Pyxus International, Inc. Annual Report 2017

FY2017 Annual Report · Pyxus International, Inc.

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2 0 1 7 A N N U A L R E P O R T

FELLOW INVESTOR:
The results of our 2017 ﬁscal year tell two stories – one

of a challenging past year, and the other relating to a

positive future.

Our Proﬁt & Loss statement tells the story of how our
Company was impacted by uncontrollable El Niño weather
conditions, which dramatically affected crop sizes,
volumes, yields, quality, cost and earnings in Brazil, the
United States and Tanzania, but which was partly offset
by improvements in many other origins through crop size,
improved sales and efﬁciencies. Conversely, our balance
sheet tells the story of the long-term health of Alliance One.
Uncommitted inventories at year-end were at a seven-year
low, total inventories were reduced and receivables were
down as well, generating $253.6 million of cash. Our year-
end cash balance improved to $473.1 million.

Total full service volumes sold this year were consistent
with last year at 381.4 million kilos that included planned
increased prior crop inventory sales. These effects, when
combined with Turkish and other regions’ sales that have
been pushed to next year based on the timing of crops and
shipments, resulted in sales and other operating revenues
decreasing by 10.0% to $1,714.7 million from the prior
year. Net loss was $62.9 million while Adjusted EBITDA
was $136.6 million at 8.0% of sales.

As indicated previously, we utilize surplus cash to reduce
long-term debt, and during March and April 2017 we
purchased and cancelled approximately $57.1 million of
our Senior Secured Second Lien Notes, leaving $662.9
million outstanding after the April purchases. We remain
conﬁdent in our targets to reduce our more expensive long-
term debt with surplus cash by $25.0-$50.0 million per
year.

Our liquidity position is strong and in line with internal
expectations at $852.9 million as of March 31, 2017,
comprised of cash and $379.8 million of available credit
lines.

Looking ahead, global market conditions are positive
and early weather patterns support better global growing
conditions. Based on current conditions, our internal
forecast anticipates signiﬁcantly increased full-service and
processing volumes, improved sales and pricing, as well
as improved adjusted EBITDA for ﬁscal year 2018 when
compared to last year. Sales are anticipated to be in a range
of $1,900.0 million to $2,000.0 million with Adjusted
EBITDA in a range of $165.0 -$185.0 million.

Fiscal year 2018 is off to a strong start. As crop sizes return
to more normal levels in key markets, the impact of our
strategic initiatives should become more apparent. We are
seeing better growing conditions in key markets where we
are currently buying. With improved customer demand in
those same markets, we plan to sell these purchases this
ﬁscal year.

Alliance One is well-positioned to address complex
industry dynamics as our customers work to simplify
their supply chains and drive positive change in nicotine
consumption habits with reduced risk products. Our global
programs, aimed at improving farmer sustainability and
reducing negative environmental impact, are a brand
differentiator and offer customers a sense of assurance that
thtt eir leaf is produced sustainably. As thtt e industrtt y continues
to evolve, responsible crop production is essential to our
customers and Alliance One.

Sustainability and traceability are key elements of our
plan to cost-effectively secure the leaf supply for our
customers. In each origin where we operate, we strive
to ensure grower economic viability, improve working
conditions for those involved in crop production and
minimize negative environmental impact. This past year,
we continued implementation of our Agricultural Labor
Practices program. An independent third-party evaluated
our programs in three origins, Brazil, Indonesia and Malawi,
and confirmed our positive progress. We remain focused
on transitioning growers away from unsustainable curing
fuel sources and are proud that we recently surpassed the
163 million mark for number of trees planted worldwide.

Our talented employees continue to develop cost-effective,
innovative solutions that are driving our business forward.
We are taking the necessary steps to further strengthen our
preferred supplier position and leverage the better growing
conditions and improved demand in key markets. Our
continued focus on strategic plan execution is anticipated
enhance shareholder valu
to enhance shareholder value.

ark W. Kehaya
Mark W. Kehaya
Chairman of the Board of Directors

Pi t Sikk l
Pieter Sikkel
President and Chief Executive Ofﬁcer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED March 31, 2017

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______.

Virginia
(State or other jurisdiction
of incorporation)

Alliance One International, Inc.
(Exact name of registrant as specified in its charter)

001-13684
(Commission File Number)

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

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

Securities registered pursuant to Section 12(b) of the Act:

54-1746567
(I.R.S. Employer
Identification No.)

Title of Each Class

Common Stock (no par value)

Name of Exchange On Which Registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YeYY s [ ] No[X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes [ ] No [X]

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 [X] No [ ]

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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [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,” and "emerging growth company' in Rule 12b-2 of
the Exchange Act. (Check one):

Large Accelerated Filer [] Accelerated Filer [X] Non-Accelerated filer [] (Do not check if a smaller reporting company)
Smaller Reporting Company [] Emerging Growth Company []

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

[ ]

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 September 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $157.7
million based on the closing sale price of the common stock as reported on the New York Stock Exchange. As of June 1, 2017, there were 8,962,891
shares of Common Stock outstanding (no par value) excluding 785,313 shares owned by a wholly owned subsidiary.

DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Proxy Statement for the Annual Meeting of Shareholders (to be held August 10, 2017) of the registrant is incorporated
by reference into Part III hereof.

TABLE OF CONTENTS

BUSINESS

PART I
ITEM 1.
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4. MINE SAFETY DISCLOSURES

PROPERTIES
LEGAL PROCEEDINGS

PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA

ITEM 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENTS OF CONSOLIDATED OPERATIONS
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED BALANCE SHEETS
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
STATEMENTS OF CONSOLIDATED CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

ITEM 9.

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION

PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY

- 2-

ITEM 1. BUSINESS

A. The Company

PART I

Alliance One International, Inc. ("we," "Alliance One" or the "Company") is a Virginia corporation with revenues of approximately
$1.7 billion and operating income of approximately $84.6 million for the year ended March 31, 2017. Our common stock has
been traded on the New York Stock Exchange since 1995. Through our predecessor companies, we have a long operating history
in the leaf tobacco industry with some customer relationships beginning in the early 1900s. Alliance One is one of only two global
publicly held leaf tobacco merchants, each with similar global market shares. We have broad geographic processing capabilities,
a diversified product offering and an established customer base, including all of the major consumer tobacco product manufacturers.
Our goal is to be the preferred supplier of quality tobacco products and innovative solutions to the world’s manufacturers and
marketers of tobacco products.

Additional Information
We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and
Exchange Commission (“SEC”). The public may read and copy any materials that we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site that contains reports, proxy and information
statements, and other information regarding issuers that file with the SEC at http://www.sec.gov.
Our website address is http://www.aointl.com. We make available free of charge through our website our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or furnished to the SEC. The information contained on our website shall
not be deemed part of this annual report on Form 10-K for any reason.

B. The Business

Leaf tobacco merchants purchase, process, pack, store and ship tobacco to manufacturers of cigarettes and other consumer tobacco
products throughout the world. In an increasing number of markets, we also provide agronomy expertise for growing leaf tobacco.
Our revenues are primarily comprised of sales of processed tobacco and fees charged for processing and related services to these
manufacturers of tobacco products. Processing and other revenues are less than 5% of our total revenues. We do not manufacture
cigarettes or other consumer tobacco products.
We deal primarily in flue-cured, burley, and oriental tobaccos that are used in international brand cigarettes. Several of the
large multinational cigarette manufacturers have operations throughout the world, particularly in Asia, Eastern Europe and the
former Soviet Union, in order to access and penetrate the international brand cigarette markets. As cigarette manufacturers expand
their global operations, we believe that demand will increase for local sources of leaf tobacco and local tobacco processing and
distribution, primarily due to beneficial tariff rates and lower freight costs. We believe that for some large multinational cigarette
manufacturers, international expansion will cause them to place greater reliance on the services of leaf tobacco merchants with
the ability to source and process tobacco on a global basis and to help develop higher quality local sources of tobacco by improving
local agronomic practices. For other large multinational cigarette manufacturers, international expansion also includes vertical
integration of their operations, either through acquisition of the operations of existing leaf tobacco merchants, establishing new
operations or contracting directly with suppliers. In recent years, Japan Tobacco, Inc. (“JTI”) enhanced their direct leaf procurement
capabilities with the acquisition of small leaf processors in Malawi and Brazil and the formation a joint venture for tobacco leaf
in the United States. Philip Morris International, Inc. (“PMI”) has also strengthened their direct leaf procurement capabilities with
the acquisition of supplier contracts and the related assets from Alliance One and from another tobacco merchant in Brazil. In
addition, some customers have entered into joint venture arrangements to secure their future leaf requirements. Beginning in fiscal
2016, some customers began reversing certain aspects of their previous vertical integration of operations. We will continue to
work with our customers to meet all their needs as their buying patterns and business models change while continuing to be a
provider of quality tobacco products and innovative solutions.

Purchasing
Tobacco is primarily purchased directly from suppliers with small quantities still sold at auction. In non-auction markets, we
purchase tobacco directly from suppliers and we assume the risk of matching the quantities and grades required by our customers
to the entire crop we must purchase under contract. In other non-auction markets, such as China, we buy tobacco from local entities
that have purchased tobacco from suppliers and supervise the processing of that tobacco by those local entities. Principal auction
markets include India, Malawi and Zimbabwe and our network of tobacco operations and buyers allows us to cover the major
auctions of flue-cured and burley tobacco throughout the world. In the United States and other locations, a number of our customers
purchase tobacco directly from the suppliers in addition to the leaf merchants. Although our facilities process the tobacco purchased
directly from suppliers by these customers, we do not take ownership of that tobacco and do not record sales revenues associated
with its resale.

- 3-

Purchasing (continued)
Our arrangements with suppliers vary from locale to locale depending on our predictions of future supply and demand, local
historical practice and availability of capital. In certain jurisdictions, we purchase seeds, fertilizer, pesticides and other products
related to growing tobacco and advance them to suppliers, which represents prepaid inventory. The suppliers then utilize these
inputs to grow tobacco, which we are contractually obligated to purchase. The advances of inputs for the current crop generally
include the original cost of the inputs plus a mark-up and interest as it is earned. Where contractually permitted, we charge interest
to the suppliers during the period the current crop advance is outstanding. We generally advance inputs at a price greater than our
cost, which results in a mark-up on the inputs. We account for our advances to tobacco suppliers using a cost accumulation model,
which results in us reporting our advances at the lower of cost or recoverable amounts excluding the mark-up and interest. The
mark-up and interest on our advances are recognized when the tobacco is delivered as a decrease in our cost of the current crop.
Upon delivery of tobacco, part of the purchase price paid to the supplier is paid in cash and part through a reduction of the advance
balance. The advances applied to the delivery are reclassified out of advances and into unprocessed inventory. We advance inputs
only to suppliers with whom we have purchase contracts. For example, in Brazil, we generally contract to purchase a supplier's
entire tobacco crop at the market price per grade at the time of harvest based on the quality of the tobacco delivered. Pursuant to
these purchase contracts, we provide suppliers with fertilizer and other materials necessary to grow tobacco and may guarantee
Brazilian rural credit loans to suppliers to finance the crop. Under longer-term arrangements with suppliers, we may advance or
guarantee financing on suppliers' capital assets, which are also recovered through the delivery of tobacco to us by our suppliers.
In these jurisdictions, our agronomists maintain frequent contact with suppliers prior to and during the growing and curing
seasons to provide technical assistance to improve the quality and yield of the crop. As a result of various factors including weather,
not all suppliers are able to settle the entire amount of advances through delivery of tobacco in a given crop year. Throughout the
crop cycle, we monitor events that may impact the suppliers’ ability to deliver tobacco. If we determine we will not be able to
recover the original cost of the advances with deliveries of the current crop, or future crop deliveries, the unit cost of tobacco
actually received is increased when unrecoverable costs are within a normal range which is based on our historical results or
expensed immediately when they are above a normal range based on our historical results. We account for the unrecoverable costs
in this manner to ensure only costs within a normal range are capitalized in inventory and costs that are above a normal range are
expensed immediately as current period charges.
Alliance One has developed an extensive international network through which we purchase, process and sell tobacco and
we hold a leading position in most tobacco growing regions in the world. We purchase tobacco in more than 30 countries. During
the three years ended March 31, 2017, 2016 and 2015, approximately 24%, 24% and 20%, respectively, of our purchases of tobacco
were from the North America operating segment and approximately 76%, 76% and 80%, respectively, were from the Other Regions
operating segment. Within the Other Regions operating segment, approximately 60%, 61% and 63% of our total purchases for
the three years ended March 31, 2017, 2016 and 2015, respectively, were from China, Brazil, Turkey and the Africa Region.

Processing
We process tobacco to meet each customer's specifications as to quality, yield, chemistry, particle size, moisture content and other
characteristics. Unprocessed tobacco is a semi-perishable commodity that generally must be processed within a relatively short
period of time to prevent fermentation or deterioration in quality. The processing of leaf tobacco facilitates shipping and prevents
spoilage and is an essential service to our customers because the quality of processed leaf tobacco substantially affects the quality
of the manufacturer’s end product. Accordingly, we have located our production facilities in proximity to our principal sources
of tobacco.
We process tobacco in more than 34 owned and third-party facilities around the world including Argentina, Brazil, China,
Zimbabwe, Jordan, Guatemala, India, Tanzania, the United States, Malawi, Thailand, Germany, Indonesia, Macedonia, Bulgaria
and Turkey. These facilities encompass all leading export locations of flue-cured, burley and oriental tobaccos. In addition, we
have entered into contracts, joint ventures and other arrangements for the purchase of tobacco grown in substantially all other
countries that produce export-quality flue-cured and burley tobacco.
Upon arrival at our processing plants, flue-cured and burley tobacco is first reclassified according to grade. Most of that
tobacco is then blended to meet customer specifications regarding color, body and chemistry, threshed to remove the stem from
the leaf and further processed to produce strips of tobacco and sieve out small scrap. We also sell a small amount of processed
but unthreshed flue-cured and burley tobacco in loose-leaf and bundle form to certain customers. Oriental tobaccos are handled
and processed in a similar manner other than that the tobaccos are not threshed to remove stems.
Processed flue-cured, burley and oriental tobacco is redried to remove excess moisture so that it can be held in storage by
customers or us for long periods of time. After redrying, whole leaves, bundles, strips or stems and scrap where applicable are
separately packed in cases, bales, cartons or hogsheads for storage and shipment. Packed flue-cured, burley and oriental tobacco
generally is transported in the country of origin by truck or rail, and exports are moved by ship. Prior to and during processing,
steps are taken to ensure consistent quality of the tobacco, including the regrading and removal of undesirable leaves, dirt and
other non-tobacco related material. Customer representatives are frequently present at our facilities to monitor the processing of
their particular orders. Throughout the processing, our technicians use quality control laboratory test equipment to ensure that the
product meets all customer specifications.

- 4-

Selling
We ship tobacco to manufacturers of cigarettes and other consumer tobacco products located in approximately 90 countries around
the world as designated by these manufacturers. We recognize sales revenue when persuasive evidence of an arrangement exists,
the price to the customer is fixed, collectability is reasonably assured and title and risk of ownership is passed to the customer,
which is upon either shipment or delivery. In certain countries we also use commissioned agents to supplement our selling efforts.
Individual shipments may be large, and since the customer typically specifies shipping dates, our financial results may vary
significantly between reporting periods due to timing of sales. In some markets, principally the United States, we process tobacco
that is owned by our customers, and revenue is recognized when the processing is completed.
The consumer tobacco business is dominated by a relatively small number of large multinational cigarette manufacturers
and by government controlled entities. Including their respective affiliates, accounting for more than 10% of our revenues were
each of PMI and China Tobacco International, Inc. for the years ended March 31, 2017, 2016 and 2015.
In 2017, Alliance One delivered approximately 39% of its tobacco sales to customers in Europe and approximately 16% to
customers in the United States. One customer directs shipments to its Belgium storage and distribution center before shipment to
its manufacturing facilities in Europe and Asia. In 2017, these Belgium sales accounted for 7% of sales to customers in Europe.
The remaining sales are to customers located in Asia, Africa and other geographic regions of the world.

Seasonality
The purchasing and processing activities of our tobacco business are seasonal. Flue-cured tobacco grown in the United States is
purchased, processed and marketed generally during the five-month period beginning in July and ending in November. U.S. grown
burley tobacco is purchased, processed and marketed usually from late November through January or February. Tobacco grown
in Brazil is usually purchased, processed and marketed from January through July and in Africa from April through September.
Other markets around the world have similar purchasing periods, although at different times of the year.
During the purchasing, processing and marketing seasons, inventories of unprocessed tobacco, inventories of redried tobacco
and trade accounts receivable normally reach peak levels in succession. Current liabilities, particularly advances from customers
and short-term notes payable to banks, normally reach their peak in this period as a means of financing the seasonal expansion of
current assets. At March 31, the end of our fiscal year, the seasonal components of our working capital reflect primarily the
operations related to foreign grown tobacco.

Competition
Alliance One is one of only two global publicly held leaf tobacco merchants, with substantially similar global market shares in
markets in which we both operate. We hold a leading position in most major tobacco growing regions in the world, including the
principal export markets for flue-cured, burley and oriental tobacco and, as a result of our scale, global reach, and financial resources,
we believe we are well-suited to serve the needs of all manufacturers of cigarettes and other consumer tobacco products.
The leaf tobacco industry is highly competitive and competition is based primarily on the price charged for products and
services as well as the merchant's ability to meet customer specifications in the buying, processing, residue compliance and financing
of tobacco. In addition to the primary global independent leaf tobacco merchants, there are a number of other independent global,
regional or national competitors. Local independent leaf merchants with low fixed costs and overhead also supply cigarette
manufacturers. Recent vertical integration initiatives and other changes in customer buying patterns have resulted in a more
dynamic and competitive operating environment. There is also competition in all countries to buy the available leaf tobacco and,
in many areas, total leaf tobacco processing capacity exceeds demand.

Reportable Segments
The purchasing, processing, selling and storing of leaf tobacco is similar throughout our business. However, we maintain regional
operating and financial management in North America, South America, Europe, Africa and Asia to monitor our various operations
in these areas. In reviewing these operations, we have concluded that the economic characteristics of North America are dissimilar
from the other operating regions. Based on this fact, we disclose North America separately and aggregate the remaining four
operating segments, Africa, Asia, Europe and South America into one reportable segment “Other Regions.” Our financial
performance is reviewed at this level and these regions represent our operating segments. See Note 14 “Segment Information” to
the “Notes to Consolidated Financial Statements” for financial information attributable to our reportable segments.

C. Other

Research and Development
We routinely cooperate with both our customers and the manufacturers of the equipment used in our processing facilities to improve
processing technologies. However, no material amounts are expended for research and development, and we hold no material
patents, licenses, franchises, or concessions.

- 5-

Alliance One Employees
Alliance One's consolidated entities employed approximately 3,277 persons, excluding seasonal employees, in our worldwide
operations at March 31, 2017. In the Other Regions operating segment, Alliance One's consolidated entities employed
approximately 2,673 employees at March 31, 2017, excluding approximately 6,031 seasonal employees. Most seasonal employees
are covered by collective bargaining agreements. In the North America operating segment, Alliance One's consolidated entities
employed approximately 604 employees at March 31, 2017, excluding approximately 165 seasonal employees. Most seasonal
employees as well as approximately 208 full-time factory personnel in the United States are covered by collective bargaining
agreements. We consider Alliance One's employee relations to be satisfactory.

Government Regulation and Environmental Compliance
See Item 1A. “Risk Factors” for a discussion of government regulation. Currently there are no material estimated capital
expenditures related to environmental control facilities. In addition, there is no material effect on capital expenditures, results of
operations or competitive position anticipated as a result of compliance with current or pending federal or state laws and regulations
relating to protection of the environment.

EXECUTIVE OFFICERS OF ALLIANCE ONE INTERNATIONAL, INC.

The following information is furnished with respect to the Company's executive officers as of April 1, 2017, and the capacities in
which they serve. These officers serve at the pleasure of the Board of Directors and are elected at each annual organizational
meeting of the Board.

NAME
J. Pieter Sikkel

AGE
53

President and Chief Executive Officer

TITLE

Graham J. Kayes

52 Executive Vice President - Business Relationship Management and Leaf

Jose Maria Costa Garcia

51 Executive Vice President - Global Operations and Supply Chain

Joel L. Thomas

50 Executive Vice-President - Chief Financial Officer

William L. O’Quinn, Jr.

Senior Vice President - Chief Legal Officer and Secretary

The business experience summaries provided below for the Company's executive officers describe positions held by the named
individuals during the last five years.

J. Pieter Sikkel has served as President and Chief Executive Officer of Alliance One International, Inc., since March 2013, having
previously served as President from December 14, 2010 through February 2013, Executive Vice President - Business Strategy and
Relationship Management from May 2007 through December 13, 2010, and as Regional Director of Asia from May 2005 through
April 2007.

Graham J. Kayes has served as Executive Vice President - Business Relationship Management and Leaf since July 2014, having
previously served as Regional Director - Africa from February 2011 through June 2014, and as Managing Director of the Company's
Tanzanian subsidiary from June 2007 through January 2011.

Jose Maria Costa Garcia has served as Executive Vice President - Global Operations and Supply Chain since August 2012,
having previously served as Regional Director - Europe from September 2008 through July 2012, and as Regional Financial
Director - Europe from April 2005 through August 2008.

Joel L. Thomas has served as Executive Vice President - Chief Financial Officer since January 2014, having previously served
as Vice President - Treasurer from December 2005 through December 2013.

William L. O’Quinn, Jr. has served as Senior Vice President - Chief Legal Officer and Secretary since April 2011, having
previously served as Senior Vice President - Assistant General Counsel and Secretary from January 2011 through March 2011,
and as Assistant General Counsel and Assistant Secretary from August 2005 through December 2010.

- 6-

ITEM 1A. RISK FACTORS

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements
contained in this Annual Report on Form 10-K. Any of the following risks could materially adversely affect our business, our
operating results, our financial condition and the actual outcome of matters as to which forward-looking statements are made in
this Annual Report.
We may from time to time make written or oral forward-looking statements, including statements contained in filings with
the SEC, in reports to stockholders and in press releases and investor calls and webcasts. You can identify these forward-looking
statements by use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,”
“intends,” “projects,” “goals,” “targets” and other words of similar meaning. You can also identify them by the fact that they doy
not relate strictly to historical or current facts.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our
plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known
or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary
materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking
statements and whether to invest in or remain invested in Alliance One International, Inc. securities. In connection with the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important risk factors that, individually
or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking
statements made by us; any such statement is qualified by reference to the following cautionary statements. We elaborate on these
and other risks we face throughout this document. You should understand that it is not possible to predict or identify all risk factors.
Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. We do not
undertake to update any forward-looking statement that we may make from time to time.

Risks Relating to Our Operations

Our reliance on a small number of significant customers may adversely affect our financial statements.
Our customers are manufacturers of cigarette and other tobacco products. Several of these customers individually account for a
significant portion of our sales in a normal year.
For the year ended March 31, 2017, each of Philip Morris International, Inc. and China Tobacco International Inc., including
their respective affiliates, accounted for more than 10% of our revenues from continuing operations. In addition, tobacco product
manufacturers have experienced consolidation and further consolidation among our customers could decrease such customers’
demand for our leaf tobacco or processing services. The loss of any one or more of our significant customers could have a material
adverse effect on our financial statements.

Continued vertical integration by our customers could materially adversely affect our financial statements.
Demand for our leaf tobacco or processing services could be materially reduced if cigarette manufacturers continue to significantly
vertically integrate their operations, either through acquisition of our competitors, establishing new operations or contracting
directly with suppliers. During fiscal 2014, we completed the formation of a joint venture in Brazil with China Tobacco International
Inc. The joint venture entity had previously operated as one of our subsidiaries since its formation in 2012. In recent years, Japan
Tobacco, Inc. vertically integrated operations in Malawi, Brazil and the United States. In addition, Philip Morris International,
Inc. acquired supplier contracts and related assets in Brazil in order to procure leaf directly. In general, our results of operations
have been adversely affected by vertical integration initiatives. Although recently, some customers began reversing certain aspects
of their previous vertical integration of operations, further vertical integration by our customers could have a material adverse
effect on our financial statements.

Global shifts in sourcing customer requirements may negatively impact our organizational structure and asset base.
The global leaf tobacco industry has experienced shifts in the sourcing of customer requirements for tobacco. For example,
significant tobacco production volume decreases have occurred in the United States, Zimbabwe and Western Europe from historical
levels. At the same time, production volumes in other sourcing origins, such as Brazil and other areas of Africa, have stabilized.
Additional shifts in sourcing may occur as a result of currency fluctuations, including devaluation of the U.S. dollar. A shift in
sourcing origins in Europe has been influenced by modifications to the tobacco price support system in the European Union (EU).
Customer requirements have changed due to these variations in production, which could influence our ability to plan effectively
for the longer term in Europe.
We may not be able to timely or efficiently adjust to shifts in sourcing origins, and adjusting to shifts may require changes
in our production facilities in certain origins and changes in our fixed asset base. We have incurred, and may continue to incur,
restructuring charges as we continue to adjust to shifts in sourcing. Adjusting our capacity and adjusting to shifts in sourcing may
have an adverse impact on our ability to manage our costs, and could have an adverse effect on our financial performance.

- 7-

Risks Relating to Our Operations (continued)

Our financial results will vary according to growing conditions, customer indications and other factors, which reduces your
ability to gauge our quarterly and annual financial performance.
Our financial results, particularly the quarterly financial results, may be significantly affected by fluctuations in tobacco growing
seasons and crop sizes which affect the supply of tobacco. Crop sizes may be affected by, among other things, crop infestation
and disease, the volume of annual tobacco plantings and yields realized by supplier and suppliers' elections to grow crops other
than tobacco. The cultivation period for tobacco is dependent upon a number of factors, including the weather and other natural
events, such as hurricanes or tropical storms, and our processing schedule and results of operations for any quarterly period can
be significantly altered by these factors.
The cost of acquiring tobacco can fluctuate greatly due to crop sizes and increased competition in certain markets in which
we purchase tobacco. For example, short crops in periods of high demand translate into higher average green prices, higher
throughput costs and less volume to sell. Furthermore, large crops translate into lower average green prices, lower throughput
costs and excess volume to sell.
Further, the timing and unpredictability of customer indications, orders and shipments cause us to keep tobacco in inventory,
increase our risk and result in variations in quarterly and annual financial results. The timing of shipments can be materially
impacted by shortages of containers and vessels for shipping as well as infrastructure and accessibility issues in ports we use for
shipment. We may from time to time in the ordinary course of business keep a significant amount of processed tobacco in inventory
for our customers to accommodate their inventory management and other needs. Sales recognition by us and our subsidiaries is
based on the passage of ownership, usually with shipment of product. Because individual shipments may represent significant
amounts of revenue, our quarterly and annual financial results may vary significantly depending on our customers’ needs and
shipping instructions. These fluctuations result in varying volumes and sales in given periods, which also reduces your ability to
compare our financial results in different periods or in the same periods in different years.

Suppliers who have historically grown tobacco and from whom we have purchased tobacco may elect to grow other crops
instead of tobacco, which affects the world supply of tobacco and may impact our quarterly and annual financial
performance.
Increases in the prices for other crops have led and may in the future lead suppliers who have historically grown tobacco, and from
whom we have purchased tobacco, to elect to grow these other, more profitable items instead of tobacco. A decrease in the volume
of tobacco available for purchase may increase the purchase price of such tobacco. As a result, we could experience an increase
in tobacco crop acquisition costs which may impact our quarterly and annual financial performance.

Our advancement of inputs to tobacco suppliers could expose us to losses.
We advance seeds, fertilizer, pesticides and other products related to growing tobacco to our suppliers, which represent prepaid
inventory, in many countries to allow the suppliers to grow tobacco, which we are contractually obligated to purchase. The advances
to tobacco suppliers are settled as part of the consideration paid upon the suppliers delivering us unprocessed tobacco at market
prices. Two primary factors determine the market value of the tobacco suppliers deliver to us: the quantity of tobacco delivered
and the quality of the tobacco delivered. Unsatisfactory quantities or quality of the tobacco delivered could result in losses with
respect to advances to our tobacco suppliers or the deferral of those advances.

When we purchase tobacco directly from suppliers, we bear the risk that the tobacco will not meet our customers’ quality
and quantity requirements.
In countries where we contract directly with tobacco suppliers, including Argentina, Brazil, the United States and certain African
countries, we bear the risk that the tobacco delivered will not meet quality and quantity requirements of our customers. If the
tobacco does not meet such market requirements, we may not be able to sell the tobacco we agreed to buy and may not be able to
meet all of our customers’ orders, which would have an adverse effect on our profitability and results of operations.

Weather and other conditions can affect the marketability of our inventory.
Like other agricultural products, the quality of tobacco is affected by weather and the environment, which can change the quality
or size of the crop. If a weather event is particularly severe, such as a major drought or hurricane, the affected crop could be
destroyed or damaged to an extent that it would be less desirable to our customers, which would result in a reduction in revenues.
If such an event is also widespread, it could affect our ability to acquire the quantity of products required by customers. In addition,
other items can affect the marketability of tobacco, including, among other things, the presence of:

•
•
•

non-tobacco related material;
genetically modified organisms; and
excess residues of pesticides, fungicides and herbicides.

A significant event impacting the condition or quality of a large amount of any of the tobacco crops we buy could make it
difficult for us to sell such tobacco or to fill our customers’ orders. In addition, in the event of climate change, adverse weather
patterns could develop in the growing regions in which we purchase tobacco. Such adverse weather patterns could result in more
permanent disruptions in the quality and size of the available crop, which could adversely affect our business.

- 8-

Risks Relating to Our Operations (continued)

We face increased risks of doing business due to the extent of our international operations.
We do business in more than 35 countries, some of which do not have stable economies or governments. Our international
operations are subject to international business risks, including unsettled political conditions, uncertainty in the enforcement of
legal obligations, including the collection of accounts receivable, fraud risks, expropriation, import and export restrictions, exchange
controls, inflationary economies, currency risks and risks related to the restrictions on repatriation of earnings or proceeds from
liquidated assets of foreign subsidiaries. These risks are exacerbated in countries where we have advanced substantial sums or
guaranteed local loans or lines of credit for the purchase of tobacco from suppliers. For example, in 2006 as a result of the political
environment, economic instability, foreign currency controls and governmental regulations in Zimbabwe, we deconsolidated our
Zimbabwe subsidiary, Mashonaland Tobacco Company LTD ("MTC"). Subsequently, we determined that the significant doubt
about our ability to control MTC was eliminated and we have reconsolidated MTC as of March 31, 2016.
Our international operations are in areas where the demand is for the export of lower priced tobacco. We have significant
investments in our purchasing, processing and exporting operations in Argentina, Brazil, Malawi, Tanzania and Turkey.
In recent years, economic problems in certain African countries have received wide publicity related to devaluation and
appreciation of the local currency and inflation, including the classification of Malawi's economy as highly inflationary. Devaluation
and appreciation can affect our purchase costs of tobacco and our processing costs. In addition, we conduct business with suppliers
and customers in countries that have recently had or may be subject to dramatic political regime change, such as Egypt. In the
event of such dramatic changes in the government of such countries, we may be unable to continue to operate our business, or
adequately enforce legal obligations, after the change in a manner consistent with prior practice.

We are subject to the Foreign Corrupt Practices Act (the “FCPA”) and we operate in jurisdictions that pose a high risk of
potential FCPA violations.
We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to
foreign officials for the purpose of obtaining or keeping business and/or other benefits. We operate in a number of jurisdictions
that pose a high risk of potential FCPA violations. Although our corporate policy prohibits foreign bribery and we have adopted
procedures to promote compliance, there is no assurance that our policy or procedures will work effectively all of the time or
protect us against liability under the FCPA for actions taken by our agents, employees and intermediaries with respect to our
business or any businesses that we acquire. Failure to comply with the FCPA, other anti-corruption laws and other laws governing
the conduct of business with government entities (including local laws) could lead to criminal and civil penalties and other remedial
measures (including further changes or enhancements to our procedures, policies, and controls, the imposition of a compliance
monitor at our expense and potential personnel changes and/or disciplinary actions), any of which could have an adverse impact
on our business, financial condition, results of operations and liquidity. Any investigation of any potential violations of the FCPA
or other anti-corruption laws by U.S. or foreign authorities also could have an adverse impact on our business, financial condition
and results of operations.
In 2010, we entered into settlements with the SEC and the U.S. Department of Justice to resolve their investigations regarding
potential criminal and civil violations of the FCPA. The settlements resulted in the disgorgement in profits and fines totaling
$19.45 million, which have been paid. Both settlements also required us to retain an independent compliance monitor for a three
year term that was completed September 30, 2013.

Our exposure to foreign tax regimes, and changes in U.S. or foreign tax regimes, could adversely impact our business.
We do business in countries that have tax regimes in which the rules are not clear, are not consistently applied and are subject to
sudden change. This is especially true with regard to international transfer pricing. Our earnings could be reduced by the uncertain
and changing nature of these tax regimes. Certain of our subsidiaries are and may in the future be involved in tax matters in foreign
countries. While the outcome of any of these existing matters cannot be predicted with certainty, we are vigorously defending
them and do not currently expect that any of them will have a material adverse effect on our business or financial position. However,
should one or more of these matters be resolved in a manner adverse to our current expectation, the effect on our results of operations
for a particular fiscal reporting period could be material.
We seek to optimize our tax footprint across all operations in U.S. and non-U.S. jurisdictions alike. These benefits are
contingent upon existing tax laws and regulations in the U.S. and in the countries in which our international operations are located.
Future changes in domestic or international tax laws and regulations could adversely affect our ability to continue to realize these
tax benefits. Political leaders in the U.S. have called for comprehensive tax reform which, among other things, might change
certain U.S. tax rules impacting the way U.S. based multinationals are taxed on foreign income or may require previously earned
but untaxed foreign earnings and profits to be taxed immediately but at a rate lower than the current 35% U.S. Federal tax rate.

Fluctuations in foreign currency exchange and interest rates could adversely affect our results of operations.
We conduct our business in many countries around the world. Our business is generally conducted in U.S. dollars, as is the business
of the leaf tobacco industry as a whole. However, we generally must purchase tobacco in non-U.S. countries using local currency.
As a result, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of
exchange fluctuations of the local currency against the U.S. dollar. When the U.S. dollar weakens against foreign currencies, our
costs for purchasing and processing tobacco in such currencies increases. We attempt to minimize such currency risks by matching

- 9-

Risks relating to Our Operations (continued)

the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency
of the country where the tobacco is grown. Fluctuations in the value of foreign currencies can significantly affect our operating
results.

In addition, the devaluation of foreign currencies has resulted and may in the future result in reduced purchasing power
from customers whose capital resources are denominated in those currencies. We may incur a loss of business as a result of the
devaluation of these currencies now or in the future.

Low investment performance by our defined benefit pension plan assets may increase our pension expense, and may require
us to fund a larger portion of our pension obligations, thus, diverting funds from other potential uses.
We sponsor defined benefit pension plans that cover certain eligible employees. Our pension expense and required contributions
to our pension plans are directly affected by the value of plan assets, the projected rate of return on plan assets, the actual rate of
return on plan assets, and the actuarial assumptions we use to measure the defined benefit pension plan obligations.
If plan assets perform below the assumed rate of return used to determine pension expense, future pension expense will
increase. Further, as a result of the global economic instability or other economic market events, our pension plan investment
portfolio may experience significant volatility.
The proportion of pension assets to liabilities, which is called the funded status, determines the level of contribution to the
plan that is required by law. In recent years, we have funded the plan in amounts as required, but changes in the plan’s funded
status related to the value of assets or liabilities could increase the amount required to be funded. We cannot predict whether
changing market or economic conditions, regulatory changes or other factors will further increase our pension funding obligations,
diverting funds that would otherwise be available for other uses.

Competition could erode our earnings.
The leaf tobacco industry is highly competitive. We are one of two global publicly held competitors in the leaf tobacco industry,
each with similar global market shares. Competition is based primarily on the prices charged for products and services as well as
the merchant’s ability to meet customer specifications in the buying, processing and financing of tobacco. In addition, there is
competition in all countries to buy the available tobacco. The loss or substantial reduction of any large or significant customer
could reduce our earnings.
In addition to the two primary global independent publicly held leaf tobacco merchants, the cigarette manufacturers
increasingly buy tobacco directly from suppliers. We also face increasing competition from new local and regional independent
leaf merchants with low fixed costs and overhead and good customer connections at the local level, particularly Brazil and parts
of Africa, where the new entrants have been able to capitalize in the global transition to those markets. Any of these sources of
new competition may result in less tobacco available for us to purchase and process in the applicable markets.

We rely on internal and externally hosted information technology systems and disruption, failure or security breaches of
these systems could adversely affect our business.
We rely on information technology (IT) systems, including systems hosted by service providers. The enterprise resource planning
system (SAP) we are implementing in stages throughout the Company, for example, is hosted by Capgemini and our domestic
employee payroll system is hosted by Ceridian. Although we have disaster recovery plans and several intrusion preventive
mitigating tools and services in place, which are active inline services or are tested routinely, our portfolio of hardware and software
products, solutions and services and our enterprise IT systems, including those hosted by service providers, may be vulnerable to
damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters,
computer system or network failures, computer viruses or other malicious software programs and cyber-attacks, including system
hacking and other cyber-security breaches. The failure or disruption of our IT systems to perform as anticipated for any reason
could disrupt our business and result in decreased performance, significant remediation costs, transaction errors, loss of data,
processing inefficiencies, downtime, litigation, and the loss of suppliers or customers. A significant disruption or failure could
have a material adverse effect on our business operations, financial performance and financial condition.

We have identified material weaknesses related to our internal controls and there can be no assurance that material
weaknesses will not be identified in the future.
In the course of downsizing and terminating certain operations of our subsidiary, Alliance One Tobacco (Kenya) Limited (“AOTK”),
and preparing our financial statements for the quarter ended September 30, 2015, we 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 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 restated our consolidated financial statements for the years ended March 31, 2015, 2014 and 2013, and
the selected quarterly financial data for each of the quarters in the fiscal years then ended, our condensed consolidated financial
statements for the period ended June 30, 2015 and selected consolidated statement of operations data for the fiscal year ended
March 31, 2012 and selected consolidated balance sheet data at March 31, 2012 and 2011.

- 10-

Risks relating to Our Operations (continued)

We have identified material weaknesses related to our internal controls and there can be no assurance that material
weaknesses will not be identified in the future. (continued)
Our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2016, the following material weaknesses
in internal control over financial reporting existed at AOTK:

•

Processes and control activities designed to support the amounts of inventory recorded in the general ledger were not
effective, were incorrectly applied or were overridden. It appears that local AOTK management, through collusion,
overrode controls to record fictional inventory balances.
Processes and control activities designed to support the amounts of deferred crop costs recorded in the general ledger
were not effective, were incorrectly applied or were overridden. It appears that local AOTK management, through
collusion, overrode controls to inappropriately cost redried inventory and understate cost of goods sold.
Processes and control activities designed to support the revenue transactions recorded in the general ledger were not
effective, were incorrectly applied or were overridden. Specifically, revenues were recorded based on estimated
transactions and actual transactions were processed outside the general ledger system. As a result revenue recorded did
not reflect actual sales transactions and accounts receivable balances were recorded which would not be realized.

In addition, our Chief Executive Officer and Chief Financial Officer have also concluded that, as of March 31, 2016, the
following material weaknesses existed at the regional and corporate levels:

•

The Company’s regional review of operations at African origins was ineffective due to the lack of adequate qualified
resources to appropriately examine and investigate financial results. Although the financial information from the Kenya
origin was reviewed on a timely basis, the regional review did not incorporate the qualitative and operational context
needed to perform an adequate review, which allowed the misstated balances to build up over extended periods of time.
The Company’s fraud risk assessment was not adequately designed or implemented to address the risks of fraud in
certain origins. The Company’s assessment did not determine that certain regions warranted additional control activities
to respond to additional fraud risks.
The Company’s controls applicable to the accounting for the reconsolidation of its Zimbabwe subsidiary did not operate
effectively.

We remediated those material weaknesses in internal control over financial reporting, and we believe that our internal control over
financial reporting was effective at March 31, 2017 as reported elsewhere in this Annual Report. Although we intend to continue
to aggressively monitor and improve our internal controls, we cannot assure you that other material weaknesses will not occur in
the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could
cause us to fail to meet our reporting obligations or result in misstatements in our financial statements in amounts that could be
material. Ineffective internal controls could cause investors to lose confidence in our reported financial information, which could
have a negative effect on the value of our common stock and could also require additional restatements of our prior reported
financial information.

Risks Relating to Our Capital Structure

We may not continue to have access to the capital markets to obtain long-term and short-term financing on acceptable
terms and conditions.
We access the short-term capital markets and, from time to time, the long-term markets to obtain financing. Although we believe
that we can continue to access the capital markets in fiscal 2017 on acceptable terms and conditions, our access and the availability
of acceptable terms and conditions are impacted by many factors, including: (i) our credit ratings; (ii) the liquidity and volatility
of the overall capital markets; and (iii) the current state of the economy, including the tobacco industry. There can be no assurances
that we will continue to have access to the capital markets on terms acceptable to us.

We may not have access to available capital to finance our local operations in non-U.S. jurisdictions.
We have typically financed our non-U.S. local operations with uncommitted short-term operating credit lines at the local level.
These operating lines are typically seasonal in nature, normally extending for a term of 180 to 270 days corresponding to the
tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the right to cease making
loans or demand payment of outstanding loans at any time. In addition, each of these operating lines must be renewed with each
tobacco crop season in that jurisdiction. Although our foreign subsidiaries are the borrowers under these lines, many of them are
guaranteed by us.
As of March 31, 2017, we had approximately $486.0 million drawn and outstanding on short-term and long-term foreign
seasonal lines with maximum capacity totaling $818.7 million subject to limitations under our asset-based revolving credit facility
(the "ABL Facility"). Additionally against these lines there was $13.0 million available in unused letter of credit capacity with
$5.2 million issued but unfunded.

- 11-

Risks relating to Our Capital Structure (continued)

We may not have access to available capital to finance our local operations in non-U.S. jurisdictions. (continued)
Because the lenders under these operating lines typically have the right to cancel the loan at any time and each line must be renewed
with each crop season, there can be no assurance that this capital will be available to our subsidiaries. If a number of these lenders
cease lending to our subsidiaries or dramatically decrease such lending, it could have a material adverse effect on our liquidity.

Failure of foreign banks in which our subsidiaries deposit funds or the failure to transfer funds or honor withdrawals may
affect our results of operations.
Funds held by our foreign subsidiaries are often deposited in their local banks. Banks in certain foreign jurisdictions may be
subject to a higher rate of failure or may not honor withdrawals of deposited funds. In addition, the countries in which these local
banks operate may lack sufficient regulatory oversight or suffer from structural weaknesses in the local banking system. Due to
uncertainties and risks relating to the political stability of certain foreign governments, these local banks also may be subject to
exchange controls and therefore unable to perform transfers of certain currencies. If our ability to gain access to these funds was
impaired, it could have a material adverse effect on our results of operations.

We may not be able to satisfy the covenants included in our financing arrangements, which could result in the default of
our outstanding debt obligations.
The agreement governing the ABL Facility includes certain restrictive covenants and a springing covenant requiring that our fixed
charge coverage ratio be no less than 1.00 to 1.00 during any period commencing at any time that the excess borrowing availability
under the ABL Facility is less than a specified amount and ending on the first date after excess borrowing availability has been
equal to or greater than such specified amount for a period of 30 consecutive days. The agreements governing our other indebtedness
and the indentures governing our 8.500% senior secured first lien notes due 2021 (the “senior secured first lien notes”) and our
9.875% senior secured second lien notes due 2021 (the “senior secured second line notes”) also include restrictive covenants. In
the recent past, we have sought and obtained waivers and amendments under our existing financing arrangements to avoid future
non-compliance with financial covenants and cure past defaults under restrictive covenants. We also paid significant fees to obtain
these waivers and consents. You should consider this in evaluating our ability to comply with financial and restrictive covenants
in our debt instruments and the financial costs of our ability to do so. Any future defaults for which we do not obtain waivers or
amendments could result in the acceleration of a substantial portion of our indebtedness, much of which is cross-defaulted to other
indebtedness.

We have substantial debt which may adversely affect us by limiting future sources of financing, interfering with our ability
to pay interest and principal on the senior notes and subjecting us to additional risks.
We have a significant amount of indebtedness and debt service obligations. As of March 31, 2017, we had approximately $1,428.9
million of indebtedness. If we incur additional indebtedness to our current indebtedness levels, including borrowings under the
ABL Facility or other short or long-term credit facilities, the related risks that we now face could increase.
Our substantial debt could have important consequences, including:

• making it more difficult for us to satisfy our obligations with respect to the senior notes and our other obligations;
•

limiting our ability to obtain additional financing on satisfactory terms and to otherwise fund working capital, capital
expenditures, debt refinancing, acquisitions and other general corporate requirements;
a significant portion of our cash flow from operations must be dedicated to paying interest on and the repayment of the
principal of our indebtedness. This reduces the amount of cash we have available for making principal and interest
payments under the senior notes and for other purposes and makes us more vulnerable to a decrease in demand for leaf
tobacco, increases in our operating costs or general economic or industry conditions;
our ability to adjust to changing market conditions and to compete with other global leaf tobacco merchants may be
hampered by the amount of debt we owe;
increasing our vulnerability to general adverse economic and industry conditions;
placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
restricting us from making strategic acquisitions or exploiting business opportunities.

•

•
•
•
•

In addition, the agreement governing the ABL Facility and the indentures governing the senior secured first lien notes and
the senior secured second lien notes each contain financial and other restrictive covenants that will limit our ability to engage in
activities that may be in our long-term best interests. Our failure to comply with certain covenants within the ABL Facility could
result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt. Also, a substantial
portion of our debt, including borrowings under the ABL Facility, bears interest at variable rates. If market interest rates increase,
variable-rate debt will create higher debt service requirements, which would adversely affect our cash flow. While we may enter
into agreements limiting our exposure to higher debt service requirements, any such agreements may not offer complete protection
from this risk.

- 12-

Risks Relating to Our Capital Structure (continued)

Despite current indebtedness levels, we may still be able to incur substantially more debt. This could exacerbate further
the risks associated with our significant leverage.
We may be able to incur substantial additional indebtedness in the future under the terms of the indentures governing the senior
secured first lien notes and the senior secured second lien notes and the agreement governing the ABL Facility. The ABL Facility
provides for a revolving credit line of up to $60.0 million subject to a borrowing base of eligible inventory and accounts receivable,
and under certain conditions, we may solicit the lenders under the ABL Facility or other prospective lenders to provide additional
revolving loan commitments under the ABL Facility in an aggregate amount not to exceed $15.0 million (less the aggregate
principal amount of any additional notes issued under the indenture governing the senior secured first lien notes). As of March 31,
2017, we had no outstanding borrowings under the ABL Facility and $60.0 million, subject to limitations under the ABL Facility,
was available for borrowing under the ABL Facility and an additional $327.6 million was available for borrowing under other
short and long-term credit facilities, including $7.8 million with respect to issued but unfunded letters of credit. If new debt is
added to our current debt levels, the risks discussed above could intensify.

Our debt agreements will contain restrictions that limit our flexibility in operating our business.
The agreement governing the ABL Facility and the indentures governing the senior secured first lien notes and the senior secured
second lien notes contain a number of significant covenants. These covenants limit our ability to, among other things:

incur additional indebtedness or issue disqualified stock or preferred stock;

•
• make investments;
•
•
•
•
•
•
•

pay dividends and make other restricted payments;
sell certain assets;
create liens;
enter into sale and leaseback transactions;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
enter into transactions with our affiliates; and
designate our subsidiaries as unrestricted subsidiaries.

In addition, the ABL Facility requires us to periodically satisfy a fixed charge coverage ratio during any period commencing
at any time that excess borrowing availability is less than a specified amount and ending on the first date after excess borrowing
availability has been equal to or greater than such specified amount for a period of 30 consecutive days. Complying with these
covenants and tests may cause us to take actions that we otherwise would not take or not take actions that we otherwise would
take. The failure to comply with these covenants and tests would cause a default under the ABL Facility and under the indentures
governing the senior secured first lien notes and the senior secured second lien notes and would prevent us from taking certain
actions, such as incurring additional debt, paying dividends or redeeming the senior secured first lien notes, the senior secured
second lien notes or any subordinated debt. A default, if not waived, could result in the debt under the ABL Facility and the
indentures governing the senior secured first lien notes and the senior secured second lien notes becoming immediately due and
payable and could result in a default or acceleration of our other indebtedness with cross-default provisions. If this occurs, we
may not be able to pay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be on
terms that are acceptable to us.

We will require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many
factors beyond our control.
Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures
will depend on our ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flowh
from operations or that future borrowings will be available to us under the ABL Facility or otherwise in an amount sufficient to
enable us to pay our indebtedness, including the senior secured first lien notes and the senior secured second lien notes, or to fund
our other liquidity needs.

We may not be able to refinance or renew our indebtedness, including the senior secured first lien notes, the senior secured
second lien notes and the ABL Facility, or be able to borrow under the ABL Facility or other future credit facilities, which
may have a material adverse effect on our financial condition.
We anticipate that loans under the ABL Facility will mature on January 14, 2021. We may not be able to renew or refinance the
ABL Facility or other indebtedness, including the senior secured first lien notes and the senior secured second lien notes, on
substantially similar terms, or at all. We may have to pay additional fees and expenses that we might not have to pay under normal
circumstances, and we may have to agree to terms that could increase the cost of our debt structure. If we are unable to renew or w
refinance the ABL Facility, the senior secured first lien notes, the senior secured second lien notes or our other indebtedness on
terms which are not materially less favorable than the terms currently available to us or obtain alternative or additional financing

- 13-

Risks Relating to Our Capital Structure (continued)

We may not be able to refinance or renew our indebtedness, including the senior secured first lien notes, the senior secured
second lien notes and the ABL Facility, or be able to borrow under the ABL Facility or other future credit facilities, which
may have a material adverse effect on our financial condition. (continued)
arrangements, we may not be able to repay the ABL Facility, the senior secured first lien notes, the senior secured second lien
notes or certain of our other indebtedness, which may result in a default under other indebtedness.
We may need to refinance all or a portion of our indebtedness, including the ABL Facility, the senior secured first lien notes
and the senior secured second lien notes, on or before maturity. Additionally, to the extent permitted under the agreement governing
the ABL Facility and indentures governing the senior secured first lien notes and the senior secured second lien notes, we may
repurchase, repay or tender for our bank debt, senior secured first lien notes and the senior secured second lien notes or other debt,
which may place pressure on future cash requirements to the extent that the debt repurchased, repaid or tendered cannot be redrawn.

Risks Related to Global Financial and Credit Markets

Volatility and disruption of global financial and credit markets may negatively impact our ability to access financing and
expose us to unexpected risks.
Global financial and credit markets expose us to a variety of risks as we fund our business with a combination of cash from
operations, short-term seasonal credit lines, our revolving credit facility, long-term debt securities and customer advances. We
have financed our non-U.S. operations with uncommitted unsecured short term seasonal lines of credit at the local level. These
local operating lines typically extend for a term of up to one year and are typically uncommitted in that the lenders have the right
to cease making loans and demand repayment of loans at any time. As of March 31, 2017, we had approximately $486.0 million
drawn and outstanding on short-term and long-term foreign seasonal lines with maximum capacity totaling $818.7 million subject
to limitations under the ABL Facility. Changes in the global financial and credit markets could create uncertainty as to whether
local seasonal lines will continue to be available to finance our non-U.S. operations to the extent or on terms similar to what has
been available in the past and whether repayment of existing loans under these lines will be demanded prior to maturity. To the
extent that local seasonal lines cease to be available at levels necessary to finance our non-U.S. operations or we are required to
repay loans under the lines prior to maturity, we may be required to seek alternative financing sources beyond our existing committed
sources of funding. Based on the current financial and credit markets, we cannot assure you that such alternative funding will be
available to us on terms and conditions acceptable to us, or at all. In the event that we may be required to support our non-U.S.
operations by borrowing U.S. dollars under the ABL Facility, we may be exposed to additional currency exchange risk that we
may be unable to successfully hedge. Further, there is additional risk that certain banks that are lenders in the ABL Facility could
be unable to meet contractually obligated borrowing requests in the future if their financial condition were to deteriorate. In
addition, we maintain deposit accounts with numerous financial institutions around the world in amounts that exceed applicable
governmental deposit insurance levels. While we actively monitor our deposit relationships, we are subject to risk of loss in the
event of the unanticipated failure of a financial institution in which we maintain deposits, which loss could be material to ouruu
results of operations and financial condition.

Derivative transactions may expose us to potential losses and counterparty risk.
We may, from time to time, enter into certain derivative transactions, including interest rate swaps and foreign exchange contracts.
Changes in the fair value of these derivative financial instruments that are not accounted for as cash flow hedges are reported as
income, and accordingly could materially affect our reported income in any period. In addition, the counterparties to these derivative
transactions may be financial institutions or affiliates of financial institutions, and we would be subject to risks that these
counterparties default under these transactions. In some of these transactions, our exposure to counterparty credit risk may not be
secured by any collateral. Global economic conditions over the last few years have resulted in the actual or perceived failure or
financial difficulties of many financial institutions, including bankruptcy. If one or more of the counterparties to one or more of
our derivative transactions not secured by any collateral becomes subject to insolvency proceedings, we would become an unsecured
creditor in those proceedings with a claim equal to our exposure at the time under those transactions. We can provide no assurances
as to the financial stability or viability of any of our counterparties.

Risks Relating to the Tobacco Industry

Reductions in demand for consumer tobacco products could adversely affect our results of operations.
The tobacco industry, both in the United States and abroad, continues to face a number of issues that may reduce the consumption
of cigarettes and adversely affect our business, sales volume, results of operations, cash flows and financial condition.
These issues, some of which are more fully discussed below, include:

•

governmental actions seeking to ascribe to tobacco product manufacturers liability for adverse health effects associated
with smoking and exposure to environmental tobacco smoke;
smoking and health litigation against tobacco product manufacturers;

- 14-

Risks Relating to the Tobacco Industry (continued)

Reductions in demand for consumer tobacco products could adversely affect our results of operations. (continued)

•
•
•

•
•
•
•
•
•
•

increased consumer acceptance of electronic cigarettes;
tax increases on consumer tobacco products;
current and potential actions by state attorneys general to enforce the terms of the Master Settlement Agreement, or MSA,
between state governments in the United States and tobacco product manufacturers;
governmental and private bans and restrictions on smoking;
actual and proposed price controls and restrictions on imports in certain jurisdictions outside the United States;
restrictions on tobacco product manufacturing, marketing, advertising and sales;
the diminishing social acceptance of smoking;
increased pressure from anti-smoking groups;
other tobacco product legislation that may be considered by Congress, the states, municipalities and other countries; and
the impact of consolidation among multinational cigarette manufacturers.

Tobacco product manufacturer litigation may reduce demand for our products and services.
Our primary customers, the leading cigarette manufacturers, face thousands of lawsuits brought throughout the United States and,
to a lesser extent, the rest of the world. These lawsuits have been brought by plaintiffs, including (1) individuals and classes of
individuals alleging personal injury and/or misleading advertising, (2) governments (including governmental and quasi-
governmental entities in the United States and abroad) seeking recovery of health care costs allegedly caused by cigarette smoking,
and (3) other groups seeking recovery of health care expenditures allegedly caused by cigarette smoking, including third-party
health care payors, such as unions and health maintenance organizations. Damages claimed in some of the smoking and health
cases range into the billions of dollars. There have been several jury verdicts in tobacco product litigation during the past several
years. Additional plaintiffs continue to file lawsuits. The effects of the lawsuits on our customers could reduce their demand for
tobacco from us.

Legislation and regulatory and other governmental initiatives could impose burdensome restrictions on the tobacco industry
and reduce consumption of consumer tobacco products and demand for our services.
The Family Smoking Prevention and Tobacco Control Act, which amended the Food, Drug, and Cosmetic Act, extends the authority
of the Food and Drug Administration ("FDA") to regulate tobacco products. This act authorizes the FDA to adopt product standards
for tobacco products, including the level of nicotine yield and the reduction or elimination of other constituents of the products,
along with provisions for the testing of products against these standards. The act imposes further restrictions on advertising of
tobacco products, authorizes the FDA to limit the sales of tobacco products to face-to-face transactions permitting the verification
of the age of the purchaser, authorizes a study to determine whether the minimum age for the purchase of tobacco products should
be increased and requires submission of reports from manufacturers of tobacco products to the FDA regarding product ingredients
and other matters, including reports on health, toxicological, behavioral, or physiologic effects of tobacco products and their
constituents. The act also mandates warning labels and requires packaging to indicate the percentage of domestically grown tobacco
and foreign grown tobacco included in the product. The FDA has adopted regulations under the act establishing requirements for
the sale, distribution and marketing of cigarettes, as well as package warnings and advertising limitations.
In addition, the act directs the FDA to promulgate regulations requiring that the methods used in, and the facilities and
controls used for, the manufacture, preproduction design validation, packing, and storage of a tobacco product conform to current
good manufacturing practice. Regulations under the act do not apply to tobacco leaf that is not in the possession of a manufacturer
of tobacco products, or to the producers of tobacco leaf, including tobacco suppliers, tobacco warehouses, and tobacco supplier
cooperatives unless those entities are controlled by a tobacco product manufacturer, but do apply to our U.S. cut rag processing
facility with respect to covered tobacco products.

In May 2016, the FDA finalized regulations, which became effective in August 2016, that extend its regulatory authority
under the act to tobacco products not previously covered by its regulations, including vaporizers, vape pens, hookah pens, electronic
cigarettes (or, e-cigarettes), e-pipes, and other types of electronic nicotine delivery systems, including e-liquids used in these
devices, as well as pipe tobacco and cigars (including little cigars and cigarillos), and future novel tobacco products. These
regulations require manufacturers of these additional tobacco products to, among other things submit an application and obtain
FDA authorization to market a new tobacco product; register establishment(s) and submit product listing to FDA; submit listing
of ingredients; submit information on harmful and potentially harmful constituents; submit tobacco health documents; not introducedd
into interstate commerce modified-risk tobacco products (e.g., products with label, labeling, or advertising representing that they
reduce risk or are less harmful compared to other tobacco products on the market) without an FDA order; and include the required
warning statement on packaging and advertisements. These regulations will extend to certain of our operations that had not
previously been subject to the act, including the processing of pipe tobacco and tobacco for little cigars and cigarillos at our U.S.
cut rag processing facility, and to Purilum, LLC, a 50% owned joint venture that develops, produces and sells consumable e-liquids
to manufacturers and distributors of e-vapor products. In addition, the May 2016 regulations make these additional tobacco
products subject to certain existing restrictions on the sale of cigarettes, including restrictions prohibiting sale to individuals under

- 15-

Risks Relating to the Tobacco Industry (continued)

Legislation and regulatory and other governmental initiatives could impose burdensome restrictions on the tobacco industry
and reduce consumption of consumer tobacco products and demand for our services. (continued)
18 years of age. In addition, in finalizing the May 2016 regulations, the FDA announced that it intends in the future to issue a
proposed product standard that would, if finalized, eliminate characterizing flavors in all cigars, including cigarillos and little
cigars.

The full impact of the act, including the May 2016 regulations and any future regulatory action to implement the act, is
uncertain. However, if the effect of the act and FDA regulations under the act is a significant reduction in consumption of tobacco
products, it could materially adversely affect our business, volume, results of operations, cash flows and financial condition.
Reports with respect to the harmful physical effects of cigarette smoking have been publicized for many years, and the sale,
promotion and use of cigarettes continue to be subject to increasing governmental regulation. Since 1964, the Surgeon General of
the United States and the Secretary of Health and Human Services have released a number of reports linking cigarette smoking
with a broad range of health hazards, including various types of cancer, coronary heart disease and chronic lung disease, and
recommending various governmental measures to reduce the incidence of smoking. More recent reports focus upon the addictive
nature of cigarettes, the effects of smoking cessation, the decrease in smoking in the United States, the economic and regulatory
aspects of smoking in the Western Hemisphere, and cigarette smoking by adolescents, particularly the addictive nature of cigarette
smoking in adolescence. Numerous state and municipal governments have taken and others may take actions to diminish the social
acceptance of smoking of tobacco products, including banning smoking in certain public and private locations.
A number of foreign nations also have taken steps to restrict or prohibit cigarette advertising and promotion, to increase
taxes on cigarettes and to discourage cigarette smoking. In some cases, such restrictions are more onerous than those in the United
States. For example, advertising and promotion of cigarettes has been banned or severely restricted for a number of years in
Australia, Canada, Finland, France, Italy, Singapore and other countries. Further, in February 2005, the World Health Organization
(“WHO”) treaty, the Framework Convention for Tobacco Control (“FCTC”), entered into force. This treaty, to which 180 nations
were parties at March 31, 2015, requires signatory nations to enact legislation that would require, among other things, specific
actions to prevent youth smoking; restrict or prohibit tobacco product marketing; inform the public about the health consequences
of smoking and the benefits of quitting; regulate the content of tobacco products; impose new package warning requirements
including the use of pictorial or graphic images; eliminate cigarette smuggling and counterfeit cigarettes; restrict smoking in public
places; increase and harmonize cigarette excise taxes; abolish duty-free tobacco sales; and permit and encourage litigation against
tobacco product manufacturers.

Due to the present regulatory and legislative environment, a substantial risk exists that past growth trends in tobacco
product sales may not continue and that existing sales may decline. A significant decrease in worldwide tobacco consumption
brought about by existing or future governmental laws and regulations would reduce demand for tobacco products and services
and could have a material adverse effect on our results of operations.

Government actions can have a significant effect on the sourcing of tobacco. If some of the current efforts are successful,
we could have difficulty obtaining sufficient tobacco to meet our customers’ requirements, which could have an adverse
effect on our performance and results of operations.
The WHO, through the FCTC, created a formal study group to identify and assess crop diversification initiatives and alternatives
to leaf tobacco growing in countries whose economies depend upon tobacco production. The study group began its work in
February 2007. In its initial report published later that year, the study group indicated that the FCTC did not aim to phase out
tobacco growing, but the study group's focus on alternatives to tobacco crops was in preparation for its anticipated eventual decrease
in demand resulting from the FCTC's other tobacco control initiatives.
If the objective of the FCTC study group were to change to seek to eliminate or significantly reduce leaf tobacco production
and certain countries were to partner with the study group in pursuing this objective, we could encounter difficulty in sourcing
leaf tobacco to fill customer requirements, which could have an adverse effect on our results of operations.
In addition, continued government and public emphasis on environmental issues, including climate change, conservation,
and natural resource management, could result in new or more stringent forms of regulatory oversight of industry activities, which
may lead to increased levels of expenditures for environmental controls, land use restrictions affecting us or our suppliers, and
other conditions that could have a material adverse effect on our business, financial condition, and results of operations. For
example, certain aspects of our business generate carbon emissions. Regulatory restrictions on greenhouse gas emissions have
been proposed in certain countries in which we operate. These may include limitations on such emissions, taxes or emission
allowance fees on such emissions, various restrictions on industrial operations, and other measures that could affect land-use
decisions, the cost of agricultural production, and the cost and means of processing and transporting our products. These actions
could adversely affect our business, financial condition, and results of operations.

We have been, and continue to be, subject to governmental investigations into, and litigation concerning, leaf tobacco
industry buying and other payment practices.
The leaf tobacco industry, from time to time, has been the subject of government investigations regarding trade practices. For
example, we were the subject of an investigation by the Antitrust Division of the United States Department of Justice into certain

- 16-

Risks Relating to the Tobacco Industry (continued)

We have been, and continue to be, subject to governmental investigations into, and litigation concerning, leaf tobacco
industry buying and other payment practices. (continued)
buying practices alleged to have occurred in the industry, we were named defendants in an antitrust class action litigation alleging
a conspiracy to rig bids in the tobacco auction markets, and we were the subject of an administrative investigation into certain
tobacco buying and selling practices alleged to have occurred within the leaf tobacco industry in some countries within the European
Union, including Spain, Italy, Greece and potentially other countries.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Following is a description of Alliance One’s material properties as of March 31, 2017.

Corporate
p
Our corporate headquarters are located in Morrisville, North Carolina and are leased under an agreement that expires in May 2021.

Facilities

We own a total of 12 production facilities in 8 countries. We operate each of our tobacco processing plants for seven to nine
months during the year to correspond with the applicable harvesting season. While we believe our production facilities have been
efficiently utilized, we continually compare our production capacity and organization with the transitions occurring in global
sourcing of tobacco. We also believe our domestic production facilities and certain foreign production facilities have the capacity
to process additional volumes of tobacco if required by customer demand.
The following is a listing of the various material properties used in operations all of which are owned by Alliance One:

LOCATION

NORTH AMERICA SEGMENT

OTHER REGIONS SEGMENT

UNITED STATES
WILSON, N.C.
FARMVILLE, N.C.
DANVILLE, VA

SOUTH AMERICA
VENANCIO AIRES, BRAZIL
ARARANGUA, BRAZIL
EL CARRIL, ARGENTINA
AFRICA
LILONGWE, MALAWI
MOROGORO, TANZANIA
HARARE, ZIMBABWE
EUROPE
KARLSRUHE, GERMANY
ASIA
NGORO, INDONESIA

USE

FACTORY/STORAGE
FACTORY/STORAGE
STORAGE

FACTORY/STORAGE
FACTORY/STORAGE
FACTORY/STORAGE

FACTORY/STORAGE

- 17-

ITEM 3. LEGAL PROCEEDINGS

Mindo, S.r.l., the purchaser in 2004 of the Company's Italian subsidiary Dimon Italia, S.r.l., asserted claims against a subsidiary
of the Company arising out of that sale transaction in an action filed before the Court of Rome on April 12, 2007. The claim
involved a guaranty letter issued by a consolidated subsidiary of the Company in connection with the sale transaction, and sought
the recovery of €7.4 million plus interest and costs. On November 11, 2013, the court issued its judgment in favor of the Company’s
subsidiary, rejecting the claims asserted by Mindo, S.r.l., and awarding the Company’s subsidiary legal costs of €0.05 million. On
December 23, 2014, Mindo, S.r.l. appealed the judgment of the Court of Rome to the Court of Appeal of Rome. A hearing before
the Court of Appeal of Rome was held on June 12, 2015, which was adjourned pending a further hearing set for February 2018.
The outcome of, and timing of a decision on, the appeal are uncertain.
The Company received a subpoena from the SEC, dated November 28, 2016, for documents relating to the restatement of
its financial statements for the years ended March 31, 2013, 2014 and 2015 and the three months ended June 30, 2015, which
restatements were filed with the SEC on May 25, 2016. The Company is cooperating fully with the SEC and providing the requested
materials.
In addition to the above-mentioned matters, certain of the Company’s subsidiaries are involved in other litigation or legal
matters incidental to their business activities, including tax matters. While the outcome of these matters cannot be predicted with
certainty, the Company is vigorously defending them and does not currently expect that any of them will have a material adverse
effect on its business or financial position. However, should one or more of these matters be resolved in a manner adverse to its
current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material.

r
d

ITEM 4. MINE SAFETY DISCLOSURES

N/A

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Alliance One’s common stock is traded on the New York Stock Exchange, under the ticker symbol "AOI."
The following table sets forth for the periods indicated the high and low reported sales prices of our common stock as reported
by the NYSE and the amount of dividends declared per share for the periods indicated. Stock prices are adjusted for a 1-to-10
reverse stock split that was effective June 26, 2015.

Year Ended March 31, 2017
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year Ended March 31, 2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

High

Low

Dividends
Declared

19.50 $
19.81
22.69
27.23

17.94 $
21.03
26.47
25.40

12.30 $
13.75
15.35
14.40

8.33 $

10.35
18.79
10.80

—
—
—
—

As of March 31, 2017, there were 4,187 shareholders, including 3,549 non-objecting beneficial holders of our common
stock.
The payment of dividends by Alliance One is subject to the discretion of our board of directors and will depend on business
conditions, compliance with debt agreements, achievement of anticipated cost savings, financial condition and earnings, regulatory
considerations and other factors. The agreement governing the ABL Facility and the indentures governing our senior secured first
lien notes and our senior secured second lien notes restrict our ability to pay dividends. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Dividends.”

- 18-

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES

,
(continued)

Alliance One International, Inc. Comparison of Cumulative Total Return to Shareholders

The following line graph and table presents the cumulative total shareholder return of a $100 investment including reinvestment
of dividends and price appreciation over the last five years in each of the following: Alliance One International, Inc. (AOI) common
stock, the S&P 500 Index, the S&P 600 Small Cap Index and an index of peer companies. The sole company in the peer group is
Universal Corporation (UVV).

*$100 invested on 3/31/12 in stock or index, including reinvestment of dividends.
i d
d
*$100 i
Fiscal year ending March 31.

f di id d

3/31/12 i

l di

Cumulative Total Return

3/13

3/14

3/15

3/16

3/17

29.18
156.55
161.39

114.21

46.58
159.34
156.22

143.20

34.08
186.71
194.63

183.20

Alliance One International, Inc.
S&P 500
S&P Smallcap 600

3/12
$
$
$

100.00 $
100.00 $
100.00 $

103.18 $
113.96 $
116.14 $

77.45 $
138.87 $
148.44 $

Custom Peer Group

100.00 $

125.16 $

129.53 $

- 19-

ITEM 6. SELECTED FINANCIAL DATA

FIVE YEAR FINANCIAL STATISTICS
Alliance One International, Inc. and Subsidiaries

(in thousands, except per share amount, ratio and number
of stockholders)

Summary of Operations
Sales and other operating revenues
Other income (expense) (1)
Restructuring and asset impairment charges
(recoveries)
Operating income
Debt retirement expense (income) (2)
Net income (loss)
Net income (loss) attributable to
Alliance One International, Inc.
Earnings Per Share Attributable to Alliance
One International, Inc.:
Basic earnings (loss) per share

Diluted earnings (loss) per share (3)

Cash dividends paid

Balance Sheet Data
Working capital
Total assets (6)
Long-term debt (6)
Stockholders’ equity attributable to
Alliance One International, Inc.

Other Data
Ratio of earnings to fixed charges
Coverage deficiency
Common shares outstanding at year end (4)
( )
Number of stockholders at year end (5)

Years Ended March 31,

2017

2016

2015

2014

2013

$ 1,714,750 $ 1,904,592 $ 2,066,865 $ 2,354,996 $

4,896

105,427

(66)

18,760

1,375
84,568
(300)
(63,271)

5,888
201,787
—
65,445

9,118
97,295
(771)
(28,034)

5,111
105,513
57,449
(102,876)

2,240,996
20,721

(55)
162,201
1,195
24,612

(62,928)

65,532

(27,862)

(102,533)

23,913

(7.05) $

—

7.38 $

—

(3.16) $

(11.69) $

(3.16) $

(11.69) $

—

2.74

2.53

—

797,326 $

815,532 $

641,275 $

803,038 $

1,971,872
942,959

1,968,198
910,214

1,622,460
727,197

1,744,460
886,475

841,700
1,899,232
822,831

203,518

271,126

190,790

243,830

324,504

—
35,335
35,335
8,963
4,187

1.75
n/a
8,900
4,465

—
8,939
8,858
4,995

—
60,852
8,816
5,346

1.44
n/a
8,764
5,582

(1) As of March 31, 2016, the Company determined that the significant doubt about our ability to control MTC was eliminated
and recorded a gain of $106,203 upon reconsolidation.
(2) For the year ended March 31, 2014, the Company refinanced its credit facility and long-term debt which resulted in recognition
of significant costs to retire existing debt and accelerated recognition of related deferred financing costs and original issue discounts.
For the year ended March 31, 2013, the Company terminated a long-term foreign seasonal borrowing which resulted in accelerated
recognition of related deferred financing costs.
(3) For the years ended March 31, 2017, 2015 and 2014, all outstanding restricted shares and shares applicable to stock options
and restricted stock units are excluded because their inclusion would have an antidilutive effect on the loss per share. For the years
ended March 31, 2015 and 2014, assumed conversion of convertible notes at the beginning of the period has an antidultive effect
on the loss per share.
(4) Excluding 785 shares owned by a wholly owned subsidiary.
(5) Includes the number of stockholders of record and non-objecting beneficial owners.
(6) On April 1, 2016, new accounting guidance that changed the presentation of debt issuance costs in financial statements was
adopted on a retrospective basis. Therefore the March 31, 2016, 2015, 2014 and 2013 balances have been adjusted in accordance
with the adoption of this guidance.

- 20-

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

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

Financial Results
With our heavy weighting in Brazil, the United States and Tanzania - three crops that were hardest hit by El Nino weather-related
crop size reductions, yield and consequent increases in conversion cost we were hard hit in Fiscal 2017 by unusual and uncontrollable
events, which overshadowed significant improvements in many origins and targeted improvements to the balance sheet. Smaller
crops in the U.S., Brazil and Tanzania related to weather conditions, lower prices paid to tobacco suppliers across most regions
and an increased percentage of byproduct sales versus lamina resulted in reduced revenues and cost of sales. As a result, gross
profit decreased 3.9% to $217.0 million while gross profit as a percentage of sales improved from 11.9% to 12.7% due to the
positive impact of currency movements and reduced lower of cost or market adjustments this year. SG&A increased from increased
legal and professional fees, incentive compensation costs and the inclusion of costs from our reconsolidated Zimbabwe subsidiaryrr
this year. Primarily due to the non-recurrence of a one-time gain of $106.2 million related to the reconsolidation of our Zimbabwe
subsidiary in the prior year, operating income declined $117.3 million. Accounts receivable and inventory reductions from prior
year-end levels generated $253.6 million of cash this year and we ended the fiscal year with an uncommitted inventory level well
within our stated target range of $50-$150 million. The significantly lower levels of inventory positions us well for improved
quality and size of most 2017 crops.

Liquidity
Our liquidity requirements are affected by various factors including crop seasonality, foreign currency and interest rates, green
tobacco prices, customer mix, crop size and quality. During March and April 2017, we utilized surplus cash to reduce long-term
debt with the purchase and cancellation of $57.1 million of our Senior Secured Second Lien Notes, leaving $662.9 million after
purchases in April. We remain confident in our targets to purchase $25.0-$50.0 million per year of our more expensive debt with
surplus cash. After giving effect to the initial $28.4 million purchased in March, our year-end cash position was $473.1 million
with $475.9 million in notes payable to banks. Our liquidity position is strong and in line with internal expectations at $852.9
million as of March 31, 2017, comprised of cash and $379.8 million of available credit lines. We will continue to monitor and
adjust funding sources as needed to enhance and drive various business opportunities that maintain flexibility and meet cost
expectations.

Outlook
As we look to fiscal year 2018, global market conditions are positive with good early weather patterns that support better global
growing conditions. These conditions have resulted in increased global Flue Cured crop sizes particularly in Brazil and Argentina,
while total Burley production will see some decline particularly from wetter conditions in Africa. Based on current conditions,
our internal forecast anticipates significantly increased full-service and processing volumes across most regions and improved
sales boosted by increased demand, crop size and pricing in fiscal 2018. Our Company is well positioned to address complex
industry dynamics and the impact of our strategic initiatives should become more apparent as crop sizes return to normalized levels
in key markets. Our strong employee base continues to innovate and develop cost-driven solutions to meet evolving customer
requirements. Our customers remain focused on optimizing their supply chains with reduced complexity. They are planning for
improvement in global sustainability and driving positive change in nicotine consumption habits with reduced risk products. We
are well positioned to assist them with all of these requirements, investing where appropriate returns should be achievable. Growth
opportunities exist and we continue to take the necessary steps to further strengthen our preferred supplier position. Continued
focus on strategic plan execution to meet our customer’s growth initiatives is anticipated to improve shareholder value.

- 21-

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)

Results of Operations

Condensed Consolidated Statements of Operations and Supplemental Information

(in millions, except per kilo amounts)
Kilos sold
Tobacco sales and other operating
revenues:
Sales and other operating revenues
Average price per kilo
Processing and other revenues

Total sales and other operating
revenues

Tobacco cost of goods sold:
Tobacco costs
Transportation, storage and other period
costs
Derivative financial instrument and
exchange (gains) losses
Total tobacco cost of goods sold
Average cost per kilo
Processing and other revenues cost of
services

Total cost of goods and services sold

136.0
4.9

Gross profit
Selling, general, and administrative
expenses
Other income (expense)
Restructuring and asset impairment
charges
Operating income
Debt retirement expense (income)
Interest expense
Interest income
Income tax expense
Equity in net income (loss) of investee
companies
Loss attributable to noncontrolling
interests
Income (loss) attributable to Alliance One
International, Inc.
*Amounts do not equal column totals due to rounding.

1.4
84.5
(0.3)
132.7
8.2
23.5

(0.1)

(0.3)

Twelve Months Ended March 31,

Change

2017

381.4

$
(1.0)

2016

(0.3)

382.4

4.0

2015

1.1

378.4

$1,631.3
4.28
83.4

$ (196.6)
(0.50)
6.7

(10.8) $1,827.9
(10.5)
4.78
76.7
8.7

$ (120.6)
(0.37)
(41.7)

(6.2) $1,948.5
(7.2)
5.15
(35.2)
118.4

1,714.7

(189.9)

(10.0) 1,904.6

(162.3)

(7.9) 2,066.9

1,371.6

(181.6)

(11.7) 1,553.2

(120.4)

(7.2) 1,673.6

70.7

(0.7)

(1.0)

71.4

(6.8)

(8.7)

78.2

(7.5)
1,434.8
3.76

62.9
1,497.7
217.0

(10.4)
(192.7)
(0.50)

11.6
(181.1)
(8.8)

12.5
(100.5)

(4.5)
(117.3)
(0.3)
15.5
1.1
(8.7)

(358.6)
2.9
(11.8) 1,627.5
(11.7)
4.26

22.6
51.3
(10.8) 1,678.8
(3.9)
225.8

10.1
(95.4)

(76.3)
(58.1)
(100.0)
13.2
15.5
(27.0)

123.5
105.4

5.9
201.8
—
117.2
7.1
32.2

(6.1)

(101.7)

6.0

(0.2)

(200.0)

(0.1)

3.4
(123.8)
(0.37)

(20.8)
(144.6)
(17.7)

(13.5)
105.5

(3.2)
104.5
0.8
3.9
0.8
10.3

3.2

0.1

680.0

(0.5)
(7.1) 1,751.3
(8.0)
4.63

(28.8)
72.1
(7.9) 1,823.4
(7.3)
243.5

(9.9)
105,500.0

(35.2)
107.4
100.0
3.4
12.7
47.0

137.0
(0.1)

9.1
97.3
(0.8)
113.3
6.3
21.9

114.3

2.8

50.0

(0.2)

$ (62.9) * $ (128.4) *

(196.0) $

65.5 *

93.4 *

334.8 $ (27.9) *

Comparison of the Year Ended March 31, 2017 to the Year Ended March 31, 2016
Summary
Total sales and other operating revenues decreased by 10.0% to $1,714.7 million and total costs of goods and services sold decreased
10.8% to $1,497.7 million primarily due to lower average sales prices and tobacco costs per kilo attributable to smaller crops in
the U.S., Brazil and Tanzania related to weather conditions, lower prices paid to tobacco suppliers across most regions and changes
in product mix with an increased percentage of byproduct sales versus lamina. The positive impact of currency movements
primarily in Europe on average tobacco costs per kilo were partially offset by $4.8 million of lower of cost or market adjustments.
Volumes were down slightly as volume increases from expanded cut rag services in the Africa Region, sales of prior crop in most
regions and the timing of shipments in Africa were offset by the weather-related smaller crop sizes and the timing of shipments
in other regions. Processing and other revenues and processing costs increases were primarily related to the reconsolidation of
our Zimbabwe subsidiary. As a result of lower average sales price and costs per kilo, gross profit decreased 3.9% to $217.0 million

- 22-

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

Results of Operations

(continued)

Comparison of the Year Ended March 31, 2017 to the Year Ended March 31, 2016

Summary - (continued)
while gross profit as a percentage of sales improved from 11.9% to 12.7%. SG&A increased 10.1% primarily from increased legal
and professional fees, incentive compensation costs and the inclusion of costs from our reconsolidated Zimbabwe subsidiary this
year partially offset by the non-recurrence of reserves for customer receivables in the prior year. Increases in SG&A were partially
offset by the net insurance recovery related to tobacco lost by fire in Zimbabwe last year, the non-recurrence of one-time expenses
in Africa and the sale of trade tax credits in South America. During the prior year, we determined that the significant doubt about
our ability to control MTC was eliminated and we reconsolidated it as of March 31, 2016. As a result, we recorded a gain of
$106.2 million in other operating income. Restructuring and asset impairment charges in the current year are mainly related to
our former U.S. cut rag facility. Restructuring and asset impairment charges in the prior year were primarily attributable to
impairment of advances to tobacco suppliers and real property in Africa. During third quarter of fiscal 2017, we refinanced our uu
existing senior secured revolving credit facility with the issuance of $275.0 million of 8.5% senior secured first lien notes due dd
2021 and a $60.0 million ABL credit agreement. As a result, one-time debt retirement costs of $2.3 million were recorded for thet
accelerated amortization of debt issuance costs. During the fourth quarter of fiscal 2017, we purchased $28.4 million of our senior
secured second lien notes on the open market. As a result, one-time related discounts of $3.4 million offset by $0.7 million for
the accelerated amortization of debt issuance costs and original issue discount were recorded. Our interest costs increased from
the prior year primarily due to higher average borrowings and higher average rates on our seasonal lines of credit as well as
increased amortization of debt issuance costs and the inclusion of interest costs from our reconsolidated Zimbabwe subsidiary this
year. Our effective tax rate was (59.2)% this year compared to 35.1% last year. The variance in the effective tax rate between this
year and last year 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 quarters; 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 benefit.

North America Regiong

North America Region Supplemental Information

(in millions, except per kilo amounts)
Kilos sold
Tobacco sales and other operating revenues:
Sales and other operating revenues
Average price per kilo
Processing and other revenues
Total sales and other operating revenues
Tobacco cost of goods sold
Tobacco costs
Transportation, storage and other period costs
Derivative financial instrument and exchange (gains) losses
Total tobacco cost of goods sold
Average cost per kilo
Processing and other revenues costs of services sold
Total cost of goods and services sold
Gross profit
Selling, general and administrative expenses
Other income (expense)
Restructuring and asset impairment charges
Operating income

- 23-

Twelve Months Ended March 31,
Change

2017

2016

67.1

(4.5)

(6.3)

71.6

357.4 $
5.33
38.8
396.2

315.6
10.1
(0.2)
325.5
4.85
29.8
355.3
40.9
25.0
(0.1)
0.5
15.3 $

(63.3)
(0.55)
(8.6)
(71.9)

(54.1)
(2.9)
(1.0)
(58.0)
(0.51)
(3.8)
(61.8)
(10.1)
(0.9)
(0.2)
0.5
(9.9(
))

(15.0) $
(9.4)
(18.1)
(15.4)

(14.6)
(22.3)
(125.0)
(15.1)
(9.5)
(11.3)
(14.8)
(19.8)
(3.5)
(200.0)
100.0
(
(39.3
)
) $

420.7
5.88
47.4
468.1

369.7
13.0
0.8
383.5
5.36
33.6
417.1
51.0
25.9
0.1
—
25.2

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

Results of Operations

(continued)

Comparison of the Year Ended March 31, 2017 to the Year Ended March 31, 2016 (continued)

North America Regiong

(continued)

Total sales and other operating revenues decreased 15.4% to $396.2 million and total costs of goods and services sold decreased
14.8% to $355.3 million due to a 9.4% decrease in average sales prices per kilo and a 9.5% decrease in average tobacco costs per
kilo primarily attributable to the impact of adverse weather conditions during the U.S. growing season that resulted in a smaller
crop this year. Also decreasing average sales prices and costs per kilo was product mix with an increased percentage of byproduct
sales versus lamina. Volume decreases resulted from the negative impact of smaller U.S. crops and the timing of shipments. The
smaller U.S. crops also negatively impacted customer requirements for processing and other services which decreased processing
and other revenues and costs of services when compared with the prior year. As a result, gross profit decreased 19.8% to $40.9
million this year and gross profit as a percentage of sales declined slightly from 10.9% to 10.3%. Decreases in SG&A were related
to allocations for general corporate services. Restructuring and asset impairment charges during the current year were from our u
former U.S. cut rag facility. Primarily due to the decrease in gross profit, operating income declined $9.9 million from the prior
year.

Other Regions

Other Regions Supplemental Information

(in millions, except per kilo amounts)
Kilos sold
Tobacco sales and other operating revenues:
Sales and other operating revenues
Average price per kilo
Processing and other revenues
Total sales and other operating revenues
Tobacco cost of goods sold
Tobacco costs
Transportation, storage and other period costs
Derivative financial instrument and exchange losses
Total tobacco cost of goods sold
Average cost per kilo
Processing and other revenues costs of services sold
Total cost of goods and services sold
Gross profit
Selling, general and administrative expenses
Other income (expense)
Restructuring and asset impairment charges
Operating income

Twelve Months Ended March 31,

1.1

(9.5)
(10.6)
52.2
(8.2)

(10.8)
3.8
(447.6)
(10.8)
(11.8)
87.0
(9.5)
0.8
13.7
(95.3)
(84.7)
(
(60.8
)
)

2016

310.8

$ 1,407.2
4.53
29.3
1,436.5

1,183.5
58.4
2.1
1,244.0
4.00
17.7
1,261.7
174.8
97.6
105.3
5.9
176.6

Change

2017

314.3

3.5

$ 1,274.0 $ (133.2)
(0.48)
15.3
(117.9)

4.05
44.6
1,318.6

1,056.0
60.6
(7.3)
1,109.3
3.53
33.1
1,142.4
176.2
111.0
5.0
0.9

(127.5)
2.2
(9.4)
(134.7)
(0.47)
15.4
(119.3)
1.4
13.4
(100.3)
(5.0)
69.3 $ (107.3
))

(

- 24-

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

Results of Operations

(continued)

Other Regions

(continued)

Total sales and other operating revenues decreased 8.2% to $1,318.6 million and total costs of goods and services sold decreased
9.5% to $1,142.4 million. Volumes increased 1.1% primarily due to expansion of our cut rag services in the Africa Region, the
timing of shipments and sales of prior crop in the current year in most regions that were partially offset by the short crops in Brazil
and Tanzania this year. Although volumes increased, the product mix of sales this year changed with an increased percentage of
byproduct sales versus lamina. The change in product mix and lower prices paid to tobacco suppliers in Africa and South America
lowered average sales prices by 10.6% and average tobacco costs per kilo by 11.8%. The positive impact of currency movements
primarily in Europe on average tobacco costs per kilo were partially offset by $4.2 million of lower of cost or market adjustments,
and higher conversion costs per kilo in Tanzania due to the smaller crop size. Processing and other revenues and processing costs
increases were related to the reconsolidation of our Zimbabwe subsidiary. As a result, gross profit increased slightly by 0.8% to
$176.2 million and gross profit as a percentage of sales increased from 12.2% to 13.4%. Increases in SG&A are associated with
increased Kenya-related legal and professional fees, incentive compensation costs, additional audit related fees and the inclusion
of costs from our reconsolidated Zimbabwe subsidiary partially offset by the non-recurrence of reserves for customer receivables
in the prior year. Increases in SG&A were partially offset by the net insurance recovery related to tobacco lost by fire in Zimbabwe
last year, the non-recurrence of one-time expenses in Africa and the sale of trade tax credits in South America as well as reduced
restructuring and asset impairment charges from the prior year related to impairment of advances to tobacco suppliers and real
property in Africa. During the prior year, we determined that the significant doubt about our ability to control MTC was eliminated
and we reconsolidated it as of March 31, 2016. As a result, we recorded a gain of $106.2 million in other operating income in
fiscal 2016. Primarily the result of the gain on reconsolidation of MTC in the prior year and increased SG&A, operating income
declined 60.8% to $69.3 million this year.

Comparison of the Year Ended March 31, 2016 to the Year Ended March 31, 2015

Summary
Total sales and other operating revenues decreased by 7.9% to $1,904.6 million. Tobacco revenues decreased 6.2% and average
sales prices decreased 7.2% due to changes in product mix, the negative impact on pricing resulting from an oversupply of tobacco
in the market and lower prices paid to tobacco suppliers in most regions due to a stronger U.S. dollar. Certain customers in North
America changed their requirements during fiscal 2016 from processing-services-only to purchases of full-service tobaccos. This
shift in requirements resulted in increased volumes, tobacco revenues and tobacco costs which were partially offset by decreased
processing revenues and processing costs related to the change in sales terms and weather-related reduced crop sizes when compared
with the previous year. However, volumes remained consistent with the prior year from reduced requirements in some markets
and the timing of shipments in North America and Europe. Changes in product mix and lower prices paid to tobacco suppliers
across all regions partially offset by currency movement reduced tobacco costs overall as well as lowered average tobacco costs
on a per kilo basis. As a result, gross margin decreased 7.3% to $225.8 million however gross margin as a percentage of sales
remained consistent with the prior year. SG&A decreased primarily from the non-recurrence of reserves for customer receivables
in the prior year, decreased compensation costs due to headcount reduction, lower travel costs and the favorable impact of currency
movement that were partially offset by increased Kenya-related legal and professional fees. During the fourth quarter of fiscal
2016, we determined that the significant doubt about our ability to control MTC was eliminated and we reconsolidated it as of
March 31, 2016. As a result, we recorded a gain of $106.2 million in other operating income. Restructuring and asset impairment
charges in fiscal 2016 were primarily attributable to impairment of advances to tobacco suppliers and real property in Africa and
to changes in certain defined benefit plans as a result of our restructuring initiative that began in the prior fiscal year. Charges in
the prior year are primarily employee severance charges in connection with our restructuring plan that began in the fourth quarter
of the prior year. Due to the changes in our results for fiscal 2016, operating income increased 107.4% to $201.8 million.

Our interest costs increased from the prior year primarily due to higher amortization of debt costs and higher average
borrowings. Our effective tax rate was 35.1% in fiscal 2016 compared to (245.2)% in the prior year. The variance in the effective
tax rate between fiscal 2016 and the prior year is the result of many factors that include but are not limited to differences in income
for the respective years; certain losses for which no tax benefit is recorded; and, differences between discrete items recognized for
the years that include changes in valuation allowances, net exchanges losses on income tax accounts, and net exchange gains
related to liabilities for unrecognized tax benefits.

- 25-

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

Results of Operations

(continued)

Comparison of the Year Ended March 31, 2016 to the Year Ended March 31, 2015 (continued)

North America Regiong

North America Region Supplemental Information

(in millions, except per kilo amounts)
Kilos sold
Tobacco sales and other operating revenues:
Sales and other operating revenues
Average price per kilo
Processing and other revenues
Total sales and other operating revenues
Tobacco cost of goods sold
Tobacco costs
Transportation, storage and other period costs
Derivative financial instrument and exchange (gains) losses
Total tobacco cost of goods sold
Average cost per kilo
Processing and other revenues costs of services sold
Total cost of goods and services sold
Gross profit
Selling, general and administrative expenses
Other income
Restructuring and asset impairment charges
Operating income

Twelve Months Ended March 31,
Change

2016

2015

71.6

18.0

33.6

53.6

420.7 $
5.88
47.4
468.1

369.7
13.0
0.8
383.5
5.36
33.6
417.1
51.0
25.9
0.1
—
25.2 $

57.4
(0.90)
(30.3)
27.1

53.5
2.0
3.1
58.6
(0.70)
(11.9)
46.7
(19.6)
(4.0)
(0.1)
(0.5)
(
(15.2
))

15.8 $
(13.3)
(39.0)
6.1

16.9
18.2
134.8
18.0
(11.6)
(26.2)
12.6
(27.8)
(13.4)
(50.0)
(100.0)
(
(37.6
)
) $

363.3
6.78
77.7
441.0

316.2
11.0
(2.3)
324.9
6.06
45.5
370.4
70.6
29.9
0.2
0.5
40.4

Total sales and other operating revenues increased 6.1% to $468.1 million while total cost of goods and services sold increased
12.6% to $417.1 million. In fiscal 2016, certain customer requirements changed from providing processing-services-only in the
prior year to providing full-service tobacco sales in fiscal 2016. As a result, volumes, tobacco revenues and tobacco costs increased
but were partially offset by the related decrease in processing revenues and cost of services. The 33.6% increase in volumes was
partially offset by the timing of shipments. Tobacco revenues and tobacco costs of goods sold increases due to the change in
customer requirements were partially offset by the timing of shipments and product mix which also decreased average sales prices
and average cost of tobacco on a per kilo basis. In addition, the decrease in tobacco costs of goods sold was partially offset byt
increased period costs as a result of maintaining two U.S. cut rag facilities in fiscal 2016 and the negative impact of exchange rate
movement. Processing revenues and costs of services also decreased due to weather-related reduced crop sizes which particularly
negatively impacted costs of services as a result of lower throughput. As a result, gross margin decreased 27.8% to $51.0 million
and gross margin as a percentage of sales decreased from 16.0% to 10.9% when compared to the prior year. Reductions in SG&A
were attributable to allocations for general corporate services. Asset impairment charges in the prior year are for machinery and
equipment related to our previous U.S. cut rag facility due to the construction of a new facility. Operating income declined 37.6%
from the prior year as a result of the impact of the change in results for the region.

- 26-

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

Results of Operations

(continued)

Comparison of the Year Ended March 31, 2016 to the Year Ended March 31, 2015 (continued)

Other Regions

Other Regions Supplemental Information

Twelve Months Ended March 31,

(in millions, except per kilo amounts)
Kilos sold
Tobacco sales and other operating revenues:
Sales and other operating revenues
Average price per kilo
Processing and other revenues
Total sales and other operating revenues
Tobacco cost of goods sold
Tobacco costs
Transportation, storage and other period costs
Derivative financial instrument and exchange losses
Total tobacco cost of goods sold
Average cost per kilo
Processing and other revenues costs of services sold
Total cost of goods and services sold
Gross profit
Selling, general and administrative expenses
Other income (expense)
Restructuring and asset impairment charges
Operating income

Change

2016

310.8

$
(14.0)

$ 1,407.2 $ (178.0)
(0.35)
(11.4)
(189.4)

4.53
29.3
1,436.5

1,183.5
58.4
2.1
1,244.0
4.00
17.7
1,261.7
174.8
97.6
105.3
5.9
176.6 $

(173.9)
(8.8)
0.3
(182.4)
(0.39)
(8.9)
(191.3)
1.9
(9.5)
105.6
(2.7)
119.7

(4.3)

(11.2)
(7.2)
(28.0)
(11.6)

(12.8)
(13.1)
16.7
(12.8)
(8.9)
(33.5)
(13.2)
1.1
(8.9)
35,200.0
(31.4)
210.3

2015

324.8

$ 1,585.2
4.88
40.7
1,625.9

1,357.4
67.2
1.8
1,426.4
4.39
26.6
1,453.0
172.9
107.1
(0.3)
8.6
56.9

Total sales and other operating revenues decreased 11.6% to $1,436.5 million primarily due to a 4.3% decrease in volumes sold
primarily due to lower customer requirements in Asia and Europe and the timing of shipments in Europe. Average sales prices
decreased 7.2% and average tobacco costs per kilo decreased 8.9% primarily due to product mix, lower prices paid to tobacco
suppliers across all regions and the impact on costs due to a stronger U.S. dollar. Processing and other revenues and processing
costs decreased primarily due to timing of processing for our former Brazilian subsidiary. As a result of product mix, gross margin
increased slightly to $174.8 million and gross margin as a percentage of sales increased from 10.6% to 12.2%. Decreases in SG&A
are associated with the non-recurrence of reserves for customer receivables in the prior year, decreased compensation costs due
to headcount reduction, lower travel costs and the favorable impact of currency movement that were partially offset by increased
Kenya-related legal and professional fees. During the fourth quarter of fiscal 2016, we determined that the significant doubt about
our ability to control MTC was eliminated and we reconsolidated it as of March 31, 2016. As a result, we recorded a gain of
$106.2 million in other operating income. Restructuring and asset impairment charges in fiscal 2016 were primarily attributable
to impairment of advances to tobacco suppliers and real property in Africa and to changes in certain defined benefit plans as a
result of our restructuring initiative that began in the prior fiscal year compared to charges in the prior year primarily due to
employee severance costs in connection the same restructuring plan. Operating income improved 210.3% from the prior year as
a result of the impact of these changes.

- 27-

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

Liquidity and Capital Resources

Overview
Historically we have needed capital in excess of cash flow from operations to finance accounts receivable, inventory and advances
to suppliers for tobacco crops in certain foreign countries. Purchasing, processing and selling activities of our business are seasonal
and our need for capital fluctuates with corresponding peaks where outstanding indebtedness may be greater or less as a result.
Our long-term borrowings consist of senior secured first lien notes, senior secured second lien notes and an ABL facility. We also
have a combination of short-term and long-term seasonal lines of credit available with a number of banks throughout the world
that finances seasonal working capital and corresponds to regional peak requirements.
At March 31, 2017, we had $473.1 million in cash on our balance sheet, $60.0 million available under the ABL facility,yy
$485.9 million outstanding under short-term and long-term foreign lines with an additional $319.8 million available under those
lines and $0.9 million outstanding of other debt for a total of $852.9 million of debt availability and cash on hand around the world,
excluding $5.2 million in issued but unfunded letters of credit with $7.8 million available. Another source of liquidity as of
March 31, 2017 was $175.8 million funded under our accounts receivable sale programs. Additionally, customer advances were
$30.9 million at March 31, 2017 compared to $9.9 million at March 31, 2016. To the extent that these customers do not provide
this advance funding, we must provide financing for their inventories. Should customers pre-finance less in the future for committed
inventories, this action could impact our short-term liquidity. Effective March 31, 2017, we did not meet the fixed charge coverage
ratio of 2.0 to 1.0 required under the indentures governing our senior secured first lien notes and our senior secured second lien
notes to permit us to access the restricted payments basket for the purchase of common stock and other actions under that basket.
From time to time we may not satisfy the required ratio and failure to meet this fixed charge coverage ratio does not constitute an
event of default. See Note 7 “Short-term Borrowing Arrangements” and Note 17 “Sale of Receivables” to the “Notes to Consolidated
Financial Statements” for further information.

Alliance One affirms our belief that the sources of capital we have access to are sufficient to fund our anticipated needs for
fiscal year 2018. Our access to capital meets our current expectations and outlook that is anticipated to provide sufficient liquidity
to fulfill our future funding requirements. General deterioration of our business and the cash flow that it generates or failure to
renew foreign lines could impact our ability to meet our future liquidity requirements.
Seasonal liquidity beyond cash flow from operations is provided by our ABL facility, seasonal working capital lines
throughout the world, advances from customers and sale of accounts receivable. For the years ended March 31, 2017 and 2016,
our average short-term borrowings, aggregated peak short-term borrowings outstanding and weighted-average interest rate on
short-term borrowings were as follows:

(dollars in millions)
Average short-term borrowings
Aggregated peak short-term borrowings outstanding
Weighted-average interest rate on short-term borrowings

2017

2016

$
$

528.2
688.7

$ 444.8
$ 665.0

5.89%

5.18%

Aggregated peak borrowings for 2017 were during the second quarter of 2017 compared to during the fourth quarter for
2016. The peak borrowings occurred in the second quarter of 2017 due to the timing of purchases of tobacco and repayments in
the South America and Africa regions as compared to 2016. Peak borrowings for 2017 and 2016 were repaid with cash provided
by operating activities.
As of March 31, 2017, we are in our working capital build. In South America we are in the process of purchasing and
processing the most recent crop, while the peak tobacco sales season for South America is at its beginning stages. Africa is also
in the middle of its buying, processing and selling season and is utilizing working capital funding as well. North America and
Europe are still selling and planning for the next crop that is now being grown.

- 28-

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

Working Capital
Our working capital decreased to $797.3 million at March 31, 2017 from $815.5 million at March 31, 2016. Our current ratio was
2.1 to 1 at March 31, 2017 compared to 2.2 to 1 at March 31, 2016. The decrease in working capital is primarily attributable to
increased customer advances and interest accruals due to our first lien notes issued during fiscal 2017 and the timing of the related
interest payments. The decrease in working capital is partially offset by increased cash balances due to the timing of collections
of receivables, efforts to reduce uncommitted inventory balances and other inventory reductions due to the timing of shipments.
The following table is a summary of items from the Consolidated Balance Sheets and Consolidated Statements of Cash
Flows. Approximately $322.3 million of our outstanding cash balance at March 31, 2017 was held in foreign jurisdictions. If
these funds in foreign jurisdictions were repatriated, due to the valuation allowance on U.S. tax loss carryovers and foreign tax
credit carryovers, the cost of repatriation would not have a material financial impact.

As of March 31,

Change

(in millions except for current ratio)
Cash and cash equivalents
Net trade and other receivables
Inventories and advances to
tobacco suppliers
Total current assets
Notes payable to banks
Accounts payable
Advances from customers
Total current liabilities
Current ratio
Working capital
Total long term debt
Stockholders’ equity attributable to
Alliance One International, Inc.

Net cash provided (used) by:
Operating activities
Investing activities
Financing activities

2017
$ 473.1
254.2

$
$ 273.4
(146.8)

2016

%
136.9 $ 199.7
(36.6)
401.0

733.0
1,510.1
475.9
89.4
30.9
712.8
2.1 to 1
797.3
943.0

(100.2)
19.7
(0.1)
7.8
21.0
38.0

(12.0)
833.2
1.3
1,490.4
— 476.0 (1)
9.6
212.1
5.6

81.6
9.9
674.8
2.2 to 1
815.5
910.2

(18.2)
32.8

(2.2)
3.6

$
55.9
161.5

55.9
264.7
145.7
8.3
(9.0)
90.4

174.2
183.0

2015

%
38.9 $ 143.8
239.5
67.4

7.2
21.6
44.1
11.3
(47.6)
15.5

27.2
25.2

777.3
1,225.7
330.3
73.3
18.9
584.4
2.1 to 1
641.3
727.2

203.5

(67.6)

(24.9)

271.1

80.3

42.1

190.8

$ 247.2
(11.5)
38.2

$ 382.5
2.0
(155.4)

282.7 $ (135.3)
(13.5)
193.6

14.8
(80.3)

(80.1) $ (145.1) $
(1.8)
217.0

(15.4)
927.4

(55.2)
(11.7)
(23.4)

(1) Includes $130.6 million of debt owed by MTC under a short-term credit facility in which one of our other subsidiaries had a participation interest in the lender’s
rights and obligations under the facility. At March 31, 2016, $84.3 million of that amount was attributed to outstanding borrowings by MTC funded under that
facility by such other subsidiary pursuant to that participation interest. Because such other subsidiary’s funding is pursuant to a participation interest through a
third-party lender and not a direct intercompany loan between such other subsidiary and MTC, the total amount of debt under the facility is required to be reflected
as consolidated debt upon the reconsolidation of MTC. At March 31, 2017, our subsidiary's participation interest no longer remained.

Operating Cash Flows
Net cash provided by operating activities increased $382.5 million compared to net cash used by operating activities in 2016 which
increased $80.1 million compared to 2015. The increase in cash provided in 2017 compared to 2016 is primarily due to increased
collections of accounts receivable in accordance with terms and the timing of shipments in the fourth quarter. Cash provided also
increased due to lower inventory balances from the timing of shipments in the fourth quarter as well as smaller crop sizes resulting
in lower balances of inventory carried over to the next fiscal year. The increase in cash used in 2016 compared to 2015 is primarily
due to the increase in accounts receivable as a result of the timing of sales in the fourth quarter partially offset by less cash used
for accounts payable due to the timing of payments in accordance with terms.

Investing Cash Flows
Net cash used by investing activities decreased $2.0 million in 2017 compared to 2016 which increased $1.8 million compared to
2015. The decrease in cash used in 2017 is primarily due to lower purchases of property and equipment while the increase in cash
used in 2016 is primarily due to lower proceeds from the sale of property partially offset by lower purchases of property and
equipment.

- 29-

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

Liquidity and Capital Resources

(continued)

Financing Cash Flows
Net cash provided by financing activities decreased $155.4 million in 2017 compared to 2016 which increased $217.0 million
compared to 2015. The decrease in cash provided in 2017 is primarily due to repayments and cancellation of our former senior
revolving credit facility during the year and our repurchase of $28.4 million of second lien notes partially offset by proceeds from
the issuance of $275.0 million first lien notes. The increase in cash provided in 2016 compared to 2015 is primarily due to less
repayment of our former senior revolving credit facility during the year due to the higher balance outstanding at year end.
Certain debt agreements contain certain cross-default or cross-acceleration provisions. The following table summarizes our
debt financing as of March 31, 2017:

Interest
Rate

Long Term Debt Repayment Schedule by Fiscal Year

2018

2019

2020

2021

2022

Later

—

60.0

—% (3) $

—% (3)

— $

— $ — $ — $

—

267.0

—

8.5%

699.3

675.1

10.0

—

9.9%

4.1% (3)

10.0

7.2% (3)
5.9% (3)

0.1

—

0.2

—

— 267.0

—

0.3

—

— 675.1

—

0.1

—

0.1

—

10.1 $

0.2 $

0.3 $

0.1 $ 942.2 $

0.1

—

0.1

—

Outstanding

March 31,
2016

March 31,
2017

March
31, 2017
Lines
and
Letters
Available

Senior secured credit
facility:

Revolver (1)

200.0 $

— $

—

ABL facility (2)
Senior notes:
8.5% senior secured
first lien notes due
2021 (6)
9.875% senior secured
second lien notes due
2021 (4) (5)

Long-term foreign
seasonal borrowings

Other long-term debt
Notes payable to banks (7)

1.3

476.0

0.9

475.9

Total debt
Short-term (7)
Long-term:
Long-term debt current
Long-term debt

Letters of credit
Total credit available

$ 1,386.6 $
476.0 $
$

1,428.9
475.9

$
$

0.4 $

910.2
910.6 $
4.7 $

10.0
943.0
953.0
5.2

—

319.8

379.8

7.8
387.6

(1) As of October 14, 2016, the revolving credit facility was paid in full and cancelled.
(2) As of March 31, 2017, the full amount of the ABL facility was available. Borrowing is permitted under the ABL Credit Facility only to the extent that, after
consideration of the application of the proceeds of the borrowing, the Company’s unrestricted cash and cash equivalents would not exceed $180.0 million. At
March 31, 2017, the Company’s unrestricted cash and cash equivalents significantly exceeded $180.0 million.
(3) Weighted average rate for the twelve months ended March 31, 2017.
(4) On April 1, 2016, we adopted new accounting guidance that changed the presentation of debt issuance costs in financial statements on a retrospecitve basis.
Therefore, the March 31, 2016 balance previously reported of $709.2 million has been adjusted by $9.9 million to $699.3 million in accordance with the adoption
of this new accounting guidance.
(5) Repayment of $675.1 million is net of original issue discount of $8.8 million and unamortized debt issuance of $7.7 million. Total repayment will be $691.6
million.
(6) Repayment of $267.0 million is net of original issue discount of $2.3 million and unamortized debt issuance of $5.7 million. Total repayment will be $275.0
million.
(7) Primarily foreign seasonal lines of credit. At March 31, 2016, the outstanding amount includes $130.6 million of debt owed by MTC under a short-term credit
facility in which one of the Company’s other subsidiaries has a participation interest in the lender’s rights and obligations under the facility. At March 31, 2016,
$84.3 million of that amount was attributed to outstanding borrowings by MTC funded under that facility by such other subsidiary pursuant to that participation
interest. Because such other subsidiary’s funding is pursuant to a participation interest through a third-party lender and not a direct intercompany loan between
such other subsidiary and MTC, the total amount of debt under the facility is required to be reflected as consolidated debt upon the reconsolidation of MTC. See
Note 21 “Reconsolidation of MTC” to the “Notes to Consolidated Financial Statements” for further information. At March 31, 2017, our subsidiary's participation
interest no longer remained.

- 30-

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

Liquidity and Capital Resources

(continued)

On October 14, 2016, the Company issued $275.0 million in aggregate principal amount of 8.5% senior secured first lien notes
due 2021 (the “First Lien Notes”), at an issue price of 99.085% of the face amount thereof, entered into an ABL credit agreement
(the “ABL Credit Agreement”) with certain bank lenders establishing a senior secured revolving asset-based lending facility (the
“ABL Facility”) of $60.0 million subject to a borrowing base composed of its eligible accounts receivable and inventory, and used
a portion of the net proceeds from the offering of the First Lien Notes to repay in full all outstanding indebtedness and accrued
and unpaid interest owed under the Company’s then existing senior secured revolving credit facility. Upon such repayment, Alliance
One terminated the senior secured revolving credit facility.

The ABL credit agreement restricts the Company from paying any dividends during the term of this facility subject to
the satisfaction of specified financial ratios. In addition, the indentures governing the First Lien Notes and its outstanding senior
secured second lien notes due 2021 contain similar restrictions and also prohibit the payment of dividends and other distributions
if the Company fails to satisfy a ratio of consolidated EBITDA to fixed charges of at least 2.0 to 1.0. At March 31, 2017, the
Company did not satisfy this fixed charge coverage ratio. The Company may from time to time not satisfy this ratio.

The terms of the First Lien Notes and the ABL Facility, and certain effects of these refinancing transactions, are summarized

below:

First Lien Notes

The First Lien Notes, which bear interest at a rate of 8.500% per year, are payable semi-annually in arrears in cash on April 15
and October 15 of each year, beginning April 15, 2017, to holders of record at the close of business on the preceding April 1 and
October 1, respectively. The First Lien Notes mature on April 15, 2021. The First Lien Notes are initially guaranteed on a senior
secured basis by Alliance One’s subsidiary, Alliance One Specialty Products, LLC (the “Initial Guarantor”), and each of its future
material domestic subsidiaries are required to guarantee the First Lien Notes on a senior secured basis. The Initial Guarantor is
not a material domestic subsidiary, and Alliance One currently has no material domestic subsidiaries. The Initial Guarantor and
any future guarantors of the First Lien Notes are referred to as the “guarantors.”

Alliance One’s and the guarantors’ obligations under the First Lien Notes and any guarantee of the First Lien Notes (and
certain related obligations) and under the ABL Facility and any guarantee of the ABL Facility (and certain related obligations and
obligations in respect of certain hedging arrangements) are secured by first-priority liens on substantially all of Alliance One’s and
the guarantors’ tangible and intangible assets, subject to certain exceptions and permitted liens (the “Collateral”). Alliance One’s
and the guarantors’ obligations under the First Lien Notes and any guarantee of the First Lien Notes (and certain related obligations)
have first-priority in the waterfall set forth in a senior lien intercreditor agreement entered into in connection with the issuance of
the First Lien Notes and the establishment of the ABL Facility (the “Senior Lien Intercreditor Agreement”) in respect of the liens
on the Collateral that is not ABL Priority Collateral (as defined below), including owned material real property in the United States,
capital stock of subsidiaries owned directly by Alliance One or a guarantor (except that, in the case of foreign subsidiaries, only
capital stock of only direct foreign subsidiaries that are material are to be pledged and only 65% of the voting capital stock and
100% of the non-voting capital stock are to be pledged), existing and after acquired intellectual property rights, equipment, related
general intangibles and instruments and certain other related assets of the foregoing and proceeds of the foregoing (collectively,
the “Notes Priority Collateral”). Alliance One’s and the guarantors’ obligations under the ABL Facility and any guarantee of the
ABL Facility (and certain related obligations and obligations in respect of certain hedging arrangements) have second-priority in
the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the Notes Priority Collateral. Alliance
One’s and the guarantors’ obligations under the First Lien Notes and any guarantee of the First Lien Notes (and certain related
obligations) have second-priority in the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the
Collateral consisting of accounts receivable, inventories, cash (other than identifiable cash proceeds of the Notes Priority Collateral),
deposit accounts, related general intangibles and instruments, certain other related assets of the foregoing and proceeds of the
foregoing (collectively, the “ABL Priority Collateral”). Alliance One’s and the guarantors’ obligations under the ABL Facility and
any guarantee of the ABL Facility (and certain related obligations and obligations in respect of certain hedging arrangements) have
first-priority in the waterfall set forth in the Senior Lien Intercreditor Agreement in respect of the liens on the ABL Priority Collateral.
If a change of control (as defined in the indenture governing the First Lien Notes) occurs at any time, holders of the First
Lien Notes will have the right, at their option, to require the Company to repurchase all or a portion of the First Lien Notes for
cash at a price equal to 101% of the principal amount of First Lien Notes being repurchased, plus accrued and unpaid interest, to,
but excluding, the date of repurchase. The indenture governing the First Lien Notes restricts (subject to exceptions and
qualifications) the Company's ability and the ability of its restricted subsidiaries to, among other things, incur additional indebtedness
or issue disqualified stock or preferred stock, pay dividends and make other restricted payments (including restricted investments),
sell assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions
with its affiliates, enter into certain sale and leaseback transactions, create certain dividend and payment restrictions on its restricted
subsidiaries, and designate its subsidiaries as unrestricted subsidiaries.

- 31-

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

Liquidity and Capital Resources

(continued)

ABL Facility

The ABL Facility may be used for revolving credit loans, swingline loans and letters of credit from time to time up to an initial
maximum principal amount of $60.0 million, subject to the limitations described below in this paragraph. Under certain conditions,
Alliance One may solicit the ABL Facility lenders or other prospective lenders to provide additional revolving loan commitments
under the ABL Facility in an aggregate amount not to exceed $15.0 million (less the aggregate principal amount of any notes
exceeding $275.0 million issued under the First Lien Notes Indenture). The maximum amount available under the revolving credit
facility is limited by a borrowing base consisting of eligible accounts receivable and inventory as follows:

•

85% of eligible accounts receivable, plus

the lesser of (i) 85% of the appraised net-orderly-liquidation value of eligible inventory or (ii) 65% of eligible inventory
valued at the lower of cost (based on a first-in first-out basis) and market value thereof (net of intercompany profits).

The borrowing base is subject to a $25.0 million deduction and customary reserves, which are to be established by the agent
for the ABL Facility lenders in its permitted discretion from time to time. At March 31, 2017, no borrowings were outstanding
under the ABL Facility and $60.0 million was available for borrowing. Borrowing is permitted under the ABL Credit Facility only
to the extent that, after consideration of the application of the proceeds of the borrowing, the Company’s unrestricted cash and
cash equivalents would not exceed $180.0 million. At March 31, 2017, the Company’s unrestricted cash and cash equivalents
significantly exceeded $180.0 million.

In addition, loans under the ABL Facility shall not be made if after incurrence of such loans there will be more than $180.0
million of unrestricted cash and cash equivalents in the aggregate on the consolidated balance sheet of the Company and its
subsidiaries.

The ABL Facility permits both base rate borrowings and LIBOR borrowings. Borrowings under the ABL Facility bear interest
at an annual rate equal to LIBOR plus 250 basis points or 150 basis points above base rate, as applicable, with a fee on unused
borrowings initially at an annual rate of 50 basis points until March 31, 2017 and thereafter at annual rates of either 37.5 or 50r
basis points based on average quarterly historical utilization under the ABL Facility. The ABL Facility matures on January 14,
2021.

In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of
certain events including, without limitation, certain dispositions of assets outside of the ordinary course of business in respect of
certain collateral securing the ABL Facility, unrestricted cash and cash equivalents on the Company’s consolidated balance sheet
exceeding $180.0 million for a period of seven consecutive business days, and certain casualty and condemnation events.

The Company’s obligations under the ABL Facility (and certain related obligations and obligations in respect of certain
hedging arrangements) are (a) guaranteed by the Initial Guarantor and are required to be guaranteed by each material domestic
subsidiary of Alliance One (currently there are no material domestic subsidiaries of Alliance One) (collectively with the Company,
the “Credit Parties”) and (b) secured by the Collateral.

The liens and other security interests granted by the Credit Parties on the Collateral for the benefit of the ABL Lenders (and

certain related secured parties) are, subject to certain permitted liens, secured by first-priority security interests on a pari passu
basis with the security interests securing the First Lien Notes, with respective priorities in a waterfall with respect to portions of
the Collateral as set forth in the Senior Lien Intercreditor Agreement described above.

Under the terms of the ABL Facility, if (i) an event of default has occurred and is continuing or (ii) excess borrowing
availability under the ABL Facility (based on the lesser of the commitments thereunder and the borrowing base) (the “Excess
Availability”) falls below the greater of (x) $12,500 and (y) 25% of the lesser of (A) the commitments under the ABL Facility at aa
such time and (B) the borrowing base at such time (such greater amount being the “Cash Dominion Threshold”) for more than
three consecutive business days, the Credit Parties will become subject to cash dominion, which will require daily prepayment of
loans under the ABL Facility with the cash deposited in certain deposit accounts of the Credit Parties, including concentration
accounts, and will restrict the Credit Parties’ ability to transfer cash from their concentration accounts to their disbursement accounts.
Such cash dominion period shall end when (i) if arising as a result of a continuing event of default, such event of default ceases
to exist, or (ii) if arising as a result of non-compliance with the Excess Availability threshold, Excess Availability shall be equal
to or greater than the Cash Dominion Threshold for a period of 30 consecutive days.

The ABL Credit Agreement governing the ABL Facility contains a springing covenant requiring that the Company’s fixed
charge coverage ratio be no less than 1.00 to 1.00 during any period commencing when our Excess Availability is less than the
greater of (x) $10,000 and (y) 20% of the lesser of (A) the commitments under the ABL Facility at such time and (B) the borrowing
base at such time (such greater amount being the “Financial Covenant Threshold”) until such time as our Excess Availability has
been equal to or greater than the Financial Covenant Threshold for a period of 30 consecutive days.

- 32-

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

Liquidity and Capital Resources

(continued)

ABL Facility (continued)
its assets, grant liens on assets, pay dividends, redeem stock or make other distributions or restricted payments, create certain
dividend and payment restrictions on subsidiaries, repurchase or redeem capital stock or prepay subordinated or certain other
material debt (including the First Lien Notes and the Company’s senior secured second lien notes due 2021), make certain
investments, agree to restrictions on the payment of dividends to Alliance One by its subsidiaries, sell or otherwise dispose of
assets, including equity interests of subsidiaries, enter into transactions with affiliates, enter into certain sale and leaseback
transactions.
The ABL credit agreement restricts the Company from paying any dividends during the term of this facility subject to thet
satisfaction of specified financial ratios. In addition, the indentures governing the Company's First Lien Notes and its senior
secured second lien notes due 2021 contain similar restrictions and also prohibits the payment of dividends and other distributions
if the Company fails to satisfy a ratio of consolidated EBITDA to fixed charges of at least 2.0 to 1.0. At March 31, 2017, the
Company did not satisfy this fixed charge coverage ratio. The Company may from time to time not satisfy this ratio.

Termination of Existing Senior Secured Revolving Credit Facility

On October 14, 2016, the Company terminated its then existing senior secured revolving credit facility and repaid in full all
outstanding indebtedness plus accrued and unpaid interest and other costs, of which $0.1 million was charged to debt retirement
expense. As a result, the Company accelerated $2.3 million of deferred financing costs during the three months ended December 31,
2016.

Senior Secured Second Lien Notes
On August 1, 2013, the Company issued $735.0 million in aggregate principal amount of its 9.875% senior secured second lien
notes due 2021 (the "Second Lien Notes"). The Second Lien Notes were sold at 98% of the face value, for gross proceeds of
approximately $720.3 million. The Second Lien Notes bear interest at a rate of 9.875% per year, payable semi-annually in arrears
in cash on January 15 and July 15 of each year, beginning January 15, 2014, to holders of record at the close of business on the
preceding January 1 and July 1, respectively. The Second Lien Notes will mature on July 15, 2021. The Second Lien Notes are
secured by a second priority lien on specified property of Alliance One International, Inc. for which the senior secured credit
facility is secured by a first priority lien. The indenture governing the Second Lien Notes restricts (subject to exceptions and
qualifications) the Company's ability and the ability of its restricted subsidiaries to, among other things, incur additional indebtedness
or issue disqualified stock or preferred stock, pay dividends and make other restricted payments (including restricted investments),
sell assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions
with its affiliates, enter into certain sale and leaseback transactions, create certain dividend and payment restrictions on its restricted
subsidiaries, and designate its subsidiaries as unrestricted subsidiaries.
The indenture governing the Second Lien Notes requires the Company's existing and future material domestic subsidiaries
to guarantee the Second Lien Notes. The Company has no material domestic subsidiaries, and the Second Lien Notes are not
presently guaranteed by any subsidiary. If a change of control (as defined in the indenture governing the Second Lien Notes) occurs
at any time, holders of the Second Lien Notes will have the right, at their option, to require the Company to repurchase all or a
portion of the Second Lien Notes for cash at a price equal to 101% of the principal amount of Second Lien Notes being repurchased,
plus accrued and unpaid interest and special interest, if any, to, but excluding, the date of repurchase.
During the year ended March 31, 2017, the Company purchased $28.4 million of its senior notes on the open market. All
purchased securities were canceled leaving $691.6 million of the 9.875% senior notes outstanding at March 31, 2017. Associated
costs paid were $0.1 million and related discounts were $(3.4) million resulting in net cash repayment of $25.6 million and recorded
in Repayment of Long-Term Borrowings in the Consolidated Statements of Cash Flows. Deferred financing costs and amortization
of original issue discount of $0.7 million were accelerated. In April 2017, the Company purchased $28.6 million of its existing
$691.6 million senior notes on the open market. See Note 20 "Subsequent Events" to the Notes to Consolidated Financial Statements.

Foreign Seasonal Lines of Credit
The Company has typically financed its non-U.S. operations with uncommitted unsecured short-term seasonal lines of credit at
the local level. These operating lines are seasonal in nature, normally extending for a term of 180 to 270 days corresponding to
the tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the right to cease making
loans and certain lenders can demand repayment of loans at any time. These loans are typically renewed at the outset of each
tobacco season. As of March 31, 2017, the Company had approximately $475.9 million drawn and outstanding on foreign seasonal
lines with maximum capacity totaling $808.7 million subject to limitations as provided for in the Credit Agreement. Additionally,
against these lines there was $13.0 million available in unused letter of credit capacity with $5.2 million issued but unfunded.

Long-Term Foreign Seasonal Borrowings
The Company had foreign seasonal borrowings with original maturities greater than one year. At March 31, 2017, approximately
$10.0 million was drawn and outstanding with maximum capacity totaling $10.0 million.

- 33-

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

Liquidity and Capital Resources

(continued)

Aggregate Contractual Obligations and Off-Balance Sheet Arrangements
We have summarized in the table below our contractual cash obligations and other commercial commitments as of March 31,
2017.

Payments / Expirations by Period

Years
2019-2020

y
Years
2021-2022

After
2022

Total

(in millions)
Long-Term Debt Obligations*
Other Long-Term Obligations**
Operating Lease Obligations
Tobacco and Other Purchase Obligations
Beneficial Interest in Receivables Sold
Amounts Guaranteed for Tobacco Suppliers
Total Contractual Obligations and Other
Commercial Commitments
* Long-Term Debt Obligations include projected interest for both fixed and variable rate debt. We assume that there will be no
additional drawings after March 31, 2017 on the ABL credit facility until the maturity of January 14, 2021, in these calculations.
The variable rate used in the projections is the rate that was being charged on our variable rate debt as of March 31, 2017.
These calculations also assume that there is no refinancing of debt during any period. These calculations are on Long-Term
Debt Obligations only.

1,367.2 $
46.9
43.9
745.2
38.2
182.2

1,062.4 $
9.0
7.0
—
—
—

196.8 $
8.8
17.2
82.1
—
—

2018
108.0 $
6.8
18.1
663.1
38.2
182.2

—
22.3
1.6
—
—
—

1,078.4 $

1,016.4 $

2,423.6 $

304.9 $

23.9

**Other long-term obligations consist of accrued pension and postretirement costs. Contributions for funded pension plans are
based on the Pension Protection Act and tax deductibility and are not reasonably estimable beyond one year. Contributions
for unfunded pension plans and postretirement plans captioned under "After 2022" include obligations during the next five
years only. These obligations are not reasonably estimable beyond ten years. In addition, the following long-term liabilities
included on the consolidated balance sheet are excluded from the table above: accrued postemployment costs, income taxes
and tax contingencies, and other accruals. We are unable to estimate the timing of payments for these items.

We do not have any other off-balance sheet arrangements that are reasonably likely to have a current or future effect on our
financial condition, results of operations, liquidity, capital expenditures or capital resources, as defined under the rules of SEC
Release No. FRR-67, Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate
Contractual Obligations.

Lease Obligations
We have operating leases for land, buildings, automobiles and other equipment. In accordance with accounting principles generally
accepted in the United States, operating leases are not reflected in the accompanying Consolidated Balance Sheet. Operating
assets that are of long-term and continuing benefit are generally purchased.

Tobacco and Other Purchase Obligations
Tobacco purchase obligations result from contracts with suppliers, primarily in the United States, Brazil, Malawi and Turkey, to
buy either specified quantities of tobacco or the supplier’s total tobacco production. Amounts shown as tobacco purchase obligations
are estimates based on projected purchase prices of the future crop tobacco. Payment of these obligations is net of our advances
to these suppliers. Our tobacco purchase obligations do not exceed our projected requirements over the related terms and are in
the normal course of business. Other purchase obligations consist primarily of purchase commitments of agricultural material.

Beneficial Interest in Receivables Sold
We sell accounts receivable under two revolving trade accounts receivable securitization programs. Under the agreements, we
receive either 80% or 90% of the face value of the receivable sold, less contractual dilutions which limit the amount that may be
outstanding from any one particular customer and insurance reserves that also have the effect of limiting the risk attributable to
any one customer. Our beneficial interest is subordinate to the purchaser of the receivables. See Note 17 “Sale of Receivables”
to the “Notes to Consolidated Financial Statements” for further information.

Amounts Guaranteed for Tobacco Suppliers
In Brazil and Malawi, we provide guarantees to ensure financing is available to our tobacco suppliers. In the event these suppliers
should default, we would be responsible for repayment of the funds provided to these suppliers. We also provide guarantees for
financing by certain unconsolidated subsidiaries in Asia and Brazil. See Note 1 “Significant Accounting Policies – Advances to
Tobacco Suppliers” to the “Notes to Consolidated Financial Statements” for further information.

- 34-

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

Liquidity and Capital Resources

(continued)

Aggregate Contractual Obligations and Off-Balance Sheet Arrangements (continued)

Planned Capital Expenditures
We have projected a total of $30.7 million in capital investments for our 2018 fiscal year. We forecast our capital expenditure
needs for routine replacement of equipment as well as investment in assets that will add value to the customer or increase efficiency.

Tax and Repatriation Matters
We are subject to income tax laws in each of the countries in which we do business through wholly owned subsidiaries and through
affiliates. We make a comprehensive review of the income tax requirements of each of our operations, file appropriate returns
and make appropriate income tax planning analyses directed toward the minimization of our income tax obligations in these
countries. Appropriate income tax provisions are determined on an individual subsidiary level and at the corporate level on both
an interim and annual basis. These processes are followed using an appropriate combination of internal staff at both the subsidiary
and corporate levels as well as independent outside advisors in review of the various tax laws and in compliance reporting for the
various operations.
We regularly review the status of the accumulated unremitted earnings of each of our foreign subsidiaries. We would provide
deferred income taxes, net of any foreign tax credits, if applicable, on any earnings that are determined to no longer be indefinitely
invested. See Note 12 “Income Taxes” to the “Notes to Consolidated Financial Statements” for further information.

Critical Accounting Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States (GAAP)
requires the use of estimates and assumptions that have an impact on the assets, liabilities, revenue and expense amounts reported.
These estimates can also affect supplemental disclosures including information about contingencies, risk and financial condition.
Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties and potentially
yield materially different results under different assumptions or conditions. Given current facts and circumstances, we believe
that our estimates and assumptions are reasonable, adhere to GAAP and are consistently applied. Our selection and disclosure of
our critical accounting policies and estimates has been reviewed with our Audit Committee. Following is a review of the more
significant assumptions and estimates and the accounting policies and methods used in the preparation of our consolidated financial
statements. For all of these estimates, we caution that future events rarely develop exactly as forecast, and the best estimates
routinely require adjustment. See Note 1 “Significant Accounting Policies” to the “Notes to Consolidated Financial Statements”
which discusses the significant accounting policies that we have adopted.

Inventories
Costs included in inventory include processed tobacco inventory, unprocessed tobacco inventory and other inventory costs.
Inventories are valued at the lower of cost or market (“LCM”), which requires us to make significant estimates in assessing our
inventory balances for potential LCM adjustments. We evaluate our inventories for LCM adjustments by country and type of
inventory. Therefore, processed tobacco and unprocessed tobacco are evaluated separately for LCM purposes. We compare the
cost of our processed tobacco to market values based on recent sales of similar grades when evaluating those balances for LCM
adjustments. We also consider whether our processed tobacco is committed to a customer, whereby the expected sales price would
be utilized in determining the market value for committed tobacco. We also review data on market conditions in performing our
LCM evaluation for our unprocessed tobacco. See Note 1 “Significant Accounting Policies - Inventories” and Note 2 “Inventories”
to the “Notes to Consolidated Financial Statements” for further information.

Income Taxes
Our annual tax rate is based on our income, statutory tax rates, exchange rates and tax planning opportunities available to us in
the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and
respective governmental taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our
tax positions including evaluating uncertainties under ASC 740. We review our tax positions quarterly and adjust the balances as
new information becomes available.

- 35-

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

Liquidity and Capital Resources

(continued)

Income Taxes (continued)

Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years.
Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well
as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions by assessing
the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted
operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates. To provide
insight, we use our historical experience and our short and long-range business forecasts. We believe it is more likely than not
that a portion of the deferred income tax assets may expire unused and have established a valuation allowance against them.
Although realization is not assured for the remaining deferred income tax assets, we believe it is more likely than not that the
remaining deferred tax assets will be fully recoverable within the applicable statutory expiration periods. However, deferred tax
assets could be reduced in the near term if our estimates of taxable income are significantly reduced. See Note 12 “Income Taxes”
to the “Notes to Consolidated Financial Statements” for further information.

Advances to Tobacco Suppliers
We evaluate our advances to tobacco suppliers, which represent prepaid inventory, for recoverability by crop and country. Our
recoverability assessment for our advances to tobacco suppliers and our LCM evaluation for our inventories achieve a similar
objective. We reclassify the advances to inventory at the time suppliers deliver tobacco. The purchase price for the tobacco
delivered by the suppliers is based on market prices. Two primary factors determine the market value of the tobacco suppliers
deliver to us: the quantity of tobacco delivered and the quality of the tobacco delivered. Therefore, and at the time of delivery, we
ensure our advances to tobacco suppliers are appropriately stated at the lower of cost or their recoverable amounts.
Upon delivery of tobacco, part of the purchase price to the supplier is paid in cash and part through a reduction of the advance
balance. If a sufficient value of tobacco is not delivered to allow the reduction of the entire advance balance, then we first determine
how much of the deficiency for the current crop is recoverable through future crops. This determination is made by analyzing thet
suppliers’ ability-to-deliver a sufficient supply of tobacco. This analysis includes historical quantity and quality of production
with monitoring of crop information provided by our field service technicians related to flood, drought and disease. The remaining
recoverable advance balance would then be classified as noncurrent. Any increase in the estimate of unrecoverable advances
associated with the noncurrent portion is charged to cost of goods and services sold in the income statement when determined.
Amounts not expected to be recovered through current or future crops are then evaluated to determine whether the yield is
considered to be normal or abnormal. If the yield adjustment is normal, then we capitalize the applicable variance in the current
crop of inventory. If the yield adjustment is considered abnormal, then we immediately charge the applicable variance to cost of
goods and services sold in the income statement. A normal yield adjustment is based on the range of unrecoverability for the
previous three years by country. Our normal yield adjustment in the South America region is less than 5.0%.
We account for our advances to tobacco suppliers using a cost accumulation model, which results in reporting our advances
at the lower of cost or recoverable amounts exclusive of the mark-up and interest. The mark-up and interest on our advances are
recognized upon delivery of tobacco as a decrease in our cost of the current crop.
The following table illustrates the amounts of favorable and unfavorable variances on current crop advances to tobacco
suppliers (prepaid inventory) that will be capitalized into inventory when the crop has been purchased as of March 31, 2017, 2016
and 2015. The current crop is primarily sold in the next fiscal year when the net favorable / (unfavorable) variance is recognized
through cost of sales. See Note 1 “Significant Accounting Policies – Advances to Tobacco Suppliers” for further information on
the various components noted below. Variances on advances serve to state the tobacco inventory at cost by accumulating actual
total cash expended and allocating it to the tobacco received during the crop cycle.

(in millions)
Favorable variances (including mark-up)
Unfavorable variances (including unrecoverable advances)
Net favorable variance in crop cost in inventory

2017

2016

2015

16.9 $
(9.1)
7.8 $

14.2 $
(8.5)
5.7 $

19.8
(11.4)
8.4

- 36-

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

Liquidity and Capital Resources

(continued)

Advances to Tobacco Suppliers (continued)

Other Regions
The price, and the resulting mark-up, of the inputs we advance is determined at the beginning of each season and depends on
various market considerations. The interest rate charged on advances depends on market conditions as well. We purchase and
advance the inputs based on an expected crop production. These advances are in the currency of the local market. We base our
estimate of the unrecoverable advances on numerous factors, including, but not limited to our expectations of the quantity and
quality of tobacco our suppliers will deliver to us.

Within the Other Regions, Brazil and Africa are the primary areas where we advance some inputs to suppliers for the
coming crop based on expected crop production. Advances to tobacco suppliers in most other areas are primarily cash advances
to third party commercial suppliers.

For 2017, favorable variances increased primarily due to more normalized crop sizes but were partially offset by the
continued devaluation of the U.S. dollar against South American and African currencies. Unfavorable variances are comparable
with the prior year due to increases from larger crop sizes offset by currency impact and improved recoverability in certain locations.
For 2016, favorable variances decreased due to the currency impact in South America and due to smaller crops in Other Regions
due to the global oversupply situation. Additionally, unfavorable variances decreased for similar reasons, as well as fewer
unrecoverable advances in certain locations.

We believe the favorable variances relating to the 2017, 2016 and 2015 crops are representative of average favorable
variance percentages based on market conditions and currency rates in each year. The Company did not incur any other changes
in net variances within the Other Regions operating segments for 2017, 2016 and 2015 that were absorbed into inventory.

North America Region
In Guatemala, we advance some inputs to suppliers for the coming crop based on expected crop production. For 2017, 2016, and
2015, advances in North America have a minor impact to the consolidated favorable and unfavorable variances.

Asset Impairment
Long-lived assets, including recoverable intrastate trade tax credits, are reviewed for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable. Additionally, goodwill is reviewed for impairment
on an annual basis. Determining whether an impairment has occurred typically requires various estimates and assumptions,
including determining which undiscounted cash flows are directly related to the potentially impaired asset, the useful life over
which cash flows will occur, their amount, and the asset’s residual value, if any. In turn, measurement of an impairment loss
requires a determination of fair value, which is based on the best information available. We derive the required undiscounted cash
flow estimates from our historical experience and our internal business plans. To determine fair value, we use our internal cash
flow estimates discounted at an appropriate interest rate, quoted market prices when available and independent appraisals, as
appropriate. Accordingly, the fair value of an asset could be different using different estimates and assumptions in these valuation
techniques which would increase or decrease the impairment charge.

Other Intangible Assets
We have no intangible assets with indefinite useful lives. We test identified intangible assets with defined useful lives and subject
to amortization whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
We perform this test by initially comparing the carrying amount to the sum of undiscounted cash flows expected to be generated
by the asset. If the carrying amount of an intangible asset exceeds its estimated future undiscounted cash flows, then an impairment
loss would be indicated. The amount of the impairment loss to be recorded would be based on the excess of the carrying amount
of the intangible asset over its discounted future cash flows. We use judgment in assessing whether the carrying amount of our
intangible assets is not expected to be recoverable over their estimated remaining useful lives. See Note 5 “Goodwill and Other
Intangibles” to the “Notes to Consolidated Financial Statements” for further information.

Business Combinations
The reconsolidation of MTC has been treated as a purchase business combination which requires recording the assets and liabilities
of MTC at their estimated fair values. The Company employed a discounted cash flow model to estimate the fair values of the
assets and liabilities. The model used assumptions and estimates including projections of financial information; forecasted capital
expenditure requirements and related tax depreciation; cash-free, debt-free long-term growth rate; and discount rate. Management's
estimates were based on historical performance, current market conditions and industry trends, long-term customer relationships
and strategic plans for future business growth and opportunities. Liquidity assumptions were based on the historical and current
economic environments in capital markets.

- 37-

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

Critical Accounting Estimates

(continued)

Pensions and Postretirement Health Care and Life Insurance Benefits
The valuation of our pension and other postretirement health care and life insurance plans requires the use of assumptions and
estimates that are used to develop actuarial valuations of expenses, assets and liabilities. These assumptions include discount rates,
investment returns, projected salary increases and benefits and mortality rates. The significant assumptions used in the calculation
of pension and postretirement obligations are:

Discount rate: The discount rate is based on investment yields available at the measurement date on high-quality
fixed income obligations, such as those included in the Moody’s Aa bond index.

Salary increase assumption: The salary increase assumption reflects our expectations with respect to long-term
salary increases of our workforce. Historical pay increases, expectations for the future, and anticipated inflation
and promotion rates are considered in developing this assumption.

Cash Balance Crediting Rate: Interest is credited on cash balance accounts based on the yield on one-year Treasury
Constant Maturities plus 1%. The assumed crediting rate thus considers the discount rate, current treasury rates,
current inflation rates, and expectations for the future.

Mortality Rates: Mortality rates are based on gender-distinct group annuity mortality (GAM) tables.

Expected return on plan assets: The expected return reflects asset allocations, investment strategy and our historical
actual returns.

Termination and Retirement Rates: Termination and retirement rates are based on standard tables reflecting past
experience and anticipated future experience under the plan. No early retirement rates are used since benefits
provided are actuarially equivalent and there are not early retirement subsidies in the plan.

Management periodically reviews actual demographic experience as it compares to the actuarial assumptions. Changes in
assumptions are made if there are significant deviations or if future expectations change significantly. Based upon anticipated
changes in assumptions, pension and postretirement expense is expected to decrease by $1.4 million in the fiscal year ended March
31, 2018 as compared to March 31, 2017. We continually evaluate ways to better manage benefits and control costs. The cash
contribution to our employee benefit plans in fiscal 2017 was $6.2 million and is expected to be $6.8 million in fiscal 2018.
The effect of actual results differing from our assumptions are accumulated and amortized over future periods and, therefore,
generally affect our recognized expense in such future periods. Changes in other assumptions and future investment returns could
potentially have a material impact on our pension and postretirement expenses and related funding requirements.
The effect of a change in certain assumptions is shown below:

Change in Assumption (Pension and Postretirement Plans)
)
1% increase in discount rate
1% decrease in discount rate

(

1% increase in salary increase assumption
1% decrease in salary increase assumption

1% increase in cash balance crediting rate
1% decrease in cash balance crediting rate

1% increase in rate of return on assets
1% decrease in rate of return on assets

Estimated Change
in Projected
Benefit Obligation
Increase (Decrease)
(in 000’s)

Estimated Change in
Annual Expense
Increase (Decrease)
(in 000’s)

$
$

(16,842 ) $
$
19,799

207
$
(191 ) $

$
1,307
(1,131 ) $

$
$

70
124

46
(46)

98
(85)

(909)
909

Changes in assumptions for other post retirement benefits are no longer applicable as the benefit is capped and no longer
subject to inflation. See Note 13 “Employee Benefits” to the “Notes to Consolidated Financial Statements” for further information.

- 38-

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

Recent Accounting Pronouncements Not Yet Adopted
See Note 1 "Significant Accounting Policies" to the "Notes to Consolidated Financial Statements" for further information.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivatives policies: Hedging foreign exchange exposure using forward contracts are specifically contemplated to manage risk
in accordance with management's policies and reduce the risks inherent in currency fluctuations. We do not utilize derivatives for
speculative purposes or enter into market risk sensitive instruments for trading purposes. Derivatives are transaction specific so
that a specific contract or invoice determines the amount, maturity and other specifics of the hedge.

Foreign exchange rates: Our business is generally conducted in U.S. dollars, as is the business of the tobacco industry as a whole.
However, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of
exchange fluctuations of the local currency against the U.S. dollar. We attempt to minimize such currency risks by matching the
timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency
of the country where the tobacco is grown. Also, in some cases, our sales pricing arrangements with our customers allow adjustments
for the effect of currency exchange fluctuations on local purchasing and processing costs. Fluctuations in the value of foreign
currencies can significantly affect our operating results. In our cost of goods and services sold, we have recognized exchange
gains (losses) of $8.7 million, $(0.9) million and $3.8 million for the fiscal years ended March 31, 2017, 2016 and 2015, respectively.
We recognized exchange gains (losses) of $3.1 million, $(5.6) million and $(7.9) million related to tax balances in our tax expense
for the fiscal years ended March 31, 2017, 2016 and 2015, respectively. In addition, foreign currency fluctuations in the Euro and
(U.K.) Sterling can significantly impact the currency translation adjustment component of accumulated other comprehensive
income. We recognized gains (losses) of $(8.2) million, $0.1 million and $(12.5) million in 2017, 2016, and 2015, respectively, yy
as a result of fluctuations in these currencies.
Our consolidated SG&A expenses denominated in foreign currencies are subject to translation risks from currency exchange
fluctuations. These foreign denominated expenses accounted for approximately 24.1% or $32.8 million of our total SG&A expenses
for the twelve months ended March 31, 2017. A 10% change in the value of the U.S. dollar relative to those currencies would
have caused the reported value of those expenses to increase or decrease by approximately $3.3 million.

Interest rates: We manage our exposure to interest rate risk through the proportion of fixed rate and variable rate debt in our total
debt portfolio. A 1% change in variable interest rates would increase or decrease our reported interest cost by approximately $5.0
million. A substantial portion of our borrowings are denominated in U.S. dollars and bear interest at commonly quoted rates.

- 39-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

STATEMENTS OF CONSOLIDATED OPERATIONS
Alliance One International, Inc. and Subsidiaries

(in thousands, except per share data)
Sales and other operating revenues
Cost of goods and services sold
Gross profit
Selling, general and administrative expenses
Other income (expense)
Restructuring and asset impairment charges

Operating income

Debt retirement expense (income)
Interest expense
Interest income
Income (loss) before income taxes and other items
Income tax expense
Equity in net income (loss) of investee companies
Net income (loss)

Less: Net loss attributable to noncontrolling interests

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

Years Ended March 31,
2016
1,904,592 $
1,678,798
225,794
123,546
105,427
5,888
201,787
—
117,190
7,077
91,674
32,215
5,986
65,445
(87)
65,532 $

2017
1,714,750 $
1,497,721
217,029
135,982
4,896
1,375
84,568
(300)
132,667
8,157
(39,642)
23,480
(149)
(63,271)
(343)
(
(62,928
)
) $

2015
2,066,865
1,823,366
243,499
137,020
(66)
9,118
97,295
(771)
113,273
6,268
(8,939)
21,918
2,823
(28,034)
(172)
(
(27,862
))

Earnings (loss) per share:

Basic
Diluted

See notes to consolidated financial statements.

$
$

(7.05) $
(7.05) $

7.38 $
7.38 $

(3.16)
(3.16)

- 40-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Alliance One International, Inc. and Subsidiaries

(in thousands)
Net income (loss)

2017
(63,271) $

65,445

2015
(28,034)

Years Ended March 31,
2016

Other comprehensive income (loss), net of tax:
Currency translation adjustment

Pension prior service credit (cost) and net actuarial gain (loss), net of tax of
$(670) in 2017, $(328) in 2016 and $186 in 2015
Loss on derivatives, net of tax

Total other comprehensive income (loss), net of tax
Total comprehensive income (loss)
Comprehensive loss attributable to noncontrolling interests

(8,247)

108

(12,514)

3,137
(1,100)
(6,210)
(69,481)
(354)

12,437
—
12,545
77,990
(80)

(15,546)
—
(28,060)
(56,094)
(172)

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

(69,127) $

78,070

(55,922)

See notes to consolidated financial statements.

- 41-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

CONSOLIDATED BALANCE SHEETS
Alliance One International, Inc. and Subsidiaries

(in thousands)
ASSETS
Current assets

Cash and cash equivalents
Trade receivables, net
Other receivables
Accounts receivable, related parties
Inventories
Advances to tobacco suppliers
Recoverable income taxes
Prepaid expenses
Current derivative asset
Other current assets

Total current assets

Other assets

Investments in unconsolidated affiliates
Goodwill
Other intangible assets
Long-term recoverable income taxes
Deferred income taxes
Other deferred charges
Other noncurrent assets

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities

Notes payable to banks
Accounts payable
Due to related parties
Advances from customers
Accrued expenses and other current liabilities
Income taxes
Long-term debt current

Total current liabilities

Long-term debt
Deferred income taxes
Liability for unrecognized tax benefits
Pension, postretirement and other long-term liabilities

Commitments and contingencies
Stockholders’ equity

Common stock—no par value:

250,000 authorized shares, 9,748 issued and outstanding (9,685 at March 31,
2016))

Retained deficit
Accumulated other comprehensive loss

Total stockholders’ equity of Alliance One International, Inc.

Noncontrolling interests

Total equity

See notes to consolidated financial statements.

- 42-

March 31,
2017

March 31,
2016

473,110
239,558
14,627
8,133
678,325
54,713
7,389
17,924
943
15,354
,
1,510,076

52,328
16,463
46,136
—
38,507
5,397
46,454
,,
205,285
,
256,511
,
1,971,872
,

475,863
89,434
9,773
30,925
91,332
5,377
10,046
,
712,750

942,959
17,608
10,073
81,772
,,
1,052,412

199,720
303,907
97,101
1,920
791,340
41,837
13,421
20,016
—
21,096
,
1,490,358

58,259
16,463
50,571
8,686
38,773
3,934
23,629
,
200,315
,
277,525
,
1,968,198

475,989
81,649
20,490
9,895
74,425
12,022
356
674,826

910,214
16,924
9,809
81,753
,
1,018,700

472,349
(208,784)
(60,047)
)
,
(
203,518
,
3,192
206,710
,
,
,
1,971,872

470,830
(145,856)
(53,848)
)
,
(
271,126
,
3,546
274,672
,
,
1,968,198

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY
Alliance One International, Inc. and Subsidiaries

Attributable to Alliance One International, Inc.

Accumulated Other
Comprehensive Income

(in thousands)
Balance, March 31, 2014
Net loss
Acquisition of noncontrolling
interest
Restricted stock surrendered
Stock-based compensation
Other comprehensive loss, net
of tax
Balance, March 31, 2015
Net income (loss)
Acquisition of noncontrolling
interest
Restricted stock surrendered
Stock-based compensation
Other comprehensive income,
net of tax
Balance, March 31, 2016
Net loss
Restricted stock surrendered
Stock-based compensation
Other comprehensive income
(loss), net of tax
Balance, March 31, 2017

Common
Stock

Retained
Deficit

Currency
Translation
Adjustment

Pensions,
Net of Tax

Loss on
Derivatives,
Net of Tax

Noncontrolling
Interest

Total
Stockholders’
Equity

$ 465,682 $ (183,526) $

(1,640) $ (36,686) $

— (27,862)

—
(146)
3,028

—

—
—
—

—

—
—
—

—

—
—
—

(12,514)

(15,546)

$ 468,564 $ (211,388) $ (14,154) $ (52,232) $

—

65,532

—
(157)
2,423

—

—
—
—

—

—
—
—

—

—
—
—

108

12,430

$ 470,830 $ (145,856) $ (14,046) $ (39,802) $

— (62,928)
—
(32)
—
1,551

—
—
—

— $
—

—
—

—

—
— $
—

—
—
—

—
— $
—
—
—

—

(
$ 472,349 $ (208,784) $

)

(8,247)
(
(22,293

) $)

3,148
(
(36,654

)) $

(1,100)
(1,100) $

3,295 $
(172)

247,125
(28,034)

151
—
—

151
(146)
3,028

—
3,274 $
(87)

(28,060)
194,064
65,445

352
—
—

7
3,546 $
(343)
—
—

(11)
3,192 $

352
(157)
2,423

12,545
274,672
(63,271)
(32)
1,551

(6,210)
206,710

See notes to consolidated financial statements.

- 43-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

STATEMENTS OF CONSOLIDATED CASH FLOWS
Alliance One International, Inc. and Subsidiaries

(in thousands)
Operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided

(used) by operating activities:

Depreciation and amortization
Debt amortization/interest
Debt retirement
Restructuring and asset impairment charges
(Gain) loss on foreign currency transactions
Gain on sale of property, plant and equipment
Reconsolidation of subsidiary
Bad debt expense (recovery)
Equity in net (income) loss of unconsolidated affiliates, net of
dividends
Stock-based compensation
Changes in operating assets and liabilities, net:

Trade and other receivables
Inventories and advances to tobacco suppliers
Deferred items
Recoverable income taxes
Payables and accrued expenses
Advances from customers
Current derivative asset
Prepaids
Income taxes
Other operating assets and liabilities

Other, net
Net cash provided (used) by operating activities

Investing activities

Purchases of property, plant and equipment
Intangibles, including internally developed software costs
Proceeds from sale of property, plant and equipment
Payments to acquire equity method investments
Change in restricted cash
Surrender of life insurance policies
Other, net
Net cash used by investing activities

Years Ended March 31,
2016

2015

2017

(63,271) $

65,445 $

(28,034)

34,476
13,122
(300)
1,375
(11,816)
(658)
—
(5,545)

4,348
1,712

146,109
92,586
611
15,410
13,192
21,096
(2,044)
(10,413)
(6,331)
5,376
(1,806)
247,229

(13,683)
(79)
1,890
—
389
91
(89)
(11,481)

28,361
11,333
—
5,888
6,498
(597)
(106,203)
(169)

(4,105)
2,874

(149,825)
(13,747)
(2,439)
(8,563)
46,767
(19,224)
1,373
6,218
2,943
(8,382)
227
(135,327)

(17,194)
—
2,270
—
(276)
1,675
—
(13,525)

29,623
8,816
(771)
9,118
8,274
(1,751)
—
12,368

(2,823)
3,194

(50,358)
(3,992)
(18,025)
(1,372)
(23,408)
(3,638)
(1,373)
1,743
5,511
1,452
223
(55,223)

(25,273)
(781)
16,840
(1,655)
(1,678)
1,194
(309)
(11,662)

- 44-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

STATEMENTS OF CONSOLIDATED CASH FLOWS (continued)
Alliance One International, Inc. and Subsidiaries

(in thousands)
Financing activities

Net proceeds of short-term borrowings
Proceeds from long-term borrowings
Repayment of long-term borrowings
Debt issuance cost
Other, net
Net cash provided (used) by financing activities

Years Ended March 31,
2016

2015

2017

10,544 $

21,360 $

472,484
(425,426)
(19,305)
(95)
38,202

210,000
(32,867)
(5,325)
455
193,623

145,988
300,000
(463,341)
(6,538)
455
(23,436)

Effect of exchange rate changes on cash

(560)

823

(608)

Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash assumed in reconsolidation of subsidiary
Cash and cash equivalents at end of year

Other information:

Cash paid for income taxes
Cash paid for interest
Cash received from interest

See notes to consolidated financial statements.

273,390
199,720
—

473,110 $

45,594
143,849
10,277
199,720 $

(90,929)
234,778
—
143,849

18,088 $

20,369 $

107,116
(8,140)

104,882
(7,291)

16,192
98,957
(6,529)

- 45-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 – Significant Accounting Policies

Description of Business
The Company is principally engaged in purchasing, processing, storing, and selling leaf tobacco. The Company purchases tobacco
primarily in the United States, Africa, Europe, South America and Asia for sale to customers primarily in the United States, Europe
and Asia.

Basis of Presentation
The accounts of the Company and its consolidated subsidiaries are included in the consolidated financial statements after elimination
of intercompany accounts and transactions. The Company uses the cost or equity method of accounting for its investments in
affiliates that are owned 50% or less and are not variable interest entities where the Company is the primary beneficiary.
In fiscal 2006, the Company deconsolidated its Zimbabwe subsidiary, Mashonaland Tobacco Company LTD ("MTC") in
accordance with accounting requirements that apply to foreign subsidiaries that are subject to foreign exchange controls and other
government restrictions that casted significant doubt on the parent's ability to control the subsidiary. As of March 31, 2016, the
Company determined that significant doubt about its ability to control MTC were eliminated due to changes in the political landscape
and the recent issuance of clarifications to the indigenization laws within Zimbabwe. The recent issuance of clarifications to the
indigenization law within Zimbabwe resulted in the Company's development and filing with the Zimbabwean government of a plan
of compliance with the indigenization law on March 31, 2016, the date of reconsolidation of MTC. The reconsolidation was treated
as a purchase business combination for accounting purposes, with the Company designated as the acquirer. As such, the Consolidated
Balance Sheet includes 100% of the fair value of the assets and liabilities of MTC as of March 31, 2016. See Note 21 “Reconsolidation
of MTC” to the “Notes to Consolidated Financial Statements” for further information.

Beginning April 1, 2016, the financial results of MTC are included in the Statements of Consolidated Operations, Consolidated

Balance Sheets and Statements of Consolidated Cash Flows.

Prior to March 31, 2016, the Company accounted for its investment in MTC on the cost method and had been reporting it in
Investments in Unconsolidated Affiliates in the Consolidated Balance Sheets since March 31, 2006 and had written its investment
in MTC down to zero in fiscal 2007.

Investments in Unconsolidated Affiliates
The Company’s equity method investments and its cost method investments are non-marketable securities. The Company reviews
such investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an investment
may not be recovered. For example, the Company would test such an investment for impairment if the investee were to lose a
significant customer, suffer a large reduction in sales margins, experience a major change in its business environment, or undergo
any other significant change in its normal business. In assessing the recoverability of equity or cost method investments, the
Company uses discounted cash flow models. If the fair value of an equity investee is determined to be lower than its carrying value,
an impairment loss is recognized. The preparation of discounted future cash flow analysis requires significant management judgment
with respect to future operating earnings growth rates and the selection of an appropriate discount rate. The use of different
assumptions could increase or decrease estimated future operating cash flows, and the discounted value of those cash flows, and
therefore could increase or decrease any impairment charge.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and
liabilities. They also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and changes in
these estimates are recorded when known. Estimates are used in accounting for, among other things, pension and postretirement
health care benefits, inventory market values, allowances for doubtful accounts and advances, bank loan guarantees to suppliers
and unconsolidated subsidiaries, useful lives for depreciation and amortization, future cash flows associated with impairment testing
for long-lived assets, deferred tax assets and uncertain income tax positions, intrastate tax credits in Brazil and fair value
determinations of financial assets and liabilities including derivatives, securitized beneficial interests and counterparty risk. Changes
in market and economic conditions, local tax laws, and other related factors are considered each reporting period, and adjustments
to the accounts are made based on the Company’s best judgment.

- 46-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Revenue Recognition
The Company recognizes revenue from the sale of tobacco when persuasive evidence of an arrangement exists, the price to the
customer is fixed or determinable, collectibility is reasonably assured and title and risk of ownership is passed to the customer,
which is upon shipment or delivery. The Company requires that all customer-specific acceptance provisions be met at the time title
and risk of ownership passes to the customer. Furthermore, the Company’s sales history indicates customer returns and rejections
are not significant.
The Company also processes tobacco owned by its customers and revenue is recognized based on contractual terms as the
service is provided. The revenue and cost associated with processing is recorded gross in the Statements of Consolidated Operations.
The Company’s history indicates customer requirements for processed tobacco are met upon completion of processing. In addition,
advances from customers are deferred and recognized as revenue upon shipment or delivery.

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 goods
and services sold and were $25,631, $23,451 and $25,282 for the years ended March 31, 2017, 2016 and 2015, respectively.

Shipping and Handling
Shipping and handling costs are included in cost of goods and services sold in the statement of operations.

Other Income (Expense)
At March 31, 2016, the Company reconsolidated MTC. As a result, the Company recorded a gain of $106,203 to record the fair
value of MTC of which $10,277 was cash and the remaining $95,926 was non-cash.

Other Income (Expense) also includes gains on sales of property, plant and equipment and assets held for sale. This caption
also includes expenses related to the Company's sale of receivables and Brazilian intrastate trade tax credits. See Note 16
"Contingencies and other Information" and Note 17 "Sale of Receivables" to the "Notes to Consolidated Financial Statement" for
further information.

The following table summarizes the significant components of Other Income (Expense).

Gain on reconsolidation of subsidiary
Other sales of assets and expenses
Sales of Brazilian intrastate trade tax credits
Losses on sale of receivables

,
Years Ending March 31,
g
2015
2016

2017

— $

1,994
9,356
( ,
(6,454)
)
,
4,896 $

106,203 $
595
4,309
( ,
(5,680)
)
,
105,427 $

—
5,286
2,073
(7,425)
)
( ,
)
(
(66)

Cash and Cash Equivalents
Cash equivalents are defined as temporary investments of cash with original maturities of less than 90 days. At March 31, 2017
and 2016, respectively, customer funding that was restricted for social responsibility programs maintained by the Company of $153
and $188 and cash held on deposit as a compensating balance for short-term borrowings of $1,767 and $2,137 were included in
Other Current Assets.

Trade Receivables, Net
Trade receivables are amounts owed to the Company from its customers. Trade receivables are recorded at invoiced amounts and
primarily have net 30-day terms. The Company extends credit to its customers based on an evaluation of a company’s financial
condition and collateral is generally not required.
The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable. The allowance
is based on the Company’s assessment of known delinquent accounts, other currently available evidence of collectability and the
aging of accounts receivable. The Company’s allowance for doubtful accounts was $6,990 and $12,984 at March 31, 2017 and
2016 respectively. The provision for doubtful accounts was $(5,545), $(169) and $12,446 for the years ending March 31, 2017,
2016 and 2015, respectively and is reported in Selling, General and Administrative Expenses in the Statements of Consolidated
Operations.

- 47-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Other Receivables
Other receivables consist primarily of receivables related to participation in a subsidiary funding arrangement of $84,258 at March 31,
2016 (the subsidiary funding arrangement no longer remained at March 31, 2017); and value added tax receivables of $12,449 and
$9,377 at March 31, 2017 and 2016, respectively.

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

Sale of Accounts Receivable
The Company is currently engaged in two revolving trade accounts receivable securitization arrangements to sell receivables. The
Company records the transaction as a sale of receivables, removes such receivables from its financial statements and records a
receivable for the beneficial interest in such receivables. The losses on the sale of receivables are recognized in Other Income
(Expense). As of March 31, 2017 and 2016, respectively, accounts receivable sold and outstanding were $200,084 and $188,764.
See Note 17 “Sale of Receivables” and Note 18 “Fair Value Measurements” to the “Notes to Consolidated Financial Statements”
for further information.

Inventories
Costs in inventory include processed tobacco inventory, unprocessed tobacco inventory and other inventory. Costs of unprocessed
tobacco inventories are determined by the average cost method, which include the cost of green tobacco. Costs of processed tobacco
inventories are determined by the average cost method, which include both the cost of unprocessed tobacco, as well as direct and
indirect costs that are related to the processing of the product. Costs of other non-tobacco inventory are determined by the first-in,
first-out method, which include costs of packing materials, non-tobacco agricultural products and agricultural supplies including
seed, fertilizer, herbicides and pesticides.
Inventories are carried at the lower of cost or market (“LCM”). The Company evaluates its inventories for LCM adjustments
by country and type of inventory. Therefore, processed tobacco and unprocessed tobacco are evaluated separately for LCM purposes.
The Company compares the cost of its processed tobacco to market values based on recent sales of similar grades when evaluating
those balances for LCM adjustments. The Company also considers whether its processed tobacco is committed to a customer,
whereby the expected sales price would be utilized in determining the market value for committed tobacco. The Company also
reviews data on market conditions in performing its LCM evaluation for unprocessed tobacco.
See Note 2 “Inventories” to the “Notes to Consolidated Financial Statements” for further information.

Advances to Tobacco Suppliers
The Company purchases seeds, fertilizer, pesticides and other products related to growing tobacco and advances them to suppliers,
which represents prepaid inventory and is recorded as advances to tobacco suppliers. The advances of current crop inputs generally
include the original cost of the inputs plus a mark-up and interest as it is earned. Where contractually permitted, the Company nn
charges interest to the suppliers during the period the current crop advance is outstanding. The Company generally advances the
inputs at a price that is greater than its cost, which results in a mark-up on the inputs. The suppliers then utilize these inputs to grow
tobacco, which the Company is contractually obligated to purchase. Upon delivery of tobacco, part of the purchase price to the
supplier is paid in cash and part through a reduction of the advance balance. The advances applied to the delivery are reclassified
out of advances and into unprocessed inventory. Advances to tobacco suppliers are accounted for utilizing a cost accumulation
methodology.
The Company has current and noncurrent advances to tobacco suppliers. The current advances represent the cost of the seeds,
fertilizer and other materials that are advanced for the current crop of inventory. The noncurrent advances generally represent the
cost of advances to suppliers for infrastructure, such as curing barns, which is also recovered through the delivery of tobacco to the
Company by the suppliers. As a result of various factors in a given crop year (weather, etc.) not all suppliers are able to settle the
entire amount of advances that are due that year. In these situations, the Company may allow the suppliers to deliver tobacco over
future crop years to recover its advances. The advance balances that are deferred over future crop years are also classified as
noncurrent.
Advances to tobacco suppliers are carried at cost and evaluated for recoverability. The realizability evaluation process is
similar to that of the LCM evaluation process for inventories. The Company evaluates its advances for recoverability by crop and
country. The Company reclasses the advance to inventory at the time suppliers deliver tobacco. The purchase price for the tobacco
delivered by the suppliers is based on market prices. Two primary factors determine the market value of the tobacco suppliers

- 48-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Advances to Tobacco Suppliers (continued)
deliver: the quantity of tobacco delivered and the quality of the tobacco delivered. Therefore, the Company ensures its advances
are appropriately stated at the lower of cost or estimated recoverable amounts.
Upon delivery of tobacco, part of the purchase price to the supplier is paid in cash and part through a reduction of the advance
balance. If a sufficient value of tobacco is not delivered to allow the reduction of the entire advance balance, then the Company
first determines how much of the deficiency for the current crop is recoverable through future crops. This determination is made
by analyzing the suppliers’ ability-to-deliver a sufficient supply of tobacco. This analysis includes historical quantity and quality
of production with monitoring of crop information provided by field service technicians related to flood, drought and disease. The
remaining recoverable advance balance would then be classified as noncurrent. Any increase in the estimate of unrecoverable
advances associated with the noncurrent portion is charged to cost of goods and services sold in the income statement when
determined. Amounts not expected to be recovered through current or future crops are then evaluated to determine whether the
yield is considered to be normal or abnormal. If the yield adjustment is normal, then the Company capitalizes the applicable variance
in the current crop of inventory. If the yield adjustment is considered abnormal, then the Company immediately charges the applicable
variance to cost of goods and services sold in the income statement. A normal yield adjustment is based on the range of
unrecoverability for the previous three years by country.

The Company accounts for its advances to tobacco suppliers using a cost accumulation model, which results in the reporting
of its advances at the lower of cost or recoverable amounts exclusive of the mark-up and interest. The mark-up and interest on its
advances are recognized upon delivery of tobacco as a decrease in the cost of the current crop. The mark-up and interest capitalized
or to be capitalized into inventory for the current crop was $16,919 and $14,208 as of March 31, 2017 and 2016, respectively.
Unrecoverable advances and other costs capitalized or to be capitalized into the current crop was $9,125 and $8,535 at March 31,
2017 and 2016, respectively. The following table reflects the classification of advances to tobacco suppliers:

Current
Noncurrent

March 31, 2017 March 31, 2016
41,837
$
2,612
44,449

54,713 $
5,855
60,568 $

Noncurrent advances to tobacco suppliers are recorded in Other Noncurrent Assets in the Consolidated Balance Sheets.
Unrecovered amounts expensed directly to cost of goods and services sold in the income statement for abnormal yield
adjustments or unrecovered amounts from prior crops were $1,085 for the year ended March 31, 2015. There were no such abnormal
yield adjustments or unrecovered amounts for the years ended March 31, 2017 and 2016. Normal yield adjustments are capitalized
into the cost of the current crop and are expensed as cost of goods and services sold as that crop is sold.

Guarantees
The Company and certain of its foreign subsidiaries guarantee bank loans to suppliers to finance their crops. Under longer-termrr
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 and Brazil. The following table summarizes
amounts guaranteed and the fair value of those guarantees:

Amounts guaranteed (not to exceed)
Amounts outstanding under guarantees
Fair value of guarantees

March 31, 2017 March 31, 2016
210,703
$
107,615
7,350

194,656 $
106,465
7,126

Of the guarantees outstanding at March 31, 2017, all expire within one year. The fair value of guarantees is recorded in
Accrued Expenses and Other Current Liabilities in the Consolidated Balance Sheets and included in crop costs except for the joint
venture in Brazil which are included in Accounts Receivable, Related Parties. See Note 18 "Fair Value Measurements" to the "Notes
to Consolidated Financial Statements" for further information.

- 49-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Guarantees (continued)

In Brazil, some 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 March 31, 2017 and 2016,
respectively, the Company had balances of $20,860 and $16,699 that were due to local banks on behalf of suppliers. These amounts
are included in Accounts Payable in the Consolidated Balance Sheets.

Goodwill and Other Intangibles
Goodwill represents the excess of purchase price over fair value of net assets acquired, and is allocated to the appropriate reporting
unit when acquired. Reporting units may be operating segments as a whole or an operation one level below an operating segment,
referred to as a component. The components within the Company’s operating segments were aggregated into three reporting units
(North America, Africa and Other Regions) due to their similar economic characteristics. Goodwill is not amortized; rather it is
evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of the asset may be
impaired. Goodwill is evaluated for impairment by determining the fair value of the related reporting unit. Fair value is measured
based on a discounted cash flow method or relative market-based approach. If the carrying amount of goodwill exceeds its fair
value, an impairment charge is recorded.
The Company has no intangible assets with indefinite useful lives. It does have other intangible assets, production and supply
contracts and a customer relationship intangible asset as well as internally developed software that is capitalized into intangibles.
These intangible assets are stated at amortized cost and tested for impairment whenever factors indicate the carrying amount may aa
not be recoverable. Supply contracts are amortized based on the expected realization of the benefit over the term of the contracts
ranging from 3 to 5 years. Production contracts and the customer relationship intangible are both amortized on a straight-line basis
ranging from five to ten years and twenty years, respectively. The amortization period is the term of the contract or, if no term is
specified in the contract, management’s best estimate of the useful life based on past experience. Internally developed software is
amortized on a straight-line basis over five years once the software testing is complete. Events and changes in circumstance may
either result in a revision in the estimated useful life or impairment of an intangible. See Note 5 “Goodwill and Other Intangibles”
to the “Notes to Consolidated Financial Statements” for further information.

Other Noncurrent Assets
For the year ended March 31, 2017, other noncurrent assets consist primarily of long-term VAT and intrastate tax receivables of
$4,170, long-term advances to suppliers of $5,855, long-term escrow deposits of $12,745, long-term retirement benefit assets of
$7,555 and cash surrender value of life insurance of $5,502. For the year ended March 31, 2016, other noncurrent assets consist
primarily of long-term VAT and intrastate tax receivables of $4,816, long-term advances to suppliers of $2,612, long-term retirement
benefit assets of $2,450 and cash surrender value of life insurance of $5,575.

Property, Plant and Equipment
Property, plant and equipment at March 31, 2017 and 2016, are summarized as follows:

Land
Buildings
Machinery and equipment
Total
Less accumulated depreciation
Total property, plant and equipment, net

2016

2017
27,705 $ 26,995
207,833
211,540
178,182
183,000
421,535
413,720
(144,010)
(157,209)
)
)
(
(
,
$
,
$
$ 256,511 $ 277,525

Property, plant and equipment is stated at cost less accumulated depreciation. Provisions for depreciation are computed on
a straight-line basis at annual rates calculated to amortize the cost of depreciable properties over their estimated useful lives.
Buildings and machinery and equipment are depreciated over ranges of 20 to 30 years and 3 to 10 years, respectively. The consolidated
financial statements do not include fully depreciated assets. Depreciation expense recorded in Cost of Goods and Services Sold
for the years ended March 31, 2017, 2016 and 2015 was $27,730, $23,132 and $24,179, respectively. Depreciation expense recorded
in Selling, General and Administrative Expense for the years ended March 31, 2017, 2016 and 2015 was $2,662, $2,699 and $2,998,
respectively. Total property and equipment purchases, including internally developed software intangibles, were $12,737 for the

- 50-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Property, Plant and Equipment (continued)
year ended March 31, 2017 of which $413 was unpaid at March 31, 2017 and included in Accounts Payable; $17,786 for the year
ended March 31, 2016 of which $1,359 was unpaid at March 31, 2016 and included in Accounts Payable; and $22,673 for the year
ended March 31, 2015 of which $1,024 was unpaid at March 31, 2015 and included in Accounts Payable. Estimated useful lives
are periodically reviewed and changes are made to the estimated useful lives when necessary. Long-lived assets are reviewed for
indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The evaluation is performed at the lowest level of identifiable cash flows. An impairment loss would be recognized when estimated
undiscounted future cash flows from the use of the asset and its eventual disposition are less than its carrying amount. Measurement
of an impairment loss would be based on the excess of the carrying amount of the asset over its fair value. Fair value is the amount
at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of
techniques, including quoted market prices or valuations, present value techniques based on estimates of cash flows, or multiples
of earnings or revenue performance measures.

Derivative Financial Instruments
The Company uses forward or option currency contracts to protect against volatility associated with certain non-U.S. dollar
denominated forecasted transactions. These contracts are for green tobacco purchases, processing costs, and selling, general and
administrative costs. Derivative financial instruments are recognized on the balance sheet as assets and liabilities and are measured
at fair value. Changes in the fair value of derivative instruments designated as hedging instruments are recorded each period according
to the determination of the derivative's effectiveness. The effective portion of changes in the fair value of derivatives designated as
cash flow hedges is recorded in Accumulated Other Comprehensive Loss and subsequently reclassified into earnings in the period
during which the hedged transaction is recognized in earnings. The ineffective portion of the change in fair value of the derivatives
is recognized in Cost of Goods and Services Sold immediately as incurred.

As of March 31, 2017, Other Comprehensive Loss includes $1,100, net of tax, of unrealized (gains)/losses related to
designated cash flow hedges. These contracts did not qualify for hedge accounting as defined by generally accepted accounting
principles in the previous years. The Company recorded losses of $1,161, $2,001 and $3,123 in its Cost of Goods and Services Sold
for the years ended March 31, 2017, 2016, and 2015, respectively. The Company recorded a current derivative asset of $943 as of
March 31, 2017. There was no current derivative asset as of March 31, 2016.

The Company has elected not to offset fair value amounts recognized for derivative instruments with the same counterparty
under a master netting agreement. See Note 18 “Fair Value Measurements” to the “Notes to Consolidated Financial Statements”
for further information of fair value methodology.

Income Taxes
The Company uses the asset and liability method to account for income taxes. The objective of the asset and liability method is to
establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax
basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.
The Company’s annual tax rate is based on its income, statutory tax rates and tax planning opportunities available to it in the
various jurisdictions in which it operates. Tax laws are complex and subject to different interpretations by the taxpayer and respective
governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions,
including evaluating uncertainties. The Company reviews its tax positions quarterly and adjusts the balances as new information
becomes available.
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years.
Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as
from net operating loss and tax credit carryforwards. The Company evaluates the recoverability of these future tax deductions by
assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences,
forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates. The
Company uses historical experience and short and long-range business forecasts to provide insight. The Company believes it is
more likely than not that a portion of the deferred income tax assets may expire unused and has established a valuation allowance
against them. Although realization is not assured for the remaining deferred income tax assets, the Company believes it is more
likely than not the deferred tax assets will be fully recoverable within the applicable statutory expiration periods. However, deferred
tax assets could be reduced in the near term if estimates of taxable income are significantly reduced or available tax planning
strategies are no longer viable. See Note 12 “Income Taxes” to the “Notes to Consolidated Financial Statements” for further
information.

- 51-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Stock-Based Compensation
The Company expenses the fair value of grants of various stock-based compensation programs at fair value over the vesting period
of the awards. The fair value of stock options is estimated at the date of grant using the Black-Scholes-Merton option valuation
model which was developed for use in estimating the fair value of exchange traded options that have no vesting restrictions and
are fully transferable. Option valuation methods require the input of highly subjective assumptions, including the expected stock
price volatility. See Note 11 “Stock-Based Compensation” to the “Notes to Consolidated Financial Statements” for further
information.

New Accounting Standards

Recent Adopted Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-15
“Presentation of Financial Statement-Going Concern (Subtopic 205-40): Disclosure of uncertainties about and Entity’s ability to
Continue as a Going Concern,” which requires management to perform interim and annual assessments of an entity’s ability to
continue as a going concern within one year of the date of 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 guidance is effective for
the Company as of March 31, 2017. Additional disclosures were added in Note 8 “Long-Term Debt” to the "Notes to Consolidated
Financial Statements" as a result of the adoption of this guidance.

In April 2015, the FASB issued ASU 2015-03 “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs,” which changed the presentation of debt issuance costs in financial statements from an asset
on the balance sheet to a direct deduction of the related debt liability. Amortization of debt issuance costs are reported as interest
expense. The Company adopted this guidance as of April 1, 2016, on a retrospective basis. As a result of the adoption of this
guidance, $9,875 was reclassified from Other Deferred Charges to Long-Term Debt on the consolidated balance sheets at March
31, 2016.

In May 2015, the FASB issued ASU 2015-07 "Fair Value Measurement, Disclosures for Investments in Certain Entities
that Calculate Net Asset Value per Share or its Equivalent,” which removes the requirement to categorize within the fair value
hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and eliminates
certain disclosures for investments that are eligible to be measured at fair value using the net asset value per share practical expedient.
The Company adopted this guidance as of March 31, 2017. Additional disclosures were added in Note 13 "Employee Benefits" to
the "Notes to Consolidated Financial Statements” as a result of the adoption of this guidance.

Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09 “Revenue Recognition (Topic 606), Revenue from Contracts with Customers”,
which outlines a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer
of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or
services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash
flows arising from customer contracts. This guidance provides companies the option of applying a full or modified retrospective
approach upon adoption and is effective for the Company April 1, 2018. An implementation group for this ASU has been established
and is evaluating the impact this guidance will have on the consolidated financial statements and related disclosures, business
processes, systems and controls. The Company is analyzing its current contracts and comparing its current accounting policies and
practices pertaining to revenue recognition to those required under the new ASU to identify potential differences; however, any
potential effect of adoption of this ASU has not yet been quantified. Additionally, the Company anticipates election of the full
retrospective approach upon adoption.

In July 2015, the FASB issued ASU 2015-11 “Inventory,” which simplifies the measurement of inventory and requires a
single measurement of inventory at the lower of cost and net realizable value. Under the previous accounting guidance, an entitytt
measured inventory at the lower of cost or market with market defined as one of three different measures. This guidance is effective
for the Company April 1, 2017. The Company does not expect this new guidance to have a material impact on its consolidated
financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-01 “Financial Instruments - Recognition and Measurement of Financial
Assets and Liabilities,” which requires equity investments (excluding equity method investments) to be measured at fair value with
changes in fair value recognized in net income. This guidance is effective for the Company April 1, 2018. The Company does not
expect this new guidance to have a material impact on its consolidated financial statements and related disclosures.

- 52-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

New Accounting Standards (continued)

Recent Accounting Pronouncements Not Yet Adopted (continued)
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize the assets and liabilities
arising from leases on the balance sheet. This guidance also requires disclosures about the amount, timing and uncertainty of cash
flows arising from leases. The guidance must be adopted using a modified retrospective approach and is effective for the Companynn
April 1, 2020. Early adoption is permitted. The Company is evaluating the effect that the adoption will have on its consolidated
financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments,” which provides financial statement users with more decision-useful information about the expected
credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. This
guidance is effective for the Company April 1, 2020. The Company is evaluating the effect that the adoption will have on its
consolidated financial statements and related disclosures.

In August of 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments,” which clarifies the classification of certain cash receipts and cash payments to reduce the diversity
in practice on how these activities are presented on the statement of cash flows. This guidance is effective for the Company March
31, 2018. The Company is evaluating the effect that the adoption will have on its consolidated financial statements and related
disclosures.

In November of 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash,” which
clarifies the presentation of restricted cash on the statement of cash flows to reduce diversity in practice on how restricted cash is
presented on the statement of cash flows. This guidance is effective for the Company April 1, 2018. The Company is evaluating
the effect that the adoption will have on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04 “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment,” which eliminates the requirement to determine implied goodwill in measuring an impairment loss. Upon
adoption, goodwill impairment will be measured as the excess of the reporting unit’s carrying value over fair value, limited to the
amount of goodwill. This guidance is effective for the Company April 1, 2020. Early adoption is permitted. The Company is
evaluating the effect that the adoption will have on its consolidated financial statements and related disclosures.

In March 31, 2017, the FASB issued ASU 2017-07 “Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” to increase the consistency, transparency,
and usefulness of financial information of retirement benefits by disaggregating the service cost component from the other
components of net benefit cost. This guidance is effective for the Company April 1, 2019. Early adoption is permitted. The Company
is currently evaluating the impact of this new guidance.

- 53-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Computation of Earnings (Loss) Per Common Share

(in thousands, except per share data)
BASIC EARNINGS (LOSS)
Net income (loss) attributable to Alliance One International, Inc.
SHARES
Weighted Average Number of Shares Outstanding
BASIC EARNINGS (LOSS) PER SHARE

DILUTED EARNINGS (LOSS)
Net income (loss) attributable to Alliance One International, Inc.
Plus interest expense on 5 ½% convertible notes, net of tax
Net income (loss) attributable to Alliance One International, Inc. as
adjusted
SHARES
Weighted average number of shares outstanding
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 ½% convertible notes
Shares applicable to stock warrants
Adjusted weighted average number of shares outstanding
DILUTED EARNINGS (LOSS) PER SHARE

Years Ended March 31,
2016

2015

2017

$ (62,928)

65,532

$ (27,862)

8,930
(7.05)

$ (62,928)
—

8,882
7.38

8,829
(3.16)

65,532
—

$ (27,862)

— *

$ (62,928)

65,532

$ (27,862)

8,930

8,882

8,829

— *
—
—
8,930
(7.05)

1
—
— **

— *
— *
— **

8,883
7.38

8,829
(3.16)

Assumed conversion of convertible notes at the beginning of the period has an antidilutive effect on earnings (loss) per
share. All outstanding restricted shares and shares applicable to stock options and restricted stock units are excluded
because their inclusion would have an antidilutive effect on the loss per share.
For the years ended March 31, 2016 and 2015 the warrants were not assumed exercised because the exercise price was
more than the average price for the period. The warrants were fully expired on April 8, 2015.

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 March 31, 2017 and 2016. 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 458 at a weighted average exercise price of $61.00 per share at March 31, 2017, 471 at a weighted
average exercise price of $60.70 per share at March 31, 2016 and 661 at a weighted average exercise price of $60.37 per share at
March 31, 2015.
In connection with the offering of the Company’s 5.50% 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 exceeds the initial conversion price of $50.28 per share. 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 second quarter of fiscal 2015.

- 54-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 1 - Significant Accounting Policies (continued)

Other Comprehensive Income (Loss)
The following tables set forth the changes in each component of accumulated other comprehensive income (loss), net of tax,
attributable to the Company:

Balances, March 31, 2014
Other comprehensive losses before reclassifications

Amounts reclassified to net income, net of tax
Other comprehensive losses, net of tax

Balances, March 31, 2015
Other comprehensive income before reclassifications

Amounts reclassified to net loss, net of tax
Other comprehensive income, net of tax

Balances, March 31, 2016
Other comprehensive losses before reclassifications

Amounts reclassified to net loss, net of tax
Other comprehensive losses, net of tax

Balances, March 31, 2017

Translation
Adjustment

Pensions, Net
of Tax

Derivatives,
Net Tax

Accumulated
Other
Comprehensive
Income (Loss)

(1,640) $
(12,514)
—
(12,514)
(14,154)
108

—
108
(14,046)
(8,247)
—
(8,247)
(22,293) $

(36,686) $
(16,257)
711
(15,546)
(52,232)
7,811

4,619
12,430
(39,802)
(573)
3,721
3,148
(36,654) $

— $
—

—
—

—
(1,100)
—
(1,100)
(1,100) $

(38,326)
(28,771)
711
(28,060)
(66,386)
7,919

4,619
12,538
(53,848)
(9,920)
3,721
(6,199)
(60,047)

The following table sets forth amounts by component, reclassified from accumulated other comprehensive income (loss) to net
income (loss) for the years ended March 31, 2017, 2016 and 2015:

Years Ended
March 31,
2016

2017

2015

Pension and postretirement plans *:

Actuarial loss

Amortization of prior service cost (credit)
Deferred income tax benefit
Amounts reclassified from accumulated other comprehensive
income (loss) to net income (loss)

3,911 $
(670)
480

3,629 $

840
150

3,092
(2,213)
(168)

3,721 $

4,619 $

711

* Amounts are included in net periodic benefit costs for pension and postretirement plans.

Concentration of Credit Risk
The Company may potentially be subject to a concentration of credit risks due to tobacco supplier advances and trade receivables
relating to customers in the tobacco industry as well as cash which is deposited with high-credit-quality financial institutions. See
Note 14 “Segment Information” to the “Notes to Consolidated Financial Statements” for further information of particular
concentrations.

Preferred Stock
The Board of Directors is authorized to issue shares of Preferred Stock in series with variations as to the number of shares in any
series. The Board of Directors also is authorized to establish the rights and privileges of such shares issued, including dividend and
voting rights. At March 31, 2017, 10,000 shares of preferred stock were authorized and no shares had been issued.

- 55-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 2 – Inventories

Processed tobacco
Unprocessed tobacco
Other

March 31, 2017 March 31, 2016
584,158
$
175,933
31,249
791,340

424,984 $
220,625
32,716
678,325 $

See Note 1 “Significant Accounting Policies - Inventories” to the “Notes to Consolidated Financial Statements” for further
information on the costs that comprise the inventory balances and the LCM testing methodologies.
The Company recorded LCM adjustments of $4,833, $5,996 and $7,533 for the years ended March 31, 2017, 2016 and 2015,
respectively.

Note 3 – 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 procure 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 ventures' borrowings which also represent a variable interest in those joint ventures. The Company is not the primaryrr
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
March 31, 2017 and 2016, the Company’s investment in these joint ventures was $51,443 and $57,243, respectively and is classified
as Investments in Unconsolidated Affiliates in the Consolidated Balance Sheets. The Company’s advances to these joint ventures
were $8,133 and $1,920 at March 31, 2017 and 2016, respectively, and are classified as Accounts Receivable, Related Parties in
the Consolidated Balance Sheets. The Company guaranteed an amount to two joint ventures not to exceed $96,378 and $100,238
at March 31, 2017 and 2016, respectively. The investments, advances and guarantees in these joint ventures represent the Company’s
maximum exposure to loss.

Note 4 – Restructuring and Asset Impairment Charges

During the quarter ended March 31, 2015, the Company announced 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 in future periods. At March 31, 2017, the costs of any future initiatives is
not estimable. During the fiscal year ended March 31, 2017, the Company recorded $517 for employee severance charges, primarily
related to certain operations in Africa, $120 for other cash charges and $738 for asset impairment charges primarily related to the
Company's former U.S. cut rag facility. During the fiscal year ended March 31, 2016, the Company recorded $(498) of employee
severance charges and $5,723 of asset impairment charges. The asset impairment charges were incurred due to restructuring of
certain operations in Africa, Bulgaria and Brazil as well as the curtailment of certain U.S. pension plans. During the fiscal year
ended March 31, 2015, charges of $8,612 were incurred in connection with the reduction in the global workforce. Also during
the fiscal year ended March 31, 2015, the Company recorded a $500 asset impairment charge resulting from certain machinery in
a former U.S. cut rag facility as operations moved to a new facility.

- 56-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 4 – Restructuring and Asset Impairment Charges (continued)

The following table summarizes the restructuring actions as of March 31, 2017, 2016 and 2015:

Restructuring and Asset Impairment Charges
Employee separation and other cash charges:
Beginning balance
Period Charges:
Employee separation charges (recoveries)
Other cash charges
Total employee separation and other cash charges
Payments
Ending balance March 31
Asset impairment and other non-cash charges
Total restructuring and asset impairment charges

Years Ended March 31,
2016

2015

2017

398 $

8,087 $

397

517
120
637
(846)
189 $
738
1,375 $

(498)
662
164
(7,853)

398 $

5,724
5,888 $

8,612
6
8,618
(928)
8,087
500
9,118

The following table summarizes the employee separation and other cash charges recorded in the Company’s North America and
Other Regions segments as of March 31, 2017, 2016 and 2015:

Employee Separation and Other Cash Charges
Beginning balance:
North America
Other regions
Period charges:
North America
Other regions
Payments:
North America
Other regions
Ending balance March 31:
North America
Other regions

Years Ended March 31,
2016

2015

2017

398 $
—
398
637 $
180
457
(846) $
(120)
(726)
189 $
60
129

8,087 $
—
8,087

164 $
—
164
(7,853) $
—
(7,853)

398 $
—
398

397
—
397
8,618
—
8,618
(928)
—
(928)
8,087
—
8,087

The following table summarizes non-cash charges for the Company's North America and Other Regions segments for fiscal years
ended March 31, 2017, 2016 and 2015:

North
America

Other
Regions

Years ended March 31,
2017

2016
2015

495

712
500

243

5,012
—

- 57-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 5 – Goodwill and Other Intangibles

The Company tests the carrying amount of goodwill annually as of the first day of the last quarter of the fiscal year and whenever
events or circumstances indicate that impairment may have occurred. The Company evaluated its goodwill for impairment during
fiscal 2017, 2016 and 2015 and determined that the fair value of each reporting unit is substantially in excess of its carrying value
including goodwill.
The carrying value of other intangible assets as of March 31, 2017 represents customer relationship, production and supply
contracts and internally developed software. These intangible assets were determined by management to meet the criterion for
recognition apart from goodwill and have finite lives. The Company uses judgment in assessing whether the carrying amount of its
intangible assets is not expected to be recoverable over their estimated remaining useful lives. Amortization expense associated with
these intangible assets was $4,514, $3,356 and $3,532 for the years ended March 31, 2017, 2016 and 2015, respectively and is recorded
in Selling, General and Administrative Expenses except for production and supply contracts which is recorded against the associated
revenues.
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 years ended March 31, 2017, 2016
and 2015.

Goodwill and Intangible Asset Rollforward:

Weighted average remaining useful life in years as
of March 31, 2017
March 31, 2015 balance:
Gross carrying amount
Accumulated amortization
Net March 31, 2015 balance
Additions (2)
Amortization expense
Net March 31, 2016 balance
Additions
Amortization expense
Net March 31, 2017 balance

Goodwill (1)

Amortizable Intangibles
Production
and Supply
Contract
g
Intangibles

Internally
Developed
Software
g
Intangible

Customer
Relationship
Intangible

Total

4.25

2,794
—
2,794
13,669
—
16,463
—
—
,
16,463

33,700
)
(16,639)
,
(
)
,
(
17,061
24,830
(1,685)
)
( ,
40,206
—
( ,
(3,340)
)
,
36,866

14,893
)
(5,786)
( ,
9,107
—
(825)
)
(
8,282
—
(432)
)
(
,
7,850

18,502
)
(15,573)
,
(
2,929
—
(846)
)
(
)
(
2,083
79
(742)
)
(
,
1,420

69,889
)
(37,998)
,
(
31,891
38,499
(3,356)
)
( ,
67,034
79
(4,514)
)
( ,
,
62,599

$
(1) Goodwill of $2,794 relates to the North America segment and $13,669 relates to the Other Regions segment.
(2) Additions relate to the reconsolidation of MTC. See Note 21 "Reconsolidation of MTC" to the "Notes to Consolidated Financial Statements"
for further information.

The following table summarizes the estimated intangible asset amortization expense for the next five years and beyond:

For Fiscal
Years Ended
2018
2019
2020
2021
2022
Later

Customer
Relationship
Intangible

Production
and Supply
Contract
Intangible

3,340
3,340
3,340
3,340
3,340
,
20,166
,
36,866

1,492
1,405
1,397
1,397
1,397
762
,
7,850

Internally
Developed
Software
Intangible *
646
$
427
247
86
14
—
,
1,420

Total

5,478
5,172
4,984
4,823
4,751
,
20,928
,
46,136

* Estimated amortization expense for the internally developed software is based on costs accumulated as of March 31, 2017.
These estimates will change as new costs are incurred and until the software is placed into service in all locations.

- 58-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 6 – Related Party Transactions

The Company’s operating subsidiaries engage in transactions with related parties in the normal course of business. The following
is a summary of balances and transactions with related parties of the Company:

Balances:
Accounts receivable
Accounts payable

Transactions:
Sales
Purchases

March 31, 2017

March 31, 2016

$
$

8,133 $
9,773 $

1,920
20,490

2017

Year Ended March 31,
2016

2015

$
$

47,726 $
62,350 $

18,827 $
264,707 $

20,692
271,466

The Company’s operating subsidiaries have entered into transactions with affiliates of the Company for the purpose of
procuring inventory.
The Company’s balances due to and from related parties and transactions relate to the Company’s equity basis investments
in companies located in Asia, South America, North America and Europe which grow, purchase, process and sell tobacco or produce
consumable e-liquids.

Note 7 – Short-Term Borrowing Arrangements

Excluding all long-term credit agreements, the Company has lines of credit arrangements with a number of banks under which
the Company may borrow up to a total of $808,695 and $910,131 at March 31, 2017 and 2016, respectively. The weighted average
variable interest rate for the years ending March 31, 2017 and 2016 was 5.9% and 5.2%, respectively. At March 31, 2017 and
2016, amounts outstanding under the lines were $475,863 and $475,989, respectively. Unused lines of credit at March 31, 2017
amounted to $319,844, net of $12,989 of letters of credit and $416,352 at March 31, 2016, net of $17,790 of letters of credit.
Certain non-U.S. borrowings of approximately $144,881 and $103,366 have inventories of $56,040 and $99,442 as collateral at
March 31, 2017 and 2016, respectively. At March 31, 2017 and 2016, respectively, $1,767 and $2,137 were held on deposit as a
compensating balance.

The foregoing amounts at March 31, 2016 reflected aggregate borrowing availability, outstanding borrowings and unused
borrowing availability under a short-term credit facility extended to MTC in which one of the Company’s other subsidiaries had
a participation interest in the lender’s rights and obligations under the facility. At March 31, 2016, $100,000 of the aggregate
borrowing availability was with respect to borrowing such other subsidiary would be required to fund under the terms of the
participation interest. Aggregate outstanding borrowings attributed to outstanding borrowings by MTC funded under that facilitytt
by such other subsidiary pursuant to that participation interest are $84,258 and $15,742 of the unused borrowing availability was
with respect to unused borrowing availability such other subsidiary would be required to fund under the terms of the participation
interest. Because such other subsidiary’s funding was pursuant to a participation interest through a third-party lender and not a
direct intercompany loan between such other subsidiary and MTC, the total amount of debt under the facility was required to be
reflected as consolidated debt upon the reconsolidation of MTC. See Note 21 “Reconsolidation of MTC” to the “Notes to
Consolidated Financial Statements” for further information. At March 31, 2017, the other subsidiary's participation interest no
longer remained.

Note 8 – Long-Term Debt

On October 14, 2016, the Company issued $275,000 in aggregate principal amount of 8.5% senior secured first lien notes due
2021 (the “First Lien Notes”), at an issue price of 99.085% of the face amount thereof, entered into an ABL credit agreement (thet
“ABL Credit Agreement”) with certain bank lenders establishing a senior secured revolving asset-based lending facility (the “ABL
Facility”) of $60,000 subject to a borrowing base composed of its eligible accounts receivable and inventory, and used a portion
of the net proceeds from the offering of the First Lien Notes to repay in full all outstanding indebtedness and accrued and unpaid
interest owed under the Company’s then existing senior secured revolving credit facility. Upon such repayment, Alliance One
terminated the senior secured revolving credit facility.

- 59-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 8 – Long-Term Debt (continued)

The ABL credit agreement restricts the Company from paying any dividends during the term of this facility subject to the satisfaction
of specified financial ratios. In addition, the indentures governing the First Lien Notes and its outstanding senior secured second
lien notes due 2021 contain similar restrictions and also prohibit the payment of dividends and other distributions if the Company
fails to satisfy a ratio of consolidated EBITDA to fixed charges of at least 2.0 to 1.0. At March 31, 2017, the Company did not
satisfy this fixed charge coverage ratio. The Company may from time to time not satisfy this ratio and failure to meet this fixed
charge coverage ratio does not constitute an event of default.

The terms of the First Lien Notes and the ABL Facility, and certain effects of these refinancing transactions, are summarized below:

First Lien Notes

ABL Facility

The ABL Facility may be used for revolving credit loans, swingline loans and letters of credit from time to time up to an initial
maximum principal amount of $60,000, subject to the limitations described below in this paragraph. Under certain conditions,
Alliance One may solicit the ABL Facility lenders or other prospective lenders to provide additional revolving loan commitments

- 60-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 8 – Long-Term Debt (continued)

ABL Facility (continued)

under the ABL Facility in an aggregate amount not to exceed $15,000 (less the aggregate principal amount of any notes exceeding
$275,000 issued under the First Lien Notes Indenture). The maximum amount available under the revolving credit facility is
limited by a borrowing base consisting of eligible accounts receivable and inventory as follows:

•
•

85% of eligible accounts receivable, plus
the lesser of (i) 85% of the appraised net-orderly-liquidation value of eligible inventory or (ii) 65% of eligible inventory
valued at the lower of cost (based on a first-in first-out basis) and market value thereof (net of intercompany profits).

The borrowing base is subject to a $25,000 deduction and customary reserves, which are to be established by the agent for
the ABL Facility lenders in its permitted discretion from time to time. At March 31, 2017, no borrowings were outstanding under
the ABL Facility and $60,000 was available for borrowing. Borrowing is permitted under the ABL Credit Facility only to the extent
that, after consideration of the application of the proceeds of the borrowing, the Company’s unrestricted cash and cash equivalents
would not exceed $180,000. At March 31, 2017, the Company’s unrestricted cash and cash equivalents significantly exceeded
$180,000.

In addition, loans under the ABL Facility shall not be made if after incurrence of such loans there will be more than $180,000
of unrestricted cash and cash equivalents in the aggregate on the consolidated balance sheet of the Company and its subsidiaries.
The ABL Facility permits both base rate borrowings and LIBOR borrowings. Borrowings under the ABL Facility bear interest at
an annual rate equal to LIBOR plus 250 basis points or 150 basis points above base rate, as applicable, with a fee on unused
borrowings initially at an annual rate of 50 basis points until March 31, 2017 and thereafter at annual rates of either 37.5 or 50r
basis points based on average quarterly historical utilization under the ABL Facility. The ABL Facility matures on January 14,
2021.

In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of
certain events including, without limitation, certain dispositions of assets outside of the ordinary course of business in respect of
certain collateral securing the ABL Facility, unrestricted cash and cash equivalents on the Company’s consolidated balance sheet
exceeding $180,000 for a period of seven consecutive business days, and certain casualty and condemnation events.

The liens and other security interests granted by the Credit Parties on the Collateral for the benefit of the ABL Lenders (and
certain related secured parties) are, subject to certain permitted liens, secured by first-priority security interests on a pari passu
basis with the security interests securing the First Lien Notes, with respective priorities in a waterfall with respect to portions of
the Collateral as set forth in the Senior Lien Intercreditor Agreement described above.

The ABL Credit Agreement governing the ABL Facility contains customary representations and warranties, affirmative and
negative covenants (subject, in each case, to exceptions and qualifications) and events of defaults, including covenants that limit
the Company’s ability to, among other things incur certain guarantees, merge, consolidate or dispose of substantially all of its
assets, grant liens on assets, pay dividends, redeem stock or make other distributions or restricted payments, create certain dividend
and payment restrictions on subsidiaries, repurchase or redeem capital stock or prepay subordinated or certain other material debt
(including the First Lien Notes and the Company’s senior secured second lien notes due 2021), make certain investments, agree
- 61-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 8 - Long-Term Debt (continued)

ABL Facility (continued)

to restrictions on the payment of dividends to Alliance One by its subsidiaries, sell or otherwise dispose of assets, including equity
interests of subsidiaries, enter into transactions with affiliates, enter into certain sale and leaseback transactions.
The ABL credit agreement restricts the Company from paying any dividends during the term of this facility subject to thet
satisfaction of specified financial ratios. In addition, the indentures governing the Company's First Lien Notes and its senior
secured second lien notes due 2021 contain similar restrictions and also prohibits the payment of dividends and other distributions
if the Company fails to satisfy a ratio of consolidated EBITDA to fixed charges of at least 2.0 to 1.0. At March 31, 2017, the
Company did not satisfy this fixed charge coverage ratio. The Company may from time to time not satisfy this ratio.

Termination of Existing Senior Secured Revolving Credit Facility

On October 14, 2016, the Company terminated its then existing senior secured revolving credit facility and repaid in full all
outstanding indebtedness plus accrued and unpaid interest and other costs, of which $73 was charged to debt retirement expense.
As a result, the Company accelerated $2,266 of deferred financing costs during the three months ended December 31, 2016, which
was charged to debt retirement expense.

Senior Secured Second Lien Notes
On August 1, 2013, the Company issued $735,000 in aggregate principal amount of its 9.875% senior secured second lien notes
due 2021 (the "Second Lien Notes"). The Second Lien Notes were sold at 98% of the face value, for gross proceeds of approximately
$720,300. The Second Lien Notes bear interest at a rate of 9.875% per year, payable semi-annually in arrears in cash on January
15 and July 15 of each year, beginning January 15, 2014, to holders of record at the close of business on the preceding January 1
and July 1, respectively. The Second Lien Notes will mature on July 15, 2021. The Second Lien Notes are secured by a second
priority lien on specified property of Alliance One International, Inc. for which the amended and restated senior secured credit
facility is secured by a first priority lien. The indenture governing the Second Lien Notes restricts (subject to exceptions and
qualifications) the Company's ability and the ability of its restricted subsidiaries to, among other things, incur additional indebtedness
or issue disqualified stock or preferred stock, pay dividends and make other restricted payments (including restricted investments),
sell assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into transactions
with its affiliates, enter into certain sale and leaseback transactions, create certain dividend and payment restrictions on its restricted
subsidiaries, and designate its subsidiaries as unrestricted subsidiaries.
The indenture governing the Second Lien Notes requires the Company's existing and future material domestic subsidiaries
to guarantee the Second Lien Notes. The Company has no material domestic subsidiaries, and the Second Lien Notes are not
presently guaranteed by any subsidiary. If a change of control (as defined in the indenture governing the Second Lien Notes) occurs
at any time, holders of the Second Lien Notes will have the right, at their option, to require the Company to repurchase all or a
portion of the Second Lien Notes for cash at a price equal to 101% of the principal amount of Second Lien Notes being repurchased,
plus accrued and unpaid interest and special interest, if any, to, but excluding, the date of repurchase. In connection with the
issuance of the Second Lien Notes, the Company entered into a registration rights agreement that requires the Company to pay
additional special interest on the Second Lien Notes, at increasing annual rates up to a maximum of 1.0% per year, if the Companya
fails to timely comply with its registration obligations thereunder. Pursuant to the registration rights agreement, on December 20,
2013, the Company completed a registered exchange offer in which it offered to exchange for the outstanding Second Lien Notes
an equal amount of new Second Lien Notes having identical terms in all material respects. During the year ended March 31, 2017,
the Company purchased $28,409 of its senior notes on the open market. All purchased securities were canceled leaving $691,591
of the 9.875% senior notes outstanding at March 31, 2017. Associated costs paid were $71 and related discounts were $(3,409)
resulting in net cash repayment of $25,606 and recorded in Repayment of Long-Term Borrowings in the Consolidated Statements
of Cash Flows. Deferred financing costs and amortization of original issue discount of $678 were accelerated. In April 2017, the
Company purchased $28,645 of its existing $691,591 senior notes on the open market. See Note 20 "Subsequent Events" to the
Notes to Consolidated Financial Statements.

Foreign Seasonal Lines of Credit
The Company has typically financed its non-U.S. operations with uncommitted unsecured short-term seasonal lines of credit at
the local level. These operating lines are seasonal in nature, normally extending for a term of 180 to 270 days corresponding to
the tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the right to cease making
loans and demand repayment of loans at any time. These loans are typically renewed at the outset of each tobacco season. As of
March 31, 2017, the Company had approximately $475,863 drawn and outstanding on foreign seasonal lines with maximum
capacity totaling $808,695 subject to limitations as provided for in the Credit Agreement. Additionally, against these lines there
was $12,988 available in unused letter of credit capacity with $5,211 issued but unfunded.

- 62-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 8 - Long-Term Debt (continued)

Long-Term Foreign Seasonal Borrowings
The Company had foreign seasonal borrowings with original maturities greater than one year. At March 31, 2017, approximately
$10,000 was drawn and outstanding with maximum capacity totaling $10,000.

Summary of Debt
Certain debt agreements contain cross-default or cross-acceleration provisions. The Company has considered its short-term liquidity
needs, the adequacy of estimated cash flows from operating activities, and other financing sources to meet these needs. The
Company expects that its cash and cash equivalents, available borrowings from foreign lines of credit and accounts receivable
securitization programs, and cash flows from operating activities are sufficient to meet anticipated cash flow needs for operations,
capital expenditures, debt service obligations, and other fees payable under other contractual obligations for the foreseeable future.
The following table summarizes the Company’s debt financing as of March 31, 2017:

Outstanding

March 31,
2016

March 31,
2017

March 31, 2017
Lines
and
Letters

Interest

Long Term Debt Repayment Schedule by Fiscal Year

Available Rate

2018

2019

2020

2021

2022

Later

Senior secured credit
facility:
Revolver (1)
ABL facility (2)
Senior notes:
8.5% senior first lien
notes due 2021 (6)
9.875% senior secured
second lien notes due
2021 (4) (5)

Long-term foreign
seasonal borrowings

Other long-term debt
Notes payable to banks (7)
Total debt
Short term (7)
Long term:
Long term debt current
Long term debt

Letters of credit
Total credit available

$ — $ — $ — $ — $

— $ —

—

205

329

—

— 267,049

— 675,076

—

100

—

100

—
205 $

—
329 $

—
100 $ 942,225 $

—

100

—
100

9.9%

4.1% (3) 10,000

7.2% (3)
5.9% (3)

—

$10,046 $

$ 200,000 $

—

— $

—

— 60,000

—%

—

267,049

—

8.5%

699,321

675,076

10,000

1,249

880

475,989

475,863
$ 1,386,559 $ 1,428,868
$ 475,989 $ 475,863

—

319,844
379,844

356 $

910,214

10,046
942,959
$ 910,570 $ 953,005
5,211
$

4,733 $

7,777
$ 387,621

(1) As of October 14, 2016, the revolving credit facility was paid in full and cancelled.
(2) As of March 31, 2017, the full amount of the ABL facility was available. Borrowing is permitted under the ABL Credit Facility only to the extent that, after
consideration of the application of the proceeds of the borrowing, the Company’s unrestricted cash and cash equivalents would not exceed $180,000. At March
31, 2017, the Company’s unrestricted cash and cash equivalents significantly exceeded $180,000.
(3) Weighted average rate for the twelve months ended March 31, 2017.
(4) On April 1, 2016, we adopted new accounting guidance that changed the presentation of debt issuance costs in financial statements on a retrospecitve basis.
Therefore, the March 31, 2016 balance previously reported of $709,196 has been adjusted by $9,875 to $699,321 in accordance with the adoption of this new
accounting guidance.
(5) Repayment of $675,076 is net of original issue discount of $8,821 and unamortized debt issuance of $7,694. Total repayment will be $691,591.
(6) Repayment of $267,049 is net of original issue discount of $2,303 and unamortized debt issuance of $5,648. Total repayment will be $275,000.
(7) Primarily foreign seasonal lines of credit. At March 31, 2016, the outstanding amount includes $130,600 of debt owed by MTC under a short-term credit
facility in which one of the Company’s other subsidiaries has a participation interest in the lender’s rights and obligations under the facility. At March 31, 2016,
$84,258 of that amount was attributed to outstanding borrowings by MTC funded under that facility by such other subsidiary pursuant to that participation interest.
Because such other subsidiary’s funding is pursuant to a participation interest through a third-party lender and not a direct intercompany loan between such other
subsidiary and MTC, the total amount of debt under the facility is required to be reflected as consolidated debt upon the reconsolidation of MTC. See Note 21
“Reconsolidation of MTC” to the “Notes to Consolidated Financial Statements” for further information. At March 31, 2017, the other subsidiary's participation
interest no longer remained.

t
t

- 63-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 9 - Long-Term Leases

The Company has operating leases for land, buildings, automobiles and other equipment. Rent expense for all operating leases
was $21,689, $22,989 and $22,622 for the years ended March 31, 2017, 2016 and 2015, respectively. Minimum future obligations
are as follows:

2018
2019
2020
2021
2022
Remaining

Operating
Leases

18,150
10,096
7,056
4,716
2,259
1,601
43,878

Note 10 – Equity in Net Assets of Investee Companies

The Company has equity method investments in companies located in Asia which purchase and process tobacco. The Asia investees
and ownership percentages are as follows: Alliance One Industries India Private Ltd. (India) 49%, Siam Tobacco Export Company
(Thailand) 49%, and Adams International Ltd. (Thailand) 49%. The Company owns a 50% equity based interest in Oryantal Tutun
Paketleme which processes tobacco in Turkey. On March 26, 2014, the Company completed the formation of a new joint venture
in Brazil with the disposition of 51% interest in China Brasil Tobacos Exportadora SA (“CBT”). The Company retained a 49%
equity based interest in CBT which purchases and processes tobacco. Upon the disposition of 51% interest in CBT, the difference
between the book basis of the Company’s 49% interest and the fair value of the investment recorded created a basis difference of
$15,990. The Company evaluated the contributed assets and identified basis differences in certain accounts, including inventory,rr
intangible assets and deferred taxes. The basis differences are being amortized over the respective estimated lives of these assets
and liabilities, which range from one to ten years. For the year ended March 31, 2017, the Company’s earnings from the equity
method investment were reduced by amortization expense of $1,518 related to these basis differences. At March 31, 2017, the
basis difference was $10,104. On April 2, 2014 the Company completed the purchase of a 50% interest in Purilum, LLC, a U.S.
company that develops, produces and sells consumable e-liquids to manufacturers and distributors of e-vapor products. Summarized
combined financial information for these investees for fiscal years ended March 31, 2017, 2016 and 2015 follows:

Operations Statement Information
Sales
Gross profit
Net income
Company's dividends received

2017

2015

Years Ended March 31,
2016
$ 232,145 $ 274,183 $ 297,474
33,246
11,394
—

23,739
3,072
4,307

42,143
15,254
1,887

Balance Sheet Information
Current assets
Property, plant and equipment and other assets
Current liabilities
Long-term obligations and other liabilities

March 31,

2017

2016

139,146 $
54,674
102,550
7,432

118,745
61,845
77,908
10,222

- 64-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 11 – Stock–Based Compensation

The Company expenses the fair value of grants of various stock-based compensation programs over the vesting period of the
awards. Awards granted are recognized as compensation expense based on the grant-date fair value estimated in accordance with
generally accepted accounting principles.
The table below summarizes certain data for the Company’s stock-based compensation plans:

Compensation expense for all stock based
compensation plans
Tax (expense) benefits for stock-based compensation
Fair value of stock options vested

Year Ended March 31,
2015
2016
2017

$ 1,712 $ 2,874 $ 3,194
$ — $ — $ —
315 $ 2,043 $ 3,353
$

The Company’s shareholders approved the 2016 Incentive Plan (the “2016 Plan”) at its Annual Meeting of Shareholders on August
12, 2016, which is the successor to the 2007 Incentive Plan (the “2007 Plan”) as amended on August 11, 2011 and August 6, 2009.
The 2016 Plan is an omnibus plan that provides the flexibility to grant a variety of equity awards including stock options, stock
appreciation rights, stock awards, stock units, performance awards and incentive awards to officers, directors and employees of
the Company.

As of March 31, 2017, a maximum of 1,109 shares may be issued under the 2016 Plan, inclusive of 900 original to the
2016 Plan and 209 carried forward from the 2007 Plan. The 2016 Plan requires that the shares available for grant be reduced by
twice the number of shares issued for any awards other than options or stock appreciation rights. This has resulted in decreasing
the shares available to grant by 140. As of March 31, 2017, 142 equity awards have been granted, 2 equity awards have been
cancelled and 22 vested under the 2016 Plan, leaving 828 shares available for future awards under the 2016 Plan, inclusive of 620
original to the 2016 Plan and 209 carried forward from the 2007 Plan.

Total equity awards outstanding are 660, inclusive of 542 awards granted and outstanding under the previous 2007 plan
and 118 awards granted under the 2016 Plan. Shares issued are new shares which have been authorized and designated for award
under the plans. Individual types of awards are discussed in greater detail below.

Stock Option Awards
Stock options allow for the purchase of common stock at a price determined at the time the option is granted. Stock options
generally vest ratably over five years and generally expire after ten years. The fair value of these options is determined at grant
date using the Black-Scholes valuation model and includes estimates of forfeiture based on historical experience. The fair value
is then recognized as compensation expense ratably over the vesting term of the options. No stock options were granted during
2017, 2016 and 2015.

- 65-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 11 – Stock–Based Compensation (continued)

Stock Option Awards (continued)
A summary of option activity for stock options follows:

Options

Outstanding at March 31, 2014
Forfeited
Expired
Outstanding at March 31, 2015
Forfeited
Expired
Outstanding at March 31, 2016
Forfeited
Expired
Outstanding at March 31, 2017
Vested and expected to vest at March 31, 2017
Exercisable at March 31, 2017

688 $
(18)
(9)
661
(9)
(182)
470
(4)
(8)
458
458
441

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

60.45
61.49
64.50
60.37
66.21
59.23
60.70
66.73
39.40
61.00
61.00
61.04

4.29 $
4.29 $
4.26 $

—
—
—

The intrinsic values in the table above represent the total pre-tax intrinsic value which is the difference between the Company’s
closing stock price and the exercise price multiplied by the number of options. The expense related to stock option awards for
2017, 2016, and 2015 was $277, $1,097, and $1,363, respectively. There were no options exercised in 2017, 2016 and 2015.
The table below shows the movement in unvested options from March 31, 2016 to March 31, 2017.

Unvested March 31, 2016
Forfeited
Vested
Unvested March 31, 2017

Weighted Average
Grant Date
Fair Value

Aggregate
Grant Date
Fair Value

38 $
(1)
(20)
17

15.80 $
15.80
15.80
15.80 $

599
(9)
(315)
275

As of March 31, 2017, there is $13 of unearned compensation, net of expected forfeitures, related to stock option awards
which will vest over a weighted average remaining life of 0.1 years.

Restricted Stock
Restricted stock is common stock that is both nontransferable and forfeitable unless and until certain conditions are satisfied. The
fair value of restricted shares is determined on grant date and is amortized over the vesting period.

- 66-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 11 – Stock–Based Compensation (continued)

Restricted Stock (continued)

Restricted Stock

Restricted at March 31, 2014
Granted
Vested
Restricted at March 31, 2015
Granted
Vested
Restricted at March 31, 2016
Granted
Vested
Restricted at March 31, 2017

Shares
20
27
(47)
—
23
(23)
—
28
(28)
—

Weighted Average
Grant Date
Fair Value
38.00
16.12
25.39
—
18.42
18.42
—
16.74
16.74
—

As of March 31, 2017, there was no remaining unamortized deferred compensation. Expense recognized due to the vesting
of restricted stock awards was $469, $417 and $701 for the years ended March 31, 2017, 2016 and 2015, respectively.

Restricted Stock Units
Restricted stock units differ from restricted stock in that zero shares are issued until restrictions lapse. Certain restricted stock
units vest ratably over a three-year period and others vest 50% in the first year and 25% in each of the second and third years. The
fair value of the restricted stock units is determined on the grant date and is amortized over the vesting period.

Restricted Stock Units

Outstanding at March 31, 2014
Granted
Vested
Forfeited
Outstanding at March 31, 2015
Granted
Vested
Forfeited
Outstanding at March 31, 2016
Granted
Vested
Forfeited
Outstanding at March 31, 2017

63
22
(21)
(6)
58
58
(25)
(2)
89
64
(48)
(1)
104

Weighted Average
Grant Date
Fair Value
38.50
27.20
38.50
38.50
34.18
14.73
35.16
38.50
21.28
17.19
25.43
22.41
16.84

As of March 31, 2017, there was $1,119 of remaining unamortized deferred compensation associated with these restricted
stock units that will be expensed over the remaining service period through August 15, 2019. Expense recognized due to the
vesting of these awards was $805, $1,113 and $859 during the years ended March 31, 2017, 2016 and 2015 respectively.

On August 13, 2015, the Company's shareholders approved an exchange offer that would allow certain employees to surrender
options and receive restricted stock units in exchange for these options. The offer was made on September 14, 2015 and applied
only to grants made during years 2012 and 2013 that had an exercise price of $60.00 following the reverse stock split on June 26,
2015. The exchange offer was consummated as of October 13, 2015 with no changes in the timing or material amount of expense
recognized for stock based compensation.

- 67-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 11 – Stock–Based Compensation (continued)

Performance-Based Restricted Stock Units
Performance-based restricted stock units may vest at the end of either a two- or three-year performance period but the level of the
awards to be earned at the end of the performance period is contingent upon attainment of specific business performance goals.
If certain minimum performance levels are not attained, no compensation will be earned. The awards are variable in that
compensation could range from zero to 200% of the plan’s target contingent on the performance level attained. The table below
includes the maximum number of restricted stock units that may be earned under the plan.

Performance-Based
Restricted Stock Units

Outstanding as of March 31, 2014
Granted
Forfeited
Outstanding as of March 31, 2015
Granted
Forfeited
Outstanding as of March 31, 2016
Granted
Forfeited
Outstanding as of March 31, 2017

Weighted Average
Grant Date Fair
Value
38.50
27.20
38.50
35.52
10.11
38.50
17.33
17.76
26.81
15.06

Shares
62
22
(1)
83
30
(61)
52
56
(23)
85

As of March 31, 2017, the Company anticipates that no performance-based restricted stock units will vest resulting in $0 to be
expensed over the remaining service life through August 15, 2019. Expense recognized due to the expected vesting of these awards
were $(202) and $104 during the years ended March 31, 2016 and 2015, respectively. There was no expense recognized for the
year ending March 31, 2017.

Cash-Settled Awards
Cash-settled awards differ from the Company's other awards in that no shares will be issued and the cumulative compensation
expense is recognized as a liability rather than equity. Under both of our current Cash-Settled Awards, the fair value of the award
is equal to the period-end closing price of one share. The liability recognized will be the product of the fair value multiplied ratably
by the expired vesting term. The expense related to these awards is derived by appropriately adjusting the value of the liability.
As a result, the expense will be variable as the value of the liability will increase or decrease subject to the period-end closing
price.

Cash-Settled Restricted Stock Units
Cash-settled restricted stock units vest ratably over the first, second and third anniversaries of the date of award.

Cash-Settled Restricted Stock
Units
Outstanding as of March 31, 2015
Granted
Vested
Forfeited
Outstanding as of March 31, 2016
Vested
Forfeited
Outstanding as of March 31, 2017

44 $
1
(14)
(2)
29
(14)
(2)
13

Weighted Average
Grant Date
Fair Value
27.06
19.65
27.06
27.20
26.85
26.84
25.82
27.01

- 68-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 11 – Stock–Based Compensation (continued)

Cash-Settled Restricted Stock Units (continued)
As of March 31, 2017, there was $46 of remaining unamortized deferred compensation associated with these restricted stock units
that will be expensed over the remaining service period through August 13, 2017. Expense recognized due to the vesting of these
awards was $161, $488 and $128 during the years ended March 31, 2017, 2016 and 2015, respectively.

Cash-Settled Performance-Based Restricted Stock Units
Cash-settled restricted stock units vest at the end of a three-year performance period but the level of the award to vest is subject
to similar performance criteria as the Performance-Based Restricted Stock Units described above. The awards are also variable
in that they range from zero to 200% of the plan’s target contingent on the performance level attained. The table below includes
the maximum number of restricted stock units that may be earned under the plan.

Cash-Settled Performance-Based
Restricted Stock Units

Outstanding as of March 31, 2015
Forfeited
Outstanding as of March 31, 2016
Forfeited
Outstanding as of March 31, 2017

Weighted Average
Grant Date Fair
Value
27.06
27.20
27.10
27.10
—

Shares
44
(2)
42
(42)
—

As of March 31, 2017, the Company anticipates that no performance-based restricted stock units will vest resulting in $0 to
be expensed over the remaining service period through August 13, 2017. Expense recognized due to the expected vesting of these
awards was $(39) and $39 during the years ended March 31, 2016 and 2015. There was no expense recognized for the year ending
March 31, 2017.

Note 12 – Income Taxes

Accounting for Uncertainty in Income Taxes
As of March 31, 2017, 2016 and 2015, the Company’s unrecognized tax benefits totaled $15,196, $16,675 and $17,752, respectively,yy
of which $7,710 would impact the Company’s March 31, 2017 effective tax rate if recognized. The following table presents the
changes to unrecognized tax benefits during the years ended March 31, 2017, 2016 and 2015:

Balance at April 1
Increase for current year tax positions
Reduction for prior year tax positions
Impact of changes in exchange rates
Balance at March 31

2015

2017

2016
$ 16,675 $ 17,752 $ 12,635
7,260
(1,055)
(1,088)
$ 15,196 $ 16,675 $ 17,752

275
(1,764)
10

24
(223)
(878)

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. During the years
ended March 31, 2017 and 2016, the Company accrued (reduced) interest, penalties and related exchange losses related to
unrecognized tax benefits by $255 and $(224), respectively. As of March 31, 2017, accrued interest and penalties totaled $1,545
and $818, respectively. During the year ending March 31, 2017, the Company reduced its accrued interest and penalties for $287
related to the expiration of statute of limitations. As of March 31, 2016, accrued interest and penalties totaled $1,315 and $793,
respectively.
During the fiscal year ending March 31, 2017, the Company’s total liability for unrecognized tax benefits, including thet
related interest and penalties, decreased from $18,784 to $17,558. The change in the liability for unrecognized tax benefits relates
to expiration of statute of limitations of approximately $505 and decreases related to current period activity of approximately $721.
The Company expects to continue accruing interest expenses related to the remaining unrecognized tax benefits. Additionally,
the Company may be subject to fluctuations in the unrecognized tax liability due to currency exchange rate movements.

- 69-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 12 – Income Taxes (continued)

Income Tax Provision (continued)

During the fiscal year ending March 31, 2017, the Zimbabwe High Court of Harare rejected the Company’s appeal relating to the
recovery of an income tax receivable for certain withholding taxes which were assessed against the Company’s subsidiary in
Switzerland. As a result, the Company concluded it was no longer more-likely-than-not that the receivable will be realized and a d
non-cash tax provision of approximately $9,000 was recorded as an adjustment to tax expense. The tax expense recognized this
fiscal year does not impact cash flow as the Company had previously made a deposit of the amount due as part of the appeal
process. The Company is in the process of appealing the decision to the Supreme Court of Zimbabwe.

It is reasonably possible that the Company's unrecognized tax benefits may decrease in the next twelve months by $261
due to the expiration of the statute of limitations, but the Company must acknowledge 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 have 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.

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 March 31, 2017, the Company’s earliest open tax year for U.S. federal income
tax purposes was its fiscal year ended March 31, 2014; 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.

Income Tax Provision
The components of income (loss) before income taxes, equity in net income of investee companies and minority interests consisted
of the following:

U.S.
Non-U.S.
Total

2017

Years Ended March 31,
2016
$ (87,963) $ (55,073) $ (24,749)
15,810
146,747
(
(8,939
)
) $ 91,674 $

48,321
(
$ (39,642

2015

))

The details of the amount shown for income taxes in the Consolidated Statements of Operations follow:

Years Ended March 31,
2016

2015

2017

(926) $
—
23,974

—
—
19,850
$ 23,048 $ 26,476 $ 19,850

— $
—
26,476

— $
—
432
432 $

—
—
2,068
2,068
$
$ 23,480 $ 32,215 $ 21,918

— $
—
5,739
5,739 $

Current
Federal
State
Non-U.S.

Deferred
Federal
State
Non-U.S.

Total

- 70-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 12 - Income Taxes (continued)

Income Tax Provision (continued)

The reasons for the difference between income tax expense based on income before income taxes, equity in net income of investee
companies and minority interests and the amount computed by applying the U.S. statutory federal income tax rate to such income
are as follows:

Tax expense (benefit) at U.S. statutory rate
Effect of non-U.S. income taxes
U.S. taxes on non-U.S. income
Foreign tax credits expiration
Change in valuation allowance
Increase (decrease) in reserves for uncertain tax positions
Change in tax rates
Exchange effects and currency translation
Permanent items
Write-down of state tax loss carryovers
Nontaxable gain - Zimbabwe subsidiary reconsolidation
Write-down of withholding tax recoverable
Actual tax expense

The deferred tax liabilities (assets) are comprised of the following:

Years Ended March 31,
2016

2015

2017
(13,875) $
(6,410)
3,736
—
13,748
264
(308)
6,046
4,859
6,430
—
8,990
23,480 $

32,086 $
(15,131)
23,734
47,552
(47,135)
(1,203)
2,480
15,492
891
—
(26,551)
—
32,215 $

(3,129)
647
14,768
—
(14,908)
5,227
—
14,308
5,005
—
—
—
21,918

Deferred tax liabilities:

Unremitted earnings of foreign subsidiaries

Intangible assets
Fixed assets
Total deferred tax liabilities
Deferred tax assets:
Reserves and accruals
Tax credits
Tax loss carryforwards
Derivative transactions
Postretirement and other benefits
Unrealized exchange loss
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Net deferred tax asset

March 31,
2017

March 31,
2016

$
$

30,581 $
8,397
7,242
46,220 $

27,641
9,334
11,435
48,410

(24,308) $
(7,286)
(125,601)
(669)
(28,512)
(4,046)
(8,471)
(198,893)
131,774
(67,119) $
(
(20,899
) $)

(23,870)
(8,191)
(104,337)
(892)
(30,635)
(12,645)
(8,207)
(188,777)
118,518
(70,259)
(
(21,849
))

The following table presents the breakdown between non-current (assets) liabilities:

Non-current asset
Non-current liability
Net deferred tax asset

- 71-

March 31,
2017
(38,507) $
17,608
(
(20,899

March 31,
2016
(38,773)
16,924
(
(21,849
))

) $)

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 12 - Income Taxes (continued)

Income Tax Provision (continued)

During the year ended March 31, 2017, the net deferred tax asset balance decreased by $(454) for certain adjustments not included
in the deferred tax expense (benefit), primarily for deferred tax assets related to pension accruals recorded in equity as part of
Other Comprehensive Income (Loss) and currency translation adjustments.
For the year ended March 31, 2017, the valuation allowance increased by $13,256 which is inclusive of $(595) related to
adjustments in other comprehensive income and $100 related primarily to currency translation adjustments. The valuation
allowance increased primarily due to U.S. federal, U.S. state and non-U.S. tax losses. The valuation allowance is based on the
Company's assessment that it is more likely than not that certain deferred tax assets, primarily foreign tax credits and net operating
loss carryovers, will not be realized in the foreseeable future. Recent years' cumulative losses incurred in the United States as of
March 31, 2017, combined with the effects of certain changes in the market, provide significant objective negative evidence in
the evaluation of whether the U.S. entity will generate sufficient taxable income to realize the tax benefits of the deferred tax assets.
This negative evidence carries greater weight than the more subjective positive evidence of favorable future projected income in
the assessment of whether realization of the tax benefits of the deferred tax assets is more likely than not. Therefore, based on the
weight of presently objectively verifiable positive and negative evidence, it is management's judgment that realization of the tax
benefits of the deferred tax assets is less than more likely than not.
At March 31, 2017, the Company has U.S federal tax loss carryovers of $324,608, non-U.S. tax loss carryovers of $75,873,
and U.S. state tax loss carryovers of $575,419. The U.S. federal tax loss carryovers will expire in 2030 and thereafter. Of the
non-U.S. tax loss carryovers, $29,129 will expire within the next 5 years, $31,586 will expire in later years, and $15,158 can be
carried forward indefinitely. Of the U.S. state tax loss carryovers, $1,854 will expire within the next five years and $573,565
will expire thereafter. At March 31, 2017, the Company has foreign tax credit carryovers in the United States of $4,348, of which
$2,195 will expire within the next five years.
Realization of deferred tax assets is dependent on generating sufficient taxable income prior to expiration of the loss carryovers.
Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets, net of applicable
valuation allowances, will be realized. The amount of the deferred tax assets considered realizable could be reduced or increased
if estimates of future taxable income change during the carryover period.
A provision of $30,581 has been made for U.S. or foreign taxes that may result from future remittances of foreign earnings
of $95,662. No provision has been made for U.S. or foreign taxes that may result from future remittances of approximately
$353,032 at March 31, 2017 and $334,445 at March 31, 2016 of undistributed earnings of foreign subsidiaries because management
expects that such earnings will be reinvested overseas indefinitely. Determination of the amount of any unrecognized deferred
income tax liability on these unremitted earnings is not practicable.

Note 13 – Employee Benefits

Retirement Benefits
The Company has multiple benefit plans at several locations. The Company has a defined benefit plan that provides retirement
benefits for substantially all U.S. salaried personnel based on years of service rendered, age and compensation. The Company
also maintains various other Excess Benefit and Supplemental Plans that provide additional benefits to (1) certain individuals
whose compensation and the resulting benefits that would have actually been paid are limited by regulations imposed by the
Internal Revenue Code and (2) certain individuals in key positions. In addition, a Supplemental Retirement Account Plan ("SRAP"),
a defined contribution program, is maintained.
The Company's policy is to contribute amounts to the plans sufficient to meet or exceed funding requirements of local
governmental rules and regulations.
Additional non-U.S. plans sponsored by certain subsidiaries cover substantially all of the full-time employees located in
Germany, Turkey and the United Kingdom.

- 72-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 – Employee Benefits (continued)

Retirement Benefits (continued)
During the year ended March 31, 2017, the Company's activity of cash payments triggered settlement accounting. The settlement
accounting resulted in a settlement loss of $1,454 recorded in Selling, General and Administrative Expenses ("SGA") and a reduction
in accumulated other comprehensive income as of March 31, 2017. In addition, as a result of payments made to employees due
to involuntary dismissal in a foreign subsidiary, special termination benefits of $14 were recorded in SGA and the benefit obligation.
During the three months ended December 31, 2015, the Company announced that the U.S. Pension Plan would be frozen
effective January 1, 2016. This change is accounted for as a curtailment and resulted in a curtailment loss of $1,062 and a reduction
in the benefit obligation and accumulated other comprehensive income of $2,534 as of December 31, 2015. The curtailment loss
is recorded in restructuring and asset impairment charges.

A reconciliation of benefit obligations, plan assets and funded status of the plans at March 31, 2017 and 2016, the measurement

dates, is as follows:

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017

2016

2017

2016

Change in Benefit Obligation

Benefit obligation, beginning
Service cost
Interest cost
Plan amendments
Plan curtailments
Actuarial losses (gains)
Settlements/special termination benefits
Effects of currency translation
Benefits paid
Benefit obligation, ending

Change in Plan Assets

Fair value of plan assets, beginning
Actual return on plan assets
Employer contributions
Plan settlements
Effects of currency translation
Benefits paid
Fair value of plan assets, ending
Net amount recognized

$ 99,632 $ 107,423
1,434
3,640
—
(1,963)
(3,288)
—
—
(7,614)
$ 92,633 $ 99,632

250
2,863
—
—
(161)
(4,802)
—
(5,149)

$ 63,570 $

226
1,728
18
—
6,245
(123)
(4,693)
(2,433)
$ 64,538 $

2,954
2,902
(4,802)
—
(5,149)

$ 40,982 $ 44,921
(471)
4,146
—
—
(7,614)
$ 36,887 $ 40,982
(
(58,650
$ (55,746
) $)

(

$ 52,774 $
8,784
2,868
(136)
(4,731)
(2,433)
$ 57,126 $
(
(7,412
) $)

) $)

69,939
271
2,146
(4)
(256)
(5,025)
—
(681)
(2,820)
63,570

53,709
(289)
3,211
—
(1,037)
(2,820)
52,774
(
(10,796

))

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017

2016

2017

2016

Amounts Recognized in the Consolidated Balance Sheets Consist of:
Noncurrent benefit asset recorded in Other Noncurrent Assets

Accrued current benefit liability recorded in Accrued Expenses
and Other Current Liabilities
Accrued noncurrent benefit liability recorded in Pension,
Postretirement and Other Long-Term Liabilities

Net amount recognized

— $

7,555 $

2,450

(3,010)

(2,967)

(1,224)

(1,166)

(52,736)
(
$ (55,746

) $)

(55,683)
(
(58,650

) $)

(13,743)
(
(7,412

) $)

(12,080)
(
(10,796
))

- 73-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Retirement Benefits (continued)
The pension obligations for all defined benefit pension plans:

Information for Pension Plans with Accumulated Benefit
Obligation in Excess of Plan Assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017

2016

2017

2016

92,633 $
92,633
36,887

99,632
99,632
40,982

34,391 $
33,715
19,423

32,683
32,068
19,437

Net periodic pension costs included the following components:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses
Amortization of prior service cost
Curtailment loss
Special termination benefits
Effects of settlement
p
Net periodic pension cost

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017

2016

2015

2017

2016

2015

250 $

2,863
(2,578)
1,136
40
—
—
1,363
3,074 $

1,434 $
3,640
(3,070)
1,809
136
1,062
—
—
5,011 $

1,856
3,969
(3,131)
1,440
192
—
—
35
4,361

226 $

271 $

1,728
(2,760)
905
(1)
—
14
91
203 $

2,146
(3,110)
1,388
1
—
—
—
696 $

173
2,711
(3,477)
740
1
—
72
(13)
207

The amounts showing in accumulated other comprehensive income at March 31, 2017, March 31, 2016 and movements for
the year were as follows:

Pension

U.S. and Non-U.S.
Post-retirement

Total

Prior service credit (cost)
Net actuarial losses
Deferred taxes

Balance at March 31, 2016

Prior service credit (cost)
Net actuarial gains
Deferred taxes

Total change for 2017
Prior service credit (cost)
Net actuarial losses
Deferred taxes
Balance at March 31, 2017

$
$

(516) $

(49,819)
11,347
(38,988) $
$
26
5,098
(891)
4,233
$
(490) $

(44,721)
10,456
(
(34,755

) $)

- 74-

3,733
(4,018)
(529)
(814) $
(691) $
(615)
221
(1,085) $
$
3,042
(4,633)
(308)
(
(1,899

) $)

3,217
(53,837)
10,818
(39,802)
(665)
4,483
(670)
3,148
2,552
(49,354)
10,148
(
(36,654
))

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Retirement Benefits (continued)
The following weighted average assumptions were used to determine the expense for the pension, postretirement, other
postemployment, and employee savings plans as follows:

Discount rate
Rate of increase in future
compensation
Expected long-term rate of return on
plan assets

U.S. Plans
March 31,
2016
3.60%

2015
4.20%

2017
3.38%

Non-U.S. Plans
March 31,
2016
3.13%

2015
4.30%

4.50%

3.47%

3.56%

3.94%

2017
3.86%
Not
applicable

7.00%

7.25%

5.63%

5.73%

6.83%

In order to project the long-term investment return for the total portfolio, estimates are prepared for the total return of each
major asset class over the subsequent 10-year period, or longer. Those estimates are based on a combination of factors including
the current market interest rates and valuation levels, consensus earnings expectations and historical long-term risk premiums. To
determine the aggregate return for the pension trust, the projected return of each individual asset class is then weighted according
to the allocation to that investment area in the trust’s long-term asset allocation policy.
A March 31 measurement date is used for the pension, postretirement, other postemployment and employee savings plans.
The expected long-term rate of return on assets was determined based upon historical investment performance, current asset
allocation, and estimates of future investment performance by asset class.
The following assumptions were used to determine the benefit obligations disclosed for the pension plans at March 31, 2017
and 2016:

Discount rate
Rate of increase in future compensation

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017
3.90%
Not applicable

2016
3.86%
Not applicable

2017
2.59%
5.91%

2016
3.38%
3.47%

Net gain (loss) and prior service credits (costs) for the combined U.S. and non-U.S. pension plans expected to be amortized
from accumulated comprehensive income into net periodic benefit cost during fiscal 2017 is $(1,142) and $(943), respectively.

Plan Assets
The Company’s asset allocations and the percentage of the fair value of plan assets at March 31, 2017 and 2016 by asset category rr
are as follows:

(percentages)
Asset Category:
Cash and cash equivalents
Equity securities
Debt securities
Real estate and other investments
Total

Target
Allocations

U.S. Plans
March 31,

March 31, 2017

2017

2016

Non-U.S. Plans
March 31,

2017

2016

—%
36.0%
24.0%
40.0%

34.5%
1.5%
19.6% 58.8%
10.6% 34.2%
5.5%
35.3%
100.0% 100.0% 100.0% 100.0% 100.0%

3.7%
3.2%
34.3% 34.6%
22.4% 22.8%
39.6% 39.4%

- 75-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Plan Assets (continued)
The Company's investment objectives are to generate consistent total investment return to pay anticipated plan benefits,
while minimizing long-term costs and portfolio volatility. Financial objectives underlying this policy include maintaining plana
contributions at a reasonable level relative to benefits provided and assuring that unfunded obligations do not grow to a level that
would adversely affect the Company's financial health. Manager and composite portfolio performance is measured against
investment objectives and objective benchmarks, including but not limited to: Citibank 90 Day Treasury Bill, Bloomberg Barclays
Intermediate Govt/Credit, Bloomberg Barclays Aggregate, Russell 1000 Value, Russell 1000 Growth, Russell 2500 Value, Russell
2500 Growth, MSCI EAFE, HFR Absolute Return, HFR Equity Hedge, and others. The Portfolio Objective is to exceed the
actuarial return on assets assumption. Management and the Plan's Consultant regularly review portfolio allocations and periodically
rebalance the portfolio to the targeted allocations according to the guidelines set forth in the Company's investment policy. Equity
securities do not include the Company's common stock. The Company's diversification and risk control processes serve to minimize
the concentration and experience of risk. There are no significant concentrations of risk, in terms of sector, industry, geography
or individual company or companies.

The fair values for the pension plans by asset category are as follows:

U.S. Pension Plans

Cash and cash equivalents
U.S. equities / equity funds
International equities / equity funds
U.S. fixed income funds
International fixed income funds
Other investments:
Diversified funds (1)
Real estate and other (1)
Total

U.S. Pension Plans

March 31, 2017

Total

Level 1

Level 2

Level 3

1,342
7,649
4,997
7,251
1,028

10,496
4,124
36,887

Total

1,326
8,712
5,466
8,178
1,169

11,791
4,352
40,994

851
7,649
4,997
7,251
1,028

10,463
—
32,239

491
—
—
—
—

—
—
491

March 31, 2016

Level 1

Level 2

815
8,712
5,466
8,178
1,169

11,741
—
36,081

511
—
—
—
—

—
—
511

—
—
—
—
—

—
—
—

Level 3

—
—
—
—
—

—
—
—

(1) In accordance with new guidance retrospectively adopted this year, certain investments that are measured at fair value using
the net asset value have not been classified in the fair value hierarchy.

Coast Access III Ltd (UL) Class (Diversified). The hedge fund's objective is to use leveraged, long, short, and derivative positions
in both domestic and international markets with the goal of generating positive absolute returns uncorrelated to other asset classes
over full market cycles. The fund is in process of periodic and self-liquidating drawdown, to be fully liquidated by January 2018.

Trumbull Property Fund (Real Estate and Other). The real estate fund invests primarily in commercial real estate and includes
mortgage loans which are backed by associated properties. It focuses on properties that return both lease income and appreciation
of the buildings' marketable value. This fund has a quarterly redemption frequency with a 60-day notice period.

- 76-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Plan Assets (continued)

The following table summarizes the plan assets recognized and measured at fair value using the net asset value and the inputs used
to determine the fair value:

Fair
Value

Unfunded
Commitments

None

Redemption
Frequency
Self-
Liquidating

Redemption
Notice Period

Fair
Value

Unfunded
Commitments

None

Redemption
Frequency
Self-
Liquidating

Redemption
Notice Period

None

4,124

None

Quarterly

60 Days

4,352

None

Quarterly

60 Days

Diversified
funds
Real estate
and other

Non-U.S. Pension Plans

March 31, 2017

Total

Level 1

Level 2

Level 3

Cash and cash equivalents
U.S. equities / equity funds
International equities / equity funds
Global equity funds
U.S. fixed income funds
International fixed income funds
Global fixed income funds
Other investments:
Diversified funds
Real estate
Total

Non-U.S. Pension Plans

Cash and cash equivalents
U.S. equities / equity funds
International equities / equity funds
Global equity funds
US fixed income funds
International fixed income funds
Global fixed income funds
Other investments:
Diversified funds
Real estate
Total

19,749
—
5,208
6,000
—
6,040
—

20,201
—
57,198

Total

776
7,340
13,615
10,083
2,829
8,415
6,813

1,685
1,268
52,824

19,749
—
—
—
—
—
—

—
—
19,749

— $
—
5,208
6,000
—
6,040
—

20,201
—
37,449

—
—
—
—
—
—
—

—
—
—

March 31, 2016

Level 1

Level 2

Level 3

776
7,340
4,335
—
2,829
—
1,384

— $
—
9,280
10,083
—
8,415
5,429

1,685
1,268
19,617

—
—
33,207

—
—
—
—
—
—
—

—
—
—

The fair value hierarchy is described in Note 18 “Fair Value Measurements” to the “Notes to Consolidated Financial
Statements." For all periods presented, the Company had no Non-U.S. pension plan assets measured at fair value using the net
asset value. Plan assets are recognized and measured at fair value in accordance with the accounting standards regarding fair value
measurements. The following are general descriptions of asset categories, as well as the valuation methodologies and inputs used
to determine the fair value of each major category of plan assets.

Cash and cash equivalents include short-term investment funds, primarily in diversified portfolios of investment grade
money market instruments and are valued using quoted market prices or other valuation methods, and thus classified within Level
1 or Level 2 of the fair value hierarchy.

- 77-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Plan Assets (continued)
Equity securities are investments in common stock of domestic and international corporations in a variety of industry sectors,
and are valued primarily using quoted market prices and generally classified within Level 1 in the fair value hierarchy.
Fixed income securities include U.S. Treasuries and agencies, debt obligations of foreign governments and debt obligations
in corporations of domestic and foreign issuers. The fair value of fixed income securities are based on observable prices for
identical or comparable assets, adjusted using benchmark curves, sector grouping, matrix pricing, broker/dealer quotes and issuer
spreads, and are generally classified within Level 1 or Level 2 in the fair value hierarchy.
Investments in equity and fixed income mutual funds are publicly traded and valued primarily using quoted market prices
and generally classified within Level 1 in the fair value hierarchy. Investments in commingled funds used in certain non-U.S.
pension plans are not publicly traded, but the underlying assets held in these funds are traded in active markets and the prices for
these assets are readily observable. Holdings in these commingled funds are generally classified as Level 2 investments.
Real estate investments include those in private limited partnerships that invest in various commercial and residential real
estate projects both domestically and internationally as well as publicly traded REIT securities. The fair values of private real
estate assets are typically determined by using income and/or cost approaches or comparable sales approach, taking into
consideration discount and capitalization rates, financial conditions, local market conditions and the status of the capital markets,
and thus are generally classified within Level 3 in the fair value hierarchy. Publicly traded REIT securities are valued primarilya
using quoted market prices and are generally classified within Level 1 in the fair value hierarchy.
Diversified investments include those in limited partnerships that invest in companies that are not publicly traded on a stock
exchange and mutual funds with an absolute return strategy. Limited partnership investment strategies in non-publicly traded
companies include leveraged buyouts, venture capital, distressed investments and investments in natural resources. These
investments are valued using inputs such as trading multiples of comparable public securities, merger and acquisition activity and
pricing data from the most recent equity financing taking into consideration illiquidity, and thus are classified within Level 3 in
the fair value hierarchy. Mutual fund investments with absolute return strategies are publicly traded and valued using quoted
market prices and are generally classified within Level 1 in the fair value hierarchy.

Cash Flows

Contributions
The Company expects to contribute $3,751 to its U.S. benefits plans and $2,571 to its non-U.S. benefit plans in fiscal 2018.

Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2018
2019
2020
2021
2022
Years 2023-2027

U.S. Plans
March 31, 2017

8,981
7,047
7,299
6,920
6,807
31,888

Non-U.S. Plans
U.S. Plans
Non-U.S. Plans
March 31, 2017 March 31, 2017 March 31, 2017
142
$
147
162
169
175
991

2,996
2,805
2,492
2,949
2,632
15,385

339
341
279
280
268
1,320

The Company sponsors 401-k savings plans for most of its salaried employees located in the United States. The Supplemental
Executive Retirement Plan and the Pension Equity Plan were replaced by the SRAP during 2008. The Company also maintains
defined contribution plans at various foreign locations. The Company’s contributions to the defined contribution plans were $4,843
in 2017, $3,978 in 2016 and $4,009 in 2015.

- 78-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits to retired U.S. employees (and their eligible dependents) who
meet specified age and service requirements. The plan excludes new employees after September 2005 and caps the Company’s
annual cost commitment to postretirement benefits for retirees. The Company retains the right, subject to existing agreements, to
modify or eliminate these postretirement health and life insurance benefits in the future.
The Company provides certain health and life insurance benefits to retired Brazilian directors and certain retirees located
in Europe including their eligible dependents who meet specified requirements.

During the three months ended September 30, 2015, the Company announced that certain U.S. postretirement medical
benefits would no longer be provided effective January 1, 2016. This change is accounted for as a negative plan amendment and
resulted in a reduction of $4,461 in the benefit obligation and in accumulated other comprehensive income as of September 30,
2015. The Company retains the right, subject to existing agreements, to modify or eliminate the postretirement medical benefits.
The following assumptions were used to determine non-U.S. Plan postretirement benefit obligations at March 31:

Discount rate
Health care cost trend rate assumed for next year
Ultimate trend rate

2017

9.74%
8.00%
8.00%

2016
11.33%
8.00%
8.00%

A one-percentage-point change in assumed health care cost trend rates would not have a significant effect on the amounts
reported for health care plans.
For 2017 and 2016, the annual rate of increase in the per capita cost of covered health care benefits is not applicable as the
Company’s annual cost commitment to the benefits is capped and not adjusted for future medical inflation.
Additional retiree medical benefits are provided to certain U.S. individuals in accordance with their employment contracts.
For 2017 the additional cost related to these contracts was $45.
Prior service credits of $710 and unrecognized net actuarial losses of $460 are expected to be amortized from accumulated
comprehensive income into postretirement healthcare benefits net periodic benefit cost for the combined U.S. and non-U.S.
postretirement benefits during fiscal 2018.

- 79-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 13 - Employee Benefits (continued)

Postretirement Health and Life Insurance Benefits (continued)

A reconciliation of benefit obligations, plan assets and funded status of the plans is as follows:

Change in Benefit Obligation

Benefit obligation, beginning
Service cost
Interest cost
Effect of currency translation
Plan amendments
Actuarial losses (gains)
Benefits paid
Benefit obligation, ending

Change in Plan Assets

Fair value of plan assets, beginning
Employer contributions
Benefits paid
Fair value of plan assets, ending
Net amount recognized

Amounts Recognized in the Consolidated
Balance Sheets Consist of:

Accrued current benefit liability recorded in
Accrued Expenses and Other Current Liabilities
Accrued non-current benefit liability recorded in
Pension, Postretirement and Other Long-Term
Liabilities
Net amount recognized

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017

2016

2017

2016

4,217
8
132
—
—
351
(347)
)
(
4,361

— $

347
)
(347)
(
— $
)
( ,
(4,361) $

8,841
23
247
—
(3,933)
(450)
(511)
)
(
4,217

— $

511
)
(511)
(
— $
)
( ,
(4,217) $

1,229
4
148
144
—
662
(102)
)
(
2,085

— $

102
)
)
(102)
(
(
— $
)
( ,
(2,085) $

1,243
3
113
(107)
—
93
(116)
)
(
1,229

—
116
(116)
)
(
—
)
( ,
(1,229)

U.S. Plans
March 31,

Non-U.S. Plans
March 31,

2017

2016

2017

2016

(339) $

(278) $

(142) $

(96)

(4,022)
)
( ,
(4,361) $

(3,939)
)
( ,
(4,217) $

(1,943)
)
( ,
(2,085) $

(1,133)
)
( ,
(1,229)

$
$

There are no plan assets for 2017 or 2016. Net periodic benefit costs included the following components:

U.S. Plans
March 31,
2016

2017

2015

2017

Non-U.S. Plans
March 31,
2016

2015

Service cost
Interest cost
Prior service credit
Actuarial losses (gains)
Net periodic benefit costs (income)

8 $

132
(698)
413
(145) $

23 $
247
(349)
432
353 $

39
361
(1,196)
450
(346) $

4 $

148
(11)
3
144 $

3 $

113
(10)
(2)
104 $

3
154
(14)
(5)
138

The Company continues to evaluate ways to better manage these benefits and control their costs. Any changes in the plan
or revisions to assumptions that affect the amount of expected future benefits may have a significant effect on the amount of thet
reported obligation and annual expense. The Company expects to contribute $480 to its combined U.S. and non-U.S. postretirement
benefit plans in fiscal 2018.
Employees in operations located in certain other foreign operations are covered by various postretirement benefit
arrangements. For these foreign plans, the cost of benefits charged to income was not material in 2017, 2016 and 2015.

- 80-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 14 – 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 our 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.
Management evaluates performance using information included in management reports. The Company has five geographic
operating segments: Africa, Asia, Europe, North America and South America. 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. In reviewing these
operations, the Company concluded that the economic characteristics of North America were dissimilar from the other operating
segments. Based on this fact, the Company is disclosing North America separately and has aggregated the remaining four operating
segments, Africa, Asia, Europe and South America into one reportable segment "Other Regions." The Company concluded that
these operating segments have similar long term financial performance and similar economic characteristics in each of the following
areas:

a.
b.
c.
d.
e.

the nature of the products and services;
the nature of the production processes;
the type or class of customer for their products and services;
the methods used to distribute their products or provide their services; and
the nature of the regulatory environment.

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 purchase through sale based on the source of the product and all intercompany transactions are allocated to the region
that either purchases or processes the tobacco.

Analysis of Segment Operations

Sales and other operating revenues:

North America
Other Regions
Total revenue
Operating income:
North America
Other Regions
Total operating income

Debt retirement expense (income)
Interest expense
Interest income

Income (loss) before income taxes and other items

2017

Years Ended March 31,
2016

2015

396,217 $

1,318,533
1,714,750 $

468,098 $

1,436,494
1,904,592 $

440,985
1,625,880
2,066,865

15,333 $
69,235
84,568
(300)
132,667
8,157
(
(39,642
)
) $

25,230 $

176,557
201,787
—
117,190
7,077
91,674 $

40,437
56,858
97,295
(771)
113,273
6,268
(
(8,939
))

- 81-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 14 - Segment Information (continued)

Analysis of Segment Assets

Segment assets:

North America
Other Regions
Total assets

Trade and other receivables, net

North America
Other Regions
Total trade and other receivables, net

Goodwill:

North America
Other Regions
Total Goodwill

Equity in net assets of investee companies:

North America
Other Regions
Total equity in net assets of investee companies

Depreciation and amortization:

North America
Other Regions
Total depreciation and amortization

Capital expenditures:
North America
Other Regions
Total capital expenditures

2017

Years Ended March 31,
2016

2015

375,782 $

1,596,090
1,971,872 $

338,834 $

1,629,364
1,968,198 $

40,212 $

213,973
254,185 $

48,229 $

352,779
401,008 $

230,842
1,391,618
1,622,460

26,781
212,722
239,503

2,794
13,669
16,463 $

— $

51,443
51,443 $

7,543 $

26,933
34,476 $

3,638 $
9,099
12,737 $

2,794
13,669
16,463 $

— $

57,243
57,243 $

6,432 $

21,929
28,361 $

7,516 $

10,270
17,786 $

2,794
—
2,794

—
53,678
53,678

5,618
24,005
29,623

10,044
12,629
22,673

Geographic information as to sales and other operating revenues is based on the destination of the product shipped. The
Belgium destination represents a customer owned storage and distribution center from which the tobacco will be shipped on to
manufacturing facilities.

Sales by Destination
Sales and Other Operating Revenues:

Years Ended March 31,
2016

2015

2017

United States
China
Belgium
Germany
Russia
Indonesia
Other

272,161 $
230,226
115,632
88,650
87,461
75,346
845,274

363,964
254,658
137,513
116,713
118,233
58,609
1,017,175
$ 1,714,750 $ 1,904,592 $2,066,865

311,634 $
209,781
132,817
110,318
116,941
82,867
940,234

Sales and Other Operating Revenues to Major Customers
Including their respective affiliates, accounting for more than 10% of total sales and other operating revenues were each of Philip
Morris International Inc. and China Tobacco International Inc. for the years ended March 31, 2017, 2016 and 2015.

- 82-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 14 - Segment Information (continued)

Property, Plant and Equipment by Location
Property, Plant and Equipment, Net:

Brazil
United States
Zimbabwe
Malawi
Tanzania
Argentina
Asia
Europe
Zambia
Turkey
Other

Years Ended March 31,
2016

2015

2017

77,653 $
56,028
48,738
22,299
20,997
6,580
6,130
5,467
3,877
2,654
6,088
256,511 $

82,307 $
59,713
51,295
24,609
22,831
6,914
6,447
6,895
4,366
2,955
9,193
277,525 $

87,161
57,861
—
25,704
23,610
7,390
6,960
15,191
6,582
3,454
4,001
237,914

Note 15 – Foreign Currency Translation

The financial statements of foreign entities included in the consolidated financial statements have been translated to U.S. dollars
in accordance with generally accepted accounting principles.
The financial statements of foreign subsidiaries, for which the local currency is the functional currency, are translated into
U.S. dollars using exchange rates in effect at period end for assets and liabilities and average exchange rates during each reporting
period for results of operations. Adjustments resulting from translation of financial statements are reflected as a separate component
of other comprehensive income.
The financial statements of foreign subsidiaries, for which the U.S. dollar is the functional currency and which have certain
transactions denominated in a local currency, are remeasured into U.S. dollars. The remeasurement of local currencies into U.S.
dollars creates remeasurement adjustments that are included in net income. Exchange (gains) losses in 2017, 2016 and 2015 were
$(11,816), $6,498 and $8,274, respectively, and are included in the respective statements of income in cost of sales and income
taxes.

- 83-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Alliance One International, Inc. and Subsidiaries
(in thousands)

Note 16 – Contingencies and Other Information
Non-Income Tax
The government in the Brazilian State of Parana (“Parana”) issued a tax assessment on October 26, 2007 with respect to local
intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. The assessment for intrastate
trade tax credits taken is $4,158 and the total assessment including penalties and interest at March 31, 2017 is $13,475. The
Company believes it has properly complied with Brazilian law and will contest any assessment through the judicial process. Should
the Company lose in the judicial process, the loss of the intrastate trade tax credits would have a material impact on the financial
statements of the Company.
The Company also has local intrastate trade tax credits in the Brazil State of Rio Grande do Sul and the State of Santa
Catarina. These jurisdictions permit the sale or transfer of excess credits to third parties, however approval must be obtained from
the tax authorities. The Company has agreements with the state governments regarding the amounts and timing of credits that canaa
be sold. The tax credits have a carrying value of $2,393. The intrastate trade tax credits are monitored for impairment in future
periods based on market conditions and the Company’s ability to use or sell the tax credits.
In 1969, the Brazilian government created a tax credit program that allowed companies to earn IPI tax credits (“IPI credits”)
based on the value of their exports. The government began to phase out this program in 1979, which resulted in numerous lawsuits
between taxpayers and the Brazilian government. The Company has a long legal history with respect to credits it earned while
the IPI credit program was in effect. In 2001, the Company won a claim related to certain IPI credits it earned between 1983 and
1990. The Brazilian government appealed this decision and numerous rulings and appeals were rendered on behalf of both the
government and the Company from 2001 through 2013. Because of this favorable ruling, the Company began to use these earned
IPI credits to offset federal taxes in 2004 and 2005, until it received a Judicial Order to suspend the IPI offsetting in 2005. The
value of the federal taxes offset in 2004 and 2005 was $24,142 and the Company established a reserve on these credits at the time
of offsetting as they were not yet realizable due to the legal uncertainty that existed. Specifically, the Company extinguished other
federal tax liabilities using IPI credits and recorded a liability in Pension, Postretirement and Other Long-Term Liabilities to reflect
that the credits were not realizable at that time due to the prevalent legal uncertainty. On March 7, 2013, the Brazilian Supreme
Court rendered a final decision in favor of the Company that recognized the validity of the IPI credits and secured the Company's
right to benefit from the IPI credits earned from March 1983 to October 1990. This final decision expressly stated the Company
has the right to the IPI credits. The Company estimates the total amount of the IPI credits to be approximately $94,316 at March
31, 2013. Since the March 2013 ruling definitively (without the government's ability to appeal) granted the Company the ownership
of the IPI credits generated between 1983 and 1990, the Company believes the amount of IPI credits that were used to offset other
federal taxes in 2004 and 2005 are realizable beyond a reasonable doubt. Accordingly, at March 31, 2013, the Company recorded
the $24,142 IPI credits it realized in the Statements of Consolidated Operations in Other Income. No further benefit has been
recognized pending the outcome of the judicial procedure to ascertain the final amount as those amounts have not yet been realized.
Other
Mindo, S.r.l., the purchaser in 2004 of the Company's Italian subsidiary Dimon Italia, S.r.l., asserted claims against a subsidiary
of the Company arising out of that sale transaction in an action filed before the Court of Rome on April 12, 2007. The claim
involved a guaranty letter issued by a consolidated subsidiary of the Company in connection with the sale transaction, and sought
the recovery of €7,400 plus interest and costs. On November 11, 2013, the court issued its judgment in favor of the Company’s
subsidiary, rejecting the claims asserted by Mindo, S.r.l., and awarding the Company’s subsidiary legal costs of €48. On December
23, 2014, Mindo, S.r.l. appealed the judgment of the Court of Rome to the Court of Appeal of Rome. A hearing before the Court
of Appeal of Rome was held on June 12, 2015, which was adjourned pending a further hearing set for February 2018. The outcome
of, and timing of a decision on, the appeal are uncertain.
In addition to the above-mentioned matter, certain of the Company’s subsidiaries are involved in other litigation or legal
matters incidental to their business activities, including tax matters. While the outcome of these matters cannot be predicted with
certainty, the Company is vigorously defending them and does not currently expect that any of them will have a material adverse
effect on its business or financial position. However, should one or more of these matters be resolved in a manner adverse to its
current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material.
In accordance with generally accepted accounting principles, the Company records all known asset retirement obligations
(“ARO”) for which the liability can be reasonably estimated. Currently, it has identified an ARO associated with one of its facilities
that requires it to restore the land to its initial condition upon vacating the facility. The Company has not recognized a liability
under generally accepted accounting principles for this ARO because the fair value of restoring the land at this site cannot be
reasonably estimated since the settlement date is unknown at this time. The settlement date is unknown because the land restoration
is not required until title is returned to the government, and the Company has no current or future plans to return the title. The
Company will recognize a liability in the period in which sufficient information is available to reasonably estimate its fair value.

- 84-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 17 – Sale of Receivables

uu
a

During the year ended March 31, 2017, the Company sold trade receivables to unaffiliated financial institutions under two accounts
receivable securitization programs. Under the first program, the Company continuously sells a designated pool of trade receivables
to a special purpose entity, which in turn sells 100% of the receivables to an unaffiliated financial institution. This program allows
the Company to receive a cash payment and a deferred purchase price receivable for sold receivables. Following the sale and
transfer of the receivables to the special purpose entity, the receivables are isolated from the Company and its affiliates, and upon
the sale and transfer of the receivables from the special purpose entity to the unaffiliated financial institutions effective control of
the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the
receivables. The investment limit is $100,000. On May 31, 2017, the investment limit was increased to $155,000. See Note 20
"Subsequent Events" to the "Notes to Consolidated Financial Statements" for further information.
The Company incurred program costs of $1,468 and $1,580 during the years ending March 31, 2017 and 2016 which were
included in Other Income (Expense) in the Statements of Consolidated Operations. The program requires a minimum level of
deferred purchase price to be retained by the Company in connection with the sales. The Company continues to service, administer
and collect the receivables on behalf of the special purpose entity and receives a servicing fee of 0.5% of serviced receivables per
annum. As the Company estimates the fee it receives in return for its obligation to service these receivables is at fair value, no
servicing assets or liabilities are recognized. Servicing fees recognized were not material and are recorded as a reduction of Selling,
General and Administrative Expenses within the Statements of Consolidated Operations.
The agreement for the second securitization program allows the Company to receive a cash payment and a deferred purchase
price receivable for sold receivables. This is an uncommitted program, whereby the Company offers receivables for sale to the
respective unaffiliated financial institution which are then subject to acceptance by the unaffiliated financial institution. Following
the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are isolated from the Company and
its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including
the right to pledge or sell the receivables. The Company receives no servicing fee from the unaffiliated financial institution and
as a result, has established a servicing liability based upon unobservable inputs, primarily discounted cash flow. The investment
limit under the second agreement is $110,000
Under the programs, all of the receivables sold for cash are removed from the Consolidated Balance Sheets and the net cash
proceeds received by the Company are included as cash provided by operating activities in the Statements of Consolidated Cash
Flows. A portion of the purchase price for the receivables is paid by the unaffiliated financial institutions in cash and the balance
is a deferred purchase price receivable, which is paid as payments on the receivables are collected from account debtors. The
deferred purchase price receivable represents a continuing involvement and a beneficial interest in the transferred financial assets
and is recognized at fair value as part of the sale transaction. The deferred purchase price receivables are included in Trade and
Other Receivables, Net in the Consolidated Balance Sheets and are valued using unobservable inputs (i.e., level three inputs),
primarily discounted cash flow. As servicer of these facilities, the Company may receive funds that are due to the unaffiliated
financial institutions which are net settled on the next settlement date. As of March 31, 2017 and 2016, Trade and Other Receivables,
Net in the Consolidated Balance Sheets has been reduced by $11,985 and $9,113 as a result of the net settlement. See Note 18
"Fair Value Measurements" to the "Notes to Consolidated Financial Statements" for further information.
The difference between the carrying amount of the receivables sold under these programs and the sum of the cash and fair
value of the other assets received at the time of transfer is recognized as a loss on sale of the related receivables and recorded in
Other Income (Expense) in the Statements of Consolidated Operations.

The following table summarizes the Company’s accounts receivable securitization information as of March 31:

Receivables outstanding in facility as of March 31:

Beneficial interest as of March 31

Servicing Liability as of March 31

Cash proceeds for the twelve months ended March 31:
Cash purchase price
Deferred purchase price
Service fees
Total

2017

2016

200,084

38,206

101

648,730
231,658
492
880,880

188,764

40,368

585,648
233,753
553
819,954

- 85-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 18 – Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants. A three-
level valuation hierarchy based upon observable and non-observable inputs is utilized. Observable inputs reflect market data
obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. Preference is given to
observable inputs. These two types of inputs create the following fair value hierarchy:

• Level 1 - Quoted prices for identical assets or liabilities in active markets.
• Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant
value drivers are observable.

• Level 3 - Significant inputs to the valuation model are unobservable.

The Company's financial assets and liabilities measured at fair value include derivative instruments, securitized beneficial
interests and guarantees. The application of the fair value guidance to our non-financial assets and liabilities primarily includes
assessments of investments in subsidiaries, goodwill and other intangible assets and long-lived assets for potential impairment.
Following are descriptions of the valuation methodologies the Company uses to measure different assets or liabilities at fair
value.

Debt
The fair value of debt is measured for purpose of disclosure. Debt is shown at historical value in the Consolidated Balance Sheets.
When possible, to measure the fair value of its debt the Company uses quoted market prices of its own debt with approximately
the same remaining maturities. When this is not possible, the fair value of debt is calculated using discounted cash flow models
with interest rates based upon market based expectations, the Company's credit risk and the contractual terms of the debt instrument.
The Company has portions of its debt with maturities of one year or less for which book value is a reasonable approximation of
the fair value of this debt. The fair value of debt is considered to fall within Level 2 of the fair value hierarchy as significant value
drivers such as interest rates are readily observable. The carrying value and estimated fair value of the Company's Long-Term
Debt are shown in the table below.

March 31,

2017

2016

Carrying value
Estimated fair value

$ 953,006 $ 920,444
753,038

867,825

Derivative financial instruments
The Company's derivatives consist of foreign currency contracts. The fair value of the derivatives are determined using a discounted
cash flow analysis on the expected future cash flows of each derivative. This analysis utilizes observable market data including
forward yield curves and implied volatilities to determine the market's expectation of the future cash flows of the variable component.
The fixed and variable components of the derivative are then discounted using calculated discount factors developed based on the
LIBOR swap rate and are netted to arrive at a single valuation for the period. The Company also incorporates credit valuation
adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in
the fair value measurements. As of March 31, 2017 and March 31, 2016 the inputs used to value the Company's derivatives fall
within Level 2 of the fair value hierarchy. However, credit valuation adjustments associated with its derivatives could utilize Level
3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. Should
the use of such credit valuation adjustment estimates result in a significant impact on the overall valuation, this would require
reclassification to Level 3.

- 86-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 18 – Fair Value Measurements (continued)

Securitized beneficial interests
The fair value of securitized beneficial interests is based upon a valuation model that calculates the present value of future expected
cash flows using key assumptions for payment speeds and discount rates. The assumptions for payment speed are based on the
Company's historical experience. The discount rates are based upon market trends and anticipated performance relative to the
particular assets securitized which have been assumed to be commercial paper rate plus a margin or LIBOR plus a margin. Due
to the use of the Company's own assumptions which are not observable, and the uniqueness of these transactions, securitized
beneficial interests fall within Level 3 of the fair value hierarchy. Since the discount rate and the payment speed are components
of the same equation, a change in either by 10% or 20% would change the value of the recorded beneficial interest at March 31,
2017 by $207 and $413, respectively.

Guarantees
The Company guarantees funds issued to tobacco suppliers by third party lending institutions and also guarantees funds borrowed
by a deconsolidated subsidiary. The fair value of guarantees is based upon either the premium the Company would require to
issue the same inputs or historical loss rates and as such these guarantees fall into Level 3 of the fair value hierarchy.

Tobacco Supplier Guarantees - The Company provides guarantees to third parties for indebtedness of certain tobacco
suppliers to finance their crops. The fair value of these guarantees is the greater of using a discounted cash flow based on rates
with and without the guarantees or applying historical loss rates generated from guaranteed and non-guaranteed tobacco supplier
loans. Should the loss rates change 10% or 20%, the fair value of the guarantee at March 31, 2017 would change by $983 or
$1,946, respectively.

Input Hierarchy of Items Measured at Fair Value on a Recurring Basis

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis:

March 31, 2017

March 31, 2016

Total
Assets /
Liabilities,
at Fair
Value

Level 2

Level 3

Level 2

Level 3

Assets
Derivative financial instruments
Securitized beneficial interests
Total Assets
Liabilities
Guarantees
Derivative financial instruments

Total Liabilities

943 $
—
943 $

— $

38,206
38,206 $

943
38,206
39,149

— $
—
— $

7,126 $
—
7,126 $

7,126
—
7,126

— $
—
— $

— $

40,368
40,368 $

—
40,368
40,368

7,350 $
—
7,350 $

7,350
—
7,350

- 87-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 18 – Fair Value Measurements (continued)

Reconciliation of Change in Recurring Level 3 Balances

The following tables present the changes in Level 3 instruments measured on a recurring basis.

Beginning Balance March 31, 2015
Sales of receivables/issuance of guarantees
Settlements
Losses recognized in earnings
Ending Balance at March 31, 2016
Sales of receivables/issuance of guarantees
Settlements
Losses recognized in earnings
Ending Balance at March 31, 2017

Securitized
Beneficial Interests
$

40,712 $
249,326
(246,009)
(3,661)
40,368
229,580
(227,495)
(4,247)
38,206 $

Guarantees

8,650
11,327
(11,719)
(908)
7,350
7,478
(5,921)
(1,781)
7,126

The amount of total losses included in earnings for the years ended March 31, 2017 and 2016 attributable to the change in
unrealized losses relating to assets still held at the respective dates was $1,722 and $1,521 on securitized beneficial interests.
Gains and losses included in earnings are reported in Other Income.

Information About Fair Value Measurements Using Significant Unobservable Inputs

The following table summarizes significant unobservable inputs and the valuation techniques thereof for the periods ended
March 31, 2017 and 2016:

Fair value at

March 31, 2017 Valuation Technique

Unobservable Input

Range (Weighted Average)

Securitized Beneficial
Interests

Tobacco Supplier
Guarantees

Discount Rate

38,206 Discounted Cash Flow Payment Speed

2,850 Historical Loss

Historical Loss

2.9% to 4.37%

46 days to 101 days

10.0% to 16.0%

4,276 Discounted Cash Flow Market Interest Rate

16.5% to 38.0%

Fair value at

March 31, 2016 Valuation Technique

Unobservable Input

Range (Weighted Average)

Securitized Beneficial
Interests

Tobacco Supplier
Guarantees

Discount Rate

40,368 Discounted Cash Flow

Payment Speed

3,278 Historical Loss

Historical Loss

3.17% to 3.77%

94.7 to 116.0 days

5.0% to 15.9%

4,072 Discounted Cash Flow Market Interest Rate

15.8% to 22.0%

- 88-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 19 – Selected Quarterly Financial Data (Unaudited)

Summarized quarterly financial information is as follows:

Year Ended March 31, 2017
Sales and other operating revenue
Gross profit
Other income (expense)

Restructuring
Net income (loss)
Net earnings (loss) attributable to
noncontrolling interest
g
Net income (loss) attributable to
Alliance One International, Inc.
Per Share of Common Stock:
Basic earnings (loss) attributable to
Alliance One International, Inc. (1)

Diluted earnings (loss) attributable to
Alliance One International, Inc. (1)
Market Price

d d

Year Ended March 31, 2016
h
Sales and other operating revenue
Gross profit
Other income (expense)
Restructuring
Net income (loss)
Net earnings (loss) attributable to
noncontrolling interest
Net income (loss) attributable to
Alliance One International, Inc.
Per Share of Common Stock:
Basic earnings (loss) attributable to
Alliance One International, Inc. (1)
Diluted earnings (loss) attributable to
Alliance One International, Inc. (1)
Market Price

- High
- Low

- High
- Low
,

First
Q
Quarter

Second
Q
Quarter

Third
Q
Quarter

Fourth
Q
Quarter

Fiscal Year

261,101
34,051
(481)

41
(31,539)

(34)

389,423
50,281
2,104

577
(15,613)

454,535
65,152
2,688

450
(15,595)

(138)

(31,505)

(15,657)

(15,457)

(3.54)

(3.54)
27.23
14.40

(1.75)

(1.75)
22.69
15.35

(1.73)

(1.73)
19.81
13.75

609,691
67,545
585

1,714,750
217,029
4,896

307
(524)

(215)

(309)

(0.03)

(0.03)
19.50
12.30

1,375
(63,271)

(343)

(62,928)

(7.05)

(7.05)
27.23
12.30

266,282
29,398
560
2,948
(25,957)

414,853
54,874
(1,029)
(386)
(21,123)

491,139
68,738
594
1,525
11,685

732,318
72,784
105,302
1,801
100,840

1,904,592
225,794
105,427
5,888
65,445

(7)

(58)

(50)

(87)

(25,950)

(21,065)

11,735

100,812

65,532

(2.93)

(2.93)
25.40
10.80

(2.37)

(2.37)
26.47
18.79

1.32

1.32
21.03
10.35

11.33

11.33
17.94
8.33

7.38

7.38
26.47
8.33

(1) Does not add due to quarterly change in average shares outstanding.

Fourth Quarter 2016 - As of March 31, 2016, the Company determined that the significant doubt about the Company's ability to
control MTC was eliminated and recorded a gain of $106,203 upon reconsolidation.

- 89-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 20 - Subsequent Events

Debt Repurchase
In April 2017, the Company purchased $28,645 of its existing $691,591 Second Lien Notes on the open market. All purchased
securities were canceled leaving $662,946 of the Second Lien Notes outstanding. Associated costs paid were $72 and related
discounts were $(3,730) resulting in net cash repayment of $24,915.

Accounts Receivable Securitization Programs
On May 31, 2017, the Company amended one of its accounts receivable securitization programs. This amendment increased the
facility amount from $100,000 to $155,000; replaced one unaffiliated financial institution with another; and changed the agent for
the special purpose entity from one unaffiliated financial institution to another.

Note 21 - Reconsolidation of MTC

On March 31, 2016, the Company regained control over its wholly owned Zimbabwe subsidiary, Mashonaland Tobacco Company,
LTD (“MTC”). The change in control was a result of the change in the political landscape in Zimbabwe and the recent issuance
of clarifications to the indigenization laws within Zimbabwe that resulted in the elimination of significant doubt about the Company's
ability to control MTC. The reconsolidation of MTC has been treated as a purchase business combination and as such, the fair
value of the assets and liabilities has been recorded at their fair value.

Since the Company already owned 100% of the equity interest, no consideration was transferred as part of the
reconsolidation. The Company estimated the fair value of its equity interest in MTC at March 31, 2016 to be $94,395 based on a
discounted cash flow model. The amount was then allocated to the fair value of the acquired assets and liabilities, which were
recorded on the Consolidated Balance Sheet at March 31, 2016. The fair value of the recognized assets included a customer
relationship intangible asset of $24,830 and goodwill of $13,669. The effect of the reconsolidation under the purchase business
combination guidance resulted in a gain of $106,203 which has been recorded and shown in “Other Income (Expense)” on the
Statement of Consolidated Operations for the year ended March 31, 2016. The gain is the result of the fair value of the equity
interest of $94,395 and the reversal of a deferred liability of $11,808.

- 90-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

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

Note 21 - Reconsolidation of MTC (continued)

The following table summarizes the fair values of the assets acquired and liabilities assumed as of March 31, 2016.

thousands
Cash and cash equivalents
Trade and other receivables, net
Net intercompany receivable (eliminated in consolidation)
Inventories
Other current assets
Property, plant and equipment
Goodwill and other intangible assets
Other noncurrent assets
Total assets acquired

Notes payable to banks (1)
Accounts payable
Other current liabilities
Deferred tax liabilities
Total liabilities

Fair value of equity interest

March 31, 2016
10,277
4,377
100,423
38,087
1,663
51,295
38,499
288
244,909

130,600
3,344
5,480
11,090
150,514

94,395

(1) Includes $130,600 of debt owed by MTC under a short-term credit facility in which one of the Company’s other subsidiaries, Intabex Netherlands
BV (“Intabex”), has a participation interest in the lender’s rights and obligations under the facility. At March 31, 2016, $84,258 of that amount was
attributed to outstanding borrowings by MTC funded under that facility by Intabex pursuant to that participation interest. Because Intabex’s funding
is pursuant to a participation interest through a third-party lender and not a direct intercompany loan between Intabex and MTC, the total amount of
debt under the facility is required to be reflected as consolidated debt upon the reconsolidation of MTC.

As indicated in the above table, the goodwill and intangible asset balance relative to the reconsolidation of MTC is $38,499 within
the “Other Regions” segment and is non-deductible for tax purposes. Included within this balance is goodwill attributable in part a
to the workforce of the acquired business and a finite-lived customer relationship intangible of $24,830, which is being amortized
over a useful life of fifteen years.

Alliance One Selected Unaudited Pro Forma Combined Financial Information
The unaudited pro forma information in the table below summarizes the combined results of the Company and MTC for the year
ended March 31, 2016 as if the companies were combined as of April 1, 2014. The pro forma information is presented for
informational purposes only and is not indicative of the results of operations that would have been achieved had the reconsolidation
taken place at the beginning of each period or results of future periods. The following information has been adjusted for intercompany
eliminations as required for consolidation accounting.

Unaudited Proforma
Twelve Months Ended March 31,
2015
2,077,732
108,669
(24,885)

2016
1,912,324
114,615
(31,409)

thousands except per share data
Revenues
Operating income
Net loss

- 91-

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Alliance One International, Inc.
Morrisville, North Carolina

We have audited the accompanying consolidated balance sheets of Alliance One International, Inc. and subsidiaries (the "Company")
as of March 31, 2017, and 2016, and the related consolidated statements of operations, comprehensive income (loss), stockholders'
equity, and cash flows for each of the three years in the period ended March 31, 2017. Our audits also included the financial
statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of March 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period
ended March 31, 2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company's internal control over financial reporting as of March 31, 2017, based on the criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated June 14, 2017, expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP
_____________________________________
Raleigh, North Carolina
June 14, 2017

- 92-

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Annual Report on Form 10-K, an evaluation was carried out by the Company’s
management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act))
as of March 31, 2017. Disclosure controls and procedures are designed to ensure that information required to be disclosed in
reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
In making this evaluation, our management considered the matters relating to the prior material weaknesses discussed below.
Based on this evaluation, and in light of our completion of remediation of prior material weaknesses as discussed below, our Chief
Executive Office and Chief Financial Officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) were effective as of March 31, 2017.

Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.
The Company’s internal control over financial reporting is a process, under the supervision of our Chief Executive Officer and
Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of the Company’s financial statements for external purposes in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).

Our internal control over financial reporting includes those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets;

ii. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and

iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of

our assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of
March 31, 2017 based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in 2013. Based on that assessment, and in light of our completion of
remediation of prior material weaknesses as described below, management believes our internal control over financial reporting
was effective as of March 31, 2017.

Remediation of Previously Reported Material Weaknesses
Our Chief Executive Officer and Chief Financial Officer concluded that the following material weaknesses in internal control over
financial reporting existed at the Kenyan subsidiary as of March 31, 2016:

•

Processes and control activities designed to support the amounts of deferred crop costs recorded in the general ledger
were not effective, were incorrectly applied or were overridden. It appears that local management, through collusion,
overrode controls to inappropriately cost redried inventory and understate cost of goods sold.

Processes and control activities designed to support the revenue transactions recorded in the general ledger were not
effective, were incorrectly applied or were overridden. Specifically, revenues were recorded based on estimated
transactions and actual transactions were processed outside the general ledger system. As a result revenue recorded did
not reflect actual sales transactions and accounts receivable balances were recorded which would not be realized.

As discussed below, we completed remediation of these material weakness as of March 31, 2017.

- 93-

ITEM 9A. CONTROLS AND PROCEDURES (AS REVISED)

(

) (continued)

Evaluation of Disclosure Controls and Procedures (continued)

Our Chief Executive Officer and Chief Financial Officer also concluded that the following material weaknesses existed at the
regional and corporate levels as of March 31, 2016:

• The Company’s regional review of operations at African origins was ineffective due to the lack of adequate qualified
resources to appropriately examine and investigate financial results. Although the financial information from the Kenya
origin was reviewed on a timely basis, the regional review did not incorporate the qualitative and operational context
needed to perform an adequate review, which allowed the misstated balances to build up over extended periods of time.
• The Company’s fraud risk assessment was not adequately designed or implemented to address the risks of fraud in certain
origins. The Company’s assessment did not determine that certain regions warranted additional control activities to respond
to additional fraud risks.

• The Company's controls applicable to the accounting for the reconsolidation of its Zimbabwe subsidiary did not operate

effectively.

As discussed below, we completed remediation of these material weaknesses as of March 31, 2017.

Changes in Internal Control over Financial Reporting
During the three months ended March 31, 2017, we completed remediation of these material weaknesses. In connection with our
remediation process, we implemented the following:

• The Kenyan operation is under new management including the Managing Director and the Finance & Operations Manager.

• The Company has been standardizing key controls across regions. As part of this process, which is being led by Corporate
Audit Services, the deficient control activities at the Kenya location were replaced with the standardized key control
activities. The control activities in Kenya were tested for design and operating effectiveness in fiscal 2017.

• Two new regional controller positions have been employed for the Africa region. These positions add an additional layer
of review and oversight of African entities and function as “super” financial directors of three entities each, as well as
being part of the regional team. The entities for which each position is responsible will rotate every two years.

• This African regional controller team performs new analyses, which include but are not limited to trend analyses over
time, crop information and inventory turns (including by comparison to other origins within the region) to corroborate
accounting amounts, sign off on quarterly packet reviews and account reconciliations, and monitoring controls around
the financial close process. Additionally, the regional controllers regularly visit origins for their work to help assess
monthly and quarterly financial processes.

• We enhanced regional review procedures at the corporate level with the implementation of semi-annual regional risk
management committee meetings to review business risks and controls, and results of the region based on new analyses
and trends as well.

• The Company’s fraud risk assessment of a location has been included as a factor in determining the scope of our SOX
compliance program, in order to more specifically tailor the design of internal control over financial reporting to mitigate
the risk of material misstatement caused by fraud or otherwise.

Other than the remediation measures described above, there were no other changes that occurred during the three months ended
March 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over
financial reporting.
The effectiveness of our internal control over financial reporting as of March 31, 2017 has been audited by Deloitte &
Touche, LLP, an independent registered public accounting firm, as stated in their attestation report that follows.

- 94-

ITEM 9A. CONTROLS AND PROCEDURES (continued)

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Alliance One International, Inc.
Morrisville, North Carolina

We have audited the internal control over financial reporting of Alliance One International, Inc. and subsidiaries (the "Company")nn
as of March 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March
31, 2017, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement schedule as of and for the year ended March 31, 2017 of the Company
and our report dated June 14, 2017 expressed an unqualified opinion on those consolidated financial statements and financial
statement schedule.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
June 14, 2017

- 95-

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning directors and persons nominated to become directors of Alliance One International, Inc. included in
the Proxy Statement under the headings “Board of Directors - Proposal One-Election of Directors” and “Board of Directors -
Director Biographies” is incorporated herein by reference. The information concerning the executive officers of the Company
included in Part I, Item I of this Annual Report on Form 10-K under the heading “Business - Executive Officers of Alliance One
International, Inc.” is incorporated herein by reference.

Audit Committee
The information included in the Proxy Statement under the headings “Board of Directors - Board Committees and Membership”
and “Audit Matters” is incorporated herein by reference.

Section 16(a) Compliance
The information included in the Proxy Statement under the heading “Ownership of Equity Securities - Section 16(a) Beneficial
Ownership Reporting Compliance” is incorporated herein by reference.

Code of Business Conduct
The information included in the Proxy Statement under the heading “Governance of the Company - Code of Business Conduct”
is incorporated herein by reference.

Corporate Governance
The Board of Directors has adopted corporate governance guidelines and charters for its Audit Committee, Executive Compensation
Committee and Governance and Nominating Committee. These governance documents are available on our website,
www.aointl.com, or by written request, without charge, addressed to: Corporate Secretary, Alliance One International, Inc., 8001
Aerial Center Parkway, Morrisville, NC 27560-8417.

ITEM 11. EXECUTIVE COMPENSATION

The information contained in the Proxy Statement under the captions “Board of Directors – Compensation of Directors” and
“Executive Compensation” is incorporated herein by reference.

- 96-

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

EQUITY COMPENSATION PLAN INFORMATION
as of March 31, 2017

Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a) (1)

Weighted-
Average Exercise
Price of
Outstanding
Options, Warrants
and Rights
(b) (2)

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))
(c) (3)

659,673

$61.00

—

659,673

Not Applicable

$61.00

828,340

—

828,340

Plan Category

Equity Compensation Plans
Approved by Security Holders

Equity Compensation Plans
Not Approved by Security
Holders

Total

1) These shares consist of 117,760 restricted stock units and performance share units issued and outstanding under the 2016
Incentive Plan and 541,913 stock options, restricted stock units and performance share units issued and outstanding under the
2007 Incentive Plan.

(2) The weighted-average exercise price does not take into account restricted stock units or performance share units.

(3) The Incentive Plan allows for these shares to be issued in a variety of forms, including stock options, stock appreciation rights,
stock awards, stock units, performance awards and incentive awards. Further, the Number of Securities Remaining Available
for Future Issuance as set forth in this column (c) will increase by the Number of Securities to be Issued (as reflected in column
(a)) which are associated with options, rights and warrants plus other stock awards that are forfeited from time to time.

The information contained in the Proxy Statement under the caption "Ownership of Equity Securities," together with the information
included herein is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information contained in the Proxy Statement under the captions “Governance of the Company -Determination of Independence
of Directors,” “Board of Directors - Independence,” “Board of Directors – Compensation of Directors,” and "Executive
Compensation - Compensation Discussion and Analysis - Employment and Consulting Agreements" is incorporated herein by
reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information contained in the Proxy Statement under the captions “Audit Matters - Policy for Pre-Approval of Audit and Non-
Audit Services” and “Audit Matters - Audit and Non-Audit Fees” is incorporated herein by reference.

- 97-

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)

(1) and (2)

PART IV

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Statements of Consolidated Operations –Years ended March 31, 2017, 2016 and 2015

Statements of Consolidated Comprehensive Income (Loss) - Years ended March 31, 2017, 2016 and 2015
Consolidated Balance Sheets - March 31, 2017 and 2016

Statements of Consolidated Stockholders' Equity - Years ended March 31, 2017, 2016 and 2015
Statements of Consolidated Cash Flows - Years ended March 31, 2017, 2016 and 2015

Notes to Consolidated Financial Statements
Report of Deloitte & Touche LLP

Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm on Internal Control
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts

(b) Exhibits

3.01 Amended and Restated Articles of Incorporation of Alliance One International, Inc., as amended, incorporated
by reference to Exhibit 3.01 of the Quarterly Report on Form 10-Q for the period ended June 30, 2015, filed
August 5, 2015 (SEC File No. 001-13684).

3.02 Amended and Restated Bylaws of Alliance One International, Inc., incorporated by reference to Exhibit 3.2 of

the Current Report on Form 8-K, filed June 21, 2016 (SEC File No. 001-13684).

4.01 Specimen of Common Stock certificate incorporated by reference to Exhibit 4.1 to the Current Report on Form

8-K, filed June 29, 2015 (SEC File No. 001-13684).

4.02

4.03

Indenture dated as of August 1, 2013 among Alliance One International, Inc., Law Debenture Trust Company
of New York, as trustee, Law Debenture Trust Company of New York, as collateral trustee, and Deutsche Bank
Trust Company Americas, as registrar and paying agent, relating to 9.875% Senior Secured Second Lien Notes
due 2021, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 1, 2013 of
Alliance One International, Inc. (SEC File No. 001-13684).

Indenture dated as of October 14, 2016 among Alliance One International, Inc., Alliance One Specialty Products,
LLC, as initial guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee, collateral agent,
registrar and paying agent, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated
October 14, 2016 of Alliance One International, Inc. (SEC File No. 001-13684).

10.01 Amended and Restated Receivables Purchase Agreement dated as of March 30, 2012 among Alliance One
International, Inc., Finacity Receivables 2006-2, LLC and Finacity Corporation, incorporated by reference to
Exhibit 10.31 to Alliance One International, Inc.'s Annual Report on Form 10-K for the year ended March 31,
2012, filed June 13, 2012 (SEC File No. 001-13684).

10.02 Second Amended and Restated Receivables Purchase Agreement dated as of March 30, 2012 among Alliance
One International AG, Finacity Receivables 2006-2, LLC and Finacity Corporation, incorporated by reference
to Exhibit 10.32 to Alliance One International, Inc.'s Annual Report on Form 10-K for the year ended March
31, 2012, filed June 13, 2012 (SEC File No. 001-13684).

10.03 Second Amended and Restated Receivables Sale Agreement dated as of March 30, 2012 among Finacity
Receivables 2006-2, LLC, Finacity Corporation, Alliance One International AG, Norddeutsche Landesbank
Girozentrale, Standard Chartered Bank, the other Purchaser Agents from time to time party thereto, the Bank
Purchasers from time to time party thereto, Hannover Funding Company LLC, and the other Conduit Purchasers
from time to time party thereto, incorporated by reference to Exhibit 10.33 to Alliance One International, Inc.'s
Annual Report on Form 10-K for the year ended March 31, 2012, filed June 13, 2012 (SEC File No. 001-13684).

- 98-

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(b)

Exhibits (continued)

(continued)

10.04 Amended and Restated Alliance One International, Inc. 2007 Incentive Plan, incorporated by reference to Appendix
A to the definitive proxy statement of Alliance One International, Inc. filed on July 11, 2011 (SEC File No.
001-13684).*

10.05 Alliance One International, Inc. 2016 Incentive Plan (incorporated by reference to Appendix A to the Proxy
Statement on Schedule 14A filed by Alliance One International, Inc. on July 15, 2016 (SEC File No. 001-13684)).*

10.06 Form of Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.2 to Alliance One International,
Inc.’s Quarterly Report on Form 10-Q for the period ended December 31, 2010, filed February 4, 2011 (SEC File
No. 001-13684).*

10.07 Form of Restricted Stock Unit Agreement (Supplemental Award), incorporated by reference to Exhibit 10.3 to
Alliance One International, Inc.’s Quarterly Report on Form 10-Q for the period ended December 31, 2010, filed
February 4, 2011 (SEC File No. 001-13684).*

10.08 Form of Performance-based Stock Unit Award Agreement, incorporated by reference to Exhibit 10.1 to Alliance
One International, Inc.’s Quarterly Report on Form 10-Q for the period ended December 31, 2010, filed February
4, 2011 (SEC File No. 001-13684).*

10.09 Form of Non-Qualified Stock Option Award Agreement incorporated by reference to Exhibit 10.2 of the Current

Report on Form 8-K, filed on March 28, 2011 (SEC File No 001-13684).*

10.10 DIMON Incorporated 2003 Incentive Plan, incorporated by reference to Exhibit 10.14 of DIMON’s Annual Report

on Form 10-K for the year ended March 31, 2004, filed June 10, 2004 (SEC File No. 001-13684).*

10.11 Alliance One International, Inc. Pension Equity Plan (amended and restated effective January 1, 2009),
incorporated by reference to Exhibit 10.04 to Alliance One International, Inc.’s Quarterly Report on Form 10-Q
for the period ended December 31, 2008, filed February 17, 2009 (SEC File No. 001-13684).*

10.12 Alliance One International, Inc. Supplemental Retirement Account Plan (amended and restated as of January 1,
2009), incorporated by reference to Exhibit 10.6 to Alliance One International, Inc.’s Quarterly Report on Form
10-Q for the period ended December 31, 2008, filed February 17, 2009 (SEC File No. 001-13684).*

10.13 Executive Employment Agreement dated as of March 1, 2013 between Alliance One International, Inc. and J.
Pieter Sikkel, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed February 6,
2013 (SEC File No. 001-13684).*

10.14 Summary of director and executive officer compensation arrangements (filed herewith).*

10.15 Description of the material terms of the Alliance One International, Inc. management incentive plan as implemented
by the Executive Compensation Committee of the Board of Directors, incorporated by reference to the text
appearing under the heading “Executive Compensation—Compensation Discussion and Analysis—Incentives—
Annual Incentives” beginning on page 25 of Alliance One International, Inc.’s definitive proxy statement on
Schedule 14A, filed July 8, 2011 (SEC File No. 001-13684) *

- 99-

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(b)

Exhibits (continued)

(continued)

12 Ratio of Earnings to Fixed Charges (filed herewith).

21 List of Subsidiaries (filed herewith).

23.1 Consent of Deloitte & Touche LLP (filed herewith).

31.01 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.02 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-

Oxley Act of 2002 (filed herewith).

101 The following materials from the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
2017, formatted in XBRL: (i) Statements of Consolidated Operations for the three years ended March 31, 2017,
2016 and 2015; (ii) Consolidated Statements of Comprehensive Income (Loss) for the three years ended March
31, 2017, 2016 and 2015; (iii) Consolidated Balance Sheets as of March 31, 2017 and 2016; (iv) Statements of
Consolidated Stockholders' Equity for the three years ended March 31, 2017, 2016 and 2015; (v) Statements of
Consolidated Cash Flows for the three years ended March 31, 2017, 2016 and 2015; (vi) Notes to Consolidated
Financial Statements; and (vii) Schedule II - Valuation and Qualifying Accounts (submitted herewith)

* Indicates management contract or compensatory plan or arrangement.

Instruments with respect to long-term debt, the amount of securities authorized thereunder being less than ten percent
of the Company’s consolidated assets, have been omitted and the Company agrees to furnish such instruments to
the Securities and Exchange Commission upon request.

Schedule II – Valuation and Qualifying Accounts appears on the following page of this Form 10-K. All other schedules are
not required under the related instructions or are not applicable and therefore have been omitted.

ITEM 16. FORM 10-K SUMMARY

The Company has chosen not to include an optional summary of the information required by this Form 10-K. For a reference
to information in the Form 10-K, investors should refer to the Table of Contents to this Form 10-K.

- 100-

ALLIANCE ONE INTERNATIONAL, INC. AND SUBSIDIARIES

COL. A

COL. B

COL. C
ADDITIONS

(1)

(2)

COL. D

COL. E

DESCRIPTION

(in thousands)
Year Ended March 31, 2015
Deducted from asset accounts:
Allowance for doubtful
accounts
Valuation allowance on
deferred tax assets

Year Ended March 31, 2016
Deducted from asset accounts:
Allowance for doubtful
accounts
Valuation allowance on
deferred tax assets

Year Ended March 31, 2017
Deducted from asset accounts:
Allowance for doubtful
accounts
Valuation allowance on
deferred tax assets

Balance at
Beginning
of Period

Charged to
Costs and
Expenses

Charged to
Other
Accounts

Deductions

Balance at
End of
Period

$3,418

$12,456

$—

$1,921 (A)

$13,953

$181,843

$(14,926) (C)

$3,999 (B)

$1,112 (A)

$169,804

$13,953

$(169)

$—

$800 (A)

$12,984

$169,804

$(47,103) (C)

$(3,370) (B)

$813 (A)

$118,518

$12,984

$(5,545)

$—

$449 (A)

$6,990

$118,518

$13,748 (C)

$(595) (B)

$(103) (A)

$131,774

(A) Currency translation and direct write off.
(B) Accumulated other comprehensive loss
(C) Deferred tax on unremitted earnings of foreign subsidiaries

- 101-

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized on June 14, 2017.

SIGNATURES

ALLIANCE ONE INTERNATIONAL, INC. (Registrant)

/s/ J. Pieter Sikkel
By________________________________________________
J. Pieter Sikkel
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on June 14, 2017.

/s/ J. Pieter Sikkel
By________________________________________________
J. Pieter Sikkel
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Joel L. Thomas
By________________________________________________
Joel L. Thomas
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

/s/ Todd B. Compton
By________________________________________________
Todd B. Compton
Vice President - Controller
(Principal Accounting Officer)

/s/ Carl L. Hausmann
By________________________________________________
Carl L. Hausmann
Director

/s/ Jeffrey A. Eckmann
By________________________________________________
Jeffrey A. Eckmann
Director

/s/ John D. Rice
By________________________________________________
John D. Rice
Director

/s/ Joyce L. Fitzpatrick
By________________________________________________
Joyce L. Fitzpatrick
Director

/s/ Martin R. Wade III
By________________________________________________
Martin R. Wade III
Director

/s/ C. Richard Green, Jr.
By________________________________________________
C. Richard Green Jr.
Director

/s/ Nigel G. Howard
By________________________________________________
Nigel G. Howard
Director

/s/ Mark W. Kehaya
By________________________________________________
Mark W. Kehaya
Chairman

- 102-

Exhibits

EXHIBIT INDEX

3.02 Amended and Restated Bylaws of Alliance One International, Inc., incorporated by reference to Exhibit 3.2

of the Current Report on Form 8-K, filed June 21, 2016 (SEC File No. 001-13684).

4.01 Specimen of Common Stock certificate incorporated by reference to Exhibit 4.1 to the Current Report on Form

8-K, filed June 29, 2015 (SEC File No. 001-13684).

4.02

4.03

Indenture dated as of August 1, 2013 among Alliance One International, Inc., Law Debenture Trust Company
of New York, as trustee, Law Debenture Trust Company of New York, as collateral trustee, and Deutsche Bank
Trust Company Americas, as registrar and paying agent, relating to 9.875% Senior Secured Second Lien Notes
due 2021, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 1, 2013
of Alliance One International, Inc. (SEC File No. 001-13684).

Indenture dated as of October 14, 2016 among Alliance One International, Inc., Alliance One Specialty
Products, LLC, as initial guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee,
collateral agent, registrar and paying agent, incorporated by reference to Exhibit 4.1 to the Current Report on
Form 8-K dated October 14, 2016 of Alliance One International, Inc. (SEC File No. 001-13684).

10.04 Amended and Restated Alliance One International, Inc. 2007 Incentive Plan, incorporated by reference to
Appendix A to the definitive proxy statement of Alliance One International, Inc. filed on July 11, 2011(SEC
File No. 001-13684).*

10.06 Form of Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.2 to Alliance One
International, Inc.’s Quarterly Report on Form 10-Q for the period ended December 31, 2010, filed February
4, 2011 (SEC File No. 001-13684).*

10.07 Form of Restricted Stock Unit Agreement (Supplemental Award), incorporated by reference to Exhibit 10.3
to Alliance One International, Inc.’s Quarterly Report on Form 10-Q for the period ended December 31, 2010,
filed February 4, 2011 (SEC File No. 001-13684).*

10.09

Form of Non-Qualified Stock Option Award Agreement incorporated by reference to Exhibit 10.2 of the
Current Report on Form 8-K, filed on March 28, 2011 (SEC File No 001-13684).*

10.10 DIMON Incorporated 2003 Incentive Plan, incorporated by reference to Exhibit 10.14 of DIMON’s Annual

Report on Form 10-K for the year ended March 31, 2004, filed June 10, 2004 (SEC File No. 001-13684).*

10.11 Alliance One International, Inc. Pension Equity Plan (amended and restated effective January 1, 2009),
incorporated by reference to Exhibit 10.04 to Alliance One International, Inc.’s Quarterly Report on Form 10-
Q for the period ended December 31, 2008, filed February 17, 2009 (SEC File No. 001-13684).*

10.12 Alliance One International, Inc. Supplemental Retirement Account Plan (amended and restated as of January
1, 2009), incorporated by reference to Exhibit 10.6 to Alliance One International, Inc.’s Quarterly Report on
Form 10-Q for the period ended December 31, 2008, filed February 17, 2009 (SEC File No. 001-13684).*

- 103-

Exhibits (continued)

EXHIBIT INDEX

10.13

Executive Employment Agreement dated as of March 1, 2013 between Alliance One International, Inc. and
J. Pieter Sikkel, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed February
6, 2013 (SEC File No. 001-13684).*

10.14

Summary of director and executive officer compensation arrangements (file herewith).*

10.15

Description of the material terms of the Alliance One International, Inc. management incentive plan as
implemented by the Executive Compensation Committee of the Board of Directors, incorporated by reference
to the text appearing under the heading “Executive Compensation—Compensation Discussion and Analysis
—Incentives—Annual Incentives” beginning on page 25 of Alliance One International, Inc.’s definitive proxy
statement on Schedule 14A, filed July 8, 2011 (SEC File No. 001-13684).*

Ratio of Earnings to Fixed Charges (filed herewith).

List of Subsidiaries (filed herewith).

23.1

Consent of Deloitte & Touche LLP (filed herewith).

31.01

31.02

101

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 (filed herewith).

The following materials from the Company's Annual Report on Form 10-K for the fiscal year ended March
31, 2017, formatted in XBRL: (i) Statements of Consolidated Operations for the three years ended March 31,
2017, 2016 and 2015; (ii) Consolidated Statements of Comprehensive Income (Loss) for the three years ended
March 31, 2017, 2016 and 2015; (iii) Consolidated Balance Sheets as of March 31, 2017 and 2016; (iv)
Statements of Consolidated Stockholders' Equity for the three years ended March 31, 2017, 2016 and 2015;
(v) Statements of Consolidated Cash Flows for the three years ended March 31, 2017, 2016 and 2015; (vi)
Notes to Consolidated Financial Statements; and (vii) Schedule II - Valuation and Qualifying Accounts
(submitted herewith)

* Indicates management contract or compensatory plan or arrangement.

Instruments with respect to long-term debt, the amount of securities authorized thereunder being less than ten
percent of the Company’s consolidated assets, have been omitted and the Company agrees to furnish such
instruments to the Securities and Exchange Commission upon request.

- 104-

[THIS PAGE INTENTIONALLY LEFT BLANK]

RECONCILIATION OF ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION (“ADJUSTED EBITDA”)(1)
(Unaudited)

(in thousands)

U.S. GAAP - Net Income(loss) attributable to Alliance One International, Inc.

Plus: Interest expense
Plus: Income tax expense
Plus: Depreciation and amortization expense

EBITDA

(1)

Plus: Abnormal unrecovered advances (recoveries) to suppliers (2)
Plus: Reserves for (recoveries on) doubtful customer receivables
Plus: Non-cash employee stock based compensation
Less: Other income (expense)
Plus: Restructuring and asset impairment charges
Plus: Debt retirement expense (income)
Plus: Amortization of basis difference - CBT investment(3)
Plus: Kenyan investigation legal & professional costs
Less: Kenyan green leaf operation Adjusted EBITDA(4)
Plus: Reconsolidated subsidiary incremental EBITDA after elimination of related party
transactions with AOI and its consolidated subsidiaries (5)

Adjusted EBITDA(1)

Total debt

Less: Debt of reconsolidated subsidiary funded by affiliate
Total adjusted debt
Less: Cash
Total adjusted debt less cash(6)

(6)

(Total adjusted debt less cash) /Adjusted EBITDA(1)(6)

FYE
March 31, 2017

(62,928)

132,667
23,481
34,476

127,696

-
(5,545)
1,551
4,896
1,375
(300)

1,518
7,171

(8,013)

136,583

1,428,868

1,428,868
473,110

955,758

7.00x

(1) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted earnings before interest, taxes,
depreciation and amortization (“Adjusted EBITDA”) are not measures of results of operations under generally accepted
accounting principles in the United States (“U.S. GAAP”) and should not be considered as an alternative to other U.S. GAAP
measurements. EBITDA and Adjusted EBITDA as presented may not equal column or row totals due to rounding.

(2) Unrecovered amounts expensed directly to cost of goods and services sold in the income statement for abnormal yield
adjustments or unrecovered amounts from prior crops. Normal yield adjustments are capitalized into the cost of the current
crop and are expensed as cost of goods and services sold as that crop is sold.

(3) Related to a former Brazilian subsidiary that is now deconsolidated following the completion of a joint venture in March
2014.

(4) Adjusted EBITDA of our former green leaf sourcing operation in Kenya of $(8,013) for the fiscal year ended March 31, 2017
and for each of the quarters therein is calculated on the same basis as Adjusted EBITDA presented in this table. In fiscal year
2016 we decided to exit green leaf sourcing in the Kenyan market as part of our restructuring program.

(5) Adjusted EBITDA of the subsidiary reconsolidated at the end of the fourth quarter of fiscal year 2016 is calculated on the
same basis as Adjusted EBITDA as presented in this table, with eliminations for related party transactions with AOI and its
consolidated subsidiaries, and will be include in consolidated information going forward. Additionally, the calculation of total
adjusted debt less cash includes the cash of the subsidiary reconsolidated at the end of the fourth quarter of fiscal year 2016
and the debt of that subsidiary not funded by a subsidiary of AOI.

(6) Represents the portion of outstanding debt of the subsidiary reconsolidated at the end of the fourth quarter of fiscal year
2016 under a credit facility attributable to the participation interest of another AOI subsidiary funding that portion of the
borrowing under that facility.

Non-GAAP Financial Measures

We have presented EBITDA and Adjusted EBITDA to adjust for the items identified above because we believe that it would
be helpful to the readers of our financial information to understand the impact of these items on our reported results. This
presentation enables readers to better compare our results to similar companies that may not incur the sporadic impact of
various items identified above. Management acknowledges that there are many items that impact a company's reported results
and this list is not intended to present all items that may have impacted these results. EBITDA, Adjusted EBITDA and any
ratios calculated based on these measures are not necessarily comparable to similarly-titled measures used by other companies
or appearing in our debt obligations or agreements. Adjusted EBITDA anticipated for fiscal year 2018 is calculated in a manner
consistent with the presentation of Adjusted EBITDA in the foregoing table. Because of the forward-looking nature of this
estimate of Adjusted EBITDA, it is impractical to present a quantitative reconciliation of such measure to a comparable GAAP
measure, and accordingly no such GAAP measure is being presented.

Board of Directors:

Mark W. Kehaya - Chairman
Founding partner of Meriturn Partners, LLC,
an investment firm specializing in
restructurings and turnarounds of middle-
market companies

Jeffrey A. Eckmann
Retired, former Group President of
Reynolds American, Inc., a manufacturer
of consumer tobacco products

Nigel G. Howard
Retired, former Deputy Chief Executive of
The Morgan Crucible Company plc, a designer,
developer and supplier of products made from
carbon, ceramic and magnetic materials

John D. Rice
Retired, former Vice Chairman of
Archer-Daniels-Midland Company,
a Fortune 30 agribusiness

Joyce L. Fitzpatrick
President of Fitzpatrick Communications, Inc.,
a public relations firm

J. Pieter Sikkel
President and Chief Executive Officer of
Alliance One International, Inc.

C. Richard Green, Jr.
Retired, former Regional Director of
British American Tobacco, a multinational
tobacco company

Carl L. Hausmann
Retired, former Managing Director – Global
Government & Corporate Affairs of
Bunge Limited, a leading global agribusiness
and food company

Martin R. Wade, III
President and Chief Executive Officer of
Broadcaster, Inc., an internet service provider
and applications business

SHAREHOLDER INFORMATION

GOVERNANCE DOCUMENTS
The Company’s governance-related documents, includ-
ing our Corporate Governance Guidelines, Code of
Business Conduct, and committee charters are available
without charge through our website, www.aointl.com,
or by written request addressed to:

Corporate Secretary
Alliance One International, Inc.
8001 Aerial Center Parkway
P. O. Box 2009
Morrisville, North Carolina 27560

SHAREHOLDER COMMUNICATIONS
Shareholders may communicate with the Board of
Directors in writing. Such communications should be
sent in care of the Corporate Secretary to the address
noted above.

FORWARD-LOOKING STATEMENTS
Alliance One International’s 2017 Annual Report may
include certain “forward-looking” statements. These
forward-looking statements generally are identiﬁed by
words such as “expects” or “anticipates” and words
of similar effect and include statements regarding
the Company’s ﬁnancial and operating goals. Actual
results may differ materially from those expressed
in any forward-looking statements due to a variety of
factors, including those discussed in “Risk Factors” and
elsewhere in the Annual Report and in our ﬁlings with
the Securities and Exchange Commission.

ANNUAL MEETING
The annual meeting of shareholders will be held
at 10:00 a.m. on Thursday, August 10, 2017 at
the Hamner Conference Center, North Carolina
Auditorium, 15,
h
Research
Triangle
Park, NC 27709. Formal notice of the meeting, together
with a proxy statement and proxy, was mailed on or
about July 10, 2017.

,
Drive,
r
T.W. Alexander

COMMON STOCK
Alliance One International, Inc. common stock is listed
on the New York Stock Exchange (NYSE) as ticker
symbol AOI.

TRANSFER AGENT AND REGISTRAR
FOR THE COMMON STOCK
Inquiries concerning Alliance One International, Inc.
common stock, including stock transfers, lost or stolen
stock certiﬁcates, changes of address and dividend
payment, should be directed to:

American Stock Transfer & Trust Company, LLC
Operations Center
6201 15th Avenue
Brooklyn, NY 11219

Shareholder Services:
Toll Free within the United States: (866) 627-2656
Outside the United States: (718) 921-8124

SEC FILINGS
The Company’s Annual Report on Form 10-K and
other Securities and Exchange Commission (SEC)
ﬁlings are available without charge through our website
at www.aointl.com or by written request addressed to:

Investor Relations
Alliance One International, Inc.
8001 Aerial Center Parkway
P. O. Box 2009
Morrisville, North Carolina 27560

8001 Aerial Center Parkway
Morrisville, NC 27560-8417
Phone 919-379-4300
www.aointl.com