avo-20240131

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________

FORM 10-Q

_____________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39561

_____________

MISSION PRODUCE, INC.

(Exact name of Registrant as specified in its charter)

_____________

Delaware

(State or Other Jurisdiction of

Incorporation or Organization)

2710 Camino Del Sol

Oxnard, California

(Address of Principal Executive Offices)

95-3847744

(I.R.S. Employer

Identification No.)

93030

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (805) 981-3650

_____________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

AVO

NASDAQ Global Select Market

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

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of March 1, 2024, the registrant had 70,846,927 shares of common stock at $0.001 par value outstanding.

MISSION PRODUCE, INC.

TABLE OF CONTENTS

FORM 10-Q

FISCAL FIRST QUARTER 2024


PART I- FINANCIAL INFORMATION		5

Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Income (Loss) (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	7
	Condensed Consolidated Statements of Changes in Equity (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows (Unaudited)	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II- OTHER INFORMATION		27

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

	Signatures	29

FORWARD LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “could”, “intends”, “target”, “projects”, “contemplates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to, the following:

•Risks related to our business, including: limitations regarding the supply of fruit, either through purchasing or growing; fluctuations in the market price of fruit; increasing competition; risks associated with doing business internationally, including Mexican and Peruvian economic, political and/or societal conditions; inflationary pressures; establishment of sales channels and geographic markets; loss of one or more of our largest customers; general economic conditions or downturns; supply chain failures or disruptions; disruption to the supply of reliable and cost-effective transportation; failure to recruit or retain employees, poor employee relations, and/or ineffective organizational structure; inherent farming risks, including climate change; seasonality in operating results; failures associated with information technology infrastructure, system security and cyber risks; new and changing privacy laws and our compliance with such laws; food safety events and recalls; failure to comply with laws and regulations; changes to trade policy and/or export/import laws and regulations; risks from business acquisitions, if any; lack of or failure of infrastructure; material litigation or governmental inquiries/actions; failure to maintain or protect our brand; changes in tax rates or international tax legislation; risks associated with global conflicts; and inability to accurately forecast future performance.

•Risks related to our common stock, including: the viability of an active, liquid, and orderly market for our common stock; volatility in the trading price of our common stock; concentration of control in our executive officers, and directors over matters submitted to stockholders for approval; limited sources of capital appreciation; significant costs associated with being a public company and the allocation of significant management resources thereto; reliance on analyst reports; failure to maintain proper and effective internal control over financial reporting; restrictions on takeover attempts in our charter documents and under Delaware law; and the selection of Delaware as the exclusive forum for substantially all disputes between us and our stockholders.

•Risks related to restrictive covenants under our credit facility, which could affect our flexibility to fund ongoing operations, uses of capital and strategic initiatives, and, if we are unable to maintain compliance with such covenants, lead to significant challenges in meeting our liquidity requirements and acceleration of our debt.

•Other risks and factors listed under “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the year ended October 31, 2023 and elsewhere in this report.

We have based the forward-looking statements contained in this report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described in “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the year ended October 31, 2023 and elsewhere in this report. These risks are not exhaustive. Other sections of this report include additional factors that could adversely impact our business and financial performance. Furthermore, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this report, including documents that we reference and exhibits that have been filed, in this report and have filed as exhibits to this report, with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The forward-looking statements made in this report relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this report or to conform such statements to actual results or revised expectations, except as required by law.

This quarterly report may also include trademarks, tradenames and service marks that are the property of the Company and also certain trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this quarterly report appear without the ® and ™ symbols, but those references are not

intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.

We maintain a website at www.missionproduce.com, to which we regularly post copies of our press releases as well as additional information about us. Our filings with the Securities and Exchange Commission (“SEC”), are available free of charge through our website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Information contained in our website does not constitute a part of this report or our other filings with the SEC.

PART I- FINANCIAL INFORMATION

Item 1. Financial Statements

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(In millions, except for shares)	January 31, 2024		October 31, 2023
Assets
Current Assets:
Cash and cash equivalents	$	39.9	$	42.9
Restricted cash	0.6		0.3
Accounts receivable
Trade, net of allowances of $0.8 and $0.9, respectively	85.3		74.1
Grower and fruit advances	1.4		0.9
Other	13.1		12.4
Inventory	85.9		70.8
Prepaid expenses and other current assets	9.1		9.1
Income taxes receivable	9.2		9.6
Total current assets	244.5		220.1
Property, plant and equipment, net	525.2		523.2
Operating lease right-of-use assets	71.4		72.4
Equity method investees	28.6		31.0
Deferred income tax assets, net	8.7		8.5
Goodwill	39.4		39.4
Intangible asset, net	0.2		0.5
Other assets	19.5		19.7
Total assets	$	937.5	$	914.8

Liabilities and Equity
Liabilities
Accounts payable	$	26.7	$	27.2
Accrued expenses	29.1		26.4
Income taxes payable	2.8		1.6
Grower payables	36.9		26.4
Short-term borrowings	—		2.8
Notes payable	0.5		—
Loans from noncontrolling interest holders—current portion	0.2		0.5
Long-term debt—current portion	3.3		3.4
Operating leases—current portion	7.0		6.6
Finance leases—current portion	1.4		2.6
Total current liabilities	107.9		97.5
Long-term debt, net of current portion	152.8		148.6
Loans from noncontrolling interest holders, net of current portion	1.8		2.5
Operating leases, net of current portion	70.3		71.0
Finance leases, net of current portion	20.1		14.7
Income taxes payable	2.3		2.3
Deferred income tax liabilities, net	22.8		23.5
Other long-term liabilities	27.7		26.4
Total liabilities	405.7		386.5
Commitments and contingencies (Note 7)
Shareholders’ Equity
Common stock ($0.001 par value, 1,000,000,000 shares authorized; 70,841,303 and 70,728,404 shares issued and outstanding as of January 31, 2024 and October 31, 2023, respectively)	0.1		0.1
Additional paid-in capital	234.1		233.4
Accumulated other comprehensive loss	(0.1)		(0.9)
Retained earnings	271.0		271.0
Mission Produce shareholders' equity	505.1		503.6
Noncontrolling interest	26.7		24.7
Total equity	531.8		528.3
Total liabilities and equity	$	937.5	$	914.8

See accompanying notes to unaudited condensed consolidated financial statements.

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


	Three Months Ended January 31,
(In millions, except for per share amounts)	2024		2023
Net sales	$	258.7	$	213.5
Cost of sales	230.0		204.5
Gross profit	28.7		9.0
Selling, general and administrative expenses	20.7		19.1

Operating income (loss)	8.0		(10.1)
Interest expense	(3.3)		(2.4)
Equity method income	0.4		1.0
Other expense, net	(1.0)		(0.8)
Income (loss) before income taxes	4.1		(12.3)
Provision (benefit) for income taxes	2.1		(1.7)
Net income (loss)	$	2.0	$	(10.6)
Less: Net income (loss) attributable to noncontrolling interest	2.0		(1.8)
Net loss attributable to Mission Produce	$	—	$	(8.8)

Net loss per share attributable to Mission Produce:
Basic	$	0.00	$	(0.12)
Diluted	$	0.00	$	(0.12)

See accompanying notes to unaudited condensed consolidated financial statements.

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended January 31,
(In millions)	2024		2023
Net income (loss)	$	2.0	$	(10.6)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	0.8		0.5
Total comprehensive income (loss), net of tax	2.8		(10.1)
Less: Comprehensive income (loss) attributable to noncontrolling interest	2.0		(1.8)
Comprehensive income (loss)	$	0.8	$	(8.3)

See accompanying notes to unaudited condensed consolidated financial statements.

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)


(In millions, except for shares)	Common stock			Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings		Noncontrolling interest		Total equity
	Shares	Amount
Balance at October 31, 2022	70,669,535	$	0.1	$	229.3	$	(1.7)	$	274.4	$	20.8	$	522.9
Stock-based compensation	—	—		0.7		—		—		—		0.7
Exercise of stock options	8,500	—		—		—		—		—		—
Issuance of common stock for equity awards, net of shares withheld for the settlement of taxes	55,055	—		(0.4)		—		—		—		(0.4)
Contributions from noncontrolling interest holders	—	—		—		—		—		1.0		1.0
Net loss	—	—		—		—		(8.8)		(1.8)		(10.6)
Other comprehensive income	—	—		—		0.5		—		—		0.5
Balance at January 31, 2023	70,733,090	$	0.1	$	229.6	$	(1.2)	$	265.6	$	20.0	$	514.1














Balance at October 31, 2023	70,728,404	$	0.1	$	233.4	$	(0.9)	$	271.0	$	24.7	$	528.3
Stock-based compensation	—	—		1.4		—		—		—		1.4

Issuance of common stock for equity awards, net of shares withheld for the settlement of taxes	112,899	—		(0.7)		—		—		—		(0.7)

Net income	—	—		—		—		—		2.0		2.0
Other comprehensive income	—	—		—		0.8		—		—		0.8
Balance at January 31, 2024	70,841,303	$	0.1	$	234.1	$	(0.1)	$	271.0	$	26.7	$	531.8

See accompanying notes to unaudited condensed consolidated financial statements.

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)


	Three Months Ended January 31,
(In millions)	2024		2023
Operating Activities
Net income (loss)	$	2.0	$	(10.6)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

Depreciation and amortization	12.9		9.3
Amortization of debt issuance costs	0.1		0.1
Equity method income	(0.4)		(1.0)
Noncash lease expense	1.5		1.4
Stock-based compensation	1.4		0.7
Dividends received from equity method investees	3.2		2.7
Losses on asset impairment, disposals and sales, net of insurance recoveries	0.2		0.3
Deferred income taxes	(0.8)		(0.5)


Other	0.9		0.1
Effect on cash of changes in operating assets and liabilities:
Trade accounts receivable	(10.9)		(1.2)
Grower fruit advances	(0.5)		—
Other receivables	(0.7)		6.1
Inventory	(14.8)		(3.8)
Prepaid expenses and other current assets	—		0.8
Income taxes receivable	0.3		(3.2)
Other assets	0.1		(1.2)
Accounts payable and accrued expenses	4.6		(1.7)
Income taxes payable	1.2		(0.5)
Grower payables	10.1		1.1
Operating lease liabilities	(0.9)		(1.4)
Other long-term liabilities	—		1.2
Net cash provided by (used in) operating activities	$	9.5	$	(1.3)
Investing Activities
Purchases of property, plant and equipment	(9.9)		(17.6)


Investment in equity method investees	—		(0.3)




Net cash used in investing activities	$	(9.9)	$	(17.9)
Financing Activities
Borrowings on revolving credit facility	15.0		10.0
Payments on revolving credit facility	(10.0)		—

Repayment of short-term borrowings	(2.8)		(2.5)

Principal payments on long-term debt obligations	(0.9)		(0.9)
Principal payments on finance lease obligations	(2.3)		(1.7)
Payments for long-term supplier financing	(0.3)		—
Principal payments on loans due to noncontrolling interest holder	(0.5)		—
Payments of minimum withholding taxes on net share settlement of equity awards	(0.7)		(0.4)


Equity contributions from noncontrolling interest holders	—		1.0
Net cash (used in) provided by financing activities	$	(2.5)	$	5.5
Effect of exchange rate changes on cash	0.2		—
Net decrease in cash, cash equivalents and restricted cash	(2.7)		(13.7)
Cash, cash equivalents and restricted cash, beginning of period	43.2		53.9
Cash, cash equivalents and restricted cash, end of period	$	40.5	$	40.2

Summary of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:
Cash and cash equivalents	$	39.9	$	39.2
Restricted cash	0.6		1.0

Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	40.5	$	40.2

See accompanying notes to unaudited condensed consolidated financial statements.

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Business

Mission Produce, Inc. together with its consolidated subsidiaries (“Mission,” “the Company,” “we,” “us” or “our”), is a global leader in the avocado industry. The Company’s expertise lies in the farming, packaging, marketing and distribution of avocados to food retailers, distributors and produce wholesalers worldwide. The Company procures avocados principally from California, Mexico and Peru. Through our various operating facilities, we grow, sort, pack, bag and ripen avocados and a small amount of other fruits for distribution to domestic and international markets. We report our results of operations in three operating segments: Marketing and Distribution, International Farming and Blueberries (see Note 12).

Basis of presentation and consolidation

The unaudited interim condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and include the Company’s consolidated domestic and international subsidiaries and variable interest entity (“VIE”) for which we are the primary beneficiary and have a controlling interest. Certain information and disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements and accompanying footnotes should be read in conjunction with the Company’s Annual Report for the year ended October 31, 2023. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair statement have been included in the unaudited condensed consolidated financial statements. Interim results of operations are not necessarily indicative of future results, including results that may be expected for the twelve months ended October 31, 2024.

Recently issued accounting standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. We are currently evaluating the impact of adoption on our financial disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures. The ASU requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of adoption on our financial disclosures.

2. Inventory

Major classes of inventory were as follows:


(In millions)	January 31, 2024		October 31, 2023
Finished goods	$	42.6	$	29.5
Crop growing costs	24.8		21.5
Packaging and supplies	18.5		19.8
Inventory	$	85.9	$	70.8

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Goodwill and Intangible Asset, net

Goodwill


(In millions)	International Farming		Blueberries		Total
Goodwill as of January 31, 2024 and October 31, 2023	$	26.9	$	12.5	$	39.4

The carrying amounts of goodwill as of January 31, 2024 and October 31, 2023 were net of accumulated impairment losses of $49.5 million, attributable to the International Farming segment. Goodwill is tested for impairment on an annual basis in the fourth quarter, or when an event or changes in circumstances indicate that its carrying value may not be recoverable.

Intangible asset, net


(In millions)	January 31, 2024		October 31, 2023
Intangible asset, gross	$	2.8	$	2.8
Accumulated amortization	(2.6)		(2.3)
Intangible asset, net	$	0.2	$	0.5

The intangible asset, net consists of a distributor relationship entirely attributed to the business combination with Moruga on May 1, 2022. The intangible asset has an amortizable life of 2 years, to be recognized in selling, general and administrative expenses coinciding with the timing of the estimated revenues. Amortization expense was $0.3 million and $1.2 million for the three months ended January 31, 2024 and 2023, respectively. The remaining amortization expense of $0.2 million is expected to be recognized during the year ended October 31, 2024.

4. Details of Certain Account Balances

Accrued expenses


(In millions)	January 31, 2024		October 31, 2023
Employee-related	$	13.6	$	12.8
Freight	5.5		4.5
Outside fruit purchase	4.5		2.7
VAT and local taxes payable	0.1		0.3
Legal settlement	1.0		0.8
Other	4.4		5.3
Accrued expenses	$	29.1	$	26.4

Other long-term liabilities


(In millions)	January 31, 2024		October 31, 2023
Uncertain tax positions(1)	$	20.7	$	19.4
Employee-related	1.7		1.4
Trade payables to noncontrolling interest holders	4.7		4.5
Other	0.6		1.1
Other long-term liabilities	$	27.7	$	26.4

(1)Includes uncertain tax positions related to both income taxes and other statutory tax reserves, plus related penalties and interest.

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other expense, net


	Three Months Ended January 31,
(In millions)	2024		2023
Gains on derivative financial instruments	$	—	$	0.1
Foreign currency transaction loss	1.4		0.9
Interest income	(0.3)		(0.2)

Other expense, net	$	1.0	$	0.8

Other amounts attributable to noncontrolling interest holders

Amounts included in trade accounts receivable due from noncontrolling interest holders were $6.7 million and $5.7 million as of January 31, 2024 and October 31, 2023, respectively. Amounts included in trade accounts payable due to noncontrolling interest holders were $3.0 million and $3.2 million as of January 31, 2024 and October 31, 2023, respectively.

5. Variable Interest Entity

Assets of our variable interest in Moruga may only be used to settle its own liabilities and creditors of Moruga only have recourse for the liabilities of Moruga. A summary of these balances, which are wholly included in our condensed consolidated balance sheets, is as follows:


(In millions)	January 31, 2024		October 31, 2023
Current assets	$	27.2	$	30.0
Long-term assets	71.4		69.9
Current liabilities	12.8		17.0
Long-term liabilities	29.7		25.4

6. Debt

Credit facility

Long-term debt under our syndicated credit facility with Bank of America (“BoA”) Merrill Lynch consisted of the following:


(In millions)	January 31, 2024		October 31, 2023
Revolving line of credit. The interest rate is variable, based on SOFR plus a spread that varies with the Company’s leverage ratio. As of January 31, 2024 and October 31, 2023, the interest rate was 7.43% and 7.42%, respectively. Interest is payable monthly and principal is due in full in October 2027	$	60.0	$	55.0
Senior term loan (A-1). The interest rate is variable, based on SOFR plus a spread that varies with the Company’s leverage ratio. As of January 31, 2024 and October 31, 2023, the interest rate was 7.43% and 7.42%, respectively. Interest is payable monthly, principal is payable quarterly and due in full in October 2027.	46.9		47.5
Senior term loan (A-2). The interest rate is variable, based on SOFR plus a spread that varies with the Company’s leverage ratio. As of January 31, 2024 and October 31, 2023, the interest rate was 7.68% and 7.67% respectively. Interest is payable monthly, principal is payable quarterly and due in full in October 2029.	49.3		49.5
Note payable to BoA. Payable in monthly installments including interest at a rate of 3.96% as of both January 31, 2024 and October 31, 2023. Principal is due July 2024.	0.3		0.4
Total long-term debt	156.5		152.4
Less debt issuance costs	(0.4)		(0.4)
Long-term debt, net of debt issuance costs	156.1		152.0
Less current portion of long-term debt	(3.3)		(3.4)
Long-term debt, net of current portion	$	152.8	$	148.6

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The credit facility requires the Company to comply with financial and other covenants, including limitations on investments, capital expenditures, dividend payments, amounts and types of liens and indebtedness, and material asset sales. The Company is also required to maintain certain leverage and fixed charge coverage ratios. As of January 31, 2024, the Company was in compliance with all financial covenants of the credit facility.

Other

Certain of our consolidated subsidiaries may also enter into short-term bank borrowings from time to time. As of January 31, 2024, no short-term borrowings were outstanding as the $2.8 million balance outstanding at October 31, 2023 had been repaid in full. The weighted average variable interest rate on the borrowings were 10.46%. Our Blueberries business also obtains loans from shareholders from time to time, which accrue interest at rates ranging from 5.0 to 6.5%. Amounts outstanding as of January 31, 2024 are expected to be repaid by the end of fiscal 2026.

The Company may issue standby letters of credit through banking institutions. As of January 31, 2024, total letters of credit outstanding were $0.7 million.

Interest rate swaps

The Company has four separate interest rate swaps with a total notional amount of $100 million to hedge changes in variable interest rates on the principal value of the Company’s term loans. The interest rate swaps carried fixed LIBOR rates ranging from 1.75% to 2.57%. Three of the four interest rate swaps matured during fiscal year 2023. As of January 31, 2024, the remaining interest swap notional amount of $25 million carries a fixed rate of 2.30% and matures in the second quarter of fiscal 2024. We account for the interest rate swaps in accordance with ASC 815, Derivatives and Hedging, as amended, which requires the recognition of all derivative instruments as either assets or liabilities in the consolidated balance sheets and measurement of those instruments at fair value. The Company has not designated the interest rate swaps as cash flow hedges, and as a result under the accounting guidance, changes in the fair value of the interest rate swaps have been recorded in other expense, net in the condensed consolidated statements of income (loss) and changes in the asset are presented in net cash provided by (used in) operating activities in the condensed consolidated statements of cash flow. Refer to Note 9 for more details.

7. Commitments and Contingencies

Litigation

The Company is involved from time to time in claims, proceedings, and litigation, including the following:

On April 23, 2020, former Mission Produce, Inc. employees filed a class action lawsuit in the Superior Court of the State of California for the County of Los Angeles against us alleging violation of certain wage and labor laws in California, including failure to pay all overtime wages, minimum wage violations, and meal and rest period violations, among others. Additionally, on June 10, 2020, former Mission Produce, Inc. employees filed a class action lawsuit in the Superior Court of the State of California for the County of Ventura against us alleging similar violations of certain wage and labor laws. The plaintiffs in both cases seek damages primarily consisting of class certification and payment of wages earned and owed, plus other consequential and special damages. While the Company believes that it did not violate any wage or labor laws, it nevertheless decided to settle these class action lawsuits. In May 2021, the plaintiffs in both class action lawsuits and the Company agreed preliminarily to a comprehensive settlement to resolve both class action cases for a total of $0.8 million, which the Company recorded as a loss contingency in selling, general and administrative expenses in the consolidated statements of income during the three months ended April 30, 2021. The 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.

As a result of a dispute over the size of the settlement class, the Company recorded an additional reserve of $0.2 million in selling, general and administrative expenses in the condensed consolidated statements of income (loss) during the three months ended January 31, 2024. A final approval hearing is scheduled for June 2024.

The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and if one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that period could be materially adversely affected.

8. Income Taxes

The provision for income tax recorded for the three months ended January 31, 2024 and 2023 differs from the income taxes expected at the U.S. federal statutory tax rate of 21.0%, primarily due to income attributable to foreign jurisdictions which is

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

taxed at different rates, changes in foreign exchange rates taxable in foreign jurisdictions, state taxes, nondeductible tax items, changes in uncertain tax positions (“UTP”), and changes in tax law affecting the rate in future years.

As of January 31, 2024, the Company had $18.1 million accrued in UTP on income taxes, of which $10.0 million relates to interest and penalties, inclusive of inflationary adjustments. The period for assessing interest and penalties has expired. However, the Company continues to record certain statutory adjustments related to inflation. Changes in the UTP related to changes in foreign exchange rates during the period are included in other expense, net in the condensed consolidated statements of income (loss).

9. Fair Value Measurements

Financial assets measured and recorded at fair value on a recurring basis included in the condensed consolidated balance sheets were as follows:

January 31, 2024

October 31, 2023

(In millions)

Total

Quoted Prices

in Active

Markets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Total

Quoted Prices

in Active

Markets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Assets

Mutual funds

SEC Form 10-Q filed by Mission Produce Inc.