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We may not be able to achieve our stated goals, which may adversely affect our liquidity.
−Removed: Even though the Plan has been consummated, we continue to face a number of risks, such as changes in economic conditions, continued impacts of the COVID-19 pandemic, changes in the leaf tobacco market and the markets for our other products, other changes in demand for our products and increasing expenses.
−Removed: We may need to raise additional funds through public or private debt or equity financing or other various means to fund our business, including short-term operating credit lines to fund the needs of our non-U.S.
−Removed: local leaf tobacco operations.
+Added: We face a number of risks, such as changes in economic conditions, continued impacts of the COVID-19 pandemic, changes in the leaf tobacco market, changes in regulations affecting the tobacco industry, other changes in demand for our products, and increasing expenses.
+Added: We may need to raise additional funds through public or private debt or equity financing or other various
+Added: means to fund our business, both at a holding-company level and the local short-term credit lines that fund the operating needs of our non-U.S.
+Added: local leaf tobacco subsidiaries.
Our access to necessary financing may be limited, if it is available at all.
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We anticipate periods in the next twelve months during which our liquidity needs will approach the levels of our anticipated available cash and permitted borrowings under our credit facilities.
−Removed: Developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations (including as a result of delays with respect to the anticipated timing of shipments of leaf tobacco, whether due to the impact of COVID-19 or customer preferences) and the availability of capital resources (including an inability to renew or refinance seasonal lines of credit), may result in a deficiency in liquidity.
+Added: Developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations (including as a result of delays with respect to the anticipated timing of shipments of leaf tobacco, whether due to the impact of COVID-19, customer preferences, or other reasons) and the availability of capital resources (including an inability to renew or refinance short-term operating lines of credit and other short-term indebtedness), may result in a deficiency in liquidity.
To address a potential liquidity deficiency, we may continue to undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow.
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Moreover, as these facilities mature, local lenders may not renew them or otherwise offer replacement financing facilities.
−Removed: Since the commencement of the Chapter 11 Cases, the terms and conditions on which certain local lenders have agreed to offer short-term operating credit lines have become more restrictive.
If local lenders lose confidence in us, they may cease making loans or demand payment of outstanding loans with respect to uncommitted facilities or, with respect to committed facilities, decline to renew or extend existing facilities, or require stricter terms and conditions with respect to future facilities.
−Removed: We may not find these terms and conditions acceptable or they may overly restrict our ability to conduct our
−Removed: businesses successfully.
+Added: We may not find these terms and conditions acceptable or they may overly restrict our ability to conduct our businesses successfully.
An inability to maintain adequate financing to fund our non-U.S.
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As of March 31, 2022, we had approximately $1,066.9 million in aggregate principal amount of indebtedness.
−Removed: This indebtedness included (i) approximately $67.5 million of outstanding borrowings pursuant to an Exit ABL Credit Agreement (the “ABL Credit Agreement”), dated as of August 24, 2020 by and among, amongst others, our Pyxus Holdings, Inc.
−Removed: subsidiary (“Pyxus Holdings”), certain lenders party thereto and Wells Fargo Bank, National Association, as administrative agent and collateral agent which governs an asset-based revolving credit facility (the “ABL Credit Facility”) which permits borrowings in an initial maximum principal amount of $75.0 million, subject to certain limitations, and matures on February 24, 2023, (ii) approximately $215.6 million in aggregate principal amount of term loans (the “Term Loans”) under an Exit Term Loan Credit Agreement, dated as of August 24, 2020 (the “Term Loan Credit Agreement”), by and among, amongst others, Pyxus Holdings, certain lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, which Term Loans mature on February 24, 2025, (iii) approximately $267.4 million in aggregate principal amount of 10.00% Senior Secured First Lien Notes due 2024 (the “Notes”) of Pyxus Holdings pursuant to an Indenture (the “Indenture”) dated as of August 24, 2020 among Pyxus Holdings, the initial guarantors party thereto (including Pyxus International, Inc.), and Wilmington Trust, National Association, as trustee, and collateral agent, which Notes mature on August 24, 2024, and (iv) approximately $116.4 million in aggregate outstanding borrowings under a Second Amendment and Restatement Agreement (the “TDB Facility Agreement”) among Alliance One International Holdings, Ltd., a subsidiary of Pyxus and the Company’s subsidiaries in Kenya, Malawi, Tanzania, Uganda and Zambia and Eastern and Southern African Trade and Development Bank (“TDB”), which TDB Facility Agreement terminates on June 30, 2021 for Kenya and Uganda and on June 30, 2022 for Malawi, Tanzania, and Zambia and may be renewed at TDB’s discretion.
−Removed: Such indebtedness does not include borrowings under a $120.0 million delayed-draw term loan lending facility (the “DDTL Facility”) established under a term loan credit agreement (the “DDTL Facility Credit Agreement”) dated April 23, 2021 among Intabex Netherlands B.V.
−Removed: (“Intabex”), our indirect wholly owned subsidiary, as the borrower, the Company, Pyxus Holdings, Pyxus Parent, Inc., Alliance One International, LLC and Alliance One International Holdings, Ltd as guarantors, and certain funds managed by Glendon Capital Management LP and Monarch Alternative Capital LP, as lenders, which borrowings were $120.0 million at Ju ne 29, 20 21.
+Added: This indebtedness included (i) approximately $90.0 million of outstanding borrowings pursuant to an ABL Credit Agreement (the " ABL Credit Agreement " ), dated as of February 8, 2022 by and among, amongst others, Pyxus, our subsidiaries Pyxus Parent, Inc., and Pyxus Holdings, Inc.
+Added: ( " Pyxus Holdings " ), and certain subsidiaries of Pyxus Holdings, certain lenders party thereto and PNC Bank, National Association, as Administrative Agent and Collateral Agent to establish an asset-based revolving credit facility (the "ABL Credit Facility") which provides for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $100.0 million subject to certain limitations, and matures on the earlier of February 8, 2027 or 90 days prior to the earliest maturity of obligations owing under the Exit Term Loan Credit Agreement and the Indenture (each as defined below), (ii) approximately $219.5 million in aggregate principal amount of term loans (the " Exit Term Loans " ) under an Exit Term Loan Credit Agreement, dated as of August 24, 2020 (the " Exit Term Loan Credit Agreement " ), by and among, amongst others, Pyxus Holdings, certain lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, which Term Loans mature on February 24, 2025, (iii) approximately $270.8 million in aggregate principal amount of 10.00% Senior Secured First Lien Notes due 2024 (the "Notes") of Pyxus Holdings pursuant to an Indenture (the "Indenture") dated as of August 24, 2020 among Pyxus Holdings, the initial guarantors party thereto (including Pyxus International, Inc.), and Wilmington Trust, National Association, as trustee, and collateral agent, which Notes mature on August 24, 2024, (iv) approximately $107.8 million in aggregate principal amount of term loans (the "DDTL Term Loans") under a delayed-draw term loan lending facility (as amended on May 21, 2021, the "DDTL Facility") established under a term loan credit agreement (the "DDTL Facility Credit Agreement") dated April 23, 2021 among Intabex Netherlands B.V.
+Added: ("Intabex"), our indirect wholly owned subsidiary, as the borrower, the Company, Pyxus Holdings, Pyxus Parent, Inc., Alliance One International, LLC and Alliance One International Holdings, Ltd.
+Added: as guarantors, and the lenders party thereto, including certain funds managed by Glendon Capital Management LP, Monarch Alternative Capital LP, and Owl Creek Asset Management, L.P., which mature on July 31, 2022, (v) approximately $71.6 million in aggregate outstanding borrowings under a Third Amendment and Restatement Agreement (the "TDB Facility Agreement") among Pyxus and certain of our subsidiaries, including subsidiaries in Malawi, Tanzania and Zambia, and Eastern and Southern African Trade and Development Bank ("TDB"), which TDB Facility
+Added: Agreement terminates on June 30, 2024, unless terminated sooner at TDB's discretion on June 30, 2022 or June 30, 2023, and (vi) approximately $378.6 million in aggregate outstanding borrowings under local short-term operating lines of credit.
Our substantial debt could have important consequences, including:
−Removed: • making it more difficult for us to satisfy our obligations with respect to the ABL Credit Facility, the Term Loans, the Notes, the DDTL Facility and our other obligations;
+Added: • making it more difficult for us to satisfy our obligations with respect to the ABL Credit Facility, the Exit Term Loans, the Notes, the DDTL Facility, the TDB Facility Agreement and our other obligations;
+Added: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the funds available for operations, working capital, capital expenditures, acquisitions, product development, and other purposes;
• 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;
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• restricting us from making strategic acquisitions or exploiting business opportunities;
+Added: • exposing us to the risk of increased interest rates as borrowings under a substantial portion of our debt are subject to variable interest rates.
We require a significant amount of cash to service our indebtedness.
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Our ability to service our indebtedness and to fund planned capital expenditures depends on our ability to generate cash.
−Removed: This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the continuing impact of the COVID-19 pandemic.
−Removed: Also, a substantial portion of our debt, including any borrowings under the ABL Credit Facility, bears interest at variable rates.
+Added: This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the continuing impact of shipping constraints related to the COVID-19 pandemic.
+Added: Also, a substantial portion of our debt, including borrowings under the ABL Credit 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.
We cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us under in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs.
−Removed: We may not be able to refinance or renew our indebtedness, including the ABL Credit Facility, the Term Loans, the Notes, the DDTL Facility, or indebtedness under the TDB Facility Agreement, other seasonal credit lines, or other credit facilities, which may have a material adverse effect on our financial condition.
−Removed: We may not be able to renew or refinance our indebtedness, including the ABL Credit Facility, the Term Loans, the Notes, the DDTL Facility or indebtedness under the TDB Facility Agreement, other seasonal credit lines, or other credit facilities, on substantially similar terms, or at all.
+Added: We may not be able to refinance or renew our indebtedness, which may have a material adverse effect on our financial condition.
+Added: We may not be able to renew or refinance our indebtedness, including indebtedness under the ABL Credit Facility, the Exit Term Loans, the Notes, the DDTL Facility (including any amendment and restatement thereof) or indebtedness under the TDB Facility Agreement, other seasonal credit lines, or other credit facilities, on substantially similar terms, or at all.
Our ability to access short-term and long-term lending and capital markets to obtain, and the availability of acceptable terms and conditions of, financing are impacted by many factors, including:
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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.
−Removed: The agreement governing the ABL Credit 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 cash dominion period under the ABL Credit Agreement.
+Added: The agreement governing the ABL Credit Facility includes certain restrictive covenants, a springing covenant requiring that our fixed charge coverage ratio be no less than 1.10 to 1.00 during any cash dominion period under the ABL Credit Agreement, and a covenant requiring Domestic Availability (as defined in the ABL Credit Agreement) greater than $20.0 million at all times until audited financial statements for fiscal year ending March 31, 2023 are delivered under the ABL Credit Agreement.
Certain agreements governing our seasonal credit facilities, including the TDB Agreement, include financial and restrictive covenants applicable to the subsidiaries that borrow thereunder and in certain cases with respect to Pyxus.
−Removed: The agreements governing our other indebtedness, including the Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement, also include restrictive covenants.
+Added: The agreements governing our other indebtedness, including the Exit Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement, also include restrictive covenants.
These covenants limit our ability to, among other things:
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• enter into transactions with affiliates;
−Removed: • designate subsidiaries as Unrestricted Subsidiaries (as defined in the ABL Credit Agreement, the Indenture and the Term Loan Credit Agreement).
+Added: • designate subsidiaries as Unrestricted Subsidiaries (as defined in the ABL Credit Agreement, the Indenture and the Exit Term Loan Credit Agreement).
Complying with these covenants may cause us to take actions that we otherwise would not take or not take actions that we otherwise would take.
Our failure to comply with certain of these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of a substantial portion of our indebtedness, much of which is cross-defaulted to other indebtedness.
−Removed: In the past, we sought and obtained waivers and amendments under our then-existing financing arrangements to avoid future non-compliance with financial covenants and cure past defaults under restrictive covenants, including recent waivers with respect to financial covenants included in the TDB Facility Agreement and waivers under the Indenture, ABL Credit Facility and the Term Loan Credit Agreement with respect to the commencement of the CCAA Proceeding and the contemplated disposition of the Canadian Cannabis Subsidiaries.
+Added: In the past, we sought and obtained waivers and amendments under our then-existing financing arrangements to avoid future non-compliance with financial covenants and cure past defaults under restrictive covenants, including recent waivers with respect to financial covenants included in the TDB Facility Agreement and waivers under the Indenture, ABL Credit Facility and the Exit Term Loan Credit Agreement with respect to the commencement of the CCAA Proceeding and the dispositions with respect to the Canadian Cannabis Subsidiaries.
We also paid significant fees to obtain certain of these waivers and consents.
−Removed: 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.
We cannot assure you that we will be able to maintain compliance with, or obtain waivers and amendments related to, financial or restrictive covenants in the future.
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This could exacerbate further the risks associated with our significant leverage.
−Removed: We may be able to incur substantial additional indebtedness in the future to the extent permitted under the ABL Credit Agreement, the Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement.
+Added: We may be able to incur substantial additional indebtedness in the future to the extent permitted under the ABL Credit Agreement, the Exit Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement.
As of March 31, 2022 , $302.1 million was available for borrowing under our short and long-term credit facilities.
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Risks Related to the COVID-19 Pandemic
−Removed: We have been and will likely continue to be negatively impacted by the COVID-19 global pandemic and its related impacts to our employees, operations, customers and suppliers .
−Removed: The COVID-19 pandemic has adversely affected, and is likely to continue to adversely affect, our businesses, and we have experienced and expect to continue to experience delays in shipments of leaf tobacco and other disruptions to our operations.
−Removed: Although, in many jurisdictions, our operations have been classified as “essential” under various governmental orders restricting business activities implemented in response to the COVID-19 outbreak, that classification has not been universal and
−Removed: we have been, and may in the future be, required to suspend operations at certain facilities as a result of similar governmental orders.
−Removed: We cannot predict whether our operations classified as “essential” will continue to be so classified or, even if so classified, whether site-specific health and safety concerns related to COVID-19 might otherwise require operations at any of our facilities to be halted for some period of time.
−Removed: Other operational disruptions may result from restrictions on the ability of employees and others in the supply chain to travel and work, such as caused by quarantine or individual illness, or which may result from border closures imposed by governments to deter the spread of COVID-19, or determinations by us or shippers to temporarily suspend operations in affected areas, or other actions which restrict the ability to ship our products or which may otherwise negatively impact our ability to ship our products.
−Removed: Ports or channels of entry may be closed, operate at only a portion of capacity or require quarantining of vessels, or transportation of products within a region or country may be limited, if workers are unable to report to work due to travel restrictions or personal illness.
−Removed: These factors have also impacted certain of our suppliers and we have been and will likely continue to be impacted by disruptions in the supply of certain materials used in our operations.
−Removed: The COVID-19 pandemic may further damage our business due to negative consumer purchasing behavior with respect to the products of our leaf tobacco customers and our other products.
−Removed: Public health officials around the world have recommended, and local, state, and national governments have mandated, precautions to mitigate the spread of COVID-19, including prohibitions on congregating in groups, shelter-in-place orders or similar measures.
−Removed: Consumer purchasing behavior may be impacted by reduced consumption by consumers who may not be able to leave home or otherwise shop in a normal manner as a result of these restrictions.
−Removed: In addition, in view of uncertainties with respect to the spread of COVID-19 and the duration and terms of related governmental orders restricting activities, we cannot predict whether demand for our products will persist at current levels or decrease on a global or regional basis.
+Added: We have been and will likely continue to be negatively impacted by the COVID-19 global pandemic and its related shipping constraints, labor shortages and supply-chain impacts.
+Added: The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business and consolidated financial results, and we are unable to determine the extent, duration, or nature at this time.
+Added: The intensity, duration and governmental responses to the pandemic, as well as the pace of vaccination efforts and the emergence of new variants of the virus that cause COVID-19, are all highly uncertain and could contribute to the ultimate impact on our business.
+Added: Among other things, the impact of the COVID-19 pandemic has resulted, and could continue to result, in:
+Added: • Shipping constraints, including vessel and equipment availability, closure of port facilities due to quarantines, port congestion, and rising freight costs, which have resulted in delays in shipments to customers;
+Added: • Disruptions in our supply chain or increased costs for certain materials or commodities;
+Added: • Labor shortages and difficulties filling positions within our organization;
+Added: • Greater cybersecurity risk and other fraud risks.
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.
−Removed: Risks Related to Our Business Strategy
−Removed: Our Board of Directors was reconstituted in connection with and following the effectiveness of the Plan in the Chapter 11 Cases and may implement changes in our business strategy that could affect the scope of our operations, including the countries in which we continue to operate and the business lines that we continue to pursue, and may result in the recognition of restructuring or asset impairment charges.
−Removed: Our corporate business strategy is subject to continued development and evaluation by our management and Board of Directors.
−Removed: In connection with the effectiveness of the Plan in the Chapter 11 Cases, the Company’s Board of Directors was reconstituted, with six of the seven members of the Board of Directors having joined the Board of Directors on or after the August 24, 2020 effective date of the Plan.
−Removed: The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on the Board of Directors of Old Pyxus at the time of the commencement of the Chapter 11 Cases and, thus, may have different views on the issues that will determine our future, including our strategic plans.
−Removed: The Board of Directors, as reconstituted, has determined to change our business strategy and exit our industrial hemp and Canadian cannabis businesses.
−Removed: The Board of Directors may further determine, from time to time, to implement additional changes in our business strategy, which could affect the scope of our operations, including the countries in which we continue to operate and the business lines that we continue to pursue.
−Removed: Such changes could result in our incurring restructuring charges or the impairment of assets that could materially adversely impact our results of operations.
Risks Relating to Our Leaf Tobacco Operations
−Removed: Our reliance on a small number of significant customers may adversely affect our financial statements.
+Added: Our reliance on a small number of significant customers may adversely affect our financial results.
The customers of our leaf tobacco business are manufacturers of cigarette and other tobacco products.
Several of these customers individually may account for a significant portion of our sales in a normal year.
−Removed: For the year ended March 31, 2021, Philip Morris International Inc.
−Removed: accounted for more than 10% of our revenues from continuing operations.
+Added: For the year ended March 31, 2022, Philip Morris International Inc., China Tobacco International Inc., and British American Tobacco each 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.
−Removed: The loss of any one or more of our significant customers could have a material adverse effect on our financial statements.
−Removed: Continued vertical integration by our customers could materially adversely affect our financial statements.
−Removed: 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.
−Removed: Japan Tobacco, Inc.
−Removed: has vertically integrated operations in Malawi, Brazil, and the United States.
−Removed: In addition, Philip Morris International Inc.
−Removed: acquired supplier contracts and related assets in Brazil in order to procure
−Removed: leaf directly.
−Removed: In general, our results of operations have been adversely affected by vertical integration initiatives.
−Removed: Although some customers have reversed 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.
+Added: The loss of any one or more of our significant customers could have a material adverse effect on our financial results.
+Added: Vertical integration by our customers could materially adversely affect our financial performance.
+Added: Demand for our leaf tobacco or processing services could be materially reduced if cigarette manufacturers make the decision to significantly vertically integrate their operations, either through acquisition of our competitors, establishing new operations or contracting directly with suppliers.
+Added: In general, our results of operations have not been adversely affected by vertical integration
+Added: initiatives, and some customers have reversed certain aspects of their previous vertical integration of operations.
+Added: However, further vertical integration by our customers could have a material adverse effect on our financial performance.
Global shifts in sourcing customer requirements may negatively affect our organizational structure and asset base.
−Removed: The global leaf tobacco industry has experienced shifts in the sourcing of customer requirements for tobacco.
−Removed: For example, significant tobacco production volume decreases have occurred in the United States and Europe from historical levels.
−Removed: At the same time, production volumes in other sourcing origins have stabilized.
−Removed: Additional shifts in sourcing may occur as a result of currency fluctuations, including changes in currency exchange rates against the United States Dollar ("USD"), the imposition of tariffs and other changes in international trade policies.
−Removed: A shift in sourcing origins in Europe has been influenced by modifications to the tobacco price support system in the European Union.
−Removed: Customer requirements have changed due to these variations in production, which could influence our ability to plan effectively for the longer term in the United States and Europe.
+Added: Shifts in sourcing of tobacco may occur as a result of currency fluctuations, including changes in currency exchange rates against the United States Dollar ("USD"), the imposition of tariffs and other changes in international trade policies.
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.
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Our financial results will vary according to growing conditions, customer indications, and other factors, which significantly impacts our ability to forecast our quarterly and annual financial performance.
−Removed: 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.
+Added: Our 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 suppliers, 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.
+Added: The unpredictability may be exacerbated by the effects of climate change, which could increase the likelihood or severity of disruptive weather events.
The cost of acquiring tobacco can fluctuate greatly due to crop sizes and increased competition in certain markets in which we purchase tobacco.
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Furthermore, large crops translate into lower average green prices, lower throughput costs and excess volume to sell.
−Removed: 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.
−Removed: 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.
+Added: 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 financial results.
+Added: The timing of shipments can be materially impacted by shortages of containers and vessels for shipping, increased spot-prices for shipping leading vessel operators to reduce cargo allocations of our customers' containers covered by lower-priced, long-term shipping arrangements, 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.
−Removed: 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.
+Added: Because individual shipments may represent significant amounts of revenue, our 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.
−Removed: Loss of confidence in us by our customers, farmers and other suppliers, as a result of the Chapter 11 Cases, may have a material adverse impact on our business, financial condition, results of operations, and cash flows.
−Removed: If our customers, farmers and other suppliers lose confidence in us as a result of the Chapter 11 Cases or for other reasons, they may seek to establish alternative commercial relationship.
−Removed: In addition, in such circumstances, our suppliers, farmers, vendors, counterparties and service providers to renegotiate the terms of our agreements, attempt to terminate their relationship with us or require financial assurances from us.
+Added: Loss of confidence in us by our customers, farmers and other suppliers may have a material adverse impact on our business, financial condition, results of operations, and cash flows.
+Added: If our customers, farmers and other suppliers lose confidence in us, they may seek to establish alternative commercial relationships.
+Added: In addition, in such circumstances, our suppliers, farmers, vendors, counterparties and service providers may seek to renegotiate the terms of our agreements, attempt to terminate their relationships with us or require financial assurances from us.
If our suppliers, farmers, vendors, and other providers require stricter terms and conditions, we may not find these terms and conditions acceptable.
−Removed: Any failure to timely obtain suitable inventory at competitive prices could materially adversely affect our businesses, financial condition, liquidity and results of operations.
−Removed: 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.
−Removed: 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.
+Added: Failure to timely obtain suitable inventory at competitive prices could materially adversely affect our businesses, financial condition, liquidity and results of operations.
+Added: Suppliers who have historically grown tobacco may elect to grow other crops instead of tobacco, which affects the world supply of tobacco and may impact our financial performance.
+Added: Increases in the prices for other crops have led and may in the future lead suppliers who have historically grown 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.
−Removed: As a result, we could experience an increase in tobacco crop acquisition costs, which may impact our quarterly and annual financial performance.
+Added: As a result, we could experience an increase in tobacco crop acquisition costs, which may impact our financial performance.
Our advancement of inputs to tobacco suppliers could expose us to losses.
−Removed: Advances to tobacco suppliers are settled as part of the consideration paid upon the suppliers delivering us unprocessed tobacco at market prices.
+Added: Our arrangements with suppliers vary depending on our predictions of future supply and demand, local historical practice and availability of capital.
+Added: In some locales, we purchase seeds, fertilizer, pesticides, and other products related to growing tobacco, which represent prepaid inventory, and issue them to suppliers with whom we have purchase contracts.
+Added: The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if they meet our specifications.
+Added: These 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:
−Removed: the quantity of tobacco delivered and the quality of the tobacco delivered.
+Added: the quantity of tobacco delivered and the quality of the tobacco delivered, both of which are subject to factors outside of our control at the time we
+Added: make advances to suppliers.
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.
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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.
−Removed: Weather and other conditions can affect the marketability of our inventory.
+Added: Weather and other conditions can affect the marketability of our inventory, and climate change may adversely alter weather patterns in tobacco-growing regions.
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.
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If such an event is also widespread, it could affect our ability to acquire the quantity of products required by customers.
+Added: In addition, the potential impact of climate change is uncertain and may vary by geographic region.
+Added: The possible effects, as described in various public accounts, could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels, all of which may be of greater permanence than typical weather fluctuations.
+Added: Some or all of these impacts could adversely affect the ability of farmers in the regions in which we source leaf tobacco to continue to produce crops of acceptable quality and in sufficient quantities.
+Added: Their inability to do so could materially adversely affect our operations, results of operations and financial condition.
In addition, other items can affect the marketability of tobacco, including, among other things, the presence of:
2 unchanged sentences
• excess residues of pesticides, fungicides and herbicides.
−Removed: 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.
−Removed: In addition, in the event of climate change, adverse weather patterns could develop in the growing regions in which we purchase tobacco.
−Removed: 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.
+Added: A significant event impacting the condition or quality of a large amount of the tobacco crops we buy could make it difficult for us to sell such tobacco or to fill our customers’ orders.
We face increased risks of doing business due to the extent of our international operations.
2 unchanged sentences
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.
−Removed: 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").
+Added: 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 reconsolidated MTC as of March 31, 2016.
1 unchanged sentence
RTGS is a local currency equivalent that is exchanged at a government specified rate with USD.
−Removed: In order to convert these units to USD, the Company must obtain foreign currency resources from the Reserve Bank of Zimbabwe, which are subject to the monetary and exchange control policy in Zimbabwe.
+Added: To convert these units to USD, the Company must obtain foreign currency resources from the Reserve Bank of Zimbabwe, which are subject to the monetary and exchange control policy in Zimbabwe.
If the foreign exchange restrictions and government-imposed controls become severe, we may have to reassess our ability to control MTC.
−Removed: Our international operations are in areas where the demand is for the export of lower priced tobacco.
−Removed: We have significant investments in our purchasing, processing and exporting operations in Argentina, Brazil, Malawi, Tanzania and Turkey.
−Removed: In recent years, economic problems in certain countries where we have international operations have received wide publicity related to devaluation and appreciation of the local currency and inflation, including the classification of the Argentina, Malawi, and Zimbabwe economies as highly inflationary.
+Added: In recent years, economic problems in certain countries where we have international operations have received wide publicity related to devaluation and appreciation of the local currency and inflation, including the classification of the Argentina, Turkey, and Zimbabwe economies as highly inflationary.
Devaluation and appreciation of the local currency and inflation can affect our purchase costs of tobacco and our processing costs.
1 unchanged sentence
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.
+Added: Further, the imposition of governmental sanctions or other restrictions may preclude us from continuing to sell to certain customers or to source leaf tobacco from certain jurisdictions.
+Added: For example, approximately $57.8 million of our revenue for the year ended March 31, 2022 was from direct sales to entities located in Russia.
+Added: Governmental sanctions imposed in response to the invasion of Ukraine by Russia and additional sanctions imposed in response to the continuation or escalation of these
+Added: hostilities could restrict or prohibit such sales, which would have an adverse effect on our profitability, results of operations and financial position.
+Added: Other limitations imposed on such subsidiaries' ability to continue to sell to customers in Russia, whether through commercial, societal or other pressures, could similarly have an adverse effect on our profitability, results of operations and financial position.
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.
2 unchanged sentences
Banks in certain foreign jurisdictions may be subject to a higher rate of failure or may not honor withdrawals of deposited funds.
−Removed: In addition, the countries in which these local banks operate may lack sufficient regulatory oversight or suffer from
−Removed: structural weaknesses in the local banking system.
+Added: 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.
19 unchanged sentences
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.
−Removed: We seek to optimize our tax footprint across all operations in U.S.
−Removed: jurisdictions alike.
−Removed: These benefits are contingent upon existing tax laws and regulations in the U.S.
−Removed: and in the countries in which our international operations are located.
+Added: We seek to optimize our tax footprint across globally.
+Added: The related benefits are contingent upon existing tax laws and regulations in the countries in which our 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.
6 unchanged sentences
When the USD weakens against foreign currencies, our costs for purchasing and processing tobacco in such currencies increases.
−Removed: 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.
+Added: Although we operate in many non-U.S.
+Added: countries and are exposed to fluctuations in the currencies of numerous foreign countries, exchange fluctuation in the Brazilian Real against the USD has the greatest potential for impact on our financial results.
+Added: We attempt to reduce 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.
Fluctuations in the value of foreign currencies can significantly affect our operating results.
6 unchanged sentences
The loss or substantial reduction of any large or significant customer could reduce our earnings.
−Removed: In addition to the two primary global independent publicly held leaf tobacco merchants, the cigarette manufacturers increasingly buy tobacco directly from local and regional suppliers.
−Removed: We also face increasing competition from new local and
−Removed: regional independent leaf merchants with low fixed costs and overhead and good local customer connections, where the new entrants have been able to capitalize in the global transition to those markets.
+Added: In addition to the two primary global independent publicly held leaf tobacco merchants, the cigarette manufacturers also buy tobacco directly from local and regional suppliers.
+Added: We also face increasing competition from new local and regional independent leaf merchants with low fixed costs and overhead and good local customer connections, 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.
−Removed: Risks Related to Our E-liquids Businesses
−Removed: The results of operations and financial position of our e-liquids businesses may differ materially from the expectations of the Company's management.
−Removed: Due to numerous uncertainties, the results of operations and financial position of our e-liquids businesses may differ materially from the expectations of the Company’s management.
−Removed: The process for estimating the revenue, net income, and cash flow of these businesses requires the use of judgment in determining the appropriate assumptions and estimates.
−Removed: These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed.
−Removed: In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect the financial condition or results of operations of these businesses.
−Removed: As the markets in which our e-liquids businesses compete continue to develop, competition from market participants may have a negative impact on their business and prospects.
−Removed: The markets in which our e-liquids businesses compete are competitive and are expected to become increasingly competitive.
−Removed: Certain of these competitors have significantly greater financial, production, marketing, research and development, technical, and human resources than we do.
−Removed: The commercial opportunity for these businesses could be reduced or eliminated if their competitors produce and commercialize products that, among other things, are safer, more effective, more convenient or less expensive, have greater sales, marketing, and distribution support, enjoy enhanced timing of market introduction and perceived advantages of better quality and receive more favorable publicity.
−Removed: As a result, these competitors may be more successful in gaining market penetration and market share.
−Removed: If our e-liquids businesses do not achieve an adequate level of acceptance in their respective markets, they may not generate sufficient revenue from their products, and their businesses may not be profitable.
−Removed: To remain competitive while complying with regulatory requirements, our e-liquids businesses will require continued significant investment in regulatory compliance, research and development, marketing, sales, and customer support.
−Removed: These businesses may not have sufficient resources to maintain research and development, marketing, sales and customer support efforts on a competitive basis, which could materially and adversely affect the business, financial condition and results of operations of the Company.
−Removed: Changing consumer preferences may adversely affect consumer retention and results of operations.
−Removed: As a result of changing consumer preferences, many novel products attain financial success for a limited period of time.
−Removed: Even if certain of our e-liquids products find retail success, we cannot assure you that any of these products will continue to see extended financial success.
−Removed: The success of our e-liquids businesses will be significantly dependent upon their ability to develop new and improved product lines and to adapt to consumer preferences.
−Removed: Even if we are successful in introducing new products or developing current products, a failure to gain consumer acceptance or to update products with compelling content could cause a decline in popularity of these products that could reduce revenues and harm the Company's e-liquids brands, business, financial condition, and results of operations.
−Removed: Consumer perception and reputational risk may negatively affect our e-liquids businesses.
−Removed: The respective markets for the products of our e-liquids businesses are highly dependent upon consumer perception regarding the safety, efficacy and quality of their products.
−Removed: Consumer perception can be significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention and other publicity regarding the consumption of these products.
−Removed: We cannot assure you that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the these markets or any particular product, or consistent with currently held views.
−Removed: Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the respective industries and demand for the products of our e-liquids businesses, which could affect their businesses, results of operations and cash flows.
−Removed: This dependence upon consumer perception means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on our e-liquids businesses and their respective business, financial condition, results of operations and cash flows.
−Removed: Further, adverse publicity, reports or other media attention regarding the safety, efficacy and quality of the vaping industry's products in general, or associating the consumption of these types of products with illness or other negative effects or events, could have a material adverse effect.
−Removed: Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products legally, appropriately, or as directed.
−Removed: Any litigation that might affect consumer perception regarding the products of our e-liquids businesses could take the form of class proceedings or individual proceedings.
−Removed: There have been a number of highly publicized cases involving lung and other illness and deaths that appear to be related to vaporizer devices or products used in such devices.
−Removed: For example, in February 2020, the U.S.
−Removed: Centers for Disease Control reported that federal and state agencies were investigating an outbreak of over 2,807 lung injury cases involving patients from all 50 states and one U.S.
−Removed: territory, including 68 confirmed deaths.
−Removed: As a result of the outbreak or future developments related to potential health risks associated with vaping, governments and private sector parties initiated actions aimed at reducing the incidence of vaping and/or seeking to hold manufacturers of nicotine e-liquids, and other vaping products, responsible for the adverse health effects associated with the use of vaping products.
−Removed: As there has been a limited period of time to study the long-term effects of vaporizer use, there is limited data on the safety and health effects.
−Removed: If scientific or medical research ultimately determines that use of vaporizer devices poses a significant risk to health or safety, the demand for vaporizer products may decrease, and regulation of these products could become significantly more restrictive.
−Removed: Certain states and local governments have already implemented regulations that prohibit the sale of vaporizers, the sale of flavored products (including nicotine, non-nicotine, e-liquid, e-cigarette and other vaping products) or have implemented additional restrictions on the composition of the product (e.g., maximum nicotine content restrictions).
−Removed: Additional states and localities may implement similar restrictions and the regulations may become more restrictive at the federal level.
−Removed: Additional or more restrictive regulatory changes may have a material adverse effect on the Company's business, financial condition and results of operations.
−Removed: Actions by the U.S.
−Removed: Food and Drug Administration (the “FDA”) and other federal, state, or local governments or agencies may impact consumers’ acceptance of or access to nicotine e-liquids, and other vaping products (for example, through product standards related to flavored products promulgated by the FDA), limit consumers’ choices, delay or prevent the launch of new or modified products or products with claims of reduced risk, require the recall or other removal of products from the marketplace (for example, as a result of product contamination or regulations that ban certain flavors or ingredients), restrict communications to consumers, restrict the ability to differentiate products, create a competitive advantage or disadvantage for certain companies, impose additional manufacturing, labeling, or packaging requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business, or restrict or prevent the use of specified products in certain locations or the sale of products by certain retail establishments.
−Removed: Any one or more of these actions may have a material adverse impact on the Company's business, financial condition, and results of operations.
−Removed: Restrictions on our ability to ship e-liquids products to consumers from online sales, including recently enacted prohibitions with respect to shipments through on the U.S.
−Removed: Postal Service, could materially adversely affect our e-liquids businesses.
−Removed: On February 19, 2021, the USPS published its Proposed Regulations regarding the mailing of cigarettes, e-cigarettes, vaping device products, and e-liquids.
−Removed: The Proposed Regulations would subject e-cigarettes, vaping devices products, and e-liquid products to all existing restrictions on and exceptions for the mailing of cigarettes, except that the existing exceptions permitting the mailing of cigarettes (i) for consumer testing purposes and (ii) by federal agencies for public health purposes would not be available for the mailing of e-cigarettes, vaping devices products, and e-liquid products.
−Removed: If the Proposed Regulations were enacted as proposed by the USPS, subject to limited exceptions in applicable USPS regulations (including between legally operating businesses pursuant to applications approved by the USPS), shipment of these products via the USPS would be prohibited on and after the date on which the USPS promulgates the final regulations.
−Removed: While the USPS did not meet its deadline for issuing the final regulations, the Company expects publication of the final regulations in the second or third quarter of 2021, which would result in a general federal prohibition on the mailing of e-cigarettes and other vaping devices, as well as e-liquids products, by businesses to consumers.
−Removed: Any such shipments are subject to seizure, and the sender is subject to criminal fines, imprisonment, and civil penalties.
−Removed: It has generally been reported that certain private delivery services, such as United Parcel Service, DHL and FedEx, have voluntarily implemented similar prohibitions on the use of their services for the delivery of e-cigarettes and other vaping devices, as well as e-liquids products.
−Removed: In light of the amended PACT Act, described below, it is uncertain whether any other reliable private delivery service will undertake to deliver e-liquids products to consumers.
−Removed: Historically, a substantial portion of our e-liquids products are sold to consumers through online orders.
−Removed: Accordingly, our e-liquids businesses will be materially adversely affected by these prohibitions and other restrictions if we are unable to effect shipment of e-liquids products to consumers through reliable and efficient delivery services.
−Removed: Other provisions of the 2021 Appropriations Act significantly increase the federal regulation of the online sale of our e-liquids products, which may increase our costs and affect the competitiveness of our products as compared to those sold by local retailers, and violations of these regulations could expose us to significant penalties.
−Removed: Provisions of the 2021 Appropriations Act subject e-cigarettes and other vaping devices, as well as e-liquids products, to the provisions of the PACT Act, which imposes stringent rules on online sellers, including requirements for online retailers to register with the U.S.
−Removed: Attorney General, verify the age of customers using a commercially available database, collect an adult signature at the point of delivery, and collect all applicable local and state taxes, and affix any required tax stamps to the products sold.
−Removed: Sellers who do not register or do not comply with the shipping and reporting rules of the PACT Act are subject to civil and criminal penalties, including up to three years in prison.
−Removed: Accordingly, compliance with the requirements of the PACT Act may significantly increase the costs of our e-liquids online businesses, increasing the prices of our online products and
−Removed: making them less attractive to consumers as compared to products sold at local retailers.
−Removed: In addition, failure to comply with the PACT Act could expose us to significant penalties that could materially adversely affect our e-liquids businesses and our financial condition and results of operations.
−Removed: There are limited long-term data with respect to the efficacy and side effects of nicotine e-liquids products, and future studies may lead to conclusions that dispute or conflict with the Company's understanding and belief regarding the benefits, viability, safety, efficacy, dosing and social acceptance of such products.
−Removed: In particular, the rapid development of nicotine e-liquids and other vaping products has not provided sufficient time for the medical profession to study the long-term health effects of using such products.
−Removed: Therefore, it is uncertain as to whether or not nicotine e-liquids and other vaping products are safe for their intended use.
−Removed: If the medical profession were to determine that using nicotine e-liquids and other vaping products posed a significant threat to long-term human health, consumption could decline rapidly and we may be forced to modify our e-liquids and other vaping products.
−Removed: Such an outcome may have a material adverse effect on the Company's e-liquids businesses, and results of operations.
−Removed: In addition, these products could have unexpected side effects, the discovery of which could materially and adversely affect the Company's business, financial condition, and results of operations.
−Removed: Our e-liquids businesses face inherent risk of exposure to product liability claims, regulatory action, and litigation if their products are alleged to have caused significant loss, injury, or death.
−Removed: As manufacturers and distributors of products that are ingested or otherwise consumed by humans, our e-liquids businesses face the risk of exposure to product liability claims, regulatory action and litigation (including class proceedings and individual proceedings) if their products are alleged to have caused loss, injury or death.
−Removed: They may be subject to these types of claims due to allegations that their products caused or contributed to injury, illness or death, made false, misleading or impermissible claims, failed to include adequate labelling and instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances.
−Removed: Previously unknown adverse reactions resulting from human consumption of our e-liquids products alone or in combination with other medications or substances could also occur.
−Removed: In addition, the manufacture and sale of any ingested or consumable product involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
−Removed: Our e-liquids businesses may in the future have to recall certain of their products as a result of potential contamination and quality assurance concerns.
−Removed: A product liability claim or regulatory action against these businesses could result in increased costs and could adversely affect their reputation and goodwill with their consumers.
−Removed: We cannot assure you that product liability insurance can be maintained on acceptable terms or with adequate coverage against potential liabilities.
−Removed: Such insurance is expensive and may not be available in the future on acceptable terms, or at all.
−Removed: The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in the Company's becoming subject to significant liabilities that are uninsured and also could adversely affect commercial arrangements between our e-liquids businesses and third parties.
−Removed: The risk of class-based litigation (and individual litigation) for manufacturers and distributors of e-liquids and other vaping products, and others involved in the vaping industry, is significant, particularly in the face of increasing health and marketing concerns, the potential for product recalls or other product-related issues.
−Removed: The United States has highly active plaintiffs’ bar.
−Removed: Recent years have seen a number of purported class action lawsuits in the United States against manufacturers and distributors of e-liquids and other vaping products.
−Removed: These circumstances create enhanced risk and exposure for the Company given the nature of its operations, the products it manufactures, distributes and sells, and its business environment.
−Removed: The Company could incur unexpected expenses due to product recalls and any legal proceedings that may arise in connection with product recalls.
−Removed: Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure, or other alleged or actual regulatory compliance violations.
−Removed: If any of the Company's products, including our e-liquids businesses, are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall.
−Removed: The Company may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all.
−Removed: In addition, a product recall may require significant attention from management.
−Removed: Although the Company has detailed procedures in place for testing its products, we cannot assure you that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits.
−Removed: Additionally, if one of the products produced by the Company were subject to recall, the image and reputation of that product and the Company as a whole could be harmed.
−Removed: A recall for any of the foregoing reasons could lead to decreased demand for the Company's products and could have a material adverse effect on the results of operations, financial condition and reputation of the Company.
−Removed: Additionally, product recalls may lead to increased scrutiny of the Company's operations by applicable regulatory agencies, requiring further management attention and potential legal fees and other expenses.
−Removed: Risks Relating to the CCAA Proceedings
−Removed: Certain of the sales contemplated in the CCAA Proceeding remain subject to the satisfaction of conditions and may not occur, in which case we may be unable to recover funds advanced to the Canadian Cannabis Subsidiaries under the Canadian DIP Facility, and if such sales transactions occur the amount of recovery that the Company may receive with respect to its interests in the Canadian Cannabis Subsidiaries will depend on the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the Canadian Court and the extent to which the Company’s advancements with respect to Canadian Cannabis Subsidiaries determined by the Canadian Court as debt claims entitled to recovery on the same basis as other unsecured creditor claims and, accordingly, Pyxus may incur additional impairments charges related to our investments in and advances to the Canadian Cannabis Subsidiaries, and Pyxus may be liable under its guarantees of obligations of the Canadian Cannabis Subsidiaries to the extent that those obligations are not fully satisfied by the Canadian Cannabis Subsidiaries in the CCAA Proceeding.
−Removed: The consummation of all of the contemplated sales with respect to the Canadian Cannabis Subsidiaries are subject to the satisfaction of certain conditions, some of which have not yet been satisfied.
−Removed: In the event that conditions to the consummation of the respective sales are not satisfied, such sale transaction may not occur, and accordingly the anticipated sales with respect to the Canadian Cannabis Subsidiaries may not generate sufficient net proceeds to fund repayment in full of aggregate borrowings owed under the Canadian DIP Facility.
−Removed: Further, even if such sales transactions are completed as contemplated and borrowings under the Canadian DIP facility are repaid, the amount of any recovery that the Company may receive related to advancements with respect to the Canadian Cannabis Subsidiaries will depend on the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the Canadian Court and the extent to which the Company’s advancements with respect to Canadian Cannabis Subsidiaries are determined by the Canadian Court to be debt claims entitled to recovery on the same basis as other unsecured creditor claims with respect to the Canadian Cannabis Subsidiaries.
−Removed: In the event that such advancements by the Company are not treated in the CCAA Proceedings as debt claims entitled to recovery on the same basis as other unsecured creditor claims Pyxus may not recover a substantial portion or any amounts with respect to such advancements.
−Removed: In such case, Pyxus may incur further impairment with respect to its advancements in respect to the Canadian Cannabis Subsidiaries.
−Removed: In addition, Pyxus has guaranteed certain obligations of the Canadian Cannabis Subsidiaries, including office lease obligations and severance that may be owed to certain executives of the Canadian Cannabis Subsidiaries.
−Removed: To the extent that such obligations are not satisfied by the Canadian Cannabis Subsidiaries, Pyxus may have liability under such guarantees.
−Removed: To the extent that consummation of the sales transactions contemplated in the CCAA Proceeding, or other aspects of the CCAA Proceeding, are delayed, borrowings of the Canadian Cannabis Subsidiaries under the Canadian DIP Facility may be greater than anticipated and exacerbate concerns with respect to our maintenance of necessary liquidity.
+Added: Continued high inflation may adversely affect our profitability and the demand for our leaf tobacco products.
+Added: The economies of the United States and other nations have recently experienced the highest levels of consumer price inflation in decades.
+Added: Continued inflationary pressures may continue to increase our costs, including the cost of leaf tobacco that we purchase.
+Added: If these increased costs cannot successfully be passed on to our customers, many of which have significant negotiating power, our profitability and results of operations may be adversely affected.
+Added: In addition, since our leaf tobacco products are used in the manufacture of tobacco consumer goods, consumer behavior that deprioritizes the purchase of tobacco consumer goods in response to inflationary increases in the price of such goods could result in reduced overall demand for consumer tobacco products and consequently for the leaf tobacco we provide to manufacturers, which could materially adversely affect of our profitability, results of operations and financial position.
Risks Relating to Other Aspects of Our Operations
−Removed: 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.
−Removed: We sponsor defined benefit pension plans that cover certain eligible employees.
−Removed: 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.
−Removed: If plan assets perform below the assumed rate of return used to determine pension expense, future pension expense will increase.
−Removed: Further, as a result of the global economic instability or other economic market events, our pension plan investment portfolio may experience significant volatility.
−Removed: 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.
−Removed: 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.
−Removed: 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.
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.
−Removed: The enterprise resource planning system we have implemented throughout the Company, for example, is hosted by iTelligence and our domestic employee payroll system is hosted by Ceridian.
−Removed: 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,
−Removed: 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.
+Added: For example, our enterprise resource planning system and our domestic employee payroll system are hosted by external service providers.
+Added: 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.
For example, in April 2019, the Company discovered that the email accounts of two Canadian employees had been compromised resulting in the unauthorized access of customer and vendor data.
5 unchanged sentences
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.
−Removed: 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.
+Added: 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.
−Removed: In addition, because we are no longer an “accelerated filer” under applicable SEC regulations, we are no longer required to obtain and present a report of our independent accounting firm with respect to the effectiveness of our internal control over financial reporting and we have not obtained such a report with respect to an evaluation of our internal controls as of March 31, 2021 and, accordingly, no such report is included in this Form 10-K.
−Removed: Regulations regarding environmental matters may affect the Company by substantially increasing the Company's costs and exposing it to potential liability.
−Removed: The Company is subject to environmental, health, and safety laws and regulations in each jurisdiction in which the Company operates.
−Removed: Such regulations govern, among other things, emissions of pollutants into the air, wastewater discharges, waste disposal, the investigation and remediation of soil, and groundwater contamination, and the health and safety of the Company's employees.
−Removed: For example, the Company's products and the raw materials used in its production processes are subject to numerous environmental laws and regulations.
−Removed: The Company may be required to obtain environmental permits from governmental authorities for certain of its current or proposed operations.
−Removed: The Company may not have been, nor may it be able to be at all times, in full compliance with such laws, regulations and permits.
−Removed: If the Company violates or fails to comply with these laws, regulations or permits, the Company could be fined or otherwise sanctioned by regulators.
−Removed: As with other companies engaged in similar activities or that own or operate real property, the Company faces inherent risks of environmental liability at its current and historical production sites.
+Added: In addition, because we are not an "accelerated filer" under applicable SEC regulations, we are not required to obtain and present a report of our independent accounting firm with respect to the effectiveness of our internal control over financial reporting and we have not obtained such a report with respect to an evaluation of our internal controls as of March 31, 2022 and, accordingly, no such report is included in this Form 10-K.
+Added: Regulations regarding environmental matters may affect us by substantially increasing our costs and exposing us to potential liability.
+Added: We are subject to environmental, health, and safety laws and regulations in each jurisdiction in which we operate.
+Added: Such regulations govern, among other things, emissions of pollutants into the air, wastewater discharges, waste disposal, the investigation and remediation of soil, and groundwater contamination, and the health and safety of our employees.
+Added: For example, our products and the raw materials used in its production processes are subject to numerous environmental laws and regulations.
+Added: We may be required to obtain environmental permits from governmental authorities for certain of its current or proposed operations.
+Added: We may not have been, nor may it be able to be at all times, in full compliance with such laws, regulations and permits.
+Added: If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators.
+Added: As with other companies engaged in similar activities or that own or operate real property, we face inherent risks of environmental liability at our current and historical production sites.
Certain environmental laws impose strict and, in certain circumstances, joint and several liability on current or previous owners or operators of real property for the cost of the investigation, removal or remediation of hazardous substances as well as liability for related damages to natural resources.
−Removed: In addition, the Company may discover new facts or conditions that may change its expectations or be faced with changes in environmental laws or their enforcement that would increase its liabilities.
−Removed: Furthermore, its costs of complying with current and future environmental, health, and safety laws, or the Company's liabilities arising from past or future releases of, or exposure to, regulated materials, may have a material adverse effect on its business, financial condition, and results of operations.
+Added: In addition, we may discover new facts or conditions that may change our expectations or be faced with changes in environmental laws or their enforcement that would impose additional liabilities.
+Added: Furthermore, our costs of complying with current and future environmental, health, and safety laws, or our liabilities arising from past or future releases of, or exposure to, regulated materials, may have a material adverse effect on our business, financial condition, and results of operations.
Derivative transactions may expose us to potential losses and counterparty risk.
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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.
−Removed: We cannot assure you of the financial stability or viability of any of our counterparties.
−Removed: To the extent that any of our indebtedness that extends beyond 2021 bears interest at rates based on LIBOR, the interest rates for these obligations might be subject to change based on recent regulatory changes .
−Removed: The chief executive of the United Kingdom Financial Conduct Authority (“FCA”), which regulates the London Interbank Offered Rate (“LIBOR”), announced that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
−Removed: The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts.
−Removed: In November 2020, the ICE Benchmark Administration Limited, the benchmark administrator for USD LIBOR rates, proposed extending the publication of certain commonly used USD LIBOR settings until
−Removed: June 30, 2023 and the FCA issued a statement supporting such proposal.
−Removed: In connection with this proposal, certain U.S.
−Removed: banking regulators issued guidance strongly encouraging banks to generally cease entering into new contracts referencing USD LIBOR as soon as practicable and in any event by December 31, 2021.
−Removed: It is not possible to predict the effect of these changes, including when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets.
−Removed: The future of LIBOR at this time is uncertain.
−Removed: If LIBOR ceases to exist, we may need to renegotiate applicable agreements that utilize LIBOR as a factor in determining the interest rate that extend beyond the scheduled LIBOR termination dates to replace LIBOR with the new standard that is established, which may have an adverse effect on our interest expense and results of operations.
+Added: We cannot assure you of the financial stability or viability of our counterparties.
+Added: Increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers, with respect to our environmental, social and governance ("ESG") policies, including sustainability policies, may impose additional costs on us or expose us to additional risks.
+Added: Governments, the non-governmental community, and industry increasingly understand the importance of implementing comprehensive environmental, labor, and governance practices.
+Added: We are committed to implementing a robust sustainability management system, and we continue to implement what we believe are responsible ESG practices.
+Added: Government regulations, however, could result in new or more stringent forms of ESG oversight and disclosures.
+Added: These may lead to increased expenditures for environmental controls, land use restrictions, reporting, and other conditions, which could have an adverse effect on our results of operations.
+Added: In addition, a number of governments are considering due diligence procedures to ensure strict compliance with environmental, labor, and government regulations.
+Added: The European Union has proposed broad due diligence reporting requirements for all industries operating within Europe.
+Added: The United States has called for a broader and more robust approach to labor compliance in foreign jurisdictions, which could include some of our strategic origins.
+Added: Due to general uncertainty regarding the timing, content, and extent of any such regulatory changes in the United States or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition, and results of operations.
+Added: Our e-liquids business faces inherent risk of exposure to product liability claims, regulatory action, and litigation if its products are alleged to have caused significant loss, injury, or death.
+Added: As a manufacturer and distributor of products that are ingested or otherwise consumed by humans, our e-liquids business faces the risk of exposure to product liability claims, regulatory action and litigation (including class proceedings and individual proceedings) if its products are alleged to have caused loss, injury or death.
+Added: Our e-liquids business may be subject to these types of claims due to allegations that its products caused or contributed to injury, illness or death, made false, misleading or impermissible claims, failed to include adequate labelling and instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances.
+Added: Previously unknown adverse reactions resulting from human consumption of these e-liquids products alone or in combination with other medications or substances could also occur.
+Added: In addition, the manufacture and sale of any ingested or consumable product involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
+Added: Our e-liquids business may in the future have to recall certain of its products as a result of potential contamination and quality assurance concerns.
+Added: A product liability claim or
+Added: regulatory action against our e-liquids business could result in increased costs and could adversely affect its reputation and goodwill with its consumers.
+Added: We cannot assure you that product liability insurance can be maintained on acceptable terms or with adequate coverage against potential liabilities.
+Added: Such insurance is expensive and may not be available in the future on acceptable terms, or at all.
+Added: The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in the Company's becoming subject to significant liabilities that are uninsured.
+Added: The risk of class-based litigation (and individual litigation) for manufacturers and distributors of e-liquids and other vaping products, and others involved in the vaping industry, is significant, particularly in the face of increasing health and marketing concerns, the potential for product recalls or other product-related issues.
+Added: The United States has a highly active plaintiffs’ bar.
+Added: Recent years have seen a number of purported class action lawsuits in the United States against manufacturers and distributors of e-liquids and other vaping products.
+Added: These circumstances create enhanced risk and exposure for the Company given the nature of its operations, the products it manufactures, distributes and sells, and its business environment.
Risks Relating to the Ownership of Our Common Stock
Certain shareholders have the ability to exercise controlling influence on various corporate matters.
−Removed: Upon our emergence from Chapter 11, two shareholders and their respective affiliates, Glendon Capital Management LP (together with its affiliates, the “Glendon Investor”) and Monarch Alternative Capital LP (together with its affiliates, the “Monarch Investor”;
−Removed: the Glendon Investor and the Monarch Investor are together referred to as the “Significant Shareholders”) beneficially own in the aggregate approximately 56% of our issued and outstanding common stock and, therefore, have significant control on the outcome of matters submitted to a vote of shareholders, including, but not limited to, electing directors and approving corporate transactions.
+Added: Upon our emergence from Chapter 11, two shareholders and their respective affiliates, Glendon Capital Management LP (together with its affiliates, the "Glendon Investor") and Monarch Alternative Capital LP (together with its affiliates, the "Monarch Investor;" the Glendon Investor and the Monarch Investor are together referred to as the "Significant Shareholders") beneficially own in the aggregate approximately 56% of our issued and outstanding common stock and, therefore, have significant control on the outcome of matters submitted to a vote of shareholders, including, but not limited to, electing directors and approving corporate transactions.
Pursuant to the terms of a Shareholders Agreement dated as of August 24, 2020 among the Company and certain shareholders, including the Significant Shareholders, each of the Glendon Investor and the Monarch Investor has the right (depending on its continued ownership of a specified percentage of the outstanding shares of our common stock) to nominate up to two individuals for election as directors, and each of them and the other shareholders that are parties to the Shareholders Agreement have agreed to take all necessary action to elect such nominees as directors.
Under our articles of incorporation, the affirmative vote of each of the Glendon Investor and the Monarch Investor, so long as it continues to maintain an Investor Percentage Interest (as defined in the Shareholders Agreement) of at least five percent, is required for the approval of any amendment to the articles of incorporation.
−Removed: It is our understanding that each of the Glendon Investor and the Monarch Investor hold a significant amount of the Notes and the Term Loans.
+Added: It is our understanding that each of the Glendon Investor and the Monarch Investor hold a significant amount of the Notes and the Exit Term Loans.
In addition, the Glendon Investor and the Monarch Investor are the lenders under the DDTL Facility.
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This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
−Removed: Our actual financial results may vary significantly from the projections that were filed with the Bankruptcy Court.
−Removed: Certain projected financial information was included in the disclosure statement relating to the Plan filed with the Bankruptcy Court to support the feasibility of the Plan and our ability to continue operations upon emergence from the Chapter 11 Cases.
−Removed: This projected financial information was prepared by, and is the responsibility of, our management.
−Removed: At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance and with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize.
−Removed: Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects.
−Removed: Actual results may vary significantly from those contemplated by the projections.
−Removed: Those projections were prepared solely for the purpose of the Chapter 11 Cases and have not been, and will not be, updated on an ongoing basis.
−Removed: Accordingly, such projections are now stale and should no longer be relied upon as a forecast of expected results.
Risks Relating to the Tobacco Industry
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cut rag processing facility with respect to covered tobacco products.
−Removed: 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.
−Removed: 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 (as noted above);
−Removed: register establishment(s) and submit product listing to FDA;
−Removed: submit listing of ingredients;
−Removed: submit information on harmful and potentially harmful constituents;
−Removed: submit tobacco health documents;
−Removed: not introduce 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;
−Removed: and include the required warning statement on packaging and advertisements.
−Removed: These regulations apply 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.
−Removed: cut rag processing facility, and to joint ventures and subsidiaries that develop, produce and sell consumable e-liquids.
−Removed: In addition, the May 2016 regulations make these additional tobacco products subject to certain existing restrictions on the sale of cigarettes, including then-existing restrictions prohibiting sale to individuals under 18 years of age.
−Removed: In addition, recent federal legislation established a national minimum purchase age of 21 for tobacco and tobacco-based products, including e-liquids.
−Removed: The full impact of the act, including the May 2016 regulations and any future regulatory action to implement the act, is uncertain.
−Removed: However, if the effect of the act and FDA regulations under the act is a significant reduction in consumption of
−Removed: tobacco products, it could materially adversely affect our business, volume, results of operations, cash flows and financial condition.
−Removed: On April 28, 2021, the FDA announced its intention to propose regulations that would ban the sale of menthol flavored cigarettes in the United States.
−Removed: It is uncertain whether any such regulations will be proposed or adopted.
−Removed: If such regulations are adopted, consumption of tobacco products in the United States could be materially reduced.
−Removed: Such a reduction could adversely impact customer demand for our leaf tobacco products, which could materially adversely affect our business, volume, results of operations, cash flows and financial condition.
+Added: On April 28, 2022, the FDA announced its proposal to adopt regulations to prohibit the manufacture, distribution, and sale in the United States of cigarettes having menthol as a characterizing flavor and all cigars having a characterizing flavor other than tobacco.
+Added: According to the FDA’s proposed rulemaking, sales of menthol-flavored cigarettes accounted for 34-36% of total cigarette sales in the U.S.
+Added: While we are unable to precisely estimate the portion of our sales of leaf tobacco in the U.S.
+Added: that is used in the manufacture of menthol-flavored cigarettes, we believe a significant portion of our U.S.
+Added: leaf tobacco sales are used for such purpose.
+Added: In addition, a significant portion of the tobacco from our U.S.
+Added: cut rag processing facility is used in the manufacture of flavored cigars.
+Added: The FDA’s proposed regulations are subject to public comment and may not be adopted exactly as proposed.
+Added: In addition, if the proposed regulations are adopted, the extent of any reduction in consumer demand for tobacco products is uncertain, though such reduction could be significant.
+Added: The full impact of the act, including regulations adopted thereunder, the recently proposed regulations, and any further regulatory action to implement the act, is uncertain.
+Added: 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.
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Further, in February 2005, the World Health Organization ("WHO") treaty, the Framework Convention for Tobacco Control ("FCTC"), entered into force.
−Removed: This treaty, which the WHO reports has been signed by 182 nations as of March 31, 2021, requires signatory nations to enact legislation that would require, among other things, specific actions to prevent youth smoking;
+Added: This treaty, which the WHO reports has been signed or otherwise ratified by 181 nations, requires party nations to enact legislation that would require, among other things, specific actions to prevent youth smoking;
restrict or prohibit tobacco product marketing;
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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.
−Removed: 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.
−Removed: In its initial report published in 2007, 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.
−Removed: 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.
+Added: A variety of government actions can have a significant effect on the sourcing and production of leaf tobacco.
+Added: If some of the current proposed efforts are successful, we could have increased barriers to meeting our customers’ requirements, which could have an adverse effect on our performance and results of operations.
+Added: The WHO, through the FCTC, has specifically issued policy options and recommendations to promote crop diversification initiatives and alternatives to growing leaf tobacco in countries whose economies depend upon tobacco production.
+Added: If certain countries were to follow these policy recommendations and seek to eliminate or significantly reduce leaf tobacco production, we could encounter difficulty in sourcing leaf tobacco from these regions to fill customer requirements, which could have an adverse effect on our results of operations.
+Added: Certain recommendations by the WHO, through the FCTC, may also cause shifts in customer usage of certain styles of tobacco.
+Added: In countries such as Canada and Brazil and in the European Union, efforts have been taken to eliminate certain ingredients from the manufacturing process for tobacco products.
+Added: The FCTC and national governments have also discussed formulating a strategy to place limitations on the level of nicotine allowed in tobacco and tobacco smoke.
+Added: Such decisions could cause a change in requirements for certain styles of tobacco in particular countries.
+Added: Shifts in customer demand from one type of tobacco to another could create sourcing challenges as requirements move from one origin to another.
+Added: Regulations impacting our customers that change the requirements for leaf tobacco or restrict their ability to sell their products would inherently impact our business.
+Added: We have implemented a proprietary "track and trace" system that gathers data on leaf product beginning at the farm level to assist our customers’ collection of raw material information to support leaf traceability and customer testing requirements.
+Added: Additionally, given our global presence, we also have the ability to source different types and styles of tobacco for our customers should their needs change due to regulation.
+Added: Despite our capabilities, the extent to which governmental actions will affect our business, financial condition, results of operations and demand for our products and services will depend on future developments, which are highly uncertain and cannot be predicted.
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.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.