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FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 2020.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______.

001-13684
(Commission File Number)

Virginia

85-2386250

(State or other jurisdiction of incorporation)

(I.R.S. Employer Identification No.)

8001 Aerial Center Parkway

Morrisville,

North Carolina

27560

(Address of principal executive offices)

(Zip Code)

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 ☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

Indicate by check mark if the registrant has filed all documents and reports required to be filed under Sections 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 ☐

Pyxus International, Inc. and Subsidiaries
Table of Contents
									Page No.
Preliminary Note									3
Forward-Looking Statements									3
Summary of Risk Factors									3
Part I.			Financial Information
			Item 1.			Financial Statements (Unaudited)
						Condensed Consolidated Statements of Operations			6
						Condensed Consolidated Statements of Comprehensive Income (Loss)			8
						Condensed Consolidated Balance Sheets			9
						Condensed Statements of Consolidated Stockholders’ Equity			11
						Condensed Consolidated Statements of Cash Flows			13
						Notes to Condensed Consolidated Financial Statements			15
			Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			52
			Item 3.			Quantitative and Qualitative Disclosures about Market Risk			64
			Item 4.			Controls and Procedures			64
Part II.			Other Information
			Item 1.			Legal Proceedings			66
			Item 1A.			Risk Factors			66
			Item 6.			Exhibits			81
Signature									82

On January 21, 2021, Canada's Island Garden Inc. (“Figr East”), Figr Norfolk Inc. (“Figr Norfolk”) and Figr Brands, Inc. (“Figr Brands”, and together with Figr East and Figr Norfolk, the “Canadian Cannabis Subsidiaries”), which are indirect subsidiaries 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”). On January 29, 2021, the Canadian Court issued an order permitting the Canadian Cannabis Subsidiaries to initiate a sale and investment solicitation process to be conducted by the Monitor and its affiliate to solicit interest in, and opportunities for, a sale of, or investment in, all or substantially all, or one or more components, of the assets and/or the business operations of the Canadian Cannabis Subsidiaries. These and other related matters are discussed in greater detail in "Note 25. Subsequent Events" to the "Notes to the Condensed Consolidated Financial Statements" included herein.

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. These risks and uncertainties include those discussed in this Quarterly Report on Form 10-Q, including in "Part II. Item 1A Risk Factors". We do not undertake to update any forward-looking statements that we may make from time to time. In that regard, the Company has not updated any financial projections included in the disclosure statement of the Debtors distributed in the Chapter 11 Cases, and such financial projections are now stale and should no longer be relied upon as a forecast of expected results.

This Quarterly Report on Form 10-Q includes, in "Part II, Item 1A. Risk Factors", a discussion of the most significant risks with respect to making or maintaining an investment in the Company. The following summarizes the principal risks presented in that discussion. Investors are urged to review the full discussion of risks presented in "Part II, Item 1A. Risk Factors".

•Risks related to our indebtedness, including that:

◦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 require a significant amount of cash to service our indebtedness, and our ability to generate cash depends on many factors beyond our control;

◦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 satisfy the covenants included in our financing arrangements, which could result in the default of our outstanding debt obligations; and

◦despite current indebtedness levels, we may still be able to incur substantially more debt, which could exacerbate further the risks associated with our significant leverage.

•Risks related to the Chapter 11 Cases, our liquidity and our business strategy, including that:

◦our leaf tobacco customers, farmers and other suppliers might lose confidence in us as a result of the Chapter 11 Cases and may seek to establish alternative commercial relationships;

◦foreign lenders that have provided short-term operating credit lines to fund leaf tobacco operations at the local level may lose confidence in us and cease to provide such funding;

◦there continues to be uncertainty and risks associated with our ability to achieve our goals and continue as a going concern;

◦unanticipated developments with respect to our liquidity needs and sources of liquidity could result in a deficiency in liquidity; and

◦our Board of Directors, as reconstituted in connection with the Chapter 11 Cases, may implement changes in our business strategy that could affect the scope of our operations, including the countries in which we continue to operate and the business lines that we continue to pursue, and may result in the recognition of restructuring or asset impairment charges.

•Risks related to the COVID-19 pandemic, including:

◦possible delays in shipments of leaf tobacco, including from the closure or restricted activities at ports or other channels, disruptions to our operations or the operations of suppliers and customers resulting from restrictions on the ability of employees and others in the supply chain to travel and work, border closures, determinations by us or shippers to temporarily suspend operations in affected areas;

◦whether operations at any of our facilities might be halted for some period of time; and

◦whether COVID-19 pandemic concerns may negatively affect consumer purchasing behavior with respect to our products or the products of our leaf tobacco customers.

•Risks related to our leaf tobacco operations, including our reliance on a small number of significant customers, continuation of vertical integration, changes in the timing of anticipated shipments, changes in anticipated geographic product sourcing, uncertainties with respect to our ability to renew or refinance short-term seasonal financing, political instability and other risks associated with the scope of our international operations, currency and interest rate fluctuations, shifts in the global supply and demand position for tobacco products, competition, changes in tax laws and regulations or the interpretation of tax laws and regulations, resolution of tax matters, adverse weather conditions, the impact of disasters or other unusual events affecting international commerce, and changes in costs incurred in supplying products and related services.

•Risks related to the CCAA Proceeding, including:

◦whether the proposed sales processes with respect to any of the Canadian Cannabis Subsidiaries will be successfully completed within the anticipated time frames;

◦the extent to which borrowings under the debtor-in-possession lending facility extended by a separate subsidiary of the Company to the Canadian Cannabis Subsidiaries will be repaid;

◦the extent to which Pyxus will incur liabilities with respect to certain obligations of the Canadian Cannabis Subsidiaries that Pyxus has guaranteed; and

◦the extent of impairment that Pyxus may recognize with respect to its investment in the Canadian Cannabis Subsidiaries.

•Risks related to the continuing business lines in the Company's Other Products and Services segment, including that the new businesses have limited operating histories, are in newly developed markets, may not generate the results that we anticipate and have, and may continue to need significant investment to fund continued operations and expansion, that technologies, processes and formulations may become obsolete, the impact of increasing competition, uncertainties with respect to the development of the industries and markets of the business lines, including the level of consumer demand for such products, the potential for product liability claims, uncertainties with respect to the extent of consumer acceptance of the products offered by the business lines, and the impact of regulation associated with the business lines, including the risk of obtaining anticipated regulatory approvals for nicotine e-liquids products in the United States.

•Risks related to other aspects of our operations, including low investment performance by our defined benefit pension plan assets may increase our pension expense, requiring us to fund a larger portion of our pension obligations and diverting funds from other potential uses, the risk of potential disruption, failure, or security breaches of our internal and externally hosted information technology system, including as a result of cyber-attacks, as well as risks related to our continued maintenance of effective internal control over financial reporting, environmental matters, continued viability of derivative instrument counterparties and the impact of the termination of LIBOR.

•Risks related to ownership of our common stock, including the concentration of ownership of our common stock, with two shareholders that, together with their respective affiliates, beneficially own approximately 56% of the outstanding shares of our common stock, as well as significant levels of our indebtedness, and may have the ability to exercise controlling influence on various corporate matters, volatility in the price of our common stock and the staleness of financial projections filed in the Chapter 11 Cases.

•Risks related to the tobacco industry, including the decline in the overall consumer demand for tobacco products and the impact of litigation against manufacturers of tobacco products and governmental initiatives targeted at reducing consumer demand for tobacco products.

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
			Successor			Predecessor
(in thousands, except per share data)			Three months ended December 31, 2020			Three months ended December 31, 2019
Sales and other operating revenues			$	379,560		$	363,260
Cost of goods and services sold			317,032			308,133
Gross profit			62,528			55,127
Selling, general, and administrative expenses			45,943			45,911
Other income (expense), net			4,669			(401)
Restructuring and asset impairment charges			7,774			672
Operating income			13,480			8,143
Interest expense (includes debt amortization of $3,031 and $2,559, respectively)			24,898			32,200
Interest income			126			442
Loss before income taxes and other items			(11,292)			(23,615)
Income tax expense (benefit)			4,492			(914)
Income from unconsolidated affiliates			7,564			255
Net loss			(8,220)			(22,446)
Net loss attributable to noncontrolling interests			(55)			(453)
Net loss attributable to Pyxus International, Inc.			$	(8,165)		$	(21,993)
Loss per share:
Basic			$	(0.33)		$	(2.40)
Diluted			$	(0.33)		$	(2.40)
Weighted average number of shares outstanding:
Basic			25,000			9,166
Diluted			25,000			9,166
See "Notes to Condensed Consolidated Financial Statements"

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
			Successor						Predecessor
(in thousands, except per share data)			Four months ended December 31, 2020									Five months ended August 31, 2020			Nine months ended December 31, 2019
Sales and other operating revenues			$	497,394								$	447,600		$	1,022,911
Cost of goods and services sold			424,498									402,594			867,852
Gross profit			72,896									45,006			155,059
Selling, general, and administrative expenses			61,627									87,858			142,551
Other income (expense), net			2,736									(539)			4,061
Restructuring and asset impairment charges			8,991									566			892
Operating income (loss)			5,014									(43,957)			15,677
Debt retirement expense			—									828			—
Interest expense (includes debt amortization of $4,307, $4,082, and $7,478, respectively)			33,101									46,616			101,346
Interest income			180									1,426			2,966
Reorganization items:
Gain on settlement of liabilities subject to compromise			—									462,304			—
Professional fees			—									(30,526)			—
United States trustee fees			—									(970)			—
Write-off of unamortized debt issuance costs and discount			—									(5,303)			—
Issuance of exit facility shares and DIP financing fees			—									(208,538)			—
Other debt restructuring costs			—									(19,442)			—
Fresh start reporting adjustments			—									(91,541)			—
(Loss) income before income taxes and other items			(27,907)									16,009			(82,703)
Income tax (benefit) expense			(6,091)									292			25,238
Income from unconsolidated affiliates			7,798									2,358			6,728
Net (loss) income			(14,018)									18,075			(101,213)
Net loss attributable to noncontrolling interests			(540)									(962)			(905)
Net (loss) income attributable to Pyxus International, Inc.			$	(13,478)								$	19,037		$	(100,308)
(Loss) earnings per share:
Basic			$	(0.54)								$	1.91		$	(10.98)
Diluted			$	(0.54)								$	1.91		$	(10.98)
Weighted average number of shares outstanding:
Basic			25,000									9,976			9,137
Diluted			25,000									9,992			9,137
See "Notes to Condensed Consolidated Financial Statements"

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
			Successor			Predecessor
(in thousands)			Three months ended December 31, 2020			Three months ended December 31, 2019
Net loss			$	(8,220)		$	(22,446)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment			(145)			1,871
Defined benefit pension amounts reclassified to income			—			312
Change in pension liability for settlements			47			799
Cash flow hedges			(619)			—
Amounts reclassified to income for derivatives			—			576
Total other comprehensive (loss) income, net of tax			(717)			3,558
Total comprehensive loss			(8,937)			(18,888)
Comprehensive loss attributable to noncontrolling interests			(197)			(405)
Comprehensive loss attributable to Pyxus International, Inc.			$	(8,740)		$	(18,483)

			Successor						Predecessor
(in thousands)			Four months ended December 31, 2020									Five months ended August 31, 2020			Nine months ended December 31, 2019
Net (loss) income			$	(14,018)								$	18,075		$	(101,213)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment			(952)									4,377			(474)
Defined benefit pension amounts reclassified to income			—									734			934
Change in pension liability for settlements			47									—			(1,213)
Cash flow hedges			(619)									(531)			(147)
Amounts reclassified to income for derivatives			—									—			2,520
Total other comprehensive (loss) income, net of tax			(1,524)									4,580			1,620
Total comprehensive (loss) income			(15,542)									22,655			(99,593)
Comprehensive loss attributable to noncontrolling interests			(661)									(1,030)			(846)
Comprehensive (loss) income attributable to Pyxus International, Inc.			$	(14,881)								$	23,685		$	(98,747)
See "Notes to Condensed Consolidated Financial Statements"

Pyxus International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
												Successor						Predecessor
(in thousands)												December 31, 2020						December 31, 2019			March 31, 2020
Assets
Current assets
Cash and cash equivalents												$	123,167					$	72,230		$	170,208
Restricted cash												3,779						2,359			2,486
Trade receivables, net												177,556						180,404			226,742
Other receivables												16,404						12,257			12,997
Accounts receivable, related parties												3,344						6,418			5,030
Notes receivable, related parties												—						406			406
Inventories, net												771,821						871,850			730,019
Advances to tobacco suppliers, net												61,773						61,536			38,877
Recoverable income taxes												12,023						9,751			7,562
Prepaid expenses												31,082						22,447			23,383
Other current assets												16,981						14,345			14,658
Total current assets												1,217,930						1,254,003			1,232,368
Restricted cash												389						389			389
Long-term notes receivable, related parties												149						7,466			7,450
Investments in unconsolidated affiliates												92,657						69,368			67,967
Goodwill												37,935						34,570			—
Other intangible assets, net												69,008						67,404			65,948
Deferred income taxes, net												8,929						115,947			2
Long-term recoverable income taxes												3,523						2,618			3,038
Other noncurrent assets												42,870						49,954			48,434
Right-of-use assets												39,416						43,372			41,471
Property, plant, and equipment, net												183,249						303,956			295,996
Total assets												$	1,696,055					$	1,949,047		$	1,763,063
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks												$	433,571					$	580,346		$	540,157
Accounts payable												51,945						61,076			67,094
Accounts payable, related parties												28,417						11,077			11,820
Advances from customers												24,881						19,227			18,810
Accrued expenses and other current liabilities												75,813						103,351			89,928
Income taxes payable												2,220						15,444			5,049
Operating leases payable												9,214						14,033			11,160
Current portion of long-term debt												141						325			45,048
Total current liabilities												626,202						804,879			789,066
Long-term taxes payable												7,623						8,523			8,543
Long-term debt												551,925						902,461			904,316
Deferred income taxes												13,234						30,396			22,903
Liability for unrecognized tax benefits												13,327						12,233			12,311
Long-term leases												29,740						28,206			27,843
Pension, postretirement, and other long-term liabilities												74,467						70,315			74,389
Total liabilities												1,316,518						1,857,013			1,839,371
Commitments and contingencies

												Successor						Predecessor
(in thousands)												December 31, 2020						December 31, 2019			March 31, 2020
Stockholders’ equity
Common Stock—no par value:
Authorized shares (250,000 for all periods)
Issued shares (25,000, 9,963, and 9,976, respectively)												391,089						469,450			469,677
Retained deficit												(13,478)						(324,192)			(488,545)
Accumulated other comprehensive loss												(1,403)						(59,781)			(59,132)
Total stockholders’ equity (deficit) of Pyxus International, Inc.												376,208						85,477			(78,000)
Noncontrolling interests												3,329						6,557			1,692
Total stockholders’ equity (deficit)												379,537						92,034			(76,308)
Total liabilities and stockholders’ equity												$	1,696,055					$	1,949,047		$	1,763,063
See "Notes to Condensed Consolidated Financial Statements"

Pyxus International, Inc. and Subsidiaries
Condensed Statements of Consolidated Stockholders' Equity
(Unaudited)
			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 Interests			Total Stockholders' Equity
Balance, March 31, 2020 (Predecessor)			$	469,677		$	(488,545)		$	(22,509)		$	(37,154)		$	531		$	1,692		$	(76,308)
Net loss			—			(92,161)			—			—			—			(648)			(92,809)
Stock-based compensation			117			—			—			—			—			—			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			—			111,198			—			—			—			(314)			110,884
Stock-based compensation			8			—			—			—			—			—			8
Dividends paid			—			—			—			—			—			(180)			(180)
Change in investment in subsidiaries			(1,655)			—			—			—			—			(461)			(2,116)
Other comprehensive income, net of tax			—			—			4,509			240			—			8			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 stock			391,402			—			—			—			—			—			391,402
Fresh start adjustment to noncontrolling interests			—			—			—			—			—			4,359			4,359
Net loss			—			(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			—			(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

Pyxus International, Inc. and Subsidiaries
Condensed Statements of Consolidated Stockholders' Equity
(Unaudited)
			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 Interests			Total Stockholders' Equity
Balance, March 31, 2019 (Predecessor)			$	468,936		$	(223,884)		$	(21,979)		$	(36,749)		$	(2,614)		$	8,309		$	192,019
Net loss			—			(61,797)			—			—			—			(366)			(62,163)
Stock-based compensation			429			—			—			—			—			—			429
Other comprehensive (loss) income, net of tax			—			—			(430)			311			369			30			280
Balance, June 30, 2019 (Predecessor)			469,365			(285,681)			(22,409)			(36,438)			(2,245)			7,973			130,565
Net loss			—			(16,518)			—			—			—			(86)			(16,604)
Restricted stock surrender			(12)			—			—			—			—			—			(12)
Stock-based compensation			383			—			—			—			—			—			383
Dividends paid			—			—			—			—			—			(480)			(480)
Other comprehensive (loss) income, net of tax			—			—			(1,925)			(1,701)			1,428			(19)			(2,217)
Balance, September 30, 2019 (Predecessor)			469,736			(302,199)			(24,334)			(38,139)			(817)			7,388			111,635
Net loss			—			(21,993)			—			—			—			(453)			(22,446)
Stock-based compensation			242			—			—			—			—			—			242
Purchase of noncontrolling interests in a subsidiary			(528)			—			33			—			—			(426)			(921)
Other comprehensive loss, net of tax			—			—			1,789			1,111			576			48			3,524
Balance, December 31, 2019 (Predecessor)			$	469,450		$	(324,192)		$	(22,512)		$	(37,028)		$	(241)		$	6,557		$	92,034
*Amounts may not equal column totals due to rounding
See "Notes to Condensed Consolidated Financial Statements"

Pyxus International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
			Successor			Predecessor
(in thousands)			Four months ended December 31, 2020			Five months ended August 31, 2020			Nine months ended December 31, 2019
Operating Activities:
Net (loss) income			$	(14,018)		$	18,075		$	(101,213)
Adjustments to reconcile net (loss) income to net cash used by operating activities:
Depreciation and amortization			13,301			16,580			26,003
Debt amortization/interest			6,552			4,862			9,356
Gain on foreign currency transactions			(2,196)			(11,077)			(3,921)
Asset impairment charges			3,982			213			260
(Income) loss from unconsolidated affiliates, net of dividends			(7,600)			2,915			(128)
Reorganization items			—			(130,215)			—
Changes in operating assets and liabilities, net			(33,151)			(67,544)			(323,849)
Other, net			7,588			(15,870)			6,274
Net cash used by operating activities			(25,542)			(182,061)			(387,218)
Investing Activities:
Purchases of property, plant, and equipment			(11,557)			(7,757)			(51,479)
Collections on beneficial interests on securitized trade receivables			49,562			74,328			174,741
Loans to unconsolidated affiliates			—			—			(5,250)
Payments to acquire businesses, net of cash acquired			—			(4,805)			—
Other, net			116			(109)			1,604
Net cash provided by investing activities			38,121			61,657			119,616
Financing Activities:
Net repayments and proceeds from short-term borrowings			(37,915)			(99,969)			156,784
Proceeds from DIP facility			—			206,700			—
Repayment of DIP facility			—			(213,418)			—
Proceeds from term loan facility			—			213,418			—
Proceeds from 10.0% first lien notes			—			280,844			—
Repayment of 8.5% first lien notes			—			(280,844)			—
Proceeds from revolving loans facilities			37,500			27,438			—
Proceeds from long-term borrowings			462			2,568			—
Repayment of revolving loans facilities			—			(44,900)			—
Repayment of second lien notes			—			(1,199)			—
Share repurchases			—			(1,000)			—
Debt issuance costs			(2,657)			(8,486)			(5,245)
DIP financing fees			—			(9,344)			—
Purchase of noncontrolling interests in a subsidiary			—			—			(921)
Other debt restructuring costs			—			(7,574)			—
Other, net			(241)			(565)			(571)
Net cash (used) provided by financing activities			(2,851)			63,669			150,047
Effect of exchange rate changes on cash			(369)			1,628			(5,277)

			Successor			Predecessor
(in thousands)			Four months ended December 31, 2020			Five months ended August 31, 2020			Nine months ended December 31, 2019
Increase (decrease) in cash, cash equivalents, and restricted cash			9,359			(55,107)			(122,832)
Cash and cash equivalents at beginning of period			93,138			170,208			192,043
Restricted cash at beginning of period			24,838			2,875			5,767
Cash, cash equivalents, and restricted cash at end of period			$	127,335		$	117,976		$	74,978
Other information:
Cash paid for income taxes, net			$	8,409		$	5,560		$	13,768
Cash paid for interest			17,451			54,233			80,191
Cash received from interest			(406)			(1,356)			(2,839)
Cash paid for reorganization items			—			7,314			—
Noncash investing and financing activities:
Purchases of property, plant, and equipment included in accounts payable			$	1,090		$	1,759		$	4,590
Sales of property, plant, and equipment included in notes receivable			117			304			662
Noncash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction			59,501			66,821			151,149
Cancellation of second lien notes			—			(634,487)			—
See "Notes to Condensed Consolidated Financial Statements"

Pyxus International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
Note 1						Basis of Presentation and Significant Accounting Policies			15
Note 2						New Accounting Standards			16
Note 3						Emergence from Voluntary Reorganization under Chapter 11			17
Note 4						Fresh Start Reporting			20
Note 5						Revenue Recognition			25
Note 6						Restructuring and Asset Impairment Charges			26
Note 7						Income Taxes			28
Note 8						(Loss) Earnings Per Share			29
Note 9						Cash, Cash Equivalents, and Restricted Cash			30
Note 10						Inventories, Net			31
Note 11						Acquisitions			31
Note 12						Equity Method Investments			32
Note 13						Variable Interest Entities			33
Note 14						Goodwill and Other Intangible Assets, Net			34
Note 15						Debt Arrangements			36
Note 16						Securitized Receivables			42
Note 17						Guarantees			42
Note 18						Derivative Financial Instruments			43
Note 19						Fair Value Measurements			43
Note 20						Pension and Other Postretirement Benefits			44
Note 21						Contingencies and Other Information			46
Note 22						Other Comprehensive Loss			47
Note 23						Related Party Transactions			48
Note 24						Segment Information			49
Note 25						Subsequent Event			50

The Company applied Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 852 – Reorganizations (“ASC 852”) in preparing the condensed consolidated financial statements. For periods subsequent to the Chapter 11 filing, 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

The Company generally records a receivable when revenue is recognized as the timing of revenue recognition may differ from the timing of payment from customers. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 60 days. The Company's trade receivables do not bear interest, and they are recorded at the invoiced amount less an estimated allowance for expected credit losses. In addition to estimating an allowance based on specific identification of certain receivables that have a higher probability of not being paid, the Company also records an estimate for expected credit losses for the remaining receivables in the aggregate using a loss-rate method that considers historical bad debts, age of customer receivable balances, and current customer receivable balances. Additionally, the Company considers future reasonable and supportable forecasts of economic conditions to adjust historical loss rate percentages as necessary. Balances are written-off when determined to be uncollectible. Refer to "Note 5. Revenue Recognition" for a summary of the activity in the allowance for expected credit losses.

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 and its related amendments are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial assets held at amortized cost and other commitments to extend credit held by a reporting entity at each reporting date. Based on the Company's scoping assessment, ASU 2016-13 primarily impacts trade receivables. This guidance was early adopted by the Company as of April 1, 2020 using the modified retrospective approach. The adoption of this new accounting standard did not have a material impact on the Company's financial condition, results of operations, or cash flows.

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 updates disclosure requirements for defined benefit plans. This guidance was adopted using a retrospective approach and was effective beginning in the first quarter of fiscal year 2021. This new accounting standard did not have a material impact on the Company's financial condition, results of operations, or cash flows; however, expanded disclosures will be required in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocations, the methodology for calculating income taxes during interim periods when there are changes in tax laws or when year-to-date losses exceed anticipated losses, and the recognition of deferred tax liabilities for outside basis differences in foreign investments. This guidance also simplifies aspects of the accounting for franchise taxes that are partially based on income, separate financial statements of legal entities not subject to tax, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for the Company on April 1, 2021, with early adoption permitted. The Company is currently evaluating the impact that this new accounting standard will have on its consolidated financial statements and related disclosures.

•Other Secured Claims (as defined in the Plan) were either (i) paid in full in cash, (ii) satisfied by delivery of collateral securing any such Claim (as defined in the Plan) and payment of any required interest, or (iii) reinstated.

•Other Priority Claims (as defined in the Plan) were paid in full in cash.

•Holders of First Lien Notes Claims (as defined in the Plan) received (i) payment in full in cash of all accrued and unpaid interest on such First Lien Notes, and (ii) the Notes (as defined below).

•Holders (as defined in the Plan) of Second Lien Notes Claims (as defined in the Plan) received, at the Holder’s election, (i) their pro rata share of the Company's common stock distributed in connection with the effectiveness of the Plan or (ii) cash equal to 2.00% of the principal amount of all Second Lien Notes beneficially owned by such Holder.

•Lenders under Foreign Credit Lines (as defined in the Plan) were paid in the ordinary course of business in accordance with the terms of the relevant agreement.

•General Unsecured Claims (as defined in the Plan) were paid in the ordinary course of business.

•The existing common stock, and rights to acquire common stock, of Old Pyxus was discharged, cancelled, released, and extinguished and of no further force or effect.

•Three new Virginia corporations (i.e., the Company (then known as “Pyxus One, Inc.”), Pyxus Parent, Inc. and Pyxus Holdings) were organized.

•Pyxus Parent, Inc. issued all of its equity interests to the Company in exchange for 25.0 million shares of common stock, no par value, of the Company (such common stock is referred to as “New Common Stock” and the 25.0 million shares of which are referred to as the “Equity Consideration”). Pyxus Holdings then issued all of its equity interests to Pyxus Parent, Inc. in exchange for the Equity Consideration.

•Pyxus Holdings entered into the ABL Credit Agreement (as defined below) to borrow cash under the ABL Credit Facility (as defined below) which together with cash on-hand was sufficient to fund (1) the distributions to holders of Allowed Second Lien Notes Claims (as defined in the Plan) that elected to take the Second Lien Notes Cash Option (as defined in the Plan) and (2) the Existing Equity Cash Pool (as defined in the Plan) (collectively such amount of cash is referred to as the “Cash Consideration”).

•Pursuant to an Asset Purchase Agreement, Old Pyxus transferred to Pyxus Holdings all of its assets (including by assuming and assigning all of Old Pyxus’ Executory Contracts and Unexpired Leases (as such terms are defined in the Plan) to Pyxus Holdings in accordance with the Plan, other than those Executory Contracts and Unexpired Leases that were rejected) and Pyxus Holdings assumed all of Old Pyxus’ obligations that are not discharged under the Plan (including all of Old Pyxus’ obligations to satisfy Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Other Secured Claims, Allowed Other Priority Claims, Allowed Foreign Credit Line Claims, Allowed General Unsecured Claims, Allowed Debtor Intercompany Claims, and Allowed Debtor Intercompany Claims as set forth in the Plan (as such terms are defined in the Plan)) in exchange for (i) Pyxus Holdings transferring the Equity Consideration to Old Pyxus, (ii) Pyxus Holdings transferring the Cash Consideration to Old Pyxus, (iii) Pyxus Holdings issuing the Notes (as defined below) under the Indenture (as defined below) which, on behalf of Old Pyxus, was issued to the Holders of Allowed First Lien Notes Claims (as defined in the Plan) as set forth in the Plan, and (iv) Pyxus Holdings issuing the Term Loans (as defined below) under the Term Loan Credit Facility (as defined below) which, on behalf of Old Pyxus, was issued to the holders of the DIP Facility Claims (as defined in the Plan) as set forth in the Plan. In addition to the transfer of assets to Pyxus Holdings, Pyxus Holdings made an offer of employment to all employees of Old Pyxus and all such employees became employed by Pyxus Holdings, or a designated subsidiary, upon the effectiveness of the Plan on the same terms and conditions existing immediately prior to the effectiveness of the Plan.

•The Company and Pyxus Parent, Inc., along with each applicable subsidiary of the Company, guaranteed the Notes, the Term Loan Credit Facility, and the ABL Credit Facility.

•Old Pyxus provided for the distribution of (i) the Notes to the Holders of Allowed First Lien Notes Claims pursuant to the Plan, (ii) approximately 12.5 million shares of New Common Stock to Holders of Allowed Second Lien Notes Claims (as defined in the Plan) that elected to receive New Common Stock under the Second Lien Notes Stock Option (as defined in the Plan) pursuant to the Plan, (iii) cash to the Holders of Allowed Second Lien Notes Claims that elected to take or are deemed to elect to take the Second Lien Notes Cash Option (as defined in the Plan), (iv) cash to the Qualifying Holders (as defined in the Plan) of the common stock of Old Pyxus pursuant to the Plan, (v) the Term Loans under the Term Loan Credit Facility and approximately 11.1 million shares of New Common Stock to the Holders of the DIP Facility Claims pursuant to the Plan, and (vi) approximately 1.4 million shares of New Common Stock in satisfaction of the Second Lien Notes RSA Fee Shares (as defined in the Plan) and in satisfaction of the Backstop Fee Shares (as defined in the Plan) to the persons entitled thereto pursuant to the terms and conditions of the Restructuring Support Agreement, dated June 14, 2020, by and among Old Pyxus and certain of its creditors party thereto, which was filed as Exhibit 10.1 to the Current Report on Form 8-K of Old Pyxus filed on June 15, 2020.

•Old Pyxus changed its name to Old Holdco, Inc., and the Company changed its name to Pyxus International, Inc.

•The Company elected a board of directors, initially comprising J. Pieter Sikkel, Holly Kim, and Patrick Fallon, and appointed as its officers the individuals serving as officers of Old Pyxus to the same offices held immediately prior to the effectiveness of the Old Plan.

On the Effective Date, Pyxus Holdings entered into an Exit ABL Credit Agreement (the “ABL Credit Agreement”), dated as of August 24, 2020 by and among, amongst others, Pyxus Holdings, certain lenders party thereto and Wells Fargo Bank, National Association, as administrative agent and collateral agent to establish an asset-based revolving credit facility (the “ABL Credit Facility”). 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 $75.0 million, subject to certain limitations. The ABL Credit Facility matures on February 24, 2023, subject to potential extension on terms and conditions set forth in the ABL Credit Agreement. Refer to “Note 15. Debt Arrangements” for a description of the ABL Credit Agreement and the ABL Credit Facility.

On the Effective Date, Pyxus Holdings entered into an Exit Term Loan Credit Agreement (the “Term Loan Credit Agreement”), dated as of August 24, 2020 by and among, amongst others, Pyxus Holdings, certain lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent to establish a term loan credit facility in an aggregate principal amount of approximately $213.4 million (the “Term Loan Credit Facility”). The aggregate principal amount of loans outstanding under Debtors’ debtor-in-possession financing facility (the "DIP Facility”), and related fees, were converted into, or otherwise satisfied with the proceeds of, the Term Loan Credit Facility. The loans made under the Term Loan Credit Facility (the “Term Loans”) and the Term Loan Credit Facility mature on February 24, 2025. Refer to “Note 15. Debt Arrangements” for a description of the Term Loan Credit Agreement, the Term Loan Credit Facility and the Term Loans.

On the Effective Date, Pyxus Holdings issued approximately $280.8 million in aggregate principal amount of its 10.00% Senior Secured First Lien Notes due 2024 (the “Notes”) to holders of Allowed First Lien Notes Claims (as defined in the Plan) pursuant to an 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 mature on August 24, 2024. Refer to “Note 15. Debt Arrangements” for a description of the Notes and the Indenture.

Enterprise value, excluding cash			$	1,252,379
Plus: cash, cash equivalents, and restricted cash			117,587
Less: fair value of debt			(974,205)
Fair value of Successor stockholders’ equity			$	395,761
Shares issued upon emergence			25,000
Per share value			$	15.83

Enterprise value, excluding cash			$	1,252,379
Plus: cash, cash equivalents, and restricted cash			117,587
Plus: working capital liabilities			170,905
Plus: other operating liabilities			54,700
Plus: non-operating liabilities			113,954
Reorganization value of Successor assets			$	1,709,525

(in thousands)												As of August 31, 2020
																					Fresh Start Reporting Adjustments
												Predecessor			Reorganization Adjustments						As Reported at September 30, 2020			As Adjusted at December 31, 2020						Successor
Assets
Current assets
Cash and cash equivalents												$	111,427		$	(18,289)		(1)			$	—		$	—					$	93,138
Restricted cash												2,949			21,500			(2)			—			—						24,449
Trade receivables, net												152,309			—						—			—						152,309
Other receivables												13,227			—						—			—						13,227
Accounts receivable, related parties												2,780			—						—			—						2,780
Inventories, net												861,851			—						—			—						861,851
Advances to tobacco suppliers, net												44,061			—						—			—						44,061
Recoverable income taxes												5,830			—						—			—						5,830
Prepaid expenses												34,350			—						—			—						34,350
Other current assets												15,059			—						—			—						15,059
Total current assets												1,243,843			3,211						—			—						1,247,054

Restricted cash												389			—						—			—						389
Investments in unconsolidated affiliates												54,460			—						13,291			30,531			(13)			84,991
Goodwill												6,120			—						48,756			31,815			(14)			37,935
Other intangible assets, net												64,924			—						1,596			6,075			(15)			70,999
Deferred income taxes, net												125			—						9,638			7,484			(16)			7,609
Long-term recoverable income taxes												3,130			—						—			—						3,130
Other noncurrent assets												45,821			3,139			(3)			(310)			(310)			(17)			48,650
Right-of-use assets												39,576			—						(4,281)			(4,281)			(18)			35,295
Property, plant, and equipment, net												299,293			—						(124,965)			(125,820)			(19)			173,473
Total assets												$	1,757,681		$	6,350					$	(56,275)		$	(54,506)					$	1,709,525
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks												$	461,783		$	—					$	—		$	—					$	461,783
DIP financing												206,700			(206,700)			(4)			—			—						—
Accounts payable												58,813			334			(5)			25			25						59,172
Accounts payable, related parties												26,125			—						—			—						26,125
Advances from customers												23,967			—						—			—						23,967
Accrued expenses and other current liabilities												113,118			(31,853)			(6)			(1,792)			(1,792)			(20)			79,473
Income taxes payable												8,319			—						—			—						8,319
Operating leases payable												11,083			—						(992)			(992)			(21)			10,091
Current portion of long-term debt												90			—						—			—						90
Total current liabilities												909,998			(238,219)						(2,759)			(2,759)						669,020
Long-term taxes payable												7,623			—						—			—						7,623
Long-term debt												277,090			250,546			(7)			(15,304)			(15,304)			(22)			512,332
Deferred income taxes												20,749			91			(8)			(10,070)			(7,742)			(23)			13,098
Liability for unrecognized tax benefits												13,420			—						—			—						13,420
Long-term leases												25,728			—						(2,263)			(2,263)			(21)			23,465
Pension, postretirement, and other long-term liabilities												71,898			—						3,467			3,467			(24)			75,365
Total liabilities not subject to compromise												1,326,506			12,418						(26,929)			(24,601)						1,314,323
Liabilities subject to compromise
Debt subject to compromise												635,686			(635,686)			(9)			—			—						—
Accrued interest on debt subject to compromise												26,156			(26,156)			(9)			—			—						—
Total liabilities subject to compromise												661,842			(661,842)						—			—						—
Total liabilities												1,988,348			(649,424)						(26,929)			(24,601)						1,314,323
Stockholders’ equity
Common Stock—no par value:
Predecessor common stock (shares)												9,976			(9,976)						—			—						—
Successor common stock (shares)												—			25,000						—			—						25,000
Predecessor additional paid-in capital												468,147			(468,147)			(10)			—			—						—
Successor additional paid-in capital												—			391,402			(11)			—			(313)						391,089
Retained deficit												(644,250)			728,160			(12)			(83,910)			(83,910)			(25)			—
Accumulated other comprehensive loss												(54,484)			—						54,484			54,484			(26)			—
Total stockholders’ equity (deficit) of Pyxus International, Inc.												(230,587)			651,415						(29,426)			(29,739)						391,089
Noncontrolling interests												(80)			4,359						80			(166)						4,113
Total stockholders’ equity (deficit)												(230,667)			655,774						(29,346)			(29,905)						395,202
Total liabilities and stockholders’ equity												$	1,757,681		$	6,350					$	(56,275)		$	(54,506)					$	1,709,525

Proceeds from ABL Credit Facility, net of debt issuance costs			$	26,861
Repayment of DIP Facility			(213,418)
Proceeds from Term Loan Credit Facility			213,418
Proceeds from 10.0% first lien notes			280,844
Repayment of 8.5% first lien notes			(280,844)
Payment to fund professional fee escrow account			(21,500)
Payment of other professional and administrative fees			(11,828)
Payment of accrued interest on DIP Facility			(494)
Payment to holders of Predecessor second lien notes that elected the cash option			(1,199)
Payment to holders of Predecessor common stock			(1,000)
Payment of accrued interest on prepetition Predecessor first lien notes			(9,129)
			$	(18,289)

(4) Represents the conversion of the DIP Facility that was exchanged for the Term Loans, and accordingly reclassified to long-term debt.

(5) Reflects the recognition of payables for professional fees to be paid subsequent to the Company's emergence from Chapter 11 Cases.

Payment of accrued interest on the DIP Facility			$	(494)
Payment of accrued interest on the Predecessor first lien notes			(9,129)
Settlement of accrued backstop fee through the issuance of common stock			(18,000)
Reclassification of DIP Facility exit fee to long-term debt			(6,718)
Recognition of accrued interest from the Effective Date to the Convenience Date			1,044
Accrual for professional fees			1,444
			$	(31,853)

Draw on the ABL Credit Facility			$	30,000
Issuance of the Term Loans (1)			213,418
Conversion of redemption fee on Predecessor first lien notes to Successor Notes			5,843
Derecognition of the original issue discount and the debt issuance costs on Predecessor first lien notes			1,285
			$	250,546
(1) Includes $6,718 related to the DIP Facility exit fee

(8) Represents the recognition of deferred tax liabilities as a result of the cumulative tax impact of the reorganization adjustments herein.

(9) Represents the settlement of liabilities subject to compromise in accordance with the Plan, which resulted in a gain on the discharge of the Predecessor second lien notes as follows:

Debt subject to compromise			$	635,686
Accrued interest on debt subject to compromise			26,156
Total second lien notes discharged			661,842
Payment to holders of second lien notes electing cash option			(1,199)
Value of common stock issued to holders of second lien notes			(198,339)
Gain on discharge of second lien notes			$	462,304

Value of Successor common stock, second lien notes			$	198,339
Value of Successor common stock, other			193,063
			$	391,402