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) 2024 2023 Sales and other operating revenues $ 634,855 $ 477,092 Cost of goods and services sold 551,003 403,947 Gross profit 83,852 73,145 Selling, general, and administrative expenses 40,662 34,063 Other expense, net 2,630 2,624 Restructuring and asset impairment charges 103 40 Operating income 40,457 36,418 Gain on debt retirement 1,323 — Interest expense, net 33,272 30,844 Income before income taxes and other items 8,508 5,574 Income tax expense 6,119 2,646 (Income) loss from unconsolidated affiliates, net ( 2,563 ) 2,158 Net income 4,952 770 Net income (loss) attributable to noncontrolling interests 310 ( 34 ) Net income attributable to Pyxus International, Inc. $ 4,642 $ 804 Earnings per share: Basic $ 0.18 $ 0.03 Diluted $ 0.18 $ 0.03 Weighted average number of shares outstanding: Basic 25,461 25,000 Diluted 25,461 25,000 See "Notes to Condensed Consolidated Financial Statements" 3 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended June 30, (in thousands) 2024 2023 Net income $ 4,952 $ 770 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment 543 707 Cash flow hedges ( 2,237 ) 862 Total other comprehensive (loss) income, net of tax ( 1,694 ) 1,569 Total comprehensive income 3,258 2,339 Comprehensive income (loss) attributable to noncontrolling interests 310 ( 34 ) Comprehensive income attributable to Pyxus International, Inc. $ 2,948 $ 2,373 See "Notes to Condensed Consolidated Financial Statements" 4 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (in thousands) June 30, 2024 June 30, 2023 March 31, 2024 Assets Current assets Cash and cash equivalents $ 82,042 $ 100,045 $ 92,569 Restricted cash 7,061 5,456 7,224 Trade receivables, net 209,053 185,467 168,764 Other receivables 17,042 18,978 18,704 Inventories, net 1,014,527 1,006,437 931,654 Advances to tobacco suppliers, net 43,863 56,408 20,397 Recoverable income taxes 4,070 5,867 4,455 Prepaid expenses 47,270 42,132 50,185 Other current assets 17,219 15,500 16,254 Total current assets 1,442,147 1,436,290 1,310,206 Investments in unconsolidated affiliates 103,818 98,591 101,255 Intangible assets, net 32,728 37,412 33,879 Deferred income taxes, net 8,947 8,879 7,196 Long-term recoverable income taxes 3,985 3,373 2,963 Other noncurrent assets 33,097 45,845 32,617 Right-of-use assets 33,521 40,280 35,639 Property, plant, and equipment, net 134,468 132,324 134,158 Total assets $ 1,792,711 $ 1,802,994 $ 1,657,913 Liabilities and Stockholders’ Equity Current liabilities Notes payable $ 679,399 $ 585,408 $ 499,312 Accounts payable 115,312 133,854 181,247 Advances from customers 70,985 61,297 90,719 Accrued expenses and other current liabilities 99,052 94,356 96,954 Income taxes payable 8,706 20,081 8,539 Operating leases payable 7,822 9,249 8,100 Current portion of long-term debt 20,445 42 20,294 Total current liabilities 1,001,721 904,287 905,165 Long-term taxes payable 5,373 4,978 2,678 Long-term debt 531,461 643,808 497,734 Deferred income taxes 6,571 10,336 7,934 Liability for unrecognized tax benefits 19,257 13,494 17,742 Long-term leases 22,456 28,219 26,136 Pension, postretirement, and other long-term liabilities 52,760 53,703 53,701 Total liabilities $ 1,639,599 $ 1,658,825 $ 1,511,090 Commitments and contingencies Stockholders’ equity Common Stock— no par value: Authorized shares ( 250,000 for all periods) Issued and outstanding shares ( 25,000 for all periods) $ 392,820 $ 390,290 $ 389,789 Retained deficit ( 250,649 ) ( 257,150 ) ( 255,291 ) Accumulated other comprehensive income 6,092 7,084 7,786 Total stockholders’ equity of Pyxus International, Inc. 148,263 140,224 142,284 Noncontrolling interests 4,849 3,945 4,539 Total stockholders’ equity 153,112 144,169 146,823 Total liabilities and stockholders’ equity $ 1,792,711 $ 1,802,994 $ 1,657,913 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, 2024 $ 389,789 $ ( 255,291 ) $ ( 5,692 ) $ 12,766 $ 712 $ 4,539 $ 146,823 Net income — 4,642 — — — 310 4,952 Equity-based compensation 3,031 — — — — — 3,031 Other comprehensive (loss) income, net of tax — — 543 — ( 2,237 ) — ( 1,694 ) Balance, June 30, 2024 $ 392,820 $ ( 250,649 ) $ ( 5,149 ) $ 12,766 $ ( 1,525 ) $ 4,849 $ 153,112 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 See "Notes to Condensed Consolidated Financial Statements" 6 Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended June 30, (in thousands) 2024 2023 Operating Activities: Net income $ 4,952 $ 770 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 5,127 4,606 Debt amortization/interest 2,828 2,682 Gain on debt retirement ( 1,323 ) — Loss on foreign currency transactions 978 1,926 Equity-based compensation 3,031 — (Income) loss from unconsolidated affiliates, net of dividends ( 2,563 ) 2,158 Changes in operating assets and liabilities, net Trade and other receivables ( 72,392 ) ( 33,122 ) Inventories and advances to tobacco suppliers ( 108,015 ) ( 245,854 ) Deferred items ( 899 ) ( 1,043 ) Recoverable income taxes ( 622 ) ( 352 ) Payables and accrued expenses ( 64,786 ) ( 32,509 ) Advances from customers ( 18,550 ) 18,802 Prepaid expenses 3,883 ( 2,653 ) Income taxes 326 1,924 Other operating assets and liabilities ( 175 ) 1,474 Other, net ( 3,976 ) ( 4,483 ) Net cash used in operating activities $ ( 252,176 ) $ ( 285,674 ) Investing Activities: Purchases of property, plant, and equipment $ ( 5,097 ) $ ( 3,661 ) Collections from beneficial interests in securitized trade receivables 31,741 30,419 Other, net 1,304 283 Net cash provided by investing activities $ 27,948 $ 27,041 Financing Activities: Net proceeds from short-term borrowings $ 182,001 $ 205,879 Proceeds from revolving loan facilities 130,000 65,000 Repayment of revolving loan facilities ( 86,000 ) ( 40,000 ) Debt issuance costs ( 2,662 ) ( 3,462 ) Repayment of long-term borrowings ( 9,104 ) — Other, net 64 ( 34 ) Net cash provided by financing activities $ 214,299 $ 227,383 Effect of exchange rate changes on cash ( 761 ) ( 2,158 ) Decrease in cash, cash equivalents, and restricted cash ( 10,690 ) ( 33,408 ) Cash and cash equivalents at beginning of period 92,569 136,733 Restricted cash at beginning of period 7,224 2,176 Cash, cash equivalents, and restricted cash at end of period $ 89,103 $ 105,501 Other information: Cash paid for income taxes, net $ 2,679 $ 2,542 Cash paid for interest, net 30,833 25,693 Noncash investing activities: Noncash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction 60,491 36,271 See "Notes to Condensed Consolidated Financial Statements" 7 Pyxus International, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) (in thousands, except per share data) Page Number Note 1 Basis of Presentation and Summary of Significant Accounting Policies 9 Note 2 New Accounting Standards 9 Note 3 Revenue Recognition 10 Note 4 Income Taxes 10 Note 5 Earnings Per Share 11 Note 6 Restricted Cash 11 Note 7 Inventories, Net 11 Note 8 Equity Method Investments 12 Note 9 Variable Interest Entities 12 Note 10 Intangible Assets, Net 13 Note 11 Debt Arrangements 14 Note 12 Securitized Receivables 17 Note 13 Guarantees 18 Note 14 Derivative Financial Instruments 18 Note 15 Fair Value Measurements 18 Note 16 Contingencies and Other Information 19 Note 17 Equity-Based Compensation 19 Note 18 Related Party Transactions 20 Note 19 Segment Information 21 Note 20 Subsequent Events 22 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 Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed on June 6, 2024. 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. New Accounting Standards Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures . This ASU amends FASB Topic 280 to permit the disclosure of multiple measures of a segment's profit or loss, and requires an entity with a single reportable segment to apply FASB Topic 280 in its entirety. In addition, this ASU requires the following new segment disclosures: • Significant segment expenses by reportable segment if regularly provided to the Chief Operating Decision Maker ("CODM") and included within the reported measure of segment profit or loss; • Other segment items, which represents the difference between reported segment revenues less the significant segment expenses less reported segment profit or loss; and • Title and position of the CODM. Disclosures required under this new ASU and the existing segment profit or loss and assets disclosures currently required annually by FASB Topic 280 are to be disclosed in interim periods. The annual disclosure requirements are effective for the Company's fiscal year ending March 31, 2025, and the interim period disclosure requirements are effective beginning April 1, 2025. Early adoption is permitted. This new rule will result in additional disclosures for segment reporting, and does not have an impact on the Company's financial condition, results of operations, or cash flows. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures , to provide more disaggregation of income tax information mainly related to the effective tax rate reconciliation and the income taxes paid disclosure requirements. Under the new accounting rules, the tabular effective tax rate reconciliation must include specific categories with certain reconciling items based on the expected tax further disaggregated by nature and/or jurisdiction. Income taxes paid, net of refunds received, must be broken out by federal, state, and foreign taxes, and further disaggregated by individual jurisdictions based on total income taxes paid. These new annual disclosure requirements are effective for the Company's fiscal year ending March 31, 2026. Early adoption is permitted. The Company is currently evaluating the impact that this new accounting standard will have on its income tax disclosures. 9 3. Revenue Recognition Product revenue is primarily from the sale of processed tobacco to customers. Processing and other revenues are mainly 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, 2024 2023 Leaf: Product revenue $ 589,217 $ 450,938 Processing and other revenues 41,746 25,495 Total sales and other operating revenues 630,963 476,433 All Other: Total sales and other operating revenues 3,892 659 Total sales and other operating revenues $ 634,855 $ 477,092 The following summarizes activity in the allowance for expected credit losses: Three Months Ended June 30, 2024 2023 Balance, beginning of period $ ( 23,940 ) $ ( 24,730 ) Additions ( 401 ) ( 320 ) Write-offs and other adjustments 306 610 Balance, end of period ( 24,035 ) ( 24,440 ) Trade receivables 233,088 209,907 Trade receivables, net $ 209,053 $ 185,467 4. Income Taxes For each period presented, the Company's quarterly provision for income taxes is not 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 the end of the current period, 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 FASB ASC 740-270, Income Taxes - Interim Reporting . Using the discrete method, the Company determined income tax expense as if each of the three-month interim periods reported were an annual period. The effective tax rate for the three months ended June 30, 2024 and 2023 was 71.9 % and 47.5 %, respectively. For the three months ended June 30, 2024, the difference between the Company’s effective rate and the U.S. statutory rate of 21.0% is primarily due to U.S. taxation of foreign earnings partially offset by foreign tax credits and additional unrecognized tax benefits reserves. 10 5. Earnings Per Share The calculations of basic and diluted earnings per share are based on net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares outstanding, respectively. Under the treasury stock method, restricted stock units will have a dilutive effect when the respective period's average market price of the Company's common stock exceeds the assumed exercise proceeds and the average amount of cost not yet recognized. Performance based stock units are included in diluted earnings per share if the performance targets have been met at the end of the reporting period. Share-based payment awards that provide contingently issuable shares upon a performance or market condition are included in basic and diluted earnings per share only if the condition is met as of the end of the reporting period. The following summarizes the computation of earnings per share: Three Months Ended June 30, 2024 2023 Net income attributable to Pyxus International, Inc. $ 4,642 $ 804 Basic weighted average shares outstanding (1) 25,461 25,000 Plus: Dilutive equity awards (2) — — Diluted weighted average shares outstanding 25,461 25,000 Earnings per share: Basic $ 0.18 $ 0.03 Diluted $ 0.18 $ 0.03 (1) For the three months ended June 30, 2024, the basic weighted average shares outstanding are adjusted to include 461 weighted average shares outstanding, representing the underlying shares associated with the time-vesting restricted stock units granted prior to May 10, 2024 that were modified on such date to remove the market condition. Refer to " Note 17. Equity-Based Compensation " for additional information. (2) For the three months ended June 30, 2024, the weighted average number of outstanding restricted stock units not included in the computation of diluted earnings per share because their effect would be antidilutive is 17 . 6. Restricted Cash The following summarizes the composition of restricted cash: June 30, 2024 June 30, 2023 March 31, 2024 Compensating balance for short-term borrowings $ 542 $ 439 $ 516 Escrow 3,209 2,344 2,647 Grants 1,158 696 1,375 Other 2,152 $ 1,977 $ 2,686 Total $ 7,061 $ 5,456 $ 7,224 7. Inventories, Net The following summarizes the composition of inventories, net: June 30, 2024 June 30, 2023 March 31, 2024 Processed tobacco $ 605,535 $ 642,745 $ 585,280 Unprocessed tobacco 375,102 320,470 305,928 Other tobacco related 28,083 34,127 31,213 All Other 5,807 9,095 9,233 Total $ 1,014,527 $ 1,006,437 $ 931,654 11 8. Equity Method Investments The following summarizes the Company's equity method investments as of June 30, 2024: Investee Name Location Primary Purpose Ownership Percentage Basis Difference (1) 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 Tabaco Exportadora SA Brazil Purchase and process tobacco 49 % 43,000 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 ) (1) Basis differences for the Company's equity method investments were due to fair value adjustments recorded during fiscal 2021. The following summarizes financial information for these equity method investments: Three Months Ended June 30, 2024 2023 Statement of operations: Sales $ 56,771 $ 44,831 Gross profit 7,187 7,185 Net income (loss) 5,239 ( 3,854 ) June 30, 2024 June 30, 2023 March 31, 2024 Balance sheet: Current assets $ 533,214 $ 456,755 $ 542,702 Property, plant, and equipment and other assets 57,453 48,498 50,925 Current liabilities 438,293 366,806 446,597 Long-term obligations and other liabilities 3,468 2,685 3,356 9. 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, 2024 June 30, 2023 March 31, 2024 Investments in variable interest entities $ 96,903 $ 91,587 $ 94,609 Receivables with variable interest entities 3,980 4,767 — Guaranteed amounts to variable interest entities (not to exceed) 16,392 61,041 11,113 12 10. Intangible Assets, Net The gross carrying amount and accumulated amortization of intangible assets consist of the following: June 30, 2024 Weighted Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization: Customer relationships 8.2 years $ 26,101 $ ( 8,338 ) $ 17,763 Technology 4.2 years 12,948 ( 6,189 ) 6,759 Trade names 10.2 years 11,300 ( 3,094 ) 8,206 Total $ 50,349 $ ( 17,621 ) $ 32,728 June 30, 2023 Weighted Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization: Customer relationships 9.2 years $ 26,101 $ ( 6,163 ) $ 19,938 Technology 5.0 years 13,132 ( 4,671 ) 8,461 Trade names 11.2 years 11,300 ( 2,287 ) 9,013 Total $ 50,533 $ ( 13,121 ) $ 37,412 March 31, 2024 Weighted Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization: Customer relationships 8.4 years $ 26,101 $ ( 7,794 ) $ 18,307 Technology 4.4 years 12,948 ( 5,784 ) 7,164 Trade names 10.4 years 11,300 ( 2,892 ) 8,408 Total $ 50,349 $ ( 16,470 ) $ 33,879 The following summarizes amortization expense for definite-lived intangible assets: Three Months Ended June 30, 2024 2023 Amortization expense $ 1,151 $ 1,160 13 11. Debt Arrangements The following summarizes debt and notes payable: (in thousands) Interest Rate June 30, 2024 June 30, 2023 March 31, 2024 Senior secured credit facilities: ABL Credit Facility 8.6 % (1) $ 44,000 $ 50,000 $ — Senior secured notes: 10.0 % Notes Due 2024 (2) 10.0 % (1) 20,328 20,004 20,247 8.5 % Notes Due 2027 (3) 8.5 % (1) 178,423 253,779 178,146 Senior secured term loans: Intabex Term Loans (4) 13.6 % (1) 186,770 186,307 186,659 Pyxus Term Loans (5) 13.6 % (1) 122,268 133,284 132,819 Other Debt: Other long-term debt 8.7 % (1) 117 476 157 Notes payable (6) 9.8 % (1) 679,399 585,408 499,312 Total debt $ 1,231,305 $ 1,229,258 $ 1,017,340 Short-term (6) $ 679,399 $ 585,408 $ 499,312 Long-term: Current portion of long-term debt $ 20,445 $ 42 $ 20,294 Long-term debt 531,461 643,808 497,734 Total $ 551,906 $ 643,850 $ 518,028 Letters of credit $ 7,669 $ 6,018 $ 5,070 (1) Weighted average rate for the trailing twelve months ended June 30, 2024 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 10.0 % Notes due 2024 outstanding of $ 20,328 is net of a debt discount of $ 63 . Total repayment at maturity is $ 20,391 . (3) Balance of $ 178,423 is net of a debt discount of $ 4,107 . Total repayment at maturity is $ 182,530 . (4) Balance of $ 186,770 is net of a debt discount of $ 2,263 . Total repayment at maturity is $ 189,033 , which includes a $ 2,000 exit fee payable upon repayment. (5) Balance of $ 122,268 is net of a debt premium of $ 2,063 . Total repayment at maturity is $ 120,205 . (6) Primarily foreign seasonal lines of credit. 14 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 (as amended, 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 Agreement was amended on May 23, 2023 to extend the maturity of the ABL Credit Facility to February 8, 2027. The ABL Credit Agreement was amended on October 24, 2023 to, among other things increase the aggregate amount of the revolving loan commitments under the ABL Credit Facility to $ 120,000 . 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, 2024 . 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 $ 120,000 , subject to the limitations described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. 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 $ 140,000 . At June 30, 2024, the Borrowers and the parent guarantors under the ABL Credit Agreement were in compliance with the covenants under the ABL Credit Agreement. Intabex Term Loans 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 certain outstanding term debt of Pyxus Holdings, accrued and unpaid PIK interest thereon, and related fees. 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, 2024. At June 30, 2024, 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 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 certain outstanding term debt of Pyxus Holdings and 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, 2024. At June 30, 2024, 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 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 due December 31, 2027 (the "2027 Notes") 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, 15 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, 2024. At June 30, 2024, Pyxus Holdings and the guarantors of the 2027 Notes were in compliance with all covenants under the 2027 Notes Indenture. Related Party Transactions Based on a Schedule 13D/A filed with the SEC on March 25, 2024, by Monarch Alternative Capital LP (the "Monarch Investor"), MDRA GP LP and Monarch GP LLC, the Monarch Investor reported beneficial ownership of 6,125 shares of the Company’s common stock, representing approximately 24.5 % of the outstanding shares of the Company’s common stock. An individual designated by the Monarch Investor serves as a director of Pyxus. On March 21, 2024, Pyxus Holdings entered into an agreement (the "Debt Repurchase Agreement") with funds affiliated with the Monarch Investor to purchase $ 77,922 of aggregate principal amount of their holdings in the 2027 Notes for $ 60,000 , a 23.0 % discount to par value, plus accrued and unpaid interest and specified customary fees. The purchase of $ 77,922 aggregate principal amount of the 2027 Notes for a total of $ 62,339 (including fees and accrued and unpaid interest) was completed on March 28, 2024. The Debt Repurchase Agreement also included the right of Pyxus Holdings, at its option, to purchase from such holders an additional $ 34,191 aggregate principal amount of the 2027 Notes for $ 26,327 , a 23.0 % discount to par value, plus accrued and unpaid interest, and $ 10,345 aggregate principal amount of the Pyxus Term Loans for $ 9,104 , a 12.0 % discount to par value, plus accrued and unpaid interest. On April 12, 2024, Pyxus Holdings exercised its rights to complete these repurchases by September 30, 2024. On May 31, 2024, Pyxus Holdings completed the purchase of $ 10,345 of aggregate principal amount of the Pyxus Term Loans for a total of $ 9,435 (including accrued and unpaid interest). The Debt Repurchase Agreement and the transactions contemplated thereunder 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 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, 2024, 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 long-term credit agreements, the Company typically finances its non-U.S. 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, 2024, the total borrowing capacity under individual foreign seasonal lines of credit range up to $ 152,600 . As of June 30, 2024, the aggregate amount available for borrowing under the seasonal lines of credit was $ 169,703 . At June 30, 2024 , the Company was permitted to borrow under foreign seasonal lines of credit up to a total $ 815,646 , subject to limitations under the ABL Credit Agreement and the agreements governing the Intabex Term Loans, the Pyxus Term Loans and the 2027 Notes. At June 30, 2024 , $ 542 of cash was held on deposit as a compensating balance. At June 30, 2024, the Company, and its subsidiaries, were in compliance with the covenants associated with its short-term seasonal lines of credit. 16 12. Securitized Receivables The Company sells trade receivables to unaffiliated financial institutions under various accounts receivable securitization facilities, two of which are subject to annual renewal. Under the first facility, with Finacity Corporation (the "Finacity 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. Following the sale and transfer of the receivables to the special purpose entity, the receivables are isolated from the Company and its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the receivables. This facility requires a minimum level of deferred purchase price be retained by the Company in connection with the sales of the receivables to the unaffiliated financial institution. The Company continues to service, administer, and collect the receivables on behalf of the special purpose entity and receives a servicing fee of 0.5 % of serviced receivables per annum. As the Company estimates the expected fee it receives in return for its obligation to service these receivables is at fair value, no servicing assets or liabilities are recognized. Servicing fees are recorded as a reduction of selling, general, and administrative expenses within the condensed consolidated statements of operations. As of June 30, 2024, the investment limit of this facility was $ 120,000 of trade receivables. Under the second facility, the Company offers trade receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are isolated from the Company and its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the receivables. Although the Company continues to service, administer, and collect the receivables on behalf of the unaffiliated financial institution, the Company does not receive a servicing fee, and as a result, has established a servicing liability based upon unobservable inputs, primarily discounted cash flow. As of June 30, 2024, the investment limit under the second facility was $ 130,000 of trade receivables. As servicer for the Finacity Facility and the second facility, 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, 2024 and 2023, and March 31, 2024, trade receivables, net in the condensed consolidated balance sheets has been reduced by $ 8,219 , $ 908 , and $ 15,036 as a result of the net settlement, respectively. As of March 31, 2024, accrued expenses and other current liabilities in the consolidated balance sheets includes $ 10,279 of net payables for the Finacity Facility. Refer to " Note 15. Fair Value Measurements " for additional information. Under the other facilities, the Company offers trade receivables for sale to unaffiliated financial institutions, which are then subject to acceptance by the unaffiliated financial institutions. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are isolated from the Company and its affiliates, and effective control of the receivables is passed to the unaffiliated financial institution, which has all rights, including the right to pledge or sell the receivables. As of June 30, 2024, the investment limits under these other facilities were variable based on qualifying sales. 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, 2024 June 30, 2023 March 31, 2024 Receivables outstanding in facility $ 260,973 $ 132,313 $ 170,267 Beneficial interests 25,640 19,641 15,036 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, 2024 2023 Cash proceeds: Cash purchase price $ 243,109 $ 172,943 Deferred purchase price 31,741 30,419 17 13. 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, 2024 June 30, 2023 March 31, 2024 Amounts guaranteed (not to exceed) $ 79,192 $ 138,523 $ 97,411 Amounts outstanding under guarantee (1) 41,581 43,563 71,427 Fair value of guarantees 2,611 5,764 5,097 Amounts due to local banks on behalf of suppliers for government subsidized rural credit financing 526 459 34,571 (1) Most of the guarantees outstanding at June 30, 2024 expire within one year . 14. 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 $ 851 and $ 1,434 from its derivative financial instruments in cost of goods and services sold for the three months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and 2023, the Company recorded current derivative liabilities of $ 1,834 and $ 11 within accrued expenses and other current liabilities, respectively. Refer to " N ote 15. Fair Value Measurements " for additional information. The following summarizes the U.S. Dollar notional amount of derivative contracts outstanding: June 30, 2024 June 30, 2023 March 31, 2024 U.S. Dollar notional outstanding $ 23,300 $ 4,378 $ — 15. Fair Value Measurements The following summarizes the financial assets and liabilities measured at fair value on a recurring basis: June 30, 2024 June 30, 2023 March 31, 2024 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: Securitized beneficial interests $ — $ 25,640 $ 25,640 $ — $ 19,641 $ 19,641 $ — $ 15,036 $ 15,036 Total assets $ — $ 25,640 $ 25,640 $ — $ 19,641 $ 19,641 $ — $ 15,036 $ 15,036 Financial Liabilities: Derivative financial instruments $ 1,834 $ — $ 1,834 $ 11 $ — $ 11 $ — $ — $ — Long-term debt (1) 455,789 160 455,949 492,098 509 492,607 462,987 160 463,147 Guarantees — 2,611 2,611 — 5,764 5,764 — 5,097 5,097 Total liabilities $ 457,623 $ 2,771 $ 460,394 $ 492,109 $ 6,273 $ 498,382 $ 462,987 $ 5,257 $ 468,244 (1) This fair value measurement disclosure does not affect the condensed consolidated balance sheets. 18 The following summarizes the reconciliation of changes in Level 3 instruments measured on a recurring basis: Securitized Beneficial Interests Long-Term Debt Guarantees Beginning balance at March 31, 2024 $ 15,036 $ 160 $ 5,097 Issuances of sales of receivables/guarantees 61,029 — 938 Settlements ( 45,233 ) — ( 715 ) Losses recognized in earnings ( 5,192 ) — ( 2,709 ) Ending balance at June 30, 2024 $ 25,640 $ 160 $ 2,611 Securitized Beneficial Interests Long-Term Debt Guarantees Beginning balance at March 31, 2023 $ 19,522 $ 514 $ 5,262 Issuances of sales of receivables/guarantees 36,640 — 1,054 Settlements ( 33,183 ) ( 5 ) ( 555 ) Losses recognized in earnings ( 3,338 ) — 3 Ending balance at June 30, 2023 $ 19,641 $ 509 $ 5,764 For the three months ended June 30, 2024 and 2023, the impact to earnings attributable to the change in unrealized losses on securitized beneficial interests was $ 1,250 and $ 748 , respectively. Gains and losses included in earnings are reported in other expense, net. 16. 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, 2024, the assessment for intrastate trade tax credits taken is $ 2,375 and the total assessment including penalties and interest is $ 9,796 . 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, 2024, the assessment for intrastate trade tax credits taken is $ 2,050 and the total assessment including penalties and interest is $ 6,201 . 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 $ 20,377 as of June 30, 2024. 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, the Company or certain of its 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 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. 17. Equity-Based Compensation Pursuant to the Pyxus International, Inc. Amended and Restated 2020 Incentive Plan (the "Incentive Plan"), the Company granted time-vesting restricted stock units, with the vesting of these restricted stock units being subject to continued employment through specified dates and the condition that the Company’s common stock be listed for trading on a national securities exchange or an approved foreign securities exchange by March 31, 2028 (the "Listing Condition"). On May 10, 2024 (the "Modification Date"), the time-vesting restricted stock units granted under the Incentive Plan that were outstanding 19 immediately prior to that date were amended to extend the period by which the Listing Condition must be satisfied for the vesting of such restricted stock units from March 31, 2028 to March 31, 2031 and to provide that the Listing Condition shall be deemed to be satisfied on March 31, 2031 regardless of whether the Company’s common stock has been listed by that date on a national securities exchange or foreign securities exchange and would vest earlier upon the occurrence of a "Change in Control" (as defined in the Incentive Plan) as a result of a merger, consolidation, share exchange or sale of all or substantially all of the assets of the Company. On the Modification Date, the amended Listing Condition was rendered nonsubstantive, and recipients of all such outstanding time-vesting restricted stock units had satisfied the continued service requirement, meaning the restricted stock units were fully earned for vesting. During the three months ended June 30, 2024, the Company recognized total equity-based compensation expense of $ 3,031 , which is recorded in selling, general, and administrative expenses within the condensed consolidated statements of operations. The modified time-vesting restricted stock units accounted for $ 2,877 of the total equity-based compensation to reflect the cumulative catch-up required on the Modification Date. The following summarizes the Company's equity awards granted: Three Months Ended June 30, (in thousands, except grant date fair value) 2024 2023 Restricted stock units Number granted 768 — Grant date fair value $ 3.50 $ — Performance-based stock units Number granted (at target performance level) 576 — Grant date fair value $ 4.36 $ — Restricted stock units granted under the Incentive Plan during the three months ended June 30, 2024 are earned ratably over a three-year period, and will vest, subject to continued employment, upon the earlier of March 31, 2031 or the occurrence of a liquidity event as defined under the terms of the restricted stock unit award agreement. Unrecognized compensation costs for restricted stock units is $ 2,534 as of June 30, 2024, and is expected to be recognized over a weighted average period of 2.75 years, representing the remaining service period related to the awards, subject to adjustments for actual forfeitures. Under the terms of the performance-based stock units, the amount of shares to be issued (ranging from 0 % to 200 % of the number of shares to be issued at the target performance level) will be contingent upon the per share price achieved in a liquidity event (as defined under the terms of the performance-based stock unit award agreement), subject to continued employment through the date of a liquidity event. The contingent liquidity event is not probable as of June 30, 2024, and accordingly, no equity-based compensation expense has been recognized for the performance-based stock units granted during the period. 18. Related Party Transactions The Company engages in transactions with its equity method investees primarily for the procuring and processing of inventory. The following summarizes activities with the Company's equity method investees: Three Months Ended June 30, 2024 2023 Sales $ 10,575 $ 10,817 Purchases 34,886 38,789 The Company included the following related party balances in its condensed consolidated balance sheets: June 30, 2024 June 30, 2023 March 31, 2024 Location in Condensed Consolidated Balance Sheet Accounts receivable, related parties $ 4,080 $ 5,090 $ 50 Other receivables Accounts payable, related parties 12,041 19,776 35,396 Accounts payable Advances from related parties 1,247 10,061 12,533 Advances from customers 20 Transactions with Significant Shareholders Based on a Schedule 13D/A filed with the SEC on June 13, 2024 by Glendon Capital Management, L.P. (the "Glendon Investor"), Holly Kim Olsen, Glendon Opportunities Fund, L.P. and Glendon Opportunities Fund II, L.P., the Glendon Investor reported beneficial ownership of 8,315 shares of the Company’s common stock, representing approximately 33.3 % of the outstanding shares of the Company’s common stock. A representative of the Glendon Investor serves as a director of Pyxus. Based on a Schedule 13G/A filed with the SEC on May 6, 2024 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 2,605 shares of the Company’s common stock on April 30, 2024, representing approximately 10.4 % of the outstanding shares of the Company’s common stock. 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") were holders, in part, of the Intabex Term Loans, the Pyxus Term Loans and the 2027 Notes, which are described in " Note 11. Debt Arrangements ," during the three months ended June 30, 2024. Accrued expenses and other current liabilities as presented in the condensed consolidated balance sheets as of June 30, 2024 and 2023, and March 31, 2024, includes $ 1,894 , $ 3,945 , and $ 4,239 , 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 condensed consolidated statements of operations includes $ 7,261 and $ 10,075 for the three months ended June 30, 2024 and 2023, respectively, that relates to the Investor-Affiliated Funds and CI Investments. The holders of senior debt that are parties to the Debt Repurchase Agreement entered into on March 21, 2024 are funds affiliated with the Monarch Investor and of which the Monarch Investor is the investment advisor. The Debt Repurchase Agreement and the transactions contemplated thereby, including the exercise by Pyxus Holdings of its right to purchase the Pyxus Term Loans and additional 2027 Notes thereunder on April 12, 2024, 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. Under the terms of the Debt Repurchase Agreement, the Company has paid the following amounts to funds affiliated with the Monarch Investor: • On March 28, 2024, the Company paid a total of $ 62,339 , which included $ 1,849 of accrued and unpaid interest and $ 490 in other fees, to retire $ 77,922 of aggregate principal amount of the 2027 Notes. • On May 31, 2024, the Company paid a total of $ 9,435 , which included $ 332 of accrued and unpaid interest, to retire $ 10,345 of aggregate principal amount of the Pyxus Term Loans. 19. Segment Information The following summarizes segment information, with the All Other category being included for purposes of reconciliation of the respective balances of the Leaf segment (the Company's sole reportable segment) to the condensed consolidated financial statements: Three Months Ended June 30, 2024 2023 Sales and other operating revenues: Leaf $ 630,963 $ 476,433 All Other 3,892 659 Consolidated sales and other operating revenues $ 634,855 $ 477,092 Segment operating income (loss): Leaf $ 42,482 $ 37,929 All Other ( 1,922 ) ( 1,471 ) Segment operating income 40,560 36,458 Restructuring and asset impairment charges 103 40 Consolidated operating income $ 40,457 $ 36,418 21 June 30, 2024 June 30, 2023 March 31, 2024 Segment assets: Leaf $ 1,752,886 $ 1,761,971 $ 1,616,486 All Other 39,825 41,023 41,427 Total assets $ 1,792,711 $ 1,802,994 $ 1,657,913 20 . S ubsequent Events Debt Repurchase On August 2, 2024, pursuant to the Debt Repurchase Agreement with funds affiliated with the Monarch Investor, Pyxus paid a total of $ 26,707 , which includes $ 379 for accrued and unpaid interest through the date prior to payment, to retire $ 34,191 of aggregate principal amount of the 2027 Notes. 22