I am a newcomer to AOI and I have found this board very informative. I was hoping that some of you may help me with a few questions I had about AOI.

1. How do tobacco prices affect AOI's gross margins? I.e. do higher crop prices squeeze AOI's gross margins? I guess this goes to how the contracts with the big tobacco companies are structured, so any insights there would be appreciated.

2. How is AOI's business different from UVV? Why does AOI need so much debt (more than $1B as of March 31) to run its business (essentially to keep a large tobacco inventory) while UVV has a similar inventory but only one third the debt? Should I be thinking vicious competition between the two like Intel vs. AMD or relatively peaceful coexistence of a duopoly with separate turfs, etc.?

3. Here is a back-of-the-envelope valuation based on next year's estimates. Assume next fiscal year (ending in March 2010) revenues come in at $2.4B. Use a gross margin of 16% (I read somebody on this board says 20% is doable, but 16% is about the best they have done in recent years), this get's you to a gross profit of $384M. If we assume that SG&A expense (exluding depreciation) will be at $135M , that gets us to an Ebitda of $249M. Now let's put a 6 multiple on that Ebitda to get an Enterprise Value of $1.49B, and subtract the $1B in net debt to get an equity valuation of $490M, or a share price of $5.54. Because the balance sheet is highly leveraged, a P/E based valuation would probably make the shares look even more attractive. Does this sound right or am I off the mark here?

Thanks in advance for any thoughtful comments.