What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-06-29 compared with 2020-08-24 · 1682 added, 1299 removed, 765 unchanged (80% of the section changed)

7 unchanged sentences

Report of Independent Registered Public Accounting Firm

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Pyxus International, Inc.

and Subsidiaries

Consolidated Statements of Operations

Years Ended March 31,

(in thousands, except per share data) 2020 2019 2018

Successor Predecessor

(in thousands, except per share data) Seven months ended March 31, 2021 Five months ended August 31, 2020 Year ended March 31, 2020 Year ended March 31, 2019

Sales and other operating revenues $ 884,328 $ 447,600 $ 1,527,261 $ 1,801,593

2 unchanged sentences

Selling, general, and administrative expenses 110,007 87,858 199,016 172,831

Other income, net 2,133 14,217 14,382

Other (expense) income, net ( 9,615 ) ( 539 ) 2,133 14,217

Restructuring and asset impairment charges 11,817 566 5,646 4,946

1 unchanged sentence

Operating (loss) income ( 16,048 ) ( 43,957 ) ( 11,609 ) 87,254

Debt retirement benefit — ( 1,753 ) ( 2,975 )

Loss on deconsolidation of subsidiaries 70,242 — — —

Debt retirement expense (benefit) — 828 — ( 1,753 )

Interest expense 56,724 46,616 136,656 135,553

Interest income 1,348 1,426 3,850 3,629

Loss before income taxes and other items ( 144,415 ) ( 42,917 ) ( 16,129 )

Income tax expense (benefit) 131,789 37,840 ( 58,764 )

Reorganization items:

Gain on settlement of liabilities subject to compromise — 462,304 — —

Professional fees — ( 30,526 ) — —

United States trustee fees — ( 970 ) — —

Write-off of unamortized debt issuance costs and discount — ( 5,303 ) — —

Issuance of exit facility shares and DIP financing fees — ( 208,538 ) — —

Other debt restructuring costs — ( 19,442 ) — —

Fresh start reporting adjustments — ( 91,541 ) — —

(Loss) income before income taxes and other items ( 141,666 ) 16,009 ( 144,415 ) ( 42,917 )

Income tax expense 13,215 292 131,789 37,840

Income from unconsolidated affiliates, net 11,875 2,358 5,885 9,589

7 unchanged sentences

See "Notes to Consolidated Financial Statements"

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Pyxus International, Inc.

and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

Years Ended March 31,

(in thousands) 2020 2019 2018

Successor Predecessor

(in thousands) Seven months ended March 31, 2021 Five months ended August 31, 2020 Year ended March 31, 2020 Year ended March 31, 2019

Net (loss) income $ ( 143,006 ) $ 18,075 $ ( 270,319 ) $ ( 71,168 )

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment ( 5,004 ) 4,377 ( 583 ) ( 9,048 )

1 unchanged sentence

Cash flow hedges ( 2,625 ) ( 531 ) 3,145 ( 2,614 )

Total other comprehensive income (loss), net of tax 2,157 ( 12,900 ) 14,324

Total other comprehensive (loss) income, net of tax ( 7,088 ) 4,580 2,157 ( 12,900 )

Total comprehensive (loss) income ( 150,094 ) 22,655 ( 268,162 ) ( 84,068 )

3 unchanged sentences

See "Notes to Consolidated Financial Statements"

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Pyxus International, Inc.

and Subsidiaries

Consolidated Balance Sheets

Successor Predecessor

(in thousands) March 31, 2021 March 31, 2020

7 unchanged sentences

Inventories, net 727,893 730,019

Advances to suppliers, net 38,877 19,754

Advances to tobacco suppliers, net 43,569 38,877

Recoverable income taxes 4,781 7,562

9 unchanged sentences

Long-term recoverable income taxes 4,133 3,038

Other deferred charges — 2,175

Other noncurrent assets 40,334 48,434

27 unchanged sentences

Accumulated other comprehensive loss ( 6,733 ) ( 59,132 )

Total stockholders’ (deficit) equity of Pyxus International, Inc.

Total stockholders’ equity (deficit) of Pyxus International, Inc.

247,670 ( 78,000 )

Noncontrolling interests 6,270 1,692

Total stockholders' (deficit) equity ( 76,308 ) 192,019

Total stockholders' equity (deficit) 253,940 ( 76,308 )

Total liabilities and stockholders' equity $ 1,539,462 $ 1,763,063

See "Notes to Consolidated Financial Statements"

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Pyxus International, Inc.

and Subsidiaries

Consolidated Statements of Stockholders’ Equity

3 unchanged sentences

Stock Retained

(Deficit) Earnings Currency

Adjustment Pensions,

Net of Tax Derivatives,

Net of Tax Noncontrolling

Interest Total

Stockholders’

Balance, March 31, 2020 (Predecessor) $ 469,677 $ ( 488,545 ) $ ( 22,509 ) $ ( 37,154 ) $ 531 $ 1,692 $ ( 76,308 )

Net loss — ( 92,161 ) — — — ( 648 ) ( 92,809 )

Stock-based compensation 117 — — — — — 117

Dividends paid — — — — — ( 120 ) ( 120 )

Other comprehensive (loss) income, net of tax — — ( 64 ) 494 ( 531 ) ( 76 ) ( 177 )

Balance, June 30, 2020 (Predecessor) 469,794 ( 580,706 ) ( 22,573 ) ( 36,660 ) — 848 ( 169,297 )

Net income — 111,198 — — — ( 314 ) 110,884

Stock-based compensation 8 — — — — — 8

Dividends paid — — — — — ( 180 ) ( 180 )

Change in investment in subsidiaries ( 1,655 ) — — — — ( 461 ) ( 2,116 )

Other comprehensive income, net of tax — — 4,509 240 — 8 4,757

Cancellation of Predecessor equity ( 468,147 ) 469,508 18,064 36,420 — 99 55,944

Balance, August 31, 2020 (Predecessor) $ — $ — $ — $ — $ — $ — $ —

Balance, September 1, 2020 (Successor) $ — $ — $ — $ — $ — $ — $ —

Issuance of Successor common stock 391,402 — — — — — 391,402

Fresh start adjustment to noncontrolling interests — — — — — 4,359 4,359

Net loss — ( 5,313 ) — — — ( 485 ) ( 5,798 )

Dividends paid — — — — — ( 123 ) ( 123 )

Other comprehensive (loss) income, net of tax — — ( 828 ) — — 21 ( 807 )

Balance, September 30, 2020 (Successor) 391,402 ( 5,313 ) ( 828 ) — — 3,772 389,033

Net loss — ( 8,165 ) — — — ( 55 ) ( 8,220 )

Fresh start adjustments ( 313 ) — — — — ( 246 ) ( 559 )

Other comprehensive (loss) income, net of tax — — ( 3 ) 47 ( 619 ) ( 142 ) ( 717 )

Balance, December 31, 2020 (Successor) 391,089 ( 13,478 ) ( 831 ) 47 ( 619 ) 3,329 379,537

Net loss — ( 123,208 ) — — — ( 5,780 ) ( 128,988 )

Deconsolidation of subsidiaries — — — — — 8,972 8,972

Dividends paid — — — — — ( 17 ) ( 17 )

Other comprehensive (loss) income, net of tax — — ( 3,818 ) 494 ( 2,006 ) ( 234 ) ( 5,564 )

Balance, March 31, 2021 (Successor) $ 391,089 $ ( 136,686 ) $ ( 4,649 ) $ 541 $ ( 2,625 ) $ 6,270 $ 253,940

Pyxus International, Inc.

and Subsidiaries

Consolidated Statements of Stockholders’ Equity (continued)

Attributable to Pyxus International, Inc.

Accumulated Other Comprehensive Loss

(in thousands) Common

Stock Retained

Deficit Currency

4 unchanged sentences

Stockholders’

Balance, March 31, 2019 $ 468,936 $ ( 223,884 ) $ ( 21,979 ) $ ( 36,749 ) $ ( 2,614 ) $ 8,309 $ 192,019

Balance, March 31, 2019 (Predecessor) $ 468,936 $ ( 223,884 ) $ ( 21,979 ) $ ( 36,749 ) $ ( 2,614 ) $ 8,309 $ 192,019

Net loss attributable to Pyxus International, Inc.

2 unchanged sentences

Other comprehensive (loss) income, net of tax — — ( 430 ) 311 369 30 280

Balance, June 30, 2019 469,365 ( 285,681 ) ( 22,409 ) ( 36,438 ) ( 2,245 ) 7,973 130,565

Balance, June 30, 2019 (Predecessor) 469,365 ( 285,681 ) ( 22,409 ) ( 36,438 ) ( 2,245 ) 7,973 130,565

Net loss attributable to Pyxus International, Inc.

4 unchanged sentences

Other comprehensive (loss) income, net of tax — — ( 1,925 ) ( 1,701 ) 1,428 ( 19 ) ( 2,217 )

Balance, September 30, 2019 469,736 ( 302,199 ) ( 24,334 ) ( 38,139 ) ( 817 ) 7,388 111,635

Balance, September 30, 2019 (Predecessor) 469,736 ( 302,199 ) ( 24,334 ) ( 38,139 ) ( 817 ) 7,388 111,635

Net loss attributable to Pyxus International, Inc.

3 unchanged sentences

Other comprehensive income, net of tax — — 1,789 1,111 576 48 3,524

Balance, December 31, 2019 469,450 ( 324,192 ) ( 22,512 ) ( 37,028 ) ( 241 ) 6,557 92,034

Balance, December 31, 2019 (Predecessor) 469,450 ( 324,192 ) ( 22,512 ) ( 37,028 ) ( 241 ) 6,557 92,034

Net loss attributable to Pyxus International, Inc.

2 unchanged sentences

Other comprehensive (loss) income, net of tax — — 3 ( 126 ) 772 ( 112 ) 537

Balance, March 31, 2020 $ 469,677 $ ( 488,545 ) $ ( 22,509 ) $ ( 37,154 ) $ 531 $ 1,692 $ ( 76,308 )

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Statements of Consolidated Stockholders’ Equity (continued)

Balance, March 31, 2020 (Predecessor) $ 469,677 $ ( 488,545 ) $ ( 22,509 ) $ ( 37,154 ) $ 531 $ 1,692 $ ( 76,308 )

Pyxus International, Inc.

and Subsidiaries

Consolidated Statements of Stockholders’ Equity (continued)

Attributable to Pyxus International, Inc.

8 unchanged sentences

Stockholders’

Balance, March 31, 2018 $ 473,476 $ ( 156,348 ) $ ( 12,682 ) $ ( 32,580 ) $ — $ 10,962 $ 282,828

Balance, March 31, 2018 (Predecessor) $ 473,476 $ ( 156,348 ) $ ( 12,682 ) $ ( 32,580 ) $ — $ 10,962 $ 282,828

Net loss attributable to Pyxus International, Inc.

3 unchanged sentences

Other comprehensive (loss) income, net of tax — — ( 5,136 ) 366 ( 1,496 ) ( 175 ) ( 6,441 )

Balance, June 30, 2018 473,771 ( 157,107 ) ( 17,818 ) ( 32,214 ) ( 1,496 ) 15,664 280,800

Balance, June 30, 2018 (Predecessor) 473,771 ( 157,107 ) ( 17,818 ) ( 32,214 ) ( 1,496 ) 15,664 280,800

Net loss attributable to Pyxus International, Inc.

3 unchanged sentences

Other comprehensive (loss) income, net of tax — — ( 257 ) 973 780 251 1,747

Balance, September 30, 2018 474,221 ( 211,741 ) ( 18,075 ) ( 31,241 ) ( 716 ) 15,707 228,155

Balance, September 30, 2018 (Predecessor) 474,221 ( 211,741 ) ( 18,075 ) ( 31,241 ) ( 716 ) 15,707 228,155

Net (loss) income attributable to Pyxus International, Inc.

5 unchanged sentences

Other comprehensive loss, net of tax — — ( 1,787 ) ( 877 ) ( 1,591 ) ( 523 ) ( 4,778 )

Balance, December 31, 2018 474,603 ( 213,905 ) ( 19,862 ) ( 35,049 ) ( 2,307 ) 14,887 218,367

Balance, December 31, 2018 (Predecessor) 474,603 ( 213,905 ) ( 19,862 ) ( 35,049 ) ( 2,307 ) 14,887 218,367

Net (loss) income attributable to Pyxus International, Inc.

4 unchanged sentences

Other comprehensive (loss) income, net of tax — — ( 1,656 ) ( 1,700 ) ( 307 ) 696 ( 2,967 )

Balance, March 31, 2019 $ 468,936 $ ( 223,884 ) $ ( 21,979 ) $ ( 36,749 ) $ ( 2,614 ) $ 8,309 $ 192,019

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Statements of Consolidated Stockholders’ Equity (continued)

Attributable to Pyxus International, Inc.

Accumulated Other Comprehensive Loss

(in thousands) Common

Stock Retained

Deficit Currency

Adjustment Pensions,

Net of Tax Derivatives,

Net of Tax Noncontrolling

Interest Total

Stockholders’

Balance, March 31, 2017 $ 472,349 $ ( 208,784 ) $ ( 22,293 ) $ ( 36,654 ) $ ( 1,100 ) $ 3,192 $ 206,710

Net loss attributable to Pyxus International, Inc.

— ( 32,543 ) — — — ( 90 ) ( 32,633 )

Stock-based compensation 291 — — — — — 291

Other comprehensive income (loss), net of tax — — 3,742 459 ( 562 ) — 3,639

Balance, June 30, 2017 472,640 ( 241,327 ) ( 18,551 ) ( 36,195 ) ( 1,662 ) 3,102 178,007

Net income (loss) attributable to Pyxus International, Inc.

— 1,024 — — — ( 68 ) 956

Restricted stock surrender ( 2 ) — — — — — ( 2 )

Stock-based compensation 253 — — — — — 253

Other comprehensive income, net of tax — — 2,349 459 71 — 2,879

Balance, September 30, 2017* 472,892 ( 240,304 ) ( 16,202 ) ( 35,736 ) ( 1,591 ) 3,033 182,092

Net income (loss) attributable to Pyxus International, Inc.

— 88,456 — — — ( 130 ) 88,326

Restricted stock surrender ( 6 ) — — — — — ( 6 )

Stock-based compensation 270 — — — — — 270

Purchase of additional investment in subsidiary — — — — — 264 264

Other comprehensive income, net of tax — — 726 458 592 — 1,776

Balance, December 31, 2017 473,156 ( 151,848 ) ( 15,476 ) ( 35,278 ) ( 999 ) 3,167 272,722

Net loss attributable to Pyxus International, Inc.

— ( 4,501 ) — — — ( 242 ) ( 4,743 )

Restricted stock surrender ( 223 ) — — — — — ( 223 )

Stock-based compensation 544 — — — — — 544

Purchase of additional investment in subsidiary — — — — — 8,497 8,497

Other comprehensive income (loss), net of tax — — 2,794 2,698 999 ( 461 ) 6,030

Balance, March 31, 2018* $ 473,476 $ ( 156,348 ) $ ( 12,682 ) $ ( 32,580 ) $ — $ 10,962 $ 282,828

*Amounts may not equal column totals due to rounding

Balance, March 31, 2019 (Predecessor) $ 468,936 $ ( 223,884 ) $ ( 21,979 ) $ ( 36,749 ) $ ( 2,614 ) $ 8,309 $ 192,019

See "Notes to Consolidated Financial Statements"

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Pyxus International, Inc.

and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended March 31,

(in thousands) 2020 2019 2018

Successor Predecessor

(in thousands) Seven months ended March 31, 2021 Five months ended August 31, 2020 Year ended March 31, 2020 Year ended March 31, 2019

Operating activities:

2 unchanged sentences

Depreciation and amortization 11,839 16,580 35,828 35,747

Loss on deconsolidation of subsidiaries 70,242 — — —

Debt amortization/interest 11,272 4,862 12,875 11,843

Debt retirement benefit — ( 1,753 ) ( 2,975 )

(Gain) loss on foreign currency transactions ( 4,512 ) ( 11,077 ) 14,105 ( 2,383 )

Asset impairment charges 4,001 213 34,813 891

Remeasurement loss (gain) on foreign currency transactions 14,105 ( 2,383 ) 5,396

Gain on sale of property, plant, and equipment ( 6,539 ) ( 2,080 ) ( 2,704 )

Gain on insurance proceeds received for destroyed buildings and equipment ( 18 ) ( 6,038 ) —

Bad debt expenses (recovery) 5,700 ( 1,037 ) 8,644 6,821

Loss (income) from unconsolidated affiliates, net of dividends 820 ( 3,936 ) ( 6,345 )

Stock-based compensation 1,231 1,544 1,189

(Income) loss from unconsolidated affiliates, net of dividends ( 11,735 ) 2,915 820 ( 3,936 )

Reorganization items — ( 130,215 ) — —

Changes in operating assets and liabilities, net:

6 unchanged sentences

Current derivative asset ( 917 ) — — ( 3,495 )

Prepaids ( 16,945 ) ( 1,916 ) ( 9,994 )

Prepaid expenses 6,941 ( 2,812 ) ( 16,945 ) ( 1,916 )

Income taxes 457 4,188 2,462 ( 2,302 )

4 unchanged sentences

Purchases of property, plant, and equipment ( 16,628 ) ( 7,757 ) ( 61,063 ) ( 47,539 )

Intangibles, including internally developed software costs ( 3,236 ) ( 3,105 ) ( 231 )

Proceeds from sale of property, plant, and equipment 947 311 9,677 5,148

1 unchanged sentence

Loans to unconsolidated affiliates — — ( 5,250 ) —

Insurance proceeds received for destroyed buildings and equipment 18 6,465 —

Payments to acquire equity method investments — — ( 10,000 )

Payments to acquire controlling interests, net of cash acquired — ( 8,692 ) ( 32,687 )

DIP loan to deconsolidated subsidiary ( 5,790 ) — — —

Payments to acquire businesses, net of cash acquired — ( 4,805 ) — —

Payments to acquire additional interests, net of cash acquired — — — ( 8,692 )

Other, net ( 767 ) ( 420 ) ( 3,005 ) 3,391

Net cash provided by investing activities 71,824 61,657 181,353 195,274

Years Ended March 31,

(in thousands) 2020 2019 2018

Financing activities:

Net proceeds (repayments) of short-term borrowings ( 83,895 ) ( 99,969 ) 122,524 23,043

Proceeds from DIP facility — 206,700 — —

Repayment of DIP facility — ( 213,418 ) — —

Proceeds from term loan facility — 213,418 — —

Proceeds from 10.0 % first lien notes

— 280,844 — —

Repayment of 8.5 % first lien notes

— ( 280,844 ) — —

Proceeds from revolving loan facilities 37,500 27,438 44,900 —

1 unchanged sentence

Repayment of long-term borrowings ( 119 ) ( 93 ) ( 335 ) ( 25,132 )

Repayment of revolving loan facilities — ( 44,900 ) — —

Repayment of second lien notes — ( 1,199 ) — —

Share repurchases — ( 1,000 ) — —

Debt issuance costs ( 3,291 ) ( 8,486 ) ( 6,313 ) ( 5,285 )

Additional investment in consolidated affiliates — — ( 921 ) ( 13,470 )

DIP financing fees — ( 9,344 ) — —

Other debt restructuring costs — ( 7,574 ) — —

Other, net ( 183 ) ( 472 ) ( 480 ) ( 788 )

Net cash provided (used) by financing activities 159,875 ( 21,632 ) ( 103,078 )

Net cash (used) provided by financing activities ( 49,318 ) 63,669 159,875 ( 21,632 )

Effect of exchange rate changes on cash 1,706 1,628 ( 7,333 ) 4,416

Decrease in cash, cash equivalents, and restricted cash ( 20,263 ) ( 55,107 ) ( 24,727 ) ( 70,223 )

Cash and cash equivalents at beginning of year 192,043 264,660 473,110

Restricted cash at beginning of year 5,767 3,373 2,309

Cash, cash equivalents, and restricted cash at end of year $ 173,083 $ 197,810 $ 268,033

Cash and cash equivalents at beginning of period 93,138 170,208 192,043 264,660

Restricted cash at beginning of period 24,838 2,875 5,767 3,373

Cash, cash equivalents, and restricted cash at end of period $ 97,713 $ 117,976 $ 173,083 $ 197,810

Other information:

2 unchanged sentences

Cash received from interest ( 1,444 ) ( 1,356 ) ( 4,066 ) ( 3,845 )

Noncash investing activities:

Cash paid for reorganization items — 7,314 — —

Noncash investing and financing activities:

Purchases of property, plant, and equipment included in accounts payable 1,060 1,759 2,087 7,095

Sales of property, plant, and equipment included in notes receivable 81 304 334 1,957

Beneficial interests obtained in exchange for transferring trade receivables in a securitization transaction 229,751 247,386 281,601

Noncash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction 105,118 66,821 229,751 247,386

Cancellation of second lien notes — ( 634,487 ) — —

See "Notes to Consolidated Financial Statements"

Old Holdco, Inc.

(formerly Pyxus International, Inc.) and Subsidiaries

Pyxus International, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except per share data)

Basis of Presentation and Significant Accounting Policies

New Accounting Standards

Emergence from Voluntary Reorganization under Chapter 11

Fresh Start Reporting

CCAA Proceeding and Deconsolidation of Subsidiaries

Revenue Recognition

Other Income, Net

Restructuring and Asset Impairment Charges

(Loss) Earnings Per Share

Cash, Cash Equivalents, and Restricted Cash

Inventories, Net

Advances to Tobacco Suppliers, Net

Equity Method Investments

Variable Interest Entities

Goodwill and Other Intangible Assets, Net

Property, Plant, and Equipment, Net

Debt Arrangements

Securitized Receivables

Derivative Financial Instruments

Fair Value Measurements

Pension and Other Postretirement Benefits

Contingencies and Other Information

Other Comprehensive Loss

Related Party Transactions

Segment Information

Subsequent Event s

Basis of Presentation and Summary of Significant Accounting Policies

The Company is a global agricultural company with more than 145 years of experience delivering value-added products and services to businesses and customers.

Pyxus International, Inc.

(the “Company” or “Pyxus”) is a global agricultural company with more than 145 years of experience delivering value-added products and services to businesses and customers.

The Company is a trusted provider of responsibly sourced, independently verified, sustainable, and traceable products and ingredients.

As the context requires, the “Company” and “Pyxus” also includes the consolidated subsidiaries of Pyxus International, Inc.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission applicable to annual reporting on Form 10-K.

Going Concern

In an effort to address the Company's maturing long-term debt, the Company contemplated a number of actions, including reviewing of strategic business alternatives, evaluating and developing plans for a partial monetization of its interests in certain subsidiaries in the Other Products and Services segment, and implementing a global operations efficiency program.

After implementing certain of these actions, evaluating other financing alternatives, and the impact of the COVID-19 pandemic, the Company determined that it will not have liquidity to fund near-term operations.

As a result, the Company and certain of its subsidiaries commenced the Chapter 11 Cases on June 15, 2020.

"Subsequent Events" to the "Notes to Consolidated Financial Statements" for additional information, including the definitions of certain capitalized terms used in Note 1.

The Company and such subsidiaries operated as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 of the Bankruptcy Code and the orders of the Bankruptcy Court until their emergence from bankruptcy.

The Company’s other subsidiaries were not part of the Chapter 11 Cases, and have continued to operate in the ordinary course of business.

The accompanying consolidated financial statements and related notes have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.

The accompanying consolidated financial statements do not include adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the Chapter 11 Cases.

As a result of the Company's financial condition and the near-term maturities of substantial indebtedness, substantial doubt existed as of March 31, 2020 that the Company would be able to continue as a going concern.

Based on the confirmation of the Plan by the Bankruptcy Court and the effectiveness of the Plan, there is no longer substantial doubt about the Company’s ability to continue as a going concern.

The Company has been closely monitoring the impact of the disease caused by the novel coronavirus ("COVID-19") on the Company and its workforce since January 2020.

In March 2020, the World Health Organization recognized the outbreak of COVID-19 as a global pandemic.

The COVID-19 pandemic and government actions implemented to contain the further spread of COVID-19 have severely restricted economic activity around the world.

The Company’s businesses have been classified as an “essential” business under governmental shelter-in-place and similar orders in many of the jurisdictions in which we operate.

As such, the Company is still able to produce and sell products.

The Company’s production facilities are still operating but, in some instances, at lower production levels than planned due to the shelter in-place mandates.

While the Company’s supply chains and distribution channels have experienced delays, the Company currently has adequate supply of products to meet forecasted demand for fiscal 2021.

The Company implemented various measures to reduce the spread of the virus including working from home, restricting visitors to production locations, splitting production workforce, reducing the on-site production workforce levels, screening workers before they enter facilities, implementing social distancing, and encouraging employees to adhere to prevention measures recommended by the Center for Disease Control and the World Health Organization.

The Company applied Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations (“ASC 852”) in preparing the consolidated financial statements.

For periods subsequent to the Chapter 11 filing, ASC 852 requires distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business.

Upon the effectiveness of the Plan and the emergence of the Debtors from the Chapter 11 Cases, the Company determined it qualified for fresh start reporting under ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes on the Effective Date (as defined below).

The Company elected to apply fresh start reporting using a convenience date of August 31, 2020 (the “Fresh Start Reporting Date”).

The Company evaluated and concluded that the events between August 24, 2020 and August 31, 2020 were not material to the Company's financial reporting on both a quantitative or qualitative basis.

Refer to “ Note 4.

Fresh Start Reporting ” for additional information.

Due to the application of fresh start reporting, the pre-emergence and post-emergence periods are not comparable.

The lack of comparability is emphasized by the use of a “black line” to separate the Predecessor and Successor periods in the consolidated financial statements and footnote tables.

References to “Successor” relate to our financial position and results of operations after August 31, 2020.

References to “Predecessor” relate to our financial position and results of operations on or before August 31, 2020.

Bankruptcy Proceedings

On June 15, 2020 (the "Petition Date"), Old Holdco, Inc.

(then named Pyxus International, Inc.) (“Old Pyxus”) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC, and GSP Properties, LLC (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring (the “Restructuring”) of Old Pyxus’ secured debt.

On August 21, 2020, the Bankruptcy Court issued an order (the “Confirmation Order”) confirming the Amended Joint Prepackaged Chapter 11 Plan of Reorganization (the “Plan”) filed by the Debtors in the Chapter 11 Cases.

On August 24, 2020 (the “Effective Date”), the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases.

In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc., which is a subsidiary of the Company.

Pursuant to the Confirmation Order and the Plan, at the effectiveness of the plan all outstanding shares of common stock, and rights to acquire the common stock, of Old Pyxus were cancelled and the shares of common stock of the Company were delivered to certain creditors of Old Pyxus.

Refer to “ Note 3.

Emergence from Voluntary Reorganization under Chapter 11 ” for additional information.

Reorganization Items

Expenditures, gains, and losses that were realized or incurred by the Debtors subsequent to the Petition Date and as a direct result of the Chapter 11 Cases are reported as reorganization items in the consolidated statements of operations.

Reorganization items are primarily composed of write-off of unamortized debt issuance costs and discount, fresh start reporting adjustments, legal, valuation, and consulting professional fees pertaining to the Chapter 11 Cases, United States trustee fees, DIP financing fees, other debt restructuring costs, gain on settlement of liabilities subject to compromise, and the issuance of exit facility shares.

We continue to monitor the impact of the COVID-19 outbreak on our Company and our workforce.

In March 2020, the World Health Organization recognized the COVID-19 outbreak as a global pandemic.

The COVID-19 pandemic and government actions implemented to contain further spread of COVID-19 have severely restricted economic activity around the world.

Our production facilities are still operating but, in some instances, at lower production levels than planned due to social distancing requirements and safety practices implemented in accordance with Company policy.

We continue to monitor the measures we implemented to reduce the spread of COVID-19 and make updates and improvements, as necessary.

While our supply chains and distribution channels continue to experience delays due to COVID-19, we currently have adequate supply of products to meet the near-term forecasted demand.

In addition, we have experienced procedural delays during fulfillment of customer orders for leaf tobacco due to COVID-19.

Broad economic factors from the COVID-19 pandemic, including increasing unemployment rates and reduced consumer spending, may extend billing and collection cycles.

Deterioration in the collectability of accounts receivable from extended billing and collection cycles would adversely affect our results of operations, financial condition, and cash flows, leading to working capital constraints.

If general economic conditions in the markets in which we operate continue to deteriorate or remain uncertain for an extended period of time, our business, results of operations, financial condition, and cash flows will be adversely affected.

Due to the scope of our operations, including emerging markets, and our sale to customers around the world, the impact of the COVID-19 pandemic on our operations and the demand for our products may not coincide with impacts experienced in the United States in the event that the impacts in the United States improve over time due to increased vaccinations or improved medical treatments.

Accordingly, to the extent that the impact of the COVID-19 pandemic in the United States may improve over time, results of operations may continue to be adversely affected by COVID-19 impacts in other areas of the world.

We cannot predict the extent or duration of the COVID pandemic, the effects of the COVID pandemic on the global, national or local economy, or the effect of the COVID pandemic on our business, financial position, results of operations, and cash flows.

CCAA Proceeding

On January 21, 2021, Figr Norfolk Inc.

(“Figr Norfolk”) and Figr Brands, Inc.

(“Figr Brands”), which are indirect subsidiaries of the Company, and Canada’s Island Garden Inc.

(“Figr East,” and together with Figr Norfolk and Figr Brands, the “Canadian Cannabis Subsidiaries”), which, prior to its sale on June 28, 2021 was an indirect subsidiary of the Company, applied for relief from their respective creditors pursuant to Canada’s Companies’ Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice (Commercial List) (the “Canadian Court”) in Ontario, Canada as Court File No.

CV-21-00655373-00CL (the “CCAA Proceeding”).

On January 21, 2021 (the “Order Date”), upon application by the Canadian Cannabis Subsidiaries, the Canadian Court issued an order for creditor protection of the Canadian Cannabis Subsidiaries pursuant to the provisions of the CCAA and the appointment of FTI Consulting Canada Inc.

to serve as the Canadian Court-appointed monitor of the Canadian Cannabis Subsidiaries during the pendency of the CCAA Proceeding (the “Monitor”).

The Canadian Cannabis Subsidiaries collectively operate businesses, under licenses issued by Health Canada, for the production and sale of cannabis products to retailers in Canada.

The Canadian Cannabis Subsidiaries are the only subsidiaries of the Company engaged in such business.

Refer to “ Note 5.

CCAA Proceeding and Deconsolidation of Subsidiaries ” for additional information.

Deconsolidation

In accordance with ASC 810, Consolidation ("ASC 810"), a parent company must deconsolidate a subsidiary as of the date the parent ceases to have a controlling financial interest in that subsidiary, or if the parent no longer has the power to direct the activities that most significantly affect the subsidiary’s economic performance.

Due to the CCAA Proceeding, the Company lost control of the Canadian Cannabis Subsidiaries and they were deconsolidated from the Company's financial statements as of the Order Date due to the CCAA Proceeding and the appointment of the Monitor.

Prior to the deconsolidation of the Canadian Cannabis Subsidiaries, they comprised an operating segment within the Other Products and Services reportable segment.

Refer to "Note 5.

CCAA Proceeding and Deconsolidation of Subsidiaries" for additional information.

Related Party Relationship

The commencement of the CCAA Proceeding and the subsequent deconsolidation results in transactions with the Canadian Cannabis Subsidiaries no longer being eliminated in consolidation.

As such, transactions between the Company and the Canadian Cannabis Subsidiaries are treated as related party transactions.

Refer to "Note 28.

Related Party Transactions" for transactions between the Company and the Canadian Cannabis Subsidiaries from January 21, 2021 to March 31, 2021.

Discontinued Operations

The Company determined the Canadian Cannabis Subsidiaries do not meet the qualifications as outlined under ASC 205-20, Discontinued Operations ("ASC 205-20") to be reported as discontinued operations.

The Company reached this conclusion as the Canadian Cannabis Subsidiaries do not represent, individually or in the aggregate, a ‘strategic shift’ that has a major effect on the consolidated operations and financial results of the Company.

Principles of Consolidation

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As a result, the majority of these variable interest entities are not consolidated.

The Company holds a majority voting interest and is the primary beneficiary of its variable interest in Humble Juice Co., LLC, a consolidated entity for which the related intercompany accounts and transactions have been eliminated.

The Company holds a majority voting interest and is the primary beneficiary of its variable interest in Criticality and Humble Juice, consolidated entities for which the related intercompany accounts and transactions have been eliminated.

Creditors of the Company’s variable interest entities do not have recourse against the general credit of the Company.

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Actual results may differ from the Company's estimates and assumptions.

Estimates are used in accounting for, among other things, revenue recognition, pension and postretirement health care benefits, inventory reserves, accounts receivable reserves, 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, fair value determinations of financial assets and liabilities, including derivatives, securitized beneficial interests, and counterparty risk.

Estimates are used in accounting for, among other things, determining the entity's enterprise value upon emergence from the Chapter 11 Cases, revenue recognition, pension and postretirement health care benefits, inventory reserves, accounts receivable reserves, 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 an d uncertain income tax positions, intrastate tax credits in Brazil, fair value determinations of financial assets and liabilities, including derivatives, securitized beneficial interests, and counterparty risk.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current year presentation in the restructuring and asset impairment charges in the consolidated statements of cash flows, and the components within inventory.

Subsequent to the issuance of the fiscal year ended March 31, 2019 financial statements, management identified a classification error of an additional investment in consolidated affiliates in the consolidated statements of cash flows.

During the fiscal year ended March 31, 2020, the Company restated its consolidated statements of cash flows to correct the misclassification.

The misclassification resulted in an understatement of net cash provided by investing activities and an understatement of net cash used by financing activities of $ 13,470 in the consolidated statement of cash flows related to additional investments in consolidated affiliates.

This restatement did not affect the consolidated balance sheets, consolidated statements of operations, or consolidated statements of stockholder's equity for any period.

Certain prior period amounts have been reclassified to conform to the current year presentation in the consolidated statements of cash flows.

Segment Information

The Company's operations are managed and reported in ten operating segments that are organized by product category and geographic area and aggregated into three reportable segments for financial reporting purposes:

As a result of the deconsolidation of the Canadian Cannabis Subsidiaries, as of March 31, 2021, t he Company's operations are managed and reported in nine operating segments that are organized by product category and geographic area and aggregated into three reportable segments for financial reporting purposes:

Leaf - North America, Leaf - Other Regions, and Other Products and Services.

In reviewing operations, the Company concluded that the economic characteristics of Leaf - North America operations were dissimilar from the other Leaf geographic operating segments in Africa, Asia, Europe, and South America, which have been consolidated into one reportable segment, "Leaf - Other Regions".

The five other operating segments are aggregated into the "Other Products and Services" reportable segment as they do not meet the quantitative thresholds to be individually reportable.

The four other operating segments are aggregated into the "Other Products and Services" reportable segment as they do not meet the quantitative thresholds to be individually reportable.

The Other Products and Services segment included, for periods prior to the Order Date, the Canadian Cannabis Subsidiaries.

These segment groupings are consistent with information used by the chief operating decision maker to assess performance and allocate resources.

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Leaf - Other Regions sells a small amount of processed but un-threshed flue-cured and burley tobacco in loose-leaf and bundle form to certain customers.

• Other Products and Services primarily consists of cannabis and e-liquid products.

Cannabis was legalized for adult use in Canada on October 17, 2018.

The cannabis products of the Company's Canadian subsidiaries are sold primarily to municipally-owned retailers in the provinces of Prince Edward Island, Ontario, New Brunswick, and Nova Scotia in the Canadian market.

E-liquids products are sold through retailers and directly to consumers via e-commerce platforms and other distribution channels.

• Other Products and Services primarily consists of e-liquid products and industrial hemp and included, for periods prior to the Order Date, the Canadian Cannabis Subsidiaries.

E-liquids and industrial hemp products are sold through retailers and directly to consumers via e-commerce platforms and other distribution channels.

The Canadian Cannabis

Subsidiaries collectively operate businesses, under licenses issued by Health Canada, for the production and sale of cannabis products to retailers in Canada.

The Company evaluates the operating performance of its segments based upon information included in management reports.

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Contract costs primarily include labor, material, shipping and handling, and overhead expenses.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company records product and supply contract intangible assets for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year, and if such costs are material.

The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less.

Capitalized costs to obtain a contract are classified as other intangible assets, net in the consolidated balance sheets.

Contract Balances

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Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days.

The Company applied a practical expedient not to adjust the transaction price for the effects of financing components when the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service is one year or less.

As a result, where the timing of revenue recognition differs from the timing of payment, the Company determined its contracts do not include a significant financing component.

The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the trade receivables, net balance.

The Company determines the allowance based on historical experience and other currently available information.

The provision for doubtful accounts is recorded in selling, general, and administrative expenses in the statements of consolidated operations.

The Company's trade receivables do not bear interest, and they are recorded at the invoiced amount less an estimated allowance for expected credit losses.

In addition to estimating an allowance based on specific identification of certain receivables that have a higher probability of not being paid, the Company also records an estimate for expected credit losses for the remaining receivables in the aggregate using a loss-rate method that considers historical bad debts, age of customer receivable balances, and current customer receivable balances.

Additionally, the Company considers future reasonable and supportable forecasts of economic conditions to adjust historical loss rate percentages as necessary.

Balances are written-off when determined to be uncollectible.

T he provision for expected credit losses is recorded in selling, general, and administrative expenses in the consolidated statements of operations.

Significant Judgments

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Shipping and handling fees that are billed to customers are recognized in sales and other operating revenues and the associated shipping and handling costs are recognized in cost of goods and services sold in the statements of consolidated operations.

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 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.

As 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 as 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 such 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 estimates of taxable income are significantly reduced or available tax planning strategies are no longer viable.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.

Cash and Cash Equivalents

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LCM and obsolescence inventory write-downs are recorded in cost of goods and services sold within the consolidated statements of operations.

Advances to Suppliers, Net

The Company purchases seeds, fertilizer, pesticides, and other products related to growing tobacco and advances them to farmers to assist in crop production.

These seasonal advances are short term, represent prepaid inventory, and are recorded as advances to suppliers.

Advances to Tobacco Suppliers, Net

The Company purchases seeds, fertilizer, pesticides, and other products related to growing tobacco and advances them to tobacco suppliers to assist in crop production.

These seasonal advances are short term, represent prepaid inventory, and are recorded as advances to tobacco suppliers.

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 from advances to unprocessed inventory.

The Company also has noncurrent advances, which generally represent the cost of advances to farmers for infrastructure, such as curing barns, recovered through the delivery of tobacco to the Company by the suppliers.

Suppliers may not be able to settle the entire amount of advances due in a given year.

In these situations, the Company may allow the suppliers to deliver tobacco over future crop years to recover its advances.

Noncurrent advances to suppliers are recorded in other noncurrent assets in the consolidated balance sheets.

The Company accounts for its advances to suppliers using a cost accumulation model, which reports advances at the lower of cost or recoverable amounts exclusive of the mark-up and interest.

The Company also has noncurrent advances, which generally represent the cost of advances to tobacco suppliers for infrastructure, such as curing barns, recovered through the delivery of tobacco to the Company by the tobacco suppliers.

Tobacco suppliers may not be able to settle the entire amount of advances due in a given year.

In these situations, the Company may allow the farmers to deliver tobacco over future crop years to recover its advances.

Noncurrent advances to tobacco suppliers are recorded in other noncurrent assets in the consolidated balance sheets.

The Company accounts for its advances to tobacco suppliers using a cost accumulation model, which reports 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.

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Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of net assets acquired and is allocated to the appropriate reporting unit when acquired.

The Company's goodwill was primarily recorded upon emergence from the Chapter 11 Cases in accordance with ASC 852.

Goodwill represents the excess of reorganization value over fair value of identified assets and liabilities allocated to the appropriate each reporting unit.

A reporting unit is an operating segment, or one level below an operating segment, referred to as a component.

The components within the Company’s operating segments are aggregated into ten reporting units due to their similar economic characteristics.

The components within the Company’s operating segments are aggregated into nine reporting units due to their similar economic characteristics.

Goodwill is not subject to amortization and is tested for impairment annually, on the first day of the fourth quarter of the fiscal year, or whenever events and circumstances indicate that impairment may have occurred.

The Company utilized a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

In performing the Company’s quantitative assessments, the Company utilized the discounted cash flow (“DCF”) method of the income approach.

The future cash flows of the Company’s reporting units were projected based on estimates of future revenues, gross margins, operating income, excess net working capital, capital

expenditures, and other factors.

The Company utilized estimated revenue growth rates and cash flow projections.

The discount rates utilized in the DCF method were based on a weighted-average cost of capital ("WACC") determined from relevant market comparisons and adjusted for specific reporting unit risks, country risk premiums, and capital structure.

A terminal value estimated growth rate was applied to the final year of the projected period and reflected the Company’s estimate of perpetual growth.

The Company then calculated a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach.

The Company then reconciled the estimated fair value of its reporting units to its total public market capitalization as of the valuation date.

An implied control premium was calculated based on the Company’s stock price as of the valuation date and compared to control premiums paid in recent industry transactions for reasonableness.

The carrying amount of goodwill exceeded its fair value.

As a result, the Company recorded an impairment charge.

The Company utilizes a qualitative assessment to evaluate whether it is more likely than not that the estimated fair value of a reporting unit is less than its carrying value.

If the Company's qualitative assessment indicates that it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is performed.

Otherwise, the Company performs a quantitative assessment using the discounted cash flow (“DCF”) method of the income approach.

The future cash flows of the Company’s reporting units are projected based on estimates of future revenues, gross margins, operating income, excess net working capital, capital expenditures, and other factors.

The Company utilizes estimated revenue growth rates and cash flow projections.

The discount rates utilized in the DCF method are based on a weighted-average cost of capital determined from relevant market comparisons and adjusted for specific reporting unit risks, country risk premiums, and capital structure.

A terminal value estimated growth rate is applied to the final year of the projected period and reflects the Company’s estimate of perpetual growth.

The Company then calculates a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach.

The Company has intangible assets with definite useful lives.

These intangible assets are assessed annually and tested for impairment whenever factors indicate that the carrying amount may not be recoverable.

Production and supply contracts are amortized based on the expected realization of the benefit over the term of the contracts ranging from three to five years .

The trade name, customer relationship, and license intangibles are amortized on a straight-line basis over eight , eight to twenty years , and five to twenty years , respectively.

The trade name, customer relationship, technology, and license intangibles are amortized on a straight-line basis over twenty , eight to twenty years , fifteen , and five to 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 three to five years once the software testing is complete.

Technology includes internally developed software, which is amortized on a straight-line basis over three to 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.

Amortization expense associated with finite-lived intangible assets is recorded in selling, general, and administrative expenses in the consolidated statements of operations, except for production and supply contracts which is recorded against the associated revenues.

Amortization expense associated with finite-lived intangible assets is recorded in selling, general, and administrative expenses in the consolidated statements of operations.

The Company has operating leases for land, buildings, automobiles, and other equipment that expire at various dates through 2040.

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Property, plant, and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets.

Buildings are depreciated over a range of 20 to 30 years.

Machinery and equipment are depreciated over a range of three to ten years .

Buildings are depreciated over a range of nine to forty years .

Machinery and equipment are depreciated over a range of two to nineteen years .

Repairs and maintenance costs are expensed as incurred.

The cost of major improvements are capitalized.

Upon sale or disposition of an asset, the cost and related accumulated depreciation are removed from the balance sheet accounts and the resulting gain or loss is included in other income, net in the consolidated statements of operations.

Upon sale or disposition of an asset, the cost and related accumulated depreciation are removed from the balance sheet accounts and the resulting gain or loss is included in other income (expense), net in the consolidated statements of operations.

Long-lived assets are tested for recoverability 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 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.

Capitalized Interest

Interest is capitalized on significant construction in progress using the weighted average interest rate during the capitalization period.

The evaluation is performed at the lowest level of identifiable cash flows 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.

The Company's guarantees are primarily related to bank loans to suppliers for crop production financing.

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Rural credit financing repayment is due to local banks based on contractual due dates.