PYXUS INTERNATIONAL, INC. 10-Q

Item 1. Financial Statements Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, (in thousands, except per share data) 2023 2022 Sales and other operating revenues $ 477,092 $ 343,905 Cost of goods and services sold 403,947 303,150 Gross profit 73,145 40,755 Selling, general, and administrative expenses 34,063 34,588 Other expense (income), net 2,624 ( 1,085 ) Restructuring and asset impairment charges 40 300 Operating income 36,418 6,952 Loss on deconsolidation/disposition of subsidiaries — 599 Interest expense, net 30,844 25,474 Income (loss) before income taxes and other items 5,574 ( 19,121 ) Income tax expense (benefit) 2,646 ( 867 ) Loss (income) from unconsolidated affiliates 2,158 ( 3,749 ) Net income (loss) 770 ( 14,505 ) Net (loss) income attributable to noncontrolling interests ( 34 ) 158 Net income (loss) attributable to Pyxus International, Inc. $ 804 $ ( 14,663 ) Income (loss) per share: Basic and diluted $ 0.03 $ ( 0.59 ) Weighted average number of shares outstanding: Basic and diluted 25,000 25,000 See "Notes to Condensed Consolidated Financial Statements" 3 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended June 30, (in thousands) 2023 2022 Net income (loss) $ 770 $ ( 14,505 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustment 707 947 Cash flow hedges 862 ( 1,503 ) Total other comprehensive income (loss), net of tax 1,569 ( 556 ) Total comprehensive income (loss) 2,339 ( 15,061 ) Comprehensive (loss) income attributable to noncontrolling interests ( 34 ) 158 Comprehensive income (loss) attributable to Pyxus International, Inc. $ 2,373 $ ( 15,219 ) See "Notes to Condensed Consolidated Financial Statements" 4 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands) June 30, 2023 June 30, 2022 March 31, 2023 Assets Current assets Cash and cash equivalents $ 100,045 $ 165,441 $ 136,733 Restricted cash 5,456 9,495 2,176 Trade receivables, net 185,467 155,976 185,351 Other receivables 18,978 26,859 17,387 Inventories, net 1,006,437 980,070 775,071 Advances to tobacco suppliers, net 56,408 44,070 42,305 Recoverable income taxes 5,867 8,747 5,815 Prepaid expenses 42,132 44,513 37,555 Other current assets 15,500 16,672 18,172 Total current assets 1,436,290 1,451,843 1,220,565 Investments in unconsolidated affiliates 98,591 87,139 100,750 Other intangible assets, net 37,412 42,052 38,572 Deferred income taxes, net 8,879 8,871 6,662 Long-term recoverable income taxes 3,373 4,571 2,863 Other noncurrent assets 45,845 46,456 43,761 Right-of-use assets 40,280 35,636 35,892 Property, plant, and equipment, net 132,324 135,878 133,398 Total assets $ 1,802,994 $ 1,812,446 $ 1,582,463 Liabilities and Stockholders’ Equity Current liabilities Notes payable $ 585,408 $ 545,224 $ 382,544 Accounts payable 133,854 144,915 170,287 Advances from customers 61,297 46,071 42,472 Accrued expenses and other current liabilities 94,356 91,054 92,693 Income taxes payable 20,081 6,729 18,264 Operating leases payable 9,249 8,535 8,723 Current portion of long-term debt 42 13,781 75 Total current liabilities 904,287 856,309 715,058 Long-term taxes payable 4,978 5,783 4,978 Long-term debt 643,808 678,777 618,430 Deferred income taxes 10,336 9,925 9,900 Liability for unrecognized tax benefits 13,494 12,173 14,175 Long-term leases 28,219 26,473 25,581 Pension, postretirement, and other long-term liabilities 53,703 59,748 52,511 Total liabilities 1,658,825 1,649,188 1,440,633 Commitments and contingencies Stockholders’ equity Common Stock— no par value: Authorized shares ( 250,000 for all periods) Issued shares ( 25,000 for all periods) 390,290 390,290 390,290 Retained deficit ( 257,150 ) ( 233,476 ) ( 257,954 ) Accumulated other comprehensive income 7,084 3,248 5,515 Total stockholders’ equity of Pyxus International, Inc. 140,224 160,062 137,851 Noncontrolling interests 3,945 3,196 3,979 Total stockholders’ equity 144,169 163,258 141,830 Total liabilities and stockholders’ equity $ 1,802,994 $ 1,812,446 $ 1,582,463 See "Notes to Condensed Consolidated Financial Statements" 5 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Attributable to Pyxus International, Inc. Accumulated Other Comprehensive Income (in thousands) Common Stock Retained Deficit Currency Translation Adjustment Pensions, Net of Tax Derivatives, Net of Tax Noncontrolling Interests Total Stockholders' Equity Balance, March 31, 2023 $ 390,290 $ ( 257,954 ) $ ( 6,392 ) $ 8,335 $ 3,572 $ 3,979 $ 141,830 Net income (loss) — 804 — — — ( 34 ) 770 Other comprehensive income, net of tax — — 707 — 862 — 1,569 Balance, June 30, 2023 $ 390,290 $ ( 257,150 ) $ ( 5,685 ) $ 8,335 $ 4,434 $ 3,945 $ 144,169 Balance, March 31, 2022 $ 390,290 $ ( 218,813 ) $ ( 8,873 ) $ 6,328 $ 6,349 $ 6,090 $ 181,371 Net (loss) income — ( 14,663 ) — — — 158 ( 14,505 ) Other — — — — — ( 3,052 ) ( 3,052 ) Other comprehensive income (loss), net of tax — — 947 — ( 1,503 ) — ( 556 ) Balance, June 30, 2022 $ 390,290 $ ( 233,476 ) $ ( 7,926 ) $ 6,328 $ 4,846 $ 3,196 $ 163,258 See "Notes to Condensed Consolidated Financial Statements" 6 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended (in thousands) June 30, 2023 June 30, 2022 Operating Activities: Net income (loss) $ 770 $ ( 14,505 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 4,606 5,929 Debt amortization/interest 2,682 5,530 Loss on foreign currency transactions 1,926 39 Loss on deconsolidation/disposition of subsidiaries — 599 Loss from unconsolidated affiliates, net of dividends 2,158 7,773 Changes in operating assets and liabilities, net Trade and other receivables ( 33,122 ) 26,612 Inventories and advances to tobacco suppliers ( 245,854 ) ( 228,994 ) Deferred items ( 1,043 ) ( 8,214 ) Recoverable income taxes ( 352 ) ( 796 ) Payables and accrued expenses ( 32,509 ) ( 25,249 ) Advances from customers 18,802 ( 6,997 ) Prepaid expenses ( 2,653 ) ( 6,027 ) Income taxes 1,924 1,313 Other operating assets and liabilities 1,474 3,396 Other, net ( 4,483 ) ( 2,899 ) Net cash used in operating activities ( 285,674 ) ( 242,490 ) Investing Activities: Purchases of property, plant, and equipment ( 3,661 ) ( 2,210 ) Collections from beneficial interests in securitized trade receivables 30,419 45,468 Proceeds from settlement of debt claims from deconsolidated subsidiaries — 2,011 Other, net 283 1,766 Net cash provided by investing activities 27,041 47,035 Financing Activities: Net proceeds from short-term borrowings 205,879 170,419 Proceeds from revolving loan facilities 65,000 — Repayment of revolving loan facilities ( 40,000 ) — Debt issuance costs ( 3,462 ) ( 2,036 ) Other, net ( 34 ) 372 Net cash provided by financing activities 227,383 168,755 Effect of exchange rate changes on cash ( 2,158 ) 322 Decrease in cash, cash equivalents, and restricted cash ( 33,408 ) ( 26,378 ) Cash and cash equivalents at beginning of period 136,733 198,777 Restricted cash at beginning of period 2,176 2,537 Cash, cash equivalents, and restricted cash at end of period $ 105,501 $ 174,936 Other information: Cash paid for income taxes, net $ 2,542 $ 5,027 Cash paid for interest, net 25,693 12,704 Noncash investing activities: Noncash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction 36,271 29,033 See "Notes to Condensed Consolidated Financial Statements" 7 Pyxus International, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (in thousands, except per share data) Note 1 Basis of Presentation and Summary of Significant Accounting Policies 9 Note 2 Revenue Recognition 9 Note 3 Income Taxes 10 Note 4 Income (Loss) Per Share 10 Note 5 Inventories, Net 10 Note 6 Equity Method Investments 10 Note 7 Variable Interest Entities 11 Note 8 Other Intangible Assets, Net 12 Note 9 Debt Arrangements 13 Note 10 Securitized Receivables 16 Note 11 Guarantees 17 Note 12 Derivative Financial Instruments 17 Note 13 Fair Value Measurements 18 Note 1 4 Contingencies and Other Information 18 Note 1 5 Related Party Transactions 19 Note 1 6 Segment Information 20 8 1. Basis of Presentation and Summary of Significant Accounting Policies The accompanying condensed consolidated financial statements represent the consolidation of Pyxus International, Inc. (the "Company", "Pyxus", "we", or "us") and all companies that Pyxus directly or indirectly controls, either through majority ownership or otherwise. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, the normal and recurring adjustments necessary for fair statement of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. Intercompany accounts and transactions have been eliminated. These condensed consolidated interim financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed on June 6, 2023. Due to the seasonal nature of the Company’s business, the results of operations for a fiscal quarter are not necessarily indicative of the operating results that may be attained for other quarters or a full fiscal year. 2. Revenue Recognition Product revenue is primarily from the sale of processed tobacco to customers. Processing and other revenues are mainly derived via contracts to process customer-owned green tobacco. During such processing, ownership remains with the customers. All Other revenue is primarily composed of revenue from the sale of e-liquids and non-tobacco agriculture products. The following disaggregates sales and other operating revenues by major source, with the All Other category being included for purposes of reconciliation of the respective balances below of the Leaf segment (the Company's sole reportable segment) to the condensed consolidated financial statements: Three Months Ended June 30, 2023 2022 Leaf: Product revenue $ 450,938 $ 322,884 Processing and other revenues 25,495 17,742 Total sales and other operating revenues 476,433 340,626 All Other: Total sales and other operating revenues 659 3,279 Total sales and other operating revenues $ 477,092 $ 343,905 The following summarizes activity in the allowance for expected credit losses: Three Months Ended June 30, 2023 2022 Balance, beginning of period $ ( 24,730 ) $ ( 24,541 ) Additions ( 320 ) ( 165 ) Write-offs and other adjustments 610 1,376 Balance, end of period ( 24,440 ) ( 23,330 ) Trade receivables 209,907 179,306 Trade receivables, net $ 185,467 $ 155,976 9 3. Income Taxes The Company's quarterly provision for income taxes has generally been calculated using the annual effective tax rate method ("AETR method"), which applies an estimated annual effective tax rate to pre-tax income or loss. As of June 30, 2023, market specific factors coupled with tax rate sensitivity caused the AETR method to produce an unreliable estimate of the Company’s annual effective tax rate; therefore, the Company recorded its interim income tax provision using the discrete method, as allowed under ASC 740-270, Income Taxes - Interim Reporting . Using the discrete method, the Company determined current and deferred income tax expense as if the three-month interim period of the current fiscal year were an annual period. The effective tax rate for the three months ended June 30, 2023 and 2022 was 47.5 % and 4.5 %, respectively. For the three months ended June 30, 2023 and 2022, the difference between the Company’s effective rate and the U.S. statutory rate of 21.0% is primarily due to the impact of foreign exchange effects, valuation allowance impacts of non-deductible interest, U.S. taxation of foreign earnings, and variations in the jurisdictional mix of earnings. 4. Income (Loss) Per Share The following summarizes the computation of income (loss) per share: Three Months Ended June 30, 2023 2022 Basic and diluted income (loss) per share: Net income (loss) attributable to Pyxus International, Inc. $ 804 $ ( 14,663 ) Shares: Weighted average number of shares outstanding 25,000 25,000 Basic and diluted income (loss) per share $ 0.03 $ ( 0.59 ) 5. Inventories, Net The following summarizes the composition of inventories, net: June 30, 2023 June 30, 2022 March 31, 2023 Processed tobacco $ 642,745 $ 646,539 $ 498,398 Unprocessed tobacco 320,470 290,913 231,651 Other tobacco related 34,127 33,739 39,670 All Other 9,095 8,879 5,352 Total $ 1,006,437 $ 980,070 $ 775,071 6. Equity Method Investments The following summarizes the Company's equity method investments as of June 30, 2023: Investee Name Location Primary Purpose Ownership Percentage Basis Difference Adams International Ltd. Thailand Purchase and process tobacco 49 % $ ( 4,526 ) Alliance One Industries India Private Ltd. India Purchase and process tobacco 49 % ( 5,770 ) China Brasil Tobacos Exportadora SA Brazil Purchase and process tobacco 49 % 43,900 Oryantal Tütün Paketleme Sanayi ve Ticaret A.Ş. Turkey Process tobacco 50 % ( 416 ) Purilum, LLC U.S. Produce flavor formulations and consumable e-liquids 50 % 4,589 Siam Tobacco Export Company Thailand Purchase and process tobacco 49 % ( 6,098 ) 10 The following summarizes financial information for these equity method investments: Three Months Ended June 30, 2023 2022 Operations statement: Sales $ 44,831 $ 69,382 Gross profit 7,185 14,089 Net (loss) income ( 3,854 ) 8,330 Company's dividends received — 11,522 June 30, 2023 June 30, 2022 March 31, 2023 Balance sheet: Current assets $ 456,755 $ 441,973 $ 419,229 Property, plant, and equipment and other assets 48,498 37,876 48,174 Current liabilities 366,806 367,743 323,899 Long-term obligations and other liabilities 2,685 2,249 3,887 7. Variable Interest Entities The Company holds variable interests in multiple entities that primarily procure or process inventory or are securitization entities. These variable interests relate to equity investments, receivables, guarantees, and securitized receivables. The following summarizes the Company's financial relationships with its unconsolidated variable interest entities: June 30, 2023 June 30, 2022 March 31, 2023 Investments in variable interest entities $ 91,587 $ 80,446 $ 93,754 Receivables with variable interest entities 4,767 16,825 2,617 Guaranteed amounts to variable interest entities (not to exceed) 61,041 64,610 68,265 11 8. Other Intangible Assets, Net The following summarizes the changes in the Company's other intangible assets, net: Three Months Ended June 30, 2023 Weighted Average Remaining Useful Life Beginning Carrying Amount, Net Amortization Expense Ending Intangible Assets, Net Intangibles subject to amortization: Customer relationships 9.2 years $ 20,482 $ ( 544 ) $ 19,938 Technology 5.0 years 8,875 ( 414 ) 8,461 Trade names 11.2 years 9,215 ( 202 ) 9,013 Total $ 38,572 $ ( 1,160 ) $ 37,412 Year Ended March 31, 2023 Weighted Average Remaining Useful Life Beginning Carrying Amount, Net Amortization Expense Ending Intangible Assets, Net Intangibles subject to amortization: Customer relationships 9.4 years $ 23,568 $ ( 3,086 ) $ 20,482 Technology 5.2 years 11,471 ( 2,596 ) 8,875 Trade names 11.4 years 10,022 ( 807 ) 9,215 Total $ 45,061 $ ( 6,489 ) $ 38,572 12 9. Debt Arrangements The following summarizes debt and notes payable: June 30, June 30, March 31, (in thousands) Interest Rate 2023 2022 2023 Senior secured credit facilities: ABL Credit Facility 6.8 % (1) $ 50,000 $ 90,000 $ 25,000 DDTL Facility (2) 11.5 % (1) — 109,751 — Senior secured notes: 10.0% Notes Due 2024 (3) 10.0 % (1) 20,004 271,678 19,931 8.5% Notes Due 2027 (4) 8.6 % (1) 253,779 — 253,483 Senior secured term loans: Intabex Term Loans (5) 13.1 % (1) 186,307 $ — 186,194 Pyxus Term Loans (6) 13.1 % (1) 133,284 $ — 133,393 Exit Facility Loans (7) 11.4 % (1) — $ 220,518 — Other Debt: Other long-term debt 7.9 % (1) 476 611 504 Notes payable (8) 7.9 % (1) 585,408 545,224 382,544 Total debt $ 1,229,258 $ 1,237,782 $ 1,001,049 Short-term (8) $ 585,408 $ 545,224 $ 382,544 Long-term: Current portion of long-term debt $ 42 $ 13,781 $ 75 Long-term debt 643,808 678,777 618,430 Total $ 643,850 $ 692,558 $ 618,505 Letters of credit $ 6,018 $ 14,430 $ 11,684 (1) Weighted average rate for the trailing twelve months ended June 30, 2023 or, for indebtedness outstanding only during a portion of such twelve-month period, for the portion of such period that such indebtedness was outstanding. (2) The amount outstanding at June 30, 2022 is net of original issue discount of $ 499 . The DDTL Facility was refinanced on July 28, 2022, with the issuance of the DDTL Term Loans, which refinancing included a partial principal payment of $ 9,000 and an exit fee payment of $ 5,250 . Subsequent to this refinancing, on February 6, 2023, the DDTL Term Loans were exchanged for $ 102,000 (inclusive of a $ 2,000 exit fee) of Intabex Term Loans. (3) On February 6, 2023, $ 260,452 of the 10.0 % Notes due 2024 were exchanged for 8.5 % Notes due 2027. The remaining 10.0 % Notes due 2024 outstanding of $ 20,004 is net of a debt discount of $ 387 . Total repayment at maturity is $ 20,391 . (4) Balance of $ 253,779 is net of a debt discount of $ 6,673 . Total repayment at maturity is $ 260,452 . (5) Balance of $ 186,307 is net of a debt discount of $ 2,726 . Total repayment at maturity is $ 189,033 , which includes a $ 2,000 exit fee payable upon repayment (6) Balance of $ 133,284 is net of a debt premium of $ 2,734 . Total repayment at maturity is $ 130,550 . (7) On February 6, 2023, $ 189,033 , representing 40.0 % of the Exit Facility Loans were exchanged for Intabex Term Loans, and $ 130,550 , representing the remaining 60.0 % of the Exit Facility Loans were exchanged for Pyxus Term Loans. (8) Primarily foreign seasonal lines of credit. 13 Outstanding Senior Secured Debt ABL Credit Facility On February 8, 2022, the Company’s wholly owned subsidiary, Pyxus Holdings, Inc. ("Pyxus Holdings"), certain subsidiaries of Pyxus Holdings (together with Pyxus Holdings, the "Borrowers"), and the Company and its wholly owned subsidiary, Pyxus Parent, Inc. ("Pyxus Parent"), as parent guarantors, entered into an ABL Credit Agreement (the "ABL Credit Agreement"), dated as of February 8, 2022, by and among Pyxus Holdings, as Borrower Agent, the Borrowers and parent guarantors party thereto, the lenders party thereto, and PNC Bank, National Association, as Administrative Agent and Collateral Agent, to establish an asset-based revolving credit facility (the "ABL Credit Facility"), the proceeds of which may be used to refinance existing senior bank debt, pay fees and expenses related to the ABL Credit Facility, partially fund capital expenditures, and provide for the ongoing working capital needs of the Borrowers. The ABL Credit Facility may be used for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $ 100,000 , subject to the limitations described below in this paragraph. The ABL Credit Facility includes a $ 20,000 uncommitted accordion feature that permits Pyxus Holdings, under certain conditions, to solicit the lenders under the ABL Credit Facility to provide additional revolving loan commitments to increase the aggregate amount of the revolving loan commitments under the ABL Credit Facility not to exceed a maximum principal amount of $ 120,000 . The ABL Credit Facility matures, subject to extension on terms and conditions set forth in the ABL Credit Agreement, on February 8, 2027. A detailed description of the ABL Credit Agreement is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023. At June 30, 2023, Pyxus Holdings was in compliance with the covenants under the ABL Credit Agreement. Intabex Term Loans Pursuant to (i) an exchange offer (the "DDTL Facility Exchange") made to, and accepted by, holders of 100.0 % of the outstanding term loans (the "DDTL Term Loans") under the Amended and Restated Term Loan Credit Agreement, effectuated pursuant to that certain Amendment and Restatement Agreement, dated as of June 2, 2022 (the "DDTL Credit Agreement"), by and among Intabex Netherlands B.V., as borrower ("Intabex"), the guarantors party thereto, the administrative agent and collateral agent thereunder, and the several lenders from time to time party thereto and (ii) an exchange offer (the "Exit Facility Exchange") made to, and accepted by, holders of 100.0 % of the outstanding term loans (the "Exit Term Loans") under the Exit Term Loan Credit Agreement, dated as of August 24, 2020 (the "Exit Term Loan Credit Agreement"), by and among Pyxus Holdings, as borrower, the guarantors party thereto, the administrative agent and collateral agent thereunder, and the several lenders from time to time party thereto, on February 6, 2023, Pyxus Holdings entered into the Intabex Term Loan Credit Agreement, dated as of February 6, 2023 (the "Intabex Term Loan Credit Agreement"), by and among, Pyxus Holdings, the guarantors party thereto, the lenders party thereto and Alter Domus (US) LLC ("Alter Domus"), as administrative agent and senior collateral agent. The Intabex Term Loan Credit Agreement established a term loan credit facility in an aggregate principal amount of approximately $ 189,033 (the "Intabex Credit Facility"), under which term loans in the full aggregate principal amount of the Intabex Credit Facility (the "Intabex Term Loans") were deemed made in exchange for (i) $ 100,000 principal amount of the DDTL Term Loans, plus an additional $ 2,000 on account of the exit fee payable under the DDTL Credit Agreement and (ii) approximately $ 87,033 principal amount of Exit Term Loans, representing 40.0 % of the outstanding principal amount thereof (including the applicable accrued and unpaid PIK interest thereon). The Intabex Term Loans bear interest, at Pyxus Holdings’ option, at either (i) a term SOFR rate (subject to a floor of 1.5 %) plus 8.0 % per annum or (ii) an alternate base rate plus 7.0 % per annum. The Intabex Term Loans are stated to mature on December 31, 2027. A detailed description of the Intabex Term Loan Credit Agreement is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023. At June 30, 2023, Pyxus Holdings and the guarantors under the Intabex Term Loan Credit Agreement were in compliance with all covenants under the Intabex Term Loan Credit Agreement. Pyxus Term Loans Pursuant to the Exit Facility Exchange, on February 6, 2023, Pyxus Holdings entered into the Pyxus Term Loan Credit Agreement, dated as of February 6, 2023 (the "Pyxus Term Loan Credit Agreement"), by and among, Pyxus Holdings, the guarantors party thereto, the lenders party thereto and Alter Domus, as administrative agent and senior collateral agent, to establish a term loan credit facility in an aggregate principal amount of approximately $ 130,550 (the "Pyxus Credit Facility"), under which term loans in the full aggregate principal amount of the Pyxus Credit Facility (the "Pyxus Term Loans" and, together with the Intabex Term Loans, the "New Term Loans") were deemed made in exchange for 60.0 % of the outstanding principal amount of Exit Term Loans (including the applicable accrued and unpaid PIK interest thereon). The Pyxus Term Loans bear interest, at Pyxus Holdings’ option, at either (i) a term SOFR rate (subject to a floor of 1.5 %) plus 8.0 % per annum or (ii) an alternate base rate plus 7.0 % per annum. The Pyxus Term Loans are stated to mature on December 31, 2027. A detailed description of the Pyxus Term Loan Credit Agreement is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023. At June 30, 2023, Pyxus Holdings and the guarantors under the Pyxus Term Loan Credit Agreement were in compliance with all covenants under the Pyxus Term Loan Credit Agreement. 8.50% Senior Secured Notes due 2027 Pursuant to an exchange offer (the "Notes Exchange" and, together with the DDTL Facility Exchange and the Exit Facility Exchange, the "Debt Exchange Transactions") made by Pyxus Holdings and accepted by holders of approximately 92.7 % of the aggregate principal amount of the outstanding 10.0 % Senior Secured First Lien Notes due 2024 issued by Pyxus Holdings (the "2024 Notes") pursuant to that certain Indenture, dated as of August 24, 2020 (the "2024 Notes Indenture"), by and among Pyxus Holdings, the guarantors party thereto and the trustee, collateral agent, registrar and paying agent thereunder, on February 6, 2023, Pyxus Holdings issued approximately $ 260,452 in aggregate principal amount of 8.5 % Senior Secured Notes 14 due December 31, 2027 (the "2027 Notes" and, together with the New Term Loans, the "New Secured Debt") to the exchanging holders of the 2024 Notes for an equal principal amount of 2024 Notes. The 2027 Notes were issued pursuant to the Indenture, dated as of February 6, 2023 (the "2027 Notes Indenture"), among Pyxus Holdings, the guarantors party thereto, and Wilmington Trust, National Association, as trustee, and Alter Domus, as collateral agent. The 2027 Notes bear interest at a rate of 8.5 % per annum, which interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The 2027 Notes are stated to mature on December 31, 2027. A detailed description of the 2027 Notes and the 2027 Notes Indenture is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023. At June 30, 2023, Pyxus Holdings and the guarantors of the 2027 Notes were in compliance with all covenants under the 2027 Notes Indenture. Refinanced Senior Secured Debt DDTL Facility On April 23, 2021 (the “DDTL Closing Date”), Intabex entered into a Term Loan Credit Agreement (as amended on May 21, 2021, the "Initial DDTL Facility Credit Agreement"), dated as of April 23, 2021, by and among (i) Intabex, as borrower, (ii) the Company, Pyxus Parent, Pyxus Holdings, Alliance One International, LLC, Alliance One International Holdings, Ltd, as guarantors (collectively, the "Parent Guarantors"), (iii) the lenders thereto, which included certain funds managed by Glendon Capital Management, L.P., Monarch Alternative Capital LP, and Owl Creek Asset Management, L.P. (collectively and, together other lenders that became parties thereto as lenders, the "DDTL Facility Lenders"), and (iv) Alter Domus, as administrative agent and collateral agent. The Initial DDTL Facility Credit Agreement established a $ 120,000 delayed-draw term loan credit facility (the "Initial DDTL Facility") under which the full amount was drawn (the "Initial DDTL Loans") by March 31, 2022. The obligations of Intabex under the Initial DDTL Facility Credit Agreement (and certain related obligations) were (a) guaranteed by the Parent Guarantors and Alliance One International Tabak B.V., an indirect subsidiary of the Company, and each of the Company’s domestic and foreign subsidiaries that was or became a guarantor of borrowings under the Exit Term Loan Credit Agreement and (b) was secured by the pledge of all of the outstanding equity interests of (i) Alliance One Brasil Exportadora de Tabacos Ltda. ("AO Brazil"), which principally operates the Company’s leaf tobacco operations in Brazil, and (ii) Alliance One International Tabak B.V., which owns a 0.001 % interest of AO Brazil. The Initial DDTL Credit Facility Agreement was amended and restated by the DDTL Credit Agreement, which established a $ 100,000 term loan credit facility (the "DDTL Term Loan Facility") and required that Intabex use the net proceeds of the DDTL Term Loans made thereunder and other funds to repay in full its obligations under the Initial DDTL Facility Credit Agreement, including the outstanding principal of, and accrued and unpaid interest on, borrowings under the Initial DDTL Facility and the payment of fees and expenses incurred in connection with repaying such borrowings and incurring the DDTL Term Loans under the DDTL Credit Agreement. The DDTL Term Loans were exchanged upon consummation of the DDTL Facility Exchange on February 6, 2023. Exit Term Loan Credit Facility On August 24, 2020, pursuant to the Exit Term Loan Credit Agreement, Pyxus Holdings became obligated with respect to the Exit Term Loans in an aggregate principal amount of approximately $ 213,418 . Pyxus Holdings’ obligations under the Exit Term Loan Credit Agreement (and certain related obligations) were (a) guaranteed by Pyxus Parent, Inc. and the Company, all of Pyxus Holdings’ material domestic subsidiaries and certain of Pyxus Holdings’ foreign subsidiaries, and each of Pyxus Holdings’ material domestic subsidiaries was required to guarantee the Exit Term Loan Credit Agreement on a senior secured basis and (b) secured by specified collateral owned by Pyxus Holdings and such guarantors. The Exit Term Loans were exchanged upon consummation of the DDTL Facility Exchange and the Exit Facility Exchange on February 6, 2023. Related Party Transactions The Company, Pyxus Parent and Pyxus Holdings (collectively, the "Holding Companies") entered into a Support and Exchange Agreement, effective as of December 27, 2022 (as amended, including by joinders thereto, the "Support Agreement"), with a group of creditors, including Glendon Capital Management LP, Monarch Alternative Capital LP, Nut Tree Capital Management, L.P., Intermarket Corporation and Owl Creek Asset Management, L.P. on behalf of certain funds managed by them and/or certain of their advisory clients, as applicable (collectively, the "Supporting Holders"), holding in aggregate: • approximately 99.7 % of the DDTL Term Loans outstanding under the DDTL Credit Agreement; • approximately 68.1 % of the Exit Term Loans outstanding under the Exit Term Loan Credit Agreement; and • approximately 64.1 % of the 2024 Notes outstanding under the 2024 Notes Indenture. Pursuant to the Support Agreement, the Supporting Holders agreed to participate in the DDTL Facility Exchange, the Exit Facility Exchange and the Notes Exchange. Based on a Schedule 13D/A filed with the SEC on January 4, 2023 by Glendon Capital Management, L.P. (the "Glendon Investor"), Glendon Opportunities Fund, L.P. and Glendon Opportunities Fund II, L.P., Glendon Capital Management, L.P. reported beneficial ownership of 7,939 shares of the Company’s common stock, representing approximately 31.8 % of the outstanding shares of the Company’s common stock. Based on a Schedule 13D/A filed with the SEC on January 23, 2023, by Monarch Alternative Capital LP (the "Monarch Investor"), MDRA GP LP and Monarch GP LLC, Monarch Alternative Capital LP reported beneficial ownership of 6,140 shares of the Company’s common stock, representing approximately 24.6 % of the outstanding shares of the Company’s common stock. Based on a Schedule 13G/A filed with the SEC on February 10, 2022 by Owl Creek Asset Management, L.P. and Jeffrey A. Altman, Owl Creek Asset Management, L.P. is the investment manager of certain funds and reported beneficial ownership of 2,405 shares of the 15 Company’s common stock on December 31, 2021, representing approximately 9.6 % of the outstanding shares of the Company’s common stock. A representative of the Glendon Investor and a representative of the Monarch Investor served as directors of Pyxus at the time the Company and its applicable subsidiaries entered into the Initial DDTL Credit Facility Agreement, the amendments thereto (including the DDTL Credit Agreement) and the Support Agreement, effected borrowings under the Initial DDTL Credit Facility Agreement and the DDTL Credit Agreement and commenced the DDTL Facility Exchange, the Exit Facility Exchange and the Notes Exchange. The Initial DDTL Credit Facility Agreement and the amendments thereto (including the DDTL Credit Agreement), any and all borrowings thereunder, the related guaranty transactions, the Support Agreement, the DDTL Facility Exchange, the Exit Facility Exchange and the Notes Exchange, including the Intabex Term Loan Credit Agreement, the Intabex Term Loans, the Pyxus Term Loan Credit Agreement, the Pyxus Term Loans, the 2027 Notes and the 2027 Notes Indenture were approved, and determined to be on terms and conditions at least as favorable to the Company and its subsidiaries as could reasonably have been obtained in a comparable arm’s-length transaction with an unaffiliated party, by a majority of the disinterested members of the Board of Directors of Pyxus. Other Outstanding Debt 2024 Notes In conjunction with the Notes Exchange, Pyxus Holdings received consents from requisite holders of 2024 Notes to amend the 2024 Notes Indenture, the 2024 Notes and the related intercreditor and security documents to, among other things, (i) eliminate most of the restrictive covenants and certain of the affirmative covenants in the 2024 Notes Indenture, (ii) eliminate the change of control repurchase obligation in the 2024 Notes Indenture, (iii) subordinate the 2024 Notes in right of payment to existing and future senior indebtedness (including the New Secured Debt), (iv) eliminate certain events of default and (v) release all of the collateral securing the 2024 Notes. On February 6, 2023, the relevant parties to the 2024 Notes Indenture entered into the Second Supplemental Indenture, dated as of February 6, 2023 (the "2024 Notes Supplemental Indenture"), to the 2024 Notes Indenture, pursuant to which the 2024 Notes Indenture, the 2024 Notes and the related intercreditor and security documents were amended to effect these changes. The 2024 Notes bear interest at a rate of 10.0 % per year, payable semi-annually in arrears in cash on February 15 and August 15 of each year. The 2024 Notes are stated to mature on August 24, 2024. At June 30, 2023, Pyxus Holdings and the guarantors of the 2024 Notes were in compliance with all covenants under the 2024 Notes Indenture, as amended by the 2024 Notes Supplemental Indenture. Foreign Seasonal Lines of Credit Excluding all long-term credit agreements, the Company typically finances its foreign operations with uncommitted short-term seasonal lines of credit arrangements with a number of banks. These operating lines are generally seasonal in nature, typically extending for a term of 180 days to 365 days corresponding to the tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the unilateral right to cease making loans and demand repayment of loans at any time or at specified dates. These loans are generally renewed at the outset of each tobacco season. Certain of the foreign seasonal lines of credit are secured by trade receivables and inventories as collateral and are guaranteed by the Company and certain of its subsidiaries. As of June 30, 2023, the total borrowing capacity under individual foreign seasonal lines of credit range up to $ 160,551 . As of June 30, 2023, the aggregate amount available for borrowing under the seasonal lines of credit was $ 149,047 . At June 30, 2023 , the Company was permitted to borrow under foreign seasonal lines of credit up to a total $ 712,255 , subject to limitations under the ABL Credit Agreement and the agreements governing the New Secured Debt. At June 30, 2023 , $ 896 of cash was held on deposit as a compensating balance. At June 30, 2023, the Company, and its subsidiaries, were in compliance with the covenants associated with its short-term seasonal lines of credit. 10. Securitized Receivables The Company sells trade receivables to unaffiliated financial institutions under four accounts receivable securitization facilities, two of which are subject to annual renewal. Under the first facility, the Company continuously sells a designated pool of trade receivables to a special purpose entity, which sells 100 % of the receivables to an unaffiliated financial institution. As of June 30, 2023, the investment limit of this facility was $ 100,000 of trade receivables. For the other facilities, the Company offers trade receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. As of June 30, 2023, the investment limit under the second facility was $ 110,000 of trade receivables. As of June 30, 2023, the investment limit under the third and fourth facilities were variable based on qualifying sales. As the servicer of the first and second facilities, the Company may receive funds that are due to the unaffiliated financial institutions, which are net settled on the next settlement date. As of June 30, 2023 and 2022, and March 31, 2023, trade receivables, net in the condensed consolidated balance sheets has been reduced by $ 908 , $ 14,893 , and $ 3,193 as a result of the net settlement, respectively. Refer to " Note 1 3 . Fair Value Measurements " for additional information. 16 The following summarizes the Company's accounts receivable outstanding in the securitization facilities, which represents trade receivables sold into the program that have not been collected from the customer, and related beneficial interests, which represents the Company's residual interest in receivables sold that have not been collected from the customer: June 30, 2023 June 30, 2022 March 31, 2023 Receivables outstanding in facility $ 132,313 $ 179,761 $ 173,979 Beneficial interests 19,641 22,762 19,522 Cash proceeds from the sale of trade receivables is comprised of a combination of cash and a deferred purchase price receivable. Deferred purchase price receivable is realized after the collection of the underlying trade receivables sold by the purchasers. The following summarizes the Company's cash purchase price and deferred purchase price: Three Months Ended June 30, 2023 2022 Cash proceeds for the period ended: Cash purchase price $ 172,943 $ 153,449 Deferred purchase price 30,419 45,468 11. Guarantees In certain markets, the Company guarantees bank loans for suppliers to finance their crops. The Company also guarantees bank loans of certain unconsolidated subsidiaries. The following summarizes amounts guaranteed and the fair value of those guarantees: June 30, 2023 June 30, 2022 March 31, 2023 Amounts guaranteed (not to exceed) $ 138,523 $ 118,615 $ 152,032 Amounts outstanding under guarantee (1) 43,563 45,552 83,420 Fair value of guarantees 5,764 2,601 5,262 Amounts due to local banks on behalf of suppliers for government subsidized rural credit financing 459 6,376 12,529 (1) Most of the guarantees outstanding at June 30, 2023 expire within one year . 12. Derivative Financial Instruments The Company uses forward or option currency contracts to manage risks associated with foreign currency exchange rates on foreign operations. These contracts are for green tobacco purchases, processing costs, and selling, general, and administrative expenses. The Company recorded a net gain of $ 1,434 and $ 862 from its derivative financial instruments in cost of goods and services sold for the three months ended June 30, 2023 and June 30, 2022, respectively. As of June 30, 2023 and 2022, and March 31, 2023, the Company recorded current derivative assets of $ 0 , $ 560 , and $ 3,970 within other current assets, respectively. The U.S. Dollar notional amount of derivative contracts outstanding as of June 30, 2023 and 2022, and March 31, 2023 was $ 4,378 , $ 7,259 , and $ 63,622 , respectively. 17 13. Fair Value Measurements The following summarizes the financial assets and liabilities measured at fair value on a recurring basis: June 30, 2023 June 30, 2022 March 31, 2023 Level 2 Level 3 Total at Fair Value Level 2 Level 3 Total at Fair Value Level 2 Level 3 Total at Fair Value Financial Assets: Derivative financial instruments $ — $ — $ — $ 560 $ — $ 560 $ 3,970 $ — $ 3,970 Securitized beneficial interests — 19,641 19,641 — 22,762 22,762 — 19,522 19,522 Total assets $ — $ 19,641 $ 19,641 $ 560 $ 22,762 $ 23,322 $ 3,970 $ 19,522 $ 23,492 Financial Liabilities: Long-term debt $ 492,098 $ 509 $ 492,607 $ 430,573 $ 660 $ 431,233 $ 523,758 $ 514 $ 524,272 Guarantees — 5,764 5,764 — 2,601 2,601 — 5,262 5,262 Total liabilities $ 492,098 $ 6,273 $ 498,371 $ 430,573 $ 3,261 $ 433,834 $ 523,758 $ 5,776 $ 529,534 The following summarizes the reconciliation of changes in Level 3 instruments measured on a recurring basis: Three Months Ended June 30, 2023 June 30, 2022 Securitized Beneficial Interests Long-Term Debt Guarantees Securitized Beneficial Interests Long-Term Debt Guarantees Beginning balance $ 19,522 $ 514 $ 5,262 $ 28,072 $ 246 $ 2,956 Issuances of sales of receivables/guarantees — — 1,054 — — 206 Settlements ( 33,183 ) ( 5 ) ( 555 ) ( 33,361 ) — ( 535 ) Additions 36,640 — — 29,033 414 — Losses recognized in earnings ( 3,338 ) — 3 ( 982 ) — ( 26 ) Ending balance $ 19,641 $ 509 $ 5,764 $ 22,762 $ 660 $ 2,601 For the three months ended June 30, 2023 and 2022, the impact to earnings attributable to the change in unrealized losses on securitized beneficial interests was $ 748 and $ 618 , respectively. 14. Contingencies and Other Information Brazilian Tax Credits The government in the Brazilian State of Parana ("Parana") issued a tax assessment on October 26, 2007 with respect to local intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. At June 30, 2023, the assessment for intrastate trade tax credits taken is $ 2,739 and the total assessment including penalties and interest is $ 10,793 . On March 18, 2014, the government in Brazilian State of Santa Catarina also issued a tax assessment with respect to local intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. At June 30, 2023, the assessment for intrastate trade tax credits taken is $ 2,364 and the total assessment including penalties and interest is $ 6,883 . The Company believes it has properly complied with Brazilian law and will contest any assessment through the judicial process. Should the Company lose in the judicial process, the loss of the intrastate trade tax credits would have a material impact on the financial statements of the Company. The Company also has local intrastate trade tax credits in the Brazil State of Rio Grande do Sul. This jurisdiction permits the sale or transfer of excess credits to third parties, however approval must be obtained from the tax authorities. The Company has an agreement with the state government regarding the amounts and timing of credits that can be sold. The tax credits have a carrying value of $ 20,445 as of June 30, 2023. The intrastate trade tax credits are monitored for impairment in future periods based on market conditions and the Company’s ability to use or sell the tax credits. Other Matters In addition to the above-mentioned matters, certain of the Company’s subsidiaries are involved in other litigation or legal matters incidental to their business activities, including tax matters. While the outcome of these matters cannot be predicted with certainty, they are being vigorously defended and the Company does not currently expect that any of them will have a 18 material adverse effect on its business or financial position. However, should one or more of these matters be resolved in a manner adverse to its current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material. 15. Related Party Transactions The Company engages in transactions with its equity method investees primarily for the procuring and processing of inventory. The following summarizes sale and purchase transactions with related parties: Three Months Ended June 30, 2023 2022 Sales $ 10,817 $ 10,622 Purchases 38,789 25,841 The Company included the following related party balances in its condensed consolidated balance sheets: June 30, 2023 June 30, 2022 March 31, 2023 Accounts receivable, related parties $ 5,090 $ 17,750 $ 3,090 Other receivables Accounts payable, related parties 19,776 10,403 20,438 Accounts payable Advances from related parties 10,061 1,342 3,494 Advances from customers Transactions with Significant Shareholders As described in " Note 9 . Debt Arrangements ," funds managed by the Glendon Investor, funds managed by the Monarch Investor, and funds managed by Owl Creek Asset Management, L.P., (such funds are collectively referred to as the "Investor-Affiliated Funds") held 2024 Notes and/or Exit Term Loans, were parties to the Initial DDTL Facility Credit Agreement and amendments thereto (including the DDTL Credit Agreement) and the Support Agreement, and received the New Secured Debt pursuant to the Debt Exchange Transactions. Accrued expenses and other current liabilities as presented in the consolidated balance sheets as of June 30, 2023 and 2022, and March 31, 2023, includes $ 3,945 , $ 5,953 , and $ 3,653 , respectively, of interest payable to Investor-Affiliated Funds and CI Investments, Inc. ("CI Investments"), which is also a beneficial owner of greater than five percent of the Company's common stock. Interest expense as presented in the consolidated statements of operations includes $ 10,075 and $ 8,097 for the three months ended June 30, 2023 and 2022 that relates to the Investor-Affiliated Funds and CI Investments. 19 16. Segment Information The following summarizes segment information, with the All Other category being included for purposes of reconciliation of the respective balances below of the Leaf segment (the Company's sole reportable segment) to the condensed consolidated financial statements: Three Months Ended June 30, 2023 2022 Sales and other operating revenues: Leaf $ 476,433 $ 340,626 All Other 659 3,279 Consolidated sales and other operating revenues $ 477,092 $ 343,905 Segment operating income: Leaf $ 37,929 $ 11,629 All Other ( 1,471 ) ( 4,377 ) Segment operating income 36,458 7,252 Restructuring and asset impairment charges 40 300 Consolidated operating income $ 36,418 $ 6,952 June 30, 2023 June 30, 2022 March 31, 2023 Segment assets: Leaf $ 1,761,971 $ 1,760,557 $ 1,544,798 All Other 41,023 51,889 37,665 Total assets $ 1,802,994 $ 1,812,446 $ 1,582,463 20