The following discussions should be read in conjunction with the other sections of this report, including the consolidated financial statements and related notes contained in Item 8 of the Form 10-K:

Executive Overview

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

Financial Results

Average selling prices increased over the prior year in response to increased green tobacco and processing costs partially offset by a decrease in quantities sold. Increased sales prices and profitability improvements by both our South America Region and Other Regions operating segments provided a stable balanced platform from which our financial results for the year were achieved. The costs of this year's crops were higher as a result of crop competition, inflationary pressure and various appreciating currencies versus the U.S. dollar and in particular, the Brazilian real during the growing season. Recently these trends have reversed somewhat as an impact of the current financial crisis. Working closer with our dedicated customer base also played a major role in improved performance this year versus the prior year, as we worked in concert with them to anticipate their evolving requirements.

Liquidity

Our liquidity as of March 31, 2009, was $489.8 million comprised of $87.7 million of cash and $402.1 million of available credit, that includes $185.0 million undrawn on our $305.0 million senior credit facility, $2.9 million of other long term debt, $174.1 million of notes payable to banks, and $40.1 million exclusively for letters of credit. While the global capital markets remain challenged by the current financial crisis our access to capital has remained in line with management's expectations and required levels to adequately fund ongoing business requirements. We continue to monitor unfolding financial market developments, with a view toward adjusting our strategy if warranted to protect capital and liquidity, while maintaining funding sources, controlling costs and maximizing enterprise flexibility. As a result, we have borrowed $120.0 million under our revolver and reduced borrowing under foreign seasonal lines of credit because of more attractive interest rates. Challenges in anticipating future financial market changes, coupled with the seasonal nature of our business, industry and country supply and demand levels, as well as other external economic and currency factors that may change quickly and in an unanticipated manner, could negatively impact our results. As part of addressing these risks, our liquidity is derived from a numbers of sources including cash from operations, our committed Senior Credit Facility, sale of accounts receivable, active working capital management, advances from our well-capitalized customers, and lastly, bilateral short-term credit lines throughout the world. Additionally, our primary overnight cash investments are with financial institutions that have government guaranties, though in amounts that may exceed applicable guarantee levels, and we do not invest cash in auction rate securities or mortgage backed money market funds. Our strategy to protect capital and ensure appropriate liquidity management is dynamic and will be modified to meet changing market conditions.

Outlook

Industry stocks have remained tight but it is anticipated that the Malawi burley crop that is beginning harvest will increase global supplies of burley tobacco significantly, although other factors may result in higher costs to procure this tobacco. Global flue cured and oriental production should be relatively unchanged with some cost increases probable over the next twelve months. We continue to work closely with our global farmer base to ensure their sustainability while using our significant agronomy resources to also ensure that best practices and total product integrity is being maintained in the face of increasing product regulation. One of the primary challenges we face is potential further adjustments that may be necessary due to the continuing dynamic global financial uncertainty. We continue to attract working capital financing with appropriate levels of liquidity but at a higher cost. Further decline in the global financial systems could negatively impact our ability to secure cost effective funding, so we are monitoring the fluid situation, planning with our well-capitalized customers while working closely with our global financing sources. When combined with further expense control and focus on specific global markets that are growing, our balanced approach and delivery of goods and services should provide value.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations

Consolidated Statement of Operations
                                                    Twelve Months Ended March 31,
                                                 Change                    Change
(in millions)                           2009       $     %       2008       $      %      2007
Sales and other operating revenues  $2,258.2  $ 246.7  12.3  $2,011.5   $ 32.4    1.6  $1,979.1
Gross profit                           360.8    110.4  44.1     250.4    (45.3) (15.3)    295.7
Selling, administrative and general
    expenses                           156.0    (1.4)  (0.9)    157.4     (0.9)  (0.6)    158.3
Other income                             0.2   (20.0)            20.2     14.1              6.1
Goodwill impairment                        -        -               -        -                -
Restructuring and asset impairment
    charges                              0.6   (19.0)            19.6    (10.2)            29.8
Debt retirement expense                  1.0    (4.9)             5.9      2.0              3.9
Interest expense                        98.0    (3.9)           101.9     (3.7)           105.6
Interest income                          3.8   (12.4)            16.2      7.6              8.6
Derivative financial instruments
    income                                 -        -               -     (0.3)             0.3
Income tax expense (benefit)          (22.0)   (16.5)           (5.5)    (21.6)            16.1
Equity in net income of investee
    companies                            1.5    (0.3)             1.8      0.8              1.0
Minority interests (income)              0.7      0.3             0.4     (0.3)             0.7
Income (loss) from discontinued
    operations                           0.4    (7.5)             7.9     26.6            (18.7)
Cumulative effect of accounting
    changes, net of income tax             -        -               -      0.3             (0.3)
Net income (loss)                   $  132.6* $ 115.7*       $   16.9* $  38.5         $  (21.6)*

* Amounts do not equal column totals due to rounding.

Sales and Other Operating Revenue Supplemental Information

                                                Twelve Months Ended March 31,
                                               Change                    Change
(in millions, except per kilo
amounts)                             2009      $       %       2008     $       %       2007
Tobacco sales and other
operating
    revenues:
   Sales and other operating
revenues                         $ 2,172.7 $ 239.7   12.4  $ 1,933.0 $ 23.7    1.2  $ 1,909.3
   Kilos                             498.0   (58.1) (10.4)     556.1  (28.8)  (4.9)     584.9
   Average price per kilo        $    4.36 $  0.88   25.3  $    3.48 $ 0.22    6.7  $    3.26
Processing and other revenues    $    85.5     7.0    8.9  $    78.5 $  8.7   12.5  $    69.8
Total sales and other operating
revenues                         $ 2,258.2 $ 246.7   12.3  $ 2,011.5 $ 32.4    1.6  $ 1,979.1

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (Continued)

Comparison of the Year Ended March 31, 2009 to the Year Ended March 31, 2008

Sales and other operating revenues. The increase of 12.3% from $2,011.5 million in 2008 to $2,258.2 million in 2009 is the result of a 25.3% or $0.88 per kilo increase in average sales prices and an 8.9% or $7.0 million increase in processing and other revenues partially offset by a 10.4% or 58.1 million kilo decrease in quantities sold.

South America region. Tobacco revenues increased $19.8 million, reflecting an increase of $1.16 per kilo in average sales prices substantially offset by a decrease of 58.8 million kilos in quantities sold. The increase in average sales price is primarily due to improved customer pricing and the decrease in volume is mainly attributable to reduced inventories carried over from the prior fiscal year and smaller crop sizes.

Other regions. Tobacco revenues increased $220.0 million or 20.2% primarily as a result of a $0.70 per kilo increase in average sales prices and a slight increase of 0.7 million kilos in quantities sold. Average sales price increases due to improved customer pricing, as well as increased byproduct volumes in the Africa region, were the primary contributors to the increase in revenues in the Other Regions operating segment. Average sales prices and changing product mix as well as increased volumes in the Asia and North America regions also contributed significantly to the increase in revenues. In Europe, improved customer pricing more than offset decreased volumes that resulted from the exit from the Greek and Spanish tobacco markets as well as reduced demand in Russia.
Processing and other revenues increased 8.9% or $7.0 million from $78.5 million in 2008 to $85.5 million in 2009 primarily as a result of increased processing volumes and prices in Africa.

Gross profit as a percentage of sales. Gross profit increased 44.1% from $250.4 million in 2008 to $360.8 million in 2009 and the gross profit percentage increased as well from 12.4% in 2008 to 16.0% in 2009.

South America region. Gross profit in the South America Region operating segment increased $26.1 million primarily as a result of the nonrecurrence of significant grower bad debt and interstate trade tax provisions in the prior year. In 2008, as a result of the poor quality of the 2006 crop and the resulting surplus quantities on hand combined with substantial increases in both green tobacco and tobacco processing costs for the 2006 and 2007 crops due to the strengthening Brazilian real, 2007 crop production and purchases declined as expected. The continued decline in market conditions again resulted in an increased grower bad debt provision for the 2007 crop. As a result, a $37.5 million bad debt provision associated with farmer accounts related to the cumulative impact of the lower quality of the 2006 crop and smaller 2007 crop was recorded. The positive impact on gross profit from the nonrecurrence of these provisions in 2009 was partially offset by the impact of decreased volumes and net losses on derivative financial instruments. During 2009, the gross profit from sales of the 2008 crop remain negatively impacted by higher grower bad debt and other costs that result from the decreased supply of tobacco volumes available. However, increased sales prices mitigate the impact of these higher costs. The net impact to gross profit from derivative financial instruments was a reduction of $9.3 million compared to the prior year as a result primarily of the volatility in the Brazilian real.

Other Region. The increase in gross profit of $84.3 million is primarily attributable to the Africa and Asia regions. Gross profit in Africa increased as a result of better sales prices and increased volumes combined with lower freight costs and lower period costs as a result of more throughput due to increased third party processing. Gross profit in Asia increased as a result of delayed shipments from the prior fiscal year into the current fiscal year, increased sales prices in all Asian regions, changing product mix and lower freight costs. Gross profit in the Europe region improved as a result of improved customer pricing, lower period costs and the favorable impact of exchange rates. The North America region results remained relatively consistent with the prior year.

Selling, administrative and general expenses decreased $1.4 million or 0.9% from $157.4 million in 2008 to $156.0 million in 2009. The decrease is primarily due to reduced travel, insurance and the movement of foreign currency exchange rates which were partially offset by increased incentive compensation costs. The stronger U.S. dollar positively impacted expenses denominated in foreign currencies, primarily Brazilian Reals, Euros and Pounds Sterling. Foreign currency denominated expenses accounted for approximately 29.4% and 33.1% of the total selling, administrative and general expenses in 2009 and 2008, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (Continued)

Comparison of the Year Ended March 31, 2009 to the Year Ended March 31, 2008
(Continued)

Other income decreased $20.0 million from $20.2 million in 2008 to $0.2 million in 2009. The decrease is primarily attributable to the gains of approximately $9.5 million and $7.0 million on the non-recurring sales of the Malawi factory and Greek properties, respectively, in 2008. These sales occurred primarily during the fourth quarter of fiscal 2008. The remaining decrease in other income between 2008 and 2009 is primarily the change in gains on other sales of fixed assets. See Note A "Significant Accounting Policies" to the "Notes to Consolidated Financial Statements" for further information.

Restructuring and asset impairment charges were $0.6 million in 2009 compared to $19.6 million in 2008. The charges in 2009 are primarily employee severance charges related to the closure of an operation in Germany. In 2008, asset impairment charges of $10.6 million were incurred primarily as a result of a $6.1 million charge from the sale of our interest in Compania General de Tabacos de Filipinas ("CdF"). In addition, we reported an impairment charge of $2.7 million related to long-lived assets in Turkey as a result of significant reductions in future Turkish flue cured and burley tobacco volumes. The remaining restructuring charges of $9.0 million were substantially employee severance charges primarily in Malawi due to the sale of one of the Malawi factories, in Turkey due to the significant reductions in future volumes, in Brazil due to the sale of one of the operating facilities as previously disclosed and other employee severance charges as the execution of our merger integration plan continued. See Note D "Restructuring and Assets Impairment Charges" to the "Notes to Consolidated Financial Statements" for further information.

Debt retirement expense of $1.0 million in 2009 and $5.9 million in 2008 relate to accelerated amortization of debt issuance costs as a result of debt prepayment and retirement in both years as well as other one time costs associated with the retirement of senior notes including premiums paid for the repurchase of the senior notes and other debt related fees.

Interest expense decreased $3.9 million from $101.9 million in 2008 to $98.0 million in 2009. Interest expense decreased primarily due to the reduced impact of Brazilian farmer financing in 2009 compared to 2008 and lower average rates.
The decrease in expense was substantially offset by higher average borrowings.

Interest income was $3.8 million in 2009 and $16.2 million in 2008. The decrease of $12.4 million was primarily due to lower cash balances and decreased interest income from Brazilian farmer refinancing in 2009 compared to 2008.

Effective tax rates were a benefit of (20.1)% and (268.8)% during the years ended March 31, 2009 and 2008, respectively. Effective tax rates are largely determined by the distribution of taxable income among various taxing jurisdictions as well as management's judgment on the ability to realize the tax benefits of deferred tax assets. The significant variance from the statutory tax rate in 2009 is due primarily to the decrease in the valuation allowance, foreign income tax rates lower than the U.S. rate, permanent differences related to local goodwill amortization, and to exchange gains and losses and currency translation adjustments. Our valuation allowances are reviewed when the outlook for utilizing those credits changes. The significant variance from the statutory rate in 2008 is due primarily to permanent differences related to local goodwill amortization and to exchange gains and losses and currency translation adjustments, partially offset by an increase to the valuation allowance. See Note L "Income Taxes" to the "Notes to Consolidated Financial Statements" for further information.

Income from discontinued operations was $0.4 million in 2009 compared to $7.9 million in 2008. The decrease of $7.5 million is primarily due to gains on the sale of the remaining wool assets of $7.2 million in 2008. See Note C "Discontinued Operations" to the "Notes to Consolidated Financial Statements" for further information.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (Continued)

Comparison of the Year Ended March 31, 2008 to the Year Ended March 31, 2007

Sales and other operating revenues. The increase of 1.6% from $1,979.1 million in 2007 to $2,011.5 million in 2008 is the result of a 6.7% or $0.22 per kilo increase in average sales prices and a 12.5% or $8.7 million increase in processing and other revenues partially offset by a 4.9% or 28.8 million kilo decrease in quantities sold.

South America region. Tobacco revenues increased $121.5 million, reflecting increases of 32.6 million kilo in quantities sold and $0.05 per kilo in average sales prices versus the prior year. The return of certain customer sales in 2008 as well as increased demand for Brazilian tobacco are the primary reasons for the increase in the South America operating segment revenues.

Other regions. Tobacco revenues decreased $97.8 million due to a 61.3 million kilo decrease in quantities sold, partially offset by a $0.32 per kilo increase in average sales prices. The decrease in volumes was primarily as a result of opportunistic sales of U.S. inventories that occurred in the prior year. The decrease in sales also reflected the exit from the European markets in Greece and Spain, decreased volumes available in Zimbabwe and reduced sales from Malawi and Zambia due to smaller 2007 crops. These decreases were partially offset by Asian sales due to increased demand for these tobaccos. Processing and other revenues increased 12.5% from $69.8 million in 2007 to $78.5 million in 2008 primarily as a result of increased processing volumes and prices in the United States.

Gross profit as a percentage of sales. Gross profit decreased 15.3% from $295.7 million in 2007 to $250.4 million in 2008 and the gross profit percentage decreased from 14.9% in 2007 to 12.4% in 2008.

South America region. Gross profit declined $38.8 million in 2008 compared to 2007. Although 2008 volumes increased, 2007 results included the reversal of a reserve for interstate trade tax assets from the State of Rio Grande do Sul as the assets were determined to be realizable due to an amended agreement with the government. In addition, gross margin was negatively impacted by a $37.5 million bad debt provision associated with farmer accounts related to the cumulative impact of the lower quality of the 2006 crop and smaller 2007 crop. The continued impact of the strengthening Brazilian real also had a negative impact on gross margin as we experienced substantial increases in both green tobacco and tobacco processing costs for the 2006 and 2007 crops. Management considered the 2007 crop to be of improved quality. However, as a result of the poor quality of the 2006 crop and the resulting surplus quantities on hand, 2007 crop production and purchases declined as planned. The decline in market conditions again resulted in an increased grower bad debt provision for the 2007 crop. During 2008, a provision of $6.2 million related to interstate trade taxes receivable from the State of Parana was recorded which also negatively impacted Brazilian gross profits. See Note P "Contingencies - Non-Income Tax" to the "Notes to Consolidated Financial Statements" for further information.
These cost increases in 2008 were partially offset by an $8.6 million inventory valuation adjustment in 2007 as a result of poor quality crops.

Other Region. Gross profit in 2008 decreased $6.5 million primarily as a result of the increased cost of the 2007 burley crop in Malawi that was being sold. A smaller crop size due to weather, coupled with an increase of competition within the Malawi market, almost doubled the average auction prices for the 2007 crop in Malawi. In addition, the reduction in crop purchases also increased the per kilo processing and overhead costs allocated to the 2007 crop. Negotiated sales price increases were insufficient to compensate for lost volumes thereby resulting in decreased 2008 margins. These factors had a material negative impact on Other Region gross profit as the remainder of the 2007 Malawi burley crop was sold in fiscal 2009. Also negatively impacting gross profit in the Africa region was the short crop in Zambia and the decrease in volumes available from Zimbabwe. Partially offsetting these decreases in gross profit were increases in gross profit from the Asia, Europe and North America operating segments. The increases in gross profit were primarily related to decreased inventory valuation adjustments of approximately $6.3 million as well as the timing of shipments in the current year in the oriental markets in Bulgaria and Serbia and increased volumes in certain Asian markets.

Selling, administrative and general expenses decreased $0.9 million or 0.6% from $158.3 million in 2007 to $157.4 million in 2008. The decrease is primarily due to decreased legal and professional fees and compensation costs. The weak U.S. dollar negatively impacted expenses denominated in foreign currencies, primarily Brazilian Reals, Euros and Pounds Sterling. Foreign currency denominated expenses accounted for approximately 33.1% and 32.9% of the total selling, administrative and general expenses in 2008 and 2007, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (Continued)

Comparison of the Year Ended March 31, 2008 to the Year Ended March 31, 2007
(Continued)

Other income increased $14.1 million from $6.1 million in 2007 to $20.2 million in 2008. The increase was primarily attributable to the gains of approximately $9.5 million and $7.0 million on the sales of the Malawi factory and Greek properties, respectively. These sales occurred primarily during the fourth quarter of fiscal 2008. The remaining 2008 income was primarily other gains on sales of fixed assets. The 2007 income was primarily related to the final collection of pre-1991 Gulf War Iraqi receivables written off in prior years and gains on fixed asset sales. See Note A "Significant Accounting Policies" to the "Notes to Consolidated Financial Statements" for further information.

Restructuring and asset impairment charges were $19.6 million in 2008 compared to $29.8 million in 2007. During 2008, we incurred asset impairment charges of $10.6 million which were primarily the result of a $6.1 million charge from the sale of CdF. In addition, we reported an impairment charge of $2.7 million related to long-lived assets in Turkey as a result of significant reductions in future Turkish flue cured and burley tobacco volumes. The remaining restructuring charges of $9.0 million were substantially employee severance charges primarily in Malawi due to the sale of one of the Malawi factories, in Turkey due to the significant reductions in future volumes, in Brazil due to the sale of one of the operating facilities and other employee severance charges as we continued the execution of our merger integration plan. The 2007 costs relate to additional impairment charges of $13.2 million to write down our Zimbabwe operations to zero as a result of the continuing political and economic strife as well as the further decline in crop size. Other asset impairment charges of $6.7 million related to assets in the United States, Thailand and Greece, primarily machinery and equipment. The remaining $9.9 million in 2007 related primarily to employee severance and other integration related charges as a result of the merger. See Note D "Restructuring and Assets Impairment Charges" to the "Notes to Consolidated Financial Statements" for further information.

Debt retirement expense of $5.9 million in 2008 related to accelerated amortization of debt issuance costs as a result of debt prepayment and retirement as well as other one time costs associated with the retirement of senior notes including premiums paid for the repurchase of the senior notes and other debt related fees. Debt retirement expense of $3.9 million in 2007 related to one time costs of refinancing our senior secured credit facility.

Interest expense decreased $3.7 million from $105.6 million in 2007 to $101.9 million in 2008 primarily due to lower average borrowings.

Interest income was $16.2 million in 2008 and $8.6 million in 2007. The increase of $7.6 million was primarily due to higher cash balances in 2008 and increased interest income from Brazilian farmer refinancing.

Effective tax rates were a benefit of (268.8)% in 2008 and an expense of 122.7% in 2007. Effective tax rates were largely determined by the distribution of taxable income among various taxing jurisdictions as well as management's judgment on the ability to realize the tax benefits of deferred tax assets. The significant variance from the statutory tax rate in 2008 was due primarily to permanent differences related to local goodwill amortization and to exchange gains and losses and currency translation adjustments, partially offset by increases to valuation allowance. The significant unfavorable variance from the statutory rate in 2007 was primarily due to the inability to recognize the benefit of losses in certain jurisdictions and the additional income tax accrual for the tax audit in Germany. See Note L "Income Taxes" to the "Notes to Consolidated Financial Statements" for further information. The effective rate was favorably impacted as a result of the reduction in tax rates in Turkey and a reduction in valuation allowance related to U.S. foreign tax credit carryovers.

Income (loss) from discontinued operations was $7.9 million in 2008 compared to $(18.7) million in 2007. The increase of $26.6 million was primarily due to gains on the sale of the remaining wool assets of $7.2 million in 2008, 2007 charges of $9.3 million related to finalizing our exit from the Italian market and a 2007 fair value adjustment to inventory in Mozambique for $1.1 million.
The remaining increase of $9.0 million is due to our exit from the discontinued operations in Italy, Mozambique and wool operations. See Note C "Discontinued Operations" to the "Notes to Consolidated Financial Statements" for further information.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources

Overview

Historically we have needed capital in excess of cash flow from operations to finance accounts receivable, inventory and advances to farmers for pre-financing tobacco crops in certain foreign countries. Purchasing, processing and selling activities of our business are seasonal and our need for capital fluctuates with corresponding peaks where outstanding indebtedness may be significantly greater . . .