UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, ~~2019.~~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)

~~Pyxus International,~~Old Holdco, Inc.

(Exact name of registrant as specified in its charter)

Virginia

54-1746567

(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)

(919) 379-4300

(Registrant’s telephone number, including area code)

Pyxus International, Inc.

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


~~Title of Each Class~~	~~Trading Symbol~~	~~Name of Exchange On Which Registered~~
~~Common Stock (no par value)~~	~~PYX~~	~~New York Stock Exchange~~


Title of Each Class	Trading Symbol	Name of Exchange On Which Registered
Common Stock (no par value)	(1)	(1)

(1) On June 30, 2020, the New York Stock Exchange filed a Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934 on Form 25 with the Securities and Exchange Commission with respect to the registrant’s common stock (no par value) which became effective to strike the registrant’s common stock from listing on the New York Stock Exchange 10 days thereafter and will become effective to withdraw the registrant’s common stock from registration under Section 12(b) of the Act 90 days thereafter (or such shorter period as the Securities and Exchange Commission may determine).

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company' in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large Accelerated Filer ☐ Accelerated Filer ☒ Non-Accelerated filer ☐

Smaller Reporting Company ☒ Emerging Growth Company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of July 31, ~~2019,~~2020, the registrant had ~~9,137,812~~9,975,875 shares outstanding of Common Stock (no par value) ~~excluding 785,313 shares owned by a wholly owned subsidiary.~~

-1-

Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries

Table of Contents

Page No.

Preliminary Note

Forward-Looking Statements

~~Page No.~~

Part I.

Financial Information

Item 1.

Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Balance Sheets

June 30, ~~2019~~2020 and ~~2018~~2019 and March 31, ~~2019~~2020

Condensed Statements of Consolidated Stockholders’ Equity

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Cash Flows

Three Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

710

Notes to Condensed Consolidated Financial Statements

811

Item 2.

Management's Discussion and Analysis

of Financial Condition and Results of Operations

2537

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

3346

Item 4.

Controls and Procedures

Part II.

Item 1.

Item 1A.

Item 6.

-2-

PRELIMINARY NOTE

This Form 10-Q is being filed by Old Holdco, Inc. which was formerly named “Pyxus International, Inc.” (the “Company,” “Pyxus,” “we,” or “us,” which terms, when used with respect to periods commencing after the effectiveness of the Plan (as defined below), would include New Pyxus (as defined in "Note 1. Basis of Presentation and Significant Accounting Policies" and "Note 22. Subsequent Events" to the "Notes to Consolidated Financial Statements"), unless the context would indicate otherwise). This Form 10-Q is being signed concurrently with the effectiveness of the Plan.

Bankruptcy Proceedings

On June 15, 2020 (the "Petition Date"), the Company (then named Pyxus International, Inc.) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC and GSP Properties, LLC (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged chapter 11 plan of reorganization (“Prepack Plan”) that effectuates a financial restructuring of the Company’s secured debt (the “Restructuring”). The Company commenced solicitation of the Prepack Plan with a related disclosure statement (“Disclosure Statement”) on June 14, 2020. The Chapter 11 Cases have been administered jointly under the caption In re Pyxus International, Inc., et al. 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. This Form 10-K is being signed concurrently with the effectiveness of the Plan. These and other related matters are discussed in greater detail in the "Note 1. Basis of Presentation and Significant Accounting Policies" and "Note 22. Subsequent Events" to the "Notes to Consolidated Financial Statements" for additional information.

FORWARD-LOOKING STATEMENTS

•risks and uncertainties relating to the Chapter 11 Cases, including but not limited to: whether 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, whether, as a result of the Chapter 11 Cases, 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, and uncertainty and continuing risks associated with our ability to achieve our goals and continue as a going concern;

•risk and uncertainties related to our leaf tobacco operations, including changes in the timing of anticipated shipments, changes in anticipated geographic product sourcing, changes in relevant capital markets affecting the terms and availability of short-term seasonal financing, political instability, currency and interest rate fluctuations, shifts in the global supply and demand position for tobacco products, 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 and uncertainties 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

-3-

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 our operations that have been classified as “essential” under various governmental orders restricting business activities will continue to be so classified or, even if so classified, whether site-specific health and safety concerns related to COVID-19 might otherwise require operations at any of our facilities to be halted for some period of time, negative consumer purchasing behavior with respect to our products or the products of our leaf tobacco customers during periods of government mandates restricting activities imposed in response to the COVID-19 pandemic, and the extent to which the impact of the COVID-19 pandemic on our operations and the demand for our products may not coincide with impacts experienced in the United States due to the international scope of our operations, including in emerging markets that have only recently experienced COVID-19 outbreaks; and

•risks and uncertainties related to our new business lines, including with respect to the impact of regulation associated with new business lines, including the risk of obtaining anticipated regulatory approvals for cannabis products in Canada and for nicotine e-liquids products in the United States, uncertainties regarding the regulation of the production and distribution of industrial hemp products and continued compliance with applicable regulatory requirements, uncertainties with respect to the development of the industries and markets of the new business lines, consumer acceptance of products offered by the new business lines, uncertainties with respect to the timing and extent of geographic and product-line expansion, the impact of increasing competition in the new business lines, uncertainties regarding the viability of facilities expansions, the possibility of delays in the completion of facilities expansions and uncertainties regarding the potential production yields of new or expanded facilities, as well as the progress of legalization of cannabis for medicinal and adult recreational uses in other jurisdictions.

A further description of these risks, uncertainties, and other factors can be found in the “Risk Factors” section of the Company's annual report on Form 10-K for the fiscal year ended March 31, 2020 and in our other filings with the Securities and Exchange Commission. We do not undertake to update any forward-looking statements that we may make from time to time.

-4-

Part I. Financial Information

Item 1. Financial Statements


Pyxus International, Inc. and Subsidiaries
Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries						Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries
(Debtor-in-Possession)						(Debtor-in-Possession)
Condensed Consolidated Statements of Operations	Condensed Consolidated Statements of Operations						Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2019 and 2018
(Unaudited)	(Unaudited)						(Unaudited)

		Three Months Ended June 30,								Three Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2019		2018		(in thousands, except per share data)		2020		2019
Sales and other operating revenues	Sales and other operating revenues	$	276,670	$	290,989	Sales and other operating revenues		$	262,809	$	276,670
Cost of goods and services sold	Cost of goods and services sold	236,958		249,594		Cost of goods and services sold		243,183		236,958
Gross profit	Gross profit	39,712		41,395		Gross profit		19,626		39,712
Selling, general, and administrative expenses	Selling, general, and administrative expenses	49,377		38,084		Selling, general, and administrative expenses		60,757		49,377
Other income, net		2,948		2,921
Other (expense) income, net						Other (expense) income, net		(2,392)		2,948
Restructuring and asset impairment charges	Restructuring and asset impairment charges	212		1,541		Restructuring and asset impairment charges		73		212
Operating (loss) income		(6,929)		4,691
Debt retirement expense (benefit)		—		(84)
Interest expense (includes debt amortization of $2,208 and $2,329 for 2019 and 2018, respectively)		33,812		32,912
Operating loss						Operating loss		(43,596)		(6,929)
Debt retirement expense						Debt retirement expense		828		—
Interest expense (includes debt amortization of $2,760 and $2,208 for 2020 and 2019, respectively)						Interest expense (includes debt amortization of $2,760 and $2,208 for 2020 and 2019, respectively)		31,262		33,812
Interest income	Interest income	1,154		888		Interest income		755		1,154
Reorganization items:						Reorganization items:
Professional fees						Professional fees		(2,573)		—
United States trustee fees						United States trustee fees		(518)		—
Write-off of unamortized debt issuance costs and discount						Write-off of unamortized debt issuance costs and discount		(4,020)		—
DIP financing fees						DIP financing fees		(19,755)		—
Loss before income taxes and other items	Loss before income taxes and other items	(39,587)		(27,249)		Loss before income taxes and other items		(101,797)		(39,587)
Income tax expense (benefit)		23,453		(25,270)
Equity in net income of investee companies		877		566
Income tax (benefit) expense						Income tax (benefit) expense		(8,168)		23,453
Income from unconsolidated affiliates						Income from unconsolidated affiliates		820		877
Net loss	Net loss	(62,163)		(1,413)		Net loss		(92,809)		(62,163)
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	(366)		(654)		Net loss attributable to noncontrolling interests		(648)		(366)
Net loss attributable to Pyxus International, Inc.	Net loss attributable to Pyxus International, Inc.	$	(61,797)	$	(759)	Net loss attributable to Pyxus International, Inc.		$	(92,161)	$	(61,797)

Loss per share:	Loss per share:					Loss per share:
Basic	Basic	$	(6.79)	$	(0.08)	Basic		$	(9.24)	$	(6.79)
Diluted	Diluted	$	(6.79)	$	(0.08)	Diluted		$	(9.24)	$	(6.79)

Weighted average number of shares outstanding:	Weighted average number of shares outstanding:					Weighted average number of shares outstanding:
Basic	Basic	9,100		9,027		Basic		9,976		9,100
Diluted	Diluted	9,100		9,027		Diluted		9,976		9,100

See "Notes to Condensed Consolidated Financial Statements"	See "Notes to Condensed Consolidated Financial Statements"						See "Notes to Condensed Consolidated Financial Statements"

~~-3-~~

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
Three Months Ended June 30, 2019 and 2018
(Unaudited)
Three Months Ended June 30,
(in thousands) 2019 2018
Net loss $ (62,163) $ (1,413)
Other comprehensive income (loss), net of tax:
Currency translation adjustment (400) (5,311)
Defined benefit pension amounts reclassified to income 311 366
Change in the fair value of derivatives designated as cash flow hedges (145) (1,496)
Amounts reclassified to income for derivatives 514 —
Total other comprehensive income (loss), net of tax 280 (6,441)
Total comprehensive loss (61,883) (7,854)
Comprehensive loss attributable to noncontrolling interests (336) (829)
Comprehensive loss attributable to Pyxus International, Inc. $ (61,547) $ (7,025)
See "Notes to Condensed Consolidated Financial Statements"

~~-4-~~

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands) June 30, 2019 June 30, 2018 March 31, 2019
Assets
Current assets
Cash and cash equivalents $ 164,135 $ 202,107 $ 192,043
Restricted cash 3,137 2,374 5,378
Trade receivables, net 193,076 196,834 290,097
Other receivables 10,522 13,939 20,900
Accounts receivable, related parties 17,239 12,375 5,783
Inventories 817,663 916,928 668,171
Advances to tobacco suppliers 41,264 67,983 19,754
Recoverable income taxes 8,182 33,058 5,421
Prepaid expenses 20,448 22,356 15,934
Other current assets 15,156 17,635 15,027
Total current assets 1,290,822 1,485,589 1,238,508
Restricted cash 389 389 389
Investments in unconsolidated affiliates 64,535 67,898 69,459
Goodwill 34,547 34,487 34,336
Other intangible assets 70,778 74,322 71,781
Deferred income taxes, net 113,666 144,389 116,451
Long-term recoverable income taxes 2,638 898 3,067
Other deferred charges 2,340 3,554 2,175
Other noncurrent assets 51,505 62,973 46,713
Right-of-use assets 45,969 — —
Property, plant, and equipment, net 288,386 254,867 276,396
Total assets $ 1,965,575 $ 2,129,366 $ 1,859,275
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks $ 520,828 $ 580,221 $ 428,961
Accounts payable 85,060 83,144 87,049
Accounts payable, related parties 20,773 23,008 19,054
Advances from customers 18,779 16,646 16,436
Accrued expenses and other current liabilities 104,392 99,356 91,282
Income taxes payable 18,314 13,718 3,728
Operating leases payable 15,275 — —
Current portion of long-term debt 334 180 332
Total current liabilities 783,755 816,273 646,842
Long-term taxes payable 8,660 9,155 10,718
Long-term debt 899,672 910,635 898,386
Deferred income taxes 33,668 29,720 26,813
Liability for unrecognized tax benefits 8,544 8,917 11,189
Long-term leases 28,876 — —
Pension, postretirement, and other long-term liabilities 71,835 73,866 73,308
Total liabilities 1,835,010 1,848,566 1,667,256
Commitments and contingencies
Stockholders’ equity June 30, 2019 June 30, 2018 March 31, 2019
Common Stock—no par value:
Authorized shares 250,000 250,000 250,000
Issued shares 9,917 9,834 9,881 469,365 473,771 468,936
Retained deficit (285,681) (157,107) (223,884)
Accumulated other comprehensive loss (61,092) (51,528) (61,342)
Total stockholders’ equity of Pyxus International, Inc. 122,592 265,136 183,710
Noncontrolling interests 7,973 15,664 8,309
Total stockholders’ equity 130,565 280,800 192,019
Total liabilities and stockholders’ equity $ 1,965,575 $ 2,129,366 $ 1,859,275
See "Notes to Condensed Consolidated Financial Statements"

-5-

Pyxus International, Inc. and Subsidiaries
Condensed Statements of Consolidated Stockholders' Equity
Three Months Ended June 30, 2019 and 2018
(Unaudited)
Attributable to Pyxus International, Inc.
Accumulated Other Comprehensive Loss
(in thousands) Common
Stock Retained
Deficit Currency Translation Adjustment Pensions,
Net of Tax Loss on Derivatives, Net of Tax Noncontrolling
Interests Total Stockholders' Equity
Balance, March 31, 2019 $ 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 $ 469,365 $ (285,681) $ (22,409) $ (36,438) $ (2,245) $ 7,973 $ 130,565


Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries
(Debtor-in-Possession)
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)

	Three Months Ended June 30,
(in thousands)	2020		2019
Net loss	$	(92,809)	$	(62,163)

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(140)		(400)
Pension and other postretirement benefit plans	494		311

Cash flow hedges	(531)		369
Total other comprehensive (loss) income, net of tax	(177)		280
Total comprehensive loss	(92,986)		(61,883)
Comprehensive loss attributable to noncontrolling interests	(724)		(336)
Comprehensive loss attributable to Pyxus International, Inc.	$	(92,262)	$	(61,547)

See "Notes to Condensed Consolidated Financial Statements"

Balance, March 31, 2018 $ 473,476 $ (156,348) $ (12,682) $ (32,580) $ — $ 10,962 $ 282,828
Net loss — (759) — — — (654) (1,413)
Stock-based compensation 295 — — — — — 295
Purchase of investment in subsidiary — — — — — 5,531 5,531
Other comprehensive (loss) income, net of tax — — (5,136) 366 (1,496) (175) (6,441)
Balance, June 30, 2018 $ 473,771 $ (157,107) $ (17,818) $ (32,214) $ (1,496) $ 15,664 $ 280,800
See "Notes to Condensed Consolidated Financial Statements"

-6-

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 2019 and 2018
(Unaudited)
Three Months Ended June 30,
(in thousands) 2019 2018
Operating Activities:
Net loss $ (62,163) $ (1,413)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 8,810 9,277
Debt amortization/interest 2,818 2,894
Debt retirement benefit — (84)
Gain on foreign currency transactions (2,232) (1,478)
Restructuring and asset impairment charges 212 1,541
Loss (gain) on sale of property, plant, and equipment 78 (186)
Equity in net income of unconsolidated affiliates, net of dividends 5,328 (431)
Bad debt expense — 293
Stock-based compensation 429 295
Changes in operating assets and liabilities, net (119,919) (278,023)
Other, net (3,283) (5,793)
Net cash used by operating activities (169,922) (273,108)
Investing Activities:
Purchases of property, plant, and equipment (19,344) (8,047)
Proceeds from sale of property, plant, and equipment 224 219
Collections on beneficial interests on securitized trade receivables 72,266 76,241
Payments to acquire controlling interests, net of cash acquired — (8,692)
Other, net (543) (300)
Net cash provided by investing activities 52,603 59,421
Financing Activities:
Net proceeds from short-term borrowings 92,524 163,951
Repayment of long-term borrowings (85) (10,721)
Debt issuance cost (3,368) (4,851)
Debt retirement cost — (27)
Net cash provided by financing activities 89,071 148,352
Effect of exchange rate changes on cash (1,901) 2,172
Decrease in cash, cash equivalents, and restricted cash (30,149) (63,163)
Cash and cash equivalents at beginning of period 192,043 264,660
Restricted cash at beginning of period 5,767 3,373
Cash, cash equivalents, and restricted cash at end of period $ 167,661 $ 204,870
Other information:
Cash paid for income taxes $ 5,222 $ 9,407
Cash paid for interest 19,187 15,231
Cash received from interest (1,630) (323)
Non-cash amounts obtained as a beneficial interest in exchange for transferring
trade receivables in a securitization transaction 46,882 48,685
See "Notes to Condensed Consolidated Financial Statements"


Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries (Debtor-in-Possession) Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)				June 30, 2020		June 30, 2019		March 31, 2020
Assets
Current assets
Cash and cash equivalents				$	172,795	$	164,135	$	170,208
Restricted cash				2,649		3,137		2,486
Trade receivables, net				159,392		193,076		226,742
Other receivables				10,788		10,522		12,997
Accounts receivable, related parties				4,589		17,239		5,030
Notes receivable, related parties				400		150		406
Inventories, net				832,223		817,663		730,019
Advances to tobacco suppliers, net				32,535		41,264		38,877
Recoverable income taxes				16,873		8,182		7,562
Prepaid expenses				30,836		20,448		23,383
Other current assets				14,170		15,006		14,658
Total current assets				1,277,250		1,290,822		1,232,368
Restricted cash				389		389		389
Long-term notes receivable, related parties				—		—		7,450
Investments in unconsolidated affiliates				57,479		64,535		67,967
Goodwill				6,120		34,547		—
Other intangible assets, net				64,957		70,778		65,948
Deferred income taxes, net				—		113,666		2
Long-term recoverable income taxes				2,628		2,638		3,038

Other noncurrent assets				46,089		53,845		48,434
Right-of-use assets	39,602	45,969	41,471
Property, plant, and equipment, net				298,154		288,386		295,996
Total assets				$	1,792,668	$	1,965,575	$	1,763,063
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks				$	524,266	$	520,828	$	540,157
DIP financing	131,700	—	—
Accounts payable				84,078		85,060		67,094
Accounts payable, related parties				19,775		20,773		11,820
Advances from customers				22,100		18,779		18,810
Advances from related parties				4,030		—		—
Accrued expenses and other current liabilities				91,989		104,392		89,928
Income taxes payable				2,735		18,314		5,049
Operating leases payable				10,978		15,275		11,160
Current portion of long-term debt				273,524		334		45,048
Total current liabilities				1,165,175		783,755		789,066
Long-term taxes payable				7,623		8,660		8,543
Long-term debt				3,238		899,672		904,316
Deferred income taxes				25,603		33,668		22,903
Liability for unrecognized tax benefits				12,229		8,544		12,311
Long-term leases				25,121		28,876		27,843
Pension, postretirement, and other long-term liabilities				73,869		71,835		74,389
Total liabilities not subject to compromise				1,312,858		1,835,010		1,839,371
Liabilities subject to compromise
Debt subject to compromise				635,686		—		—
Accrued interest on debt subject to compromise				13,421		—		—
Total liabilities subject to compromise				649,107		—		—
Total liabilities				1,961,965		1,835,010		1,839,371
Commitments and contingencies

-7-


(in thousands)							June 30, 2020		June 30, 2019		March 31, 2020
Stockholders’ equity	June 30, 2020	June 30, 2019	March 31, 2020
Common Stock—no par value:
Authorized shares	250,000	250,000	250,000
Issued shares	9,976	9,917	9,976	469,794	469,365	469,677
Retained deficit							(580,706)		(285,681)		(488,545)
Accumulated other comprehensive loss							(59,233)		(61,092)		(59,132)
Total stockholders’ equity of Pyxus International, Inc.							(170,145)		122,592		(78,000)
Noncontrolling interests							848		7,973		1,692
Total stockholders’ equity							(169,297)		130,565		(76,308)
Total liabilities and stockholders’ equity							$	1,792,668	$	1,965,575	$	1,763,063

See "Notes to Condensed Consolidated Financial Statements"

-8-


Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries
(Debtor-in-Possession)
Condensed Statements of Consolidated Stockholders' Equity
(Unaudited)

	Attributable to Pyxus International, Inc.
					Accumulated Other Comprehensive Loss
(in thousands)	Common Stock		Retained Deficit		Currency Translation Adjustment		Pensions, Net of Tax		Derivatives, Net of Tax		Noncontrolling Interests		Total Stockholders' Equity
Balance, March 31, 2020	$	469,677	$	(488,545)	$	(22,509)	$	(37,154)	$	531	$	1,692	$	(76,308)
Net loss attributable to Pyxus International, Inc.	—		(92,161)		—		—		—		(648)		(92,809)
Stock-based compensation	117		—		—		—		—		—		117
Dividends paid	—		—		—		—		—		(120)		(120)
Other comprehensive (loss) income, net of tax	—		—		(64)		494		(531)		(76)		(177)
Balance, June 30, 2020	$	469,794	$	(580,706)	$	(22,573)	$	(36,660)	$	—	$	848	$	(169,297)









Balance, March 31, 2019	$	468,936	$	(223,884)	$	(21,979)	$	(36,749)	$	(2,614)	$	8,309	$	192,019
Net loss attributable to Pyxus International, Inc.	—		(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	$	469,365	$	(285,681)	$	(22,409)	$	(36,438)	$	(2,245)	$	7,973	$	130,565















See "Notes to Condensed Consolidated Financial Statements"

-9-

~~-7-~~


Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries (Debtor-in-Possession) Condensed Consolidated Statements of Cash Flows (Unaudited)
	Three Months Ended June 30,
(in thousands)	2020		2019
Operating Activities:
Net loss	$	(92,809)	$	(62,163)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	10,026		8,810
Debt amortization/interest	3,434		2,818

Gain on foreign currency transactions	(5,006)		(2,232)



Income from unconsolidated affiliates, net of dividends	4,359		5,328
Reorganization items	15,703		—


Changes in operating assets and liabilities, net	(49,285)		(119,629)
Other, net	13,292		(2,854)
Net cash used by operating activities	(100,286)		(169,922)

Investing Activities:
Purchases of property, plant, and equipment	(5,002)		(19,344)

Collections on beneficial interests on securitized trade receivables	53,949		72,266


Payments to acquire businesses, net of cash acquired	(4,805)		—
Other, net	33		(319)
Net cash provided by investing activities	44,175		52,603

Financing Activities:
Net repayments and proceeds from short-term borrowings	(19,517)		92,524
Proceeds from DIP facility	131,700		—
Repayment of revolving loans facilities	(44,900)		—

Proceeds from long term borrowings	2,606		—
Debt issuance cost	(1,758)		(3,368)
DIP financing fees	(9,085)		—


Other, net	(384)		(85)
Net cash provided by financing activities	58,662		89,071

Effect of exchange rate changes on cash	199		(1,901)

Increase (decrease) in cash, cash equivalents, and restricted cash	2,750		(30,149)
Cash and cash equivalents at beginning of period	170,208		192,043
Restricted cash at beginning of period	2,875		5,767
Cash, cash equivalents, and restricted cash at end of period	$	175,833	$	167,661

Other information:
Cash paid for income taxes, net	$	2,173	$	5,222
Cash paid for interest	18,803		19,187
Cash received from interest	(903)		(1,630)
Cash paid for reorganization items	2,078		—

Noncash investing activities:
Purchases of property, plant, and equipment included in accounts payable	$	690	$	6,545
Sales of property, plant, and equipment included in notes receivable	409		1,930
Non-cash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction	47,120		46,882

See "Notes to Condensed Consolidated Financial Statements"

-10-

Old Holdco, Inc. (formerly Pyxus International, Inc.) and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(in ~~thousands)~~

thousands, except per share data)

1. Basis of Presentation and Significant Accounting Policies

The accompanying condensed consolidated financial statements represent the consolidation of Pyxus International, Inc. (the "Company" or "Pyxus") and all companies that wePyxus directly or indirectly ~~control,~~controls, either through majority ownership or otherwise. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include ~~all of~~ the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, ~~all~~the normal and recurring adjustments necessary for fair statement of financial position, results of operations, and cash flows at the dates and for the periods presented have been included. ~~All intercompany~~Intercompany accounts and transactions have been eliminated.

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2019.~~2020. The year-end condensed balance sheet data was derived from the audited financial ~~statements, but does not include all the disclosures required by U.S. GAAP.~~statements. Due to the seasonal nature of the Company’s business, the results of operations for ~~any~~a fiscal quarter are not necessarily indicative of the operating results that may be attained for other quarters or a full fiscal year.

~~Leases~~

The Company ~~measures right-of-use assets~~applied Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 852 – Reorganizations (“ASC 852”) in preparing the condensed consolidated financial statements, which specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions associated with the reorganization separate from activities related ~~lease~~to the ongoing operations of the business. Accordingly, pre-petition liabilities ~~based~~that may be impacted by the Chapter 11 proceedings have been classified as liabilities subject to compromise on the present value of remaining lease payments, including in-substance fixed payments, the current payment amount when payments depend on an index or rate (e.g., inflation adjustments, market renewals), and the amount the Company believes is probable to be paid to the lessor under residual value guarantees, when applicable. Lease contracts may include fixed payments for non-lease components, such as maintenance, which are included in the measurement of lease liabilities for certain asset classes based on the Company’s election to combine lease and non-lease components. The Company does not recognize short-term leases, those lease contracts with durations of twelve months or less, on thecondensed consolidated balance ~~sheet.~~sheet as of June 30, 2020.

AsBankruptcy Proceedings

On June 15, 2020 (the "Petition Date"), Pyxus International, Inc. and its 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 (the “Bankruptcy Code”) with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged chapter 11 plan of reorganization (“Prepack Plan”) that effectuates a financial restructuring of the Company’s secured debt (the “Restructuring”). The Company commenced solicitation of the Prepack Plan with a related disclosure statement (“Disclosure Statement”) on June 14, 2020. The Chapter 11 Cases have been administered jointly under the caption In re Pyxus International, Inc., et al.

In the Chapter 11 Cases, the Bankruptcy Court granted the Debtors' motions to continue to operate as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable ~~borrowing rates~~provisions of the Bankruptcy Code and orders of the Bankruptcy Court. To ensure its ability to continue operating in the ordinary course of business both domestically and internationally, the Debtors also filed with the Bankruptcy Court a variety of “first day” relief motions, including authority to pay employee wages and benefits and vendors and suppliers in the ordinary course of business, which motions were granted by the Bankruptcy Court. Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by the Debtors, as well as most litigation then pending against these entities, have been subject to an automatic stay during the pendency of the Chapter 11 Cases.

The commencement of the Chapter 11 Cases constituted an event of default, and caused an automatic and immediate acceleration of repayment obligations under the Company's 8.500% Senior Secured First Lien Notes due 2021 ("the First Lien Notes"), its 9.875% Senior Secured Second Lien Notes due 2021 ("the Second Lien Notes"), and the Company's asset-based revolving credit facility ("the ABL Facility"). However, any efforts to enforce such payment obligations are automatically stayed as of the Petition Date, and are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Borrowings under the ABL Facility were not ~~typically implied within the lease arrangements, the Company discounts lease payments based on its estimated incremental borrowing rate at lease commencement, or modification, which is based~~available commencing on the ~~Company’s estimated credit rating, the lease term at commencement and the contract currency of the lease arrangement.~~

~~Segments~~

During the three months ended December 31, 2018, the Company realigned its reportable segments to reflect changes to how the business is managed and results are reviewed by the Company's chief operating decision maker. In connection with the "One Tomorrow Transformation" initiative, the Company changed its organizational structure to support its diversified business lines. Prior to the realignment, the Company assessed financial information based on geographic regions. The Company's diversification efforts have resulted in management placing emphasis on data by business line in addition to the historical focus by geography. AsPetition Date as a result of this ~~realignment,~~event of default.

On June 14, 2020, the ~~reportable segments now~~Debtors entered into a Restructuring Support Agreement with holders (collectively, the “Consenting Noteholders”) of greater than 92% of the First Lien Notes and greater than 67% of the Second Lien Notes. As set forth in the RSA, including in the term sheets attached thereto (including all exhibits, annexes and schedules attached thereto, the Debtors and Consenting Noteholders agreed to the terms of the Restructuring, which was contemplated to be implemented through the Prepack Plan. On June 15, 2020, the Debtors commenced the Chapter 11 Cases to implement the Prepack Plan. Refer to "Note 22. Subsequent Events" for more information.

-11-

Liabilities Subject to Compromise

The condensed consolidated balance sheets include ~~Leaf - North America, Leaf - Other Regions,~~amounts classified as liabilities subject to compromise, which represent pre-petition liabilities that have been allowed as claims in the Chapter 11 Cases, although they may be settled for less. The Company evaluated these liabilities throughout the Chapter 11 Cases and ~~Other Products~~adjusted amounts as necessary. Liabilities subject to compromise included the Company's Second Lien Notes and ~~Services.~~ related interest. Upon confirmation of the Plan of Reorganization by the Bankruptcy Court, claims and interests with respect to the First Lien Notes were discharged. As a result, liabilities subject to compromise does not include the Company's First Lien Notes and related interest.

Reorganization Items

Expenditures, gains, and losses that are realized or incurred by the Debtors subsequent to the Petition Date and as a direct result of the Chapter 11 Cases are reported as reorganization items in the condensed consolidated statements of operations. Reorganization items included professional fees pertaining to the Chapter 11 Cases, United States trustee fees, DIP financing fees, and the write-off of unamortized debt issuance cost and discount.

Contract Balances

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 3. Revenue Recognition" for a summary of the activity in the allowance for expected credit losses.

Reclassifications

Prior period ~~segment financial information has~~amounts have been ~~revised~~reclassified to conform to the current year ~~presentation.~~

~~Restricted Cash~~

~~The following summarizes the restricted cash balance:~~

June 30, 2019 June 30, 2018 March 31, 2019
Compensating balance for short-term borrowings $ 1,230 $ 1,047 $ 1,225
Capital investments — 850 —
Escrow 1,397 — 2,894
Other 899 866 1,648
Total $ 3,526 $ 2,763 $ 5,767

Aspresentation of ~~June 30, 2019 and 2018, and March 31, 2019, the Company held $0, $2,638, and $1,082, respectively,~~notes receivable, related parties in the ~~Zimbabwe Real Time Gross Settlement (“RTGS”) system. RTGS is a local currency equivalent that as~~condensed consolidated balance sheets, certain items in the condensed consolidated statements of ~~June 30, 2019 was exchanged at a government specified rate of 6.6:1 with~~cash flows, and the ~~U.S. Dollar ("USD").~~

components within inventory, see
"Note 7. Inventories, Net"

~~-8-~~

for more information.

~~Property, Plant, and Equipment~~

~~The following summarizes purchases and sales of property, plant, and equipment included in accounts payable and notes receivable:~~

June 30, 2019 June 30, 2018 March 31, 2019
Purchases of property, plant, and equipment included in accounts payable $ 6,545 $ 1,854 $ 7,095
Sales of property, plant, and equipment included in notes receivable 1,950 1,999 1,957

2. New Accounting Standards

Recently Adopted Accounting Pronouncements

In ~~February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02,~~ ~~Leases (Topic 842)~~. Under this guidance, a lessee recognizes assets and liabilities on its balance sheet for most leases, and retains a dual model approach for assessing lease classification and recognizing expense. This guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The FASB subsequently issued updates to provide clarification on specific topics, including adoption guidance, practical expedients, and interim transition disclosure requirements. The Company adopted this guidance during the first quarter beginning April 1, 2019 under the modified retrospective approach, which does not require adjustments to comparative periods or require modified disclosures for those comparative periods. The guidance provides a number of optional practical expedients in transition. The Company elected the package of transition practical expedients. The Company implemented changes to the accounting policies, systems, and controls to align with the new guidance. There is a material impact on the consolidated balance sheet from applying this guidance, which resulted in the recognition of new right-of-use assets of $43,900 and lease liabilities of $42,064 as of April 1, 2019 associated with the Company’s operating leases. The impact on the results of operations, cash flows, and existing debt covenants is not material. The adoption of this guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from lease arrangements. See ~~"Note 13. Leases"~~ ~~for more information.~~

~~Recent Accounting Pronouncements Not Yet Adopted~~

In June 2016, the FASB issued ~~ASU~~Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Instruments.~~Instruments. ASU 2016-13 ~~provides~~and its related amendments are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial ~~instruments~~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 ~~will be~~was early adopted by the Company as of April 1, 2020 using athe modified retrospective ~~approach and is effective for the Company on April 1, 2020.~~approach. The ~~Company is evaluating the effect that adoption of this guidance will have on its consolidated financial statements and related disclosures.~~

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. ASU 2017-04 simplifies the test for goodwill impairment as it eliminates step 2 of the goodwill impairment test by no longer requiring an entity to compare the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Upon adoption, goodwill impairment will be measured as the excess of the reporting unit's carrying value over fair value, limited to the amount of goodwill. The Company will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is needed. This guidance will be adopted on a prospective basis and is effective for the Company beginning on April 1, 2020. Early adoption is available and the Company is currently considering whether it will early adopt for its annual goodwill impairment testing. The Company does not expect the adoption of this new accounting standard todid 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 ~~will be~~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.

Recent Accounting Pronouncements Not Yet Adopted

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 intraperiod 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 ~~March 31, 2021.~~April 1, 2021, with early adoption permitted. The Company is currently evaluating the ~~effect~~impact that ~~adoption of~~ this ~~guidance~~new accounting standard will have on its consolidated financial statements and related disclosures.

~~In October 2018, the FASB issued ASU No. 2018-17,~~ ~~Consolidation (Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities.~~ ASU 2018-17 changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than in their entirety. This guidance will be adopted using a retrospective approach and is effective for the Company on April 1, 2020. The Company is evaluating the effect that adoption of this guidance will have on its consolidated financial statements and related disclosures.

-12-

~~-9-~~

3. Revenue Recognition

The Company derives revenue from contracts with customers, primarily from the sale of processed tobacco and fees charged for processing and related services to the manufacturers of tobacco products. The following disaggregates sales and other operating revenues by major source:

Three Months Ended June 30,
2019 2018
Leaf - North America:
Product revenue $ 31,141 $ 46,452
Processing and other revenues 3,809 3,600
Total sales and other operating revenues 34,950 50,052
Leaf - Other Regions:
Product revenue 225,147 223,896
Processing and other revenues 10,623 14,030
Total sales and other operating revenues 235,770 237,926
Other Products and Services:
Total sales and other operating revenues⁽¹⁾
5,950 3,011
Total sales and other operating revenues $ 276,670 $ 290,989
(1) Other products and services is primarily composed of revenue from the sale of legal cannabis in Canada and e-liquids product revenue.

Product revenue is primarily processed tobacco sold to the customer. Processing and other revenues are mainly contracts to process customer-owned green ~~tobacco owned and provided by the customers.~~tobacco. During processing, ownership remains with the ~~customers~~customers. Other products and services venue is primarily composed of revenue from the ~~Company is engaged to perform processing services.~~sale of legal cannabis in Canada and e-liquids product revenue. The following disaggregates sales and other operating revenues by major source:


	Three Months Ended June 30,
	2020		2019
Leaf - North America:
Product revenue	$	25,918	$	31,141
Processing and other revenues	3,979		3,809
Total sales and other operating revenues	29,897		34,950

Leaf - Other Regions:
Product revenue	218,356		225,147
Processing and other revenues	9,383		10,623
Total sales and other operating revenues	227,739		235,770

Other Products and Services:
Total sales and other operating revenues	5,173		5,950

Total sales and other operating revenues	$	262,809	$	276,670

The following summarizes activity in the allowance for ~~doubtful accounts:~~expected credit losses:


		Three Months Ended June 30,							Three Months Ended June 30,
		2019		2018			2020		2019
Balance, beginning of period	Balance, beginning of period	$	(13,381)	$	(7,055)	Balance, beginning of period	$	(15,893)	$	(13,381)
Additions		—		(293)

Write-offs	Write-offs	6,131		91		Write-offs	908		6,131
Balance, end of period	Balance, end of period	(7,250)		(7,257)		Balance, end of period	(14,985)		(7,250)
Trade receivables	Trade receivables	200,326		204,091		Trade receivables	174,377		200,326
Trade receivables, net	Trade receivables, net	$	193,076	$	196,834	Trade receivables, net	$	159,392	$	193,076

-13-

4. Income Taxes

Accounting for Uncertainty in Income Taxes

As of June 30, ~~2019,~~2020, the Company’s unrecognized tax benefits totaled ~~$9,854,~~$20,843, of which ~~$7,575~~$10,316 would impact the Company’s effective tax rate, if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, ~~2019,~~2020, accrued interest and penalties totaled ~~$1,158~~$1,198 and ~~$688,~~$728, respectively. The Company expects to continue accruing interest expense related to the unrecognized tax benefits described above. The Company may be subject to fluctuations in the unrecognized tax benefit due to currency exchange rate movements.

During the three months ended June 30, 2019, the Company reached an income tax settlement with the Kenyan Revenue Authority for $1,558 for a previously recorded uncertain tax position. In addition, a previous accrual to settle asserted issues for years 2009 to 2016 in Zimbabwe of $964 was reduced by $818 to account for the exchange rate impact of the local currency

~~-10-~~

~~equivalent. The U.S. federal net operating loss was reduced to reflect the impacts of certain tax accounting methods on Global Intangible Low-Taxed Income ("GILTI").~~

The Company does not expect ~~additional~~significant changes in the amount of its unrecognized tax benefits in the next twelve months but acknowledges circumstances can change due to unexpected developments in the law. In certain jurisdictions, tax authorities have challenged positions taken by the Company that resulted in recognizing benefits that are material to its financial statements. The Company believes it is more likely than not that it will prevail in these situations and accordingly has not recorded liabilities for these positions. The Company expects the challenged positions to be settled at a time greater than twelve months from its balance sheet date.

The Company and its subsidiaries file a U.S. federal consolidated income tax return as well as returns in several U.S. states and a number of foreign jurisdictions. As of June 30, ~~2019,~~2020, the Company’s earliest open tax year for U.S. federal income tax purposes is its fiscal year ended March 31, ~~2016.~~2017. The Company's tax attributes from prior periods remain subject to adjustment. Open tax years in state and foreign jurisdictions generally range from three to six years.

Provision for the Three Months Ended June 30, ~~2019~~2020

The effective tax rate for the three months ended June 30, 2020 and 2019 was 8.0% and (59.2)%, respectively. For the three months ended June 30, 2020 and 2019, the effective rate differed from the U.S. statutory rate of 21% due to the impact of non-deductible interest, net foreign exchange effects, and the expected jurisdictional mix of earnings. The primary differences in the effective tax rates year-over-year are the impact of net foreign exchange effects, increases in non-deductible interest, as well as foreign income taxed in the U.S., variations in the expected jurisdictional mix of earnings, and variations in included/excluded entities per adherence to ASC 240-270.

The Company's quarterly provision for income taxes has been calculated using the annual effective tax rate method (“AETR method”), which applies an estimated annual effective tax rate to pre-tax income or loss. The ~~effective tax rate used for~~Company expects the recorded current benefit to be utilized by year-end through offsets to current tax. For the three months ended June 30, ~~2019~~2020, the Company recorded the net tax effects of excluded entities and ~~2018 was (59.2)%~~certain discrete events, which resulted in income tax benefits of $360 and ~~92.7%,~~$276, respectively. The ~~decrease in the effective~~discrete income tax ~~rate was due~~benefits are primarily related to the impact of ~~net~~changes in uncertain tax positions and changes in foreign exchange ~~effects, increases in non-deductible interest, as well as Subpart F income, and variation in expected jurisdictional mix of earnings.~~

impacts. For the three months ended June 30, 2019, the Company recorded the ~~net~~ tax effects of ~~certain~~ discrete events ~~which resulted~~resulting in anadditional income tax benefit of $2,601. ~~This~~These discrete income tax ~~benefit~~benefits are primarily related to the impact of changes in uncertain tax positions, an adjustment made to the deemed repatriation tax liability as a result of retroactive regulatory guidance issued during the quarter, and changes in foreign exchange impacts.

-14-

~~For~~

5. Loss Per Share

The following summarizes the computation of loss per share:


	Three Months Ended June 30,
(in thousands, except per share data)	2020		2019
Basic loss per share:
Net loss attributable to Pyxus International, Inc.	$	(92,161)	$	(61,797)
Shares:
Weighted average number of shares outstanding⁽¹⁾	9,976		9,100
Basic loss per share	$	(9.24)	$	(6.79)

Diluted loss per share:
Net loss attributable to Pyxus International, Inc.	$	(92,161)	$	(61,797)
Shares:
Weighted average number of shares outstanding⁽¹⁾	9,976		9,100
Plus: Restricted shares issued and shares applicable to stock options and restricted stock units, net of shares assumed to be purchased from proceeds at average market price⁽²⁾	—		—
Adjusted weighted average number of shares outstanding	9,976		9,100
Diluted loss per share	$	(9.24)	$	(6.79)
(1) 0 and 785 shares of common stock were owned by a wholly owned subsidiary as of June 30, 2020 and 2019, respectively.
(2) Outstanding restricted shares, shares applicable to stock options, and restricted stock units are excluded because their inclusion would have an antidilutive effect on the loss per share. The dilutive shares would have been 20 and 62 for the three months ended June 30, 2020 and 2019, respectively.

Certain potentially dilutive options were not included in the computation of loss per diluted share because their effect would be antidilutive. Potential common shares are also considered antidilutive in the event of a net loss. The number of potential shares outstanding that were considered antidilutive and that were excluded from the computation of diluted loss per share, weighted for the portion of the period they were outstanding were as follows:


	Three Months Ended June 30,
	2020		2019
Antidilutive stock options and other awards	427		427
Antidilutive stock options and other awards under stock-based compensation programs excluded based on reporting a net loss for the period	24		—
Total common stock equivalents excluded from diluted loss per share	451		427
Weighted average exercise price	$	56.86	$	60.00

6. Cash, Cash Equivalents, and Restricted Cash

The following summarizes the composition of restricted cash:


	June 30, 2020		June 30, 2019		March 31, 2020
Compensating balance for short-term borrowings	$	900	$	1,230	$	893

Escrow	1,363		1,397		1,450
Other	775		899		$	532
Total	$	3,038	$	3,526	$	2,875

-15-

7. Inventories, Net

The following summarizes the composition of inventories, net:


	June 30, 2020		June 30, 2019		March 31, 2020
Processed tobacco	$	534,833	$	553,890	$	485,764
Unprocessed tobacco	237,227		234,766		178,782
Other tobacco related	21,779		24,145		24,071
Other⁽¹⁾	38,384		4,862		41,402
Total	$	832,223	$	817,663	$	730,019
(1) Represents inventory from the other products and services segment.

During the quarter ended June 30, 2020, the Company recorded a $15,056 inventory LCM write-down of its inventory from the other products and services segment due to a shift in expected future products mix in response to market supply conditions and continued market price compression.

8. Acquisitions

On December 18, 2017, the Company completed a purchase of a 40.0% interest in Criticality LLC ("Criticality"), a North Carolina-based industrial hemp company that is engaged in cannabidiol ("CBD") extraction and other applications for industrial hemp in accordance with a pilot program authorized under the federal Agriculture Act of 2014 and applicable North Carolina law. On April 22, 2020, the Company acquired the remaining 60.0% of the equity in Criticality in exchange for consideration consisting of $5,000 cash and the settlement of the Company's $7,450 note receivable from Criticality, subject to certain post-closing adjustments.

The acquisition of Criticality was a business combination achieved in stages, which required the Company to remeasure its previously held equity interest in Criticality at its acquisition date fair value. This remeasurement resulted in a loss of approximately $2,667 being recorded in other (expense) income, net within the condensed consolidated statements of operations for the three months ended June 30, ~~2018,~~2020. The assets and liabilities were recorded at their fair value.

Following the acquisition, the Company recorded certain post-closing purchase price adjustments. The acquisition allowed the ~~tax effects~~Company to expand its industrial hemp production and product portfolio. The following summarizes the fair values of the assets acquired and liabilities assumed as of April 22, 2020:


Cash and cash equivalents	$	195
Accounts receivable	1,528
Advances to suppliers	1,043
Inventories	3,823
Other current assets	181
Property, plant, and equipment	5,060
Goodwill	6,120

Total assets acquired	17,950
Accounts payable	1,654
Notes payable	7,450
Other current liabilities	513

Total liabilities	9,617
Fair value of equity interest	$	8,333

Revenue, operating loss, and net loss of Criticality in the consolidated statements of operations from and including April 22, 2020 to June 30, 2020 were $17, $(791), and $(910), respectively. As a ~~discrete~~result, the impact to basic and diluted earnings per share was $(0.09) and $(0.09), respectively. Unaudited pro forma information was not separately stated due to the close proximity of the acquisition date to the beginning of the Company's fiscal year.

-16-

9. Equity Method Investments

The following summarizes the Company's equity method investments as of June 30, 2020:


Entity Name	Location	Primary Purpose	The Company's Ownership Percentage		Basis Difference
Adams International Ltd.	Thailand	purchase and process tobacco	49	%	—
Alliance One Industries India Private Ltd.	India	purchase and process tobacco	49	%	—
China Brasil Tobacos Exportadora SA	Brazil	purchase and process tobacco	49	%	5,189
Nicotine River, LLC	U.S.	produce consumable e-liquids	40	%	1,778
Oryantal Tütün Paketleme Sanayi ve Ticaret A.Ş.	Turkey	process tobacco	50	%	—
Purilum, LLC	U.S.	produce flavor formulations and consumable e-liquids	50	%	—
Siam Tobacco Export Company	Thailand	purchase and process tobacco	49	%	—

The following summarizes financial information for these equity method investments:


	Three Months Ended June 30,
	2020		2019
Operations statement:
Sales	$	35,711	$	46,233
Gross profit	6,949		9,507
Net income	2,309		3,100
Company's dividends received	5,064		6,094


	June 30,
	2020		2019		March 31, 2020
Balance sheet:
Current assets	$	232,176	$	236,389	$	145,207
Property, plant, and equipment and other assets	50,679		55,023		56,481
Current liabilities	174,367		184,526		82,377
Long-term obligations and other liabilities	6,107		3,354		6,296

Of the amounts presented above, the following summarizes financial information for China Brasil Tobacos Exportadora SA ("CBT"):


	Three Months Ended June 30,
	2020		2019
Operations statement:
Sales	$	14,328	$	18,391
Gross profit	2,148		2,212
Net income (loss)	915		(35)
Net income (loss) attributable to CBT	448		(17)

-17-

10. Variable Interest Entities

The Company holds variable interests in multiple entities that primarily procure or process inventory or are securitization entities. These variable interests relate to equity investments, receivables, guarantees, and securitized receivables. The following summarizes the Company's financial relationships with its unconsolidated variable interest entities:


	June 30, 2020		June 30, 2019		March 31, 2020
Investments in variable interest entities	$	51,509	$	57,541	$	62,407
Receivables with variable interest entities	2,039		14,500		10,099
Guaranteed amounts to variable interest entities (not to exceed)	60,937		63,584		59,792

11. Goodwill and Other Intangible Assets, Net

The following summarizes the changes in the Company's goodwill and other intangible assets, net:


	Three Months Ended June 30, 2020
	Weighted Average Remaining Useful Life	Beginning Gross Carrying Amount		Additions		Accumulated Amortization ⁽¹⁾		Impact of Foreign Currency Translation		Ending Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships	8.45 years	$	63,980	$	—	$	(34,054)	$	—	$	29,926
Production and supply contracts ⁽²⁾	2.75 years	7,000		—		(3,354)		—		3,646
Internally developed software	3.60 years	22,385		—		(19,427)		17		2,975
Licenses ⁽³⁾	16.75 years	30,886		—		(3,754)		919		28,051
Trade names	5.75 years	500		—		(141)		—		359
Intangibles not subject to amortization:
Goodwill ⁽⁴⁾		—		6,120		—		—		6,120
Total		$	124,751	$	6,120	$	(60,730)	$	936	$	71,077

(1) Amortization expense across intangible asset classes for the three months ended June 30, 2020 was $1,839.

(2) Production and supply contract with a gross carrying amount of $7,893 was fully amortized and removed during the year ended March 31, 2020.

(3) Certain of the Company's license intangibles are subject to annual renewal.

(4) Goodwill of $6,120 relates to the Other Products and Services segment.


	Year Ended March 31, 2020
	Weighted Average Remaining Useful Life	Beginning Gross Carrying Amount		Additions		Accumulated Amortization ⁽¹⁾		Impact of Foreign Currency Translation		Ending Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships	8.66 years	$	63,980	$	—	$	(33,049)	$	—	$	30,931
Production and supply contracts	3.00 years	14,893		—		(11,217)		—		3,676
Internally developed software	3.96 years	19,917		2,468		(19,082)		—		3,303
Licenses ⁽²⁾	16.95 years	33,330		195		(3,310)		(2,551)		27,664
Trade names	6.00 years	500		—		(126)		—		374


Total		$	132,620	$	2,663	$	(66,784)	$	(2,551)	$	65,948

(1) Amortization expense across intangible asset classes for the fiscal year ended March 31, 2020 was $6,991.

(2) Certain of the Company's license intangibles are subject to annual renewal.

-18-

The following summarizes the estimated intangible asset amortization expense for the next five years and beyond:


For Fiscal Years Ended	Customer Relationships		Production and Supply Contracts		Internally Developed Software⁽¹⁾		Licenses		Trade Names		Total
2021 (excluding the three months ended June 30, 2020)	$	3,016	$	841	$	579	$	1,347	$	47	$	5,830
2022	4,022		1,397		851		1,793		63		8,126
2023	4,022		1,397		768		1,790		63		8,040
2024	4,022		11		520		1,790		63		6,406
2025	4,022		—		257		1,735		63		6,077
Thereafter	10,822		—		—		19,596		60		30,478
	$	29,926	$	3,646	$	2,975	$	28,051	$	359	$	64,957

(1) Estimated amortization expense for the internally developed software is based on costs accumulated as of June 30, 2020. These estimates will change as new costs are incurred and until the software is placed into service in all locations.

12. Debt Arrangements

The following summarizes debt and notes payable:


							June 30, 2020
	Outstanding						Lines and
	March 31,		June 30,		Letters		Interest
(in thousands)	2020		2020		Available		Rate
Senior secured credit facility:
ABL facility	$	44,900	$	—	$	—	4.1	%	(1)
Senior notes:
8.5% senior secured first lien notes ⁽²⁾	272,871		273,377		—		8.5	%
9.875% senior secured second lien notes ⁽³⁾	630,737		635,686		—		9.9	%
Other long-term debt	856		3,385		387		8.0	%	(1)
Notes payable to banks ⁽⁴⁾	540,157		524,266		234,953		6.6	%	(1)
DIP Financing	—		131,700		75,000		11.9	%
Total debt	$	1,489,521	$	1,568,414	$	310,340
Short-term	540,157		655,966
Long-term:
Current portion of long-term debt	$	45,048	$	273,524
Long-term debt	904,316		3,238
	$	949,364	$	276,762
Debt subject to compromise:
9.875% senior secured second lien notes ⁽³⁾	$	—	$	635,686

Letters of credit	7,027		5,880		2,765
Total credit available					$	313,105

(1) Weighted average rate for the trailing twelve months ended June 30, 2020.
(2) Repayment of $273,377 is net of original issue discount of $517 and unamortized debt issuance costs of $1,106. Total repayment will be $275,000.
(3) Upon commencement of the Chapter 11 Cases on June 15, 2020, the carrying amount of the Second Lien Notes was adjusted to write-off the original issue discount of $2,305 and the unamortized debt issuance costs of $1,715 to reorganization items. The Second Lien Notes are classified as liabilities subject to compromise within the condensed consolidated balance sheets as of June 30, 2020.
(4) Primarily foreign seasonal lines of credit.

Debtor-in-Possession Financing

The commencement of the Chapter 11 Cases on June 15, 2020 constituted an event ~~resulting~~of default, and caused an automatic and immediate acceleration of repayment obligations under the First Lien Notes, the Second Lien Notes, and the ABL Facility.

-19-

However, any efforts to enforce such payment obligations are automatically stayed as of the Petition Date, and are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Borrowings under the ABL Facility were not available commencing on the Petition Date as a result of this event of default.

In June 2020, the Company drew down $131,700 in ~~additional income tax expense~~initial funding from the DIP Facility. The proceeds from the DIP Facility were used to (a) pay down the outstanding amount drawn on the ABL Facility of ~~$3,906. This discrete income tax expense primarily~~$44,900; (b) pay related transaction costs, fees, and expenses associated with the repayment and termination of the ABL Facility; (c) provide working capital for other general corporate purposes in accordance with the Budget; (d) make adequate protection payments as authorized by the Bankruptcy Court in the DIP Order; (e) pay obligations arising from or related to the ~~impact~~Carve Out (as defined below); and (f) pay restructuring costs incurred in connection with the Chapter 11 Cases. Drawn amounts under the DIP Facility bear interest at either (1) an Alternate Base Rate plus 9.25%, per annum or (2) 10.25% plus the LIBOR Rate, per annum, with a LIBOR floor of ~~changes~~1.5%. Undrawn amounts under the DIP Facility are subject to a ticking fee of 3.0% per annum calculated on a daily basis on the aggregate daily unused amount, accruing commencing on June 17, 2020 and until such commitments have terminated, which ticking fee is due and payable in ~~uncertain tax positions~~arrears on the earlier to occur of a borrowing upon entry of a final order and ~~changes~~the date on which such commitments have terminated. During the continuance of an event of default (as further described in the DIP Credit Agreement), the overdue amounts under the DIP Facility bear interest at an additional 2% per annum above the interest rate otherwise applicable.

The maturity date of the DIP Facility is the earliest of (a) December 17, 2020; (b) the date of the substantial consummation (as defined in Section 1101(2) of the Bankruptcy Code) of a plan of reorganization; (c) the date on which Pyxus and its subsidiaries consummate a sale of all or substantially all of their assets pursuant to section 363 of the Bankruptcy Code or otherwise; or (d) such earlier date on which the loans shall become due and payable by acceleration or otherwise in accordance with the terms of the DIP Credit Agreement and the other related documents.

Under the DIP Facility, the DIP Lenders and Cortland Capital Market Services LLC, as collateral agent, subject to the Carve Out and the terms of the DIP Order and, in each case, other than certain excluded assets, are at all times secured, by (i) a first priority senior priming security interest in and lien upon the DIP Priming Collateral (as defined in the DIP Order); (ii) a first priority senior security interest in and lien upon the DIP Priority Collateral (as defined in the DIP Order), and (iii) a junior security interest in and lien upon DIP Junior Collateral (as defined in the DIP Order). The DIP Lenders and collateral agent are also secured by security interests in substantially all of the assets of certain non-debtor subsidiaries of Pyxus. The Debtors’ obligations to the DIP Lenders and the liens and superpriority claims are subject in each case to a carve out (the “Carve Out”), subject to a cap, that accounts for certain statutory fees, committee professional fees and post-notice professional fees payable in connection with the Chapter 11 Cases.

The DIP Credit Agreement also includes certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, payment defaults, material inaccuracy of representations and warranties, covenant defaults, certain events under the Employee Retirement Income Security Act of 1974 and change of control. Certain bankruptcy-related events are also events of default, including, but not limited to, the dismissal by the Bankruptcy Court of any of the Chapter 11 Cases, the conversion of any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code and certain other events related to the impairment of the DIP Lenders’ rights or liens granted under the DIP Credit Agreement.

Upon the effectiveness of the Plan, claims under the DIP Facility are satisfied in the manner set forth in the Plan and the DIP Facility terminates. Refer to "Note 22. Subsequent Events" for more information.

Foreign Seasonal Lines of Credit

On May 19, 2020, the Company amended the terms of its $105,000 of foreign ~~exchange impacts.~~seasonal lines of credit with the Standard Bank of South Africa Limited (“Standard”). The amendment reduced the total credit limit to $85,000 and changed the maturity date from April 30, 2020 to March 31, 2021 or May 1, 2021, depending on the line of credit.

On June 29, 2020, the Company amended the terms of its $255,000 of the original aggregate maximum borrowing availability under the existing foreign seasonal lines of credit with Eastern and Southern African Trade and Development Bank (“TDB”). The amendment changed the anniversary date for renewal to July 31, 2020 and extended the review period for subsequent renewals from March 31, 2020 to July 31, 2020.

13. Securitized Receivables

The Company sells trade receivables to unaffiliated financial institutions under 3 accounts receivable securitization facilities. Under the first facility, the Company continuously sells a designated pool of trade receivables to a special purpose entity, which sells 100% of the receivables to an unaffiliated financial institution. As of June 30, 2020, the investment limit under the first facility was $125,000 of trade receivables. Under the second and third facilities, the Company offers receivables for sale to unaffiliated financial institutions, which are then subject to acceptance by the unaffiliated financial institutions. As of

-20-

June 30, 2020, the investment limit under the second facility was $125,000 of trade receivables. As of June 30, 2020, the investment limit under the third facility was variable based on qualifying sales.

As the servicer of these facilities, the Company may receive funds that are due to the unaffiliated financial institutions, which are net settled on the next settlement date. As a result of the net settlement, trade and other receivables, net in the condensed consolidated balance sheets has been reduced by $5,663, $6,348, and $9,586 as of June 30, 2020 and 2019, and March 31, 2020, respectively.

The following summarizes the accounts receivable securitization information:


	June 30,						March 31,
	2020		2019		2020
Receivables outstanding in facility	$	60,324	$	78,258	$	135,439
Beneficial interests	14,949		14,648		27,021
Servicing liability	7		—		43


	Three Months Ended June 30,
	2020		2019
Cash proceeds for the period ended:
Cash purchase price	$	108,007	$	103,517
Deferred purchase price	53,949		72,266
Service fees	131		137
Total	$	162,087	$	175,920

5.14. Guarantees

In certain markets, the Company guarantees bank loans to suppliers to finance their crops. Under longer-term arrangements, the Company may also guarantee financing on suppliers’ construction of curing barns or other tobacco production assets. Guaranteed loans are generally repaid concurrent with the delivery of tobacco to the Company. The Company is obligated to repay ~~any~~ guaranteed ~~loan~~loans should the supplier default. If default occurs, the Company has recourse against its various suppliers and their production assets. The Company also guarantees bank loans of certain unconsolidated subsidiaries in Asia and South America. The following summarizes amounts guaranteed and the fair value of those guarantees:


		June 30, 2019		June 30, 2018		March 31, 2019			June 30, 2020		June 30, 2019		March 31, 2020
Amounts guaranteed (not to exceed)	Amounts guaranteed (not to exceed)	$	127,738	$	153,347	$	143,298	Amounts guaranteed (not to exceed)	$	110,712	$	127,738	$	138,953
Amounts outstanding under guarantee(1)	Amounts outstanding under guarantee(1)	90,535		84,116		103,846		Amounts outstanding under guarantee(1)	48,339		90,535		48,565
Fair value of guarantees	Fair value of guarantees	3,136		3,544		3,714		Fair value of guarantees	3,312		3,136		2,791
Amounts due to local banks on behalf of suppliers and included in accounts payable								Amounts due to local banks on behalf of suppliers and included in accounts payable	14,206		24,131		6,849

(1) Of the guarantees outstanding at June 30, ~~2019,~~2020, most expire within one year. As of June 30, 2019 and 2018, and March 31, 2019, respectively, the Company had balances of $24,131, $18,652, and $18,659 due to local banks on behalf of suppliers included in accounts payable in the condensed consolidated balance sheets.

-21-

~~-11-~~

~~6. Goodwill and Intangibles~~

~~The following summarizes goodwill and other intangible assets:~~

Three Months Ended June 30, 2019
Weighted Average Remaining Useful Life Beginning Gross Carrying Amount Additions
Accumulated Amortization ⁽¹⁾
Impact of Foreign Currency Translation Ending Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships 9.3 years $ 63,980 $ — $ (30,032) $ — $ 33,948
Production and supply contracts 2.7 years 14,893 — (10,892) — 4,001
Internally developed software 3.8 years 19,917 205 (18,531) — 1,591
Licenses ⁽²⁾
17.9 years 32,284 68 (2,106) 570 30,816
Trade names 6.8 years 500 — (78) — 422
Intangibles not subject to amortization:
Goodwill 34,336 — — 211 34,547
Total $ 165,910 $ 273 $ (61,639) $ 781 $ 105,325

~~(1) Amortization expense across intangible asset classes for the three months ended June 30, 2019 was $1,846.~~

~~(2) Certain of the Company's license intangibles are subject to annual renewal.~~

Twelve Months Ended March 31, 2019
Weighted Average Remaining Useful Life Beginning Gross Carrying Amount
Additions ⁽¹⁾
Accumulated Amortization ⁽²⁾
Impact of Foreign Currency Translation Ending Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships 9.6 years $ 58,530 $ 5,450 $ (29,027) $ — $ 34,953
Production and supply contracts 2.9 years 14,893 — (10,668) — 4,225
Internally developed software 3.8 years 18,812 1,105 (18,391) — 1,526
Licenses ⁽³⁾
18.1 years 30,339 2,991 (1,644) (1,046) 30,640
Trade names 7.0 years — 500 (63) — 437
Intangibles not subject to amortization:
Goodwill ⁽⁴⁾
27,546 7,174 — (384) 34,336
Total $ 150,120 $ 17,220 $ (59,793) $ (1,430) $ 106,117

(1) Additions to goodwill, customer relationships, and trade names relate to the acquisition of Humble Juice. Additions to licenses relates to FIGR East, FIGR Norfolk, and Alliance One Specialty Products, LLC.

~~(2) Amortization expense across intangible asset classes for the fiscal year ended March 31, 2019 was $7,943.~~

~~(3) Certain of the Company's license intangibles are subject to annual renewal.~~

~~(4) Goodwill activity relates to the Other Products and Services segment.~~15. Fair Value Measurements

The following summarizes the ~~estimated future intangible asset amortization expense:~~financial assets and liabilities measured at fair value on a recurring basis:

For Fiscal
Years Ended Customer
Relationships Production
and Supply
Contracts Internally
Developed
Software* Licenses Trade Names Total
July 1, 2019 through March 31, 2020 $ 3,017 $ 1,992 $ 375 $ 1,342 $ 48 $ 6,774
2021 4,022 1,397 394 1,789 63 7,665
2022 4,022 612 322 1,787 63 6,806
2023 4,022 — 289 1,783 63 6,157
2024 4,022 — 170 1,783 63 6,038
Later 14,843 — 41 22,332 122 37,338
$ 33,948 $ 4,001 $ 1,591 $ 30,816 $ 422 $ 70,778


	June 30, 2020											June 30, 2019										March 31, 2020
							Total							Total							Total
	Level 2		Level 3		at Fair Value			Level 2		Level 3		at Fair Value			Level 2		Level 3		at Fair Value
Financial Assets:
Derivative financial instruments	$	—	$	—	$	—		$	3	$	—	$	3		$	—	$	—	$	—
Securitized beneficial interests	—		14,949		14,949			—		14,648		14,648			—		27,021		27,021
Total assets	$	—	$	14,949	$	14,949		$	3	$	14,648	$	14,651		$	—	$	27,021	$	27,021
Financial Liabilities:
Long-term debt	$	318,060	$	3,804	$	321,864		$	814,766	$	623	$	815,389		$	358,782	$	848	$	359,630
Guarantees	—		3,312		3,312			—		3,136		3,136			—		2,791		2,791
Total liabilities	$	318,060	$	7,116	$	325,176		$	814,766	$	3,759	$	818,525		$	358,782	$	3,639	$	362,421

*Estimated amortization expense for the internally developed software

Level 2 measurements

•Debt: The fair value of debt is based on ~~costs accumulated as of June 30, 2019. These estimates will change as new costs are incurred~~the market price for similar financial instruments or model-derived valuations with observable inputs. The primary inputs to the valuation include market expectations, the Company's credit risk, and ~~until~~ the ~~software is placed into service in all locations.~~

~~-12-~~

~~7. Variable Interest Entities~~

~~The Company holds variable interests in multiple entities that primarily procure or process inventory on behalf~~contractual terms of the Company and other parties or are securitization entities. These variable interests relate to equity investments, advances, guarantees made by the Company, and securitized receivables. The Company is not the primary beneficiary of the majority of its variable interests in variable interest entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities due to the entities’ management and board of directors structure. As a result, the majority of these variable interest entities are not consolidated. The Company holds a majority voting interest and is the primary beneficiary of its variable interest in Humble Juice Co., LLC ("Humble Juice"), a consolidated entity for which the related intercompany accounts and transactions have been eliminated.

~~The following summarizes financial relationships with variable interest entities:~~

June 30, 2019 June 30, 2018 March 31, 2019
Investment in variable interest entities $ 57,541 $ 63,021 $ 64,281
Advances to variable interest entities 14,500 9,937 3,273
Guaranteed amounts to variable interest entities (not to exceed) 63,584 71,919 67,027

The Company's investment in and advances to variable interest entities are classified as investments in unconsolidated affiliates and accounts receivable, related parties, respectively, in the consolidated balance sheets. The Company's maximum exposure to loss in these variable interest entities is represented by the investments, advances, guarantees, and the deferred purchase price on the sale of securitized receivables that is disclosed in ~~"Note 18. Sale of Receivables"~~.

~~8. Segment Information~~

The Company's 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. These segment groupings are consistent with information used by the chief operating decision maker to assess performance and allocate resources. The types of products and services from which each reportable segment derives its revenues are as follows:

•Leaf - North America ships tobacco to manufacturers of cigarettes and other consumer tobacco products around the world. Leaf - North America is more highly concentrated on processing and other activities compared to the rest of the world.debt instrument.

•~~Leaf - Other Regions ships tobacco~~Derivatives: The fair value of derivatives is based on using the discounted cash flow analysis of the expected future cash flows. The primary inputs to ~~manufacturers~~the valuation include forward yield curves, implied volatilities, LIBOR rates, and credit valuation adjustments.

Level 3 measurements

•Guarantees: The fair value of ~~cigarettes~~guarantees is based on the discounted cash flow analysis of the expected future cash flows or historical loss rates. The primary inputs to the discounted cash flow analysis include market interest rate of 15.0% and ~~other consumer tobacco products around~~ the ~~world. Leaf - Other Regions sells a small amount~~Company’s historical loss rates ranging between 2.2% to 10.0% as of ~~processed but un-threshed flue-cured and burley tobacco in loose-leaf and bundle form to certain customers.~~June 30, 2020. The historical loss rate was weighted by the principal balance of the loans.

•~~Other Products~~Securitized beneficial interests: The fair value of securitized beneficial interests is based on using the present value of future expected cash flows. The primary inputs to this valuation include payment speeds of 70 to 72 days and ~~Services primarily consists~~discount rates of ~~cannabis and e-liquid products. Cannabis~~2.0% to 3.6% as of June 30, 2020. The discount rate was ~~legalized for adult use in Canada on October 17, 2018. The cannabis products of certain of~~weighted by the ~~Company's subsidiaries have been sold in~~outstanding interest. Payment speed was weighted by the ~~Canadian market, primarily to municipally-owned retailers. E-liquids products are sold to consumers via e-commerce platforms and other distribution channels, and retail stores.~~average days outstanding.

~~-13-~~

•

Long-term debt: The ~~following summarizes segment information:~~

Three Months Ended June 30,
2019 2018
Sales and other operating revenues:
Leaf - North America $ 34,950 $ 50,052
Leaf - Other Regions 235,770 237,926
Other Products and Services 5,950 3,011
Total sales and other operating revenues $ 276,670 $ 290,989
Operating income (loss):
Leaf - North America $ 762 $ 1,293
Leaf - Other Regions 7,034 7,654
Other Products and Services (14,725) (4,256)
Total operating (loss) income $ (6,929) $ 4,691

June 30, 2019 June 30, 2018 March 31, 2019
Segment assets:
Leaf - North America $ 257,707 $ 300,307 $ 243,248
Leaf - Other Regions 1,540,147 1,735,490 1,488,226
Other Products and Services 167,721 93,569 127,801
Total assets $ 1,965,575 $ 2,129,366 $ 1,859,275

~~9. Earnings Per Share~~

~~The weighted average number of common shares outstanding is reported as the weighted average~~fair value of the ~~total shares~~long-term debt is based on the present value of ~~common stock outstanding, net~~future payments. The primary inputs to this valuation include treasury notes interest of ~~shares~~0.3% to 0.6% and borrowing rates of ~~common stock held~~7.0% to 10.7%. The borrowing rates were weighted by a wholly owned subsidiary. 785 shares of common stock were owned by the subsidiary as of June 30, 2019 and 2018. This subsidiary waives its right to receive dividends and does not have the right to vote.

~~Certain potentially dilutive options were not included in the computation of earnings per diluted share because their exercise prices were greater than the~~ average market price of the shares of common stock during the period and their effect would be antidilutive. These shares totaled 427 at a weighted average exercise price of $60.00 per share as of June 30, 2019 and 2018. Diluted net loss per share as of June 30, 2019 was the same as basic net loss per share as the effects of potentially dilutive items were antidilutive given the Company’s net loss.

~~-14-~~

loans outstanding.

~~The following summarizes the computation of earnings per share:~~

Three Months Ended June 30,
(in thousands, except per share data) 2019 2018
Basic loss per share:
Net loss attributable to Pyxus International, Inc. $ (61,797) $ (759)
Shares:
Weighted average number of shares outstanding 9,100 9,027
Basic loss per share $ (6.79) $ (0.08)
Diluted loss per share:
Net loss attributable to Pyxus International, Inc. $ (61,797) $ (759)
Shares:
Weighted average number of shares outstanding 9,100 9,027
Plus: Restricted shares issued and shares applicable to stock options and restricted stock units, net of shares assumed to be purchased from proceeds at average market price — * — *
Adjusted weighted average number of shares outstanding 9,100 9,027
Diluted loss per share $ (6.79) $ (0.08)
*All outstanding restricted shares, shares applicable to stock options, and restricted stock units are excluded because their inclusion would have an antidilutive effect on the loss per share. The dilutive shares would have been 62 and 65 at June 30, 2019 and 2018, respectively.

~~10. Stock-Based Compensation~~

The following summarizes the ~~Company's stock-based compensation expense related~~reconciliation of changes in Level 3 instruments measured on a recurring basis:


	Three Months Ended June 30, 2020										Three Months Ended June 30, 2019
	Securitized Beneficial Interests		Long-Term Debt		Guarantees		Securitized Beneficial Interests		Long-Term Debt		Guarantees
Beginning balance	$	27,021	$	848	$	2,791	$	40,332	$	703	$	3,714
Issuances of sales of receivables/guarantees	47,120		—		647		46,882		—		293
Settlements	(57,902)		(100)		(117)		(71,623)		(83)		(879)
Additions	—		3,056		—		—		3		—
(Losses) gains recognized in earnings	(1,290)		—		(9)		(943)		—		8
Ending balance	$	14,949	$	3,804	$	3,312	$	14,648	$	623	$	3,136

For the three months ended June 30, 2020 and 2019, the impact to ~~awards granted under its various employee~~earnings attributable to the change in unrealized losses on securitized beneficial interests were $468 and ~~non-employee stock incentive plans:~~$946, respectively.

Three Months Ended June 30,
(in thousands) 2019 2018
Stock-based compensation expense $ 429 $ 295
Stock-based compensation expense payable in cash — —

-22-

16. Pension and Other Postretirement Benefits

The following summarizes the ~~Company's stock-based compensation awards:~~

Three Months Ended June 30,
(in thousands, except grant date fair value) 2019 2018
Restricted stock
Number granted 13 7
Grant date fair value $ 15.20 $ 15.85
Restricted stock units
Number granted 2 61
Grant date fair value $ 18.29 $ 16.00
Performance-based stock units
Number granted — 30
Grant date fair value $ — $ 16.00
components of net periodic benefit cost:

~~Restricted stock units granted during the three months ended June 30, 2019 vest ratably over a three-year period.~~


	Defined Benefit Plans
	Three Months Ended June 30,
	2020		2019
Operating expenses:
Service cost	$	106	$	117
Interest expense:
Interest expense	957		1,029
Expected return on plan assets	(740)		(1,121)
Amortization of prior service cost	10		10

Actuarial loss	521		456
Net periodic pension cost	$	854	$	491


	Other Postretirement Benefits
	Three Months Ended June 30,
	2020		2019
Operating expenses:
Service cost	$	2	$	2
Interest expense:
Interest expense	69		82
Amortization of prior service cost	(176)		(177)
Actuarial loss	94		109
Net periodic pension cost	$	(11)	$	16

The following summarizes contributions to pension plans and postretirement health and life insurance benefits:


	Three Months Ended June 30,
	2020		2019
Contributions made during the period	$	875	$	1,565
Contributions expected for the remainder of the fiscal year	6,306		5,557
Total	$	7,181	$	7,122

~~11.~~17. Contingencies and Other Information

Brazilian Tax Credits

The government in the Brazilian State of Parana ("Parana") issued a tax assessment on October 26, 2007 with respect to local intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. The assessment for intrastate trade tax credits taken is ~~$3,437~~$2,405 and the total assessment including penalties and interest at June 30, ~~2019~~2020 is ~~$12,041.~~

~~-15-~~

$8,610. On March 18, 2014, the government in Brazilian State of Santa Catarina also issued a tax assessment with respect to local intrastate trade tax credits that result primarily from tobacco transferred between states within Brazil. The assessment for intrastate trade tax credits taken is ~~$2,973~~$2,081 and the total assessment including penalties and interest at June 30, ~~2019~~2020 is ~~$7,862.~~$5,594. The Company believes it has properly complied with Brazilian law and will contest any assessment through the judicial process. Should the Company lose in the judicial process, the loss of the intrastate trade tax credits would have a material impact on the financial statements of the Company.

The Company also has local intrastate trade tax credits in the Brazil State of Rio Grande do Sul and the State of Santa Catarina. These jurisdictions permit the sale or transfer of excess credits to third parties, however approval must be obtained from the tax

-23-

authorities. The Company has agreements with the state governments regarding the amounts and timing of credits that can be sold. The tax credits have a carrying value of ~~$10,782.~~$11,371. The intrastate trade tax credits are monitored for impairment in future periods based on market conditions and the Company’s ability to use or sell the tax credits.

In 1969, the Brazilian government created a tax credit program that allowed companies to earn IPI tax credits (“IPI credits”) based on the value of their exports. The government began to phase out this program in 1979, which resulted in numerous lawsuits between taxpayers and the Brazilian government. The Company has a long legal history with respect to credits it earned while the IPI credit program was in effect. In 2001, the Company won a claim related to certain IPI credits it earned between 1983 and 1990. The Brazilian government appealed this decision and numerous rulings and appeals were rendered on behalf of both the government and the Company from 2001 through 2013. Because of this favorable ruling, the Company began to use these earned IPI credits to offset federal taxes in 2004 and 2005, until it received a Judicial Order to suspend the IPI offsetting in 2005. The value of the federal taxes offset in 2004 and 2005 was $24,142 and the Company established a reserve on these credits at the time of offsetting as they were not yet realizable due to the legal uncertainty that existed. Specifically, the Company extinguished other federal tax liabilities using IPI credits and recorded a liability in Pension, Postretirement and Other Long-Term Liabilities to reflect that the credits were not realizable at that time due to the prevalent legal uncertainty. On March 7, 2013, the Brazilian Supreme Court rendered a final decision in favor of the Company that recognized the validity of the IPI credits and secured the Company's right to benefit from the IPI credits earned from March 1983 to October 1990. This final decision expressly stated the Company has the right to the IPI credits. The Company estimates the total amount of the IPI credits to be approximately $94,316 at March 31, 2013. Since the March 2013 ruling definitively (without the government's ability to appeal) granted the Company the ownership of the IPI credits generated between 1983 and 1990, the Company believes the amount of IPI credits that were used to offset other federal taxes in 2004 and 2005 are realizable beyond a reasonable doubt. Accordingly, at March 31, 2013, the Company recorded the $24,142 IPI credits it realized in the Statements of Consolidated Operations in Other Income. No further benefit has been recognized pending the outcome of the judicial procedure to ascertain the final amount as those amounts have not yet been realized.

Other Matters

On June 7, 2019, the Company and certain of its officers were named as defendants in a complaint filed in the United States District Court for the Eastern District of North Carolina. The complaint was brought on behalf of a putative class of investors who purchased the Company's common stock between June 7, 2018 and November 8, 2018. The complaint alleges that the defendants violated federal securities laws provisions with respect to fraud and material representations, which purported misconduct was revealed by the Company's November 8, 2018 announcement that sales and other operating revenues for the quarter ended September 30, 2018 had decreased approximately 12% over the prior year quarter and the announcement on November 9, 2018 by the Securities and Exchange Commission that the Company had settled charges that it had materially misstated its financial statements from 2011 through the second quarter of 2015 due to improper and insufficient accounting, processes and control activities, deferred crop costs and revenue transactions in Africa. The complaint alleges that members of the purported class were harmed by the decline in the trading price of the Company's common stock on the dates of these announcements. The complaint seeks damages in an unspecified amount. The Company does not believe the claims have merit, and intends to vigorously defend against the claims made in the complaint.

In addition to the above-mentioned matters, certain of the Company’s subsidiaries are involved in other litigation or legal matters incidental to their business activities, including tax matters. While the outcome of these matters cannot be predicted with certainty, the Company is vigorously defending them and does not currently expect that any of them will have a material adverse effect on its business or financial position. However, should one or more of these matters be resolved in a manner adverse to its current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material.

Asset Retirement Obligations

~~In accordance with generally accepted accounting principles, the~~The Company ~~records all known~~identified an asset retirement ~~obligations (“ARO”~~obligation ("ARO") ~~for which the liability can be reasonably estimated. Currently, it has identified an ARO~~ associated with ~~one~~1 of its facilities that requires it to restore the land to its initial condition upon vacating the facility. The Company has not recognized a liability under generally accepted accounting principles for this ARO because the fair value of restoring the land at this site

~~-16-~~

cannot be reasonably estimated since the settlement date is unknown at this time. The settlement date is unknown because the land restoration is not required until title is returned to the government, and the Company has no current or future plans to return the title. The Company will recognize a liability in the period in which sufficient information is available to reasonably estimate its fair value.

-24-

~~12. Debt Arrangements~~

~~ABL Facility~~

The ABL credit agreement restricts the Company from paying any dividends during the term of this facility subject to the satisfaction of specified financial ratios. In addition, the indentures governing the Company's outstanding 8.5% senior secured first lien notes due 2021 and its outstanding 9.875% senior secured second lien notes due 2021 contain similar restrictions and also prohibit the payment of dividends and other distributions if the Company fails to satisfy a ratio of consolidated EBITDA to fixed charges of at least 2.0 to 1.0. As of June 30, 2019, the Company did not satisfy this fixed charge coverage ratio. The Company may not satisfy this ratio from time to time and failure to meet this fixed charge coverage ratio does not constitute an event of default.

~~13. Leases~~

The Company has operating leases for land, buildings, automobiles, and other equipment that expire at various dates through 2040. Leases for real estate generally have initial terms ranging from 2 to 15 years, excluding renewal options. Leases for equipment typically have initial terms ranging from 2 to 5 years excluding renewal options. Most leases have fixed rentals, with many of the real estate leases requiring additional payments for real estate taxes. These lease terms may include optional renewals, terminations or purchases, which are considered in the Company’s assessments when such options are reasonably certain to be exercised.

~~The following summarizes weighted-average information associated with the measurement of remaining operating lease as of June 30, 2019:~~


~~Weighted-average remaining lease term~~			~~5.3 years~~
~~Weighted-average discount rate~~			~~9.5%~~

~~The following summarizes lease costs for operating leases for the three months ended June 30, 2019:~~



~~Operating lease costs~~	$	~~4,188~~
~~Variable and short-term lease costs~~	~~1,468~~

~~Total lease costs~~	$	~~5,656~~

~~The following summarizes supplemental cash flow information related to cash paid for amounts included in the measurement of lease liabilities three months ended June 30, 2019:~~




~~Operating cash flows impact - operating leases~~	$	~~4,140~~
~~Right-of-use assets obtained in exchange for new operating leases~~	$	~~1,578~~

~~-17-~~

~~The following reconciles maturities of operating lease liabilities to the lease liabilities reflected in the condensed consolidated balance sheet as of June 30, 2019:~~

2020 (excluding the three months ended June 30, 2019) $ 11,672
2021 14,328
2022 10,462
2023 6,117
2024 4,982
Thereafter 11,772
Total future minimum lease payments 59,333
Less: amounts related to imputed interest 15,182
Present value of future minimum lease payments 44,151
Less: operating lease liabilities, current 15,275
Operating lease liabilities, non-current $ 28,876

The Company continuously monitors and may negotiate contract amendments that include extensions or modifications to existing leases. The following presents the future minimum rental commitments under noncancelable operating leases as of March 31, 2019:

2020 (excluding the three months ended June 30, 2019) $ 15,651
2021 10,554
2022 8,483
2023 6,735
2024 5,356
Thereafter 7,324
Total $ 54,103

~~14. Derivative Financial Instruments~~

The Company uses forward or option currency contracts to protect against volatility associated with certain non-U.S. dollar denominated forecasted transactions. These contracts are for green tobacco purchases, processing costs, and selling, general and administrative costs. As of June 30, 2019 and 2018, accumulated other comprehensive loss includes $2,245 and $1,496, net of tax of $98 and $398, for unrealized losses related to designated cash flow hedges, respectively. The Company recorded losses of $651 and $0 in its cost of goods and services sold for the three months ended June 30, 2019 and 2018, respectively. The Company recorded a current derivative asset of $3 and $6 as of June 30, 2019 and 2018, respectively, included on the condensed consolidated balance sheets. The USD notional amount of derivatives contracts outstanding as of June 30, 2019 was $32,574.

~~-18-~~

~~15. Pension and Other Postretirement Benefits~~

~~The following summarizes the components of net periodic benefit cost:~~

Pension Benefits
Three Months Ended June 30,
2019 2018
Operating expenses:
Service cost $ 117 $ 120
Interest expense:
Interest expense 1,029 1,155
Expected return on plan assets (1,121) (1,286)
Amortization of prior service cost 10 11
Actuarial loss 456 422
Net periodic pension cost $ 491 $ 422

Other Postretirement Benefits
Three Months Ended June 30,
2019 2018
Operating expenses:
Service cost $ 2 $ 4
Interest expense:
Interest expense 82 83
Amortization of prior service cost (177) (177)
Actuarial loss 109 109
Net periodic pension cost $ 16 $ 19

For the three months ended June 30, 2019, contributions were made to pension plans and postretirement health and life insurance benefits of approximately $1,463 and $102, respectively. Additional contributions to pension plans and postretirement health and life insurance benefits of approximately $5,171 and $386, respectively, are expected during the remainder of fiscal 2020.

~~16. Inventories~~

~~Inventories consist of the following:~~

June 30, 2019 June 30, 2018 March 31, 2019
Processed tobacco $ 554,165 $ 563,539 $ 455,303
Unprocessed tobacco 238,653 330,227 186,108
Other 24,845 23,162 26,760
Total $ 817,663 $ 916,928 $ 668,171

~~-19-~~

~~17.~~18. Other Comprehensive Loss

The movements in accumulated other comprehensive loss and the related tax effects that are due to current period activity and reclassifications to the condensed consolidated statements of operations as shown on the condensed consolidated statements of comprehensive loss. The following summarizes ~~pension and other postretirement benefits and derivatives that were~~amounts reclassified from accumulated other comprehensive loss to ~~interest expense and cost of goods and services sold within the condensed consolidated statement of operations:~~

Three Months Ended June 30, Affected Line Item in the Condensed
2019 2018 Consolidated Statements of Operations
Pension and other postretirement benefits*:
Actuarial loss $ 560 $ 533
Amortization of prior service cost (165) (167)
Amounts reclassified from accumulated other comprehensive loss to net income, gross 395 366
Tax effects of amounts reclassified from
accumulated other comprehensive loss to net
income (84) —
Amounts reclassified from accumulated other comprehensive loss to net income, net $ 311 $ 366 Interest expense
Three Months Ended June 30, Affected Line Item in the Condensed
2019 2018 Consolidated Statements of Operations
Derivatives:
Losses reclassified to cost of goods sold $ 651 $ —
Amounts reclassified from accumulated other comprehensive loss to net income, gross $ 651 $ —
Tax effects of amounts reclassified from
accumulated other comprehensive loss to net
income (137) —
Amounts reclassified from accumulated other comprehensive loss to net income, net $ 514 $ — Cost of goods and services sold
net income:


	Three Months Ended June 30,					Affected Line Item in the Condensed Consolidated
	2020		2019		Statements of Operations
Pension and other postretirement benefits⁽¹⁾:
Actuarial loss	$	605	$	560
Amortization of prior service cost	(165)		(165)
Amounts reclassified from accumulated other comprehensive loss to net income, gross	440		395
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income	—		(84)
Amounts reclassified from accumulated other comprehensive loss to net income, net	$	440	$	311	Interest expense

	Three Months Ended June 30,					Affected Line Item in the Condensed Consolidated
	2020		2019		Statements of Operations
Derivatives:
Losses reclassified to cost of goods sold	$	164	$	651
Amounts reclassified from accumulated other comprehensive loss to net income, gross	164		651
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income	(694)		(137)
Amounts reclassified from accumulated other comprehensive loss to net income, net	$	(530)	$	514	Cost of goods and services sold

(1) Amounts are included in net periodic benefit costs for pension and other postretirement benefits. See "Note ~~15.~~16. Pension and Other Postretirement Benefits" for ~~more~~additional information.

~~18. Sale of Receivables~~19. Related Party Transactions

The Company ~~sells trade receivables to unaffiliated financial institutions under two accounts receivable securitization facilities. Under~~engages in transactions with related parties primarily for the ~~first facility, the Company continuously sells a designated pool~~procuring and processing of trade receivables to a special purpose entity, which sells 100% of the receivables to an unaffiliated financial institution. During the three months ended June 30, 2018, the investment limit of this program was decreased from $155,000 trade receivables to $125,000 trade receivables. Under the second facility, the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. As of June 30, 2019, the investment limit under the second facility was $125,000 trade receivables.inventory. The following summarizes sales and purchases transactions with related parties:


	Three Months Ended June 30,
	2020		2019
Sales	$	7,228	$	7,504
Purchases	18,727		21,355

The ~~Company is the servicer of both facilities~~Company’s accounts receivable, accounts payable, and ~~may receive funds that are due to the unaffiliated financial institutions, which are net settled on the next settlement date. As a result of the net settlement, trade and other receivables, net~~advances with related parties, as presented in the condensed consolidated balance sheets, ~~has been reduced by $6,348, $8,559, and $5,208 as of June 30, 2019 and 2018, and March 31, 2019, respectively.~~relate to transactions with equity method investees.

~~-20-~~-25-

~~The following summarizes the accounts receivable securitization information:~~

20. Segment Information

June 30, March 31,
2019 2018 2019
Receivables outstanding in facility $ 78,258 $ 79,179 $ 210,672
Beneficial interest 14,648 17,736 40,332
Servicing liability — 8 90
Cash proceeds for the three months ended:
Cash purchase price $ 103,517 $ 101,080 $ 672,333
Deferred purchase price 72,266 76,240 242,966
Service fees 137 180 576
Total $ 175,920 $ 177,500 $ 915,875
The Company's operations are managed and reported in 10 operating segments that are organized by product category and geographic area and aggregated into 3 reportable segments for financial reporting purposes: Leaf - North America, Leaf - Other Regions, and Other Products and Services. The types of products and services from which each reportable segment derives its revenues are as follows:

•Leaf - North America ships tobacco to manufacturers of cigarettes and other consumer tobacco products around the world. Leaf - North America is more concentrated on processing and other activities compared to the rest of the world.

~~19. Fair Value Measurements~~

•Leaf - Other Regions ships tobacco to manufacturers of cigarettes and other consumer tobacco products around the world. Leaf - Other Regions sells a small amount of processed but un-threshed flue-cured and burley tobacco in loose-leaf and bundle form to certain customers.

•Other Products and Services primarily consists of cannabis, e-liquid products, and industrial hemp. Cannabis was legalized for adult use in Canada on October 17, 2018. The cannabis products produced by certain of the Company's Canadian subsidiaries are sold primarily to municipally-owned retailers in the provinces of British Columbia, New Brunswick, Nova Scotia, Ontario, and Prince Edward Island in the Canadian market. E-liquids products are sold to consumers through retailers and directly to consumers via e-commerce platforms and other distribution channels.

The following summarizes ~~the items measured at fair value on a recurring basis:~~ segment information:

June 30, 2019 June 30, 2018 March 31, 2019
Total Assets / Total Assets / Total Assets /
Liabilities Liabilities Liabilities
Level 2 Level 3 at Fair Value Level 2 Level 3 at Fair Value Level 2 Level 3 at Fair Value
Assets
Derivative financial instruments $ 3 $ — $ 3 $ 6 $ — $ 6 $ 186 $ — $ 186
Securitized beneficial interests — 14,648 14,648 — 17,736 17,736 — 40,332 40,332
Total assets $ 3 $ 14,648 $ 14,651 $ 6 $ 17,736 $ 17,742 $ 186 $ 40,332 $ 40,518
Liabilities
Long-term debt $ 814,766 $ 623 $ 815,389 $ 863,620 $ 711 $ 864,331 $ 830,082 $ 703 $ 830,785
Guarantees — 3,136 3,136 — 3,544 3,544 — 3,714 3,714
Total liabilities $ 814,766 $ 3,759 $ 818,525 $ 863,620 $ 4,255 $ 867,875 $ 830,082 $ 4,417 $ 834,499


	Three Months Ended June 30,
	2020		2019
Sales and other operating revenues:
Leaf - North America	$	29,897	$	34,950
Leaf - Other Regions	227,739		235,770
Other Products and Services	5,173		5,950
Total sales and other operating revenues	$	262,809	$	276,670

Operating loss:
Leaf - North America	$	(833)	$	762
Leaf - Other Regions	(6,182)		7,034
Other Products and Services	(36,581)		(14,725)
Total operating loss	$	(43,596)	$	(6,929)

~~Level 2 measurements~~


	June 30, 2020		June 30, 2019		March 31, 2020
Segment assets:
Leaf - North America	$	283,715	$	257,707	$	266,253
Leaf - Other Regions	1,334,372		1,540,147		1,284,317
Other Products and Services	174,581		167,721		212,493
Total assets	$	1,792,668	$	1,965,575	$	1,763,063

•Debt: The fair value of debt is based on the market price for similar financial instruments or model-derived valuations whose inputs are observable. The primary inputs to the valuation include market expectations, the Company's credit risk, and the contractual terms of the debt instrument.

-26-

•Derivatives: The fair value of derivatives is based on the discounted cash flow analysis of the expected future cash flows. The primary inputs to the valuation include forward yield curves, implied volatilities, LIBOR rates, and credit valuation adjustments.

~~Level 3 measurements~~

•Guarantees: The fair value of guarantees is based on the discounted cash flow analysis of the expected future cash flows or historical loss rates. The primary inputs to the discounted cash flow analysis include a market interest rate of 15.0% and the Company’s historical loss rates of 2.4% to 10.0% as of June 30, 2019. The historical loss rate was weighted by the principal balance of the loans.

•Securitized beneficial interests: The fair value of securitized beneficial interests is based on the present value of future expected cash flows. The primary inputs to this valuation include payment speeds of 84 days and a discount rate of 4.9% as of June 30, 2019. The discount rate was weighted by the outstanding interest. Payment speed was weighted by the average days outstanding.

~~-21-~~

~~The following summarizes the reconciliation of changes in Level 3 instruments measured on a recurring basis:~~

Three Months Ended June 30, 2019 Three Months Ended June 30, 2018
Securitized Beneficial Interests Guarantees Securitized Beneficial Interests Guarantees
Beginning balance $ 40,332 $ 3,714 $ 48,715 $ 5,864
Issuances of sales of receivables/guarantees 46,882 293 48,685 244
Settlements (71,623) (879) (79,551) (2,701)
(Losses) gains recognized in earnings (943) 8 (113) 137
Ending balance $ 14,648 $ 3,136 $ 17,736 $ 3,544
21. Condensed Combined Debtor-In-Possession Financial Information

The ~~amount~~financial statements below represent the unaudited condensed combined financial statements of ~~total losses included in earnings~~the Debtors as of and for the three months ended June 30, ~~2019 and 2018, and for~~2020. These condensed combined financial statements do not include the ~~fiscal year ended March 31, 2019 attributable to the change in unrealized losses relating to assets still held at the respective dates were $946, $801, and $1,289 on securitized beneficial interests.~~

~~20. Related Party Transactions~~

~~The following summarizes sales and purchases with related parties:~~

Three Months Ended June 30,
2019 2018
Sales $ 7,504 $ 6,890
Purchases 21,355 26,267

~~21. Investee Companies~~

~~The following summarizes~~results of the Company's ~~equity method investments as of June 30, 2019:~~

Investee Name Location Primary Purpose The Company's Ownership Percentage Basis Difference
Adams International Ltd. Thailand purchase and process tobacco 49 % —
Alliance One Industries India Private Ltd. India purchase and process tobacco 49 % —
China Brasil Tobacos Exportadora SA Brazil purchase and process tobacco 49 % 6,707
Criticality LLC U.S. extraction of cannabidiol from industrial hemp 40 % 913
Nicotine River, LLC U.S. produce consumable e-liquids 40 % 2,026
Oryantal Tutun Paketleme Turkey process tobacco 50 % —
Purilum, LLC U.S. produce flavor formulations and consumable e-liquids 50 % —
Siam Tobacco Export Company Thailand purchase and process tobacco 49 % —

~~-22-~~

~~The following summarizes financial information for these investees for the three months ended June 30, 2019 and 2018:~~

Three Months Ended June 30,
Operations Statement Information 2019 2018
Sales $ 46,233 $ 47,226
Gross profit 9,507 7,767
Net income 3,100 2,044
Company's dividends received 6,094 —

June 30,
Balance Sheet Information 2019 2018 March 31, 2019
Current assets $ 236,389 $ 235,004 $ 152,661
Property, plant, and equipment and other assets 55,023 50,618 53,103
Current liabilities 184,526 172,263 89,791
Long-term obligations and other liabilities 3,354 4,622 3,222

~~Of the amounts presented above, the following summarizes financial information for China Brasil Tobacos Exportadora SA for the three months ended June 30, 2019 and 2018:~~

Three Months Ended June 30,
Operations Statement Information 2019 2018
Sales $ 18,391 $ 23,235
Gross profit 2,212 3,605
Net (loss) income (35) 780
Net (loss) income attributable to the investee (17) 382

~~22. Acquisition of Humble Juice Co., LLC~~

~~On April 2, 2018, the Company acquired 51%~~subsidiaries that are not part of the ~~equity~~Chapter 11 Cases. Intercompany transactions among the Debtors have been eliminated in ~~Humble Juice. Humble Juice sells e-liquid products~~the combined financial statements. Intercompany transactions among the Debtors and related merchandise. The Company acquired its interest in Humble Juice in exchange for consideration consisting of approximately $9,000 cash and $446 contingent consideration, subject to certain post-closing adjustments. The consolidation of Humble Juice has been treated as a business combination. The assets and liabilities were recorded at their fair value. The fair valuethe subsidiaries that are not part of the ~~non-controlling interest was $5,086.~~

The Company incurred $12 of acquisition-related expenses, primarily consisting of consulting fees, which were accounted for separately from the business combination and expensed as incurred within selling, general, and administrative expensesChapter 11 Cases have not been eliminated in the ~~condensed consolidated statements of operations.~~

~~Following the acquisition, the Company recorded certain post-closing purchase price adjustments. The acquisition allowed the Company to expand its e-liquid product portfolio.~~

~~-23-~~

~~The following summarizes the fair values of the assets acquired and liabilities assumed as of April 2, 2018:~~Debtors' combined financial statements.


Debtors Condensed Combined Statement of Operations
(Unaudited)

	Three Months Ended
(in thousands)		June 30, 2020
Sales and other operating revenues		$	190,806
Cost of goods and services sold		167,534
Gross profit		23,272
Selling, general, and administrative expenses		43,151
Other expense, net		(2,536)
Operating loss		(22,415)
Debt retirement expense		828
Interest expense		21,403
Interest income		1,514
Reorganization items:
Professional fees		(2,573)
United States trustee fees		(518)
Write-off of unamortized debt issuance costs and discount		(4,020)
DIP financing fees		(19,755)
Loss before income taxes and other items		(69,998)
Income tax benefit		(160)
Equity in earnings of subsidiaries		(34,859)
Net loss		(104,697)
Net loss attributable to noncontrolling interests		—
Net loss attributable to Pyxus International, Inc.		$	(104,697)

-27-


Debtors Condensed Consolidated Balance Sheet (Unaudited)
(in thousands)			June 30, 2020
Assets
Current assets
Cash and cash equivalents			$	~~308~~ 66,063
~~Other~~Trade receivables, net			56 84,327
Accounts receivable, related parties			60,648
Notes receivable, related parties			57,803
Inventories, net			~~1,048~~ 184,469
Advances to tobacco suppliers, net			84,275
Prepaid expenses			8,334
Other current assets			6 5,399
Total current assets			551,318
Investment in subsidiaries			1,431,249
Other intangible assets, net			13,146
Property, plant, and equipment, net			851,843
~~Goodwill~~	~~7,174~~
~~Other intangible assets~~		~~5,950~~
Total assets ~~acquired~~			$	~~14,550~~ 2,047,556
Liabilities and Stockholders’ Equity
Current liabilities
DIP Financing			$	131,700
Notes payable, related parties			30,000
Accounts payable			18 18,951
Accounts payable, related parties			195,591
Advances from customers			14,611
Accrued expenses			43,051
Other current liabilities			3,402
Current portion of long-term debt			273,377
Total current liabilities			710,683
Long-term taxes payable			7,623
Liability for unrecognized tax benefits			9,015
Deferred tax liabilities			6,755
Pension and postretirement liabilities			84,162
Other long-term liabilities			5,004
Total liabilities not subject to compromise			823,242
Debt subject to compromise			635,686
Accrued interest on debt subject to compromise			13,421
Total liabilities subject to compromise			649,107
Total liabilities			18 1,472,349
~~Fair value of~~Stockholders’ equity ~~interest~~			575,207
Total liabilities and stockholders’ equity			$	~~14,532~~ 2,047,556

-28-


Debtors Condensed Consolidated Statement of Cash Flows (Unaudited)
	Three Months Ended
(in thousands)	June 30, 2020
Operating Activities:
Net loss	$	(104,697)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	2,745
Debt amortization/interest	1,738
Debt retirement expense	657
Reorganization items	15,703







Changes in operating assets and liabilities, net	(107,138)
Other, net	20,206
Net cash used by operating activities	(170,786)

Investing Activities:
Purchases of property, plant, and equipment	(396)

Collections on beneficial interests on securitized trade receivables	51,533




Net cash provided by investing activities	51,137

Financing Activities:

Repayment of revolving loans facilities	(44,900)
Proceeds from DIP facility	131,700



DIP financing fees	(9,085)
Other, net	(171)


Net cash provided by financing activities	77,544

Effect of exchange rate changes on cash	(164)

Decrease in cash, cash equivalents, and restricted cash	(42,269)
Cash and cash equivalents at beginning of period	108,332
Restricted cash at beginning of period	—
Cash, cash equivalents, and restricted cash at end of period	66,063

Other information:
Cash paid for income taxes, net	52
Cash paid for interest	11,881
Cash received from interest	1,514
Cash paid for reorganization items	2,078

Noncash investing activities:

Non-cash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction	47,120

22. Subsequent Events

Debtor-in-Possession Financing

On July 21, 2020, following the Bankruptcy Court's final approval of the DIP facility in an aggregate principal amount of $206,700, the Company borrowed the remaining $75,000 available under the DIP Facility.

Foreign Seasonal Lines of Credit

On August 13, 2020, the Company entered into an Amendment and Restatement Agreement ("the Agreement") with TDB. The Agreement sets forth the terms that govern and supersede the terms of the separate existing foreign seasonal lines of credit for various subsidiaries of the Company with TDB. The original aggregate maximum borrowing availability under the existing foreign seasonal lines of credit was $255,000 and the aggregate borrowings outstanding were $240,500 as of August 13, 2020. Subject to certain conditions, the Agreement increases the Company's maximum aggregate borrowing capacity to $285,000.

-29-

Loans under the Agreement will bear interest at LIBOR plus 6%. The Agreement terminates on June 30, 2021, and may be renewed at TDB’s discretion.

Nicotine River, LLC Ownership Exchange

On August 14, 2020, the Company exchanged its 40% ownership interest in Nicotine River, LLC for an additional 14.3% interest in Humble Juice Co, LLC ("Humble"), increasing the Company's ownership interest in Humble to 65.3%. Humble is a consolidated subsidiary of the Company.

Bankruptcy Proceedings

On August 21, 2020, the Bankruptcy Court entered an order (“Confirmation Order”) pursuant to the Bankruptcy Code, which approved and confirmed the Amended Joint Prepackaged Chapter 11 Plan of Reorganization of Pyxus and Its Affiliated Debtors (as supplemented and amended, the “Plan”). After the satisfaction or waiver of the conditions precedent of the Plan, the Debtors intend to effect the transactions contemplated by the Plan and emerge from Chapter 11 protection. The Confirmation Order and Plan are filed as Exhibit 2.1 and Exhibit 2.2 to the Company’s Form 8-K filed on August 24, 2020, respectively, are filed as exhibits to this Form 10-K and incorporated herein by reference.

Summary Features of the Plan of Reorganization

Pursuant to the Plan, the business assets and operations of the Company will vest in a new Virginia corporation, Pyxus Holdings, Inc., which will be an indirect subsidiary of an additional Virginia corporation (“New Pyxus”) which will be renamed Pyxus International, Inc. upon completion of such transfer of assets and operations. Under the Plan, all suppliers, vendors, employees, trade partners, foreign lenders and landlords will be unimpaired by the Plan and will be satisfied in full in the ordinary course of business, and the Company’s existing trade and customer contracts and terms will be maintained. New Pyxus will continue to operate the Company’s business in the ordinary course.

Treatment of Claims and Interests

The Plan provides for the following treatment of claims against and interest in the Company upon the effectiveness of the Plan:

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

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

•Holders of First Lien Notes Claims (as defined in the Plan) will receive (i) payment in full in cash of all accrued and unpaid interest on such First Lien Notes, and (ii) their pro rata share of the Exit Secured Notes (as defined in the Plan).

•Holders (as defined in the Plan) of Second Lien Notes Claims (as defined in the Plan) will receive, at the Holder’s election, (i) their pro rata share of Second Lien Notes Common Stock Pool (as defined in 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) will be paid in the ordinary course of business in accordance with the terms of the relevant agreement.

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

•The existing common stock of the Company shall be discharged, cancelled, released, and extinguished and of no further force or effect.

Transactions in Connection with Emergence

As contemplated by the Plan, certain transactions were effected on or prior to the effectiveness of the Plan, including the following:

•Three new Virginia corporations (i.e., Pyxus One, Inc. (“New Pyxus”), Pyxus Parent, Inc. and Pyxus Holdings, Inc.) were organized.

•Pyxus Parent, Inc. issued all of its equity interests to Pyxus One, Inc. in exchange for 25,000,000 shares of New Pyxus common stock, 0 par value (such common stock is referred to as “New Common Stock” and the 25,000,000 shares of which are referred to as the “Equity Consideration”). Pyxus Holdings, Inc. then issued all of its equity interests to Pyxus Parent, Inc. in exchange for the Equity Consideration.

•Pyxus Holdings, Inc. entered into the Exit ABL Facility (as defined below) to borrow cash under Exit ABL Facility which together with cash on-hand is 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)

-30-

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, Pyxus transferred to Pyxus Holdings, Inc. all of its assets (including by assuming and assigning all of Pyxus’ Executory Contracts and Unexpired Leases (as such terms are defined in the Plan) to Pyxus Holdings, Inc. in accordance with the Plan, other than those Executory Contracts and Unexpired Leases that were rejected) and Pyxus Holdings, Inc. assumed all of Pyxus’ obligations that are not discharged under the Plan (including all of 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, Inc. transferring the Equity Consideration to Pyxus, (ii) Pyxus Holdings, Inc. transferring the Cash Consideration to Pyxus, (iii) Pyxus Holdings, Inc. issuing the Exit Secured Notes (as defined below) under the Exit Secured Notes Indenture (as defined below) which, on behalf of 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, Inc. issuing the Exit Term Loans (as defined below) under the Exit Term 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, Inc., Pyxus Holdings, Inc. made an offer of employment to all employees of Pyxus and all such employees became employed by Pyxus Holdings, Inc., 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.

•New Pyxus and Pyxus Parent, Inc., along with each applicable subsidiary of New Pyxus, guaranteed the Exit Secured Notes, the Exit Term Facility and the Exit ABL Facility.

•Pyxus provided for the distribution of (i) Exit Secured Notes to the Holders of Allowed First Lien Notes Claims pursuant to the Plan, (ii) New Common Stock from the Second Lien Notes Common Stock Pool (as defined in the Plan) 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 Pyxus pursuant to the Plan, and (v) the Exit Term Loans under the Exit Term Facility and the Exit Facility Shares to the Holders of the DIP Facility Claims pursuant to the Plan.

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

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

Third Party Releases

Upon the effectiveness of the Plan, certain Holders of Claims and Interests (as such terms are defined in the Plan), except as otherwise specified in the Plan or Confirmation Order, were deemed to release and discharge the Released Parties (as defined in the Plan) from certain claims, obligations, rights, suits, damages, causes of action and liabilities in connection with the Chapter 11 Cases.

Exit ABL Credit Facility

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 Facility”). The ABL 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 the limitations described below in this paragraph. Under certain conditions, Pyxus Holdings may solicit the ABL Lenders to provide additional revolving loan commitments under the ABL Facility in an aggregate amount not to exceed $15.0 million. The ABL Facility is required to be drawn at all times in an amount greater than or equal to the lesser of (i) 25% of total commitments under the ABL Facility and (ii) $18.75 million.The amount available under the ABL Facility is limited by a borrowing base consisting of eligible accounts receivable and inventory as follows:

•85% of eligible accounts receivable, plus

•the lesser of (i) 70% of eligible inventory valued at the lower of cost (based on a first-in first-out basis) and market value thereof (net of intercompany profits) or (ii) 85% of the appraised net-orderly-liquidation value of eligible inventory.

-31-

The ABL Facility permits both base rate borrowings and LIBOR borrowings. Borrowings under the ABL Facility bear interest at an annual rate equal to LIBOR plus 475 basis points or 375 basis points above base rate, as applicable, with a fee on unutilized commitments at an annual rate of 100 basis points.

The ABL Facility matures on February 24, 2023, subject to extension on terms and conditions set forth in the ABL Credit Agreement. The ABL Facility may be prepaid from time to time, in whole or in part, without prepayment or premium, subject to a termination fee of 50 basis points upon the permanent reduction of commitments under the ABL Facility, including maturity.In addition, customary mandatory prepayments of the loans under the ABL Facility are required upon the occurrence of certain events including, without limitation, certain dispositions of assets outside of the ordinary course of business in respect of certain collateral securing the ABL Facility and certain casualty and condemnation events. With respect to base rate loans, accrued interest is payable monthly in arrears on the last business day of each calendar month and, with respect to LIBOR loans, accrued interest is payable monthly and on the last day of any applicable interest period. Pyxus Holdings’ obligations under the ABL Facility (and certain related obligations) are (a) guaranteed by Pyxus Holdings, Pyxus Parent, Inc. and the Company and all of Pyxus Holdings’ material domestic subsidiaries, and each of Pyxus Holdings’ future material domestic subsidiaries is required to guarantee the ABL Facility on a senior secured basis (including Pyxus Holdings, collectively, the “ABL Loan Parties”) and (b) secured by the Collateral, as described below, which is owned by the ABL Loan Parties.

The liens and other security interests granted by the ABL Loan Parties on the Collateral for the benefit of the lenders under the ABL Facility (and certain related secured parties) are, subject to certain permitted liens, secured by first-priority security interests on ABL Priority Collateral (as defined in the ABL/Term Loan/Intercreditor Agreement) with the security interests securing the Term Loan Credit Facility and the Senior Secured First Lien Notes junior thereto, each as described below. The obligations of Pyxus Holdings and each other ABL Credit Party under the ABL Facility and any related guarantee have respective priorities in a waterfall with respect to portions of the Collateral as set forth in the ABL/Term Loan/Notes Intercreditor Agreement and the Term Loan/Notes Intercreditor Agreement described below.

Cash Dominion

Under the terms of the ABL Facility, if (i) an event of default has occurred and is continuing or (ii) excess borrowing availability under the ABL Facility (based on the lesser of the commitments thereunder and the borrowing base) (the “Excess Availability”) falls below the greater of (x) $7.5 million and (y) 10% of the lesser of (A) the commitments under the ABL Facility at such time and (B) the borrowing base at such time (such greater amount being the “Cash Dominion Threshold”), the ABL Loan Parties will become subject to cash dominion, which will require daily prepayment of loans under the ABL Facility with the cash deposited in certain deposit accounts of the ABL Loan Parties, including concentration accounts, and will restrict the ABL Loan Parties’ ability to transfer cash from their concentration accounts to their disbursement accounts. Such cash dominion period (a “Dominion Period”) shall end when (i) if arising as a result of a continuing event of default, such event of default ceases to exist, or (ii) if arising as a result of non-compliance with the Excess Availability threshold, Excess Availability shall be equal to or greater than the Cash Dominion Threshold for a period of 30 consecutive days.

Financial Covenants

The ABL Credit Agreement governing the ABL Facility contains a covenant requiring that the Company’s fixed charge coverage ratio be no less than 1.00 to 1.00 during any Dominion Period.

Affirmative and Restrictive Covenants

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

•incur additional indebtedness or issue disqualified stock or preferred stock;

•make investments;

•pay dividends and make other restricted payments;

•sell certain assets;

•create liens;

•consolidate, merge, sell or otherwise dispose of all or substantially all of their assets;

•enter into transactions with affiliates; and

•designate subsidiaries as Unrestricted Subsidiaries.

-32-

The description of the ABL Credit Agreement and the ABL Facility set forth herein is qualified in its entirety by reference to the ABL Credit Agreement filed as Exhibit 10.1 hereto, which is incorporated by reference herein.

Exit Term Loan 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 $213.5 million (the “Term Loan Credit Facility”). The aggregate principal amount of loans outstanding under Debtors’ debtor-in-possession financing facility, and related fees, were converted into, or otherwise satisfied with the proceeds of, the Term Loan Credit Facility.

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

The Term Loan Credit Facility matures on June 21, 2025. The Term Loan Credit Facility may be prepaid from time to time, in whole or in part, without prepayment or penalty. In addition, customary mandatory prepayments of the loans under the Term Loan Credit Facility are required upon the occurrence of certain events including, without limitation, certain dispositions of assets outside of the ordinary course of business in respect of certain collateral securing the Term Loan Credit Facility and certain casualty and condemnation events. With respect to base rate loans, accrued interest is payable monthly in arrears on the last business day of each calendar month and, with respect to LIBOR loans, accrued interest is payable monthly and on the last day of any applicable interest period.

Pyxus Holdings’ obligations under the ABL Facility (and certain related obligations) are (a) guaranteed by Pyxus Holdings, Pyxus Parent, Inc. and the Company, all of Pyxus Holdings’ material domestic subsidiaries and certain of Pyxus Holdings’ foreign subsidiaries, and each of Pyxus Holdings’ future material domestic subsidiaries is required to guarantee the Term Loan Credit Facility on a senior secured basis (including Pyxus Holdings, collectively, the “Term Facility Loan Parties”) and (b) secured by the Collateral, as described below, which is owned by the Term Facility Loan Parties.

The liens and other security interests granted by the Term Facility Loan Parties on the Collateral for the benefit of the lenders under the Term Loan Credit Facility (and certain related secured parties) are, subject to certain permitted liens, secured by first-priority security interests on the Term Loan Priority Collateral and a junior lien on the ABL Priority Collateral and the Notes Priority Collateral (in each case as defined in the ABL/Term Loan/Notes Intercreditor Agreement and the Term Loan/Notes Intercreditor Agreement (together, the “Intercreditor Agreements”). The obligations of Pyxus Holdings and each other Term Facility Loan Party under the Term Loan Credit Facility and any related guarantee have respective priorities as set forth in the Intercreditor Agreements described below.

Affirmative and Restrictive Covenants

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

•incur additional indebtedness or issue disqualified stock or preferred stock;

•make investments;

•pay dividends and make other restricted payments;

•sell certain assets;

•create liens;

•consolidate, merge, sell or otherwise dispose of all or substantially all of their assets;

•enter into transactions with affiliates; and

•designate subsidiaries as Unrestricted Subsidiaries.

-33-

The description of the Term Loan Credit Agreement and the Term Loan Credit Facility set forth herein is qualified in its entirety by reference to the Term Loan Credit Agreement filed as Exhibit 10.2 hereto, which is incorporated by reference herein.

Exit Senior Secured First Lien Notes

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 bear interest at a rate of 10.00% per year, payable semi-annually in arrears in cash on February 15 and August 15 of each year, beginning February 15, 2020, to holders of record at the close of business on the preceding February 1 and August 1, respectively. The Notes mature on August 24, 2024.

Guarantees

The Notes are initially guaranteed on a senior secured basis by the Company, all of the Company’s material domestic subsidiaries (other than Pyxus Holdings) and the Foreign Guarantors, on a subordinated basis to the guarantees securing the Term Loan Facility and each of its future material domestic subsidiaries are required to guarantee the Notes on a senior secured basis.

Optional Redemption

At any time prior to August 24, 2022, Pyxus Holdings may redeem the Notes, in whole or in part, at a redemption price equal to the “make-whole” amount as set forth in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. On or after August 24, 2022, the Pyxus Holdings may on any one or more occasions redeem all or a part of the Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest on the Notes redeemed, to the applicable date of redemption, if redeemed during the periods specified below, subject to the rights of holders of Notes on the relevant record date to receive interest on the relevant interest payment date:


Period	Percentage
From August 24, 2022 to August 23, 2023	105.0	%
From August 24, 2023 to August 23, 2024	102.5	%
On or after February 24, 2024	100.0	%

~~Revenue, operating loss, and net loss~~Mandatory Repurchase Offers

Upon a “Change of ~~Humble Juice~~Control” (as defined in the ~~condensed consolidated statements~~Indenture), Pyxus Holdings will be required to make an offer to repurchase the Notes at a price in cash equal to 101% of ~~operations from and including April 2, 2018~~the principal amount thereof. Upon certain asset sales, Pyxus Holdings may be required to ~~June 30, 2018 were $2,487, $(501), and $(256), respectively. As~~make an offer to repurchase the Notes at a ~~result,~~price in cash equal to 100% of the ~~impact to basic and diluted earnings per share was $(0.03) and $(0.03), respectively.~~principal amount thereof.

Certain Covenants

~~23. Restructuring~~The Indenture contains covenants that will impose restrictions on Pyxus Holdings, the Company and ~~Asset Impairment Charges~~the Company’s subsidiaries (other than subsidiaries that may in the future be designated as “Unrestricted Subsidiaries” under the Indenture), including on their ability to, among other things:

~~During the fiscal year ended March 31, 2019, the Company incurred costs associated with the closure~~•incur additional indebtedness or issue disqualified stock or preferred stock;

•make investments;

•pay dividends and make other restricted payments;

•sell certain assets;

•create liens;

•enter into sale and leaseback transactions;

•consolidate, merge, sell or otherwise dispose of ~~a processing facility in the Leaf - Other Regions segment in order to process tobacco in the affected area under a third-party processing arrangement going forward, the consolidation~~all or substantially all of the ~~Company's U.S. green tobacco processing operations~~Company’s assets; and

•enter into ~~its Wilson, North Carolina facility, and the re-purposing of its Farmville, North Carolina facility for storage and special projects.~~transactions with affiliates.

The ~~following summarizes~~description of the ~~restructuring actions:~~

Three Months Ended June 30,
2019 2018
Employee separation charges $ 93 $ 1,198
Asset impairment and other non-cash charges 119 343
Restructuring and asset impairment charges $ 212 $ 1,541
Indenture and the Notes set forth herein is qualified in its entirety by reference to the Indenture, which includes the form of the Notes, filed as Exhibit 4.1 hereto, which is incorporated by reference herein.

~~The following summarizes the employee separation and other cash charges recorded in the Company's Leaf - North America and Leaf - Other Regions segments:~~

Three Months Ended June 30,
2019 2018
Leaf - North America Leaf - Other Regions Leaf - North America Leaf - Other Regions
Beginning balance $ 1,621 $ 222 $ — $ 107
Period charges 7 86 247 951
Payments (811) (94) — —
Ending balance $ 817 $ 214 $ 247 $ 1,058

~~The following summarizes the asset impairment and other non-cash charges for the Company's Leaf - North America and Leaf - Other Regions segments:~~

Three Months Ended June 30,
2019 2018
Leaf - North America $ — $ —
Leaf - Other Regions 119 343
Total $ 119 $ 343

~~-24-~~-34-

Collateral

The liens and other security interests granted by Pyxus Holdings and the guarantors on the Collateral for the benefit of the noteholders are, subject to certain permitted liens, secured by first-priority security interests on the Notes Priority Collateral and a junior lien on the ABL Priority Collateral and the Term Loan Priority Collateral (in each case as defined in the Intercreditor Agreements. The obligations of Pyxus Holdings and each other guarantor have respective priorities with respect to the guarantees and the Collateral as set forth in the Intercreditor Agreements described below.

Intercreditor Agreements

The priority of the obligations under each of the Notes, the ABL Facility and the Term Loan Credit Facility are set forth in the two intercreditor agreements entered into in connection with the Plan, including the issuance of the Notes and the establishment of the ABL Facility and the Term Loan Credit Facility.

ABL/Term Loan/Notes Intercreditor Agreement

The intercreditor relationship between, (i) on one hand, the holders of obligations under the ABL Facility, the guarantees thereof and certain related obligations and (ii) on the other hand, (A) the holders of obligations under the Term Loan Credit Facility, the guarantees thereof and certain related obligations and (B) the holders of obligations under the Notes, the guarantees thereof and certain related obligations, is governed by the ABL/Term Loan/Notes Intercreditor Agreement. Pursuant to the terms of the ABL/Term Loan/Notes Intercreditor Agreement, Pyxus Holdings’ obligations under the ABL Facility, the guarantees thereof and certain related obligations have first priority liens on the Collateral consisting of ABL Priority Collateral (as defined therein), including certain accounts receivable and inventory and certain related intercompany notes, cash, deposit accounts, related general intangibles and instruments, certain other related assets of the foregoing entities and proceeds of the foregoing (other than identifiable cash proceeds of the Term Loan Priority Collateral or the Notes Priority Collateral, each as defined below), with the obligations under the Notes and the Term Loan Facility having junior priority liens on the ABL Priority Collateral. Pursuant to the ABL/Term Loan/Notes Intercreditor Agreement, Pyxus Holdings’ collective obligations under the Term Loan Credit Facility and the Notes, the guarantees thereof and certain related obligations have first priority liens on the Notes Priority Collateral which consists of the Collateral that is not ABL Priority Collateral, including owned material real property in the United States, capital stock of subsidiaries owned directly by Pyxus Holdings or a guarantor, existing and after acquired intellectual property rights, equipment, related general intangibles and instruments and certain other assets related to the foregoing and proceeds of the foregoing, with the obligations under the ABL Facility having junior priority liens on the Notes Priority Collateral.

Term Loan/Notes Intercreditor Agreement

The intercreditor relationship between and among the holders of obligations under the Term Loan Credit Facility, the guarantees thereof and certain related obligations and the holders of obligations under the Notes, the guarantees thereof and certain related obligations is governed by the Term Loan/Notes Intercreditor Agreement. Pursuant to the terms of the Term Loan/Notes Intercreditor Agreement, Pyxus Holdings’ obligations under the Term Loan Credit Facility, the guarantees thereof and certain related obligations have senior priority liens on the Term Loan Priority Collateral consisting of (i) all assets and property of Pyxus Holdings and any domestic Guarantor constituting ABL Priority Collateral up to (A) $125,000 minus (B) the aggregate principal amount of loans and the aggregate face amount of letters of credit outstanding under the ABL Credit Agreement, and (ii) all assets and property of any Foreign Guarantor constituting Collateral securing the Term Loan Agreement, with the obligations under the Notes having junior priority liens on the Term Loan Priority Collateral (the "ABL Priority Collateral Cap"). The liens securing the Notes and the Term Loan Facility on the ABL Priority Collateral in excess of the ABL Priority Collateral Cap will be secured on a pari passu basis. Further, the guarantees of the Foreign Guarantors in respect of the Notes are subordinated in right of payments to the guarantees of the Foreign Guarantors in respect of the Term Loan Facility. Pursuant to the Term Loan/Notes Intercreditor Agreement, Pyxus Holdings’ obligations under the Notes, the guarantees thereof and certain related obligations have first priority liens on all Notes Priority Collateral, with the obligations under the Term Loan Facility having junior priority liens on the Notes Priority Collateral.

Shareholders Agreement

On August 24, 2020, the Company entered into a Shareholders Agreement (the “Shareholders Agreement”), among the Company and the investors listed therein, each other beneficial owner of the Company's common stock as of the date of the Shareholder Agreement deemed to be a party thereto pursuant to the Plan and other persons that may from time to time become parties thereto (collectively, the “Investors”). The Shareholders Agreement provides that each of Glendon Capital Management LP (together with its affiliates, the “Glendon Investor”) and Monarch Alternative Capital LP (together with its affiliates, the “Monarch Investor”) shall be entitled to nominate 2 individuals to serve on the 7-member board of directors of the Company so long as it beneficially owns at least 20% of the outstanding shares of the Company's common stock, or 1 individual to serve as such a director if it beneficially owns fewer than 20% of the outstanding shares but at least 10% of the outstanding shares. The Shareholders Agreement provides that the Investors shall take all necessary action to elect such nominees of each of the Glendon Investor and the Monarch Investor as directors, as well as the election of the chief executive officer of the Company as a director and other individuals qualifying as independent directors to be selected by Investors that beneficially own 5% or more of the outstanding shares of common stock of the Company, as determined by a majority of the shares of the Company's common stock beneficially owned by such Investors. The Shareholders Agreement provides that the chairperson of the board of directors of the Company is to be elected by a majority of the directors that had been nominated by

-35-

the Glendon Investor (the “Glendon Directors”) and those that had been nominated by the Monarch Investor (the “Monarch Directors”), with the chairperson of such board to be elected by the board of directors of the Company if the Glendon Directors and Monarch Directors are together fewer than three in number or fail to appoint a chairperson. The Shareholders Agreement also includes provisions for the removal and replacement of the Glendon Directors at the request of the Glendon Investor and the removal and replacement of the Monarch Directors at the request of the Monarch Director, as well as provisions with respect to the calling and quorum of meetings of the board of directors of the Company, membership of committees of the board of directors of the Company, and compensation and insurance of members of the board of directors of the Company.

The Shareholders Agreement also provides for tag-along rights for Investors beneficially owning 1% or more of the outstanding shares of the Company's common stock (the “1% Investors”) upon the transfer by an Investor or group of Investors of 20% or more of the outstanding shares of the Company's common stock, drag-along rights upon the transfer of shares by an Investor or group of Investors of 50% or more of the outstanding shares of the Company's common stock, rights of first offer with respect to the transfer by an Investor, subject to certain exceptions, of 1% or more of the outstanding shares of the Company common stock, pre-emptive rights to the 1% Investors upon issuance of new securities by the Company, and demand and piggyback registration rights.

The Shareholders Agreement includes the agreement of the Investors not to transfer shares of common stock of the Company (i) in violation of federal and state securities laws, (ii) in a transfer that would cause the Company to be regarded as an “investment company” under the Investment Company Act of 1940, as amended, (iii) in a transfer, at any time that the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, that would cause the number of holders of the Company's common stock to exceed specified thresholds, or (iv) in a transfer that is, to the knowledge of the transferor after reasonable inquiry, (A) to any specified competitor of the Company (B) or to a person that would become either a beneficial owner of 5% of the outstanding common stock of the Company or a “5-percent shareholder” within the meaning of Section 382 of the Internal Revenue Code and the regulations promulgated thereunder (collectively, a “5% Holder”). The Shareholders Agreement provides that the board of directors may waive these restrictions, provided that any waiver of the restriction with respect to a person that would become a 5% Holder upon such transfer may be waived only if the transferee enters into a joinder agreeing to be bound by the Shareholders Agreement.

Dissolution and Successor Reporting

Pursuant to the Plan, the Company will, promptly following the effectiveness of the Plan, commence proceedings for the dissolution and winding up the affairs of the Company. During such period, the Company��s corporate existence will continue, but its activities will be limited to those matters appropriate to the winding up and liquidation of its business and affairs.

Following the effectiveness of the Plan, the common stock of New Pyxus will be deemed to be registered under Section 12 of the Securities Exchange Act of 1934, as amended, pursuant to Rule 12g-3 thereunder. Accordingly, following the effectiveness of the Plan, New Pyxus will be obligated to file with the Securities and Exchange Commission annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other filings and to otherwise comply with requirements applicable to entities with a class of securities so registered.

-36-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

~~Executive Overview~~

Historically, Pyxus’ core business has been as a tobacco leaf merchant, purchasing, processing, packing, storing, and shipping tobacco to manufacturers of cigarettes and other consumer tobacco products throughout the world. Through our predecessor companies, we have a long operating history in the leaf tobacco industry with some customer relationships beginning in the early 1900s. In an increasing number of markets, we also provide agronomy expertise for growing leaf tobacco. Our ~~company changed its name from Alliance One International, Inc.~~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 ~~Pyxus International, Inc. on September 12, 2018. The following executive overview~~find markets for these crops as part of our ongoing efforts to improve farmer livelihoods and the ~~period ended June 30, 2019 is intended to provide highlights of the discussion and analysis that follows.~~communities in which they live.

~~Financial Results~~

Sales and other operating revenues decreased to $276.7 million, a 4.9% decrease from the three months ended June 30, 2018. This decrease was primarily due to an 11.5% decrease in Leaf volumes, primarily in North America and Africa due to the timing of shipments. This decrease was partially offset by the continued development of the Other Products and Services segment and a 7.2% increase in average sales price due to favorable Leaf product mix. Gross profit as a percent of sales increased to 14.3% for the three months ended June 30, 2019 from 14.2% for the three months ended June 30, 2018. This increase was primarily due to increased sales in the Other Products and Services segment and favorable Leaf product mix. Total selling, general and administrative expense ("SG&A") increased $11.3 million or 29.7% to $49.4 million for the three months ended June 30, 2019 from $38.1 million for the three months ended June 30, 2018. SG&A as a percent of sales increased to 17.9% for the three months ended June 30, 2019 from 13.1% for the three months ended June 30, 2018. These increases were primarily due to startup costs associated with branding, marketing, and advertising expenses for the FIGR cannabinoid and Humble Juice e-liquid brands and the evaluation of a partial monetization of a portion of the Other Prodcuts and Services segment.

~~Liquidity~~

Our liquidity requirements are affected by various factors including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix, crop size, and quality. As of June 30, 2019, the Company's available credit lines, letters of credit, and cash totaled $505.5 million. We will continue to monitor and adjust funding sources as needed to enhance and drive various business opportunities that maintain flexibility and meet cost expectations.

~~Outlook~~

Following a transformative fiscal year 2019, we remain dedicated to execution of our strategy and opportunities to drive enhanced shareholder value. As we move into the next phase of our ‘One Tomorrow’ journey, we are taking additional steps to further position Pyxus for long-term success. We are committed to ~~driving improved~~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 SENTRI^SM traceability system provides clear visibility into how products are produced throughout the supply chain, supporting product integrity.

We are continuing our transformation journey designed 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.

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. While our supply chains and distribution channels continue to experience delays, we currently have adequate supply of products to meet the near-term forecasted demand. We continue to monitor the measures we implemented to reduce the spread of COVID-19. We make timely updates and improvements, as necessary.

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

-37-

matters are discussed in greater detail in the "Note 1. Basis of Presentation and Significant Accounting Policies" and "Note 22. Subsequent Events" to the "Notes to Consolidated Financial Statements" for additional information, which is incorporated by reference herein.

During the pendency of the Chapter 11 Cases, we ~~remain focused on strengthening~~expect our ~~leaf business while continuing~~financial results to ~~invest in~~be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our ~~new startup business ventures to position them for growth.~~consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, we ~~are continuing~~have incurred significant professional fees and other costs in connection with preparation for the Chapter 11 Cases and expect that we will continue to ~~evaluate~~incur significant professional fees and costs throughout the consolidation of Pyxus' ownership in its two majority-owned Canadian cannabis businesses with two of its minority-owned U.S. hemp and e-liquids businesses under the common control of a subsidiary separate from Pyxus’ other operations, as well as assess related opportunities to monetize a portion of its interests in this subsidiary in fiscal 2020.

~~Moving forward in fiscal year 2020, we are committed~~Chapter 11 Cases. See Note 22. "Subsequent Events" to the ~~ongoing execution~~"Notes to Consolidated Financial Statements" for additional information.

If the Company meets the criteria set forth in Accounting Standards Codification Topic 852 – Reorganizations (“ASC 852”), New Pyxus will adopt the fresh start accounting rules upon emergence from Chapter 11, in which case its assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our ~~strategy in~~consolidated balance sheets. The accompanying consolidated financial statements do not reflect the ~~next chapter~~adoption of our transformation as we work together to achieve our shared purpose to transform people's lives so that we can grow a better world. Our team remains focused on pursuing growth opportunities, enhancing the balance sheet and unlocking value for the benefit of our shareholders, customers, affiliates and employees.fresh start accounting.

~~-25-~~-38-

Results of Operations

Condensed Consolidated Statement of Operations and Supplemental Information
Three Months Ended June 30,
Change
(in millions) 2019 2018 $ %
Sales and other operating revenues $ 276.7 $ 291.0 $ (14.3) (4.9)
Cost of goods and services sold 237.0 249.6 (12.6) (5.0)
Gross profit 39.7 41.4 (1.7) (4.1)
Selling, general, and administrative expenses 49.4 38.1 11.3 29.7
Other income, net 2.9 2.9 — —
Restructuring and asset impairment charges 0.2 1.5 (1.3) (86.7)
Operating (loss) income* (6.9) 4.7 (11.6) (246.8)
Debt retirement expense (income) — (0.1) 0.1 100.0
Interest expense 33.8 32.9 0.9 2.7
Interest income 1.2 0.9 0.3 33.3
Income tax expense (benefit) 23.5 (25.3) 48.8 192.9
Equity in net income of investee companies 0.9 0.6 0.3 50.0
Net loss attributable to noncontrolling interests (0.4) (0.7) 0.3 42.9
Net loss attributable to Pyxus International, Inc.* $ (61.8) $ (0.8) $ (61.0) (7,625.0)
* Amounts may not equal column totals due to rounding

~~Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018~~


Three Months Ended June 30, 2020 and 2019
	Three Months Ended June 30,
					Change
(in millions)	2020		2019		$		%
Sales and other operating revenues	$	262.8	$	276.7	$	(13.9)	(5.0)
Cost of goods and services sold	243.2		237.0		6.2		2.6
Gross profit	19.6		39.7		(20.1)		(50.6)
Selling, general, and administrative expenses	60.8		49.4		11.4		23.1
Other (expense) income, net	(2.4)		2.9		(5.3)		(182.8)
Restructuring and asset impairment charges	0.1		0.2		(0.1)		(50.0)
Operating loss*	(43.6)		(6.9)		(36.7)		(531.9)
Debt retirement expense	0.8		—		0.8		100.0
Interest expense	31.3		33.8		(2.5)		(7.4)
Interest income	0.8		1.2		(0.4)		(33.3)
Reorganization items	(26.9)		—		(26.9)		(100.0)
Income tax (benefit) expense	(8.2)		23.5		(31.7)		(134.9)
Income from unconsolidated affiliates	0.8		0.9		(0.1)		(11.1)
Net (loss) income attributable to noncontrolling interests	(0.6)		(0.4)		(0.2)		(50.0)
Net loss attributable to Pyxus International, Inc.*	$	(92.2)	$	(61.8)	$	(30.4)	(49.2)

* Amounts may not equal column totals due to rounding

Sales and other operating revenues decreased ~~$14.3~~$13.9 million or ~~4.9%~~5.0% to $262.8 million for the three months ended June 30, 2020 from $276.7 million for the three months ended June 30, ~~2019~~2019. This decrease was due to a 7.9% decrease in average sales prices attributable to flue-cured oversupply conditions and unfavorable foreign exchange rate fluctuations in South America. This decrease was partially offset by a 3.4% increase in volume primarily due to the timing of shipments in Africa (delayed by the COVID-19 pandemic from ~~$291.0~~the fourth quarter of fiscal 2020 to the first quarter of fiscal 2021). This increase in volume was partially offset by the timing of shipments in South America (delayed by the COVID-19 pandemic from the first quarter of fiscal 2021 to future quarters).

Cost of goods and services sold increased $6.2 million or 2.6% to $243.2 million for the three months ended June 30, 2018. This decrease was primarily due to an 11.5% decrease in Leaf volumes, attributable to Hurricane Florence reducing the U.S. crop size and foreign tariffs on U.S. tobacco in North America and timing of shipments in Africa. This decrease was partially offset by the continued development of the Other Products and Services segment and a 7.2% increase in average sales price due to favorable Leaf product mix.

~~Cost of goods sold decreased $12.6 million or 5.0% to~~2020 from $237.0 million for the three months ended June 30, ~~2019 from $249.6 million for the three months ended June 30, 2018. This decrease was primarily due to the decrease in Leaf volume in North America.~~

~~Gross profit as a percent of sales increased to 14.3% for the three months ended June 30, 2019 from 14.2% for three months ended June 30, 2018.~~2019. This increase was ~~primarily due to increased sales in the Other Products and Services segment and favorable Leaf product mix.~~

Selling, general, and administrative expense ("SG&A") increased $11.3 million or 29.7% to $49.4 million for the three months ended June 30, 2019 from $38.1 million for the three months ended June 30, 2018. SG&A as a percent of sales increased to 17.9% for the three months ended June 30, 2019 from 13.1% for the three months ended June 30, 2018. These increases were primarily due to startup costs associated with branding, marketing, and advertising expenses for the FIGR cannabinoid and Humble Juice e-liquid brands and the evaluation of a partial monetization of the Other Prodcuts and Services segment.

~~Restructuring and asset impairment charges decreased $1.3 million or 86.7% to $0.2 million for the three months ended June 30, 2019 from $1.5 million for the three months ended June 30, 2018 primarily~~mainly due to a ~~cost-saving and restructuring associated with the closure~~$15.1 million inventory LCM write-down of ~~a processing facility in the Leaf - Other Regions segment in 2018.~~

Income tax expense increased $48.8 million or 192.9% to $23.5 million for three months ended June 30, 2019 from $(25.3) million for the three months ended June 30, 2018. This increase was primarily due to the change in the effective tax rate from 92.7% to (59.2)% for the three months ended June 30, 2018 and 2019, respectively, and the occurrence of certain discrete items during the three months ended June 30, 2019.

~~-26-~~

~~Results of Operations(continued)~~

~~Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018~~ ~~(continued)~~

Leaf - North America Supplemental Information
Three Months Ended June 30,
Change
(in millions, except per kilo amounts) 2019 2018 $ %
Kilos sold 6.6 11.0 (4.4) (40.0)
Tobacco sales and other operating revenues:
Sales and other operating revenues $ 31.1 $ 46.5 $ (15.4) (33.1)
Average price per kilo 4.71 4.23 0.48 11.3
Processing and other revenues 3.8 3.6 0.2 5.6
Total sales and other operating revenues 34.9 50.1 (15.2) (30.3)
Tobacco cost of goods sold:
Tobacco costs 24.4 38.2 (13.8) (36.1)
Transportation, storage, and other period costs 3.2 2.8 0.4 14.3
Derivative financial instrument and exchange losses (gains) (0.1) (0.1) — —
Total tobacco cost of goods sold 27.5 40.9 (13.4) (32.8)
Average cost per kilo 4.17 3.72 0.45 12.1
Processing and other revenues cost of services sold 2.2 2.1 0.1 4.8
Total cost of goods and services sold 29.7 43.0 (13.3) (30.9)
Gross profit 5.2 7.1 (1.9) (26.8)
Selling, general, and administrative expenses 4.2 5.4 (1.2) (22.2)
Other income, net (0.2) (0.1) (0.1) (100.0)
Restructuring and asset impairment charges — 0.3 (0.3) (100.0)
Operating income $ 0.8 $ 1.3 (0.5) (38.5)

Sales and other operating revenues decreased $15.2 million or 30.3% to $34.9 million for the three months ended June 30, 2019 from $50.1 million for the three months ended June 30, 2018. This decrease was primarily due to lower volume attributable to Hurricane Florence reducing the U.S. crop size and foreign tariffs on U.S. tobacco. This decrease was partially offset by an 11.3% increase in average sales prices due to product mix.

Cost of goods sold decreased $13.3 million or 30.9% to $29.7 million for the three months ended June 30, 2019 from $43.0 million for the three months ended June 30, 2018. This decrease was primarily due to the decrease in volume.

Gross profit as a percent of sales increased to 14.9% for the three months ended June 30, 2019 from 14.2% for the three months ended June 30, 2018. This increase was primarily due to favorable changes in product mix. This increase was partially offset by higher conversion costs in the U.S. from lower factory throughputindustrial hemp inventory driven by ~~reduced volumes.~~

SG&A decreased $1.2 million or 22.2% to $4.2 million for the three months ended June 30, 2019 from $5.4 million for the three months ended June 30, 2018. This decrease was primarily due to the impact of restructuring initiatives enacteda shift in the prior year. SG&A as a percent of sales increased to 12.0% for the three months ended June 30, 2019 from 10.8% for the three months ended June 30, 2018. This increase was primarily due to the decrease in sales. This increase was partially offset by lower SG&A costs in the current year due to the impact of restructuring initiatives enacted in the prior year.

~~-27-~~

~~Results of Operations(continued)~~

~~Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018~~ ~~(continued)~~

Leaf - Other Regions Supplemental Information
Three Months Ended June 30,
Change
(in millions, except per kilo amounts) 2019 2018 $ %
Kilos sold 54.9 58.5 (3.6) (6.2)
Tobacco sales and other operating revenues:
Sales and other operating revenues $ 225.2 $ 223.9 $ 1.3 0.6
Average price per kilo 4.10 3.83 0.27 7.0
Processing and other revenues 10.6 14.0 (3.4) (24.3)
Total sales and other operating revenues 235.8 237.9 (2.1) (0.9)
Tobacco cost of goods sold:
Tobacco costs 183.2 186.6 (3.4) (1.8)
Transportation, storage, and other period costs 12.8 10.0 2.8 28.0
Derivative financial instrument and exchange losses (gains) (0.9) (3.6) 2.7 75.0
Total tobacco cost of goods sold 195.1 193.0 2.1 1.1
Average cost per kilo 3.55 3.30 0.25 7.6
Processing and other revenues cost of services sold 8.5 10.7 (2.2) (20.6)
Total cost of goods and services sold 203.6 203.7 (0.1) —
Gross profit 32.2 34.2 (2.0) (5.8)
Selling, general, and administrative expenses 28.2 28.4 (0.2) (0.7)
Other income, net 3.2 3.1 0.1 3.2
Restructuring and asset impairment charges 0.2 1.3 (1.1) (84.6)
Operating income $ 7.0 $ 7.6 $ (0.6) (7.9)

Sales and other operating revenues decreased $2.1 million or 0.9% to $235.8 million for the three months ended June 30, 2019 from $237.9 million for the three months ended June 30, 2018. This decrease was primarily due to a 6.2% decrease in volumes, primarily in Africa due to the timing of shipments. This decrease was partially offset by an 7.0% increase in average sales prices due to productexpected future products mix in ~~South America~~response to market supply conditions and ~~Asia.~~

~~Cost of goods sold decreased $0.1 million to $203.6 million for the three months ended June 30, 2019 from $203.7 million for the three months ended June 30, 2018.~~continued market price compression.

Gross profit as a percent of sales decreased to ~~13.7%~~7.5% for the three months ended June 30, 2020 from 14.3% for three months ended June 30, 2019. This decrease was primarily due to a $15.1 million LCM write-down of industrial hemp inventory described above as well as unfavorable foreign currency exchange rate fluctuations resulting in higher raw materials prices and higher conversion costs in South America. These decreases were partially offset by lower conversion costs in Africa.

Selling, general, and administrative expenses increased $11.4 million or 23.1% to $60.8 million or the three months ended June 30, 2020 from $49.4 million or the three months ended June 30, 2019. This increase was driven by expenses for the Chapter 11 Cases that were incurred prior to the Petition Date.

Reorganization items increased $26.9 million or 100.0% for the three months ended June 30, 2020 as a result of the Chapter 11 Cases.

Income tax benefit was $8.2 million benefit for the three months ended June 30, 2020, compared to income tax expense of $23.5 million for the three months ended June 30, 2019. This change was primarily due to a change in the effective tax rate to 8.0% for three months ended June 30, 2020 from (59.2)% for the three months ended June 30, 2019 ~~from 14.4% for the three months ended June 30, 2018. This decrease was primarily due to higher conversion costs in Africa from lower factory throughput~~ driven by ~~lower volumes~~net foreign exchange effects, increases in non-deductible interest, foreign income taxed in the U.S., and variation in the ~~unfavorable exchange impact on local currency costs, primarily in Europe. This decrease was partially offset by favorable product~~expected jurisdictional mix ~~in South America and Asia.~~of earnings.

~~SG&A~~

-39-


Leaf - North America Supplemental Information
	Three Months Ended June 30,
					Change
(in millions, except per kilo amounts)	2020		2019		$		%
Kilos sold	5.1		6.6		(1.5)		(22.7)
Tobacco sales and other operating revenues:
Sales and other operating revenues	$	25.9	$	31.1	$	(5.2)	(16.7)
Average price per kilo	5.08		4.71		0.37		7.9
Processing and other revenues	4.0		3.8		0.2		5.3
Total sales and other operating revenues	29.9		34.9		(5.0)		(14.3)
Tobacco cost of goods sold:
Tobacco costs	20.0		24.4		(4.4)		(18.0)
Transportation, storage, and other period costs	2.7		3.2		(0.5)		(15.6)
Derivative financial instrument and exchange losses (gains)	0.2		(0.1)		0.3		300.0
Total tobacco cost of goods sold	22.9		27.5		(4.6)		(16.7)
Average cost per kilo	4.49		4.17		0.32		7.7
Processing and other revenues cost of services sold	2.6		2.2		0.4		18.2
Total cost of goods and services sold	25.5		29.7		(4.2)		(14.1)
Gross profit	4.4		5.2		(0.8)		(15.4)
Selling, general, and administrative expenses	4.9		4.2		0.7		16.7
Other expense, net	(0.3)		(0.2)		(0.1)		(50.0)

Operating (loss) income	$	(0.8)	$	0.8	(1.6)		(200.0)

Sales and other operating revenues decreased ~~$0.2~~$5.0 million or ~~0.7%~~14.3% to ~~$28.2~~$29.9 million for the three months ended June 30, ~~2019~~2020 from ~~$28.4~~$34.9 million for the three months ended June 30, ~~2018. SG&A as a percent of sales increased to 12.0% for the three months ended June 30, 2019 from 11.9% for the three months ended June 30, 2018. These increases were~~2019. This decrease was primarily due to 22.7% lower volume driven by the timing of shipments. This decrease was partially offset by a 7.9% increase in ~~sales.~~average sales prices attributable to the product mix having a higher concentration of lamina.

~~Restructuring~~Cost of goods and ~~asset impairment charges~~services sold decreased ~~$1.1~~$4.2 million or ~~84.6%~~14.1% to ~~$0.2~~$25.5 million for the three months ended June 30, ~~2019~~2020 from ~~$1.3~~$29.7 million for the three months ended June 30, ~~2018 primarily~~2019. This decrease was mainly due to ~~a cost-saving and restructuring associated with~~ the ~~closure of a processing facility~~decrease in ~~Europe in 2018.~~

~~-28-~~

~~Results of Operations(continued)~~

~~Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018~~ ~~(continued)~~

Other Products and Services Supplemental Information
Three Months Ended June 30,
Change
(in millions) 2019 2018 $ %
Sales and other operating revenues $ 6.0 $ 3.0 $ 3.0 100.0
Cost of goods and services sold 3.7 2.9 0.8 27.6
Gross profit 2.3 0.1 2.2 2,200.0
Selling, general, and administrative expenses 17.0 4.3 12.7 295.3
Other income, net — (0.1) 0.1 100.0
Operating loss $ (14.7) $ (4.3) $ (10.4) (241.9)

~~Sales~~sales and other operating revenues increased $3.0 million or 100.0% to $6.0 million for the three months ended June 30, 2019 from $3.0 million for the three months ended June 30, 2018. This increase was primarily due to increased cannabiniod revenue attributable to sales in the province of Nova Scotia following the legalization of the Canadian recreational cannabis market on October 17, 2018, as well as increased e-liquids product revenue attributable to additional product offerings and an expanding customer base.

Cost of goods sold increased $0.8 million or 27.6% to $3.7 million for the three months ended June 30, 2019 from $2.9 million for the three months ended June 30, 2018. This increase was primarily due to the increase in sales.revenues.

Gross profit as a percent of sales decreased to 14.7% for the three months ended June 30, 2020 from 14.9% for the three months ended June 30, 2019. This decrease was attributable to higher conversion costs due to lower volumes.

-40-


Leaf - Other Regions Supplemental Information
	Three Months Ended June 30,
					Change
(in millions, except per kilo amounts)	2020		2019		$		%
Kilos sold	58.5		54.9		3.6		6.6
Tobacco sales and other operating revenues:
Sales and other operating revenues	$	218.3	$	225.2	$	(6.9)	(3.1)
Average price per kilo	3.73		4.10		(0.37)		(9.0)
Processing and other revenues	9.4		10.6		(1.2)		(11.3)
Total sales and other operating revenues	227.7		235.8		(8.1)		(3.4)
Tobacco cost of goods sold:
Tobacco costs	182.8		183.2		(0.4)		(0.2)
Transportation, storage, and other period costs	8.5		12.8		(4.3)		(33.6)
Derivative financial instrument and exchange (gains) losses	(1.5)		(0.9)		(0.6)		(66.7)
Total tobacco cost of goods sold	189.8		195.1		(5.3)		(2.7)
Average cost per kilo	3.24		3.55		(0.31)		(8.7)
Processing and other revenues cost of services sold	7.4		8.5		(1.1)		(12.9)
Total cost of goods and services sold	197.2		203.6		(6.4)		(3.1)
Gross profit	30.5		32.2		(1.7)		(5.3)
Selling, general, and administrative expenses	37.1		28.2		8.9		31.6
Other income, net	0.4		3.2		(2.8)		(86.6)
Restructuring and asset impairment charges	0.1		0.2		(0.2)		(75.0)
Operating (loss) income*	$	(6.2)	$	7.0	$	(13.2)	(188.9)
* Amounts may not equal column totals due to rounding

Sales and other operating revenues decreased $8.1 million or 3.4% to $227.7 million for the three months ended June 30, 2020 from $235.8 million for the three months ended June 30, 2019. This decrease was due to a 9.0% decrease in average sales prices attributable to flue-cured oversupply conditions and unfavorable foreign exchange rate fluctuations in South America. This decrease was partially offset by product mix having a lower concentration of lamina in South America and Africa. The 6.6% increase in volume was driven by the timing of shipments in Africa (delayed by the COVID-19 pandemic from the fourth quarter of fiscal 2020 to the first quarter of fiscal 2021). This increase in volume was partially offset by the timing of shipments in South America (delayed by the COVID-19 pandemic from the first quarter of fiscal 2021 to future quarters).

Cost of goods and services sold decreased $6.4 million or 3.1% to $197.2 million for the three months ended June 30, 2020 from $203.6 million for the three months ended June 30, 2019. This decrease was mainly due to the decrease in sales and other operating revenues.

Gross profit as a percent of sales decreased to 13.4% for the three months ended June 30, 2020 from 13.7% for the three months ended June 30, 2019. This decrease was attributable to unfavorable foreign currency exchange rate fluctuations resulting in higher raw materials prices and higher conversion costs in South America. These decreases were partially offset by lower conversion costs in Africa.

SG&A increased $8.9 million or 31.6% to $37.1 million for the three months ended June 30, 2020 from $28.2 million for the three months ended June 30, 2019. SG&A as a percent of sales increased to 16.3% for the three months ended June 30, 2020 from 12.0% for the three months ended June 30, 2019. These increases were related to the decrease in sales and other operating revenues and higher allocations of general corporate services.


Other Products and Services Supplemental Information
	Three Months Ended June 30,
					Change
(in millions)	2020		2019		$		%
Sales and other operating revenues	$	5.2	$	6.0	$	(0.8)	(13.3)
Cost of goods and services sold	20.5		3.7		16.8		454.1
Gross (loss) profit	(15.3)		2.3		(17.6)		(765.2)
Selling, general, and administrative expenses	18.7		17.0		1.7		10.0
Other expense, net	(2.5)		—		(2.5)		(100.0)

Operating loss	$	(36.5)	$	(14.7)	$	(21.8)	(148.5)

Sales and other operating revenues decreased $0.8 million or 13.3% to $5.2 million for the three months ended June 30, 2020 from $6.0 million for the three months ended June 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.

Cost of goods and services sold increased $16.8 million or 454.1% to $20.5 million for the three months ended June 30, 2020 from $3.7 million for the three months ended June 30, 2019. This increase was mainly due to a $15.1 million LCM write-down of industrial hemp inventory driven by a shift in expected future products mix in response to market supply conditions and continued market price compression.

Gross loss as a percent of sales was (294.2)% for the three months ended June 30, 2020 compared to gross profit as a percent of sales of 38.3% for the three months ended June 30, ~~2019 from 3.3%~~2019. This decrease in profitability was primarily attributable to the $15.1 million inventory LCM write-down of industrial hemp inventory described above.

SG&A increased $1.7 million or 10.0% to $18.7 million for the three months ended June 30, ~~2018. This increase was primarily due to higher sales volume and favorable changes in product mix.~~

~~SG&A increased $12.7 million or 295.3% to~~2020 from $17.0 million for the three months ended June 30, ~~2019 from $4.3 million for the three months ended June 30, 2018.~~2019. SG&A as a percent of sales increased to 359.6% for the three months ended June 30, 2020 from 283.3% for the three months ended June 30, ~~2019 from 143.3% for the three months ended June 30, 2018.~~2019. These increases were ~~primarily due~~related to ~~startup costs associated with branding, marketing,~~lower sales and ~~advertising expenses for the FIGR cannabinoid~~other operating revenues and ~~Humble Juice e-liquid brands and the evaluation~~higher allocations of ~~a partial monetization of the Other Prodcuts and Services segment.~~general corporate services.

~~-29-~~-41-

Liquidity and Capital Resources

Overview

Working capital needs are seasonal within each geographic region. Our working capital requirements are affected by various factors from our core tobacco leaf business, including crop seasonality, crop size and quality, foreign currency, interest rates, green tobacco ~~business is seasonal,~~prices, and customer shipping requirements. Peak working capital requirements are generally during the first and second fiscal quarters. The leaf crop cycle includes buying, processing, and shipping tobacco. As of June 30, 2020, Africa and Europe are generally purchasing and processing. Asia and South America are purchasing, processing, and ~~selling activities~~selling. These crop seasons have ~~several~~been delayed due to the COVID-19 pandemic. In North America, we are generally harvesting. 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 associated ~~peaks where~~with the Chapter 11 Cases.

Debtor-in-Possession Financing

The commencement of the Chapter 11 Cases constituted an event of default, and caused an automatic and immediate acceleration of repayment obligations under the First Lien Notes, the Second Lien Notes, and the ABL Facility. However, any efforts to enforce such payment obligations are automatically stayed as of the Petition Date, and are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Borrowings under the ABL Facility were not available commencing on the Petition Date as a result of this event of default. As described below, the ABL Facility was terminated and repaid on June 17, 2020.

On June 17, 2020, following its receipt on such date of interim approval from the Bankruptcy Court (the “DIP Order”), the Company entered into a multiple draw superpriority secured debtor-in-possession term loan facility (the “DIP Facility”) in an aggregate principal amount of $206.7 million on the terms and conditions set forth in the DIP credit agreement (the “DIP Credit Agreement”) between the Company, certain holders of the Company’s 9.875% senior secured second lien notes due 2021 (the “DIP Lenders”) and Cortland Capital Market Services LLC, as administrative agent and collateral agent, which is guaranteed by certain of the Debtors’ subsidiaries.

In June 2020, the Company received $131.7 million in initial proceeds from the DIP Facility. An additional $75.0 million in proceeds were received in July 2020 upon entry of a final order from the Bankruptcy Court approving the DIP Facility. Drawn amounts under the DIP Facility bear interest at either (1) an Alternate Base Rate plus 9.25%, per annum or (2) 10.25% plus the LIBOR Rate, per annum, with a LIBOR floor of 1.5%. Undrawn amounts under the DIP Facility are subject to a ticking fee of 3.0% per annum calculated on a daily basis on the aggregate daily unused amount, accruing commencing on June 17, 2020 and until such commitments have terminated, which ticking fee is due and payable in arrears on the earlier to occur of a borrowing upon entry of a final order and the date on which such commitments have terminated. During the continuance of an event of default (as further described in the DIP Credit Agreement), the overdue amounts under the DIP Facility bear interest at an additional 2% per annum above the interest rate otherwise applicable.

The proceeds from the DIP Facility were used, among other things, to (a) pay down the outstanding amount drawn on the ABL Facility (which occurred on June 17, 2020); (b) pay related transaction costs, fees and expenses; (c) provide working capital and for other general corporate purposes in accordance with the Budget; (d) make adequate protection payments as authorized by the Court in the DIP Order; (e) pay obligations arising from or related to the Carve Out (as defined below); and (f) pay restructuring costs incurred in connection with the Chapter 11 Cases.

The maturity date of the DIP Facility is the earliest of (a) December 17, 2020; (b) the date of the substantial consummation (as defined in Section 1101(2) of the Bankruptcy Code) of a plan of reorganization; (c) the date on which Pyxus and its subsidiaries consummate a sale of all or substantially all of their assets pursuant to section 363 of the Bankruptcy Code or otherwise; and (d) such earlier date on which the loans shall become due and payable by acceleration or otherwise in accordance with the terms of the DIP Credit Agreement and the other related documents.

-42-

Upon the effectiveness of the Plan, claims under the DIP Facility are satisfied in the manner set forth in the Plan and the DIP Facility terminates.

Foreign Seasonal Lines of Credit

On August 13, 2020, the Company entered into an Amendment and Restatement Agreement ("the Agreement") with TDB. The Agreement sets forth the terms that govern and supersede the terms of the separate existing foreign seasonal lines of credit for various subsidiaries of the Company with TDB. The original aggregate maximum borrowing availability under the existing foreign seasonal lines of credit was $255.0 million and the aggregate borrowings outstanding were $240.5 million as of August 13, 2020. Subject to certain conditions, the Agreement increases the Company's maximum aggregate borrowing capacity to $285.0 million. Loans under the Agreement will bear interest at LIBOR plus 6%. The Agreement terminates on June 30, 2021, and may be renewed at TDB’s discretion.

Working Capital

The following is a summary of items from the condensed consolidated balance sheets:


	June 30,						March 31,
(in millions except for current ratio)	2020		2019		2020
Cash and cash equivalents	$	172.8	$	164.1	$	170.2
Trade and other receivables, net	170.2		203.6		239.7
Inventories and advances to tobacco suppliers	864.8		858.9		768.9
Total current assets	1,277.3		1,290.8		1,232.4
Notes payable to banks	524.3		520.8		540.2
Accounts payable	84.1		85.1		67.1
Advances from customers	22.1		18.8		18.8
Total current liabilities	1,165.2		783.8		789.1
Current ratio	1.1 to 1		1.6 to 1		1.6 to 1
Working capital	112.1		507.0		443.3
Long-term debt	3.2		899.7		904.3
Stockholders’ equity attributable to Pyxus International, Inc.	(170.1)		122.6		(78.0)

Working capital decreased to $112.1 million at June 30, 2020 from $507.0 million at June 30, 2019 primarily resulting from a lower trade receivables balance due to decreased sales, along with increases in short term debt balances such as the First Lien Notes that became current in April, and the initial DIP financing that was executed in June.

Sources and Uses of Cash

Our primary sources of liquidity are cash ~~on hand~~generated from operations, cash collections from our securitized receivables, and ~~outstanding indebtedness may vary significantly compared~~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 ~~fiscal year-end.~~ 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 12. "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, including Argentina, Brazil, Guatemala, Malawi, Tanzania, Turkey, and Zambia.~~countries. In addition, ~~from time to time,~~ we may periodically elect to purchase, redeem, repay, retire, or cancel indebtedness prior to stated maturity under our various foreign credit lines and senior secured credit agreement or indentures, as permitted therein.

-43-

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


	Three Months Ended June 30,
(in millions)	2020		2019
Operating activities	$	(100.3)	$	(169.9)
Investing activities	44.2		52.6
Financing activities	58.7		89.1
Effect of exchange rate changes on cash	0.2		(1.9)
Increase (decrease) in cash, cash equivalents, and restricted cash	2.8		(30.1)
Cash and cash equivalents at beginning of period	170.2		192.0
Restricted cash at beginning of period	2.9		5.8
Cash, cash equivalents, and restricted cash at end of period*	$	175.8	$	167.7

* Amounts may not equal column totals due to rounding

Net cash used by operating activities decreased $69.6 million in the three months ended June 30, ~~2019, we are approaching~~2020 compared to the ~~seasonally-adjusted peak for our~~three months ended June 30, 2019. The decrease in cash used was primarily due to decreased inventory purchases in Africa due to the delayed start of the buying season as well as lower inventory values in South American crop lines as we are completing purchasing and processing in these markets, with shipping stepping into full mode. In Africa, purchasing will continue through August in most sourcing areas while processing and shipping will peakAmerica due to foreign exchange.

Net cash provided by investing activities decreased $8.4 million in the ~~second~~three months ended June 30, 2020 compared to the three months ended June 30, 2019. The decrease in cash provided was primarily due to lower collections on beneficial interests on securitized trade receivables due to lower tobacco sales, partially offset by lower capital spending in the Other Products and ~~third quarters. In Asia,~~Services segment.

Net cash provided by financing activities decreased $30.4 million in the ~~Chinese crop~~three months ended June 30, 2020 compared to the three months ended June 30, 2019. The decrease is ~~fully processed and~~primarily due to the Thai crops are fully purchased, with significant shipping still to come, while some Indian traditional crop is still left to purchase and process. The Indonesian purchasing season begins in August. Europe has completed purchasesrepayment of the ~~2018 crop and is finishing processing with most shipping to come. North America is preparing to begin flue cured purchasing~~ABL Facility, partially offset by higher net proceeds from short-term borrowings, which was driven by the receipt of initial DIP funds in ~~August with processing and shipping to follow, which will commence its seasonally-elevated working capital needs.~~ June 2020.

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

~~Working Capital~~

~~Our working capital decreased to $507.0 million at~~Restricted cash as of June 30, ~~2019 from $591.7~~2020 primarily consists of approximately $0.9 million ~~at March 31, 2019. Our current ratio was 1.6 to 1 at June 30, 2019~~in compensating balances held with lenders in various jurisdictions where we operate, and ~~1.9 to 1 at March 31, 2019. The decrease~~approximately $1.4 million held as escrow for bid bonds used in ~~working capital was primarily related to the seasonal buildup of African~~new customer tenders. See "Note 6. Cash, Cash Equivalents, and South American inventories and advances to tobacco suppliers and the related seasonal increase of notes payable to finance the purchase and processing of these crops partially offset by lower cash balances and accounts receivable due to the timing of collections.

Restricted Cash"
for additional information.

~~The following is a summary of items from the condensed consolidated balance sheets and condensed consolidated statements of cash flows:~~

June 30, March 31,
(in millions except for current ratio) 2019 2018 2019
Cash and cash equivalents $ 164.1 $ 202.1 $ 192.0
Trade and other receivables, net 203.6 210.8 311.0
Inventories and advances to tobacco suppliers 858.9 984.9 687.9
Total current assets 1,290.8 1,485.6 1,238.5
Notes payable to banks 520.8 580.2 429.0
Accounts payable 85.1 83.1 87.0
Advances from customers 18.8 16.6 16.4
Total current liabilities 783.8 816.3 646.8
Current ratio 1.6 to 1 1.8 to 1 1.9 to 1
Working capital 507.0 669.3 591.7
Long-term debt 899.7 910.6 898.4
Stockholders’ equity attributable to Pyxus International, Inc. 122.6 265.1 183.7
Net cash provided (used) by:
Operating activities (169.9) (273.1)
Investing activities 52.6 59.4
Financing activities 89.1 148.4

Approximately ~~$83.4~~$103.4 million of our outstanding cash balance at June 30, ~~2019~~2020 was held in foreign ~~jurisdictions.~~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.

~~-30-~~

~~Operating Cash Flows~~

Net cash used by operating activities decreased $103.2 million in the three months ended June 30, 2019 compared to the three months ended June 30, 2018. The decrease in cash used was primarily due to smaller crop sizes in South America and Africa.

~~Investing Cash Flows~~

Net cash provided by investing activities decreased $6.8 million in the three months ended June 30, 2019 compared to the three months ended June 30, 2018. The decrease in cash provided was primarily due to higher purchases for property, plant, and equipment related to expansion of the Other Products and Services segment.

~~Financing Cash Flows~~

Net cash provided by financing activities decreased $59.3 million in the three months ended June 30, 2019 compared to the three months ended June 30, 2018. This decrease is primarily due to lower net proceeds from short-term borrowings due to decreases in purchasing requirements for the current South American crops.

Debt Financing

We continue to finance our business with a combination of short-term and long-term seasonal credit lines, ~~an ABL facility,~~the DIP Facility, long-term debt securities, advances from customers, and cash from operations when available. AtSee a summary of our short-term and long-term debt as of June 30, 2020 and 2019 ~~we had cash of $164.1 million~~at "Note 12. Debt Arrangements"for additional information. We will continue to monitor and, ~~total debt outstanding of $1,420.8 million comprised of $520.8 million of short-term notes payable~~as available, adjust funding sources as needed to ~~banks, $271.4 million of 8.5% senior secured first lien notes, $628.0 million of 9.875% senior secured second lien notes,~~enhance and $0.6 million of other long-term debt. The $91.8 million seasonal increase in notes payable to banks from March 31, 2019 to June 30, 2019 results from the timing of borrowings under the Brazilian credit lines. Aggregated peak borrowings by facility occurring during the three months ended June 30, 2019 and 2018, were $645.3 million at a weighted average interest rate of 7.2% and $635.7 million at a weighted average interest rate of 6.2%, respectively. Aggregated peak borrowings by facility occurring during the three months ended June 30, 2019 and 2018 were repaid with cash provided by operating activities.drive various business opportunities. Available credit as of June 30, ~~2019~~2020 was ~~$341.4~~$313.1 million comprised of ~~$60.0 million under our ABL facility, $275.1~~$235.0 million of ~~notes payable to banks,~~foreign seasonal lines of credit, $75.0 million of DIP financing, and ~~$6.3~~$2.8 million of availability for letters of credit. ~~Borrowing under~~Upon the ~~ABL facility is permitted only~~Effective Date of the Plan, subject to satisfaction or waiver of certain conditions, we anticipate that we or our successor upon emergence from Chapter 11, will have access to the extent that, after consideration of the application of the proceeds of the borrowing, our unrestricted cash and cash equivalents would not exceed $180.0 million. At June 30, 2019, our unrestricted cash and cash equivalents was $164.1 million. In fiscal 2020, we expect to incur capital expenditures of approximately $83.0 million. Approximately $27.0 million is expected to be expended for routine replacement of equipment and investments intended to add value to our customers or increase efficiency in our tobacco business. Approximately $6.0 million is expected to be expended for value-added agriculture capabilities. The remainder is expected to be for expansion of our production capacity in Canada with anticipated funding by future Canadian structure-finance products.Exit ABL Facility as described above.

No cash dividends were paid to shareholders during the three months ended June 30, ~~2019.~~2020. The payment of dividends is restricted under the terms ~~of our ABL credit facility,~~ the indentures governing the ~~8.5% senior secured first lien notes, and the 9.875% senior secured second lien notes.~~

~~-31-~~

~~Our debt agreements contain certain cross-default or cross-acceleration provisions. The following table summarizes our debt financing as of June 30, 2019:~~

June 30, 2019
Outstanding Lines and
March 31, June 30, Letters Interest
(in millions) 2019 2019 Available Rate
Senior secured credit facility:
ABL facility ⁽¹⁾
$ — $ — $ 60.0 — %
Senior notes:
8.5% senior secured first lien notes due 2021 270.9 271.4 — 8.5 %
9.875% senior secured second lien notes due 2021 627.1 628.0 — 9.9 %
Other long-term debt 0.7 0.6 — 5.3 % (2)
Notes payable to banks ⁽³⁾
429.0 520.8 275.1 6.9 % (2)
Total debt $ 1,327.7 $ 1,420.8 $ 335.1
Short-term $ 429.0 $ 520.8
Long-term:
Current portion of long-term debt $ 0.3 $ 0.3
Long-term debt 898.4 899.7
$ 898.7 $ 900.0
Letters of credit $ 5.4 $ 6.4 6.3
Total credit available $ 341.4
(1)  As of June 30, 2019, the full amount of the ABL facility was available. Borrowing is permitted under the ABL facility only to the extent that, after consideration of the application of the proceeds of the borrowing, the Company’s unrestricted cash and cash equivalents would not exceed $180.0 million.
(2)  Weighted average rate for the trailing twelve months ended June 30, 2019.
(3)  Primarily foreign seasonal lines of credit.

~~Foreign Seasonal Lines of Credit~~

We have typically financed our non-U.S. tobacco operations with uncommitted unsecured short-term seasonal lines of credit at the local level. These operating lines are seasonal in nature, normally extending for a term of 180 to 270 days, corresponding to the tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the right to cease making loans and demand repayment of loans at any time. These loans are typically renewed at the outset of each tobacco season. As of June 30, 2019, we had $520.8 million drawn and outstanding on foreign seasonal lines with maximum capacity totaling $808.6 million, subject to limitations as provided for in the agreement governing our ABL credit facility. Additionally, against these lines there was $12.7 million available in letter of credit capacity with $6.4 million issued but unfunded.

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~See~~ ~~"Note 2. New Accounting Standards"~~ ~~for more information.~~First Lien Notes.

Zimbabwe Currency Considerations

~~As of June 30, 2019, the~~The Company ~~held $0 in the~~often holds Zimbabwe RTGS ~~system.~~Dollars necessary for operations within Zimbabwe. RTGS is a local currency equivalent that, as of June 30, ~~2019~~2020, was exchanged at a government specified rate of ~~6.6:~~57.36:1 with the U.S. Dollar ("USD"). In

-44-

order to convert ~~these units~~Zimbabwe RTGS Dollars to ~~USD, the Company~~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 ~~MTC.~~our Zimbabwe subsidiary, Mashonaland Tobacco Company ("MTC"). As of June 30, ~~2019,~~2020, MTC has ~~$90.6~~$83.4 million of net assets. ~~See~~ ~~"Item 1A. Risk Factors"~~ ~~for more information.~~

~~-32-~~

~~Factors That May Affect Future Results~~

Readers are cautioned that the statements contained in this report regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which are based on current expectations of future events, may be identified by the use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “intends,” “projects,” “goals,” “targets,” and other words of similar meaning. These statements also may be identified by the fact that they do not relate strictly to historical or current facts. If underlying assumptions prove inaccurate, or if known or unknown risks or uncertainties materialize, actual results could vary materially from those anticipated, estimated, or projected. Some of these risks and uncertainties include changes in the timing of anticipated shipments, changes in anticipated geographic product sourcing, political instability, currency and interest rate fluctuations, shifts in the global supply and demand position for tobacco products, changes in tax laws and regulations or the interpretation of tax laws and regulations, resolution of tax matters, adverse weather conditions, changes in costs incurred in supplying products and related services, uncertainties with respect to the impact of regulation associated with new business lines, including the risk of obtaining anticipated regulatory approvals in Canada, uncertainties regarding the regulation of the production and distribution of hemp products and continued compliance with applicable regulatory requirements, uncertainties with respect to the development of the industries and markets of the new business lines, consumer acceptance of products offered by the new business lines, uncertainties with respect to the timing and extent of retail and product-line expansion; the impact of increasing competition in the new business lines, uncertainties regarding obtaining financing to fund planned facilities expansions in Prince Edward Island and Ontario, the possibility of delays in the completion of these and other facilities expansions and uncertainties regarding the potential production yields of new or expanded facilities, as well as the progress of legalization of cannabis for medicinal and adult recreational uses in other jurisdictions. A further list and description of these risks, uncertainties, and other factors can be found in the “Risk Factors” section of our annual report on Form 10-K for the fiscal year ended March 31, 2019, in Part II, Item 1A of this report, and in our other filings with the Securities and Exchange Commission. We do not undertake to update any forward-looking statements that we may make from time to time.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes to our market risk exposures since March 31, ~~2019.~~2020. For a discussion of our exposure to market risk, refer to Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” contained in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2019.~~

2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Due to inherent limitations, our disclosure controls and procedures, however well designed and operated, can provide only reasonable assurance (not absolute) that the objectives of the disclosure controls and procedures are met.

~~In connection with the preparation of this quarterly report on Form 10-Q, our~~Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as required by Rule 13a-15(b) of the Exchange Act), as of June 30, ~~2019.~~2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective to provide reasonable assurance as of June 30, ~~2019.~~2020.

Changes in Internal Control ~~Over~~over Financial Reporting

As required by Rule 13a-15(d) under the Exchange Act, ~~the Company’s~~our management, including ~~the Company’s~~our Chief Executive Officer and Chief Financial Officer, have evaluated ~~the Company’s~~our internal control over financial reporting to determine whether any changes occurred during the quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

~~Certain updates to our internal controls, processes, and systems were implemented in connection with the adoption of ASU 2016-02.~~ There were no ~~additional~~ changes that occurred during the three months ended June 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

-45-

~~-33-~~

Part II. Other Information

Item 1. Legal Proceedings

See "Note ~~11.~~17. Contingencies and Other Information" to the "Notes to Condensed Consolidated Financial Statements" for ~~further~~additional information with respect to legal proceedings, which is incorporated by reference herein.

Item 1A. Risk Factors

~~Investors should carefully consider our risk factors, which could materially affect our business, financial condition, or operating results, in~~In addition to the other information set forth in this report and in our other filings with the Securities and Exchange ~~Commission.~~Commission, investors should carefully consider our risk factors, which could materially affect our business, financial condition, or operating results. As of the date of this report, there are no material changes to the risk factors previously disclosed in Part I, Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, ~~2019, except for updated information included in the following:~~2020.

~~We face increased risks of doing business due to the extent of our international operations.~~

Some of the countries we do business in do not have stable economies or governments. Our international operations are subject to international business risks, including unsettled political conditions, uncertainty in the enforcement of legal obligations, including the collection of accounts receivable, fraud risks, expropriation, import and export restrictions, exchange controls, inflationary economies, currency risks and risks related to the restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries. These risks are exacerbated in countries where we have advanced substantial sums or guaranteed local loans or lines of credit for the purchase of tobacco from suppliers. For example, in 2006 as a result of the political environment, economic instability, foreign currency controls and governmental regulations in Zimbabwe, we deconsolidated our Zimbabwe subsidiary, Mashonaland Tobacco Company LTD ("MTC"). Subsequently, we determined that the significant doubt about our ability to control MTC was eliminated and reconsolidated MTC as of March 31, 2016. The Company utilizes the Zimbabwe RTGS system for local transactions. RTGS is a local currency equivalent that is exchanged at a government specified rate with the USD. In order to convert these units to USD, the Company 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 MTC.

Our international operations are in areas where the demand is for the export of lower priced tobacco. We have significant investments in our purchasing, processing and exporting operations in Argentina, Brazil, Malawi, Tanzania, Turkey, and Zimbabwe.

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

~~Fluctuations in foreign currency exchange and interest rates could adversely affect our results of operations.~~

We conduct our business in many countries around the world. Our business is generally conducted in U.S. dollars, as is the business of the leaf tobacco industry as a whole. We generally must purchase tobacco in non-U.S. countries using local currency. As a result, local country operating costs, including the purchasing and processing costs for tobaccos, are subject to the effects of exchange fluctuations of the local currency against the U.S. dollar. When the U.S. dollar weakens against foreign currencies, our costs for purchasing and processing tobacco in such currencies increases. We attempt to minimize such currency risks by matching the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency of the country where the tobacco is grown. Fluctuations in the value of foreign currencies can significantly affect our operating results.

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

~~-34-~~

Item 6. Exhibits


2 .01						Order dated August 24, 2020 issued by the United States Bankruptcy Court for the District of Delaware in the case captioned In re Pyxus International, Inc., et al. (Case No. 20-11570 (LLS)), incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K, filed August 24, 2020 (SEC File No. 001-13684).
2 .02						Amended Joint Prepackaged Chapter 11 Plan of Reorganization filed by the Debtors in the case before the United States Bankruptcy Court for the District of Delaware captioned In re Pyxus International, Inc., et al. (Case No. 20-11570 (LLS)), incorporated by reference to Exhibit 2.2 of the Current Report on Form 8-K, filed August 24, 2020 (SEC File No. 001-13684).
10.01						Executive Officer Retention Plan (filed herewith)
10.02						Restructuring Support Agreement, dated June 14, 2020, by and among Pyxus International, Inc. and certain of its creditors party thereto incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed June 15, 2020 (SEC File No. 001-13684).
10.03						Superpriority Secured Debtor-In-Possession Credit Agreement, dated as of June 17, 2020, by and among Pyxus International, Inc., as borrower, the guarantor parties thereto, the lenders parties thereto, and Cortland Capital Market Services LLC, as administrative agent and collateral agent incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed June 19, 2020 (SEC File No. 001-13684).
31.01						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.02						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

101.INS						XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH						Inline XBRL Taxonomy Extension Schema (filed herewith)
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibits 101.*)

~~-35-~~-46-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~Pyxus International,~~Old Holdco, Inc.

Date: August ~~8, 2019~~24, 2020 /s/ Philip C. Garofolo

Philip C. Garofolo

Vice President - Controller

(Principal Accounting Officer)

~~-36-~~-47-










Balance, March 31, 2018	$	473,476	$	(156,348)	$	(12,682)	$	(32,580)	$	—	$	10,962	$	282,828
Net loss	—		(759)		—		—		—		(654)		(1,413)
Stock-based compensation	295		—		—		—		—		—		295
Purchase of investment in subsidiary	—		—		—		—		—		5,531		5,531
Other comprehensive (loss) income, net of tax	—		—		(5,136)		366		(1,496)		(175)		(6,441)
Balance, June 30, 2018	$	473,771	$	(157,107)	$	(17,818)	$	(32,214)	$	(1,496)	$	15,664	$	280,800














See "Notes to Condensed Consolidated Financial Statements"


	Twelve Months Ended March 31, 2019
	Weighted Average Remaining Useful Life	Beginning Gross Carrying Amount		Additions ⁽¹⁾		Accumulated Amortization ⁽²⁾		Impact of Foreign Currency Translation		Ending Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships	9.6 years	$	58,530	$	5,450	$	(29,027)	$	—	$	34,953
Production and supply contracts	2.9 years	14,893		—		(10,668)		—		4,225
Internally developed software	3.8 years	18,812		1,105		(18,391)		—		1,526
Licenses ⁽³⁾	18.1 years	30,339		2,991		(1,644)		(1,046)		30,640
Trade names	7.0 years	—		500		(63)		—		437
Intangibles not subject to amortization:
Goodwill ⁽⁴⁾		27,546		7,174		—		(384)		34,336
Total		$	150,120	$	17,220	$	(59,793)	$	(1,430)	$	106,117


	Three Months Ended June 30,
(in thousands, except grant date fair value)	2019		2018
Restricted stock
Number granted	13		7
Grant date fair value	$	15.20	$	15.85
Restricted stock units
Number granted	2		61
Grant date fair value	$	18.29	$	16.00
Performance-based stock units
Number granted	—		30
Grant date fair value	$	—	$	16.00


2020 (excluding the three months ended June 30, 2019)	$	11,672
2021	14,328
2022	10,462
2023	6,117
2024	4,982
Thereafter	11,772
Total future minimum lease payments	59,333
Less: amounts related to imputed interest	15,182
Present value of future minimum lease payments	44,151
Less: operating lease liabilities, current	15,275
Operating lease liabilities, non-current	$	28,876


2020 (excluding the three months ended June 30, 2019)	$	15,651
2021	10,554
2022	8,483
2023	6,735
2024	5,356
Thereafter	7,324
Total	$	54,103


	Pension Benefits
	Three Months Ended June 30,
	2019		2018
Operating expenses:
Service cost	$	117	$	120
Interest expense:
Interest expense	1,029		1,155
Expected return on plan assets	(1,121)		(1,286)
Amortization of prior service cost	10		11
Actuarial loss	456		422
Net periodic pension cost	$	491	$	422


	Three Months Ended June 30,					Affected Line Item in the Condensed
	2019		2018		Consolidated Statements of Operations
Pension and other postretirement benefits*:
Actuarial loss	$	560	$	533
Amortization of prior service cost	(165)		(167)
Amounts reclassified from accumulated other comprehensive loss to net income, gross	395		366
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income	(84)		—
Amounts reclassified from accumulated other comprehensive loss to net income, net	$	311	$	366	Interest expense

	Three Months Ended June 30,					Affected Line Item in the Condensed
	2019		2018		Consolidated Statements of Operations
Derivatives:
Losses reclassified to cost of goods sold	$	651	$	—
Amounts reclassified from accumulated other comprehensive loss to net income, gross	$	651	$	—
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income	(137)		—
Amounts reclassified from accumulated other comprehensive loss to net income, net	$	514	$	—	Cost of goods and services sold


	Three Months Ended June 30, 2019						Three Months Ended June 30, 2018
	Securitized Beneficial Interests		Guarantees		Securitized Beneficial Interests		Guarantees
Beginning balance	$	40,332	$	3,714	$	48,715	$	5,864
Issuances of sales of receivables/guarantees	46,882		293		48,685		244
Settlements	(71,623)		(879)		(79,551)		(2,701)
(Losses) gains recognized in earnings	(943)		8		(113)		137
Ending balance	$	14,648	$	3,136	$	17,736	$	3,544


Investee Name	Location	Primary Purpose	The Company's Ownership Percentage		Basis Difference
Adams International Ltd.	Thailand	purchase and process tobacco	49	%	—
Alliance One Industries India Private Ltd.	India	purchase and process tobacco	49	%	—
China Brasil Tobacos Exportadora SA	Brazil	purchase and process tobacco	49	%	6,707
Criticality LLC	U.S.	extraction of cannabidiol from industrial hemp	40	%	913
Nicotine River, LLC	U.S.	produce consumable e-liquids	40	%	2,026
Oryantal Tutun Paketleme	Turkey	process tobacco	50	%	—
Purilum, LLC	U.S.	produce flavor formulations and consumable e-liquids	50	%	—
Siam Tobacco Export Company	Thailand	purchase and process tobacco	49	%	—


	Three Months Ended June 30,
Operations Statement Information	2019		2018
Sales	$	46,233	$	47,226
Gross profit	9,507		7,767
Net income	3,100		2,044
Company's dividends received	6,094		—


	June 30,
Balance Sheet Information	2019		2018		March 31, 2019
Current assets	$	236,389	$	235,004	$	152,661
Property, plant, and equipment and other assets	55,023		50,618		53,103
Current liabilities	184,526		172,263		89,791
Long-term obligations and other liabilities	3,354		4,622		3,222