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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  Pyxus International, Inc.    PYYX

PYXUS INTERNATIONAL, INC.

(PYYX)
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Old Holdco : PYXUS INTERNATIONAL, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/13/2020 | 04:54pm EST

Overview

Pyxus provides responsibly produced, independently verified, and traceable
agricultural products, ingredients, and services to businesses and customers.
Headquartered in the Research Triangle Park region of North Carolina, we
contract with growers 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. In an
increasing number of markets, we also provide agronomy expertise for growing
leaf tobacco. Our contracted tobacco grower base often produces a significant
volume of non-tobacco crop 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.

We are committed to responsible crop production which supports economic
viability for the grower, provides a safe working atmosphere for those involved
in crop production, and minimizes negative environmental impact. Our agronomists
maintain frequent contact with growers 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-to-sale, our
SENTRISM traceability system provides clear visibility into how products are
produced throughout the supply chain, supporting product integrity.

We continue to diversify the Company's products and services by leveraging our
core strengths in agronomy and traceability. In general, our diversification
focuses on products that are value-added, require some degree of processing, and
offer higher margin potential than our core tobacco leaf business. To support
these new business lines, we have broad geographic processing capabilities, a
diversified product offering, an established customer base for our core leaf
tobacco business, and a growing customer base.

Our consolidated operations are managed and reported in ten operating segments
that are organized by product category and geographic area and aggregated into
three reportable segments for financial reporting purposes: Leaf - North
America, Leaf - Other Regions, and Other Products and Services.

Due to the seasonal nature of our business, the results of operations for a fiscal quarter are not necessarily indicative of the operating results that may be attained for other quarters or a full fiscal year.

COVID-19

We continue to monitor the impact of the COVID-19 outbreak on our Company and
our workforce. In March 2020, the World Health Organization recognized the
COVID-19 outbreak as a global pandemic. The COVID-19 pandemic and government
actions implemented to contain further spread of COVID-19 have severely
restricted economic activity around the world. Our businesses have been
classified as an "essential" business under governmental shelter-in-place and
similar orders in many of the jurisdictions in which we operate. As such, we are
still able to produce and sell products. Our production facilities are still
operating but, in some instances, at lower production levels than planned due to
the shelter in-place mandates and social distancing requirements. We continue to
monitor the measures we implemented to reduce the spread of COVID-19 and make
updates and improvements, as necessary. While our supply chains and distribution
channels continue to experience delays, we have experienced slower customer
orders for leaf tobacco due to COVID-19 and currently have adequate supply of
products to meet the near-term forecasted demand.
                                      -50-
--------------------------------------------------------------------------------


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 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. We cannot
predict the extent or duration of the COVID pandemic, the effects of the COVID
pandemic on the global, national or local economy, or the effect of the COVID
pandemic on our business, financial position, results of operations, and cash
flows.

Bankruptcy Proceedings
On June 15, 2020 (the "Petition Date"), Old Holdco, Inc. (then named Pyxus
International, Inc.) ("Old Pyxus") 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. Refer to   "    Note 3. Emergence from Voluntary Reorganization under
Chapter 11    "   for additional information.

The Company applied Financial Accounting Standards Board ("FASB") 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 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 below). Our financial results for the
two and five months ended August 31, 2020 and for the three and six months ended
September 30, 2019 are referred to as those of the "Predecessor." Our financial
results for the one month ended September 30, 2020 are referred to as those of
the "Successor." Our results of operations as reported in our Condensed
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. 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  " for additional information.

We do not believe that reviewing the results of these periods in isolation would
be useful in identifying any trends in or reaching any conclusions regarding our
overall operating performance. Management believes that operating metrics for
the Successor period when combined with the Predecessor period provides more
meaningful comparisons to other periods and are useful in identifying current
business trends. Accordingly, in addition to presenting our results of
operations as reported in our Condensed Consolidated Financial Statements in
accordance with U.S. GAAP, the tables and discussions below also present the
combined results for the three months and six months ended September 30, 2020.
The combined results (referenced as "Combined (Non-GAAP)" or "combined") for the
three months and six months ended September 30, 2020 represent the sum of the
reported amounts for the Predecessor period July 1, 2020 through August 31, 2020
combined with the Successor period from September 1, 2020 through September 30,
2019 and the Predecessor period from April 1, 2020 through August 31, 2020
combined with the Successor period from September 1, 2020 through September 30,
2020, respectively. These combined results are not considered to be prepared in
accordance with U.S. GAAP and have not been prepared as pro forma results under
applicable regulations. 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 three and six month periods ended September 30, 2020
are to the comparable U.S. GAAP measures for the respective three and six month
periods ended September 30, 2019.
                                      -51-
--------------------------------------------------------------------------------


Results of Operations
Three Months Ended September 30, 2020 and 2019

                                                                                         Combined
                                               Successor           

Predecessor (Non-GAAP) Predecessor

                                            One month ended     Two months ended    Three months ended   Three months ended
(in millions)                              September 30, 2020    August 31, 2020    September 30, 2020   September 30, 2019
Sales and other operating revenues        $           117.8    $          184.8    $           302.6    $           383.0
Cost of goods and services sold                       107.5               159.4                266.9                322.8
Gross profit*                                          10.4                25.4                 35.8                 60.2
Selling, general, and administrative
expenses                                               15.7                27.1                 42.8                 47.3
Other (expense) income, net                            (1.9)                1.9                    -                  1.5
Restructuring and asset impairment
charges                                                 1.2                 0.5                  1.7                    -

Operating (loss) income*                               (8.5)               (0.4)                (8.9)                14.5

Interest expense                                        8.2                15.4                 23.6                 35.3
Interest income                                         0.1                 0.7                  0.8                  1.4
Reorganization items                                      -               132.9                132.9                    -
Income tax (benefit) expense                          (10.6)                8.5                 (2.1)                 2.7
Income from unconsolidated affiliates                   0.2                 1.5                  1.7                  5.6
Net loss attributable to noncontrolling
interests                                              (0.5)               (0.3)                (0.8)                (0.1)
Net (loss) income attributable to Pyxus
International, Inc.*                      $            (5.3)   $          111.2    $           105.9    $           (16.5)

* Amounts may not equal column totals due to rounding



Combined sales and other operating revenues decreased $80.4 million or 21.0% to
$302.6 million for the three months ended September 30, 2020 from $383.0 million
for the three months ended September 30, 2019. This decrease was due to a 12.9%
decrease in volume from smaller crop sizes and shipping delays in Africa caused
by the COVID-19 pandemic as well as an 11.8% decrease in average sales prices
attributable to product mix in Asia, Europe, and South America having a lower
concentration of lamina and changes in foreign exchange rates in Africa and
South America. These decreases were partially offset by an increase in volume
due to the timing of shipments in Europe, changes in foreign exchange rates in
Europe, and product mix in North America having a higher concentration of
lamina.

Combined cost of goods and services sold decreased $55.9 million or 17.3% to
$266.9 million for the three months ended September 30, 2020 from $322.8 million
for the three months ended September 30, 2019. This decrease was mainly due to
the decrease in sales and other operating revenues and changes in foreign
currency exchange rates in Africa and South America. This decrease was partially
offset by inventory write-offs of cannabis and industrial hemp inventory driven
by a shift in expected future products mix in response to market supply
conditions and continued market price compression.

Combined gross profit as a percent of sales decreased to 11.8% for the three
months ended September 30, 2020 from 15.7% for three months ended September 30,
2019. This decrease was primarily due to product mix in Asia, Europe, and South
America having a lower concentration of lamina and inventory write-offs
described above. These decreases were partially offset by changes in foreign
exchange rates in Europe, lower conversion costs in Europe, and product mix in
North America having a higher concentration of lamina.

Combined selling, general, and administrative expenses decreased $4.5 million or
9.5% to $42.8 million for the three months ended September 30, 2020 from $47.3
million for the three months ended September 30, 2019. This decrease was mainly
due to higher expenses in the prior year for the evaluation of a partial
monetization of the Company's investments in certain businesses included in the
Other Products and Services segment, lower travel expenses caused by the
COVID-19 pandemic, and current year savings from restructuring initiatives.

Combined interest expense decreased $11.7 million or 33.1% to $23.6 million for
the three months ended September 30, 2020 from $35.3 million for the three
months ended September 30, 2019. 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 increased $132.9 million or 100.0% for the three
months ended September 30, 2020 and were incurred in connection with the Chapter
11 Cases.
                                      -52-
--------------------------------------------------------------------------------

Leaf - North America Supplemental Information


                                                                                          Combined
                                                Successor           

Predecessor (Non-GAAP) Predecessor

                                             One month ended     Two months 

ended Three months ended Three months ended (in millions, except per kilo amounts) September 30, 2020August 31, 2020September 30, 2020September 30, 2019 Kilos sold

                                               2.9                 4.4                  7.3                  7.6
Tobacco sales and other operating
revenues:
Sales and other operating revenues         $            17.1    $           25.3    $            42.4    $            44.3
Average price per kilo                                  5.90                5.75                 5.81                 5.83
Processing and other revenues                            2.9                 2.5                  5.4                  7.2
Total sales and other operating revenues                20.0                27.8                 47.8                 51.5
Tobacco cost of goods sold:
Tobacco costs                                           13.5                19.4                 32.9                 33.2
Transportation, storage, and other period
costs                                                    1.3                 3.0                  4.3                  5.5
Derivative financial instrument and
exchange (gains) losses                                 (0.1)                  -                 (0.1)                 0.1
Total tobacco cost of goods sold                        14.7                22.4                 37.1                 38.8
Average cost per kilo                                   5.07                5.09                 5.08                 5.11
Processing and other revenues cost of
services sold                                            2.4                 1.7                  4.1                  5.6
Total cost of goods and services sold                   17.1                24.1                 41.2                 44.4
Gross profit                                             2.9                 3.7                  6.6                  7.1
Selling, general, and administrative
expenses                                                 1.8                 2.3                  4.1                  4.3
Other expense, net                                      (0.1)               (0.2)                (0.3)                (0.3)
Restructuring and asset impairment charges               0.1                   -                  0.1                    -
Operating income                           $             0.9    $            1.2    $             2.1    $             2.5



Combined total sales and other operating revenues decreased $3.7 million or 7.2%
to $47.8 million for the three months ended September 30, 2020 from $51.5
million for the three months ended September 30, 2019. This decrease was
primarily due to 3.9% lower volume driven by the timing of shipments. This
decrease was partially offset by product mix having a higher concentration of
lamina.

Combined cost of goods and services sold decreased $3.2 million or 7.2% to $41.2
million for the three months ended September 30, 2020 from $44.4 million for the
three months ended September 30, 2019. This decrease was mainly due to the
decrease in sales and other operating revenues.

Combined gross profit as a percent of sales was 13.8% for the three months ended September 30, 2020 and 2019.



                                      -53-
--------------------------------------------------------------------------------

Leaf - Other Regions Supplemental Information


                                                                                          Combined
                                                Successor           

Predecessor (Non-GAAP) Predecessor

                                             One month ended     Two months 

ended Three months ended Three months ended (in millions, except per kilo amounts) September 30, 2020August 31, 2020September 30, 2020September 30, 2019 Kilos sold

                                              25.7                44.0                 69.7                 80.8
Tobacco sales and other operating
revenues:
Sales and other operating revenues         $            89.4    $          137.6    $           227.0    $           306.7
Average price per kilo                                  3.48                3.13                 3.26                 3.80
Processing and other revenues                            7.6                15.2                 22.8                 18.8
Total sales and other operating revenues                97.0               152.8                249.8                325.5
Tobacco cost of goods sold:
Tobacco costs                                           72.6               109.2                181.8                246.8
Transportation, storage, and other period
costs                                                    5.9                 8.4                 14.3                 12.2
Derivative financial instrument and
exchange losses (gains)                                  0.4                (0.1)                 0.3                  1.3
Total tobacco cost of goods sold                        78.9               117.5                196.4                260.3
Average cost per kilo                                   3.07                2.67                 2.82                 3.22
Processing and other revenues cost of
services sold                                            5.3                12.7                 18.0                 14.3
Total cost of goods and services sold                   84.2               130.2                214.4                274.6
Gross profit                                            12.8                22.6                 35.4                 50.9
Selling, general, and administrative
expenses                                                 8.4                17.3                 25.7                 25.6
Other income, net                                        0.6                 0.4                  1.0                  1.2
Restructuring and asset impairment charges               1.1                 0.5                  1.6                    -
Operating income                           $             3.9    $            5.2    $             9.1    $            26.5



Combined total sales and other operating revenues decreased $75.7 million or
23.3% to $249.8 million for the three months ended September 30, 2020 from
$325.5 million for the three months ended September 30, 2019. This decrease was
due to a 13.7% decrease in volume from smaller crop sizes and shipping delays in
Africa caused by the COVID-19 pandemic as well as a 14.2% decrease in average
sales prices attributable product mix in Asia, Europe, and South America having
a lower concentration of lamina and changes in foreign exchange rates in Africa
and South America. These decreases were partially offset by an increase in
volume due to the timing of shipments in Europe and changes in foreign exchange
rates in Europe.

Combined cost of goods and services sold decreased $60.2 million or 21.9% to
$214.4 million for the three months ended September 30, 2020 from $274.6 million
for the three months ended September 30, 2019. This decrease was mainly due to
the decrease in sales and other operating revenues and changes in foreign
currency exchange rates in Africa and South America.

Combined gross profit as a percent of sales decreased to 14.2% for the three
months ended September 30, 2020 from 15.6% for the three months ended September
30, 2019. This decrease was attributable to product mix in Asia, Europe, and
South America having a lower concentration of lamina and higher conversion costs
in Africa. These decreases were partially offset by lower conversion costs in
Europe.

Combined selling, general, and administrative expenses increased $0.1 million or
0.4% to $25.7 million for the three months ended September 30, 2020 from $25.6
million for the three months ended September 30, 2019. Combined selling,
general, and administrative expenses as a percent of sales increased to 10.3%
for the three months ended September 30, 2020 from 7.9% for the three months
ended September 30, 2019. These increases were related to the decrease in sales
and other operating revenues and higher allocations of general corporate
services. These increases were partially offset by decreases in travel expenses
caused by the COVID-19 pandemic and current year savings from restructuring
initiatives.
                                      -54-
--------------------------------------------------------------------------------

Other Products and Services Supplemental Information

                                                                                         Combined
                                               Successor           Predecessor          (Non-GAAP)          Predecessor
                                            One month ended     Two months ended    Three months ended   Three months ended
(in millions)                              September 30, 2020    August 31, 2020    September 30, 2020   September 30, 2019
Sales and other operating revenues        $             0.9    $            4.2    $             5.1    $             6.0
Cost of goods and services sold                         6.3                 5.2                 11.5                  3.8
Gross (loss) profit                                    (5.4)               (1.0)                (6.4)                 2.2
Selling, general, and administrative
expenses                                                5.5                 7.4                 12.9                 17.3
Other (expense) income, net                            (2.4)                1.7                 (0.7)                 0.6

Operating loss                            $           (13.3)   $           (6.7)   $           (20.0)   $           (14.5)



Combined sales and other operating revenues decreased $0.9 million or 15.0% to
$5.1 million for the three months ended September 30, 2020 from $6.0 million for
the three months ended September 30, 2019. This decrease was primarily due to a
decrease in cannabinoid revenue attributable to oversupply conditions on the
Canadian cannabis market, a decrease in e-liquids revenue related to a general
industry slow-down amid health and regulatory concerns, and the global impact of
the COVID-19 pandemic.

Combined cost of goods and services sold increased $7.7 million or 202.6% to
$11.5 million for the three months ended September 30, 2020 from $3.8 million
for the three months ended September 30, 2019. This increase was mainly due to
inventory write-offs of cannabis and industrial hemp inventory driven by a shift
in expected future products mix in response to market supply conditions and
continued market price compression.

Combined gross loss as a percent of sales was (125.5)% for the three months
ended September 30, 2020 compared to gross profit as a percent of sales of 36.7%
for the three months ended September 30, 2019. This difference was primarily
attributable to the inventory write-offs described above.

Combined selling, general, and administrative expenses decreased $4.4 million or
25.4% to $12.9 million for the three months ended September 30, 2020 from $17.3
million for the three months ended September 30, 2019. Combined selling,
general, and administrative expenses as a percent of sales decreased to 252.9%
for the three months ended September 30, 2020 from 288.3% for the three months
ended September 30, 2019. These decreases were mainly due to higher expenses in
the prior year for the evaluation of a partial monetization of the Company's
investments in certain businesses.


                                      -55-
--------------------------------------------------------------------------------

Six Months Ended September 30, 2020 and 2019


                                                                                         Combined
                                               Successor           

Predecessor (Non-GAAP) Predecessor

                                            One month ended     Five months ended    Six months ended    Six months ended
(in millions)                              September 30, 2020    August 31, 2020    September 30, 2020  September 30, 2019
Sales and other operating revenues        $           117.8    $          447.6    $           565.4    $          659.7
Cost of goods and services sold                       107.5               402.6                510.1               559.7
Gross profit*                                          10.4                45.0                 55.4                99.9
Selling, general, and administrative
expenses                                               15.7                87.9                103.6                96.6
Other (expense) income, net                            (1.9)               (0.5)                (2.4)                4.5
Restructuring and asset impairment
charges                                                 1.2                 0.6                  1.8                 0.2

Operating (loss) income*                               (8.5)              (44.0)               (52.5)                7.5
Debt retirement expense                                   -                 0.8                  0.8                   -
Interest expense                                        8.2                46.6                 54.8                69.1
Interest income                                         0.1                 1.4                  1.5                 2.5
Reorganization items                                      -               106.0                106.0                   -
Income tax (benefit) expense                          (10.6)                0.3                (10.3)               26.2
Income from unconsolidated affiliates                   0.2                 2.4                  2.6                 6.5
Net loss attributable to noncontrolling
interests                                              (0.5)               (1.0)                (1.5)               (0.5)
Net (loss) income attributable to Pyxus
International, Inc.*                      $            (5.3)   $           19.0    $            13.7    $          (78.3)

* Amounts may not equal column totals due to rounding



Combined sales and other operating revenues decreased $94.3 million or 14.3% to
$565.4 million for the six months ended September 30, 2020 from $659.7 million
for the six months ended September 30, 2019. This decrease was due to a 6.2%
decrease in volume due to reduced orders from smaller crop sizes and shipping
delays in Africa, North America, and South America primarily due to the COVID-19
pandemic as well as an 9.9% decrease in average sales prices attributable to
unfavorable product mix in Asia and South America and changes in foreign
exchange rates in South America. These decreases were partially offset by an
increase in volume due to the timing of shipments in Asia and Europe, changes in
foreign exchange rates in Europe, and product mix in North America having a
higher concentration of lamina.

Combined cost of goods and services sold decreased $49.6 million or 8.9% to
$510.1 million for the six months ended September 30, 2020 from $559.7 million
for the six months ended September 30, 2019. This decrease was mainly due to the
decrease in sales and other operating revenues and changes in foreign currency
exchange rates in South America. This decrease was partially offset by inventory
write-offs of cannabis and industrial hemp inventory driven by a shift in
expected future products mix in response to market supply conditions and
continued market price compression.

Combined gross profit as a percent of sales decreased to 9.8% for the six months
ended September 30, 2020 from 15.1% for the six months ended September 30, 2019.
This decrease was primarily due to product mix in Asia, Europe, and South
America having a lower concentration of lamina, higher conversion costs in
Africa and South America, and the inventory write-downs described above. These
decreases were partially offset by lower conversion costs in Asia and Europe and
product mix in North America having a higher concentration of lamina.

Combined selling, general, and administrative expenses increased $7.0 million or
7.2% to $103.6 million for the six months ended September 30, 2020 from $96.6
million for the six months ended September 30, 2019. Combined selling, general,
and administrative expenses as a percent of sales increased to 18.3% for the six
months ended September 30, 2020 from 14.6% for the six months ended September
30, 2019. These increases were driven by professional service expenses
associated with our emergence from the Chapter 11 Cases. These increases were
partially offset by lower travel expenses caused by the COVID-19 pandemic and
current year savings from restructuring initiatives.

Combined reorganization items increased $106.0 million or 100.0% for the six
months ended September 30, 2020 and were incurred in connection with the Chapter
11 Cases.

Combined income tax expense decreased $36.5 million or 139.3% to a benefit of
$10.3 million for the six months ended September 30, 2020 from expense of $26.2
million for the six months ended September 30, 2019. This decrease was primarily
due to the change in the effective tax rate to 1,717.0% for the six months ended
September 30, 2020 from (44.3)% for the six months ended September 30, 2019 and
the occurrence of certain discrete items during the six months ended September
30, 2020.
                                      -56-
--------------------------------------------------------------------------------

Leaf - North America Supplemental Information


                                                                                          Combined

(in millions, except per kilo amounts) Successor Predecessor (Non-GAAP) Predecessor

                                             One month ended     Five 

months ended Six months ended Six months ended

                                            September 30, 2020    August 

31, 2020 September 30, 2020September 30, 2019 Kilos sold

                                               2.9                 9.5                 12.4                14.2
Tobacco sales and other operating
revenues:
Sales and other operating revenues         $            17.1    $           51.2    $            68.3    $           75.4
Average price per kilo                                  5.90                5.39                 5.51                5.31
Processing and other revenues                            2.9                 6.5                  9.4                11.0
Total sales and other operating revenues                20.0                57.7                 77.7                86.4
Tobacco cost of goods sold:
Tobacco costs                                           13.5                39.3                 52.8                57.6
Transportation, storage, and other period
costs                                                    1.3                 5.6                  6.9                 8.7
Derivative financial instrument and
exchange (gains) losses                                 (0.1)                0.3                  0.2                   -
Total tobacco cost of goods sold                        14.7                45.2                 59.9                66.3
Average cost per kilo                                   5.07                4.76                 4.83                4.67
Processing and other revenues cost of
services sold                                            2.4                 4.4                  6.8                 7.9
Total cost of goods and services sold                   17.1                49.6                 66.7                74.2
Gross profit                                             2.9                 8.1                 11.0                12.2
Selling, general, and administrative
expenses                                                 1.8                 7.2                  9.0                 8.4
Other expense, net                                      (0.1)               (0.5)                (0.6)               (0.5)
Restructuring and asset impairment charges               0.1                   -                  0.1                   -
Operating income (loss)                    $             0.9    $            0.4    $             1.3    $            3.3



Combined total sales and other operating revenues decreased $8.7 million or
10.1% to $77.7 million for the six months ended September 30, 2020 from $86.4
million for the six months ended September 30, 2019. This decrease was due to a
12.7% decrease in volume attributable to timing of shipments and the timing of
shipments. This decrease was partially offset by a 3.8% increase in average
sales price due to product mix having a higher concentration of lamina.

Combined cost of goods and services sold decreased $7.5 million or 10.1% to
$66.7 million for the six months ended September 30, 2020 from $74.2 million for
the six months ended September 30, 2019. This decrease was mainly due to the
decrease in sales and other operating revenues.

Combined gross profit as a percent of sales increased slightly to 14.2% for the six months ended September 30, 2020 from 14.1% for the six months ended September 30, 2019.





                                      -57-
--------------------------------------------------------------------------------

Leaf - Other Regions Supplemental Information


                                                                                          Combined

(in millions, except per kilo amounts) Successor Predecessor (Non-GAAP) Predecessor

                                             One month ended     Five 

months ended Six months ended Six months ended

                                            September 30, 2020    August 

31, 2020 September 30, 2020September 30, 2019 Kilos sold

                                              25.7               102.5                128.2               135.7
Tobacco sales and other operating
revenues:
Sales and other operating revenues         $            89.4    $          355.9    $           445.3    $          531.9
Average price per kilo                                  3.48                3.47                 3.47                3.92
Processing and other revenues                            7.6                24.6                 32.2                29.4
Total sales and other operating revenues                97.0               380.5                477.5               561.3
Tobacco cost of goods sold:
Tobacco costs                                           72.6               292.0                364.6               430.0
Transportation, storage, and other period
costs                                                    5.9                16.9                 22.8                24.9
Derivative financial instrument and
exchange losses (gains)                                  0.4                (1.6)                (1.2)                0.3
Total tobacco cost of goods sold                        78.9               307.3                386.2               455.2
Average cost per kilo                                   3.07                3.00                 3.01                3.35
Processing and other revenues cost of
services sold                                            5.3                20.0                 25.3                22.8
Total cost of goods and services sold                   84.2               327.3                411.5               478.0
Gross profit                                            12.8                53.2                 66.0                83.3
Selling, general, and administrative
expenses                                                 8.4                54.5                 62.9                53.9
Other income, net                                        0.6                 0.8                  1.4                 4.3
Restructuring and asset impairment charges               1.1                 0.5                  1.6                 0.2
Operating income (loss)                    $             3.9    $           (1.0)   $             2.9    $           33.5



Combined total sales and other operating revenues decreased $83.8 million or
14.9% to $477.5 million for the six months ended September 30, 2020 from $561.3
million for the six months ended September 30, 2019. This decrease was due to a
5.5% decrease in volume from smaller crop sizes and shipping delays in Africa
and South America primarily due to the COVID-19 pandemic as well as an 11.5%
decrease in average sales prices attributable product mix in Asia, Europe, and
South America having a lower concentration of lamina and changes in foreign
exchange rates in Africa and South America. These decreases were partially
offset by an increase in volume due to the timing of shipments in Asia and
Europe and changes in foreign exchange rates in Europe.

Combined cost of goods and services sold decreased $66.5 million or 13.9% to
$411.5 million for the six months ended September 30, 2020 from $478.0 million
for the six months ended September 30, 2019. This decrease was mainly due to the
decrease in sales and other operating revenues and changes in foreign currency
exchange rates in Africa and South America.

Combined gross profit as a percent of sales decreased to 13.8% for the six
months ended September 30, 2020 from 14.8% for the six months ended September
30, 2019. This decrease was attributable to product mix in Asia, Europe, and
South America having a lower concentration of lamina and higher conversion costs
in Africa and South America. These decreases were partially offset by lower
conversion costs in Asia and Europe.

Combined selling, general, and administrative expenses increased $9.0 million or
16.7% to $62.9 million for the six months ended September 30, 2020 from $53.9
million for the six months ended September 30, 2019. Combined selling, general,
and administrative expenses as a percent of sales increased to 13.2% for the six
months ended September 30, 2020 from 9.6% for the six months ended September 30,
2019. These increases were related to the decrease in sales and other operating
revenues and higher allocations of general corporate services. These increases
were partially offset by lower travel expenses caused by the COVID-19 pandemic
and current year savings from restructuring initiatives.
                                      -58-
--------------------------------------------------------------------------------

Other Products and Services Supplemental Information


                                                                                         Combined

(in millions, except per kilo amounts) Successor Predecessor (Non-GAAP) Predecessor

                                            One month ended     Five months 

ended Six months ended Six months ended

                                           September 30, 2020    August 31, 2020    September 30, 2020  September 30, 2019
Sales and other operating revenues        $             0.9    $            9.4    $            10.3    $           11.9
Cost of goods and services sold                         6.3                25.7                 32.0                 7.5
Gross (loss) profit                                    (5.4)              (16.3)               (21.7)                4.4
Selling, general, and administrative
expenses                                                5.5                26.2                 31.7                34.3
Other (expense) income, net                            (2.4)               (0.8)                (3.2)                0.7

Operating loss                            $           (13.3)   $          (43.3)   $           (56.6)   $          (29.2)



Combined sales and other operating revenues decreased $1.6 million or 13.4% to
$10.3 million for the six months ended September 30, 2020 from $11.9 million for
the six months ended September 30, 2019. This decrease was primarily due to a
decrease in cannabinoid revenue attributable to oversupply conditions on the
Canadian cannabis market, a decrease in e-liquids revenue related to a general
industry slow-down amid health and regulatory concerns, and the global impact of
the COVID-19 pandemic.

Combined cost of goods and services sold increased $24.5 million or 326.7% to
$32.0 million for the six months ended September 30, 2020 from $7.5 million for
the six months ended September 30, 2019. This increase was mainly due to
inventory write-offs of cannabis and industrial hemp inventory driven by a shift
in expected future products mix in response to market supply conditions and
continued market price compression.

Combined gross profit as a percent of sales decreased to (210.7)% for the six
months ended September 30, 2020 from 37.0% for the six months ended September
30, 2019. This decrease was mainly due to the inventory write-downs described
above.

Combined selling, general, and administrative expenses decreased $2.6 million or
7.6% to $31.7 million for the six months ended September 30, 2020 from $34.3
million for the six months ended September 30, 2019. Combined selling, general,
and administrative expenses as a percent of sales increased to 307.8% for the
six months ended September 30, 2020 from 288.2% for the six months ended
September 30, 2019. These decreases were mainly due to higher expenses in the
prior year for the evaluation of a partial monetization of the Company's
investments in certain businesses.
                                      -59-
--------------------------------------------------------------------------------

Liquidity and Capital Resources
Overview
The following transactions occurred at or prior to the Effective Date, as
contemplated by the Plan:
•Claims with respect to the Company's $275.0 million of 8.5% First Lien Notes
due 2021 were satisfied by the issuance of 10.0% First Lien Notes due in 2024 in
the aggregate principal amount of $280.8 million.
•Claims with respect to the Company's $635.7 million of 9.875% Second Lien Notes
due 2021 were satisfied by the issuance of approximately 12.5 million shares of
common stock and a $2.2 million cash payment.
•Claims with respect to the DIP Facility were satisfied by the issuance of
$213.4 million aggregate principal amount of the Term Loans due February 24,
2025.
•Claims with respect to the $60.0 million ABL in existence at the Petition Date
were repaid in full during the pendency of the Chapter 11 Cases with proceeds
from borrowings under the DIP Facility, and at the Effective Date the Company
entered into the ABL Credit Agreement providing a new $75.0 million ABL Credit
Facility that is due on February 24, 2023, with $67.5 million of borrowings
thereunder outstanding as of September 30, 2020.
•The Company's $255.0 million African seasonal line of credit with TDB was
amended and restated, which resulted in an increase in the line of credit with
TDB to $285.0 million.
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.
Additionally, our liquidity requirements are increasingly affected by branding,
marketing, and advertising expenses to support growth of the Other Products and
Services segment, and legal and professional costs. Although we believe that our
sources of liquidity will be sufficient to fund our anticipated needs for the
next twelve months, we anticipate periods during which our liquidity needs 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.
As of September 30, 2020, Asia, Europe, and North America are generally
harvesting, buying, marketing, and processing; Africa is generally seeding,
harvesting, buying, and processing; and South America is transplanting and
seeding.
Working Capital
The following is a summary of items from the condensed consolidated balance
sheets:
                                                       Successor            

Predecessor

(in millions except for current ratio)             September 30, 2020     September 30, 2019    March 31, 2020
Cash and cash equivalents                        $             125.6    $             172.5    $        170.2
Trade and other receivables, net                               166.4                  214.5             239.7
Inventories and advances to tobacco suppliers                  892.8                  848.7             768.9
Total current assets                                         1,281.8                1,295.6           1,232.4
Notes payable to banks                                         457.9                  582.4             540.2
Accounts payable                                                56.9                   50.8              67.1
Advances from customers                                         22.0                   22.3              18.8
Total current liabilities                                      670.0                  812.0             789.1
Current ratio                                                  1.9 to 1               1.6 to 1          1.6 to 1
Working capital                                                611.8                  483.6             443.3
Long-term debt                                                 550.2                  901.1             904.3
Stockholders' equity attributable to Pyxus
International, Inc.                                            385.3                  104.2             (78.0)



Working capital increased to $611.8 million at September 30, 2020 from $483.6
million at September 30, 2019 primarily due to lower balances on the African
seasonal lines of credit resulting from cash payments and shorter crops
resulting in decreased inventory purchases.
                                      -60-
--------------------------------------------------------------------------------

Sources and Uses of Cash
Our primary sources of liquidity are cash generated from operations, cash
collections from our securitized receivables, borrowings under the ABL Credit
Facility, and short-term borrowings under our foreign seasonal lines of credit.
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
seasonal in nature 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 15. "Debt
Arrangements"   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.

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


                                                      Successor             

Predecessor

                                                   One month ended      Five months ended     Six months ended
(in millions)                                     September 30, 2020     August 31, 2020     September 30, 2019
Operating activities                            $             (16.9)   $          (182.1)   $          (257.8)
Investing activities                                           10.0                 61.7                 90.9
Financing activities                                           38.8                 63.7                154.1
Effect of exchange rate changes on cash                        (0.6)                 1.6                 (7.3)
Increase (decrease) in cash, cash equivalents,
and restricted cash                                            31.2                (55.1)               (20.1)
Cash and cash equivalents at beginning of
period                                                         93.1                170.2                192.0
Restricted cash at beginning of period                         24.8                  2.9                  5.8
Cash, cash equivalents, and restricted cash at
end of period*                                  $             149.2    $           118.0    $           177.7

* Amounts may not equal column totals due to
rounding



Net cash used by operating activities decreased on a combined basis for the one
month ended September 30, 2020 and the five months ended August 31, 2020
compared to the six months ended September 30, 2019, primarily due to (excluding
non-cash activities) decreased inventory driven by smaller crop sizes in Africa
and currency devaluation in Africa and South America.

Net cash provided by investing activities decreased on a combined basis for the
one month ended September 30, 2020 and the five months ended August 31, 2020
compared to the six months ended September 30, 2019 primarily due to lower
collections on beneficial interests on securitized trade receivables driven by
lower tobacco sales and lower qualifying receivables available for sale into the
securitization facilities.

Net cash provided by financing activities decreased on a combined basis for the
one month ended September 30, 2020 and the five months ended August 31, 2020
compared to the six months ended September 30, 2019 primarily due to lower net
proceeds resulting from higher repayments of short-term borrowings and the
repayment of the ABL facility in place at the Petition Date, partially offset by
proceeds from the DIP Facility and borrowings under the ABL Credit Facility.

Fluctuation of the U.S. dollar versus many of the currencies in which we have
costs may have an impact on our working capital requirements. We will continue
to monitor and hedge foreign currency costs, as needed.

Restricted cash as of September 30, 2020 includes approximately $21.0 million
held as escrow for professional fees incurred by the Debtors' during the Chapter
11 Cases. See   "Note 9. Cash, Cash Equivalents, and Restricted Cash"   for
additional information.

Approximately $88.9 million of our outstanding cash balance at September 30,
2020 was held in foreign jurisdictions, which includes approximately $1.0
million held by our legal Canadian cannabis businesses. As a result of our cash
needs abroad and legal restrictions with respect to repatriation of the proceeds
from operations of our Canadian cannabis subsidiaries, it is our intention to
permanently reinvest these funds in foreign jurisdictions regardless of the fact
that the cost of repatriation would not have a material financial impact.
                                      -61-
--------------------------------------------------------------------------------

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 described above,
advances from customers, and cash from operations when available. Refer to
  "Note 15. Debt Arrangements"   for summary of our short-term and long-term
debt. We will continue to monitor and, as available, adjust funding sources as
needed to enhance and drive various business opportunities. Available credit as
of September 30, 2020 was $306.4 million comprised of $296.0 million of foreign
seasonal lines of credit (of which $123.9 million of availability under the TDB
Facility Agreement includes limits for borrowings for jurisdictions to fund the
purchase of tobacco in that jurisdiction), $7.5 million from the ABL Credit
Facility, and $2.6 million of availability for letters of credit. We believe
that our sources of liquidity will be sufficient to fund our anticipated needs
for the next twelve months.

No cash dividends were paid to shareholders during the three months ended September 30, 2020. The payment of dividends is restricted under the terms the ABL Credit Agreement, the Term Loan Credit Agreement, and the Indenture.


Zimbabwe Currency Considerations
The Company often holds Zimbabwe RTGS Dollars necessary for operations within
Zimbabwe. RTGS is a local currency equivalent that, as of September 30, 2020,
was exchanged at a government specified rate of 81:1 with the U.S. Dollar
("USD"). In order to convert Zimbabwe RTGS Dollars to U.S. Dollars, we must
obtain foreign currency resources from the Reserve Bank of Zimbabwe, 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 our Zimbabwe subsidiary, Mashonaland Tobacco
Company ("MTC"). As of September 30, 2020, MTC has $45.0 million of net assets.

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