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EX-32 - EXHIBIT 32 - PYXUS INTERNATIONAL, INC.aoi-20151231xex32.htm
EX-31.02 - EXHIBIT 31.02 - PYXUS INTERNATIONAL, INC.aoi-20151231xex3102.htm
EX-31.01 - EXHIBIT 31.01 - PYXUS INTERNATIONAL, INC.aoi-20151231xex3101.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
 
 
 
FORM 10-Q
 
 
 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 2015.

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______.
Alliance One International, Inc.
(Exact name of registrant as specified in its charter)
Virginia
001-13684
54-1746567
________________
_____________________________
____________________
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

8001 Aerial Center Parkway
Morrisville, NC 27560-8417
(Address of principal executive offices)

(919) 379-4300
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.                                                                                                                                               

Large accelerated filer  [ ]                                                                        Accelerated filer  [X]                                           

Non-accelerated filer    [ ]                                                                        Smaller reporting company  [ ]                                 
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
                                               Yes [ ]                                                                              No [X]

As of January 31, 2016, the registrant had 8,894,558 shares outstanding of Common Stock (no par value) excluding 785,312 shares owned by a wholly owned subsidiary.

- 1 -



Preliminary Note

Immediately prior to the filing of this report, we filed a Form 10-K/A report for the year ended March 31, 2015 and a Form 10-Q/A report for the quarter ended June 30, 2015, restating our financial statements for the periods. These filings were made to correct errors we discovered in our accounting at our Kenya subsidiary. Certain details regarding those errors and adjustments covered by these reports are discussed in Note 1A “Restatement of Previously Issued Condensed Consolidated Financial Statements” of this Form 10-Q. The Company is also concurrently filing a Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.
    
Restatement Background

On February 15, 2016, the Audit Committee of our Board of Directors (the “Audit Committee”), after discussion with management , determined that the following financial statements previously filed with the SEC should no longer be relied upon: (1) the audited consolidated financial statements included in our Annual Report on Form 10-K for the years ended March 31, 2015, 2014 and 2013; and (2) the unaudited condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2015, 2014 and 2013, September 30, 2014 and 2013, and December 31, 2014 and 2013.
In the course of downsizing and terminating certain operations of Alliance One Tobacco (Kenya) Limited (“AOTK”), and preparing our financial statements for the quarter ended September 30, 2015, the Company identified errors in accounts receivable, inventory, sales and cost of goods sold in AOTK. Specifically, the value of inventory was overstated due to improper accounting for shrinkage, deferred crop costs, lower of cost or market valuations and accurate inventory counts. Further, sales and other operating revenues, and trade and other receivables, net were incorrectly stated due to improper revenue recognition for external sales. As a result of these errors, we have restated our consolidated financial statements for the years ended March 31, 2015, 2014 and 2013 and our unaudited condensed consolidated financial information for the three months and nine months ended December 31, 2014 on this Form 10-Q.
As of December 31, 2015, the correction of these errors principally decreased the Company’s inventory by approximately $46 million, decreased accounts receivable by approximately $3 million, and decreased retained earnings by approximately $49 million. Approximately $39 million of the decrease in retained earnings is related to March 31, 2015 and prior periods, with a portion in each quarter dating back to fiscal 2011 and prior. Further, these corrections decreased operating income for the nine months ended December 31, 2015 by approximately $10 million. Please refer to Note 1A “Restatement of Previously Issued Consolidated Financial Statements” of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for more information regarding the impact of these adjustments.
Along with restating our financial statements to correct the errors discussed above, we have recorded adjustments for certain previously identified immaterial accounting errors related to the periods covered by this Form 10-Q. When these financial statements were originally issued, we assessed the impact of these errors and concluded that they were not material to our financial statements for the three months and nine months ended December 31, 2014. However, in conjunction with our need to restate our financial statements as a result of the errors above, we have determined that it would be appropriate within this Form 10-Q to record all such previously unrecorded adjustments. Please refer to Note 1A "Restatement of Previously Issued Consolidated Financial Statements" of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q for more information regarding the impact of these adjustments.
Because our prior period financial results have been corrected for errors, they are considered to be “restated” under U.S. generally accepted accounting principles. Accordingly, the revised financial information included in this Quarterly Report on Form 10-Q has been identified as “restated.”
 
Internal Control Consideration

Our Chief Executive Officer and Chief Financial Officer have determined that there were deficiencies in our internal control over financial reporting that constitute material weaknesses, as defined by SEC regulations, at December 31, 2015. Accordingly, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting and our disclosure controls and procedures, as defined by SEC regulations, were not effective at December 31, 2015, as discussed in Part I, Item 4 of this Form 10-Q.




- 2 -



 
Alliance One International, Inc. and Subsidiaries
 
 
Table of Contents
 
 
 
Page No.
Part I.
Financial Information
 
 
 
 
Item 1.
Financial Statements (Unaudited)
 
 
 
 
Condensed Consolidated Statements of Operations
 
 
Three and Nine Months Ended December 31, 2015 and 2014 (As Restated)
4
 
 
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
 
Three and Nine Months Ended December 31, 2015 and 2014 (As Restated)
5
 
 
 
 
Condensed Consolidated Balance Sheets
 
 
December 31, 2015 and 2014 (As Restated) and March 31, 2015 (As Restated)
6
 
 
 
Condensed Statements of Consolidated Stockholders’ Equity
 
 
Nine Months Ended December 31, 2015 and 2014 (As Restated)
7
 
 
 
 
Condensed Consolidated Statements of Cash Flows
 
 
Nine Months Ended December 31, 2015 and 2014 (As Restated)
8
 
 
 
Notes to Condensed Consolidated Financial Statements
9 – 30
 
 
 
 
Item 2.
Management's Discussion and Analysis
 
 
 
of Financial Condition and Results of Operations
31 – 40
 
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
40
 
 
 
 
 
Item 4.
Controls and Procedures
40 – 41
 
 
Part II.
Other Information
 
 
 
 
 
Item 1.
Legal Proceedings
42
 
 
 
 
 
Item 1A.
Risk Factors
42
 
 
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
42
 
 
 
 
 
Item 3.
Defaults Upon Senior Securities
42
 
 
 
 
 
Item 4.
42
 
 
 
 
 
Item 5.
Other Information
42
 
 
 
 
 
Item 6.
Exhibits
43
 
Signature
44
 
 
Index of Exhibits
45

- 3 -


Part I. Financial Information

Item 1. Financial Statements

Alliance One International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended December 31, 2015 and 2014
(Unaudited)
 
 
 
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
(in thousands, except per share data)
 
2015
 
2014 (As Restated)
 
2015
 
2014 (As Restated)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and other operating revenues
 
$
491,139

 
$
489,227

 
$
1,172,274

 
$
1,335,341

Cost of goods and services sold
 
422,566

 
419,972

 
1,020,066

 
1,167,940

Gross profit
 
68,573

 
69,255

 
152,208

 
167,401

Selling, general and administrative expenses
 
29,124

 
38,882

 
86,986

 
106,207

Other income
 
594

 
146

 
125

 
1,273

Restructuring and asset impairment charges
 
1,525

 

 
4,087

 
500

Operating income
 
38,518

 
30,519

 
61,260

 
61,967

Debt retirement expense (income)
 

 
(338
)
 

 
(338
)
Interest expense (includes debt amortization of $2,497 and $2,131 for the three months and $7,123 and $5,693 for the nine months in 2015 and 2014, respectively)
 
30,356

 
28,277

 
86,911

 
83,694

Interest income
 
2,744

 
1,486

 
5,393

 
4,411

Income (loss) before income taxes and other items
 
10,906

 
4,066

 
(20,258
)
 
(16,978
)
Income tax expense
 
1,930

 
2,089

 
21,617

 
13,387

Equity in net income of investee companies
 
2,544

 
1,088

 
5,679

 
1,642

Net income (loss)
 
11,520

 
3,065

 
(36,196
)
 
(28,723
)
Less: Net loss attributable to noncontrolling interests
 
(50
)
 
(230
)
 
(115
)
 
(182
)
Net income (loss) attributable to Alliance One International, Inc.
 
$
11,570

 
$
3,295

 
$
(36,081
)
 
$
(28,541
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
$
1.30

 
$
0.37

 
$
(4.06
)
 
$
(3.24
)
Diluted
 
$
1.30

 
$
0.37

 
$
(4.06
)
 
$
(3.24
)
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
8,889

 
8,841

 
8,878

 
8,821

Diluted
 
8,889

 
8,841

 
8,878

 
8,821

 
 
 
 
 
 
 
 
 
 
 
 
See notes to condensed consolidated financial statements
 
 
 

- 4 -


Alliance One International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three and Nine Months Ended December 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
(in thousands)
 
2015
 
2014 (As Restated)
 
2015
 
2014 (As Restated)
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
11,520

 
$
3,065

 
$
(36,196
)
 
$
(28,723
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Currency translation adjustment
 
(1,075
)
 
(2,095
)
 
(432
)
 
(6,174
)
Defined benefit pension amounts reclassified to income:
 
 
 
 
 
 
 
 
Negative plan amendment/reclassified to liability
 
2,534

 

 
7,220

 

Curtailment
 
1,062

 

 
1,062

 

Amounts reclassified to income
 
725

 
413

 
2,725

 
1,240

Defined benefit plan adjustment
 
4,321

 
413

 
11,007

 
1,240

Total other comprehensive income (loss), net of tax
 
3,246

 
(1,682
)
 
10,575

 
(4,934
)
Total comprehensive income (loss)
 
14,766

 
1,383

 
(25,621
)
 
(33,657
)
Comprehensive loss attributable to noncontrolling interests
 
(50
)
 
(230
)
 
(115
)
 
(182
)
Comprehensive income (loss) attributable to Alliance One International, Inc.
 
$
14,816

 
$
1,613

 
$
(25,506
)
 
$
(33,475
)
 
 
 
See notes to condensed consolidated financial statements
 
 

- 5 -


Alliance One International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited)
(in thousands)
December 31, 2015
 
December 31, 2014 (As Restated)
 
March 31, 2015
(As Restated)
ASSETS
 
 
 
 
 
Current assets
 
 
 
 
 
Cash and cash equivalents
$
195,230

 
$
235,009

 
$
143,849

Trade and other receivables, net
242,435

 
219,673

 
193,370

Accounts receivable, related parties
81,837

 
63,491

 
41,816

Inventories
936,181

 
925,810

 
740,943

Advances to tobacco suppliers
62,648

 
81,016

 
37,767

Recoverable income taxes
14,809

 
6,673

 
5,257

Current deferred taxes, net
7,773

 
10,204

 
15,586

Prepaid expenses
23,257

 
27,105

 
23,901

Other current assets
13,529

 
11,840

 
14,606

Total current assets
1,577,699

 
1,580,821

 
1,217,095

Other assets
 
 
 
 
 
Investments in unconsolidated affiliates
57,698

 
54,299

 
54,694

Goodwill and other intangible assets
29,248

 
32,739

 
31,891

    Long-term recoverable income taxes
7,786

 
5,992

 
6,571

Deferred income taxes, net
24,208

 
35,952

 
33,155

Other deferred charges
15,392

 
17,426

 
17,695

Other noncurrent assets
20,812

 
31,876

 
27,631

 
155,144

 
178,284

 
171,637

Property, plant and equipment, net
228,786

 
240,554

 
237,914

 
$
1,961,629

 
$
1,999,659

 
$
1,626,646

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities
 
 
 
 
 
Notes payable to banks
$
522,538

 
$
506,822

 
$
330,254

Accounts payable
57,548

 
59,682

 
73,349

Due to related parties
30,137

 
24,767

 
58,512

Advances from customers
20,661

 
57,290

 
18,906

Accrued expenses and other current liabilities
109,044

 
107,029

 
87,815

Income taxes
5,961

 
8,096

 
12,694

Long-term debt current
30,269

 
2,894

 
2,894

Total current liabilities
776,158

 
766,580

 
584,424

 
 
 
 
 
 
Long-term debt
919,787

 
923,618

 
738,943

Deferred income taxes
2,341

 
5,213

 
3,498

Liability for unrecognized tax benefits
9,872

 
11,401

 
11,011

Pension, postretirement and other long-term liabilities
79,710

 
75,543

 
91,502

 
1,011,710

 
1,015,775

 
844,954

Commitments and contingencies


 


 


Stockholders’ equity
December 31, 2015
 
December 31, 2014
 
March 31, 2015
 
 
 
 
 
Common Stock—no par value:
 
 
 
 
 
 
 
 
 
 
Authorized shares
250,000

 
250,000

 
250,000

 
 
 
 
 
Issued shares
9,680

 
9,638

 
9,644

470,480

 
467,934

 
468,564

Retained deficit
(244,265
)
 
(210,595
)
 
(208,184
)
Accumulated other comprehensive loss
(55,811
)
 
(43,260
)
 
(66,386
)
Total stockholders’ equity of Alliance One International, Inc.
170,404

 
214,079

 
193,994

Noncontrolling interests
3,357

 
3,225

 
3,274

Total equity
173,761

 
217,304

 
197,268

 
$
1,961,629

 
$
1,999,659

 
$
1,626,646

See notes to condensed consolidated financial statements

- 6 -



Alliance One International, Inc. and Subsidiaries
CONDENSED STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY
(Unaudited)
 
 
 
 
 
Attributable to Alliance One International, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
(in thousands)
Common
Stock
Retained
Deficit (As Restated)
Currency Translation Adjustment
Pensions, Net of Tax (As Restated)
Noncontrolling
Interests
Total
Equity (As Restated)
 
 
 
 
 
 
 
Balance, March 31, 2014 (as restated)
$
465,682

$
(182,054
)
$
(1,640
)
$
(36,686
)
$
3,295

$
248,597

Net loss

(28,541
)


(182
)
(28,723
)
Acquisition of noncontrolling interest




112

112

Restricted stock surrendered
(145
)




(145
)
Stock-based compensation
2,397





2,397

Other comprehensive income, net of tax


(6,174
)
1,240


(4,934
)
 
 
 
 
 
 
 
Balance, December 31, 2014 (as restated)
$
467,934

$
(210,595
)
$
(7,814
)
$
(35,446
)
$
3,225

$
217,304

 
 
 
 
 
 
 
Balance, March 31, 2015 (as restated)
$
468,564

$
(208,184
)
$
(14,154
)
$
(52,232
)
$
3,274

$
197,268

Net loss

(36,081
)


(115
)
(36,196
)
Increase in capitalization of non-controlling interest




198

198

Restricted stock surrendered
(159
)




(159
)
Stock-based compensation
2,075





2,075

Other comprehensive loss, net of tax


(432
)
11,007


10,575

 
 
 
 
 
 
 
Balance, December 31, 2015
$
470,480

$
(244,265
)
$
(14,586
)
$
(41,225
)
$
3,357

$
173,761

 
 
 
 
 
 
 
See notes to condensed consolidated financial statements

- 7 -


Alliance One International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
Nine Months Ended December 31, 2015 and 2014
(Unaudited)
 
 
(in thousands)
 
December 31,
2015
 
December 31, 2014 (As Restated)
 
 
 
 
 
Operating activities
 
 
 
 
   Net loss
 
$
(36,196
)
 
$
(28,723
)
   Adjustments to reconcile net loss to net cash used by operating activities:
 
 
 
 
      Depreciation and amortization
 
21,018

 
22,247

      Debt amortization/interest
 
8,207

 
6,691

      Debt retirement
 

 
(338
)
     Loss on foreign currency transactions
 
16,713

 
5,167

      Restructuring and asset impairment charges
 
4,087

 
500

      Gain on sale of property, plant and equipment
 
(496
)
 
(1,322
)
      Bad debt expense (recovery)
 
(181
)
 
12,417

      Equity in net income of unconsolidated affiliates, net of dividends
 
(3,710
)
 
(1,642
)
      Stock-based compensation
 
2,323

 
2,562

      Changes in operating assets and liabilities, net
 
(357,391
)
 
(333,890
)
      Other, net
 
620

 
729

   Net cash used by operating activities
 
(345,006
)
 
(315,602
)
 
 
 
 
 
Investing activities
 
 
 
 
   Purchases of property, plant and equipment
 
(13,356
)
 
(19,585
)
   Proceeds from sale of property, plant and equipment
 
1,072

 
15,063

   Payments to acquire equity method investments
 

 
(1,655
)
   Surrender of life insurance policies
 
1,657

 
1,194

   Other, net
 
(266
)
 
(733
)
   Net cash used by investing activities
 
(10,893
)
 
(5,716
)
 
 
 
Financing activities
 
 
 
 
   Net proceeds from short-term borrowings
 
203,968

 
306,540

   Proceeds from long-term borrowings
 
210,000

 
210,000

   Repayment of long-term borrowings
 
(2,867
)
 
(188,864
)
   Debt issuance cost
 
(5,325
)
 
(4,963
)
   Other, net
 
303

 
415

   Net cash provided by financing activities
 
406,079

 
323,128

 
 
 
 
 
Effect of exchange rate changes on cash
 
1,201

 
(1,579
)
 
 
 
Increase in cash and cash equivalents
 
51,381

 
231

Cash and cash equivalents at beginning of period
 
143,849

 
234,778

Cash and cash equivalents at end of period
 
$
195,230

 
$
235,009

 
Other information:
 
 
 
 
      Cash paid for income taxes
 
$
12,445

 
$
11,728

      Cash paid for interest
 
58,240

 
50,971

      Cash received from interest
 
5,606

 
4,554

 
 
 
 
 
See notes to condensed consolidated financial statements

- 8 -

Alliance One International, Inc. and Subsidiaries

Alliance One International, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)

Note 1A - Restatement of Previously Issued Condensed Consolidated Financial Statements

In the course of downsizing and terminating certain operations of Alliance One Tobacco (Kenya) Limited (“AOTK”), and preparing our financial statements for the quarter ended September 30, 2015, the Company identified errors in accounts receivable, inventory, sales and cost of goods sold in AOTK. Specifically, the value of inventory was overstated due to improper accounting for shrinkage, deferred crop costs, lower of cost or market valuations and accurate inventory counts. Further, sales and other operating revenues, and trade and other receivables, net were incorrectly stated due to improper revenue recognition for external sales. As a result of these errors, we have restated our audited consolidated financial statements for the years ended March 31, 2015, 2014 and 2013 and our unaudited condensed consolidated financial information for the three and nine months ended December 31, 2014 on this Form 10-Q. See the Company’s Annual Report on Form 10-K/A for the fiscal year ended March 31, 2015 for further information.
As of December 31, 2015, the correction of these errors principally decreased the Company’s inventory by approximately $46 million, decreased accounts receivable by approximately $3 million, and decreased retained earnings by approximately $49 million. Approximately $39 million of the decrease in retained earnings is related to March 31, 2015 and prior periods, with a portion in each quarter dating back to fiscal 2011 and prior. Further, these corrections decreased operating income for the nine months ended December 31, 2015 by approximately $10 million.
Along with restating our financial statements to correct the errors discussed above, we are making adjustments for certain previously identified immaterial accounting errors related to the periods covered by this Form 10-Q. When these financial statements were originally issued, we assessed the impact of these errors and concluded that they were not material to our financial statements for the three months and nine months ended December 31, 2014. However, in conjunction with our need to restate our financial statements as a result of the errors above, we have determined that it would be appropriate within this Form 10-Q to make adjustments for all such previously unrecorded adjustments.
The combined impacts of all the adjustments to the applicable line items in our unaudited consolidated financial statements for the periods covered by this Form 10Q are provided in the tables below.
 
 
Condensed Consolidated Statements of Operations
 
 
Three Months Ended December 31, 2014
(in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Sales and other operating revenues
 
$
488,921

$

$
306

$

$
489,227

Cost of goods and services sold
 
419,217

755



419,972

Gross profit (loss)
 
69,704

(755
)
306


69,255

Operating income (loss)
 
30,968

(755
)
306


30,519

Income (loss) before income taxes and other items
 
4,515

(755
)
306


4,066

Income tax expense (benefit)
 
4,481

(1,763
)
327

(956
)
2,089

Net income (loss)
 
1,122

1,008

(21
)
956

3,065

Net income (loss) attributable to Alliance One International, Inc.
 
1,352

1,008

(21
)
956

3,295

Income (loss) per share:
 
 
 
 
 
 
    Basic
 
0.15

0.11


0.11

0.37

    Diluted
 
0.15

0.11


0.11

0.37












- 9 -

Alliance One International, Inc. and Subsidiaries

Note 1A - Restatement of Previously Issued Condensed Consolidated Financial Statements (continued)

 
 
Condensed Consolidated Statements of Operations
 
 
Nine Months Ended December 31, 2014
(in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Sales and other operating revenues
 
$
1,327,753

$

$
7,588

$

$
1,335,341

Cost of goods and services sold
 
1,151,462

18,316


(1,838
)
1,167,940

Gross profit (loss)
 
176,291

(18,316
)
7,588

1,838

167,401

Operating income (loss)
 
70,857

(18,316
)
7,588

1,838

61,967

Income (loss) before income taxes and other items
 
(8,088
)
(18,316
)
7,588

1,838

(16,978
)
Income tax expense (benefit)
 
12,912

1,539

(263
)
(801
)
13,387

Net income (loss)
 
(19,358
)
(19,855
)
7,851

2,639

(28,723
)
Net income (loss) attributable to Alliance One International, Inc.
 
(19,176
)
(19,855
)
7,851

2,639

(28,541
)
Income (loss) per share:
 
 
 
 
 
 
    Basic
 
(2.17
)
(2.24
)
0.88

0.30

(3.24
)
    Diluted
 
(2.17
)
(2.24
)
0.88

0.30

(3.24
)

 
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
 
Three Months Ended December 31, 2014
(in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Net income (loss)
 
$
1,122

1,008

$
(21
)
956

$
3,065

Total comprehensive income (loss), net of tax
 
(560
)
1,008

(21
)
956

1,383

Comprehensive income (loss) attributable to Alliance One International, Inc.
 
(330
)
1,008

(21
)
956

1,613


 
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
 
Nine Months Ended December 31, 2014
(in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Net income (loss)
 
$
(19,358
)
$
(19,855
)
$
7,851

$
2,639

$
(28,723
)
Total comprehensive income (loss), net of tax
 
(24,292
)
(19,855
)
7,851

2,639

(33,657
)
Comprehensive income (loss) attributable to Alliance One International, Inc.
 
(24,110
)
(19,855
)
7,851

2,639

(33,475
)









- 10 -

Alliance One International, Inc. and Subsidiaries

Note 1A - Restatement of Previously Issued Condensed Consolidated Financial Statements (continued)

 
 
December 31, 2014
Condensed Consolidated Balance Sheets (in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Trade and other receivables, net
 
$
221,128

$

$
(1,455
)
$

$
219,673

Inventories
 
961,064

(35,254
)


925,810

Total current assets
 
1,617,530

(35,254
)
(1,455
)

1,580,821

Investments in unconsolidated affiliates
 
53,769



530

54,299

Total assets
 
2,035,838

(35,254
)
(1,455
)
530

1,999,659

Income taxes
 
9,194

2,345

(534
)
(2,909
)
8,096

Total current liabilities
 
767,678

2,345

(534
)
(2,909
)
766,580

Deferred income taxes
 
4,997



216

5,213

Liability for unrecognized tax benefits
 
9,292



2,109

11,401

Pension, postretirement and other long-term liabilities
 
75,293



250

75,543

Retained deficit
 
(173,164
)
(37,599
)
(921
)
1,089

(210,595
)
Accumulated other comprehensive loss
 
(43,035
)


(225
)
(43,260
)
Total stockholders' equity of Alliance One International, Inc.
 
251,735

(37,599
)
(921
)
864

214,079

Total equity
 
254,960

(37,599
)
(921
)
864

217,304

Total liabilities and stockholders' equity
 
2,035,838

(35,254
)
(1,455
)
530

1,999,659


Condensed Statements of Consolidated Stockholders' Equity (in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Retained deficit at March 31, 2014
 
$
(153,988
)
$
(17,744
)
$
(8,772
)
$
(1,550
)
$
(182,054
)
Net loss
 
(19,176
)
(19,855
)
7,851

2,639

(28,541
)
Retained deficit at December 31, 2014
 
(173,164
)
(37,599
)
(921
)
1,089

(210,595
)
 
 
 
 
 
 
 
Accumulated Other Comprehensive Income (in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Pensions, net of tax at March 31, 2014
 
$
(36,461
)
$

$

$
(225
)
$
(36,686
)
Pensions, net of tax at December 31, 2014
 
(35,221
)


(225
)
(35,446
)
 
 
 
 
 
 
 
(in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Total equity at March 31, 2014
 
$
276,888

$
(17,744
)
$
(8,772
)
$
(1,775
)
$
248,597

Net loss
 
(19,358
)
(19,855
)
7,851

2,639

(28,723
)
Total equity at December 31, 2014
 
254,960

(37,599
)
(921
)
864

217,304






- 11 -

Alliance One International, Inc. and Subsidiaries

Note 1A - Restatement of Previously Issued Condensed Consolidated Financial Statements (continued)

 
 
Statement of Condensed Consolidated Cash Flows for the nine months ended December 31, 2014
(in thousands)
 
As Previously Reported
Inventory Adjustments (1)
Receivables Adjustments (2)
Other Adjustments (3)
As Restated
Net loss
 
$
(19,358
)
$
(19,855
)
$
7,851

$
2,639

$
(28,723
)
Changes in operating assets and liabilities, net
 
(343,219
)
19,855

(7,851
)
(2,675
)
(333,890
)
Net cash used by operating activities
 
(315,566
)


(36
)
(315,602
)
Increase in cash and cash equivalents
 
267



(36
)
231

Cash and cash equivalents at beginning of period
 
234,742



36

234,778


(1) Adjustments per the errors described above related to 1) improper accounting for shrinkage, deferred crop costs, lower of cost or market valuations and accurate inventory, and 2) costs of goods and services sold associated with improper revenue recognition.
(2) Adjustments for the errors described above related to improper revenue recognition.
(3) Adjustments for the previously identified immaterial accounting errors described above, primarily impacting inventories, costs of goods and services sold, income tax expense, and interest expense.

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Because of the seasonal nature of the Company’s business, the results of operations for any fiscal quarter will not necessarily be indicative of results to be expected for other quarters or a full fiscal year. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of financial position, results of operation and cash flows at the dates and for the periods presented have been included. The unaudited information included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended March 31, 2015.
Beginning April 1, 2015, the Company's management ceased evaluating performance of value added services as a separate operating segment. The Company's cut rag and other specialty products and services are now combined within the geographic operating segments in which they operate. The Company reviewed certain long-term financial performance and economic characteristics such as nature of products and services, production processes, type or class of customer, distribution methods for products and services, and regulatory environment. Based on review of the aggregation criteria, the Company concluded that Africa, Asia, Europe, and South America share similar economic indicators and are aggregated into one reportable segment “Other Regions.” The Company concluded that the economic characteristics of North America are dissimilar from the other operating segments and is disclosing it separately.               




















- 12 -

Alliance One International, Inc. and Subsidiaries

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Taxes Collected from Customers
Certain subsidiaries are subject to value added taxes on local sales. These amounts have been included in sales and cost of sales and were $5,796 and $3,468 for the three months ended December 31, 2015 and 2014, respectively and $14,408 and $17,956 for the nine months ended December 31, 2015 and 2014, respectively.

Other Deferred Charges
Other deferred charges are primarily deferred financing costs that are amortized over the life of the debt.

New Accounting Standards

Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board ("FASB") issued new accounting guidance that outlines a single comprehensive model to use in accounting for revenue from contracts with customers. The primary objective of this accounting guidance is to recognize revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. This accounting guidance, as amended, is effective for the Company on April 1, 2018. The Company is currently evaluating the impact of this new guidance.
     In August 2014, the FASB issued new accounting guidance on determining when and how to disclose going concern uncertainties in the financial statements. The primary objective of this accounting guidance is for management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. This accounting guidance is effective for the Company on March 31, 2017. The Company is currently evaluating the impact of this new guidance.
In April 2015, the FASB issued new accounting guidance that changes the presentation of debt issuance costs in financial statements. The primary objective of this accounting guidance is to present these costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is still reported as interest expense. This accounting guidance is effective for the Company on April 1, 2016. The Company is currently evaluating the impact of this new guidance.
In July 2015, the FASB issued new accounting guidance that simplifies the measurement of inventory. Under the previous accounting guidance, an entity measured inventory at the lower of cost or market with market defined as one of three different measures. The primary objective of this accounting guidance is to require a single measurement of inventory at the lower of cost and net realizable value. This accounting guidance is effective for the Company on April 1, 2017. The Company is currently evaluating the impact of this new guidance.
In August 2015, the FASB issued new accounting guidance that clarifies the presentation of debt issuance costs associated with line-of-credit arrangements in financial statements. The primary objective of this accounting guidance is to present these costs as an asset in the balance sheet. The accounting guidance issued in April 2015 did not address the presentation of debt issuance costs for this type of arrangement. This accounting guidance is effective for the Company on April 1, 2016. The Company is currently evaluating the impact of this new guidance.
    In November 2015, the FASB issued new accounting guidance regarding the balance sheet classification of deferred income taxes. The primary objective of this accounting guidance is to classify all deferred income tax assets and liabilities as noncurrent in a classified statement of financial position. This accounting guidance is effective for the Company on April 1, 2017. The Company is currently evaluating the impact of this new guidance.

2. INCOME TAXES

Accounting for Uncertainty in Income Taxes
As of December 31, 2015, the Company’s unrecognized tax benefits totaled $16,722, all of which would impact the Company’s effective tax rate if recognized.
         The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2015, accrued interest and penalties totaled $1,274 and $831 respectively.
         The Company expects to continue accruing interest expense related to the unrecognized tax benefits described above. Additionally, the Company may be subject to fluctuations in the unrecognized tax liability due to currency exchange rate movements.
         The Company does not foresee any reasonably possible changes in the unrecognized tax benefits in the next twelve months but acknowledges circumstances can change due to unexpected developments in the law. In certain jurisdictions, tax authorities have challenged positions that the Company has taken that resulted in recognizing benefits that are material to its financial statements. The Company believes it is more likely than not that it will prevail in these situations and accordingly has not recorded liabilities for these positions. The Company expects the challenged positions to be settled at a time greater than twelve months from its balance sheet date.

- 13 -

Alliance One International, Inc. and Subsidiaries

2. INCOME TAXES (continued)

         The Company and its subsidiaries file a U.S. federal consolidated income tax return as well as returns in several U.S. states and a number of foreign jurisdictions. As of December 31, 2015, the Company’s earliest open tax year for U.S. federal income tax purposes is its fiscal year ended March 31, 2012; however, the Company's net operating loss carryovers from prior periods remain subject to adjustment. Open tax years in state and foreign jurisdictions generally range from three to six years.

Provision for the Nine Months Ended December 31, 2015
The effective tax rate used for the nine months ended December 31, 2015 was (106.7)% compared to (78.8)% for the nine months ended December 31, 2014. The effective tax rates for these periods are based on the current estimate of full year results including the effect of taxes related to discrete events which are recorded in the interim period in which they occur. The difference in the effective tax rate in one year compared to another is the result of many factors that include, but are not limited to, differences in forecasted income for the respective years, differences in year-to-date income for the periods, certain losses for which no tax benefit is recorded; and, differences between discrete items recognized for the periods that include changes in valuation allowances, net exchanges losses on income tax accounts and net exchange gains related to liabilities for unrecognized tax benefits.
         For the nine months ended December 31, 2015, the Company recorded a discrete event adjustment expense of $9,492, bringing the effective tax rate estimated for the nine months of (59.9)% to (106.7)%. This discrete event adjustment expense relates primarily to net exchange losses on income tax accounts and net exchange gains related to liabilities for unrecognized tax benefits. For the nine months ended December 31, 2014, as restated, the Company recorded a discrete event adjustment expense of $4,860, bringing the effective tax rate estimated for the nine months of (50.2)% to (78.8)%. This discrete event adjustment expense relates primarily to net exchange losses on income tax accounts and net exchange gains related to liabilities for unrecognized tax benefits. The significant difference in the estimated effective tax rate for the nine months ended December 31, 2015 from the U.S. federal statutory rate is primarily due to net exchange losses on income tax accounts, foreign income tax rates lower than the U.S. rate and certain losses for which no benefit is currently recorded.

3. GUARANTEES

The Company and certain of its foreign subsidiaries guarantee bank loans to suppliers to finance their crops. Under longer-term arrangements, the Company may also guarantee financing on suppliers’ construction of curing barns or other tobacco production assets. Guaranteed loans are generally repaid concurrent with the delivery of tobacco to the Company. The Company is obligated to repay any guaranteed loan should the supplier default. If default occurs, the Company has recourse against the supplier. The Company also guarantees bank loans of certain unconsolidated subsidiaries in Asia, Brazil and Zimbabwe.

         The following table summarizes amounts guaranteed and the fair value of those guarantees:
 
December 31, 2015
 
December 31, 2014
 
March 31, 2015
Amounts guaranteed (not to exceed)
$
256,300

 
$
310,006

 
$
300,557

Amounts outstanding under guarantee
131,706

 
202,391

 
185,486

Fair value of guarantees
5,852

 
8,507

 
8,650


         Of the guarantees outstanding at December 31, 2015, all expire within one year. The fair value of guarantees is recorded in Accrued Expenses and Other Current Liabilities in the Condensed Consolidated Balance Sheets and included in crop costs except for Zimbabwe and the joint venture in Brazil which is included in Accounts Receivable, Related Parties.
         In Brazil, certain suppliers obtain government subsidized rural credit financing from local banks that is guaranteed by the Company. The Company withholds amounts owed to suppliers related to the rural credit financing of the supplier upon delivery of tobacco to the Company. The Company remits payments to the local banks on behalf of the guaranteed suppliers. Terms of rural credit financing are such that repayment is due to local banks based on contractual due dates. As of December 31, 2014 and March 31, 2015, respectively, the Company had balances of $558 and $16,412 that were due to local banks on behalf of suppliers. These amounts are included in Accounts Payable in the Condensed Consolidated Balance Sheets. There was no similar balance on December 31, 2015.










- 14 -

Alliance One International, Inc. and Subsidiaries

4. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

During the quarter ended March 31, 2015, the Company announced the first phase of a global restructuring plan focusing on efficiency and cost improvements. The Company reviewed origin and corporate operations and initiatives were implemented to increase operational efficiency and effectiveness. These initiatives continue to occur as the Company restructures certain operations not meeting strategic business objectives and performance metrics. During the three months ended December 31, 2015, the Company recorded $127 of employee severance charges and $1,398 of asset impairment charges primarily related to changes in certain U.S. pension plans and equipment located in Bulgaria. During the nine months ended December 31, 2015, the Company recorded $116 of employee severance charges and $3,971 of asset impairment charges in connection with the restructuring of certain operations primarily in Africa and Bulgaria and changes to certain U.S. pension plans. At December 31, 2015, the costs of any future initiatives are not estimable. During the nine months ended December 31, 2014, the Company recorded a $500 asset impairment charge for certain machinery and equipment due to the construction of a new U.S. cut rag facility with state of the art machinery and equipment.
The following table summarizes the restructuring charges recorded in the Company’s reporting segments during the three months and nine months ended December 31, 2015 and 2014, respectively:
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
Restructuring and Asset Impairment Charges
2015
 
2014
 
2015
 
2014
Employee separation and other cash charges:
 
 
 
 
 
 
 
Beginning balance
$
1,563

 
$

 
$
8,087

 
$
397

Period charges:
 
 
 
 
 
 
 
Severance charges
127

 

 
116

 

Total period charges
127

 

 
116

 

Payments through December 31
(1,052
)
 

 
(7,565
)
 
(397
)
Ending balance December 31
$
638

 
$

 
$
638

 
$

Asset impairment and other non-cash charges
$
1,398

 
$

 
$
3,971

 
$
500

Total restructuring charges for the period
$
1,525

 
$

 
$
4,087

 
$
500


On April 1, 2015, the Company revised its reportable segments. See Note 1 "Basis of Presentation and Significant Accounting Policies" to the "Notes to Condensed Consolidated Financial Statements."

The following table summarizes the employee separations and other cash charges recorded in the Company's North America and Other Regions segment during the three months and nine months ended December 31, 2015 and 2014:
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
Employee Separation and Other Cash Charges
2015
 
2014
 
2015
 
2014
Beginning balance:
$
1,563

 
$

 
$
8,087

 
$
397

   North America

 

 

 

   Other regions
1,563

 

 
8,087

 
397

Period charges:
$
127

 
$

 
$
116

 
$

   North America

 

 

 

   Other regions
127

 

 
116

 

Payments through December 31
$
(1,052
)
 
$

 
$
(7,565
)
 
$
(397
)
   North America

 

 

 

   Other regions
(1,052
)
 

 
(7,565
)
 
(397
)
Ending balance December 31
$
638

 
$

 
$
638

 
$

   North America

 

 

 

   Other regions
638

 

 
638

 










- 15 -

Alliance One International, Inc. and Subsidiaries

5. GOODWILL AND INTANGIBLES

Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not subject to amortization, but rather is tested for impairment annually or whenever events and circumstances indicate that an impairment may have occurred. The Company has chosen the first day of the last quarter of its fiscal year as the date to perform its annual goodwill impairment test.
         The Company has no intangible assets with indefinite useful lives. It does have intangible assets which are amortized. The following table summarizes the changes in the Company’s goodwill and other intangibles for the periods provided below:
 
 
 
 
Amortizable Intangibles
 
 
 
Goodwill (1)
 
Customer
Relationship
Intangible
 
Production
and Supply
Contract
Intangibles
 
Internally
Developed
Software
Intangible
 
Total
Weighted average remaining useful
    life in years as of December 31, 2015
 
 
 
9.25

 
5.00

 

 
 
March 31, 2014 balance
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
 
$
2,794

 
$
33,700

 
$
14,893

 
$
17,804

 
$
69,191

Accumulated amortization
 

 
(14,954
)
 
(4,752
)
 
(14,760
)
 
(34,466
)
Net March 31, 2014
 
2,794

 
18,746

 
10,141

 
3,044

 
34,725

Additions
 

 

 

 
395

 
395

Amortization expense
 

 
(843
)
 
(333
)
 
(394
)
 
(1,570
)
Net September 30, 2014
 
2,794

 
17,903

 
9,808

 
3,045

 
33,550

Additions
 

 

 

 
132

 
132

Amortization expense
 

 
(421
)
 
(317
)
 
(205
)
 
(943
)
Net December 31, 2014
 
2,794

 
17,482

 
9,491

 
2,972

 
32,739

Additions
 

 

 

 
171

 
171

Amortization expense
 

 
(421
)
 
(384
)
 
(214
)
 
(1,019
)
Net March 31, 2015
 
2,794

 
17,061

 
9,107

 
2,929

 
31,891

Amortization expense
 

 
(842
)
 
(542
)
 
(409
)
 
(1,793
)
Net September 30, 2015
 
2,794

 
16,219

 
8,565

 
2,520

 
30,098

Amortization expense
 

 
(421
)
 
(237
)
 
(192
)
 
(850
)
Net December 31, 2015
 
$
2,794

 
$
15,798

 
$
8,328

 
$
2,328

 
$
29,248

 
(1) Goodwill of $2,794 relates to the North America segment.

         The following table summarizes the estimated future intangible asset amortization expense:
    
For Fiscal
Years Ended
 
Customer
Relationship
Intangible
 
Production
and Supply
Contract
Intangible
 
Internally
Developed
Software
Intangible*
 
Total
January 1, 2016 through March 31, 2016
 
$
422

 
$
1,680

 
$
676

 
$
2,778

2017
 
1,685

 
1,405

 
740

 
3,830

2018
 
1,685

 
1,403

 
512

 
3,600

2019
 
1,685

 
1,397

 
259

 
3,341

2020
 
1,685

 
1,396

 
141

 
3,222

Later
 
8,636

 
1,047

 

 
9,683

 
 
$
15,798

 
$
8,328

 
$
2,328

 
$
26,454

*  Estimated amortization expense for the internally developed software is based on costs accumulated as of December 31, 2015. These estimates will change as new costs are incurred and until the software is placed into service in all locations.





- 16 -

Alliance One International, Inc. and Subsidiaries

6. VARIABLE INTEREST ENTITIES

The Company holds variable interests in seven joint ventures that are accounted for under the equity method of accounting. These joint ventures primarily procure or process inventory on behalf of the Company and the other joint venture partners. The variable interests relate to equity investments and advances made by the Company to the joint ventures. In addition, the Company also guarantees two of its joint venture’s borrowings which also represents a variable interest in those joint ventures. The Company is not the primary beneficiary, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities as a result of the entities’ management and board of directors' structure. Therefore, these entities are not consolidated. At December 31, 2015 and 2014, and March 31, 2015, the Company’s investment in these joint ventures was $56,682, $53,282, and $53,678, respectively and is classified as Investments in Unconsolidated Affiliates in the Condensed Consolidated Balance Sheets. The Company’s advances to these joint ventures at December 31, 2015 and 2014, and March 31, 2015, respectively were $3,484, $4,728 and $3,293 and are classified as Accounts Receivable, Related Parties in the Condensed Consolidated Balance Sheets. The Company guaranteed an amount to two joint ventures not to exceed $95,486, $111,065 and $105,983 at December 31, 2015 and 2014, and March 31, 2015, respectively. The investments, advances and guarantees in these joint ventures represent the Company’s maximum exposure to loss.

7. SEGMENT INFORMATION

The Company purchases, processes, sells and stores leaf tobacco. Tobacco is purchased in more than 35 countries and shipped to approximately 90 countries. The sales, logistics and billing functions of the Company are primarily concentrated in service centers outside of the producing areas to facilitate access to its major customers. Within certain quality and grade constraints, tobacco is fungible and, subject to these constraints, customers may choose to fulfill their needs from any of the areas where the Company purchases tobacco.
Beginning April 1, 2015, the Company has revised its reportable segments. Prior year segment data has been recast to conform with the current year segment presentation. See Note 1 "Basis of Presentation and Significant Accounting Policies" to the "Notes to Condensed Consolidated Financial Statements" for further information.         
    Selling, logistics, billing, and administrative overhead, including depreciation, which originates primarily from the Company’s corporate and sales offices, are allocated to the segments based upon segment operating income. The Company reviews performance data from the purchase of the product or the service provided through sale based on the source of the product or service and all intercompany transactions are allocated to the operating segment that either purchases or processes the tobacco.

          The following table presents the summary segment information for the three months and nine months ended December 31, 2015 and 2014:       
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2015
 
2014
 
2015
 
2014
Sales and other operating revenues:
 
 
 
 
 
 
 
    North America
$
148,971

 
$
148,271

 
$
244,101

 
$
269,648

    Other regions
342,168

 
340,956

 
928,173

 
1,065,693

    Total revenue
$
491,139

 
$
489,227

 
$
1,172,274

 
$
1,335,341

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
    North America
$
8,616

 
$
16,196

 
$
14,994

 
$
25,422

    Other regions
29,902

 
14,323

 
46,266

 
36,545

Total operating income
38,518

 
30,519

 
61,260

 
61,967

 
 
 
 
 
 
 
 
    Debt retirement expense (income)

 
(338
)
 

 
(338
)
    Interest expense
30,356

 
28,277

 
86,911

 
83,694

    Interest income
2,744

 
1,486

 
5,393

 
4,411

Income (loss) before income taxes and other items
$
10,906

 
$
4,066

 
$
(20,258
)
 
$
(16,978
)

Analysis of Segment Assets
December 31, 2015
 
December 31, 2014
 
March 31, 2015
Segment assets:
 
 
 
 
 
 
North America
$
517,207

 
$
412,387

 
$
231,131

 
Other regions
1,444,422

 
1,587,272

 
1,395,515

 
Total assets
$
1,961,629

 
$
1,999,659

 
$
1,626,646



- 17 -

Alliance One International, Inc. and Subsidiaries

8. EARNINGS PER SHARE

After the close of all trading on June 26, 2015, the Company’s approved 1-for-10 reverse stock split of its common stock became effective. As a result, every 10 shares of Alliance One common stock outstanding were combined into one share of Alliance One common stock, reducing the number of outstanding shares of the Company’s common stock at June 26, 2015 from approximately 88.6 million shares to approximately 8.86 million shares. This change did not affect any shareholder’s rights. No fractional shares were issued in connection with the reverse stock split. Instead, the Company issued one full share of the post-reverse stock split common stock to any shareholder who would have been entitled to receive a fractional share as a result of the reverse stock split. Each common shareholder holds the same percentage of the outstanding common stock immediately following the reverse split as that shareholder did immediately prior to the reverse split, except for minor adjustments due to the additional net share fraction issued as a result of the treatment of fractional shares. For the three months and nine months ended December 31, 2014, the weighted average number of common shares has been restated to a post-reverse stock split-adjusted basis.
The weighted average number of common shares outstanding is reported as the weighted average of the total shares of common stock outstanding net of shares of common stock held by a wholly owned subsidiary. Shares of common stock owned by the subsidiary were 785 at December 31, 2015 and 2014. This subsidiary waives its right to receive dividends and it does not have the right to vote.
          Certain potentially dilutive options were not included in the computation of earnings per diluted share because their exercise prices were greater than the average market price of the shares of common stock during the period and their effect would be antidilutive. These shares totaled 471 at a weighted average exercise price of $60.70 per share at December 31, 2015 and 662 at a weighted average exercise price of $60.37 per share at December 31, 2014.
          In connection with the offering of the Company’s 5.5% Convertible Senior Subordinated Notes due 2014, issued on July 2, 2009 (the “Convertible Notes”), the Company entered into privately negotiated convertible note hedge transactions (the “convertible note hedge transactions”) equal to the number of shares that underlie the Company’s Convertible Notes. These convertible note hedge transactions were designed to reduce the potential dilution of the Company’s common stock upon conversion of the Convertible Notes in the event that the value per share of common stock exceeded the initial conversion price of $50.28 per share on a post-reverse stock split basis. These shares were not included in the computation of earnings per diluted share because their inclusion would be antidilutive. The Convertible Notes matured during the three months ended September 30, 2014.

































- 18 -

Alliance One International, Inc. and Subsidiaries

8. EARNINGS PER SHARE (continued)

          The following table summarizes the computation of earnings per share for the three months and nine months ended December 31, 2015 and 2014, respectively.

 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
(in thousands, except per share data)
2015
 
2014
 
2015
 
2014
 
BASIC INCOME (LOSS)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Alliance One International, Inc.
$
11,570

 
$
3,295

 
$
(36,081
)
 
$
(28,541
)
 
 
 
 
 
 
 
 
 
 
SHARES
 
 
 
 
 
 
 
 
   Weighted average number of shares outstanding
8,889

 
8,841

 
8,878

 
8,821

 
 
 
 
 
 
 
 
 
 
BASIC INCOME (LOSS) PER SHARE
$
1.30

 
$
.37

 
$
(4.06
)
 
$
(3.24
)
 
 
 
 
 
 
 
 
 
 
DILUTED INCOME (LOSS)
 
 
 
 
 
 
 
 
   Net income (loss) attributable to Alliance One International, Inc.
$
11,570

 
$
3,295

 
$
(36,081
)
 
$
(28,541
)
 
   Plus interest expense on 5 1/2% convertible notes,
   net of tax

 

 

 

*
   Net income (loss) attributable to Alliance One International, Inc. as adjusted
$
11,570

 
$
3,295

 
$
(36,081
)
 
$
(28,541
)
 
 
 
 
 
 
 
 
 
 
SHARES
 
 
 
 
 
 
 
 
   Weighted average number of common shares
   outstanding
8,889

 
8,841

 
8,878

 
8,821

 
   Plus: Restricted shares issued and shares applicable to
              stock options and restricted stock units, net of
             shares assumed to be purchased from proceeds
             at average market price

*

 

*

*
              Assuming conversion of 5 1/2% convertible
              notes at the time of issuance

 

 

 

*
             Shares applicable to stock warrants

 

**

**