Pyxus International Inc.

06/08/2025 | Press release | Distributed by Public on 06/08/2025 05:00

Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Readers are cautioned that the statements contained in this report regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements, which are based on current expectations of future events, may be identified by the use of words such as "guidance", "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, in our Annual Report on Form 10-K for the year ended March 31, 2025 and in our other filings with the Securities and Exchange Commission. These risks and uncertainties include: our reliance on a small number of significant customers; continued vertical integration by our customers; global shifts in sourcing customer requirements, the imposition of tariffs and other changes in international trade policies; shifts in the global supply and demand position for tobacco products; variation in our financial results due to growing conditions, customer indications and other factors; loss of confidence in us by our customers, farmers and other suppliers; migration of suppliers who have historically grown tobacco and from whom we have purchased tobacco toward growing other crops; risks related to our advancement of inputs to tobacco suppliers to be settled upon the suppliers delivering us unprocessed tobacco at the end of the growing season; risks that the tobacco we purchase directly from suppliers will not meet our customers' quality and quantity requirements; weather and other environmental conditions that can affect the quantity and marketability of our inventory; international business risks, including unsettled political conditions, uncertainty in the enforcement of legal obligations, including the collection of accounts receivable, fraud risks, expropriation, import and export restrictions, exchange controls, inflationary economies, currency risks and risks related to the restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries; many of our operations are located in jurisdictions that pose a high risk of potential violations of the Foreign Corrupt Practices Act; risks and uncertainties related to geopolitical conflicts, including the conflicts in the Middle East and disruptions affecting shipping in that area; impacts of international sanctions on our ability to sell or source tobacco in certain regions; exposure to foreign tax regimes in which the rules are not clear, are not consistently applied and are subject to sudden change; fluctuations in foreign currency exchange and interest rates; competition with the other primary global independent leaf tobacco merchant and independent leaf merchants; disruption, failure or security breaches of our information technology systems and other cybersecurity risks; continued high inflation; regulations regarding environmental matters; risks related to our capital structure, including risks related to our significant debt and our ability to continue to finance our non-U.S. local operations with uncommitted short-term operating credit lines at the local level; our ability to continue to access capital markets to obtain long-term and short-term financing; potential failure of foreign banks in which our subsidiaries maintain deposits or the failure by such banks to transfer funds or honor withdrawals; the risk that, because our ability to generate cash depends on many factors beyond our control, we may be unable to generate the significant amount of cash required to service our indebtedness; our ability to refinance our current credit facilities at the same availability or at similar or reduced interest rates; failure to achieve our stated goals, which may adversely affect our liquidity; developments with respect to our liquidity needs and sources of liquidity; the volatility and disruption of global credit markets; failure by counterparties to derivative transactions to perform their obligations; increasing scrutiny and changing expectations from governments, as well as other stakeholders such as investors and customers, with respect to our environmental, social and governance policies, including sustainability policies; inherent risk of exposure to product liability claims, regulatory action and litigation facing our e-liquids business if its products are alleged to have caused significant loss, injury, or death; certain shareholders have the ability to exercise controlling influence on various corporate matters; reductions in demand for consumer tobacco products; risks and uncertainties related to pandemics or other widespread health crises and any related shipping constraints, labor shortages and supply-chain impacts; legislative and regulatory initiatives that may reduce consumption of consumer tobacco products and demand for our services and increase regulatory burdens on us or our customers; government actions that significantly affect the sourcing of tobacco, including governmental actions to identify and assess crop diversification initiatives and alternatives to leaf tobacco growing in countries whose economies depend upon tobacco production; governmental investigations into the Company's business activities, including but not limited to, leaf tobacco industry buying and other payment practices; and impact of proposed regulations to prohibit the sale of cigarettes and certain other tobacco products in the United States other than low-nicotine versions of those products.
We do not undertake to update any forward-looking statements that we may make from time to time except to the extent required by law.
Overview
Pyxus is a global agricultural company with businesses having more than 150 years of experience delivering value-added products and services to businesses and customers. The Company is a trusted provider of responsibly sourced, independently verified, sustainable, and traceable products and ingredients.
Executive Summary
The start to fiscal year 2026 delivered a larger tobacco crop than we experienced in the prior year, and we are pleased with our ability to capture larger quantities of leaf in key markets. As anticipated, first quarter results were below the same period of the prior year as a result of the acceleration of certain customer shipments into the fourth quarter of fiscal year 2025. Despite a 19.9% reduction in sales and other operating revenues to $508.8 million during the three months ended June 30, 2025 from $634.9 million during the three months ended June 30, 2024, the Company's gross margin as a percent of sales remained relatively stable over the same period due mainly to product mix.
Crop purchases in the Southern hemisphere are near completion and have been strong to date as favorable weather conditions have produced larger volumes of better quality leaf when compared to the prior year, which is evident in both Africa and South America, where unfavorable weather conditions dampened the prior-year crop. Our strengthened credit profile enabled us to secure the necessary funds to purchase these larger volumes of green tobacco to satisfy demand from our customers. Our total tobacco inventory balance, comprised of both processed and unprocessed tobacco, of $1,089.8 million at June 30, 2025, puts us in the position to meet the needs of our customers.
Results of Operations
Three Months Ended June 30, 2025 and 2024
Three Months Ended June 30,
Change
(in millions, except per kilo amounts) 2025 2024 $ %
Consolidated:
Sales and other operating revenues $ 508.8 $ 634.9 (126.1) (19.9)
Cost of goods and services sold 443.2 551.0 (107.8) (19.6)
Gross profit 65.6 83.9 (18.3) (21.8)
Gross profit as a percent of sales 12.9 % 13.2 %
Selling, general, and administrative expenses $ 40.4 $ 40.7 (0.3) (0.7)
Other expense, net 4.2 2.6 1.6 61.5
Restructuring and asset impairment charges 0.1 0.1 - -
Operating income* 21.0 40.5 (19.5) (48.1)
Gain on debt retirement - 1.3 (1.3) (100.0)
Interest expense, net 29.8 33.3 (3.5) (10.5)
(Loss) income before income taxes and other items (8.8) 8.5 (17.3) (203.5)
Income tax expense 5.2 6.1 (0.9) (14.8)
(Loss) income from unconsolidated affiliates, net (1.3) 2.6 (3.9) (150.0)
Net income attributable to noncontrolling interests 0.6 0.3 0.3 100.0
Net (loss) income attributable to Pyxus International, Inc.* $ (15.8) $ 4.6 (20.4) (443.5)
Leaf:
Product revenues $ 458.2 $ 589.2 (131.0) (22.2)
Tobacco costs 375.7 484.0 (108.3) (22.4)
Transportation, storage, and other period costs 25.1 24.8 0.3 1.2
Total product cost of goods sold 400.8 508.8 (108.0) (21.2)
Product gross profit 57.4 80.4 (23.0) (28.6)
Product gross profit as a percent of sales 12.5 % 13.6 %
Kilos sold 66.9 95.7 (28.8) (30.1)
Average price per kilo $ 6.85 $ 6.16 0.69 11.2
Average cost per kilo 5.99 5.32 0.67 12.6
Average gross profit per kilo 0.86 0.84 0.02 2.4
Processing and other revenues $ 50.2 $ 41.8 8.4 20.1
Processing and other costs of services sold 42.6 37.4 5.2 13.9
Processing and other gross profit 7.6 4.4 3.2 72.7
Processing and other gross profit as a percent of sales 15.1 % 10.5 %
All Other:
Sales and other operating revenues $ 0.4 $ 3.9 (3.5) (89.7)
Cost of goods and services sold (0.2) 4.8 (5.0) (104.2)
Gross profit (loss) 0.6 (0.9) 1.5 166.7
Gross profit (loss) as a percent of sales 150.0 % (23.1) %
* Amounts may not equal column totals due to rounding.
Sales and other operating revenues decreased $126.1 million, or 19.9%, to $508.8 million for the three months ended June 30, 2025 from $634.9 million for the three months ended June 30, 2024. This decline was a result of a 30.1% decrease in kilo volumes sold primarily from Africa and North America due to the timing of certain customer shipments. In the fourth quarter of fiscal year 2025, certain customer orders were accelerated from Africa and North America, which resulted in the year-over-year sales decline that was partially offset by higher average sales prices.
Cost of goods and services sold decreased $107.8 million, or 19.6%, to $443.2 million for the three months ended June 30, 2025 from $551.0 million for the three months ended June 30, 2024. This decrease was mainly due to the reduction in sales and other operating revenues.
Gross profit as a percent of sales decreased to 12.9% for the three months ended June 30, 2025 from 13.2% for the three months ended June 30, 2024. The slight decline was driven by regional and customer sales mix within leaf, partially offset by an increase in processing and other gross profit.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash generated from operations, short-term borrowings under our foreign seasonal lines of credit, availability under our ABL Credit Facility, and cash collections from our securitized receivables. Our liquidity requirements are affected by various factors from our core tobacco leaf business, including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix, crop size, and quality. Our leaf tobacco business is seasonal, and purchasing, processing, and selling activities have several associated peaks where cash on-hand and outstanding indebtedness may vary significantly compared to year end. The first three quarters of our fiscal year generally represent the peak of our working capital requirements.
Although we believe that our sources of liquidity will be sufficient to fund our anticipated operating needs for the next twelve months, we anticipate periods during which our liquidity needs for operations will approach the levels of our anticipated available cash and permitted borrowings under our credit facilities. Unanticipated developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations and the availability of capital resources (including an inability to renew or refinance seasonal lines of credit), may result in a deficiency in liquidity. To address a potential liquidity deficiency, we may undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow. It is possible that, depending on the occurrence of events affecting our liquidity needs and sources of liquidity, such plans may not be sufficient to adequately or timely address a liquidity deficiency.
Debt Financing
We continue to finance our business with a combination of short-term and long-term credit lines, the long-term debt securities, advances from customers, and cash from operations when available. See "Note 11. Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for a summary of our short-term and long-term debt.
We continuously monitor and, as available, adjust funding sources as needed to enhance and drive various business opportunities. From time to time we may take steps to reduce our debt or otherwise improve our financial position. Such actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, and refinancing of debt. The amount of prepayments or the amount of debt that may be repurchased, refinanced, or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants, and other considerations.
The following summarizes our total borrowing capacity at June 30, 2025 and 2024 under our short-term and long-term credit lines and letter of credit facilities and the remaining available amount after the reduction for outstanding borrowings and amounts reserved for outstanding letters of credit:
June 30, 2025 June 30, 2024
(in millions) Total Borrowing Capacity Remaining Amount Available Total Borrowing Capacity Remaining Amount Available
Senior Secured Credit Facilities:
ABL Credit Facility $ 150.0 $ 150.0 $ 120.0 $ 76.0
Foreign seasonal lines of credit 1,025.2 171.2 815.6 169.7
Other long-term debt - - 0.4 0.3
Letters of credit 12.3 3.4 10.6 2.9
Total $ 1,187.5 $ 324.6 $ 946.6 $ 248.9
The total borrowing capacity under the ABL Credit Facility increased $30.0 million when compared to the prior period as a result of the Fourth Amendment to the ABL Credit Agreement entered into on May 12, 2025, which among other things, increased the aggregate amount of revolving loan commitments from $120.0 million to $150.0 million. The amounts presented as available under the ABL Credit Facility are subject to further limitations from the borrowing base consisting of certain eligible accounts receivable and inventory, reduced by specified reserves.
The total borrowing capacity of our foreign seasonal lines of credit increased $209.6 million when compared to the prior year and were primarily utilized to purchase larger volumes of green tobacco. The amounts presented as the remaining amount available for borrowing under the foreign seasonal lines of credit are subject to limitations based on the level of receivables and inventories as collateral and by certain restrictive covenants.
Net Debt
We refer to "Net debt," a non-GAAP measure, as total debt liabilities less cash and cash equivalents. We believe this non-GAAP financial measure is useful to monitor leverage and to evaluate changes to the Company's capital structure. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt and that cash held in certain jurisdictions can be applied to repay obligations owing in other jurisdictions and without reduction for applicable taxes. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates. The following summarizes the computation of net debt:
(in millions) June 30, 2025 June 30, 2024 March 31, 2025
Notes payable $ 880.9 $ 679.4 $ 395.0
Current portion of long-term debt - 20.4 -
Long-term debt(1)
455.1 531.5 454.9
Total debt liabilities $ 1,336.0 $ 1,231.3 $ 849.9
Less: Cash and cash equivalents 96.4 82.0 78.3
Net debt $ 1,239.6 $ 1,149.3 $ 771.6
(1) Fluctuations in long-term debt include borrowings and repayments on the outstanding indebtedness under the ABL Credit Facility, along with repurchases of certain long-term debt. Weighted average borrowings outstanding under the ABL Credit Facility were $57.6 million for the three months ended June 30, 2025.
Net debt increased as of June 30, 2025 when compared to June 30, 2024 due to higher borrowings on our foreign seasonal lines of credit, partially offset by lower borrowings on the ABL Credit Facility and the repurchase of certain long-term debt in August 2024.
Working Capital
The following summarizes our working capital:
(in millions except for current ratio) June 30, 2025 June 30, 2024 March 31, 2025
Cash, cash equivalents, and restricted cash $ 101.4 $ 89.1 $ 85.5
Trade and other receivables, net 223.3 226.1 204.3
Inventories and advances to tobacco suppliers, net 1,183.5 1,058.4 792.7
Recoverable income taxes 11.7 4.1 6.6
Prepaid expenses and other current assets 71.1 64.5 69.0
Total current assets* $ 1,591.0 $ 1,442.1 $ 1,158.2
Notes payable $ 880.9 $ 679.4 $ 395.0
Accounts payable 124.3 115.3 132.9
Advances from customers 87.4 71.0 135.6
Accrued expenses and other current liabilities 104.2 99.1 90.9
Income taxes payable 10.4 8.7 11.0
Operating leases payable 9.6 7.8 8.5
Current portion of long-term debt - 20.4 -
Total current liabilities $ 1,216.8 $ 1,001.7 $ 773.9
Current ratio 1.3 to 1 1.4 to 1 1.5 to 1
Working capital $ 374.2 $ 440.4 $ 384.3
* Amounts may not equal column totals due to rounding
Working capital declined from June 30, 2024 to June 30, 2025 by $66.2 million, or 15.0%, driven by higher borrowings on our foreign seasonal lines of credit to fund the purchases of larger volumes of green tobacco, particularly in Africa and South America.
Inventories
The following summarizes inventory committed to a customer and uncommitted inventory balances for processed tobacco:
(in millions) June 30, 2025 June 30, 2024 March 31, 2025
Committed $ 562.3 $ 590.8 $ 482.8
Uncommitted 13.6 14.7 7.6
Total processed tobacco $ 575.9 $ 605.5 $ 490.4
Total processed tobacco decreased from June 30, 2024 to June 30, 2025 by $29.6 million, or 4.9%, primarily from lower inventory costs of the current crop that has been processed in South America. Uncommitted levels of processed tobacco remain low due to strong demand from our customers. While undersupply conditions have persisted in the global tobacco market in recent periods, the larger crops experienced in Africa and South America are anticipated to provide a more balanced position. See "Note 7. Inventories, Net" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
Sources and Uses of Cash
We typically finance our non-U.S. tobacco operations with committed and uncommitted short-term foreign seasonal lines of credit, normally extending for a term of 180 to 365 days, corresponding to the tobacco crop cycle in that market. For uncommitted facilities, the lenders have the right to cease making loans and demand repayment of loans. These short-term seasonal lines of credit are generally renewed at the outset of each tobacco season. We maintain various other financing arrangements to meet the cash requirements of our businesses. See "Note 11. Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
We utilize capital in excess of cash flow from operations to finance accounts receivable, inventory, and advances to tobacco suppliers in foreign countries. In addition, we may periodically elect to purchase, redeem, repay, retire, or cancel indebtedness prior to stated maturity under our various foreign credit lines.
As of June 30, 2025, our cash, cash equivalents, and restricted cash was $101.4 million, of which approximately $79.1 million was held in non-U.S. jurisdictions for non-U.S. working capital needs, a majority of which is subject to exchange controls and a portion of which is subject to tax consequences upon repatriation, which could limit our ability to fully repatriate these funds. 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.
The following summarizes the sources and uses of our cash flows:
Three Months Ended
June 30,
(in millions) 2025 2024
Net (loss) income $ (15.3) $ 5.0
Inventories and advances to tobacco suppliers (388.0) (108.0)
Payables and accrued expenses 0.4 (64.8)
Advances from customers (49.8) (18.6)
Other (42.6) (65.8)
Net cash used in operating activities $ (495.3) $ (252.2)
Collections from beneficial interests in securitized trade receivables 41.0 31.7
Other (3.4) (3.8)
Net cash provided by investing activities $ 37.6 $ 27.9
Net proceeds from short-term borrowings 476.9 182.0
Net proceeds from revolving loan facilities - 44.0
Repayment of long-term borrowings - (9.1)
Other (2.4) (2.6)
Net cash provided by financing activities $ 474.5 $ 214.3
Effect of exchange rate changes on cash (1.0) (0.8)
Increase (decrease) in cash, cash equivalents, and restricted cash* $ 15.8 $ (10.7)
* Amounts may not equal column totals due to rounding
The change in cash, cash equivalents, and restricted cash for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 increased by $26.5 million. This increase was driven by higher net proceeds received from foreign seasonal lines of credit, partially offset by an increase in cash used in operations to fund purchases of larger crops.
Planned Capital Expenditures
Capital investments in our leaf operations were primarily for routine replacement of machinery and equipment, as well as investments in assets to enhance our sustainability efforts or increase efficiencies, which we believe will add value to our customers. We incurred approximately $4.3 million in capital expenditures for the three months ended June 30, 2025, and are expecting to incur an additional $21.8 million for the remainder of the fiscal year ending March 31, 2026.
Pension and Postretirement Health and Life Insurance Benefits
The following summarizes cash contributions to pension and postretirement health and life insurance benefits:
Three Months Ended
(in millions) June 30, 2025
Contributions made during the period $ 1.1
Contributions expected for the remainder of the fiscal year 3.4
Total $ 4.5
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates since March 31, 2025. For information regarding our critical accounting estimates, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025.
Pyxus International Inc. published this content on August 06, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on August 06, 2025 at 11:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]