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February 7, 2008 at 12:00 AM EST

Universal Corporation Announces Third Quarter Results

RICHMOND, Va., Feb. 7 /PRNewswire-FirstCall/ -- Allen B. King, Chairman and Chief Executive Officer of Universal Corporation (NYSE: UVV), announced that income from continuing operations for the third quarter of fiscal year 2008, which ended on December 31, 2007, increased by 42% to $50.8 million, or $1.56 per diluted share. In the same quarter last year, continuing operations earned $35.8 million, or $1.17 per diluted share. For fiscal year 2008, the third quarter's results reflected higher earnings in the Other Regions segment of the flue-cured and burley operations, as well as Other Tobacco Operations. Earnings also benefited from lower net interest expense. Last year's net income for the quarter totaled $24.1 million, or $0.79 per diluted share, including results from discontinued operations. There was no income or loss from discontinued operations in the quarter ended December 31, 2007, as the Company had completed the sale of its non-tobacco operations at the beginning of the period.

For the nine months ended on December 31, 2007, Universal earned $109.4 million from continuing operations, or $3.38 per diluted share, compared to $59.3 million, or $1.87 per diluted share last year. The significant improvement in the nine-month results was caused by a number of factors, including shipment timing, lower net interest expense, lower charges this year related to African flue-cured growing projects, and a lower effective tax rate. The favorable comparisons were offset in part by significantly lower margins in Africa, after adjusting for last year's charges, combined with lower carryover sales and lower old-crop burley sales by the North America segment. In addition, higher currency remeasurement and transaction gains offset some of the increased costs related to the weaker U.S. dollar. Net income for the nine months, including results from discontinued operations, was $109.3 million, or $3.37 per diluted share, compared to $24.8 million, or $0.54 per diluted share, for the same period in the prior year.

Mr. King said, "Results for the third fiscal quarter and the nine months have improved despite difficult supply shortages and rapidly rising costs that were due in part, to the weak U.S. dollar. Much of our improvement came from the reduction of restructuring charges and provisions for inventory valuation and farmer advances. However, our inventories have fallen by over 25% since last year, primarily reflecting the smaller crops in Africa and Canada and more rapid shipment of leaf during fiscal year 2008. That acceleration of shipments, which has led to near completion of yearly shipping in some origins, and the accompanying substantial reduction in total inventories, is likely to mean lower shipments in future quarters. We also continue to work with our customers to mitigate the effect of the weak dollar on our unit costs. Despite these many challenges, we believe that we have been taking the necessary actions to improve our performance. Our business model is sound, and we believe that because of our dedication to producing quality leaf and service to our customers, we will continue to be successful in the long term."

Sales and other operating revenues were up 12% in each period, totaling $573 million in the quarter and $1.7 billion for the nine months. In the quarter, the growth was principally due to higher volumes in Europe, Asia, Africa, and the Special Services group, as well as the impact of currency changes. A significant part of the volume increase was related to shipment timing. For the nine months, the increase was more widely dispersed and caused by higher volumes and higher leaf prices in most regions.

The North America segment of the flue-cured and burley operations reported operating income of $19.4 million for the quarter, nearly level with the prior year, despite the effect of crop reductions in Canada and the absence of last year's sales of old-crop U.S. burley. Higher volumes of current crop tobacco in most origins combined with improved pricing in some areas largely offset those negative factors, and the net effect caused an 8% increase in revenues for the quarter.

For the nine months, the North America segment reported operating income of $18.4 million compared to $27.2 million in the prior year. The reduction reflected lower carryover sales in the United States this year, the effect of old-crop U.S. burley sales last year, increased operating costs associated with handling the drought-affected crop in the United States, and the significant reduction of the Canadian crop. Pricing and volume improvements in some origins mitigated part of the decline in earnings caused by those factors. In addition, last year's results reflected a $3 million gain on the sale of idle assets. Revenues for this segment fell by $31.5 million, to $222 million, compared to last year.

The Other Regions segment of the flue-cured and burley operations earned $52.0 million, up 13% from the same quarter in fiscal year 2007, driven by improvement in operations in Europe and Asia. The segment also recognized higher income that had been deferred on sales of leaf to another segment to provide just-in-time delivery services. That leaf has now been delivered to customers. Despite higher volumes due to accelerated shipments, African results fell, reflecting lower margins as smaller crops, higher farm prices, and the weaker U.S. dollar increased unit costs significantly. Europe saw improvement in the quarter due to earlier shipments, better product mix, and additional blending and sheet volumes, while Asia's comparisons improved with the absence of last year's flood-related costs in the Philippines and additional trading volumes, some of which represented shipment delays earlier in the year. Revenues for this segment increased by $29 million in the quarter. In several origins, higher gains from currency remeasurement and transactions offset part of the increased costs related to purchasing and processing tobacco with weaker U.S. dollars.

For the nine months, the Other Regions segment of the flue-cured and burley operations earned $147.9 million compared to $106.5 million last year, an increase of nearly 39%. The increase reflected improved results in all regions. In addition to the improvements in Europe and Asia and recognition of deferred income that benefited the quarter, the nine-month period reflected lower charges for inventory and farmer receivables this year, primarily in Africa, which contributed $26 million to the comparison. Currency remeasurement and transaction gains mitigated only some of the effects of the weaker U.S. dollar on costs. The segment also benefited from larger crops in the Philippines where flooding reduced last year's crops and lower overhead costs in Africa and Asia. Those improvements were partially offset by lower operating margins in Africa, after adjusting for last year's charges, on higher volumes shipped as the African season rapidly draws to a close. Revenues for the Other Regions segment increased by about 14% to $1.3 billion.

The Other Tobacco Operations segment results improved by $2 million in the quarter to $16.2 million and revenues increased by $22 million to $66 million. Most of these increases related to accelerated sales volumes for the Special Services group as part of the business is being absorbed by regional operations. That change was also primarily responsible for the 30% increase in segment operating income for the nine months and a 33% growth in revenues. Earnings from the oriental tobacco joint venture were also up for the nine months, mainly due to a gain from the sale of an investment, and remeasurement gains, which partially offset the adverse effect of currency changes on its costs.

Selling, general and administrative expenses, which are included in segment operating results, fell by over $15 million in the quarter, primarily related to currency benefits of approximately $10 million from transactions and from remeasurement of net foreign currency asset positions as the U.S. dollar weakened. For the nine months, selling, general, and administrative expenses dropped by approximately $39 million. In addition to an $18 million reduction in provisions for farmer receivables, expenses for the nine-month period were offset by a $21 million increase in net foreign exchange remeasurement and transaction gains. Of the transaction gains, about $7 million is due to forward currency exchange contracts related to certain customer sales contracts. The forward contracts were not accounted for as hedges, and mark-to-market gains were included in income as they occurred. The effect of the weaker U.S. dollar on costs is widely dispersed through the Company's results and is not offset against currency gains in reporting those gains. Increases in corporate overhead for stock-based compensation and incentive compensation were partially offset by lower legal fees.

The Company recorded higher interest income and lower interest expense as a result of funds provided by tobacco operations, the sale of its non-tobacco businesses, asset sales, and executive stock option exercises. Net interest savings were $4.3 million for the quarter and $15.8 million for the nine months. The effective income tax rate for the nine months, at approximately 36%, is higher than the U.S. federal statutory income tax rate primarily because of U.S. state income taxes and excess foreign taxes recorded in countries where the tax rates exceed U.S. rates. In addition, the restructuring charges in the nine-month period provided tax benefits at a rate that was below the statutory rate, which increased the effective tax rate. For the full fiscal year, the rate is expected to be slightly below 37%. The effective tax rate last year for the nine-month period was 42.8%. Universal did not record any tax benefit on its $12.3 million asset impairment charge last year since management believed that the Company would be unable to utilize the net operating loss carryforward generated by the charge. A valuation allowance of $4.9 million on deferred tax assets associated with Zambia also increased last year's effective tax rate. That impact was partially offset by a reduction in the valuation allowance on deferred tax assets due to the method of attributing income taxes to discontinued operations under the applicable accounting guidance.

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 for one week by dialing (800) 642-1687. The confirmation number to access the replay is 32785707.

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, 2007, were $2.0 billion. For more information on Universal Corporation, visit its web site at www.universalcorp.com.

    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME
    (In thousands of dollars, except per share data)
                                  Three Months Ended       Nine Months Ended
                                     December 31,             December 31,
                                    2007       2006          2007       2006
                                     (Unaudited)              (Unaudited)

    Sales and other operating
     revenues                   $573,094   $511,706    $1,678,641  $1,502,787
    Costs and expenses
      Cost of goods sold         446,089    378,348     1,324,752   1,147,293
      Selling, general and
       administrative expenses    47,869     63,010       165,545     204,637
      Restructuring and impairment
       costs                           -      3,519         3,304      15,808

    Operating income              79,136     66,829       185,040     135,049
      Equity in pretax earnings
       of unconsolidated
       affiliates                  8,477      9,570         7,231       5,302
      Interest income              4,453      4,208        13,317       7,188
      Interest expense            10,314     14,347        32,274      41,961

    Income before income taxes
     and other items              81,752     66,260       173,314     105,578
      Income taxes                29,204     24,805        62,937      45,203
      Minority interests, net of
       income taxes                1,796      5,676           974       1,085
    Income from continuing
     operations                   50,752     35,779       109,403      59,290
    Loss from discontinued
     operations, net of income
     taxes                             -    (11,674)         (145)    (34,454)
    Net income                    50,752     24,105       109,258      24,836
    Dividends on convertible
     perpetual preferred stock    (3,712)    (3,713)      (11,137)    (10,973)
    Earnings available to common
     shareholders                $47,040    $20,392       $98,121     $13,863

    Basic earnings (loss) per
     common share:
      From continuing operations   $1.72      $1.24         $3.60       $1.87
      From discontinued operations     -      (0.45)        (0.01)      (1.33)
        Net income                 $1.72      $0.79         $3.59       $0.54

    Diluted earnings (loss) per
     common share:
      From continuing operations   $1.56      $1.17         $3.38       $1.87
      From discontinued operations     -      (0.38)        (0.01)      (1.33)
        Net income                 $1.56      $0.79         $3.37       $0.54

    See accompanying notes.



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

                                 December 31,  December 31,     March 31,
                                     2007          2006            2007
                                 (Unaudited)   (Unaudited)
               ASSETS

    Current
      Cash and cash equivalents     $502,277      $220,438      $358,236
      Accounts receivable, net       233,861       289,548       261,106
      Advances to suppliers, net     114,897        83,629       113,396
      Accounts receivable -
       unconsolidated affiliates      46,732        43,709        37,290
      Inventories - at lower of
       cost or market:
        Tobacco                      486,785       656,329       595,901
        Other                         42,289        45,553        40,577
      Prepaid income taxes             8,032         7,580         8,760
      Deferred income taxes           19,158        27,443        25,182
      Other current assets            58,264        52,511        62,480
      Current assets of
       discontinued operations             -        75,482        42,437
        Total current assets       1,512,295     1,502,222     1,545,365

    Property, plant and equipment
      Land                            17,061        17,141        16,640
      Buildings                      250,202       250,281       241,410
      Machinery and equipment        515,870       521,608       512,586
                                     783,133       789,030       770,636
        Less accumulated
         depreciation               (442,844)     (408,408)     (410,478)
                                     340,289       380,622       360,158
    Other assets
      Goodwill and other
       intangibles                   104,689       104,265       104,284
      Investments in
       unconsolidated affiliates     114,622        94,242       104,316
      Deferred income taxes           66,991        92,879        81,003
      Other noncurrent assets        183,948       143,781       133,696
                                     470,250       435,167       423,299

        Total assets              $2,322,834    $2,318,011    $2,328,822

    See accompanying notes.



    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (In thousands of dollars)
                                    December 31,  December 31,     March 31,
                                        2007          2006           2007
                                     (Unaudited)   (Unaudited)
     LIABILITIES AND SHAREHOLDERS'
      EQUITY

    Current
      Notes payable and overdrafts     $139,632      $169,283      $131,159
      Accounts payable                  173,864       192,797       220,181
      Accounts payable -
       unconsolidated affiliates          8,815        10,730           644
      Customer advances and deposits     86,099       122,086       133,608
      Accrued compensation               15,007        13,858        18,519
      Income taxes payable               12,712        23,763        11,549
      Current portion of long-term
       obligations                      150,000        22,513       164,000
      Current liabilities of
       discontinued operations                -        15,816        13,314
        Total current liabilities       586,129       570,846       692,974

    Long-term obligations               400,644       548,769       398,952

    Pensions and other postretirement
     benefits                            98,242        81,383       100,004

    Other long-term liabilities          73,322        76,839        70,528

    Deferred income taxes                47,881        34,038        29,809
      Total liabilities               1,206,218     1,311,875     1,292,267

    Minority interests                    6,985        14,934         5,822

    Shareholders' equity
      Preferred stock:
        Series A Junior Participating
         Preferred Stock, no par
         value, 500,000 shares
         authorized, none issued
         or outstanding                       -             -             -
        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 December 31,
         2006, and March 31, 2007)      213,023       213,024       213,024
      Common stock, no par value,
       100,000,000 shares authorized,
       27,299,524 shares issued and
       outstanding (25,923,058 at
       December 31, 2006, and
       26,948,599 at March 31, 2007)    198,581       130,564       176,453
     Retained earnings                  729,548       678,289       682,232
     Accumulated other comprehensive
      loss                              (31,521)      (30,675)      (40,976)
       Total shareholders' equity     1,109,631       991,202     1,030,733
       Total liabilities and
        shareholders' equity         $2,322,834    $2,318,011    $2,328,822

    See accompanying notes.



    UNIVERSAL CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands of dollars)
                                                     Nine Months Ended
                                                        December 31,
                                                    2007             2006
                                                    (Unaudited)
    CASH FLOWS FROM OPERATING ACTIVITIES
     OF CONTINUING OPERATIONS:
       Net income                                $109,258          $24,836
       Adjustments to reconcile net
        income to net cash provided by
        operating
       activities of continuing
        operations:
          Net loss from discontinued
           operations                                 145           34,454
          Depreciation                             31,028           36,662
          Amortization                              1,597            1,488
          Provisions for losses on
           advances and guaranteed loans
           to suppliers                            12,218           30,250
          Restructuring and impairment
           costs                                    3,304           15,808
          Other, net                               16,490           (2,264)
          Changes in operating assets and
           liabilities, net                        28,988          (30,381)
            Net cash provided by
             operating activities of
             continuing operations                203,028          110,853

    CASH FLOWS FROM INVESTING ACTIVITIES
     OF CONTINUING OPERATIONS:
        Purchase of property, plant and
         equipment                                (18,355)         (20,915)
        Proceeds from sale of businesses,
         less cash of businesses sold              26,556          379,379
        Proceeds from sale of property,
         plant and equipment                       15,964            4,960
        Deposit to escrow account                 (32,098)               -
            Net cash provided (used) by
             investing activities of
             continuing operations                 (7,933)         363,424

    CASH FLOWS FROM FINANCING ACTIVITIES
     OF CONTINUING OPERATIONS:
        Repayment of short-term debt, net          (2,559)        (118,814)
        Repayment of long-term debt               (14,000)        (200,000)
        Issuance of convertible perpetual
         preferred stock, net of issuance
         costs                                          -           19,478
        Issuance of common stock                   16,131            5,910
        Repurchase of common stock                 (4,084)               -
        Dividends paid on convertible
         perpetual preferred stock                (11,137)         (10,973)
        Dividends paid on common stock            (36,422)         (33,561)
        Other                                        (907)          (1,325)
            Net cash used by financing
             activities of continuing
             operations                           (52,978)        (339,285)

            Net cash provided by
             continuing operations                142,117          134,992

    CASH FLOWS FROM DISCONTINUED
     OPERATIONS:
         Net cash provided by operating
          activities of discontinued
          operations                                6,495           36,776
         Net cash used by investing
          activities of discontinued
          operations                                  (17)          (9,417)
         Net cash used by financing
          activities of discontinued
          operations                               (4,957)          (6,766)

           Net cash provided by
            discontinued operations                 1,521           20,593

    Effect of exchange rate changes on
     cash                                             164               75
    Net increase in cash and cash
     equivalents                                  143,802          155,660
    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
     period                                             -            1,854

    Cash and cash equivalents at end of
     period                                      $502,277         $220,438

    Significant non-cash items from investing activities of continuing
    operations for the nine months ended December 31, 2006, 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.

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 December 31, 2007, the Company's total exposure under guarantees issued by its operating subsidiary in Brazil for banking facilities of farmers in that country was approximately $205 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 is the face amount, $205 million, and any unpaid accrued interest. The fair value liability recorded for the guarantees was approximately $11 million and $12 million at December 31, 2007 and 2006, respectively, and approximately $10 million at March 31, 2007. In addition to these guarantees, the Company has other contingent liabilities totaling approximately $6 million.

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- and nine-month periods ended December 31, 2007 and 2006.

                                        Three Months Ended  Nine Months Ended
                                            December 31,      December 31,
    (in thousands, except per share data)   2007     2006      2007     2006

    Basic Earnings (Loss) Per Share
    Numerator for basic earnings (loss)
     per share
      From continuing operations:
      Income from continuing
       operations                         $50,752  $35,779  $109,403  $59,290
      Less:  Dividends on convertible
       perpetual preferred stock           (3,712)  (3,713)  (11,137) (10,973)
        Earnings available to common
         shareholders from continuing
         operations                        47,040   32,066    98,266   48,317
      From discontinued operations:
        Earnings (loss) available to
         common shareholders from
         discontinued operations                -  (11,674)     (145) (34,454)
      Net income available to common
       shareholders                       $47,040  $20,392   $98,121  $13,863

    Denominator for basic earnings
     (loss) per share
      Weighted average shares
       outstanding                         27,357   25,815    27,285   25,775

    Basic earnings (loss) per share:
      From continuing operations            $1.72    $1.24     $3.60    $1.87
      From discontinued operations              -    (0.45)    (0.01)   (1.33)
      Net income per share                  $1.72    $0.79     $3.59    $0.54

    Diluted Earnings (Loss) Per Share
    Numerator for diluted earnings (loss)
     per share
      From continuing operations:
        Earnings available to common
         shareholders from continuing
         operations                       $47,040  $32,066   $98,266  $48,317
        Add:  Dividends on convertible
         perpetual preferred stock (if
         conversion assumed)                3,712    3,713    11,137        -
        Earnings available to common
         shareholders from continuing
         operations for calculation of
         diluted earnings (loss) per
         share                             50,752   35,779   109,403   48,317
      From discontinued operations:
        Earnings (loss) available to
         common shareholders from
         discontinued operations                -  (11,674)     (145) (34,454)
      Net income available to common
       shareholders                       $50,752  $24,105  $109,258  $13,863

    Denominator for diluted earnings
     (loss) per share:
      Weighted average shares
       outstanding                         27,357   25,815    27,285   25,775
      Effect of dilutive securities (if
       conversion or exercise assumed)
        Convertible perpetual
         preferred stock                    4,711    4,708     4,710        -
        Employee share-based awards           373      111       385       69
      Denominator for diluted earnings
       (loss) per share                    32,441   30,634    32,380   25,844

    Diluted earnings (loss) per share:
      From continuing operations            $1.56    $1.17     $3.38    $1.87
      From discontinued operations              -    (0.38)    (0.01)   (1.33)
      Net income per share                  $1.56    $0.79     $3.37    $0.54



    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
                                                          December 31,
    (in thousands of dollars)                         2007              2006

    SALES AND OTHER OPERATING REVENUES

       Flue-cured and burley leaf tobacco
        operations:
            North America                         $133,319          $123,477
            Other regions (1)                      373,670           344,424
                 Subtotal                          506,989           467,901
       Other tobacco operations (2)                 66,105            43,805

       Consolidated sales and other
        operating revenues                        $573,094          $511,706

    OPERATING INCOME

       Flue-cured and burley leaf tobacco
        operations:
            North America                          $19,395           $19,765
            Other regions (1)                       52,016            45,939
                 Subtotal                           71,411            65,704
       Other tobacco operations (2)                 16,202            14,214

       Segment operating income                     87,613            79,918

       Less:
            Equity in pretax earnings of
             unconsolidated affiliates (3)           8,477             9,570
            Restructuring and impairment
             costs (4)                                   -             3,519

       Consolidated operating income               $79,136           $66,829



                                                       Nine Months Ended
                                                         December 31,
    (in thousands of dollars)                         2007              2006

    SALES AND OTHER OPERATING REVENUES

       Flue-cured and burley leaf tobacco
        operations:
            North America                         $222,004          $253,489
            Other regions (1)                    1,258,781         1,100,910
                 Subtotal                        1,480,785         1,354,399
       Other tobacco operations (2)                197,856           148,388

       Consolidated sales and other
        operating revenues                      $1,678,641        $1,502,787

    OPERATING INCOME

       Flue-cured and burley leaf tobacco
        operations:
            North America                          $18,364           $27,169
            Other regions (1)                      147,928           106,520
                 Subtotal                          166,292           133,689
       Other tobacco operations (2)                 29,283            22,470

       Segment operating income                    195,575           156,159

       Less:
            Equity in pretax earnings of
             unconsolidated affiliates (3)           7,231             5,302
            Restructuring and impairment
             costs (4)                               3,304            15,808

       Consolidated operating income              $185,040          $135,049


    (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. Sales and other operating revenues for
        this reportable segment include limited amounts for Oriental 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

CONTACT: Karen M. L. Whelan of Universal Corporation, +1-804-359-9311, +1-804-254-3594 (fax), investor@universalleaf.com