Pyxus International, Inc 10-Q for FY2025 Q1
Pyxus International, Inc. (PYYX)
10-Q
2024-08-07
For: 2024-06-30
View Original
Added on
April 06, 2026
About this 10-Q
Pyxus International, Inc filed this 10-Q on August 7, 2024, covering the quarter ended June 30, 2024 (FY2025 Q1).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $634.86M
- up 33.1% from $477.09M a year earlier
- Net income
- $4.64M
- up 477.4% from net income of $804K a year earlier
- Diluted EPS
- $0.18
- up 500.0% from $0.03 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Commission File Number) | ||
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | ||||||||||
| | |||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(919 ) 379-4300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark if the registrant has filed all documents and reports required to be filed under Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of July 31, 2024, the registrant had 24,999,947 shares outstanding of Common Stock (no par value).
1
| Pyxus International, Inc. and Subsidiaries | |||||||||||
| Table of Contents | |||||||||||
| Page Number | |||||||||||
| Part I | Financial Information | ||||||||||
| Item 1. | Financial Statements (Unaudited) | ||||||||||
| Item 2. | |||||||||||
| Item 3. | |||||||||||
| Item 4. | |||||||||||
| Part II | Other Information | ||||||||||
| Item 1. | |||||||||||
| Item 1A. | |||||||||||
| Item 5. | |||||||||||
| Item 6. | |||||||||||
2
Part I. Financial Information
Item 1. Financial Statements
| Pyxus International, Inc. and Subsidiaries | ||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| (in thousands, except per share data) | 2024 | 2023 | ||||||||||||
| Sales and other operating revenues | $ | $ | ||||||||||||
| Cost of goods and services sold | ||||||||||||||
| Gross profit | ||||||||||||||
| Selling, general, and administrative expenses | ||||||||||||||
| Other expense, net | ||||||||||||||
| Restructuring and asset impairment charges | ||||||||||||||
| Operating income | ||||||||||||||
| Gain on debt retirement | ||||||||||||||
| Interest expense, net | ||||||||||||||
| Income before income taxes and other items | ||||||||||||||
| Income tax expense | ||||||||||||||
| (Income) loss from unconsolidated affiliates, net | ( | |||||||||||||
| Net income | ||||||||||||||
| Net income (loss) attributable to noncontrolling interests | ( | |||||||||||||
| Net income attributable to Pyxus International, Inc. | $ | $ | ||||||||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | $ | ||||||||||||
| Diluted | $ | $ | ||||||||||||
| Weighted average number of shares outstanding: | ||||||||||||||
| Basic | ||||||||||||||
| Diluted | ||||||||||||||
| See "Notes to Condensed Consolidated Financial Statements" | ||||||||||||||
3
| Pyxus International, Inc. and Subsidiaries | ||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| (in thousands) | 2024 | 2023 | ||||||||||||
| Net income | $ | $ | ||||||||||||
| Other comprehensive (loss) income, net of tax: | ||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||
| Cash flow hedges | ( | |||||||||||||
| Total other comprehensive (loss) income, net of tax | ( | |||||||||||||
| Total comprehensive income | ||||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interests | ( | |||||||||||||
| Comprehensive income attributable to Pyxus International, Inc. | $ | $ | ||||||||||||
| See "Notes to Condensed Consolidated Financial Statements" | ||||||||||||||
4
Pyxus International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) | ||||||||||||||||||||
| (in thousands) | June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
| Restricted cash | ||||||||||||||||||||
| Trade receivables, net | ||||||||||||||||||||
| Other receivables | ||||||||||||||||||||
| Inventories, net | ||||||||||||||||||||
| Advances to tobacco suppliers, net | ||||||||||||||||||||
| Recoverable income taxes | ||||||||||||||||||||
| Prepaid expenses | ||||||||||||||||||||
| Other current assets | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Investments in unconsolidated affiliates | ||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||
| Deferred income taxes, net | ||||||||||||||||||||
| Long-term recoverable income taxes | ||||||||||||||||||||
| Other noncurrent assets | ||||||||||||||||||||
| Right-of-use assets | ||||||||||||||||||||
| Property, plant, and equipment, net | ||||||||||||||||||||
| Total assets | $ | $ | $ | |||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Notes payable | $ | $ | $ | |||||||||||||||||
| Accounts payable | ||||||||||||||||||||
| Advances from customers | ||||||||||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||||||||
| Income taxes payable | ||||||||||||||||||||
| Operating leases payable | ||||||||||||||||||||
| Current portion of long-term debt | ||||||||||||||||||||
| Total current liabilities | ||||||||||||||||||||
| Long-term taxes payable | ||||||||||||||||||||
| Long-term debt | ||||||||||||||||||||
| Deferred income taxes | ||||||||||||||||||||
| Liability for unrecognized tax benefits | ||||||||||||||||||||
| Long-term leases | ||||||||||||||||||||
| Pension, postretirement, and other long-term liabilities | ||||||||||||||||||||
| Total liabilities | $ | $ | $ | |||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||
Common Stock— | ||||||||||||||||||||
Authorized shares ( | ||||||||||||||||||||
Issued and outstanding shares ( | $ | $ | $ | |||||||||||||||||
| Retained deficit | ( | ( | ( | |||||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||||||||
| Total stockholders’ equity of Pyxus International, Inc. | ||||||||||||||||||||
| Noncontrolling interests | ||||||||||||||||||||
| Total stockholders’ equity | ||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | |||||||||||||||||
See "Notes to Condensed Consolidated Financial Statements" | ||||||||||||||||||||
5
| Pyxus International, Inc. and Subsidiaries | |||||||||||||||||||||||
| Condensed Consolidated Statements of Stockholders' Equity | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Attributable to Pyxus International, Inc. | |||||||||||||||||||||||
| Accumulated Other Comprehensive Income | |||||||||||||||||||||||
| (in thousands) | Common Stock | Retained Deficit | Currency Translation Adjustment | Pensions, Net of Tax | Derivatives, Net of Tax | Noncontrolling Interests | Total Stockholders' Equity | ||||||||||||||||
| Balance, March 31, 2024 | $ | $ | ( | $ | ( | $ | $ | $ | $ | ||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||
| Equity-based compensation | — | — | — | — | — | ||||||||||||||||||
| Other comprehensive (loss) income, net of tax | — | — | — | ( | — | ( | |||||||||||||||||
| Balance, June 30, 2024 | $ | $ | ( | $ | ( | $ | $ | ( | $ | $ | |||||||||||||
| Balance, March 31, 2023 | $ | $ | ( | $ | ( | $ | $ | $ | $ | ||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | ( | $ | ( | $ | $ | $ | $ | ||||||||||||||
See "Notes to Condensed Consolidated Financial Statements"
6
Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| June 30, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Debt amortization/interest | ||||||||
| Gain on debt retirement | ( | |||||||
| Loss on foreign currency transactions | ||||||||
| Equity-based compensation | ||||||||
| (Income) loss from unconsolidated affiliates, net of dividends | ( | |||||||
| Changes in operating assets and liabilities, net | ||||||||
| Trade and other receivables | ( | ( | ||||||
| Inventories and advances to tobacco suppliers | ( | ( | ||||||
| Deferred items | ( | ( | ||||||
| Recoverable income taxes | ( | ( | ||||||
| Payables and accrued expenses | ( | ( | ||||||
| Advances from customers | ( | |||||||
| Prepaid expenses | ( | |||||||
| Income taxes | ||||||||
| Other operating assets and liabilities | ( | |||||||
| Other, net | ( | ( | ||||||
| Net cash used in operating activities | $ | ( | $ | ( | ||||
| Investing Activities: | ||||||||
| Purchases of property, plant, and equipment | $ | ( | $ | ( | ||||
| Collections from beneficial interests in securitized trade receivables | ||||||||
| Other, net | ||||||||
| Net cash provided by investing activities | $ | $ | ||||||
| Financing Activities: | ||||||||
| Net proceeds from short-term borrowings | $ | $ | ||||||
| Proceeds from revolving loan facilities | ||||||||
| Repayment of revolving loan facilities | ( | ( | ||||||
| Debt issuance costs | ( | ( | ||||||
| Repayment of long-term borrowings | ( | |||||||
| Other, net | ( | |||||||
| Net cash provided by financing activities | $ | $ | ||||||
| Effect of exchange rate changes on cash | ( | ( | ||||||
| Decrease in cash, cash equivalents, and restricted cash | ( | ( | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Restricted cash at beginning of period | ||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | ||||||
| Other information: | ||||||||
| Cash paid for income taxes, net | $ | $ | ||||||
| Cash paid for interest, net | ||||||||
| Noncash investing activities: | ||||||||
| Noncash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction | ||||||||
| See "Notes to Condensed Consolidated Financial Statements" | ||||||||
7
Pyxus International, Inc. and Subsidiaries | |||||||||||
Notes to Condensed Consolidated Financial Statements | |||||||||||
(Unaudited) | |||||||||||
| (in thousands, except per share data) | Page Number | ||||||||||
8
1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements represent the consolidation of Pyxus International, Inc. (the "Company", "Pyxus", "we", or "us") and all companies that Pyxus directly or indirectly controls, either through majority ownership or otherwise. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, the normal and recurring adjustments necessary for fair statement of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. Intercompany accounts and transactions have been eliminated.
These condensed consolidated interim financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed on June 6, 2024. Due to the seasonal nature of the Company’s business, the results of operations for a fiscal quarter are not necessarily indicative of the operating results that may be attained for other quarters or a full fiscal year.
2. New Accounting Standards
Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This ASU amends FASB Topic 280 to permit the disclosure of multiple measures of a segment's profit or loss, and requires an entity with a single reportable segment to apply FASB Topic 280 in its entirety. In addition, this ASU requires the following new segment disclosures:
•Significant segment expenses by reportable segment if regularly provided to the Chief Operating Decision Maker ("CODM") and included within the reported measure of segment profit or loss;
•Other segment items, which represents the difference between reported segment revenues less the significant segment expenses less reported segment profit or loss; and
•Title and position of the CODM.
Disclosures required under this new ASU and the existing segment profit or loss and assets disclosures currently required annually by FASB Topic 280 are to be disclosed in interim periods. The annual disclosure requirements are effective for the Company's fiscal year ending March 31, 2025, and the interim period disclosure requirements are effective beginning April 1, 2025. Early adoption is permitted. This new rule will result in additional disclosures for segment reporting, and does not have an impact on the Company's financial condition, results of operations, or cash flows.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures, to provide more disaggregation of income tax information mainly related to the effective tax rate reconciliation and the income taxes paid disclosure requirements. Under the new accounting rules, the tabular effective tax rate reconciliation must include specific categories with certain reconciling items based on the expected tax further disaggregated by nature and/or jurisdiction. Income taxes paid, net of refunds received, must be broken out by federal, state, and foreign taxes, and further disaggregated by individual jurisdictions based on total income taxes paid. These new annual disclosure requirements are effective for the Company's fiscal year ending March 31, 2026. Early adoption is permitted. The Company is currently evaluating the impact that this new accounting standard will have on its income tax disclosures.
9
3. Revenue Recognition
Product revenue is primarily from the sale of processed tobacco to customers. Processing and other revenues are mainly contracts to process customer-owned green tobacco. During such processing, ownership remains with the customers. All Other revenue is primarily composed of revenue from the sale of e-liquids and non-tobacco agriculture products. The following disaggregates sales and other operating revenues by major source, with the All Other category being included for purposes of reconciliation of the respective balances below of the Leaf segment (the Company's sole reportable segment) to the condensed consolidated financial statements:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Leaf: | ||||||||||||||
| Product revenue | $ | $ | ||||||||||||
| Processing and other revenues | ||||||||||||||
| Total sales and other operating revenues | ||||||||||||||
| All Other: | ||||||||||||||
| Total sales and other operating revenues | ||||||||||||||
| Total sales and other operating revenues | $ | $ | ||||||||||||
The following summarizes activity in the allowance for expected credit losses:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Balance, beginning of period | $ | ( | $ | ( | ||||||||||
| Additions | ( | ( | ||||||||||||
| Write-offs and other adjustments | ||||||||||||||
| Balance, end of period | ( | ( | ||||||||||||
| Trade receivables | ||||||||||||||
| Trade receivables, net | $ | $ | ||||||||||||
4. Income Taxes
For each period presented, the Company's quarterly provision for income taxes is not calculated using the annual effective tax rate method ("AETR method"), which applies an estimated annual effective tax rate to pre-tax income or loss. As of the end of the current period, market specific factors coupled with tax rate sensitivity caused the AETR method to produce an unreliable estimate of the Company’s annual effective tax rate; therefore, the Company recorded its interim income tax provision using the discrete method, as allowed under FASB ASC 740-270, Income Taxes - Interim Reporting. Using the discrete method, the Company determined income tax expense as if each of the three-month interim periods reported were an annual period.
The effective tax rate for the three months ended June 30, 2024 and 2023 was 71.9 % and 47.5 %, respectively. For the three months ended June 30, 2024, the difference between the Company’s effective rate and the U.S. statutory rate of 21.0% is primarily due to U.S. taxation of foreign earnings partially offset by foreign tax credits and additional unrecognized tax benefits reserves.
10
5. Earnings Per Share
The calculations of basic and diluted earnings per share are based on net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares outstanding, respectively. Under the treasury stock method, restricted stock units will have a dilutive effect when the respective period's average market price of the Company's common stock exceeds the assumed exercise proceeds and the average amount of cost not yet recognized. Performance based stock units are included in diluted earnings per share if the performance targets have been met at the end of the reporting period. Share-based payment awards that provide contingently issuable shares upon a performance or market condition are included in basic and diluted earnings per share only if the condition is met as of the end of the reporting period.
The following summarizes the computation of earnings per share:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Net income attributable to Pyxus International, Inc. | $ | $ | ||||||||||||
Basic weighted average shares outstanding (1) | ||||||||||||||
Plus: Dilutive equity awards (2) | ||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | $ | ||||||||||||
| Diluted | $ | $ | ||||||||||||
(1) For the three months ended June 30, 2024, the basic weighted average shares outstanding are adjusted to include | ||||||||||||||
(2) For the three months ended June 30, 2024, the weighted average number of outstanding restricted stock units not included in the computation of diluted earnings per share because their effect would be antidilutive is | ||||||||||||||
6. Restricted Cash
The following summarizes the composition of restricted cash:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Compensating balance for short-term borrowings | $ | $ | $ | ||||||||
| Escrow | |||||||||||
| Grants | |||||||||||
| Other | $ | $ | |||||||||
| Total | $ | $ | $ | ||||||||
7. Inventories, Net
The following summarizes the composition of inventories, net:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Processed tobacco | $ | $ | $ | ||||||||
| Unprocessed tobacco | |||||||||||
| Other tobacco related | |||||||||||
All Other | |||||||||||
| Total | $ | $ | $ | ||||||||
11
8. Equity Method Investments
The following summarizes the Company's equity method investments as of June 30, 2024:
| Investee Name | Location | Primary Purpose | Ownership Percentage | Basis Difference(1) | ||||||||||
| Adams International Ltd. | Thailand | Purchase and process tobacco | $ | ( | ||||||||||
| Alliance One Industries India Private Ltd. | India | Purchase and process tobacco | ( | |||||||||||
| China Brasil Tabaco Exportadora SA | Brazil | Purchase and process tobacco | ||||||||||||
| Oryantal Tütün Paketleme Sanayi ve Ticaret A.Ş. | Turkey | Process tobacco | ( | |||||||||||
| Purilum, LLC | U.S. | Produce flavor formulations and consumable e-liquids | ||||||||||||
| Siam Tobacco Export Company | Thailand | Purchase and process tobacco | ( | |||||||||||
(1) Basis differences for the Company's equity method investments were due to fair value adjustments recorded during fiscal 2021. | ||||||||||||||
The following summarizes financial information for these equity method investments:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Statement of operations: | ||||||||||||||
| Sales | $ | $ | ||||||||||||
| Gross profit | ||||||||||||||
| Net income (loss) | ( | |||||||||||||
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Balance sheet: | |||||||||||
| Current assets | $ | $ | $ | ||||||||
| Property, plant, and equipment and other assets | |||||||||||
| Current liabilities | |||||||||||
| Long-term obligations and other liabilities | |||||||||||
9. Variable Interest Entities
The Company holds variable interests in multiple entities that primarily procure or process inventory or are securitization entities. These variable interests relate to equity investments, receivables, guarantees, and securitized receivables. The following summarizes the Company's financial relationships with its unconsolidated variable interest entities:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Investments in variable interest entities | $ | $ | $ | ||||||||
| Receivables with variable interest entities | |||||||||||
| Guaranteed amounts to variable interest entities (not to exceed) | |||||||||||
12
10. Intangible Assets, Net
The gross carrying amount and accumulated amortization of intangible assets consist of the following:
| June 30, 2024 | ||||||||||||||||||||
| Weighted Average Remaining Useful Life | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | |||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | ||||||||||||||||
| Technology | ( | |||||||||||||||||||
| Trade names | ( | |||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||
| June 30, 2023 | ||||||||||||||||||||
| Weighted Average Remaining Useful Life | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | |||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | ||||||||||||||||
| Technology | ( | |||||||||||||||||||
| Trade names | ( | |||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||
| March 31, 2024 | ||||||||||||||||||||
| Weighted Average Remaining Useful Life | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | |||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | ||||||||||||||||
| Technology | ( | |||||||||||||||||||
| Trade names | ( | |||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||
The following summarizes amortization expense for definite-lived intangible assets:
| Three Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Amortization expense | $ | $ | ||||||
13
11. Debt Arrangements
The following summarizes debt and notes payable:
| (in thousands) | Interest Rate | June 30, 2024 | June 30, 2023 | March 31, 2024 | ||||||||||||||||||||||||||||
| Senior secured credit facilities: | ||||||||||||||||||||||||||||||||
| ABL Credit Facility | % | (1) | $ | $ | $ | |||||||||||||||||||||||||||
| Senior secured notes: | ||||||||||||||||||||||||||||||||
| % | (1) | |||||||||||||||||||||||||||||||
| % | (1) | |||||||||||||||||||||||||||||||
| Senior secured term loans: | ||||||||||||||||||||||||||||||||
Intabex Term Loans (4) | % | (1) | ||||||||||||||||||||||||||||||
Pyxus Term Loans (5) | % | (1) | ||||||||||||||||||||||||||||||
| Other Debt: | ||||||||||||||||||||||||||||||||
| Other long-term debt | % | (1) | ||||||||||||||||||||||||||||||
Notes payable (6) | % | (1) | ||||||||||||||||||||||||||||||
| Total debt | $ | $ | $ | |||||||||||||||||||||||||||||
Short-term (6) | $ | $ | $ | |||||||||||||||||||||||||||||
| Long-term: | ||||||||||||||||||||||||||||||||
| Current portion of long-term debt | $ | $ | $ | |||||||||||||||||||||||||||||
| Long-term debt | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||||||||
| Letters of credit | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Weighted average rate for the trailing twelve months ended June 30, 2024 or, for indebtedness outstanding only during a portion of such twelve-month period, for the portion of such period that such indebtedness was outstanding. | ||||||||||||||||||||||||||||||||
(2) The | ||||||||||||||||||||||||||||||||
(3) Balance of $ | ||||||||||||||||||||||||||||||||
(4) Balance of $ | ||||||||||||||||||||||||||||||||
(5) Balance of $ | ||||||||||||||||||||||||||||||||
(6) Primarily foreign seasonal lines of credit. | ||||||||||||||||||||||||||||||||
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Outstanding Senior Secured Debt
ABL Credit Facility
On February 8, 2022, the Company’s wholly owned subsidiary, Pyxus Holdings, Inc. ("Pyxus Holdings"), certain subsidiaries of Pyxus Holdings (together with Pyxus Holdings, the "Borrowers"), and the Company and its wholly owned subsidiary, Pyxus Parent, Inc. ("Pyxus Parent"), as parent guarantors, entered into an ABL Credit Agreement (as amended, the "ABL Credit Agreement"), dated as of February 8, 2022, by and among Pyxus Holdings, as Borrower Agent, the Borrowers and parent guarantors party thereto, the 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"), the proceeds of which may be used to refinance existing senior bank debt, pay fees and expenses related to the ABL Credit Facility, partially fund capital expenditures, and provide for the ongoing working capital needs of the Borrowers. The ABL Credit Agreement was amended on May 23, 2023 to extend the maturity of the ABL Credit Facility to February 8, 2027. The ABL Credit Agreement was amended on October 24, 2023 to, among other things increase the aggregate amount of the revolving loan commitments under the ABL Credit Facility to $120,000 . A detailed description of the ABL Credit Agreement is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
The ABL Credit Facility may be used for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $120,000 , subject to the limitations described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. The ABL Credit Facility includes a $20,000 uncommitted accordion feature that permits Pyxus Holdings, under certain conditions, to solicit the lenders under the ABL Credit Facility to provide additional revolving loan commitments to increase the aggregate amount of the revolving loan commitments under the ABL Credit Facility not to exceed a maximum principal amount of $140,000 . At June 30, 2024, the Borrowers and the parent guarantors under the ABL Credit Agreement were in compliance with the covenants under the ABL Credit Agreement.
Intabex Term Loans
On February 6, 2023, Pyxus Holdings entered into the Intabex Term Loan Credit Agreement, dated as of February 6, 2023 (the "Intabex Term Loan Credit Agreement"), by and among, Pyxus Holdings, the guarantors party thereto, the lenders party thereto and Alter Domus (US) LLC ("Alter Domus"), as administrative agent and senior collateral agent. The Intabex Term Loan Credit Agreement established a term loan credit facility in an aggregate principal amount of approximately $189,033 (the "Intabex Credit Facility"), under which term loans in the full aggregate principal amount of the Intabex Credit Facility (the "Intabex Term Loans") were deemed made in exchange for certain outstanding term debt of Pyxus Holdings, accrued and unpaid PIK interest thereon, and related fees. The Intabex Term Loans bear interest, at Pyxus Holdings’ option, at either (i) a term SOFR rate (subject to a floor of 1.5 %) plus 8.0 % per annum or (ii) an alternate base rate plus 7.0 % per annum. The Intabex Term Loans are stated to mature on December 31, 2027. A detailed description of the Intabex Term Loan Credit Agreement is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. At June 30, 2024, Pyxus Holdings and the guarantors under the Intabex Term Loan Credit Agreement were in compliance with all covenants under the Intabex Term Loan Credit Agreement.
Pyxus Term Loans
On February 6, 2023, Pyxus Holdings entered into the Pyxus Term Loan Credit Agreement, dated as of February 6, 2023 (the "Pyxus Term Loan Credit Agreement"), by and among, Pyxus Holdings, the guarantors party thereto, the lenders party thereto and Alter Domus, as administrative agent and senior collateral agent, to establish a term loan credit facility in an aggregate principal amount of approximately $130,550 (the "Pyxus Credit Facility")., under which term loans in the full aggregate principal amount of the Pyxus Credit Facility (the "Pyxus Term Loans" and, together with the Intabex Term Loans, the "New Term Loans") were deemed made in exchange for certain outstanding term debt of Pyxus Holdings and applicable accrued and unpaid PIK interest thereon. The Pyxus Term Loans bear interest, at Pyxus Holdings’ option, at either (i) a term SOFR rate (subject to a floor of 1.5 %) plus 8.0 % per annum or (ii) an alternate base rate plus 7.0 % per annum. The Pyxus Term Loans are stated to mature on December 31, 2027. A detailed description of the Pyxus Term Loan Credit Agreement is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. At June 30, 2024, Pyxus Holdings and the guarantors under the Pyxus Term Loan Credit Agreement were in compliance with all covenants under the Pyxus Term Loan Credit Agreement.
Pursuant to an exchange offer made by Pyxus Holdings and accepted by holders of approximately 92.7 % of the aggregate principal amount of the outstanding 10.0 % Senior Secured First Lien Notes due 2024 issued by Pyxus Holdings (the "2024 Notes") pursuant to that certain Indenture, dated as of August 24, 2020 (the "2024 Notes Indenture"), by and among Pyxus Holdings, the guarantors party thereto and the trustee, collateral agent, registrar and paying agent thereunder, on February 6, 2023, Pyxus Holdings issued approximately $260,452 in aggregate principal amount of 8.5 % Senior Secured Notes due December 31, 2027 (the "2027 Notes") to the exchanging holders of the 2024 Notes for an equal principal amount of 2024 Notes. The 2027 Notes were issued pursuant to the Indenture, dated as of February 6, 2023 (the "2027 Notes Indenture"), among Pyxus Holdings, the guarantors party thereto, and Wilmington Trust, National Association, as trustee, and Alter Domus,
15
as collateral agent. The 2027 Notes bear interest at a rate of 8.5 % per annum, which interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The 2027 Notes are stated to mature on December 31, 2027. A detailed description of the 2027 Notes and the 2027 Notes Indenture is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. At June 30, 2024, Pyxus Holdings and the guarantors of the 2027 Notes were in compliance with all covenants under the 2027 Notes Indenture.
Related Party Transactions
Based on a Schedule 13D/A filed with the SEC on March 25, 2024, by Monarch Alternative Capital LP (the "Monarch Investor"), MDRA GP LP and Monarch GP LLC, the Monarch Investor reported beneficial ownership of 6,125 shares of the Company’s common stock, representing approximately 24.5 % of the outstanding shares of the Company’s common stock. An individual designated by the Monarch Investor serves as a director of Pyxus.
On March 21, 2024, Pyxus Holdings entered into an agreement (the "Debt Repurchase Agreement") with funds affiliated with the Monarch Investor to purchase $77,922 of aggregate principal amount of their holdings in the 2027 Notes for $60,000 , a 23.0 % discount to par value, plus accrued and unpaid interest and specified customary fees. The purchase of $77,922 aggregate principal amount of the 2027 Notes for a total of $62,339 (including fees and accrued and unpaid interest) was completed on March 28, 2024.
The Debt Repurchase Agreement also included the right of Pyxus Holdings, at its option, to purchase from such holders an additional $34,191 aggregate principal amount of the 2027 Notes for $26,327 , a 23.0 % discount to par value, plus accrued and unpaid interest, and $10,345 aggregate principal amount of the Pyxus Term Loans for $9,104 , a 12.0 % discount to par value, plus accrued and unpaid interest. On April 12, 2024, Pyxus Holdings exercised its rights to complete these repurchases by September 30, 2024.
On May 31, 2024, Pyxus Holdings completed the purchase of $10,345 of aggregate principal amount of the Pyxus Term Loans for a total of $9,435 (including accrued and unpaid interest).
The Debt Repurchase Agreement and the transactions contemplated thereunder were approved and determined to be on terms and conditions at least as favorable to the Company and its subsidiaries as could reasonably have been obtained in a comparable arm's-length transaction with an unaffiliated party by a majority of the disinterested members of the Board of Directors of Pyxus.
Other Outstanding Debt
2024 Notes
On February 6, 2023, the relevant parties to the 2024 Notes Indenture entered into the Second Supplemental Indenture, dated as of February 6, 2023 (the "2024 Notes Supplemental Indenture"), to the 2024 Notes Indenture, pursuant to which the 2024 Notes Indenture, the 2024 Notes and the related intercreditor and security documents were amended to effect these changes. The 2024 Notes bear interest at a rate of 10.0 % per year, payable semi-annually in arrears in cash on February 15 and August 15 of each year. The 2024 Notes are stated to mature on August 24, 2024. At June 30, 2024, Pyxus Holdings and the guarantors of the 2024 Notes were in compliance with all covenants under the 2024 Notes Indenture, as amended by the 2024 Notes Supplemental Indenture.
Foreign Seasonal Lines of Credit
Excluding long-term credit agreements, the Company typically finances its non-U.S. operations with uncommitted short-term seasonal lines of credit arrangements with a number of banks. These operating lines are generally seasonal in nature, typically extending for a term of 180 days to 365 days corresponding to the tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the unilateral right to cease making loans and demand repayment of loans at any time or at specified dates. These loans are generally renewed at the outset of each tobacco season. Certain of the foreign seasonal lines of credit are secured by trade receivables and inventories as collateral and are guaranteed by the Company and certain of its subsidiaries. As of June 30, 2024, the total borrowing capacity under individual foreign seasonal lines of credit range up to $152,600 . As of June 30, 2024, the aggregate amount available for borrowing under the seasonal lines of credit was $169,703 . At June 30, 2024, the Company was permitted to borrow under foreign seasonal lines of credit up to a total $815,646 , subject to limitations under the ABL Credit Agreement and the agreements governing the Intabex Term Loans, the Pyxus Term Loans and the 2027 Notes. At June 30, 2024, $542 of cash was held on deposit as a compensating balance. At June 30, 2024, the Company, and its subsidiaries, were in compliance with the covenants associated with its short-term seasonal lines of credit.
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12. Securitized Receivables
The Company sells trade receivables to unaffiliated financial institutions under various accounts receivable securitization facilities, two of which are subject to annual renewal.
Under the first facility, with Finacity Corporation (the "Finacity Facility"), the Company continuously sells a designated pool of trade receivables to a special purpose entity, which sells 100 % of the receivables to an unaffiliated financial institution. Following the sale and transfer of the receivables to the special purpose entity, the receivables are isolated from the Company and its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the receivables. This facility requires a minimum level of deferred purchase price be retained by the Company in connection with the sales of the receivables to the unaffiliated financial institution. The Company continues to service, administer, and collect the receivables on behalf of the special purpose entity and receives a servicing fee of 0.5 % of serviced receivables per annum. As the Company estimates the expected fee it receives in return for its obligation to service these receivables is at fair value, no servicing assets or liabilities are recognized. Servicing fees are recorded as a reduction of selling, general, and administrative expenses within the condensed consolidated statements of operations. As of June 30, 2024, the investment limit of this facility was $120,000 of trade receivables.
Under the second facility, the Company offers trade receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are isolated from the Company and its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the receivables. Although the Company continues to service, administer, and collect the receivables on behalf of the unaffiliated financial institution, the Company does not receive a servicing fee, and as a result, has established a servicing liability based upon unobservable inputs, primarily discounted cash flow. As of June 30, 2024, the investment limit under the second facility was $130,000 of trade receivables.
As servicer for the Finacity Facility and the second facility, the Company may receive funds that are due to the unaffiliated financial institutions which are net settled on the next settlement date. As of June 30, 2024 and 2023, and March 31, 2024, trade receivables, net in the condensed consolidated balance sheets has been reduced by $8,219 , $908 , and $15,036 as a result of the net settlement, respectively. As of March 31, 2024, accrued expenses and other current liabilities in the consolidated balance sheets includes $10,279 of net payables for the Finacity Facility. Refer to "Note 15. Fair Value Measurements" for additional information.
Under the other facilities, the Company offers trade receivables for sale to unaffiliated financial institutions, which are then subject to acceptance by the unaffiliated financial institutions. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are isolated from the Company and its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the receivables. As of June 30, 2024, the investment limits under these other facilities were variable based on qualifying sales.
The following summarizes the Company's accounts receivable outstanding in the securitization facilities, which represents trade receivables sold into the program that have not been collected from the customer, and related beneficial interests, which represents the Company's residual interest in receivables sold that have not been collected from the customer:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Receivables outstanding in facility | $ | $ | $ | ||||||||
| Beneficial interests | |||||||||||
Cash proceeds from the sale of trade receivables is comprised of a combination of cash and a deferred purchase price receivable. Deferred purchase price receivable is realized after the collection of the underlying trade receivables sold by the purchasers. The following summarizes the Company's cash purchase price and deferred purchase price:
| Three Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash proceeds: | ||||||||
| Cash purchase price | $ | $ | ||||||
| Deferred purchase price | ||||||||
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13. Guarantees
In certain markets, the Company guarantees bank loans for suppliers to finance their crops. The Company also guarantees bank loans of certain unconsolidated subsidiaries. The following summarizes amounts guaranteed and the fair value of those guarantees:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Amounts guaranteed (not to exceed) | $ | $ | $ | ||||||||
Amounts outstanding under guarantee (1) | |||||||||||
| Fair value of guarantees | |||||||||||
| Amounts due to local banks on behalf of suppliers for government subsidized rural credit financing | |||||||||||
(1) Most of the guarantees outstanding at June 30, 2024 expire within | |||||||||||
14. Derivative Financial Instruments
The Company uses forward or option currency contracts to manage risks associated with foreign currency exchange rates on foreign operations. These contracts are for green tobacco purchases, processing costs, and selling, general, and administrative expenses. The Company recorded a net gain of $851 and $1,434 from its derivative financial instruments in for the three months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and 2023, the Company recorded of $1,834 and $11 within accrued expenses and other current liabilities, respectively. Refer to "Note 15. Fair Value Measurements" for additional information.
The following summarizes the U.S. Dollar notional amount of derivative contracts outstanding:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| U.S. Dollar notional outstanding | $ | $ | $ | ||||||||
15. Fair Value Measurements
The following summarizes the financial assets and liabilities measured at fair value on a recurring basis:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||||||||||||||||||||
| Level 2 | Level 3 | Total at Fair Value | Level 2 | Level 3 | Total at Fair Value | Level 2 | Level 3 | Total at Fair Value | |||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||
| Securitized beneficial interests | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Long-term debt(1) | |||||||||||||||||||||||||||||
| Guarantees | |||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
(1) This fair value measurement disclosure does not affect the condensed consolidated balance sheets. | |||||||||||||||||||||||||||||
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The following summarizes the reconciliation of changes in Level 3 instruments measured on a recurring basis:
| Securitized Beneficial Interests | Long-Term Debt | Guarantees | |||||||||
Beginning balance at March 31, 2024 | $ | $ | $ | ||||||||
| Issuances of sales of receivables/guarantees | — | ||||||||||
| Settlements | ( | ( | |||||||||
| Losses recognized in earnings | ( | ( | |||||||||
Ending balance at June 30, 2024 | $ | $ | $ | ||||||||
| Securitized Beneficial Interests | Long-Term Debt | Guarantees | |||||||||
Beginning balance at March 31, 2023 | $ | $ | $ | ||||||||
| Issuances of sales of receivables/guarantees | — | ||||||||||
| Settlements | ( | ( | ( | ||||||||
| Losses recognized in earnings | ( | ||||||||||
Ending balance at June 30, 2023 | $ | $ | $ | ||||||||
For the three months ended June 30, 2024 and 2023, the impact to earnings attributable to the change in unrealized losses on securitized beneficial interests was $1,250 and $748 , respectively. Gains and losses included in earnings are reported in other expense, net.
16. Contingencies and Other Information
Brazilian Tax Credits
The government in the Brazilian State of Parana ("Parana") issued a tax assessment on October 26, 2007 with respect to local intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. At June 30, 2024, the assessment for intrastate trade tax credits taken is $2,375 and the total assessment including penalties and interest is $9,796 . On March 18, 2014, the government in Brazilian State of Santa Catarina also issued a tax assessment with respect to local intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. At June 30, 2024, the assessment for intrastate trade tax credits taken is $2,050 and the total assessment including penalties and interest is $6,201 . The Company believes it has properly complied with Brazilian law and will contest any assessment through the judicial process. Should the Company lose in the judicial process, the loss of the intrastate trade tax credits would have a material impact on the financial statements of the Company.
The Company also has local intrastate trade tax credits in the Brazil State of Rio Grande do Sul. This jurisdiction permits the sale or transfer of excess credits to third parties, however approval must be obtained from the tax authorities. The Company has an agreement with the state government regarding the amounts and timing of credits that can be sold. The tax credits have a carrying value of $20,377 as of June 30, 2024. The intrastate trade tax credits are monitored for impairment in future periods based on market conditions and the Company’s ability to use or sell the tax credits.
Other Matters
In addition to the above-mentioned matters, the Company or certain of its subsidiaries are involved in other litigation or legal matters incidental to their business activities, including tax matters. While the outcome of these matters cannot be predicted with certainty, they are being vigorously defended and the Company does not currently expect that any of them will have a material adverse effect on its business or financial position. However, should one or more of these matters be resolved in a manner adverse to its current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material.
17. Equity-Based Compensation
Pursuant to the Pyxus International, Inc. Amended and Restated 2020 Incentive Plan (the "Incentive Plan"), the Company granted time-vesting restricted stock units, with the vesting of these restricted stock units being subject to continued employment through specified dates and the condition that the Company’s common stock be listed for trading on a national securities exchange or an approved foreign securities exchange by March 31, 2028 (the "Listing Condition"). On May 10, 2024 (the "Modification Date"), the time-vesting restricted stock units granted under the Incentive Plan that were outstanding
19
immediately prior to that date were amended to extend the period by which the Listing Condition must be satisfied for the vesting of such restricted stock units from March 31, 2028 to March 31, 2031 and to provide that the Listing Condition shall be deemed to be satisfied on March 31, 2031 regardless of whether the Company’s common stock has been listed by that date on a national securities exchange or foreign securities exchange and would vest earlier upon the occurrence of a "Change in Control" (as defined in the Incentive Plan) as a result of a merger, consolidation, share exchange or sale of all or substantially all of the assets of the Company. On the Modification Date, the amended Listing Condition was rendered nonsubstantive, and recipients of all such outstanding time-vesting restricted stock units had satisfied the continued service requirement, meaning the restricted stock units were fully earned for vesting. During the three months ended June 30, 2024, the Company recognized total equity-based compensation expense of $3,031 , which is recorded in selling, general, and administrative expenses within the condensed consolidated statements of operations. The modified time-vesting restricted stock units accounted for $2,877 of the total equity-based compensation to reflect the cumulative catch-up required on the Modification Date.
The following summarizes the Company's equity awards granted:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| (in thousands, except grant date fair value) | 2024 | 2023 | ||||||||||||
| Restricted stock units | ||||||||||||||
| Number granted | ||||||||||||||
| Grant date fair value | $ | $ | ||||||||||||
| Performance-based stock units | ||||||||||||||
| Number granted (at target performance level) | ||||||||||||||
| Grant date fair value | $ | $ | ||||||||||||
Restricted stock units granted under the Incentive Plan during the three months ended June 30, 2024 are earned ratably over a three-year period, and will vest, subject to continued employment, upon the earlier of March 31, 2031 or the occurrence of a liquidity event as defined under the terms of the restricted stock unit award agreement. Unrecognized compensation costs for restricted stock units is $2,534 as of June 30, 2024, and is expected to be recognized over a weighted average period of 2.75 years, representing the remaining service period related to the awards, subject to adjustments for actual forfeitures.
Under the terms of the performance-based stock units, the amount of shares to be issued (ranging from 0 % to 200 % of the number of shares to be issued at the target performance level) will be contingent upon the per share price achieved in a liquidity event (as defined under the terms of the performance-based stock unit award agreement), subject to continued employment through the date of a liquidity event. The contingent liquidity event is not probable as of June 30, 2024, and accordingly, no equity-based compensation expense has been recognized for the performance-based stock units granted during the period.
18. Related Party Transactions
The Company engages in transactions with its equity method investees primarily for the procuring and processing of inventory. The following summarizes activities with the Company's equity method investees:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Sales | $ | $ | ||||||||||||
| Purchases | ||||||||||||||
The Company included the following related party balances in its condensed consolidated balance sheets:
| June 30, 2024 | June 30, 2023 | March 31, 2024 | Location in Condensed Consolidated Balance Sheet | |||||||||||
| Accounts receivable, related parties | $ | $ | $ | Other receivables | ||||||||||
| Accounts payable, related parties | Accounts payable | |||||||||||||
| Advances from related parties | Advances from customers | |||||||||||||
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Transactions with Significant Shareholders
Based on a Schedule 13D/A filed with the SEC on June 13, 2024 by Glendon Capital Management, L.P. (the "Glendon Investor"), Holly Kim Olsen, Glendon Opportunities Fund, L.P. and Glendon Opportunities Fund II, L.P., the Glendon Investor reported beneficial ownership of 8,315 shares of the Company’s common stock, representing approximately 33.3 % of the outstanding shares of the Company’s common stock. A representative of the Glendon Investor serves as a director of Pyxus. Based on a Schedule 13G/A filed with the SEC on May 6, 2024 by Owl Creek Asset Management, L.P. and Jeffrey A. Altman, Owl Creek Asset Management, L.P. is the investment manager of certain funds and reported beneficial ownership of 2,605 shares of the Company’s common stock on April 30, 2024, representing approximately 10.4 % of the outstanding shares of the Company’s common stock. Funds managed by the Glendon Investor, funds managed by the Monarch Investor, and funds managed by Owl Creek Asset Management, L.P., (such funds are collectively referred to as the "Investor-Affiliated Funds") were holders, in part, of the Intabex Term Loans, the Pyxus Term Loans and the 2027 Notes, which are described in "Note 11. Debt Arrangements," during the three months ended June 30, 2024.
Accrued expenses and other current liabilities as presented in the condensed consolidated balance sheets as of June 30, 2024 and 2023, and March 31, 2024, includes $1,894 , $3,945 , and $4,239 , respectively, of interest payable to Investor-Affiliated Funds and CI Investments, Inc. ("CI Investments"), which is also a beneficial owner of greater than five percent of the Company's common stock. Interest expense as presented in the condensed consolidated statements of operations includes $7,261 and $10,075 for the three months ended June 30, 2024 and 2023, respectively, that relates to the Investor-Affiliated Funds and CI Investments.
The holders of senior debt that are parties to the Debt Repurchase Agreement entered into on March 21, 2024 are funds affiliated with the Monarch Investor and of which the Monarch Investor is the investment advisor. The Debt Repurchase Agreement and the transactions contemplated thereby, including the exercise by Pyxus Holdings of its right to purchase the Pyxus Term Loans and additional 2027 Notes thereunder on April 12, 2024, were approved, and determined to be on terms and conditions at least as favorable to the Company and its subsidiaries as could reasonably have been obtained in a comparable arm's-length transaction with an unaffiliated party, by a majority of the disinterested members of the Board of Directors of Pyxus. Under the terms of the Debt Repurchase Agreement, the Company has paid the following amounts to funds affiliated with the Monarch Investor:
•On March 28, 2024, the Company paid a total of $62,339 , which included $1,849 of accrued and unpaid interest and $490 in other fees, to retire $77,922 of aggregate principal amount of the 2027 Notes.
•On May 31, 2024, the Company paid a total of $9,435 , which included $332 of accrued and unpaid interest, to retire $10,345 of aggregate principal amount of the Pyxus Term Loans.
19. Segment Information
The following summarizes segment information, with the All Other category being included for purposes of reconciliation of the respective balances of the Leaf segment (the Company's sole reportable segment) to the condensed consolidated financial statements:
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Sales and other operating revenues: | ||||||||||||||
| Leaf | $ | $ | ||||||||||||
| All Other | ||||||||||||||
| Consolidated sales and other operating revenues | $ | $ | ||||||||||||
| Segment operating income (loss): | ||||||||||||||
| Leaf | $ | $ | ||||||||||||
| All Other | ( | ( | ||||||||||||
| Segment operating income | ||||||||||||||
| Restructuring and asset impairment charges | ||||||||||||||
| Consolidated operating income | $ | $ | ||||||||||||
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| June 30, 2024 | June 30, 2023 | March 31, 2024 | |||||||||
| Segment assets: | |||||||||||
| Leaf | $ | $ | $ | ||||||||
| All Other | |||||||||||
| Total assets | $ | $ | $ | ||||||||
20. S ubsequent Events
Debt Repurchase
On August 2, 2024, pursuant to the Debt Repurchase Agreement with funds affiliated with the Monarch Investor, Pyxus paid a total of $26,707 , which includes $379 for accrued and unpaid interest through the date prior to payment, to retire $34,191 of aggregate principal amount of the 2027 Notes.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Readers are cautioned that the statements contained in this report regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements, which are based on current expectations of future events, may be identified by the use of words such as "guidance", "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets," and other words of similar meaning. These statements also may be identified by the fact that they do not relate strictly to historical or current facts. If underlying assumptions prove inaccurate, or if known or unknown risks or uncertainties materialize, actual results could vary materially from those anticipated, estimated, or projected. These risks and uncertainties include those discussed in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended March 31, 2024 and in our other filings with the Securities and Exchange Commission. These risks and uncertainties include: our reliance on a small number of significant customers; continued vertical integration by our customers; global shifts in sourcing customer requirements; shifts in the global supply and demand position for tobacco products; variation in our financial results due to growing conditions, customer indications and other factors; loss of confidence in us by our customers, farmers and other suppliers; migration of suppliers who have historically grown tobacco and from whom we have purchased tobacco toward growing other crops; risks related to our advancement of inputs to tobacco suppliers to be settled upon the suppliers delivering us unprocessed tobacco at the end of the growing season; risks that the tobacco we purchase directly from suppliers will not meet our customers’ quality and quantity requirements; weather and other environmental conditions that can affect the marketability of our inventory; international business risks, including unsettled political conditions, uncertainty in the enforcement of legal obligations, including the collection of accounts receivable, fraud risks, expropriation, import and export restrictions, exchange controls, inflationary economies, currency risks and risks related to the restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries; many of our operations are located in jurisdictions that pose a high risk of potential violations of the Foreign Corrupt Practices Act; risks and uncertainties related to geopolitical conflicts, including the armed conflict between Israel and Hamas and disruptions affecting Red Sea shipping; impacts of international sanctions on our ability to sell or source tobacco in certain regions; exposure to foreign tax regimes in which the rules are not clear, are not consistently applied and are subject to sudden change; fluctuations in foreign currency exchange and interest rates; competition with the other primary global independent leaf tobacco merchant and independent leaf merchants; disruption, failure or security breaches of our information technology systems and other cybersecurity risks; continued high inflation; regulations regarding environmental matters; risks related to our capital structure, including risks related to our significant debt and our ability to continue to finance our non-U.S. local operations with uncommitted short-term operating credit lines at the local level; our ability to continue to access capital markets to obtain long-term and short-term financing; potential failure of foreign banks in which our subsidiaries maintain deposits or the failure by such banks to transfer funds or honor withdrawals; the risk that, because our ability to generate cash depends on many factors beyond our control, we may be unable to generate the significant amount of cash required to service our indebtedness; our ability to refinance our current credit facilities at the same availability or at similar or reduced interest rates; failure to achieve our stated goals, which may adversely affect our liquidity; developments with respect to our liquidity needs and sources of liquidity; the volatility and disruption of global credit markets; failure by counterparties to derivative transactions to perform their obligations; 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 policies, including sustainability policies; inherent risk of exposure to product liability claims, regulatory action and litigation facing our e-liquids business if its products are alleged to have caused significant loss, injury, or death; certain shareholders have the ability to exercise controlling influence on various corporate matters; reductions in demand for consumer tobacco products; risks and uncertainties related to pandemics or other widespread health crises and any related shipping constraints, labor shortages and supply-chain impacts; legislative and regulatory initiatives that may reduce consumption of consumer tobacco products and demand for our services and increase regulatory burdens on us or our customers; government actions that significantly affect the sourcing of tobacco, including governmental actions to identify and assess crop diversification initiatives and alternatives to leaf tobacco growing in countries whose economies depend upon tobacco production; governmental investigations into the Company's business activities, including but not limited to, leaf tobacco industry buying and other payment practices; and impact of potential regulations to prohibit the sale of cigarettes in the United States other than low-nicotine cigarettes.
We do not undertake to update any forward-looking statements that we may make from time to time except to the extent required by law.
Overview
Pyxus is a global agricultural company with businesses having more than 150 years of experience delivering value-added products and services to businesses and customers. The Company is a trusted provider of responsibly sourced, independently verified, sustainable, and traceable products and ingredients.
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Executive Summary
The positive momentum from fiscal year 2024 carried into the Company's first quarter of fiscal year 2025 as sales growth remained strong year-over-year. Customer demand remains steady as undersupply conditions persist due to short crops in South America and in certain geographies in Africa. We were successful in adapting to market conditions by leveraging our global geographic footprint to meet the needs of our customers and grow our business.
We also continued to take advantage of opportunities to reduce long-term debt by purchasing $10.3 million of aggregate principal amount of the Pyxus Term Loans for $9.4 million in May 2024 and on August 2, 2024, the Company purchased $34.2 million of the 8.5% Senior Secured Notes for $26.7 million. Our disciplined focus on reducing long-term debt, optimizing working capital, and improving access to liquidity remain paramount to our strategy to enhance stakeholder value.
Our employees kept their focus on operational effectiveness and demonstrated resiliency in the face of external challenges, especially in Southern Brazil where El Niño weather effects dealt this region unprecedented amounts of rainfall in April and May, leading to widespread catastrophic flooding. While the Company was spared from significant damage, our teams provided relief to affected colleagues, contracted farmers, and the local communities, while at the same time working to ensure the safety of our operations and the continuity of our business during the busy crop buying season.
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Results of Operations
Three Months Ended June 30, 2024 and 2023 | ||||||||||||||
| Three Months Ended June 30, | ||||||||||||||
| Change | ||||||||||||||
| (in millions, except per kilo amounts) | 2024 | 2023 | $ | % | ||||||||||
| Consolidated: | ||||||||||||||
| Sales and other operating revenues | $ | 634.9 | $ | 477.1 | 157.8 | 33.1 | ||||||||
| Cost of goods and services sold | 551.0 | 404.0 | 147.0 | 36.4 | ||||||||||
| Gross profit | 83.9 | 73.1 | 10.8 | 14.8 | ||||||||||
| Gross profit as a percent of sales | 13.2 | % | 15.3 | % | ||||||||||
| Selling, general, and administrative expenses | $ | 40.7 | $ | 34.1 | 6.6 | 19.4 | ||||||||
| Other expense, net | 2.6 | 2.6 | — | — | ||||||||||
| Restructuring and asset impairment charges | 0.1 | — | 0.1 | ** | ||||||||||
| Operating income | 40.5 | 36.4 | 4.1 | 11.3 | ||||||||||
| Gain on debt retirement | 1.3 | — | 1.3 | ** | ||||||||||
| Interest expense, net | 33.3 | 30.8 | 2.5 | 8.1 | ||||||||||
| Income tax expense | 6.1 | 2.6 | 3.5 | 134.6 | ||||||||||
| (Income) loss from unconsolidated affiliates, net | (2.6) | 2.2 | (4.8) | (218.2) | ||||||||||
| Net income (loss) attributable to noncontrolling interests | 0.3 | — | 0.3 | ** | ||||||||||
| Net income attributable to Pyxus International, Inc.* | $ | 4.6 | $ | 0.8 | 3.8 | 475.0 | ||||||||
| Leaf: | ||||||||||||||
| Product revenues | $ | 589.2 | $ | 450.9 | 138.3 | 30.7 | ||||||||
| Tobacco costs | 484.0 | 363.0 | 121.0 | 33.3 | ||||||||||
| Transportation, storage, and other period costs | 24.8 | 20.7 | 4.1 | 19.8 | ||||||||||
| Total product cost of goods sold | 508.8 | 383.7 | 125.1 | 32.6 | ||||||||||
| Product revenue gross profit | 80.4 | 67.2 | 13.2 | 19.6 | ||||||||||
| Product revenue gross profit as a percent of sales | 13.6 | % | 14.9 | % | ||||||||||
| Kilos sold | 95.7 | 85.5 | 10.2 | 11.9 | ||||||||||
| Average price per kilo | $ | 6.16 | $ | 5.27 | 0.89 | 16.9 | ||||||||
| Average cost per kilo | 5.32 | 4.49 | 0.83 | 18.5 | ||||||||||
| Average gross profit per kilo | 0.84 | 0.78 | 0.06 | 7.7 | ||||||||||
| Processing and other revenues | $ | 41.8 | $ | 25.5 | 16.3 | 63.9 | ||||||||
| Processing and other revenues costs of services sold | 37.4 | 19.9 | 17.5 | 87.9 | ||||||||||
| Processing and other gross profit | 4.4 | 5.6 | (1.2) | (21.4) | ||||||||||
| Processing and other gross profit as a percent of sales | 10.5 | % | 22.0 | % | ||||||||||
| All Other: | ||||||||||||||
| Sales and other operating revenues | $ | 3.9 | $ | 0.7 | 3.2 | 457.1 | ||||||||
| Cost of goods and services sold | 4.8 | 0.4 | 4.4 | 1,100.0 | ||||||||||
| Gross income (loss) | (0.9) | 0.3 | (1.2) | (400.0) | ||||||||||
| Gross income (loss) as a percent of sales | (23.1) | % | 42.9 | % | ||||||||||
| * Amounts may not equal column totals due to rounding. | ||||||||||||||
| ** Not meaningful for comparison purposes. | ||||||||||||||
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Sales and other operating revenues were $477.1 million for the three months ended June 30, 2023 and $634.9 million for the three months ended June 30, 2024, an increase of $157.8 million, or 33.1%. This increase was due to a 16.9% increase in average price per kilo driven by higher tobacco prices and a 11.9% increase in volume primarily due to accelerated timing of shipments in North America compared to the prior year.
Cost of goods and services sold were $404.0 million for the three months ended June 30, 2023 and $551.0 million for the three months ended June 30, 2024, an increase of $147.0 million, or 36.4%. This increase was mainly due to the 18.5% increase in average cost per kilo primarily due to undersupply conditions and inflation.
Gross profit as a percent of sales decreased from 15.3% for the three months ended June 30, 2023 to 13.2% for the three months ended June 30, 2024 mainly due to a shift in product mix in Africa and regional mix. Average gross profit per kilo increased 7.7% primarily due to more favorable customer and regional mix.
Selling, general, and administrative expenses were $34.1 million for the three months ended June 30, 2023 and $40.7 million for the three months ended June 30, 2024, an increase of $6.6 million, or 19.4%. This increase was primarily due to the recognition of $3.0 million of equity-based compensation in the current quarter for modified awards, pursuant to the Amended and Restated 2020 Incentive Plan, and earlier recognition of accrued bonus compensation.
Income tax expense was $2.6 million for the three months ended June 30, 2023 and $6.1 million for the three months ended June 30, 2024, an increase of $3.5 million, or 134.6%. This increase was primarily due to higher income during the period, net foreign currency impact, and additional uncertain tax benefits reserves, partially offset by changes in the valuation allowance.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash generated from operations, short-term borrowings under our foreign seasonal lines of credit, availability under our ABL Credit Facility, and cash collections from our securitized receivables. Our liquidity requirements are affected by various factors from our core tobacco leaf business, including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix, crop size, and quality. Our leaf tobacco business is seasonal, and purchasing, processing, and selling activities have several associated peaks where cash on-hand and outstanding indebtedness may vary significantly compared to year end. The first three quarters of our fiscal year generally represent the peak of our working capital requirements.
Although we believe that our sources of liquidity will be sufficient to fund our anticipated operating needs for the next twelve months, we anticipate periods during which our liquidity needs for operations will approach the levels of our anticipated available cash and permitted borrowings under our credit facilities. Unanticipated developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations and the availability of capital resources (including an inability to renew or refinance seasonal lines of credit), may result in a deficiency in liquidity. To address a potential liquidity deficiency, we may undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow.
Debt Financing
We continue to finance our business with a combination of short-term and long-term credit lines, the long-term debt securities, advances from customers, and cash from operations when available. See "Note 11. Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for a summary of our short-term and long-term debt.
We continuously monitor and, as available, adjust funding sources as needed to enhance and drive various business opportunities. From time to time we may take steps to reduce our debt or otherwise improve our financial position. Such actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, and refinancing of debt. The amount of prepayments or the amount of debt that may be repurchased, refinanced, or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants, and other considerations.
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The following summarizes our total borrowing capacity at June 30, 2024 and 2023 under our short-term and long-term credit lines and letter of credit facilities and the remaining available amount after the reduction for outstanding borrowings and amounts reserved for outstanding letters of credit:
| June 30, 2024 | June 30, 2023 | |||||||||||||
| (in millions) | Total Borrowing Capacity | Remaining Amount Available | Total Borrowing Capacity | Remaining Amount Available | ||||||||||
| Senior Secured Credit Facilities: | ||||||||||||||
| ABL Credit Facility | $ | 120.0 | $ | 76.0 | $ | 100.0 | $ | 50.0 | ||||||
| Foreign seasonal lines of credit | 815.6 | 169.7 | 702.1 | 149.1 | ||||||||||
| Other long-term debt | 0.4 | 0.3 | 0.6 | 0.2 | ||||||||||
| Letters of credit | 10.6 | 2.9 | 10.1 | 4.1 | ||||||||||
| Total | $ | 946.6 | $ | 248.9 | $ | 812.8 | $ | 203.4 | ||||||
The total borrowing capacity under the ABL Credit Facility increased $20.0 million when compared to the prior period as a result of the Company entering into the Third Amendment to the ABL Credit Agreement on October 24, 2023, which among other things, increased the aggregate amount of revolving loan commitments from $100.0 million to $120.0 million. The amount available under the ABL Credit Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves.
Foreign seasonal lines of credit increased $113.5 million when compared to the prior year and were utilized to purchase green tobacco at higher prices. Many of the foreign seasonal lines of credit are secured by trade receivables and inventories as collateral and are subject to restrictive covenants.
Net Debt
We refer to "Net debt," a non-GAAP measure, as total debt liabilities less cash and cash equivalents. We believe this non-GAAP financial measure is useful to monitor leverage and to evaluate changes to the Company's capital structure. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt and that cash held in certain jurisdictions can be applied to repay obligations owing in other jurisdictions and without reduction for applicable taxes. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates. The following summarizes the computation of net debt:
| (in millions) | June 30, 2024 | June 30, 2023 | March 31, 2024 | ||||||||
| Notes payable | $ | 679.4 | $ | 585.4 | $ | 499.3 | |||||
| Current portion of long-term debt | 20.4 | — | 20.3 | ||||||||
Long-term debt (1) | 531.5 | 643.8 | 497.7 | ||||||||
| Total debt liabilities* | $ | 1,231.3 | $ | 1,229.3 | $ | 1,017.3 | |||||
| Less: Cash and cash equivalents | 82.0 | 100.0 | 92.6 | ||||||||
| Net debt* | $ | 1,149.3 | $ | 1,129.2 | $ | 924.7 | |||||
* Amounts may not equal column totals due to rounding | |||||||||||
(1) Fluctuations in long-term debt are due to borrowings and repayments on the outstanding indebtedness under the ABL Credit Facility, along with repurchases of certain long-term debt. Weighted average borrowings outstanding under the ABL Credit Facility during the three months ended June 30, 2024 was $64.0 million. | |||||||||||
Net debt increased as of June 30, 2024 when compared to June 30, 2023 as a result of lower cash and cash equivalents on hand, which is driven by higher cash spend on purchases of more expensive green tobacco.
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Working Capital
The following summarizes our working capital:
| (in millions except for current ratio) | June 30, 2024 | June 30, 2023 | March 31, 2024 | ||||||||
| Cash, cash equivalents, and restricted cash | $ | 89.1 | $ | 105.5 | $ | 99.8 | |||||
| Trade and other receivables, net | 226.1 | 204.4 | 187.5 | ||||||||
| Inventories and advances to tobacco suppliers | 1,058.4 | 1,062.8 | 952.1 | ||||||||
| Recoverable income taxes | 4.1 | 5.9 | 4.5 | ||||||||
| Prepaid expenses and other current assets | 64.5 | 57.6 | 66.4 | ||||||||
| Total current assets* | $ | 1,442.1 | $ | 1,436.3 | $ | 1,310.2 | |||||
| Notes payable | $ | 679.4 | $ | 585.4 | $ | 499.3 | |||||
| Accounts payable | 115.3 | 133.9 | 181.2 | ||||||||
| Advances from customers | 71.0 | 61.3 | 90.7 | ||||||||
| Accrued expenses and other current liabilities | 99.1 | 94.4 | 97.0 | ||||||||
| Income taxes payable | 8.7 | 20.1 | 8.5 | ||||||||
| Operating leases payable | 7.8 | 9.2 | 8.1 | ||||||||
| Current portion of long-term debt | 20.4 | — | 20.3 | ||||||||
| Total current liabilities* | $ | 1,001.7 | $ | 904.3 | $ | 905.2 | |||||
| Current ratio | 1.4 to 1 | 1.6 to 1 | 1.4 to 1 | ||||||||
| Working capital | $ | 440.4 | $ | 532.0 | $ | 405.0 | |||||
| * Amounts may not equal column totals due to rounding | |||||||||||
Working capital declined from June 30, 2023 to June 30, 2024 by $91.6 million, or 17.2%, primarily due to the increase in outstanding short-term lines of credit used to purchase green tobacco at higher prices, as well as the impact of the 10% Notes due August 24, 2024 being classified as current.
Inventories
The following summarizes inventory committed to a customer and uncommitted inventory balances for processed tobacco:
| (in millions) | June 30, 2024 | June 30, 2023 | March 31, 2024 | ||||||||
| Committed | $ | 590.8 | $ | 630.8 | $ | 570.4 | |||||
| Uncommitted | 14.7 | 12.0 | 14.9 | ||||||||
| Total processed tobacco | $ | 605.5 | $ | 642.8 | $ | 585.3 | |||||
Total processed tobacco decreased from June 30, 2023 to June 30, 2024 by $37.3 million, or 5.8%, primarily due to accelerated timing of shipments from North America and smaller crop sizes from certain markets in Africa. Uncommitted levels of processed tobacco continue to remain low as undersupply conditions persist in the global tobacco market. See "Note 7. Inventories, Net" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
Sources and Uses of Cash
We typically finance our non-U.S. tobacco operations with uncommitted short-term foreign seasonal lines of credit, normally extending for a term of 180 to 365 days, corresponding to the tobacco crop cycle in that market. These short-term foreign seasonal lines of credit are typically uncommitted and provide lenders the right to cease making loans and demand repayment of loans. These short-term foreign seasonal lines of credit are generally renewed at the outset of each tobacco season. We maintain
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various other financing arrangements to meet the cash requirements of our businesses. See "Note 11. Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
We utilize capital in excess of cash flow from operations to finance accounts receivable, inventory, and advances to tobacco suppliers in foreign countries. In addition, we may periodically elect to purchase, redeem, repay, retire, or cancel indebtedness prior to stated maturity under our various foreign credit lines.
As of June 30, 2024, our cash, cash equivalents, and restricted cash was $89.1 million of which approximately $63.4 million was held in non-U.S. jurisdictions, which $44.6 million was subject to exchange controls and tax consequences that could limit our ability to fully repatriate these funds. Fluctuation of the U.S. dollar versus many of the currencies in which we have costs may have an impact on our working capital requirements. We will continue to monitor and hedge foreign currency costs, as needed.
The following summarizes the sources and uses of our cash flows:
| Three Months Ended | ||||||||
| June 30, | ||||||||
| (in millions) | 2024 | 2023 | ||||||
| Net income | $ | 5.0 | $ | 0.8 | ||||
| Trade and other receivables | (72.4) | (33.1) | ||||||
| Inventories and advances to tobacco suppliers | (108.0) | (245.9) | ||||||
| Payables and accrued expenses | (64.8) | (32.5) | ||||||
| Advances from customers | (18.6) | 18.8 | ||||||
| Other | 6.6 | 6.2 | ||||||
| Net cash used in operating activities | $ | (252.2) | $ | (285.7) | ||||
| Collections from beneficial interests in securitized trade receivables | 31.7 | 30.4 | ||||||
| Other | (3.8) | (3.4) | ||||||
| Net cash provided by investing activities | $ | 27.9 | $ | 27.0 | ||||
| Net proceeds from short-term borrowings | 182.0 | 205.9 | ||||||
| Repayment of long-term borrowings | (9.1) | — | ||||||
| Net proceeds of revolving loan facilities | 44.0 | 25.0 | ||||||
| Other | (2.6) | (3.5) | ||||||
| Net cash provided by financing activities | $ | 214.3 | $ | 227.4 | ||||
| Effect of exchange rate changes on cash | (0.8) | (2.2) | ||||||
| Decrease in cash, cash equivalents, and restricted cash* | $ | (10.7) | $ | (33.4) | ||||
| * Amounts may not equal column totals due to rounding | ||||||||
The change in cash, cash equivalents, and restricted cash for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 increased by $22.7 million. This increase was mainly driven by the change in inventory, primarily the timing of purchases in Africa and South America compared to the prior year, partially offset by accelerated timing of shipments in North America.
Planned Capital Expenditures
Capital investments in our leaf operations were primarily for routine replacement of machinery and equipment, as well as investments in assets that will add value for our customers and increase our efficiency. We incurred approximately $5.1 million in capital expenditures for the three months ended June 30, 2024, and are expecting to incur an additional $25.2 million for the remainder of the fiscal year ending March 31, 2025, which includes expenditures expected to be funded through government assistance.
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Pension and Postretirement Health and Life Insurance Benefits
The following summarizes cash contributions to pension and postretirement health and life insurance benefits:
| Three Months Ended | |||||
| June 30, | |||||
| (in millions) | 2024 | ||||
| Contributions made during the period | $ | 1.3 | |||
| Contributions expected for the remainder of the fiscal year | 3.6 | ||||
| Total | $ | 4.9 | |||
No cash dividends on shares of common stock of Pyxus International, Inc. were paid to shareholders during the three months ended June 30, 2024. As of June 30, 2024, the payment of such dividends is restricted under the terms of our debt agreements.
Critical Accounting Policies and Estimates
As of the date of this report, there are no material changes to the critical accounting policies and estimates previously disclosed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes to our market risk exposures since March 31, 2024. For a discussion of our exposure to market risk, see Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) designed to provide reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Due to inherent limitations, our disclosure controls and procedures, however well designed and operated, can provide only reasonable assurance (not absolute) that the objectives of the disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as required by Rule 13a-15(b) of the Exchange Act), as of June 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective to provide reasonable assurance as of June 30, 2024.
Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated our internal control over financial reporting to determine whether any changes occurred during the quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
There were no changes that occurred during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
See "Note 16. Contingencies and Other Information" to the "Notes to Condensed Consolidated Financial Statements" for additional information with respect to legal proceedings, which are incorporated by reference herein.
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Item 1A. Risk Factors
In addition to the other information set forth in this report and in our other filings with the Securities and Exchange Commission, investors should carefully consider our risk factors, which could materially affect our business, financial condition, or operating results. As of the date of this report, there are no material changes or updates to the risk factors previously disclosed in Part I, Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Item 5. Other Information
During the three months ended June 30, 2024, none of the Company's directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted terminated
Item 6. Exhibits
| Form of Restricted Stock Unit Award Agreement (2024), incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on May 14, 2024 (File No. 000-25734) | ||||||||
| Form of Performance-based Stock Unit Award Agreement (2024), incorporated by reference to Exhibit 10.2 to the registrant's Current Report on Form 8-K filed on May 14, 2024 (File No. 000-25734) | ||||||||
| Pyxus International, Inc. Executive Severance Plan, incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on June 14, 2024 (File No. 000-25734) | ||||||||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | ||||||||
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | ||||||||
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) | ||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (filed herewith) | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema (filed herewith) | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
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| SIGNATURE | ||||||||
| Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | ||||||||
| Pyxus International, Inc. | ||||||||
Date: August 7, 2024 | /s/ Philip C. Garofolo | |||||||
| Philip C. Garofolo | ||||||||
| Senior Vice President Finance and Chief Accounting Officer | ||||||||
| (Principal Accounting Officer) | ||||||||
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Exhibit 31.01
CERTIFICATION
I, J. Pieter Sikkel, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Pyxus International, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ J. Pieter Sikkel | ||
| J. Pieter Sikkel President and Chief Executive Officer | ||
| August 7, 2024 | ||
Exhibit 31.02
CERTIFICATION
I, Flavia B. Landsberg, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Pyxus International, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ Flavia B. Landsberg | ||
| Flavia B. Landsberg Executive Vice President and Chief Financial Officer | ||
| August 7, 2024 | ||
Exhibit 32
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
In connection with the Quarterly Report on Form 10-Q of Pyxus International, Inc. (the "Company") for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), to their knowledge, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 7, 2024
| /s/ J. Pieter Sikkel | ||
| J. Pieter Sikkel President and Chief Executive Officer | ||
| /s/ Flavia B. Landsberg | ||
| Flavia B. Landsberg Executive Vice President and Chief Financial Officer | ||