reeman, 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.