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Item 1. Business

2024-06-06 compared with 2023-06-06 · 46 added, 32 removed, 74 unchanged (51% of the section changed)

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

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.

Pyxus is a global agricultural company with businesses having more than 150 years of experience delivering value-added products and services to customers.

The Company is a trusted provider of responsibly sourced, independently verified, sustainable, and traceable products and ingredients, principally leaf tobacco.

The Company has one reportable segment for financial reporting purposes:

An All Other category is included for purposes of reconciliation of respective balances for the Leaf segment.

All Other revenue is primarily composed of revenue from the sale of e-liquids and non-tobacco agriculture products.

See " Note 1.

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We primarily purchase tobacco directly from suppliers.

In those instances, we assume the risk of matching the quantities and grades required by our customers to the entire crop we must purchase under contract.

In those instances, we assume the risk of matching the quantities and grades required by our customers to the crop we must purchase under contract.

Our arrangements with suppliers vary depending on our predictions of future supply and demand, local historical practice and availability of capital.

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 as long as the supplier meets our specifications.

The suppliers, who generally operate small farms, 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.

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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.

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

As a result of various factors including weather, not all suppliers are able to settle the entire amount of advances through delivery of tobacco in a given crop year.

Throughout the crop cycle, we monitor events that may impact the suppliers’ ability to deliver tobacco.

If we determine we will not be able to recover the original cost of the advances with deliveries of the current crop, or future crop deliveries, the unit cost of tobacco actually received is increased when unrecoverable costs are within a normal range or expensed immediately when they are above a normal range.

If we determine we will not be able to recover the original cost of the advances with deliveries of the current crop, or future crop deliveries, the unit cost of tobacco received is increased when unrecoverable costs are within a normal range or expensed immediately when they are above a normal range.

The normal range is based on our historical results.

We account for the unrecoverable costs in this manner to ensure only costs within a normal range are capitalized in inventory and costs that are above a normal range are expensed immediately as current period charges.

We process tobacco to meet each customer's specifications as to quality, yield, chemistry, particle size, moisture content and other characteristics.

Unprocessed tobacco is a semi-perishable commodity.

The processing of leaf tobacco facilitates shipping and prevents spoilage and is an essential service to our customers because the quality of processed leaf tobacco substantially affects the quality of the manufacturer’s end product.

Accordingly, we have located our production facilities in proximity to our principal sources of tobacco.

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

The processing of leaf tobacco facilitates shipping and prevents spoilage and is an essential service to our customers as the quality of processed leaf tobacco substantially affects the quality of the manufacturer’s end product.

Accordingly, our production facilities are located in proximity to our principal sources of tobacco.

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

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 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.

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

The majority of the tobacco we purchase is sourced from the African, Asian, and South American regions in which we operate.

The approximate percentage of tobacco purchases from these regions were as follows:

Years Ended March 31,

2024 2023 2022

Africa 33% 30% 31%

Asia 19% 21% 20%

South America 28% 26% 23%

Key Customers

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Refer to " Note 28.

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.

The remaining sales of leaf tobacco are to customers located in Asia, Africa, and other geographic regions of the world.

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.

We delivered approximately 18% of our tobacco sales to customers in Africa, approximately 36% to customers in Asia, and approximately 31% to customers in Europe for the year ended March 31, 2024.

The remaining sales of leaf tobacco are to customers located in other geographic regions of the world.

Leaf tobacco industry competition is based primarily on the price charged for products and services as well as the merchant's ability to meet customer specifications in the buying, processing, residue compliance and financing of tobacco.

The Company is one of only two global, publicly held leaf tobacco merchants.

Pyxus is one of only two global, publicly held leaf tobacco merchants.

We hold a leading position in most major tobacco growing regions in the world, including the principal export markets for flue-cured, burley and oriental tobacco.

In addition to the primary global independent leaf tobacco merchants, there are a number of other independent global, regional or national competitors.

Local independent leaf merchants with low fixed costs and overhead also supply cigarette manufacturers.

The purchasing and processing activities of our leaf tobacco business are seasonal.

Tobacco purchases vary by market and tobacco variety.

In addition to the primary global independent leaf tobacco merchants, there are a number of other global, regional or national competitors.

These include local independent leaf merchants that have low fixed costs and overhead, and some of our cigarette manufacturing customers that have vertically integrated operations in certain markets.

We have long-standing relationships with growers across the globe that we contract directly with in order to procure tobacco.

We realize our grower base is critical to our ability to provide sustainable, compliant crops that meet the specific requirements of our customers.

We strive to maintain strong and productive relationships with our growers by providing them with agronomic expertise, which includes training on good agricultural practices to support high-quality and high-yielding crops, and training on our agricultural labor practices that sets human rights standards by which they are expected to comply.

Our commitment to conducting business in accordance with international standards and practices related to human rights, and in an ethical and environmentally responsible manner gives our customers confidence that we can satisfy their demand requirements through a sustainable and compliant value chain.

The purchasing and processing activities of our leaf tobacco business are seasonal and vary by market and tobacco variety.

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.

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

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

During the purchasing, processing and marketing seasons, inventories of unprocessed tobacco, inventories of redried tobacco, and trade accounts receivable normally reach peak levels in succession.

Current liabilities, particularly advances from customers, and short-term notes payable to banks, normally reach their peak in this period as a means of financing the seasonal expansion of current assets.

At March 31, the end of our fiscal year, the seasonal components of our working capital reflect primarily the operations related to foreign-grown tobacco.

Current liabilities, particularly advances from customers, and short-term notes payable, normally reach their peak in this period as a means of financing the seasonal expansion of current assets.

At March 31, the end of our fiscal year, the seasonal components of our working capital primarily reflect foreign-grown tobacco operations.

Track and Trace Technology

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.

In connection with our leaf tobacco operations, the Company uses a proprietary "track and trace" platform, branded as 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:

The key features of SENTRI ® include:

• Product Tracking :

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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We are able to track specific products through the manufacturing process by lot number with full visibility to our customers.

This permits us and our customers to discover more about the product, its origin and other information relevant to quality control and product transparency.

This provides more information about the product, its origin, and other information relevant to quality control and product transparency.

• Agronomic Services :

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Risk Factors " for a discussion of applicable government regulation of leaf tobacco.

We are also engaged in the sale of e-liquids and non-tobacco agriculture products, which represented less than 1% of our consolidated revenues for each of the fiscal years ended March 31, 2024, 2023, and 2022.

These operations have been combined and reported in an "All Other" category included for purposes of reconciliation of respective balances for the Leaf segment.

See " Note 28.

Segment Information " for additional information.

Human Capital Management

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 in an ethical and responsible manner.

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.

The attraction, development, and retention of talent enables us to make progress against our business strategy.

It is essential that we create and maintain a culture of conducting business in an ethical and responsible manner.

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

As of March 31, 2024, we employed approximately 3,000 p eople, excluding seasonal employees, in our worldwide operations.

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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 Human Resources department is responsible for managing employment-related matters, including recruiting, hiring, onboarding, compensation, performance management, advancement, succession planning, and professional and learning development.

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

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

What changed 10-K

Item 1. Business