What changed in this filing

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Item 1A. Risk Factors

2022-05-27 compared with 2021-05-28 · 57 added, 17 removed, 182 unchanged (29% of the section changed)

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Accordingly, you should carefully consider the following risk factors, as well as other information contained in or incorporated by reference in this Annual Report.

The ongoing coronavirus (COVID-19) pandemic could adversely affect our business, financial condition, results of operations and demand for our products and services.

Since January 2020, the COVID-19 outbreak, characterized as a pandemic by the World Health Organization on March 11, 2020, has caused, and could possibly continue to cause a widespread health crisis and significantly disrupt the U.S.

Epidemics, pandemics or similar widespread public health concerns, such as COVID-19, could adversely affect our business, financial condition, results of operations and demand for our products and services.

Since January 2020, the COVID-19 outbreak, characterized as a pandemic by the World Health Organization ("WHO") on March 11, 2020, has caused, and could possibly continue to cause a widespread health crisis and significantly disrupt the U.S.

and global economies, markets and supply chains.

The ultimate impact of the ongoing COVID-19 pandemic on our business, financial condition, results of operations and the demand for our products and services in the future is uncertain, and it is impossible to predict whether any impacts we have experienced to date would continue or worsen in the future.

The extent to which the ongoing COVID-19 pandemic will impact our business, financial condition, results of operations, and demand for our products and services will depend on future developments including the ongoing geographic spread of COVID-19, the impact of COVID-19 mutations, the severity of the pandemic, the duration of the COVID-19 outbreak, and the type and duration of actions that may be taken by various governmental authorities in response to the COVID-19 pandemic and the impact on the U.S.

The ultimate impact of the COVID-19 pandemic or any future pandemic or disease outbreak on our business, financial condition, results of operations and the demand for our products and services in the future is uncertain, and it is impossible to predict whether any impacts we have experienced to date would continue or worsen in the future.

The extent to which the COVID-19 pandemic or any future pandemic or disease outbreak will impact our business, financial condition, results of operations, and demand for our products and services will depend on future developments including the ongoing geographic spread of the health crisis, the impact of disease mutations, the severity and duration of the health crisis, and the type and duration of actions that may be taken by various governmental authorities in response to the COVID-19 pandemic or any future pandemic or disease outbreak and the impact on the U.S.

and the global economies, markets, and supply chains.

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These effects could include a negative impact on the availability of our employees, temporary closures of our facilities or the facilities of our business partners, customers, suppliers, third party service providers or other vendors, and the interruption of domestic and global supply chains, distribution channels, liquidity and capital markets.

In addition, we have taken and will continue to take precautionary measures, including through consultation with governmental authorities and union representatives, intended to help minimize the risk of the ongoing COVID-19 pandemic to our employees, including implementing work-from-home protocols, instituting mandatory stay-at-home policies for those who are ill or significantly exposed to COVID-19, acquiring personal protective equipment (PPE), increasing sanitation and special sanitation of work areas, mandating social distancing (particularly among our employees engaged in manual processes), altering work arrangements to maintain social distancing and limiting visitors and non-employees at our facilities.

Our business continuity plans and other safeguards, however, may not be effective to mitigate the results of the ongoing COVID-19 pandemic.

The impact of the ongoing COVID-19 pandemic and any worsening of the global business and economic environment as a result may also exacerbate the following risk factors discussed below in this Form 10-K, any of which could have a material effect on us.

In addition, we have taken and will continue to take precautionary measures, including through consultation with governmental authorities and union representatives, intended to help minimize the risk of the COVID-19 pandemic to our employees, including implementing work-from-home protocols, instituting mandatory stay-at-home policies for those who are ill or significantly exposed to COVID-19, acquiring personal protective equipment (PPE), increasing sanitation and special sanitation of work areas, mandating social distancing (particularly among our employees engaged in manual processes), altering work arrangements to maintain social distancing and limiting visitors and non-employees at our facilities.

Our business continuity plans and other safeguards, however, may not be effective to mitigate the results of the COVID-19 pandemic.

The impact of the COVID-19 pandemic and any worsening of the global business and economic environment as a result may also exacerbate the following risk factors discussed below in this Form 10-K, any of which could have a material effect on us.

This situation remains fluid and additional impacts may arise that we are not aware of currently.

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• trends in consumption of cigars and other tobacco products,

• trends in consumption of alternative tobacco products, such as electronic nicotine delivery systems and non-combustible products,

• trends in consumption of alternative tobacco products, such as electronic nicotine delivery systems ("ENDS") and non-combustible products,

• levels of competition among our customers, and

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We may also need to make significant capital investments in other regions to develop the needed infrastructure to meet customer supply requirements.

We may not be able to increase prices to fully offset inflationary and other pressures on costs, such as raw products, packing materials, labor, energy, and distribution costs.

As a supplier of leaf tobacco and plant-based ingredients, we source our raw materials globally and rely on labor, energy, packing materials, and distribution resources to produce and distribute our products.

Many of these materials and inputs are subject to price fluctuations from a number of factors, including but not limited to changes in crop sizes, crop qualities, crop disease, product scarcity, fertilizer costs, energy costs, labor costs, currency fluctuations, import and export requirements (including tariffs), adverse weather events, pandemic illness (such as the COVID-19 pandemic), political instability or military conflict such as the ongoing conflict in Ukraine, and other factors that may be beyond our control.

We try to pass along to our customers some or all cost increases through increases in the sales prices of our products.

To the extent that price increases are not sufficient to offset the cost increases or we experience reductions in sales volumes, our business results and financial condition may be adversely affected.

Weather and other conditions can affect the marketability of our products.

Tobacco and other agricultural crops are subject to vagaries of weather and the environment that can, in some cases, change the quality or size of the crops.

If a weather event is particularly severe, such as a major drought or hurricane, the affected crop could be destroyed or damaged to an extent that it would be less desirable to manufacturers, which would result in a reduction in revenues.

If such an event is also widespread, it could affect our ability to acquire the quantity of tobacco or fruit and vegetable ingredients required by our customers.

In addition, other factors can affect the marketability of tobacco, including, among other things, the presence of excess residues of crop protection agents or non-tobacco related materials.

Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change.

If a weather event or other event is particularly severe, such as a volcanic eruption, major drought, hurricane, cyclone, typhoon, windstorm, or temperature or precipitation extreme, the affected crop could be destroyed or damaged to an extent that it would be less desirable to our customers, which would result in a reduction in operating results.

If such an event is also widespread, it could affect our ability to acquire the quantity of tobacco or plant-based ingredients required by our customers or could prevent or impair our ability to process or ship products as planned.

In addition, other factors can affect the marketability of our products, including, among other things, the presence of excess residues of crop protection agents or non-tobacco related materials.

A significant event impacting the condition or quality of a large amount of any of the crops that we buy could make it difficult for us to sell these products or to fill customers’ orders.

Our food ingredient business is subject to industry-specific risks which could adversely affect our operating results.

Our food ingredients business is subject to risks posed by food spoilage or food contamination;

Legal, regulatory or other market measures to address climate change could negatively affect our business operations.

The increasing concern over climate change may result in more regional, federal, foreign and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases.

In the event that such regulation is enacted and is more aggressive than the sustainability measures that we and our suppliers are currently undertaking to monitor our emissions and improve energy and resource efficiency, we may experience significant increases in our material and production costs.

Our suppliers would likely pass all or a portion of their increased costs along to us.

We may not be able to pass any resulting cost increases to our customers.

Furthermore, we may be required to make additional investments of capital to maintain compliance with new laws and regulations.

As a result, climate change or increased concern over climate change could negatively affect our business or operations.

Our plant-based ingredients business is subject to industry-specific risks which could adversely affect our operating results.

Our plant-based ingredients business is subject to risks posed by food spoilage or food contamination;

shifting consumer preferences;

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If one or more of these risks were to materialize, our revenues and operating results could be adversely affected, and our reputation might be damaged.

Disruption of our supply chain for our plant-based ingredients operations could adversely affect our business .

Damages or disruption to raw material supplies or our manufacturing or distribution capabilities due to weather, climate change, natural disaster, fire, terrorism, cyber-attack, pandemics (such as the COVID-19 pandemic), governmental restrictions or mandates, strikes, import/export restrictions, political instability or military conflict such as the ongoing conflict in Ukraine, or other factors could impair our ability to produce or sell our plant-based ingredient products.

Many of our plant-based ingredient product lines are manufactured at a single location or require raw materials that are currently sourced from a limited number of regions.

The failure of third parties on which we rely, including those third parties who supply our raw materials, packaging, capital equipment and other necessary operation materials, to meet their obligations to us, or significant disruptions in their ability to do so, may negatively impact our operations, as well as require additional resources to restore our supply chain.

We may not be successful in pursuing strategic investments or acquisitions or realize the expected benefits of those transactions because of integration difficulties and other challenges.

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In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures, security breaches or intrusions (including theft of confidential data), and viruses.

Cyber attacks, data breaches or other breaches of our information security systems may cause equipment failures or disruptions to our operations.

Our inability to operate our networks and security information systems as a results of such events, even for a short period of time, may result in significant expenses or operating disruptions.

If we are unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation, or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers, or employees.

We have invested and expect to continue to invest in technology security initiatives, information technology risk management, and disaster recovery plans.

The cost and operational consequences of implementing, maintaining, and enhancing further data or system protection measures could increase significantly to overcome increasingly frequent, complex, and sophisticated cyber threats.

Our efforts to deter, identify, mitigate, or eliminate future cyber threats may require significant additional expense and may not be successful.

The inability for us to attract, develop, retain, motivate, and maintain good relationships with our workforce, including key personnel, could negatively impact our business and our profitability.

Our future success depends on our ability to attract, develop, retain, motivate, and maintain good relationships with qualified personnel, particularly those who have extensive expertise in leaf tobacco or plant-based ingredients operations and who may also have long service with our Company.

We have such personnel in our senior executive leadership as well as in other key areas throughout our U.S.

and international operations such as procurement, manufacturing, and sales, all of which are critical to our future growth and profitability.

Changes in labor markets as a result of COVID-19 and other socioeconomic and demographic changes, have increased the competition for hiring and retaining talent.

As a result of this competition, we may be unable to continue to attract, develop, retain, motivate, and maintain good relationships with suitably qualified individuals at acceptable compensation levels who have the managerial, operational, and technical knowledge and experience to meet our needs.

Furthermore, the failure to execute on internal succession plans or to effectively transfer knowledge from exiting employees to others in the organization could adversely affect our business and results of operations.

Even if we succeed in hiring new personnel to fill vacancies, lengthy training and orientation periods might be required before new employees are able to achieve necessary productivity levels.

Any failure by us to attract, develop, retain, motivate, and maintain good relationships with qualified individuals could adversely affect our business and results of operations.

We are dependent on a seasonal workforce to meet our operational needs.

Our tobacco operations depend in part on our ability to attract, train, motivate and retain qualified employees, many of whom are seasonal employees.

We seek to manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place for peak and low seasons.

Many of our tobacco operations are located in rural communities that may not have sufficient labor pools.

If we are unable to hire sufficient personnel or successfully manage our seasonal workforce needs, we may not be able to meet our operational needs and our financial results could be negatively impacted.

Regulatory and Governmental Factors

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Governments continue their efforts to reduce the consumption of tobacco products globally by advancing regulations that, among other things, restrict or prohibit tobacco product use, advertising and promotion, increase taxes on tobacco products, limit nicotine levels in tobacco products, or eliminate the use of characterizing flavors.

A number of such measures are included in the World Health Organization’s (“WHO”) Framework Convention on Tobacco Control (“FCTC”), which entered into force on February 27, 2005, and currently has 181 Parties to the Convention.

A number of such measures are included in the WHO Framework Convention on Tobacco Control (“FCTC”), which entered into force on February 27, 2005, and currently has 182 Parties to the Convention.

The Conference of the Parties (“COP”), which is the governing body of the WHO FCTC and is comprised of all Parties to the Convention, meets every two years to consider amendments to the agreement and track progress in the implementation of the treaty’s 38 articles.

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We have substantial capital investments in South America and Africa, and the performance of our operations in those regions can materially affect our earnings.

Our customers’ operations are subject to similar uncertainties and risks relating to the political stability of the foreign governments in the countries in which their operations are located.

Political or economic instability in those countries, such as the ongoing conflict in Ukraine, may impede or disrupt our ability to meet our customers’ leaf tobacco needs in those impacted countries.

If the political situation in any of the countries where we conduct business were to deteriorate significantly, our ability to recover assets located there could be impaired.

To the extent that we do not replace any lost volumes of leaf tobacco with leaf tobacco from other sources, or we incur increased costs related to such replacement, our financial condition or results of operations, or both, would suffer.

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 may impose additional costs on us or expose us to additional risks.

In addition, if we are unable to supply leaf tobacco to our customers’ locations or otherwise conduct business with our customers due to political stability or interference in their countries of operation, or if we incur increased cost related to such challenges, our performance and results of operations could suffer.

Increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers, with respect to our ESG considerations may impose additional costs on us or expose us to additional risks.

Governments, the non-governmental community, and industry increasingly understand the importance of implementing comprehensive environmental, labor, and governance practices.

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dollar terms, it may be less attractive in the world market.

This could negatively affect the profitability of that crop and our results of operations.

This could negatively affect the profitability of

that crop and our results of operations.

In tobacco markets that are primarily domestic, the local currency is the functional currency.

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In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to shareholders’ equity through a reduction or increase to the “Pension and other postretirement benefit plans” component of Accumulated Other Comprehensive Loss.

At the end of fiscal year 2021, the projected benefit obligation of our qualified U.S.

At the end of fiscal year 2022, the projected benefit obligation ("PBO") of our qualified U.S.

pension plan was $237 million and plan assets were $250 million.

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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.

What changed 10-K

Item 1A. Risk Factors