MISSION PRODUCE, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this annual report. This discussion and analysis contains forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. 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. We source, produce, pack and distribute avocados to our customers and provide value-added services including ripening, bagging, custom packing 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. We have two operating segments, which are also reporting segments. These reporting segments are Marketing and Distribution and International Farming. Our Marketing and Distribution reporting segment primarily sources fruit from growers and then distributes the fruit through our global distribution network. Our International Farming segment owns and operates orchards from which substantially all 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. The segment also earns service revenues for packing and processing for producers of other crops during the avocado off-harvest season. The International Farming segment is principally located inPeru , with smaller operations emerging in other areas ofLatin America . Recent developments In fiscal 2021, we completed one of our major capital projects, a new mega-distribution center inLaredo, Texas . Serving as a major hub for avocados coming fromMexico intothe United States , the 262,000-square-foot facility is positioned to funnel product into the rest of the distribution centers inMission's advanced network. The facility is designed with state-of-the-art refrigeration, ripening rooms and pallet cooling capabilities, and has the capability to provide logistics support and transportation services, in addition to cold storage, bagging operations and packing for external enterprises, which we anticipate will generate additional revenue and value for the Company.Mission's Laredo mega center is positioned to strengthen the Company's advantage in the avocado sector and is expected to increase its third-party storage and distribution 17 -------------------------------------------------------------------------------- capabilities for others in the produce industry, improve ability to efficiently distribute Mexican avocados throughoutNorth America and expedite transportation times. In our International Farming segment, we have made significant investments this year in orchard development and land improvements inGuatemala andPeru . Our expansion intoGuatemala will diversify our sourcing mix on owned fruit. 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. Results of Operations The operating results of our businesses are significantly impacted by the price and volume of avocados we farm, source and distribute. In addition, our results have been, and will continue to be, affected by quarterly and annual fluctuations due to a number of factors, including but not limited to pests and disease, weather patterns, changes in demand by consumers, food safety advisories, the timing of the receipt, reduction, or cancellation of significant customer orders, the gain or loss of significant customers, the availability, quality and price of raw materials, the utilization of capacity at our various locations and general economic conditions. Our financial reporting currency is theU.S. dollar. The functional currency of substantially all of our subsidiaries is theU.S. dollar and substantially all of our sales are denominated inU.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. Fluctuations in the exchange rates between theU.S. dollar and these local currencies usually do not have a significant impact on our gross margin because the impact affects our pricing by comparable amounts. Our margin exposure to exchange rate fluctuations is short-term in nature, as our sales price commitments are generally limited to less than one month and orders can primarily be serviced with procured inventory. 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. Year Ended October 31, 2021 2020 2019 (In millions, except percentages) Dollar % Dollar % Dollar % Net sales$ 891.7 100.0 %$ 862.3 100.0 %$ 883.3 100.0 % Cost of sales 767.2 86.0 % 737.7 85.6 % 728.6 82.5 % Gross profit 124.5 14.0 % 124.6 14.4 % 154.7 17.5 % Selling, general and administrative 63.6 7.1 % 56.2 6.5 % 48.2 5.5 % expenses Operating income 60.9 6.8 % 68.4 7.9 % 106.5 12.1 % Interest expense (3.7) (0.4) % (6.7) (0.8) % (10.3) (1.2) % Equity method income 7.5 0.8 % 4.0 0.5 % 3.4 0.4 % Impairment on equity method - - % (21.2) (2.5) % - - % investment Other income (expense), net 1.3 0.1 % (0.7) (0.1) % (3.6) (0.4) % Income before income taxes 66.0 7.4 % 43.8 5.1 % 96.0 10.9 % Provision for income taxes 21.1 2.4 % 15.0 1.7 % 24.3 2.8 % Net income$ 44.9 5.0 %$ 28.8 3.3 %$ 71.7 8.1 % Net sales Our net sales are generated predominantly from the shipment of fresh avocados to retail, wholesale and foodservice customers worldwide. Our net sales are affected by numerous factors, including mainly the balance between the supply of and demand for our produce and competition from other fresh produce companies. Our net sales are also dependent on our ability to supply a consistent volume and quality of fresh produce to the markets we serve. Year Ended October 31, (In millions) 2021 2020 2019 Net sales: Marketing and Distribution$ 872.0 $ 846.9 $ 873.7 International Farming 19.7 15.4 9.6 Total net sales$ 891.7 $ 862.3 $ 883.3 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 fromMexico andPeru . Higher volumes and lower pricing were concentrated in the first half of the fiscal year whenMexico was the country of origin for the majority of the fruit sold. 18 -------------------------------------------------------------------------------- Net sales decreased$21.0 million or 2% in fiscal year 2020 compared to fiscal year 2019 primarily due to a 12% decrease in average per unit sales prices partially offset by an 11% increase in volume. Average price decreases were concentrated in the second half of fiscal year 2020 primarily due to strong industry supply relative to prior year inCalifornia andPeru related to weather conditions. Gross profit Cost of sales is composed primarily of avocado procurement costs from independent growers and packers, logistics costs, packaging costs, labor, costs associated with cultivation (the cost of growing crops), harvesting and depreciation. Avocado procurement costs from third-party suppliers can vary significantly between and within fiscal years and correlate closely with market prices for avocados. 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. Land transportation costs consist primarily of third-party trucking services to support North American distribution, while sea transportation cost consists primarily of third-party shipping of refrigerated containers from supply markets in South andCentral America to demand markets inNorth America ,Europe andAsia . 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. In general, changes in our volume of products sold can have a disproportionate effect on our gross profit. Within any particular year, a significant portion of our cost of products are fixed, particularly in our International Farming segment. Accordingly, higher volumes processed through packing and distribution facilities or 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. Year Ended October 31, 2021 2020 2019 Gross profit (in millions) $ 124.5 $
124.6
Gross profit as a percentage of net sales 14.0 %
14.4 % 17.5 %
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. The declines were due to lower per-unit margins related to sourcing of Californian and Mexican fruit, which were exacerbated by lower industry volumes from theCalifornia market as well as smaller fruit sizes from the Mexican market. Additionally, gross margin was impacted by incremental infrastructure costs related to our newLaredo facility within the Marketing & Distribution segment, which is still in the process of ramping up utilization. Gross margin was also negatively impacted by widespread port delays in the fourth quarter, which created quality issues related to the extended age of inventory on late-season fruit which impacted sales returns. These impacts were substantially offset by higher volume of avocados sold from Company-owned farms within our International Farming segment compared to prior year, which had lower per-unit cost than fruit purchased from third-party growers. Gross profit percentage will fluctuate based upon per-unit sales price levels. Gross profit decreased fiscal year 2020 over fiscal year 2019 as a result of lower gross margin percentage partially offset by higher sales volumes. Our gross margin percentage decreased 310 basis points primarily due to higher third-party fruit costs during first quarter of fiscal year 2020 compared to the same period of last year. The market conditions experienced during the early part of fiscal year 2019 were non-recurring in nature, as customer prices remained steady despite significant declines in fruit costs incurred due to the instability of supply fromMexico . In addition, gross profit in the International Farming segment was negatively impacted by lower sales pricing during the second half of fiscal year 2020 due to larger industry volumes fromCalifornia andPeru relative to prior year. 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. Year Ended October
31,
(In millions) 2021 2020
2019
Selling, general and administrative expenses
Selling, general and administrative expenses increased$7.4 million or 13% in fiscal year 2021 compared to fiscal year 2020 due primarily to higher professional fees and higher liability insurance premiums associated with being a public company and the change inSEC filer status from an emerging growth company to a large accelerated filer onOctober 31, 2021 . Other factors included an increase in rent expense in conjunction with our move to our new corporate headquarters inFebruary 2021 , and a legal settlement contingency of$0.8 million , partially offset by a$0.9 million gain from an insurance settlement, net of asset impairment and disposals. Selling, general and administrative expenses increased$8.0 million or 17% in fiscal year 2020 compared to fiscal year 2019 primarily due to higher stock-based compensation expense due to an award that vested during the fourth quarter of fiscal year 2020 in connection with the successful completion of our IPO. 19 -------------------------------------------------------------------------------- Interest expense Interest expense consists primarily of interest on borrowings under working capital facilities that we maintain and interest on other long-term debt used to make capital and equity investments. Year Ended October 31, (In millions) 2021 2020 2019 Interest expense$ 3.7 $ 6.7 $ 10.3 Interest expense decreased$3.0 million or 45% in fiscal year 2021 compared to fiscal year 2020 due to a combination of lower interest rates and lower average principal balances. A substantial portion of our debt has variable interest rates that are based on LIBOR, which has declined significantly since the first half of fiscal year 2020. Interest expense decreased$3.6 million or 35% in fiscal year 2020 compared to fiscal year 2019 due to a combination of lower interest rates and lower average debt balances. A substantial portion of our debt has variable interest rates that are based on LIBOR, which has declined significantly since fiscal year 2019. Average debt balances were lower reflecting principal payments of existing long-term debt as well as prepayments of term debt that were made in fiscal year 2019. Equity method income Our material equity method investees include Henry Avocado ("HAC"), Mr. Avocado, Moruga, and Copaltas. Year Ended October 31, (In millions) 2021 2020 2019 Equity method income$ 7.5 $ 4.0 $ 3.4 Impairment on equity method investment -
(21.2) -
Equity method income increased$3.5 million or 88% in in fiscal year 2021 compared to fiscal year 2020, driven by higher earnings from investments in Moruga and HAC. Moruga's earnings increased due to higher blueberry volume attributed to improved yields and better pricing returns. HAC's earnings increased due to higher per-unit margins. The impact of COVID-19 related stay at-home orders that went into effect inMarch 2020 were more profound to HAC due to their heavier concentration of foodservice customers. Equity method income increased$0.6 million or 18% in fiscal year 2020 compared to fiscal year 2019 due to earnings increases from Moruga due to the timing of blueberry harvests inPeru , partially offset by a decrease in earnings from Henry Avocado. During the second quarter of fiscal 2020, industry wide production information regarding the 2019-2020 blueberry harvest inPeru became available, indicating that there is greater competition and expansion by competitors than what we were previously expecting. We believed that the increase in supply due to expansion would result in a reduction in pricing over the long-term. As a result of this factor, among others, we lowered our long-term revenue and profitability forecasts of Moruga during the second quarter of fiscal 2020, and concluded that the reduction in the forecasted revenues was an indicator of impairment. As a result, we tested our investment in Moruga for impairment and concluded that the estimated fair value of the investment in Moruga was less than the carrying value of the investment. Due to the change in long-term pricing and revenue expectations, we concluded that the impairment is other-than-temporary. We recorded an impairment charge of$21.2 million to reduce the carrying balance of the investment to its estimated fair value of$22.2 million during the second quarter of fiscal 2020. 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. Year Ended October 31, (In millions) 2021 2020 2019 Other income (expense), net 1.3 (0.7) (3.6) Other income in fiscal year 2021 was$1.3 million , compared to other expense of$0.7 million in fiscal year 2020. The$2.0 million change was primarily due to losses on interest rate swaps in the prior year, driven by market movements in short-term interest rates, partially offset by the effect of foreign currency loss in the current year compared to gains in the previous year. The significant weakening of the Mexican peso relative to theU.S. dollar and the substantial reduction in LIBOR in fiscal 2020 were correlated with the COVID-19 pandemic. Other expense decreased$2.9 million or 81% in fiscal year 2020 compared to fiscal year 2019 primarily due to foreign currency gains resulting from the weakening of the Mexican peso exchange rate relative to the US dollar and higher interest income due to higher average cash balances, partially offset by higher losses on interest rate contracts driven by market movements in short-term interest rates during fiscal year 2020. 20 -------------------------------------------------------------------------------- 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. We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. We recognize a tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within provision for income taxes. Year Ended
2021 2020 2019
Provision for income taxes (in millions) $ 21.1 $ 15.0 $ 24.3
Effective tax rate 32.0 % 34.2 % 25.3 %
The provision for income taxes increased $6.1 million or 41% in fiscal year 2021
compared to fiscal year 2020, primarily due to remeasurement of our deferred tax
balances in Peru due to the enactment of tax rate changes for future years. The
effective tax rate decreased by 2.2% in fiscal year 2021 over fiscal year 2020.
The decrease was primarily due to the nondeductible impairment of Moruga in
fiscal year 2020, partially offset by increases in the Peruvian tax rates. On
December 30, 2020 , Peru enacted tax law repealing current tax law which provided
benefits to agribusiness entities. 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 remeasured our deferred tax balances based on the applicable tax
rate in the year the deferred balances are expected to reverse. The increase to
the net deferred tax liability for the change in Peruvian tax rate resulted in a
$5.4 million increase to tax expense in fiscal year 2021.
The provision for income taxes decreased $9.3 million or 38% in fiscal year 2020
compared to fiscal year 2019. The effective tax rate increased by 8.9% in fiscal
year 2020 over fiscal year 2019. The higher effective tax rate was primarily due
to the (i) nondeductible impairment of Moruga in fiscal year 2020, (ii)
nondeductible executive compensation incurred as a result of the IPO in fiscal
year 2020, and (iii) tax benefit related to net operating loss ("NOL") carryback
provisions of the Coronavirus Aid, Relief and Economic Security ("CARES Act")
enacted in March 2020 . The NOL carryback provisions allow the Company to
carryback its fiscal year 2018 NOL to offset taxable income on a previously
filed tax return. The result is a revaluation of deferred tax assets due to the
utilization of NOLs at a higher tax rate in the carryback period.
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"). 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.
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, legal
settlement, farming costs for nonproductive orchards (which represents land
lease costs), and any special, non-recurring, or one-time items such as
impairments that are excluded from the results the CEO reviews uses to assess
segment performance and results.
21
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Net sales
Year Ended October 31,
2021 2020 2019
Marketing & International Marketing & International Marketing & International
(In millions) Distribution Farming Total Distribution Farming Total
Distribution Farming Total
Third party sales $ 872.0 $ 19.7 $ 891.7 $ 846.9 $ 15.4 $ 862.3 $ 873.7 $ 9.6 $ 883.3
Affiliated sales - 84.9 84.9 - 66.4 66.4 - 80.7 80.7
Total segment sales $ 872.0 $ 104.6 $ 976.6 $ 846.9 $ 81.8 $ 928.7 $ 873.7 $ 90.3 $ 964.0
Intercompany eliminations - (84.9) (84.9) - (66.4) (66.4) - (80.7) (80.7)
Total net sales $ 872.0 $ 19.7 $ 891.7 $ 846.9 $ 15.4 $ 862.3 $ 873.7 $ 9.6 $ 883.3
Adjusted EBITDA
Year Ended October 31,
(In millions) 2021 2020 2019
Marketing & Distribution adjusted EBITDA $ 51.4 $ 68.2 $ 88.0
International Farming adjusted EBITDA 33.9 23.3 35.0
Total reportable segment adjusted EBITDA 85.3 91.5 123.0
Net income 44.9 28.8 71.7
Interest expense 3.7 6.7 10.3
Provision for income taxes 21.1 15.0 24.3
Depreciation and amortization 20.4 18.1 16.5
Equity method income (7.5) (4.0) (3.4)
Stock-based compensation 2.6 5.0 -
Other (income) expense, net (1.3) 0.7 3.6
Impairment on equity method investment - 21.2 -
Legal settlement 0.8 - -
Asset impairment and disposals, net of insurance
recoveries (0.2) - -
Farming costs for nonproductive orchards 0.8 - -
Total adjusted EBITDA 85.3 91.5 123.0
Marketing and Distribution
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 $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. Gross margin was impacted by tighter
per-unit margins related to the sourcing of Californian and Mexican fruit, which
were exacerbated by smaller industry volumes within the California market as
well as smaller fruit sizes within the Mexican market. Additionally, gross
margin was pressured by incremental infrastructure costs related to our new
Laredo facility, which is still in the process of ramping up utilization.
Selling, general and administrative expenses increased due to the same factors
as described above.
Net sales decreased $26.8 million or 3% in fiscal year 2020 compared to fiscal
year 2019 primarily due to a 12% decrease in average per unit sales prices
partially offset by an 11% increase in volume. Average price decreases were
concentrated in the second half of fiscal year 2020 primarily due to strong
industry supply in California and Peru , relative to prior year.
Adjusted EBITDA decreased $19.8 million or 23% in fiscal year 2020 over fiscal
year 2019 primarily due to lower gross profit per pound of avocados sold. The
decrease in gross margin was due primarily to the benefit of lower third-party
fruit costs during the first quarter of fiscal year 2019. The market conditions
experienced in the prior year period were non-recurring in nature, as customer
prices remained steady despite significant declines in fruit costs due to the
instability of supply from Mexico .
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. 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 International Farming is
generally concentrated in the third and fourth quarters of the fiscal year in
alignment with sales.
Total segment sales in our International Farming segment increased $22.8 million
or 28% in fiscal year 2021 compared to fiscal year 2020, due to a 33% increase
in fruit volumes resulting from improved harvest yields at our maturing
orchards, partially offset by a 3% decrease in average
22
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sales prices. Net sales increased $4.3 million or 28% in fiscal year 2021
compared to fiscal year 2020, primarily due to higher packing and processing
service revenue for third-party growers.
Segment adjusted EBITDA increased $10.6 million or 45% in fiscal year 2021
compared to fiscal year 2020, primarily due to the revenue drivers noted above.
Total segment sales decreased $8.5 million or 9% in fiscal year 2020 compared to
fiscal year 2019 primarily due to lower per unit sales pricing on the sale of
avocados. Average sales prices declined by 24%, driven by strong industry supply
during the harvest window which was concentrated in the second half of the
fiscal year. The impact of lower sales pricing was partially offset by a 20%
increase in volume harvested during fiscal year 2020. Volume increases were
driven by improved production yields resulting from maturity of our avocado
orchards. Net sales in our International Farming segment increased $5.8 million
or 60% in fiscal year 2020 compared to fiscal year 2019 primarily due to higher
packing and processing service revenues provided to third-party growers driven
by their higher volumes.
Adjusted EBITDA decreased $11.7 million or 33% in fiscal year 2020 compared to
fiscal year 2019 primarily due to lower sales which was driven by lower pricing
during the second half of fiscal year 2020. Adjusted EBITDA for International
Farming is generally concentrated in the third and fourth quarters of our fiscal
year in alignment with the harvest season for avocados in Peru .
Liquidity and Capital Resources
Operating activities
Year Ended October 31,
(In millions) 2021 2020 2019
Net income $ 44.9 $ 28.8 $ 71.7
Depreciation and amortization 20.4 18.1 16.5
Equity method income (7.5) (4.0) (3.4)
Noncash lease expense 4.3 - -
Impairment on equity method investment - 21.2 -
Stock-based compensation 2.6 5.0 -
Dividends received from equity method investees 1.7 1.7 1.4
Deferred income taxes 8.8 (1.0) 0.6
Other (0.5) 1.2 4.0
Change in working capital (27.7)
7.9 1.8
Net cash provided by operating activities
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. Changes in inventory were driven by a combination of higher farm related inventory inPeru , as well as higher per-unit cost of Mexican fruit on-hand compared to prior year. The increases in farm related inventory were due primarily to growth in productive acreage and higher on-hand quantities of fruit at the end of the year due to the extension of the harvest season combined with port delays. Favorable changes in grower payables were correlated with the pricing increases experienced with Mexican inventory. Net cash provided by operating activities decreased$13.7 million in fiscal year 2020 compared to fiscal year 2019, reflecting lower net income, favorable net change in working capital, and higher stock-based compensation expense. Within working capital, favorable changes in inventory and trade accounts receivables were partially offset by unfavorable changes in grower payables and miscellaneous receivables. The decrease in pricing on third-party fruit during the second half of fiscal year 2020 resulted in lower revenue and lower cost-basis, resulting in lower trade accounts receivable and inventory balances, as well as lower grower payables balances as ofOctober 31, 2020 . Changes in miscellaneous receivables were largely due to change in value-added tax ("VAT") receivable, which is correlated with the timing of material purchases and claim activity. We also experienced an increase in other assets attributable to implementation costs associated with cloud-based computing software solutions. 23 --------------------------------------------------------------------------------
Investing activities
Year Ended October 31,
(In millions) 2021 2020 2019
Purchases of property and equipment $ (73.4) $ (67.3) $ (29.7)
Proceeds from sale of property, plant and
equipment 2.4 3.0 0.1
Insurance proceeds for the replacement of
property, plant and equipment 1.1 - -
Investment in equity method investees (0.2) (3.4) (1.9)
Loans to equity method investees (2.0) - -
Loan repayments from equity method investees 1.5 - -
Other 0.3 - 0.8
Net cash used in investing activities $ (70.3) $
(67.7)
Property, plant and equipment In both fiscal years 2021 and 2020, capital expenditures were primarily for the construction of theLaredo facility, which was completed in mid-fiscal 2021, and land improvements and orchard development inPeru andGuatemala . In both fiscal years 2021 and 2020, proceeds from the sale of property, plant and equipment were primarily from the sale of multi-unit housing properties inCalifornia that had been used for housing seasonal avocado labor contractors. In fiscal year 2021, we received insurance proceeds for property, plant and equipment damage sustained in ourDallas facility from a cold weather storm inFebruary 2021 . The proceeds have been invested in the rebuilding of the equipment. Equity method investees In fiscal years 2021 and 2020, capital contributions to equity method investees were to our joint venture, Copaltas S.A.S., to support the purchase of additional farmland inColombia . In fiscal year 2021, we issued$2.0 million in loans to Copaltas to support the working capital needs of the entity. In addition, we received an installment payment of$1.5 million on our outstanding loan to Moruga during fiscal year 2021. Financing activities Year Ended October 31, (In millions) 2021 2020 2019 Proceeds from issuance of common stock in public offering, net of issuance costs $ -$ 78.1 $ - Borrowings on revolving credit facility - 14.0 45.0 Payments on revolving credit facility - (14.0) (51.0) Principal payments on long-term debt obligations (10.5) (6.3) (14.2) Principal payments on finance lease obligations (1.2) (0.9) (0.4) Payment for debt extinguishment costs (0.1) - - Payments for long-term supplier financing - (5.8) - Dividends paid - (13.0) (5.6) Proceeds from exercise of stock options 0.2 - - Repayment of stock option notes receivable 0.1 0.1 0.3 Debt issuance costs - (0.2) - Purchase and retirement of stock - (1.9) (0.9)
Net cash (used in) provided by financing activities
50.1
IPO
Net proceeds from our IPO inOctober 2020 were$78.1 million , after deducting underwriting discounts and issuance costs. We intend to use the proceeds for growth-related capital expenditures, working capital and other general corporate purposes, which may include the repayment of indebtedness, and funding future acquisitions (if any). Borrowings and repayments of debt We utilize a revolving line of credit for short-term working capital purposes. Principal payments on our term loans and other notes payable are made in accordance with debt maturity schedules. During the year endedOctober 31, 2021 , we repaid outstanding principal of$3.0 million on a note payable earlier than its scheduled maturity. 24 --------------------------------------------------------------------------------
Shareholders' equity
No dividends were paid in fiscal year 2021. We paid dividends of$0.21 per share in fiscal year 2020 compared to$0.09 per share in fiscal year 2019. Capital resources October 31, (In millions) 2021 2020 Cash and cash equivalents$ 84.5 $ 124.0 Working capital 157.9 170.2 Capital resources include cash flows from operations, cash and cash equivalents, and debt financing. We have a syndicated credit facility withBank of America, N.A ., comprised of two term loans and a revolving credit facility ("revolver") that provides up to$100 million in borrowings that will expire inOctober 2023 . The credit facility also includes a swing line facility and an accordion feature which allows us to increase the borrowings by up to$125 million , with bank approval. We did not have any outstanding borrowings under the revolver as ofOctober 31, 2021 and 2020. Interest on the revolver bears rates at a spread over LIBOR that varies with our leverage ratio. As ofOctober 31, 2021 and 2020, interest rates on the revolver were 1.84% and 1.90%, respectively. As ofOctober 31, 2021 , we were required to comply with the following financial covenants: (a) a quarterly consolidated leverage ratio of not more than 2.75 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.50 to 1.00. As ofOctober 31, 2021 , our consolidated leverage ratio was 1.26 to 1.00 and our consolidated fixed charge coverage ratio was 2.52 to 1.00 and we were in compliance with all such covenants of the credit facility. The loans are secured by real property, personal property and the capital stock of our subsidiaries. We pay fees on unused commitments on the credit facility. 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. Leases We are party to various operating leases for facilities, land, and equipment. As ofOctober 31, 2021 , our undiscounted cash liabilities for operating leases were$74.9 million , with maturities ranging up through fiscal 2048. We also have a small number of finance leases, with undiscounted cash liabilities of$3.9 million , due up through 2024. See Note 6 "Leases," to the consolidated financial statements for more information. Long-term Debt As ofOctober 31, 2021 , remaining maturities on our term loans and notes were$164.3 million . See Note 5 "Debt," 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 withU.S. GAAP.U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Additionally, we frequently engage third party valuation experts to assist us with estimates described below. Actual results could differ from those estimates. Investments. We maintain investments in other fruit growers, packers and distributors. These investments are accounted for under the equity method of accounting when we have the ability to exercise significant influence, but not control, over the investee. Significant influence generally exists when we have an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions. We review our investments for other-than temporary-impairment ("OTTI") on a quarterly basis, or earlier if indicators of impairment arise. If an impairment of an equity method investment is determined to be other than temporary, we would record OTTI sufficient to reduce the investment's carrying value to its fair value, which results in a new cost basis in the investment. The primary factors we consider in our determination of whether declines in fair value are other-than-temporary are the length of time that the fair value of the investment is below our carrying value; the severity of the decline; and the financial condition, operating performance and near term prospects of 25
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the investee. In addition, we consider the reason for the decline in fair value, be it general market conditions, industry specific or investee specific; and our intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. As our assessment of the fair value of our investments and any resulting impairment losses and the timing of when to recognize such charges requires judgment and includes estimates and assumptions, actual results could differ materially from our estimates and assumptions.Goodwill . Our goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired.Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units. The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses. 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. If qualitative factors were to indicate that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value, we would then perform a quantitative assessment, which would consist primarily of a discounted cash flow ("DCF") analysis to determine the fair value of the reporting unit's goodwill. To the extent the carrying amount of the reporting unit's allocated goodwill exceeds the unit's fair value, we recognize an impairment of goodwill for the excess up to the amount of goodwill of that reporting unit. Income taxes. As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed, and we will recognize a tax benefit during the period in which it is determined the liability no longer applies. Conversely, we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be. We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within provision for income taxes. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability forU.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. JOBS Act The Company previously qualified as an emerging growth company ("EGC") untilOctober 31, 2021 , when it no longer qualified based on its status as a Large Accelerated Filer and accordingly, must comply with all financial disclosure and governance requirements applicable to Large Accelerated Filers. Off-Balance Sheet Arrangements During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined underSEC rules.
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