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Pyxus International, Inc. (PYYX) SEC Filing 10-K Annual Report for the fiscal year ending Thursday, March 31, 2022

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Pyxus International, Inc.

CIK: 939930 Ticker: PYYX

Exhibit 99.1
 
Pyxus International, Inc.  Tel: 919 379 4300  
logoa01.jpg
8001 Aerial Center Parkway  Fax: 919 379 4346
Post Office Box 2009  www.pyxus.com
Morrisville, NC 27560-2009  
USA  
 
NEWS RELEASE    Contact:  Tomas Grigera
          (919) 379-4300
Pyxus International, Inc. Reports Fourth Quarter and Fiscal Year 2022 Results

Morrisville, NC – June 14, 2022 –
Pyxus International, Inc. (OTC Pink: PYYX) (“Pyxus” or the “Company”), a global value-added agricultural company, today announced results for its quarter and fiscal year ended March 31, 2022. As described in more detail below, results presented for the prior fiscal year period reflect the combined results of the Successor and Predecessor periods reflecting, respectively, the periods prior to and subsequent to the Company's emergence from Chapter 11 proceedings.
Highlights*
 
Sales and other operating revenues were $1,639.9 million, which increased $308.0 million or 23.1% from the prior fiscal year.
Gross profit as a percent of sales was 13.8%, which increased from 12.1% in the prior fiscal year.
Selling, general, and administrative expenses ("SG&A") were $142.0 million, which decreased $55.9 million or 28.2% from the prior fiscal year.
Net loss attributable to Pyxus International, Inc. was $82.1 million, which improved $35.6 million or 30.2% from the prior fiscal year despite $32.2 million of goodwill impairment in fiscal 2022.
Adjusted EBITDA** increased $33.2 million or 35.5% to $126.7 million.
Cash and cash equivalents was $198.8 million, an increase of $106.1 million, as of March 31, 2022 from the prior fiscal year end.
While shipping constraints continue, as of March 31, 2022, 91.2% of the Company's inventory is committed to specific customers to meet near-term forecasted demand.
In December 2021, the Company publicly announced its environmental, social, and governance framework, which provides the connection between its purpose and business priorities.
In February 2022, the Company entered into a new $100.0 million ABL credit facility with PNC Bank to replace its existing $75.0 million ABL credit facility.
In June 2022, the Company entered into an agreement to amend and extend the Company's delayed draw term loan facility.

* See "Presentation of Combined Financial Information" in this press release for a discussion of the calculation of combined amounts.
** Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization ("Adjusted EBITDA") is not a measure of results under GAAP. See the reconciliation tables included in this press release for details regarding the calculation of Adjusted EBITDA.
Pieter Sikkel, Pyxus' President and CEO said, "We are proud of the progress made by the business during fiscal year 2022. Our employees worked diligently to successfully increase volumes and revenue compared to the prior year while continuing to navigate global challenges, which largely stem from the ongoing impacts of COVID-19 and the unfortunate events in Ukraine.

"We continued to expand our customer relationships as customers sought solutions to reduce supply chain complexities and improve operational efficiencies. Expansion of these relationships, partially attributable to our environmental, social, and governance ("ESG") framework that we publicly announced in December 2021, increased our market share in Africa, Asia, and South America and contributed to a 16.8% increase in kilo volume compared to last year.

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The following information was filed by Pyxus International, Inc. (PYYX) on Tuesday, June 14, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED March 31, 2022

    ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______.
000-25734
(Commission File Number)
pyx-20220331_g1.jpg
Pyxus International, Inc.
(Exact name of registrant as specified in its charter)
Virginia85-2386250
(State or other jurisdiction of incorporation)
(I.R.S. Employer Identification No.)
 8001 Aerial Center Parkway
Morrisville,North Carolina27560
(Address of principal executive offices)(Zip Code)

(919) 379-4300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock (no par value)
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
                                           
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No    

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.       
                                                                
Large accelerated filer                                           
Non-accelerated filer   
Accelerated filer   ☐                    

Smaller reporting company    
Emerging growth company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

As of September 30, 2021, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $23.5 million based on the closing price of the common stock as reported on the OTC Pink Marketplace.

As of May 31, 2022, there were 24,999,947 shares of common stock outstanding (no par value).

DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Proxy Statement for the 2022 Annual Meeting of Shareholders (to be held August 18, 2022) of the registrant is incorporated by reference into Part III hereof.



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Table of Contents
Page No.
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.


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PART I

Item 1. Business

This Annual Report on Form 10-K (this "Annual Report") is being filed by Pyxus International, Inc. (the "Company," "Pyxus," "we," or "us"). The Company is the successor issuer to Old Holdco, Inc. ("Old Pyxus") and was incorporated as a Virginia corporation in August 2020 to facilitate the Restructuring described below. The terms the "Company," "Pyxus," "we," or "us" when used with respect to periods commencing prior to the effectiveness of the Plan (as defined below), refer to Old Pyxus, unless the context would indicate otherwise. As the context requires, the "Company," "Pyxus," "we" and "us" also includes the consolidated subsidiaries of Pyxus International, Inc.

On June 15, 2020 (the "Petition Date"), Old Pyxus (then named Pyxus International, Inc.) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC and GSP Properties, LLC (collectively, the "Debtors") filed voluntary petitions (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring (the "Restructuring") of Old Pyxus’ secured debt. On August 21, 2020, the Bankruptcy Court issued an order (the "Confirmation Order") confirming the Amended Joint Prepackaged Chapter 11 Plan of Reorganization (the "Plan") filed by the Debtors in the Chapter 11 Cases. On August 24, 2020, the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases. In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc., which is an indirect subsidiary of the Company. Pursuant to the Confirmation Order and the Plan, at the effectiveness of the Plan, all outstanding shares of common stock, and rights to acquire the common stock, of Old Pyxus were cancelled and the shares of common stock of the Company were delivered to certain creditors of Old Pyxus. Other than our Chief Executive Officer, our Board of Directors does not include any of the individuals who served as directors of Old Pyxus at the time the Chapter 11 Cases were commenced or at the effectiveness of the Plan. These and other related matters are discussed in greater detail in "Note 3. Emergence from Voluntary Reorganization under Chapter 11" to the "Notes to Consolidated Financial Statements," which is incorporated herein by reference. Cross references included in this Annual Report to "Notes to Consolidated Financial Statements" are to the "Notes to Consolidated Financial Statements" included in Item 8, "Financial Statements and Supplementary Data" of this Annual Report.

Company Overview
Pyxus is a trusted provider of responsibly sourced, independently verified, sustainable and traceable products and ingredients. Headquartered in Morrisville, North Carolina, we contract with suppliers across five continents to help them produce sustainable, compliant crops.

Historically, Pyxus’ core business has been as a tobacco leaf merchant, purchasing, processing, packing, storing and shipping tobacco to manufacturers of cigarettes and other consumer tobacco products throughout the world. Through our predecessor companies, we have a long operating history in the leaf tobacco industry with some customer relationships beginning in the early 1900s. Our core leaf tobacco operations continued to account for almost all of our revenues for the year ended March 31, 2022.

We are committed to responsible crop production that supports economic viability for the supplier, provides a safe working atmosphere for farmworkers and minimizes negative environmental impacts. Our agronomists maintain frequent contact with our contracted suppliers prior to and during the growing and curing seasons to provide technical assistance to improve the quality and yield of the crop. Throughout the entire production process, from seed through processing and final shipment, our SENTRI® traceability platform can provide clear visibility into how products are produced throughout the supply chain, supporting product integrity.

In an increasing number of markets, we also provide agronomy expertise for alternative crops. Our contracted tobacco supplier base often produces non-tobacco crops, utilizing the agronomic assistance that our team provides. Pyxus is working to find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the communities in which they live.

Beginning in 2017, we undertook to diversify the Company's products and services. In support of this strategy, the Company made the following investments:

E-liquids
On April 2, 2018, we purchased a 51% interest in Humble Juice, LLC ("Humble Juice"), a manufacturer and distributor of flavored e-liquids.
On August 21, 2017, the Company completed a purchase of a 40% interest in Nicotine River, LLC ("Nicotine River"), a manufacturer, retailer and wholesale supplier of compounds used for e-liquid production, and on August 14, 2020,
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the Company exchanged its 40% ownership interest in Nicotine River for an additional 14.3% interest in Humble Juice, then increasing the Company's ownership interest in Humble to 65.3%.

Industrial hemp/CBD
On December 18, 2017, a subsidiary of the Company completed a purchase of a 40% interest in Criticality LLC ("Criticality"), a North Carolina-based industrial hemp company to engage in cannabidiol ("CBD") extraction and other applications for industrial hemp. On April 22, 2020, that subsidiary completed a purchase of the 60% interest in Criticality not owned by the subsidiary, and as a result Criticality became a wholly owned subsidiary of Pyxus.

Legal cannabis in Canada
On January 25, 2018, a wholly owned Canadian subsidiary of the Company acquired a 75% equity position in Canada’s Island Garden Inc. ("Figr East"). Figr East obtained license to produce and sell medicinal and adult-use cannabis in most of the provinces in the Canadian market. We acquired an additional 18% and 1.2% equity interest in Figr East on March 22, 2019 and October 15, 2019, respectively, increasing the ownership percentage to 94.2%.
On January 29, 2018, a wholly owned Canadian subsidiary of the Company acquired an 80% equity position in Figr Norfolk Inc. ("Figr Norfolk" and, together with Figr East "Figr"), formerly known as Goldleaf Pharm Inc., which obtained license to produce and sell medicinal and adult-use cannabis in most of the provinces in the Canadian market.

As further discussed below, we have generally divested or ceased operating these businesses and have returned our focus to our leaf tobacco businesses.

Following the effectiveness of the Plan and the election of additional members of our Board of Directors in October 2020, our Board of Directors determined to exit the industrial hemp, CBD and Canadian cannabis businesses in light of the Company’s limited capital resources and the continuing capital requirements to develop and expand these early-stage businesses. In December 2020, the Company commenced actions to exit operations of the industrial hemp businesses, including the production and sale of products containing extracts of industrial hemp, including CBD products, by Criticality. Criticality’s CBD extraction facility has ceased operations.

On January 21, 2021, Figr Norfolk Inc. ("Figr Norfolk") and Figr Brands, Inc. ("Figr Brands"), which are indirect subsidiaries of the Company, and Canada’s Island Garden Inc. ("Figr East", and together with Figr Norfolk and Figr Brands, the "Canadian Cannabis Subsidiaries"), which, prior to its sale on June 28, 2021 was an indirect subsidiary of the Company, applied for relief from their respective creditors pursuant to Canada’s Companies’ Creditors Arrangement Act (the "CCAA") in the Ontario Superior Court of Justice (Commercial List) (the "Canadian Court") in Ontario, Canada as Court File No. CV-21-00655373-00CL (the "CCAA Proceeding"). On January 21, 2021 (the "Order Date"), upon application by the Canadian Cannabis Subsidiaries, the Canadian Court issued an order for creditor protection of the Canadian Cannabis Subsidiaries pursuant to the provisions of the CCAA and the appointment of FTI Consulting Canada Inc. to serve as the Canadian Court-appointed monitor of the Canadian Cannabis Subsidiaries during the pendency of the CCAA Proceeding (the "Monitor"). As a result of the commencement of the CCAA Proceeding and the appointment of the Monitor, and in accordance with U.S. generally accepted accounting principles, the Canadian Cannabis Subsidiaries were deconsolidated from the Company's financial statements as of the Order Date.

As a result of a sale process under an order issued by the Canadian Court in the CCAA Proceeding, the sale of Figr East and certain intangible assets of Figr Brands was completed on June 28, 2021 and the sale of assets of Figr Norfolk was completed on January 28, 2022. Pursuant to the CCAA Proceeding, the Company received funds in settlement of its debt claims with respect to the Canadian Cannabis Subsidiaries and did not receive any recovery with respect to its equity interest in the Canadian Cannabis Subsidiaries. See "Note 5. CCAA Proceeding and Deconsolidation of Subsidiaries" and "Note 30. Subsequent Events" to the "Notes to Consolidated Financial Statements" for additional information.

On November 23, 2021, the Company disposed of its ownership interests in Humble Juice, the Company's primary e-liquids business, in exchange for royalties on future revenue. During the fourth quarter of the year ended March 31, 2022, the Company's remaining e-liquids subsidiary, Twelfth State Brands LLC, which markets e-liquids under the Bantam trademark, suspended the sourcing of additional inventory and reduced staffing pending action by the U.S. Food and Drug Administration (the "FDA") on its applications to permit continued marketing of its remaining products.

Historically, the Company had nine operating segments that were organized by product category and geographic area and were aggregated into three reportable segments for financial reporting purposes: Leaf - North America, Leaf - Other Regions, and Other Products and Services. During the year ended March 31, 2022, the Company reevaluated its operating and reportable segments under ASC Topic 280 - Segment Reporting ("ASC 280") in response to the effectiveness of the Plan in August 2020, the appointment of a new Board of Directors during the seven months ended March 31, 2021, the outcomes achieved from cost savings and restructuring initiatives implemented during the five months ended August 31, 2020 and the seven months ended March 31, 2021, the Company's exit from its industrial hemp, CBD, and Canadian cannabis businesses during the seven months
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ended March 31, 2021, and changes to business operations as a result of the COVID-19 pandemic. As a result of this reevaluation, effective during the fourth quarter of the year ended March 31, 2022, the Company has eight operating segments organized by geographic area and product category and are aggregated into one reportable segment for financial reporting purposes: Leaf. See "Note 1. Basis of Presentation and Summary of Significant Accounting Policies" to the "Notes to Consolidated Financial Statements" for additional information.

Leaf Tobacco Operations
Our leaf tobacco revenues are primarily comprised of sales of processed leaf tobacco and fees charged for processing and related services to manufacturers of tobacco products. Our leaf tobacco operations deal primarily in flue-cured, burley, and oriental tobaccos that are used in international cigarette brands.

We purchase tobacco on five continents and ship to customers globally. We primarily purchase tobacco directly from suppliers. In those instances, we assume the risk of matching the quantities and grades required by our customers to the entire crop we must purchase under contract.

Our arrangements with suppliers vary depending on our predictions of future supply and demand, local historical practice and availability of capital. In some locales, we purchase seeds, fertilizer, pesticides, and other products related to growing tobacco, which represent prepaid inventory, and issue them to suppliers with whom we have purchase contracts. The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if they meet our specifications. The advances of inputs for the current crop generally include the original cost of the inputs plus a mark-up and interest as it is earned. Where contractually permitted, we charge interest to the suppliers during the period the current crop advance is outstanding. We generally advance inputs at a price greater than our cost, which results in a mark-up on the inputs. We account for our advances to tobacco suppliers using a cost accumulation model, which results in us reporting our advances at the lower of cost or recoverable amounts excluding the mark-up and interest. The mark-up and interest on our advances are recognized when the tobacco is delivered as a decrease in our cost of the current crop. Upon delivery of tobacco, part of the purchase price paid to the supplier is paid in cash and part through a reduction of the advance balance. The advances applied to the delivery are reclassified out of advances and into unprocessed inventory. We advance inputs only to suppliers with whom we have purchase contracts. Under longer-term arrangements with suppliers, we may advance or guarantee financing on suppliers' capital assets, which are also recovered through the delivery of tobacco to us by our suppliers.

As a result of various factors including weather, not all suppliers are able to settle the entire amount of advances through delivery of tobacco in a given crop year. Throughout the crop cycle, we monitor events that may impact the suppliers’ ability to deliver tobacco. If we determine we will not be able to recover the original cost of the advances with deliveries of the current crop, or future crop deliveries, the unit cost of tobacco actually received is increased when unrecoverable costs are within a normal range or expensed immediately when they are above a normal range. The normal range is based on our historical results. We account for the unrecoverable costs in this manner to ensure only costs within a normal range are capitalized in inventory and costs that are above a normal range are expensed immediately as current period charges.

We process tobacco to meet each customer's specifications as to quality, yield, chemistry, particle size, moisture content and other characteristics. Unprocessed tobacco is a semi-perishable commodity. The processing of leaf tobacco facilitates shipping and prevents spoilage and is an essential service to our customers because the quality of processed leaf tobacco substantially affects the quality of the manufacturer’s end product. Accordingly, we have located our production facilities in proximity to our principal sources of tobacco. We process tobacco in Company-owned and third-party facilities around the world, including in Argentina, Brazil, China, Guatemala, India, Indonesia, Jordan, Macedonia, Malawi, Tanzania, Thailand, Turkey, United States, and Zimbabwe. These facilities encompass all leading export locations of flue-cured, burley and oriental tobaccos. After processing, whole leaves, bundles, strips or stems, and scrap where applicable, are separately packed in cases, bales, cartons or hogsheads for storage and shipment. Packed flue-cured, burley and oriental tobacco generally is transported in the country of origin by truck or rail, and exports are moved by ship.

During the year ended March 31, 2022, the seven months ended March 31, 2021, the five months ended August 31, 2020, and the year ended March 31, 2020, approximately 64%, 60%, 68%, and 67% of our total purchases for the respective period were from Brazil, China, Turkey, and the Africa Region. We have entered into contracts, joint ventures and other arrangements for the purchase of tobacco grown in substantially all other countries that produce export-quality flue-cured and burley tobacco.

Key Customers
In our leaf tobacco business, our primary customers are major consumer tobacco product manufacturers. Refer to "Note 29. Segment Information" to the "Notes to Consolidated Financial Statements" for additional information regarding customers, and their respective affiliates, that account for more than 10% of our annual revenues. Pyxus delivered approximately 33% of its tobacco sales to customers in Europe, approximately 17% to customers in China, and approximately 13% to customers in the United States for year ended March 31, 2022. The remaining sales of leaf tobacco are to customers located in Asia, Africa, and other geographic regions of the world.
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Competition
Leaf tobacco industry competition is based primarily on the price charged for products and services as well as the merchant's ability to meet customer specifications in the buying, processing, residue compliance and financing of tobacco. The Company is one of only two global, publicly held leaf tobacco merchants. We hold a leading position in most major tobacco growing regions in the world, including the principal export markets for flue-cured, burley and oriental tobacco. In addition to the primary global independent leaf tobacco merchants, there are a number of other independent global, regional or national competitors. Local independent leaf merchants with low fixed costs and overhead also supply cigarette manufacturers.

Seasonality
The purchasing and processing activities of our leaf tobacco business are seasonal. Tobacco purchases vary by market and tobacco variety. Flue-cured tobacco grown in North America is purchased, processed, and marketed generally during the five-month period beginning in July and ending in November. North American burley tobacco is purchased, processed, and marketed usually from late November through January or February. Tobacco grown in South America is usually purchased, processed, and marketed from January through July and in Africa from April through September. Other tobacco markets around the world have similar purchasing periods, although at different times of the year. During the purchasing, processing and marketing seasons, inventories of unprocessed tobacco, inventories of redried tobacco, and trade accounts receivable normally reach peak levels in succession. Current liabilities, particularly advances from customers, and short-term notes payable to banks, normally reach their peak in this period as a means of financing the seasonal expansion of current assets. At March 31, the end of our fiscal year, the seasonal components of our working capital reflect primarily the operations related to foreign-grown tobacco.

Track and Trace Technology
In connection with its leaf tobacco operations, the Company uses a proprietary "track and trace" system, which we have branded as the SENTRISM platform, which we believe provides transparency into the lifecycle of agricultural products by monitoring information and obtaining data related to the growth, cultivation, harvest, processing, formulation, testing, and release of individual batches of products. By obtaining data on products at each stage of the supply chain, SENTRISM permits proactive decision-making for both the Company and its leaf tobacco customers. The key features of the SENTRISM platform include:

Product Tracking: Data collection and tracking at various stages in the product lifecycle permits customers and consumers to gain an understanding of where products originate from, how they were produced, and the product testing data in order to understand ingredients and the product journey.
Control and Visibility: With access to increased data regarding the supply chain, we are able to monitor quality control at various points in the product route to market.
Sustainability Commitments: SENTRISM incorporates visibility into the practices and procedures of the product supply chain.
Lot Number Tracking: We are able to track specific products through the manufacturing process by lot number with full visibility to our customers. This permits us and our customers to discover more about the product, its origin and other information relevant to quality control and product transparency.
Agronomic Services: SENTRISM utilizes an experienced team of agronomists to track data and insights regarding growing practices.

Regulation
See "Item 1A. Risk Factors" for a discussion of applicable government regulation of leaf tobacco.

Human Capital Management
Our workforce is one of our most important stakeholder groups and is critical to achieving our purpose – to transform people’s lives so that together we can grow a better world. The attraction, development and retention of talent enables us to make progress against our business strategy, and it is essential that we create and maintain a culture of conducting business the right way. It is for these reasons that we dedicate resources to employee engagement, focus on creating a safe workplace and recognizing employees for the results that they deliver.
As of March 31, 2022, we employed approximately 3,000 people, excluding seasonal employees, in our worldwide operations. We maintain positive relationships with the Company’s employees and their respective organizations. We have collective bargaining agreements in place in many of the countries in which we operate and we have long-term agreements in-place in certain jurisdictions to resolve disputes through binding arbitration.
Oversight and Management
Our Human Resources department is responsible for managing employment-related matters, including recruiting and hiring, onboarding, compensation design and implementation, performance management, advancement and succession planning, and
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professional and learning development. Our Board of Directors provides oversight of various matters pertaining to our workforce. The Compensation Committee of the Board of Directors is responsible for executive compensation matters and oversight of the risks and programs related to talent management. Our Human Rights Policy and Code of Business Conduct highlight our commitment to diversity, inclusion, fairness, safety and equal opportunity in all aspects of employment.
In response to COVID-19, we focused on business continuity, health and safety of our employees, and adapting our ways of working to a new environment. We quickly implemented additional safety measures to protect essential employees in our offices and facilities, including social distancing protocols, face covering requirements, temperature checks, and additional cleaning and sanitation practices. We also enhanced remote-work arrangements and digital collaboration and related risk management.
Supply Chain Human Rights Matters
We support efforts to address human rights concerns in the tobacco supply chain. For example, in our tobacco supply chain, we use on-farm good agricultural practices assessments to assess suppliers’ compliance with labor practices. Our subsidiaries establish contract terms and conditions with tobacco suppliers related to issues such as forced and child labor, and they conduct social compliance due diligence throughout our tobacco-growing regions.
Environmental Compliance
Currently, there are no material estimated capital expenditures related to environmental control facilities. In addition, there is no material effect on capital expenditures, results of operations or competitive position anticipated as a result of compliance with current or pending federal or state laws and regulations relating to protection of the environment.
Available Information
Our website is www.pyxus.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at http://investors.pyxus.com as soon as reasonably practicable after we file such material with, or furnish it to, the U.S. Securities and Exchange Commission ("SEC"). The information contained on our website shall not be deemed part of this annual report on Form 10-K. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Forward-looking Statements
We may from time to time make written or oral forward-looking statements, including statements contained in filings with the SEC, in reports to stockholders and in press releases and investor calls and webcasts, which are forward-looking statements under the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in the Company’s securities. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, this Annual Report includes disclosure of risks and uncertainties, including in "Item 1A. Risk Factors", that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by us. Any such statement is qualified by reference to these cautionary statements. It is not possible to predict or identify all risk factors. Consequently, the risks and uncertainties identified in this Annual Report should not be considered a complete discussion of all potential risks or uncertainties. We do not undertake to update any forward-looking statement that we may make from time to time except as may be required by law.

Item 1A. Risk Factors

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained in this Annual Report. Any of the following risks could materially adversely affect our business, our operating results, our financial condition, and the actual outcome of matters as to which forward-looking statements are made in this Annual Report.

Risks Related to Our Liquidity

We may not be able to achieve our stated goals, which may adversely affect our liquidity.
We face a number of risks, such as changes in economic conditions, continued impacts of the COVID-19 pandemic, changes in the leaf tobacco market, changes in regulations affecting the tobacco industry, other changes in demand for our products, and increasing expenses. We may need to raise additional funds through public or private debt or equity financing or other various
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means to fund our business, both at a holding-company level and the local short-term credit lines that fund the operating needs of our non-U.S. local leaf tobacco subsidiaries. Our access to necessary financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, or at all.

Developments with respect to our liquidity needs and sources of liquidity could result in a deficiency in liquidity.
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 and shipping requirements, 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 during the fiscal year. We anticipate periods in the next twelve months during which our liquidity needs will approach the levels of our anticipated available cash and permitted borrowings under our credit facilities. Developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations (including as a result of delays with respect to the anticipated timing of shipments of leaf tobacco, whether due to the impact of COVID-19, customer preferences, or other reasons) and the availability of capital resources (including an inability to renew or refinance short-term operating lines of credit and other short-term indebtedness), may result in a deficiency in liquidity. To address a potential liquidity deficiency, we may continue to undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow. It is possible that, depending on the occurrence of events affecting our liquidity needs and sources of liquidity, such plans may not be sufficient to adequately or timely address a liquidity deficiency.

We may be unable to continue to access short-term operating credit lines to fund local operations on terms that are acceptable or at all.
We have historically financed our non-U.S. local leaf tobacco operations with short-term operating credit lines at the local level. These operating lines are typically seasonal in nature, corresponding to the tobacco crop cycle in that location. Certain of these facilities are uncommitted in that the lenders have the right to cease making loans or demand payment of outstanding loans at any time. Moreover, as these facilities mature, local lenders may not renew them or otherwise offer replacement financing facilities. If local lenders lose confidence in us, they may cease making loans or demand payment of outstanding loans with respect to uncommitted facilities or, with respect to committed facilities, decline to renew or extend existing facilities, or require stricter terms and conditions with respect to future facilities. We may not find these terms and conditions acceptable or they may overly restrict our ability to conduct our businesses successfully. An inability to maintain adequate financing to fund our non-U.S. local leaf tobacco operations in any significant location could result in a significant decline in our revenues, profitability and cash flow and may require us to exit operations in that jurisdiction.

Risks Related to our Indebtedness

We have substantial debt which may adversely affect us by limiting future sources of financing, interfering with our ability to pay interest, and principal on our indebtedness and subjecting us to additional risks.
We have a significant amount of indebtedness and debt service obligations. As of March 31, 2022, we had approximately $1,066.9 million in aggregate principal amount of indebtedness. This indebtedness included (i) approximately $90.0 million of outstanding borrowings pursuant to an ABL Credit Agreement (the "ABL Credit Agreement"), dated as of February 8, 2022 by and among, amongst others, Pyxus, our subsidiaries Pyxus Parent, Inc., and Pyxus Holdings, Inc. ("Pyxus Holdings"), and certain subsidiaries of Pyxus Holdings, certain 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") which provides for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $100.0 million subject to certain limitations, and matures on the earlier of February 8, 2027 or 90 days prior to the earliest maturity of obligations owing under the Exit Term Loan Credit Agreement and the Indenture (each as defined below), (ii) approximately $219.5 million in aggregate principal amount of term loans (the "Exit Term Loans") under an Exit Term Loan Credit Agreement, dated as of August 24, 2020 (the "Exit Term Loan Credit Agreement"), by and among, amongst others, Pyxus Holdings, certain lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, which Term Loans mature on February 24, 2025, (iii) approximately $270.8 million in aggregate principal amount of 10.00% Senior Secured First Lien Notes due 2024 (the "Notes") of Pyxus Holdings pursuant to an Indenture (the "Indenture") dated as of August 24, 2020 among Pyxus Holdings, the initial guarantors party thereto (including Pyxus International, Inc.), and Wilmington Trust, National Association, as trustee, and collateral agent, which Notes mature on August 24, 2024, (iv) approximately $107.8 million in aggregate principal amount of term loans (the "DDTL Term Loans") under a delayed-draw term loan lending facility (as amended on May 21, 2021, the "DDTL Facility") established under a term loan credit agreement (the "DDTL Facility Credit Agreement") dated April 23, 2021 among Intabex Netherlands B.V. ("Intabex"), our indirect wholly owned subsidiary, as the borrower, the Company, Pyxus Holdings, Pyxus Parent, Inc., Alliance One International, LLC and Alliance One International Holdings, Ltd. as guarantors, and the lenders party thereto, including certain funds managed by Glendon Capital Management LP, Monarch Alternative Capital LP, and Owl Creek Asset Management, L.P., which mature on July 31, 2022, (v) approximately $71.6 million in aggregate outstanding borrowings under a Third Amendment and Restatement Agreement (the "TDB Facility Agreement") among Pyxus and certain of our subsidiaries, including subsidiaries in Malawi, Tanzania and Zambia, and Eastern and Southern African Trade and Development Bank ("TDB"), which TDB Facility
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Agreement terminates on June 30, 2024, unless terminated sooner at TDB's discretion on June 30, 2022 or June 30, 2023, and (vi) approximately $378.6 million in aggregate outstanding borrowings under local short-term operating lines of credit.

Our substantial debt could have important consequences, including:

making it more difficult for us to satisfy our obligations with respect to the ABL Credit Facility, the Exit Term Loans, the Notes, the DDTL Facility, the TDB Facility Agreement and our other obligations;
requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the funds available for operations, working capital, capital expenditures, acquisitions, product development, and other purposes;
limiting our ability to obtain additional financing on satisfactory terms and to otherwise fund working capital, capital expenditures, debt refinancing, acquisitions, and other general corporate requirements;
hampering our ability to adjust to changing market conditions;
increasing our vulnerability to general adverse economic and industry conditions;
placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged;
limiting our flexibility in planning for, or reacting to, changes in our business, and the industries in which we operate;
restricting us from making strategic acquisitions or exploiting business opportunities; and
exposing us to the risk of increased interest rates as borrowings under a substantial portion of our debt are subject to variable interest rates.

We require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control.
We require a significant amount of cash to service our indebtedness and a substantial portion of our cash flow is required to fund the interest payments on our indebtedness. Our ability to service our indebtedness and to fund planned capital expenditures depends on our ability to generate cash. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the continuing impact of shipping constraints related to the COVID-19 pandemic. Also, a substantial portion of our debt, including borrowings under the ABL Credit Facility, bears interest at variable rates. If market interest rates increase, variable-rate debt will create higher debt-service requirements, which would adversely affect our cash flow. We cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us under in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

We may not be able to refinance or renew our indebtedness, which may have a material adverse effect on our financial condition.
We may not be able to renew or refinance our indebtedness, including indebtedness under the ABL Credit Facility, the Exit Term Loans, the Notes, the DDTL Facility (including any amendment and restatement thereof) or indebtedness under the TDB Facility Agreement, other seasonal credit lines, or other credit facilities, on substantially similar terms, or at all. Our ability to access short-term and long-term lending and capital markets to obtain, and the availability of acceptable terms and conditions of, financing are impacted by many factors, including: (i) our credit ratings; (ii) the liquidity and volatility of the overall lending and capital markets; and (iii) the current state of the economy, including the tobacco industry. There can be no assurances that we will be able to access the lending and capital markets to refinance our indebtedness. We may have to pay additional fees and expenses that we might not have to pay under normal circumstances, and we may have to agree to terms that could increase the cost of our debt structure. If we are unable to renew or refinance our indebtedness on terms that are not materially less favorable than the terms currently available to us or obtain alternative or additional financing arrangements, we may not be able to timely repay certain of our indebtedness, which may result in a default under other indebtedness. Failure to refinance or renew any material indebtedness would have a material adverse effect on our financial condition.

We may not be able to satisfy the covenants included in our financing arrangements, which could result in the default of our outstanding debt obligations.
The agreement governing the ABL Credit Facility includes certain restrictive covenants, a springing covenant requiring that our fixed charge coverage ratio be no less than 1.10 to 1.00 during any cash dominion period under the ABL Credit Agreement, and a covenant requiring Domestic Availability (as defined in the ABL Credit Agreement) greater than $20.0 million at all times until audited financial statements for fiscal year ending March 31, 2023 are delivered under the ABL Credit Agreement. Certain agreements governing our seasonal credit facilities, including the TDB Agreement, include financial and restrictive covenants applicable to the subsidiaries that borrow thereunder and in certain cases with respect to Pyxus. The agreements governing our other indebtedness, including the Exit Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement, also include restrictive covenants. These covenants limit our ability to, among other things:

incur additional indebtedness or issue disqualified stock or preferred stock;
make investments;
pay dividends and make other restricted payments;
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sell certain assets;
create liens;
consolidate, merge, sell or otherwise dispose of all or substantially all of their assets;
enter into transactions with affiliates; and
designate subsidiaries as Unrestricted Subsidiaries (as defined in the ABL Credit Agreement, the Indenture and the Exit Term Loan Credit Agreement).

Complying with these covenants may cause us to take actions that we otherwise would not take or not take actions that we otherwise would take. Our failure to comply with certain of these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of a substantial portion of our indebtedness, much of which is cross-defaulted to other indebtedness. In the past, we sought and obtained waivers and amendments under our then-existing financing arrangements to avoid future non-compliance with financial covenants and cure past defaults under restrictive covenants, including recent waivers with respect to financial covenants included in the TDB Facility Agreement and waivers under the Indenture, ABL Credit Facility and the Exit Term Loan Credit Agreement with respect to the commencement of the CCAA Proceeding and the dispositions with respect to the Canadian Cannabis Subsidiaries. We also paid significant fees to obtain certain of these waivers and consents. We cannot assure you that we will be able to maintain compliance with, or obtain waivers and amendments related to, financial or restrictive covenants in the future.

Despite current indebtedness levels, we may still be able to incur substantially more debt. This could exacerbate further the risks associated with our significant leverage.
We may be able to incur substantial additional indebtedness in the future to the extent permitted under the ABL Credit Agreement, the Exit Term Loan Credit Agreement, the Indenture and the DDTL Facility Credit Agreement. As of March 31, 2022, $302.1 million was available for borrowing under our short and long-term credit facilities. If new debt is added to our current debt levels, the risks discussed above could intensify.

Risks Related to the COVID-19 Pandemic

We have been and will likely continue to be negatively impacted by the COVID-19 global pandemic and its related shipping constraints, labor shortages and supply-chain impacts.
The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business and consolidated financial results, and we are unable to determine the extent, duration, or nature at this time. The intensity, duration and governmental responses to the pandemic, as well as the pace of vaccination efforts and the emergence of new variants of the virus that cause COVID-19, are all highly uncertain and could contribute to the ultimate impact on our business. Among other things, the impact of the COVID-19 pandemic has resulted, and could continue to result, in:

Shipping constraints, including vessel and equipment availability, closure of port facilities due to quarantines, port congestion, and rising freight costs, which have resulted in delays in shipments to customers;
Disruptions in our supply chain or increased costs for certain materials or commodities;
Labor shortages and difficulties filling positions within our organization; and
Greater cybersecurity risk and other fraud risks.

Due to the scope of our operations, including emerging markets, and our sale to customers around the world, the impact of the COVID-19 pandemic on our operations and the demand for our products may not coincide with impacts experienced in the United States in the event that the impacts in the United States improve over time due to increased vaccinations or improved medical treatments. Accordingly, to the extent that the impact of the COVID-19 pandemic in the United States may improve over time, results of operations may continue to be adversely affected by COVID-19 impacts in other areas of the world.

Risks Relating to Our Leaf Tobacco Operations

Our reliance on a small number of significant customers may adversely affect our financial results.
The customers of our leaf tobacco business are manufacturers of cigarette and other tobacco products. Several of these customers individually may account for a significant portion of our sales in a normal year. For the year ended March 31, 2022, Philip Morris International Inc., China Tobacco International Inc., and British American Tobacco each accounted for more than 10% of our revenues from continuing operations. In addition, tobacco product manufacturers have experienced consolidation and further consolidation among our customers could decrease such customers’ demand for our leaf tobacco or processing services. The loss of any one or more of our significant customers could have a material adverse effect on our financial results.

Vertical integration by our customers could materially adversely affect our financial performance.
Demand for our leaf tobacco or processing services could be materially reduced if cigarette manufacturers make the decision to significantly vertically integrate their operations, either through acquisition of our competitors, establishing new operations or contracting directly with suppliers. In general, our results of operations have not been adversely affected by vertical integration
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initiatives, and some customers have reversed certain aspects of their previous vertical integration of operations. However, further vertical integration by our customers could have a material adverse effect on our financial performance.

Global shifts in sourcing customer requirements may negatively affect our organizational structure and asset base.
Shifts in sourcing of tobacco may occur as a result of currency fluctuations, including changes in currency exchange rates against the United States Dollar ("USD"), the imposition of tariffs and other changes in international trade policies. We may not be able to timely or efficiently adjust to shifts in sourcing origins, and adjusting to shifts may require changes in our production facilities in certain origins and changes in our fixed asset base. We have incurred, and may continue to incur, restructuring charges as we continue to adjust to shifts in sourcing. Adjusting our capacity and adjusting to shifts in sourcing may have an adverse impact on our ability to manage our costs and could have an adverse effect on our financial performance.

Our financial results will vary according to growing conditions, customer indications, and other factors, which significantly impacts our ability to forecast our quarterly and annual financial performance.
Our financial results may be significantly affected by fluctuations in tobacco growing seasons and crop sizes, which affect the supply of tobacco. Crop sizes may be affected by, among other things, crop infestation and disease, the volume of annual tobacco plantings and yields realized by suppliers, and suppliers' elections to grow crops other than tobacco. The cultivation period for tobacco is dependent upon a number of factors, including the weather and other natural events, such as hurricanes or tropical storms, and our processing schedule and results of operations for any quarterly period can be significantly altered by these factors. The unpredictability may be exacerbated by the effects of climate change, which could increase the likelihood or severity of disruptive weather events.

The cost of acquiring tobacco can fluctuate greatly due to crop sizes and increased competition in certain markets in which we purchase tobacco. For example, short crops in periods of high demand translate into higher average green prices, higher throughput costs and less volume to sell. Furthermore, large crops translate into lower average green prices, lower throughput costs and excess volume to sell.

The timing and unpredictability of customer indications, orders, and shipments cause us to keep tobacco in inventory, increase our risk, and result in variations in financial results. The timing of shipments can be materially impacted by shortages of containers and vessels for shipping, increased spot-prices for shipping leading vessel operators to reduce cargo allocations of our customers' containers covered by lower-priced, long-term shipping arrangements, as well as infrastructure and accessibility issues in ports we use for shipment. We may, from time to time in the ordinary course of business, keep a significant amount of processed tobacco in inventory for our customers to accommodate their inventory management and other needs. Sales recognition by us and our subsidiaries is based on the passage of ownership, usually with shipment of product. Because individual shipments may represent significant amounts of revenue, our financial results may vary significantly depending on our customers’ needs and shipping instructions. These fluctuations result in varying volumes and sales in given periods, which also reduces your ability to compare our financial results in different periods or in the same periods in different years.

Loss of confidence in us by our customers, farmers and other suppliers may have a material adverse impact on our business, financial condition, results of operations, and cash flows.
If our customers, farmers and other suppliers lose confidence in us, they may seek to establish alternative commercial relationships. In addition, in such circumstances, our suppliers, farmers, vendors, counterparties and service providers may seek to renegotiate the terms of our agreements, attempt to terminate their relationships with us or require financial assurances from us. If our suppliers, farmers, vendors, and other providers require stricter terms and conditions, we may not find these terms and conditions acceptable. Failure to timely obtain suitable inventory at competitive prices could materially adversely affect our businesses, financial condition, liquidity and results of operations.

Suppliers who have historically grown tobacco may elect to grow other crops instead of tobacco, which affects the world supply of tobacco and may impact our financial performance.
Increases in the prices for other crops have led and may in the future lead suppliers who have historically grown tobacco to elect to grow these other, more profitable, items instead of tobacco. A decrease in the volume of tobacco available for purchase may increase the purchase price of such tobacco. As a result, we could experience an increase in tobacco crop acquisition costs, which may impact our financial performance.

Our advancement of inputs to tobacco suppliers could expose us to losses.
Our arrangements with suppliers vary depending on our predictions of future supply and demand, local historical practice and availability of capital. In some locales, we purchase seeds, fertilizer, pesticides, and other products related to growing tobacco, which represent prepaid inventory, and issue them to suppliers with whom we have purchase contracts. The suppliers then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if they meet our specifications. These advances to tobacco suppliers are settled as part of the consideration paid upon the suppliers delivering us unprocessed tobacco at market prices. Two primary factors determine the market value of the tobacco suppliers deliver to us: the quantity of tobacco delivered and the quality of the tobacco delivered, both of which are subject to factors outside of our control at the time we
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make advances to suppliers. Unsatisfactory quantities or quality of the tobacco delivered could result in losses with respect to advances to our tobacco suppliers or the deferral of those advances.

When we purchase tobacco directly from suppliers, we bear the risk that the tobacco will not meet our customers’ quality and quantity requirements.
In countries where we contract directly with tobacco suppliers, we bear the risk that the tobacco delivered will not meet quality and quantity requirements of our customers. If the tobacco does not meet such market requirements, we may not be able to sell the tobacco we agreed to buy and may not be able to meet all of our customers’ orders, which would have an adverse effect on our profitability and results of operations.

Weather and other conditions can affect the marketability of our inventory, and climate change may adversely alter weather patterns in tobacco-growing regions.
Like other agricultural products, the quality of tobacco is affected by weather and the environment, which can change the quality or size of the crop. If a weather event is particularly severe, such as a major drought or hurricane, the affected crop could be destroyed or damaged to an extent that it would be less desirable to our customers, which would result in a reduction in revenues. If such an event is also widespread, it could affect our ability to acquire the quantity of products required by customers. In addition, the potential impact of climate change is uncertain and may vary by geographic region. The possible effects, as described in various public accounts, could include changes in rainfall patterns, water shortages, changing storm patterns and intensities, and changing temperature levels, all of which may be of greater permanence than typical weather fluctuations. Some or all of these impacts could adversely affect the ability of farmers in the regions in which we source leaf tobacco to continue to produce crops of acceptable quality and in sufficient quantities. Their inability to do so could materially adversely affect our operations, results of operations and financial condition.

In addition, other items can affect the marketability of tobacco, including, among other things, the presence of:

non-tobacco related material;
genetically modified organisms; and
excess residues of pesticides, fungicides and herbicides.

A significant event impacting the condition or quality of a large amount of the tobacco crops we buy could make it difficult for us to sell such tobacco or to fill our customers’ orders.

We face increased risks of doing business due to the extent of our international operations.
Some of the countries we do business in do not have stable economies or governments. Our international operations are subject to 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. These risks are exacerbated in countries where we have advanced substantial sums or guaranteed local loans or lines of credit for the purchase of tobacco from suppliers.

In 2006, as a result of the political environment, economic instability, foreign currency controls, and governmental regulations in Zimbabwe, we deconsolidated our Zimbabwe subsidiary, Mashonaland Tobacco Company LTD ("MTC"). Subsequently, we determined that the significant doubt about our ability to control MTC was eliminated and reconsolidated MTC as of March 31, 2016. The Company utilizes the Zimbabwe RTGS system for local transactions. RTGS is a local currency equivalent that is exchanged at a government specified rate with USD. To convert these units to USD, the Company must obtain foreign currency resources from the Reserve Bank of Zimbabwe, which are subject to the monetary and exchange control policy in Zimbabwe. If the foreign exchange restrictions and government-imposed controls become severe, we may have to reassess our ability to control MTC.

In recent years, economic problems in certain countries where we have international operations have received wide publicity related to devaluation and appreciation of the local currency and inflation, including the classification of the Argentina, Turkey, and Zimbabwe economies as highly inflationary. Devaluation and appreciation of the local currency and inflation can affect our purchase costs of tobacco and our processing costs. In addition, we conduct business with suppliers and customers in countries that have recently had or may be subject to dramatic political regime change. In the event of such dramatic changes in the government of such countries, we may be unable to continue to operate our business, or adequately enforce legal obligations, after the change in a manner consistent with prior practice.

Further, the imposition of governmental sanctions or other restrictions may preclude us from continuing to sell to certain customers or to source leaf tobacco from certain jurisdictions. For example, approximately $57.8 million of our revenue for the year ended March 31, 2022 was from direct sales to entities located in Russia. Governmental sanctions imposed in response to the invasion of Ukraine by Russia and additional sanctions imposed in response to the continuation or escalation of these
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hostilities could restrict or prohibit such sales, which would have an adverse effect on our profitability, results of operations and financial position. Other limitations imposed on such subsidiaries' ability to continue to sell to customers in Russia, whether through commercial, societal or other pressures, could similarly have an adverse effect on our profitability, results of operations and financial position.

Failure of foreign banks in which our subsidiaries deposit funds or the failure to transfer funds or honor withdrawals may affect our results of operations.
Funds held by our foreign subsidiaries are often deposited in their local banks. In addition, we maintain deposit accounts with numerous financial institutions around the world in amounts that exceed applicable governmental deposit insurance levels. Banks in certain foreign jurisdictions may be subject to a higher rate of failure or may not honor withdrawals of deposited funds. In addition, the countries in which these local banks operate may lack sufficient regulatory oversight or suffer from structural weaknesses in the local banking system. Due to uncertainties and risks relating to the political stability of certain foreign governments, these local banks also may be subject to exchange controls and therefore unable to perform transfers of certain currencies. If our ability to gain access to these funds was impaired, it could have a material adverse effect on our results of operations.

We are subject to the Foreign Corrupt Practices Act (the "FCPA") and we operate in jurisdictions that pose a high risk of potential FCPA violations.
We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. We operate in a number of jurisdictions that pose a high risk of potential FCPA violations. Although our corporate policy prohibits foreign bribery and we have adopted procedures to promote compliance, we cannot assure you that our policy or procedures will work effectively all of the time or protect us against liability under the FCPA for actions taken by our agents, employees, and intermediaries with respect to our business or any businesses that we acquire. Failure to comply with the FCPA, other anti-corruption laws and other laws governing the conduct of business with government entities (including local laws) could lead to criminal and civil penalties and other remedial measures (including further changes or enhancements to our procedures, policies, and controls, the imposition of a compliance monitor at our expense and potential personnel changes and/or disciplinary actions), any of which could have an adverse impact on our business, financial condition, results of operations, and liquidity. Any investigation of any potential violations of the FCPA or other anti-corruption laws by U.S. or foreign authorities also could have an adverse impact on our business, financial condition, and results of operations.

In 2010, we entered into settlements with the SEC and the U.S. Department of Justice to resolve their investigations regarding potential criminal and civil violations of the FCPA. The settlements resulted in the disgorgement in profits and fines totaling $19.5 million, which have been paid. Both settlements also required us to retain an independent compliance monitor for a three-year term that was completed on September 30, 2013.

Our exposure to foreign tax regimes, and changes in U.S. or foreign tax regimes, could adversely affect our business.
We do business in countries that have tax regimes in which the rules are not clear, are not consistently applied and are subject to sudden change. This is especially true with regard to international transfer pricing. Our earnings could be reduced by the uncertain and changing nature of these tax regimes. Certain of our subsidiaries are and may in the future be involved in tax matters in foreign countries. While the outcome of any of these existing matters cannot be predicted with certainty, we are vigorously defending them and do not currently expect that any of them will have a material adverse effect on our business or financial position. However, should one or more of these matters be resolved in a manner adverse to our current expectation, the effect on our results of operations for a particular fiscal reporting period could be material.

We seek to optimize our tax footprint across globally. The related benefits are contingent upon existing tax laws and regulations in the countries in which our operations are located. Future changes in domestic or international tax laws and regulations could adversely affect our ability to continue to realize these tax benefits.

Fluctuations in foreign currency exchange and interest rates could adversely affect our results of operations.
We conduct our business in many countries around the world. Our business is generally conducted in USD, as is the business of the leaf tobacco industry as a whole. We generally must purchase tobacco in non-U.S. countries using local currency. As a result, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of exchange fluctuations of the local currency against the USD. When the USD weakens against foreign currencies, our costs for purchasing and processing tobacco in such currencies increases. Although we operate in many non-U.S. countries and are exposed to fluctuations in the currencies of numerous foreign countries, exchange fluctuation in the Brazilian Real against the USD has the greatest potential for impact on our financial results. We attempt to reduce such currency risks by matching the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency of the country where the tobacco is grown. Fluctuations in the value of foreign currencies can significantly affect our operating results.

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In addition, the devaluation of foreign currencies has resulted and may in the future result in reduced purchasing power from customers whose capital resources are denominated in those currencies. We may incur a loss of business as a result of the devaluation of these currencies now or in the future.

Competition could erode our earnings.
The leaf tobacco industry is highly competitive. Competition is based primarily on the prices charged for products and services as well as the merchant’s ability to meet customer specifications in the buying, processing, and financing of tobacco. In addition, there is competition in all countries to buy the available tobacco. The loss or substantial reduction of any large or significant customer could reduce our earnings.

In addition to the two primary global independent publicly held leaf tobacco merchants, the cigarette manufacturers also buy tobacco directly from local and regional suppliers. We also face increasing competition from new local and regional independent leaf merchants with low fixed costs and overhead and good local customer connections, where the new entrants have been able to capitalize in the global transition to those markets. Any of these sources of new competition may result in less tobacco available for us to purchase and process in the applicable markets.

Continued high inflation may adversely affect our profitability and the demand for our leaf tobacco products.
The economies of the United States and other nations have recently experienced the highest levels of consumer price inflation in decades. Continued inflationary pressures may continue to increase our costs, including the cost of leaf tobacco that we purchase. If these increased costs cannot successfully be passed on to our customers, many of which have significant negotiating power, our profitability and results of operations may be adversely affected. In addition, since our leaf tobacco products are used in the manufacture of tobacco consumer goods, consumer behavior that deprioritizes the purchase of tobacco consumer goods in response to inflationary increases in the price of such goods could result in reduced overall demand for consumer tobacco products and consequently for the leaf tobacco we provide to manufacturers, which could materially adversely affect of our profitability, results of operations and financial position.

Risks Relating to Other Aspects of Our Operations

We rely on internal and externally hosted information technology systems and disruption, failure, or security breaches of these systems could adversely affect our business.
We rely on information technology ("IT") systems, including systems hosted by service providers. For example, our enterprise resource planning system and our domestic employee payroll system are hosted by external service providers. Although we have disaster recovery plans and several intrusion preventive mitigating tools and services in-place, which are active inline services or are tested routinely, our portfolio of hardware and software products, solutions and services and our enterprise IT systems, including those hosted by service providers, may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system, or network failures, computer viruses or other malicious software programs, and cyber-attacks, including system hacking and other cyber-security breaches. For example, in April 2019, the Company discovered that the email accounts of two Canadian employees had been compromised resulting in the unauthorized access of customer and vendor data. These incidents were neither material nor compromised the Company’s other IT systems. The failure or disruption of our IT systems to perform as anticipated for any reason could disrupt our business and result in decreased performance, significant remediation costs, transaction errors, loss of data, processing inefficiencies, downtime, litigation, and the loss of suppliers or customers. A significant disruption or failure could have a material adverse effect on our business operations, financial performance and financial condition.

We cannot assure you that material weaknesses will not be identified in the future.
In certain prior years, we identified material weaknesses in our internal control over financial reporting. Although we intend to continue to aggressively monitor and improve our internal controls, we cannot assure you that other material weaknesses will not occur in the future. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in misstatements in our financial statements in amounts that could be material. Ineffective internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the value of our common stock and could also require additional restatements of our prior reported financial information. In addition, because we are not an "accelerated filer" under applicable SEC regulations, we are not required to obtain and present a report of our independent accounting firm with respect to the effectiveness of our internal control over financial reporting and we have not obtained such a report with respect to an evaluation of our internal controls as of March 31, 2022 and, accordingly, no such report is included in this Form 10-K.

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Regulations regarding environmental matters may affect us by substantially increasing our costs and exposing us to potential liability.
We are subject to environmental, health, and safety laws and regulations in each jurisdiction in which we operate. Such regulations govern, among other things, emissions of pollutants into the air, wastewater discharges, waste disposal, the investigation and remediation of soil, and groundwater contamination, and the health and safety of our employees. For example, our products and the raw materials used in its production processes are subject to numerous environmental laws and regulations. We may be required to obtain environmental permits from governmental authorities for certain of its current or proposed operations. We may not have been, nor may it be able to be at all times, in full compliance with such laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators.

As with other companies engaged in similar activities or that own or operate real property, we face inherent risks of environmental liability at our current and historical production sites. Certain environmental laws impose strict and, in certain circumstances, joint and several liability on current or previous owners or operators of real property for the cost of the investigation, removal or remediation of hazardous substances as well as liability for related damages to natural resources. In addition, we may discover new facts or conditions that may change our expectations or be faced with changes in environmental laws or their enforcement that would impose additional liabilities. Furthermore, our costs of complying with current and future environmental, health, and safety laws, or our liabilities arising from past or future releases of, or exposure to, regulated materials, may have a material adverse effect on our business, financial condition, and results of operations.

Derivative transactions may expose us to potential losses and counterparty risk.
We may, from time to time, enter into certain derivative transactions, including interest rate swaps and foreign exchange contracts. Changes in the fair value of these derivative financial instruments that are not accounted for as cash flow hedges are reported as income, and accordingly could materially affect our reported income in any period. In addition, the counterparties to these derivative transactions may be financial institutions or affiliates of financial institutions, and we would be subject to risks that these counterparties default under these transactions. In some of these transactions, our exposure to counterparty credit risk may not be secured by any collateral. Global economic conditions over the last few years have resulted in the actual or perceived failure or financial difficulties of many financial institutions, including bankruptcy. If one or more of the counterparties to one or more of our derivative transactions not secured by any collateral becomes subject to insolvency proceedings, we would become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under those transactions. We cannot assure you of the financial stability or viability of our counterparties.

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 ("ESG") policies, including sustainability policies, may impose additional costs on us or expose us to additional risks.
Governments, the non-governmental community, and industry increasingly understand the importance of implementing comprehensive environmental, labor, and governance practices. We are committed to implementing a robust sustainability management system, and we continue to implement what we believe are responsible ESG practices. Government regulations, however, could result in new or more stringent forms of ESG oversight and disclosures. These may lead to increased expenditures for environmental controls, land use restrictions, reporting, and other conditions, which could have an adverse effect on our results of operations.

In addition, a number of governments are considering due diligence procedures to ensure strict compliance with environmental, labor, and government regulations. The European Union has proposed broad due diligence reporting requirements for all industries operating within Europe. The United States has called for a broader and more robust approach to labor compliance in foreign jurisdictions, which could include some of our strategic origins. Due to general uncertainty regarding the timing, content, and extent of any such regulatory changes in the United States or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition, and results of operations.

Our e-liquids business faces inherent risk of exposure to product liability claims, regulatory action, and litigation if its products are alleged to have caused significant loss, injury, or death.
As a manufacturer and distributor of products that are ingested or otherwise consumed by humans, our e-liquids business faces the risk of exposure to product liability claims, regulatory action and litigation (including class proceedings and individual proceedings) if its products are alleged to have caused loss, injury or death. Our e-liquids business may be subject to these types of claims due to allegations that its products caused or contributed to injury, illness or death, made false, misleading or impermissible claims, failed to include adequate labelling and instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances. Previously unknown adverse reactions resulting from human consumption of these e-liquids products alone or in combination with other medications or substances could also occur. In addition, the manufacture and sale of any ingested or consumable product involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Our e-liquids business may in the future have to recall certain of its products as a result of potential contamination and quality assurance concerns. A product liability claim or
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regulatory action against our e-liquids business could result in increased costs and could adversely affect its reputation and goodwill with its consumers. We cannot assure you that product liability insurance can be maintained on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in the Company's becoming subject to significant liabilities that are uninsured.

The risk of class-based litigation (and individual litigation) for manufacturers and distributors of e-liquids and other vaping products, and others involved in the vaping industry, is significant, particularly in the face of increasing health and marketing concerns, the potential for product recalls or other product-related issues. The United States has a highly active plaintiffs’ bar. Recent years have seen a number of purported class action lawsuits in the United States against manufacturers and distributors of e-liquids and other vaping products. These circumstances create enhanced risk and exposure for the Company given the nature of its operations, the products it manufactures, distributes and sells, and its business environment.

Risks Relating to the Ownership of Our Common Stock

Certain shareholders have the ability to exercise controlling influence on various corporate matters.
Upon our emergence from Chapter 11, two shareholders and their respective affiliates, Glendon Capital Management LP (together with its affiliates, the "Glendon Investor") and Monarch Alternative Capital LP (together with its affiliates, the "Monarch Investor;" the Glendon Investor and the Monarch Investor are together referred to as the "Significant Shareholders") beneficially own in the aggregate approximately 56% of our issued and outstanding common stock and, therefore, have significant control on the outcome of matters submitted to a vote of shareholders, including, but not limited to, electing directors and approving corporate transactions. Pursuant to the terms of a Shareholders Agreement dated as of August 24, 2020 among the Company and certain shareholders, including the Significant Shareholders, each of the Glendon Investor and the Monarch Investor has the right (depending on its continued ownership of a specified percentage of the outstanding shares of our common stock) to nominate up to two individuals for election as directors, and each of them and the other shareholders that are parties to the Shareholders Agreement have agreed to take all necessary action to elect such nominees as directors. Under our articles of incorporation, the affirmative vote of each of the Glendon Investor and the Monarch Investor, so long as it continues to maintain an Investor Percentage Interest (as defined in the Shareholders Agreement) of at least five percent, is required for the approval of any amendment to the articles of incorporation. It is our understanding that each of the Glendon Investor and the Monarch Investor hold a significant amount of the Notes and the Exit Term Loans. In addition, the Glendon Investor and the Monarch Investor are the lenders under the DDTL Facility. Circumstances may occur in which the interests of the Significant Shareholders could be in conflict with the interests of other shareholders, and the Significant Shareholders could have substantial influence to cause us to take actions that align with their interests. Should conflicts arise, we can provide no assurance that the Significant Shareholders would act in the best interests of other shareholders or that any conflicts of interest would be resolved in a manner favorable to our other shareholders.

The price of our common stock may be negatively impacted by factors that are unrelated to our operations.
Although our common stock is currently listed for quotation on the OTC Markets, we understand that no securities brokerage firm is making a market in the Company’s common stock. Trading through the OTC Markets is frequently thin and may be highly volatile. There is no assurance that a sufficient market will continue in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of the markets in which our businesses operate, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

Risks Relating to the Tobacco Industry
Reductions in demand for consumer tobacco products could adversely affect our results of operations.
The tobacco industry, both in the United States and abroad, continues to face a number of issues that may reduce the consumption of cigarettes and adversely affect our business, sales volume, results of operations, cash flows and financial condition.

These issues, some of which are more fully discussed below, include:

governmental actions seeking to ascribe to tobacco product manufacturers liability for adverse health effects associated with smoking and exposure to environmental tobacco smoke;
smoking and health litigation against tobacco product manufacturers;
increased consumer acceptance of electronic cigarettes;
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tax increases on consumer tobacco products;
potential prohibition on the sale of menthol cigarettes in the United States;
current and potential actions by state attorneys general to enforce the terms of the Master Settlement Agreement, or MSA, between state governments in the United States and tobacco product manufacturers;
governmental and private bans and restrictions on smoking;
actual and proposed price controls and restrictions on imports in certain jurisdictions outside the United States;
restrictions on tobacco product manufacturing, marketing, advertising and sales;
the diminishing social acceptance of smoking;
increased pressure from anti-smoking groups;
other tobacco product legislation that may be considered by Congress, the states, municipalities and other countries; and
the impact of consolidation among multinational cigarette manufacturers.
Legislation and regulatory and other governmental initiatives could impose burdensome restrictions on the tobacco industry and reduce consumption of consumer tobacco products and demand for our services.
The Tobacco Control Act, which amended the Food, Drug, and Cosmetic Act, extends the authority of the FDA to regulate tobacco products. This act authorizes the FDA to adopt product standards for tobacco products, including the level of nicotine yield and the reduction or elimination of other constituents of the products, along with provisions for the testing of products against these standards. The act imposes further restrictions on advertising of tobacco products, authorizes the FDA to limit the sales of tobacco products to face-to-face transactions permitting the verification of the age of the purchaser, authorizes a study to determine whether the minimum age for the purchase of tobacco products should be increased and requires submission of reports from manufacturers of tobacco products to the FDA regarding product ingredients and other matters, including reports on health, toxicological, behavioral, or physiologic effects of tobacco products and their constituents. The act also mandates warning labels and requires packaging to indicate the percentage of domestically grown tobacco and foreign grown tobacco included in the product, although the FDA has issued guidance to the industry announcing its intent to enforce the latter requirements until further notice. The FDA has adopted regulations under the act establishing requirements for the sale, distribution, and marketing of cigarettes, as well as package warnings and advertising limitations.

The act directs the FDA to promulgate regulations requiring that the methods used in, and the facilities and controls used for, the manufacture, preproduction design validation, packing, and storage of a tobacco product conform to current good manufacturing practice. Regulations under the act do not apply to tobacco leaf that is not in the possession of a manufacturer of tobacco products, or to the producers of tobacco leaf, including tobacco suppliers, tobacco warehouses, and tobacco supplier cooperatives unless those entities are controlled by a tobacco product manufacturer, but do apply to our U.S. cut rag processing facility with respect to covered tobacco products.

On April 28, 2022, the FDA announced its proposal to adopt regulations to prohibit the manufacture, distribution, and sale in the United States of cigarettes having menthol as a characterizing flavor and all cigars having a characterizing flavor other than tobacco. According to the FDA’s proposed rulemaking, sales of menthol-flavored cigarettes accounted for 34-36% of total cigarette sales in the U.S. in 2020. While we are unable to precisely estimate the portion of our sales of leaf tobacco in the U.S. that is used in the manufacture of menthol-flavored cigarettes, we believe a significant portion of our U.S. leaf tobacco sales are used for such purpose. In addition, a significant portion of the tobacco from our U.S. cut rag processing facility is used in the manufacture of flavored cigars. The FDA’s proposed regulations are subject to public comment and may not be adopted exactly as proposed. In addition, if the proposed regulations are adopted, the extent of any reduction in consumer demand for tobacco products is uncertain, though such reduction could be significant.

The full impact of the act, including regulations adopted thereunder, the recently proposed regulations, and any further regulatory action to implement the act, is uncertain. However, if the effect of the act and FDA regulations under the act is a significant reduction in consumption of tobacco products, it could materially adversely affect our business, volume, results of operations, cash flows and financial condition.

Reports with respect to the harmful physical effects of cigarette smoking have been publicized for many years, and the sale, promotion and use of cigarettes continue to be subject to increasing governmental regulation. Since 1964, the Surgeon General of the United States and the Secretary of Health and Human Services have released a number of reports linking cigarette smoking with a broad range of health hazards, including various types of cancer, coronary heart disease and chronic lung disease, and recommending various governmental measures to reduce the incidence of smoking. More recent reports focus upon the addictive nature of cigarettes, the effects of smoking cessation, the decrease in smoking in the United States, the economic and regulatory aspects of smoking in the Western Hemisphere, and cigarette smoking by adolescents, particularly the addictive nature of cigarette smoking in adolescence. Numerous state and municipal governments have taken and others may take actions to diminish the social acceptance of smoking of tobacco products, including banning smoking in certain public and private locations.

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A number of foreign nations also have taken steps to restrict or prohibit cigarette advertising and promotion, to increase taxes on cigarettes and to discourage cigarette smoking. In some cases, such restrictions are more onerous than those in the United States. For example, advertising and promotion of cigarettes has been banned or severely restricted for a number of years in Australia, Canada, Finland, France, Italy, Singapore and other countries. Further, in February 2005, the World Health Organization ("WHO") treaty, the Framework Convention for Tobacco Control ("FCTC"), entered into force. This treaty, which the WHO reports has been signed or otherwise ratified by 181 nations, requires party nations to enact legislation that would require, among other things, specific actions to prevent youth smoking; restrict or prohibit tobacco product marketing; inform the public about the health consequences of smoking and the benefits of quitting; regulate the content of tobacco products; impose new package warning requirements including the use of pictorial or graphic images; eliminate cigarette smuggling and counterfeit cigarettes; restrict smoking in public places; increase and harmonize cigarette excise taxes; abolish duty-free tobacco sales; and permit and encourage litigation against tobacco product manufacturers.
Due to the present regulatory and legislative environment, a substantial risk exists that tobacco product sales may decline. A significant decrease in worldwide tobacco consumption brought about by existing or future governmental laws and regulations would reduce demand for tobacco products and services and could have a material adverse effect on our results of operations.

Government actions can have a significant effect on the sourcing of tobacco. If some of the current efforts are successful, we could have difficulty obtaining sufficient tobacco to meet our customers’ requirements, which could have an adverse effect on our performance and results of operations.
A variety of government actions can have a significant effect on the sourcing and production of leaf tobacco. If some of the current proposed efforts are successful, we could have increased barriers to meeting our customers’ requirements, which could have an adverse effect on our performance and results of operations.
The WHO, through the FCTC, has specifically issued policy options and recommendations to promote crop diversification initiatives and alternatives to growing leaf tobacco in countries whose economies depend upon tobacco production. If certain countries were to follow these policy recommendations and seek to eliminate or significantly reduce leaf tobacco production, we could encounter difficulty in sourcing leaf tobacco from these regions to fill customer requirements, which could have an adverse effect on our results of operations.
Certain recommendations by the WHO, through the FCTC, may also cause shifts in customer usage of certain styles of tobacco. In countries such as Canada and Brazil and in the European Union, efforts have been taken to eliminate certain ingredients from the manufacturing process for tobacco products. The FCTC and national governments have also discussed formulating a strategy to place limitations on the level of nicotine allowed in tobacco and tobacco smoke. Such decisions could cause a change in requirements for certain styles of tobacco in particular countries. Shifts in customer demand from one type of tobacco to another could create sourcing challenges as requirements move from one origin to another.
Regulations impacting our customers that change the requirements for leaf tobacco or restrict their ability to sell their products would inherently impact our business. We have implemented a proprietary "track and trace" system that gathers data on leaf product beginning at the farm level to assist our customers’ collection of raw material information to support leaf traceability and customer testing requirements. Additionally, given our global presence, we also have the ability to source different types and styles of tobacco for our customers should their needs change due to regulation. Despite our capabilities, the extent to which governmental actions will affect our business, financial condition, results of operations and demand for our products and services will depend on future developments, which are highly uncertain and cannot be predicted.
In addition, continued government and public emphasis on environmental issues, including climate change, conservation, and natural resource management, could result in new or more stringent forms of regulatory oversight of industry activities, which may lead to increased levels of expenditures for environmental controls, land use restrictions affecting us or our suppliers, and other conditions that could have a material adverse effect on our business, financial condition, and results of operations. For example, certain aspects of our business generate carbon emissions. Regulatory restrictions on greenhouse gas emissions have been proposed in certain countries in which we operate. These may include limitations on such emissions, taxes or emission allowance fees on such emissions, various restrictions on industrial operations, and other measures that could affect land-use decisions, the cost of agricultural production, and the cost and means of processing and transporting our products. These actions could adversely affect our business, financial condition, and results of operations.
We have been subject to governmental investigations into, and litigation concerning, leaf tobacco industry buying and other payment practices.
The leaf tobacco industry, from time to time, has been the subject of government investigations regarding trade practices. For example, we were the subject of an investigation by the Antitrust Division of the United States Department of Justice into certain buying practices alleged to have occurred in the industry, we were named defendants in an antitrust class action litigation alleging a conspiracy to rig bids in the tobacco auction markets, and we were the subject of an administrative investigation into certain tobacco buying and selling practices alleged to have occurred within the leaf tobacco industry in some countries within the European Union, including Spain, Italy, Greece and potentially other countries.
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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters are leased and are located in Morrisville, North Carolina. We own nine facilities in seven countries that are material to our leaf operations. We operate our leaf tobacco processing facilities for seven to nine months per year corresponding with the applicable harvesting seasons. We continually compare our production capacity and organization with the transitions occurring in global sourcing of tobacco. We believe our domestic production facilities and certain foreign production facilities have the capacity to process additional volumes of tobacco if required by customer demand.

The following is a listing of the principal physical properties used in our leaf operations, all of which are owned by the Company, as of March 31, 2022:

LocationUse
North America
Wilson, North Carolina, USAFactory / Storage
Farmville, North Carolina, USAStorage
South America
Venancio Aires, BrazilFactory / Storage
Ararangua, BrazilFactory / Storage
El Carril, ArgentinaStorage
Africa
Lilongwe, MalawiFactory / Storage
Morogoro, TanzaniaFactory / Storage
Harare, ZimbabweFactory / Storage
Asia
Ngoro, IndonesiaFactory / Storage

Item 3. Legal Proceedings

Refer to "Note 25. Contingencies and Other Information" to the "Notes to Consolidated Financial Statements" for additional information with respect to legal proceedings, which is incorporated by reference herein.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Pyxus’ common stock is traded on the OTC Pink Marketplace maintained by the OTC Markets Group, Inc., under the symbol "PYYX". Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

As of May 11, 2022, the outstanding shares of our common stock were held by one shareholder of record and there were approximately 1,000 beneficial holders of our common stock.

The payment of dividends by Pyxus is subject to the discretion of our Board of Directors and will depend on business conditions, compliance with debt agreements, achievement of anticipated cost savings, financial condition and earnings, regulatory considerations, and other factors. The declaration of future dividends by Pyxus is at the discretion of our Board of Directors and subject to our results of operations, financial condition, cash requirements, and other factors and restrictions under applicable law, and our debt agreements. Refer to "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

Item 6. [Reserved]

Item 7. 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 "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. Some of these risks and uncertainties include the risks, uncertainties, and other factors set forth in "Item 1A, Risk Factors" in this Annual Report and in our other filings with the Securities and Exchange Commission. We do not undertake to update any forward-looking statements that we may make from time to time.

Non-GAAP Financial Measure
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). However, we use net debt, a non-GAAP financial measure, to evaluate our financial condition. We believe that the presentation of this non-GAAP financial measure, when viewed as a supplement to our indebtedness reflected on our balance sheets prepared in accordance with U.S. GAAP, provides useful information to investors in evaluating our indebtedness. In addition, this non-GAAP measure addresses questions we routinely receive from analysts and investors and, in order to ensure that investors have access to similar data, we make this data available to the public. This non-GAAP measure should not be considered as an alternative to total debt or any other measure derived in accordance with U.S. GAAP. This non-GAAP measure has important limitations as an analytical tool and should not be considered in isolation or as a substitute for financial measures presented in accordance with U.S. GAAP. The presentation of our non-GAAP financial measures may change from time to time, including as a result of changed business conditions, new accounting rules, or otherwise. Further, our use of "net debt" may vary from the use of similarly-titled measures by other companies due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

Executive Summary
We are proud of the progress made by the business during fiscal year 2022. Our employees worked diligently to successfully increase volumes and revenue compared to the prior year while continuing to navigate global challenges, which largely stem from the ongoing impacts of COVID-19 and the unfortunate events in Ukraine.

We continued to expand our customer relationships as customers sought solutions to reduce supply chain complexities and improve operational efficiencies. Expansion of these relationships, partially attributable to our environmental, social, and governance ("ESG") framework publicly announced in December 2021, increased our market share in Africa, Asia, and South America and contributed to a 16.8% increase in kilo volume compared to last year.

Our efforts in fiscal 2022 to execute on our strategy to increase financing sources and working capital lines around the globe resulted in a new asset-based lending ("ABL") credit facility with PNC Bank in February 2022, which provides the Company with an extended maturity date, reduced costs, and increased potential borrowing availability. In addition, in June 2022, we entered into an agreement to amend our delayed draw term loan facility ("DDTL"), which provides the Company with an extended maturity date, reduced costs, and increased financial flexibility.

In January 2022, we completed the exit of our cash-flow-negative cannabinoid operations. Our restructuring activities generated savings in SG&A, which contributed to a $55.9 million decrease in expense compared to last year. As a result, our SG&A expense has normalized and is consistent with levels prior to our investments to develop those businesses.

Maintaining farmer livelihood and a supply chain of responsibly sourced, sustainable, and traceable products remains a top priority as we engage with customers about the impact of inflation on the cost and price of tobacco going forward. Additionally, we have taken proactive measures to secure inputs for the next year, such as fertilizer and fuel, allowing us to remain focused on delivering stakeholder value as we work to grow a better world.

Overview
Historically, Pyxus’ core business has been as a tobacco leaf merchant, purchasing, processing, packing, storing and shipping tobacco to manufacturers of cigarettes and other consumer tobacco products throughout the world. Through our predecessor companies, we have a long operating history in the leaf tobacco industry with some customer relationships beginning in the early 1900s. Our core leaf tobacco operations continued to account for almost all of our revenues for the year ended March 31, 2022.

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We are committed to responsible crop production that supports economic viability for the supplier, provides a safe working atmosphere for those involved in crop production and minimizes negative environmental impact. Our agronomists maintain frequent contact with suppliers prior to and during the growing and curing seasons to provide technical assistance to improve the quality and yield of the crop. Throughout the entire production process, from seed through processing and final shipment, our SENTRISM traceability system provides clear visibility into how products are produced throughout the supply chain, supporting product integrity.

We also provide agronomy expertise for growing leaf tobacco in numerous markets. Our contracted tobacco grower base produces a significant volume of non-tobacco crop utilizing the agronomic assistance that our team provides. Pyxus works with our grower base, as needed, to find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the communities in which they live.

Historically, the Company had nine operating segments that were organized by product category and geographic area and were aggregated into three reportable segments for financial reporting purposes: Leaf - North America, Leaf - Other Regions, and Other Products and Services. During year ended March 31, 2022, the Company reevaluated its operating and reportable segments under ASC Topic 280 - Segment Reporting in response to the effectiveness of the Plan in August 2020, the appointment of a new Board of Directors during the seven months ended March 31, 2021, the outcomes achieved from cost savings and restructuring initiatives implemented during the five months ended August 31, 2020 and the seven months ended March 31, 2021, the Company's exit from its industrial hemp, CBD, and Canadian cannabis businesses the seven months ended March 31, 2021, and changes to business operations as a result of the COVID-19 pandemic. As a result of this reevaluation, effective during the fourth quarter of the year ended March 31, 2022, the Company has eight operating segments organized by geographic area and product category and are aggregated into one reportable segment for financial reporting purposes: Leaf. An All Other category is included for purposes of reconciliation of the results of the Leaf reportable segment to the consolidated results. Refer to "Note 1. Basis of Presentation and Summary of Significant Accounting Policies" for additional information.

U.S. Bankruptcy Proceedings
On June 15, 2020, Old Pyxus (then named Pyxus International, Inc.) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC and GSP Properties, LLC (collectively, the "Debtors") filed voluntary petitions (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring (the "Restructuring") of Old Pyxus’ secured debt. On August 21, 2020, the Bankruptcy Court issued an order (the "Confirmation Order") confirming the Amended Joint Prepackaged Chapter 11 Plan of Reorganization (the "Plan") filed by the Debtors in the Chapter 11 Cases. On August 24, 2020 (the "Effective Date"), the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases. In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc., which is an indirect subsidiary of the Company. Pursuant to the Confirmation Order and the Plan, at the effectiveness of the Plan, all outstanding shares of common stock, and rights to acquire the common stock, of Old Pyxus were cancelled and the shares of common stock of the Company were delivered to certain creditors of Old Pyxus. Accordingly, upon the effectiveness of the Plan the Company, through its subsidiaries, operated all of the businesses operated by Old Pyxus and its subsidiaries immediately prior to the effectiveness of the Plan and the Company is the successor issuer to Old Pyxus. Other than our Chief Executive Officer, our Board of Directors does not include any of the individuals who served as directors of Old Pyxus at the time the Chapter 11 Cases were commenced or at the effectiveness of the Plan. Refer to "Note 3. Emergence from Voluntary Reorganization under Chapter 11" to the "Notes to Consolidated Financial Statements" for additional information.

Development of Businesses
Beginning in 2017, we undertook a strategic process designed to diversify the Company's products and services by leveraging our core strengths in agronomy and traceability. In general, our diversification strategy focused on products that were value-added, required some degree of processing and offered a higher margin potential than our core tobacco leaf business. In support of this strategy, the Company made certain investments in e-liquids and industrial hemp/CBD businesses in the United States and legal cannabis businesses in Canada. Refer to "Item 1. Business" for additional information regarding these investments. As discussed below, we have generally divested or ceased operating these businesses and have returned our focus to our leaf tobacco businesses.

Following the effectiveness of the Plan and the election of additional members of our Board of Directors in October 2020, our Board of Directors determined to exit the industrial hemp, CBD and Canadian cannabis businesses in light of the Company’s limited capital resources and the continuing capital requirements to develop and expand these early-stage businesses. In December 2020, the Company commenced actions to exit operations of the industrial hemp businesses, including the production and sale of products containing extracts of industrial hemp, including CBD products, by Criticality. Criticality’s CBD extraction facility has ceased operations.

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On November 23, 2021, the Company disposed of its ownership interests in Humble Juice, the Company's primary e-liquids business, in exchange for royalties on future revenue. During the fourth quarter of the year ended March 31, 2022, the Company's remaining e-liquids subsidiary, Twelfth State Brands LLC, which markets e-liquids under the Bantam trademark, suspended the sourcing of additional inventory and reduced staffing pending action by the FDA on its applications to permit continued marketing of its remaining products.

CCAA Proceeding and Deconsolidation and Disposition of Canadian Cannabis Subsidiaries
On January 21, 2021, Figr Norfolk Inc. ("Figr Norfolk") and Figr Brands, Inc. ("Figr Brands"), which are indirect subsidiaries of the Company, and Canada’s Island Garden Inc. ("Figr East," and together with Figr Norfolk and Figr Brands, the "Canadian Cannabis Subsidiaries"), which, prior to its sale on June 28, 2021 was an indirect subsidiary of the Company, applied for relief from their respective creditors pursuant to Canada’s Companies’ Creditors Arrangement Act (the "CCAA") in the Ontario Superior Court of Justice (Commercial List) (the "Canadian Court") in Ontario, Canada as Court File No. CV-21-00655373-00CL (the "CCAA Proceeding"). On January 21, 2021 (the "Order Date"), upon application by the Canadian Cannabis Subsidiaries, the Canadian Court issued an order for creditor protection of the Canadian Cannabis Subsidiaries pursuant to the provisions of the CCAA and the appointment of FTI Consulting Canada Inc. to serve as the Canadian Court-appointed monitor of the Canadian Cannabis Subsidiaries during the pendency of the CCAA Proceeding (the "Monitor"). As a result of the commencement of the CCAA Proceeding and the appointment of the Monitor, and in accordance with U.S. generally accepted accounting principles, the Canadian Cannabis Subsidiaries were deconsolidated from the Company's financial statements as of the Order Date.

As a result of a sale process under an order issued by the Canadian Court in the CCAA Proceeding, the sale of Figr East and certain intangible assets of Figr Brands was completed on June 28, 2021 and the sale of assets of Figr Norfolk was completed on January 28, 2022. Pursuant to the CCAA Proceeding, we received funds in settlement of our debt claims with respect to the Canadian Cannabis Subsidiaries and did not receive any recovery with respect to our equity interest in the Canadian Cannabis Subsidiaries. Refer to "Note 5. CCAA Proceeding and Deconsolidation of Subsidiaries" and "Note 30. Subsequent Events" to the "Notes to Consolidated Financial Statements" for additional information.

COVID-19
We continue to monitor the impact of the COVID-19 pandemic on our Company and workforce. The COVID-19 pandemic and government actions implemented to contain further spread of COVID-19 have severely restricted economic activity around the world, and the onset of new variants of COVID-19 threaten to prolong the effects of the pandemic. The leaf tobacco business continues to be impacted by COVID-related shipping constraints, including vessel and equipment availability, closure of port facilities due to quarantines, port congestion, and rising freight costs, which have resulted in delays in shipments to customers. Our production facilities are still operating but, in some instances, at lower production levels than planned due to social distancing requirements and safety practices implemented in accordance with Company policy. While our supply chains and distribution channels continue to experience delays due to COVID-19 in certain markets, we currently have adequate supply of products to meet the near-term forecasted demand.

Broad economic factors from the COVID-19 pandemic, including increasing unemployment rates and reduced consumer spending, may extend billing and collection cycles. Deterioration in the collectability of accounts receivable from extended billing and collection cycles would adversely affect our results of operations, financial condition, and cash flows, leading to working capital constraints. If general economic conditions in the markets in which we operate continue to deteriorate or remain uncertain for an extended period of time, our business, results of operations, financial condition, and cash flows will be adversely affected. Due to the geographic scope of our operations, including emerging markets, and our sale to customers around the world, our operations and the demand for our products are subject to the impact of COVID-19 on a global scale. In addition, we cannot predict the extent or duration of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the global, national or local economies, or the effect of the COVID-19 pandemic on our business, financial position, results of operations, and cash flows.

Fresh Start Reporting
The Company applied Financial Accounting Standards Board ("FASB") ASC Topic 852 – Reorganizations ("ASC 852") in preparing the consolidated financial statements. For periods subsequent to the commencement of the Chapter 11 Cases, ASC 852 requires distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business. Upon the effectiveness of the Plan and the emergence of the Debtors from the Chapter 11 Cases, the Company determined it qualified for fresh start reporting under ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes on the Effective Date (as defined above). Our financial results for the year ended March 31, 2020 and for the five months ended August 31, 2020 are referred to as those of the "Predecessor." Our financial results for the seven months ended March 31, 2021 and for the year ended March 31, 2022 are referred to as those of the "Successor." Our results of operations as reported in our consolidated financial statements for these periods are prepared in accordance with fresh start reporting, which requires that we report on our results for the periods prior to the Effective Date separately from the period following the Effective Date. The Company elected to apply fresh start reporting using a convenience date of August 31, 2020
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(the "Fresh Start Reporting Date"). The Company evaluated and concluded the events between August 24, 2020 and August 31, 2020 were not material to the Company's financial reporting on both a quantitative or qualitative basis. Refer to "Note 4. Fresh Start Reporting" to the "Notes to Consolidated Financial Statements" for additional information.

We do not believe that reviewing the results of periods that span the Fresh Start Reporting Date in isolation would be useful in identifying trends in or reaching conclusions regarding our overall operating performance. Management believes that operating metrics for the Successor for the seven months ended March 31, 2021 when combined with those of the Predecessor for the five months ended August 31, 2020 provides a more meaningful comparison to the results for the fiscal years ended March 31, 2020 and 2022 and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our consolidated financial statements in accordance with U.S. GAAP, the table and discussion below also present the combined results for these periods. The combined results (referenced as "Combined (Non-GAAP)" or "combined") for the fiscal year ended March 31, 2021 represent the sum of the reported amounts for the Predecessor period April 1, 2020 through August 31, 2020 combined with the Successor period from September 1, 2020 through March 31, 2021. These combined results are not considered to be prepared in accordance with U.S. GAAP. The combined operating results are presented for supplemental purposes only, may not reflect the actual results we would have achieved absent our emergence from bankruptcy, may not be indicative of future results and should not be viewed as a substitute for the financial results of the Predecessor period and Successor period presented in accordance with U.S. GAAP. In the following discussion of results of operations, comparisons of combined results for the fiscal year ended March 31, 2021 are to the comparable U.S. GAAP measures for the fiscal years ended March 31, 2022 and 2020.

23



Results of Operations

Years Ended March 31, 2022 and 2021
ConsolidatedSuccessorPredecessorCombined
(Non-GAAP)
(in millions)Year Ended March 31, 2022Seven months ended March 31, 2021Five months ended August 31, 2020Year ended
March 31, 2021
Sales and other operating revenues$1,639.9 $884.3 $447.6 $1,331.9 
Cost of goods and services sold1,412.8 767.9 402.6 1,170.5 
Gross profit*227.1 116.5 45.0 161.5 
Gross profit as a percent of sales13.8 %13.2 %10.1 %12.1 %
Selling, general, and administrative expenses$142.0 $110.0 $87.9 $197.9 
Other expense, net3.1 9.6 0.5 10.1 
Restructuring and asset impairment charges8.0 11.8 0.6 12.4 
Goodwill impairment32.2 1.1 — 1.1 
Operating income (loss)*41.7 (16.0)(44.0)(60.0)
Loss on deconsolidation/disposition of subsidiaries10.7 70.2 — 70.2 
Debt retirement expense2.0 — 0.8 0.8 
Interest expense, net108.4 55.4 45.2 100.6 
Reorganization items, net— — 106.0 106.0 
Income tax expense12.6 13.2 0.3 13.5 
Income from unconsolidated affiliates, net10.0 11.9 2.4 14.3 
Net income (loss) attributable to noncontrolling interests0.1 (6.3)(1.0)(7.3)
Net (loss) income attributable to Pyxus International, Inc.*$(82.1)$(136.7)$19.0 $(117.7)
Leaf:
Product revenues$1,531.8 $814.5 $407.1 $1,221.6 
Tobacco costs1,233.7 645.2 331.3 976.5 
Transportation, storage, and other period costs92.2 50.2 21.2 71.4 
Total cost of goods sold1,325.9 695.4 352.5 1,047.9 
Product revenue gross profit205.9 119.1 54.6 173.7 
Product revenue gross profit as a percent of sales13.4 %14.6 %13.4 %14.2 %
Kilos sold381.0 214.2 112.0 326.2 
     Average price per kilo$4.02 $3.80 $3.63 $3.74 
     Average cost per kilo3.48 3.25 3.15 3.21 
Average gross profit per kilo0.54 0.55 0.48 0.53 
Processing and other revenues95.4 50.0 31.1 81.1 
Processing and other revenues costs of services sold65.9 36.6 24.4 61.0 
Processing and other gross margin29.5 13.4 6.7 20.1 
All Other:
Sales and other operating revenues$12.6 $19.9 $9.4 $29.3 
Cost of goods and services sold21.0 35.9 25.7 61.6 
Gross loss(8.4)(16.0)(16.3)(32.3)
Segment operating income (loss):
Leaf106.2 43.7 (0.1)43.6 
All Other(24.2)(46.8)(43.3)(90.1)
Segment operating income (loss)*$81.9 $(3.1)$(43.4)$(46.5)
*Amounts may not equal column totals due to rounding.
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Segment operating income (loss) of $81.9 million for the year ended March 31, 2022 increased $128.5 million, or 276.1%, from combined operating loss of $46.5 million for the year ended March 31, 2021. This increase was mainly due to higher leaf sales and other operating revenues and increased average leaf gross margin per kilo, as well as the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of year ended March 31, 2021 and savings from restructuring initiatives contributing to gross profit improvement and the reduction of sales, general, and administrative expenses.

Sales and other operating revenues increased $308.0 million, or 23.1%, to $1,639.9 million for the year ended March 31, 2022 from combined sales and other operating revenues of $1,331.9 million for the year ended March 31, 2021. This increase was due to a 16.8% increase in kilo volume and a 7.5% increase in average price per kilo. The 16.8% increase in kilo volume was driven by larger crop sizes in Africa and increased market share in Africa, Asia, and South America partially due to customers reversing their vertical integration in certain markets. In addition, 21.1 million kilos or $178.3 million of shipments were delayed by the COVID-19 pandemic and customer shipping instructions from the prior year into the current year and was offset by similar volume of shipments expected in the current year that has been delayed into next year in Africa, North America, and South America. The 7.5% increase in average price per kilo was primarily due to product mix having a higher concentration of lamina in Asia, Africa, and Europe, as well as customer and grade mix in Africa and North America.

Cost of goods and services sold increased $242.3 million, or 20.7%, to $1,412.8 million for the year ended March 31, 2022 from combined cost of goods and services sold of $1,170.5 million for the year ended March 31, 2021. This increase was driven by the increase in sales and other operating revenues. Average cost per kilo increased primarily due to higher tobacco prices.

Gross profit as a percent of sales increased to 13.8% for the year ended March 31, 2022 from combined gross profit as a percent of sales of 12.1% for the year ended March 31, 2021. This increase was mainly due to the deconsolidation of the Company's Canadian Cannabis Subsidiaries in the fourth quarter of the year ended March 31, 2021, the wind down of the industrial hemp and CBD businesses, and customer mix. Average gross profit per kilo increased primarily due to customer mix.

Selling, general, and administrative expenses decreased $55.9 million, or 28.2%, to $142.0 million for the year ended March 31, 2022 from combined selling, general, and administrative expenses of $197.9 million for the year ended March 31, 2021. Selling, general, and administrative expenses as a percent of sales decreased to 8.7% for the year ended March 31, 2022 from combined selling, general, and administrative expenses as a percent of sales of 14.9% for the year ended March 31, 2021. These decreases were related to increased sales and other operating revenues, the deconsolidation of the Canadian Cannabis Subsidiaries in the fourth quarter of year ended March 31, 2021, and savings from restructuring initiatives.

Goodwill impairment charges of $32.2 million for the year ended March 31, 2022 were from the full write-off of the carrying value of goodwill for each of the Company's reporting units. See "Note 16. Goodwill and Other Intangibles, Net" for additional information.

Loss on deconsolidation/disposition of subsidiaries decreased $59.5 million, or 84.8%, to $10.7 million for the year ended March 31, 2022 from combined loss on deconsolidation/disposition of subsidiaries of $70.2 million for the year ended March 31, 2021. The combined loss on deconsolidation/disposition of subsidiaries in the prior year was attributable to the deconsolidation of the Canadian Cannabis Subsidiaries in connection with the commencement of the CCAA Proceeding, while the loss on deconsolidation/disposition of subsidiaries in the current year was attributable to write-downs of the Company's related party receivable from the CCAA Proceeding and the disposition of Humble Juice during the three months ended December 31, 2021.

Combined reorganization items of $106.0 million for the year ended March 31, 2021 were incurred during the pendency of the Chapter 11 Cases.
25


Results of Operations

Years Ended March 31, 2021 and 2020
ConsolidatedSuccessorPredecessorCombined
(Non-GAAP)
Predecessor
(in millions)Seven months ended March 31, 2021Five months ended August 31, 2020Year ended
March 31, 2021
Year ended
March 31, 2020
Sales and other operating revenues$884.3 $447.6 $1,331.9 $1,527.3 
Total cost of goods and services sold767.9 402.6 1,170.5 1,302.6 
Gross profit*116.5 45.0 161.5 224.7 
Gross profit as a percent of sales13.2 %10.1 %12.1 %14.7 %
Selling, general, and administrative expenses$110.0 $87.9 $197.9 $199.0 
Other (expense) income, net(9.6)(0.5)(10.1)2.1 
Restructuring and asset impairment charges11.8 0.6 12.4 5.6 
Goodwill impairment1.1 — 1.1 33.8 
Operating loss(16.0)(44.0)(60.0)(11.6)
Loss on deconsolidation/disposition of subsidiaries70.2 — 70.2 — 
Debt retirement expense— 0.8 0.8 — 
Interest expense, net55.4 45.2 100.6 132.8 
Reorganization items— 106.0 106.0 — 
Income tax expense13.2 0.3 13.5 131.8 
Income from unconsolidated affiliates11.9 2.4 14.3 5.9 
Net loss attributable to noncontrolling interests(6.3)(1.0)(7.3)(5.7)
Net (loss) income attributable to Pyxus International, Inc.*$(136.7)$19.0 $(117.7)$(264.7)
Leaf:
Sales and other operating revenues$814.5 $407.1 $1,221.6 $1,428.6 
Tobacco costs645.2 331.3 976.5 1,142.4 
Transportation, storage, and other period costs50.2 21.2 71.4 83.9 
Total cost of goods sold695.4 352.5 1,047.9 1,226.3 
Product revenue gross profit119.1 54.6 173.7 202.3 
Product revenue gross profit as a percent of sales14.6 %13.4 %14.2 %14.2 %
Kilos sold214.2 112.0 326.2 342.8 
     Average price per kilo$3.80 $3.63 $3.74 $4.17 
     Average cost per kilo3.25 3.15 3.21 3.58 
Average gross profit per kilo0.55 0.48 0.53 0.59 
Processing and other revenues50.0 31.1 81.1 78.8 
Processing and other revenues costs of services sold36.6 24.4 61.0 59.5 
Processing and other gross margin13.4 6.7 20.1 19.3 
All Other:
Sales and other operating revenues$19.9 $9.4 $29.3 $19.9 
Cost of goods and services sold35.9 25.7 61.6 16.8 
Gross (loss) profit(16.0)(16.3)(32.3)3.1 
Segment operating (loss) income:
Leaf43.7 (0.1)43.6 99.0 
All Other(46.8)(43.3)(90.1)(71.2)
Segment operating (loss) income$(3.1)$(43.4)$(46.5)$27.8 
*Amounts may not equal column totals due to rounding.
26



Combined sales and other operating revenues decreased $195.4 million, or 12.8%, to $1,331.9 million for the year ended March 31, 2021 from $1,527.3 million for the year ended March 31, 2020. This decrease was due to a 4.8% decrease in leaf volume and a 10.3% decrease in leaf average selling prices. These decreases were partially offset by an increase in cannabinoid revenue attributable to sales occurring in most of the Canadian provinces, as well as the launch of the GO! cannabinoid product line in Canada. The 4.8% decrease in leaf volume was primarily due to smaller crop sizes in Africa and shipments delayed into fiscal 2022 by the COVID-19 pandemic in Africa, Asia, and North America, as well as customer shipping instructions in North America. This decrease was partially offset by higher volume in South America driven by the timing of shipments. The 10.3% decrease in leaf average sales prices was due to changes in foreign exchange rates in Europe and South America and product mix in Africa and Europe having a lower concentration of lamina. This decrease was partially offset by product mix having a higher concentration of lamina in Asia, North America, and South America.

Combined cost of goods sold decreased $132.1 million, or 10.1%, to $1,170.5 million for the year ended March 31, 2021 from $1,302.6 million for the year ended March 31, 2020. This decrease was mainly due to the reduction in sales and other operating revenues. This decrease was partially offset by $32.1 million of inventory write-offs related to the Company's actions to exit operations of the industrial hemp businesses and shifts in expected future products mix in response to market supply conditions.

Combined gross profit as a percent of sales decreased to 12.1% for the year ended March 31, 2021 from 14.7% for the year ended March 31, 2020. This decrease was mainly due to the inventory write-offs described above and product mix in Africa and Europe having a lower concentration of lamina.

Combined selling, general, and administrative expenses decreased $1.1 million, or 0.6%, to $197.9 million for the year ended March 31, 2021 from $199.0 million for the year ended March 31, 2020. This decrease was driven by lower travel expenses due to the COVID-19 pandemic, current-year savings from restructuring initiatives, and $13.8 million of costs incurred to evaluate and develop plans for a potential partial monetization of interests in subsidiaries in the All Other category in the prior year. The decrease was partially offset by $21.8 million of expenses in the current year associated with the Chapter 11 Cases. Combined selling, general, and administrative expenses as a percent of sales increased to 14.9% for the year ended March 31, 2021 from 13.0% for the year ended March 31, 2020 primarily due to the decrease in sales and other operating revenues.

Combined restructuring and asset impairment charges increased $6.8 million or 121.4% to $12.4 million for the year ended March 31, 2021 from $5.6 million for the year ended March 31, 2020. This increase was attributable to employee separation and impairment charges related to the CCAA Proceeding and the restructuring of certain U.S. operations, which included the industrial hemp and CBD businesses, and the continued restructuring of certain African operations.

Combined loss on deconsolidation/disposition of subsidiaries of $70.2 million in the year ended March 31, 2021 related to the deconsolidation of the Canadian Cannabis Subsidiaries in connection with the commencement of the CCAA Proceeding.

Combined interest expense, net decreased $32.2 million, or 24.2%, to $100.6 million for the year ended March 31, 2021 from $132.8 million for the year ended March 31, 2020. This decrease was driven by lower outstanding long-term debt balances, as well as lower balances on the African seasonal lines of credit.

Combined reorganization items of $106.0 million for the year ended March 31, 2021 were comprised of the $462.3 million gain on settlement of liabilities subject to compromise as a result of the Chapter 11 Cases, partially offset by fees and costs incurred in connection with the Chapter 11 Cases, including with respect to the debtor-in-possession financing, and fresh start reporting adjustments.

Combined income tax expense decreased $118.3 million, or 89.8%, to $13.5 million for the year ended March 31, 2021 from $131.8 million for the year ended March 31, 2020. This decrease was primarily due to the reversal of valuation allowances recorded in the prior year, which were driven by substantial doubt regarding the Company's ability to continue as a going concern prior to the implementation of the Plan.
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Liquidity and Capital Resources

Overview
Our primary sources of liquidity are cash generated from operations, cash collections from our securitized receivables, and short-term borrowings under our foreign seasonal lines of credit. 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 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. It is possible that, depending on the occurrence of events affecting our liquidity needs and sources of liquidity, such plans may not be sufficient to adequately or timely address a liquidity deficiency.

Debt Financing
We continue to finance our business with a combination of short-term and long-term seasonal credit lines, the long-term debt securities, advances from customers, and cash from operations when available. See "Note 19. Debt Arrangements" to the "Notes to 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 condition, trading levels of our debt, our cash position, compliance with debt covenants, and other considerations.

Exit Term Loan Credit Facility
On the Effective Date, Pyxus Holdings entered into an Exit Term Loan Credit Agreement (the "Exit Term Loan Credit Agreement"), to establish a term loan credit facility in an aggregate principal amount of approximately $213.4 million (the "Exit Term Loan Credit Facility"). The aggregate principal amount of loans outstanding under Debtors’ debtor-in-possession financing facility, and related fees, were converted into, or otherwise satisfied with the proceeds of, the Exit Term Loan Credit Facility.

The Exit Term Loan Credit Facility permits both base rate borrowings and LIBOR borrowings. Borrowings under the Exit Term Loan Credit Facility bear interest at an annual rate equal to LIBOR plus 800 basis points or 700 basis points above base rate, as applicable. In addition to the cash interest payments, from and after the first anniversary of the Exit Term Loan Credit Agreement, the term loans (the "Exit Term Loans") under the Exit Term Loan Credit Facility bear "payment in kind" interest in an annual rate equal to 100 basis points, which rate increases by an additional 100 basis points on each of the second, third and fourth anniversaries of the Exit Term Loan Credit Agreement.

Pyxus Holdings’ obligations under the Exit Term Loan Credit Facility (and certain related obligations) are (a) guaranteed by Pyxus Parent, Inc. and the Company, all of Pyxus Holdings’ material domestic subsidiaries and certain of Pyxus Holdings’ foreign subsidiaries (the "Foreign Guarantors"), and each of Pyxus Holdings’ future material domestic subsidiaries is required to guarantee the Exit Term Loan Credit Facility on a senior secured basis (including Pyxus Holdings, collectively, the "Exit Term Facility Loan Parties") and (b) secured by certain collateral owned by the Exit Term Facility Loan Parties.

The Exit Term Loans and the Exit Term Loan Credit Facility mature on February 24, 2025. At March 31, 2022, the aggregate principal amount of the Exit Term Loans outstanding was approximately $219.5 million. As of March 31, 2022, Pyxus Holdings was in compliance with all covenants under the Exit Term Loan Credit Agreement.

Refer to "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

Senior Secured First Lien Notes
On the Effective Date, Pyxus Holdings issued approximately $280.8 million in aggregate principal amount of its 10.0% Senior Secured First Lien Notes due 2024 (the "Notes") to holders of specified claims under the Plan pursuant to the Indenture (the "Indenture") dated as of the Effective Date among Pyxus Holdings, the initial guarantors party thereto, and Wilmington Trust, National Association, as trustee, and collateral agent. The 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 Notes are initially guaranteed on a senior secured basis by the Company, all of the Company’s material domestic subsidiaries (other than Pyxus Holdings) and the Foreign Guarantors, on
28


a subordinated basis to the guarantees securing the Exit Term Loan Facility, and each of its future material domestic subsidiaries are required to guarantee the Notes on a senior secured basis (collectively, the "Notes Guarantors"). The obligations of Pyxus Holdings and the Notes Guarantors with respect to the Notes and the Indenture are secured by certain collateral owned by Pyxus Holdings and the Notes Guarantors. The Notes mature on August 24, 2024. At March 31, 2022, the aggregate principal amount of the Notes outstanding was approximately $270.8 million. At March 31, 2022, each of Pyxus Holdings and each guarantor of the Notes was in compliance with all covenants under the Indenture.

Refer to "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

ABL Credit Facility
On February 8, 2022, Pyxus Holdings, certain subsidiaries of Pyxus Holdings (together with Pyxus Holdings, the "Borrowers"), and the Company and its wholly owned subsidiary, Pyxus Parent, Inc., as guarantors, entered into an ABL Credit Agreement (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 Facility may be used for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $100.0 million, subject to the limitations described below in this paragraph. The ABL Credit Facility includes a $20.0 million 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 $120.0 million. The amount available under the ABL Credit Facility is limited by a borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves, as follows:

85% of eligible accounts receivable, plus
90% of eligible credit insured accounts receivable, plus
the lesser of (i) 70% of eligible inventory valued at the lower of cost (based on a first-in first-out basis) and market value thereof (net of intercompany profits) or (ii) 85% of the net-orderly-liquidation value percentage of eligible inventory, minus
applicable reserves.

At March 31, 2022, $10.0 million was available for borrowing under the ABL Credit facility, after reducing availability by the aggregate borrowings under the ABL Credit facility of $90.0 million outstanding on that date and the $20.0 million of Domestic Availability (as defined in the ABL Credit Agreement) required to be maintained.

The ABL Credit Facility permits both base rate borrowings and borrowings based upon the Bloomberg-Short-Term Bank Yield Index rate ("BSBY"). Borrowings under the ABL Credit Facility bear interest at an annual rate equal to one, three, or six-month reserve-adjusted BSBY Rate plus 300 basis points or 200 basis points above base rate, as applicable, with a fee on unutilized commitments at an annual rate of 37.5 basis points.

The ABL Credit Facility matures, subject to extension on terms and conditions set forth in the ABL Credit Agreement, on the earlier of February 8, 2027 or 90 days prior to the earliest maturity of obligations owing under the Exit Term Loan Credit Agreement and the Indenture.

The ABL Credit Facility may be prepaid from time to time, in whole or in part, without prepayment or premium, subject to a termination fee upon the permanent reduction of commitments under the ABL Credit Facility of 300 basis points for terminations in the first year after entry into the ABL Credit Agreement, 200 basis points for terminations in the second year and 100 basis points for termination in the third year. In addition, customary mandatory prepayments of the loans under the ABL Credit Facility are required upon the occurrence of certain events including, without limitation, outstanding borrowing exposures exceeding the borrowing base, certain dispositions of assets outside of the ordinary course of business in respect of certain collateral securing the ABL Credit Facility and certain casualty and condemnation events. With respect to base rate loans, accrued interest is payable monthly in arrears and, with respect to BSBY loans, accrued interest is payable monthly and on the last day of any applicable interest period.

The Borrowers’ obligations under the ABL Credit Facility (and certain related obligations) are (a) guaranteed by Pyxus Parent, Inc. and the Company and all of Pyxus Holdings’ wholly owned domestic subsidiaries, and each of Pyxus Holdings’ future wholly owned domestic subsidiaries is required to guarantee the ABL Credit Facility on a senior secured basis (collectively, the "ABL Loan Parties") and (b) secured by the collateral, as described below, which is owned by the ABL Loan Parties.

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The liens and other security interests granted by the ABL Loan Parties on the collateral for the benefit of the lenders under the ABL Credit Facility (and certain related secured parties) are, subject to certain permitted liens, secured by first-priority security interests on a pari passu basis with the security interests securing the ABL Loan Parties’ obligations under the Exit Term Loan Credit Agreement and the Notes. The obligations of Pyxus Holdings and each other ABL Loan Party under the ABL Credit Facility and any related guarantee are repaid pursuant to a waterfall with respect to portions of the Collateral as set forth in the existing intercreditor agreements with respect to Pyxus Holdings’ senior secured debt.

Cash Dominion
Under the terms of the ABL Credit Facility, if (i) an event of default has occurred and is continuing, (ii) excess borrowing availability under the ABL Credit Facility (based on the lesser of the commitments thereunder and the borrowing base) (the "Excess Availability") falls below 10% of the total commitments under the ABL Credit Facility at such time, or (iii) Domestic Availability (as defined in the ABL Credit Agreement) being less than $20.0 million, the ABL Loan Parties will become subject to cash dominion, which will require daily prepayment of loans under the ABL Credit Facility with the cash deposited in certain deposit accounts of the ABL Loan Parties, including concentration accounts, and will restrict the ABL Loan Parties’ ability to transfer cash from their concentration accounts to their disbursement accounts. Such cash dominion period (a "Dominion Period") shall end when (i) if arising as a result of a continuing event of default, such event of default ceases to exist, (ii) if arising as a result of non-compliance with the Excess Availability threshold, Excess Availability shall be equal to or greater than 10% of the total commitments under the ABL Credit Facility for a period of 30 consecutive days and no event of default is continuing, or (iii) if arising as a result of Domestic Availability being less than $20.0 million, Domestic Availability is greater than $20.0 million for a period of 30 consecutive days and no event of default is continuing.

Covenants
The ABL Credit Agreement governing the ABL Credit Facility contains (i) a springing covenant requiring that the Company’s fixed charge coverage ratio be no less than 1.10 to 1.00 during any Dominion Period and (ii) a covenant requiring Domestic Availability greater than $20.0 million at all times until audited financial statements for fiscal year ending March 31, 2023 are delivered under the ABL Credit Agreement.

The ABL Credit Agreement governing the ABL Credit Facility contains customary representations and warranties, affirmative and negative covenants (subject, in each case, to exceptions and qualifications) and events of defaults, including covenants that limit the Company’s ability to, among other things:

incur additional indebtedness or issue disqualified stock or preferred stock;
make investments;
pay dividends and make other restricted payments;
sell certain assets;
create liens;
enter into sale and leaseback transactions;
consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets;
enter into transactions with affiliates; and
designate subsidiaries as Unrestricted Subsidiaries (as defined in the ABL Credit Agreement).

On March 31, 2022, the Borrowers were in compliance with all covenants under the ABL Credit Agreement. See "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

DDTL Facility
On April 23, 2021, Intabex Netherlands B.V. ("Intabex"), an indirect wholly owned subsidiary of the Company, entered into a Term Loan Credit Agreement (as amended on May 21, 2021, the "DDTL Facility Credit Agreement"), dated as of April 23, 2021 (the "Closing Date"), by and among (i) Intabex, as borrower, (ii) the Company, Pyxus Parent, Inc., Pyxus Holdings, Inc., Alliance One International, LLC, Alliance One International Holdings, Ltd, as guarantors (collectively, the "Parent Guarantors"), (iii) the lenders party thereto, which currently include certain funds managed by Glendon Capital Management LP, Monarch Alternative Capital LP, and Owl Creek Asset Management, L.P. (collectively and, together with any other lender that is or becomes a party thereto as a lender, the "DDTL Facility Lenders"), and (iv) Alter Domus (US) LLC, as administrative agent and collateral agent (the "DDTL Agent"). The DDTL Facility Credit Agreement establishes a $120.0 million delayed-draw term loan credit facility (the "DDTL Facility") permitting borrowings by Intabex in up to four draws on or prior to June 30, 2021 in a minimum amount of $30.0 million each (or, if less than $30.0 million remains available under the DDTL Facility, the remaining commitments under the DDTL Facility) (the "DDTL Loans"). The proceeds of the DDTL Loans are to be used to provide ongoing working capital and for other general corporate purposes of Intabex, the Guarantors (as defined below) and their subsidiaries.

Interest on the aggregate principal amount of outstanding DDTL Loans accrues at an annual rate of LIBOR plus 9.0%, subject to a LIBOR floor of 1.5%, for "LIBOR loans" or, for loans that are not LIBOR loans, at an annual rate of an alternative base
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rate (as specified in the DDTL Facility Credit Agreement) plus 8.0%. The obligations of Intabex under the DDTL Facility Credit Agreement (and certain related obligations) are (a) guaranteed by the Parent Guarantors and Alliance One International Tabak B.V., an indirect subsidiary of the Company, and each of the Company’s domestic and foreign subsidiaries that is or becomes a guarantor of borrowings under the Exit Term Loan Credit Agreement (which subsidiaries are referred to collectively, together with the Parent Guarantors, as the "Guarantors").

The DDTL Facility and all DDTL Loans made thereunder mature on July 31, 2022. At March 31, 2022, the aggregate principal amount of the DDTL Loans outstanding was $107.8 million, and the Company and each of the Guarantors were in compliance with all covenants under the DDTL Credit Facility Agreement.

Related Party Transaction
Based on a Schedule 13D filed with the SEC on September 3, 2020 by Glendon Capital Management, L.P., Glendon Opportunities Fund, L.P. and Glendon Opportunities Fund II, L.P., Glendon Capital Management, L.P. reported beneficial ownership of 7,938,792 shares of the Company’s common stock, representing approximately 31.8% of the outstanding shares of the Company’s common stock. Based on Form 4 filed with the SEC on July 15, 2021, as well as Schedule 13D filed with the SEC on September 3, 2020, by Monarch Alternative Capital LP, MDRA GP LP and Monarch GP LLC, Monarch Alternative Capital LP reported beneficial ownership of 6,140,270 shares of the Company’s common stock, representing approximately 24.6% of the outstanding shares of the Company’s common stock. Based on a Schedule 13G/A filed with the SEC on February 10, 2022 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 2,405,287 shares of the Company’s common stock on December 31, 2021, representing approximately 9.6% of the outstanding shares of the Company’s common stock. Pursuant to a Shareholders Agreement dated as of August 24, 2020 (the "Shareholders Agreement") among Pyxus and certain of its shareholders, including Glendon Capital Management L.P., on behalf of its managed funds and accounts, and Monarch Alternative Capital LP, as investment manager of Monarch Special Opportunities Master Fund Ltd, Monarch Debt Recovery Master Fund Ltd and Monarch Capital Master Partners IV LP, Holly Kim and Patrick Fallon were designated to serve as directors of Pyxus and each continues to serve as a director of Pyxus. Ms. Kim is a Partner at Glendon Capital Management L.P. and Mr. Fallon is a Managing Principal at Monarch Alternative Capital LP.

The DDTL Facility Credit Agreement, any and all borrowings thereunder and the guaranty transactions described above 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.

See "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

On June 2, 2022, we entered into an agreement with the DDTL Facility Lenders and the DDTL Agent, subject to the satisfaction of customary closing conditions, to amend and restate the DDTL Facility Credit Agreement to, among other things, replace the DDTL Facility with a $100.0 million term loan facility maturing on December 2, 2023. See "Note 30. Subsequent Events" for additional information.

African Lines of Credit
On August 12, 2021, the Company and certain subsidiaries of the Company, including the Company’s subsidiaries in Malawi, Tanzania, and Zambia (the "African Subsidiary Borrowers"), entered into the Third Amendment and Restatement Agreement (the "Restated TDB Agreement") with Eastern and Southern African Trade and Development Bank ("TDB"). The Restated TDB Agreement sets forth the terms that govern the foreign seasonal lines of credit of each of the African Subsidiary Borrowers with TDB in effect. The Restated TDB Agreement provides for a lending commitment with respect to the line of credit of the Company’s Malawi subsidiary of $80.0 million, a lending commitment with respect to the line of credit of the Company’s Tanzania subsidiary of $85.0 million, and a lending commitment with respect to the line of credit of the Company’s Zambia subsidiary of $40.0 million, in each case with current borrowing availability reduced by the amount of outstanding loans borrowed under the respective existing line of credit with TDB. Loans under the Restated TDB Agreement bear interest at LIBOR plus 6%. The Restated TDB Agreement terminates on June 30, 2024, unless terminated sooner at TDB’s discretion on June 30, 2022 or June 30, 2023. The terms of the Restated TDB Agreement may also be modified at TDB’s discretion on those dates. Borrowings under the Restated TDB Agreement are due upon the termination of the Restated TDB Agreement.

Pursuant to the Restated TDB Agreement, each of the Company and its subsidiaries, Pyxus Parent, Inc., and Pyxus Holdings, guarantee the obligations of the African Subsidiary Borrowers under the Restated TDB Agreement. In addition, the Restated TDB Agreement provides that obligations of each African Subsidiary Borrower under the Restated TDB Agreement are secured by a first priority pledge of:

tobacco purchased by that African Subsidiary Borrower that is financed by TDB;
intercompany receivables arising from the sale of the tobacco financed by TDB;
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customer receivables arising from the sale of the tobacco financed by TDB; and
such African Subsidiary Borrower's local collection account receiving customer payments for purchases of tobacco financed by TDB.

The Restated TDB Agreement also requires Alliance One International, LLC, a subsidiary of the Company, to pledge customer receivables arising from the sale of the tobacco financed by TDB and pledge its collection accounts designated for receiving customer payments for purchases of tobacco financed by TDB.

At March 31, 2022, the Company and its subsidiaries party to the Restated TDB Agreement were in compliance with all such covenants under the Restated TDB Agreement and $133.4 million was available for borrowing under the Restated TDB Agreement, after reducing availability by the aggregate borrowings under the Restated TDB Agreement of $71.6 million outstanding on that date.

See "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

Short-Term Seasonal Lines of Credit
Excluding its long-term credit arrangements, the Company has typically financed 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 to 270 days corresponding to the tobacco crop cycle in that location. Other than described below, these facilities are typically uncommitted in that the lenders have the right to cease making loans and demand repayment of loans at any time. These loans are typically renewed at the outset of each tobacco season. At March 31, 2022, the aggregate outstanding borrowings of the Company under these seasonal credit lines was approximately $372.6 million and approximately $287.2 million was available for borrowing under these seasonal credit lines, subject to limitations as provided for in the ABL Credit Agreement. The weighted average variable interest rate for these seasonal lines of credit for the year ended March 31, 2022 was 6.1%. Certain of the foreign seasonal lines of credit, with aggregate outstanding borrowings at March 31, 2022 of approximately $109.4 million, are secured by trade receivables and inventories as collateral.

Seasonal liquidity beyond cash flow from operations is provided by our foreign seasonal lines of credit, advances from customers, and sales of accounts receivable. For the years ended March 31, 2022 and 2021, our average short-term borrowings, aggregated peak short-term borrowings outstanding, and weighted-average interest rate on short-term borrowings were as follows:
(in millions)March 31, 2022March 31, 2021
Average short-term borrowings(1)
$393.1 $461.8 
Aggregated peak short-term borrowings outstanding(1)
$559.4 $818.9 
Weighted-average interest rate on short-term borrowings6.1 %6.1 %
(1) The Company utilized borrowings under the DDTL Facility during the year ended March 31, 2022 to fund a portion of its tobacco purchasing commitments.

Aggregated peak borrowings for the year ended March 31, 2022 occurred during the fourth quarter and were due to the timing of purchases of tobacco and repayments in Africa and South America. Peak borrowings during the prior year and in the current year were repaid with cash provided by operating activities. For further information on our debt financing as of March 31, 2022, see "Note 19. Debt Arrangements" to the "Notes to Consolidated Financial Statements" for additional information.

Our borrowing capacity and available liquidity under our lines and letters of credit included the following:

March 31, 2022
(in millions)Borrowing CapacityLines and Letters Available
Senior Secured Credit Facilities:
ABL Credit Facility$100.0 $10.0 
Foreign seasonal lines of credit659.7 287.2 
Other long-term debt0.7 0.4 
Letters of credit13.5 4.5 
Total$773.9 $302.1 

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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.

(in millions)March 31, 2022March 31, 2021
Notes payable to banks$378.6 $372.2 
Current portion of long-term debt(1)
107.9 2.1 
Long-term debt(2)
580.5 551.2 
Total debt liabilities$1,067.0 $925.5 
Less: Cash and cash equivalents(1)
198.8 92.7 
Net debt$868.2 $832.8 
(1) The increases in the current portion of long-term debt and cash and cash equivalents are driven by the DDTL Facility, which was implemented in during the year ended March 31, 2022.
(2) The increase in long-term debt is primarily due to the implementation of a new ABL Credit Facility in during the year ended March 31, 2022.

Working Capital
The following summarizes our working capital:
Change
(in millions except for current ratio)March 31, 2022March 31, 2021$%
Cash, cash equivalents, and restricted cash$200.9 $97.3 103.6 106.5 
Trade and other receivables, net260.2 203.8 56.4 27.7 
Inventories and advances to tobacco suppliers, net798.4 771.5 26.9 3.5 
Recoverable income taxes7.9 4.8 3.1 64.6 
Prepaid expenses and other current assets60.3 45.1 15.2 33.7 
Total current assets*$1,327.6 $1,122.5 205.1 18.3 
Notes payable to banks$378.6 $372.2 6.4 1.7 
Accounts payable179.0 125.9 53.1 42.2 
Advances from customers53.0 12.1 40.9 338.0 
Accrued expenses and other current liabilities82.2 71.7 10.5 14.6 
Income taxes payable5.6 8.3 (2.7)(32.5)
Operating leases payable8.1 9.5 (1.4)(14.7)
Current portion of long-term debt107.9 2.1 105.8 5,038.1 
Total current liabilities*$814.4 $601.7 212.7 35.3 
Current ratio1.6 to 11.9 to 1
Working capital$513.2 $520.8 (7.6)(1.5)
*Amounts may not equal column totals due to rounding

The decrease in working capital and the current ratio between the periods was due to the increase in current liabilities outpacing the increase in current assets, which was driven by the following changes in account balances:

Cash, cash equivalents, and restricted cash increased $103.6 million, or 106.5%, to $200.9 million as of March 31, 2022 from $97.3 million as of March 31, 2021 due to higher net proceeds from short-term borrowings and higher collections of beneficial interests on securitized trade receivables.

Trade and other receivables, net increased $56.4 million, or 27.7%, to $260.2 million as of March 31, 2022 from $203.8 million as of March 31, 2021 due primarily from the increase in sales.

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Inventories and advances to tobacco suppliers, net increased $26.9 million, or 3.5%, to $798.4 million as of March 31, 2022 from $771.5 million as of March 31, 2021. This increase was mainly due to higher green tobacco prices in South America. These increases were partially offset by the restructuring of certain African operations in the prior year where the Company no longer operates.

Advances from customers increased $40.9 million, or 338.0%, to $53.0 million as of March 31, 2022 from $12.1 million as of March 31, 2021 due to increased prepayments from certain customers for inventory purchases to be made next year.

Current portion of long-term debt increased $105.8 million, or 5,038.1%, to $107.9 million as of March 31, 2022 from $2.1 million as of March 31, 2021 due to the reclassification of the DDTL facility from long-term debt to current portion of long-term debt during the year ended March 31, 2022.

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

March 31, 2022March 31, 2021
Committed$471.9 $437.0 
Uncommitted$45.7 $97.7 
Total processed tobacco$517.6 $534.7 

See "Note 1. Basis of Presentation and Summary of Significant Accounting Policies" and "Note 11. Inventories" to the "Notes to Consolidated Financial Statements" for further information.

Sources and Uses of Cash
We have typically financed our non-U.S. tobacco operations with uncommitted short-term foreign seasonal lines of credit. These foreign lines of credit are generally seasonal in nature, normally extending for a term of 180 to 270 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 typically renewed at the outset of each tobacco season. We maintain various other financing arrangements to meet the cash requirements of our businesses. See "Note 19. Debt Arrangements" to the "Notes to 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 March 31, 2022 our cash and cash equivalents was $198.8 million, of which $69.7 million was held in foreign jurisdictions and subject to exchange controls and tax consequences that could limit our ability to fully repatriate these funds. Fluctuation of the U.S. dollar versus many of the currencies in which we incur costs may have an impact on our working capital requirements. We will continue to monitor and hedge foreign currency costs, as needed.

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

SuccessorPredecessorCombined
(Non-GAAP)
(in millions)Year Ended March 31, 2022Seven months ended March 31, 2021Five months ended August 31, 2020Year Ended
March 31, 2021
Operating activities$(198.8)$(44.5)$(182.1)$(226.6)
Investing activities181.2 71.8 61.7 133.5 
Financing activities123.3 (49.3)63.7 14.4 
Effect of exchange rate changes on cash(2.1)1.7 1.6 3.3 
Increase (decrease) in cash, cash equivalents, and restricted cash*$103.6 $(20.3)$(55.1)$(75.4)
 *Amounts may not equal column totals due to rounding.

Net cash used by operating activities decreased for the year ended March 31, 2022 compared to the combined seven months ended March 31, 2021 and the five months ended August 31, 2020 primarily due to lower net loss from not incurring
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reorganization expenses in the year ended March 31, 2022 for the Chapter 11 Cases. This decrease was partially offset by higher receivables outstanding in the current period due to increased sales.

Net cash provided by investing activities increased for the year ended March 31, 2022 compared to the combined seven months ended March 31, 2021 and the five months ended August 31, 2020 primarily due to higher collections of beneficial interests on securitized trade receivables driven by increased sales over the same period and lower capital expenditures.

Net cash provided by financing activities increased for the year ended March 31, 2022 compared to the combined seven months ended March 31, 2021 and the five months ended August 31, 2020 primarily due to higher net proceeds from short term borrowings and net proceeds from the DDTL. These increases were partially offset by proceeds from the debtor-in-possession financing facility ("DIP facility") in place during the pendency of the Chapter 11 Cases in the prior year that did not recur in the current year.

Planned Capital Expenditures
We are estimating $21.3 million in capital investments for fiscal 2023 for routine replacement of equipment, as well as investments in assets that will add value to the customer or increase efficiency.

Securitized Receivables
We sell accounts receivable under three revolving trade accounts receivable securitization programs. Under the first and second programs, we receive a discount from the face value of the receivable sold, less contractual dilutions which limit the amount that may be outstanding from any one particular customer and insurance reserves that also have the effect of limiting the risk attributable to any one customer. Our beneficial interests in the first and second facilities is subordinate to the purchaser of the receivables. Under the third program, we receive an amount equal to the face value of the receivable sold, less a discount rate tied to a benchmark rate, which varies based on the invoice currency. See "Note 20. Securitized Receivables" to the "Notes to Consolidated Financial Statements" for additional information.

Aggregate Contractual Obligations and Commitments
The following summarizes our contractual cash obligations and other commercial commitments as of March 31, 2022:

Payments / Expirations by Fiscal Year
(in millions)Total2023   Years
   2024-2025
   Years
   2026-2027
   After
   2027
Long-Term Debt Obligations$580.5 $— $580.5 $— $— 
Short-Term Debt Obligations(1)
486.5 486.5 — — — 
Interest on Debt Obligations(2)
151.0 62.8 88.2 — — 
Pension and Postretirement Obligations87.8 10.4 17.4 17.2 42.8 
Operating Lease Obligations53.7 12.2 16.9 10.5 14.1 
Tobacco and Other Purchase Obligations515.5 515.5 — — — 
Amounts Guaranteed for Tobacco Suppliers114.2 114.2 — — — 
Total Contractual Obligations and Other
     Commercial Commitments
$1,989.2 $1,201.6 $703.0 $27.7 $56.9 
(1) Short-term debt obligations consist of the current portion of long-term debt and our seasonal foreign credit lines.
(2) Interest obligations includes interest for long-term debt, including the DDTL Loans and indebtedness under the ABL Credit Facility. The projected interest includes both fixed and variable rate debt. The variable rate used in the projections is the rate that was being charged on our variable rate debt as of March 31, 2022.

Tobacco and Other Purchase Obligations
Tobacco purchase obligations result from contracts with suppliers, primarily in Africa, Europe, North America, and South America, to buy either specified quantities of tobacco or the supplier’s total tobacco production. Amounts shown as tobacco purchase obligations are estimates based on projected purchase prices of the future crop tobacco. Payment of these obligations is net of our advances to these suppliers. Our tobacco purchase obligations do not exceed our projected requirements over the related terms and are in the normal course of business. Other purchase obligations consist primarily of purchase commitments of agricultural material. Tobacco and other purchase obligations increased $104.4 million, or 25.4%, from $411.1 million to $515.5 million primarily due to increased customer demand.

Amounts Guaranteed for Tobacco Suppliers
In Africa and South America, we provide guarantees to ensure financing is available to our tobacco suppliers. In the event these suppliers should default, we would be responsible for repayment of the funds provided to these suppliers. We also provide
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guarantees for the financing of certain unconsolidated subsidiaries in Asia and South America. See "Note 21. Guarantees" to the "Notes to Consolidated Financial Statements" for additional information.

Tax and Repatriation Matters
We are subject to income tax laws in each of the countries in which we do business through wholly owned subsidiaries and through affiliates. We regularly review of the income tax requirements of each of our operations, file appropriate returns, and make appropriate income tax planning analyses directed toward the minimization of our income tax obligations in these countries. Appropriate income tax provisions are determined on an individual subsidiary level and at the corporate level on both an interim and annual basis. These processes are followed using an appropriate combination of internal staff at both the subsidiary and corporate levels as well as independent outside advisors in review of the various tax laws and in compliance reporting for the various operations. We regularly review the status of the accumulated unremitted earnings of each of our foreign subsidiaries. We would provide deferred income taxes, net of creditable foreign taxes, if applicable, on earnings that are determined to no longer be indefinitely invested. See "Note 9. Income Taxes" to the "Notes to Consolidated Financial Statements" for additional information.

Critical Accounting Estimates
The preparation of financial statements and related disclosures in accordance with U.S. GAAP requires the use of estimates and assumptions that have an impact on the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. Management considers an accounting estimate critical if it: (i) requires us to make judgments and estimates about matters that are inherently uncertain, (ii) it is important to an understanding of our financial condition or operating results, and (iii) has a material impact to the financial statements.

We base our estimates on currently available information, historical experience, and various other assumptions we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates. Management has discussed the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of the Board of Directors.
Management believes the following accounting estimates are most critical to our business operations and to an understanding of our financial condition and results of operations and reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements.

Application of Fresh Start Reporting
We applied FASB ASC 852 in preparing the consolidated financial statements. For periods subsequent to the Chapter 11 filing and before emergence, ASC 852 requires distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business. Upon the effectiveness of the Plan and the emergence of the Debtors from the Chapter 11 Cases, the Company determined it qualified for fresh start reporting under ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes on the Effective Date. We elected to apply fresh start reporting using a convenience date of August 31, 2020. We evaluated and concluded that the events between August 24, 2020 and August 31, 2020 were not material to our financial reporting on both a quantitative or qualitative basis.

In accordance with ASC 852 and the application of fresh start reporting, we allocated our reorganization value to our individual assets based on our estimated fair values in conformity with ASC 805, Business Combinations. Deferred income tax amounts were determined in accordance with ASC 740, Income Taxes ("ASC 740"). Reorganization value represents the fair value of the Successor Company's assets before considering liabilities. The excess reorganization value over the fair value of identified tangible and intangible assets is reported as goodwill.

The Effective Date fair values of the Successor assets and liabilities differ materially from their recorded values as reflected in the historical balance sheet of the Predecessor and required the use of a number of judgments, assumptions, and estimates. It is reasonably possible that changes in these judgments, assumptions, and estimates could have a material effect on our allocation of reorganization value to our individual assets. Among the most material judgments, assumptions, and estimates utilized was our determination of reorganization value. The reorganization value was derived from, and falls within the court approved range of, enterprise values associated with the Plan. The enterprise values were based on management projections and the valuation models as determined by the Plan of Reorganization.

We determined the enterprise and corresponding equity value of the Successor using various valuation approaches and methods, including: (i) the income approach using a calculation of the present value of future cash flows based on our financial projections, (ii) the market approach using selling prices of similar business/assets and (iii) the cost approach, using estimated costs to replace or rebuild our assets. We primarily utilized the discounted cash flow ("DCF") method of the income approach, utilizing detailed revenue and expense projections that reflected the financial and operational facts and circumstances specific to the business. Our future cash flows were projected based on estimates of future revenues, gross margins, operating income, capital expenditures, and other cash flow factors, including income taxes and net working capital requirements. We utilized estimated revenue growth rates and cash flow projections. The discount rates utilized in the DCF method were based on a
36


weighted-average cost of capital determined from relevant market comparisons and adjusted for specific risk premiums, country risk premiums, and capital structure. A terminal value estimated growth rate was applied to the final year of the projected period and reflected our estimate of perpetual growth. We then calculated a present value of the respective cash flows and adjusted for the value of other aspects not reflected in the projections, such as excess net working capital, the value of non-consolidated investments, and non-operating assets and liabilities to arrive at an estimate of fair value under the income approach. We then reconciled the estimated fair value to the court approved range of enterprise values associated with the Plan. See "Note 4. Fresh Start Reporting" to the "Notes to Consolidated Financial Statements" for additional information.

Income Taxes
Our annual effective income tax rate is based on our jurisdictional mix of pretax income, statutory tax rates, exchange rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex, subject to change, and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions including evaluating uncertainties under ASC 740. We record unrecognized tax benefits in multiple jurisdictions and evaluate the future potential outcomes of tax positions, based upon our interpretation of the country-specific tax law, and the likelihood of future settlement. We review our tax positions quarterly and adjust the balances as new information becomes available.

Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise from temporary differences between the financial reporting and tax bases of assets and liabilities and from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions by assessing the impact from changes in or issuance of new tax law and the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates. To provide insight, we use our historical experience along with our short and long-range business forecasts. In addition, we make adjustments to historical data for objectively verifiable information where appropriate.

We believe it is more likely than not that a portion of the deferred income tax assets may expire as unused and have established a valuation allowance against them. Although realization is not assured for the remaining deferred income tax assets, we believe it is more likely than not such remaining deferred tax assets will be fully recoverable within the applicable statutory expiration periods. However, deferred tax assets could be reduced in the near term if estimates of taxable income are significantly reduced or available tax planning strategies are no longer viable. See "Note 9. Income Taxes" to the "Notes to Consolidated Financial Statements" for additional information.

Pensions and Postretirement Health Care and Life Insurance Benefits
The valuation of our pension and other postretirement health care and life insurance plans requires the use of assumptions and estimates that are used to develop actuarial valuations of expenses, assets and liabilities. These assumptions include discount rates, investment returns, projected salary increases, benefits, and mortality rates. The significant assumptions used in the calculation of pension and postretirement obligations are:

Discount rate: The discount rate is based on investment yields available at the measurement date on high-quality fixed income obligations, such as those included in the Moody’s Aa bond index.
Salary increase assumption: The salary increase assumption reflects our expectations with respect to long-term salary increases of our workforce. Historical pay increases, expectations for the future, and anticipated inflation and promotion rates are considered in developing this assumption.
Cash balance crediting rate: Interest is credited on cash balance accounts based on the yield on one-year Treasury Constant Maturities plus 1%. The assumed crediting rate thus considers the discount rate, current treasury rates, current inflation rates, and expectations for the future.
Mortality rates: Mortality rates are based on gender-distinct group annuity mortality tables.
Expected return on plan assets: The expected return reflects asset allocations, investment strategy, and our historical actual returns.
Termination and retirement rates: Termination and retirement rates are based on standard tables reflecting past experience and anticipated future experience under the plan. No early retirement rates are used since benefits provided are actuarially equivalent and there are not early retirement subsidies in the plan.
Inflation: The inflation assumption is based on an evaluation of external market indicators, including real gross domestic product growth and central bank inflation targets.
Expected contributions: The expected amount and timing of contributions are based on an assessment of minimum requirements, cash availability, and other considerations (e.g., funded status, avoidance of regulatory premiums, and levies, and tax efficiency).
Health care cost trends: The health care cost trend assumptions are developed based on historical cost data, the near-term outlook, and an assessment of likely long-term trends.

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Assumptions are set at each year end and are generally not changed during the year unless there is a major plan event such as a curtailment or settlement that would trigger a plan remeasurement.

Management periodically reviews actual demographic experience as it compares to the actuarial assumptions. Changes in assumptions are made if there are significant deviations or if future expectations change significantly. Based upon anticipated changes in assumptions, pension and postretirement expense is expected to increase by $1.8 million in the year ended March 31, 2023 as compared to March 31, 2022. The cash contribution to our employee benefit plans during the year ended March 31, 2022 was $5.6 million and is expected to be $4.6 million in fiscal 2023.

The effect of actual results differing from our assumptions are accumulated and amortized over future periods. Changes in other assumptions and future investment returns could potentially have a material impact on our pension and postretirement expenses and related funding requirements. The effect of a change in certain assumptions is shown below:
(in thousands)Estimated Change
in Projected
Benefit Obligation
Increase (Decrease)
Estimated Change in
Annual Expense
Increase (Decrease)
Change in Assumption (Pension and Postretirement Plans)
     1% increase in discount rate$(12,365)$269 
     1% decrease in discount rate$14,123 $(572)
     1% increase in salary increase assumption$166 $40 
     1% decrease in salary increase assumption$(155)$(37)
     1% increase in cash balance crediting rate$650 $25 
     1% decrease in cash balance crediting rate$(588)$(25)
     1% increase in rate of return on assets$(850)
     1% decrease in rate of return on assets$850 

Changes in assumptions for other postretirement benefits are no longer applicable as the benefit is capped and no longer subject to inflation. See "Note 24. Pension and Other Postretirement Benefits" to the "Notes to Consolidated Financial Statements" for additional information.

Recent Accounting Pronouncements Not Yet Adopted
Information with respect to recent accounting pronouncements not yet adopted is included in "Note 2. New Accounting Standards" to the "Notes to Consolidated Financial Statements," which information is incorporated by reference herein.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Derivatives policies
Hedging foreign exchange exposure using forward contracts are specifically contemplated to manage risk in accordance with management's policies and reduce the risks inherent in currency fluctuations. We do not utilize derivatives for speculative purposes or enter into market risk sensitive instruments for trading purposes. Derivatives are transaction specific such that a specific contract or invoice determines the amount, maturity, and other specifics of the hedge.

Foreign exchange rates
Our business is generally conducted in USD, as is the business of the tobacco industry as a whole. However, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of exchange fluctuations of the local currency against the USD. We attempt to minimize such currency risks by matching the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency of the country where the tobacco is grown. Also, in some cases, our sales pricing arrangements with our customers allow adjustments for the effect of currency exchange fluctuations on local purchasing and processing costs. Fluctuations in the value of foreign currencies can significantly affect our operating results. In our cost of goods and services sold, we have recognized exchange (losses) gains of $(2.7) million, $(1.8) million, $1.4 million, and $(4.7) million for the year ended March 31, 2022, the seven months ended March 31, 2021, the five months ended August 31, 2020, and the year ended March 31, 2020, respectively. We recognized exchange gains (losses) of $2.6 million, $(0.1) million, $(0.1) million, and $(1.2) million related to tax balances in our tax expense for the year ended March 31, 2022, the seven months ended March 31, 2021, the five months ended August 31, 2020, and the year ended March 31, 2020, respectively. In addition, foreign currency fluctuations in the Euro and (U.K.) Sterling can
38


significantly impact the currency translation adjustment component of accumulated other comprehensive income (loss). We recognized (losses) gains of $(4.2) million, $(4.6) million, $4.4 million, and $(0.5) million for the year ended March 31, 2022, the seven months ended March 31, 2021, the five months ended August 31, 2020, and the year ended March 31, 2020, respectively, as a result of fluctuations in these currencies.

Our consolidated SG&A expenses denominated in foreign currencies are subject to translation risks from currency exchange fluctuations. These foreign denominated expenses accounted for approximately 23.8% or $33.8 million of our total SG&A expenses for the year ended March 31, 2022. A 10% change in the value of the USD relative to those currencies would have caused the reported value of those expenses to increase or decrease by approximately $3.4 million.

Interest rates
We manage our exposure to interest rate risk through the proportion of fixed rate and variable rate debt in our total debt portfolio. A 1% change in variable interest rates would have increased or decreased our reported interest cost for the year ended March 31, 2022 by approximately $8.1 million. A substantial portion of our borrowings are denominated in USD and bear interest at commonly quoted rates.

Item 8. Financial Statements and Supplementary Data


39


Pyxus International, Inc. and Subsidiaries
Consolidated Statements of Operations
SuccessorPredecessor
(in thousands, except per share data)Year Ended March 31, 2022Seven months ended March 31, 2021Five months ended August 31, 2020Year Ended March 31, 2020
Sales and other operating revenues$1,639,862 $884,328 $447,600 $1,527,261 
Cost of goods and services sold1,412,805 767,855 402,594 1,302,582 
Gross profit227,057 116,473 45,006 224,679 
Selling, general, and administrative expenses142,021 110,007 87,858 199,016 
Other (expense) income, net(3,102)(9,615)(539)2,133 
Restructuring and asset impairment charges8,031 11,817 566 5,646 
Goodwill impairment32,186 1,082 — 33,759 
Operating income (loss)41,717 (16,048)(43,957)(11,609)
Loss on deconsolidation/disposition of subsidiaries10,701 70,242 — — 
Debt retirement expense1,997 — 828 — 
Interest expense, net108,383 55,376 45,190 132,806 
Reorganization items, net— — 105,984 — 
(Loss) income before income taxes and other items(79,364)(141,666)16,009 (144,415)
Income tax expense12,640 13,215 292 131,789 
Income from unconsolidated affiliates, net9,950 11,875 2,358 5,885 
Net (loss) income(82,054)(143,006)18,075 (270,319)
Net income (loss) attributable to noncontrolling interests65 (6,320)(962)(5,658)
Net (loss) income attributable to Pyxus International, Inc.$(82,119)$(136,686)$19,037 $(264,661)
(Loss) earnings per share:
Basic and Diluted$(3.28)$(5.47)$1.91 $(28.93)
See "Notes to Consolidated Financial Statements"

40


Pyxus International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income
SuccessorPredecessor
(in thousands)Year Ended March 31, 2022Seven months ended March 31, 2021Five months ended August 31, 2020Year Ended March 31, 2020
Net (loss) income$(82,054)$(143,006)$18,075 $(270,319)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(4,224)(5,004)4,377 (583)
Pension and other postretirement benefit plans5,777 541 734 (405)
Cash flow hedges8,974 (2,625)(531)3,145 
Total other comprehensive income (loss), net of tax10,527 (7,088)4,580 2,157 
Total comprehensive (loss) income(71,527)(150,094)22,655 (268,162)
Comprehensive income (loss) attributable to noncontrolling interests55 (6,675)(1,030)(5,711)
Comprehensive (loss) income attributable to Pyxus International, Inc.$(71,582)$(143,419)$23,685 $(262,451)
See "Notes to Consolidated Financial Statements"


41


Pyxus International, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)March 31, 2022March 31, 2021
Assets
Current assets
Cash and cash equivalents$198,777 $92,705 
Restricted cash2,148 4,619 
Trade receivables, net247,677 175,912 
Other receivables12,511 27,920 
Inventories, net749,427 727,893 
Advances to tobacco suppliers, net48,932 43,569 
Recoverable income taxes7,906 4,781 
Prepaid expenses34,817 29,532 
Other current assets25,452 15,569 
Total current assets1,327,647 1,122,500 
Restricted cash389 389 
Investments in unconsolidated affiliates95,420 96,356 
Goodwill— 36,853 
Other intangible assets, net45,061 51,417 
Deferred income taxes, net6,498 7,063 
Long-term recoverable income taxes4,588 4,133 
Other noncurrent assets45,424 40,355 
Right-of-use assets35,979 40,259 
Property, plant, and equipment, net137,521 140,137 
Total assets$1,698,527 $1,539,462 
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks$378,612 $372,174 
Accounts payable179,012 125,876 
Advances from customers52,998 12,120 
Accrued expenses and other current liabilities82,239 71,656 
Income taxes payable5,592 8,254 
Operating leases payable8,065 9,529 
Current portion of long-term debt107,856 2,122 
Total current liabilities814,374 601,731 
Long-term taxes payable6,703 7,623 
Long-term debt580,477 551,235 
Deferred income taxes11,670 12,944 
Liability for unrecognized tax benefits14,401 14,835 
Long-term leases28,604 29,508 
Pension, postretirement, and other long-term liabilities60,927 67,646 
Total liabilities1,517,156 1,285,522 
Commitments and contingencies
Stockholders’ equity
Common stock—no par value:
250,000 authorized shares, 25,000 issued and outstanding (25,000 at March 31, 2021)
390,290 391,089 
Retained deficit(218,813)(136,686)
Accumulated other comprehensive income (loss)3,804 (6,733)
Total stockholders’ equity of Pyxus International, Inc.175,281 247,670 
Noncontrolling interests6,090 6,270 
Total stockholders' equity181,371 253,940 
Total liabilities and stockholders' equity$1,698,527 $1,539,462 
See "Notes to Consolidated Financial Statements"

42


Pyxus International, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Attributable to Pyxus International, Inc.
Accumulated Other Comprehensive Income (Loss)
(in thousands)Common
Stock
Retained
Deficit
Currency
Translation
Adjustment
Pensions,
Net of Tax
Derivatives,
Net of Tax
Noncontrolling
Interest
Total
Stockholders’
Equity
Balance, March 31, 2021 (Successor)$391,089 $(136,686)$(4,649)$541 $(2,625)$6,270 $253,940 
Net loss attributable to Pyxus International, Inc.— (11,508)— — — (120)(11,628)
Other— (8)— 
Other comprehensive income, net of tax— — 689 — 4,328 — 5,017 
Balance, June 30, 2021 (Successor)391,089 (148,202)(3,960)541 1,703 6,158 247,329 
Net loss attributable to Pyxus International, Inc.— (9,681)— — — (342)(10,023)
Other— — — — — (88)(88)
Other comprehensive loss, net of tax— — (1,591)(512)(2,896)— (4,999)
Balance, September 30, 2021 (Successor)391,089 (157,883)(5,551)29 (1,193)5,728 232,219 
Net (loss) income attributable to Pyxus International, Inc.— (30,100)— — — 43 (30,057)
Change in investment in subsidiaries(799)— — — — (155)(954)
Other comprehensive loss, net of tax— — (1,753)(35)(1,550)— (3,338)
Balance, December 31, 2021 (Successor)390,290 (187,983)(7,304)(6)(2,743)5,616 197,870 
Net (loss) income attributable to Pyxus International, Inc.— (30,830)— — — 484 (30,346)
Other comprehensive (loss) income, net of tax— — (1,569)6,334 9,092 (10)13,847 
Balance, March 31, 2022 (Successor)$390,290 $(218,813)$(8,873)$6,328 $6,349 $6,090 $181,371 























Pyxus International, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity (continued)
Attributable to Pyxus International, Inc.
Accumulated Other Comprehensive Loss
(in thousands)Common
Stock
Retained
(Deficit) Earnings
Currency
Translation
Adjustment
Pensions,
Net of Tax
Derivatives,
Net of Tax
Noncontrolling
Interest
Total
Stockholders’
Equity
Balance, March 31, 2020 (Predecessor)$469,677 $(488,545)$(22,509)$(37,154)$531 $1,692 $(76,308)
Net loss attributable to Pyxus International, Inc.— (92,161)— — — (648)(92,809)
Stock-based compensation117 — — — — — 117 
Dividends paid— — — — — (120)(120)
Other comprehensive (loss) income, net of tax— — (64)494 (531)(76)(177)
Balance, June 30, 2020 (Predecessor)469,794 (580,706)(22,573)(36,660)— 848 (169,297)
Net income (loss) attributable to Pyxus International, Inc.— 111,198 — — — (314)110,884 
Stock-based compensation— — — — — 
Dividends paid— — — — — (180)(180)
Change in investment in subsidiaries(1,655)— — — — (461)(2,116)
Other comprehensive income, net of tax— — 4,509 240 — 4,757 
Cancellation of Predecessor equity(468,147)469,508 18,064 36,420 — 99 55,944 
Balance, August 31, 2020 (Predecessor)$— $— $— $— $— $— $— 
Balance, September 1, 2020 (Successor)$— $— $— $— $— $— $— 
Issuance of Successor common stock391,402 — — — — — 391,402 
Fresh start adjustment to noncontrolling interests— — — — — 4,359 4,359 
Net loss attributable to Pyxus International, Inc.— (5,313)— — — (485)(5,798)
Dividends paid— — — — — (123)(123)
Other comprehensive (loss) income, net of tax— — (828)— — 21 (807)
Balance, September 30, 2020 (Successor)391,402 (5,313)(828)— — 3,772 389,033 
Net loss attributable to Pyxus International, Inc.— (8,165)— — — (55)(8,220)
Fresh start adjustments(313)— — — — (246)(559)
Other comprehensive (loss) income, net of tax— — (3)47 (619)(142)(717)
Balance, December 31, 2020 (Successor)391,089 (13,478)(831)47 (619)3,329 379,537 
Net loss attributable to Pyxus International, Inc.— (123,208)— — — (5,780)(128,988)
Deconsolidation of subsidiaries— — — — — 8,972 8,972 
Dividends paid— — — — — (17)(17)
Other comprehensive (loss) income, net of tax— — (3,818)494 (2,006)(234)(5,564)
Balance, March 31, 2021 (Successor)$391,089 $(136,686)$(4,649)$541 $(2,625)$6,270 $253,940 


Pyxus International, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity (continued)
Attributable to Pyxus International, Inc.
Accumulated Other Comprehensive Loss
(in thousands)Common
Stock
Retained
Deficit
Currency
Translation
Adjustment
Pensions,
Net of Tax
Derivatives,
Net of Tax
Noncontrolling
Interest
Total
Stockholders’
Equity
Balance, March 31, 2019 (Predecessor)$468,936 $(223,884)$(21,979)$(36,749)$(2,614)$8,309 $192,019 
Net loss attributable to Pyxus International, Inc.— (61,797)— —