PYXUS INTERNATIONAL, INC. 10-Q

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 "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, 2022 and in our other filings with the Securities and Exchange Commission. These risks and uncertainties include: • risks related to the Company's indebtedness, including that the Company has substantial debt which may adversely affect it by limiting future sources of financing, interfering with its ability to pay interest, and principal on its indebtedness and subjecting it to additional risks, the Company requires a significant amount of cash to service indebtedness and its ability to generate cash depends on many factors beyond its control, the Company may not be able to refinance or renew its indebtedness, which may have a material adverse effect on its financial condition, the Company may not be able to satisfy the covenants included in its financing arrangements, which could result in the default of its outstanding debt obligations, and despite current indebtedness levels, the Company may still be able to incur substantially more debt, which could exacerbate further the risks associated with its significant leverage; • risks and uncertainties relating to the Company's liquidity, including but not limited to: whether foreign lenders that have provided short-term operating credit lines to fund leaf tobacco operations at the local level cease to provide such funding, uncertainty and continuing risks associated with the Company’s ability to achieve its goals and continue as a going concern, and unanticipated developments with respect to liquidity needs and sources of liquidity could result in a deficiency in liquidity; • risk and uncertainties related to the Company’s leaf tobacco operations, including changes in the timing of anticipated shipments, changes in anticipated geographic product sourcing, changes in relevant capital markets affecting the terms and availability of short-term seasonal financing, political instability, currency and interest rate fluctuations, the impact of high inflation, shifts in the global supply and demand position for tobacco products, changes in tax laws and regulations or the interpretation of tax laws and regulations, resolution of tax matters, adverse weather conditions, the impact of climate change on weather patterns in tobacco-growing regions, the impact of disasters or other unusual events affecting international commerce, the impacts of international sanctions on the Company's ability to sell or source tobacco in certain regions, changes in governmental regulations applicable to tobacco products, and changes in costs incurred in supplying products and related services; and • risks and uncertainties related to the COVID-19 pandemic, including possible delays in shipments of leaf tobacco, including from the closure or restricted activities at ports or other channels, disruptions to the Company’s operations or the operations of suppliers and customers resulting from restrictions on the ability of employees and others in the supply chain to travel and work, border closures, determinations by Pyxus or shippers to temporarily suspend operations in affected areas, whether safety concerns related to COVID-19 might otherwise require operations at any of the Company's facilities to be halted or limited for some period of time, negative consumer purchasing behavior with respect to the Company’s products or the products of its leaf tobacco customers during periods of government mandates restricting activities imposed in response to the COVID-19 pandemic, and the extent to which the impact of the COVID-19 pandemic on the Company’s operations and the demand for its products may not coincide with impacts experienced in the United States due to the international scope of its operations, including in emerging and other markets in which the Company operates where the timing and severity of COVID-19 outbreaks, governmental reactions to the threat of outbreaks, and the pace and efficacy of COVID-19 vaccinations may differ from those in the United States. We do not undertake to update any forward-looking statements that we may make from time to time. 24 Executive Summary Through the first half of fiscal 2023, we reduced supply chain complexities and increased operational efficiencies. These efforts result in more normalized shipments in certain markets compared to the prior year. During the quarter ended September 30, 2022, we experienced increased sales and other operating revenue and operating margin improvement primarily due to increased demand and more normalized timing of shipments from Africa, Asia, and South America. This enabled the Company to utilize cash generated from increased sales in the quarter to refinance the Delayed Draw Term Loan Facility, repay a portion of the revolving loan facilities, and fully fund the U.S. defined benefit pension plan. As of September 30, 2022, our inventory increased $87.7 million compared to the prior year primarily due to higher green tobacco prices and processing costs in South America and delayed shipments from North America. Our processed tobacco inventory continues to be more than 90% committed to specific customers. The overall increase in inventory and our committed inventory levels for processed tobacco position us to meet near-term demand. The prevailing La Nina weather patterns continue to adversely affect the global supply of tobacco. Through our efforts to accelerate buying activities in certain key markets, investments we have made across the business, and engaging with customers in transparent dialogue regarding the impacts of La Nina and inflation on our business, we purchased sufficient volume to meet near-term customer demand and maintained our gross profit as a percentage of sales despite historic inflation. As we approach the second half of fiscal 2023, we are closely monitoring the market for crop inputs like fertilizer and taking steps to mitigate the near-term risk of supply shortages where possible. Overview The Company is a global agricultural company with nearly 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. Historically, the Company had nine operating segments that were organized by product category and geographic area and were aggregated into three reportable segments for financial reporting purposes: Leaf - North America, Leaf - Other Regions, and Other Products and Services. During year ended March 31, 2022, the Company reevaluated its operating and reportable segments under ASC Topic 280 - Segment Reporting . As a result of this reevaluation, effective during the fourth quarter of the year ended March 31, 2022, the Company has eight operating segments organized by geographic area and product category and are aggregated into one reportable segment for financial reporting purposes: Leaf. An All Other category is included for purposes of reconciliation of the results of the Leaf reportable segment to the consolidated results. See " Note 1. Basis of Presentation and Summary of Significant Accounting Policies " for additional information. 25 Results of Operations Three Months Ended September 30, 2022 and 2021 Three Months Ended September 30, Change (in millions, except per kilo amounts) 2022 2021 $ % Sales and other operating revenues $ 508.3 $ 394.2 114.1 28.9 Cost of goods and services sold 441.0 342.1 98.9 28.9 Gross profit 67.3 52.1 15.2 29.2 Gross profit as a percent of sales 13.2 % 13.2 % Selling, general, and administrative expenses 35.0 37.9 (2.9) (7.7) Other expense, net 1.2 1.8 (0.6) (33.3) Restructuring and asset impairment charges 4.0 6.9 (2.9) (42.0) Operating income 27.1 5.5 21.6 392.7 Loss on deconsolidation/disposition of subsidiaries — 2.5 (2.5) (100.0) Loss on pension settlement 2.6 — 2.6 100.0 Interest expense, net 28.8 28.5 0.3 1.1 Income tax benefit 1.2 14.1 (12.9) (91.5) Income from unconsolidated affiliates 1.6 1.3 0.3 23.1 Net income (loss) attributable to noncontrolling interests — (0.3) 0.3 100.0 Net loss attributable to Pyxus International, Inc.* $ (1.5) $ (9.7) 8.2 84.5 Leaf: Sales and other operating revenues $ 475.6 $ 357.7 117.9 33.0 Tobacco costs 388.7 292.9 95.8 32.7 Transportation, storage, and other period costs 23.9 18.8 5.1 27.2 Total cost of goods sold* 412.5 311.7 100.9 32.4 Product revenue gross profit* 63.1 46.1 17.0 36.9 Product revenue gross profit as a percent of sales 13.3 % 12.9 % Kilos sold 101.4 86.3 15.1 17.5 Average price per kilo $ 4.69 $ 4.14 0.55 13.3 Average cost per kilo 4.07 3.61 0.46 12.7 Average gross profit per kilo 0.62 0.53 0.09 17.0 Processing and other revenues $ 30.3 $ 33.2 (2.9) (8.7) Processing and other revenues costs of services sold 23.0 24.6 (1.6) (6.4) Processing and other gross profit* 7.3 8.7 (1.3) (15.4) Processing and other gross profit as a percent of sales 24.2 % 26.1 % All Other: Sales and other operating revenues $ 2.3 $ 3.2 (0.9) (28.0) Cost of goods and services sold 5.4 5.8 (0.4) (6.8) Gross loss (3.1) (2.6) (0.5) (19.9) Gross loss as a percent of sales (132.5) % (79.6) % * Amounts may not equal column totals due to rounding 26 Sales and other operating revenues were $394.2 million for the three months ended September 30, 2021 and $508.3 million for the three months ended September 30, 2022, an increase of $114.1 million , or 28.9%. This increase was primarily due t o a 17.5% increase in leaf volume and a 13.3% increase in average price per kilo. The increase in leaf volume was driven by increased demand and more normalized timing of shipments from Africa, Asia, and South America and was partially offset by the timing of shipments from North America. The increase in average price per kilo was mainly due to higher tobacco prices. Cost of goods and services sold were $342.1 million for the three months ended September 30, 2021 and $441.0 million for the three months ended September 30, 2022, an increase of $98.9 million, or 28.9%. This increase was mainly due to the increase in sales and other operating revenues. Average cost per kilo increased primarily due to higher tobacco prices. Gross profit was $52.1 million for the three months ended September 30, 2021 and $67.3 million for the three months ended September 30, 2022, an increase of $15.2 million, or 29.2%. This increase was mainly due to the increase in sales and other operating revenues. Gross profit as a percent of sales was 13.2% for the three months ended September 30, 2022 and 2021. Operating income was $5.5 million for the three months ended September 30, 2021 and $27.1 million for the three months ended September 30, 2022, an increase of $21.6 million. This increase was mainly due to higher leaf sales and other operating revenues from increased volume and average price per kilo, lower restructuring and impairment charges, and a reduction in sales, general, and administrative expenses. Income tax benefit was $14.1 million for the three months ended September 30, 2021 and $1.2 million for the three months ended September 30, 2022, a decrease of $12.9 million, or 91.5%. The decrease was driven by the Company utilizing a different method for estimating tax expense (benefit) for the period ended September 30, 2022. Using the discrete method for the period ended September 30, 2022, the Company determined current and deferred income tax expense (benefit) as if the six-month interim period of the current fiscal year were an annual period, which resulted in the recognition of the fiscal 2023 year-to-date benefit in the quarter. Refer to See " Note 5. Income Taxes " to the "Notes to Condensed Consolidated Financial Statements" for additional information. Average gross profit per kilo for product revenue was $0.53 for the three months ended September 30, 2021 and $0.62 for the three months ended September 30, 2022, an increase of $0.09 per kilo or 17.0%. This increase was primarily due to a favorable shift in customer and product mix. The impact of this increase was partially offset by lower gross profit from processing and other revenues and increased gross loss in the All Other category. 27 Six Months Ended September 30, 2022 and 2021 Six Months Ended September 30, Change (in millions, except per kilo amounts) 2022 2021 $ % Sales and other operating revenues $ 852.2 $ 727.5 124.7 17.1 Cost of goods and services sold 744.1 633.3 110.8 17.5 Gross profit 108.1 94.2 13.9 14.8 Gross profit as a percent of sales 12.7 % 12.9 % Selling, general, and administrative expenses 69.6 71.8 (2.2) (3.1) Other expense, net 0.1 1.7 (1.6) (94.1) Restructuring and asset impairment charges 4.3 7.1 (2.8) (39.4) Operating income* 34.1 13.7 20.4 148.9 Loss on deconsolidation/disposition of subsidiaries 0.6 2.5 (1.9) (76.0) Loss on pension settlement 2.6 — 2.6 100.0 Interest expense, net 54.3 55.3 (1.0) (1.8) Income tax benefit 2.1 22.6 (20.5) (90.7) Income (loss) from unconsolidated affiliates 5.3 (0.1) 5.4 5,400.0 Net income (loss) attributable to noncontrolling interests 0.1 (0.5) 0.6 120.0 Net loss attributable to Pyxus International, Inc.* $ (16.2) $ (21.2) 5.0 23.6 Leaf: Sales and other operating revenues $ 798.5 $ 669.5 129.0 19.3 Tobacco costs 654.6 544.7 110.0 20.2 Transportation, storage, and other period costs 44.5 40.3 4.2 10.5 Total cost of goods sold* 699.1 584.9 114.2 19.5 Product revenue gross profit* 99.3 84.5 14.8 17.5 Product revenue gross profit as a percent of sales 12.4 % 12.6 % Kilos sold 173.5 155.4 18.1 11.6 Average price per kilo $ 4.60 $ 4.31 0.29 6.7 Average cost per kilo 4.03 3.76 0.27 7.2 Average gross profit per kilo 0.57 0.55 0.02 3.6 Processing and other revenues $ 48.1 $ 51.4 (3.3) (6.4) Processing and other revenues costs of services sold 35.5 37.0 (1.4) (3.8) Processing and other gross profit* 12.5 14.4 (1.9) (12.9) Processing and other gross profit as a percent of sales 26.1 % 28.0 % All Other: Sales and other operating revenues $ 5.6 $ 6.7 (1.1) (15.9) Cost of goods and services sold 9.4 11.3 (1.9) (16.8) Gross loss (3.8) (4.6) 0.8 18.2 Gross loss as a percent of sales (67.8) % (69.6) % * Amounts may not equal column totals due to rounding 28 Sales and other operating revenues were $727.5 million for the six months ended September 30, 2021 and $852.2 million for the six months ended September 30, 2022, an increase of $124.7 million, or 17.1%. This increase was primarily due t o an 11.6% increase in leaf volume and a 6.7% increase in average price per kilo. The increase in kilo volume was driven by increased demand and more normalized timing of shipments from Asia and was partially offset by the timing of shipments from North America and South America. The increase in average sales price per kilo was mainly due to higher tobacco prices. Cost of goods and services sold were $633.3 million for the six months ended September 30, 2021 and $744.1 million for the six months ended September 30, 2022, an increase of $110.8 million, or 17.5%. This increase was mainly due to the increase in sales and other operating revenues. Average cost per kilo increased primarily due to higher tobacco prices. Gross profit was $94.2 million for the six months ended September 30, 2021 and $108.1 million for the six months ended September 30, 2022, an increase of $13.9 million, or 14.8%. This increase was mainly due to the increase in sales and other operating revenues. Gross profit as a percent of sales went from 12.9% for the six months ended September 30, 2021 to 12.7% for the six months ended September 30, 2022. This decrease was primarily due to customer mix in South America and higher inventory write-downs within the All Other category from the restructuring of certain non-leaf agriculture operations. Operating income was $13.7 million for the six months ended September 30, 2021 and $34.1 million for the six months ended September 30, 2022, an increase of $20.4 million, or 148.9% . This increase was mainly due to higher leaf sales and other operating revenues from increased volume and average price per kilo, lower restructuring and impairment charges, and a reduction in sales, general, and administrative expenses. Income tax benefit was $22.6 million for the six months ended September 30, 2021 and $2.1 million for the six months ended September 30, 2022, a de crease of $20.5 million , or 90.7% . This decrease was driven by the Company utilizing a different method for estimating tax expense (benefit) for the period ended September 30, 2022. Using the discrete method for the period ended September 30, 2022, the Company determined current and deferred income tax expense (benefit) as if the six-month interim period of the current fiscal year were an annual period, which resulted in the recognition of the fiscal 2023 year-to-date benefit in the quarter. Refer to See " Note 5. Income Taxes " to the "Notes to Condensed Consolidated Financial Statements" for additional information. Average gross profit per kilo for product revenue was $0.57 for the six months ended September 30, 2021 and $0.55 for the six months ended September 30, 2022, an increase of $0.02 per kilo or 3.6% . This increase was primarily due to a favorable change in customer and product mix. The impact of the increase was partially offset by lower gross profit from processing and other revenues. Liquidity and Capital Resources Overview 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. 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. We believe our sources of liquidity will be sufficient to fund our anticipated operating needs for the next twelve months. During such time our liquidity needs for operations may 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. 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. 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 12. 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 29 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. The following summarizes our total borrowing capacity 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: September 30, 2022 (in millions) Total Borrowing Capacity Remaining Amount Available ABL Credit Facility $ 100.0 $ 45.0 Foreign seasonal lines of credit 714.4 165.9 Other long-term debt 0.6 0.1 Letters of credit 18.4 4.1 Total $ 833.4 $ 215.1 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. (in millions) September 30, 2022 September 30, 2021 March 31, 2022 Notes payable to banks (1) $ 548.5 $ 457.7 $ 378.6 Current portion of long-term debt (2) 0.1 121.9 107.9 Long-term debt (2) 646.1 543.2 580.5 Total debt liabilities* $ 1,194.8 $ 1,122.9 $ 1,066.9 Less: Cash and cash equivalents 114.1 127.6 198.8 Net debt* $ 1,080.7 $ 995.2 $ 868.2 * Amounts may not equal column totals due to rounding (1) The increase from September 30, 2021 to September 30, 2022 is due to higher borrowings under the Company's foreign seasonal lines of credit used to finance higher green tobacco prices and processing costs in Africa and South America as well as increased borrowing capacity in certain markets. The increase from March 31, 2022 to September 30, 2022 is due to seasonality of the business, with higher working capital requirements in the first half of the fiscal year. (2) The decrease in current portion of long-term debt and the increase in long-term debt from September 30, 2021 and March 31, 2022 are due to the refinancing of the DDTL Facility on a long-term basis. 30 Working Capital The following summarizes our working capital: (in millions except for current ratio) September 30, 2022 September 30, 2021 March 31, 2022 Cash, cash equivalents, and restricted cash $ 115.8 $ 130.7 $ 200.9 Trade and other receivables, net 220.6 223.7 260.2 Inventories and advances to tobacco suppliers 938.8 838.6 798.4 Recoverable income taxes 12.0 34.1 7.9 Prepaid expenses and other current assets 50.9 48.6 60.3 Total current assets* $ 1,338.1 $ 1,275.6 $ 1,327.6 Notes payable to banks $ 548.5 $ 457.7 $ 378.6 Accounts payable 103.5 72.1 179.0 Advances from customers 43.8 33.5 53.0 Accrued expenses and other current liabilities 76.0 72.6 82.2 Current portion of long-term debt 0.1 121.9 107.9 Other current liabilities 13.9 8.4 13.7 Total current liabilities* $ 785.8 $ 766.3 $ 814.4 Current ratio 1.7 to 1 1.7 to 1 1.6 to 1 Working capital $ 552.3 $ 509.3 $ 513.2 * Amounts may not equal column totals due to rounding Working capital increased from September 30, 2021 to September 30, 2022 by $43.0 million, or 8.4%, primarily due to the refinancing of the DDTL Facility on a long-term basis as well as the increased capacity and higher utilization of securitization facilities, which resulted in decreased trade receivables despite higher sales. This increase in working capital was partially offset by increased inventory driven by higher green tobacco prices and processing costs in Africa and South America, which was financed by higher foreign seasonal lines of credit, and delayed shipments from North America. Inventories The following summarizes inventory committed to a customer and uncommitted inventory balances for processed tobacco: (in millions) September 30, 2022 September 30, 2021 March 31, 2022 Committed $ 677.9 $ 536.9 $ 471.9 Uncommitted 34.2 68.5 45.7 Total processed tobacco $ 712.1 $ 605.4 $ 517.6 Total processed tobacco increased from September 30, 2021 to September 30, 2022 by $106.7 million, or 17.6%, primarily due to increased foreign seasonal lines of credit used to finance higher green tobacco prices and processing costs in Africa and South America and delayed shipments from North America. See " Note 1. Basis of Presentation and Summary of Significant Accounting Policies " and " Note 7. Inventories " 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. These foreign lines of credit are generally seasonal in nature, 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 various other financing arrangements to meet the cash requirements of our businesses. See " Note 12. 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. 31 As of September 30, 2022, our cash, cash equivalents, and restricted cash was $115.8 million of which approximately $46.1 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: Six Months Ended September 30, (in millions) 2022 2021 Trade and other receivables $ (48.4) $ (113.8) Inventories and advances to tobacco suppliers (146.5) (67.1) Recoverable income taxes (3.5) (29.0) Payables and accrued expenses (76.6) (60.8) Advances from customers (9.2) 21.4 Other (2.5) 18.2 Net cash used by operating activities $ (286.7) $ (231.1) Collections on beneficial interests on securitized trade receivables 76.2 82.6 Other (0.8) (2.4) Net cash provided by investing activities $ 75.4 $ 80.2 Net proceeds from short-term borrowings 176.3 85.0 Proceeds from DDTL facility — 117.6 Net repayment of revolving loan facilities (35.0) (11.0) Other (19.5) (6.1) Net cash provided by financing activities 121.8 185.5 Effect of exchange rate changes on cash 3.9 (1.2) (Decrease) increase in cash, cash equivalents, and restricted cash* $ (85.5) $ 33.3 * Amounts may not equal column totals due to rounding Cash, cash equivalents, and restricted cash decreased by $118.8 million during the six months ended September 30, 2022 compared to the increase during the six months ended September 30, 2021. The decrease was primarily due to higher green tobacco prices and processing costs in Africa and South America and increased inventory from delayed shipments from North America, as well as decreased trade receivables from increased capacity and higher utilization of securitization facilities. The increase in inventory was financed by higher foreign seasonal lines of credit and increased capacity and higher utilization of trade receivable securitization facilities. Planned Capital Expenditures 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 $5.4 million in capital expenditures for the six months ended September 30, 2022 , and are expecting to incur an additional $15.9 million for the remainder of the fiscal year ending March 31, 2023. 32 Pension and Postretirement Health and Life Insurance Benefits The following summarizes cash contributions to pension and postretirement health and life insurance benefits: Six Months Ended (in millions) September 30, 2022 Contributions made during the period (1) $ 8.4 Contributions expected for the remainder of the fiscal year 1.5 Total $ 9.9 (1) Includes $5.3 million paid during the current quarter to fully fund the U.S. Pension Plan's liabilities in preparation to purchase a group annuity contract to administer future payments to the remaining U.S. Pension Plan participants. No cash dividends were paid to shareholders during the six months ended September 30, 2022. The payment of dividends is restricted under the terms of the ABL Credit Agreement, the Exit Term Loan Credit Agreement, and the Indenture. 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 I, Item 7 "Critical Accounting Policies and Estimates" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes to our market risk exposures since March 31, 2022. 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, 2022.