PYXUS INTERNATIONAL, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Readers are cautioned that the statements contained in this report regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements, which are based on current expectations of future events, may be identified by the use of words such as "guidance", "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets," and other words of similar meaning. These statements also may be identified by the fact that they do not relate strictly to historical or current facts. If underlying assumptions prove inaccurate, or if known or unknown risks or uncertainties materialize, actual results could vary materially from those anticipated, estimated, or projected. These risks and uncertainties include those discussed in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended March 31, 2024 and in our other filings with the Securities and Exchange Commission. These risks and uncertainties include: our reliance on a small number of significant customers; continued vertical integration by our customers; global shifts in sourcing customer requirements; shifts in the global supply and demand position for tobacco products; variation in our financial results due to growing conditions, customer indications and other factors; loss of confidence in us by our customers, farmers and other suppliers; migration of suppliers who have historically grown tobacco and from whom we have purchased tobacco toward growing other crops; risks related to our advancement of inputs to tobacco suppliers to be settled upon the suppliers delivering us unprocessed tobacco at the end of the growing season; risks that the tobacco we purchase directly from suppliers will not meet our customers’ quality and quantity requirements; weather and other environmental conditions that can affect the marketability of our inventory; international business risks, including unsettled political conditions, uncertainty in the enforcement of legal obligations, including the collection of accounts receivable, fraud risks, expropriation, import and export restrictions, exchange controls, inflationary economies, currency risks and risks related to the restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries; many of our operations are located in jurisdictions that pose a high risk of potential violations of the Foreign Corrupt Practices Act; risks and uncertainties related to geopolitical conflicts, including conflict in the Middle East and disruptions affecting Red Sea shipping; impacts of international sanctions on our ability to sell or source tobacco in certain regions; exposure to foreign tax regimes in which the rules are not clear, are not consistently applied and are subject to sudden change; fluctuations in foreign currency exchange and interest rates; competition with the other primary global independent leaf tobacco merchant and independent leaf merchants; disruption, failure or security breaches of our information technology systems and other cybersecurity risks; continued high inflation; regulations regarding environmental matters; risks related to our capital structure, including risks related to our significant debt and our ability to continue to finance our non-U.S. local operations with uncommitted short-term operating credit lines at the local level; our ability to continue to access capital markets to obtain long-term and short-term financing; potential failure of foreign banks in which our subsidiaries maintain deposits or the failure by such banks to transfer funds or honor withdrawals; the risk that, because our ability to generate cash depends on many factors beyond our control, we may be unable to generate the significant amount of cash required to service our indebtedness; our ability to refinance our current credit facilities at the same availability or at similar or reduced interest rates; failure to achieve our stated goals, which may adversely affect our liquidity; developments with respect to our liquidity needs and sources of liquidity; the volatility and disruption of global credit markets; failure by counterparties to derivative transactions to perform their obligations; increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers, with respect to our environmental, social and governance policies, including sustainability policies; inherent risk of exposure to product liability claims, regulatory action and litigation facing our e-liquids business if its products are alleged to have caused significant loss, injury, or death; certain shareholders have the ability to exercise controlling influence on various corporate matters; reductions in demand for consumer tobacco products; risks and uncertainties related to pandemics or other widespread health crises and any related shipping constraints, labor shortages and supply-chain impacts; legislative and regulatory initiatives that may reduce consumption of consumer tobacco products and demand for our services and increase regulatory burdens on us or our customers; government actions that significantly affect the sourcing of tobacco, including governmental actions to identify and assess crop diversification initiatives and alternatives to leaf tobacco growing in countries whose economies depend upon tobacco production; governmental investigations into the Company's business activities, including but not limited to, leaf tobacco industry buying and other payment practices; and impact of potential regulations to prohibit the sale of cigarettes in the United States other than low-nicotine cigarettes. We do not undertake to update any forward-looking statements that we may make from time to time except to the extent required by law. Overview Pyxus is a global agricultural company with businesses having more than 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. 23 Executive Summary Through the first six months of the fiscal year, sales and other operating revenues increased $99.8 million , or 9.1% , to $1,201.2 million for the six months ended September 30, 2024 compared to $1,101.4 million for the six months ended September 30, 2023 . This increase was due to a 15.6% increase in average sales prices driven by higher tobacco prices, despite a 7.9% decrease in kilo volumes sold. Gross profit as a percent of sales decreased from 14.7% for the six months ended September 30, 2023 to 13.3% for the six months ended September 30, 2024 due mainly to regional mix from the El Niño weather effects on Africa and South America. The ongoing Red Sea conflict, Typhoon Yagi in Southeast Asia in September 2024, and monsoon rains in India and Bangladesh during August and September 2024 contributed to shipping constraints, including vessel and equipment availability, port congestion, and rising freight costs, and undersupply conditions throughout the first half of the fiscal year. We completed our crop purchases in the southern hemisphere and commenced crop purchases in certain markets in the northern hemisphere during the second quarter. We continued to experience elevated prices for green tobacco from continued undersupply conditions and inflation. As of September 30, 2024 , our inventory was $974.6 million and our uncommitted inventory was $16.7 million. Despite purchasing more expensive green tobacco, our disciplined focus on reducing long-term debt has resulted in a total reduction of $142.8 million of aggregate principal amount of long-term debt since March 2024. 24 Results of Operations Three Months Ended September 30, 2024 and 2023 Three Months Ended September 30, Change (in millions, except per kilo amounts) 2024 2023 $ % Consolidated: Sales and other operating revenues $ 566.3 $ 624.3 (58.0) (9.3) Cost of goods and services sold 490.9 535.5 (44.6) (8.3) Gross profit 75.4 88.7 (13.3) (15.0) Gross profit as a percent of sales 13.3 % 14.2 % Selling, general, and administrative expenses $ 38.8 $ 40.0 (1.2) (3.0) Other expense, net 3.3 1.1 2.2 200.0 Restructuring and asset impairment charges 0.2 1.3 (1.1) (84.6) Operating income* 33.0 46.3 (13.3) (28.7) Gain on debt retirement 6.9 — 6.9 100.0 Interest expense, net 35.7 33.0 2.7 8.2 Income tax expense 8.1 7.6 0.5 6.6 Income from unconsolidated affiliates, net (0.5) (2.1) 1.6 76.2 Net loss attributable to noncontrolling interests — (0.2) 0.2 100.0 Net (loss) income attributable to Pyxus International, Inc.* $ (3.2) $ 8.1 (11.3) (139.5) Leaf: Product revenues $ 515.8 $ 585.8 (70.0) (11.9) Tobacco costs 428.9 484.7 (55.8) (11.5) Transportation, storage, and other period costs 18.0 22.2 (4.2) (18.9) Total product cost of goods sold 446.9 506.9 (60.0) (11.8) Product revenue gross profit 68.9 78.9 (10.0) (12.7) Product revenue gross profit as a percent of sales 13.4 % 13.5 % Kilos sold 86.0 111.7 (25.7) (23.0) Average price per kilo $ 6.00 $ 5.24 0.76 14.5 Average cost per kilo 5.20 4.54 0.66 14.5 Average gross profit per kilo 0.80 0.70 0.10 14.3 Processing and other revenues $ 48.3 $ 37.3 11.0 29.5 Processing and other revenues costs of services sold 40.1 27.2 12.9 47.4 Processing and other gross profit 8.2 10.1 (1.9) (18.8) Processing and other gross profit as a percent of sales 17.0 % 27.1 % All Other: Sales and other operating revenues $ 2.2 $ 1.2 1.0 83.3 Cost of goods and services sold 3.9 1.4 2.5 178.6 Gross loss (1.7) (0.3) (1.4) (466.7) Gross loss as a percent of sales (77.3) % (25.0) % * Amounts may not equal column totals due to rounding. 25 Sales and other operating revenues were $624.3 million for the three months ended September 30, 2023 and $566.3 million for the three months ended September 30, 2024, a decrease of $58.0 million, or 9.3%. This was due to a 23.0% decrease in kilo volumes sold primarily due to the accelerated timing of shipments from North America in the three months ended June 30, 2024 and delayed shipments from Africa in the three months ended September 30, 2024 compared to the prior-year period, partially offset by a 14.5% increase in average sales prices over this period, driven by higher tobacco prices. Cost of goods and services sold were $535.5 million for the three months ended September 30, 2023 and $490.9 million for the three months ended September 30, 2024 , a decrease of $44.6 million, or 8.3%. This was mainly due to the decrease in kilo volumes sold , partially offset by a 14.5% increase in average cost per kilo primarily due to undersupply conditions and inflation. Gross profit as a percent of sales decreased from 14.2% for the three months ended September 30, 2023 to 13.3% for the three months ended September 30, 2024, due mainly to product and regional mix. Average gross profit per kilo increased 14.3%, primarily due t o more favorable customer mix. Gain on debt retirement of $6.9 million for the three months ended September 30, 2024 was due to the repurchase of $34.2 million aggregate principal amount of the 2027 Notes for $26.3 million, a 23.0% discount to par, during the current quarter. See " Note 11. Debt Arrangements " to the "Notes to Condensed Consolidated Financial Statements" for additional information. Interest expense was $33.0 million for three months ended September 30, 2023 and $35.7 million for the three months ended September 30, 2024, an increase of $2.7 million, or 8.2%. This increase was driven by higher borrowings on our foreign seasonal lines of credit that were primarily used to purchase more expensive green tobacco, particularly from Africa , and increased variable interest rates. This increase was partially offset by partial repurchases of the 2027 Notes in March, April, and August 2024, as well as the partial repurchase of the Pyxus Term Loans in May 2024. 26 Six Months Ended September 30, 2024 and 2023 Six Months Ended September 30, Change (in millions, except per kilo amounts) 2024 2023 $ % Consolidated: Sales and other operating revenues $ 1,201.2 $ 1,101.4 99.8 9.1 Cost of goods and services sold 1,041.9 939.5 102.4 10.9 Gross profit 159.3 161.8 (2.5) (1.5) Gross profit as a percent of sales 13.3 % 14.7 % Selling, general, and administrative expenses 79.5 74.1 5.4 7.3 Other expense, net 5.9 3.7 2.2 59.5 Restructuring and asset impairment charges 0.3 1.3 (1.0) (76.9) Operating income* 73.5 82.7 (9.2) (11.1) Gain on debt retirement 8.2 — 8.2 100.0 Interest expense, net 69.0 63.8 5.2 8.2 Income tax expense 14.2 10.2 4.0 39.2 (Income) loss from unconsolidated affiliates, net (3.1) 0.1 (3.2) (3,200.0) Net income (loss) attributable to noncontrolling interests 0.3 (0.2) 0.5 250.0 Net income attributable to Pyxus International, Inc.* $ 1.4 $ 8.9 (7.5) (84.3) Leaf: Product revenue $ 1,105.0 $ 1,036.8 68.2 6.6 Tobacco costs 912.9 847.7 65.2 7.7 Transportation, storage, and other period costs 42.8 42.8 — — Total cost of goods sold 955.7 890.5 65.2 7.3 Product revenue gross profit 149.3 146.2 3.1 2.1 Product revenue gross profit as a percent of sales 13.5 % 14.1 % Kilos sold 181.7 197.2 (15.5) (7.9) Average price per kilo $ 6.08 $ 5.26 0.82 15.6 Average cost per kilo 5.26 4.52 0.74 16.4 Average gross profit per kilo 0.82 0.74 0.08 10.8 Processing and other revenues $ 90.1 $ 62.8 27.3 43.5 Processing and other revenues costs of services sold 77.5 47.2 30.3 64.2 Processing and other gross profit 12.6 15.6 (3.0) (19.2) Processing and other gross profit as a percent of sales 14.0 % 24.8 % All Other: Sales and other operating revenues $ 6.1 $ 1.8 4.3 238.9 Cost of goods and services sold 8.7 1.8 6.9 383.3 Gross loss (2.6) — (2.6) (100.0) Gross loss as a percent of sales (42.6) % — % * Amounts may not equal column totals due to rounding. 27 Sales and other operating revenues were $1,101.4 million for the six months ended September 30, 2023 and $1,201.2 million for the six months ended September 30, 2024, an increase of $99.8 million, or 9.1%. This was due to a 15.6% increase in average sales prices over this period, driven by higher tobacco prices, partially offset by 7.9% decrease in kilo volumes sold. Cost of goods and services sold were $939.5 million for the six months ended September 30, 2023 and $1,041.9 million for the six months ended September 30, 2024, an increase of $102.4 million, or 10.9%. This was mainly due to a 16.4% increase in average cost per kilo, primarily due to undersupply conditions and inflation, partially offset by the decrease in kilo volumes sold . Gross profit as a percent of sales decreased from 14.7% for the six months ended September 30, 2023 to 13.3% for the six months ended September 30, 2024, due mainly to regional mix. Average gross profit per kilo increased 10.8%, primari ly due to a more favorable customer mix. Selling, general, and administrative expenses were $74.1 million for the six months ended September 30, 2023 and $79.5 million for the six months ended September 30, 2024, an increase of $5.4 million, or 7.3%. This increase wa s primarily due to the recognition of $3.6 million for equity-based compensation pursuant to the Amended and Restated 2020 Incentive Plan, and a higher accrual for bonus compensation. See " Note 17. Equity -Based Compensation " to the "Notes to Condensed Consolidated Financial Statements" for additional information. Gain on debt retirement of $8.2 million for the six months ended September 30, 2024 was due to the repurchase of $10.3 million of aggregate principal amount of the Pyxus Term Loans for $9.4 million, a 12.0% discount to par, and the repurchase of $34.2 million aggregate principal amount of the 2027 Notes for $26.3 million, a 23.0% discount to par. See " Note 11. Debt Arrangements " to the "Notes to Condensed Consolidated Financial Statements" for additional information. Interest expense, net was $63.8 million for the six months ended September 30, 2023 and $69.0 million for the six months ended September 30, 2024, an increase of $5.2 million, or 8.2%. This increase was due to higher borrowings on our foreign seasonal lines of credit that were primarily used to purchase more expensive green tobacco, particularly from South America and Africa , and increased variable interest rates. This increase was partially offset by partial repurchases of the 2027 Notes in March, April, and August 2024, as well as the partial repurchase of the Pyxus Term Loans in May 2024. Income tax expense was $10.2 million for the six months ended September 30, 2023 and $14.2 million for the six months ended September 30, 2024, an increase of $4.0 million, or 39.2%. This increase was primarily due to tax benefits in the prior period from foreign currency losses and foreign unremitted earnings, partially offset by improvements in the current period valuation allowances and uncertain tax benefits. 28 Liquidity and Capital Resources Overview Our primary sources of liquidity are cash generated from operations, short-term borrowings under our foreign seasonal lines of credit, availability under our ABL Credit Facility, and cash collections from our securitized receivables. Our liquidity requirements are affected by various factors from our core tobacco leaf business, including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix, crop size, and quality. Our leaf tobacco business is seasonal, and purchasing, processing, and selling activities have several associated peaks where cash on-hand and outstanding indebtedness may vary significantly compared to year end. The first three quarters of our fiscal year generally represent the peak of our working capital requirements. Although we believe that our sources of liquidity will be sufficient to fund our anticipated operating needs for the next twelve months, we anticipate periods during which our liquidity needs for operations will approach the levels of our anticipated available cash and permitted borrowings under our credit facilities. Unanticipated developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations and the availability of capital resources (including an inability to renew or refinance seasonal lines of credit), may result in a deficiency in liquidity. To address a potential liquidity deficiency, we may undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow. Debt Financing We continue to finance our business with a combination of short-term and long-term credit lines, the long-term debt securities, advances from customers, and cash from operations when available. See " Note 11. Debt Arrangements " to the "Notes to Condensed Consolidated Financial Statements" for a summary of our short-term and long-term debt. We continuously monitor and, as available, adjust funding sources as needed to enhance and drive various business opportunities. From time to time we may take steps to reduce our debt or otherwise improve our financial position. Such actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, and refinancing of debt. The amount of prepayments or the amount of debt that may be repurchased, refinanced, or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants, and other considerations. The following summarizes our total borrowing capacity at September 30, 2024 and 2023 under our short-term and long-term credit lines and letter of credit facilities and the remaining available amount after the reduction for outstanding borrowings and amounts reserved for outstanding letters of credit: September 30, 2024 September 30, 2023 (in millions) Total Borrowing Capacity Remaining Amount Available Total Borrowing Capacity Remaining Amount Available Senior Secured Credit Facilities: ABL Credit Facility $ 120.0 $ 85.0 $ 100.0 $ 100.0 Foreign seasonal lines of credit 885.2 175.4 652.8 130.2 Other long-term debt 0.4 0.3 0.6 0.2 Letters of credit 10.8 3.0 10.5 3.7 Total $ 1,016.4 $ 263.7 $ 763.9 $ 234.1 The total borrowing capacity under the ABL Credit Facility increased $20.0 million when compared to the prior period as a result of the Company entering into the Third Amendment to the ABL Credit Agreement on October 24, 2023, which among other things, increased the aggregate amount of revolving loan commitments from $100.0 million to $120.0 million. The amounts presented as available under the ABL Credit Facility are subject to further limitations from the borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves. The total borrowing capacity of our foreign seasonal lines of credit increased $232.4 million when compared to the prior year and were primarily utilized to purchase green tobacco at higher prices. The amounts presented as available for certain of the foreign seasonal lines of credit are subject to further limitations by receivables and inventories as collateral and restrictive covenants. 29 Net Debt We refer to "Net debt," a non-GAAP measure, as total debt liabilities less cash and cash equivalents. We believe this non-GAAP financial measure is useful to monitor leverage and to evaluate changes to the Company's capital structure. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt and that cash held in certain jurisdictions can be applied to repay obligations owing in other jurisdictions and without reduction for applicable taxes. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates. The following summarizes the computation of net debt: (in millions) September 30, 2024 September 30, 2023 March 31, 2024 Notes payable $ 744.8 $ 570.0 $ 499.3 Current portion of long-term debt 0.1 20.2 20.3 Long-term debt (1) 489.5 574.0 497.7 Total debt liabilities* $ 1,234.3 $ 1,164.2 $ 1,017.3 Less: Cash and cash equivalents 123.5 112.1 92.6 Net debt* $ 1,110.9 $ 1,052.1 $ 924.7 * Amounts may not equal column totals due to rounding (1) Fluctuations in long-term debt include borrowings and repayments on the outstanding indebtedness under the ABL Credit Facility, along with repurchases of certain long-term debt. Weighted average borrowings outstanding under the ABL Credit Facility were $37.3 million and $50.6 million for the three and six months ended September 30, 2024, respectively. Net debt increased as of September 30, 2024 when compared to September 30, 2023 from higher borrowings on our foreign seasonal lines of credit that were primarily used to purchase more expensive green tobacco, particularly from South America and Africa. Working Capital The following summarizes our working capital: (in millions except for current ratio) September 30, 2024 September 30, 2023 March 31, 2024 Cash, cash equivalents, and restricted cash $ 130.9 $ 117.7 $ 99.8 Trade and other receivables, net 237.5 261.3 187.5 Inventories and advances to tobacco suppliers, net 1,052.6 944.8 952.1 Recoverable income taxes 3.0 5.1 4.5 Prepaid expenses and other current assets 62.1 52.0 66.4 Total current assets* $ 1,486.1 $ 1,380.9 $ 1,310.2 Notes payable $ 744.8 $ 570.0 $ 499.3 Accounts payable 152.6 153.2 181.2 Advances from customers 75.8 46.1 90.7 Accrued expenses and other current liabilities 103.4 94.0 97.0 Income taxes payable 13.6 12.6 8.5 Operating leases payable 8.3 8.4 8.1 Current portion of long-term debt 0.1 20.2 20.3 Total current liabilities* $ 1,098.5 $ 904.4 $ 905.2 Current ratio 1.4 to 1 1.5 to 1 1.4 to 1 Working capital $ 387.6 $ 476.5 $ 405.0 * Amounts may not equal column totals due to rounding Working capital declined from September 30, 2023 to September 30, 2024 by $88.9 million, or 18.7%, due to higher borrowings on our foreign seasonal lines of credit that were primarily used to purchase more expensive green tobacco, particularly from South America and Africa, and increased variable interest rates. 30 Inventories The following summarizes inventory committed to a customer and uncommitted inventory balances for processed tobacco: (in millions) September 30, 2024 September 30, 2023 March 31, 2024 Committed $ 733.9 $ 622.1 $ 570.4 Uncommitted 16.7 24.7 14.9 Total processed tobacco $ 750.6 $ 646.8 $ 585.3 Total processed tobacco increased from September 30, 2023 to September 30, 2024 by $103.8 million, or 16.0%, due to the higher costs of procuring and processing tobacco, along with delayed shipments out of Africa. Uncommitted levels of processed tobacco remain low as undersupply conditions persist in the global tobacco market. Challenging weather events in multiple geographies and shipping constraints, such as container availability and longer transit routes, have contributed to the continued undersupply conditions. See " Note 7. Inventories, Net " to the "Notes to Condensed Consolidated Financial Statements" for additional information. Sources and Uses of Cash We typically finance our non-U.S. tobacco operations with uncommitted short-term foreign seasonal lines of credit, normally extending for a term of 180 to 365 days, corresponding to the tobacco crop cycle in that market. These short-term foreign seasonal lines of credit are typically uncommitted and provide lenders the right to cease making loans and demand repayment of loans. These short-term foreign seasonal lines of credit are generally renewed at the outset of each tobacco season. We maintain various other financing arrangements to meet the cash requirements of our businesses. See " Note 11. Debt Arrangements " to the "Notes to Condensed Consolidated Financial Statements" for additional information. We utilize capital in excess of cash flow from operations to finance accounts receivable, inventory, and advances to tobacco suppliers in foreign countries. In addition, we may periodically elect to purchase, redeem, repay, retire, or cancel indebtedness prior to stated maturity under our various foreign credit lines. As of September 30, 2024, our cash, cash equivalents, and restricted cash was $130.9 million, of which approximately $76.5 million was held in non-U.S. jurisdictions for non-U.S. working capital needs, a majority of which is subject to exchange controls and certain of which is subject to tax consequences, which could limit our ability to fully repatriate these funds. Fluctuation of the U.S. dollar versus many of the currencies in which we have costs may have an impact on our working capital requirements. We will continue to monitor and hedge foreign currency costs, as needed. 31 The following summarizes the sources and uses of our cash flows: Six Months Ended September 30, (in millions) 2024 2023 Net income $ 1.7 $ 8.7 Trade and other receivables (150.6) (143.2) Inventories and advances to tobacco suppliers (100.7) (128.6) Payables and accrued expenses (20.3) (10.3) Advances from customers (14.1) 3.6 Other 3.7 14.4 Net cash used in operating activities $ (280.3) $ (255.4) Collections from beneficial interests in securitized trade receivables 101.6 79.3 Other (8.1) (6.2) Net cash provided by investing activities $ 93.5 $ 73.1 Net proceeds from short-term borrowings 244.2 192.2 Repayment of long-term borrowings (55.8) — Net proceeds (repayment) of revolving loan facilities 35.0 (25.0) Other (3.4) (3.9) Net cash provided by financing activities $ 220.0 $ 163.3 Effect of exchange rate changes on cash (2.1) (2.2) Increase (decrease) in cash, cash equivalents, and restricted cash $ 31.1 $ (21.2) The change in cash, cash equivalents, and restricted cash for the six months ended September 30, 2024 compared to the six months ended September 30, 2023 increased by $52.3 million. This increase was mainly driven by higher borrowings on our foreign seasonal lines of credit that were primarily used to purchase more expensive green tobacco, particularly from South America and Africa, and the ABL Credit Facility, partially offset by the repayment of long-term debt. Planned Capital Expenditures Capital investments in our leaf operations were primarily for routine replacement of machinery and equipment, as well as investments in assets that will add value for our customers and increase our efficiency. We incurred approximately $9.8 million in capital expenditures for the six months ended September 30, 2024 , and are expecting to incur an additional $20.5 million for the remainder of the fiscal year ending March 31, 2025, which includes expenditures expected to be funded through government assistance. Pension and Postretirement Health and Life Insurance Benefits The following summarizes cash contributions to pension and postretirement health and life insurance benefits: Six Months Ended September 30, (in millions) 2024 Contributions made during the period $ 2.3 Contributions expected for the remainder of the fiscal year 2.6 Total $ 4.9 Critical Accounting Policies and Estimates As of the date of this report, there are no material changes to the critical accounting policies and estimates previously disclosed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2024. 32 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes to our market risk exposures since March 31, 2024. For a discussion of our exposure to market risk, see Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.