Pyxus International, Inc. (PYYX) Earnings Call Transcript & Summary

The fourth item of business is the advisory vote regarding the frequency of future advisory votes on the compensation of the company's named executive officers. This advisory vote, commonly known as a say-on-frequency vote provides shareholders the opportunity to express their views about how frequently the company should conduct future say-on-pay votes. Although the result of the say-on-frequency vote will not be a binding vote. The Board will take into account the outcome of the say-on-frequency vote when determining how frequently the company will conduct future say-on-pay votes, and the company will disclose the frequency decision as required by the SEC. Shareholders may vote for a frequency of every 1 year, every 2 years or every 3 years. The advisory vote regarding frequency of future advisory votes on the compensation of the company's named executive officers is deemed presented to this meeting for a vote. As indicated in the proxy statement, the Board of Directors recommends that shareholders vote for the frequency of every 1 year with respect to future advisory votes on the compensation of our named executive officers. [Voting]

The fifth item of business is the approval of the company's 2020 incentive plan. As described in the proxy statement, the purpose of the incentive plan is to assist Pyxus in recruiting and retaining employees and members of the Board of Directors with ability and initiative by enabling such persons to participate in its future success and to associate their interest with those of the company and its shareholders through equity-based awards. Up to 2.2 million shares of common stock may be awarded under the plan. The plan is included as Appendix A to the proxy statement. The effectiveness of the plan is not conditioned upon the shareholders' approval of the plan. However, if the shareholders do not approve the plan, the Board of Directors will consider whether to terminate the plan and the Compensation Committee will consider whether to grant any further awards thereunder. Also, in that case, any options awarded under the plan would not be eligible for treatment as incentive stock options for income tax purposes. Approval of the 2020 incentive plan is now being presented to the shareholders for their approval at this meeting. I wish to remind everyone that the Board of Directors recommends that you vote to approve the company's 2020 incentive plan. [Voting]

Now that all items of business have been presented, I will pause to see if there have been any questions or comments submitted on these matters. Thank you. I now declare the polls closed. I will now ask Ms. Petite to read the inspector's report.

Mr. Chairman, each of the nominees for director named in the proxy statement has been elected; the appointment of the Deloitte & Touche LLP has been ratified; the resolution approving on an advisory basis, the compensation paid to the company's named executive officers has been adopted; and the advisory vote on the frequency of future say-on-pay votes every 1 year received the most votes and the company's 2020 incentive plan has been approved.

Thank you, Ms. Petite. You've heard the inspector's report. All director nominees have been elected; the appointment of Deloitte & Touche LLP as the company's independent certified public accountants for the 2022 fiscal year has been ratified; the resolution approving on an advisory basis, the compensation paid to the company's named executive officers has been adopted; and the advisory vote on frequency on future say-on-pay votes every 1 year received the most votes and the company's 2020 incentive plan has been approved. Vote totals for each of these matters and the Board's determination of the frequency of future say-on-pay votes will be reported by the company promptly in a Form 8-K report to be filed with the SEC. The matter for which it was called has been completed, and the business meeting of shareholders is, therefore, adjourned. I will now report on the company's operating results and business strategy. Following that, we will respond to general questions submitted prior to or during the course of today's meeting. In what was an unprecedented year, I'm proud of how our company adapted to constant change as we navigated the COVID-19 pandemic. We appreciate the continued support from all of our stakeholders in these extraordinary circumstances. In particular, on behalf of the Board of Directors and our leadership team, I would like to thank the entire Pyxus team for their [ unwavering ] commitment to the company and the communities in which we operate. The safety of our employees remains a high priority for our business, and we are continuing to adapt our operations to minimize the potential spread of COVID and reduce operational risks. Just over 3 years ago, we announced our transformation strategy, which was intended to guide the next 150 years of our company. Our goal was to leverage our strengths in agronomy, sustainability and traceability to enter different categories with high potential for positive returns. Unfortunately, early last year, our business was impacted by several factors, including the COVID-19 pandemic, smaller-than-expected crop sizes in Africa, trade and regulation challenges and evolving market dynamics. As a result of these events, we completed a financial restructuring last year through a prepackaged Chapter 11 proceeding. We also implemented multiple operational and process changes that allowed our business to not only continue to operate throughout fiscal '21, but also position us for success in fiscal '22 and beyond. We adjusted the structure and footprint of our tobacco operations to better align with that of our customers and implemented a cost reduction strategy. We also made the strategic decision to exit our cash flow negative industrial hemp and Canadian cannabis businesses. The exit from those businesses provides us with more flexibility to utilize working capital for anticipated opportunities in the tobacco and e-liquids industries. Through these actions and countless others, we've substantially reduced costs throughout our supply chain. Without question, we started fiscal '22 as a different and stronger company than we were 12 months ago. This has had a positive impact on our customer relationships as customers are engaging us in conversations about long-term projects that previously were not on the table. That's supporting our objective to grow our market share in the tobacco category. Most recently, we were pleased to announce the expansion of our relationship with BAT in Indonesia as they adopted a new lease supply arrangement, which involves shifting contract volumes from its direct operations to one of our tobacco subsidiaries. Effective this crop season, we will begin processing this additional volume in one of our local facilities prior to its sale to BAT. This arrangement enhances the sustainability of not only our respective operations, but also the Indonesian tobacco market, thus supporting our mutual goal to enhance farmer livelihoods. With regards to e-liquids, we're excited to share that earlier this week, Bantam received notification from the FDA that its nonflavored electronic nicotine delivery system products have moved into formal scientific review. Scientific review is the final step in the PMTA process prior to the FDA's decision to grant a marketing order and it's a significant development, given the FDA's growing enforcement against noncompliant brands. While the regulation and enforcement activities in the e-liquids industry are continuing to mature, we await our PMTA approval notifications and look forward to the post PMTA market opportunities. We are excited about these developments. And as we discussed on our first quarter earnings call this past Monday, momentum is building across our businesses as we leverage the savings from our fiscal 2021 restructuring initiatives. Despite the changes our business underwent in fiscal '21, we continue to hold true to our purpose and values. Sustainability and traceability remain core to how we operate, and we've not lost sight of those critical areas throughout the year. The COVID-19 pandemic highlighted vulnerabilities related to agricultural communities, both in terms of the virus itself as well as the economic consequences. In many areas where we operate, it appears that the economic consequences of the virus could lead to greater risk of child and forced labor. We have implemented a variety of measures throughout our operations to enable our teams to continue working with farmers, purchasing agricultural products and processing them in our facilities. Moving forward, we remain committed to further strengthening the implementation of our agricultural labor practices program across the business. Our human rights due diligence process includes the identification of actual or potential negative impacts to human rights throughout our supply chain, both through engagement with third-party stakeholders as well as our own internal processes. Employees are trying to identify, prioritize, respond, measure and report on actual and potential negative impacts in the agricultural supply chain. As a result, we are able to map our supply chain so we can prevent and mitigate any adverse impacts on human rights. This process is also supported by grievance mechanisms where any stakeholder can report human rights concerns. Through this approach, we are confident that we can drive sustainable change to improve working conditions in the agricultural supply chain. We remain sensitive to the fact that many farm workers fear raising concerns about working conditions. While this is a global challenge we continue to address, we're pleased that for the fifth year in a row, 100% of our contracted leaf farms in the United States have access to a hotline or a third-party resource that workers can call with concerns. In fact, 56% of our contracted tobacco farms in North Carolina are members of the North Carolina Growers Association. Human rights issues are only one piece of our ESG strategy, and we're excited to soon share more information with you about our approach, which supports our ability to deliver on our expected results for fiscal '22. Our global team is committed to the strengthening of our business while making positive contributions to a sustainable world. With that, I would like to open the meeting for questions. Well, thank you very much. There being no questions or comments, I would like to thank you for attending Pyxus' Annual Meeting of Shareholders. This concludes the meeting.

This concludes the meeting. You may now disconnect. Everyone, have a great day.