Company Quick10K Filing
Alliance One
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-K 2014-03-31 Annual: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-08-08 Earnings, Exhibits
8-K 2019-06-14 Earnings, Exhibits
8-K 2019-05-16 Regulation FD, Exhibits
8-K 2019-02-12 Officers, Amend Bylaw, Exhibits
8-K 2019-02-11 Earnings, Exhibits
8-K 2018-11-15 Officers
8-K 2018-11-14 Officers, Amend Bylaw, Exhibits
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-11-05 Exit Costs
8-K 2018-09-12 Amend Bylaw, Regulation FD, Other Events, Exhibits
8-K 2018-08-16 Shareholder Vote
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-20 Officers, Amend Bylaw, Exhibits
8-K 2018-06-07 Earnings, Exhibits
ITUB Itau Unibanco Holding 80,180
BLUE Bluebird Bio 7,360
POL Polyone 2,100
ZGNX Zogenix 1,630
AMWD American Woodmark 1,520
NCMI National Cinemedia 603
WNEB Western New England Bancorp 257
FGBI First Guaranty Bancshares 187
CMT Core Molding Technologies 64
KEG Key Energy Services 63
AOI 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.01 pyx-2019x06x30xex31x01.htm
EX-31.02 pyx-2019x06x30xex31x02.htm
EX-32 pyx-2019x06x30xex32.htm

Alliance One Earnings 2019-06-30

AOI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

00009399302020Q1false--03-312,2082,329three years78542760.00three yearsSubsequent EventsOn February xx, 2019, a Canadian subsidiary of the Company acquired an additional 20% equity position in Canada’s Island Garden Inc. for C$20,000.0, increasing that subsidiary's ownership level to 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Washington, D.C. 20549


(Commission File Number)
Pyxus International, Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
(I.R.S. Employer
Identification No.)
 8001 Aerial Center Parkway
Morrisville,North Carolina27560 
(Address of principal executive offices)(Zip Code)
(919) 379-4300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Exchange On Which Registered
Common Stock (no par value)PYXNew York Stock Exchange

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes No

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

Pyxus International, Inc. and Subsidiaries
Table of Contents
Page No.
Part I.
Item 1.
Financial Statements (Unaudited)
Three Months Ended June 30, 2019 and 2018
Three Months Ended June 30, 2019 and 2018
June 30, 2019 and 2018 and March 31, 2019
Three Months Ended June 30, 2019 and 2018
Three Months Ended June 30, 2019 and 2018
Item 2.
of Financial Condition and Results of Operations
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 6.


Part I. Financial Information

Item 1. Financial Statements

Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2019 and 2018
Three Months Ended June 30,
(in thousands, except per share data)20192018
Sales and other operating revenues$276,670 $290,989 
Cost of goods and services sold236,958 249,594 
Gross profit39,712 41,395 
Selling, general, and administrative expenses49,377 38,084 
Other income, net2,948 2,921 
Restructuring and asset impairment charges212 1,541 
Operating (loss) income(6,929)4,691 
Debt retirement expense (benefit) (84)
Interest expense (includes debt amortization of $2,208 and $2,329 for 2019 and 2018, respectively)33,812 32,912 
Interest income1,154 888 
Loss before income taxes and other items(39,587)(27,249)
Income tax expense (benefit)23,453 (25,270)
Equity in net income of investee companies877 566 
Net loss(62,163)(1,413)
Net loss attributable to noncontrolling interests(366)(654)
Net loss attributable to Pyxus International, Inc.$(61,797)$(759)
Loss per share:
Weighted average number of shares outstanding:
Basic9,100 9,027 
Diluted9,100 9,027 
See "Notes to Condensed Consolidated Financial Statements"


Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
Three Months Ended June 30, 2019 and 2018
Three Months Ended June 30,
(in thousands)20192018
Net loss$(62,163)$(1,413)
Other comprehensive income (loss), net of tax:
Currency translation adjustment(400)(5,311)
Defined benefit pension amounts reclassified to income311 366 
Change in the fair value of derivatives designated as cash flow hedges(145)(1,496)
Amounts reclassified to income for derivatives514  
Total other comprehensive income (loss), net of tax280 (6,441)
Total comprehensive loss(61,883)(7,854)
Comprehensive loss attributable to noncontrolling interests(336)(829)
Comprehensive loss attributable to Pyxus International, Inc.$(61,547)$(7,025)
See "Notes to Condensed Consolidated Financial Statements"


Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)June 30, 2019June 30, 2018March 31, 2019
Current assets
Cash and cash equivalents$164,135 $202,107 $192,043 
Restricted cash3,137 2,374 5,378 
Trade receivables, net193,076 196,834 290,097 
Other receivables10,522 13,939 20,900 
Accounts receivable, related parties17,239 12,375 5,783 
Inventories817,663 916,928 668,171 
Advances to tobacco suppliers41,264 67,983 19,754 
Recoverable income taxes8,182 33,058 5,421 
Prepaid expenses20,448 22,356 15,934 
Other current assets15,156 17,635 15,027 
Total current assets1,290,822 1,485,589 1,238,508 
Restricted cash389 389 389 
Investments in unconsolidated affiliates64,535 67,898 69,459 
Goodwill34,547 34,487 34,336 
Other intangible assets70,778 74,322 71,781 
Deferred income taxes, net113,666 144,389 116,451 
Long-term recoverable income taxes2,638 898 3,067 
Other deferred charges2,340 3,554 2,175 
Other noncurrent assets51,505 62,973 46,713 
Right-of-use assets45,969   
Property, plant, and equipment, net288,386 254,867 276,396 
Total assets$1,965,575 $2,129,366 $1,859,275 
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks$520,828 $580,221 $428,961 
Accounts payable85,060 83,144 87,049 
Accounts payable, related parties20,773 23,008 19,054 
Advances from customers18,779 16,646 16,436 
Accrued expenses and other current liabilities104,392 99,356 91,282 
Income taxes payable18,314 13,718 3,728 
Operating leases payable15,275   
Current portion of long-term debt334 180 332 
Total current liabilities783,755 816,273 646,842 
Long-term taxes payable8,660 9,155 10,718 
Long-term debt899,672 910,635 898,386 
Deferred income taxes33,668 29,720 26,813 
Liability for unrecognized tax benefits8,544 8,917 11,189 
Long-term leases28,876   
Pension, postretirement, and other long-term liabilities71,835 73,866 73,308 
Total liabilities1,835,010 1,848,566 1,667,256 
Commitments and contingencies
Stockholders’ equityJune 30, 2019June 30, 2018March 31, 2019
Common Stock—no par value:
Authorized shares250,000 250,000 250,000 
Issued shares9,917 9,834 9,881 469,365 473,771 468,936 
Retained deficit(285,681)(157,107)(223,884)
Accumulated other comprehensive loss(61,092)(51,528)(61,342)
Total stockholders’ equity of Pyxus International, Inc.122,592 265,136 183,710 
Noncontrolling interests7,973 15,664 8,309 
Total stockholders’ equity130,565 280,800 192,019 
Total liabilities and stockholders’ equity$1,965,575 $2,129,366 $1,859,275 
See "Notes to Condensed Consolidated Financial Statements"


Pyxus International, Inc. and Subsidiaries
Condensed Statements of Consolidated Stockholders' Equity
Three Months Ended June 30, 2019 and 2018
Attributable to Pyxus International, Inc.
Accumulated Other Comprehensive Loss
(in thousands)Common
Currency Translation AdjustmentPensions,
Net of Tax
Loss on Derivatives, Net of Tax Noncontrolling
Total Stockholders' Equity
Balance, March 31, 2019$468,936 $(223,884)$(21,979)$(36,749)$(2,614)$8,309 $192,019 
Net loss— (61,797)— — — (366)(62,163)
Stock-based compensation429 — — — — — 429 
Other comprehensive (loss) income, net of tax— — (430)311 369 30 280 
Balance, June 30, 2019$469,365 $(285,681)$(22,409)$(36,438)$(2,245)$7,973 $130,565 

Balance, March 31, 2018$473,476 $(156,348)$(12,682)$(32,580)$ $10,962 $282,828 
Net loss— (759)— — — (654)(1,413)
Stock-based compensation295 — — — — — 295 
Purchase of investment in subsidiary— — — — — 5,531 5,531 
Other comprehensive (loss) income, net of tax— — (5,136)366 (1,496)(175)(6,441)
Balance, June 30, 2018$473,771 $(157,107)$(17,818)$(32,214)$(1,496)$15,664 $280,800 
See "Notes to Condensed Consolidated Financial Statements"


Pyxus International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 2019 and 2018
Three Months Ended June 30,
(in thousands)20192018
Operating Activities:
Net loss$(62,163)$(1,413)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization8,810 9,277 
Debt amortization/interest2,818 2,894 
Debt retirement benefit (84)
Gain on foreign currency transactions(2,232)(1,478)
Restructuring and asset impairment charges212 1,541 
Loss (gain) on sale of property, plant, and equipment78 (186)
Equity in net income of unconsolidated affiliates, net of dividends5,328 (431)
Bad debt expense— 293 
Stock-based compensation429 295 
Changes in operating assets and liabilities, net(119,919)(278,023)
Other, net(3,283)(5,793)
Net cash used by operating activities(169,922)(273,108)
Investing Activities:
Purchases of property, plant, and equipment(19,344)(8,047)
Proceeds from sale of property, plant, and equipment224 219 
Collections on beneficial interests on securitized trade receivables 72,266 76,241 
Payments to acquire controlling interests, net of cash acquired (8,692)
Other, net(543)(300)
Net cash provided by investing activities52,603 59,421 
Financing Activities:
Net proceeds from short-term borrowings92,524 163,951 
Repayment of long-term borrowings(85)(10,721)
Debt issuance cost(3,368)(4,851)
Debt retirement cost (27)
Net cash provided by financing activities89,071 148,352 
Effect of exchange rate changes on cash(1,901)2,172 
Decrease in cash, cash equivalents, and restricted cash(30,149)(63,163)
Cash and cash equivalents at beginning of period192,043 264,660 
Restricted cash at beginning of period5,767 3,373 
Cash, cash equivalents, and restricted cash at end of period$167,661 $204,870 
Other information:
Cash paid for income taxes$5,222 $9,407 
Cash paid for interest19,187 15,231 
Cash received from interest(1,630)(323)
Non-cash amounts obtained as a beneficial interest in exchange for transferring
trade receivables in a securitization transaction
46,882 48,685 
See "Notes to Condensed Consolidated Financial Statements"


Pyxus International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(in thousands)

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

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

The Company measures right-of-use assets and related lease liabilities based on the present value of remaining lease payments, including in-substance fixed payments, the current payment amount when payments depend on an index or rate (e.g., inflation adjustments, market renewals), and the amount the Company believes is probable to be paid to the lessor under residual value guarantees, when applicable. Lease contracts may include fixed payments for non-lease components, such as maintenance, which are included in the measurement of lease liabilities for certain asset classes based on the Company’s election to combine lease and non-lease components. The Company does not recognize short-term leases, those lease contracts with durations of twelve months or less, on the consolidated balance sheet.

As applicable borrowing rates are not typically implied within the lease arrangements, the Company discounts lease payments based on its estimated incremental borrowing rate at lease commencement, or modification, which is based on the Company’s estimated credit rating, the lease term at commencement and the contract currency of the lease arrangement.
During the three months ended December 31, 2018, the Company realigned its reportable segments to reflect changes to how the business is managed and results are reviewed by the Company's chief operating decision maker. In connection with the "One Tomorrow Transformation" initiative, the Company changed its organizational structure to support its diversified business lines. Prior to the realignment, the Company assessed financial information based on geographic regions. The Company's diversification efforts have resulted in management placing emphasis on data by business line in addition to the historical focus by geography. As a result of this realignment, the reportable segments now include Leaf - North America, Leaf - Other Regions, and Other Products and Services. Prior period segment financial information has been revised to conform to the current year presentation.

Restricted Cash
The following summarizes the restricted cash balance:

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

As of June 30, 2019 and 2018, and March 31, 2019, the Company held $0, $2,638, and $1,082, respectively, in the Zimbabwe Real Time Gross Settlement (“RTGS”) system. RTGS is a local currency equivalent that as of June 30, 2019 was exchanged at a government specified rate of 6.6:1 with the U.S. Dollar ("USD").


Property, Plant, and Equipment
The following summarizes purchases and sales of property, plant, and equipment included in accounts payable and notes receivable:
June 30, 2019June 30, 2018March 31, 2019
Purchases of property, plant, and equipment included in accounts payable $6,545 $1,854 $7,095 
Sales of property, plant, and equipment included in notes receivable1,950 1,999 1,957 

2. New Accounting Standards

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

Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. This guidance will be adopted using a modified retrospective approach and is effective for the Company on April 1, 2020. The Company is evaluating the effect that adoption of this guidance will have on its consolidated financial statements and related disclosures.

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

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 updates disclosure requirements for defined benefit plans. This guidance will be adopted using a retrospective approach and is effective for the Company on March 31, 2021. The Company is evaluating the effect that adoption of this guidance will have on its consolidated financial statements and related disclosures.

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


3. Revenue Recognition

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

Three Months Ended June 30,
Leaf - North America:
Product revenue$31,141 $46,452 
Processing and other revenues3,809 3,600 
Total sales and other operating revenues34,950 50,052 
Leaf - Other Regions:
Product revenue225,147 223,896 
Processing and other revenues10,623 14,030 
Total sales and other operating revenues235,770 237,926 
Other Products and Services:
Total sales and other operating revenues(1)
5,950 3,011 
Total sales and other operating revenues$276,670 $290,989 
(1) Other products and services is primarily composed of revenue from the sale of legal cannabis in Canada and e-liquids product revenue.

Product revenue is primarily processed tobacco sold to the customer. Processing and other revenues are mainly contracts to process green tobacco owned and provided by the customers. During processing, ownership remains with the customers and the Company is engaged to perform processing services.

The following summarizes activity in the allowance for doubtful accounts:

Three Months Ended June 30,
Balance, beginning of period$(13,381)$(7,055)
Additions (293)
Write-offs6,131 91 
Balance, end of period(7,250)(7,257)
Trade receivables200,326 204,091 
Trade receivables, net$193,076 $196,834 

4. Income Taxes

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

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

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

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

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

Provision for the Three Months Ended June 30, 2019
The Company's quarterly provision for income taxes has been calculated using the annual effective tax rate method (“AETR method”), which applies an estimated annual effective tax rate to pre-tax income or loss. The effective tax rate used for the three months ended June 30, 2019 and 2018 was (59.2)% and 92.7%, respectively. The decrease in the effective tax rate was due to the impact of net foreign exchange effects, increases in non-deductible interest, as well as Subpart F income, and variation in expected jurisdictional mix of earnings.

For the three months ended June 30, 2019, the Company recorded the net tax effects of certain discrete events, which resulted in an income tax benefit of $2,601. This discrete income tax benefit primarily related to the impact of changes in uncertain tax positions, an adjustment made to the deemed repatriation tax liability as a result of retroactive regulatory guidance issued during the quarter, and changes in foreign exchange impacts. For the three months ended June 30, 2018, the Company recorded the tax effects of a discrete event resulting in additional income tax expense of $3,906. This discrete income tax expense primarily related to the impact of changes in uncertain tax positions and changes in foreign exchange impacts.

5. Guarantees

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

June 30, 2019June 30, 2018March 31, 2019
Amounts guaranteed (not to exceed)$127,738 $153,347 $143,298 
Amounts outstanding under guarantee90,535 84,116 103,846 
Fair value of guarantees3,136 3,544 3,714 

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


6. Goodwill and Intangibles

The following summarizes goodwill and other intangible assets:  
Three Months Ended June 30, 2019
 Weighted Average Remaining Useful LifeBeginning Gross Carrying AmountAdditions
Accumulated Amortization (1)
Impact of Foreign Currency TranslationEnding Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships9.3 years$63,980 $ $(30,032)$ $33,948 
Production and supply contracts2.7 years14,893  (10,892) 4,001 
Internally developed software3.8 years19,917 205 (18,531) 1,591 
Licenses (2)
17.9 years32,284 68 (2,106)570 30,816 
Trade names6.8 years500  (78) 422 
Intangibles not subject to amortization:
Goodwill34,336  — 211 34,547 
Total$165,910 $273 $(61,639)$781 $105,325 
(1) Amortization expense across intangible asset classes for the three months ended June 30, 2019 was $1,846.
(2) Certain of the Company's license intangibles are subject to annual renewal.

Twelve Months Ended March 31, 2019
Weighted Average Remaining Useful LifeBeginning Gross Carrying Amount
Additions (1)
Accumulated Amortization (2)
Impact of Foreign Currency TranslationEnding Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships9.6 years$58,530 $5,450 $(29,027)$ $34,953 
Production and supply contracts2.9 years14,893  (10,668) 4,225 
Internally developed software3.8 years18,812 1,105 (18,391) 1,526 
Licenses (3)
18.1 years30,339 2,991 (1,644)(1,046)30,640 
Trade names7.0 years 500 (63) 437 
Intangibles not subject to amortization:
Goodwill (4)
27,546 7,174 — (384)34,336 
Total$150,120 $17,220 $(59,793)$(1,430)$106,117 
(1) Additions to goodwill, customer relationships, and trade names relate to the acquisition of Humble Juice. Additions to licenses relates to FIGR East, FIGR Norfolk, and Alliance One Specialty Products, LLC.
(2) Amortization expense across intangible asset classes for the fiscal year ended March 31, 2019 was $7,943.
(3) Certain of the Company's license intangibles are subject to annual renewal.
(4) Goodwill activity relates to the Other Products and Services segment.

The following summarizes the estimated future intangible asset amortization expense:
For Fiscal
Years Ended
and Supply
LicensesTrade NamesTotal
July 1, 2019 through March 31, 2020$3,017 $1,992 $375 $1,342 $48 $6,774 
20214,022 1,397 394 1,789 63 7,665 
20224,022 612 322 1,787 63 6,806 
20234,022  289 1,783 63 6,157 
20244,022  170 1,783 63 6,038 
Later14,843  41 22,332 122 37,338 
$33,948 $4,001 $1,591 $30,816 $422 $70,778 
*Estimated amortization expense for the internally developed software is based on costs accumulated as of June 30, 2019. These estimates will change as new costs are incurred and until the software is placed into service in all locations.


7. Variable Interest Entities

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

The following summarizes financial relationships with variable interest entities:

June 30, 2019June 30, 2018March 31, 2019
Investment in variable interest entities$57,541 $63,021 $64,281 
Advances to variable interest entities14,500 9,937 3,273 
Guaranteed amounts to variable interest entities (not to exceed)63,584 71,919 67,027 

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

8. Segment Information

The Company's operations are managed and reported in ten operating segments that are organized by product category and geographic area and aggregated into three reportable segments for financial reporting purposes: Leaf - North America, Leaf - Other Regions, and Other Products and Services. These segment groupings are consistent with information used by the chief operating decision maker to assess performance and allocate resources. The types of products and services from which each reportable segment derives its revenues are as follows:

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

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

Other Products and Services primarily consists of cannabis and e-liquid products. Cannabis was legalized for adult use in Canada on October 17, 2018. The cannabis products of certain of the Company's subsidiaries have been sold in the Canadian market, primarily to municipally-owned retailers. E-liquids products are sold to consumers via e-commerce platforms and other distribution channels, and retail stores.


The following summarizes segment information:

Three Months Ended June 30,
Sales and other operating revenues:
Leaf - North America$34,950 $50,052 
Leaf - Other Regions235,770 237,926 
Other Products and Services5,950 3,011 
Total sales and other operating revenues$276,670 $290,989 
Operating income (loss):
Leaf - North America$762 $1,293 
Leaf - Other Regions7,034 7,654 
Other Products and Services(14,725)(4,256)
Total operating (loss) income$(6,929)$4,691 

June 30, 2019June 30, 2018March 31, 2019
Segment assets:
Leaf - North America$257,707 $300,307 $243,248 
Leaf - Other Regions1,540,147 1,735,490 1,488,226 
Other Products and Services167,721 93,569 127,801 
Total assets$1,965,575 $2,129,366 $1,859,275 

9. Earnings Per Share

The weighted average number of common shares outstanding is reported as the weighted average of the total shares of common stock outstanding, net of shares of common stock held by a wholly owned subsidiary. 785 shares of common stock were owned by the subsidiary as of June 30, 2019 and 2018. This subsidiary waives its right to receive dividends and does not have the right to vote.

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

The following summarizes the computation of earnings per share:

Three Months Ended June 30,
(in thousands, except per share data)20192018
Basic loss per share:
Net loss attributable to Pyxus International, Inc.$(61,797)$(759)
Weighted average number of shares outstanding9,100 9,027 
Basic loss per share$(6.79)$(0.08)
Diluted loss per share:
Net loss attributable to Pyxus International, Inc.$(61,797)$(759)
Weighted average number of shares outstanding9,100 9,027 
Plus: Restricted shares issued and shares applicable to stock options and restricted stock units, net of shares assumed to be purchased from proceeds at average market price  *
Adjusted weighted average number of shares outstanding9,100 9,027 
Diluted loss per share$(6.79)$(0.08)
*All outstanding restricted shares, shares applicable to stock options, and restricted stock units are excluded because their inclusion would have an antidilutive effect on the loss per share. The dilutive shares would have been 62 and 65 at June 30, 2019 and 2018, respectively.

10. Stock-Based Compensation

The following summarizes the Company's stock-based compensation expense related to awards granted under its various employee and non-employee stock incentive plans:
Three Months Ended June 30,
(in thousands)20192018
Stock-based compensation expense$429 $295 
Stock-based compensation expense payable in cash  

The following summarizes the Company's stock-based compensation awards:
Three Months Ended June 30,
(in thousands, except grant date fair value)20192018
Restricted stock
Number granted13 7 
Grant date fair value$15.20 $15.85 
Restricted stock units
Number granted2 61 
Grant date fair value$18.29 $16.00 
Performance-based stock units
Number granted 30 
Grant date fair value$ $16.00 

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

11. Contingencies and Other Information

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

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

The Company also has local intrastate trade tax credits in the Brazil State of Rio Grande do Sul and the State of Santa Catarina. These jurisdictions permit the sale or transfer of excess credits to third parties, however approval must be obtained from the tax authorities. The Company has agreements with the state governments regarding the amounts and timing of credits that can be sold. The tax credits have a carrying value of $10,782. The intrastate trade tax credits are monitored for impairment in future periods based on market conditions and the Company’s ability to use or sell the tax credits.

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

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

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

Asset Retirement Obligations
In accordance with generally accepted accounting principles, the Company records all known asset retirement obligations (“ARO”) for which the liability can be reasonably estimated. Currently, it has identified an 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.

12. Debt Arrangements

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

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