Restatement of Previously Issued 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 months ended June 30, 2015 and 2014 on this Form 10-Q/A. See the Company’s Annual Report on Form 10-K/A for the fiscal year ended March 31, 2015 for further information.

As of June 30, 2015, the correction of these errors decreased the reported amount of inventory by approximately $40 million, decreased accounts receivable by approximately $5 million, and decreased retained earnings by approximately $45 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. Further, these corrections decreased operating income for the three months ended June 30, 2015 by approximately $6 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/A. 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 ended June 30, 2015 and 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/A 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/A are provided in the tables below.

Financial Statement Presentation

In addition to the restatement of our consolidated financial statements, we have also restated the following Notes for the effects of the errors above.


•	Note 1. Summary of Significant Accounting Policies


•	Note 2. Income Taxes


•	Note 6. Variable Interest Entities


•	Note 7. Segment Information


•	Note 8. Earnings Per Share


•	Note 13. Pension and Postretirement Benefits


•	Note 14. Inventories


•	Note 15. Other Comprehensive Income (Loss)


•	Note 19. Investee Companies

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

The following tables present the effect of the correction of the error on selected line items of our previously reported unaudited condensed consolidated financial statements for the three months ended June 30, 2015 and 2014:



	Condensed Consolidated Statements of Operations
	Three Months Ended June 30,
							2015
(in thousands)	As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)		Other Adjustments (3)			As Restated
Sales and other operating revenues	$	263,812		$	—		$	2,923	$	(455	)	$	266,282
Cost of goods and services sold	229,598			8,456			—		(1,172		)	236,884
Gross profit (loss)	34,214			(8,456		)	2,923		717			29,398
Selling, general and administrative expenses	29,939			—			—		(25		)	29,914
Other income (expense)	586			—			—		(26		)	560
Operating income (loss)	1,913			(8,456		)	2,923		716			(2,904		)
Interest expense	27,691			—			—		82			27,773
Income (loss) before income taxes and other items	(24,404		)	(8,456		)	2,923		634			(29,303		)
Income tax expense (benefit)	(1,362		)	(2,174		)	202		120			(3,214		)
Net income (loss)	(22,910		)	(6,282		)	2,721		514			(25,957		)
Net income (loss) attributable to Alliance One International, Inc.	(22,903		)	(6,282		)	2,721		514			(25,950		)
Income (loss) per share:
Basic	(2.58		)	(0.71		)	0.31		0.06			(2.93		)
Diluted	(2.58		)	(0.71		)	0.31		0.06			(2.93		)

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



	Condensed Consolidated Statements of Operations
	Three Months Ended June 30,
								2014
(in thousands)		As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)			Other Adjustments (3)			As Restated
Sales and other operating revenues		$	249,017		$	—		$	125		$	—		$	249,144
Cost of goods and services sold		213,913			3,797			—			(1,839		)	215,873
Gross profit (loss)		35,104			(3,797		)	125			1,839			33,271
Selling, general and administrative expenses		31,325			—			—			—			31,325
Other income		800			—			—			—			800
Operating income (loss)		4,579			(3,797		)	125			1,839			2,746
Interest expense		26,922			—			—			—			26,922
Income (loss) before income taxes and other items		(20,992		)	(3,797		)	125			1,839			(22,825		)
Income tax expense (benefit)		(2,914		)	6,325			(3,167		)	76			320
Net income (loss)		(18,563		)	(10,122		)	3,292			1,763			(23,630		)
Net income (loss) attributable to Alliance One International, Inc.		(18,618		)	(10,122		)	3,292			1,763			(23,685		)
Income (loss) per share:
Basic		(2.12		)	(1.15		)	0.37			0.20			(2.69		)
Diluted		(2.12		)	(1.15		)	0.37			0.20			(2.69		)



	Condensed Consolidated Statements of Comprehensive Income (Loss)
	Three Months Ended June 30,
							2015
(in thousands)	As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)		Other Adjustments (3)		As Restated
Net income (loss)	$	(22,910	)	$	(6,282	)	$	2,721	$	514	$	(25,957	)
Total comprehensive income (loss), net of tax	(19,603		)	(6,282		)	2,721		739		(22,425		)
Comprehensive income (loss) attributable to Alliance One International, Inc.	(19,596		)	(6,282		)	2,721		739		(22,418		)



	Condensed Consolidated Statements of Comprehensive Income (Loss)
	Three Months Ended June 30,
							2014
(in thousands)	As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)		Other Adjustments (3)		As Restated
Net income (loss)	$	(18,563	)	$	(10,122	)	$	3,292	$	1,763	$	(23,630	)
Total comprehensive income (loss), net of tax	(17,941		)	(10,122		)	3,292		1,763		(23,008		)
Comprehensive income (loss) attributable to Alliance One International, Inc.	(17,996		)	(10,122		)	3,292		1,763		(23,063		)

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



	June 30, 2015
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	$	177,759		$	—		$	(4,536	)	$	—		$	173,223
Inventories	926,018			(40,121		)	—			—			885,897
Total current assets	1,471,926			(40,121		)	(4,536		)	—			1,427,269
Investments in unconsolidated affiliates	54,508			—			—			—			54,508
Deferred income taxes, net	29,394			—			—			1,505			30,899
Total assets	1,874,838			(40,121		)	(4,536		)	1,505			1,831,686
Accounts payable	77,758			—			—			389			78,147
Income taxes	9,740			(2,196		)	20			1,906			9,470
Total current liabilities	660,371			(2,196		)	20			2,295			660,490
Deferred income taxes	5,227			—			—			(3,749		)	1,478
Liability for unrecognized tax benefits	8,226			—			—			2,296			10,522
Pension, postretirement and other long-term benefits	89,301			—			—			—			89,301
Retained deficit	(192,316		)	(37,925		)	(4,556		)	663			(234,134		)
Accumulated other comprehensive loss	(62,854		)	—			—			—			(62,854		)
Total stockholders' equity of Alliance One International, Inc.	214,187			(37,925		)	(4,556		)	663			172,369
Total equity	217,654			(37,925		)	(4,556		)	663			175,836
Total liabilities and stockholders' equity	1,874,838			(40,121		)	(4,536		)	1,505			1,831,686



	June 30, 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	$	186,860		$	—		$	(8,918	)	$	—		$	177,942
Inventories	1,014,413			(20,735		)	—			—			993,678
Total current assets	1,530,361			(20,735		)	(8,918		)	—			1,500,708
Investments in unconsolidated affiliates	50,927			—			—			530			51,457
Deferred income taxes, net	40,878			—			—			—			40,878
Total assets	1,979,384			(20,735		)	(8,918		)	530			1,950,261
Accounts payable	89,054			—			—			—			89,054
Income taxes	9,619			7,131			(3,438		)	(4,791		)	8,521
Total current liabilities	799,432			7,131			(3,438		)	(4,791		)	798,334
Deferred income taxes	5,752			—			—			2,098			7,850
Liability for unrecognized tax benefits	9,526			—			—			2,985			12,511
Pension, postretirement and other long-term benefits	79,719			—			—			250			79,969
Retained deficit	(172,606		)	(27,866		)	(5,480		)	213			(205,739		)
Accumulated other comprehensive loss	(37,479		)	—			—			(225		)	(37,704		)
Total stockholders' equity of Alliance One International, Inc.	256,182			(27,866		)	(5,480		)	(12		)	222,824
Total equity	259,532			(27,866		)	(5,480		)	(12		)	226,174
Total liabilities and stockholders' equity	1,979,384			(20,735		)	(8,918		)	530			1,950,261

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



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	(18,618		)	(10,122		)	3,292			1,763			(23,685		)
Retained Deficit at June 30, 2014	(172,606		)	(27,866		)	(5,480		)	213			(205,739		)
Retained Deficit at March 31, 2015	(169,413		)	(31,643		)	(7,277		)	149			(208,184		)
Net loss	(22,903		)	(6,282		)	2,721			514			(25,950		)
Retained Deficit at June 30, 2015	(192,316		)	(37,925		)	(4,556		)	663			(234,134		)

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 June 30, 2014	(36,047		)	—			—			(225		)	(36,272		)
Pensions, Net of Tax at March 31, 2015	(52,007		)	—			—			(225		)	(52,232		)
Other comprehensive loss, net of tax for three months ended June 30, 2015	1,000			—			—			225			1,225

(in thousands)	As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)			Other Adjustments (3)			As Restated
Total Stockholders' Equity at March 31, 2014	$	276,888		$	(17,744	)	$	(8,772	)	$	(1,775	)	$	248,597
Net Loss	(18,563		)	(10,122		)	3,292			1,763			(23,630		)
Total Stockholders' Equity at June 30, 2014	259,532			(27,866		)	(5,480		)	(12		)	226,174
Total Stockholders' Equity at March 31, 2015	236,264			(31,643		)	(7,277		)	(76		)	197,268
Net Loss	(22,910		)	(6,282		)	2,721			514			(25,957		)
Other comprehensive loss, net of tax	3,307			—			—			225			3,532
Total Stockholders' Equity at June 30, 2015	217,654			(37,925		)	(4,556		)	663			175,836



	Condensed Statement of Consolidated Cash Flows for June 30, 2015
(in thousands)	As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)			Other Adjustments (3)			As Restated
Net loss	$	(22,910	)	$	(6,282	)	$	2,721		$	514		$	(25,957	)
Changes in operating assets and liabilities, net	(225,764		)	6,282			(2,721		)	(514		)	(222,717		)



	Condensed Statement of Consolidated Cash Flows for June 30, 2014
(in thousands)	As Previously Reported			Inventory Adjustments (1)			Receivables Adjustments (2)			Other Adjustments (3)			As Restated
Net loss	$	(18,563	)	$	(10,122	)	$	3,292		$	1,763		$	(23,630	)
Changes in operating assets and liabilities, net	(339,591		)	10,122			(3,292		)	(1,799		)	(334,560		)
Net cash used by operating acitivities	(348,171		)	—			—			(36		)	(348,207		)
Increase (decrease) in cash and cash equivalents	(108,543		)	—			—			(36		)	(108,579		)
Cash and cash equivalents at beginning of period	234,742			—			—			36			234,778

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

(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.