Rothmans Inc. Announces Financial Results for Fiscal 2008



    Trading: TSE: ROC

    TORONTO, May 16 /CNW/ - Rothmans Inc. today announced results for the
fourth quarter and fiscal year ended March 31, 2008.
    Rothmans' earnings for the year were $117.6C million or $1.73 per basic
share compared with $99.8 million or $1.47 per basic share in fiscal 2007.
    Sales at 60%-owned subsidiary Rothmans, Benson & Hedges Inc., net of
excise duty and taxes, for the 2008 fiscal year were $670.6 million compared
with $618.6 million in fiscal 2007.
    Investment income of $12.2 million for fiscal 2008 was $3.1 million
higher than fiscal 2007, due to the higher average cash balance held and a
higher rate of return experienced during the year.
    RBH's EBITDA margin was 50.9% for the year, compared with 47.6% in fiscal
2007. The increase was principally due to price increases across all product
categories partially offset by volume shifts into lower-priced tiers of the
cigarette price category and higher general and administrative expenses,
including incentive plan costs and slightly higher spending on retail trade
programs.
    RBH shipped a total of 10.7 billion equivalent sticks into the domestic
market during fiscal 2008, representing a 0.2% increase compared to fiscal
2007, due mainly to increased shipments of RBH price category cigarettes
offsetting declines in both premium cigarette and fine cut shipments. While
RBH has continued to demonstrate strong volumetric and financial performance
in the face of a declining market, the reduction in overall industry
profitability and the apparent growing presence of contraband product in the
Canadian market are expected to continue to present significant challenges for
RBH for the foreseeable future.
    During fiscal 2008, the Company paid dividends of $88.5 million, versus
$81.6 million in fiscal 2007. The fiscal 2008 regular dividend was $1.30 per
share compared to $1.20 in fiscal 2007.
    "RBH has continued to perform very well, having maintained total domestic
sales volumes and increasing earnings by almost 18% compared to fiscal 2007,"
said John Barnett, President and Chief Executive Officer of Rothmans Inc. and
RBH. "Year over year, we have grown domestic cigarette market share by
1.2 share points according to the Nielsen Company which, given our volume
performance, indicates continued declines in industry tax-paid volumes sold."

    Fourth Quarter

    Rothmans' earnings for the fourth quarter of fiscal 2008 were
$21.0 million or $0.31 basic earnings per share. This compares with earnings
of $18.0 million or $0.27 basic earnings per share in the fourth quarter of
fiscal 2007.
    Sales, net of excise duty and taxes, at RBH were $142.7 million in the
fourth quarter compared with $136.8 million in the same period in fiscal 2007.
    RBH's EBITDA margin was 43.4% in the quarter compared with 39.4% in the
same period of fiscal 2007, and compared to 49.8% in the third quarter of
fiscal 2008. The year-over-year increase in EBITDA margin compared to the
fourth quarter of fiscal 2007 is predominantly due to price increases across
all product categories partially offset by lower shipment volumes and higher
sales and marketing costs. The recent quarter EBITDA margin decrease compared
to the third quarter of 2008 was principally due to the effect of lower
shipment volumes.

    Outlook

    "The industry continues to be impacted by declining volumes overall and
increased competition, particularly in the cigarette price category. In
addition, illegal and untaxed products continue to have a negative effect on
all industry participants," said Mr. Barnett. "With our new entrants into the
premium cigarette category and our well established price cigarette category
brands, RBH will continue to compete vigorously in this changing market."

    Dividend Declared

    The Board of Directors of Rothmans Inc. declared a quarterly dividend of
$0.35 per share payable on June 17, 2008 to shareholders of record at the
close of business on June 3, 2008.

    Analyst Conference Call and Webcast

    Rothmans Inc. management will hold a conference call with analysts to
discuss the fourth quarter and full year results at 8:30 a.m. Toronto time on
Friday, May 16, 2008. In order to listen to the conference call, shareholders
are invited to call 1-866-898-9626 or 416-340-2216.
    The call will also be webcast through the Company's investor website,
www.rothmansinc.ca. At the completion of the conference call, a recording will
be available until May 24, 2008 by calling 1-800-408-3053 and entering
reservation number 3261299. The recording can also be accessed through the
investor website.
    Media are invited to listen to the call and to contact Karen Bodirsky at
(416) 442-3660 for further information.

    About Rothmans Inc.

    Rothmans Inc. is a widely held, publicly traded Canadian company that
participates in the Canadian tobacco industry through 60%-owned Rothmans,
Benson & Hedges Inc., Canada's second largest tobacco company. RBH currently
employs approximately 750 people at its head office in Toronto, its sales
offices across Canada and its manufacturing facilities in Brampton, Ontario
and Quebec City, Quebec where it has been operating for over 100 years.
Rothmans is Canada's only publicly traded company with interests exclusively
in the tobacco industry and is listed on the Toronto Stock Exchange under the
symbol ROC.


    Management's Discussion and Analysis
    for the fiscal year and three months ended March 31, 2008
    ---------------------------------------------------------
    Management's Discussion and Analysis of Financial Condition and Results
of Operations, or MD&A, provides shareholders with a review of significant
developments in the Company's financial performance in the fiscal year and
fiscal quarter ended March 31, 2008 compared with the prior year. It also
discusses factors that could affect future performance. This MD&A should be
read in conjunction with the attached unaudited consolidated financial
statements for the year ended March 31, 2008. The results reported herein have
been prepared in accordance with Canadian Generally Accepted Accounting
Principles (GAAP) and are presented in Canadian dollars. This MD&A is current
as of May 15, 2008.

    Responsibility of Management and the Board of Directors

    Management is responsible for the information disclosed in this MD&A and
has in place the appropriate information systems, procedures and controls to
ensure that information used internally by management and disclosed externally
is materially complete and reliable. In addition, the Company's Audit
Committee and Board of Directors provide an oversight role with respect to all
public financial disclosures by the Company, and have reviewed and approved
this MD&A and the accompanying unaudited consolidated financial statements.

    Disclosure and Internal Controls

    With respect to disclosure controls and procedures, the Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of the
Company's disclosure controls and procedures as of March 31, 2008. Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that such disclosure controls and procedures were effective as of
March 31, 2008 in providing reasonable assurance that material information
relating to the Company and its consolidated subsidiaries would be made known
to them by others within those entities.
    During the Company's most recent interim period, there were no changes in
the Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company's
internal controls over financial reporting.

    Forward Looking Statements

    Certain statements contained in this MD&A and other sections of this
document (in particular the sections entitled "Industry Overview" and
"Outlook") constitute "forward-looking statements" and express views as to
future events, circumstances and trends relating to RBH's business and the
Company. Words such as "plans," "intends," "outlook," "expects,"
"anticipates," "estimates," "believes," "should" and similar expressions may
identify forward-looking statements. Forward-looking statements are based on
management's current expectations and assumptions and entail various risks and
uncertainties. There is no assurance that any forward-looking statement will
materialize. Actual results may differ materially from these expectations and
forward-looking statements, if known and unknown risks or uncertainties affect
RBH's business or the Company, or if management's expectations or assumptions
prove to be inaccurate. Unless otherwise indicated, forward-looking statements
describe expectations as of May 15, 2008.
    Factors that could cause the Company's actual results to differ
materially from the forward-looking statements contained herein include, but
are not limited to: government claims and potential claims, including the
results of ongoing investigations; product liability claims; increases in the
levels of contraband product in the market; increased competition and
competitor initiatives; the variability in the rate of growth in the cigarette
price category; continued declines in consumption of tobacco products; RBH's
ability to continue to implement price increases; fluctuating wholesaler and
consumer purchasing patterns; changes in government taxation policy; changes
in government legislation and regulation including, but not limited to,
legislation banning the display of tobacco products in retail stores and new
requirements to apply federal excise duty paid stamps on tobacco products; new
product standards; and dependence on the domestic tobacco market.
    The Company disclaims any obligation or intention to update or revise any
forward-looking statement, whether the result of new information, future
events or otherwise. Additional information concerning risks and uncertainties
affecting RBH's business and the Company and other factors that could cause
financial results to fluctuate is set forth below under "Risks and
Uncertainties" and "Outlook" and is contained in the Company's filings with
Canadian securities regulatory authorities, including the Company's Annual
Information Form (in particular under "Legal Proceedings" and "Risk Factors")
available on SEDAR at www.sedar.com or on the Company's website at
www.rothmansinc.ca.

    Terminology used in this MD&A

    Throughout this MD&A, "GAAP" refers to Canadian Generally Accepted
Accounting Principles, "Rothmans" and "the Company" refer to Rothmans Inc.,
"RBH" refers to Rothmans, Benson & Hedges Inc., which is 60%-owned by Rothmans
Inc., and "EBITDA margin", a key measure of the RBH's operating performance,
refers to RBH's "earnings before interest, income taxes, depreciation and
amortization" as a percentage of "sales, net of excise duty and taxes".
    EBITDA margin provides a measure allowing period-to-period comparisons of
the core RBH operating performance before the impact of changes in capital
structure, interest, income taxes and capital spending and does not include
income from investments or the expenses related to operating Rothmans Inc. as
a public company. EBITDA margin is a non-GAAP financial measure that does not
have any standardized meaning prescribed by GAAP. It is therefore unlikely to
be comparable to similar measures presented by other companies.
    The "recent quarter" refers to the three months ended March 31, 2008, and
"prior quarter" refers to the three months ended December 31, 2007. "Fiscal
2008" or "recent fiscal year" refers to the fiscal year ended March 31, 2008
and other similar references to a fiscal year (e.g., fiscal 2007) refer to the
fiscal year then ended on March 31 (e.g., March 31, 2007).
    "The three major suppliers of tobacco products" or "three majors" refers
to RBH, Imperial Tobacco Canada Limited (ITL) and JTI-MacDonald Corp. (JTI).
"BAT" refers to British American Tobacco p.l.c., the parent company of ITL.
"Super premium" refers to tailor-made cigarettes sold at above premium retail
prices. "Premium cigarettes" refers to tailor-made cigarettes sold at premium
retail prices, "cigarette price category" refers to cigarettes sold at less-
than-premium retail prices and "price category" refers to the combination of
the cigarette price category and the fine cut category (loose tobacco and pre-
portioned tobacco sticks). "Carton" refers to a selling unit containing
200 cigarettes or stick equivalents. "Domestic composite market" refers to all
fully tax-paid cigarettes and fine cut tobacco products sold into the Canadian
market. "Direct-to-Store Distribution" or "DSD" refers to a distribution model
where a tobacco manufacturer ships directly to retail accounts instead of
through a wholesale network. "Dark markets" refer to provincial jurisdictions
where the display of tobacco products by retailers is banned by government
regulation. "CTMC" refers to the Canadian Tobacco Manufacturers Council.

    New Accounting Pronouncements

    As required by the Canadian Institute of Chartered Accountants ("CICA"),
on April 1, 2007, the Company adopted CICA Handbook Section 3855 "Financial
Instruments - Recognition and Measurement", Section 3861 "Financial
Instruments - Disclosure and Presentation" and Section 1530 "Comprehensive
Income".
    Sections 3855 and 3861 prescribe when a financial asset, financial
liability, or non-financial derivative is to be recognized on the balance
sheet, and at what amount. These sections also specify how financial
instrument gains and losses are to be presented. The prospective adoption of
these new standards resulted in changes in the accounting and presentation for
financial instruments as well as the recognition of certain transitional
adjustments that have been recorded in opening retained earnings as described
in note 2. As required by the implementation of these new standards, the
comparative consolidated financial statements have not been restated.
    CICA Handbook Section 1530, "Comprehensive Income," introduces a new
requirement to temporarily present certain gains and losses outside net income
in other comprehensive income or loss. The Company determined that for the
year ended March 31, 2008 there were no gains or losses that would be recorded
in other comprehensive income or loss. Refer to note 2 for more details.
    The implementation of these Handbook requirements did not have a material
impact on the financial results of the Company.
    The Company implemented the following three new accounting disclosure
standards effective for the quarter and year ended March 31, 2008 in advance
of the required implementation date.
    CICA Handbook Section 1535 "Capital Disclosures" requires that an entity
disclose information that enables users of its financial statements to
evaluate an entity's objectives, policies and processes for managing capital,
including disclosures of any externally imposed capital requirements and the
consequences of non-compliance. This section applies to interim and annual
financial statements relating to fiscal years beginning on or after October 1,
2007 (note 4).
    The new Sections 3862 and 3863 replace Handbook Section 3861 "Financial
Instruments - Disclosure and Presentation," revising and enhancing its
disclosure requirements, and carrying forward unchanged its presentation
requirements. These new sections place increased emphasis on disclosures about
the nature and extent of risks arising from financial instruments and how the
entity manages those risks. Sections 3862 and 3863 apply to interim and annual
financial statements for fiscal years beginning on or after October 1, 2007
(note 3).
    The following is the new accounting standard the Company will adopt
effective April 1, 2008. Management is evaluating the standard and its impact
on the Company's consolidated financial statements.
    The CICA Handbook Section 3031 "Inventories" prescribes the accounting
treatment for inventories. Specifically, the section provides guidance
relating to the accounting for inventories and revises and enhances the
requirements for assigning costs to inventories. Section 3031 applies to
interim and annual financial statements for fiscal years beginning on or after
January 1, 2008.

    Outstanding Shares

    As at March 31, 2008, there were 68,095,608 common shares outstanding or
69,346,408 shares on a fully diluted basis when all exercisable options were
included. See notes 10 and 11 to the unaudited consolidated financial
statements.

    Industry Volumes & Market Share Measurement

    For the purpose of managing and evaluating its ongoing business, RBH
continues to use various information sources, not all of which are nationally
representative, including a proprietary wholesale volumetric reporting system,
industry market share information purchased from the Nielsen Company "Nielsen"
(a recognized market research company), selected retail data, consumer survey
data, and information reported by Statistics Canada. The market share data
reported in this annual report was obtained from Nielsen and measures sales of
RBH cigarettes sold by selected retailers in the domestic market. RBH
continues to evaluate the quality of fine cut market share information
available for the purposes of external reporting. Nielsen uses a sampling
approach to determine product market share for tobacco products sold at
retail. This information, by its nature, is subject to sampling error and
variability over a range that is not determinable. Management believes that
market share information provided under this approach may be useful in
reflecting market trends rather than providing an accurate absolute measure of
market share at any particular point in time. Nielsen market share of retail
sales cannot be meaningfully compared with market share of volumetric
shipments sold to wholesalers which had been previously reported by the
Company.

    Company Overview, Core Business and Strategy

    Rothmans participates in the Canadian tobacco industry through its 60%
ownership interest in RBH. The remaining 40% of RBH is owned by FTR Holding
S.A. of Switzerland, an affiliate of Philip Morris International, Inc.
Rothmans is the only widely held Canadian public company with interests
exclusively in the tobacco industry. Its shares are listed on the Toronto
Stock Exchange under the symbol ROC. Rothmans' financial results reflect those
of RBH after minority interest, plus income generated by the Company's cash
reserves, less the costs associated with operating Rothmans as a public
company.
    RBH is the second largest supplier of tobacco products to the tax paid
Canadian market and competes in all the significant categories of that market
including premium cigarettes, price category cigarettes and fine cut. RBH also
competes in the cigar, pipe tobacco, duty free and export categories which in
aggregate represented approximately 7% of RBH's net sales revenues in the
recent fiscal year.
    RBH continuously evaluates its brand offerings and positioning within
each market category against the opportunities presented by the marketplace.
This process allows for adjustments to the execution of its brand strategy in
order to best maximize performance. The adjustment in strategy can involve
activities including changes in RBH's selling price to wholesalers, brand
launches, brand line extensions, brand repositioning, brand acquisitions and
merchandising initiatives. While RBH has continued to demonstrate strong
volumetric and financial performance in the face of a declining market, the
apparent growing presence of contraband product in the Canadian market is
expected to continue to present significant challenges for RBH for the
foreseeable future. Management continues to believe that RBH's culture,
strategy, product depth, product positioning and business processes are
important strengths that will need to be utilized in responding to the
challenges inherent within its business.
    The Company continues to believe that worldwide tobacco industry
consolidation could present opportunities for Rothmans. While consolidation
has occurred, Rothmans has not found any attractive complements to its
existing business interest in RBH that meet the Company's objective of
maximizing shareholder value at an acceptable level of risk. Rothmans will
continue to assess potential opportunities with the objective of maximizing
shareholder value; however, the opportunities going forward may be more
limited than in the past.

    Industry Overview

    The Canadian tobacco market is composed principally of consumers who
choose between tax-paid premium cigarettes, price category cigarettes, fine
cut tobacco offerings and untaxed or partially taxed contraband tobacco
products. There is also a smaller category of consumers who choose tax-paid
pipe tobacco, cigars and specialty products. Premium and super premium
cigarette consumers are principally served by the three majors, offering
products in varying lengths, package formats and tobacco blend characteristics
under a variety of trade-marks. The price category includes price category
cigarettes and fine cut products. Price category cigarette consumers are
offered tax-paid tailor-made cigarette products at less than premium pricing
by the three majors and a number of regional manufacturers. Fine cut product
offerings include loose tobacco, high-yield tobacco and a variety of pre-
portioned tobacco stick products. This category offers a lower-priced, high-
quality alternative to the consumer who is willing to assemble the product
prior to consumption. Contraband products appear to be having an increasing
impact on the Canadian tobacco marketplace. In fiscal 2008, consumers
continued to move away from premium cigarette and fine cut products to either
tax-paid price category cigarettes or contraband products principally in
search of acceptable tobacco products at a reduced price.
    RBH management believes that a number of factors affected overall
industry shipments in fiscal 2008 including:

    
    -   Contraband - During the second quarter of fiscal 2008, the CTMC
        released a study on the illicit usage of cigarettes in the Canadian
        marketplace. This study indicated that 22% of the national cigarette
        volume being purchased was contraband product; up from 16.5% found in
        a similar study conducted a year earlier. High taxes reflected in the
        selling price to the consumer contribute to probable increases in the
        presence of contraband product in the domestic market.

    -   Seasonal trends in consumer purchasing patterns - The period between
        April and September has demonstrated stronger shipments than the
        period between October and March. RBH management believes that
        smoking restrictions are causing consumer consumption variations
        between the summer and winter seasons.

    -   Fluctuations in wholesaler buying patterns - Swings in wholesaler
        purchasing patterns motivated by the timing of tax increases, price
        increases, manufacturer trade programs, manufacturer trade terms and
        other factors are anticipated to have a significant effect on
        quarter-to-quarter sales volumes.

    -   Continued declines in consumer consumption of tobacco products.
    

    During fiscal 2008, there were a number of changes in tobacco tax rates.
During the first quarter of fiscal 2008, the Province of Alberta raised its
Provincial Tobacco Tax on cigarettes and fine cut products by $5.00 per
carton, or equivalent stick basis. Effective January 1, 2008, the federal
excise duty applicable to cigarettes, tobacco sticks and fine cut products was
raised by $0.59, $0.55 and $0.39 respectively, on a per carton basis, in order
to offset the effect of the 1% GST reduction. Effective February 27, 2008, the
federal government increased the federal excise duty on the tobacco stick
category to $85.00 per thousand sticks, the same level as for tailor-made
cigarettes. Also announced February 26, 2008, but effective July 1, 2008, the
federal government changed the application of federal excise duty on fine cut
and pipe tobacco products to a "per 50 gram or fraction thereof contained in a
package" basis. This change effectively introduces a "tax penalty" on fine cut
products and pipe tobacco not packaged in multiples of 50 grams.
    Subsequent to the fiscal year end, on April 24, 2008, the Province of
Prince Edward Island raised its Provincial Tobacco Tax on cigarettes and
tobacco stick products by $5.00 per carton or equivalent stick basis. The
corresponding increase on fine cut products was $4.02.

    Key Performance Drivers

    The key performance drivers for RBH are:

    
    -   the incidence and consumption trends for tax-paid tobacco products in
        the Canadian marketplace;

    -   the amount of industry sales volume being supplanted by contraband
        tobacco products;

    -   manufacturer pricing by product category;

    -   market share of the industry; and

    -   opportunities to reduce costs.
    

    RBH's revenue model and its associated strategies for increasing
profitability and shareholder value are driven by the tobacco volume sold and
the price charged for that volume. RBH uses a variety of data sources for
management purposes to estimate volume in equivalent sticks by product
category and market share by brand. Along with these metrics, RBH also uses
margin per equivalent stick to track its key drivers.
    Volume trends provide key strategic information on market developments
leading to decisions on product launches, line extensions, and price increases
that have driven volume growth, market share growth and increasing
profitability over the past several years.
    Tobacco consumption continues to be a significant socio-political issue,
giving rise to significant pressures on manufacturers, tobacco product
consumers, tobacco growers, retailers and wholesalers. The high tax load
imposed on tobacco products has caused a diversion of some consumers away from
tax-paid products and has led to the growth of a significant contraband market
of non-tax paid and partially tax-paid products.
    Industry participants are also subject to other factors affecting the
volume of tobacco sold and consumed including: the legal and regulatory
environment related to tobacco, federal and provincial tobacco taxation
policies and escalating restrictions on where tobacco can be consumed.
Suppliers of contraband product are not subject to the same legal, regulatory,
and taxation constraints. RBH sells only legal tax-paid product, markets only
to adults who choose to smoke, does not market to youth, does not encourage
youth to smoke or non-smokers to take up smoking and does not discourage
smokers from quitting.
    RBH regularly monitors its pricing position against industry
participants, by category. This position, along with product category margin,
provides profitability information used to drive strategic pricing decisions
as well as to support sales and marketing directions. Due to contraband's
covert nature, RBH is unable to effectively monitor its position versus
suppliers of non-tax paid or partially tax-paid product.

    Results at Rothmans Benson & Hedges Inc.

    RBH shipped a total of 10.7 billion and 2.3 billion equivalent sticks
into the domestic market during fiscal 2008 and the quarter ended March 31,
2008 respectively, representing a 0.2% increase and 2.6% decrease compared to
the same periods of the prior year. While increased shipments of RBH price
category cigarettes more than offset declines in premium cigarette and fine
cut shipments during fiscal 2008, they only partially offset these declines in
the recent quarter compared with the same period of the prior fiscal year.
Based on market share information provided by Nielsen, RBH's share of total
domestic cigarettes sold by retailers increased to 32.8% in fiscal 2008, from
31.6% in fiscal 2007 on a rolling 12 month basis. Given RBH's volume
performance in fiscal 2008 this trend is indicative of continued overall
domestic, tax-paid cigarette volume erosion during the year.
    Success in the premium category, which is a significant driver of
profitability for RBH, remains dependent on the strength of RBH's portfolio of
brands. Consumers buy premium cigarettes based on a number of factors
including brand attributes and the consistent product quality that the
manufacturer provides to the consumer. Brands within the tobacco industry have
a long product cycle. In recognition of this, RBH continues to focus its
marketing and sales efforts on the top six premium brands that account for
approximately 90% of its premium cigarette sales. Over the last year, RBH
continued to leverage its retail and wholesaler programs in support of those
brands which are central to the targeted premium brand strategy. To supplement
its premium brand strategy RBH launched a number of premium and super premium
brands. In fiscal 2007, RBH launched the Carreras and ROOFTOP brands, followed
by Benson & Hedges Superslims, Davidoff and Parliament in fiscal 2008. The
super premium category offers the tobacco consumer brands, formats and tobacco
blends that differ from traditional premium offerings and are often
internationally recognized.
    Regulatory constraints continue to limit RBH's ability to communicate
with adult smokers. With dark markets already in place in British Columbia,
Saskatchewan, Manitoba, Prince Edward Island, Nova Scotia, Nunavut and the
Northwest Territories, and scheduled for implementation in 2008 for Ontario,
Quebec and Alberta, RBH's strategy for long-term success in the premium
cigarette category is to focus on growing brands by investing in retail
availability programs.
    The growth in the cigarette price category continued in fiscal 2008 as
some premium cigarette consumers continued to switch to lower-priced
alternatives. In the fourth quarter, RBH launched the Quebec Classique brand
into the cigarette price category in Quebec. The brand initially competed in
the mid tier of the cigarette price category and was repositioned to the
lowest tier subsequent to year end.
    RBH believes that its products are well positioned in all price tiers in
the cigarette price category. The Accord brand has been positioned at the
lowest price tier nationally and the Quebec Classique brand matches Accord in
the lowest price tier in Quebec. At the new mid-price tier, depending on the
region, RBH has positioned its Canadian Classics and Mark Ten brands. At the
highest tier, the Number 7 brand continues to be offered nationally. In order
to further strengthen its Number 7 and Canadian Classics trade-marks, RBH
introduced new updated packaging during the fiscal year. The cigarette price
category continues to evolve and RBH is committed to strategies that defend
its significant market position. A number of factors continue to influence the
overall growth of this product category including the brands being offered to
consumers, their availability, price and the availability of contraband
products.
    The fine cut portion of the price category continues to be driven by a
combination of price, innovative product offerings, price category cigarette
offerings and the impact of contraband product. Although the erosion of
overall fine cut volumes continued during the year, RBH continues to believe
that fine cut remains a viable part of the price category by providing lower
priced alternatives to tobacco consumers. RBH's leadership position in fine
cut has been driven by innovation resulting in product offerings that are
either easier to assemble or offer better value. The introduction in fiscal
2007 of a new "Premium Long Cut" product innovation that produces fine cut
products with enhanced tobacco strand length continued to support RBH's
leadership position in fiscal 2008. During fiscal 2008 RBH focused its
attention in this category on ensuring appropriate product distribution and on
Accord brand offerings that compete at the lowest price tier of the fine cut
category. With the announced significant change in the federal excise duty
regime as it applies to both the tobacco stick category and the fine cut
category, RBH is currently evaluating its portfolio of product offerings to
ensure its competitive position during and post implementation.
    RBH's EBITDA margin was 50.9% and 43.4% in the fiscal year and quarter
ended March 31, 2008 compared with 47.6% and 39.4% in the same periods of the
prior fiscal year. The fiscal 2008 EBITDA margin increase was principally due
to price increases across all product categories partially offset by volume
shifts into lower-priced tiers of the cigarette price category and higher
general and administrative expenses, including incentive plan costs and
slightly higher spending on retail trade programs. The recent quarter EBITDA
margin decrease from 49.8% in the prior quarter was principally due to the
effect of lower shipment volumes. The increase in EBITDA margin from the
fourth quarter of the prior year is predominantly due to price increases
across all product categories partially offset by lower volumes shipped and
higher sales and marketing costs.
    In fiscal 2008, RBH implemented various price changes for its products.
In December 2007, RBH decreased the price charged to wholesalers for its
Accord brand price category cigarettes by $1.98 per carton in Quebec and
Ontario. This price reduction, in response to competitive activity in the
market, maintained RBH's commitment to remaining competitive in the lowest
cigarette price tier, where price sensitivity is most prevalent.
    During the second quarter, RBH increased its wholesale prices on Mark Ten
and Canadian Classics price category brands by $1.00 per carton in Quebec and
Ontario. During the quarter ended June 30, 2007, RBH increased the prices
charged to wholesalers by $1.00 per carton for the Carreras, Davidoff and
ROOFTOP premium brands, $1.50 per carton for all other premium brands and
$1.00 per carton for all price category cigarettes other than the Accord
brand. Prices on fine cut products, cigars and pipe tobacco were increased by
varying amounts depending on format.
    Effective July 30, 2007, RBH implemented changes to its wholesale
distribution terms, moving from a 2% prompt payment discount to a fee-for-
service model nationally with the exception of Newfoundland and Labrador where
terms remain unchanged. This change in distribution terms has had no material
impact on distribution costs incurred since the change in terms was
implemented.
    Subsequent to year end, RBH implemented a number of price changes for its
products. The wholesale price for the Dunhill brand was increased by $5.20 per
carton. Wholesale prices for all cigarette categories were increased by
$1.00 per carton nationally, except for the Accord and Canadian Classics
brands in the Atlantic region. The price for Quebec Classique was reduced by
$5.97 per carton. Prices on fine cut products, tobacco sticks, cigars and pipe
tobacco were increased by varying amounts depending on format.

    Rothmans Inc. Financial Results

    Basic earnings per share were $1.73 and $0.31 in the fiscal year and
quarter ended March 31, 2008 versus $1.47 and $0.27 in the comparable periods
of the prior year. RBH's sales, net of excise duty and taxes, of
$670.6 million and $142.7 million for fiscal 2008 and the recent quarter were
$52.0 million higher than fiscal year 2007 and $5.8 million higher than the
quarter ended March 31, 2007. Increased volumes of RBH price category
cigarettes, together with price increases across all product categories, more
than compensated for volume declines in premium cigarettes and fine cut
products in both periods.
    Investment income of $12.2 million for fiscal 2008 was $3.1 million
higher than fiscal 2007 due to the higher average cash, cash equivalents and
short-term investment balances held and a higher rate of return experienced
during the year.
    Operating costs, which totaled $334.3 million and $82.0 million for the
fiscal year and quarter ended March 31, 2008, were $6.6 million higher and
$1.6 million lower than in the same periods of the prior fiscal year. Higher
general and administrative expenditures including incentive plan costs
contributed to the higher operating costs in the fiscal year. Recent quarter
operating costs were slightly lower due to lower volumes and general and
administrative costs, partially offset by higher sales and marketing costs.
    RBH's amortization expense of $12.6 million for fiscal 2008 was
$0.3 million higher than in the prior year. Net capital spending by RBH
increased during fiscal 2008 to $13.6 million from $6.6 million in fiscal 2007
returning to a level that approximates amortization expense. In fiscal 2009,
historical capital expenditures approximating depreciation and a requirement
to comply with the federal government's new tax stamping regime are likely to
increase capital spending to the $18 - $22 million range.
    Income tax expense was $130.6 million and $23.3 million in the fiscal
year and recent quarter ended March 31, 2008 resulting in an effective tax
rate for the fiscal year to date of 40.0%. Due to various substantively
enacted federal and provincial tax rate reductions, the Company expects its
effective tax rate for fiscal 2009 to approximate 38.0%.


    
    Rothmans Inc. Consolidated Financial Summary (Unaudited)

    (in millions of dollars, except per share data)

    Year ended March 31                         2008        2007        2006
    -------------------------------------------------------------------------
    Operations
    Sales, net of excise duty and taxes        670.6       618.6       607.2
    Cash flows from operations                 240.4       204.1       183.4
    Earnings before minority interest          195.5       165.8       165.7
    Earnings and comprehensive earnings
     for the year                              117.6        99.8        99.5
    Dividends paid                              88.5        81.6       182.7

    Financial position
    Net working capital                        273.0       248.6       213.0
    Total assets                               542.8       485.9       447.6
    Total long-term liabilities                206.1       212.3       197.9
    Shareholders' equity                       164.2       134.2       113.9

    Per common share
    Earnings - basic                            1.73        1.47        1.47
    Earnings - diluted                          1.72        1.46        1.45
    Dividends paid                            1.30(1)       1.20      2.70(2)
    Shareholders' equity                        2.41        1.97        1.68
    -------------------------------------------------------------------------
    (1) At the second quarter of year 2008, the quarterly dividend increased
        to $0.35 per share from $0.30 per share.
    (2) 2006 dividends paid includes a special dividend of $1.50 per share.
    

    Capability to Deliver Results

    Cash Flow

    RBH's operations generate significant cash resources. These are currently
sufficient to fund interest payments on RBH's long-term debt, capital
expenditures and dividends to its shareholders. Based on RBH's historical
earnings levels, the dividends received by Rothmans from RBH are expected to
be sufficient to fund its operations, pay dividends to its public shareholders
and continue to accumulate cash reserves.
    RBH's cash flow from operations before changes in working capital was
$216.7 million in the fiscal year ended March 31, 2008 compared with
$182.0 million in the prior year. RBH's ability to generate cash from
operations is generally sufficient to fund the day-to-day financing needs of
RBH's business. It is anticipated that additional funds, should they be
required, would be obtained through short-term bank borrowings.
    During fiscal 2008, the Company paid dividends of $88.5 million, versus
$81.6 million in fiscal 2007. At the end of the second quarter of fiscal 2008,
the Company announced an increase in the regular quarterly dividend to
$0.35 per share from $0.30 per share resulting in a total fiscal 2008 regular
dividend of $1.30 per share compared to $1.20 per share in fiscal 2007.

    Cash Resources

    Cash, cash equivalents and short-term investments of $234.9 million at
March 31, 2008 represented the consolidated cash resources of the Company
versus $172.2 million at March 31, 2007. The increase in cash, cash
equivalents and short-term investments is predominantly due to earnings from
RBH, investing activities and normal quarterly fluctuations in RBH's working
capital requirements. On a non-consolidated basis, Rothmans held cash, cash
equivalents and short-term investments of $154.4 million at March 31, 2008
down slightly from $157.0 million at December 31, 2007 but up from
$120.8 million at March 31, 2007. The year over year increase results from the
payment of dividends by the Company and the timing of dividends paid by RBH
while the decrease from the prior quarter was primarily due to higher
dividends paid by the Company than were received from RBH during the recent
quarter.
    RBH currently has outstanding $150.0 million of senior unsecured bonds
maturing on December 21, 2011 carrying a coupon rate of 5.552%. It is RBH's
present intention to maintain this level of debt within its capital structure
for the foreseeable future and not to enter into fixed or floating interest
rate swaps (see note 9 to the unaudited consolidated financial statements for
the fiscal year).

    Contractual Obligations

    The table below summarizes RBH's obligation to make future payments on
long-term debt, lease obligations and other obligations as at March 31, 2008.

    
    -------------------------------------------------------------------------
    Contractual                      Fiscal     Fiscal     Fiscal
     Obligations ($000's)              2009       2010  2011-2013      Total
    -------------------------------------------------------------------------
    Long term debt                        -          -    150,000    150,000
    Operating leases                  3,619      2,990      6,333     12,942
    Purchase obligations              2,423          -          -      2,423
    -------------------------------------------------------------------------
    Total contractual obligations     6,042      2,990    156,333    165,365
    -------------------------------------------------------------------------
    

    Non-Capital Resources

    RBH's critical non-capital resources are its trade-marks, and the culture
and values that characterize the organization. The continuing quality of
product that RBH delivers to its consumers is a key factor in the strength of
RBH's brands. RBH's culture and values are built upon a number of competencies
that reflect teamwork, leadership and a commitment to win. RBH believes that
its culture and values, which drive how the organization functions, are
critical to its success.

    Manufacturing Facilities

    RBH's capital expenditure programs are focused on maintaining
manufacturing flexibility and capacity at both the Quebec and Brampton plants.

    Management Estimates

    Critical Accounting Estimates

    The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Although
these estimates are based on management's best knowledge of current events and
actions that the Company and RBH may undertake in the future, actual results
could differ from these estimates. Other than as discussed below, there are no
critical accounting estimates that require disclosure or discussion in this
report.

    Employee Future Benefits

    RBH provides defined benefit pension plans, defined contribution pension
plans and post-employment benefits to its employees. For the defined benefit
pension plans and the post employment benefits, determination of the benefit
obligation and associated expense is subject to significant actuarial
assumptions including the discount rate, the expected return on plan assets,
the projected rate of compensation increase, health care cost trend rates, and
the demographic characteristics of RBH's employee base.
    The discount rate is used in determining the present value of the benefit
obligation at the fiscal year end. The discount rate is prescribed as the
market rate of high quality fixed income investments with a term equivalent to
the projected benefits to be paid under the plans. A lower discount rate
increases the present value of the benefit obligation. A 25 basis point change
in the discount rate applied to the plans would result in a change in the
obligation liability of $5.4 million and maintain the benefit cost for fiscal
2008.
    The expected return on plan assets assumption is based on plan asset
allocations and the associated future estimates of the long-term investment
returns. A 25 basis point change in the expected return on plan assets
assumption would change the pension cost in fiscal 2008 by approximately
$0.3 million.

    Compensation Programs

    RBH's compensation bonus programs are tiered by level of responsibility
and involve all non-union employees. Bonuses are generated from these programs
based on the achievement of pre-determined corporate market share,
profitability and shareholder return targets, aligning the programs with the
drivers of shareholder value. The Company is required to make estimates and
assumptions of future financial and operating performance to estimate the
ultimate amounts payable under these programs. Changes in estimates of future
financial and operating performance could result in material adjustments to
amounts recognized in the consolidated financial statements. Annual option
grants as a part of executive compensation programs were discontinued
effective fiscal 2006.

    Litigation Contingent Liabilities

    As discussed more fully in the Risks and Uncertainties section of this
MD&A, the Company and RBH have been the subjects of various lawsuits, legal
proceedings and investigations. Management is unable to determine the
likelihood of loss or liability and is unable to meaningfully estimate the
loss, if any, that might result and neither the Company nor RBH has accrued
for potential losses or liabilities. However, the outcome of any contingency
is uncertain. If determined adversely against the Company or RBH, these
lawsuits, legal proceedings or investigations either individually or in the
aggregate, could involve significant damages or payments which would have a
significant adverse effect on the financial condition of the Company, and
which the Company and RBH may not have the resources to satisfy.

    Risks and Uncertainties

    Regulatory Environment

    Canada is one of the most regulated environments in the world for the
marketing and sale of tobacco products. Restrictive legislation governing
virtually all aspects of tobacco product sales and promotion has been imposed
by federal, provincial and municipal governmental authorities in Canada.
    The Tobacco Act (Canada) prohibits the direct or indirect promotion of
tobacco products and bans sponsorships by tobacco product manufacturers. It
also mandates the display of health warnings and information concerning
constituents of the product on tobacco product packaging and requires
prescribed information concerning tobacco products and their ingredients and
emissions to be reported to Health Canada. In December 2002, the Quebec
Superior Court dismissed the constitutional challenge of this legislation by
the three major tobacco product suppliers. In August 2005, the Quebec Court of
Appeal essentially upheld the decision of the lower court. The federal
government obtained leave to appeal to the Supreme Court of Canada with
respect to those sections of the legislation which had been struck down by the
Court of Appeal, and the Supreme Court of Canada heard the appeal, as well as
the cross appeal of the three major tobacco product suppliers, in February
2007. In June 2007, the Supreme Court of Canada issued its decision on the
constitutionality of the legislation, allowing the appeals of the federal
government and dismissing the cross appeals of the three major tobacco product
suppliers. Essentially, the Supreme Court of Canada ruled that the legislative
and regulatory provisions at issue, when properly interpreted, were
constitutionally valid.
    Legislation banning the display, promotion and advertising of tobacco
products at retail stores is in effect in British Columbia, Saskatchewan,
Manitoba, Prince Edward Island, Nova Scotia, Nunavut and the Northwest
Territories, and will be in effect in Ontario and Quebec as of May 31, 2008.
In Alberta, a retail display ban comes into effect on July 1, 2008. In March
of this year, New Brunswick introduced legislation which, if passed, will ban
the display, promotion and advertising of tobacco products in retail stores as
of January 1, 2009. Health Canada is considering issuing federal regulations
banning the display of tobacco products at retail outlets where they are sold.
Regulations restricting or prohibiting smoking in the workplace and other
environments are in place in many jurisdictions. Legislation enacted in Quebec
as of May 31, 2006 prohibits the sale of tobacco products in such places as
the grounds and buildings of colleges and universities, buildings intended
mainly for the presentation of sports, recreational, cultural or artistic
activities and pubs, taverns and bars.
    Legislation enacted in British Columbia, New Brunswick, Newfoundland and
Labrador, Nova Scotia, Manitoba and Saskatchewan allows the provincial
government in its own right to bring an action against tobacco product
manufacturers for the recovery of health care costs that allegedly have been,
or will be, incurred by the province in respect of alleged smoking-related
illnesses. In January 2001, the Province of British Columbia initiated a
lawsuit in the Supreme Court of British Columbia against RBH, the Company and
numerous other Canadian and international tobacco companies and various
tobacco trade associations seeking unspecified damages in an amount to cover
the costs that allegedly have been, or will be, incurred by the Government of
British Columbia in providing health care benefits to British Columbia
residents who have allegedly suffered smoking-related illnesses. The action
was brought pursuant to the Tobacco Damages and Health Care Costs Recovery Act
(British Columbia), which purports to facilitate individuals and the
provincial government in suing tobacco manufacturers. This legislation was
enacted in January 2001, following a successful challenge (decided in March
2000 by the Supreme Court of British Columbia) by a number of tobacco
manufacturers of similar predecessor legislation enacted in 1998. RBH and
other tobacco manufacturers challenged the validity of the new British
Columbia legislation on constitutional grounds. In May 2004, the B.C. Court of
Appeal, overturning a lower court decision, ruled that the legislation was
constitutionally valid. RBH and other tobacco product manufacturers appealed
this decision to the Supreme Court of Canada which dismissed the appeal in
September 2005. The action in British Columbia is now proceeding, and the
trial is currently scheduled for the fall of 2010. A motion brought by the
federal government, seeking to strike out a third party notice which would
make it a party to the lawsuit in British Columbia, was heard in March 2008.
The motion was allowed in April 2008. The Canadian tobacco companies have
filed notices of appeal. In March 2008, the Company and RBH were named as
defendants, along with Imperial Tobacco Canada Limited, JTI-Macdonald Corp.
and a number of international tobacco product manufacturers, in a lawsuit
filed by the province of New Brunswick in the Court of Queen's Bench of New
Brunswick. The action has been brought pursuant to the Tobacco Damages and
Health Care Costs Recovery Act (New Brunswick). The lawsuit is based upon
grounds which include alleged misrepresentations made by the defendants in
respect of the hazards of tobacco products and seeks to recover unspecified
damages for costs that are alleged by the Government of New Brunswick to have
been incurred in providing health care benefits to New Brunswick residents who
have allegedly suffered smoking-related illnesses. At this time, no action has
been commenced against the tobacco manufacturers in any of the other
provinces.
    Regulations enacted under the Tobacco Act require all cigarettes
manufactured in or imported into Canada as of October 1, 2005 to meet new
reduced ignition propensity performance standards and reports on testing of
cigarette brands against these new standards to be submitted to Health Canada
on an annual basis.
    In January 2008 Canada Revenue Agency ("CRA") announced that a federal
tobacco stamping regime which would be applicable to all Canadian tobacco
product manufacturers and importers was proposed to be implemented in the
summer of 2008. The new regime would require prescribed stamps to be applied
to tobacco products which indicate that applicable excise duty has been paid.
In March 2008, CRA advised the manufacturers implementation would be delayed
to allow all parties adequate time to prepare for the new stamping regime.
Implementation is now scheduled for January 1, 2010. RBH is currently
discussing these and other anti-contraband measures with government
authorities. The cost associated with compliance with the new stamping
requirements and other anti-contraband measures including necessary plant
equipment upgrades cannot be determined by RBH until such time as details of
the new requirements have been finalized.
    Health Canada published a consultation document in 2004 soliciting
comments on a proposal for new health-related information on tobacco product
labels. It proposed, among other things, 48 new health warnings for tobacco
packaging as well as new health information messages. Health Canada is also
considering implementing regulations which would require the current toxic
emissions statement on tobacco product packaging to be replaced by other
information. A survey with respect to the costs of these proposed regulations
was circulated to industry stakeholders in March 2006.
    In August 2007, Health Canada introduced proposed regulations which would
prohibit the use of "light" and "mild" descriptors, or variations of those
terms, in connection with tobacco products and accessories. In November 2006,
at the request of the Competition Bureau, RBH agreed to discontinue
manufacturing and packaging tobacco products using "light" and "mild"
descriptors in advance of Health Canada's anticipated regulations. This change
in packaging has now been completed. Similar agreements were made with the
other two major suppliers of tobacco products.
    Restrictive legislation and regulations enacted by all levels of
government have proliferated in recent years. This legislation limits RBH's
ability to compete for market share as well as adds significant costs to RBH's
operations in terms of both increased expenses and reduced operating
efficiencies. If RBH is unable to effectively market its products and compete
for market share, or if the costs of compliance with government legislation
and regulation cannot be offset through increased selling prices for its
products, RBH's sales and operating results will be adversely affected.

    Legal Proceedings

    Various lawsuits and legal proceedings arising out of the sale,
distribution, manufacture, development, advertising and marketing of tobacco
products are pending, have been threatened or may be instituted against the
Company and RBH. Since 1995, there has been an increase in the number of these
lawsuits, which include government actions for recovery of health care costs
allegedly incurred in respect of smoking-related illnesses. Two of these
lawsuits have been authorized by the court to proceed as class actions and
punitive damages are specifically pleaded in a number of cases in addition to
compensatory and other damages.
    The lawsuits that have been filed against the Company and RBH to date
remain at an early stage and involve complicated and novel questions of law
that may take several years to resolve. Although the precise scope of the
class actions remains unclear, such actions will involve a large number of
people, possibly ranging in the millions. If determined adversely against the
Company or RBH, these lawsuits, either individually or in the aggregate, could
involve significant damages, which would have a significant adverse effect on
the financial condition of the Company, and which the Company and RBH may not
have the resources to satisfy.
    The Company and RBH believe that they have good defences in the court
proceedings with respect to the lawsuits which have been filed against them to
date and deny the allegations therein. The Company and RBH intend to
vigorously defend themselves in the court proceedings relating to those
lawsuits.
    In addition to the lawsuits commenced against the Company and RBH to
date, RBH is currently the subject of an ongoing investigation by the RCMP
relating to its sales of products exported from Canada in the period 1989-
1996. This investigation, of which RBH was notified in January 2002, is
related to allegations that tobacco products manufactured and exported by RBH
were illegally smuggled back into Canada during this period without payment of
applicable excise and tobacco taxes and duties. Although no action has been
commenced and no charges laid against the Company or RBH or any of their
present or former employees, officers or directors, the Company and RBH
believe that the RCMP and federal and provincial government authorities intend
to lay charges or commence other legal proceedings involving the Company or
RBH and certain of their employees, officers and directors relating to or
arising from these allegations. Counsel for RBH is continuing to have
discussions with government authorities with respect to this matter. RBH's
business and the Company would be materially adversely affected in the event
of an unfavourable outcome of current or future investigations, or in the
event charges or other legal proceedings are brought against RBH or the
Company.
    Illegal smuggling of tobacco products into Canada occurred during the
late 1980s and early 1990s coincident with the imposition by the federal and
provincial governments of significant new taxes and duties on tobacco
products. Such taxes and duties were, however, not imposed on tobacco products
exported out of Canada. In February 1994, in an effort to curb the high level
of smuggling of tobacco products into Canada, the federal and certain
provincial governments reduced taxes to earlier levels. Exports of tobacco
products by the major Canadian tobacco manufacturers, including RBH, increased
significantly from 1991 to 1994. In February 2003 the RCMP filed criminal
charges against another Canadian tobacco products manufacturer and certain of
its related parties alleging violations of the Criminal Code (Canada) in
connection with the sale and export of tobacco products during the early
1990's. In January 2006, a former executive of that company pled guilty to
charges of defrauding the federal government of tax revenue and was sentenced
to eight months house arrest in return for providing evidence against that
company and certain of its executives. A preliminary hearing with respect to
the other defendants concluded in 2006 and in May 2007 the Ontario Court of
Justice ordered that company and its former chief executive officer to stand
trial. Charges against six other executives were initially dismissed. The
Crown sought judicial review of these dismissals and in February 2008 those
dismissals were set aside by the Superior Court of Justice and the matter was
remitted back to the preliminary inquiry judge for reconsideration. In August
2003, the Government of Canada initiated a civil lawsuit and in August 2004
the Minister of Revenue for the Province of Quebec initiated tax reassessment
proceedings against this company and related parties seeking to recover taxes
allegedly owing in connection with the sale of such exported products. In
September 2004, this manufacturer was granted protection from creditors under
the Companies Creditors' Arrangement Act (Canada) and a stay of the civil
proceedings brought by the Government of Canada and the Minister of Revenue
for the Province of Quebec. Since that time, claims aggregating approximately
$10 billion have been made against that company relating to unpaid taxes and
duties on that company's export sales of tobacco products during the early
1990's. In November 2004, representatives of the RCMP conducted a search of
the largest Canadian tobacco products supplier as part of its investigation
into sales of tobacco products exported from Canada.
    The Company also monitors other legal proceedings and lawsuits affecting
the industry in Canada and which are ongoing or have occurred in other
jurisdictions. In Canada, these proceedings include an action against another
Canadian tobacco product manufacturer for damages alleging that a tobacco
product caused a fire resulting in injury and/or death of the plaintiffs and
that the defendant was negligent in failing to sell a fire-safe cigarette and
class action suits alleging that the use of the terms "light" and "mild" and
other similar descriptors constitute deceptive and misleading representations
and unfair trade practices. In other jurisdictions, including the United
States and the European Union, these proceedings have included product
liability claims relating to smoking and health, personal injury claims caused
by environmental tobacco smoke, class action suits alleging that the use of
descriptors such as "lights" and "ultra lights" constitutes deceptive and
unfair trade practices, claims and investigations relating to allegations of
illegal exports and imports of tobacco products and of unlawful pricing
activities, a co-operation agreement relating to anti-contraband and anti-
counterfeit efforts and settlements of health care recovery litigation.
Settlement agreements reached in the other jurisdictions on these types of
issues have involved significant monetary payments being made by tobacco
product suppliers in those jurisdictions over an extended period of up to
20 years. Should tobacco product manufacturers in Canada enter into settlement
arrangements or agreements of a similar nature in respect of any lawsuits,
legal proceedings or investigations currently outstanding or those that may be
brought in the future, significant monetary payments to third parties
including government authorities in Canada may be required which could
adversely affect the financial condition and earnings of such companies,
including RBH and the Company should they be a party to such arrangements.
    It is not possible, at the present time, to determine the likelihood of
loss or liability or to meaningfully estimate the loss, if any, that might
result from the lawsuits, legal proceedings and investigations, against the
Company or RBH or any future lawsuit or legal proceeding that may be brought
as a result of any pending or future investigation or claim against the
Company or RBH. Lawsuits, legal proceedings and investigations are subject to
many uncertainties, and it is possible that there will be adverse developments
against the Company and RBH and that these cases and any potential future
cases could be decided unfavourably against the Company or RBH. The Company
and RBH may also decide to settle current or future lawsuits, legal
proceedings or investigations if it is believed to be in the best interests of
the Company or RBH. In certain circumstances, defendants in litigation
proceedings may be required to post a bond while an unfavourable trial
decision is under appeal. The amount of such a bond may be significant and
beyond the financial resources of the defendant. An unfavourable outcome or
settlement of pending legal proceedings or investigations against RBH or other
tobacco product manufacturers could encourage the commencement of additional
litigation, or investigations involving RBH or the Company. There have also
been a number of adverse legislative, regulatory, political and other
developments concerning cigarette smoking and the tobacco industry that have
received widespread media attention. These circumstances may negatively affect
the outcome of pending proceedings and investigations and may prompt the
commencement of additional similar proceedings and investigations.
    An unfavourable outcome or settlement of lawsuits, legal proceedings or
investigations, pending and future, against the Company or RBH could involve
significant damages or significant monetary payments that would have a
significant adverse effect on the financial condition of the Company and RBH
and which, in the case of an adverse judgment, the Company and RBH may not
have the resources to satisfy.
    Further information concerning the lawsuits, legal proceedings and
investigations affecting the Company and RBH is contained in Note 16 to the
unaudited consolidated financial statements which accompany this MD&A.

    Tobacco Taxation

    Federal and provincial tobacco tax increases in the early part of this
decade raised the price of cigarettes to unprecedented levels. In several
jurisdictions cigarette prices more than doubled during this short period of
time. This policy has raised the demand for illicit product and increased the
incentive for those that choose to violate Canadian law. In particular, the
illegal sale of non tax-paid or partially taxed tobacco products emanating
from Native reserves located in Ontario, Quebec and New York State has been
reported as the major source of the contraband product distributed in Canada.
A study commissioned by the CTMC released this year found that illicit product
represents in excess of twenty percent of cigarettes consumed across Canada.
In Ontario and Quebec this figure is estimated to exceed thirty percent.
    RBH is the market leader in the fine cut segment and these products play
an important role in providing a fully taxed alternative to price-sensitive
smokers who might otherwise switch to contraband products. Traditionally, fine
cut products have been taxed at lower rates than tailor-made cigarettes in
recognition that personal manufacture is required. However, in February 2008,
the federal government increased the excise duty rate on tobacco sticks to the
equivalent cigarette rate. Tobacco sticks are now taxed on par with cigarettes
in all but a few jurisdictions in Canada. With respect to roll-your-own fine
cut products one province, Newfoundland and Labrador, has revised its tax
policy to tax these products on an approximate cigarette yield basis. Other
jurisdictions may also be considering a similar policy. Fine cut products,
including tobacco sticks, provide a controlled alternative to contraband. Fine
cut tobacco sales volumes are not growing at the expense of higher-taxed
cigarette products. In fact, sales volumes are decreasing in this market
segment at a higher rate than cigarette volume declines. The Company continues
to believe that fine cut products can contribute to the control of contraband.
However, the benefits derived from maintaining lower taxes on tobacco stick
products have recently been eliminated. RBH believes that it is important to
maintain a differentiated taxing structure for roll-your-own fine cut
products.
    RBH's sales volumes are negatively affected by the existence of illicit
trade in tobacco products within Canada, and future tax increases will
exacerbate the problem. As well, any shift in government policy to tax roll-
your-own fine cut products at cigarette equivalents may make RBH's fine cut
products less attractive to consumers. All of these factors could result in an
adverse effect on sales volumes and on RBH's profitability, cash flows and
financial condition.

    New Product Standards

    New product technologies continue to be of importance due to the
political, social and legal focus on the health effects of tobacco products.
Tobacco product manufacturers continue to seek ways to develop and
commercialize new product technologies, which continue to offer adult smokers
products that meet their taste expectations. While RBH will endeavour, where
possible, to ensure that new product developments and new technologies for
tobacco products will be available to it, there can be no guarantee that RBH
will be successful in these efforts. Should one or more of its competitors
acquire such technologies which are not available to RBH, it may be at a
competitive disadvantage and its sales and results of operations may be
adversely affected.

    Competition

    The tobacco industry is highly competitive. Certain of RBH's competitors
in the tobacco industry have substantially greater financial resources than
RBH or may have an inherently greater ability to operate on a lower-cost basis
or implement production efficiencies. As a result, those competitors may be
able to compete more aggressively than RBH, particularly in respect of retail
merchandising arrangements and product selling margins.
    The combined effect of significant tax increases implemented by federal
and provincial governments together with manufacturers' price increases have
resulted in substantial increases in the retail prices of tobacco products,
particularly premium cigarettes. Over the past five years, RBH's premium
brands have encountered significant increased competition from lower-priced
cigarette products. Additional competition has also resulted from diversion
into the domestic market of cigarettes intended for sale outside of Canada,
the sale of counterfeit cigarettes by third parties and the sale of non or
partially tax paid contraband product. As a result, the market share of
premium cigarettes has decreased significantly, putting pressure on overall
selling margins of the three major suppliers of tobacco products. If these
competitive factors continue, sales of premium cigarettes, the most profitable
category, may continue to shift to both the cigarette price category and
contraband product. The impact on the sales and earnings of RBH will be
dependent upon consumer buying patterns with respect to products offered
through the contraband distribution network and in the cigarette price
category by RBH and competing suppliers. Steps that RBH has taken or may take
with respect to the cigarette price category may not continue to be
successful. All of these factors could result in lower overall sales and
margins for RBH and could have a significant adverse effect on the operations,
cash flow and financial condition of RBH.

    Risk Management

    Corporate risks are managed by RBH at the functional level with the
oversight of a Risk Management Committee employing an enterprise-wide risk
management methodology. Risk management is a continuous process and RBH
refines its crisis management and contingency plans from time to time. RBH
adheres to certain standards, principles and operational practices in an
effort to reduce risk exposure throughout the organization, and emphasizes
risk management as a guiding objective for its operations.

    Outlook

    In fiscal 2008, it is believed that the presence of contraband remained a
key factor in affecting both RBH and total tax-paid industry volumes.
Continued availability of contraband product in the domestic market as a
result of high tobacco tax rates across the country may cause further declines
in tax-paid industry volumes in the future resulting in a negative impact on
RBH's sales volumes.
    Competition by each of the three major suppliers of tobacco products in
the cigarette price category has led to substantial growth of that category in
recent years, and there continues to be a significant degree of variability in
the underlying business trends, making it difficult to accurately estimate the
impact on consumer purchasing patterns.
    Looking ahead, Rothmans expects that a number of factors could affect its
financial performance including:

    
    -   the success of efforts by the Company and RBH to defend themselves
        against legal claims and investigations and the outcome or settlement
        of such claims and investigations that are ongoing or may arise in
        the future;

    -   increased levels of contraband product that may occur due to the high
        tax environment;

    -   the impact of continued high levels of taxation on consumer
        purchasing patterns;

    -   the variability in the rate of growth of the cigarette price category
        and RBH's ability to successfully compete in that segment;

    -   price competition within the lowest price tier of the cigarette price
        category;

    -   continued declines in the consumption of tobacco products;

    -   RBH's ability to continue to implement price increases for its
        products;

    -   RBH's ability to compete successfully in the premium cigarette
        category;

    -   the continued volatility in the cigarette market as a result of the
        evolution of the Canadian cigarette price category, varying
        wholesaler purchasing patterns and seasonal fluctuations in smoker
        consumption;

    -   the impact of continued restrictive legislation and regulations over
        the sale of tobacco products including legislation banning the
        display of tobacco products in retail stores;

    -   RBH's ability to maintain its leading position in the fine cut
        segment;

    -   government tax policy regarding federal excise duty and Provincial
        Tobacco Tax rates applicable to fine cut products; and

    -   RBH's continued success in maintaining or reducing costs, especially
        in view of the potential for regulated changes to product and
        packaging specifications, including health warnings and the proposed
        new tobacco stamping regime recently announced by Canada Revenue
        Agency.


    Quarterly Unaudited Consolidated Financial Information

                                                FISCAL 2008
    Period ended (in
     thousands of
     dollars, except                                                   Total
     per share data)          Jun 30    Sep 30    Dec 31    Mar 31      Year
    -------------------------------------------------------------------------
    EARNINGS

    Revenues:
    Sales, net of excise
     duty and taxes          177,431   179,672   170,822   142,669   670,594
    Investment income          2,677     3,098     3,406     2,987    12,168
                            -------------------------------------------------
    Total revenues           180,108   182,770   174,228   145,656   682,762

    Costs:
    Operating costs
     excluding amortization   80,079    85,157    87,055    81,968   334,259
                            -------------------------------------------------
    Earnings before interest,
     income taxes,
     amortization and
     minority interest       100,029    97,613    87,173    63,688   348,503
    Amortization               3,929     2,834     2,856     2,979    12,598
    Interest expense
      - Long-term debt         2,080     2,094     2,094     2,070     8,338
      - Other                    242       303       424       521     1,490
                            -------------------------------------------------
    Earnings before income
     taxes and minority
     interest                 93,778    92,382    81,799    58,118   326,077
    Income taxes
      - Current               36,996    36,766    32,038    28,329   134,129
      - Future                   498       196       838    (5,070)   (3,538)
                            -------------------------------------------------
    Total income taxes        37,494    36,962    32,876    23,259   130,591
                            -------------------------------------------------

    Earnings before
     minority interest        56,284    55,420    48,923    34,859   195,486
    Minority interest         22,456    22,074    19,513    13,823    77,866
                            -------------------------------------------------
    Earnings and
     comprehensive earnings
     for the period           33,828    33,346    29,410    21,036   117,620
                            -------------------------------------------------
                            -------------------------------------------------

    Earnings per common
     share
      - Basic                   0.50      0.49      0.43      0.31      1.73
                            -------------------------------------------------
                            -------------------------------------------------
      - Diluted                 0.49      0.49      0.43      0.31      1.72
                            -------------------------------------------------
                            -------------------------------------------------
    RETAINED EARNINGS

    Balance at beginning
     of period                86,645   100,398   113,325   118,913    86,645
    Transitional adjustment
     on adoption of new
     accounting policies         344         -         -         -       344
                            -------------------------------------------------
    Balance at the beginning
     of period as restated    86,989   100,398   113,325   118,913    86,989
    Earnings and
     comprehensive earnings
     for the period           33,828    33,346    29,410    21,036   117,620
                            -------------------------------------------------
                             120,817   133,744   142,735   139,949   204,609

    Dividends paid:
    Common Shares -
    (2008 - $1.30 per share) (20,419)  (20,419)  (23,822)  (23,834)  (88,494)
                            -------------------------------------------------
    Balance at end of
     period                  100,398   113,325   118,913   116,115   116,115
                            -------------------------------------------------

    Rothmans Inc. and subsidiary companies (unaudited)



    Quarterly Unaudited Consolidated Financial Information

                                                FISCAL 2007
    Period ended (in
     thousands of
     dollars, except                                                   Total
     per share data)          Jun 30    Sep 30    Dec 31    Mar 31      Year
    -------------------------------------------------------------------------
    EARNINGS

    Revenues:
    Sales, net of excise
     duty and taxes          162,886   165,237   153,606   136,830   618,559
    Investment income          1,953     2,320     2,570     2,186     9,029
                            -------------------------------------------------
    Total revenues           164,839   167,557   156,176   139,016   627,588

    Costs:
    Operating costs
     excluding amortization   78,121    82,643    83,283    83,606   327,653
                            -------------------------------------------------
    Earnings before
     interest, income taxes,
     amortization and
     minority interest        86,718    84,914    72,893    55,410   299,935
    Amortization               2,865     2,967     3,292     3,215    12,339
    Interest expense (income)
      - Long-term debt         2,080     2,095     2,094     2,059     8,328
      - Other                      3       (30)       22        66        61
                            -------------------------------------------------
    Earnings before income
     taxes and minority
     interest                 81,770    79,882    67,485    50,070   279,207
    Income taxes
      - Current               32,192    32,422    27,083    30,181   121,878
      - Future                   775       343       321    (9,895)   (8,456)
                            -------------------------------------------------
    Total income taxes        32,967    32,765    27,404    20,286   113,422
                            -------------------------------------------------

    Earnings before
     minority interest        48,803    47,117    40,081    29,784   165,785
    Minority interest         19,532    18,800    15,954    11,737    66,023
                            -------------------------------------------------
    Earnings and
     comprehensive earnings
     for the period           29,271    28,317    24,127    18,047    99,762
                            -------------------------------------------------
                            -------------------------------------------------
    Earnings per common share
      - Basic                   0.43      0.42      0.35      0.27      1.47
                            -------------------------------------------------
                            -------------------------------------------------
      - Diluted                 0.43      0.41      0.35      0.26      1.46
                            -------------------------------------------------
                            -------------------------------------------------
    RETAINED EARNINGS

    Balance at beginning
     of period                68,513    77,379    85,292    89,009    68,513
    Earnings and
     comprehensive earnings
     for the period           29,271    28,317    24,127    18,047    99,762
                            -------------------------------------------------
                              97,784   105,696   109,419   107,056   168,275
    Dividends paid:
    Common Shares -
    (2007 - $1.20 per share) (20,405)  (20,404)  (20,410)  (20,411)  (81,630)
                            -------------------------------------------------
    Balance at end of
     period                   77,379    85,292    89,009    86,645    86,645
                            -------------------------------------------------
                            -------------------------------------------------

    Rothmans Inc. and subsidiary companies (unaudited)



    Unaudited Consolidated Statements of Earnings,
    Comprehensive Earnings and Retained Earnings

    Year ended March 31 (in thousands
     of dollars, except per share data)             2008      2007      2006
    -------------------------------------------------------------------------

    EARNINGS
    Revenues:
    Sales, net of excise duty and taxes          670,594   618,559   607,165
    Investment income                             12,168     9,029     5,291
                                                -----------------------------
    Total revenues                               682,762   627,588   612,456

    Costs:
    Operating costs excluding amortization       334,259   327,653   318,439
                                                -----------------------------
    Earnings before interest, income taxes,
     amortization and minority interest          348,503   299,935   294,017
    Amortization                                  12,598    12,339    10,663
    Interest expense
      - Long-term debt (note 9)                    8,338     8,328     8,328
      - Other                                      1,490        61       197
                                                -----------------------------
    Earnings before income taxes and
     minority interest                           326,077   279,207   274,829
    Income taxes (note 13)
      - Current                                  134,129   121,878   106,584
      - Future                                    (3,538)   (8,456)    2,530
                                                -----------------------------
    Total income taxes                           130,591   113,422   109,114
                                                -----------------------------

    Earnings before minority interest            195,486   165,785   165,715
    Minority interest                             77,866    66,023    66,251
                                                -----------------------------
    Earnings and comprehensive earnings
     for the year                                117,620    99,762    99,464
                                                -----------------------------
                                                -----------------------------
    Earnings per common share (notes 5 and 10)
      - Basic                                       1.73      1.47      1.47
                                                -----------------------------
                                                -----------------------------
      - Diluted                                     1.72      1.46      1.45
                                                -----------------------------
                                                -----------------------------
    RETAINED EARNINGS
    Balance at beginning of year                  86,645    68,513   151,734
    Transitional adjustment on adoption of
     new accounting policies (note 2)                344         -         -
                                                -----------------------------
    Balance at beginning of year as restated      86,989    68,513   151,734
    Earnings and comprehensive earnings
     for the year                                117,620    99,762    99,464
                                                -----------------------------
                                                 204,609   168,275   251,198
    Dividends paid:
    Common Shares
    (2008 - $1.30 per share, 2007 - $1.20,
     2006 - $2.70(*))                            (88,494)  (81,630) (182,685)
                                                -----------------------------
    Balance at end of year                       116,115    86,645    68,513
                                                -----------------------------

    (*) Includes a special dividend of $1.50 per share paid on June 17, 2005

    Rothmans Inc. and subsidiary companies (unaudited)



    Unaudited Consolidated Balance Sheets

    March 31 (in thousands of dollars)              2008      2007      2006
    -------------------------------------------------------------------------

    ASSETS
    Current Assets
    Cash and cash equivalents                    110,127    75,228    48,364
    Short-term investments                       124,766    96,987    81,867
    Accounts receivable                            3,561     8,851    10,319
    Inventories (note 7)                         193,693   201,637   206,433
    Prepaid expenses                               1,765     1,969     1,835
    Future income taxes (note 13)                 11,616     3,418         -
                                                -----------------------------
    Total current assets                         445,528   388,090   348,818

    Property, plant and equipment (note 8)        72,475    71,023    76,298
    Future income taxes (note 13)                  6,327    11,339     6,301
    Prepaid pension benefit cost (note 12)        17,251    12,958    13,295
    Long-term debt deferred financing charges
     (note 2)                                          -     1,102     1,332
    Other assets                                   1,263     1,415     1,555
                                                -----------------------------
                                                 542,844   485,927   447,599
                                                -----------------------------
                                                -----------------------------
    LIABILITIES
    Current Liabilities
    Accounts payable and accrued liabilities      64,902    38,067    38,402
    Excise and other taxes payable                74,228    69,471    66,204
    Dividend payable to minority shareholder
     of subsidiary company                             -         -    10,761
    Income taxes payable                          33,405    31,939    20,437
                                                -----------------------------
    Total current liabilities                    172,535   139,477   135,804

    Other long-term liabilities                   10,996    17,735     6,615
    Other employee future benefits (note 12)      37,418    35,915    33,444
    Long-term debt (note 9)                      148,966   149,794   149,751
    Minority interest in subsidiary company        8,724     8,828     8,125
                                                -----------------------------
                                                 378,639   351,749   333,739
                                                -----------------------------
    Contingencies (note 16)

    SHAREHOLDERS' EQUITY
    Capital stock (notes 10 and 11)               48,090    47,533    45,347
    Retained earnings                            116,115    86,645    68,513
                                                -----------------------------
    Total shareholders' equity                   164,205   134,178   113,860
                                                -----------------------------
                                                 542,844   485,927   447,599
                                                -----------------------------
                                                -----------------------------

    Rothmans Inc. and subsidiary companies (unaudited)



    Unaudited Consolidated Statements of Cash Flows

    Year Ended March 31 (in thousands of dollars)   2008      2007      2006
    -------------------------------------------------------------------------
    Cash provided by (used in):

    OPERATING ACTIVITIES
    Earnings for the year                        117,620    99,762    99,464
    Adjusted for non-cash items:
    Amortization of property, plant
     and equipment                                12,598    12,066    10,390
    Amortization of financing charges
     and bond discount                                 -       273       273
    Non-cash interest expense                      1,452         -         -
    Minority interest                             77,866    66,023    66,251
    Future income taxes (recovery)                (3,538)   (8,456)    2,530
    Loss (gain) on disposal of property,
     plant & equipment                              (405)     (217)       44
    Defined & other employee future
     benefits expense                              8,701     8,756     5,014
    Defined & other employee future benefits
     funding                                     (11,491)   (5,948)   (6,359)
    Long-term incentive plan                      15,909    11,120     4,448
                                                -----------------------------
                                                 218,712   183,379   182,055

    Changes in non-cash operating
     working capital (note 6)                     21,728    20,704     1,391
                                                -----------------------------
                                                 240,440   204,083   183,446
                                                -----------------------------
    INVESTING ACTIVITIES
    Additions to property, plant &
     equipment, net                              (13,645)   (6,574)  (17,583)
    Proceeds on disposal (purchase) of
     short-term investments, net                 (25,984)  (15,120)   86,873
                                                -----------------------------
                                                 (39,629)  (21,694)   69,290
                                                -----------------------------
    FINANCING ACTIVITIES
    Dividends paid
      By the Company                             (88,494)  (81,630) (182,685)
      By a subsidiary company to
       minority shareholder                      (78,200)  (76,081)  (48,315)
    Proceeds on issuance of common shares            557     2,186     3,373
                                                -----------------------------
                                                (166,137) (155,525) (227,627)
                                                -----------------------------

    Increase in cash and cash equivalents         34,674    26,864    25,109
    Cash and cash equivalents at beginning
     of year, after adjustment (note 2)           75,453    48,364    23,255
                                                -----------------------------
    Cash and cash equivalents at end of year     110,127    75,228    48,364
                                                -----------------------------
                                                -----------------------------

    Supplementary disclosures (note 6)

    Rothmans Inc. and subsidiary companies (unaudited)


    Notes to Unaudited Consolidated Financial Statements

    (Tabular amounts are in thousands of dollars, except for share and per
    share data or as otherwise indicated)

    1.  Summary of significant accounting policies

    The consolidated financial statements of Rothmans Inc. (the Company) are
    prepared in accordance with Canadian generally accepted accounting
    principles.

    a) Principles of consolidation

    The consolidated financial statements include the accounts of the Company
    and all subsidiaries including its 60% owned subsidiary, Rothmans, Benson
    & Hedges Inc. (RBH).

    b) Use of Estimates

    The preparation of consolidated financial statements in conformity with
    Canadian generally accepted accounting principles requires management to
    make estimates and assumptions that affect the amounts reported in the
    consolidated financial statements and accompanying notes. Although these
    estimates are based on management's best knowledge of current events and
    actions that the Company may undertake in the future, actual results
    could differ from those estimates.

    c) Revenue Recognition

    Sales of products are recognized upon the transfer of risks and rewards
    of ownership to the customer, which occurs upon delivery and when
    ultimate collection is reasonably assured. Sales are reported net of
    excise duty and taxes, discounts, allowances and returns. The Company
    also deducts from sales consideration provided to customers and
    retailers. The Company does not have any unusual credit terms or rights
    of return or refunds that would affect revenue recognition.

    d) Inventories

    Inventories are stated at the lower of cost and net realizable value.
    Cost is determined by the first-in, first-out (FIFO) method for all
    inventories.

    e) Property, Plant and Equipment

    Property, plant and equipment are recorded at cost and adjusted to fair
    market value when the carrying amount is higher than the sum of
    undiscounted future cash flows. Amortization is provided on a straight-
    line basis over the estimated service lives of the assets, which are as
    follows for the principal asset categories:

    Land improvements.............................................. 10 years
    Buildings...................................................... 30 years
    Machinery and equipment........................................ 10 years
    Computer equipment.............................................. 3 years
    Motor vehicles.................................................. 5 years
    Leasehold improvements............ term of lease, not to exceed 10 years

    f) Employee Future Benefits

    The cost of pension benefits earned by employees covered under defined
    benefit plans is determined using the projected benefit method pro-rated
    on service, and is charged to expense as services are rendered.
    Adjustments arising from plan amendments, changes in assumptions and
    experience gains and losses are amortized on a straight-line basis over
    the estimated average remaining service lives of the employee groups,
    using the corridor approach. Defined benefit pension plan assets are
    valued at fair market value. The cost of post-employment benefits other
    than pensions is recognized on an accrual basis over the working lives of
    employees.

    g) Income Taxes

    Future income taxes are provided for using the liability method whereby
    future income taxes are recognized for the expected future income tax
    consequences of all significant temporary differences between the tax and
    consolidated financial statement bases of assets and liabilities.

    Future income tax assets are recognized only to the extent that, in the
    opinion of management, it is more likely than not that the future income
    tax assets will be realized. Future income tax assets and liabilities are
    adjusted for the effects of changes in tax laws and rates on the date of
    enactment or substantive enactment.

    h) Marketing

    Marketing costs, including those related to the introduction of new
    brands, are charged against earnings during the year in which they are
    incurred.

    i) Earnings Per Common Share (EPS)

    Basic EPS is calculated by dividing the earnings by the weighted average
    of the common shares outstanding during the year. Diluted EPS is
    calculated using the treasury stock method of calculating earnings per
    share amounts whereby any proceeds from the exercise of stock options or
    other dilutive instruments are assumed to be used to purchase common
    shares at the average market price during the year.

    j) Stock-Based Compensation Plans

    The Company has stock-based compensation plans as described in note 11.
    The Company expenses the fair value of stock options over the vesting
    period. The amount paid by employees on exercising stock options is
    credited to share capital. The Company's contributions under the employee
    share purchase plan are charged to earnings as purchases are made.

    k) Cash and Cash Equivalents

    Cash and cash equivalents are comprised of cash and short-term deposits
    with original maturities of three months or less.

    2.  Change in accounting policies

    Effective April 1, 2007, the Company adopted The Canadian Institute of
    Chartered Accountants ("CICA") Handbook Section 1530, "Comprehensive
    Income", Section 3855, "Financial Instruments - Recognition and
    Measurement" and Section 3861, "Financial Instruments - Disclosure and
    Presentation." The prospective adoption of these new standards resulted
    in changes in the measurement, recognition and presentation for financial
    instruments. As a result of adopting these standards, certain
    transitional adjustments have been recorded in opening retained earnings
    as described below. There was no change resulting from the adoption of
    these standards that required the Company to record other comprehensive
    income. The principal changes in the accounting for financial instruments
    due to the adoption of these accounting standards are described below. As
    required by the standards, the comparative consolidated financial
    statements have not been restated.

    (a) Section 3855 "Financial Instruments - Recognition and Measurement"
        Section 3861 "Financial Instruments - Disclosure and Presentation"

    Under the new standards, financial assets and financial liabilities are
    initially recognized at fair value and their subsequent measurements are
    dependent on their classification as described below. Their
    classification depends on the purpose, for which the financial
    instruments were acquired or issued, their characteristics and the
    Company's designation of such instruments. The standards require that all
    financial assets be classified either as held-for-trading ("HFT"),
    available-for-sale ("AFS"), held-to-maturity ("HTM"), loans and
    receivables or other liabilities. The standards require that all
    financial assets, including all derivatives be measured at fair value
    with the exception of loans and receivables, assets classified as HTM and
    AFS financial assets that do not have quoted market prices in an active
    market.

    Classification of Financial Instruments

    The following is a summary of the assets and liabilities the Company
    evaluated and elected to apply to its significant categories of financial
    instruments outstanding as of April 1, 2007:

    Cash                                      Designated as held-for-trading
    Cash equivalents and short-term
     investments                              Designated as held-to-maturity
    Accounts receivable                       Loans and receivables
    Accounts payable and accrued liabilities  Other liabilities
    Other long-term liabilities               Other liabilities
    Long-term debt                            Other liabilities

    Held-For-Trading

    HFT financial assets are financial assets typically acquired for resale
    prior to maturity. They are measured at fair value at the balance sheet
    date. Interest earned and accrued is included in investment income. The
    Company designated cash as HFT and it is measured at fair value as at the
    consolidated balance sheet date.

    Held-To-Maturity

    HTM financial assets are non-derivative financial assets with fixed or
    determinable payments and a fixed maturity when the Company has the
    intention and the ability to hold these financial assets to maturity.
    These financial assets are measured at amortized cost. Short-term
    investments in debt securities are classified as HTM and are accounted
    for at amortized cost. As at the consolidated balance sheet date,
    interest income receivable of $0.1 million and $2.2 million was included
    in cash and cash equivalents and short-term investments, respectively.

    Available-For-Sale

    AFS financial assets are those non-derivative financial assets that are
    designated as AFS financial assets, or that are not classified as loans
    and receivables, HTM investments or HFT financial assets. AFS financial
    assets are carried at fair value with unrealized gains and losses to be
    included in other comprehensive income until realized when the cumulative
    gain or loss is recognized in earnings. The Company has not designated
    any financial assets as AFS.

    Loans and Receivables

    Loans and receivables are accounted for at amortized cost.

    Other Liabilities

    Other liabilities are accounted for at amortized cost. Other long-term
    liabilities are initially recognized at fair value and subsequently
    accounted for at amortized cost. The transitional adjustment reducing
    other long-term liabilities amounted to $0.9 million at the date of
    adoption.

    Transaction Costs

    Transaction costs related to HTM financial assets and liabilities and
    other liabilities are netted against the carrying value of the liability
    and then amortized over the expected life of the instrument using the
    effective interest method. The deferred financing charges relating to the
    Company's long-term debt issue were reclassified to the carrying value of
    the long-term debt at the date of adoption.

    Embedded Derivatives

    Derivatives embedded in other financial instruments or contracts are
    separated from their host contracts and accounted for as derivatives when
    their economic characteristics and risks are not closely related to those
    of the host contract. Embedded derivatives are measured at fair value
    with changes in fair value recognized in earnings. The Company does not
    currently have any outstanding contracts with embedded derivatives.

    Determination of Fair Value

    The fair value of a financial instrument is the amount of consideration
    that would be agreed between two or more parties. The fair value of a
    financial instrument on initial recognition is the transaction amount
    given or received. Subsequent to initial recognition, the fair values of
    financial instruments that are quoted in active markets are based on bid
    prices for financial assets held and offer prices for financial
    liabilities. When independent prices are not available, the fair values
    are determined using valuation techniques using observable market data of
    similar instruments, discounted cash flow analysis and other valuation
    techniques commonly used by market participants. A number of factors such
    as bid-offer spread and credit profile are taken into account, as
    appropriate, when values are calculated using valuation techniques.

    (b) Section 1530 "Comprehensive Income"

    The Company determined that as at the date of adoption and for the year
    ended March 31, 2008 there were no gains or losses that would be recorded
    in other comprehensive income or loss.

    Transitional Adjustments

    The impact of adopting these standards as at April 1, 2007 is as follows:

                                                   As at               As at
                                                March 31,            April 1,
                                                    2007  Adjustment    2007
                                                --------- ---------- --------
    Assets
    Cash and cash equivalents                     75,228       225    75,453
    Short-term investments                        96,987     1,795    98,782
    Accounts receivable                            8,851    (2,020)    6,831
    Long-term debt deferred financing charges      1,102    (1,102)        -
    Future income taxes - long-term               11,339      (352)   10,987

    Liabilities
    Other long-term liabilities                   17,735      (926)   16,809
    Long-term debt                               149,794    (1,102)  148,692
    Minority interest                              8,828       230     9,058

    Shareholders' Equity
    Retained earnings                             86,645       344    86,989


    Effective January 1, 2008, the Company early adopted the new accounting
    standards for Capital Disclosures (CICA Handbook Section 1535). Under
    Section 1535, the Company has disclosed its objectives, policies and
    procedures for managing capital, including disclosures of any externally
    imposed capital requirements and the consequences of non-compliance. This
    standard did not affect the Company's consolidated results or financial
    position (see note 4).

    Effective January 1, 2008, the Company early adopted the new accounting
    standards for Financial Instruments-Disclosure and presentation (CICA
    Handbook Sections 3862 and 3863). Sections 3862 and 3863 replace Handbook
    Section 3861, Financial Instruments-Disclosure and Presentation, revising
    and enhancing its disclosure requirements, and carrying forward unchanged
    its presentation requirements. These new sections place increased
    emphasis on disclosures about the nature and extent of risks arising from
    financial instruments and how the entity manages those risks. This
    standard did not affect the Company's consolidated results or financial
    position (see note 3).

    The following is the new accounting standard the Company will adopt
    effective April 1, 2008. Management is evaluating the standard and its
    impact on the Company's consolidated financial statements.

    The CICA Handbook Section 3031 "Inventories" prescribes the accounting
    treatment for inventories. Specifically, the section provides guidance
    relating to the accounting for inventories and revises and enhances the
    requirements for assigning costs to inventories. Section 3031 applies to
    interim and annual financial statements for fiscal years beginning on or
    after January 1, 2008.

    3.  Financial Instruments

    Financial instruments consist of cash, cash equivalents, short-term
    investments, accounts receivable, accounts payable and accrued
    liabilities, excise tax and other taxes payable, other long-term
    liabilities and long-term debt.

    Fair Value of Financial Instruments

    Financial instruments are initially recognized at fair value and
    subsequent treatment depends on management's designation and intentions.
    The fair value of a financial instrument is the amount of consideration
    that would be agreed upon in an arm's length transaction between
    knowledgeable, willing parties who are under no compulsion to act. When
    independent prices are not available, fair values are determined by using
    valuation techniques that refer to observable market data.

    Financial Instruments Designated as Held-For-Trading

    Cash includes deposits held on call with a Canadian chartered bank and is
    designated as held-for-trading. The carrying value of cash approximates
    fair value as it is immediately available for use.

    Cash equivalents are investments with a maturity of three months or less
    from the date of purchase and are designated as held-for-trading. They
    are assets typically acquired for resale prior to maturity. The carrying
    amount, which includes interest earned and accrued in investment income,
    approximates the fair market value due to the short-term nature of
    investments.

    Financial Instruments Designated as Held-To-Maturity

    Short-term investments have a maturity from three months to a year from
    the date of purchase and are classified as held-to-maturity. Short-term
    investments are initially recorded at fair value and subsequently
    measured at amortized cost. The carrying amount includes interest earned
    and accrued in investment income. The fair value of short-term
    investments is subject to changes in interest rates and is determined by
    a valuation method using mid-market closing rate of the balance sheet
    date for investments with similar terms.

    Financial Instruments Designated as Loans and Receivables

    Accounts receivable are classified as loans and receivables. Their
    carrying value approximates fair value due to their short-term nature.

    Financial Instruments Designated as Other Liabilities

    Accounts payable and accrued liabilities largely consist of trade
    payables, the current portion of the long-term incentive program accrual
    and the short-term incentive program accrual. Due to the short-term
    nature of the trade accounts payable and accruals, the carrying value
    approximates the fair value.

    Other long-term liabilities are classified as other liabilities and their
    fair value is determined using a valuation technique by discounted cash
    flow analysis based on current market rates for loans and investments
    with similar terms, conditions and maturities.

    Long-term debt is comprised of senior unsecured bonds carrying a fixed
    coupon rate of 5.552% and matures on December 21, 2011. The fair value of
    the debt is subject to changes in interest rates and other market prices.
    The fair value of the debt was based on a valuation technique using
    observable market data such as market spread and the price of similar
    instruments.

    The following provides a comparison of carrying and fair values for each
    classification of financial instruments as at March 31, 2008:

                                                             March 31, 2008
                                                          Carrying      Fair
                                                            Amount     Value
                                                       ----------------------
    Financial instruments designated as
     held-for-trading:
    Cash and cash equivalents                              110,127   110,127

    Financial instruments designated as held-to-maturity:
    Short-term investments                                 124,766   124,811

    Loans and receivables:
    Accounts receivable                                      3,561     3,561

    Other liabilities:
    Accounts payable and accrued liabilities                64,902    64,926
    Other long-term liabilities                             10,996    11,024
    Long-term debt                                         148,966   148,390
                                                       ----------------------
                                                           224,864   224,340
                                                       ----------------------

    No prior year figures were provided as they are not comparable as the
    accounting policies differ significantly from the policies adopted in the
    current year.

    Credit Risk

    The credit risk is a risk of loss associated with a counterparty's
    inability or failure to discharge its obligations. The Company is exposed
    to credit risk in its cash, cash equivalents, short-term investments and
    accounts receivable.

    The Company's cash is deposited with a Canadian chartered bank and
    therefore management believes the risk of loss to be remote.

    Cash equivalents and short-term investments are held through various
    institutions, mainly in Canadian banker's acceptances and Canadian
    corporations' commercial papers. Cash equivalents are investments with a
    maturity of three months or less from the date of purchase. Short-term
    investments have a maturity from three months to a year from the date of
    purchase. The Company's maximum credit risk exposure as at March 31, 2008
    was $234.9 million which is comprised of cash, cash equivalents and
    short-term investments. The Company's credit risk on cash, cash
    equivalents and short-term investments is low as the investments are
    readily convertible into a known amount of cash and are subject to
    minimal risk of changes in value.

    The Company's credit risk with respect to accounts receivable is limited
    and managed by evaluating the customer's creditworthiness and financial
    strength before commencing trade and during the business relations. The
    Company sets a credit limit for each customer, reviews accounts
    receivable aging daily, monitor cash collections and routinely reviews
    the customers' financial statements. As at March 31, 2008, there were no
    past due accounts receivable amounts or allowances for doubtful accounts.

    Liquidity Risk

    Liquidity risk is the risk that the Company may encounter difficulties in
    meeting obligations associated with financial liabilities and
    commitments.

    The Company manages liquidity risk through its investment policy and cash
    flow planning. Excess cash is invested only in high-grade investment
    securities and the grade rating the Company uses is that of Dominion Bond
    Rating Service (DBRS) or a comparable recognized rating agency. The
    investments are placed with varying terms to maturity to effectively meet
    the required expenditures for continuing operations.

    The Company also manages this risk by regularly monitoring compliance
    with the long-term debt financial covenants. The Company is subject to
    certain financial covenants with which they were in compliance as at
    March 31, 2008. Breach of these covenants could result in the debt
    becoming due on demand.

    RBH's operations generate cash resources to fund its operations, pay
    interest payments on RBH's long-term debt and dividends to its
    shareholders. Based on RBH's historical earnings levels, the dividends
    received by Rothmans from RBH are expected to be sufficient to fund its
    operations, pay dividends to its public shareholders and continue to
    accumulate cash reserves. The table below summarizes the payment schedule
    for the financial liabilities as at March 31, 2008:

                                                             Years
                                                          subsequent
                    Fiscal    Fiscal    Fiscal    Fiscal   to Fiscal
                     2009      2010      2011      2012      2012     Total
                   ----------------------------------------------------------
    Accounts payable
     and accrued
     liabilities    64,902         -         -         -         -    64,902
    Other long-term
     liabilities         -     4,997     1,283         -     4,716    10,996
    Long-term
     debt(*)             -         -         -   148,966         -   148,966
                   ----------------------------------------------------------
                    64,902     4,997     1,283   148,966     4,716   224,864
                   ----------------------------------------------------------

    (*) Represents a carrying amount reflecting debt of $150 million less the
        unamortized debt issue costs.

    The non-cash interest expense on other liabilities, excluding long-term
    debt, amounted to $1.2 million during fiscal year 2008 and long-term debt
    interest expense totalled $8.3 million. The interest income on cash
    equivalents and short-term investments in the fiscal year 2008 amounted
    to $12.2 million.

    Market Risk

    Market risk is the risk that the fair value or future cash flows of a
    financial instrument will fluctuate as a result of changes in market
    prices. Market risk is comprised of three types of risk: interest rate,
    currency and share price.

    a) Interest Rate Risk

    Interest rate risk arises as the fair value of future cash flows
    fluctuates due to changes in market interest rates. The Company has
    limited exposure to interest rate risk through its cash equivalents,
    short-term investments, accrued liabilities and other long-term
    liabilities.

    b) Foreign Currency Risk

    Foreign currency risk is the risk that the fair value or future cash
    flows of a financial instrument will fluctuate as a result of changes in
    foreign exchange rates.

    A portion of the Company's expenditures are incurred in US dollars and
    euros. A change in the currency exchange rate between the Canadian dollar
    relative to the US dollar and euro would have an effect on the results of
    the Company's operations, financial position or cash flows. The Company
    does not hedge its exposure to currency fluctuations.

    As at March 31, 2008, the Company was exposed to currency risk mainly
    through its cash and accounts payable denominated in US dollars. As at
    March 31, 2008, the Company had cash and accounts payable in US dollars
    of $0.9 million and $0.9 million, respectively. The Company had no
    exposure to euro denominated accounts payable at the balance sheet date.

    c) Share Price Risk

    The other long-term liabilities consist of accruals related to the long-
    term incentive plan and the deferred share unit plan (DSU plan). The DSU
    plan is intended to permit non-executive directors of the Company to
    defer receipt of all or a portion of their annual retainer and attendance
    fees until termination of Board service in the Company. The valuation of
    the long-term liabilities uses the Company's share value as one of the
    factors in its calculation, therefore a change in the Company's market
    price impacts the results of operations, financial position or cash
    flows.

    Sensitivity Analysis

    Section 3862 requires disclosure of sensitivity analysis that is intended
    to illustrate the sensitivity of the Company's financial position,
    performance and fair value of cash flows associated with the Company's
    financial instruments to changes in market variables such as foreign
    exchange rates, share price and interest rates. The sensitivity analysis
    provided discloses the effect on profit or loss assuming that a
    reasonably possible change in the relevant risk variable has occurred at
    March 31, 2008 and has been applied to the risk exposures in existence at
    that date. The reasonably possible changes in market variables used in
    the sensitivity analysis were determined based on implied volatilities
    where available, or historical data.

    The sensitivity analysis has been prepared based on March 31, 2008
    balances and on the basis that the balances are all constant. Excluded
    from this analysis are all non-financial assets and liabilities that are
    not classified as financial instruments under Section 3855 and financial
    instruments not carried at fair value or denominated in a foreign
    currency in the consolidated financial statements.

    The sensitivity analysis provided is hypothetical and should be used with
    caution as these estimated impacts may differ from the actual impacts the
    Company may experience. Changes in fair values or cash flows based on a
    variation in a market variable cannot be extrapolated because the
    relationship between the change in a market variable and the change in
    fair value or cash flows may not be linear. In addition, the effect of a
    change in a particular market variable on fair values or cash flows is
    calculated without considering interrelationships between the various
    market rates or mitigating actions that would be taken by the Company.

    Based on the above discussions, the following table summarizes the
    effects of risk exposure as at March 31, 2008:

                         ----------------------------------------------------
                                       Interest      Foreign
                          Carrying       risk     currency risk  Price risk
                            value    ----------------------------------------
    ($000)                            +1%    -1%    +5%    -5%    +5%    -5%
                         ----------------------------------------------------
    Financial Assets
                         ----------------------------------------------------
    Cash and cash
     equivalents:
                         ----------------------------------------------------
      Cash denominated in
       foreign currency        769      8     (8)    47    (47)     -      -
                         ----------------------------------------------------
      Cash & cash
       equivalents in
       Canadian dollars    109,358     29    (29)     -      -      -      -
                         ----------------------------------------------------
    Short-term
     investments           124,766    486   (486)     -      -      -      -
                         ----------------------------------------------------
    Financial Liabilities
                         ----------------------------------------------------
      Accounts payable
       and accrued
       liabilities(1):
                         ----------------------------------------------------
      Accrued incentive
       plan                 31,824    (78)    78       -     -    469   (469)
                         ----------------------------------------------------
    Amount denominated in
     foreign currency(2)       892      -      -      45   (45)     -      -
                         ----------------------------------------------------
    Other long-term
     liabilities:
                         ----------------------------------------------------
      Accrued incentive
       plan                  6,280    (89)    89       -     -    171   (171)
                         ----------------------------------------------------
      Deferred share
       unit plan             4,716      -      -       -     -    236   (236)
                         ----------------------------------------------------

    (1) The carrying value excludes the Canadian dollar denominated accounts
        payable and accrued liabilities of $32.2 million.
    (2) The carrying value of amounts denominated in foreign currencies is
        not indicative of the activity in the year as significant amounts of
        services and goods denominated in foreign currency were purchased
        during the year. Total purchases in foreign currency in the current
        fiscal year amounted to $41.3 million and $20.6 million in US dollars
        and euros, respectively. Assuming that all other variables remain
        constant, a 5% depreciation or appreciation of the Canadian dollar
        against the US dollar or euro would impact the Company's expenses by
        $2.1 million and $1.0 million, respectively.

    4.  Management of Capital

    The Company's objectives when managing capital are to (i) safeguard the
    entity's ability to continue as a going concern in order to provide
    returns for shareholders and benefits for other stakeholders; and (ii)
    maintain a capital structure that provides financing options to the
    Company when a financing or a refinancing need arises to ensure access to
    capital on commercially reasonable terms, without exceeding its debt
    capacity.

    In the management of capital, the Company includes shareholders' equity,
    minority interest and senior unsecured long-term debt in the definition
    of capital.

    The Company manages the capital structure by monitoring its operational
    results against various financial scenarios prepared to reflect the
    changes in market and economic conditions. In order to maintain or adjust
    the capital structure, the Company may adjust the amount of dividends
    paid to shareholders, return capital to shareholders, issue debt to
    replace existing debt with similar or different characteristics, issue
    new shares, buy back shares or adjust the amount of cash, cash
    equivalents and short-term investment balances.

    The Company is not subject to any capital requirements imposed by a
    regulator.

    There were no changes in the Company's capital management policies during
    the period.

    5.  Earnings per share

    Earnings per common share is calculated based on a weighted average
    number of 68,064,362 (2007 - 68,001,480, 2006 - 67,745,422) shares
    outstanding. Diluted earnings per common share is calculated based on
    68,543,918 (2007 - 68,399,635, 2006 - 68,385,047) common shares
    outstanding, the dilution being due to the issuance of common share
    options.

    6.  Supplementary cash flow disclosures

    a)  Change in non-cash operating working capital:

                                                    2008      2007      2006
                                                -----------------------------
    Accounts receivable                            3,270     1,468    19,733
    Prepaid expenses                                 204      (134)     (513)
    Inventories                                    7,944     4,796     3,386
    Other assets                                     152       140       173
    Accounts payable and accrued liabilities       3,935      (335)   (9,043)
    Excise and other taxes payable                 4,757     3,267   (11,307)
    Income taxes payable                           1,466    11,502    (1,038)
                                                -----------------------------
                                                  21,728    20,704     1,391
                                                -----------------------------
                                                -----------------------------

    b)  Other:
                                                    2008      2007      2006
                                                -----------------------------
    Income taxes paid                            132,643   110,517   106,953
    Interest Paid:
      - Long-term debt                             8,328     8,328     8,328
      - Other                                        139       188       347

    7.  Inventories
                                                    2008      2007      2006
                                                -----------------------------
    Leaf tobacco                                  79,907    86,267    95,542
    Finished goods                                92,021    93,698    88,839
    Packaging material and other                  21,765    21,672    22,052
                                                -----------------------------
                                                 193,693   201,637   206,433
                                                -----------------------------
                                                -----------------------------

    8.  Property, plant and equipment
                                                    2008      2007      2006
                                                -----------------------------
    Cost
      Land and land improvements                   1,508     1,499     1,499
      Buildings                                   26,048    25,120    24,155
      Machinery and equipment                    186,592   176,602   170,938
      Computer equipment                          12,875    11,782    12,008
      Motor vehicles                               1,018     1,014     1,014
      Leasehold improvements                       2,955     2,879     2,860
                                                -----------------------------
                                                 230,996   218,896   212,474
    Less: Accumulated amortization               158,521   147,873   136,176
                                                -----------------------------
                                                  72,475    71,023    76,298
                                                -----------------------------
                                                -----------------------------
    Accumulated amortization
      Land improvements                              150       145       141
      Buildings                                   15,465    14,758    14,043
      Machinery and equipment                    128,753   120,309   110,777
      Computer equipment                          10,799     9,475     8,188
      Motor vehicles                               1,012     1,003       992
      Leasehold improvements                       2,342     2,183     2,035
                                                -----------------------------
                                                 158,521   147,873   136,176
                                                -----------------------------
                                                -----------------------------

    As at March 31, 2008, the cost of property, plant and equipment included
    capital projects in progress of $3.4 million (2007 - $2.1 million, 2006 -
    $12.6 million) for which no amortization was recorded.

    9. Long-term debt

    During fiscal 2005, RBH issued $150 million of senior unsecured bonds,
    with a discount of $303,000 to their face value and carrying a coupon
    rate of 5.552% payable semi-annually, through a private placement.

    These bonds mature on December 21, 2011 and the principal is repayable in
    full at maturity. The bonds are direct senior unsecured and
    unsubordinated obligations of RBH ranking pari passu with all other
    present and future senior unsecured and unsubordinated indebtedness of
    RBH. Under this debt obligation, RBH is subject to certain covenants,
    including a maximum debt to earnings before interest, taxes, depreciation
    and amortization ratio of 3.0 times on a consolidated basis. RBH has the
    right to repay the bonds at any time in whole or in part, subject to
    certain "make-whole" provisions.

    Financing costs related to this debt issue are being amortized over the
    term of the bonds. A total of $0.2 million (2007 - $0.2 million, 2006 -
    $0.2 million) was expensed during fiscal 2008, ending the year with
    approximately $0.9 million of unamortized financing costs remaining. The
    discount of $303,000 on the bonds is also being amortized over the term
    of the bonds and a total of $43,000 (2007 - $43,000, 2006 - $43,000) was
    expensed in fiscal 2008, ending the year with approximately $163,000
    (2007 - $206,000, 2006 - $249,000) of the unamortized bond discount
    remaining.

    10. Capital stock

    Authorized - An unlimited number of common shares

    Issued - 68,095,608 (2007 - 68,038,008, 2006 - 67,855,608) common shares

                                                    2008      2007      2006
                                                -----------------------------
    Balance - April 1                             47,533    45,347    41,974
    Issuance of shares                               557     2,186     3,373
                                                -----------------------------
    Balance - March 31                            48,090    47,533    45,347
                                                -----------------------------
                                                -----------------------------

    During fiscal year 2008, a total of 57,600 (2007 - 182,400, 2006 -
    283,600) shares were issued due to the exercise of stock options.

    The issuance of shares reflects net proceeds after the special dividend
    payment upon the exercise of share options of $0.2 million (2007 -
    $0.4 million, 2006 - $0.7 million).

    On February 4, 2005, the Company declared a two-for-one stock split to be
    effective by way of a stock dividend. The number of common shares
    outstanding and all share related data were adjusted retroactively for
    the stock split.

    11. Stock-based compensation plans

    The details of the Company's share option plan and employee share
    purchase plan are as follows:

    a)  Share option plan

    In March of 2000, the Board of Directors of the Company approved a share
    option plan for the purpose of advancing the interests of the Company
    through the attraction, motivation and retention of employees and
    officers of the Company and RBH. This plan was subsequently approved by
    the Company's shareholders at the annual general meeting in July 2000.

    Under this plan, the Company could grant options to its employees for up
    to 3.4 million common shares. The exercise price of each option equals
    the market price of the Company's common shares as at the date of the
    grant. Granted options vest in three equal amounts as the twenty-day
    average trading price of the Company's shares exceeds thresholds of 10%,
    20% and 30% above the option exercise price. Generally, vested options
    may be exercised over a ten-year period from the date of grant. In
    certain circumstances, upon exercise, optionees are also entitled to
    receive an amount equal to the aggregate of all special dividends paid
    since the date of the option grant.

    Under the share option plan, as at March 31, 2008, 181,800 (2007 -
    181,800, 2006 - 181,800) common shares were issuable. Given the limited
    number of common shares available for issuance under the share option
    plan, the annual grant of options was discontinued effective fiscal year
    2006.

    A summary of the status of the Company's employee share option plan as at
    March 31, 2008, 2007 and 2006, and changes during the years ending on
    those dates is presented below:

                                                             2008
                                           ----------------------------------
                                                         Weighted
                                                          average
                                                         exercise
    Options                                     Shares      price     Shares
    -------------------------------------------------------------------------
    Outstanding - Beginning of year          1,308,400     14.291  1,490,800
    Exercised                                  (57,600)    12.779   (182,400)
                                           ----------------------------------
    Outstanding - End of year                1,250,800     14.360  1,308,400
                                           ----------------------------------
                                           ----------------------------------
    Options exercisable at year end          1,250,800     14.360  1,308,400
                                           ----------------------------------
                                           ----------------------------------



                                                  2007                  2006
                                          ----------------------------------
                                              Weighted              Weighted
                                               average               average
                                              exercise              exercise
    Options                                      price     Shares      price
    -------------------------------------------------------------------------
    Outstanding - Beginning of year             14.301  1,774,400     14.325
    Exercised                                   14.378   (283,600)    14.448
                                           ----------------------------------
    Outstanding - End of year                   14.291  1,490,800     14.301
                                           ----------------------------------
                                           ----------------------------------
    Options exercisable at year end             14.291  1,490,800     14.301
                                           ----------------------------------
                                           ----------------------------------

    The following table summarizes information about share options
    outstanding as at March 31, 2008:

                                            Weighted
                                             average
                                            remaining
    Exercise             Number            contractual                Number
    price           outstanding               life               exercisable
    $
    -------------------------------------------------------------------------
    8.825(1)              3,000                2.3                     3,000
    11.500(1)           136,000                3.1                   136,000
    12.320(2)           308,200                5.1                   308,200
    14.080(1)           261,400                3.6                   261,400
    16.125(1)           237,000                4.2                   237,000
    16.620(2)           305,200                6.1                   305,200
                   -------------                                -------------
                      1,250,800                                    1,250,800
                   -------------                                -------------
                   -------------                                -------------

        (1) Entitled upon exercise to a payment of $4.00 per share (amount
            equal to special dividends paid since date of option grant).
        (2) Entitled upon exercise to a payment of $1.50 per share (amount
            equal to special dividends paid since date of option grant).


    b)  Employee share purchase plan

    The Company has an employee share purchase plan in place to assist
    employees in taking an ownership position in the Company. This plan
    promotes employee participation in the business, and thus better aligns
    their interests with the interests of shareholders. The plan allows every
    employee to contribute between 1% to 5% of their base salary toward the
    purchase of shares. The Company contributes 35% of each employee's
    contributions up to $1,500 per annum per employee. Contributed funds are
    utilized to purchase the Company's shares on the open market. The Company
    also pays for all fees and transaction costs associated with the
    purchases.

    During the fiscal year 2008, a total of 72,708 (2007 - 74,210, 2006 -
    101,626) shares of the Company were purchased under the provisions of
    this plan. The Company expensed a total of $0.4 million (2007 -
    $0.4 million, 2006 - $0.4 million) relating to this plan.

    12. Employee future benefits

    The Company provides defined benefit pension plans, defined contribution
    pension plans, post-retirement and post-employment benefits to its
    employees. Defined benefit pension obligations are funded with
    independent trustees in accordance with legal requirements.

    The defined benefit plan assets were determined using the market value of
    plan assets as at March 31. The most recent actuarial valuations for the
    various defined benefit plans were at April 1, 2006 and December 31, 2007
    and valuations are carried out both annually and biannually depending on
    the plan. The last actuarial valuation for other benefits was at April 1,
    2005.

    The table below provides plan information on the actuarially determined
    benefit obligation, the status of plan assets and the net benefit plan
    expense for the year:

                          2008                2007                2006
                 ------------------------------------------------------------
                   Defined             Defined             Defined
                   benefit     Other   benefit     Other   benefit     Other
                  pensions  benefits  pensions  benefits  pensions  benefits
                 ------------------------------------------------------------
    Change in
     benefit
     obligation
    Benefit
     obligation -
     Beginning
     of year       166,213    43,351   151,359    41,675   137,641    42,656
    Current service
     cost            5,842       912     5,087       873     4,717       681
    Interest cost    8,613     2,230     7,850     2,112     8,105     2,130
    Cost for
     retirement
     window
     adjustment        892         -     1,300         -         -         -
    Actuarial
     (gain) loss   (10,058)   (2,412)   10,535     1,004     9,383    (1,608)
    Benefits paid   (9,894)   (2,309)   (9,918)   (2,313)   (8,487)   (2,184)
                 ------------------------------------------------------------
    Benefit
     obligation -
     End of year   161,608    41,772   166,213    43,351   151,359    41,675
                 ------------------------------------------------------------
                 ------------------------------------------------------------

    Change in plan
     assets
    Fair value of
     plan assets -
     Beginning
     of year       167,801         -   161,335         -   153,199         -
    Return on
     plan assets    (1,331)        -    12,749         -    12,448         -
    Net employer
     contributions   9,183     2,309     3,635     2,313     4,175     2,184
    Benefits paid   (9,894)   (2,309)   (9,918)   (2,313)   (8,487)   (2,184)
                 ------------------------------------------------------------
    Fair value of
     plan assets -
     End of year   165,759         -   167,801         -   161,335         -
                 ------------------------------------------------------------
                 ------------------------------------------------------------

    Plan status
    Funded surplus
     (deficit)       4,151   (41,772)    1,588   (43,351)    9,976   (41,675)
    Unrecognized
     loss           19,882     3,023    18,867     5,882    11,530     6,453
    Unrecognized
     transition
     (asset)
     liability      (7,623)    1,331    (8,450)    1,554    (9,276)    1,778
    Unrecognized
     past service      841         -       953         -     1,065         -
                 ------------------------------------------------------------
    Prepaid
     (accrued)
     benefit cost   17,251   (37,418)   12,958   (35,915)   13,295   (33,444)
                 ------------------------------------------------------------
                 ------------------------------------------------------------

    Included in the above prepaid defined benefit obligation and fair value
    of plan assets are the following amounts in respect of plans that are not
    fully funded:

                                                    2008      2007      2006
                                                -----------------------------
    Defined benefit pensions
    Benefit obligation - End of year             121,184    42,800    36,168
    Fair value of plan assets - End of year      118,591    33,226    30,339
                                                -----------------------------
    Funded deficit                                 2,593     9,574     5,829
                                                -----------------------------
                                                -----------------------------

    As at March 31, 2008 approximately 43% (2007 - 50%, 2006 - 50%) of the
    defined benefit pension plan assets were invested in equities, 42% (2007
    - 37%, 2006 - 38%) in fixed income securities and 15% (2007 - 13%, 2006 -
    12%) in cash and cash equivalents. The plan assets for the current fiscal
    year included investments in the Company's shares of $0.4 million or 0.3%
    of defined benefit plan assets (2007 - $0.5 million or 0.3%, 2006 -
    $0.3 million or 0.2%).

    The defined contribution plan assets as at March 31, 2008 were
    $98.4 million (2007 - $103.4 million, 2006 - $95.2 million).

    The significant actuarial assumptions used to arrive at the net defined
    benefit obligations are shown below:

                          2008                2007                2006
                 ------------------------------------------------------------
                   Defined             Defined             Defined
                   benefit     Other   benefit     Other   benefit     Other
                  pensions  benefits  pensions  benefits  pensions  benefits
    -------------------------------------------------------------------------
    Weighted
     average
     assumptions
     (%)
    Discount
     rate (%)         5.75      5.75      5.25      5.25      5.25      5.25
    Expected return
     on plan
     assets (%)       7.00         -      7.00         -      7.00         -
    Rate of
     compensation
     increase (%)     4.50      4.00      4.50      4.00      4.50      4.00

    Beginning in 2007 the health care cost trend rate, mainly of prescription
    drugs, was 9.0%, which is graded down by 0.5% each year until it reaches
    4.5% in 2016. Total cash payments by the Company for all employee future
    benefits for 2008 were $14.8 million (2007 - $9.3 million and 2006 -
    $9.5 million)

    The Company's defined benefit pension plan and other benefits expense is
    as follows:

                          2008                2007                2006
                 ------------------------------------------------------------
                   Defined             Defined             Defined
                   benefit     Other   benefit     Other   benefit     Other
                  pensions  benefits  pensions  benefits  pensions  benefits
                 ------------------------------------------------------------
    Current
     service cost    5,842       912     5,087       873     4,717       681
    Interest cost    8,613     2,230     7,850     2,112     8,105     2,130
    Actual return
     on plan
     assets          1,331         -   (12,749)        -   (12,448)        -
    Actuarial
     (gains)
     losses        (10,058)   (2,412)   10,535     1,004     9,383    (1,608)
                 ------------------------------------------------------------
    Costs arising
     in the year     5,728       730    10,723     3,989     9,757     1,203
    Difference
     between costs
     arising and
     costs
     recognized in
     respect of
    Return on plan
     assets        (11,597)        -     2,930         -     3,023         -
    Actuarial
     loss (gain)    10,580     2,859   (10,267)      571    (9,182)      706
    Transitional
     obligation       (826)      223      (826)      224      (827)      222
    Past service
     cost              112         -       112         -       112         -
    Adjustment for
     retirement
     window            892         -     1,300         -         -         -
                 ------------------------------------------------------------
    Net expense
     recognized      4,889     3,812     3,972     4,784     2,883     2,131
                 ------------------------------------------------------------
                 ------------------------------------------------------------

    RBH's defined contribution pension plan expense for fiscal year 2008 was
    $3.3 million (2007 - $3.4 million, 2006 - $3.1 million).

    The following table shows the effect of a one-percentage point change in
    assumed health costs:

                                                                1%        1%
                                                          increase  decrease
                                                      -----------------------
    Effect on other benefits - total service
     and interest cost                                         564      (386)
    Effect on other benefits - accrued benefit
     obligation                                              5,671    (3,665)


    13. Income taxes

    The consolidated effective income tax rate is as follows:

                                                    2008      2007      2006
                                                -----------------------------
    Combined federal and provincial basic
     rates (%)                                      32.9      33.3      33.0
    Manufacturing and processing tax credits (%)    (0.5)     (0.5)     (0.5)
    Surtaxes and other (%)                           7.6       7.8       7.2
                                                -----------------------------
    Effective income tax rate (%)                   40.0      40.6      39.7
                                                -----------------------------
                                                -----------------------------

    Future income tax assets and liabilities are recognized on temporary
    differences between the financial and tax bases of existing assets and
    liabilities as follows:

                                                    2008      2007      2006
                                                -----------------------------
    Future income tax assets

    Deferred Compensation                         13,908     8,987         -
    Other employee future benefits                15,173    14,897    14,492
    Other                                            948       551       247
                                                -----------------------------
                                                  30,029    24,435    14,739
                                                -----------------------------
    Future income tax liabilities

    Property, plant and equipment                  5,637     4,515     2,896
    Pension asset                                  6,449     5,163     5,542
                                                -----------------------------
                                                  12,086     9,678     8,438
                                                -----------------------------
    Net future income tax asset                   17,943    14,757     6,301
    Less: Future income tax assets - current      11,616     3,418         -
                                                -----------------------------
                                                   6,327    11,339     6,301
                                                -----------------------------
                                                -----------------------------

    14. Commitments

    In the normal course of business, the Company and its subsidiaries have
    commitments in respect of capital expenditures, purchase of tobacco and
    other obligations.

    Commitments under operating lease obligations relate to fleet
    automobiles, warehouses and offices. The following table summarizes the
    payments due after March 31, 2008 for lease and other obligations:

        2009                                       6,042
        2010                                       2,990
        2011                                       2,869
        2012                                       2,498
        2013                                         966
                                               ----------
                                                  15,365
                                               ----------
                                               ----------

    15. Related party transactions

    RBH is 40% owned by FTR Holding S.A. of Switzerland, an affiliate of
    Philip Morris International, Inc. (PMI). PMI was 100% owned by Altria
    Group, Inc. until March 28, 2008. RBH entered into various related party
    transactions during the year with subsidiaries and affiliates of PMI
    ("related parties") that are measured at their exchange amounts.

    In the ordinary course of business, RBH purchased various management
    advisory services in the amount of $1.2 million (2007 - $1.2 million,
    2006 - $1.3 million), tobacco blends, raw materials and marketing
    materials totaling $3.3 million (2007 - $1.7 million, 2006 - nil) and had
    sales of $3.0 million (2007 - $3.1 million, 2006 - $5.1 million) to
    related parties. In fiscal 2007, RBH entered into a trademark license
    agreement relating to the manufacture, distribution and sale of the
    ROOFTOP brand in Canada. Total royalty expense for the year amounted to
    $1.0 million (2007 - $0.7 million, 2006 - nil). The net receivable as at
    March 31, 2008, due from related parties, was $0.2 million (2007 -
    $0.5 million, 2006 - $0.7 million).

    16. Litigation, claims and contingencies

    The Company and RBH are subject to a number of lawsuits and legal
    proceedings, investigations and legislation as described below:

    -   In February 2005, the Québec Superior Court authorized two actions
        brought by plaintiffs resident in the Province of Québec to proceed
        as class actions against RBH, Imperial Tobacco Limited and JTI-
        Macdonald Corp. The court consolidated the two actions; one
        representing a class consisting of certain persons residing in Québec
        who allegedly are or have been addicted to the nicotine contained in
        cigarettes manufactured by the respondents which is seeking
        $17.8 billion in damages, the other representing certain persons who
        have allegedly suffered certain diseases as a result of smoking
        cigarettes manufactured by the respondents, as well as the legal
        heirs of deceased persons included in the group, which is seeking
        $5 billion in damages. The claims include allegations of failure to
        warn, addiction, nicotine manipulation, advertising directed at young
        people, false advertising and inadequate warnings. The claimants are
        seeking on behalf of themselves and each class member general and
        exemplary damages to be assessed and the establishment of a fund with
        the object of limiting cigarette consumption, supporting medical
        research into tobacco linked illnesses and reimbursing the Province
        of Québec for certain health care costs incurred by it in treating
        these illnesses. Statements of claim were filed by the plaintiffs and
        oral examinations of the plaintiffs have commenced.

    -   RBH is currently the subject of an ongoing investigation by the RCMP
        relating to its sales of products exported from Canada in the period
        1989-1996. This investigation, of which RBH was notified in January
        2002, is related to allegations that tobacco products manufactured
        and exported by RBH were illegally smuggled back into Canada during
        this period without payment of applicable excise and tobacco taxes
        and duties. Although no action has been commenced and no charges laid
        against the Company or RBH or any of their present or former
        employees, officers or directors, the Company and RBH believe that
        the RCMP and federal and provincial government authorities intend to
        lay charges or commence other legal proceedings involving the Company
        or RBH and certain of their employees, officers and directors
        relating to or arising from these allegations.

        Illegal smuggling of tobacco products into Canada occurred during the
        late 1980s and early 1990s coincident with the imposition by the
        federal and provincial governments of significant new taxes and
        duties on tobacco products. Such taxes and duties were, however, not
        imposed on tobacco products exported out of Canada. In February 1994,
        in an effort to curb the high level of smuggling of tobacco products
        into Canada, the federal and certain provincial governments reduced
        taxes to earlier levels. Exports of tobacco products by the major
        Canadian tobacco manufacturers, including RBH, increased
        significantly from 1991 to 1994. In February 2003, the RCMP filed
        criminal charges against another Canadian tobacco products
        manufacturer and related parties alleging violations of the Criminal
        Code (Canada) in connection with the sale and export of tobacco
        products during the early 1990s. In January 2006, a former executive
        of that company pled guilty to charges of defrauding the federal
        government of tax revenue and was sentenced to eight months house
        arrest in return for providing evidence against that company and
        certain of its executives. A preliminary hearing with respect to the
        other defendants concluded in 2006 and in May 2007 the Ontario Court
        of Justice ordered that company and its former chief executive
        officer to stand trial. Charges against six other executives were
        initially dismissed. The Crown sought judicial review of these
        dismissals and in February 2008 those dismissals were set aside by
        the Superior Court of Justice and the matter was remitted back to the
        preliminary inquiry judge for reconsideration. In August 2003, the
        Government of Canada initiated a civil lawsuit and in August 2004 the
        Minister of Revenue for the Province of Quebec initiated tax
        reassessment proceedings against this company and related parties
        seeking to recover taxes allegedly owing in connection with the sale
        of such exported products. In September 2004, this manufacturer was
        granted protection from creditors under the Companies Creditors'
        Arrangement Act (Canada) and a stay of the civil proceedings brought
        by the Government of Canada and the Minister of Revenue for the
        Province of Quebec. Since that time, claims aggregating approximately
        $10 billion have been made against that company relating to unpaid
        taxes and duties on that company's export sales of tobacco products
        during the early 1990's. In November 2004, representatives of the
        RCMP conducted a search of the largest Canadian tobacco products
        supplier as part of its investigation into sales of tobacco products
        exported from Canada.

    -   In January 2001, the Province of British Columbia initiated a lawsuit
        in the Supreme Court of British Columbia against RBH, the Company and
        numerous other Canadian and international tobacco companies and
        various tobacco trade associations seeking unspecified damages in an
        amount to cover the costs that allegedly have been, or will be,
        incurred by the Government of British Columbia in providing health
        care benefits to British Columbia residents who have allegedly
        suffered smoking-related illnesses. The action was brought pursuant
        to the Tobacco Damages and Health Care Costs Recovery Act (British
        Columbia), which purports to facilitate individuals and the
        provincial government in suing tobacco manufacturers. This
        legislation was enacted in January 2001, following a successful
        challenge (decided in March 2000 by the Supreme Court of British
        Columbia) by a number of tobacco manufacturers of similar predecessor
        legislation enacted in 1998. RBH and other tobacco product
        manufacturers challenged the constitutional validity of the new
        legislation. However, in May 2004, the British Columbia Court of
        Appeal, overturning a lower court decision, ruled that the
        legislation was constitutionally valid. RBH and other tobacco product
        manufacturers appealed this decision to the Supreme Court of Canada,
        which dismissed the appeal in September 2005. The action is now
        proceeding and the trial is currently scheduled for the fall of 2010.
        A motion brought by the federal government, seeking to strike out a
        third party notice which would make it a party to the lawsuit, was
        heard in March 2008. The motion was allowed in April 2008. The
        Canadian tobacco companies have filed notices of appeal.

    -   In March 2008, the Company and RBH were named as defendants, along
        with Imperial Tobacco Canada Limited, JTI-Macdonald Corp. and a
        number of international tobacco product manufacturers, in a lawsuit
        filed by the province of New Brunswick in the Court of Queen's Bench
        of New Brunswick. The action has been brought pursuant to the Tobacco
        Damages and Health Care Costs Recovery Act (New Brunswick). The
        lawsuit is based upon grounds which include alleged
        misrepresentations made by the defendants in respect of the hazards
        of tobacco products and seeks to recover unspecified damages for
        costs that are alleged by the Government of New Brunswick to have
        been incurred in providing health care benefits to New Brunswick
        residents who have allegedly suffered smoking-related illnesses.

    -   In May 1997, a statement of claim was issued against RBH and Imperial
        Tobacco Limited (ITL) by a single plaintiff, Mirjana Spasic, in the
        Ontario Superior Court of Justice claiming damages in the amount of
        $1,000,000, reimbursement for moneys expended on the purchase of the
        defendants' cigarette products and aggravated, punitive and exemplary
        damages. The claim is based upon allegations of negligent and
        intentional acts, spoliation, negligent misrepresentation, deceit,
        conspiracy, product liability and breaches of express and implied
        warranty. The action is proceeding. RBH has filed its Statement of
        Defence.

    -   In September 2006, RBH received a complaint from ITL and one of its
        affiliates alleging that RBH's ROOFTOP product packaging infringed
        their rights in respect of the MARLBORO trade-mark registration in
        Canada. RBH and Philip Morris Products S.A. ("PMPSA"), the owner of
        the ROOFTOP design in Canada, commenced an action in the Federal
        Court seeking a declaration that the use of the ROOFTOP design in
        association with RBH's cigarette products does not infringe upon any
        rights which ITL or its affiliate may have in respect of the MARLBORO
        trade-mark registration in Canada. In their statement of defence, ITL
        and its affiliate have counterclaimed against RBH and PMPSA seeking,
        among other things, a declaration that the ROOFTOP packaging
        infringes their trade-mark rights, a permanent injunction restraining
        the sale and distribution of cigarettes in association with the
        ROOFTOP packaging in Canada as well as unspecified damages or an
        accounting of profits, at their election. RBH and PMPSA deny the
        allegations contained in ITL's counterclaim.

    -   In 2002, the Province of Newfoundland and Labrador enacted the
        Tobacco Health Care Costs Recovery Act. This legislation allows the
        provincial government to bring an action against tobacco product
        manufacturers for recovery of health care costs that allegedly have
        been or will be incurred by the Province in respect of alleged
        smoking-related illnesses. The Province also announced that it had
        retained a U.S. law firm to assist the Province in bringing a claim
        against tobacco product manufacturers for recovery of these health
        care costs. At this time, no action has been commenced under this
        legislation.

    -   In December 2005, Nova Scotia passed the Tobacco Damages and Health-
        care Costs Recovery Act. The legislation, which is modeled on the
        British Columbia legislation, allows the provincial government to
        bring an action against tobacco product manufacturers for the
        recovery of health care costs that allegedly have been or will be
        incurred by the Province in respect of alleged tobacco related
        diseases. No action has been commenced under this legislation.

    -   In June 2006, the Manitoba government passed the Tobacco Damages and
        Health Care Costs Recovery Act. The legislation is also similar to
        that of British Columbia. No action has been commenced under this
        legislation.

    -   In April 2007, the Saskatchewan government passed The Tobacco Damages
        and Health Care Costs Recovery Act. The legislation is similar to
        that of British Columbia. No action has been commenced under this
        legislation.

    The Company and RBH believe that they have good defenses in the court
    proceedings with respect to the lawsuits which have been filed against
    them to date and deny the allegations therein. The Company and RBH intend
    to vigorously defend themselves in the court proceedings relating to
    these lawsuits. All of the court proceedings in the lawsuits described
    above remain at an early stage and management is not able to determine
    the likelihood of loss or liability or make a meaningful estimate of the
    loss which might be incurred, if any, and accordingly, neither the
    Company or RBH has accrued for these contingent liabilities.

    It is not possible at the present time to determine the likelihood of
    loss or liability or meaningfully estimate the loss, if any, that might
    result from lawsuits, legal proceedings or investigations, pending and
    future, against the Company or RBH. Lawsuits, legal proceedings and
    investigations are subject to many uncertainties, and it is possible that
    there will be adverse developments against the Company and RBH or that
    these cases and investigations, and any potential future cases and
    investigations, could be decided unfavourably against the Company and
    RBH. The Company and RBH may also decide to settle current or future
    lawsuits, legal proceedings or investigations if it is believed to be in
    the best interests of the Company and RBH. An unfavourable outcome or
    settlement could involve significant damages or significant monetary
    payments that would have a significant adverse effect on the financial
    condition of the Company and RBH, and which, in the case of an adverse
    judgment, the Company and RBH may not have the resources to satisfy.
    





For further information:

For further information: Investor contact: Mike Frater, Vice President
Finance & CFO, (416) 442-3659; Media contact: Karen Bodirsky, Director
Corporate and Public Affairs, (416) 442-3660

Organization Profile

ROTHMANS INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890