Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

The following executive overview is intended to provide significant highlights of the discussion and analysis that follows.

Financial Results

We are experiencing a unique operating year where uncommitted inventory availability has decreased substantially, the U.S. dollar is still weakening and costs across the world are rising. Despite these challenges, we have been able to achieve improved gross profits, operating income and net income compared to the prior year. This quarter is the last quarter in which our results will be significantly impacted by the increased costs associated with the Malawi 2007 burley crop. While significant shipments expected in this quarter out of South America are delayed until next quarter, processing volumes have greatly increased in the United States and Asia. Although selling, administrative and general expenses were reduced, they were negatively impacted by the strength of local currencies against the U.S. dollar. As a result of our focus on debt reduction in the prior year, interest and other debt related costs are decreasing.

Liquidity

Our enterprise liquidity requirements are dynamic. As such we utilize various sources, which are continuously monitored and adjusted as required based on the seasonality of our business and include cash from operations, our $250.0 million revolving credit facility, short term credit lines throughout the world, sale of accounts receivable, active working capital management and advances from customers. As of June 30, 2008, we had $790.0 million of cash and available credit comprised of $179.5 million of cash and $610.5 million in available credit inclusive of our undrawn $250.0 million revolver, $32.6 million of other long term debt, $299.2 million of notes payable to banks, and $29.7 million exclusively for letters of credit. On an ongoing basis we continue to modify the composition of our available liquidity maximizing business flexibility and minimizing costs.

Outlook

As we begin the new fiscal year, we are entering into a marketplace where global supply and demand is very tight and uncommitted inventories are below historic levels. While this market presents many opportunities, it also presents many challenges. While decreased supply may translate to higher customer prices, it also translates to higher green costs for the tobacco and higher production costs. These factors, coupled with the impact of a continued weak U.S. dollar and rising fuel and other costs, will challenge us to achieve appropriate returns while continuing to improve future performance. We remain committed to our customer-focused strategy, and we are confident that we are positioned to meet these challenges, enhance our already strong customer relationships and allow us to grow with our customers. As such, we are continuing to focus our attention and resources on those origins that are growing in market importance, on delivering outstanding customer service and exercising expense discipline.