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What changed in Mission Produce, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Mission Produce, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+252 added−230 removedSource: 10-K (2023-12-21) vs 10-K (2022-12-22)

Top changes in Mission Produce, Inc.'s 2023 10-K

252 paragraphs added · 230 removed · 176 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCustomers We primarily market avocados to retail, wholesale and foodservice customers. We focus on delivering quality avocados on time and within customer specifications. Owning and farming our own avocado orchards also helps to mitigate potential disruptions across our third-party grower supply relationships.
Biggest changeIn our Blueberries segment, we act as growers. Our exclusive supply agreement with an exclusive distributor allows us to utilize our existing infrastructure and workforce in Peru during complementary periods between avocado harvest and processing seasons. Customers We primarily market avocados to retail, wholesale and foodservice customers. We focus on delivering quality avocados on time and within customer specifications.
Before being forwarded to distribution centers, avocados are sorted and packed at one of our four state-of-art packing facilities in Mexico, Peru, and California, or by co-packers in various locations. Our packing facilities are located in close proximity to growers, 1 allowing us to control the logistics of the supply chain from tree to packing, to distribution.
Before being forwarded to distribution centers, avocados are sorted and packed at one of our four state-of-the-art packing facilities in Mexico, Peru, and California, or by co-packers in various locations. Our packing facilities are located in close proximity to 1 growers, allowing us to control the logistics of the supply chain from tree to packing, to distribution.
In Mexico, avocados are harvested year-round, but the harvest typically peaks between December through March. Although these geographical 2 differences may lead to fluctuations in the purchase price of avocados, our diverse geographical avocado growth and production capabilities help us mitigate volatility in our access to supply of avocados.
In Mexico, avocados are harvested year-round, but the harvest typically peaks between December through March. Although these 2 geographical differences may lead to fluctuations in the purchase price of avocados, our diverse geographical avocado growth and production capabilities help us mitigate volatility in our access to supply of avocados.
Operations are principally located in Peru, with smaller operations emerging in other areas of Latin America. • Blueberries is a farming operation that cultivates blueberry plants in Peru. The entity farms high-quality varieties of blueberries, and has plants in various stages of development, from seedling to mature. Products and services We source, produce, pack and distribute avocados.
Operations are principally located in Peru, with smaller operations emerging in other areas of Latin America. • Blueberries is a farming operation that cultivates blueberry plants in Peru. The entity farms high-quality varieties of blueberries, and has plants in various stages of development, from seedling to mature. Products and services We primarily source, produce, pack and distribute avocados.
We make available free of charge certain reports and amendments that we file with the SEC, such as our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our directors’ and officers’ Section 16 reports, as soon as 3 reasonably practicable after filing or furnishing such materials to the SEC on the “Investor relations” section of our website.
We make available free of charge certain reports and amendments that we file with the SEC, such as our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our directors’ and officers’ Section 16 reports, as soon as reasonably practicable after filing or furnishing such materials to the SEC on the “Investor relations” section of our website.
We do not have long-term contracts with our customers and focus instead on building strong, long-term relationships based on product quality and specifications, on-time delivery and customer support and service.
We do not have long-term supply contracts with our customers and focus instead on building strong, long-term relationships based on product quality and specifications, on-time delivery and customer support and service.
In addition, we have several issued patents and copyrights that are not material to our business at this time. Seasonality The total sales and sales price of avocados fluctuates throughout the year due to variations in supply of avocados based on geographic location. For example, in California and Peru, the harvest of avocados typically peaks between April and August.
In addition, we have several issued patents and copyrights that are not material to our business at this time. Seasonality The total sales and sales price of avocados fluctuates throughout the year due to variations in supply of avocados based on geographic location. For example, in California and Peru, the harvest of avocados typically peaks between April and September.
Resources We source avocados primarily from Mexico, Peru, and California, as well as Colombia, Guatemala, South Africa, Chile, and others. Our diverse sourcing network mitigates the impact of potential geographical or grower-specific supply disruptions and optimizes our ability to fulfill year-round global demand. Third-party growers We have relationships with thousands of third-party growers.
Resources We source avocados primarily from Mexico, Peru, and California, as well as Colombia, Guatemala, South Africa, Chile, and other locations. Our diverse sourcing network mitigates the impact of potential geographical or grower-specific supply disruptions and optimizes our ability to fulfill year-round global demand. Third-party growers We have relationships with thousands of third-party growers.
They are also available free of charge on the SEC’s website at www.sec.gov.
They are also available free of charge on the SEC’s website at www.sec.gov. 3
For example, we operate category management, merchandising and packaging programs, such as our “Avocado Intel,” “Minis,” “Emeralds in the Rough,” “Ready,” “Size Minded,” “small but mighty,” “Jumbos—more to eat, more to love” and shelf-life extension programs, to promote the sale of avocados that might otherwise be underutilized, to identify ready-to-eat and various size avocados for consumers and to increase shelf life.
For example, we operate category management, merchandising and packaging programs, such as our “Avo Intel,” “Minis—small but mighty,” “Emeralds in the Rough,” “Ready,” “Size Minded,” “Jumbos—more to eat, more to love” and shelf-life extension programs, to promote the sale of avocados that might otherwise be underutilized, to identify ready-to-eat and various size avocados for consumers and to increase shelf life.
We report our results of operations in three operating segments which are also reportable segments: • Marketing and Distribution sources fruit from growers and then distributes fruit through our global distribution network; • International Farming owns and operates orchards from which substantially all fruit produced is sold to our Marketing and Distribution segment.
We report our results of operations in three operating segments which are also reportable segments: • Marketing and Distribution sources fruit from growers and then distributes fruit through our global distribution network; • International Farming owns and operates orchards from which the vast majority of fruit produced is sold to our Marketing and Distribution segment.
As of October 31, 2022, our approximate international avocado planted acreage, by age and rounded to the nearest hundred, was as follows: Avocado Acreage by Age Country 0-3 years 4-6 years >7 years Total Peru 3,100 200 6,300 9,600 Guatemala 800 — — 800 Colombia (1) 1,400 200 — 1,600 Total 5,300 400 6,300 12,000 (1) Acreage in Colombia is farmed through a joint venture.
As of October 31, 2023, our approximate international avocado planted acreage, by age and rounded to the nearest hundred, was as follows: Avocado Acreage by Age Country 0-3 years 4-6 years >7 years Total Peru 2,400 800 6,400 9,600 Guatemala 1,800 — — 1,800 Colombia (1) 1,500 200 — 1,700 Total 5,700 1,000 6,400 13,100 (1) Acreage in Colombia is farmed through a joint venture.
The segment’s farming activities range from cultivating early-stage plantings to harvesting from mature trees. It also earns service revenues for packing and processing for our Blueberries segment, as well as for third-party producers of other crops during the avocado off-harvest season.
The segment’s farming activities range from cultivating early-stage plantings to harvesting from mature trees. It also earns service revenues for packing and processing fruit for both our Blueberries segment, as well as for third-party producers of other crops.
Human Capital As of October 31, 2022, we had approximately 3,900 employees located worldwide, of which, 2,500 were located in Peru, 600 were located in Mexico, 400 were located in the U.S., and 400 in other regions such as Guatemala, Europe, Canada and the U.K. Our headcount in Peru is inclusive of our Moruga blueberry operation.
People As of October 31, 2023, we had approximately 3,300 employees located worldwide, of which, 1,800 were located in Peru, 600 were located in Mexico, 500 were located in the U.S., and 400 were located in other regions such as Guatemala, the U.K., Europe and Canada. Our headcount in Peru is inclusive of our Moruga blueberry operation.
The California Avocado Commission, which receives its funding from California avocado growers, has historically shouldered the promotional and advertising costs supporting avocado sales. We believe that the incremental funding of promotional and advertising programs in the U.S. will, in the long term, positively impact average selling prices and will favorably impact our avocado businesses.
We believe that the incremental funding of promotional and advertising programs in the U.S. will, in the long term, positively impact average selling prices and will favorably impact our avocado businesses.
Our custom ripening programs provide customers with the option of ordering avocados at five different stages of ripeness – hard, preconditioned, breaking, firm-ripe and ripe – which are delivered on specifically tailored schedules according to stage of ripeness. We also provide value-added services including ripening, bagging, custom packaging, logistical management, and quality assurance.
Our custom ripening programs provide customers with the option of ordering avocados at five different stages of ripeness – hard, preconditioned, breaking, firm-ripe and ripe – which are delivered on specifically tailored schedules according to stage of ripeness. In 2021, we also began marketing mangos on a limited scale.
Our packing facilities and products are subject to periodic inspection by federal, state and local authorities, including the California State Department of Food and Agriculture (“CFDA”), which oversees weights & measures compliance at our California packing facilities. All of our U.S. facilities are also in compliance with the FDA’s Food Safety Modernization Act (“FSMA”).
Our packing facilities and products are subject to periodic inspection by federal, state and local authorities, including FDA review of our compliance with the Food Safety Modernization Act ("FSMA") at all of our U.S. facilities.
We are subject to numerous federal, state, local and foreign environmental laws and regulations. These laws and regulations govern, among other matters, the treatment, handling, storage, use and disposal of, and exposure to, hazardous materials and waste, including herbicides, fertilizers, pesticides and other agricultural products, the remediation of contaminated properties and climate change.
These laws and regulations govern, among other matters, the treatment, handling, storage, use and disposal of, and exposure to, hazardous materials and waste, including herbicides, fertilizers, pesticides and other agricultural products, the remediation of contaminated properties and climate change. In the U.S., the Hass Avocado Board was established by the USDA to promote the sale of Hass variety avocados.
Supply chain and distribution network Our global distribution network includes twelve forward distribution centers in North America, China and Europe, equipped to offer value-added services such as ripening, bagging, custom packaging and logistical management. Our network of distribution facilities puts us in close proximity to our customers, allowing us provide fruit based on customer timing, specification, and volume needs.
Supply chain and distribution network Our global distribution network includes strategically located forward distribution centers across North America, China, Europe, and the U.K. equipped to offer value-added services such as ripening, bagging, custom packaging and logistical management.
Due to the cyclical nature of avocado production, we also hire temporary and seasonal workers on our farms in Peru and packing houses in the U.S. and Mexico to meet our needs. For nearly four decades, we have remained rooted in honesty, respect, and loyalty.
Due to the cyclical nature of avocado production, we also hire temporary and seasonal workers on our farms in Peru and packing houses in the U.S. and Mexico to meet our needs. We seek to provide an attractive workplace for our people by adhering to and demonstrating our values: FIRST – fun, innovative, reliable, successful, and trustworthy.
In the U.S., the Hass Avocado Board was established by the USDA to promote the sale of Hass variety avocados. This board provides a basis for unified funding of promotional activities based on an assessment on all avocados sold in the U.S. marketplace.
This board provides a basis for unified funding of promotional activities based on an assessment on all avocados sold in the U.S. marketplace. The California Avocado Commission, which receives its funding from California avocado growers, has historically shouldered the promotional and advertising costs supporting avocado sales.
The information on or that can be accessed through our website is not incorporated by reference in this report.
Available Information Our corporate headquarters are located at 2710 Camino Del Sol, Oxnard, California, and our telephone number is (805) 981-3650. Our internet address is www.missionproduce.com. The information on or that can be accessed through our website is not incorporated by reference in this report.
Regulation and Industry Associations Our business is impacted by environmental, health and safety, government procurement, anti-bribery and other government regulations and requirements. Below is a summary of some of the significant regulations that impact our business.
We are actively involved in supporting our surrounding communities, and we contribute to important causes, including those focused on children, families, and agriculture education. Regulation and Industry Associations Our business is impacted by general and industry-specific government regulations and requirements. Below is a summary of some of the significant industry or commodity-related regulations that impact our business.
Within the United States, we can deliver avocados within approximately eight hours or less. Internationally, we have distribution centers and investments in other distributors in Europe and Asia to serve the growing retail demand outside of the United States.
Our network of distribution facilities puts us in close proximity to our customers, allowing us to provide fruit based on customer timing, specification, and volume needs. Within the United States, we can deliver avocados within approximately eight hours or less.
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Globally, we support our people in the distinct ways needed according to their respective regions and environment and commit to treating every individual with dignity and respect by following our human rights declaration. We’ve made actionable goals to address the incorporation of Diversity, Equity, and Inclusion (“DE&I”) in our organization and industry by sponsoring and participating in certifications and trainings.
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Mangos are complementary to avocados as they typically have opposite seasons, allowing us to leverage and maintain absorption of our distribution network. We also provide value-added services including ripening, bagging, custom packaging, logistical management, and quality assurance.
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Appointed teams continually work to improve the working conditions of our people through our Health and Safety program. Our social initiatives embody our core values: Fun, Innovative, Reliable, Successful, and Trustworthy. Our corporate culture embodies these values and, as a result, we believe we have a highly motivated and skilled workforce that is committed to the success of our business.
Added
Sales in our Blueberries segment are concentrated in the first and fourth quarters of our fiscal year in alignment with the Peruvian blueberry harvest season, which typically runs from July through January.
Removed
In addition, our operations in Mexico are subject to Mexican regulations and our operations in Peru are subject to Peruvian regulations. The agricultural products sold and marketed by us are subject to additional specific government acts or regulations, including the Hass Avocado Promotion, Research and Information Act of 2000 for our avocados.
Added
In addition, our operations in Mexico are subject to Mexican regulations, our operations in Peru are subject to Peruvian regulations, and our operations in Europe and the U.K. are subject o applicable regulations for those regions. We are subject to numerous federal, state, local and foreign environmental laws and regulations.
Removed
We seek to comply at all times with all such laws and regulations and to obtain any necessary permits and licenses, and we are not aware of any instances of material non-compliance. Available Information Our corporate headquarters are located at 2710 Camino Del Sol, Oxnard, California, and our telephone number is (805) 981-3650. Our internet address is www.missionproduce.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+27 added−7 removed128 unchanged
Biggest changeIf securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline. The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors.
Biggest changeThe trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. If no securities or industry analysts commence or continue coverage of our company, the trading price for our stock would be negatively impacted.
Disruption to the timely supply of these services or dramatic increases in the cost of these services for any reason including availability of fuel or labor for such services, labor disputes, governmental regulation, or governmental restrictions limiting specific forms of transportation could have an adverse effect on our ability to serve our customers and consumers and could have an adverse effect on our financial performance.
Disruption to the timely supply or availability of these services or dramatic increases in the cost of these services for any reason including availability of fuel or labor for such services, labor disputes, governmental regulation, or governmental restrictions limiting specific forms of transportation could have an adverse effect on our ability to serve our customers and consumers and could have an adverse effect on our financial performance.
These provisions provide, among other things, that: • our Board of Directors has the exclusive right to expand the size of our Board of Directors and to elect directors to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • our Board of Directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chairperson of our Board of Directors, our chief executive officer, president or our Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our Board of Directors may alter provisions of our bylaws without obtaining stockholder approval; • the approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board of Directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board of Directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
These provisions provide, among other things, that: • our Board of Directors has the exclusive right to expand the size of our Board of Directors and to elect directors to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • our Board of Directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chairperson of our Board of Directors, our chief executive officer, president or our Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our Board of Directors may alter provisions of our bylaws without obtaining stockholder approval; • the approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board of Directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or 14 deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board of Directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
Conducting business internationally has exposed, and continues to expose, us to a variety of risks, including: • Changes in legal or regulatory requirements affecting foreign investment, taxes, labor, imports and exports or changes in or interpretations of foreign regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities; • increased demands on our limited resources created by our operations may constrain the capabilities of our administrative and operational resources and restrict our ability to attract, train, manage and retain qualified management, technicians, scientists and other personnel; • difficulties associated with staffing and managing foreign operations; • multiple, conflicting and changing laws and regulations such as tariffs and tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • potential failure by us or third parties we rely on to obtain and/or maintain regulatory approvals for the sale or use of our products in various countries; • difficulties in managing global operations; • logistics and regulations associated with shipping products, including infrastructure conditions and transportation delays; • financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to currency exchange rate fluctuations; • reduced protection for intellectual property rights, or lack of them in certain jurisdictions; • economic weakness or instability, economic recessions, political and economic instability, including corruption, wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • failure to comply with the Foreign Corrupt Practices Act, including its books and records provisions and its anti-bribery provisions, by maintaining accurate information and control over sales activities and distributors’ activities; • failure to comply with restrictions on the ability of companies to do business in foreign countries; • restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, including import/export duties and quotas and customs duties and tariffs, or unexpected changes in tariffs, trade barriers and regulatory requirements; • compliance with tax, employment, immigration and labor laws; • taxes, including withholding of payroll taxes; • currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages or disruptions in supply, labor, transportation and trading; and • business and shipping interruptions resulting from pandemics and natural or other disasters including earthquakes, volcanic activity, hurricanes, floods and fires.
Conducting business internationally has exposed, and continues to expose, us to a variety of risks, including: • Changes in legal or regulatory requirements affecting foreign investment, taxes, labor, imports and exports or changes in or interpretations of foreign regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities; 4 • increased demands on our limited resources created by our operations may constrain the capabilities of our administrative and operational resources and restrict our ability to attract, train, manage and retain qualified management, technicians, scientists and other personnel; • difficulties associated with staffing and managing foreign operations; • multiple, conflicting and changing laws and regulations such as tariffs and tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • potential failure by us or third parties we rely on to obtain and/or maintain regulatory approvals for the sale or use of our products in various countries; • difficulties in managing global operations; • logistics and regulations associated with shipping products, including infrastructure conditions and transportation delays; • financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to currency exchange rate fluctuations; • reduced protection for intellectual property rights, or lack of them in certain jurisdictions; • economic weakness or instability, economic recessions, political and economic instability, including corruption, wars and regional or global conflicts, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • failure to comply with the Foreign Corrupt Practices Act, or other similar laws, including its books and records provisions and its anti-bribery provisions, by maintaining accurate information and control over sales activities and distributors’ activities; • failure to comply with restrictions on the ability of companies to do business in foreign countries; • restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, including import/export duties and quotas and customs duties and tariffs, or unexpected changes in tariffs, trade barriers and regulatory requirements; • compliance with tax, employment, immigration and labor laws; • taxes, including withholding of payroll taxes; • currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages or disruptions in supply, labor, transportation and trading; and • business and shipping interruptions resulting from pandemics and natural or other disasters including earthquakes, volcanic activity, hurricanes, floods and fires.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could 13 be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.
Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by affected 8 individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.
Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.
Such financing may not be available on favorable terms, if at all. In addition, our term loans are secured by real property, personal property and the capital stock of our subsidiaries. If we cannot repay all amounts that we have borrowed under our term loans, our lenders could proceed against our assets. Item 1B. Unresolved Staff Comments None. 15
Such financing may not be available on favorable terms, if at all. In addition, our term loans are secured by real property, personal property and the capital stock of our subsidiaries. If we cannot repay all amounts that we have borrowed under our term loans, our lenders could proceed against our assets. Item 1B. Unresolved Staff Comments None.
These purchases may expose us to increases in short-term costs and additional production may expose us to additional long-term operating costs. If supply decreases dramatically, whether as a result of damage to farms, inclement weather, drought, labor issues, or other problems, prices have and could dramatically increase and we may not be able to purchase sufficient fruit.
These purchases may expose us to increases in short-term costs and additional production exposes us to additional long-term operating costs. If supply decreases dramatically, whether as a result of damage to farms, inclement weather, drought, labor issues, or other problems, prices have and could dramatically increase and we may not be able to purchase sufficient fruit.
Internal Revenue Service (“IRS”), the Servicio de Administracion Tributaria in Mexico (“SAT”), the Superintendencia Nacional de Administración Tributaria in Peru (“SUNAT”) and other tax authorities. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the outcome of these examinations.
Internal Revenue Service (“IRS”), the Servicio de Administración Tributaria in Mexico (“SAT”), the Superintendencia Nacional de Administración Tributaria in Peru (“SUNAT”) and other tax authorities. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the outcome of these examinations.
This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or 12 other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.
This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.
In addition, if we are unable to maintain compliance with our financial covenants or otherwise breach the covenants that we are subject to under our credit facility, our lenders could demand immediate payment of amounts outstanding and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations.
In addition, if we are unable to maintain compliance with our financial 15 covenants or otherwise breach the covenants that we are subject to under our credit facility, our lenders could demand immediate payment of amounts outstanding and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations.
We may be unable to successfully integrate businesses or the personnel of any business that might be acquired in the 10 future, and our failure to do so could have a material adverse effect on our business and on the market price of our common stock. We may also not be able to achieve an attractive return on our investments.
We may be unable to successfully integrate businesses or the personnel of any business that might be acquired in the future, and our failure to do so could have a material adverse effect on our business and on the market price of our common stock. We may also not be able to achieve an attractive return on our investments.
In addition, the government may seek to hold us liable as a successor for violations committed by companies in which we invest or that we acquire. Our business depends on a strong and trusted brand, and any failure to maintain, protect, and enhance our brand would have an adverse impact on our business.
In addition, the government may seek to hold us liable as a successor for violations committed by companies in which we invest or that we acquire. 11 Our business depends on a strong and trusted brand, and any failure to maintain, protect, and enhance our brand would have an adverse impact on our business.
We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate 14 disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation.
We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation.
These borrowing arrangements are described in more detail in “Liquidity and Capital Resources” under Part II, Item 7 and in Note 7 to the consolidated financial statements under Part II, Item 8 of this annual report. Compliance with some of these covenants is based on financial measures derived from our operating results.
These borrowing arrangements are described in more detail in “Liquidity and Capital Resources” under Part II, Item 7 and in Note 9 to the consolidated financial statements under Part II, Item 8 of this annual report. Compliance with some of these covenants is based on financial measures derived from our operating results.
The U.S. has instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., 9 economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business.
The U.S. has instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business.
Acquisitions entail numerous risks, including the integration of the acquired operations, diversion of management’s attention to other business concerns, risks of entering markets in which we have limited prior experience, assumption of liabilities and the potential loss of key employees of acquired organizations.
Acquisitions entail numerous risks, including the integration of the acquired operations, diversion of management’s attention to other business concerns, risks of entering markets in which we have limited prior experience, assumption of liabilities and the potential loss of key 10 employees of acquired organizations.
Inflationary pressures and increases in costs of commodities or other products we use in our business, such as fuel, packing, and paper, could adversely affect our operating results. The price of various products that we use in packing, shipping, or distributing avocados can significantly affect our costs.
Inflationary pressures and increases in costs of commodities or other products we use in our business, such as fuel, packing, and paper, could adversely affect our operating results. The price of various products that we use in packing, shipping, or distributing our products can significantly affect our costs.
Compliance with these laws and regulations and new or existing regulations that may be applicable to us in the future could increase our operating costs and adversely affect our financial results of operations and cash flows.
Compliance with these laws and regulations and new or existing regulations that may be applicable to us in the future, restrict our operations and increase our operating costs and could adversely affect our financial results of operations and cash flows.
Furthermore, there could be potential trade name or trademark infringement claims brought by owners of other registered 11 trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.
Furthermore, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.
In addition, customers who purchase our avocados for their food products could experience negative publicity, or experience a significant increase in food costs if there are food safety events. If such customers experience a decline in sales as a result of such food safety event, our results of operations would be adversely affected.
In addition, customers who purchase our fruit for their food products could experience negative publicity, or experience a significant increase in food costs if there are food safety events. If such customers experience a decline in sales as a result of such food safety event, our results of operations would be adversely affected.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations or financial condition. Risks Related to Our Business Our ability to generate revenues is limited by the supply of avocados and our ability to purchase or grow additional avocados.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations or financial condition. Risks Related to Our Business Our ability to generate revenues is limited by the supply of fruit and our ability to purchase or grow additional fruit.
The impact of the limited supply and increased prices could decrease our revenues or increase our costs of goods sold, which would harm our business and financial results. Our profitability is sensitive to fluctuations in market prices of avocados which we do not control.
The impact of the limited supply and increased prices could decrease our revenues or increase our costs of goods sold, which would harm our business and financial results. Our profitability is sensitive to fluctuations in market prices of our products which we do not control.
Such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, or residues introduced during the growing, storage, handling or transportation phases.
Such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, pathogenic bacteria, substances, chemicals, or residues introduced during the growing, storage, handling or transportation phases.
Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest. The selling price received depends on the availability and quality offered by us to customers and available in the market generally. Pricing also depends on demand, and consumer preferences for particular food products are subject to fluctuations over time.
Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest. The selling price received depends on the availability and quality offered by us to customers and what comparable offerings are available in the market generally. Pricing also depends on demand, and consumer preferences for particular food products are subject to fluctuations over time.
Even if we are able to comply with all such laws and regulations and obtain all necessary registrations and licenses, we cannot assure you that the herbicides, fertilizers, pesticides or other products we apply, or the manner in which we apply them, will not be alleged to cause injury to the environment, people or animals, or that such products will not be restricted or banned in certain circumstances.
Even if we are able to comply with all such laws and regulations and obtain all necessary registrations and licenses, we cannot guarantee that the herbicides, fertilizers, pesticides or other products we apply, or the manner in which we apply them, will not be alleged to cause injury to the environment, people or animals, or that such products will not be restricted or banned in certain circumstances.
If we are unable to purchase sufficient volumes from third-party growers at acceptable prices or demand for our products were to increase in the future, we would need additional production capacity, which may take time, whether by purchasing additional fruit from third-party suppliers or by waiting for our younger avocado trees to bear fruit.
If we are unable to purchase sufficient volumes from third-party growers at acceptable prices or demand for our products were to increase in the future, we would need additional production capacity, which may take time, whether by purchasing additional fruit from third-party suppliers or by waiting for our younger plants to bear fruit.
Our permits that allow us to import foreign-sourced avocados into the United States generally are contingent on our compliance with these regulations. Our results of operations may be adversely affected if we are unable to comply with existing and modified regulations and are unable to secure avocado import permits in the future.
Our permits that allow us to import foreign-sourced products into the United States generally are contingent on our compliance with these regulations. Our results of operations may be adversely affected if we are unable to comply with existing and modified regulations and are unable to secure import permits in the future.
We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities. We are subject to taxes in the U.S., Mexico, Peru and other countries. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.
We could be subject to changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities. We are subject to taxes in the U.S., Mexico, Peru, the Netherlands, the United Kingdom, and other countries. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.
We conduct a substantial amount of business internationally, including: doing business with growers and customers who are located outside the United States; purchasing fruit from growers and packers in Mexico and other countries; owning or leasing thousands of acres of farms in other countries, operating packing facilities in Peru and Mexico, having farming joint ventures in Colombia and South 4 Africa, operating sales and distribution offices in China and in Europe, and selling products to foreign customers.
We conduct a substantial amount of business internationally, including: doing business with growers and customers who are located outside the United States; purchasing fruit from growers and packers in Mexico and other countries; owning or leasing thousands of acres of farms in other countries, operating packing facilities in Peru and Mexico, having a farming joint venture in Colombia and a minority investment in South Africa, operating sales and distribution offices in China and in Europe, and selling products to foreign customers.
Additionally, damage or disruption to our collective production or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, disease, crop spoilage, fire or explosion, terrorism, pandemics, strikes, repairs or enhancements at our facilities, or other reasons, could impair our ability to produce or sell our products.
Additionally, damage or disruption to our collective production or distribution capabilities resulting from weather, any potential effects of climate change, natural disaster, disease, crop spoilage, fire or explosion, terrorism, wars or regional/global conflicts, pandemics, strikes, repairs or enhancements at our facilities, or other reasons, could impair our ability to produce or sell our products.
Sales to our top 10 customers amounted to approximately 59% of net sales for both years ended October 31, 2022 and 2021, and approximately 64% for the year ended October 31, 2020. We expect that a significant portion of our revenues will continue to be derived from a relatively small number of customers.
Sales to our top 10 customers amounted to approximately 65% of net sales for the year ended October 31, 2023 and 59% of net sales for both years ended October 31, 2022 and 2021. We expect that a significant portion of our revenues will continue to be derived from a relatively small number of customers.
Food safety events, including instances of food-borne illness involving avocados, could create negative publicity for our customers and adversely affect sales and operating results. Food safety is a top priority, and we dedicate substantial resources to ensure that our customers enjoy safe, quality products.
Food safety events, including instances of food-borne illnesses, could create negative publicity for our customers and adversely affect sales and operating results. Food safety is a top priority, and we dedicate substantial resources to ensure that our customers enjoy safe, quality products.
We are subject to possible changing United States Department of Agriculture and Food and Drug Administration regulations that govern the importation of foreign avocados into the United States. The USDA has established, and continues to modify, regulations governing the importation of avocados into the United States, and also limits the countries from which avocados may be imported.
We are subject to possible changing United States Department of Agriculture and Food and Drug Administration regulations that govern the importation of our products into the United States. The USDA has established, and continues to modify, regulations governing the importation of our products into the United States, and also limits the countries from which our products may be imported.
The market price for our common stock may be influenced by those factors discussed in this “Risk Factors” section and many others. Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to control or significantly influence all matters submitted to stockholders for approval.
The market price for our common stock may be influenced by those factors discussed in this “Risk Factors” section and many others. Our executive officers and directors, if they choose to act together, have the ability to control or significantly influence all matters submitted to stockholders for approval. Furthermore, many of our current directors were appointed by our principal stockholders.
Our results of operations may be adversely affected by numerous factors over which we have little or no control and that are inherent in farming, including reductions in the market prices for our products, adverse weather including drought, high winds, earthquakes and wildfires.
Our results of operations may be adversely affected by numerous factors over which we have little or no control and that are inherent in farming, including reductions in the market prices for our products, adverse weather including drought, floods, abnormally high or low temperatures or weather patterns, high winds, earthquakes and wildfires.
Growing conditions in various parts of the world, particularly weather conditions such as windstorms, floods, droughts, wildfires and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply, size, and quality of product. Pricing also depends on quality.
Growing conditions in various parts of the world, particularly weather conditions such as windstorms, floods, droughts, wildfires, abnormally warm or cold weather patterns, and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply, size, and quality of product. Pricing also depends on quality.
However, food safety events, including instances of food-borne illness, have occurred with avocados in the past, and could occur in the future. Food safety events at customers, whether or not they involve avocados, could adversely affect sales to those customers.
However, food safety events, including instances of food-borne illness, have occurred with avocados in the past, and could occur in the future. Food safety events experienced by our customers, whether or not they involve our fruit, could adversely affect sales to those customers.
Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as the current conflict between Russia and Ukraine, may adversely affect our business and results of operations.
Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as the current conflicts between Russia and Ukraine and the war in the Middle East, may adversely affect our business and results of operations.
Shifts in consumer preferences that impact demand at any given time can result from a number of factors, including dietary trends, price, attention to particular nutritional aspects, concerns regarding the health effects of particular products, attention given to product sourcing practices and general public perception of food safety risks.
Shifts in consumer preferences that impact demand at any given time can result from a number of factors, including dietary trends, price, attention to particular nutritional aspects, concerns regarding the health effects of particular products, attention given to product sourcing practices, economic factors, sustainability and ethical issues associated with supply chain practices, and general public perception of food safety risks.
If our effective tax rates were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.
If our effective tax rates were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected.
Past governments have frequently intervened in the nation’s economy and social structure, and also faced money laundering and corruption issues.
Past governments have frequently intervened in the nation’s economy and social structure, and they and businesses associated with them also faced money laundering and corruption issues.
Furthermore, many of our current directors were appointed by our principal stockholders. Our executive officers, directors and greater than 5% stockholders, in the aggregate, own approximately 41% of our outstanding common stock as of October 31, 2022. Furthermore, many of our current directors were appointed by our principal stockholders.
Our executive officers and directors, in the aggregate, own approximately 39% of our outstanding common stock as of October 31, 2023. Furthermore, many of our current directors were appointed by our principal stockholders.
Risks Related to Our Common Stock An active, liquid and orderly market for our common stock may not be maintained. Our common stock began trading on Nasdaq in October 2020, but we can provide no assurance that we will be able to maintain an active trading market for our common stock.
Our common stock began trading on Nasdaq in October 2020, but we can provide no assurance that we will be able to maintain an active trading market for our common stock.
With a limited number of avocado trees on our farms and on the farms from which we purchase, our ability to obtain supply from third parties and adapt to any changes in demand of our product is constrained.
Our ability to distribute fruit is limited by our ability to acquire supply from third-party growers and to produce on our own farms. With a limited number of trees on our farms and on the farms from which we purchase, our ability to obtain supply from third parties and adapt to any changes in demand of our product is constrained.
Growing conditions, pest and disease problems and new government regulations regarding farming and the marketing of agricultural products can impose additional costs on, or make it more difficult to conduct, our business. Due to the seasonality of the business, our revenue and operating results may vary from quarter to quarter and year to year.
Growing conditions, pest and disease problems and new government regulations regarding farming and the marketing of agricultural products can impose additional costs on, or make it more difficult to conduct, our business.
Such changes have the potential to adversely impact the U.S. economy or sectors thereof, our industry and the global demand for our products, and as a result, could have a negative impact on our business, financial condition and results of operations.
Such changes have the potential to adversely impact the U.S. economy or sectors thereof, our industry and the global demand for our products, and as a result, could have a negative impact on our business, financial condition and results of operations. We are subject to health and safety laws, which restrict our operations and increase our operating costs.
If no securities or industry analysts commence or continue coverage of our company, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our stock, our stock price would likely decline.
In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our stock, our stock price would likely decline.
Such disruptions have and could adversely impact our ability to fulfill orders and interrupt other key business processes. We have experienced delays and lower profit from these disruptions and may experience such difficulties in the future. As a result, our financial results, stock price, or reputation have and may be adversely affected.
Such disruptions have and could adversely impact our ability to fulfill orders and interrupt other key business processes. We have experienced delays and lower profit from these disruptions and may experience such difficulties in the future.
The broader consequences of this conflict, which may include further sanctions, embargoes, regional instability, and geopolitical shifts; transportation bans relating to certain routes, or strategic decisions to alter certain routes; potential retaliatory action by the Russian government against companies, including us, as a result of the suspension of services in Russia, including nationalization of foreign businesses in Russia; increased tensions between the United States and countries in which we operate; and the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.
The broader consequences of these conflicts, which may include sanctions, embargoes, regional instability, and geopolitical shifts; transportation bans relating to certain routes, or strategic decisions to alter certain routes; potential retaliatory action by governments against companies, including us; increased tensions between the United States and countries in which we operate; and the extent of these conflicts’ effects on our business and results of operations as well as the global economy, cannot be predicted.
If there is a determination that we have failed to comply with applicable laws or regulations, we may be subject to penalties or sanctions that could adversely impact our reputation and financial results. Compliance with changes in laws or regulations can result in increased operating costs and require additional, unplanned capital expenditures.
Compliance with laws and regulations may involve significant costs or require changes in business practices that could result in reduced profitability. If there is a determination that we have failed to comply with applicable laws or regulations, we may be subject to penalties or sanctions that could adversely impact our reputation and financial results.
The pricing of avocados depends on supply, and excess supply can lead to price competition in our industry.
The pricing of fruit we purchase for distribution depends on supply, and excess supply can lead to price competition in our industry.
Even if an active trading market is developed, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.
The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.
If consumer preferences trend negatively with respect to avocados, our sales volumes may decline as a result. We are subject to increasing competition that may adversely affect our operating results. The market for avocados is highly competitive. Competition for the purchase of avocados from suppliers and the sale of avocados to distributors primarily comes from other avocado distributors.
If consumer preferences trend negatively with respect to our products, our sales volumes may decline as a result. We are subject to increasing competition that may adversely affect our operating results. The market for our products is highly competitive.
We are analyzing the impact of this on our business and contemplating all avenues available to us to challenge and/or comply with the both the bill and the criteria released in November 2022 for inspections.
We are analyzing the impact of this on our business and contemplating all avenues available to us to challenge and/or comply with both the bill and the criteria released in November 2022 for inspections. We have challenged the legality of the criteria before the Tax Court which has granted a favorable suspension of enforcement.
An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially adversely affect our business. We may fail to comply with Nasdaq listing standards which could cause our stock to be delisted.
An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially adversely affect our growth.
Further, competitive pressures and other factors may also limit our ability to quickly raise prices in response to increased costs. Accordingly, we may not be able to offset increased costs fully or at all, and there can be no assurances that increasing prices will fully mitigate the impact of these increases, which could adversely impact our results.
We may not be able to offset increased costs fully or at all, and there can be no assurances that increasing prices will fully mitigate the impact of increases, which could adversely impact our results.
The FDA establishes, and continues to modify, regulations governing the distribution of avocado products, such as the new Food Safety Modernization Act, which implements mandatory preventive controls for food facilities and compliance with mandatory produce safety standards. Our results of operations may be adversely affected if we are unable to comply with these existing and modified regulations.
The FDA establishes, and continues to modify, regulations governing the distribution of our products, such as the Food Safety Modernization Act, which implements mandatory preventive controls for food facilities and growing operations to comply with mandatory produce safety standards.
We are subject to extensive government regulation in the jurisdictions in which we do business. Regulations addressing, among other things, import/export restrictions, anti-bribery and corruption, and taxes, can negatively impact our financial condition, results of operation, and cash flows. We are subject to government regulation in the United States and in the foreign jurisdictions where we conduct business.
We are subject to extensive government regulation in the jurisdictions in which we do business which can negatively impact our financial condition, results of operation, and cash flows. We are subject to government regulation in the United States and in the foreign jurisdictions where we conduct business. The application of laws and regulations to our business is sometimes unclear.
Such competition may adversely affect our volumes and prices, which would harm our business and results of operations. We are subject to the risks of doing business internationally and our current international operations are subject to a number of inherent risks.
We are subject to the risks of doing business internationally and our current international operations are subject to a number of inherent risks.
The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as executive officers.
The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as executive officers. 13 If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.
Such complexities have and could continue to result in delays in customer shipments which may negatively impact our ability to recover costs, retain or attract customers, and/or sell our product effectively.
In the past, we have experienced increases in transportation costs, decreases in the availability of shipping, and other global supply chain complexities, including labor shortages. Such complexities have and could continue to result in delays in customer shipments which may negatively impact our ability to recover costs, retain or attract customers, and/or sell our product effectively.
The new law will subject us to higher Peruvian corporate income tax rates than our current rate of 15% as follows: 20% for calendar years 2023 to 2024, 25% for calendar years 2025 to 2027, and 29.5% thereafter. We are also subject to the examination of our tax returns and other tax matters by the U.S.
The new law subjects us to higher Peruvian corporate income tax rates than the rate in effect on the date of repeal of 15%, as follows: 20% for calendar years 2023 to 2024, 25% for calendar years 2025 to 2027, and 29.5% thereafter.
We are subject to inflationary pressures in labor as well as a tight labor market for recruitment and retention of skilled, short- and long-term labor. If we are unable to attract and retain enough skilled personnel at a reasonable cost, our results may be negatively affected. We and our growers are subject to the risks that are inherent in farming.
If we are unable to attract and retain enough skilled personnel at a reasonable cost, our results may be negatively affected. 7 We and our growers are subject to the risks that are inherent in farming, including those related to climate change.
Foreign Corrupt Practices Act, the United Kingdom Bribery Act and the China Anti-Unfair Competition Law, could subject us to criminal or civil sanctions if a violation is deemed to have occurred.
Changes in tax laws and regulations and international tax treaties could affect the financial results of our businesses. Increasingly aggressive enforcement of anti-bribery and anti-corruption requirements, including the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act and the China Anti-Unfair Competition Law, could subject us to criminal or civil sanctions if a violation is deemed to have occurred.
As the price of paper increases, our operating income will decrease if we are not able to effectively pass these price increases along to our customers. The loss of one or more of our largest customers, or a reduction in the level of purchases made by these customers, could negatively impact our sales and profits.
The loss of one or more of our largest customers, or a reduction in the level of purchases made by these customers, could negatively impact our sales and profits.
We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data privacy and security and changes in such laws, regulations, policies and contractual obligations could adversely affect our business.
As a result, our financial results, stock price, or reputation have and may be adversely affected. 8 We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data privacy and security and such laws, regulations, policies and contractual obligations affect our business.
Changes to U.S. trade policy, tariff and import/export regulations may adversely affect our operating results.
Our results of operations may be adversely affected if we are unable to comply with these existing and modified regulations. 9 Changes to U.S. trade policy, tariff and import/export regulations may adversely affect our operating results.
Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. On December 30, 2020, Peru enacted tax law repealing current tax law which provided benefits to agribusiness entities.
Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. We are also subject to the examination of our tax returns and other tax matters by the U.S.
Our success also depends upon our ability to attract and retain additional qualified sales, marketing and other personnel. 7 The operation of our facilities depends on adequate and affordable supply of labor and good labor relations with our employees. Our employees are essential to our operations and our ability to farm, package and/or deliver our products.
This could have a material adverse effect on our business and prospects. Our success also depends upon our ability to attract and retain qualified personnel. The operation of our facilities depends on adequate and affordable supply of labor and good labor relations with our employees.
If we are unable to consistently pay growers a competitive price for their avocados, these growers may choose to have their avocados marketed by alternate distributors. If we are unable to offer attractive prices or consistent supply to retail and wholesale customers, they may choose to purchase from other companies.
Competition for the purchase of our products from suppliers and the sale of our products to our customers primarily comes from other distributors. If we are unable to consistently pay growers a competitive price for their fruit, these growers may choose to have their fruit marketed by alternative distributors.
There can be no assurance that we will be able to, or to what extent we can, pass on to our customers the increased costs we incur in these respects. 5 The cost of paper is also significant to us because most of our products are packed in cardboard boxes.
Fuel and transportation costs are a significant cost component and make up a meaningful portion of the price of much of the fruit that we purchase from growers. There can be no assurance that we will be able to, or to what extent we can, pass on to our customers the increased costs we incur in these respects.
The duration and magnitude of the increased transportation costs cannot be predicted at this time and there can be no assurances that such costs and/or shipping disruptions will not continue to increase. To the extent that we experience increased costs, we may increase our prices, pass the increase along to customers, or otherwise take actions to offset the impacts.
To the extent that we experience increased costs, we may increase our prices, pass the increase along to customers, or otherwise take actions to offset the impacts.
Export controls or other regulatory restrictions could prevent us from shipping our products to and from some markets or increase the cost of doing so. Changes in tax laws and regulations and international tax treaties could affect the financial results of our businesses. Increasingly aggressive enforcement of anti-bribery and anti-corruption requirements, including the U.S.
Compliance with changes in laws or regulations can result in increased operating costs and require additional, unplanned capital expenditures. Export controls or other regulatory restrictions could prevent us from shipping our products to and from some markets or increase the cost of doing so.
We have had departures of members of senior management and other members of senior management could depart the Company . This could have a material adverse effect on our business and prospects.
Failure or inability of key management team members to deliver on the Company’s strategic goals, execute on action items and plans, and/or operate the business in an effective manner may have a material adverse effect on our business and financial condition, We have had departures of members of senior management and other members of senior management could depart the Company .
Significant disruptions could continue to occur and put pressure on transportation and shipping infrastructure, which could in turn cause continued increases in costs that we are unable to recover fully.
Significant disruptions could continue to occur and put pressure on transportation and shipping infrastructure. The fluctuation in transportation costs cannot always be predicted and there can be no assurances that such costs and/or shipping disruptions will not increase in the future.
Removed
Our ability to distribute avocados is limited by our ability to acquire supply from third-party growers and to produce on our own farms.
Added
If we are unable to offer attractive prices or consistent supply to retail and wholesale customers, they may choose to purchase from other companies. Such competition may adversely affect our volumes and prices, which would harm our business and results of operations.
Removed
Fuel and transportation costs are a significant cost component and make up a meaningful portion of the price of much of the fruit that we purchase from growers, and such costs have recently been increasing.
Added
The cost of paper is also significant to us because most of our products are packed in cardboard boxes. As the price of paper increases, our operating income will decrease if we are not able to effectively pass these price increases along to our customers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDistribution* Marketing & Distribution Leased Virú, Peru Packing International Farming Owned Uruapan, Mexico Packing Marketing & Distribution Owned Zamora, Mexico Packing Marketing & Distribution Owned Trujillo, Peru Administrative International Farming Leased Lima, Peru Administrative, sales International Farming Leased *Indicates that the property is under construction. We own/lease approximately 20,000 acres of land under our farming operations.
Biggest changeDistribution, packing Marketing & Distribution Leased Virú, Peru Packing International Farming Owned Uruapan, Mexico Packing Marketing & Distribution Owned Zamora, Mexico Packing Marketing & Distribution Owned Trujillo, Peru Administrative International Farming Leased Lima, Peru Administrative, sales International Farming Leased We own and lease approximately 15,000 of plantable acres of agricultural land under our farming operations.
Our principal farming properties as of October 31, 2022 were as follows: Location Type Reportable Segment Owned or Leased Olmos, Peru Land International Farming Owned Virú, Peru Land International Farming Owned Santa Rosa, Guatemala Land International Farming Leased We believe that our facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms, if required.
Our principal farming properties as of October 31, 2023 were as follows: Location Type Reportable Segment Owned or Leased Olmos, Peru Land International Farming Owned Virú, Peru Land International Farming Owned Santa Rosa, Guatemala Land International Farming Leased Olmos, Peru Land Blueberries Leased We believe that our facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms, if required.
Properties Our principal operating, distribution and packing facilities as of October 31, 2022 were as follows: Location Type Reportable Segment Owned or Leased North America: Laredo, Texas Distribution Marketing & Distribution Owned Oxnard, California Distribution, packing Marketing & Distribution Owned Swedesboro, New Jersey Distribution Marketing & Distribution Leased Portland, Oregon Distribution Marketing & Distribution Leased Atlanta, Georgia Distribution Marketing & Distribution Leased Denver, Colorado Distribution Marketing & Distribution Leased Chicago, Illinois Distribution Marketing & Distribution Leased Calgary, Alberta, Canada Distribution Marketing & Distribution Leased Dallas, Texas Distribution Marketing & Distribution Leased Toronto, Ontario, Canada Distribution Marketing & Distribution Leased Oxnard, California Corporate headquarters Marketing & Distribution Leased Other: Breda, the Netherlands Distribution Marketing & Distribution Leased Dartford, U.K.
Properties Our principal operating, distribution and packing facilities as of October 31, 2023 were as follows: Location Type Reportable Segment Owned or Leased North America: Laredo, Texas Distribution Marketing & Distribution Owned Oxnard, California Distribution, packing Marketing & Distribution Owned Swedesboro, New Jersey Distribution Marketing & Distribution Leased Portland, Oregon Distribution Marketing & Distribution Leased Atlanta, Georgia Distribution Marketing & Distribution Leased Denver, Colorado Distribution Marketing & Distribution Leased Chicago, Illinois Distribution Marketing & Distribution Leased Calgary, Alberta, Canada Distribution Marketing & Distribution Leased Dallas, Texas Distribution Marketing & Distribution Leased Toronto, Ontario, Canada Distribution Marketing & Distribution Leased Oxnard, California Corporate headquarters Marketing & Distribution Leased Other: Dartford, U.K.
For additional information on leased property, see Note 8 of this annual report on Form 10-K.
For additional information on leased property, see Note 10 of this annual report on Form 10-K. 16

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe parties executed a stipulation of settlement agreement on such 16 terms in November 2021. This preliminary settlement was approved by the applicable courts in October 2022 and is subject to final approval which is currently estimated to be in the spring of 2023.
Biggest changeThe parties executed a stipulation of settlement agreement on such terms in November 2021. This preliminary settlement was approved by the applicable courts in October 2022.
Added
In the course of preparing to send out notices to the settlement class, issues arose regarding the nature and scope of the settlement, specifically with respect to the universe of participants in the settlement class, which the parties were unable to resolve.
Added
Plaintiffs filed a motion to enforce compliance with the settlement agreement and the Company filed a cross motion to reform the stipulation of settlement, or in the alternative, to vacate the order of preliminary approval. A hearing before the court was held on this matter in July 2023.
Added
The court granted Plaintiff’s motion and directed the parties to proceed with the notice procedures to a class that includes a number of participants that the Company does not feel are appropriate to include.
Added
The court did not rule on the fairness of the settlement agreement between the parties and stated that this determination would be made at final approval and that the issues raised in the Company’s motion would be considered at that time.
Added
The Company requested an appeal of the ruling and a delay of the mailing of notice to settlement class members, but such request was denied. A final approval hearing date has been set for January 30, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes $100 was invested on October 1, 2020 in Mission Produce common stock, or the respective indices, including reinvestment of dividends, with the associated plots indicating the relative performance as of the last day of trading prior to the fiscal year end date. 17 October 1, 2020 October 29, 2021 October 31, 2022 Mission Produce, Inc. 100.0 137.6 120.6 Nasdaq Composite Total Return Index 100.0 136.8 97.0 Nasdaq US Smart Food & Beverage Total Return Index 100.0 121.2 135.1 Unregistered Sales of Equity Securities None.
Biggest changeThe graph assumes $100 was invested on October 1, 2020 in Mission Produce common stock, or the respective indices, including reinvestment of dividends, with the associated plots indicating the relative performance as of the last day of trading prior to the fiscal year end date.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon results of operations, financial condition, capital requirements, business prospects, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon 17 results of operations, financial condition, capital requirements, business prospects, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
Prior to our IPO, there was no public market for our common stock. Holders of Common Stock We had 19 shareholders of record of our common stock as of December 1, 2022.
Prior to our IPO, there was no public market for our common stock. Holders of Common Stock We had 18 shareholders of record of our common stock as of December 1, 2023.
Comparative Stock Performance Graph The following performance graph shows a comparison from October 1, 2020 (the date our common stock commenced trading on the Nasdaq Global Market) through October 31, 2022, of the cumulative total return for our common stock, the Nasdaq Composite Total Return Index, and the Nasdaq US Smart Food & Beverage Total Return Index.
Comparative Stock Performance Graph The following performance graph shows a comparison from October 1, 2020 (the date our common stock commenced trading on the Nasdaq Global Market) through October 31, 2023, of the cumulative total return for our common stock, the Nasdaq Composite Index (the annual reports for fiscal years 2021 and 2022 incorrectly labeled the name of the index as Nasdaq Composite Total Return Index) and the Nasdaq US Smart Food & Beverage Total Return Index.
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Issuer Repurchases of Equity Securities None. Item 6. Reserved Not applicable.
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October 1, 2020 October 29, 2021 October 31, 2022 October 31, 2023 Mission Produce, Inc. 100.0 137.6 120.6 68.2 Nasdaq Composite Index (1) 100.0 136.8 97.0 113.5 Nasdaq US Smart Food & Beverage Total Return Index 100.0 121.2 135.1 116.0 (1) The annual reports for fiscal years 2021 and 2022 incorrectly labeled the name of this index as Nasdaq Composite Total Return Index Unregistered Sales of Equity Securities None.
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Issuer Repurchases of Equity Securities On September 6, 2023, the Board of Directors approved a stock repurchase program, which permits the Company to repurchase up to $20 million of shares of the Company’s common stock within 36 months from adoption.
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The shares may be repurchased from time to time in open market or privately negotiated transactions in such quantities and at such prices as may be authorized by certain designated officers of the Company.
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Share repurchases may be made in open market or privately negotiated 18 transactions and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors.
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Repurchases by us or our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) of the Exchange Act) of registered equity securities during the fourth quarter of 2023 were as follows: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plan Approximate dollar value of shares that may yet be purchased under the plan (in millions) September 6 - 30, 2023 21,539 $ 9.55 21,539 $ 19.8 October 1- 31, 2023 45,639 $ 9.09 45,639 $ 19.4 10b-5(1) Trading Plans Luis A.
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Gonzalez, one of the Company’s directors, and his spouse, Rosario Del Pilar Vallejos Hinojosa, have adopted a trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) (the “Gonzalez Sales Plan”) to sell an aggregate of 1,651,500 shares they hold indirectly through Beldar Enterprises S.A., and through Corp SA1, Corp SA2, Corp SA3, and Corp SA4, which are abbreviations for four affiliate corporations that are organized under the laws of Panama.
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The Gonzalez Sales Plan was adopted on July 14, 2023, with sales commencing under the Gonzalez Sales Plan on October 16, 2023.
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The Gonzalez Sales Plan terminates on the earliest to occur of (a) the close of business on October 16, 2024 ; (b) the date on which the total shares subject to the Gonzalez Sales Plan have been sold; and (c) the date the Gonzalez Sales Plan is terminated in connection with certain extraordinary transactions as specified by the terms of the Gonzalez Sales Plan.
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Jay A. Pack, one of the Company’s directors, has adopted a trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) (the “Pack Sales Plan”) to sell an aggregate of 150,000 shares held indirectly through PFP Investments, Ltd.
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The Pack Sales Plan was adopted on October 10, 2023, with sales commencing under the Pack Sales Plan on January 18, 2024.
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The Pack Sales Plan terminates on the earliest to occur of (a) July 17, 2024; (b) the completion of all sales contemplated under the Pack Sales Plan; and (c) the date the Pack Sales Plan is terminated in connection with certain events or transactions as specified by the terms of the Pack Sales Plan. Item 6. Reserved Not applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet sales Marketing and Distribution International Farming Blueberries Total Marketing and Distribution International Farming Total Marketing and Distribution International Farming Total Years ended October 31, (In millions) 2022 2021 2020 Third party sales $ 1,016.1 $ 19.1 $ 10.8 $ 1,045.9 $ 872.0 $ 19.7 $ 891.7 $ 846.9 $ 15.4 $ 862.3 Affiliated sales — 95.6 — 95.6 — 84.9 84.9 — 66.4 66.4 Total segment sales $ 1,016.1 $ 114.7 $ 10.8 $ 1,141.5 $ 872.0 $ 104.6 $ 976.6 $ 846.9 $ 81.8 $ 928.7 Intercompany eliminations — (95.6) — (95.6) — (84.9) (84.9) — (66.4) (66.4) Total net sales $ 1,016.1 $ 19.1 $ 10.8 $ 1,045.9 $ 872.0 $ 19.7 $ 891.7 $ 846.9 $ 15.4 $ 862.3 Adjusted EBITDA Years ended October 31, (In millions) 2022 2021 2020 Marketing & Distribution adjusted EBITDA $ 23.5 $ 51.4 $ 68.2 International Farming adjusted EBITDA 23.3 33.9 23.3 Blueberries adjusted EBITDA 0.8 — — Total reportable segment adjusted EBITDA $ 47.6 $ 85.3 $ 91.5 Net (loss) income (34.9) 44.9 28.8 Interest expense 5.5 3.7 6.7 Provision for income taxes 3.7 21.1 15.0 Depreciation and amortization (1) 24.8 20.4 18.1 Equity method income (5.1) (7.5) (4.0) Stock-based compensation 3.6 2.6 5.0 Other (income) expense, net (4.4) (1.3) 0.7 Legal settlement — 0.8 — Asset impairment and disposals, net of insurance recoveries 0.4 (0.2) — Farming costs for nonproductive orchards 1.5 0.8 — ERP costs (2) 4.6 — — Amortization of inventory adjustment recognized from business combination 0.4 — — Goodwill impairment 49.5 — — Remeasurement gain on business combination with Moruga (2.0) — — Impairment on equity method investment — — 21.2 Transaction costs 0.6 — — Noncontrolling interest (3) (0.6) — — Total adjusted EBITDA $ 47.6 $ 85.3 $ 91.5 (1) Includes $1.4 million of depreciation and amortization on purchase accounting assets including property, plant and equipment step-up and an intangible asset for the year ended October 31, 2022.
Biggest changeNet sales Marketing & Distribution International Farming Blueberries Total Marketing & Distribution International Farming Blueberries (1) Total Marketing & Distribution International Farming Total Years ended October 31, (In millions) 2023 2022 2021 Third party sales $ 889.9 $ 11.6 $ 52.4 $ 953.9 $ 1,016.1 $ 19.1 $ 10.7 $ 1,045.9 $ 872.0 $ 19.7 $ 891.7 Affiliated sales — 78.6 — 78.6 — 95.6 — 95.6 — 84.9 84.9 Total segment sales $ 889.9 $ 90.2 $ 52.4 $ 1,032.5 $ 1,016.1 $ 114.7 $ 10.7 $ 1,141.5 $ 872.0 $ 104.6 $ 976.6 Intercompany eliminations — (78.6) — (78.6) — (95.6) — (95.6) — (84.9) (84.9) Total net sales $ 889.9 $ 11.6 $ 52.4 $ 953.9 $ 1,016.1 $ 19.1 $ 10.7 $ 1,045.9 $ 872.0 $ 19.7 $ 891.7 (1) The Blueberries segment was consolidated prospectively from May 1, 2022. 24 Adjusted EBITDA Years Ended October 31, (In millions) 2023 2022 2021 Marketing & Distribution adjusted EBITDA $ 40.1 $ 23.5 $ 51.4 International Farming adjusted EBITDA 3.1 23.3 33.9 Blueberries adjusted EBITDA 5.2 0.8 — Total reportable segment adjusted EBITDA $ 48.4 $ 47.6 $ 85.3 Net (loss) income (3.1) (34.9) 44.9 Interest expense 11.6 5.5 3.7 Provision for income taxes 2.2 3.7 21.1 Depreciation and amortization (1) 32.8 24.8 20.4 Equity method income (4.0) (5.1) (7.5) Stock-based compensation 4.5 3.6 2.6 Executive severance 1.3 — — Legal settlement — — 0.8 Asset impairment and disposals, net of insurance recoveries 1.3 0.4 (0.2) Farming costs for nonproductive orchards 1.8 1.5 0.8 ERP costs (2) 2.2 4.6 — Goodwill impairment — 49.5 — Remeasurement gain on business combination with Moruga — (2.0) — Transaction costs 0.3 0.6 — Amortization of inventory adjustment recognized from business combination 0.7 0.4 — Other expense (income), net 0.2 (4.4) (1.3) Noncontrolling interest (3) (3.4) (0.6) — Total adjusted EBITDA $ 48.4 $ 47.6 $ 85.3 (1) Includes depreciation and amortization of purchase accounting assets of $2.4 million, $1.4 million and $0.2 million for the years ended October 31, 2023, 2022, and 2021, respectively.
Adjusted EBITDA refers to net income (loss), before interest expense, income taxes, depreciation and amortization expense, stock-based compensation expense, other income (expense), and income (loss) from equity method investees, further adjusted by asset impairment and disposals, net of insurance recoveries, farming costs for nonproductive orchards (which represents land lease costs), certain noncash and nonrecurring ERP costs, transaction costs, material legal settlements, amortization of inventory adjustments recognized from business combinations, and any special, non-recurring, or one-time items such as remeasurements or impairments, and 23 any portion of these items attributable to the noncontrolling interest, all of which are excluded from the results the CEO reviews uses to assess segment performance and results.
Adjusted EBITDA refers to net income (loss), before interest expense, income taxes, depreciation and amortization expense, stock-based compensation expense, other income (expense), and income (loss) from equity method investees, further adjusted by asset impairment and disposals, net of insurance recoveries, farming costs for nonproductive orchards (which represents land lease costs), certain noncash and nonrecurring ERP costs, transaction costs, material legal settlements, amortization of inventory adjustments recognized from business combinations, and any special, non-recurring, or one-time items such as remeasurements or impairments, and any portion of these items attributable to the noncontrolling interest, all of which are excluded from the results the CEO reviews uses to assess segment performance and results.
While we have long-standing relationships with our growers and packers, we predominantly purchase fruit on a daily basis at market rates. As such, the cost to procure products from independent growers can have a significant impact on our costs. Logistics costs include land and sea transportation and expenses related to port facilities and distribution centers.
While we have long-standing relationships with our growers and packers, we predominantly purchase fruit on a daily basis at market rates. As such, the cost to procure products from independent growers can have a significant impact on our costs. 21 Logistics costs include land and sea transportation and expenses related to port facilities and distribution centers.
Therefore, the actual liability for U.S. or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. 29 Recently Issued Accounting Standards Refer to Note 2 to the consolidated financial statements included herein for information on recently issued accounting standards.
Therefore, the actual liability for U.S. or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Recently Issued Accounting Standards Refer to Note 2 to the consolidated financial statements included herein for information on recently issued accounting standards.
As a result of the reconsideration event, we concluded that Moruga is a variable interest entity (“VIE”), and that the Company is the primary beneficiary with a controlling financial interest. Based on this conclusion, Moruga was prospectively consolidated on May 1, 2022. For more details on Moruga, refer to Note 3 to the financial statements in this annual report.
As a result of the reconsideration event, we concluded that Moruga is a variable interest entity (“VIE”), and that the Company is the primary 19 beneficiary with a controlling financial interest. Based on this conclusion, Moruga was prospectively consolidated on May 1, 2022. For more details on Moruga, refer to Note 3 to the financial statements in this annual report.
The Company operates approximately 700 acres of mangos in Peru that are largely in an early stage of production. The timing of the mango harvest is concentrated in the fiscal second quarter and, as a result, mangos have a more pronounced impact on segment financial performance during this timeframe.
The Company operates approximately 700 acres of mangos in Peru that are largely in an early stage of production. The timing of the mango harvest is concentrated in the 25 fiscal second quarter and, as a result, mangos have a more pronounced impact on segment financial performance during this timeframe.
Additionally, we frequently engage third party valuation experts to assist us with estimates described below. Actual results could differ from those estimates. 28 Business combinations.
Additionally, we frequently engage third party valuation experts to assist us with estimates described below. Actual results could differ from those estimates. Business combinations.
Off-Balance Sheet Arrangements During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules, except as follows: The Company may issue standby letters of credit through banking institutions. As of October 31, 2022, total letters of credit outstanding were $0.7 million.
Off-Balance Sheet Arrangements During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules, except as follows: The Company may issue standby letters of credit through banking institutions. As of October 31, 2023, total letters of credit outstanding were $0.7 million.
Affiliated sales are concentrated in the second half of the fiscal year in alignment with the Peruvian avocado harvest season, which typically runs from April through August of each year. As a result, adjusted EBITDA for the International Farming segment is generally concentrated in the third and fourth quarters of the fiscal year in alignment with the timing of sales.
Affiliated sales are concentrated in the second half of the fiscal year in alignment with the Peruvian avocado harvest season, which typically runs from April through September of each year. As a result, adjusted EBITDA for the International Farming segment is generally concentrated in the third and fourth quarters of the fiscal year in alignment with the timing of sales.
Segment adjusted EBITDA decreased $10.6 million or 31% in fiscal year 2022 compared to fiscal year 2021, primarily due to inflationary cost pressures impacting ocean freight costs, packaging costs, and farming input costs, partially offset by increased avocado production at our farms, as well as losses at early-stage mango farms that were mainly driven by lower sales prices and production yields.
Segment adjusted EBITDA decreased $10.6 million or 31% in fiscal year 2022 compared to the previous year, primarily due to inflationary cost pressures impacting ocean freight costs, packaging costs, and farming input costs, partially offset by increased avocado production at our farms, as well as losses at early-stage mango farms that were mainly driven by lower sales prices and production yields.
Please refer to the section of this report under the heading “Forward Looking Statements.” Overview We are a world leader in sourcing, producing and distributing fresh avocados, serving retail, wholesale and foodservice customers.
Please refer to the section of this report under the heading “Forward Looking Statements.” Overview We are a world leader in sourcing, producing and distributing Hass avocados, serving retail, wholesale and foodservice customers.
Marketing and Distribution Net sales in our Marketing and Distribution segment increased $144.1 million or 17% in fiscal year 2022 compared to fiscal year 2021, due to the same drivers impacting consolidated revenue.
Net sales in our Marketing and Distribution segment increased $144.1 million or 17% in fiscal year 2022 compared to the previous year, due to the same drivers impacting consolidated revenue.
International Farming Substantially all sales of fruit from our International Farming segment are to the Marketing and Distribution segment, with the remainder of revenue largely derived from services provided to third parties and our Blueberries segment.
International Farming The vast majority of fruit sales from our International Farming segment are to the Marketing and Distribution segment, with the remainder of revenue largely derived from services provided to third parties and our Blueberries segment.
Working capital was primarily impacted by favorable movement in accounts receivable, partially offset by unfavorable movement in inventory. Accounts receivable as of October 31, 2022 was lower compared to prior year, as a result of per-unit sales prices trending lower during the fourth quarter. Changes in inventory were primarily driven by the consolidation of Moruga and its respective inventory.
Accounts receivable as of October 31, 2022 was lower compared to prior year, as a result of per-unit sales prices trending lower during the fourth quarter. Changes in inventory were primarily driven by the consolidation of Moruga and its respective inventory.
(2) Includes recognition of deferred implementation costs and non-recurring post-implementation process reengineering costs. (3) Represents net loss attributable to noncontrolling interest plus the impact of non-GAAP adjustments, allocable to the noncontrolling owner based on their percentage of ownership interest.
(2) Includes recognition of deferred implementation costs in the years ended October 31, 2023 and 2022. The year ended October 31, 2022 also includes non-recurring post-implementation process reengineering costs. (3) Represents net loss attributable to noncontrolling interest plus the impact of non-GAAP adjustments, allocable to the noncontrolling owner based on their percentage of ownership interest.
We perform a qualitative assessment of goodwill for impairment on an annual basis during the fourth quarter of each year, and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment on an annual basis during the fourth quarter of each year, and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
See Note 7 to the consolidated financial statements for more information. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. U.S.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. U.S.
Years ended October 31, 2022 2021 2020 Gross profit (in millions) $ 89.8 $ 124.5 $ 124.6 Gross profit as a percentage of net sales 8.6 % 14.0 % 14.4 % Gross profit decreased $34.7 million in fiscal year 2022 compared to fiscal year 2021 to $89.8 million, and gross profit percentage decreased by 536 basis points to 8.6% of revenue.
Years ended October 31, 2023 2022 2021 Gross profit (in millions) $ 83.3 $ 89.8 $ 124.5 Gross profit as a percentage of net sales 8.7 % 8.6 % 14.0 % Gross profit decreased $6.5 million in fiscal year 2023 compared to the previous year to $83.3 million, and gross profit percentage increased by 10 basis points to 8.7% of revenue.
Years ended October 31, 2022 2021 2020 Provision for income taxes (in millions) $ 3.7 $ 21.1 $ 15.0 Effective tax rate (1) (12.0) % 32.0 % 34.2 % (1) May not sum due to rounding. The provision for income taxes decreased $17.4 million or 82% in fiscal year 2022 compared to fiscal year 2021.
Years ended October 31, 2023 2022 2021 Provision for income taxes (in millions) $ 2.2 $ 3.7 $ 21.1 Effective tax rate (1) (256.6) % (12.0) % 32.0 % (1) May not recalculate due to rounding. The provision for income tax decreased $1.5 million or 41% in fiscal year 2023 compared to the previous year.
Variations in containerboard prices, which affect the cost of boxes and other packaging materials, and fuel prices can have an impact on our product cost and our profit margins. Variations in the production yields, and other input costs also affect our cost of sales.
Fuel prices as well as variations in containerboard prices, which affect the cost of boxes and other packaging materials, impact our product cost and our profit margins. Variations in the production yields, and other input costs also affect our cost of sales. In general, changes in our volume of products sold can have a disproportionate effect on our gross profit.
As of October 31, 2022, we were required to comply with the following financial covenants: (a) a quarterly consolidated leverage ratio of not more than 3.5 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.25 to 1.00.
As of October 31, 2023, we were required to comply with the following financial covenants: (a) a quarterly consolidated leverage ratio of not more than 3.5 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.25 to 1.00. 28 As of October 31, 2023, our consolidated leverage ratio was 2.64 to 1.00 and our consolidated fixed charge coverage ratio was 1.58 to 1.00 and we were in compliance with all such covenants of the credit facility.
Segment adjusted EBITDA decreased $27.9 million or 54% in fiscal year 2022 compared to fiscal year 2021 due to the impact of lower avocado volume sold, lower gross margin primarily attributed to ERP-related issues during the first quarter of 2022, and higher selling, general and administrative expense as described above. 24 Net sales in our Marketing and Distribution segment increased $25.1 million or 3% in fiscal year 2021 compared to fiscal year 2020, due to the same drivers impacting consolidated revenue.
Segment adjusted EBITDA decreased $27.9 million or 54% in fiscal year 2022 compared to the previous year, due to the impact of lower avocado volume sold, lower gross margin primarily attributed to ERP-related issues during the first quarter of 2022, and higher selling, general and administrative expense as described above.
Years ended October 31, 2022 2021 2020 (In millions, except percentages) Dollar % Dollar % Dollar % Net sales $ 1,045.9 100.0 % $ 891.7 100.0 % $ 862.3 100.0 % Cost of sales 956.1 91.4 % 767.2 86.0 % 737.7 85.6 % Gross profit 89.8 8.6 % 124.5 14.0 % 124.6 14.4 % Selling, general and administrative expenses 77.5 7.4 % 63.6 7.1 % 56.2 6.5 % Goodwill impairment 49.5 4.7 % — — % — — % Operating (loss) income (37.2) (3.6) % 60.9 6.8 % 68.4 7.9 % Interest expense (5.5) (0.5) % (3.7) (0.4) % (6.7) (0.8) % Equity method income 5.1 0.5 % 7.5 0.8 % 4.0 0.5 % Remeasurement gain on acquisition of equity method investee 2.0 0.2 % — — % — — % Impairment on equity method investment — — % — — % (21.2) (2.5) % Other income (expense), net 4.4 0.4 % 1.3 0.1 % (0.7) (0.1) % (Loss) income before income taxes (31.2) (3.0) % 66.0 7.4 % 43.8 5.1 % Provision for income taxes 3.7 0.4 % 21.1 2.4 % 15.0 1.7 % Net (loss) income (34.9) (3.3) % 44.9 5.0 % 28.8 3.3 % Net loss attributable to noncontrolling interest 0.3 — % — — % — — % Net (loss) income attributable to Mission Produce $ (34.6) (3.3) % $ 44.9 5.0 % $ 28.8 3.3 % Net sales Our net sales are generated predominantly from the shipment of fresh avocados to retail, wholesale and foodservice customers worldwide.
Over longer periods of time, we believe that the impact exchange rate fluctuations will have on our cost of goods sold will largely be passed on to our customers in the form of higher or lower prices. 20 Years ended October 31, 2023 2022 2021 (In millions, except percentages) Dollar % Dollar % Dollar % Net sales $ 953.9 100.0 % $ 1,045.9 100.0 % $ 891.7 100.0 % Cost of sales 870.6 91.3 % 956.1 91.4 % 767.2 86.0 % Gross profit 83.3 8.7 % 89.8 8.6 % 124.5 14.0 % Selling, general and administrative expenses 76.4 8.0 % 77.5 7.4 % 63.6 7.1 % Goodwill impairment — — % 49.5 4.7 % — — % Operating income (loss) 6.9 0.7 % (37.2) (3.6) % 60.9 6.8 % Interest expense (11.6) (1.2) % (5.5) (0.5) % (3.7) (0.4) % Equity method income 4.0 0.4 % 5.1 0.5 % 7.5 0.8 % Remeasurement gain on acquisition of equity method investee — — % 2.0 0.2 % — — % Other (expense) income, net (0.2) — % 4.4 0.4 % 1.3 0.1 % (Loss) income before income taxes (0.9) (0.1) % (31.2) (3.0) % 66.0 7.4 % Provision for income taxes 2.2 0.2 % 3.7 0.4 % 21.1 2.4 % Net (loss) income (3.1) (0.3) % (34.9) (3.3) % 44.9 5.0 % Net loss attributable to noncontrolling interest (0.3) — % (0.3) — % — — % Net (loss) income attributable to Mission Produce $ (2.8) (0.3) % $ (34.6) (3.3) % $ 44.9 5.0 % Net sales Our net sales are generated predominantly from the shipment of fresh avocados to retail, wholesale and foodservice customers worldwide.
Borrowings under the credit facility bear interest at a spread over SOFR ranging from 1.5% to 2.5% depending on the Company’s consolidated total net leverage ratio, compared to a spread over LIBOR, ranging from 1.50% to 2.75%, prior to the third amendment.
Borrowings under the credit facility bear interest at a spread over SOFR ranging from 1.5% to 2.5% depending on the Company’s consolidated total net leverage ratio. We pay fees on unused commitments on the credit facility.
Years ended October 31, (In millions) 2022 2021 2020 Net sales: Marketing and Distribution $ 1,016.1 $ 872.0 $ 846.9 International Farming 19.1 19.7 15.4 Blueberries 10.8 — — Total net sales $ 1,045.9 $ 891.7 $ 862.3 Net sales increased $154.2 million or 17% in fiscal year 2022 compared to the previous year, primarily due to a 28% increase in average per-unit avocado sales prices, partially offset by decreases in avocado volume sold of 11%.
Years ended October 31, (In millions) 2023 2022 2021 Net sales: Marketing and Distribution $ 889.9 $ 1,016.1 $ 872.0 International Farming 11.6 19.1 19.7 Blueberries 52.4 10.7 — Total net sales $ 953.9 $ 1,045.9 $ 891.7 Net sales decreased $92.0 million or 9% in fiscal year 2023 compared to the previous year, primarily due to a 24.0% decrease in average per-unit avocado sales prices, partially offset by increases in avocado volume sold of 12.0%.
(collectively referred to as “Moruga”), an entity for which we have a 60% equity ownership interest. Moruga was previously accounted for under the equity method of accounting, where investments are stated at initial cost and adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions.
Moruga was previously accounted for under the equity method of accounting, where investments are stated at initial cost and adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions.
In 2022, our provision for income taxes was impacted by the $49.5 million non-deductible goodwill impairment charge, which generated a pre-tax loss. In 2021, the provision for income taxes included a $5.4 million charge from the remeasurement of our deferred tax balances in Peru due to the enactment of tax law repealing tax benefits to agribusiness entities.
In 2021, the provision for income taxes included a $5.4 million charge from the remeasurement of our deferred tax balances in Peru due to the enactment of tax law in 2020 repealing tax benefits to agribusiness entities.
Investing activities Years ended October 31, (In millions) 2022 2021 2020 Purchases of property and equipment $ (61.2) $ (73.4) $ (67.3) Proceeds from sale of property, plant and equipment 3.0 2.4 3.0 Insurance proceeds for the replacement of property, plant and equipment — 1.1 — Cash acquired in consolidation of Moruga 4.3 — — Investment in equity method investees (0.4) (0.2) (3.4) Loans to equity method investees — (2.0) — Loan repayments from equity method investees 3.0 1.5 — Other (0.1) 0.3 — Net cash used in investing activities $ (51.4) $ (70.3) $ (67.7) Property, plant and equipment In fiscal year 2022, capital expenditures were concentrated in the purchase of farmland in Peru as well as land improvements and orchard development of avocados in Guatemala and both avocados and blueberries in Peru.
Investing activities Years ended October 31, (In millions) 2023 2022 2021 Purchases of property, plant and equipment $ (49.8) $ (61.2) $ (73.4) Proceeds from sale of property, plant and equipment 0.2 3.0 2.4 Insurance proceeds for the replacement of property, plant and equipment — — 1.1 Cash acquired in consolidation of Moruga — 4.3 — Investment in equity method investees (2.1) (0.4) (0.2) Purchase of other investment (2.3) — — Loans to equity method investees — — (2.0) Loan repayments from equity method investees — 3.0 1.5 Other (0.1) (0.1) 0.3 Net cash used in investing activities $ (54.1) $ (51.4) $ (70.3) Property, plant and equipment In fiscal year 2023, capital expenditures were concentrated in pre-production avocado orchard maintenance in Guatemala and Peru and construction costs on our new UK distribution facility.
Years ended October 31, (In millions) 2022 2021 2020 Interest expense $ 5.5 $ 3.7 $ 6.7 Interest expense increased $1.8 million or 49% in fiscal year 2022 compared to fiscal year 2021 primarily due to higher interest rates, as the majority of our outstanding debt is subject to variable rates.
Years ended October 31, (In millions) 2023 2022 2021 Interest expense $ 11.6 $ 5.5 $ 3.7 Interest expense increased $6.1 million or 111% in fiscal year 2023 compared to the previous year, primarily due to the effect of rising interest rates on our credit facility, which is subject to variable rates, as well as higher average outstanding debt balances.
Accordingly, higher volumes produced on company-owned farms directly reduce the average cost per pound of fruit grown on company owned orchards, while lower volumes directly increase the average cost per pound of fruit grown on company owned orchards.
Within any particular year, a significant portion of our cost of products are fixed. Accordingly, higher volumes produced on company-owned farms directly reduce the average cost per pound of fruit grown on company owned orchards, while lower volumes directly increase the average cost per pound of fruit grown on company owned orchards.
The new law was enacted on December 30, 2020, and will subject us to higher Peruvian corporate income tax rates than our current rate of 15% as follows: 20% for calendar years 2023 to 2024, 25% for calendar years 2025 to 2027, and 29.5% thereafter.
The law subjects us to higher Peruvian corporate income tax rates than the rate in effect on the date of repeal of 15%, as follows: 20% for calendar years 2023 to 2024, 25% for calendar years 2025 to 2027, and 29.5% thereafter.
Financing activities Years ended October 31, (In millions) 2022 2021 2020 Borrowings on revolving credit facility $ 80.0 $ — $ 14.0 Payments on revolving credit facility (40.0) — (14.0) Short-term borrowings 2.5 — — Principal payments on long-term debt obligations (63.3) (10.5) (6.3) Principal payments on finance lease obligations (1.2) (1.2) (0.9) Payments for long-term supplier financing — — (5.8) Exercise of stock options 0.1 0.2 — Repayment of stock option notes receivable — 0.1 0.1 Payment of debt issuance or extinguishment fees (0.8) (0.1) (0.2) Purchase and retirement of stock — — (1.9) Proceeds from issuance of common stock in public offering, net of issuance costs — — 78.1 Dividends paid — — (13.0) Contributions from noncontrolling interest holders 0.9 — — Net cash (used in) provided by financing activities $ (21.8) $ (11.5) $ 50.1 Borrowings and repayments of debt We utilize a revolving line of credit for short-term working capital purposes.
Other investment In fiscal year 2023, we acquired a 5.1% equity interest in shares of common stock of a private entity that is developing avocado orchards in South Africa. 27 Financing activities Years ended October 31, (In millions) 2023 2022 2021 Borrowings on revolving credit facility $ 145.0 $ 80.0 $ — Payments on revolving credit facility (130.0) (40.0) — Proceeds from short-term borrowings 2.8 2.5 — Repayment of short-term borrowings (2.5) — — Principal payments on long-term debt obligations (3.5) (63.3) (10.5) Principal payments on finance lease obligations (2.6) (1.2) (1.2) Proceeds from loan from noncontrolling interest holder 2.0 — — Payments for long-term supplier financing (0.1) — — Purchase and retirement of common stock (0.6) — — Taxes paid related to shares withheld from the settlement of equity awards (0.5) — — Exercise of stock options 0.1 0.1 0.2 Repayment of stock option notes receivable — — 0.1 Payment of debt issuance, restructuring or extinguishment fees — (0.8) (0.1) Equity contributions from noncontrolling interest holders 4.2 0.9 — Net cash provided by (used in) financing activities $ 14.3 $ (21.8) $ (11.5) Borrowings and repayments of debt We utilize a revolving line of credit for short-term working capital purposes.
Blueberries In the six months ended October 31, 2022, net sales in our Blueberries segment were $10.8 million and segment adjusted EBITDA was $0.8 million. 25 Liquidity and Capital Resources Operating activities Years ended October 31, (In millions) 2022 2021 2020 Net (loss) income $ (34.9) $ 44.9 $ 28.8 Depreciation and amortization 24.8 20.4 18.1 Equity method income (5.1) (7.5) (4.0) Noncash lease expense 5.3 4.3 — Stock-based compensation 3.6 2.6 5.0 Dividends received from equity method investees 2.2 1.7 1.7 Deferred income taxes (0.6) 8.8 (1.0) Goodwill impairment 49.5 — — Remeasurement gain on acquisition of equity method investee (2.0) — — Impairment on equity method investment — — 21.2 Unrealized (gains) losses on derivative financial instruments (4.7) (0.8) 2.8 Other 0.9 0.3 (1.6) Change in working capital (3.8) (27.7) 7.9 Net cash provided by operating activities $ 35.2 $ 47.0 $ 78.9 Net cash provided by operating activities decreased $11.8 million for fiscal year 2022 compared to fiscal year 2021, reflecting our net loss in the current year compared to net income in the prior year, partially offset by improvements in working capital.
Liquidity and Capital Resources Operating activities Years ended October 31, (In millions) 2023 2022 2021 Net (loss) income $ (3.1) $ (34.9) $ 44.9 Depreciation and amortization 32.8 24.8 20.4 Equity method income (4.0) (5.1) (7.5) Noncash lease expense 5.9 5.3 4.3 Stock-based compensation 4.5 3.6 2.6 Dividends received from equity method investees 2.7 2.2 1.7 Deferred income taxes (6.4) (0.6) 8.8 Goodwill impairment — 49.5 — Remeasurement gain on business combination with Moruga — (2.0) — Unrealized losses on foreign currency transactions 1.4 — — Unrealized gains on derivative financial instruments (0.1) (4.7) (0.8) Other 1.7 0.9 0.3 Change in working capital (6.2) (3.8) (27.7) Net cash provided by operating activities $ 29.2 $ 35.2 $ 47.0 Net cash provided by operating activities decreased $6.0 million for 2023 compared to the previous year.
Our Marketing and Distribution reportable segment sources fruit from growers and then distributes the fruit through our global distribution network. • International Farming . International Farming owns and operates orchards from which substantially all fruit produced is sold to our Marketing and Distribution segment.
Our Marketing and Distribution reportable segment sources fruit from growers and then distributes the fruit through our global distribution network. • International Farming . International Farming owns and operates orchards from which the vast majority of fruit produced is sold to our Marketing and Distribution segment. The segment’s farming activities range from cultivating early-stage plantings to harvesting from mature trees.
Principal payments on our term loans and other notes payable are made in accordance with debt maturity schedules. Our financing cash flow for fiscal year 2022 reflects the modification of principal amounts on our term-loans and increased borrowing capacity on our revolver (refer to the Capital Resources section below for more information).
Principal payments on our term loans and other notes payable are made in accordance with debt maturity schedules. The financing cash flow for fiscal 2022 reflects the modification of principal amounts on our term-loans and increased borrowing capacity on our revolver. Blueberries Financing at our Blueberries segment consists of shareholder contributions and loans, as well as short-term bank borrowings.
We source, produce, pack and distribute avocados and a small amount of other fruits to our customers and provide value-added services including ripening, bagging, custom packaging and logistical management.
We source, produce, pack and distribute avocados and a small amount of other fruits to our customers and provide value-added services including ripening, bagging, custom packaging and logistical management. In addition, we provide our customers with merchandising and promotional support, insights on market trends and training designed to increase their retail avocado sales.
Years ended October 31, (In millions) 2022 2021 2020 Equity method income $ 5.1 $ 7.5 $ 4.0 Remeasurement gain on acquisition of equity method investee 2.0 — — Impairment on equity method investment — — (21.2) Equity method income decreased $2.4 million or 32% in fiscal year 2022 compared to fiscal year 2021, primarily due to the effect of consolidation of Moruga, partially offset by stronger operating performance from HAC.
Years ended October 31, (In millions) 2023 2022 2021 Equity method income $ 4.0 $ 5.1 $ 7.5 Remeasurement gain on acquisition of equity method investee — 2.0 — Equity method income decreased $1.1 million or 22% in fiscal year 2023 compared to the previous year, primarily due to lower income from HAC, driven by inflationary pressure on SG&A expense.
During the fourth quarter of fiscal 2022, we performed our annual goodwill impairment test on our Peruvian farming reporting unit within the International Farming segment and determined that the qualitative factors indicated that it was more-likely-than-not that the fair value of the reporting unit was less than its carrying value.
If we use a qualitative approach and determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we would then perform the first step of the goodwill impairment test, which would consist primarily of a discounted cash flow (“DCF”) analysis and guideline publicly-traded companies (“GPC”) analysis to determine the fair value of the reporting unit. 29 During the fourth quarter of fiscal 2022, we performed our annual goodwill impairment test on our Peruvian farming reporting unit within the International Farming segment and determined that the qualitative factors indicated that it was more-likely-than-not that the fair value of the reporting unit was less than its carrying value.
For fiscal 2023, we expect capital expenditures related to the project to be approximately $20 to $25 million, depending on timing and other factors. Leases We are party to various leases for facilities, land, and equipment, for which our undiscounted cash liabilities were $105.3 million as of October 31, 2022.
As of October 31, 2023, the estimated remaining capital expenditures related to the project were approximately $40 million, to be spent in phases through fiscal 2028, depending on timing and other factors. Leases We are party to various leases, the most material of which are for facilities and land.
A significant portion of our purchases of avocados are denominated in the Mexican Peso and a significant portion of our growing and harvesting costs are denominated in Peruvian Soles.
Our financial reporting currency is the U.S. dollar. The functional currency of our most significant subsidiaries is the U.S. dollar and the majority of our sales are denominated in U.S. dollars. A significant portion of our purchases of avocados are denominated in the Mexican Peso and a significant portion of our growing and harvesting costs are denominated in Peruvian Soles.
Other income (expense), net Other income (expense), net consists of interest income, currency exchange gains or losses, interest rate derivative gains or losses and other miscellaneous income and expense items. 22 Years ended October 31, (In millions) 2022 2021 2020 Other income (expense), net $ 4.4 $ 1.3 $ (0.7) Other income increased $3.1 million or 238% in fiscal year 2022 compared to the previous year, primarily due to gains on our interest rate swaps driven by market movements in short-term interest rates.
Other income increased $3.1 million or 238% in fiscal year 2022 compared to the previous year, primarily due to gains on our interest rate swaps driven by market movements in short-term interest rates.
Total segment sales in our International Farming segment increased $10.1 million or 10% in fiscal year 2022 compared to fiscal year 2021, driven by increased avocado production of 15%, which increased affiliated sales.
Segment adjusted EBITDA decreased $20.2 million or 87% in fiscal year 2023 compared to the previous year, primarily due to lower gross profit resulting from lower pricing. Total segment sales in our International Farming segment increased $10.1 million or 10% in fiscal year 2022 compared to the previous year, driven by increased avocado production of 15%, which increased affiliated sales.
Certain of our consolidated subsidiaries may also enter into short-term bank borrowings from time to time. Material cash requirements Capital expenditures We have various capital projects in progress for farming expansion and facility improvements which we intend to fund through our operating cash flow as well as cash and cash equivalents on hand.
Material cash requirements Capital expenditures We have various capital projects in progress for farming expansion and facility improvements which we intend to fund through our operating cash flow as well as cash and cash equivalents on hand. For fiscal 2024, we expect capital expenditures to be between $30 to $35 million.
Equity method income Our material equity method investees include Henry Avocado (“HAC”), Mr. Avocado, Copaltas, and up until May 1, 2022, Moruga. On May 1, 2022, Moruga became a variable interest entity and prospectively consolidated into our financial statements.
On May 1, 2022, Moruga became a variable interest entity and prospectively consolidated into our financial statements.
Its farming activities range from cultivating early-stage plantings to harvesting from mature trees, and it also earns service revenues for packing and processing for our Blueberries segment, as well as for third-party producers of other crops during the avocado off-harvest season. Operations are principally located in Peru, with smaller operations emerging in other areas of Latin America. • Blueberries.
It also earns service revenues for packing and processing fruit for both our Blueberries segment, as well as for third-party producers of other crops. Operations are principally located in Peru, with smaller operations emerging in other areas of Latin America. • Blueberries. The Blueberries segment represents the results of Moruga, subsequent to its consolidation on May 1, 2022.
The decrease was primarily due to the nondeductible impairment of Moruga in fiscal year 2020, partially offset by increases in the Peruvian tax rates. Segment Results of Operations Our CEO evaluates and monitors segment performance primarily through segment sales and segment adjusted earnings before interest expense, income taxes and depreciation and amortization (“adjusted EBITDA”).
Segment Results of Operations Our CEO evaluates and monitors segment performance primarily through segment sales and segment adjusted earnings before interest expense, income taxes and depreciation and amortization (“adjusted EBITDA”).
Capital resources October 31, (In millions) 2022 2021 Cash and cash equivalents $ 52.8 $ 84.5 Working capital (1) 126.4 157.9 (1) Includes cash and cash equivalents 27 Capital resources include cash flows from operations, cash and cash equivalents, and debt financing.
Capital resources October 31, (In millions) 2023 2022 Cash and cash equivalents $ 42.9 $ 52.8 Working capital (1) 122.6 126.4 (1) Includes cash and cash equivalents Capital resources include cash flows from operations, cash and cash equivalents, and debt financing. Our Blueberries segment may also receive capital contributions or loans from noncontrolling shareholders.
The credit facility is comprised of two senior term loans totaling $100 million, compared to $175 million before the third amendment and a revolving credit agreement now providing up to $150 million in borrowings compared to $100 million before the third amendment. The loans are secured by real property, personal property and the capital stock of the Company’s subsidiaries.
Our syndicated credit facility with Bank of America has a total borrowing capacity of $250 million. The credit facility is comprised of two senior term loans totaling $100 million and a revolving credit agreement of $150 million. The loans are secured by assets of the Company, including certain real property, personal property and capital stock of the Company’s subsidiaries.
Interest expense Interest expense consists primarily of interest on borrowings under working capital facilities that we maintain and interest on other long-term debt used to make capital and equity investments.
For more information, refer to Note 4 to the consolidated financial statements. Interest expense Interest expense consists primarily of interest on borrowings under working capital facilities that we maintain and interest on other long-term debt used to make capital and equity investments. We also incur interest expense on finance leases, computed using each leases’ explicit or implicit borrowing rate.
Domestic volumes declined at a lower rate relative to export markets, demonstrating the resiliency of demand for avocados amid higher price points in the U.S. market. 20 Net sales increased $29.4 million or 3% in fiscal year 2021 compared to fiscal year 2020, primarily due to a 5% increase in avocado volume sold, partially offset by a 2% decrease in average per-unit avocado sales prices, both of which were driven by increased supply from Mexico and Peru.
Lower avocado volume sold was primarily driven by lower Mexican supply. Domestic volumes declined at a lower rate relative to export markets, demonstrating the resiliency of demand for avocados amid higher price points in the U.S. market.
The new Blueberries segment represents the results of Moruga, subsequent to its consolidation on May 1, 2022. Moruga’s farming activities include cultivating early-stage blueberry plantings and harvesting mature bushes. Substantially all of blueberries produced are sold to a single distributor under an exclusive marketing agreement.
Moruga’s farming activities include cultivating early-stage blueberry plantings and harvesting mature bushes. Substantially all blueberries produced are sold to a single distributor under an exclusive marketing agreement. Recent business developments In April 2023, the Marketing and Distribution segment opened a 102,000-square-foot state-of-the-art ripening, packing and forward distribution center in Dartford, United Kingdom.
The project is anticipated to require a total investment of approximately $50 million, the majority of which will be funded by cash flow generated by Moruga and supplemented by pro-rata shareholder contributions based on each shareholders’ respective ownership interest. The project is expected to be carried out in phases, commencing in fiscal year 2023.
Moruga Blueberry Project In fiscal year 2023, Moruga commenced its previously announced project to farm approximately 1,500 additional acres of blueberries in the Olmos region of Peru. The project is funded by cash flow generated by Moruga and supplemented by pro-rata shareholder contributions based on each shareholders’ respective ownership interest.
ERP costs consisted of noncapitalizable implementation costs and nonrecurring process re-engineering costs. Employee-related costs were impacted by labor inflation and higher stock-based compensation expense. Higher professional fees were in-part due to our change in SEC filer status from an emerging growth company to a large accelerated filer on October 31, 2021.
Higher professional fees were in part due to our change in SEC filer status from an emerging growth company to a large accelerated filer on October 31, 2021. Travel costs increased as COVID-related travel restrictions eased relative to prior year.
Price increases were due to lower industry supply out of Mexico for much of the fiscal year, as well as inflationary pressures. Lower avocado volume sold was primarily driven by lower Mexican supply.
Net sales increased $154.2 million or 17% in fiscal year 2022 compared to the previous year, primarily due to a 28% increase in average per-unit avocado sales prices, partially offset by decreases in avocado volume sold of 11%. Price increases were due to lower industry supply out of Mexico for much of the fiscal year, as well as inflationary pressures.
Goodwill impairment A noncash impairment loss of $49.5 million was recognized in the consolidated statements of income during the fourth quarter of fiscal 2022. No goodwill impairment was recognized in fiscal years 2021 or 2020. For more information, refer to Note 4 to the consolidated financial statements.
The consolidation of Moruga increased selling, general and administrative expenses by $1.7 million, which included amortization of an intangible asset recognized at acquisition. 22 Goodwill impairment A noncash impairment loss of $49.5 million was recognized in the consolidated statements of income during the fourth quarter of fiscal 2022. No goodwill impairment was recognized in fiscal years 2023 or 2021.
Gross profit was nearly flat in fiscal year 2021 compared to fiscal year 2020 at $124.5 million, and gross profit percentage decreased by 40 basis points to 14.0% of revenue.
Gross profit decreased $34.7 million in fiscal year 2022 compared to the previous year to $89.8 million, and gross profit percentage decreased by 536 basis points to 8.6% of revenue.
Selling, general and administrative expenses Selling, general and administrative expenses primarily include the costs associated with selling, professional fees, general corporate overhead and other related administrative functions Years ended October 31, (In millions) 2022 2021 2020 Selling, general and administrative expenses $ 77.5 $ 63.6 $ 56.2 21 Selling, general and administrative expenses increased $13.9 million or 22% in fiscal year 2022 compared to fiscal year 2021 due to ERP costs in our Marketing and Distribution segment, higher employee-related costs, higher professional fees, and higher travel costs.
Years ended October 31, (In millions) 2023 2022 2021 Selling, general and administrative expenses $ 76.4 $ 77.5 $ 63.6 SG&A expenses decreased $1.1 million or 1% in fiscal year 2023 compared to the previous year, primarily due to lower ERP and insurance costs.
In addition, we provide our customers with merchandising and promotional support, insights on market trends and training designed to increase their retail avocado sales. 18 Consolidation of VIE On May 1, 2022, a reconsideration event occurred related to Moruga S.A.C., a holding company with one wholly owned subsidiary Blueberries Peru, S.A.C.
Consolidation of VIE On May 1, 2022, a reconsideration event occurred related to Moruga S.A.C., a holding company with one wholly owned subsidiary, Blueberries Peru, S.A.C. (collectively referred to as “Moruga”), an entity for which we have a 60% equity ownership interest.
The significant weakening of the Mexican peso relative to the U.S. dollar and the substantial reduction in LIBOR in fiscal 2020 were correlated with the COVID-19 pandemic. Provision for income taxes The provision for income taxes consists of the consolidation of tax provisions, computed on a separate entity basis, in each country in which we have operations.
The interest rate swaps are intended to hedge against variable interest rate exposure associated with our term debt facility. 23 Provision for income taxes The provision for income taxes consists of the consolidation of tax provisions, computed on a separate entity basis, in each country in which we have operations.
Net cash provided by operating activities decreased $31.9 million for fiscal year 2021 compared to fiscal year 2020, reflecting unfavorable net change in working capital. Within working capital, unfavorable changes in accounts receivable and inventory, were partially offset by favorable changes in grower payables. Accounts receivable increases were due to rising per-unit sales prices during the year.
Net cash provided by operating activities decreased $11.8 million for fiscal year 2022 compared to the previous year, reflecting our net loss in the current year compared to net income in the prior year, partially offset by improvements in working 26 capital. Working capital was primarily impacted by favorable movement in accounts receivable, partially offset by unfavorable movement in inventory.
Proceeds from the sale of property, plant and equipment were primarily from land that had been originally intended for use as our corporate headquarters. 26 In fiscal year 2021, capital expenditures were primarily for the construction of the Laredo facility, which was completed in mid-fiscal 2021, and land improvements and orchard development in Peru and Guatemala.
Capital expenditures in the Blueberries operation were $6.9 million, primarily related to early-stage plant cultivation. Proceeds from the sale of property, plant and equipment were primarily from land that had been originally intended for use as our corporate headquarters. Equity method investees In all fiscal years presented, we made contributions to Copaltas and Mr. Avocado.
Segment adjusted EBITDA decreased $16.8 million or 25% in fiscal year 2021 compared to fiscal year 2020 due to lower gross margins and higher selling, general and administrative expenses.
Segment adjusted EBITDA increased $16.6 million or 71% in fiscal year 2023 compared to the previous year, due to higher gross margin from higher avocado volume sold and improved avocado per-unit margins.
We also made a capital contribution to Mr. Avocado in fiscal year 2022 to support the addition of a new distribution facility in southern China. In fiscal year 2021, we issued $2.0 million in loans to Copaltas to support the working capital needs of the entity, which was repaid in fiscal year 2022.
Funds were used by Copaltas for the purchase of additional farmland in Colombia. Funds were used by Mr. Avocado to support working capital needs and an investment in a new distribution facility in southern China. Loan repayments made in fiscal years 2022 and 2021 were from Copaltas and Moruga, respectively.
Our operations in Moruga enable us to utilize our existing infrastructure and workforce in Peru during the complementary periods between avocado harvest and processing seasons. 19 Results of Operations The operating results of our businesses are significantly impacted by the price and volume of avocados we farm, source and distribute.
We are closely monitoring developments of the Pillar Two rule and are currently evaluating the potential impact in each of the countries we operate in. Results of Operations The operating results of our businesses are significantly impacted by the price and volume of fruit we farm, source and distribute.
The interest rate swaps are intended to hedge against variable interest rate exposure associated with our term debt facility. Other income in fiscal year 2021 was $1.3 million, compared to other expense of $0.7 million in fiscal year 2020.
Years ended October 31, (In millions) 2023 2022 2021 Other expense (income), net $ 0.2 $ (4.4) $ (1.3) Other expense was $0.2 million in fiscal year 2023, compared to other income of $4.4 million in the previous year.
Removed
Recent developments Marketing and Distribution On November 1, 2021, we implemented a new enterprise resource planning (“ERP”) system to improve operational visibility and financial reporting capabilities. During implementation, we encountered significant challenges which limited our ability to effectively manage our business operations, thereby impacting our profitability and financial results for the first quarter of 2022.
Added
Strategically located with direct access to major international ports and transportation networks, the facility is expected to strengthen our international footprint and optimize product distribution to the Company’s customer base in the U.K.
Removed
Our distribution centers and packing houses experienced problems with purchasing, receiving and shipping, which resulted in a high reliance on both third-party fruit and packaged fruit that we would have otherwise sourced directly in the field and packed in our facilities. Other issues included delays in automated customer invoicing and inventory management issues.
Added
Regulatory developments In December 2021, the Organization for Economic Cooperation and Development (“OECD”), which is an international public policy setting organization comprised of member countries including the U.S., published a proposal for the establishment of a global minimum tax rate of 15% (the “Pillar Two rule”) .
Removed
During the second quarter of 2022, these operational issues we experienced during the first quarter were largely resolved. International Farming As vertical integration is a key part of our sourcing strategy, we have continued to make investments in orchard development and land improvements in Peru, Guatemala and Colombia.
Added
The OECD has recommended that the Pillar Two rule become effective for fiscal years beginning after January 1, 2024, which is our fiscal 2025. To date, member states are in various stages of implementation and the OECD continues to refine technical guidance.
Removed
After planting, our avocado trees begin to produce avocados in approximately three years and reach full production in approximately five to seven years, depending on location. As of October 31, 2022, we had approximately 12,000 acres planted across these locations.
Added
Price decreases and higher avocado volume sold were driven by higher industry supply out of Mexico in the current year as compared to limited supply out of Mexico in the previous year. Net sales were favorably affected by the full-year impact of consolidating revenue from our Blueberries segment.
Removed
During the fourth quarter of fiscal 2022, we recorded a $49.5 million noncash impairment loss in the consolidated statements of (loss) income to reduce the carrying amount of goodwill associated to our Peruvian farming reporting unit within the International Farming reportable segment. Refer to Note 4 to the consolidated financial statements in this annual report for more information.
Added
The decrease in gross profit was concentrated in our International Farming segment and driven by lower pricing on avocados sold from Company-owned farms. Lower pricing conditions were driven by higher worldwide supply of avocados, driven by a stronger Mexican crop, combined with quality issues and a compressed Peruvian harvest season brought about by El Niño-related weather events.
Removed
Blueberries As noted above, we consolidated Moruga on May 1, 2022, and in connection, announced plans for a new capital project to plant approximately 1,500 additional acres of blueberry farms in Peru. We are currently in the planning phase of this project and expect planting to commence during fiscal 2023.
Added
Gross profit percentage remained flat as higher volume of avocados sold and improved per-unit margin at lower average sales prices in our Marketing & Distribution segment and higher volume of blueberries sold by Blueberries segment largely offset the negative impact from our International Farming segment.
Removed
Our financial reporting currency is the U.S. dollar. The functional currency of substantially all of our subsidiaries is the U.S. dollar and substantially all of our sales are denominated in U.S. dollars.
Added
Selling, general and administrative expenses Selling, general and administrative (“SG&A”) expenses primarily include the costs associated with selling, professional fees, general corporate overhead and other related administrative functions.
Removed
Over longer periods of time, we believe that the impact exchange rate fluctuations will have on our cost of goods sold will largely be passed on to our customers in the form of higher or lower prices.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Borrowings under our credit facility bear variable interest rates, based on SOFR, plus spreads that vary with the Company’s leverage ratio. In October 2022, we amended the credit facility reducing the principal value of our term loans to $100 million.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Borrowings under our credit facility bear variable interest rates, based on SOFR, plus spreads that vary with the Company’s leverage ratio.
A 10% increase or decrease in the interest rate on our long-term debt would not have a material effect on our financial position, results of operations, or cash flows. Foreign Currency Risk The majority of our sales are currently conducted in U.S. dollars, while a significant portion of our input costs are denominated in foreign currencies.
A 10% increase or decrease in the interest rate on our long-term debt would not have a material effect on our financial position, results of operations, or cash flows. 30 Foreign Currency Risk The majority of our sales are currently conducted in U.S. dollars, while a significant portion of our input costs are denominated in foreign currencies.
Removed
To reduce interest rate risk, we have interest rate swaps with a total notional amount of $100 million to hedge changes in the variable rates applicable to our term loan principal. The interest rate swaps carry fixed LIBOR rates ranging from 1.75% to 2.57%.

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