incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, management is vigorously defending the claims and does not currently expect that any of them will have a material adverse effect on the Company's financial position. However, should one or more of these matters be resolved in a manner adverse to management's current expectation, the effect on the Company's results of operations for a particular fiscal reporting period could be material.

NOTE 3. EARNINGS PER SHARE

The following table sets forth the computation of earnings per share for the three months and fiscal years ended March 31, 2008 and 2007.

                                    Three Months Ended      Fiscal Year Ended
                                          March 31,              March 31,
                                      2008       2007        2008       2007
    (In thousands, except per
     share data)

    Basic Earnings (Loss) Per Share
    Numerator for basic earnings
     (loss) per share
      From continuing operations:
      Income from continuing
       operations                    $9,898    $21,121    $119,301    $80,411
      Less: Dividends on
       convertible perpetual
       preferred stock               (3,713)    (3,712)    (14,850)   (14,685)
        Earnings available to
         common shareholders
         from continuing
         operations                   6,185     17,409     104,451     65,726

    From discontinued operations:

        Earnings (loss) available
         to common shareholders
         from discontinued
         operations                       -     (1,605)       (145)   (36,059)

      Net income available to
       common shareholders           $6,185    $15,804    $104,306    $29,667

    Denominator for basic earnings
     (loss) per share
      Weighted average shares
       outstanding                   27,196     26,427      27,263     25,935

    Basic earnings (loss) per share:
      From continuing operations      $0.23      $0.66       $3.83      $2.53

      From discontinued
       operations                         -      (0.06)      (0.01)     (1.39)

      Net income per share            $0.23      $0.60       $3.82      $1.14

    Diluted Earnings (Loss) Per Share
    Numerator for diluted earnings
     (loss) per share
      From continuing operations:
      Earnings available to common
       shareholders from
       continuing operations         $6,185    $17,409    $104,451    $65,726
      Add: Dividends on
       convertible perpetual
       preferred stock
       (if conversion assumed)            -          -      14,850          -
      Earnings (loss) available
       to common shareholders from
       continuing operations
       for calculation of
       diluted earnings
       (loss) per share               6,185     17,409     119,301     65,726

    From discontinued operations:
      Earnings (loss) available
       to common shareholders
       from discontinued
       operations                         -     (1,605)       (145)   (36,059)

    Net income available to
     common shareholders             $6,185    $15,804    $119,156    $29,667

    Denominator for diluted
     earnings (loss) per share:
      Weighted average shares
       outstanding                   27,196     26,427      27,263     25,935

      Effect of dilutive
       securities (if conversion
       or exercise assumed)
        Convertible perpetual
         preferred stock                  -          -       4,711          -
        Employee share-based
         awards                         204        254         212        115

      Denominator for diluted
       earnings (loss) per share     27,400     26,681      32,186     26,050

    Diluted earnings (loss)
     per share:
      From continuing operations      $0.23      $0.65       $3.71      $2.52

      From discontinued
       operations                         -      (0.06)      (0.01)     (1.39)

    Net income per share              $0.23      $0.59       $3.70      $1.13


    NOTE 4.   SEGMENT INFORMATION

The principal approach used by management to evaluate the Company's performance is by geographic region, although some components of the business are evaluated on the basis of their worldwide operations. The Company evaluates the performance of its segments based on operating income after allocated overhead expenses (excluding significant non-recurring charges or credits), plus equity in pretax earnings of unconsolidated affiliates.

Operating results for the Company's reportable segments for each period presented in the consolidated statements of income were as follows:

                                  Three Months Ended        Fiscal Year Ended
                                      March 31,                 March 31,
                                  2008         2007         2008         2007
    (in thousands of dollars)

    SALES AND OTHER OPERATING
     REVENUES

      Flue-cured and burley
       leaf tobacco
       operations:
        North America          $114,166      $95,437     $336,170     $348,926
        Other regions (1)       238,956      297,294    1,485,304    1,393,223
          Subtotal              353,122      392,731    1,821,474    1,742,149
      Other tobacco
       operations (2)           114,059      111,754      324,348      265,123

      Consolidated sales and
       other operating
       revenues                $467,181     $504,485   $2,145,822   $2,007,272

    OPERATING INCOME (LOSS)

      Flue-cured and burley
       leaf tobacco
       operations:
        North America           $16,015      $13,107      $34,379      $40,276
        Other regions (1)        (4,339)      25,321      143,589      131,841
          Subtotal               11,676       38,428      177,968      172,117
      Other tobacco
       operations (2)            10,677       14,129       39,960       36,599

      Segment operating
       income                    22,353       52,557      217,928      208,716

      Less:
        Equity in pretax
         earnings of
         unconsolidated
         affiliates (3)           6,269        8,933       13,500       14,235
        Restructuring and
         impairment costs (4)     9,611       15,082       12,915       30,890

      Consolidated operating
       income                    $6,473      $28,542     $191,513     $163,591


    (1) Includes South America, Africa, Europe, and Asia regions, as well as
        inter-region eliminations.

    (2) Includes Dark Air-Cured, Special Services and Oriental, as well as
        inter-company eliminations.  Oriental does not contribute
        significantly to the reported amounts for sales and other operating
        revenues because its financial results consist principally of equity
        in the pretax earnings of an unconsolidated affiliate.

    (3) Item is included in segment operating income, but not included in
        consolidated operating income.

    (4) Item is not included in segment operating income, but is included in
        consolidated operating income.
SOURCE  Universal Corporation
    -0-                             05/22/2008
    /CONTACT:  Karen M. L. Whelan, +1-804-359-9311, Fax, +1-804-254-3594,
investor@universalleaf.com/
    /Web site:  http://www.universalcorp.com /
    (UVV)