What changed in this filing

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Item 1. Business

2023-06-06 compared with 2022-06-14 · 27 added, 104 removed, 79 unchanged (62% of the section changed)

Company Overview

This Annual Report on Form 10-K (this "Annual Report") is being filed by Pyxus International, Inc.

(the "Company," "Pyxus," "we," or "us").

The Company is the successor issuer to Old Holdco, Inc.

("Old Pyxus") and was incorporated as a Virginia corporation in August 2020 to facilitate the Restructuring described below.

The terms the "Company," "Pyxus," "we," or "us" when used with respect to periods commencing prior to the effectiveness of the Plan (as defined below), refer to Old Pyxus, unless the context would indicate otherwise.

As the context requires, the "Company," "Pyxus," "we" and "us" also includes the consolidated subsidiaries of Pyxus International, Inc.

On June 15, 2020 (the "Petition Date"), Old Pyxus (then named Pyxus International, Inc.) 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 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.

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.

Other than our Chief Executive Officer, our Board of Directors does not include any of the individuals who served as directors of Old Pyxus at the time the Chapter 11 Cases were commenced or at the effectiveness of the Plan.

These and other related matters are discussed in greater detail in " Note 3.

Emergence from Voluntary Reorganization under Chapter 11 " to the "Notes to Consolidated Financial Statements," which is incorporated herein by reference.

Cross references included in this Annual Report to "Notes to Consolidated Financial Statements" are to the "Notes to Consolidated Financial Statements" included in Item 8, "Financial Statements and Supplementary Data" of this Annual Report.

Company Overview

Pyxus is a trusted provider of responsibly sourced, independently verified, sustainable and traceable products and ingredients.

Headquartered in Morrisville, North Carolina, we contract with suppliers across five continents to help them produce sustainable, compliant crops.

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.

Through our predecessor companies, we have a long operating history in the leaf tobacco industry with some customer relationships beginning in the early 1900s.

Our core leaf tobacco operations continued to account for almost all of our revenues for the year ended March 31, 2022.

We are committed to responsible crop production that supports economic viability for the supplier, provides a safe working atmosphere for farmworkers and minimizes negative environmental impacts.

Our agronomists maintain frequent contact with our contracted suppliers 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 ® traceability platform can provide 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 alternative crops.

Our contracted tobacco supplier base often produces non-tobacco crops, 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.

Beginning in 2017, we undertook to diversify the Company's products and services.

In support of this strategy, the Company made the following investments:

• On April 2, 2018, we purchased a 51% interest in Humble Juice, LLC ("Humble Juice"), a manufacturer and distributor of flavored e-liquids.

• On August 21, 2017, the Company completed a purchase of a 40% interest in Nicotine River, LLC ("Nicotine River"), a manufacturer, retailer and wholesale supplier of compounds used for e-liquid production, and on August 14, 2020,

the Company exchanged its 40% ownership interest in Nicotine River for an additional 14.3% interest in Humble Juice, then increasing the Company's ownership interest in Humble to 65.3%.

Industrial hemp/CBD

• On December 18, 2017, a subsidiary of the Company completed a purchase of a 40% interest in Criticality LLC ("Criticality"), a North Carolina-based industrial hemp company to engage in cannabidiol ("CBD") extraction and other applications for industrial hemp.

On April 22, 2020, that subsidiary completed a purchase of the 60% interest in Criticality not owned by the subsidiary, and as a result Criticality became a wholly owned subsidiary of Pyxus.

Legal cannabis in Canada

• On January 25, 2018, a wholly owned Canadian subsidiary of the Company acquired a 75% equity position in Canada’s Island Garden Inc.

("Figr East").

Figr East obtained license to produce and sell medicinal and adult-use cannabis in most of the provinces in the Canadian market.

We acquired an additional 18% and 1.2% equity interest in Figr East on March 22, 2019 and October 15, 2019, respectively, increasing the ownership percentage to 94.2%.

• On January 29, 2018, a wholly owned Canadian subsidiary of the Company acquired an 80% equity position in Figr Norfolk Inc.

("Figr Norfolk" and, together with Figr East "Figr"), formerly known as Goldleaf Pharm Inc., which obtained license to produce and sell medicinal and adult-use cannabis in most of the provinces in the Canadian market.

As further discussed below, we have generally divested or ceased operating these businesses and have returned our focus to our leaf tobacco businesses.

Following the effectiveness of the Plan and the election of additional members of our Board of Directors in October 2020, our Board of Directors determined to exit the industrial hemp, CBD and Canadian cannabis businesses in light of the Company’s limited capital resources and the continuing capital requirements to develop and expand these early-stage businesses.

In December 2020, the Company commenced actions to exit operations of the industrial hemp businesses, including the production and sale of products containing extracts of industrial hemp, including CBD products, by Criticality.

Criticality’s CBD extraction facility has ceased operations.

On January 21, 2021, Figr Norfolk Inc.

("Figr Norfolk") and Figr Brands, Inc.

("Figr Brands"), which are indirect subsidiaries of the Company, and Canada’s Island Garden Inc.

("Figr East", and together with Figr Norfolk and Figr Brands, the "Canadian Cannabis Subsidiaries"), which, prior to its sale on June 28, 2021 was an indirect subsidiary of the Company, applied for relief from their respective creditors pursuant to Canada’s Companies’ Creditors Arrangement Act (the "CCAA") in the Ontario Superior Court of Justice (Commercial List) (the "Canadian Court") in Ontario, Canada as Court File No.

CV-21-00655373-00CL (the "CCAA Proceeding").

On January 21, 2021 (the "Order Date"), upon application by the Canadian Cannabis Subsidiaries, the Canadian Court issued an order for creditor protection of the Canadian Cannabis Subsidiaries pursuant to the provisions of the CCAA and the appointment of FTI Consulting Canada Inc.

to serve as the Canadian Court-appointed monitor of the Canadian Cannabis Subsidiaries during the pendency of the CCAA Proceeding (the "Monitor").

As a result of the commencement of the CCAA Proceeding and the appointment of the Monitor, and in accordance with U.S.

generally accepted accounting principles, the Canadian Cannabis Subsidiaries were deconsolidated from the Company's financial statements as of the Order Date.

As a result of a sale process under an order issued by the Canadian Court in the CCAA Proceeding, the sale of Figr East and certain intangible assets of Figr Brands was completed on June 28, 2021 and the sale of assets of Figr Norfolk was completed on January 28, 2022.

Pursuant to the CCAA Proceeding, the Company received funds in settlement of its debt claims with respect to the Canadian Cannabis Subsidiaries and did not receive any recovery with respect to its equity interest in the Canadian Cannabis Subsidiaries.

See " Note 5.

CCAA Proceeding and Deconsolidation of Subsidiaries " and " Note 30.

Subsequent Events " to the "Notes to Consolidated Financial Statements" for additional information.

On November 23, 2021, the Company disposed of its ownership interests in Humble Juice, the Company's primary e-liquids business, in exchange for royalties on future revenue.

During the fourth quarter of the year ended March 31, 2022, the Company's remaining e-liquids subsidiary, Twelfth State Brands LLC, which markets e-liquids under the Bantam trademark, suspended the sourcing of additional inventory and reduced staffing pending action by the U.S.

Food and Drug Administration (the "FDA") on its applications to permit continued marketing of its remaining products.

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 the year ended March 31, 2022, the Company reevaluated its operating and reportable segments under ASC Topic 280 - Segment Reporting ("ASC 280") in response to the effectiveness of the Plan in August 2020, the appointment of a new Board of Directors during the seven months ended March 31, 2021, the outcomes achieved from cost savings and restructuring initiatives implemented during the five months ended August 31, 2020 and the seven months ended March 31, 2021, the Company's exit from its industrial hemp, CBD, and Canadian cannabis businesses during the seven months

ended March 31, 2021, and changes to business operations as a result of the COVID-19 pandemic.

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:

Pyxus is a global agricultural company with 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.

The Company has one reportable segment for financial reporting purposes:

See " Note 1.

Basis of Presentation and Summary of Significant Accounting Policies " to the "Notes to Consolidated Financial Statements" for additional information.

Basis of Presentation and Summary of Significant Accounting Policies " to the "Notes to the Consolidated Financial Statements" for additional information.

Leaf Tobacco Operations

Our leaf tobacco revenues are primarily comprised of sales of processed leaf tobacco and fees charged for processing and related services to manufacturers of tobacco products.

Our leaf tobacco revenues are principally comprised of sales of processed leaf tobacco and fees charged for processing and related services to manufacturers of tobacco products.

Our leaf tobacco operations deal primarily in flue-cured, burley, and oriental tobaccos that are used in international cigarette brands.

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In some locales, we purchase seeds, fertilizer, pesticides, and other products related to growing tobacco, which represent prepaid inventory, and issue them to suppliers with whom we have purchase contracts.

The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if they meet our specifications.

The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase as long as the supplier meets our specifications.

The advances of inputs for the current crop generally include the original cost of the inputs plus a mark-up and interest as it is earned.

Where contractually permitted, we charge interest to the suppliers during the period the current crop advance is outstanding.

We generally advance inputs at a price greater than our cost, which results in a mark-up on the inputs.

We account for our advances to tobacco suppliers using a cost accumulation model, which results in us reporting our advances at the lower of cost or recoverable amounts excluding the mark-up and interest.

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The advances applied to the delivery are reclassified out of advances and into unprocessed inventory.

We advance inputs only to suppliers with whom we have purchase contracts.

Under longer-term arrangements with suppliers, we may advance or guarantee financing on suppliers' capital assets, which are also recovered through the delivery of tobacco to us by our suppliers.

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We process tobacco in Company-owned and third-party facilities around the world, including in Argentina, Brazil, China, Guatemala, India, Indonesia, Jordan, Macedonia, Malawi, Tanzania, Thailand, Turkey, United States, and Zimbabwe.

These facilities encompass all leading export locations of flue-cured, burley and oriental tobaccos.

These facilities encompass leading export locations of flue-cured, burley and oriental tobaccos.

After processing, whole leaves, bundles, strips or stems, and scrap where applicable, are separately packed in cases, bales, cartons or hogsheads for storage and shipment.

Packed flue-cured, burley and oriental tobacco generally is transported in the country of origin by truck or rail, and exports are moved by ship.

During the year ended March 31, 2022, the seven months ended March 31, 2021, the five months ended August 31, 2020, and the year ended March 31, 2020, approximately 64%, 60%, 68%, and 67% of our total purchases for the respective period were from Brazil, China, Turkey, and the Africa Region.

During the years ended March 31, 2023 and 2022, approximately 65% and 64% of our total purchases for the respective period were from Brazil, China, Turkey, and the Africa region.

We have entered into contracts, joint ventures and other arrangements for the purchase of tobacco grown in substantially all other countries that produce export-quality flue-cured and burley tobacco.

2 unchanged sentences

Refer to " Note 26.

Segment Information " to the "Notes to Consolidated Financial Statements" for additional information regarding customers, and their respective affiliates, that account for more than 10% of our annual revenues.

Segment Information " to the "Notes to Consolidated Financial Statements" for additional information regarding customers, and

their respective affiliates, that account for more than 10% of our annual revenues.

Pyxus delivered approximately 31% of its tobacco sales to customers in Europe, approximately 18% to customers in China, and approximately 12% to customers in the United States for year ended March 31, 2023.

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Tobacco purchases vary by market and tobacco variety.

Flue-cured tobacco grown in North America is purchased, processed, and marketed generally during the five-month period beginning in July and ending in November.

North American burley tobacco is purchased, processed, and marketed usually from late November through January or February.

Tobacco grown in South America is usually purchased, processed, and marketed from January through July and in Africa from April through September.

Tobacco grown in North America is purchased, processed, and marketed generally during the five-month period beginning in July and ending in November.

Tobacco grown in South America is usually purchased, processed, and marketed from January through July and, for tobacco grown in Africa, from April through September.

Other tobacco markets around the world have similar purchasing periods, although at different times of the year.

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Track and Trace Technology

In connection with its leaf tobacco operations, the Company uses a proprietary "track and trace" system, which we have branded as the SENTRI SM platform, which we believe provides transparency into the lifecycle of agricultural products by monitoring information and obtaining data related to the growth, cultivation, harvest, processing, formulation, testing, and release of individual batches of products.

By obtaining data on products at each stage of the supply chain, SENTRI SM permits proactive decision-making for both the Company and its leaf tobacco customers.

The key features of the SENTRI SM platform include:

In connection with our leaf tobacco operations, the Company uses a proprietary "track and trace" platform, which we have branded as the SENTRI ® , which we believe provides transparency into the lifecycle of agricultural products by monitoring information and obtaining data related to the growth, cultivation, harvest, processing, formulation, testing, and release of individual batches of products.

By obtaining data on products at each stage of the supply chain, SENTRI ® permits proactive decision-making for both the Company and its leaf tobacco customers.

The key features of the SENTRI ® includes:

• Product Tracking :

Data collection and tracking at various stages in the product lifecycle permits customers and consumers to gain an understanding of where products originate from, how they were produced, and the product testing data in order to understand ingredients and the product journey.

Data collection and tracking at various stages in the product lifecycle permits customers to gain an understanding of where products originate from, how they were produced, and the product testing data in order to understand ingredients and the product journey.

• Control and Visibility :

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• Sustainability Commitments :

SENTRI SM incorporates visibility into the practices and procedures of the product supply chain.

SENTRI ® incorporates visibility into the practices and procedures of the product supply chain.

• Lot Number Tracking :

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• Agronomic Services :

SENTRI SM utilizes an experienced team of agronomists to track data and insights regarding growing practices.

SENTRI ® utilizes an experienced team of agronomists to track data and insights regarding growing practices.

See " Item 1A.

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Our workforce is one of our most important stakeholder groups and is critical to achieving our purpose – to transform people’s lives so that together we can grow a better world.

The attraction, development and retention of talent enables us to make progress against our business strategy, and it is essential that we create and maintain a culture of conducting business the right way.

It is for these reasons that we dedicate resources to employee engagement, focus on creating a safe workplace and recognizing employees for the results that they deliver.

As of March 31, 2022, we employed approximately 3,000 people, excluding seasonal employees, in our worldwide operations.

As of March 31, 2023, we employed approximately 3,000 p eople, excluding seasonal employees, in our worldwide operations.

We maintain positive relationships with the Company’s employees and their respective organizations.

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Oversight and Management

Our Human Resources department is responsible for managing employment-related matters, including recruiting and hiring, onboarding, compensation design and implementation, performance management, advancement and succession planning, and

professional and learning development.

Our Board of Directors provides oversight of various matters pertaining to our workforce.

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Our Human Rights Policy and Code of Business Conduct highlight our commitment to diversity, inclusion, fairness, safety and equal opportunity in all aspects of employment.

In response to COVID-19, we focused on business continuity, health and safety of our employees, and adapting our ways of working to a new environment.

We quickly implemented additional safety measures to protect essential employees in our offices and facilities, including social distancing protocols, face covering requirements, temperature checks, and additional cleaning and sanitation practices.

We also enhanced remote-work arrangements and digital collaboration and related risk management.

Supply Chain Human Rights Matters

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Environmental Compliance

We are aware of the impact our business activities have on the environment, and we understand that climate change will have a long-term impact on our business, our employees, suppliers and the communities in which they live.

We have committed to reducing our environmental impact from our operations and working with our contracted growers to apply sustainable agricultural methods and practices.

Additional information regarding our activities related to our sustainability strategy can be found in our Sustainability Report, which is published on our website.

Currently, there are no material estimated capital expenditures related to environmental control facilities.

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The SEC maintains a website (www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Forward-looking Statements

We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor calls and webcasts, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995.

You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning.

You can also identify them by the fact that they do not relate strictly to historical or current facts.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions.

Achievement of future results is subject to risks, uncertainties and inaccurate assumptions.

Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected.

Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in the Company’s securities.

In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, this Annual Report includes disclosure of risks and uncertainties, including in " Item 1A.

Risk Factors ", that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by us.

Any such statement is qualified by reference to these cautionary statements.

It is not possible to predict or identify all risk factors.

Consequently, the risks and uncertainties identified in this Annual Report should not be considered a complete discussion of all potential risks or uncertainties.

We do not undertake to update any forward-looking statement that we may make from time to time except as may be required by law.

Development of the Business

A description of the general development of the Company's business is included in Item 1 of Part I of the Company's Annual Report on Form 10- K for the fiscal year ended March 31, 2022 under the heading "Company Overview" and the paragraph immediately preceding such heading, which description is incorporated herein by reference.

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

What changed 10-K

Item 1. Business