What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-11 compared with 2025-11-12 · 80 added, 67 removed, 235 unchanged (38% of the section changed)

51 unchanged sentences

Executive Summary

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.

The Company's third quarter results and working capital continue to reflect the impact of larger crops, a trend that has persisted throughout fiscal year 2026.

Operational and financial performance remains aligned with expectations, and after our successful buying season, the Company continues to support customers by ensuring their leaf requirements are met.

The larger crop environment across many of our operating origins, together with various timing-related accelerations and deferrals of shipments, resulted in lower leaf product sales volumes.

This decline was partially offset by strong volume growth in processing and other revenues, which favorably impacted gross margin as a percent of sales.

Larger crops led to improved performance in the Company's equity method investments, particularly in South America and Asia, resulting in higher income from unconsolidated affiliates in both the quarterly and year-to-date periods.

Quarterly results were affected by lower average selling prices in leaf product revenues, along with volume-related declines due to shifts in shipment timing.

Sales and other operating revenues were $655.8 million for the three months ended December 31, 2025, compared to $778.3 million for the three months ended December 31, 2024, representing a decrease of 15.7%, or $122.5 million.

Despite the decrease in sales and other operating revenues, gross margin as a percent of sales for the quarterly period increased slightly from 15.0% for the prior-year period to 15.2%, due to favorable product mix.

Year-to-date sales and other operating revenues reflect the timing of shipments, including the continued impact of lower carry-over sales from the prior fiscal year.

These factors affected leaf product revenues and contributed to a 12.4%, or $244.7 million, decrease in sales to $1,734.8 million for the nine months ended December 31, 2025 from $1,979.5 million for the nine months ended December 31, 2024.

Larger crop volumes for processing and other revenues partially mitigated the decline in leaf product revenues and contributed to an improvement in gross margin as a percent of sales to 14.6%, compared to 13.9% in the prior year.

Current crop tobacco purchases were principally completed by the end of the third quarter.

During the second half of the fiscal year, the Company's operations are primarily focused on processing remaining current crop volumes and fulfilling customer shipments of processed tobacco.

Consistent with trends from the first and second quarters of fiscal year 2026, our total tobacco inventory at the end of the third quarter remained elevated, representative of the larger crop volumes from Africa and South America.

As of December 31, 2025, total processed and unprocessed tobacco inventories were $959.8 million.

This higher inventory position will support ongoing customer demand and is anticipated to contribute to seasonally higher shipment activity in the remainder of the fiscal year.

Results of Operations

Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

Three Months Ended December 31, 2025 and 2024

Three Months Ended December 31,

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

8 unchanged sentences

Operating income 51.3 66.1 (14.8) (22.4)

Gain on debt retirement — 6.9 (6.9) (100.0)

Gain on pension settlement 0.4 — 0.4 100.0

Interest expense, net 36.6 32.9 3.7 11.2

2 unchanged sentences

Income from unconsolidated affiliates, net 12.4 4.3 8.1 188.4

Net loss attributable to Pyxus International, Inc.

Net income attributable to noncontrolling interests 0.3 0.5 (0.2) (40.0)

Net income attributable to Pyxus International, Inc.

$ 16.9 $ 18.9 (2.0) (10.6)

15 unchanged sentences

Cost of goods and services sold 2.7 2.5 0.2 8.0

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

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

Gross profit 0.6 0.5 0.1 20.0

Gross profit as a percent of sales 18.2 % 16.7 %

* 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.

Sales and other operating revenues decreased $122.5 million, or 15.7%, to $655.8 million for the three months ended December 31, 2025 from $778.3 million for the three months ended December 31, 2024.

This decrease was a result of lower leaf product revenues due to the timing of customer shipments in Africa and Europe, as well as a lower average price per kilo primarily in South America, with pricing reflective of the lower costs to purchase the current crop.

Cost of goods and services sold decreased $106.0 million, or 16.0%, to $555.9 million for the three months ended December 31, 2025 from $661.9 million for the three months ended December 31, 2024, corresponding to the reduction in sales and other operating revenues, as well as the lower costs incurred to purchase the current crop.

Gross profit decreased $16.6 million, or 14.2%, to $99.9 million for the three months ended December 31, 2025 from $116.5 million for the three months ended December 31, 2024.

This decrease was due to the timing of certain leaf product revenues and the decline in average gross profit per kilo.

Average gross profit per kilo was lower by $0.11, or 12.1%, to $0.80 for the three months ended December 31, 2025 from $0.91 for the three months ended December 31, 2024, which was impacted unfavorably by lower average sales prices due to product mix and customer mix.

Selling, general, and administrative expenses decreased $8.2 million, or 17.6%, to $38.3 million for the three months ended December 31, 2025 from $46.5 million for the three months ended December 31, 2024.

This decrease was primarily due to a lower accrual for variable incentive compensation.

Other expense, net increased $5.0 million, or 131.6%, to $8.8 million for the three months ended December 31, 2025 from $3.8 million for the three months ended December 31, 2024.

This increase was primarily due to the resolution of a discrete customs dispute in the current-year period.

Income tax expense decreased $7.8 million, or 43.1%, to $10.3 million for the three months ended December 31, 2025 from $18.1 million for the three months ended December 31, 2024.

This decrease was primarily attributable to reduced unfavorable foreign currency impacts recognized in income tax expense during the current-year period.

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,

Income from unconsolidated affiliates, net increased $8.1 million, or 188.4%, to $12.4 million for the three months ended December 31, 2025 from $4.3 million for the three months ended December 31, 2024.

This increase was mainly due to higher profitability in South America as a result of lower purchasing costs for the current crop that was sold during the period.

Nine Months Ended December 31, 2025 and 2024

Nine Months Ended December 31,

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

9 unchanged sentences

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

Gain on pension settlement 0.4 — 0.4 100.0

Interest expense, net 104.3 101.9 2.4 2.4

1 unchanged sentence

Income tax expense 25.8 32.3 (6.5) (20.1)

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

Income from unconsolidated affiliates, net 11.7 7.4 4.3 58.1

Net income attributable to noncontrolling interests 0.8 0.8 — —

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

$ (16.7) $ 1.4 (18.1) **

Net income attributable to Pyxus International, Inc.* $ 0.2 $ 20.3 (20.1) (99.0)

Product revenue $ 1,584.1 $ 1,847.9 (263.8) (14.3)

17 unchanged sentences

* Amounts may not equal column totals due to rounding.

** 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 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.

Sales and other operating revenues decreased $244.7 million, or 12.4%, to $1,734.8 million for the nine months ended December 31, 2025 from $1,979.5 million for the nine months ended December 31, 2024, largely due to the 10.4% decline in kilo volumes sold as a result of the timing of certain leaf product customer shipments, including the continued impact of lower carry-over sales from accelerated shipments in Africa and North America during the fourth quarter of fiscal year 2025.

Cost of goods and services sold decreased $222.3 million, or 13.0%, to $1,481.5 million for the nine months ended December 31, 2025 from $1,703.8 million for the nine months ended December 31, 2024.

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

Gross profit decreased $22.5 million, or 8.2%, to $253.3 million for the nine months ended December 31, 2025 from $275.8 million for the nine months ended December 31, 2024, due to the decline in leaf product revenues, partially offset by increased gross profit in processing and other revenues primarily from larger crops in Africa.

Average gross profit per kilo was lower by $0.04, or 4.7%, to $0.81 for the nine months ended December 31, 2025 from $0.85 for the nine months ended December 31, 2024, mainly due to product mix.

Despite these declines, the larger crop sales for processing and other revenues contributed to an improvement in gross profit as a percent of sales to 14.6%, compared to 13.9% in the prior year.

Selling, general, and admini strative expenses decreased $7.2 million, or 5.7%, to $118.8 million for the nine months ended December 31, 2025 from $126.0 million for the nine months ended December 31, 2024.

The decrease was driven by a lower accrual for variable incentive compensation and less equity-based compensation expense due to the non-recurrence of modified restricted stock awards, partially offset by increased personnel costs.

Other expense, net increased $4.2 million, or 43.3%, to $13.9 million for the nine months ended December 31, 2025 from $9.7 million for the nine months ended December 31, 2024 .

This increase was due to the resolution of a discrete customs dispute in the current period, along with an unfavorable impact from foreign currency fluctuations.

These higher expenses were partially offset by lower utilization of the Company's securitization facilities.

The gain on debt retirement of $8.2 million for the nine months ended December 31, 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 nine months ended December 31, 2025.

See " Note 18.

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.

Related Party Transactions " to the "Notes to Condensed Consolidated Financial Statements" for additional information.

Income tax expense decreased $6.5 million, or 20.1%, to $25.8 million for the nine months ended December 31, 2025 from $32.3 million for the nine months ended December 31, 2024.

This decrease was due to lower income before income taxes and other items and from a reduction in unfavorable foreign currency impacts recognized in income tax expense during the current year-to-date period, partially offset by an increase in the reserves for unrecognized tax benefits.

See " Note 4.

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

Income from unconsolidated affiliates, net increased $4.3 million, or 58.1%, to $11.7 million for the nine months ended December 31, 2025 from $7.4 million for the nine months ended December 31, 2024.

This increase was due to higher profitability generated from larger crop volumes sold in South America and Asia, along with additional income from Asia due to a gain on the sale of certain fixed assets and from the receipt of insurance recoveries following severe flooding that impacted operations in the prior year.

Liquidity and Capital Resources

15 unchanged sentences

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, 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

The following summarizes our total borrowing capacity at December 31, 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:

December 31, 2025 December 31, 2024

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

14 unchanged sentences

The following summarizes the computation of net debt:

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

(in millions) December 31, 2025 December 31, 2024 March 31, 2025

Notes payable $ 833.7 $ 608.6 $ 395.0

5 unchanged sentences

Net debt $ 1,159.4 $ 960.0 $ 771.6

* 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.

Weighted average borrowings outstanding under the ABL Credit Facility were $52.0 million and $48.2 million for the three and nine months ended December 31, 2025, respectively.

Net debt increased as of December 31, 2025 when compared to December 31, 2024 due to higher borrowings on our foreign seasonal lines of credit.

Working Capital

The following summarizes our working capital:

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

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

Cash, cash equivalents, and restricted cash $ 134.5 $ 109.7 $ 85.5

15 unchanged sentences

* Amounts may not equal column totals due to rounding

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 change in working capital from December 31, 2024 to December 31, 2025 represents a modest decline of $2.5 million, or 0.6%, and reflects increased borrowings under foreign seasonal lines of credit to support purchases of higher volumes of green tobacco, particularly in Africa and South America, mostly offset by the increase in inventories and advances to tobacco suppliers, net funded by such borrowings.

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

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

(in millions) December 31, 2025 December 31, 2024 March 31, 2025

Committed $ 740.6 $ 581.4 $ 482.8

1 unchanged sentence

Total processed tobacco $ 768.6 $ 603.3 $ 490.4

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.

Total processed tobacco increased by $165.3 million, or 27.4%, from December 31, 2024 to December 31, 2025.

The increase primarily reflects larger crop volumes purchased and processed in Africa, including volumes affected by shipment delays from certain African origins during the period.

While uncommitted levels of processed tobacco remained low as of December 31, 2025, larger current season crop volumes, particularly from Africa and South America, led to a shift in the global tobacco market toward a more balanced supply environment during the current fiscal year, compared to undersupply conditions in prior years.

Early indications from the upcoming crop season suggest continued strong production, which is expected to result in oversupply levels at the beginning of fiscal 2027.

See " Note 7.

10 unchanged sentences

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

As of December 31, 2025, our cash, cash equivalents, and restricted cash was $134.5 million, of which approximately $75.2 million was held in non-U.S.

jurisdictions for non-U.S.

4 unchanged sentences

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

Six Months Ended

September 30,

Nine Months Ended

(in millions) 2025 2024

Net (loss) income $ (16.2) $ 1.7

Net income $ 1.0 $ 21.1

Trade and other receivables (209.2) (305.1)

8 unchanged sentences

Net proceeds from short-term borrowings 431.4 114.9

Net proceeds from revolving loan facilities — 35.0

Repayment of long-term borrowings — (55.8)

4 unchanged sentences

* Amounts may not equal column totals due to rounding

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.

The change in cash, cash equivalents, and restricted cash for the nine months ended December 31, 2025 compared to the nine months ended December 31, 2024 increased by $39.1 million.

This increase was due to 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, partially offset by an increase in cash used to purchase larger crop volumes.

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 $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.

We incurred approximately $15.8 million in capital expenditures for the nine months ended December 31, 2025, and are expecting to incur an additional $10.3 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:

Six Months Ended

(in millions) September 30, 2025

Nine Months Ended

(in millions) December 31, 2025

Contributions made during the period $ 3.2

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