What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-08-06 · 111 added, 42 removed, 191 unchanged (44% of the section changed)

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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, 2025 and in our other filings with the Securities and Exchange Commission.

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, 2025, and in our other filings with the U.S.

Securities and Exchange Commission.

These risks and uncertainties include:

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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;

inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss, injury, or death;

certain shareholders have the ability to exercise controlling influence on various corporate matters;

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Executive Summary

The start to fiscal year 2026 delivered a larger tobacco crop than we experienced in the prior year, and we are pleased with our ability to capture larger quantities of leaf in key markets.

As anticipated, first quarter results were below the same period of the prior year as a result of the acceleration of certain customer shipments into the fourth quarter of fiscal year 2025.

Despite a 19.9% reduction in sales and other operating revenues to $508.8 million during the three months ended June 30, 2025 from $634.9 million during the three months ended June 30, 2024, the Company's gross margin as a percent of sales remained relatively stable over the same period due mainly to product mix.

Crop purchases in the Southern hemisphere are near completion and have been strong to date as favorable weather conditions have produced larger volumes of better quality leaf when compared to the prior year, which is evident in both Africa and South America, where unfavorable weather conditions dampened the prior-year crop.

Our strengthened credit profile enabled us to secure the necessary funds to purchase these larger volumes of green tobacco to satisfy demand from our customers.

Our total tobacco inventory balance, comprised of both processed and unprocessed tobacco, of $1,089.8 million at June 30, 2025, puts us in the position to meet the needs of our customers.

The Company's second quarter results and financial condition reflect the impact of larger crops from our origins in the Southern hemisphere.

Sales and other operating revenues of $570.2 million for the three months ended September 30, 2025 were slightly higher by 0.7%, or $3.9 million, when compared to $566.3 million for the same period last year.

This slight increase was a result of higher volumes, bolstered by processing and other revenues, and partially offset by lower average sales prices corresponding with lower costs incurred to purchase current crops.

The Company's gross margin as a percent of sales increased by 2.1% in the current quarter, mainly due to regional mix.

The Company's year-to-date results include acceleration of shipments related to the larger current crop that have yet to offset the continued impact of lower carry-over sales from the prior fiscal year, which contributed to the 10.2%, or $122.2 million, decline in sales to $1,079.0 million for the six months ended September 30, 2025 from $1,201.2 million for the six months ended September 30, 2024.

Despite this reduction in sales and other operating revenues, the Company's year-to-date gross margin as a percent of sales of 14.2% remained relatively stable versus the comparable prior-year period mainly due to product mix.

During the first half of each fiscal year, our working capital requirements typically reach peak levels, coinciding with the buying season in each of our key sourcing regions.

First half fiscal year 2026 procurement volumes in Africa and South America exceeded those of the comparable prior-year period, with purchases substantially completed early in the second quarter.

Purchasing in the Northern hemisphere commenced during the second quarter, with volumes in North America and Europe comparable to or slightly below prior-year levels.

Our total tobacco inventory balance, comprised of both processed and unprocessed tobacco, stands at $1,102.8 million as of September 30, 2025, which will enable us to meet our customers' requirements for leaf that we have sourced from our wide network of growers across the globe.

Results of Operations

Three Months Ended June 30, 2025 and 2024

Three Months Ended June 30,

Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

(in millions, except per kilo amounts) 2025 2024 $ %

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Interest expense, net 37.9 35.7 2.2 6.2

(Loss) income before income taxes and other items (8.8) 8.5 (17.3) (203.5)

Income before income taxes and other items 8.8 4.2 4.6 109.5

Income tax expense 10.3 8.1 2.2 27.2

(Loss) income from unconsolidated affiliates, net (1.3) 2.6 (3.9) (150.0)

Net income attributable to noncontrolling interests 0.6 0.3 0.3 100.0

Net (loss) income attributable to Pyxus International, Inc.* $ (15.8) $ 4.6 (20.4) (443.5)

Income from unconsolidated affiliates, net 0.6 0.5 0.1 20.0

Net loss attributable to Pyxus International, Inc.

$ (0.9) $ (3.2) (2.3) (71.9)

Product revenues $ 511.2 $ 515.8 (4.6) (0.9)

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Cost of goods and services sold 3.9 3.9 — —

Gross loss (0.3) (1.7) (1.4) (82.4)

Gross loss as a percent of sales (8.3) % (77.3) %

* Amounts may not equal column totals due to rounding.

Sales and other operating revenues increased $3.9 million, or 0.7%, to $570.2 million for the three months ended September 30, 2025 from $566.3 million for the three months ended September 30, 2024.

This slight increase was a result of an increase in processing and other revenues emanating from the larger volumes in Africa and South America, partially offset by a decrease in leaf product revenues as a result of higher volumes sold at a lower average price per kilo.

Cost of goods and services sold decreased $8.5 million, or 1.7%, to $482.4 million for the three months ended September 30, 2025 from $490.9 million for the three months ended September 30, 2024 driven by a 7.9% reduction in average cost per kilo due to the impact of lower inventory costs of the current crop in Africa and South America that has been processed and sold.

Gross profit increased $12.4 million, or 16.4%, to $87.8 million for the three months ended September 30, 2025 from $75.4 million for the three months ended September 30, 2024.

This increase was due to larger volumes for processing and other revenues in Africa providing more margin favorability, and increased margins from certain leaf product sales in Africa and Europe.

The 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.

There were no repurchases of senior secured notes or term loans during the three months ended September 30, 2025.

See " Note 11.

Debt Arrangements " to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Income tax expense increased $2.2 million, or 27.2%, to $10.3 million for the three months ended September 30, 2025 from $8.1 million for the three months ended September 30, 2024.

This increase was primarily due to tax expense related to foreign currency gains in Africa recognized in the current period and the jurisdictional mix of earnings.

See " Note 4.

Income Taxes " to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Six Months Ended September 30, 2025 and 2024

Six Months Ended September 30,

(in millions, except per kilo amounts) 2025 2024 $ %

Consolidated:

Sales and other operating revenues $ 1,079.0 $ 1,201.2 (122.2) (10.2)

Cost of goods and services sold 925.6 1,041.9 (116.3) (11.2)

Gross profit 153.4 159.3 (5.9) (3.7)

Gross profit as a percent of sales 14.2 % 13.3 %

Selling, general, and administrative expenses 80.5 79.5 1.0 1.3

Other expense, net 5.1 5.9 (0.8) (13.6)

Restructuring and asset impairment charges 0.1 0.3 (0.2) (66.7)

Operating income* 67.7 73.5 (5.8) (7.9)

Gain on debt retirement — 8.2 (8.2) (100.0)

Interest expense, net 67.7 69.0 (1.3) (1.9)

Income before income taxes and other items — 12.7 (12.7) (100.0)

Income tax expense 15.5 14.2 1.3 9.2

(Loss) income from unconsolidated affiliates, net (0.7) 3.1 (3.8) **

Net income attributable to noncontrolling interests 0.5 0.3 0.2 66.7

Net (loss) income attributable to Pyxus International, Inc.

$ (16.7) $ 1.4 (18.1) **

Product revenue $ 969.4 $ 1,105.0 (135.6) (12.3)

Tobacco costs 794.0 912.9 (118.9) (13.0)

Transportation, storage, and other period costs 44.2 42.8 1.4 3.3

Total cost of goods sold 838.2 955.7 (117.5) (12.3)

Product revenue gross profit 131.2 149.3 (18.1) (12.1)

Product revenue gross profit as a percent of sales 13.5 % 13.5 %

Kilos sold 158.3 181.7 (23.4) (12.9)

Average price per kilo $ 6.12 $ 6.08 0.04 0.7

Average cost per kilo 5.30 5.26 0.04 0.8

Average gross profit per kilo 0.82 0.82 — —

Processing and other revenues $ 105.6 $ 90.1 15.5 17.2

Processing and other revenues costs of services sold 83.8 77.5 6.3 8.1

Processing and other gross profit 21.8 12.6 9.2 73.0

Processing and other gross profit as a percent of sales 20.6 % 14.0 %

Sales and other operating revenues $ 4.0 $ 6.1 (2.1) (34.4)

Cost of goods and services sold 3.7 8.7 (5.0) (57.5)

Gross profit (loss) 0.3 (2.6) 2.9 **

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* Amounts may not equal column totals due to rounding.

Sales and other operating revenues decreased $126.1 million, or 19.9%, to $508.8 million for the three months ended June 30, 2025 from $634.9 million for the three months ended June 30, 2024.

This decline was a result of a 30.1% decrease in kilo volumes sold primarily from Africa and North America due to the timing of certain customer shipments.

In the fourth quarter of fiscal year 2025, certain customer orders were accelerated from Africa and North America, which resulted in the year-over-year sales decline that was partially offset by higher average sales prices.

Cost of goods and services sold decreased $107.8 million, or 19.6%, to $443.2 million for the three months ended June 30, 2025 from $551.0 million for the three months ended June 30, 2024.

** Not meaningful for comparison purposes.

Sales and other operating revenues decreased $122.2 million, or 10.2%, to $1,079.0 million for the six months ended September 30, 2025 from $1,201.2 million for the six months ended September 30, 2024, due largely to the 12.9% decline in kilo volumes sold as a result of the timing of certain customer shipments.

In the fourth quarter of fiscal year 2025, certain customer orders were accelerated from Africa and North America, which contributed to the decline in sales and other operating revenues for the current year-to-date period.

Cost of goods and services sold decreased $116.3 million, or 11.2%, to $925.6 million for the six months ended September 30, 2025 from $1,041.9 million for the six months ended September 30, 2024.

This decrease was mainly due to the reduction in sales and other operating revenues.

Gross profit as a percent of sales decreased to 12.9% for the three months ended June 30, 2025 from 13.2% for the three months ended June 30, 2024.

The slight decline was driven by regional and customer sales mix within leaf, partially offset by an increase in processing and other gross profit.

Gross profit decreased $5.9 million, or 3.7%, to $153.4 million for the six months ended September 30, 2025 from $159.3 million for the six months ended September 30, 2024, due to the timing of certain sales, but slightly improved as a percent of sales mainly due to product mix.

The 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.

There were no repurchases of senior secured notes or term loans during the six months ended September 30, 2025.

See " Note 11.

Debt Arrangements " to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Income tax expense increased $1.3 million, or 9.2%, to $15.5 million for the six months ended September 30, 2025 from $14.2 million for the six months ended September 30, 2024.

This increase was due to tax expense related to foreign currency gains recognized in the current period and an increase in the liability for unrecognized tax benefits.

See " Note 4.

Income Taxes " to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Liquidity and Capital Resources

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 liquidity requirements are affected by various factors from our 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.

The first two 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.

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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 June 30, 2025 and 2024 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:

June 30, 2025 June 30, 2024

The following summarizes our total borrowing capacity at September 30, 2025 and 2024 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, 2025 September 30, 2024

(in millions) Total Borrowing Capacity Remaining Amount Available Total Borrowing Capacity Remaining Amount Available

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The following summarizes the computation of net debt:

(in millions) June 30, 2025 June 30, 2024 March 31, 2025

(in millions) September 30, 2025 September 30, 2024 March 31, 2025

Notes payable $ 908.0 $ 744.8 $ 395.0

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Net debt* $ 1,264.1 $ 1,110.9 $ 771.6

(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 $57.6 million for the three months ended June 30, 2025.

Net debt increased as of June 30, 2025 when compared to June 30, 2024 due to higher borrowings on our foreign seasonal lines of credit, partially offset by lower borrowings on the ABL Credit Facility and the repurchase of certain long-term debt in August 2024.

* 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.

Weighted average borrowings outstanding under the ABL Credit Facility were $35.1 million and $46.3 million for the three and six months ended September 30, 2025, respectively.

Net debt increased as of September 30, 2025 when compared to September 30, 2024 due to higher borrowings on our foreign seasonal lines of credit, partially offset by lower borrowings on the ABL Credit Facility.

Working Capital

The following summarizes our working capital:

(in millions except for current ratio) June 30, 2025 June 30, 2024 March 31, 2025

(in millions except for current ratio) September 30, 2025 September 30, 2024 March 31, 2025

Cash, cash equivalents, and restricted cash $ 106.4 $ 130.9 $ 85.5

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* Amounts may not equal column totals due to rounding

Working capital declined from June 30, 2024 to June 30, 2025 by $66.2 million, or 15.0%, driven by higher borrowings on our foreign seasonal lines of credit to fund the purchases of larger volumes of green tobacco, particularly in Africa and South America.

Working capital declined from September 30, 2024 to September 30, 2025 by $16.0 million, or 4.1%.

Lower working capital was a result of the increase in borrowings on our foreign seasonal lines of credit used to fund the purchases of larger volumes of green tobacco, particularly in Africa and South America, partially offset by decreases in cash and receivables as a result of timing that softened the impact of the growth in inventory.

The following summarizes inventory committed to a customer and uncommitted inventory balances for processed tobacco:

(in millions) June 30, 2025 June 30, 2024 March 31, 2025

(in millions) September 30, 2025 September 30, 2024 March 31, 2025

Committed $ 691.5 $ 733.9 $ 482.8

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Total processed tobacco $ 711.0 $ 750.6 $ 490.4

Total processed tobacco decreased from June 30, 2024 to June 30, 2025 by $29.6 million, or 4.9%, primarily from lower inventory costs of the current crop that has been processed in South America.

Uncommitted levels of processed tobacco remain low due to strong demand from our customers.

While undersupply conditions have persisted in the global tobacco market in recent periods, the larger crops experienced in Africa and South America are anticipated to provide a more balanced position.

Total processed tobacco decreased from September 30, 2024 to September 30, 2025 by $39.6 million, or 5.3%.

This decrease is primarily driven by timing of shipments made in the current quarter from certain African origins.

Uncommitted levels of processed tobacco remain low due to steady demand from our customers.

While undersupply conditions have persisted in the global tobacco market in recent periods, more favorable weather conditions have resulted in larger crops harvested, particularly in Africa and South America, which is anticipated to provide a more balanced position through the remainder of the fiscal year.

See " Note 7.

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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 June 30, 2025, our cash, cash equivalents, and restricted cash was $101.4 million, of which approximately $79.1 million was held in non-U.S.

As of September 30, 2025, our cash, cash equivalents, and restricted cash was $106.4 million, of which approximately $80.5 million was held in non-U.S.

jurisdictions for non-U.S.

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The following summarizes the sources and uses of our cash flows:

Three Months Ended

Six Months Ended

September 30,

(in millions) 2025 2024

Net (loss) income $ (16.2) $ 1.7

Trade and other receivables (111.1) (150.6)

Inventories and advances to tobacco suppliers (428.0) (100.7)

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Effect of exchange rate changes on cash (2.4) (2.1)

Increase (decrease) in cash, cash equivalents, and restricted cash* $ 15.8 $ (10.7)

Increase in cash, cash equivalents, and restricted cash* $ 20.9 $ 31.1

* Amounts may not equal column totals due to rounding

The change in cash, cash equivalents, and restricted cash for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 increased by $26.5 million.

This increase was driven by higher net proceeds received from foreign seasonal lines of credit, partially offset by an increase in cash used in operations to fund purchases of larger crops.

The change in cash, cash equivalents, and restricted cash for the six months ended September 30, 2025 compared to the six months ended September 30, 2024 decreased by $10.2 million.

This decrease was driven by the cash used in operations to fund purchases of larger crops, partially offset by higher net proceeds received from foreign seasonal lines of credit and the non-recurrence of partial repayments made on long-term debt in the prior-year period.

Planned Capital Expenditures

Capital investments in our leaf operations were primarily for routine replacement of machinery and equipment, as well as investments in assets to enhance our sustainability efforts or increase efficiencies, which we believe will add value to our customers.

We incurred approximately $4.3 million in capital expenditures for the three months ended June 30, 2025, and are expecting to incur an additional $21.8 million for the remainder of the fiscal year ending March 31, 2026.

We incurred approximately $9.7 million in capital expenditures for the six months ended September 30, 2025, and are expecting to incur an additional $16.4 million for the remainder of the fiscal year ending March 31, 2026.

Pension and Postretirement Health and Life Insurance Benefits

The following summarizes cash contributions to pension and postretirement health and life insurance benefits:

Three Months Ended

(in millions) June 30, 2025

Six Months Ended

(in millions) September 30, 2025

Contributions made during the period $ 2.1

7 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis