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 April 30, 2023

OR

☐ 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 May 25, 2023, the registrant had 70,785,602 shares of common stock at $0.001 par value outstanding.

MISSION PRODUCE, INC.

TABLE OF CONTENTS

FORM 10-Q

FISCAL SECOND QUARTER 2023

PART I- FINANCIAL INFORMATION		5
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of (Loss) Income (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive (Loss) Income (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	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II- OTHER INFORMATION		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33
	Signatures	34

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 avocados, either through purchasing or growing; fluctuations in the market price of avocados; increasing competition; risks associated with doing business internationally, including Mexican and Peruvian economic, political and/or societal conditions; inflationary pressures; 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; 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, including those promulgated by the USDA and FDA, health and safety laws, environmental laws, and other 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; and risks associated with the ongoing conflict in Russia and Ukraine.

•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, directors and principal stockholders 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, 2022 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, 2022 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.

3

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.

4

PART I- FINANCIAL INFORMATION

Item 1.    Financial Statements

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, except for shares)	April 30, 2023		October 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	20.9	$	52.8
Restricted cash	1.3		1.1
Accounts receivable
Trade, net of allowances of $0.5 and $0.3, respectively	79.0		62.9
Grower and fruit advances	4.3		1.8
Other	14.3		17.3
Inventory	96.0		73.1
Prepaid expenses and other current assets	9.9		11.1
Income taxes receivable	12.4		8.0
Total current assets	238.1		228.1
Property, plant and equipment, net	521.1		489.7
Operating lease right-of-use assets	74.7		65.4
Equity method investees	26.1		27.1
Deferred income tax assets, net	8.6		8.1
Goodwill	39.4		39.4
Intangible asset, net	0.8		2.0
Other assets	21.8		19.7
Total assets	$	930.6	$	879.5
Liabilities and Equity
Liabilities
Accounts payable	$	30.0	$	34.4
Accrued expenses	30.0		30.1
Income taxes payable	0.8		1.0
Grower payables	32.4		24.3
Short-term borrowings	—		2.5
Long-term debt—current portion	3.6		3.5
Operating leases—current portion	5.6		4.7
Finance leases—current portion	1.9		1.2
Total current liabilities	104.3		101.7
Long-term debt, net of current portion	170.2		136.9
Loans from noncontrolling interest holders	3.4		1.0
Operating leases, net of current portion	72.9		63.9
Finance leases, net of current portion	15.1		1.4
Income taxes payable	2.3		3.1
Deferred income tax liabilities, net	28.9		29.4
Other long-term liabilities	22.1		19.2
Total liabilities	419.2		356.6
Commitments and contingencies (Note 6)
Shareholders’ Equity
Common stock ($0.001 par value, 1,000,000,000 shares authorized; 70,785,682 and 70,669,535 shares issued and outstanding as of April 30, 2023 and October 31, 2022, respectively)	0.1		0.1
Additional paid-in capital	230.9		229.3
Accumulated other comprehensive loss	(0.9)		(1.7)
Retained earnings	261.0		274.4
Mission Produce shareholders' equity	491.1		502.1
Noncontrolling interest	20.3		20.8
Total equity	511.4		522.9
Total liabilities and equity	$	930.6	$	879.5

See accompanying notes to unaudited condensed consolidated financial statements.

5

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

	Three Months Ended April 30,				Six Months Ended April 30,
(In millions, except for per share amounts)	2023		2022		2023		2022
Net sales	$	221.1	$	278.1	$	434.6	$	494.7
Cost of sales	203.0		258.3		407.5		474.4
Gross profit	18.1		19.8		27.1		20.3
Selling, general and administrative expenses	19.3		18.7		38.4		37.4
Operating (loss) income	(1.2)		1.1		(11.3)		(17.1)
Interest expense	(2.7)		(1.1)		(5.1)		(2.0)
Equity method income	0.4		0.3		1.4		1.9
Other income (expense), net	0.6		2.9		(0.2)		4.5
(Loss) income before income taxes	(2.9)		3.2		(15.2)		(12.7)
Provision (benefit) for income taxes	1.8		0.8		0.1		(1.7)
Net (loss) income	$	(4.7)	$	2.4	$	(15.3)	$	(11.0)
Net loss attributable to noncontrolling interest	(0.1)		—		(1.9)		—
Net (loss) income attributable to Mission Produce	$	(4.6)	$	2.4	$	(13.4)	$	(11.0)
Net (loss) income per share attributable to Mission Produce:
Basic	$	(0.07)	$	0.03	$	(0.19)	$	(0.16)
Diluted	$	(0.07)	$	0.03	$	(0.19)	$	(0.16)

See accompanying notes to unaudited condensed consolidated financial statements.

6

MISSION PRODUCE, INC.

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

	Three Months Ended April 30,				Six Months Ended April 30,
(In millions)	2023		2022		2023		2022
Net (loss) income	$	(4.7)	$	2.4	$	(15.3)	$	(11.0)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	0.3		0.2		0.8		(0.1)
Total comprehensive loss, net of tax	(4.4)		2.6		(14.5)		(11.1)
Comprehensive loss attributable to noncontrolling interest	(0.1)		—		(1.9)		—
Comprehensive (loss) income attributable to Mission Produce	$	(4.3)	$	2.6	$	(12.6)	$	(11.1)

See accompanying notes to unaudited condensed consolidated financial statements.

7

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, 2021	70,631,525	$	0.1	$	225.6	$	(0.5)	$	309.0	$	—	$	534.2
Stock-based compensation	—	—		0.8		—		—		—		0.8
Net loss	—	—		—		—		(13.4)		—		(13.4)
Other comprehensive loss	—	—		—		(0.3)		—		—		(0.3)
Balance at January 31, 2022	70,631,525	$	0.1	$	226.4	$	(0.8)	$	295.6	$	—	$	521.3
Stock-based compensation	—	—		0.9		—		—		—		0.9
Issuance of common stock for equity awards	22,516	—		—		—		—		—		—
Net income	—	—		—		—		2.4		—		2.4
Other comprehensive income	—	—		—		0.2		—		—		0.2
Balance at April 30, 2022	70,654,041	$	0.1	$	227.3	$	(0.6)	$	298.0	$	—	$	524.8
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
Stock-based compensation	—	—		1.3		—		—		—		1.3
Exercise of stock options	5,000	—		—		—		—		—		—
Issuance of common stock for equity awards, net of shares withheld for the settlement of taxes	47,592	—		—		—		—		—		—
Contributions from noncontrolling interest holders	—	—		—		—		—		0.4		0.4
Net loss	—	—		—		—		(4.6)		(0.1)		(4.7)
Other comprehensive income	—	—		—		0.3		—		—		0.3
Balance at April 30, 2023	70,785,682	$	0.1	$	230.9	$	(0.9)	$	261.0	$	20.3	$	511.4

See accompanying notes to unaudited condensed consolidated financial statements.

8

MISSION PRODUCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

	Six Months Ended April 30,
(In millions)	2023		2022
Operating Activities
Net loss	$	(15.3)	$	(11.0)
Adjustments to reconcile net loss to net cash used in operating activities
Provision for losses on accounts receivable	—		0.1
Depreciation and amortization	15.2		10.1
Amortization of debt issuance costs	0.1		0.2
Equity method income	(1.4)		(1.9)
Noncash lease expense	2.9		2.5
Stock-based compensation	2.0		1.7
Dividends received from equity method investees	2.7		2.2
Losses on asset impairment, disposals and sales, net of insurance recoveries	0.8		—
Deferred income taxes	(0.9)		(0.1)
Unrealized gains on derivative financial instruments	—		(3.0)
Effect on cash of changes in operating assets and liabilities:
Trade accounts receivable	(15.8)		(29.6)
Grower fruit advances	(2.5)		(3.7)
Other receivables	3.2		1.6
Inventory	(21.1)		(40.7)
Prepaid expenses and other current assets	1.2		0.9
Income taxes receivable	(4.4)		(5.8)
Other assets	1.4		(0.1)
Accounts payable and accrued expenses	(2.0)		7.3
Income taxes payable	(1.0)		(0.5)
Grower payables	8.2		36.4
Operating lease liabilities	(2.3)		(2.1)
Other long-term liabilities	2.9		(1.5)
Net cash used in operating activities	$	(26.1)	$	(37.0)
Investing Activities
Purchases of property, plant and equipment	(34.9)		(29.1)
Proceeds from sale of property, plant and equipment	0.1		2.9
Investment in equity method investees	(0.3)		(0.3)
Purchase of other investment	(2.3)		—
Loan repayments from equity method investees	—		1.0
Other	(0.1)		(0.3)
Net cash used in investing activities	$	(37.5)	$	(25.8)
Financing Activities
Borrowings on revolving credit facility	135.0		20.0
Payments on revolving credit facility	(100.0)		(20.0)
Repayment of short-term borrowings	(2.5)		—
Principal payments on long-term debt obligations	(1.8)		(4.4)
Principal payments on finance lease obligations	(2.0)		(0.6)
Taxes paid related to shares withheld from the settlement of equity awards	(0.4)		—
Proceeds from loan from noncontrolling interest holder	2.4		—
Equity contributions from noncontrolling interest holders	1.4		—
Net cash provided by (used in) financing activities	$	32.1	$	(5.0)
Effect of exchange rate changes on cash	(0.2)		(0.4)
Net decrease in cash, cash equivalents and restricted cash	(31.7)		(68.2)

9

	Six Months Ended April 30,
(In millions)	2023		2022
Cash, cash equivalents and restricted cash, beginning of period	53.9		92.2
Cash, cash equivalents and restricted cash, end of period	$	22.2	$	24.0
Summary of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:
Cash and cash equivalents	$	20.9	$	21.4
Restricted cash	1.3		2.6
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	22.2	$	24.0

See accompanying notes to unaudited condensed consolidated financial statements.

10

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 11).

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, 2022. 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, 2023.

Certain reclassifications have been made to previously reported balances in the unaudited condensed consolidated balance sheets in order to conform to current period presentation.

Consolidation of VIE

On May 1, 2022, a reconsideration event occurred related to Moruga S.A.C., an entity for which we have a 60% equity ownership interest. Moruga S.A.C. is a holding company with one wholly owned subsidiary Blueberries Peru, S.A.C. (collectively referred to as “Moruga”). 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. As a result of the reconsideration event, we concluded that Moruga is a 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.

Recently issued accounting standards

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities—Supplier Finance Programs (Topic 405), which among other things, requires certain disclosures for a buyer in a supplier finance program. Some of the amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and others are required to be adopted for fiscal years beginning after December 15, 2023. Early adoption is permitted. We are currently evaluating the impact of adoption on our financial disclosures.

In March 2022, the FASB issued ASU, Financial Instruments–Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures, which among other things, requires that entities disclose current-period gross write-offs by year of origination for financing receivables. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The impact of ASU 2022-02 is not expected to be material on our financial condition, results of operations and cash flows.

11

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.     Inventory

Major classes of inventory were as follows:

(In millions)	April 30, 2023		October 31, 2022
Finished goods	$	33.9	$	33.8
Crop growing costs	40.7		19.5
Packaging and supplies	21.4		19.8
Inventory	$	96.0	$	73.1

Inventory at October 31, 2022 included a $0.7 million adjustment to increase inventories recognized in the business combination with Moruga to their fair value as of May 1, 2022. These inventories, including the fair value adjustment, were recognized in cost of sales as the underlying inventories were sold.

3.    Goodwill and Intangible Asset, net

Goodwill

(In millions)	International Farming		Blueberries		Total
Goodwill as of April 30, 2023 and October 31, 2022	$	26.9	$	12.5	$	39.4

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)	April 30, 2023		October 31, 2022
Intangible asset, gross	$	2.8	$	2.8
Accumulated amortization	(2.0)		(0.8)
Intangible asset, net	$	0.8	$	2.0

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 zero and $1.2 million for the three and six months ended April 30, 2023, respectively. The remaining amortization expense is expected to be recognized as follows.

(In millions)	Remaining 2023		Year Ending October 31, 2024
Estimated annual amortization expense	$	0.2	$	0.6

12

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.    Details of Certain Account Balances

Accrued expenses

(In millions)	April 30, 2023		October 31, 2022
Employee-related	$	12.4	$	16.3
Freight	7.0		6.2
Outside fruit purchase	4.8		1.0
Legal settlement	0.8		0.8
Other	5.0		5.8
Accrued expenses	$	30.0	$	30.1

Other long-term liabilities

(In millions)	April 30, 2023		October 31, 2022
Uncertain tax positions(1)	$	19.1	$	17.1
Employee-related	1.4		1.2
Other	1.6		0.9
Other long-term liabilities	$	22.1	$	19.2

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

Other income (expense), net

	Three Months Ended April 30,				Six Months Ended April 30,
(In millions)	2023		2022		2023		2022
Gains (losses) on derivative financial instruments	$	0.1	$	2.2	$	—	$	3.0
Foreign currency transaction (loss) gain	(0.4)		(0.4)		(1.3)		0.1
Interest income	0.9		1.1		1.1		1.2
Other	—		—		—		0.2
Other income (expense), net	$	0.6	$	2.9	$	(0.2)	$	4.5

13

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5.     Debt

Credit facility

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

(In millions)	April 30, 2023		October 31, 2022
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 April 30, 2023 and October 31, 2022, the interest rate was 6.76% and 5.34%, respectively. Interest is payable monthly and principal is due in full in October 2027	$	75.0	$	40.0
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 April 30, 2023 and October 31, 2022, the interest rate was 6.83% and 5.58%, respectively. Interest is payable monthly, principal is payable quarterly and due in full in October 2027.	48.8		50.0
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 April 30, 2023 and October 31, 2022, the interest rate was 7.08% and 5.83% respectively. Interest is payable monthly, principal is payable quarterly and due in full in October 2029.	49.8		50.0
Note payable to BoA. Payable in monthly installments including interest at a rate of 3.96% as of both April 30, 2023 and October 31, 2022. Principal is due July 2024.	0.7		1.0
Total long-term debt	174.3		141.0
Less debt issuance costs	(0.5)		(0.6)
Long-term debt, net of debt issuance costs	173.8		140.4
Less current portion of long-term debt	(3.6)		(3.5)
Long-term debt, net of current portion	$	170.2	$	136.9

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 April 30, 2023, the Company was in compliance with all covenants of the credit facility.

Other

The Company may issue standby letters of credit through banking institutions. As of April 30, 2023, total letters of credit outstanding were $0.7 million.

Certain of our consolidated subsidiaries may also enter into short-term bank borrowings from time to time. As of October 31, 2022, short-term borrowings outstanding were $2.5 million with a variable interest rate of 6.65%, all of which was repaid in the three months ended January 31, 2023. 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 April 30, 2023 are expected to be repaid by the end of fiscal 2026.

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 carry fixed LIBOR rates ranging from 1.75% to 2.57%. 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 income (expense), net in the condensed consolidated statements of (loss) income and changes in the asset are presented in net cash used in operating activities in the condensed consolidated statements of cash flow. Refer to Note 8 for more details.

14

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.      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. 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 have been unable to resolve to-date. The parties have fully briefed the court on the issues, and a hearing on the matter is set for July 2023.

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.

7.     Income Taxes

The income tax benefit recorded for the three and six months ended April 30, 2023 and 2022 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 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 April 30, 2023, the Company had $18.5 million accrued in UTP on income taxes, of which $9.3 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 income (expense), net in the condensed consolidated statements of (loss) income.

15

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.     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:

	April 30, 2023								October 31, 2022
(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	$	1.4	$	1.4	$	—	$	—	$	1.2	$	1.2	$	—	$	—
Interest rate swap	1.5		—		1.5		—		2.6		—		2.6		—

Our mutual fund investments relate to our deferred compensation plan, which are held in a Rabbi trust included in other assets in our condensed consolidated balance sheets. The funds are measured at quoted prices in active markets, which is equivalent to their fair value.

The fair value of interest rate swaps is determined using widely accepted valuation techniques, including the discounted cash flow method. The analysis reflects the contractual terms of the swaps, including the period to maturity, and uses observable market-based inputs, including interest rate curves (“significant other observable inputs”). The fair value calculation also includes an amount for risk of non-performance using “significant unobservable inputs” such as estimates of current credit spreads to evaluate the likelihood of default. The Company has concluded, as of April 30, 2023 and October 31, 2022, the fair value associated with the “significant unobservable inputs” relating to the Company’s risk of non-performance was insignificant to the overall fair value of the interest rate swap agreements and, as a result, the Company has determined that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon “significant other observable inputs”. The assets associated with the interest rate swaps have been included in prepaid expenses and other current assets and other assets in the condensed consolidated balance sheets and gains and losses for the interest rate swaps have been included in other income (expense), net in the condensed consolidated statements of (loss) income.

9.    Earnings Per Share

	Three Months Ended April 30,				Six Months Ended April 30,
	2023		2022		2023		2022
Numerator:
Net (loss) income attributable to Mission Produce (in millions)	$	(4.6)	$	2.4	$	(13.4)	$	(11.0)
Denominator:
Weighted average shares of common stock outstanding, used in computing basic earnings per share	70,744,688		70,636,331		70,716,273		70,633,888
Effect of dilutive stock options	—		27,174		—		—
Effect of dilutive RSUs	—		29,918		—		—
Weighted average shares of common stock outstanding, used in computing diluted earnings per share	70,744,688		70,693,423		70,716,273		70,633,888
Earnings per share
Basic	$	(0.07)	$	0.03	$	(0.19)	$	(0.16)
Diluted	$	(0.07)	$	0.03	$	(0.19)	$	(0.16)

16

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity awards representing shares of common stock outstanding that were excluded in the computation of diluted earnings per share because their effect would have been anti-dilutive, were as follows:

	Three Months Ended April 30,		Six Months Ended April 30,
	2023	2022	2023	2022
Anti-dilutive stock options	2,095,106	2,033,888	2,114,228	2,184,694
Anti-dilutive RSUs	636,417	213,287	534,509	236,890

10.     Related Party Transactions

Transactions with related parties included in the condensed consolidated financial statements were as follows:

	Condensed Consolidated Balance Sheets
	April 30, 2023								October 31, 2022
(In millions)	Accounts receivable		Property, plant and equipment, net		Accounts payable & accrued expenses		Finance lease liabilities		Accounts receivable		Accounts payable & accrued expenses
Equity method investees:
Mr. Avocado	$	1.6	$	—	$	—	$	—	$	1.5	$	—
Other:
Directors/Officers(1)	0.2		15.5		0.6		14.9		0.1		2.5
Employees(2)	—		—		0.8		—		—		0.4

	Condensed Consolidated Statements of (Loss) Income
(In millions)	Net sales		Cost of sales		Interest expense		Net sales		Cost of sales		Other income
	Three Months Ended April 30, 2023						Three Months Ended April 30, 2022
Equity method investees:
Henry Avocado	$	—	$	—	$	—	$	—	$	0.3	$	—
Mr. Avocado	1.7		—		—		0.1		—		—
Moruga(3)	—		—		—		0.7		—		—
Copaltas(4)	—		—		—		—		—		0.1
Other:
Directors/Officers(1)	0.4		0.9		0.4		0.3		2.2		—
Employees(2)	—		3.1		—		—		2.4		—
	Six Months Ended April 30, 2023						Six Months Ended April 30, 2022
Equity method investees:
Henry Avocado	$	—	$	—	$	—	$	—	$	0.5	$	—
Mr. Avocado	1.8		—		—		0.5		—		—
Moruga(3)	—		—		—		4.1		—		0.4
Copaltas(4)	—		—		—		—		—		0.1
Other:
Directors/Officers(1))	0.6		1.1		0.7		0.7		2.3		—
Employees(2)	—		5.3		—		—		4.1		—

(1)The Company purchases from and sells avocados to, and provides logistics services to, a small number of entities having full or partial ownership by some of our directors/officers. These transactions are made under substantially similar terms as with other growers and customers. In November 2022, Moruga entered into a long-term land lease with a company owned by one of our directors. The rental rate in the lease was comparable to market rates and reflective of an arms-length transaction. The lease was accounted for as a finance lease right-of-use asset and is included in property, plant and equipment, net in the condensed consolidated balance sheets, with amortization and interest expense recognized in cost of sales and interest expense, respectively, in the condensed consolidated statements of (loss) income. The portion of lease costs attributable to noncontrolling interest, net of income taxes, was $0.1 million and $0.3 million for the three and six months ended April 30, 2023, respectively, and included as part of net loss attributable to noncontrolling interest in the condensed consolidated statements of (loss) income.

17

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the second quarter of 2023, we purchased 20 hectares of land in Peru from the same company owned by this same director for $0.2 million, which was comparable to market rates and reflective of an arms-length transaction.

(2)The Company utilizes a small number of transportation vendors in Mexico having full or partial ownership by some of our employees. The Company also purchases avocados from a small number of entities having full or partial ownership by some employees. These transactions are made under substantially similar terms as with other transportation carriers and growers.

(3)Effective May 1, 2022, Moruga was prospectively consolidated into the Company’s financial statements, at which time transactions between parties were prospectively eliminated in the consolidation of our financial statements. Transactions prior to consolidation are presented the same as in prior periods. The Company provides packing and cooling services for blueberries and leases owned land to Moruga. The Company has also provided loans to Moruga to support growth and expansion projects, bearing interest at 6.5%, due December 31, 2024.

(4)The Company has provided loans to Copaltas to support expansion projects, bearing interest at 6.66%. The loans have been repaid in full as of October 31, 2022.

11.     Segment and Revenue Information

We have three operating segments which are also reportable segments. Our reportable segments are presented based on how information is used by our CEO, who is the chief operating decision maker, to measure performance and allocate resources. After the consolidation of Moruga on May 1, 2022 (refer to Note 1 for more information), the information used by the CEO changed to include the results of Moruga, and as such, we determined our reportable segments to be:

•Marketing and Distribution. 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. 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. The 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.

The CEO evaluates and monitors segment performance primarily through segment sales and segment adjusted EBITDA. 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, 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. We believe that adjusted EBITDA by segment provides useful information for analyzing the underlying business results as well as allowing investors a means to evaluate the financial results of each reportable segment in relation to the Company as a whole. These measures are not in accordance with, nor are they a substitute for or superior to, the comparable GAAP financial measures.

18

MISSION PRODUCE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net sales from each of our reportable segments were as follows.

	Marketing and Distribution		International Farming		Blueberries		Total		Marketing and Distribution		International Farming		Total
	Three Months Ended April 30,
(In millions)	2023								2022
Third party sales	$	215.3	$	4.1	$	1.7	$	221.1	$	273.7	$	4.4	$	278.1
Affiliated sales	—		1.9		—		1.9