What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-10 compared with 2021-11-10 · 197 added, 164 removed, 250 unchanged (59% of the section changed)

13 unchanged sentences

• risks and uncertainties related to the Company’s Other Products and Services segment, including that the e-liquids business has a limited operating history, is in a developing market, may not generate the results that the Company anticipates and has needed, and may continue to need, significant investment to fund continued operations and

expansion, that its technologies, processes and formulations may become obsolete, that government approvals necessary for the continued sale of certain e-liquids products may not be obtained, the impact of increasing competition, uncertainties with respect to the development of the industry and market, including the level of consumer demand for such products, the potential for product liability claims, uncertainties with respect to the extent of consumer acceptance of the products offered by the e-liquids business, the impact of regulation associated with the e‑liquids business, including the risk of obtaining anticipated regulatory approvals, and risks and uncertainties related to the CCAA Proceeding (as defined below), including whether the remaining sale transaction with respect to the Canadian Cannabis Subsidiaries (as defined below) will be successfully completed within the anticipated time frame or at all and the extent of any recovery, or additional impairment, that Pyxus may recognize with respect to its investment in these subsidiaries.

expansion, that its technologies, processes and formulations may become obsolete, that government approvals necessary for the continued sale of certain e-liquids products may not be obtained, the impact of increasing competition, uncertainties with respect to the development of the industry and market, including the level of consumer demand for such products, the potential for product liability claims, uncertainties with respect to the extent of consumer acceptance of the products offered by the e-liquids business, the impact of regulation associated with the e‑liquids business, including the risk of obtaining anticipated regulatory approvals, and risks and uncertainties related to the CCAA Proceeding (as defined below), including the extent of any recovery, or additional impairment, that Pyxus may recognize with respect to its investment in these subsidiaries.

We do not undertake to update any forward-looking statements that we make from time to time.

Executive Summary

Despite COVID-related shipping constraints that face many industries, the first half of fiscal 2022 reflects improved demand, increased leaf volumes, and improved operational performance.

During the second quarter we continued to catch-up from prior-period shipping delays driven by the pandemic and customer shipping instructions.

In addition, we continue to monitor the impact of COVID on our Company and our workforce, and adjust our operations to protect the health and safety of our employees while maintaining business continuity.

The leaf business continues to be impacted by COVID-related shipping constraints, including vessel and equipment availability, port congestion, and rising freight costs.

We are taking proactive steps to mitigate these challenges, including taking steps to accelerate shipments, exploring new ports for product export, and working closely with customers to determine if there are ways to expedite the process flow for their operations.

We estimate that between $90 million and $120 million of revenue was delayed from the first half of the year into future quarters due to COVID-related shipping constraints.

Despite these challenges, we continue to manage our working capital closely.

Consistent with our expectations, inventory at September 30, 2021 decreased $42.3 million or 5.0% to $802.4 million when compared to September 30, 2020.

In addition, our uncommitted inventory decreased compared to the prior year.

Our customers continue to look for ways to reduce complexity in their supply chains through partnerships with suppliers who support their environmental, social, and governance ("ESG") objectives.

The strengthening of our business in a sustainable manner remains a priority as our global team works together to achieve our purpose of growing a better world.

Our leaf operations volume, revenue, and gross margin improved on a year-to-date basis.

We remain proactive in our efforts to accelerate shipments delayed by COVID-related logistical challenges, particularly the lack of vessel and container availability, and continue to utilize additional ports for product export while working with customers to expedite certain processes.

We expect these challenges will linger for the remainder of our fiscal year, which will delay shipments of committed inventory from the fourth quarter of fiscal 2022 into fiscal 2023.

As of December 31, 2021, more than 90% of the Company’s inventory is committed to specific customers to meet near-term forecasted demand.

In December, we unveiled our ESG framework which demonstrates our commitment to operating our business in a responsible manner.

We have been recognized by CDP, the global gold standard of environmental reporting, for our coordinated efforts to address climate change, water security and deforestation.

Our team is energized by the strengthening of our business and the implementation of our ESG strategy as we work together to achieve our purpose of growing a better world.

Historically, Pyxus’ core business has been as a tobacco leaf merchant, purchasing, processing, packing, storing and shipping tobacco to manufacturers of cigarettes and other consumer tobacco products throughout the world.

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We are committed to responsible crop production that supports economic viability for the grower, provides a safe working atmosphere for those involved in crop production and minimizes negative environmental impact.

Our agronomists maintain frequent contact with growers prior to and during the growing and curing seasons to provide technical assistance to improve the quality and yield of the crop.

Throughout the entire production process, from seed through processing and final shipment, our SENTRI SM traceability system provides clear visibility into how products are produced throughout the supply chain, supporting product integrity.

In an increasing number of markets, we also provide agronomy expertise for growing leaf tobacco.

Our contracted tobacco grower base often produces a significant volume of non-tobacco crop utilizing the agronomic assistance that our team provides.

Pyxus is working to find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the communities in which they live.

Our agronomists maintain contact with growers prior to and during the growing and curing seasons to provide technical assistance to improve the quality and yield of the crop.

Throughout the production process, from seed through processing and final shipment, our SENTRI SM traceability system provides clear visibility into how products are produced throughout the supply chain, supporting product integrity.

We also provide agronomy expertise for growing leaf tobacco in numerous markets.

Our contracted tobacco grower base produces a significant volume of non-tobacco crop utilizing the agronomic assistance that our team provides.

Pyxus works with our grower base, as needed, to find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the communities in which they live.

Our consolidated operations are managed and reported in nine operating segments that are organized by product category and geographic area and aggregated into three reportable segments for financial reporting purposes:

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These events are changing how the Company is managed and the information used by Management to assess performance and allocate resources.

The Company expects to conclude this evaluation during the three months ended December 31, 2021.

The Company expects to conclude this evaluation during the three months ended March 31, 2022.

Bankruptcy Proceedings

On June 15, 2020, Old Holdco, Inc.

(collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring (the “Restructuring”) of Old Pyxus’ secured debt.

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

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

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

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

In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old

Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc., which is an indirect subsidiary of the Company.

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

10 unchanged sentences

The Company’s CBD extraction facility has ceased operations.

In November 2021, the Company disposed its interests in Humble Juice, a manufacturer and distributor of flavored e-liquids that had been included in the Other Products and Services segment, in exchange for royalties on future revenue.

See "Note 11.

Acqu isitions and Dispositions" to the "Notes to the Condensed Consolidated Financial Statements" for additional information.

CCAA Proceeding

9 unchanged sentences

On June 10, 2021, the Canadian Court approved the sale agreement.

The consummation of the sale under this agreement is subject to approval of the buyers by Health Canada and the satisfaction of certain other conditions.

The consummation of the sale of the assets of Figr Norfolk occurred on January 28, 2022.

On May 25, 2021, a definitive agreement was entered into with a separate buyer for the sale of the outstanding equity of Figr East and certain intangible assets of Figr Brands for an estimated aggregate purchase price of Cdn.$24.8 million.

2 unchanged sentences

The sale of Figr East and certain intangible assets of Figr Brands was completed on June 28, 2021.

The amount of recovery that the Company may receive from the pending sale of the assets of Figr Norfolk, the completed sale of the outstanding equity of Figr East, and the completed sale of certain intangible assets of Figr Brands will be impacted by the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the Canadian Court, and the extent to which the Company's interest in the Canadian Cannabis Subsidiaries are determined by the Canadian Court to be debt claims entitled to recovery on the same basis as other unsecured creditor claims with respect to the Canadian Cannabis Subsidiaries.

We continue to monitor the impact of the COVID-19 pandemic on our Company and workforce as well as the impact of COVID-related shipping constraints.

The amount of recovery that the Company may receive from the sales of the assets of Figr Norfolk, the outstanding equity of Figr East, and certain intangible assets of Figr Brands will be impacted by the amount of claims against the Canadian Cannabis Subsidiaries submitted in the CCAA Proceeding, the extent to which such claims are approved by the Canadian Court.

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

The COVID-19 pandemic and government actions implemented to contain further spread of COVID-19 have severely restricted economic activity around the world, and the onset of new variants of COVID-19 threaten to prolong the effects of the pandemic.

The leaf business continues to be impacted by COVID-related shipping constraints, including vessel and equipment availability, port congestion, and rising freight costs, which have resulted in delays in shipments to customers that will likely continue for the remainder of the fiscal

year and beyond.

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

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

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

In addition, shipping constraints have resulted in delays in shipments to customers, which my continue for the remainder of the fiscal year and beyond.

Broad economic impacts from the COVID-19 pandemic, including increased unemployment rates and reduced consumer spending in some markets in which we operate, may extend billing and collection cycles.

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

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

Due to the geographic scope of our operations, including emerging markets, and our sale to customers around the world, our operations and the demand for our products are subject to the impact of the COVID-19 on a global scale.

Improving economic conditions in the United States, for example, may not coincide with improvements in our results of operations because of our exposure to the impact of COVID-19 elsewhere in the world, particularly in emerging markets that lack access to adequate COVID-19 vaccines and medical treatments.

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

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

Fresh Start Reporting

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

Our financial results for the two and five months ended August 31, 2020 are referred to as those of the “Predecessor.” Our financial results for the one month ended September 30, 2020, and for the three and six months ended September 30, 2021 are referred to as those of the “Successor.” Our results of operations as reported in our Consolidated Financial Statements for these periods are prepared in accordance with fresh start reporting, which requires that we report on our results for the periods prior to the Effective Date separately from the period following the Effective Date.

Our financial results for the five months ended August 31, 2020 are referred to as those of the “Predecessor.” Our financial results for the four months ended December 31, 2020, and for the nine months ended December 31, 2021 ar e referred to as those of the “Successor.” Our results of operations as reported in our Consolidated Financial Statements for these periods and for the three months ended December 31, 2021 and 2020 are prepared in accordance with fresh start reporting, which requires that we report on our results for the periods prior to the Effective Date separately from the period following the Effective Date.

The Company elected to apply fresh start reporting using a convenience date of August 31, 2020.

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Accordingly, in addition to presenting our results of operations as reported in our Condensed Consolidated Financial Statements in accordance with U.S.

GAAP, the tables and discussions below also present the combined results for the three months and six months ended September 30, 2020.

The combined results (referenced as “Combined (Non-GAAP)” or “combined”) for the three months and six months ended September 30, 2020 represent the sum of the reported amounts for the Predecessor period July 1, 2020 through August 31, 2020 combined with the Successor period from September 1, 2020 through September 30, 2020 and the Predecessor period from April 1, 2020 through August 31, 2020 combined with the Successor period from September 1, 2020 through September 30, 2020, respectively.

GAAP, the tables and discussions below also present the combined results for the nine months ended December 31, 2020.

The combined results (referenced as “Combined (Non-GAAP)” or “combined”) for the nine months ended December 31, 2020 represent the sum of the reported amounts for the Predecessor period from April 1, 2020 through August 31, 2020 combined with the Successor period from September 1, 2020 through December 31, 2020.

These combined results are not considered to be prepared in accordance with U.S.

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The combined operating results are presented for supplemental purposes only, may not reflect the actual results we would have achieved absent our emergence from bankruptcy, may not be indicative of future results and should not be viewed as a substitute for the financial results of the Predecessor period and Successor period presented in accordance with U.S.

In the following discussion of results of operations, comparisons of combined results for the three and six month periods ended September 30, 2020 are to the comparable U.S.

GAAP measures for the respective three and six month periods ended September 30, 2021.

In the following discussion of results of operations, comparisons of combined results for the nine-month period ended December 31, 2020 are to the comparable U.S.

GAAP measures for the nine month period ended December 31, 2021.

Results of Operations

Three Months Ended September 30, 2021 and 2020

Successor Predecessor Combined

(in millions) Three months ended September 30, 2021 One month ended September 30, 2020 Two months ended August 31, 2020 Three months ended September 30, 2020

Three Months Ended December 31, 2021 and 2020

(in millions) Three months ended December 31, 2021 Three months ended December 31, 2020 $ %

Sales and other operating revenues $ 428.9 $ 379.6 $ 49.3 13.0

4 unchanged sentences

Restructuring and asset impairment charges 0.6 7.8 (7.2) (92.3)

Operating income (loss)* 5.5 (8.5) (0.4) (8.9)

Loss on deconsolidation of subsidiaries 2.5 — — —

Operating income 30.2 13.5 16.7 123.7

Loss on deconsolidation/disposition of subsidiaries 7.1 — 7.1 100.0

Interest expense, net 27.5 24.8 2.7 10.9

Reorganization items — — 132.9 132.9

Income tax (benefit) expense (14.1) (10.6) 8.5 (2.1)

Income tax expense 31.8 4.5 27.3 606.7

Income from unconsolidated affiliates 6.1 7.6 (1.5) (19.7)

Net loss attributable to noncontrolling interests (0.3) (0.5) (0.3) (0.8)

Net (loss) income attributable to Pyxus International, Inc.* $ (9.7) $ (5.3) $ 111.2 $ 105.9

Net income (loss) attributable to noncontrolling interests — (0.1) 0.1 100.0

Net loss attributable to Pyxus International, Inc.* $ (30.1) $ (8.2) $ (21.9) (267.1)

* Amounts may not equal column totals due to rounding

Sales and other operating revenues increased $91.6 million, or 30.3%, to $394.2 million for the three months ended September 30, 2021 from $302.6 million for the combined three months ended September 30, 2020.

This increase was due to a 12.2% increase in leaf volume from $82.9 million of shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current quarter and an 18.3% increase in leaf average sales price driven by product mix having a higher concentration of lamina.

These increases were partially offset by the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and the decrease in e-liquids revenue related to a general industry slow-down amid evolving regulations.

Cost of goods and services sold increased $75.2 million, or 28.2%, to $342.1 million for the three months ended September 30, 2021 from $266.9 million for the combined three months ended September 30, 2020.

Sales and other operating revenues increased $49.3 million , or 13.0%, to $428.9 million for the three months ended December 31, 2021 from $379.6 million for the three months ended December 31, 2020.

This increase was due t o a 18.7% increase in leaf volume from $17.5 million of shipments in Africa that were delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current quarter, larger crop sizes in Africa, and timing of shipments.

This increase was partially offset by a 3.4% decrease in leaf average sales price driven by product mix having a higher concentration of byproducts in South America and a decrease from the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021.

Cost of goods and services sold increased $46.7 million, or 14.7%, to $363.7 million for the three months ended December 31, 2021 from $317.0 million for the three months ended December 31, 2020.

This increase was mainly due to the increase in sales and other operating revenues.

Gross profit as a percent of sales increased to 13.2% for the three months ended September 30, 2021 from 11.8% for the combined three months ended September 30, 2020.

This increase was attributable to lower conversion costs per kilo, customer mix, and the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021.

This increase was partially offset by foreign currency fluctuations and higher shipping costs.

Selling, general, and administrative ("SG&A") expenses decreased $4.9 million, or 11.4%, to $37.9 million for the three months ended September 30, 2021 from $42.8 million for the combined three months ended September 30, 2020.

SG&A expenses as a percent of sales decreased to 9.6% for the three months ended September 30, 2021 from 14.1% for the combined three months ended September 30, 2020.

These decreases were mainly due to increased sales and other operating revenues, the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021, and savings from fiscal 2021 restructuring initiatives.

Restructuring and asset impairment charges increased $5.2 million or 305.9% to $6.9 million for the three months ended September 30, 2021 from $1.7 million for the combined three months ended September 30, 2020 due to the write-off of the Company's remaining industrial hemp CBD extraction equipment and the continued restructuring of certain leaf operations.

Interest expense, net increased $5.7 million or 25.0% to $28.5 million for the three months ended September 30, 2021 from $22.8 million for the combined three months ended September 30, 2020 due to the borrowings under the DDTL Facility in the current fiscal year.

Reorganization items of $132.9 million were incurred in the prior fiscal year as a result of the Chapter 11 Cases.

Gross profit increased $2.7 million, or 4.3%, to $65.2 million for the three months ended December 31, 2021 from $62.5 million for the three months ended December 31, 2020 mainly due to the increase in total sales and other operating revenues.

Gross profit as a percent of sales decreased to 15.2% for the three months ended December 31, 2021 from 16.5% for the three months ended December 31, 2020.

This decrease was attributable to product mix having a higher concentration of byproducts, higher green tobacco prices, and foreign currency fluctuations.

This decrease was partially offset by lower conversion costs per kilo.

Selling, general, and administrative ("SG&A") expenses decreased $11.7 million, or 25.5%, to $34.2 million for the three months ended December 31, 2021 from $45.9 million for the three months ended December 31, 2020.

SG&A expenses as a percent of sales decreased to 8.0% for the three months ended December 31, 2021 from 12.1% for the three months ended December 31, 2020.

Restructuring and asset impairment charges decreased $7.2 million, or 92.3%, to $0.6 million for the three months ended December 31, 2021 from $7.8 million for the three months ended December 31, 2020 due to fiscal 2021 restructuring initiatives, which included the Company's industrial hemp and CBD businesses.

Income tax expense increased $27.3 million, or 606.7%, to $31.8 million for the three months ended December 31, 2021 from $4.5 million for the three months ended December 31, 2020.

The increase was driven by the Company utilizing a different method for estimating tax expense for the period ended December 31, 2021 due to COVID-19 pandemic-driven variability in the Company's current expectations of results of operations for the remainder of the fiscal year.

Using the discrete method for the period ended December 31, 2021, the Company determined current and deferred income tax expense as if the interim nine-month period was a year-end period, which resulted in the recognition of the fiscal 2022 year-to-date expense in the quarter.

Refer to See “ Note 8 .

Income Taxes ” to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Leaf - North America Supplemental Information

Successor Predecessor Combined

(in millions, except per kilo amounts) Three months ended September 30, 2021 One month ended September 30, 2020 Two months ended August 31, 2020 Three months ended September 30, 2020

(in millions, except per kilo amounts) Three months ended December 31, 2021 Three months ended December 31, 2020 $ %

Kilos sold 7.1 7.4 (0.3) (4.1)

7 unchanged sentences

Transportation, storage, and other period costs 5.9 3.8 2.1 55.3

Derivative financial instrument and exchange losses (gains) — (0.1) — (0.1)

Derivative financial instrument and exchange losses 0.1 — 0.1 100.0

Total tobacco cost of goods sold 39.4 40.5 (1.1) (2.7)

4 unchanged sentences

Selling, general, and administrative expenses 4.1 3.0 1.1 36.7

Other expense, net (0.5) (0.1) (0.2) (0.3)

Other income (expense), net 1.6 (0.2) 1.8 900.0

Restructuring and asset impairment charges — 0.1 (0.1) (100.0)

Operating income $ 6.6 $ 4.5 2.1 46.7

Total sales and other operating revenues increased $42.7 million, or 89.3%, to $90.5 million for the three months ended September 30, 2021 from $47.8 million for the combined three months ended September 30, 2020.

This increase was primarily due to 75.3% higher volume from $44.7 million of shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current quarter and a 12.6% increase in average sales price driven by product mix having a higher concentration of lamina.

Cost of goods and services sold increased $36.7 million, or 89.1%, to $77.9 million for the three months ended September 30, 2021 from $41.2 million for the combined three months ended September 30, 2020.

This increase was mainly due to the increase in total sales and other operating revenues.

Gross profit as a percent of sales decreased to 13.9% for the three months ended September 30, 2021 from 13.8% for the combined three months ended September 30, 2020.

This decrease was primarily due to customer mix.

This decrease was partially offset by lower conversion costs per kilo.

SG&A expenses as a percent of sales decreased to 3.9% for the three months ended September 30, 2021 from 8.6% for the combined three months ended September 30, 2020 driven by increased total sales and other operating revenues and savings from fiscal 2021 restructuring initiatives.

Total sales and other operating revenues decreased $0.5 million, or 0.8%, to $60.0 million for the three months ended December 31, 2021 from $60.5 million for the three months ended December 31, 2020.

This decrease was primarily due to 4.1% lower volume driven by timing of shipments and a 1.4% increase in average sales price driven by product mix having a higher concentration of service revenue.

Cost of goods and services sold decreased $1.8 million, or 3.4%, to $50.9 million for the three months ended December 31, 2021 from $52.7 million for the three months ended December 31, 2020.

This decrease was mainly due to the decrease in total sales and other operating revenues.

Gross profit as a percent of sales increased to 15.2% for the three months ended December 31, 2021 from 12.9% for the three months ended December 31, 2020.

This increase was primarily due to product mix having a higher concentration of service revenue.

SG&A expenses as a percent of sales increased to 6.8% for the three months ended December 31, 2021 from 5.0% for the three months ended December 31, 2020 driven by increased allocations of general corporate services.

Leaf - Other Regions Supplemental Information

Successor Predecessor Combined

(in millions, except per kilo amounts) Three months ended September 30, 2021 One month ended September 30, 2020 Two months ended August 31, 2020 Three months ended September 30, 2020

(in millions, except per kilo amounts) Three months ended December 31, 2021 Three months ended December 31, 2020 $ %

Kilos sold 99.1 82.1 17.0 20.7

14 unchanged sentences

Selling, general, and administrative expenses 26.8 29.9 (3.1) (10.4)

Other (expense) income, net (1.0) 0.6 0.4 1.0

Other expense, net (1.5) (0.7) (0.8) (114.3)

Restructuring and asset impairment charges 0.4 2.6 (2.2) (84.6)

Operating income $ 29.2 $ 21.1 $ 8.1 38.4

Total sales and other operating revenues increased $50.6 million, or 20.3%, to $300.4 million for the three months ended September 30, 2021 from $249.8 million for the combined three months ended September 30, 2020.

This increase was due to a 5.6% increase in volume from $38.2 million of shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current quarter and a 14.1% increase in average sales price driven by product mix having a higher concentration of lamina.

Cost of goods and services sold increased $43.8 million, or 20.4%, to $258.2 million for the three months ended September 30, 2021 from $214.4 million for the combined three months ended September 30, 2020.

Total sales and other operating revenues increased $55.7 million, or 17.9%, to $366.1 million for the three months ended December 31, 2021 from $310.4 million for the three months ended December 31, 2020.

This increase was due to a 20.7% increase in volume from $17.5 million of shipments in Africa that were delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current quarter, larger crop sizes in Africa, and timing of shipments.

This increase was partially offset by a 2.8% decrease in average sales price driven by product mix having a higher concentration of byproducts in South America.

Cost of goods and services sold increased $52.1 million, or 20.3%, to $308.2 million for the three months ended December 31, 2021 from $256.1 million for the three months ended December 31, 2020.

This increase was mainly due to the increase in total sales and other operating revenues.

Gross profit as a percent of sales was 14.0% for the three months ended September 30, 2021 from 14.2% for the combined three months ended September 30, 2020.

This decrease was primarily due to foreign currency fluctuations and higher shipping costs.

Gross profit as a percent of sales decreased to 15.8% for the three months ended December 31, 2021 from 17.5% for the three months ended December 31, 2020.

This decrease was primarily due to product mix having a higher concentration of byproducts, higher green tobacco prices, and foreign currency fluctuations.

This decrease was partially offset by lower conversion costs per kilo.

SG&A expenses as a percent of sales decreased to 10.0% for the three months ended September 30, 2021 from 10.3% for the combined three months ended September 30, 2020 driven by increased total sales and other operating revenues.

SG&A expenses as a percent of sales decreased to 7.3% for the three months ended December 31, 2021 from 9.6% for the three months ended December 31, 2020 driven by savings from restructuring initiatives and increased total sales and other operating revenues.

Other Products and Services Supplemental Information

Successor Predecessor Combined

(in millions) Three months ended September 30, 2021 One month ended September 30, 2020 Two months ended August 31, 2020 Three months ended September 30, 2020

(in millions) Three months ended December 31, 2021 Three months ended December 31, 2020 $ %

Sales and other operating revenues $ 2.8 $ 8.6 $ (5.8) (67.4)

Cost of goods and services sold 4.6 8.2 (3.6) (43.9)

Gross loss (2.6) (5.4) (1.0) (6.4)

Gross (loss) income (1.8) 0.4 (2.2) (550.0)

Selling, general, and administrative expenses 3.3 13.1 (9.8) (74.8)

2 unchanged sentences

Operating loss $ (5.5) $ (12.1) $ 6.6 54.5

Sales and other operating revenues decreased $1.8 million, or 35.3%, to $3.3 million for the three months ended September 30, 2021 from $5.1 million for the combined three months ended September 30, 2020.

This decrease was primarily due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and the decrease in e-liquids revenue related to a general industry slow-down amid evolving regulations.

Cost of goods and services sold decreased $5.6 million, or 48.7%, to $5.9 million for the three months ended September 30, 2021 from $11.5 million for the combined three months ended September 30, 2020.

Sales and other operating revenues decreased $5.8 million, or 67.4%, to $2.8 million for the three months ended December 31, 2021 from $8.6 million for the three months ended December 31, 2020.

This decrease was primarily due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and a decrease in e-liquids revenue related to a general industry slow-down amid evolving regulations.

Cost of goods and services sold decreased $3.6 million, or 43.9%, to $4.6 million for the three months ended December 31, 2021 from $8.2 million for the three months ended December 31, 2020.

This decrease was mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021.

Gross loss as a percent of sales decreased to 78.8% for the three months ended September 30, 2021 from 125.5% for the combined three months ended September 30, 2020.

Gross (loss) income as a percent of sales decreased to (64.3)% for the three months ended December 31, 2021 from 4.7% for the three months ended December 31, 2020.

This decrease was primarily attributable to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021.

SG&A expenses decreased $8.5 million, or 65.9%, to $4.4 million for the three months ended September 30, 2021 from $12.9 million for the combined three months ended September 30, 2020.

SG&A expenses as a percent of sales decreased to 133.3% for the three months ended September 30, 2021 from 252.9% for the combined three months ended September 30, 2020.

These decreases were mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and savings from fiscal 2021 restructuring initiatives.

Restructuring and asset impairment charges were $5.6 million for the three months ended September 30, 2021 primarily due to the write-off of the Company's remaining industrial hemp CBD extraction equipment.

Six Months Ended September 30, 2021 and 2020

SG&A expenses decreased $9.8 million, or 74.8%, to $3.3 million for the three months ended December 31, 2021 from $13.1 million for the three months ended December 31, 2020 mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and savings from restructuring initiatives.

Restructuring and asset impairment charges decreased $5.0 million, or 98.0%, to $0.1 million for the three months ended December 31, 2021 from $5.1 million for the three months ended December 31, 2020.

This decrease was primarily due fiscal 2021 restructuring initiatives, which included the Company's industrial hemp and CBD businesses.

Nine Months Ended December 31, 2021 and 2020

Successor Predecessor Combined

(in millions) Six months ended September 30, 2021 One month ended September 30, 2020 Five months ended August 31, 2020 Six months ended September 30, 2020

(in millions) Nine months ended December 31, 2021 Four months ended December 31, 2020 Five months ended August 31, 2020 Nine months ended December 31, 2020

Sales and other operating revenues $ 1,156.4 $ 497.4 $ 447.6 $ 945.0

2 unchanged sentences

Selling, general, and administrative expenses 106.0 61.6 87.9 149.5

Other expense, net (1.7) (1.9) (0.5) (2.4)

Other (expense) income, net (1.9) 2.7 (0.5) 2.2

Restructuring and asset impairment charges 7.7 9.0 0.6 9.6

Operating income (loss)* 43.9 5.0 (44.0) (39.0)

Loss on deconsolidation of subsidiaries 2.5 — — —

Loss on deconsolidation/disposition of subsidiaries 9.5 — — —

Debt retirement expense — — 0.8 0.8

1 unchanged sentence

Reorganization items — — 106.0 106.0

Income tax (benefit) expense (22.6) (10.6) 0.3 (10.3)

(Loss) income from unconsolidated affiliates (0.1) 0.2 2.4 2.6

Income tax expense (benefit) 9.2 (6.1) 0.3 (5.8)

Income from unconsolidated affiliates 6.0 7.8 2.4 10.2

Net loss attributable to noncontrolling interests (0.4) (0.5) (1.0) (1.5)

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* Amounts may not equal column totals due to rounding

Sales and other operating revenues increased $162.1 million or 28.7% to $727.5 million for the six months ended September 30, 2021 from $565.4 million for the combined six months ended September 30, 2020.

This increase was due to a 10.6% increase in leaf volume from $160.1 million shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current fiscal year and a 17.8% increase in leaf average selling prices driven by product mix having a higher concentration of lamina.

Sales and other operating revenues increased $211.4 million, or 22.4%, to $1,156.4 million for the nine months ended December 31, 2021 from $945.0 million for the combined nine months ended December 31, 2020.

This increase was due to a 13.7% increase in leaf volume from $177.6 million shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current fiscal year, larger crop sizes in Africa, and timing of shipments.

In addition, average sales price increased 9.1% driven by product mix having a higher concentration of lamina.

Cost of goods and services sold increased $123.2 million or 24.2% to $633.3 million for the six months ended September 30, 2021 from $510.1 million for the combined six months ended September 30, 2020.

Cost of goods and services sold increased $169.9 million, or 20.5%, to $997.0 million for the nine months ended December 31, 2021 from $827.1 million for the combined nine months ended December 31, 2020.

This increase was mainly due to the increase in total sales and other operating revenues.

Gross profit as a percent of sales increased to 12.9% for the six months ended September 30, 2021 from 9.8% for the combined six months ended September 30, 2020.

Gross profit increased $41.5 million, or 35.2%, to $159.4 million for the nine months ended December 31, 2021 from $117.9 million for the combined nine months ended December 31, 2020 mainly due to the decrease in total sales and other operating revenues.

Gross profit as a percent of sales increased to 13.8% for the nine months ended December 31, 2021 from 12.5% for the combined nine months ended December 31, 2020.

This increase was attributable to lower conversion costs per kilo, customer mix, and the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021.

This increase was partially offset by foreign currency fluctuations and higher shipping costs.

SG&A expenses decreased $31.8 million or 30.7% to $71.8 million for the six months ended September 30, 2021 from $103.6 million for the combined six months ended September 30, 2020.

SG&A expenses as a percent of sales decreased to 9.9% for the six months ended September 30, 2021 from 18.3% for the combined six months ended September 30, 2020.

These decreases were driven by increased sales and other operating revenues, the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021, and savings from fiscal 2021 restructuring initiatives.

Restructuring and asset impairment charges increased $5.3 million or 294.4% to $7.1 million for the six months ended September 30, 2021 from $1.8 million for the combined six months ended September 30, 2020.

This increase was primarily due to the write-off of the Company's remaining industrial hemp CBD extraction equipment and the continued restructuring of certain leaf operations.

Interest expense, net increased $2.0 million or 3.8% to $55.3 million for the six months ended September 30, 2021 from $53.3 million for the combined six months ended September 30, 2020.

This increase was partially offset by product mix having a higher concentration of lamina and foreign currency fluctuations.

SG&A expenses decreased $43.5 million, or 29.1%, to $106.0 million for the nine months ended December 31, 2021 from $149.5 million for the combined nine months ended December 31, 2020.

SG&A expenses as a percent of sales decreased to 9.2% for the nine months ended December 31, 2021 from 15.8% for the combined nine months ended December 31, 2020.

Restructuring and asset impairment charges decreased $1.9 million, or 19.8%, to $7.7 million for the nine months ended December 31, 2021 from $9.6 million for the combined nine months ended December 31, 2020.

This decrease was primarily due to fiscal 2021 restructuring initiatives, which included the Company's industrial hemp and CBD businesses.

Interest expense, net increased $4.7 million, or 6.0%, to $82.8 million for the nine months ended December 31, 2021 from $78.1 million for the combined nine months ended December 31, 2020.

This increase was due to borrowings under the DDTL Facility in the current fiscal year.

Reorganization items of $106.0 million were incurred in the prior fiscal year as a result of the Chapter 11 Cases.

Income tax expense (benefit) increased $15.0 million, or 258.6%, to a tax expense of $9.2 million for the nine months ended December 31, 2021 from a tax benefit of $5.8 million for the nine months ended December 31, 2020.

This increase was driven by the Company utilizing a different method for estimating tax expense for the period ended December 31, 2021 due to COVID-19 pandemic-driven variability in the Company's current expectations of results of operations for the remainder of the fiscal year.

Using the discrete method for the period ended December 31, 2021, the Company determined current and deferred income tax expense as if the interim nine-month period was a year-end period.

Refer to See “ Note 8.

Income Taxes ” to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Leaf - North America Supplemental Information

Successor Predecessor Combined

(in millions, except per kilo amounts) Six months ended September 30, 2021 One month ended September 30, 2020 Five months ended August 31, 2020 Six months ended September 30, 2020

(in millions, except per kilo amounts) Nine months ended December 31, 2021 Four months ended December 31, 2020 Five months ended August 31, 2020 Nine months ended December 31, 2020

Kilos sold 27.0 10.2 9.5 19.7

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Transportation, storage, and other period costs 13.5 5.1 5.6 10.7

Derivative financial instrument and exchange (gains) losses — (0.1) 0.3 0.2

Derivative financial instrument and exchange losses (gains) 0.1 (0.1) 0.3 0.2

Total tobacco cost of goods sold 153.2 55.2 45.2 100.4

4 unchanged sentences

Selling, general, and administrative expenses 11.5 4.7 7.2 11.9

Other expense, net (0.8) (0.1) (0.5) (0.6)

Other income (expense), net 0.9 (0.3) (0.5) (0.8)

Restructuring and asset impairment charges 0.1 0.3 — 0.3

Operating income $ 17.7 $ 5.4 $ 0.4 $ 5.8

Total sales and other operating revenues increased $62.6 million or 80.6% to $140.3 million for the six months ended September 30, 2021 from $77.7 million for the combined six months ended September 30, 2020.

This increase was due to 61.3% higher volume from $57.1 million of shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current fiscal year and an 18.0% increase in average sales price due to product mix having a higher concentration of lamina.

Cost of goods and services sold increased $54.2 million or 81.3% to $120.9 million for the six months ended September 30, 2021 from $66.7 million for the combined six months ended September 30, 2020.

Total sales and other operating revenues increased $62.1 million, or 44.9%, to $200.3 million for the nine months ended December 31, 2021 from $138.2 million for the combined nine months ended December 31, 2020.

This increase was due to 37.1% higher volume from $57.1 million of shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current fiscal year and an 11.5% increase in average sales price due to customer mix.

Cost of goods and services sold increased $52.5 million, or 44.0%, to $171.9 million for the nine months ended December 31, 2021 from $119.4 million for the combined nine months ended December 31, 2020.

This increase was mainly due to the increase in total sales and other operating revenues.

Gross profit as a percent of sales decreased to 13.8% for the six months ended September 30, 2021 from 14.2% for the combined six months ended September 30, 2020.

This decrease was primarily due to customer mix.

This decrease was partially offset by lower conversion costs per kilo.

SG&A expenses decreased $1.6 million or 17.8% to $7.4 million for the six months ended September 30, 2021 from $9.0 million for the combined six months ended September 30, 2020.

SG&A expenses as a percent of sales decreased to 5.3% for the six months ended September 30, 2021 from 11.6% for the combined six months ended September 30, 2020.

These decreases were driven by savings from restructuring initiatives.

Gross profit as a percent of sales increased to 14.2% for the nine months ended December 31, 2021 from 13.6% for the combined nine months ended December 31, 2020.

This increase was primarily due to lower conversion costs per kilo and customer mix.

SG&A expenses decreased $0.4 million, or 3.4%, to $11.5 million for the nine months ended December 31, 2021 from $11.9 million for the combined nine months ended December 31, 2020.

SG&A expenses as a percent of sales decreased to 5.7% for the nine months ended December 31, 2021 from 8.6% for the combined nine months ended December 31, 2020.

These decreases were driven by the increase in sales and other operating revenues and savings from restructuring initiatives.

Leaf - Other Regions Supplemental Information

Successor Predecessor Combined

(in millions, except per kilo amounts) Six months ended September 30, 2021 One month ended September 30, 2020 Five months ended August 31, 2020 Six months ended September 30, 2020

(in millions, except per kilo amounts) Nine months ended December 31, 2021 Four months ended December 31, 2020 Five months ended August 31, 2020 Nine months ended December 31, 2020

Kilos sold 234.6 107.8 102.5 210.3

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Restructuring and asset impairment charges 1.9 3.7 0.5 4.2

Operating income (loss) $ 21.8 $ 3.9 $ (1.0) $ 2.9

Total sales and other operating revenues increased $103.0 million or 21.6% to $580.5 million for the six months ended September 30, 2021 from $477.5 million for the combined six months ended September 30, 2020.

This increase was due to a 14.7% increase in average sales prices due to product mix having a higher concentration of lamina and a 5.7% increase in volume from $103.1 million shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current fiscal year.

Cost of goods and services sold increased $89.4 million or 21.7% to $500.9 million for the six months ended September 30, 2021 from $411.5 million for the combined six months ended September 30, 2020.

Operating income $ 51.0 $ 25.0 $ (1.0) $ 24.0

Total sales and other operating revenues increased $158.8 million, or 20.2%, to $946.7 million for the nine months ended December 31, 2021 from $787.9 million for the combined nine months ended December 31, 2020.

This increase was due to an 11.6% increase in volume from $120.6 million shipments delayed by the COVID-19 pandemic and customer shipping instructions from fiscal 2021 into the current fiscal year, larger crop sizes in Africa, and timing of shipments.

In addition, average sales price increased 7.1% due to customer mix.

Cost of goods and services sold increased $141.5 million, or 21.2%, to $809.1 million for the nine months ended December 31, 2021 from $667.6 million for the combined nine months ended December 31, 2020.

This increase was mainly due to the increase in total sales and other operating revenues.

Gross profit as a percent of sales was 13.7% for the six months ended September 30, 2021 and 13.8% for the combined six months ended September 30, 2020.

This decrease was primarily due to foreign currency fluctuations and higher shipping costs.

This decrease was offset by lower conversion costs per kilo.

SG&A expenses decreased $7.4 million or 11.8% to $55.5 million for the six months ended September 30, 2021 from $62.9 million for the combined six months ended September 30, 2020.

SG&A expenses as a percent of sales decreased to 9.6% for the six months ended September 30, 2021 from 13.2% for the combined six months ended September 30, 2020.

These decreases were related to the increase in sales and other operating revenues and current year savings from restructuring initiatives.

Gross profit as a percent of sales decreased to 14.5% for the nine months ended December 31, 2021 from 15.3% for the combined nine months ended December 31, 2020.

This decrease was primarily due to foreign currency fluctuations and customer mix.

This decrease was partially offset by lower conversion costs per kilo.

SG&A expenses decreased $10.6 million, or 11.4%, to $82.2 million for the nine months ended December 31, 2021 from $92.8 million for the combined nine months ended December 31, 2020.

SG&A expenses as a percent of sales decreased to 8.7% for the nine months ended December 31, 2021 from 11.8% for the combined nine months ended December 31, 2020.

These decreases were related to savings from restructuring initiatives and the increase in sales and other operating revenues.

Other Products and Services Supplemental Information

Successor Predecessor Combined

(in millions, except per kilo amounts) Six months ended September 30, 2021 One month ended September 30, 2020 Five months ended August 31, 2020 Six months ended September 30, 2020

(in millions, except per kilo amounts) Nine months ended December 31, 2021 Four months ended December 31, 2020 Five months ended August 31, 2020 Nine months ended December 31, 2020

Sales and other operating revenues $ 9.5 $ 9.5 $ 9.4 $ 18.9

2 unchanged sentences

Selling, general, and administrative expenses 12.3 18.6 26.2 44.8

Other expense, net — (2.4) (0.8) (3.2)

Other (expense) income, net (0.3) 3.3 (0.8) 2.5

Restructuring and asset impairment charges 5.7 5.1 — 5.1

Operating loss $ (24.8) $ (25.4) $ (43.3) $ (68.7)

Sales and other operating revenues decreased $3.6 million or 35.0% to $6.7 million for the six months ended September 30, 2021 from $10.3 million for the combined six months ended September 30, 2020.

Sales and other operating revenues decreased $9.4 million, or 49.7%, to $9.5 million for the nine months ended December 31, 2021 from $18.9 million for the combined nine months ended December 31, 2020.

Cost of goods and services sold decreased $20.6 million or 64.4% to $11.4 million for the six months ended September 30, 2021 from $32.0 million for the combined six months ended September 30, 2020.

This decrease was mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and fiscal 2021 inventory write-downs, including inventory write-offs of cannabis and industrial hemp inventory.

Gross loss as a percent of sales decreased to (70.1)% for the six months ended September 30, 2021 from (210.7)% for the combined six months ended September 30, 2020.

This decrease was mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and the inventory write-downs described above.

SG&A expenses decreased $22.7 million or 71.6% to $9.0 million for the six months ended September 30, 2021 from $31.7 million for the combined six months ended September 30, 2020.

SG&A expenses as a percent of sales decreased to 134.3% for the six months ended September 30, 2021 from 307.8% for the combined six months ended September 30, 2020.

These decreases were mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and savings from fiscal 2021 restructuring initiatives.

Restructuring and asset impairment charges of $5.6 million for the six months ended September 30, 2021 were primarily due to the write-off of the Company's remaining industrial hemp CBD extraction equipment.

Cost of goods and services sold decreased $24.2 million, or 60.2%, to $16.0 million for the nine months ended December 31, 2021 from $40.2 million for the combined nine months ended December 31, 2020.

This decrease was mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and fiscal 2021 write-downs of inventory driven by price compression.

Gross loss as a percent of sales decreased to (68.4)% for the nine months ended December 31, 2021 from (112.7)% for the combined nine months ended December 31, 2020.

This decrease was mainly due to fiscal 2021 write-downs of inventory driven by price compression and the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021.

SG&A expenses decreased $32.5 million, or 72.5%, to $12.3 million for the nine months ended December 31, 2021 from $44.8 million for the combined nine months ended December 31, 2020 mainly due to the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of fiscal 2021 and savings from restructuring initiatives.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations, cash collections from our securitized receivables, and short-term borrowings under our foreign seasonal lines of credit.

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.

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It is possible that, depending on the occurrence of events affecting our liquidity needs and sources of liquidity, such plans may not be sufficient to adequately or timely address a liquidity deficiency.

Based on the assumption that COVID-related shipping constraints are moderately resolved during the remainder of the fiscal year, we are projecting to generate sufficient cash flow from operations during the third and fourth quarter of the fiscal year to satisfy the indebtedness under the DDTL Facility.

To the extent we are unable to fully satisfy the indebtedness under the DDTL Facility, we may utilize cash flows from operations or cash on-hand to satisfy a portion of the DDTL Facility and refinance the remainder.

Debt Financing

We continue to finance our business with a combination of short-term and long-term seasonal credit lines, the long-term debt securities, advances from customers, and cash from operations when available.

See "Note 15.

Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for 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.

On December 30, 2021, we repaid $15.4 million of the DDTL Facility.

The DDTL Facility matures on July 31, 2022.

We are projecting to generate cash flow from operations prior to the maturity of the DDTL Facility to partially satisfy the related indebtedness under the facility and we intend to seek to refinance the remainder.

We may not be able to renew or refinance our indebtedness under the DDTL Facility on substantially similar terms, or at all.

Our borrowing capacity and available liquidity under our lines and letters of credit included the following:

December 31, 2021

(in millions) Borrowing Capacity Lines and Letters Available

Senior Secured Credit Facilities:

ABL Credit Facility $ 75.0 $ 22.5

Foreign seasonal lines of credit 619.5 235.2

Other long-term debt 2.5 0.6

Letters of credit 12.9 3.4

Total $ 709.9 $ 261.7

On February 8, 2022, we terminated the Exit ABL Credit Agreement and replaced it with the PNC ABL Credit Facility.

The Company drew $56.5 million under the PNC ABL Credit Facility to fully repay the outstanding borrowings under the Exit ABL Credit Agreement.

The PNC ABL Credit Facility may be used for revolving credit loans and letters of credit up to an initial maximum principal amount o f $100.0 million, subject to certain limitations.

The PNC ABL Facility includes a $20.0 million uncommitted accordion feature that permits the Company, under certain conditions, to solicit the lenders under the PNC ABL Facility to provide additional revolving loan commitments to increase the aggregate amount of the revolving loan commitments under the PNC ABL Facility not to exceed a maximum principal amount of $120.0 million.

The PNC ABL Facility permits both base rate borrowings and borrowings based upon the BSBY.

Borrowings under the PNC ABL Facility bear interest at an annual rate equal to one, three, or six-month reserve-adjusted BSBY Rate plus 300 basis points or 200 basis points above base rate, as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points.

The interest rates and fees for unutilized commitments decreased compared to those under the Exit ABL Credit Agreement, which permitted both base rate borrowings and LIBOR borrowings with interest at an annual rate equal to LIBOR plus 475 basis points or 375 basis points above base rate, as applicable, with a fee on unutilized commitments at an annual rate of 100 basis points.

The PNC ABL Credit Facility matures, subject to certain extensions, on the earlier of February 8, 2027 o r 90 days prior to the earliest maturity of obligations owing under the Exit Term Loan Credit Agreement and the Indenture.

See "Note 24.

Subsequent Events" to the "Notes to Condensed Consolidated Financial Statements" for additional information on the PNC ABL Credit Facility.

Working Capital

The Company has taken steps to improve its working capital by exiting the industrial hemp, CBD and Canadian cannabis businesses that are no longer core to our operations and long-term growth strategies.

The savings from exiting these businesses along with the cash generated from the disposition of these businesses and their related assets enable us to service the debt on our seasonal foreign lines of credit, and to make periodic repayments on long-term debt.

The Company's securitization arrangements, as disclosed in "Note 16.

Securitized Receivables" to the "Notes to the Condensed Consolidated Financial Statements", allow us to sell certain trade accounts receivable balances to third party financial institutions.

These arrangements allow us to monetize certain receivables prior to their payment due date subject to payment of a discount, which enables us to accelerate cash collections on sales of tobacco to certain customers.

The first and second securitization facilities have a limit of $125.0 million and $80.0 million of trade receivables, respectively, while the limit on the third facility is variable based on qualifying sales.

The following summarizes our working capital:

(in millions except for current ratio) September 30, 2021 September 30, 2020 March 31, 2021

(in millions except for current ratio) December 31, 2021 December 31, 2020 March 31, 2021

Cash and cash equivalents $ 146.1 $ 123.2 $ 92.7

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Accounts payable 90.0 80.4 125.9

Advances from customers 19.0 22.0 12.1

Current portion of long-term debt 107.7 — 2.1

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Working capital 472.0 591.7 520.8

Long-term debt 543.2 550.2 551.2

Stockholders’ equity attributable to Pyxus International, Inc.

226.5 385.3 247.7

The decrease in working capital and the current ratio between the periods was driven by the reclassification of the Company's DDTL facility from long-term debt to current portion of long-term debt during the period ended September 30, 2021.

Sources and Uses of Cash

Our primary sources of liquidity are cash generated from operations, cash collections from our securitized receivables, and short-term borrowings under our foreign seasonal lines of credit.

We have typically financed our non-U.S.

4 unchanged sentences

We maintain various other financing arrangements to meet the cash requirements of our businesses.

See "Note 15.

Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for additional information.

1 unchanged sentence

In addition, we may periodically elect to purchase, redeem, repay, retire, or cancel indebtedness prior to stated maturity under our various foreign credit lines.

The following summarizes our sources and uses of our cash flows:

Cash and cash equivalents increased $22.9 million, or 18.6%, to $146.1 million as of December 31, 2021 of which approximately $57.9 million was held in foreign jurisdictions, certain of which are 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:

Successor Predecessor Combined

(in millions) Six months ended September 30, 2021 One month ended September 30, 2020 Five months ended August 31, 2020 Six months ended

September 30, 2020

(in millions) Nine months ended December 31, 2021 Four months ended December 31, 2020 Five months ended August 31, 2020 Nine months ended

December 31, 2020

Operating activities $ (184.8) $ (25.5) $ (182.1) $ (207.6)

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* Amounts may not equal column totals due to rounding

Net cash used by operating activities increased for the six months ended September 30, 2021 compared to the combined six months ended September 30, 2020, primarily driven by (excluding non-cash activities) higher receivables outstanding in the current period due to increased sales.

Net cash provided by investing activities increased for the six months ended September 30, 2021 compared to the combined six months ended September 30, 2020 primarily due to collection of the DIP loan made to the Canadian Cannabis Subsidiaries.

Net cash provided by financing activities increased for the six months ended September 30, 2021 compared to the combined six months ended September 30, 2020 primarily due to the borrowings under the DDTL Facility and higher net proceeds from short-term borrowings.

Approximately $107.5 million of our outstanding cash balance at September 30, 2021 was held in foreign jurisdictions, certain of which are 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.

Debt Financing

We continue to finance our business with a combination of short-term and long-term seasonal credit lines, the long-term debt securities described above, advances from customers, and cash from operations when available.

See "Note 16.

Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for summary of our short-term and long-term debt.

We will continue to monitor and, as available, adjust funding sources as needed to enhance and drive various business opportunities.

Available credit as of September 30, 2021 was $189.2 million primarily comprised of $167.0 million of foreign seasonal lines of credit, $18.5 million from the ABL Credit Facility, and $3.3 million of availability for letters of credit.

No cash dividends were paid to shareholders during the three months ended September 30, 2021.

Net cash used by operating activities decreased for the nine months ended December 31, 2021 compared to the combined nine months ended December 31, 2020, primarily driven by (excluding non-cash activities) an increase in advances received from customers for future sales.

Net cash provided by investing activities increased for the nine months ended December 31, 2021 compared to the combined nine months ended December 31, 2020 primarily due to higher collections of beneficial interests on securitized trade receivables driven by increased sales over the same period and lower capital expenditures.

Net cash provided by financing activities increased for the nine months ended December 31, 2021 compared to the combined nine months ended December 31, 2020 primarily due to higher net proceeds from short-term borrowings and the borrowings under the DDTL Facility.

Capital investments in our leaf operations have been made 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 have incurred approximately $11.2 million in capital expenditures for the nine months ended December 31, 2021 , and are expecting to incur an additional $8.4 million for the three months ended March 31, 2022.

The following summarizes cash contributions to pension plans and postretirement health and life insurance benefits:

(in millions) Nine months ended December 31, 2021

Contributions made during the period $ 4.4

Contributions expected for the remainder of the fiscal year 1.5

No cash dividends were paid to shareholders during the three months ended December 31, 2021.

The payment of dividends is restricted under the terms the ABL Credit Agreement, the Term Loan Credit Agreement, and the Indenture.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis