|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyxus International, Inc. and Subsidiaries
|
|
Condensed Consolidated Statements of Comprehensive Income (Loss)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
|
(in thousands)
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
|
|
|
Net loss
|
$
|
(8,220)
|
|
$
|
(22,446)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(145)
|
|
1,871
|
|
|
|
|
|
Defined benefit pension amounts reclassified to income
|
—
|
|
312
|
|
|
|
|
|
Change in pension liability for settlements
|
47
|
|
799
|
|
|
|
|
|
Cash flow hedges
|
(619)
|
|
—
|
|
|
|
|
|
Amounts reclassified to income for derivatives
|
—
|
|
576
|
|
|
|
|
|
Total other comprehensive (loss) income, net of tax
|
(717)
|
|
3,558
|
|
|
|
|
|
Total comprehensive loss
|
(8,937)
|
|
(18,888)
|
|
|
|
|
|
Comprehensive loss attributable to noncontrolling interests
|
(197)
|
|
(405)
|
|
|
|
|
|
Comprehensive loss attributable to Pyxus International, Inc.
|
$
|
(8,740)
|
|
$
|
(18,483)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
(in thousands)
|
Four months ended December 31, 2020
|
|
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Net (loss) income
|
$
|
(14,018)
|
|
|
|
$
|
18,075
|
|
$
|
(101,213)
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(952)
|
|
|
|
4,377
|
|
(474)
|
|
|
Defined benefit pension amounts reclassified to income
|
—
|
|
|
|
734
|
|
934
|
|
|
Change in pension liability for settlements
|
47
|
|
|
|
—
|
|
(1,213)
|
|
|
Cash flow hedges
|
(619)
|
|
|
|
(531)
|
|
(147)
|
|
|
Amounts reclassified to income for derivatives
|
—
|
|
|
|
—
|
|
2,520
|
|
|
Total other comprehensive (loss) income, net of tax
|
(1,524)
|
|
|
|
4,580
|
|
1,620
|
|
|
Total comprehensive (loss) income
|
(15,542)
|
|
|
|
22,655
|
|
(99,593)
|
|
|
Comprehensive loss attributable to noncontrolling interests
|
(661)
|
|
|
|
(1,030)
|
|
(846)
|
|
|
Comprehensive (loss) income attributable to Pyxus International, Inc.
|
$
|
(14,881)
|
|
|
|
$
|
23,685
|
|
$
|
(98,747)
|
|
|
|
|
|
|
|
|
|
See "Notes to Condensed Consolidated Financial Statements"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
March 31, 2020
|
|
Assets
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
123,167
|
|
|
$
|
72,230
|
|
$
|
170,208
|
|
|
Restricted cash
|
3,779
|
|
|
2,359
|
|
2,486
|
|
|
Trade receivables, net
|
177,556
|
|
|
180,404
|
|
226,742
|
|
|
Other receivables
|
16,404
|
|
|
12,257
|
|
12,997
|
|
|
Accounts receivable, related parties
|
3,344
|
|
|
6,418
|
|
5,030
|
|
|
Notes receivable, related parties
|
—
|
|
|
406
|
|
406
|
|
|
Inventories, net
|
771,821
|
|
|
871,850
|
|
730,019
|
|
|
Advances to tobacco suppliers, net
|
61,773
|
|
|
61,536
|
|
38,877
|
|
|
Recoverable income taxes
|
12,023
|
|
|
9,751
|
|
7,562
|
|
|
Prepaid expenses
|
31,082
|
|
|
22,447
|
|
23,383
|
|
|
Other current assets
|
16,981
|
|
|
14,345
|
|
14,658
|
|
|
Total current assets
|
1,217,930
|
|
|
1,254,003
|
|
1,232,368
|
|
|
Restricted cash
|
389
|
|
|
389
|
|
389
|
|
|
Long-term notes receivable, related parties
|
149
|
|
|
7,466
|
|
7,450
|
|
|
Investments in unconsolidated affiliates
|
92,657
|
|
|
69,368
|
|
67,967
|
|
|
Goodwill
|
37,935
|
|
|
34,570
|
|
—
|
|
|
Other intangible assets, net
|
69,008
|
|
|
67,404
|
|
65,948
|
|
|
Deferred income taxes, net
|
8,929
|
|
|
115,947
|
|
2
|
|
|
Long-term recoverable income taxes
|
3,523
|
|
|
2,618
|
|
3,038
|
|
|
|
|
|
|
|
|
Other noncurrent assets
|
42,870
|
|
|
49,954
|
|
48,434
|
|
|
Right-of-use assets
|
39,416
|
|
|
43,372
|
|
41,471
|
|
|
Property, plant, and equipment, net
|
183,249
|
|
|
303,956
|
|
295,996
|
|
|
Total assets
|
$
|
1,696,055
|
|
|
$
|
1,949,047
|
|
$
|
1,763,063
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Notes payable to banks
|
$
|
433,571
|
|
|
$
|
580,346
|
|
$
|
540,157
|
|
|
|
|
|
|
|
|
Accounts payable
|
51,945
|
|
|
61,076
|
|
67,094
|
|
|
Accounts payable, related parties
|
28,417
|
|
|
11,077
|
|
11,820
|
|
|
Advances from customers
|
24,881
|
|
|
19,227
|
|
18,810
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
75,813
|
|
|
103,351
|
|
89,928
|
|
|
Income taxes payable
|
2,220
|
|
|
15,444
|
|
5,049
|
|
|
Operating leases payable
|
9,214
|
|
|
14,033
|
|
11,160
|
|
|
Current portion of long-term debt
|
141
|
|
|
325
|
|
45,048
|
|
|
Total current liabilities
|
626,202
|
|
|
804,879
|
|
789,066
|
|
|
Long-term taxes payable
|
7,623
|
|
|
8,523
|
|
8,543
|
|
|
Long-term debt
|
551,925
|
|
|
902,461
|
|
904,316
|
|
|
Deferred income taxes
|
13,234
|
|
|
30,396
|
|
22,903
|
|
|
Liability for unrecognized tax benefits
|
13,327
|
|
|
12,233
|
|
12,311
|
|
|
Long-term leases
|
29,740
|
|
|
28,206
|
|
27,843
|
|
|
Pension, postretirement, and other long-term liabilities
|
74,467
|
|
|
70,315
|
|
74,389
|
|
|
Total liabilities
|
1,316,518
|
|
|
1,857,013
|
|
1,839,371
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
March 31, 2020
|
|
Stockholders’ equity
|
|
|
|
|
|
Common Stock—no par value:
|
|
|
|
|
|
Authorized shares (250,000 for all periods)
|
|
|
|
|
|
Issued shares (25,000, 9,963, and 9,976, respectively)
|
391,089
|
|
|
469,450
|
|
469,677
|
|
|
Retained deficit
|
(13,478)
|
|
|
(324,192)
|
|
(488,545)
|
|
|
Accumulated other comprehensive loss
|
(1,403)
|
|
|
(59,781)
|
|
(59,132)
|
|
|
Total stockholders’ equity (deficit) of Pyxus International, Inc.
|
376,208
|
|
|
85,477
|
|
(78,000)
|
|
|
Noncontrolling interests
|
3,329
|
|
|
6,557
|
|
1,692
|
|
|
Total stockholders’ equity (deficit)
|
379,537
|
|
|
92,034
|
|
(76,308)
|
|
|
Total liabilities and stockholders’ equity
|
$
|
1,696,055
|
|
|
$
|
1,949,047
|
|
$
|
1,763,063
|
|
|
|
|
|
|
|
|
|
|
|
See "Notes to Condensed Consolidated Financial Statements"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyxus International, Inc. and Subsidiaries
|
|
Condensed Statements of Consolidated Stockholders' Equity
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Attributable to Pyxus International, Inc.
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
(in thousands)
|
Common
Stock
|
Retained
(Deficit) Earnings
|
Currency Translation Adjustment
|
Pensions,
Net of Tax
|
Derivatives, Net of Tax
|
Noncontrolling
Interests
|
Total Stockholders' Equity
|
|
Balance, March 31, 2020 (Predecessor)
|
$
|
469,677
|
|
$
|
(488,545)
|
|
$
|
(22,509)
|
|
$
|
(37,154)
|
|
$
|
531
|
|
$
|
1,692
|
|
$
|
(76,308)
|
|
|
Net loss
|
—
|
|
(92,161)
|
|
—
|
|
—
|
|
—
|
|
(648)
|
|
(92,809)
|
|
|
Stock-based compensation
|
117
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
117
|
|
|
Dividends paid
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(120)
|
|
(120)
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
—
|
|
(64)
|
|
494
|
|
(531)
|
|
(76)
|
|
(177)
|
|
|
Balance, June 30, 2020 (Predecessor)
|
469,794
|
|
(580,706)
|
|
(22,573)
|
|
(36,660)
|
|
—
|
|
848
|
|
(169,297)
|
|
|
Net income
|
—
|
|
111,198
|
|
—
|
|
—
|
|
—
|
|
(314)
|
|
110,884
|
|
|
Stock-based compensation
|
8
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8
|
|
|
Dividends paid
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(180)
|
|
(180)
|
|
|
Change in investment in subsidiaries
|
(1,655)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(461)
|
|
(2,116)
|
|
|
Other comprehensive income, net of tax
|
—
|
|
—
|
|
4,509
|
|
240
|
|
—
|
|
8
|
|
4,757
|
|
|
Cancellation of Predecessor equity
|
(468,147)
|
|
469,508
|
|
18,064
|
|
36,420
|
|
—
|
|
99
|
|
55,944
|
|
|
Balance, August 31, 2020 (Predecessor)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 1, 2020 (Successor)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Issuance of Successor common stock
|
391,402
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
391,402
|
|
|
Fresh start adjustment to noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,359
|
|
4,359
|
|
|
Net loss
|
—
|
|
(5,313)
|
|
—
|
|
—
|
|
—
|
|
(485)
|
|
(5,798)
|
|
|
Dividends paid
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(123)
|
|
(123)
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
—
|
|
(828)
|
|
—
|
|
—
|
|
21
|
|
(807)
|
|
|
Balance, September 30, 2020 (Successor)
|
391,402
|
|
(5,313)
|
|
(828)
|
|
—
|
|
—
|
|
3,772
|
|
389,033
|
|
|
Net loss
|
—
|
|
(8,165)
|
|
—
|
|
—
|
|
—
|
|
(55)
|
|
(8,220)
|
|
|
|
|
|
|
|
|
|
|
|
Fresh start adjustments
|
(313)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(246)
|
|
(559)
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
—
|
|
(3)
|
|
47
|
|
(619)
|
|
(142)
|
|
(717)
|
|
|
Balance, December 31, 2020 (Successor)
|
$
|
391,089
|
|
$
|
(13,478)
|
|
$
|
(831)
|
|
$
|
47
|
|
$
|
(619)
|
|
$
|
3,329
|
|
$
|
379,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyxus International, Inc. and Subsidiaries
|
|
Condensed Statements of Consolidated Stockholders' Equity
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Attributable to Pyxus International, Inc.
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
(in thousands)
|
Common
Stock
|
Retained
(Deficit) Earnings
|
Currency Translation Adjustment
|
Pensions,
Net of Tax
|
Derivatives, Net of Tax
|
Noncontrolling
Interests
|
Total Stockholders' Equity
|
|
Balance, March 31, 2019 (Predecessor)
|
$
|
468,936
|
|
$
|
(223,884)
|
|
$
|
(21,979)
|
|
$
|
(36,749)
|
|
$
|
(2,614)
|
|
$
|
8,309
|
|
$
|
192,019
|
|
|
Net loss
|
—
|
|
(61,797)
|
|
—
|
|
—
|
|
—
|
|
(366)
|
|
(62,163)
|
|
|
Stock-based compensation
|
429
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
429
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
—
|
|
(430)
|
|
311
|
|
369
|
|
30
|
|
280
|
|
|
Balance, June 30, 2019 (Predecessor)
|
469,365
|
|
(285,681)
|
|
(22,409)
|
|
(36,438)
|
|
(2,245)
|
|
7,973
|
|
130,565
|
|
|
Net loss
|
—
|
|
(16,518)
|
|
—
|
|
—
|
|
—
|
|
(86)
|
|
(16,604)
|
|
|
Restricted stock surrender
|
(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(12)
|
|
|
Stock-based compensation
|
383
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
383
|
|
|
Dividends paid
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(480)
|
|
(480)
|
|
|
Other comprehensive (loss) income, net of tax
|
—
|
|
—
|
|
(1,925)
|
|
(1,701)
|
|
1,428
|
|
(19)
|
|
(2,217)
|
|
|
Balance, September 30, 2019 (Predecessor)
|
469,736
|
|
(302,199)
|
|
(24,334)
|
|
(38,139)
|
|
(817)
|
|
7,388
|
|
111,635
|
|
|
Net loss
|
—
|
|
(21,993)
|
|
—
|
|
—
|
|
—
|
|
(453)
|
|
(22,446)
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
242
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
242
|
|
|
Purchase of noncontrolling interests in a subsidiary
|
(528)
|
|
—
|
|
33
|
|
—
|
|
—
|
|
(426)
|
|
(921)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax
|
—
|
|
—
|
|
1,789
|
|
1,111
|
|
576
|
|
48
|
|
3,524
|
|
|
Balance, December 31, 2019 (Predecessor)
|
$
|
469,450
|
|
$
|
(324,192)
|
|
$
|
(22,512)
|
|
$
|
(37,028)
|
|
$
|
(241)
|
|
$
|
6,557
|
|
$
|
92,034
|
|
|
|
|
|
|
|
|
|
|
|
*Amounts may not equal column totals due to rounding
|
|
|
|
|
|
|
|
|
|
|
See "Notes to Condensed Consolidated Financial Statements"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
(in thousands)
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Operating Activities:
|
|
|
|
|
Net (loss) income
|
$
|
(14,018)
|
|
$
|
18,075
|
|
$
|
(101,213)
|
|
|
Adjustments to reconcile net (loss) income to net cash used by operating activities:
|
|
|
|
|
Depreciation and amortization
|
13,301
|
|
16,580
|
|
26,003
|
|
|
Debt amortization/interest
|
6,552
|
|
4,862
|
|
9,356
|
|
|
|
|
|
|
|
Gain on foreign currency transactions
|
(2,196)
|
|
(11,077)
|
|
(3,921)
|
|
|
Asset impairment charges
|
3,982
|
|
213
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income) loss from unconsolidated affiliates, net of dividends
|
(7,600)
|
|
2,915
|
|
(128)
|
|
|
Reorganization items
|
—
|
|
(130,215)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities, net
|
(33,151)
|
|
(67,544)
|
|
(323,849)
|
|
|
Other, net
|
7,588
|
|
(15,870)
|
|
6,274
|
|
|
Net cash used by operating activities
|
(25,542)
|
|
(182,061)
|
|
(387,218)
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
Purchases of property, plant, and equipment
|
(11,557)
|
|
(7,757)
|
|
(51,479)
|
|
|
|
|
|
|
|
Collections on beneficial interests on securitized trade receivables
|
49,562
|
|
74,328
|
|
174,741
|
|
|
Loans to unconsolidated affiliates
|
—
|
|
—
|
|
(5,250)
|
|
|
|
|
|
|
|
Payments to acquire businesses, net of cash acquired
|
—
|
|
(4,805)
|
|
—
|
|
|
Other, net
|
116
|
|
(109)
|
|
1,604
|
|
|
Net cash provided by investing activities
|
38,121
|
|
61,657
|
|
119,616
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
Net repayments and proceeds from short-term borrowings
|
(37,915)
|
|
(99,969)
|
|
156,784
|
|
|
Proceeds from DIP facility
|
—
|
|
206,700
|
|
—
|
|
|
Repayment of DIP facility
|
—
|
|
(213,418)
|
|
—
|
|
|
Proceeds from term loan facility
|
—
|
|
213,418
|
|
—
|
|
|
Proceeds from 10.0% first lien notes
|
—
|
|
280,844
|
|
—
|
|
|
Repayment of 8.5% first lien notes
|
—
|
|
(280,844)
|
|
—
|
|
|
Proceeds from revolving loans facilities
|
37,500
|
|
27,438
|
|
—
|
|
|
Proceeds from long-term borrowings
|
462
|
|
2,568
|
|
—
|
|
|
Repayment of revolving loans facilities
|
—
|
|
(44,900)
|
|
—
|
|
|
Repayment of second lien notes
|
—
|
|
(1,199)
|
|
—
|
|
|
Share repurchases
|
—
|
|
(1,000)
|
|
—
|
|
|
Debt issuance costs
|
(2,657)
|
|
(8,486)
|
|
(5,245)
|
|
|
DIP financing fees
|
—
|
|
(9,344)
|
|
—
|
|
|
|
|
|
|
|
Purchase of noncontrolling interests in a subsidiary
|
—
|
|
—
|
|
(921)
|
|
|
Other debt restructuring costs
|
—
|
|
(7,574)
|
|
—
|
|
|
Other, net
|
(241)
|
|
(565)
|
|
(571)
|
|
|
Net cash (used) provided by financing activities
|
(2,851)
|
|
63,669
|
|
150,047
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
(369)
|
|
1,628
|
|
(5,277)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
(in thousands)
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Increase (decrease) in cash, cash equivalents, and restricted cash
|
9,359
|
|
(55,107)
|
|
(122,832)
|
|
|
Cash and cash equivalents at beginning of period
|
93,138
|
|
170,208
|
|
192,043
|
|
|
Restricted cash at beginning of period
|
24,838
|
|
2,875
|
|
5,767
|
|
|
Cash, cash equivalents, and restricted cash at end of period
|
$
|
127,335
|
|
$
|
117,976
|
|
$
|
74,978
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
Cash paid for income taxes, net
|
$
|
8,409
|
|
$
|
5,560
|
|
$
|
13,768
|
|
|
Cash paid for interest
|
17,451
|
|
54,233
|
|
80,191
|
|
|
Cash received from interest
|
(406)
|
|
(1,356)
|
|
(2,839)
|
|
|
Cash paid for reorganization items
|
—
|
|
7,314
|
|
—
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
Purchases of property, plant, and equipment included in accounts payable
|
$
|
1,090
|
|
$
|
1,759
|
|
$
|
4,590
|
|
|
Sales of property, plant, and equipment included in notes receivable
|
117
|
|
304
|
|
662
|
|
|
Noncash amounts obtained as a beneficial interest in exchange for transferring trade receivables in a securitization transaction
|
59,501
|
|
66,821
|
|
151,149
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of second lien notes
|
—
|
|
(634,487)
|
|
—
|
|
|
|
|
|
|
|
See "Notes to Condensed Consolidated Financial Statements"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyxus International, Inc. and Subsidiaries
|
|
Notes to Condensed Consolidated Financial Statements
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Pyxus directly or indirectly controls, either through majority ownership or otherwise. The terms the “Company,” “Pyxus,” “we,” or “us” when used with respect to periods commencing prior to the effectiveness of the Plan (as defined below), refer to Old Pyxus (as defined below), unless the context would indicate 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 the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, 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. 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2020 of Old Holdco, Inc. filed on August 24, 2020. Due to the seasonal nature of the Company’s business, the results of operations for a fiscal quarter are not necessarily indicative of the operating results that may be attained for other quarters or a full fiscal year.
The Company applied Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 852 – Reorganizations (“ASC 852”) in preparing the condensed consolidated financial statements. For periods subsequent to the Chapter 11 filing, ASC 852 requires distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business. Upon the effectiveness of the Plan and the emergence of the Debtors from the
Chapter 11 Cases, the Company determined it qualified for fresh start reporting under ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes on the Effective Date (as defined below). The Company elected to apply fresh start reporting using a convenience date of August 31, 2020 (the “Fresh Start Reporting Date”). The Company evaluated and concluded that the events between August 24, 2020 and August 31, 2020 were not material to the Company's financial reporting on both a quantitative or qualitative basis. Refer to “Note 4. Fresh Start Reporting” for additional information.
Due to the application of fresh start reporting, the pre-emergence and post-emergence periods are not comparable. The lack of comparability is emphasized by the use of a “black line” to separate the Predecessor and Successor periods in the condensed consolidated financial statements and footnote tables. References to “Successor” relate to our financial position and results of operations after August 31, 2020. References to “Predecessor” relate to our financial position and results of operations on or before August 31, 2020.
Bankruptcy Proceedings
On June 15, 2020, Old Holdco, Inc. (then named Pyxus International, Inc.) (“Old Pyxus”) and its then subsidiaries Alliance One International, LLC, Alliance One North America, LLC, Alliance One Specialty Products, LLC, and GSP Properties, LLC (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to implement a prepackaged Chapter 11 plan of reorganization to effectuate a financial restructuring (the “Restructuring”) of Old Pyxus’ secured debt. On August 21, 2020, the Bankruptcy Court issued an order (the “Confirmation Order”) confirming the Amended Joint Prepackaged Chapter 11 Plan of Reorganization (the “Plan”) filed by the Debtors in the Chapter 11 Cases. On August 24, 2020 (the “Effective Date”), the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases. In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc., which is a subsidiary of the Company. Pursuant to the Confirmation Order and the Plan, at the effectiveness of the plan all outstanding shares of common stock, and rights to acquire the common stock, of Old Pyxus were cancelled and the shares of common stock of the Company were delivered to certain creditors of Old Pyxus. Refer to “Note 3. Emergence from Voluntary Reorganization under Chapter 11” for additional information.
Reorganization Items
Expenditures, gains, and losses that were 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 are primarily composed of write-off of unamortized debt issuance costs and discount, fresh start reporting adjustments, legal, valuation, and consulting professional fees pertaining to the Chapter 11 Cases, United States trustee fees, DIP financing fees, other debt restructuring costs, gain on settlement of liabilities subject to compromise, and the issuance of exit facility shares.
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 5. Revenue Recognition" for a summary of the activity in the allowance for expected credit losses.
Reclassifications
Prior period amounts have been reclassified to conform to the current year presentation of other noncurrent assets in the condensed consolidated balance sheets and certain items in the condensed consolidated statements of cash flows.
2. New Accounting Standards
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 and its related amendments are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial assets held at amortized cost and other commitments to extend credit held by a reporting entity at each reporting date. Based on the Company's scoping assessment, ASU 2016-13 primarily impacts trade receivables. This guidance was early adopted by the Company as of April 1, 2020 using the modified retrospective approach. The adoption of this new accounting standard did not have a material impact on the Company's financial condition, results of operations, or cash flows.
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 updates disclosure requirements for defined benefit plans. This guidance was adopted using a retrospective approach and was effective beginning in the first quarter of fiscal year 2021. This new accounting standard did not have a material impact on the Company's financial condition, results of operations, or cash flows; however, expanded disclosures will be required in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
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 intra-period tax allocations, the methodology for calculating income taxes during interim periods when there are changes in tax laws or when year-to-date losses exceed anticipated losses, and the recognition of deferred tax liabilities for outside basis differences in foreign investments. This guidance also simplifies aspects of the accounting for franchise taxes that are partially based on income, separate financial statements of legal entities not subject to tax, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for the Company on April 1, 2021, with early adoption permitted. The Company is currently evaluating the impact that this new accounting standard will have on its consolidated financial statements and related disclosures.
3. Emergence from Voluntary Reorganization under Chapter 11
Bankruptcy Proceedings
On June 15, 2020, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware to implement a prepackaged Chapter 11 plan of reorganization in order to effectuate a financial restructuring of the Debtors’ debt. On August 21, 2020, the Bankruptcy Court entered the Confirmation Order pursuant to the Bankruptcy Code, which approved and confirmed the Amended Joint Prepackaged Chapter 11 Plan of Reorganization of Pyxus International, Inc. and Its Affiliated Debtors.
Summary Features of the Plan of Reorganization
On August 24, 2020 (the “Effective Date”), the Plan became effective in accordance with its terms, and the Debtors emerged from the Chapter 11 Cases. In connection with the satisfaction of the conditions to effectiveness as set forth in the Confirmation Order and the Plan, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, Inc. (“Pyxus Holdings”), which is a subsidiary of the Company. Under the Plan, all suppliers, vendors, employees, trade partners, foreign lenders, and landlords were unimpaired and were to be satisfied in full in the ordinary course of business, and the existing trade and customer contracts and terms of Old Pyxus were to be maintained by the Company and its subsidiaries. Commencing upon the Effective Date, the Company, through its subsidiaries, continued to operate the Old Pyxus business in the ordinary course. Old Pyxus, which retained no assets, has commenced a dissolution process and is being wound down.
Treatment of Claims and Interests
The Plan treated claims against and interest in Old Pyxus upon the effectiveness of the Plan as follows:
•Other Secured Claims (as defined in the Plan) were either (i) paid in full in cash, (ii) satisfied by delivery of collateral securing any such Claim (as defined in the Plan) and payment of any required interest, or (iii) reinstated.
•Other Priority Claims (as defined in the Plan) were paid in full in cash.
•Holders of First Lien Notes Claims (as defined in the Plan) received (i) payment in full in cash of all accrued and unpaid interest on such First Lien Notes, and (ii) the Notes (as defined below).
•Holders (as defined in the Plan) of Second Lien Notes Claims (as defined in the Plan) received, at the Holder’s election, (i) their pro rata share of the Company's common stock distributed in connection with the effectiveness of the Plan or (ii) cash equal to 2.00% of the principal amount of all Second Lien Notes beneficially owned by such Holder.
•Lenders under Foreign Credit Lines (as defined in the Plan) were paid in the ordinary course of business in accordance with the terms of the relevant agreement.
•General Unsecured Claims (as defined in the Plan) were paid in the ordinary course of business.
•The existing common stock, and rights to acquire common stock, of Old Pyxus was discharged, cancelled, released, and extinguished and of no further force or effect.
Third Party Releases
Upon the effectiveness of the Plan, certain Holders of Claims and Interests (as such terms are defined in the Plan) with respect to the Debtors, 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.
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., the Company (then known as “Pyxus One, Inc.”), Pyxus Parent, Inc. and Pyxus Holdings) were organized.
•Pyxus Parent, Inc. issued all of its equity interests to the Company in exchange for 25.0 million shares of common stock, no par value, of the Company (such common stock is referred to as “New Common Stock” and the 25.0 million shares of which are referred to as the “Equity Consideration”). Pyxus Holdings then issued all of its equity interests to Pyxus Parent, Inc. in exchange for the Equity Consideration.
•Pyxus Holdings entered into the ABL Credit Agreement (as defined below) to borrow cash under the ABL Credit Facility (as defined below) which together with cash on-hand was sufficient to fund (1) the distributions to holders of Allowed Second Lien Notes Claims (as defined in the Plan) that elected to take the Second Lien Notes Cash Option (as defined in the Plan) and (2) the Existing Equity Cash Pool (as defined in the Plan) (collectively such amount of cash is referred to as the “Cash Consideration”).
•Pursuant to an Asset Purchase Agreement, Old Pyxus transferred to Pyxus Holdings all of its assets (including by assuming and assigning all of Old Pyxus’ Executory Contracts and Unexpired Leases (as such terms are defined in the Plan) to Pyxus Holdings in accordance with the Plan, other than those Executory Contracts and Unexpired Leases that were rejected) and Pyxus Holdings assumed all of Old Pyxus’ obligations that are not discharged under the Plan (including all of Old Pyxus’ obligations to satisfy Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Other Secured Claims, Allowed Other Priority Claims, Allowed Foreign Credit Line Claims, Allowed General Unsecured Claims, Allowed Debtor Intercompany Claims, and Allowed Debtor Intercompany Claims as set forth in the Plan (as such terms are defined in the Plan)) in exchange for (i) Pyxus Holdings transferring the Equity Consideration to Old Pyxus, (ii) Pyxus Holdings transferring the Cash Consideration to Old Pyxus, (iii) Pyxus Holdings issuing the Notes (as defined below) under the Indenture (as defined below) which, on behalf of Old Pyxus, was issued to the Holders of Allowed First Lien Notes Claims (as defined in the Plan) as set forth in the Plan, and (iv) Pyxus Holdings issuing the Term Loans (as defined below) under the Term Loan Credit Facility (as defined below) which, on behalf of Old Pyxus, was issued to the holders of the DIP Facility Claims (as defined in the Plan) as set forth in the Plan. In addition to the transfer of assets to Pyxus Holdings, Pyxus Holdings made an offer of employment to all employees of Old Pyxus and all such employees became employed by Pyxus Holdings, or a designated subsidiary, upon the effectiveness of the Plan on the same terms and conditions existing immediately prior to the effectiveness of the Plan.
•The Company and Pyxus Parent, Inc., along with each applicable subsidiary of the Company, guaranteed the Notes, the Term Loan Credit Facility, and the ABL Credit Facility.
•Old Pyxus provided for the distribution of (i) the Notes to the Holders of Allowed First Lien Notes Claims pursuant to the Plan, (ii) approximately 12.5 million shares of New Common Stock to Holders of Allowed Second Lien Notes Claims (as defined in the Plan) that elected to receive New Common Stock under the Second Lien Notes Stock Option (as defined in the Plan) pursuant to the Plan, (iii) cash to the Holders of Allowed Second Lien Notes Claims that elected to take or are deemed to elect to take the Second Lien Notes Cash Option (as defined in the Plan), (iv) cash to the Qualifying Holders (as defined in the Plan) of the common stock of Old Pyxus pursuant to the Plan, (v) the Term Loans under the Term Loan Credit Facility and approximately 11.1 million shares of New Common Stock to the Holders of the DIP Facility Claims pursuant to the Plan, and (vi) approximately 1.4 million shares of New Common Stock in satisfaction of the Second Lien Notes RSA Fee Shares (as defined in the Plan) and in satisfaction of the Backstop Fee Shares (as defined in the Plan) to the persons entitled thereto pursuant to the terms and conditions of the Restructuring Support Agreement, dated June 14, 2020, by and among Old Pyxus and certain of its creditors party thereto, which was filed as Exhibit 10.1 to the Current Report on Form 8-K of Old Pyxus filed on June 15, 2020.
•Old Pyxus changed its name to Old Holdco, Inc., and the Company changed its name to Pyxus International, Inc.
•The Company elected a board of directors, initially comprising J. Pieter Sikkel, Holly Kim, and Patrick Fallon, and appointed as its officers the individuals serving as officers of Old Pyxus to the same offices held immediately prior to the effectiveness of the Old Plan.
The Company as Successor Issuer
As a result of these transactions, the Company is deemed to be the successor issuer to Old Pyxus under Rule 12g‑3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, the shares of New Common Stock were deemed to be registered under Section 12(g) of the Exchange Act and the Company was thereby deemed to be subject to the informational requirements of the Exchange Act, and the rules and regulations promulgated thereunder and, in accordance therewith, is required to file reports and other information with the Securities and Exchange Commission.
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 Credit Facility”). The ABL Credit Facility may be used for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $75.0 million, subject to certain limitations. The ABL Credit Facility matures on February 24, 2023, subject to potential extension on terms and conditions set forth in the ABL Credit Agreement. Refer to “Note 15. Debt Arrangements” for a description of the ABL Credit Agreement and the ABL Credit Facility.
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 $213.4 million (the “Term Loan Credit Facility”). The aggregate principal amount of loans outstanding under Debtors’ debtor-in-possession financing facility (the "DIP Facility”), and related fees, were converted into, or otherwise satisfied with the proceeds of, the Term Loan Credit Facility. The loans made under the Term Loan Credit Facility (the “Term Loans”) and the Term Loan Credit Facility mature on February 24, 2025. Refer to “Note 15. Debt Arrangements” for a description of the Term Loan Credit Agreement, the Term Loan Credit Facility and the Term Loans.
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 mature on August 24, 2024. Refer to “Note 15. Debt Arrangements” for a description of the Notes and the Indenture.
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 two individuals to serve on the seven-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 one 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 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.
4. Fresh Start Reporting
In connection with the emergence from Chapter 11 Cases, the Company qualified for fresh start reporting as (i) the holders of existing voting shares of the Predecessor received less than 50% of the voting shares of the Successor Company and (ii) the preliminary reorganization value of the Company's assets immediately prior to confirmation of the Plan was less than the post-petition liabilities and allowed claims. In accordance with ASC 852, with the application of fresh start reporting, the Company allocated the preliminary reorganization value to its individual assets and liabilities based on their estimated fair values. The Effective Date estimated fair values of certain of the Company's assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets.
Reorganization Value
The reorganization value represents the fair value of the Company’s total assets before considering liabilities and is intended to approximate the amount a willing buyer would pay for the Company’s assets immediately after restructuring. The reorganization value was derived from the enterprise value, which represents the estimated fair value of an entity’s long-term debt and equity. As set forth in the Plan, the enterprise value (excluding cash) of the Company was estimated to be in the range of $1,251,000 to $1,524,000 with a midpoint of $1,388,000. The Company estimated its enterprise value to be $1,252,379, which is near the low point of the range. The Company believes utilizing an estimated enterprise value near the low point of the range is appropriate due to the identification of Level 1 trading activity that indicated the estimated enterprise value was near the low point of the range, the Company's performance lagging behind plan (due in part to the continued impact of the COVID-19 pandemic), and the utilization of an increased discount rate for the Other Products and Services long-term projections.
The estimated enterprise value is not necessarily indicative of actual value or financial results. Changes in the economy or the financial markets could result in a different estimated enterprise value. The calculated enterprise value relies on the three methodologies listed below collectively. The actual value of the business is subject to certain uncertainties and contingencies that are difficult to predict and will fluctuate with changes in various factors affecting the financial conditions and prospects of the business.
The following reconciles the estimated enterprise value to the estimated fair value of the Successor common stock as of the Fresh Start Reporting Date:
|
|
|
|
|
|
|
|
Enterprise value, excluding cash
|
$
|
1,252,379
|
|
|
Plus: cash, cash equivalents, and restricted cash
|
117,587
|
|
|
Less: fair value of debt
|
(974,205)
|
|
|
Fair value of Successor stockholders’ equity
|
$
|
395,761
|
|
|
Shares issued upon emergence
|
25,000
|
|
|
Per share value
|
$
|
15.83
|
|
The following reconciles estimated enterprise value to the reorganization value of the Successor assets to be allocated to individual assets as of the Fresh Start Reporting Date:
|
|
|
|
|
|
|
|
Enterprise value, excluding cash
|
$
|
1,252,379
|
|
|
Plus: cash, cash equivalents, and restricted cash
|
117,587
|
|
|
Plus: working capital liabilities
|
170,905
|
|
|
Plus: other operating liabilities
|
54,700
|
|
|
Plus: non-operating liabilities
|
113,954
|
|
|
Reorganization value of Successor assets
|
$
|
1,709,525
|
|
With the assistance of financial advisors, the Company determined the estimated enterprise value and the corresponding estimated equity value of the Successor by considering various valuation methods, including (i) discounted cash flow method, (ii) guideline public company method, and (iii) selected transaction analysis method. The use and reliability of each approach is dependent on the facts and circumstances of the business being valued.
In order to estimate the enterprise value using the discounted cash flow analysis approach, the Company’s estimated future cash flow projections through 2024, plus a terminal value calculated using a capitalization rate applied to normalized cash flows were discounted to an assumed present value using our estimated weighted average cost of capital (12%), which represents the internal rate of return.
Condensed Consolidated Balance Sheet
The adjustments set forth in the following condensed consolidated balance sheet as of August 31, 2020 reflect the effects of the transactions contemplated by the Plan and executed on the Fresh Start Reporting Date (reflected in the column entitled “Reorganization Adjustments”) as well as the fair value and other required accounting adjustments resulting from the adoption of fresh start reporting (reflected in the column entitled “Fresh Start Reporting Adjustments”).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
As of August 31, 2020
|
|
|
|
|
Fresh Start Reporting Adjustments
|
|
|
|
Predecessor
|
Reorganization Adjustments
|
|
As Reported at September 30, 2020
|
As Adjusted at December 31, 2020
|
|
Successor
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
111,427
|
|
$
|
(18,289)
|
|
(1)
|
$
|
—
|
|
$
|
—
|
|
|
$
|
93,138
|
|
|
Restricted cash
|
2,949
|
|
21,500
|
|
(2)
|
—
|
|
—
|
|
|
24,449
|
|
|
Trade receivables, net
|
152,309
|
|
—
|
|
|
—
|
|
—
|
|
|
152,309
|
|
|
Other receivables
|
13,227
|
|
—
|
|
|
—
|
|
—
|
|
|
13,227
|
|
|
Accounts receivable, related parties
|
2,780
|
|
—
|
|
|
—
|
|
—
|
|
|
2,780
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
861,851
|
|
—
|
|
|
—
|
|
—
|
|
|
861,851
|
|
|
Advances to tobacco suppliers, net
|
44,061
|
|
—
|
|
|
—
|
|
—
|
|
|
44,061
|
|
|
Recoverable income taxes
|
5,830
|
|
—
|
|
|
—
|
|
—
|
|
|
5,830
|
|
|
Prepaid expenses
|
34,350
|
|
—
|
|
|
—
|
|
—
|
|
|
34,350
|
|
|
Other current assets
|
15,059
|
|
—
|
|
|
—
|
|
—
|
|
|
15,059
|
|
|
Total current assets
|
1,243,843
|
|
3,211
|
|
|
—
|
|
—
|
|
|
1,247,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
389
|
|
—
|
|
|
—
|
|
—
|
|
|
389
|
|
|
|
|
|
|
|
|
|
|
|
Investments in unconsolidated affiliates
|
54,460
|
|
—
|
|
|
13,291
|
|
30,531
|
|
(13)
|
|
84,991
|
|
|
Goodwill
|
6,120
|
|
—
|
|
|
48,756
|
|
31,815
|
|
(14)
|
|
37,935
|
|
|
Other intangible assets, net
|
64,924
|
|
—
|
|
|
1,596
|
|
6,075
|
|
(15)
|
|
70,999
|
|
|
Deferred income taxes, net
|
125
|
|
—
|
|
|
9,638
|
|
7,484
|
|
(16)
|
|
7,609
|
|
|
Long-term recoverable income taxes
|
3,130
|
|
—
|
|
|
—
|
|
—
|
|
|
3,130
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets
|
45,821
|
|
3,139
|
|
(3)
|
(310)
|
|
(310)
|
|
(17)
|
|
48,650
|
|
|
Right-of-use assets
|
39,576
|
|
—
|
|
|
(4,281)
|
|
(4,281)
|
|
(18)
|
|
35,295
|
|
|
Property, plant, and equipment, net
|
299,293
|
|
—
|
|
|
(124,965)
|
|
(125,820)
|
|
(19)
|
|
173,473
|
|
|
Total assets
|
$
|
1,757,681
|
|
$
|
6,350
|
|
|
$
|
(56,275)
|
|
$
|
(54,506)
|
|
|
$
|
1,709,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Notes payable to banks
|
$
|
461,783
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
461,783
|
|
|
DIP financing
|
206,700
|
|
(206,700)
|
|
(4)
|
|
—
|
|
—
|
|
|
—
|
|
|
Accounts payable
|
58,813
|
|
334
|
|
(5)
|
|
25
|
|
25
|
|
|
59,172
|
|
|
Accounts payable, related parties
|
26,125
|
|
—
|
|
|
—
|
|
—
|
|
|
26,125
|
|
|
Advances from customers
|
23,967
|
|
—
|
|
|
—
|
|
—
|
|
|
23,967
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
113,118
|
|
(31,853)
|
|
(6)
|
|
(1,792)
|
|
(1,792)
|
|
(20)
|
|
79,473
|
|
|
Income taxes payable
|
8,319
|
|
—
|
|
|
—
|
|
—
|
|
|
8,319
|
|
|
Operating leases payable
|
11,083
|
|
—
|
|
|
(992)
|
|
(992)
|
|
(21)
|
|
10,091
|
|
|
Current portion of long-term debt
|
90
|
|
—
|
|
|
—
|
|
—
|
|
|
90
|
|
|
Total current liabilities
|
909,998
|
|
(238,219)
|
|
|
(2,759)
|
|
(2,759)
|
|
|
669,020
|
|
|
Long-term taxes payable
|
7,623
|
|
—
|
|
|
—
|
|
—
|
|
|
7,623
|
|
|
Long-term debt
|
277,090
|
|
250,546
|
|
(7)
|
|
(15,304)
|
|
(15,304)
|
|
(22)
|
|
512,332
|
|
|
Deferred income taxes
|
20,749
|
|
91
|
|
(8)
|
|
(10,070)
|
|
(7,742)
|
|
(23)
|
|
13,098
|
|
|
Liability for unrecognized tax benefits
|
13,420
|
|
—
|
|
|
—
|
|
—
|
|
|
13,420
|
|
|
Long-term leases
|
25,728
|
|
—
|
|
|
(2,263)
|
|
(2,263)
|
|
(21)
|
|
23,465
|
|
|
Pension, postretirement, and other long-term liabilities
|
71,898
|
|
—
|
|
|
3,467
|
|
3,467
|
|
(24)
|
|
75,365
|
|
|
Total liabilities not subject to compromise
|
1,326,506
|
|
12,418
|
|
|
(26,929)
|
|
(24,601)
|
|
|
1,314,323
|
|
|
Liabilities subject to compromise
|
|
|
|
|
|
|
|
|
Debt subject to compromise
|
635,686
|
|
(635,686)
|
|
(9)
|
|
—
|
|
—
|
|
|
—
|
|
|
Accrued interest on debt subject to compromise
|
26,156
|
|
(26,156)
|
|
(9)
|
|
—
|
|
—
|
|
|
—
|
|
|
Total liabilities subject to compromise
|
661,842
|
|
(661,842)
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Total liabilities
|
1,988,348
|
|
(649,424)
|
|
|
(26,929)
|
|
(24,601)
|
|
|
1,314,323
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
Common Stock—no par value:
|
|
|
|
|
|
|
|
|
Predecessor common stock (shares)
|
9,976
|
|
(9,976)
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Successor common stock (shares)
|
—
|
|
25,000
|
|
|
—
|
|
—
|
|
|
25,000
|
|
|
Predecessor additional paid-in capital
|
468,147
|
|
(468,147)
|
|
(10)
|
|
—
|
|
—
|
|
|
—
|
|
|
Successor additional paid-in capital
|
—
|
|
391,402
|
|
(11)
|
|
—
|
|
(313)
|
|
|
391,089
|
|
|
Retained deficit
|
(644,250)
|
|
728,160
|
|
(12)
|
|
(83,910)
|
|
(83,910)
|
|
(25)
|
|
—
|
|
|
Accumulated other comprehensive loss
|
(54,484)
|
|
—
|
|
|
54,484
|
|
54,484
|
|
(26)
|
|
—
|
|
|
Total stockholders’ equity (deficit) of Pyxus International, Inc.
|
(230,587)
|
|
651,415
|
|
|
(29,426)
|
|
(29,739)
|
|
|
391,089
|
|
|
Noncontrolling interests
|
(80)
|
|
4,359
|
|
|
80
|
|
(166)
|
|
|
4,113
|
|
|
Total stockholders’ equity (deficit)
|
(230,667)
|
|
655,774
|
|
|
(29,346)
|
|
(29,905)
|
|
|
395,202
|
|
|
Total liabilities and stockholders’ equity
|
$
|
1,757,681
|
|
$
|
6,350
|
|
|
$
|
(56,275)
|
|
$
|
(54,506)
|
|
|
$
|
1,709,525
|
|
(1) The following summarizes the change in cash and cash equivalents:
|
|
|
|
|
|
|
|
Proceeds from ABL Credit Facility, net of debt issuance costs
|
$
|
26,861
|
|
|
Repayment of DIP Facility
|
(213,418)
|
|
|
Proceeds from Term Loan Credit Facility
|
213,418
|
|
|
Proceeds from 10.0% first lien notes
|
280,844
|
|
|
Repayment of 8.5% first lien notes
|
(280,844)
|
|
|
Payment to fund professional fee escrow account
|
(21,500)
|
|
|
Payment of other professional and administrative fees
|
(11,828)
|
|
|
Payment of accrued interest on DIP Facility
|
(494)
|
|
|
Payment to holders of Predecessor second lien notes that elected the cash option
|
(1,199)
|
|
|
Payment to holders of Predecessor common stock
|
(1,000)
|
|
|
Payment of accrued interest on prepetition Predecessor first lien notes
|
(9,129)
|
|
|
|
$
|
(18,289)
|
|
(2) Represents the funding of an escrow account for professional fees associated with the Chapter 11 Cases.
(3) Represents the capitalization of debt issuance costs related to the ABL Credit Facility.
(4) Represents the conversion of the DIP Facility that was exchanged for the Term Loans, and accordingly reclassified to long-term debt.
(5) Reflects the recognition of payables for professional fees to be paid subsequent to the Company's emergence from Chapter 11 Cases.
(6) The following summarizes the net change in accrued expenses and other current liabilities:
|
|
|
|
|
|
|
|
Payment of accrued interest on the DIP Facility
|
$
|
(494)
|
|
|
Payment of accrued interest on the Predecessor first lien notes
|
(9,129)
|
|
|
Settlement of accrued backstop fee through the issuance of common stock
|
(18,000)
|
|
|
Reclassification of DIP Facility exit fee to long-term debt
|
(6,718)
|
|
|
Recognition of accrued interest from the Effective Date to the Convenience Date
|
1,044
|
|
|
Accrual for professional fees
|
1,444
|
|
|
|
$
|
(31,853)
|
|
(7) The following summarizes the changes in long-term debt:
|
|
|
|
|
|
|
|
Draw on the ABL Credit Facility
|
$
|
30,000
|
|
|
Issuance of the Term Loans (1)
|
213,418
|
|
|
Conversion of redemption fee on Predecessor first lien notes to Successor Notes
|
5,843
|
|
|
Derecognition of the original issue discount and the debt issuance costs on Predecessor first lien notes
|
1,285
|
|
|
|
$
|
250,546
|
|
|
(1) Includes $6,718 related to the DIP Facility exit fee
|
|
(8) Represents the recognition of deferred tax liabilities as a result of the cumulative tax impact of the reorganization adjustments herein.
(9) Represents the settlement of liabilities subject to compromise in accordance with the Plan, which resulted in a gain on the discharge of the Predecessor second lien notes as follows:
|
|
|
|
|
|
|
|
Debt subject to compromise
|
$
|
635,686
|
|
|
Accrued interest on debt subject to compromise
|
26,156
|
|
|
Total second lien notes discharged
|
661,842
|
|
|
Payment to holders of second lien notes electing cash option
|
(1,199)
|
|
|
Value of common stock issued to holders of second lien notes
|
(198,339)
|
|
|
Gain on discharge of second lien notes
|
$
|
462,304
|
|
(10) Represents the cancellation of Predecessor common stock.
(11) The changes in Successor additional paid-in capital were as follows:
|
|
|
|
|
|
|
|
Value of Successor common stock, second lien notes
|
$
|
198,339
|
|
|
Value of Successor common stock, other
|
193,063
|
|
|
|
$
|
391,402
|
|
(12) Represents $260,013 of cumulative impact to Predecessor retained deficit as a result of the reorganization adjustments described above and $468,147 for the elimination of Predecessor common stock.
(13) Represents fair value adjustments to the Company's equity method investments.
(14) Represents reorganization value in excess of value allocable to tangible and intangible assets.
(15) Represents the fair value adjustments to recognize the customer relationships, licenses, technology (inclusive of patents and know how), trade names, and internally developed software intangible assets.
(16) Represents the recognition of deferred tax assets as a result of the cumulative tax impact of the fresh start adjustments herein.
(17) Represents an adjustment to pension assets of ($352), partially offset by other adjustments of $42.
(18) Represents the fair value adjustments to right-of-use lease assets.
(19) Represents the following fair value adjustments to property, plant, and equipment, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
Historical Value
|
Fair Value
Adjustment
|
Successor
Fair Value
|
|
Land
|
$
|
33,562
|
|
$
|
(104)
|
|
$
|
33,458
|
|
|
Buildings
|
259,255
|
|
(195,797)
|
|
63,458
|
|
|
Machinery and equipment
|
198,708
|
|
(122,151)
|
|
76,557
|
|
|
Total
|
491,525
|
|
(318,052)
|
|
173,473
|
|
|
Less: Accumulated Depreciation
|
(192,232)
|
|
192,232
|
|
—
|
|
|
Total property, plant, and equipment, net
|
$
|
299,293
|
|
$
|
(125,820)
|
|
$
|
173,473
|
|
(20) Represents the revaluation of the current pension liability of ($1,800), partially offset by an adjustment to financing leases of $8.
(21) Represents the Company's recalculation of lease obligations using a higher incremental borrowing rate applicable upon emergence from Chapter 11 Cases and commensurate with the new capital structure.
(22) Represents the fair value adjustment to the first lien notes.
(23) Represents the adjustment of deferred tax liabilities as a result of the cumulative tax impact of the fresh start valuation adjustments herein.
(24) Represents the recalculation of the present value of the Company's pension liability.
(25) Represents the cumulative impact of the remeasurement of assets and liabilities from fresh start reporting, $7,631 of tax effect of reorganization items, and the elimination of Predecessor's accumulated other comprehensive losses for the five months ended August 31, 2020.
(26) Represents the derecognition of accumulated other comprehensive loss as a result of reorganization pension adjustments, and the elimination of Predecessor's foreign currency translation adjustments.
5. Revenue Recognition
Product revenue is primarily processed tobacco sold to the customer. Processing and other revenues are mainly contracts to process customer-owned green tobacco. During processing, ownership remains with the customers. Other products and services revenue is primarily composed of revenue from the sale of legal cannabis in Canada and e-liquids product revenue. The following disaggregates sales and other operating revenues by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
|
Three months ended December 31, 2019
|
|
|
|
|
|
|
Leaf - North America:
|
|
|
|
|
Product revenue
|
$
|
46,588
|
|
|
$
|
39,148
|
|
|
Processing and other revenues
|
13,956
|
|
|
13,868
|
|
|
Total sales and other operating revenues
|
60,544
|
|
|
53,016
|
|
|
|
|
|
|
|
Leaf - Other Regions:
|
|
|
|
|
Product revenue
|
298,376
|
|
|
293,564
|
|
|
Processing and other revenues
|
12,007
|
|
|
12,936
|
|
|
Total sales and other operating revenues
|
310,383
|
|
|
306,500
|
|
|
|
|
|
|
|
Other Products and Services:
|
|
|
|
|
Total sales and other operating revenues
|
8,633
|
|
|
3,744
|
|
|
|
|
|
|
|
Total sales and other operating revenues
|
$
|
379,560
|
|
|
$
|
363,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Leaf - North America:
|
|
|
|
|
Product revenue
|
$
|
63,693
|
|
$
|
51,211
|
|
$
|
114,548
|
|
|
Processing and other revenues
|
16,828
|
|
6,523
|
|
24,873
|
|
|
Total sales and other operating revenues
|
80,521
|
|
57,734
|
|
139,421
|
|
|
|
|
|
|
|
Leaf - Other Regions:
|
|
|
|
|
Product revenue
|
387,785
|
|
355,902
|
|
825,522
|
|
|
Processing and other revenues
|
19,586
|
|
24,595
|
|
42,316
|
|
|
Total sales and other operating revenues
|
407,371
|
|
380,497
|
|
867,838
|
|
|
|
|
|
|
|
Other Products and Services:
|
|
|
|
|
Total sales and other operating revenues
|
9,502
|
|
9,369
|
|
15,652
|
|
|
|
|
|
|
|
Total sales and other operating revenues
|
$
|
497,394
|
|
$
|
447,600
|
|
$
|
1,022,911
|
|
|
|
|
|
|
The following summarizes activity in the allowance for expected credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
|
Three months ended December 31, 2019
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(15,091)
|
|
|
$
|
(7,242)
|
|
|
Additions
|
(2,187)
|
|
|
(5)
|
|
|
Write-offs
|
—
|
|
|
—
|
|
|
Balance, end of period
|
$
|
(17,278)
|
|
|
$
|
(7,247)
|
|
|
Trade receivables
|
194,834
|
|
|
187,651
|
|
|
Trade receivables, net
|
$
|
177,556
|
|
|
$
|
180,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
(15,361)
|
|
$
|
(15,893)
|
|
$
|
(13,381)
|
|
|
Additions
|
(2,187)
|
|
—
|
|
—
|
|
|
Write-offs
|
270
|
|
532
|
|
6,134
|
|
|
Balance, end of period
|
$
|
(17,278)
|
|
$
|
(15,361)
|
|
$
|
(7,247)
|
|
|
Trade receivables
|
194,834
|
|
167,670
|
|
187,651
|
|
|
Trade receivables, net
|
$
|
177,556
|
|
$
|
152,309
|
|
$
|
180,404
|
|
6. Restructuring and Asset Impairment Charges
In December 2020, the Company commenced actions to exit operations of the industrial hemp businesses, including the production and sale of products containing extracts of industrial hemp, including cannabidiol ("CBD") products, by its Criticality LLC subsidiary (“Criticality”). In addition, the Company continued its focus on cost saving initiatives. The employee separation and impairment charges are primarily related to continued restructuring of certain U.S. operations, which included Criticality, and certain African operations.
The following summarizes the Company's restructuring and asset impairment charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
|
Three months ended December 31, 2019
|
|
Employee separation charges
|
$
|
4,087
|
|
|
$
|
531
|
|
|
Asset impairment and other non-cash charges
|
3,687
|
|
|
141
|
|
|
Restructuring and asset impairment charges
|
$
|
7,774
|
|
|
$
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Employee separation charges
|
$
|
5,009
|
|
$
|
353
|
|
$
|
632
|
|
|
Asset impairment and other non-cash charges
|
3,982
|
|
213
|
|
260
|
|
|
Restructuring and asset impairment charges
|
$
|
8,991
|
|
$
|
566
|
|
$
|
892
|
|
The following summarizes the activity in the restructuring accrual for employee separation and other cash charges for the Company's Leaf - North America, Leaf - Other Regions, and Other Products and Services segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
|
Three months ended December 31, 2019
|
|
|
Other Products and Services
|
Leaf - North America
|
Leaf - Other Regions
|
|
|
Leaf - North America
|
Leaf - Other Regions
|
|
Beginning balance
|
$
|
—
|
|
$
|
1,174
|
|
$
|
229
|
|
|
|
$
|
266
|
|
$
|
214
|
|
|
Period charges
|
2,105
|
|
584
|
|
1,398
|
|
|
|
—
|
|
531
|
|
|
Payments
|
—
|
|
(567)
|
|
(922)
|
|
|
|
(251)
|
|
(646)
|
|
|
Ending balance
|
$
|
2,105
|
|
$
|
1,191
|
|
$
|
705
|
|
|
|
$
|
15
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
|
Other Products and Services
|
Leaf - North America
|
Leaf - Other Regions
|
Leaf - North America
|
Leaf - Other Regions
|
Leaf - North America
|
Leaf - Other Regions
|
|
Beginning balance
|
$
|
—
|
|
$
|
312
|
|
$
|
255
|
|
$
|
—
|
|
$
|
407
|
|
$
|
1,621
|
|
$
|
222
|
|
|
Period charges
|
2,105
|
|
1,506
|
|
1,398
|
|
312
|
|
40
|
|
8
|
|
624
|
|
|
Payments
|
—
|
|
(627)
|
|
(948)
|
|
—
|
|
(192)
|
|
(1,614)
|
|
(747)
|
|
|
Ending balance
|
$
|
2,105
|
|
$
|
1,191
|
|
$
|
705
|
|
$
|
312
|
|
$
|
255
|
|
$
|
15
|
|
$
|
99
|
|
The following summarizes the asset impairment and other non-cash charges for the Company's Leaf - North America, Leaf - Other Regions, and Other Products and Services segments:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Leaf - North America
|
$
|
—
|
|
$
|
—
|
|
|
Leaf - Other Regions
|
733
|
|
141
|
|
|
Other Products and Services
|
2,954
|
|
—
|
|
|
Total
|
3,687
|
|
$
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Leaf - North America
|
$
|
—
|
|
$
|
17
|
|
$
|
—
|
|
|
Leaf - Other Regions
|
$
|
1,028
|
|
196
|
|
260
|
|
|
Other Products and Services
|
2,954
|
|
—
|
|
—
|
|
|
Total
|
$
|
3,982
|
|
$
|
213
|
|
$
|
260
|
|
7. Income Taxes
As described in “Note 3. Emergence from Voluntary Reorganization under Chapter 11”, on August 24, 2020, as part of the Chapter 11 plan of reorganization, Old Pyxus completed a series of transactions pursuant to which the business assets and operations of Old Pyxus were vested in a new Virginia corporation, Pyxus Holdings, which is an indirect subsidiary of the Company. Under the Plan, all suppliers, vendors, employees, trade partners, foreign lenders and landlords were unimpaired and were to be satisfied in full in the ordinary course of business, and the existing trade and customer contracts and terms of Old Pyxus were to be maintained by the Company and its subsidiaries. Commencing upon the Effective Date, the Company, through its subsidiaries, continued to operate the Old Pyxus business in the ordinary course. Old Pyxus, which retained no assets, has commenced a dissolution and is being wound down.
The tax attributes generated by Old Pyxus’ foreign subsidiaries (net operating loss carryforwards and income tax credits) survived the Chapter 11 proceedings and we expect, to the extent that a valuation allowance is not applicable, to use these tax attributes to reduce future tax liabilities. For U.S. tax purposes, tax attributes not utilized as part of the Chapter 11 proceedings or asset sale to Pyxus Holdings pursuant to the Plan will expire unutilized.
The Company entered into a transfer agreement with Old Pyxus to transfer and assume the liability for unpaid installments payments of Old Pyxus under Internal Revenue Code Section 965(h) (i.e. transition tax) in the amount of $8,543.
Valuation allowances have been established against deferred tax assets if, based on the available positive and negative evidence, it is more likely than not such assets will not be realized. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law of each applicable tax jurisdiction. The Company and Old Pyxus have considered the following possible sources of taxable income when assessing the realization of our and Old Pyxus’ deferred tax assets:
•future reversals of existing taxable temporary differences;
•future taxable income exclusive of reversing temporary differences and carryforwards;
•tax income in prior carryback years; and
•tax-planning strategies.
If, in the future, the Company overcomes negative evidence in tax jurisdictions where it has established valuation allowances, then the conclusions regarding the need for valuation allowances in these tax jurisdictions could change, resulting in the reversal of some or all of such valuation allowances. If the Company generates taxable income in tax jurisdictions prior to overcoming negative evidence, then it would reverse a portion of the valuation allowances related to the corresponding realized tax benefit for that period, without changing its conclusions on the need for the valuation allowance against the remaining net deferred tax assets.
For interim tax reporting, the Company estimates its annual effective tax rate and applies it to year-to-date ordinary income/loss pursuant to FASB ASC 740-270, “Accounting for Income Taxes in Interim Periods.” The Company reports the tax effect of unusual or infrequently occurring items, including changes in judgement about valuation allowances, uncertain tax positions, and effects of changes in tax laws or rates in the interim period in which they occur. The Company excludes tax jurisdictions where it has projected a year to date loss for which a tax benefit cannot be realized in accordance with FASB ASC 740, “Accounting for Income Taxes”. Old Pyxus reported on a discrete basis for the period April 1, 2020 through August 31, 2020.
The effective rate differs from the US statutory rate of 21% due to the impact of net foreign exchange effects, increases in non-deductible interest, foreign income taxed in the U.S., variations in the expected jurisdictional mix of earnings, and variations in included/excluded entities per adherence to FASB ASC 240-270. The Company has allocated $4,814 of the year-to-date tax benefit to a current tax receivable as it expects the year-to-date loss to offset current taxes payable throughout the remainder of the current year.
As of December 31, 2020, the Company’s unrecognized tax benefits totaled $15,958, of which $12,371 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 December 31, 2020, accrued interest and penalties totaled $1,353 and $669, 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.
The Company does not expect 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 December 31, 2020, the Company’s earliest open tax year for U.S. federal income tax purposes is its fiscal year ended March 31, 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.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous corporate income tax provisions, some of which affect our calculation of income taxes, including providing for the carryback of certain net operating losses, modifications to the net interest deduction limitations, refundable payroll tax credits, and deferment of employer social security payments. However, the provisions did not have a material impact on our Predecessor or Successor financial statements.
8. (Loss) Earnings Per Share
The following summarizes the computation of (loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
(in thousands, except per share data)
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
Basic loss per share:
|
|
|
|
Net loss attributable to Pyxus International, Inc.
|
$
|
(8,165)
|
|
$
|
(21,993)
|
|
|
Shares:
|
|
|
|
Weighted average number of shares outstanding(1)
|
25,000
|
|
9,166
|
|
|
Basic loss per share
|
$
|
(0.33)
|
|
$
|
(2.40)
|
|
|
|
|
|
|
Diluted loss per share:
|
|
|
|
Net loss attributable to Pyxus International, Inc.
|
$
|
(8,165)
|
|
$
|
(21,993)
|
|
|
Shares:
|
|
|
|
Weighted average number of shares outstanding(1)
|
25,000
|
|
9,166
|
|
|
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
|
25,000
|
|
9,166
|
|
|
Diluted loss per share
|
$
|
(0.33)
|
|
$
|
(2.40)
|
|
|
(1) 0 and 785 shares of common stock were owned by a wholly owned subsidiary as of December 31, 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 10 for the three months ended December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
(in thousands, except per share data)
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share:
|
|
|
|
|
Net (loss) income attributable to Pyxus International, Inc.
|
$
|
(13,478)
|
|
$
|
19,037
|
|
$
|
(100,308)
|
|
|
Shares:
|
|
|
|
|
Weighted average number of shares outstanding(1)
|
25,000
|
|
9,976
|
|
9,137
|
|
|
Basic (loss) earnings per share
|
$
|
(0.54)
|
|
$
|
1.91
|
|
$
|
(10.98)
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share:
|
|
|
|
|
Net (loss) income attributable to Pyxus International, Inc.
|
$
|
(13,478)
|
|
$
|
19,037
|
|
$
|
(100,308)
|
|
|
Shares:
|
|
|
|
|
Weighted average number of shares outstanding(1)
|
25,000
|
|
9,976
|
|
9,137
|
|
|
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)
|
—
|
|
16
|
|
—
|
|
|
Adjusted weighted average number of shares outstanding
|
25,000
|
|
9,992
|
|
9,137
|
|
|
Diluted (loss) earnings per share
|
$
|
(0.54)
|
|
$
|
1.91
|
|
$
|
(10.98)
|
|
|
(1) 0, 0, and 785 shares of common stock were owned by a wholly owned subsidiary as of December 31, 2020, August, 31, 2020, and December 31, 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 28 for the nine months ended December 31, 2019.
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Antidilutive stock options and other awards
|
—
|
|
452
|
|
|
|
|
|
|
|
|
|
|
Weighted average exercise price
|
$
|
—
|
|
$
|
56.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Antidilutive stock options and other awards
|
—
|
|
427
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average exercise price
|
$
|
—
|
|
$
|
56.86
|
|
$
|
56.98
|
|
9. Cash, Cash Equivalents, and Restricted Cash
The following summarizes the composition of restricted cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
December 31, 2020
|
December 31, 2019
|
March 31, 2020
|
|
Compensating balance for short-term borrowings
|
$
|
2,211
|
|
$
|
940
|
|
$
|
893
|
|
|
|
|
|
|
|
Escrow
|
1,273
|
|
1,363
|
|
1,450
|
|
|
Other
|
684
|
|
445
|
|
$
|
532
|
|
|
Total
|
$
|
4,168
|
|
$
|
2,748
|
|
$
|
2,875
|
|
10. Inventories, Net
The following summarizes the composition of inventories, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
December 31, 2020
|
December 31, 2019
|
March 31, 2020
|
|
Processed tobacco
|
$
|
662,179
|
|
$
|
703,124
|
|
$
|
485,764
|
|
|
Unprocessed tobacco
|
54,092
|
|
116,456
|
|
178,782
|
|
|
Other tobacco related
|
16,865
|
|
20,960
|
|
24,071
|
|
|
Other(1)
|
38,685
|
|
31,310
|
|
41,402
|
|
|
Total
|
$
|
771,821
|
|
$
|
871,850
|
|
$
|
730,019
|
|
|
(1) Represents inventory from the other products and services segment.
|
11. Acquisitions
On December 18, 2017, the Company completed a purchase of a 40.0% interest in Criticality, a North Carolina-based industrial hemp company that is engaged in 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 $7,450 for the settlement of the Company's 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 income (expense), net within the condensed consolidated statements of operations for the five months ended August 31, 2020. The assets and liabilities were recorded at their fair value.
Following the acquisition, the Company recorded certain post-closing purchase price adjustments. The intent of the acquisition was to allow the 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
|
|
The following summarizes the revenue, operating loss, and net loss for Criticality as well as the resulting impact to basic and diluted (loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
|
Revenue
|
16
|
|
19
|
|
—
|
|
|
Operating loss
|
(3,619)
|
|
(4,750)
|
|
(3,117)
|
|
|
Net loss
|
(9,897)
|
|
(11,067)
|
|
(3,317)
|
|
|
|
|
|
|
|
Impact to (loss) earnings per share:
|
|
|
|
|
Basic
|
(0.40)
|
|
(0.44)
|
|
(0.33)
|
|
|
Diluted
|
(0.40)
|
|
(0.44)
|
|
(0.33)
|
|
In December 2020, the Company commenced actions to exit operations of the industrial hemp businesses, including the production and sale of products containing extracts of industrial hemp, including CBD products, by Criticality. Refer to “Note 6. Restructuring and Asset Impairment” for additional information.
12. Equity Method Investments
The following summarizes the Company's equity method investments as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
Primary Purpose
|
The Company's Ownership Percentage
|
Basis Difference
|
|
Adams International Ltd.
|
Thailand
|
purchase and process tobacco
|
49
|
%
|
(5,313)
|
|
|
Alliance One Industries India Private Ltd.
|
India
|
purchase and process tobacco
|
49
|
%
|
(5,770)
|
|
|
China Brasil Tobacos Exportadora SA
|
Brazil
|
purchase and process tobacco
|
49
|
%
|
47,383
|
|
|
|
|
|
|
|
|
Oryantal Tütün Paketleme Sanayi ve Ticaret A.Ş.
|
Turkey
|
process tobacco
|
50
|
%
|
(416)
|
|
|
Purilum, LLC
|
U.S.
|
produce flavor formulations and consumable e-liquids
|
50
|
%
|
4,589
|
|
|
Siam Tobacco Export Company
|
Thailand
|
purchase and process tobacco
|
49
|
%
|
(5,313)
|
|
The following summarizes financial information for these equity method investments:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Operations statement:
|
|
|
|
Sales
|
$
|
121,873
|
|
$
|
61,515
|
|
|
Gross profit
|
30,154
|
|
9,462
|
|
|
Net income
|
16,577
|
|
1,506
|
|
|
Company's dividends received
|
317
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Operations statement:
|
|
|
|
|
Sales
|
$
|
134,879
|
|
$
|
67,553
|
|
$
|
256,885
|
|
|
Gross profit
|
32,403
|
|
14,151
|
|
44,235
|
|
|
Net income
|
17,315
|
|
5,869
|
|
16,599
|
|
|
Company's dividends received
|
317
|
|
5,104
|
|
6,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
December 31, 2020
|
December 31, 2019
|
March 31, 2020
|
|
Balance sheet:
|
|
|
|
|
Current assets
|
$
|
258,805
|
|
$
|
166,989
|
|
$
|
145,207
|
|
|
Property, plant, and equipment and other assets
|
44,853
|
|
57,320
|
|
56,481
|
|
|
Current liabilities
|
183,158
|
|
103,622
|
|
82,377
|
|
|
Long-term obligations and other liabilities
|
4,021
|
|
6,054
|
|
6,296
|
|
Of the amounts presented above, the following summarizes financial information for China Brasil Tobacos Exportadora SA ("CBT"):
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Operations statement:
|
|
|
|
Sales
|
$
|
94,057
|
|
$
|
22,521
|
|
|
Gross profit
|
25,170
|
|
3,338
|
|
|
Net income
|
13,598
|
|
1,041
|
|
|
Net income attributable to CBT
|
6,663
|
|
510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Operations statement:
|
|
|
|
|
Sales
|
$
|
98,730
|
|
$
|
26,675
|
|
$
|
158,955
|
|
|
Gross profit
|
26,207
|
|
6,423
|
|
25,359
|
|
|
Net income
|
13,864
|
|
3,216
|
|
11,929
|
|
|
Net income attributable to CBT
|
6,793
|
|
1,576
|
|
5,845
|
|
13. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
December 31, 2020
|
December 31, 2019
|
March 31, 2020
|
|
Investments in variable interest entities
|
$
|
85,944
|
|
$
|
63,320
|
|
$
|
62,407
|
|
|
Receivables with variable interest entities
|
1,333
|
|
11,301
|
|
10,099
|
|
|
Guaranteed amounts to variable interest entities (not to exceed)
|
56,088
|
|
61,566
|
|
59,792
|
|
14. Goodwill and Other Intangible Assets, Net
The following summarizes the changes in the Company's goodwill and other intangible assets, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Four months ended December 31, 2020
|
|
|
Weighted Average Remaining Useful Life
|
Beginning Gross Carrying Amount
|
Fresh start Adjustment (2)
|
Additions
|
Accumulated Amortization
|
|
Ending Intangible Assets, Net
|
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
|
Customer relationships
|
11.35 years
|
$
|
—
|
|
$
|
29,200
|
|
$
|
—
|
|
$
|
(840)
|
|
|
$
|
28,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses (1)
|
11.67 years
|
—
|
|
19,000
|
|
—
|
|
(445)
|
|
|
18,555
|
|
|
Technology
|
7.67 years
|
—
|
|
11,000
|
|
—
|
|
(458)
|
|
|
10,542
|
|
|
Trade names
|
13.54 years
|
—
|
|
11,800
|
|
—
|
|
(249)
|
|
|
11,551
|
|
|
Intangibles not subject to amortization:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
—
|
|
37,935
|
|
—
|
|
—
|
|
|
37,935
|
|
|
Total
|
|
$
|
—
|
|
$
|
108,935
|
|
$
|
—
|
|
$
|
(1,992)
|
|
|
$
|
106,943
|
|
(1) Certain of the Company's license intangibles are subject to annual renewal.
(2) Refer to "Note 4. Fresh Start Reporting" for additional details regarding fresh start reporting adjustments as reported at September 30, 2020 and as adjusted at December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
Five months ended August 31, 2020
|
|
|
Beginning Gross Carrying Amount
|
Additions
|
Accumulated Amortization (1)
|
Impact of Foreign Currency Translation
|
Fresh Start Adjustment(4)
|
Ending Intangible Assets, Net
|
|
Intangibles subject to amortization:
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
63,980
|
|
$
|
—
|
|
$
|
(34,724)
|
|
$
|
—
|
|
$
|
(29,256)
|
|
$
|
—
|
|
|
Production and supply contracts
|
7,000
|
|
—
|
|
(3,395)
|
|
—
|
|
(3,605)
|
|
—
|
|
|
Internally developed software (5)
|
22,385
|
|
—
|
|
(19,579)
|
|
41
|
|
(2,847)
|
|
—
|
|
|
Licenses (2)
|
30,886
|
|
—
|
|
(4,202)
|
|
2,183
|
|
(28,867)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
500
|
|
—
|
|
(151)
|
|
—
|
|
(349)
|
|
—
|
|
|
Intangibles not subject to amortization:
|
|
|
|
|
|
|
|
Goodwill (3)
|
—
|
|
6,120
|
|
—
|
|
—
|
|
(6,120)
|
|
—
|
|
|
Total
|
$
|
124,751
|
|
$
|
6,120
|
|
$
|
(62,051)
|
|
$
|
2,224
|
|
$
|
(71,044)
|
|
$
|
—
|
|
(1) Amortization expense across intangible asset classes for the five months ended August 31, 2020 was $3,160.
(2) Certain of the Company's license intangibles are subject to annual renewal.
(3) Goodwill of $6,120 relates to the Other Products and Services segment.
(6) Internally developed software was adjusted to $2,847 by Fresh Start Adjustments and has been reclassified to Successor's property, plant, and equipment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
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.
The following summarizes the estimated intangible asset amortization expense for the next five years and beyond:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Fiscal
Years Ended
|
Customer
Relationships
|
|
|
Licenses
|
Technology
|
Trade Names
|
Total
|
|
2021 (excluding the nine months ended December 31, 2020)
|
$
|
630
|
|
|
|
$
|
396
|
|
$
|
344
|
|
$
|
213
|
|
$
|
1,583
|
|
|
2022
|
2,519
|
|
|
|
1,583
|
|
1,375
|
|
853
|
|
6,330
|
|
|
2023
|
2,519
|
|
|
|
1,583
|
|
1,375
|
|
853
|
|
6,330
|
|
|
2024
|
2,519
|
|
|
|
1,583
|
|
1,375
|
|
853
|
|
6,330
|
|
|
2025
|
2,519
|
|
|
|
1,583
|
|
1,375
|
|
853
|
|
6,330
|
|
|
Thereafter
|
17,654
|
|
|
|
11,827
|
|
4,698
|
|
7,926
|
|
42,105
|
|
|
|
$
|
28,360
|
|
|
|
$
|
18,555
|
|
$
|
10,542
|
|
$
|
11,551
|
|
$
|
69,008
|
|
15. Debt Arrangements
The following summarizes debt and notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
Lines and Letters Available
|
Interest Rate
|
|
|
|
Predecessor
|
Successor
|
Successor
|
|
|
|
March 31,
|
December 31,
|
December 31,
|
|
|
(in thousands)
|
2020
|
2020
|
2020
|
|
|
Senior secured credit facility:
|
|
|
|
|
|
|
ABL facility
|
$
|
44,900
|
|
$
|
—
|
|
$
|
—
|
|
4.1
|
%
|
|
|
ABL Credit Facility
|
—
|
|
67,500
|
|
7,500
|
|
5.0
|
%
|
(1)
|
|
Senior notes:
|
|
|
|
|
|
|
8.5% senior secured first lien notes (2)
|
272,871
|
|
—
|
|
—
|
|
8.5
|
%
|
|
|
9.875% senior secured second lien notes (3)
|
630,737
|
|
—
|
|
—
|
|
9.9
|
%
|
|
|
10.0% senior secured first lien notes (4)
|
—
|
|
266,561
|
|
—
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
Term Loans (5)
|
—
|
|
214,643
|
|
—
|
|
9.7
|
%
|
(1)
|
|
Other long-term debt
|
856
|
|
3,362
|
|
386
|
|
5.4
|
%
|
(1)
|
|
Notes payable to banks (6)
|
540,157
|
|
433,571
|
|
293,876
|
|
6.2
|
%
|
(1)
|
|
Total debt
|
$
|
1,489,521
|
|
$
|
985,637
|
|
$
|
301,762
|
|
|
|
|
Short-term
|
$
|
540,157
|
|
$
|
433,571
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
45,048
|
|
$
|
141
|
|
|
|
|
|
Long-term debt
|
904,316
|
|
551,925
|
|
|
|
|
|
|
$
|
949,364
|
|
$
|
552,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of credit
|
$
|
7,027
|
|
$
|
5,100
|
|
$
|
3,700
|
|
|
|
|
Total credit available
|
|
|
$
|
305,462
|
|
|
|
|
|
|
|
|
|
|
|
(1) Weighted average rate for the trailing twelve months ended December 31, 2020.
|
|
(2) Upon emergence from Chapter 11 bankruptcy on the Effective Date, the prepetition 8.5% senior secured first lien notes were cancelled and replaced with the 10.0% senior secured first lien notes due 2024.
|
|
(3) Upon emergence from Chapter 11 bankruptcy on the Effective Date, the prepetition 9.875% senior secured second lien notes were cancelled through the exchange of common stock in the Successor or cash.
|
|
(4) Repayment of $266,561 is net of original issue discount of $14,283. Total repayment will be $280,844.
|
|
(5) Upon emergence from Chapter 11 bankruptcy on the Effective Date, the DIP Facility entered into at the petition date converted into the Term Loan Credit Facility. The aggregate balance of the Term Loans of $214,643 includes $1,225 of accrued paid in kind interest.
|
|
(6) Primarily foreign seasonal lines of credit.
|
ABL Credit Facility
On the Effective Date, Pyxus Holdings entered into 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 the ABL Credit Facility. The ABL Credit Facility may be used for revolving credit loans and letters of credit from time to time up to an initial maximum principal amount of $75,000, 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 Credit Facility in an aggregate amount not to exceed $15,000. The ABL Credit 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 Credit Facility and (ii) $18,750. The amount available under the ABL Credit 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.
At December 31, 2020, $7,500 was available for borrowing under the ABL Credit Facility, after reducing availability by the aggregate borrowings under the ABL Credit Facility of $67,500 outstanding on that date.
The ABL Credit Facility permits both base rate borrowings and LIBOR borrowings. Borrowings under the ABL Credit 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 Credit Facility matures on February 24, 2023, subject to extension on terms and conditions set forth in the ABL Credit Agreement. The ABL Credit Facility may be prepaid from time to time, in whole or in part, without prepayment or premium, subject to a termination fee of 50 basis points upon the permanent reduction of commitments under the ABL Credit Facility, including maturity. In addition, customary mandatory prepayments of the loans under the ABL 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 ABL 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 Credit Facility (and certain related obligations) are (a) guaranteed by 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 Credit 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 Credit 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 described below) 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 Credit 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 Credit Facility, if (i) an event of default has occurred and is continuing or (ii) excess borrowing availability under the ABL Credit Facility (based on the lesser of the commitments thereunder and the borrowing base) (the “Excess Availability”) falls below the greater of (x) $7,500 and (y) 10% of the lesser of (A) the commitments under the ABL Credit 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 Credit Facility with the cash deposited in certain deposit accounts of the ABL Loan Parties, including concentration accounts, and will restrict the ABL Loan Parties’ ability to transfer cash from their concentration accounts to their disbursement accounts. Such cash dominion period (a “Dominion Period”) shall end when (i) if arising as a result of a continuing event of default, such event of default ceases to exist, 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. No Dominion Period existed as of December 31, 2020.
Financial, Affirmative, and Restrictive Covenants
The ABL Credit Agreement governing the ABL Credit 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.
The ABL Credit Agreement governing the ABL Credit Facility also 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 (as defined in the ABL Credit Agreement).
At December 31, 2020, Pyxus Holdings was in compliance with all such covenants under the ABL Credit Agreement.
Term Loan Credit Facility
On the Effective Date, Pyxus Holdings entered into 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 the Term Loan Credit Facility in an aggregate principal amount of approximately $213,418. 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 (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 Loans and the Term Loan Credit Facility mature on February 24, 2025. The Term Loans may be prepaid from time to time, in whole or in part, without prepayment or penalty. In addition, customary mandatory prepayments of the Term Loans 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. At December 31, 2020, the aggregate principal amount of the Term Loans outstanding was $214,643.
Pyxus Holdings’ obligations under the Term Loan Credit Facility (and certain related obligations) are (a) guaranteed by Pyxus Parent, Inc. and the Company, all of Pyxus Holdings’ material domestic subsidiaries and certain of Pyxus Holdings’ foreign subsidiaries (the “Foreign Guarantors”), and each of Pyxus Holdings’ future material domestic subsidiaries is required to guarantee the 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.
At December 31, 2020, Pyxus Holdings was in compliance with all such covenants under the Term Loan Credit Agreement.
Senior Secured First Lien Notes
On the Effective Date, Pyxus Holdings issued approximately $280,844 in aggregate principal amount of the Notes to holders of Allowed First Lien Notes Claims (as defined in the Plan) pursuant to 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, 2021, 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, 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
|
%
|
Mandatory Repurchase Offers
Upon a “Change of Control” (as defined in the Indenture), Pyxus Holdings will be required to make an offer to repurchase the Notes at a price in cash equal to 101% of the principal amount thereof. Upon certain asset sales, Pyxus Holdings may be required to make an offer to repurchase the Notes at a price in cash equal to 100% of the principal amount thereof.
Certain Covenants
The Indenture contains covenants that impose restrictions on Pyxus Holdings, the Company and 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:
•incur additional indebtedness or issue disqualified stock or preferred stock;
•make investments;
•pay dividends and make other restricted payments;
•sell certain assets;
•create liens;
•enter into sale and leaseback transactions;
•consolidate, merge, sell, or otherwise dispose of all or substantially all of the Company’s assets; and
•enter into transactions with affiliates.
At December 31, 2020, each of Pyxus Holdings and each guarantor of the Notes was in compliance with all such covenants under the Indenture.
Collateral
The liens and other security interests granted by Pyxus Holdings and the guarantors on the Collateral for the benefit of the holders of the Notes 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 Credit Facility, and the Term Loan Credit Facility are set forth in the two intercreditor agreements entered into in connection with consummation of the transactions contemplated by the Plan, including the issuance of the Notes and the establishment of the ABL Credit 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 Credit 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 Credit 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 Credit 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 are 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.
African Seasonal Lines of Credit
On August 13, 2020, certain then subsidiaries of Old Pyxus, which are now subsidiaries of the Company, Alliance One International Holdings, Ltd. (“AOI Holdings”) and the subsidiaries in Kenya, Malawi, Tanzania, Uganda and Zambia (collectively, the “African Subsidiaries”) entered into an Amendment and Restatement Agreement (the “Initial TDB Facility Agreement”) with Eastern and Southern African Trade and Development Bank (“TDB”). On August 24, 2020, AOI Holdings, the African Subsidiaries, the Company, Pyxus Parent, Inc., Pyxus Holdings and TDB entered into a Second Amendment and Restatement Agreement (the “TDB Facility Agreement”) to amend and restate the Initial TDB Facility Agreement to add the Company, Pyxus Parent, Inc. and Pyxus Holdings as guarantors thereunder and to otherwise amend provisions thereof to permit the consummation of the transactions contemplated by the Plan. The TDB Facility Agreement sets forth the terms that govern the foreign seasonal lines of credit of each of the African Subsidiaries with TDB and supersedes the prior terms in effect. These lines of credit provide borrowings to fund the purchase of leaf tobacco in the respective jurisdictions to be repaid upon the sale of that tobacco. The original aggregate maximum borrowing availability under these separate existing foreign seasonal lines of credit was $255,000, and the aggregate borrowings were $240,485 as of August 13, 2020. Subject to certain conditions, the TDB Facility Agreement increased the maximum aggregate borrowing capacity to $285,000, less the amount of outstanding loans borrowed under the existing foreign seasonal lines of credit with TDB. Loans under the TDB Facility Agreement bear
interest at LIBOR plus 6%. The TDB Facility Agreement terminates on June 30, 2021 and may be renewed at TDB’s discretion.
Each of AOI Holdings, the Company, Pyxus Parent, Inc. and Pyxus Holdings guarantees the obligations of the African Subsidiaries under the TDB Facility Agreement. The obligations of each African Subsidiary under the TDB Facility Agreement are required to be secured by a first priority pledge of:
•tobacco purchased by that African Subsidiary that is financed by TDB;
•intercompany receivables arising from the sale of the tobacco financed by TDB;
•customer receivables arising from the sale of the tobacco financed by TDB; and
•such African Subsidiary’s local collection account receiving customer payments for purchases of tobacco financed by TDB.
The TDB Facility Agreement also requires Alliance One International, LLC, a subsidiary of the Company, to pledge customer receivables arising from the sale of the tobacco financed by TDB and pledge its collection accounts designated for receiving customer payments for purchases of tobacco financed by TDB.
The Agreement contains affirmative and negative covenants (subject, in each case, to customary and other exceptions and qualifications), including covenants that limit the ability of the African Subsidiaries to, among other things:
•grant liens on assets;
•incur additional indebtedness (including guarantees and other contingent obligations);
•sell or otherwise dispose of property or assets;
•maintain a specified amount of pledged accounts receivable and inventory;
•make changes in the nature of its business;
•enter into burdensome contracts; and
•effect certain modifications or terminations of customer contracts.
The TDB Facility Agreement contains events of default including, but not limited to, nonpayment of principal or interest, violation of covenants, breaches of representations and warranties, cross-default to other debt, bankruptcy and other insolvency events, invalidity of loan documentation, certain changes of control of the Company and the other loan parties, termination of material licenses and material adverse changes.
The Company’s subsidiary in Tanzania failed to satisfy a loan-to-value ratio requirement during November and December of 2020 under the TDB Facility Agreement. As a result, TDB was permitted to declare an event of default with respect to the Tanzania subsidiary’s borrowings under its credit facility under the TDB Facility Agreement and demand repayment of that subsidiary’s borrowings, which were approximately $50,417 at December 31, 2020. TDB entered into a First Amendment and Waiver Letter to the TDB Facility Agreement dated December 30, 2020 (the “TDB Waiver”) in which TDB waived the Tanzania subsidiary’s defaults and adjusted the required loan-to-value ratio for the Tanzania subsidiary for each month through June 2021. The existence of these defaults by the Tanzania subsidiary under the TDB Facility Agreement (the “Tanzania Default”) resulted in defaults and events of default arising under the ABL Credit Facility and the Term Loan Credit Facility, which would have permitted the respective lenders thereunder to demand repayment of the amounts outstanding under the respective facility. In December 2020, the required lenders under each of the ABL Credit Facility and the Term Loan Credit Facility entered into agreements with the Company waiving the defaults and events of default arising under the respective facility as a result of the Tanzania Default.
At December 31, 2020, the Company and its subsidiaries party to the TDB Facility Agreement were in compliance with all such covenants under the TDB Facility Agreement, as amended by the TDB Waiver, and $130,028 was available for borrowing under the TDB Facility Agreement, after reducing availability by the aggregate borrowings under the TDB Facility Agreement of $154,972 outstanding on that date.
16. Securitized Receivables
The Company sells trade receivables to unaffiliated financial institutions under two 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 December 31, 2020, the investment limit under the first facility was $125,000 of trade receivables. Under the second facility, the Company offers receivables for sale to unaffiliated financial institutions, which are then subject to acceptance by the unaffiliated financial institutions. As of December 31, 2020, the investment limit under the second facility was $125,000 of trade receivables.
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 $4,078, $7,504, and $9,586 as of December 31, 2020 and 2019, and March 31, 2020, respectively.
The following summarizes the accounts receivable securitization information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
December 31, 2020
|
December 31, 2019
|
March 31, 2020
|
|
Receivables outstanding in facility
|
$
|
87,012
|
|
$
|
69,741
|
|
$
|
135,439
|
|
|
Beneficial interests
|
20,532
|
|
14,385
|
|
27,021
|
|
|
Servicing liability
|
—
|
|
5
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine Months Ended December 31, 2019
|
|
Cash proceeds for the period ended:
|
|
|
|
|
Cash purchase price
|
$
|
142,071
|
|
$
|
151,817
|
|
$
|
331,187
|
|
|
Deferred purchase price
|
49,562
|
|
74,328
|
|
174,741
|
|
|
Service fees
|
110
|
|
218
|
|
355
|
|
|
Total
|
$
|
191,743
|
|
$
|
226,363
|
|
$
|
506,283
|
|
17. 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 guaranteed 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 and a lease obligation for a former unconsolidated subsidiary in North America. The following summarizes amounts guaranteed and the fair value of those guarantees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
December 31, 2020
|
|
December 31, 2019
|
March 31, 2020
|
|
Amounts guaranteed (not to exceed)
|
$
|
80,656
|
|
|
$
|
119,342
|
|
$
|
138,953
|
|
|
Amounts outstanding under guarantee(1)
|
18,158
|
|
|
37,624
|
|
48,565
|
|
|
Fair value of guarantees
|
306
|
|
|
1,112
|
|
2,791
|
|
|
Amounts due to local banks on behalf of suppliers and included in accounts payable
|
—
|
|
|
—
|
|
6,849
|
|
(1) Of the guarantees outstanding at December 31, 2020, most expire within one year.
18. Derivative Financial Instruments
As of December 31, 2020 and 2019, accumulated other comprehensive loss includes $619 and $241, net of tax of $168 and $64, for unrealized losses related to designated cash flow hedges, respectively. The Company recorded losses of $0 and $66 in cost of goods and services sold for the three and four months ended December 31, 2020, respectively and $164 for the five months ended August 31, 2020. The Company recorded losses of $729 and $3,189 in cost of goods and services sold for the three and nine months ended December 31, 2019, respectively. The Company recorded current derivative assets of $1,652 and $0 as of December 31, 2020 and December 31, 2019, respectively, included in the condensed consolidated balance sheets. The U.S. Dollar notional amount of derivative contracts outstanding as of December 31, 2020 was $44,123.
19. Fair Value Measurements
The following summarizes the financial assets and liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
December 31, 2020
|
|
December 31, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitized beneficial interests
|
$
|
—
|
|
$
|
20,532
|
|
$
|
20,532
|
|
|
$
|
—
|
|
$
|
14,385
|
|
$
|
14,385
|
|
|
$
|
—
|
|
$
|
27,021
|
|
$
|
27,021
|
|
|
Total assets
|
$
|
—
|
|
$
|
20,532
|
|
$
|
20,532
|
|
|
$
|
—
|
|
$
|
14,385
|
|
$
|
14,385
|
|
|
$
|
—
|
|
$
|
27,021
|
|
$
|
27,021
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
$
|
481,232
|
|
$
|
3,797
|
|
$
|
485,029
|
|
|
$
|
558,401
|
|
$
|
620
|
|
$
|
559,021
|
|
|
$
|
358,782
|
|
$
|
848
|
|
$
|
359,630
|
|
|
Guarantees
|
—
|
|
306
|
|
306
|
|
|
—
|
|
1,112
|
|
1,112
|
|
|
—
|
|
2,791
|
|
2,791
|
|
|
Total liabilities
|
$
|
481,232
|
|
$
|
4,103
|
|
$
|
485,335
|
|
|
$
|
558,401
|
|
$
|
1,732
|
|
$
|
560,133
|
|
|
$
|
358,782
|
|
$
|
3,639
|
|
$
|
362,421
|
|
Level 2 measurements
•Debt: The fair value of debt is based on 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 the contractual terms of the debt instrument.
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 historical loss rates ranging between 0.1% to 8.9% as of December 31, 2020. 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 using the present value of future expected cash flows. The primary inputs to this valuation include payment speeds of 107 days and a discount rate of 3.6% as of December 31, 2020. The discount rate was weighted by the outstanding interest. Payment speed was weighted by the average days outstanding.
•Long-term debt: The fair value of the long-term debt is based on the present value of future payments. The primary inputs to this valuation include treasury notes interest of 0.3% to 0.8% and borrowing rates of 7.0% to 10.7%. The borrowing rates were weighted by average loans outstanding.
The following summarizes the reconciliation of changes in Level 3 instruments measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
|
|
Three months ended December 31, 2020
|
|
Three months ended December 31, 2019
|
|
|
|
Securitized Beneficial Interests
|
Long-Term Debt
|
Guarantees
|
|
Securitized Beneficial Interests
|
Long-Term Debt
|
Guarantees
|
|
|
|
Beginning balance
|
$
|
13,471
|
|
$
|
3,714
|
|
$
|
491
|
|
|
$
|
25,579
|
|
$
|
—
|
|
$
|
1,026
|
|
|
|
|
Issuances of sales of receivables/guarantees
|
47,192
|
|
—
|
|
110
|
|
|
42,857
|
|
—
|
|
478
|
|
|
|
|
Settlements
|
(38,762)
|
|
—
|
|
(311)
|
|
|
(53,158)
|
|
—
|
|
(408)
|
|
|
|
|
Additions
|
—
|
|
83
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
(Losses) gains recognized in earnings
|
(1,369)
|
|
—
|
|
15
|
|
|
(893)
|
|
—
|
|
16
|
|
|
|
|
Ending balance
|
$
|
20,532
|
|
$
|
3,797
|
|
$
|
305
|
|
|
$
|
14,385
|
|
$
|
—
|
|
$
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
|
Nine months ended December 31, 2019
|
|
|
|
Securitized Beneficial Interests
|
Long-Term Debt
|
Guarantees
|
Securitized Beneficial Interests
|
Long-Term Debt
|
Guarantees
|
|
Securitized Beneficial Interests
|
Long-Term Debt
|
Guarantees
|
|
|
|
Beginning balance
|
$
|
11,159
|
|
$
|
3,892
|
|
$
|
1,256
|
|
$
|
27,021
|
|
$
|
848
|
|
$
|
2,791
|
|
|
$
|
40,332
|
|
$
|
—
|
|
$
|
3,714
|
|
|
|
|
Issuances of sales of receivables/guarantees
|
59,501
|
|
—
|
|
262
|
|
66,821
|
|
—
|
|
667
|
|
|
151,150
|
|
—
|
|
1,323
|
|
|
|
|
Settlements
|
(48,555)
|
|
(126)
|
|
(1,228)
|
|
(81,038)
|
|
(100)
|
|
(2,192)
|
|
|
(174,000)
|
|
—
|
|
(3,937)
|
|
|
|
|
Additions
|
—
|
|
31
|
|
—
|
|
—
|
|
3,144
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
(Losses) gains recognized in earnings
|
(1,573)
|
|
—
|
|
15
|
|
(1,645)
|
|
—
|
|
(10)
|
|
|
(3,097)
|
|
—
|
|
12
|
|
|
|
|
Ending balance
|
$
|
20,532
|
|
$
|
3,797
|
|
$
|
305
|
|
$
|
11,159
|
|
$
|
3,892
|
|
$
|
1,256
|
|
|
$
|
14,385
|
|
$
|
—
|
|
$
|
1,112
|
|
|
|
For the four months ended December 31, 2020, five months ended August 31, 2020, and nine months ended December 31, 2019, the impact to earnings attributable to the change in unrealized losses on securitized beneficial interests was $726, $263 and $691, respectively.
20. Pension and Other Postretirement Benefits
The following summarizes the components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Operating expenses:
|
|
|
|
Service cost
|
$
|
108
|
|
$
|
117
|
|
|
Interest expense:
|
|
|
|
Interest expense
|
678
|
|
1,029
|
|
|
Expected return on plan assets
|
(731)
|
|
(1,121)
|
|
|
Amortization of prior service cost
|
—
|
|
10
|
|
|
Settlement loss
|
(8)
|
|
271
|
|
|
Actuarial loss
|
—
|
|
456
|
|
|
Net periodic pension cost
|
$
|
47
|
|
$
|
762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plans
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Operating expenses:
|
|
|
|
|
Service cost
|
$
|
144
|
|
$
|
176
|
|
$
|
352
|
|
|
Interest expense:
|
|
|
|
|
Interest expense
|
904
|
|
1,594
|
|
3,088
|
|
|
Expected return on plan assets
|
(975)
|
|
(1,234)
|
|
(3,363)
|
|
|
Amortization of prior service cost
|
—
|
|
17
|
|
31
|
|
|
Settlement loss
|
(8)
|
|
—
|
|
819
|
|
|
Actuarial loss
|
—
|
|
868
|
|
1,368
|
|
|
Net periodic pension cost
|
$
|
65
|
|
$
|
1,421
|
|
$
|
2,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Operating expenses:
|
|
|
|
Service cost
|
$
|
2
|
|
$
|
2
|
|
|
Interest expense:
|
|
|
|
Interest expense
|
55
|
|
82
|
|
|
Amortization of prior service cost
|
—
|
|
(177)
|
|
|
Actuarial loss
|
—
|
|
109
|
|
|
Net periodic pension cost
|
$
|
57
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Operating expenses:
|
|
|
|
|
Service cost
|
$
|
3
|
|
3
|
|
5
|
|
|
Interest expense:
|
|
|
|
|
Interest expense
|
73
|
|
114
|
|
246
|
|
|
Amortization of prior service cost
|
—
|
|
(294)
|
|
(531)
|
|
|
Actuarial loss
|
—
|
|
157
|
|
328
|
|
|
Net periodic pension cost / (benefit)
|
$
|
76
|
|
$
|
(20)
|
|
$
|
48
|
|
The following summarizes contributions to pension plans and postretirement health and life insurance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
Contributions made during the period
|
$
|
1,373
|
|
$
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Contributions made during the period
|
$
|
2,025
|
|
$
|
1,941
|
|
$
|
4,457
|
|
|
Contributions expected for the remainder of the fiscal year
|
1,872
|
|
—
|
|
2,665
|
|
|
Total
|
$
|
3,897
|
|
$
|
1,941
|
|
$
|
7,122
|
|
21. 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 $2,535 and the total assessment including penalties and interest at December 31, 2020 is $9,114. 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 $2,192 and the total assessment including penalties and interest at December 31, 2020 is $5,915. 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. This jurisdiction permits the sale or transfer of excess credits to third parties, however approval must be obtained from the tax authorities. The Company has an agreement with the state government regarding the amounts and timing of credits that can be sold. The tax credits have a carrying value of $9,101. 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 as of 1983. 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, due to a decision provided in an annulment lawsuit filed by the Brazilian Government. On March 7, 2013 such a lawsuit was ruled by the Federal Supreme Court, which confirmed (without the government's ability to appeal) that the Company was entitled to the IPI credits, however, limited to the period from 1983 to 1990. 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 to reflect that the credits were not realizable at that time due to the prevalent legal uncertainty. Accordingly, at March 31, 2013, the Company recorded the $24,142 IPI credits it realized in the Statements of Consolidated Operations in Other Income. In April 2006, the Brazilian Internal Revenue Service (“IRS”) challenged the Company's valuation and application of the $24,142 IPI credits in the Company's tax filing during 2005. Numerous rulings and appeals were rendered on behalf of both the Brazilian IRS and the Company from 2006 through 2020. As of December 31, 2020, it is reasonably possible that the Company may incur $15,230 of losses associated with this matter.
Other Matters
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
The Company identified an asset retirement obligation ("ARO") associated with one 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 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.
22. Other Comprehensive Loss
The following summarizes amounts reclassified from accumulated other comprehensive loss to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
Affected Line Item in the Condensed Consolidated
|
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
Statements of Operations
|
|
|
|
Pension and other postretirement benefits(1):
|
|
|
|
|
|
|
Actuarial loss
|
$
|
—
|
|
$
|
560
|
|
|
|
|
|
Amortization of prior service cost
|
—
|
|
(165)
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, gross
|
—
|
|
395
|
|
|
|
|
|
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income
|
—
|
|
(83)
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, net
|
$
|
—
|
|
$
|
312
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
Affected Line Item in the Condensed Consolidated
|
|
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
Statements of Operations
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
Losses reclassified to cost of goods sold
|
$
|
—
|
|
$
|
729
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, gross
|
—
|
|
729
|
|
|
|
|
|
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income
|
—
|
|
(153)
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, net
|
$
|
—
|
|
$
|
576
|
|
Cost of goods and services sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
Affected Line Item in the Condensed Consolidated
|
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
Statements of Operations
|
|
|
|
Pension and other postretirement benefits(1):
|
|
|
|
|
|
|
|
Actuarial loss
|
$
|
—
|
|
$
|
899
|
|
$
|
1,680
|
|
|
|
|
|
Amortization of prior service cost
|
—
|
|
(165)
|
|
(495)
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, gross
|
—
|
|
734
|
|
1,185
|
|
|
|
|
|
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income
|
—
|
|
—
|
|
(251)
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, net
|
$
|
—
|
|
$
|
734
|
|
$
|
934
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
Affected Line Item in the Condensed Consolidated
|
|
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
Statements of Operations
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
Losses reclassified to cost of goods sold
|
$
|
—
|
|
$
|
164
|
|
$
|
3,189
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, gross
|
—
|
|
164
|
|
3,189
|
|
|
|
|
|
Tax effects of amounts reclassified from accumulated other comprehensive loss to net income
|
—
|
|
(694)
|
|
(669)
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss to net income, net
|
$
|
—
|
|
$
|
(530)
|
|
$
|
2,520
|
|
Cost of goods and services sold
|
|
|
|
|
|
|
|
|
|
|
23. Related Party Transactions
The Company engages in transactions with related parties primarily for the procuring and processing of inventory. The following summarizes sales and purchases transactions with related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
|
Three months ended December 31, 2020
|
|
Three months ended December 31, 2019
|
|
|
Sales
|
$
|
207
|
|
|
$
|
1,535
|
|
|
|
Purchases
|
28,815
|
|
|
41,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Sales
|
$
|
746
|
|
$
|
13,483
|
|
$
|
15,312
|
|
|
Purchases
|
47,734
|
|
38,655
|
|
96,252
|
|
The Company’s accounts receivable, and accounts payable with related parties, as presented in the condensed consolidated balance sheets, relate to transactions with equity method investees. Accrued expenses and other current liabilities as presented in the condensed consolidated balance sheets as of December 31, 2020 includes $4,099 of interest payable to the Glendon Investor and the Monarch Investor. Interest expense as presented in the condensed consolidated statements of operations includes $5,317 and $7,509 for the three and four months ended December 31, 2020, respectively, that relates to the Glendon Investor and the Monarch Investor. Refer to “Note 3. Emergence from Voluntary Reorganization under Chapter 11” for additional information.
24. 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. 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.
•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 the Figr Brands division, which includes 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 ("Figr") are sold primarily to municipally-owned retailers in most of the provinces 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 segment information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
|
Three months ended December 31, 2020
|
Three months ended December 31, 2019
|
|
|
|
Sales and other operating revenues:
|
|
|
|
|
|
Leaf - North America
|
$
|
60,544
|
|
$
|
53,016
|
|
|
|
|
Leaf - Other Regions
|
310,383
|
|
306,500
|
|
|
|
|
Other Products and Services
|
8,633
|
|
3,744
|
|
|
|
|
Total sales and other operating revenues
|
$
|
379,560
|
|
$
|
363,260
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
Leaf - North America
|
$
|
4,475
|
|
$
|
2,609
|
|
|
|
|
Leaf - Other Regions
|
21,100
|
|
25,508
|
|
|
|
|
Other Products and Services
|
(12,095)
|
|
(19,974)
|
|
|
|
|
Total operating income
|
$
|
13,480
|
|
$
|
8,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
Four months ended December 31, 2020
|
|
|
Five months ended August 31, 2020
|
Nine months ended December 31, 2019
|
|
Sales and other operating revenues:
|
|
|
|
|
|
|
Leaf - North America
|
$
|
80,521
|
|
|
|
$
|
57,734
|
|
$
|
139,421
|
|
|
Leaf - Other Regions
|
407,371
|
|
|
|
380,497
|
|
867,838
|
|
|
Other Products and Services
|
9,502
|
|
|
|
9,369
|
|
15,652
|
|
|
Total sales and other operating revenues
|
$
|
497,394
|
|
|
|
$
|
447,600
|
|
$
|
1,022,911
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
Leaf - North America
|
$
|
5,384
|
|
|
|
$
|
376
|
|
$
|
5,880
|
|
|
Leaf - Other Regions
|
24,988
|
|
|
|
(1,028)
|
|
59,016
|
|
|
Other Products and Services
|
(25,358)
|
|
|
|
(43,305)
|
|
(49,219)
|
|
|
Total operating income (loss)
|
$
|
5,014
|
|
|
|
$
|
(43,957)
|
|
$
|
15,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
|
December 31, 2020
|
December 31, 2019
|
March 31, 2020
|
|
Segment assets:
|
|
|
|
|
Leaf - North America
|
$
|
285,500
|
|
$
|
319,433
|
|
$
|
266,253
|
|
|
Leaf - Other Regions
|
1,227,089
|
|
1,408,705
|
|
1,284,317
|
|
|
Other Products and Services
|
183,466
|
|
220,909
|
|
212,493
|
|
|
Total assets
|
$
|
1,696,055
|
|
$
|
1,949,047
|
|
$
|
1,763,063
|
|
25. Subsequent Event
CCAA Proceeding
On January 21, 2021, Canada's Island Garden Inc. (“Figr East”), Figr Norfolk Inc. (“Figr Norfolk”) and Figr Brands, Inc. (“Figr Brands”, and together with Figr East and Figr Norfolk, the “Canadian Cannabis Subsidiaries”), which are indirect subsidiaries of the Company, applied for relief from their respective creditors pursuant to Canada’s Companies’ Creditors Arrangement Act (the “CCAA”) in the Ontario Superior Court of Justice (Commercial List) (the “Canadian Court”) in Ontario, Canada as Court File No. CV-21-00655373-00CL (the “CCAA Proceeding”). On January 21, 2021 (the “Order Date”), upon application by the Canadian Cannabis Subsidiaries, the Canadian Court issued an order for creditor protection of the Canadian Cannabis Subsidiaries pursuant to the provisions of the CCAA and the appointment of FTI Consulting Canada Inc. to serve as the
Canadian Court-appointed monitor of the Canadian Cannabis Subsidiaries during the pendency of the CCAA Proceeding (the “Monitor”).
The Canadian Cannabis Subsidiaries collectively operate businesses for the production and sale to retailers in Canada of cannabis products under licenses issued by Health Canada. The Canadian Cannabis Subsidiaries are the only subsidiaries of the Company engaged in such business.
The order issued by the Court in the CCAA Proceeding on the Order Date included the following relief:
•approval for the Canadian Cannabis Subsidiaries to borrow under a debtor-in-possession financing facility (the “Canadian DIP Facility”);
•a stay of proceedings in respect of the Canadian Cannabis Subsidiaries, the directors and officers of the Canadian Cannabis Subsidiaries (the “Canadian Directors and Officers”) and the Monitor; and
•the granting of super priority charges against the property of the Canadian Cannabis Subsidiaries in favor of: (a) certain administrative professionals; (b) the Canadian Directors and Officers; and (c) the lender under the Canadian DIP Facility for amounts borrowed under the Canadian DIP Facility.
Pursuant to the Canadian DIP Facility, another non-U.S. subsidiary of Pyxus (the "DIP Lender") provides Figr Brands with up to Cdn.$8,000 in secured debtor-in-possession financing to permit Figr Brands, the parent entity of Figr East and Figr Norfolk, to fund the working capital needs of the Canadian Cannabis Subsidiaries in accordance with the cash flow projections approved by the Monitor and the DIP Lender, fees and expenses to be paid to the DIP Lender, professional fees and expenses incurred by the Canadian Cannabis Subsidiaries and the Monitor in respect of the CCAA Proceeding, and such other costs and expenses of the Canadian Cannabis Subsidiaries as may be agreed to by the DIP Lender. The terms of the Canadian DIP Facility include the following:
•Figr Brands may draw borrowings under the Canadian DIP Facility from time to time in an aggregate principal amount of up to Cdn.$8,000;
•Loans bear interest at a rate of 8% per annum;
•Loans under the Canadian DIP Facility are guaranteed by Figr East and Figr Norfolk;
•Loans under the Canadian DIP Facility are secured by all of the properties, assets, and undertakings of the Canadian Cannabis Subsidiaries, as may be reasonably requested by the DIP Lender;
•The Canadian DIP Facility expires on June 30, 2021, and all outstanding loans are due and payable at that time; and
•Conditions to borrowing, representations, warranties, covenants, and agreements, as well as events of default and remedies, typical for this type of facility for a company in a proceeding under the CCAA.
On January 29, 2021, the Canadian Court issued an order permitting the Canadian Cannabis Subsidiaries to initiate a sale and investment solicitation process to be conducted by the Monitor and its affiliate to solicit interest in, and opportunities for, a sale of, or investment in, all or substantially all, or one or more components, of the assets and/or the business operations of the Canadian Cannabis Subsidiaries.
Prior to the commencement of the CCAA Proceeding, the required lenders under each of the ABL Credit Agreement and the Term Loan Credit Agreement waived defaults that would otherwise arise under the ABL Credit Agreement and the Term Loan Credit Agreement, respectively, in connection with the commencement of the CCAA Proceeding and other matters related to the CCAA Proceeding and holders of a majority of the aggregate outstanding principal amount of Notes waived defaults that would otherwise arise under the Indenture as a result of the commencement of the CCAA Proceeding and other matters related to the CCAA Proceeding.
As a result of the commencement of the CCAA Proceeding and the appointment of the Monitor, the Company has determined that, in accordance with U.S. generally accepted accounting principles, the Canadian Cannabis Subsidiaries will be deconsolidated from the Company’s financial statements as of the Order Date. The Company is evaluating whether, commencing with its Form 10-K for the fiscal year ending March 31, 2021, the Canadian Cannabis Subsidiaries and industrial hemp operations are to be treated as discontinued operations in the Company’s consolidated financial statements. In connection with and contemporaneous with the commencement of the CCAA Proceeding, the Company concluded that it may incur a material non-cash charge with respect to its investments in and advances to the Canadian Cannabis Subsidiaries, which is expected to be recognized in the three months ending March 31, 2021. Due to a number of uncertainties with respect to the CCAA Proceeding, the Company is not yet able to estimate the amount or range of amounts of the non-cash charge.
Exhibit 10.02