Company Quick10K Filing
Fresh Del Monte Produce
Price37.55 EPS1
Shares48 P/E29
MCap1,821 P/FCF14
Net Debt573 EBIT102
TEV2,394 TEV/EBIT23
TTM 2019-09-27, in MM, except price, ratios
10-K 2021-01-01 Filed 2021-02-24
10-Q 2020-09-25 Filed 2020-10-28
10-Q 2020-06-26 Filed 2020-07-29
10-Q 2020-03-27 Filed 2020-04-29
10-K 2019-12-27 Filed 2020-02-20
10-Q 2019-09-27 Filed 2019-10-30
10-Q 2019-06-28 Filed 2019-07-30
10-Q 2019-03-29 Filed 2019-04-30
10-K 2018-12-28 Filed 2019-02-19
10-Q 2018-09-28 Filed 2018-10-30
10-Q 2018-06-29 Filed 2018-07-31
10-Q 2018-03-30 Filed 2018-05-01
10-K 2017-12-29 Filed 2018-02-20
10-Q 2017-09-29 Filed 2017-10-31
10-Q 2017-06-30 Filed 2017-08-01
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-30 Filed 2017-02-21
10-Q 2016-09-30 Filed 2016-11-01
10-Q 2016-07-01 Filed 2016-08-02
10-Q 2016-04-01 Filed 2016-05-03
10-K 2016-01-01 Filed 2016-02-23
10-Q 2015-09-25 Filed 2015-10-27
10-Q 2015-06-26 Filed 2015-07-28
10-Q 2015-03-27 Filed 2015-04-28
10-K 2014-12-26 Filed 2015-02-18
10-Q 2014-09-26 Filed 2014-10-28
10-Q 2014-06-27 Filed 2014-07-29
10-Q 2014-03-28 Filed 2014-04-29
10-K 2013-12-27 Filed 2014-02-21
10-Q 2013-09-27 Filed 2013-10-29
10-Q 2013-06-28 Filed 2013-07-30
10-Q 2013-03-29 Filed 2013-04-30
10-K 2012-12-28 Filed 2013-02-19
10-Q 2012-09-28 Filed 2012-10-30
10-Q 2012-06-29 Filed 2012-07-31
10-Q 2012-03-30 Filed 2012-05-01
10-K 2011-12-30 Filed 2012-02-28
10-Q 2011-09-30 Filed 2011-11-01
10-Q 2011-07-01 Filed 2011-08-03
10-Q 2011-04-01 Filed 2011-05-03
10-K 2010-12-31 Filed 2011-03-01
10-Q 2010-10-01 Filed 2010-11-02
10-Q 2010-07-02 Filed 2010-08-03
10-Q 2010-04-02 Filed 2010-05-04
10-K 2010-01-01 Filed 2010-03-02
8-K 2020-10-28
8-K 2020-07-29
8-K 2020-05-07
8-K 2020-04-29
8-K 2020-04-28
8-K 2020-04-07
8-K 2020-02-19
8-K 2020-01-25
8-K 2019-10-29
8-K 2019-10-01
8-K 2019-07-31
8-K 2019-07-31
8-K 2019-07-30
8-K 2019-05-01
8-K 2019-04-30
8-K 2019-03-20
8-K 2019-03-06
8-K 2019-02-20
8-K 2019-02-20
8-K 2019-02-19
8-K 2019-02-15
8-K 2018-11-13
8-K 2018-10-31
8-K 2018-10-30
8-K 2018-09-27
8-K 2018-08-01
8-K 2018-08-01
8-K 2018-07-31
8-K 2018-05-02
8-K 2018-05-01
8-K 2018-02-26
8-K 2018-02-21
8-K 2018-02-21
8-K 2018-02-21
8-K 2018-02-20
8-K 2018-02-05

FDP 10K Annual Report

Part I
Item 1. Business
Item 1A.Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.Properties
Item 3.Legal Proceedings
Item 4.Mine Safety Disclosures
Part II
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.Reserved
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.Financial Statements and Supplementary Data
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.Controls and Procedures
Item 9B.Other Information
Part III
Item 10.Directors, Executive Officers and Corporate Governance
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.Certain Relationships and Related Transactions
Item 14.Principal Accountant Fees and Services
Part IV
Item 15.Exhibits and Financial Statement Schedules
Item 16. Form 10 - K Summary
EX-21.1 fdp-1121xex211.htm
EX-23.1 fdp-1121xex231.htm
EX-31.1 fdp-1121xex311.htm
EX-31.2 fdp-1121xex312.htm
EX-32 fdp-1121xex32.htm

Fresh Del Monte Produce Earnings 2021-01-01

Balance SheetIncome StatementCash Flow
3.62.92.21.40.70.02012201420172020
Assets, Equity
1.31.00.70.40.1-0.22012201420172020
Rev, G Profit, Net Income
0.50.30.1-0.1-0.3-0.52012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-K
 


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

For the fiscal year ended January 1, 2021

 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 333-07708
 

FRESH DEL MONTE PRODUCE INC.
(Exact Name of Registrant as Specified in Its Charter)



Cayman IslandsN/A
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S Employer
Identification No.)
c/o Intertrust SPV (Cayman) LimitedN/A
190 Elgin Avenue
George Town, Grand Cayman, KY1-9005
Cayman Islands
(Address of Registrant’s Principal Executive Offices)(Zip Code)
 (305) 520-8400
(Registrant’s telephone number including area code)
 
Please send copies of notices and communications from the Securities and Exchange Commission to:
 
c/o Del Monte Fresh Produce Company
241 Sevilla Avenue
Coral Gables, Florida 33134
(Address of Registrant’s U.S. Executive Offices)
 

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

Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Ordinary Shares, Par Value $0.01 Per ShareFDPNew York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act: None
 

    
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes       No  
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes    No  
 
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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post 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 FilerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   No  
 
The aggregate market value of Ordinary Shares held by non-affiliates at June 26, 2020, the last business day of the registrant’s most recently completed second quarter, was $766,108,706 based on the number of shares held by non-affiliates of the registrant and the reported closing price of Ordinary Shares on June 26, 2020 of $23.34.

As of February 12, 2021, there were 47,375,570 ordinary shares of Fresh Del Monte Produce Inc. issued and outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Registrant’s definitive Proxy Statement for the 2021 Annual General Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year are incorporated by reference in Part III of this report.



TABLE OF CONTENTS

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Table of Contents
PART I

Item 1. Business

Business Overview
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Fresh Del Monte Produce Inc. (the “Company,” “we” or “us”) is one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa and the Middle East. We market our products worldwide primarily under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability since 1892. Our global sourcing and logistics network allows us to provide consistent delivery of high-quality products and value-added services to our customers.
We have leading market positions in the following product categories. We believe we are:
the largest marketer of fresh pineapples in the United States, and a leading marketer in other markets worldwide;
the third-largest marketer of bananas in the United States, and a leading marketer in other markets worldwide;
a leading marketer of:
fresh-cut fruit in the United States, Canada, Japan, South Korea, the United Kingdom, United Arab Emirates and Saudi Arabia;
fresh and fresh-cut vegetable products in North America;
grapes and avocados in the United States;
non-tropical fruit in select markets; and
canned fruit in the European Union (the "EU") and other European and Middle East markets.

Our vision is to inspire healthy lifestyles through wholesome and convenient products. Our strategy is founded on six goals:

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Following our acquisition of Mann Packing Co., Inc. ("Mann Packing") in 2018, and the realignment of our business strategy to increase focus on our fresh and value-added products business as well as our core banana business, we changed our reportable segments in fiscal 2019 to better reflect the way we manage our operations. Our business is comprised of two reportable segments that represent our primary fresh & value added products and banana businesses, and one reportable segment that represents our ancillary businesses.

Fresh and value-added products - includes pineapples, fresh-cut fruit, fresh-cut vegetables, melons, vegetables, non-tropical fruit (including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and
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kiwis), other fruit and vegetables, avocados, and prepared foods (including prepared fruit and vegetables, juices, other beverages, and meals and snacks).

Banana

Other products and services - includes our ancillary businesses consisting of sales of poultry and meat products, a plastic product business, and third-party freight services.

We market and distribute our products to retail stores, club stores, convenience stores, wholesalers, distributors and foodservice operators in more than 90 countries around the world. North America is our largest market, accounting for 62% of our net sales in 2020. Our other major markets are Europe (which includes Kenya), the Middle East (which includes North Africa) and Asia. Our net sales by region for the year 2020 are depicted in the chart below.

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We produce, source, distribute and market a broad array of fresh produce, primarily under the Del Monte® brand, as well as under other proprietary brands, such as UTC® and Rosy®. We also produce, distribute and market prepared fruits and vegetables, juices, beverages and snacks under the Del Monte® brand, as well as other proprietary brands, such as Fruit Express®, Just Juice®, Fruitini® and other regional trademarks in Europe, Africa and the Middle East. We also distribute under the Mann Packing family of brands including Mann's Logo®, Arcadian Harvest®, Nourish Bowls®, Broccolini®, Caulilini®, Better Burger Leaf® and Romaleaf®.

Our distribution centers and fresh-cut facilities address the growing demand from supermarket chains, club stores, convenience stores, foodservice providers, mass merchandisers and independent grocers to provide value-added services, including the preparation of fresh-cut produce, ripening, customized sorting and packing, just-in-time and direct-store-delivery and in-store merchandising and promotional support. Large national and global chains are increasingly choosing fewer suppliers who can serve all of their needs on a national basis. We believe that there is a significant opportunity for a company like ours with a full fresh and fresh-cut produce line, well-recognized brands, a consistent supply of quality produce and a global distribution network to become the preferred supplier to these large retail, convenience store chain, and foodservice customers. We strive to expand this status by increasing our leading position in fresh-cut produce, expanding our fresh fruit and vegetable business, continuing to grow these value-added products and diversifying our other fresh produce selections.









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Sourcing and Production

A graphic depicting our geographic sales and sourcing operations is shown below.
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We source our fresh produce products primarily from Central and South America, North America, and the Philippines and our prepared food products from Africa, Europe, and the Middle East. We also produce, market and distribute certain prepared food products in North America based on our agreement with Del Monte Pacific Limited and its subsidiary Del Monte Foods, Inc.

Our products are sourced from company-owned operations, through joint venture arrangements and through supply contracts with independent producers. In 2020, 45% of the fresh produce we sold was grown on company-controlled farms and the remaining 55% was acquired primarily through supply contracts with independent growers. Costa Rica is our most significant sourcing location representing approximately 31% of our total sales volume of fresh produce products and where 33% of our property, plant and equipment was located in 2020.

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The following table indicates our net sales by product category for the last three years:

 Year ended
January 1, 2021December 27, 2019December 28, 2018
 (U.S. dollars in millions)
Net sales by product category     
Fresh and value-added products:    
Fresh-cut fruit$469.0 11 %$524.4 12 %$507.5 11 %
Fresh-cut vegetables383.8 %455.9 10 %419.8 10 %
Pineapples458.9 11 %454.8 10 %487.9 11 %
Avocados332.0 %380.7 %329.2 %
Non-tropical fruit210.6 %195.9 %226.7 %
Prepared food264.3 %279.6 %267.1 %
Melons75.5 %92.4 %107.8 %
Tomatoes40.5 %52.3 %62.5 %
Vegetables155.6 %176.6 %150.8 %
Other fruit and vegetables93.9 %91.8 %95.4 %
Total fresh and value-added products$2,484.1 59 %$2,704.4 60 %$2,654.7 59 %
Banana1,602.6 38 %1,656.0 37 %1,703.1 38 %
Other products and services115.6 %128.6 %136.1 %
Total$4,202.3 100 %$4,489.0 100 %$4,493.9 100 %


Fresh and value-added products

Our fresh and value-added products segment includes sales of the following product categories:

Fresh-cut produce (fresh-cut fruit and fresh-cut vegetables)
 
We believe that the fresh-cut produce market continues to be one of the fastest-growing categories in the fresh produce industry, largely due to consumer trends favoring healthy, fresh and conveniently packaged ready-to-eat foods. While packaged salads continue to lead the category of fresh-cut produce sales, the category has expanded significantly to include pineapples, melons, mangoes, grapes, citrus and assorted vegetable produce items that are washed, cut and packaged in a ready-to-use form. Within this market, we believe that there is differentiation between companies active primarily in the packaged salad market and other companies, like us, that can offer a wide variety of value-added fresh-cut fruit and vegetable items.

Our fresh-cut fruit products include Del Monte Gold® Extra Sweet pineapples, melons, grapes, citrus, apples, mangoes, kiwis and other fruit items. With our acquisition of Mann Packing in 2018, we have significantly expanded our offering in North America to include a broad variety of fresh and fresh-cut vegetable products. We believe that our experience in this market coupled with our sourcing and logistics capabilities and the Del Monte® brand have enabled us to become a leading supplier of fresh-cut fruit to the supermarket, convenience and club store channels in the United States.

Our fresh-cut products are sold in the United States, Canada, the United Kingdom, France, the Middle East, Japan and Korea. From a regional perspective, our net sales of each fresh-cut category in 2020 were as follows:
Fresh-cut fruit: North America - 73%, Europe - 17%, Asia - 9%, and the Middle East - 1%.
Fresh-cut vegetables: North America - 90%, the Middle East - 8%, and Asia 2%. 

The majority of fresh-cut produce is sold to consumers through retail and club store settings, as well as non-conventional settings such as convenience stores, gas stations and airports. We believe that outsourcing by food retailers will increase, particularly as food safety regulations become more stringent and retailers demand more value-added services. We believe that
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this trend should benefit large branded suppliers like us, who are better positioned to invest in state-of-the-art fresh-cut facilities and food safety systems and to service regional, national and global chains and foodservice operators, as well as supercenters, mass merchandisers, club stores and convenience stores. We also believe that large branded suppliers benefit from merchandising, branding and other marketing strategies for fresh-cut products, similar to those used for branded processed food products, which depend substantially on product differentiation.

The fruit we use in our fresh-cut operations are sourced within our integrated system of company-controlled farms and from GAP-certified (good agricultural practices) independent growers. We purchase our vegetables for these purposes from independent growers principally in the United States and Mexico. Our purchase contracts for both fruit and vegetables are typically short-term and vary by produce item.

Pineapples

We believe that we are the leading marketer of fresh pineapples in the United States and a leading marketer in other markets worldwide, based on internally generated data. Pineapple net sales by region in 2020 were as follows: North America - 61%, Europe - 20%, Asia - 13%, and the Middle East - 6%.

The premium pineapples, such as our Del Monte Gold® Extra Sweet pineapple, which has an enhanced taste, golden shell color and bright yellow flesh, has replaced the Champaka and other traditional pineapple varieties in popularity and demand. The production and sale of premium pineapples in the market has also led to increased competition. In 2020, we continued our efforts to diversify our product lines with the launch of our newest pineapple product, our proprietary Pinkglow™ pineapple which contains higher levels of lycopene, an antioxidant that has been associated with numerous health benefits.

Pineapples are grown in tropical and sub-tropical locations, including the Philippines, Costa Rica, Hawaii, Thailand, Malaysia, Brazil, Indonesia and various countries in Africa. In contrast to bananas, pineapples have a long growing cycle of 18 months, and require re-cultivation after one to two harvests. Pineapple growing requires a higher level of capital investment, as well as greater agricultural expertise as compared to growing bananas.

The principal production and procurement areas for our gold pineapples are Costa Rica and the Philippines. Additionally, we opened a fresh pineapple packing facility in Kenya in 2019 to supply our Middle East market. Given the complexity of pineapple cultivation relative to our bananas, a higher percentage of the fresh pineapples we sell (81% by volume in 2020) is produced on company-controlled farms.

Avocados

Avocados are one of the fastest growing produce items in the United States. According to a 2020 publication by The Packer, 31% of consumers purchased avocados over the past twelve months. Additionally, the USDA reports that U.S. demand for avocados has increased steadily over the past two decades, with per capita consumption tripling from 2001 to 2018.

Our avocados are sourced principally from Mexico where we have our own sourcing operations and sorting and packing facility, ensuring a consistent supply of high-quality avocados year-round. We also obtain our supply of avocados from independent growers in the United States, Chile and Peru.

Non-Tropical Fruit
 
Non-tropical fruit includes grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis. Generally, non-tropical fruit grow on trees, bushes or vines that shed their leaves seasonally. Approximately 34% of our non-tropical fruit net sales are from grapes. Fresh grapes are a favorite quick, easy and healthy snack among consumers young and old. In addition to their taste, research on fresh grapes suggests that grapes may offer significant health benefits.  In 2020, The Packer reported that fresh grapes remained a preferred fruit for snacking, with 47% of U.S. consumers having purchased grapes within the past 12 months. Fresh grapes are also processed for the production of wine, raisins, juices and canned products. The higher production cost and higher product value of fresh grapes result from more intensive production practices than are required for grapes grown for processing. While California supplies the majority of total grape volume, imports have made fresh grapes available year-round in the United States, with shipments mostly from South America.  Most U.S. production is marketed from May to October.
 
We obtain our supply of non-tropical fruit from company-owned farms in Chile and from independent growers principally in Chile, Peru and the United States.  In Chile, we purchase non-tropical fruit from independent growers and also produce a
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variety of non-tropical fruit on approximately 4,800 acres of company-owned or leased land. Purchase contracts for non-tropical fruit are typically made on an annual basis.
 
Prepared Food
 
We have a royalty-free, perpetual license to use the Del Monte® trademark in connection with the production, manufacture, sale and distribution of prepared food, including beverages, in over 100 countries throughout Western, Eastern and Central Europe, Africa, the Middle East and certain Central Asian countries.  We can also produce, market and distribute certain prepared food products in North America based on our agreement with Del Monte Pacific. In Europe, Del Monte is a premier prepared food brand with an approximate 90 year history associated with fruit-based or fruit-derived products and is the leading brand for canned fruit and pineapple in many Western European markets. The Del Monte® brand has had a presence in the United Kingdom since 1926 and is perceived to be a quality brand with high consumer awareness. The Del Monte® brand has a reputation with both consumers and retailers for value, quality and reliability.

We produce, distribute and market prepared pineapple, peaches, fruit cocktail, pears, tomatoes, fruit juices and other fruit and vegetables. Our prepared pineapple products are sourced from our own facility in Kenya. Our deciduous prepared food products, which include peaches, fruit cocktail, pears and apricots are principally sourced from our own facility in Greece and from independent producers. Our tomato products are sourced from our own facility in Greece and from independent producers in Europe. We also distribute and market beverages, including ambient juices and juice drinks, as well as various snacks. Our prepared food products are sold primarily under the Del Monte® label and under the buyers’ own label for major retailers.  We also produce and market industrial products that are composed of fruit that has been processed in our production facilities in the form of purees, pulps and concentrates for further processing (juice, yogurt, cake manufacture and pizza) and for sale to the foodservice industry worldwide. In North America, we produce and market an array of prepared vegetable offerings such as vegetable trays with dip and Mann Packing Nourish Bowls®.

We expect to continue investing in new product development to increase revenue and maintain our premium price position and market leadership in our prepared product categories.  We plan to expand our offerings in the snack category by offering multiple varieties and sizes of fruit and vegetables in plastic cups and pouches with new and improved recipes and various juices, targeting the convenience store and foodservice trade in addition to the traditional retail stores in selected European and Middle East markets.

Banana

Bananas are the leading internationally traded fresh fruit in terms of volume and dollar sales and one of the best-selling fresh fruits in the United States.  Europe, North America and the Middle East are the world’s largest banana markets. Bananas are a key produce department product due to high turnover and the premium margins obtained by retailers.

We believe that we are the third-largest marketer of bananas in the United States and a leading marketer in other markets worldwide, based on internally generated data.  Our net sales of bananas by region in 2020 were as follows: North America - 52%, Europe - 17%, Asia - 20%, and the Middle East 10%. Our ability to provide our customers with a year-round supply of high-quality Del Monte® bananas is important to maintaining our existing customer relationships and attracting new customers. Our position as a volume shipper of bananas has also allowed us to make regular shipments of a wide array of other fresh produce, such as pineapples, melons and plantains, reducing our average per-box logistics costs and maintaining higher quality produce with a longer shelf life.

Bananas have a relatively short growing cycle and are grown in tropical locations with humid climates and heavy rainfall, such as Central and South America, the Caribbean, the Philippines and Africa. Bananas are grown throughout the year in these locations, although demand and prices fluctuate based on the relative supply of bananas and the availability of seasonal and alternative fruit.
    
We produce bananas on company-controlled farms in Costa Rica, Guatemala, the Philippines, Brazil and Panama and we purchase bananas from independent growers in Guatemala, the Philippines, Ecuador, and Colombia. In 2020, we produced approximately 40% of the banana volume we sold on company-controlled farms, and we purchased the remainder from independent growers. Although our supply contracts are primarily long-term, we also make purchases in the spot market, primarily in Ecuador. In Ecuador and Costa Rica, there are minimum export prices for the sale of bananas which are established and reviewed on a periodic basis by the respective governments.

In the Philippines, we purchase the majority of our bananas through long-term contracts with independent growers. Approximately 77% of our Philippine-sourced bananas are supplied by one grower, representing 18% of the Philippines banana
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industry volume in 2020.  In the Philippines, we have leased approximately 5,100 hectares of land where we have planted approximately 3,900 hectares of bananas for the Asia and the Middle East markets.

In 2017, we entered into a contract with the Republic of Panama and will invest a minimum of $100.0 million over a period of seven years upon the delivery of a minimum of approximately 10,000 acres of land. Our investment commitment contemplates development of the leased land for banana production, including refurbishment of packing plants, buildings and other banana facilities and preparation of banana infrastructure. This investment, when completed, is expected to significantly increase our company-controlled banana production. Commercial production commenced in 2019 and we expect will continue to increase until full production is reached. At the end of 2020, approximately 1,900 acres of this leased land were under production.
 
Other Products and Services
 
Included in our other products and services segment is our Jordanian food business, our third-party ocean freight business and our third-party plastics and box manufacturing business. Our Jordanian food business includes a vertically integrated poultry business, including poultry farms, hatcheries, a feed mill, a slaughterhouse and a meat processing plant. Our Jordanian poultry business is a leading provider of poultry products to retail stores and foodservice operators in that country. The meat processing operation provides meat products for the Jordanian market and to other Middle East and North African markets.

Our third-party ocean freight business allows us to generate incremental revenue on ships’ return voyages to our product sourcing locations and when space is available on outbound voyages to our major markets, which reduces our overall shipping costs.  We expect that our six new refrigerated container vessels, discussed in more detail below and which are larger in size than our existing fleet of vessels, will allow us to expand our third-party ocean freight business by enabling us to ship third-party cargo on both our outbound and inbound voyages.

Our plastics and box manufacturing business produces bins, trays, bags and boxes. The box manufacturing business is intended mainly to satisfy internal packaging requirements. In the case of the plastic manufacturing business, we principally sell these products to third parties and use a portion for our own internal packaging requirements.  

Logistics Operations

We conduct complex logistics operations on a global basis, transporting our products from the countries in which they are grown to the many markets in which they are sold worldwide. Maintaining fresh produce at the appropriate temperature is an important factor in preventing premature ripening and optimizing product quality and freshness. Consistent with our reputation for high-quality fresh produce, we must preserve our fresh produce in a continuous temperature-controlled environment, from the harvest through its distribution.

We have an integrated logistics network, which includes land and sea transportation through a broad range of refrigerated environments in ships, port facilities, containers, trucks and warehouses. Our logistics system is supported by various information systems. Our objective is to maximize utilization of our logistics network to lower our average per-box logistics cost, while remaining sufficiently flexible to redeploy capacity or shipments to meet fluctuations in demand in our key markets. We believe that our control of the logistics process is a competitive advantage because we are able to continuously monitor and maintain the quality of our produce and ensure timely and regular distribution to customers on a year-round basis. Because logistics costs are also our largest expense other than our cost of products, we devote substantial resources to optimizing our logistics network.

As of the year ended 2020, we transported our fresh produce to markets using our fleet of one chartered and twelve owned ships, and operated four port facilities in the United States. We operated 46 distribution centers, generally with cold storage and banana ripening facilities in our key markets worldwide, including the United States, Canada, South Korea, the United Arab Emirates, Saudi Arabia, Hong Kong, Germany and France. We also operated 25 fresh-cut facilities in the United States, the United Kingdom, France, Japan, South Korea, and Saudi Arabia, some of which are located within our distribution centers. In addition, we own or lease other related equipment, including approximately 355 trucks and refrigerated trailers used to transport our fresh produce in the United States. In the Middle East, we own approximately 264 trucks used to deliver fresh produce and prepared food products to customers.

As discussed above, we transport our fresh produce using our fleet of one chartered refrigerated ship and twelve owned ships. We also transport our fruit to destinations around the world using third-party container lines that cover destinations that we do not service directly with our own fleet. During 2017 and 2018, we entered into definitive agreements for the construction of six new refrigerated container ships. We believe these new fuel-efficient vessels will allow us to generate logistics cost savings, expand our commercial cargo business, and enhance the freshness and quality of our products. We received four of the ships
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during, and one ship subsequent to, the fiscal year ended January 1, 2021 ("fiscal 2020"). We expect the final ship to be delivered during our 2021 fiscal year. This ship building program is expected to replace our entire U.S. east coast fleet of ships. We also operate a fleet of approximately 7,000 refrigerated containers.

Sales and Marketing

The Del Monte® brand has been used to identify premium produce products for over 125 years and is recognized by consumers worldwide for quality, freshness and reliability. We employ a variety of marketing tools, including but not limited to advertising, public relations and promotions, to reinforce our brand equity with consumers and the trade. Depending on the product and market, we also provide technical, logistical and merchandising support aimed at safeguarding the superior quality of our products to the ultimate consumer. Our sales and marketing activities are conducted by our sales force located at our sales offices worldwide and at each of our distribution centers. Our commercial efforts are supported by marketing professionals located in key markets and regional offices. A key element of our sales and marketing strategy is to use our distribution centers and fresh-cut facilities to provide value-added services to our customers. We actively support our customers through technical training in the handling of fresh produce, category management, in-store merchandising support, joint promotional activities, market research and inventory and other logistical support.

The level of marketing investment necessary to support the prepared food business is significantly higher than that required for the fresh produce and fresh-cut fruit and vegetable business. We utilize a variety of promotional tools to build the Del Monte® brand and engage consumers in key markets in Europe, Africa and the Middle East. In certain European markets, we utilize distributors to perform product distribution, sales and marketing activities for the prepared food business. Under these distribution agreements, the sales, warehousing, logistics, marketing and promotion functions are all performed by the distributor. This strategy of utilizing independent distributors enables us to reduce distribution, sales and marketing expenses. We plan to continue to expand our prepared food business by entering new markets in Eastern Europe, Africa and the Middle East and by continuing our offerings in the snack category, targeting the convenience store and foodservice trade in selected European and Middle East markets.

During 2020, one customer, Wal-Mart, Inc. (including its affiliates), accounted for approximately 9% of our total net sales. These sales are reported in our banana and fresh and value-added products segments. No customer accounted for 10% or more of our net sales in 2020. In 2020, our top 10 customers accounted for approximately 33% of our net sales. 

North America

In 2020, 62% of our net sales were in North America where we have established a highly integrated sales and marketing network that builds on our ability to control transportation and distribution throughout our extensive logistics network. We operate a total of 29 distribution centers and fresh-cut facilities. Our distribution centers have ripening capabilities and/or other value-added services. We also operate four port facilities, which include cold storage.

Our logistics network provides us with several sales and marketing advantages. For example, because we are able to maintain the quality of our fresh produce in a continuous temperature-controlled environment, we are under less pressure to fully sell a shipment prior to its arrival at port. This allows us to manage the timing of our sales to optimize our margins. Our ability to off-load shipments for cold storage and distribution throughout our network also improves ship utilization by minimizing in-port docking time. Our logistics network also allows us to manage our inventory among distribution centers to effectively respond to changes in customer demand.

We have sales professionals in locations throughout the United States and Canada. We sell to leading grocery stores and other retail chains, wholesalers, mass merchandisers, supercenters, foodservice operators, club stores, convenience stores and distributors in North America. These large customers typically take delivery of our products at the port facilities, which we refer to as FOB delivery. We also service these customers, as well as an increasing number of smaller regional chains and independent grocers, through our distribution centers. Additionally, during 2020 we launched our e-commerce initiative in Dallas, Texas which allows us to market our Del Monte® brand of products directly to consumers. We plan to expand the reach of our e-commerce channel in 2021 to additional markets.

Europe

In 2020, 16% of our net sales were in Europe where we distribute our fresh produce and prepared food products. Our fresh produce products are distributed to leading retail chains, smaller regional customers as well as to wholesalers and distributors through direct sales and distribution centers.  In the United Kingdom, we have a sales and marketing office in Staines, England and operate a fresh-cut facility in Wisbech, England.  In Germany, we operate a distribution center in the Frankfurt area. In
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France, we have a distribution center with banana ripening capabilities and a fresh-cut facility in the Paris area to service our expanding customer base. In the Netherlands, Spain, Portugal, Italy and Poland, we have sales and marketing entities that perform direct sales of our fresh produce products.

Our prepared food products are distributed through independent distributors throughout most of Europe. In the United Kingdom, our prepared food products are distributed using a combination of both independent distributors and our own marketing entity. In Russia, we have a sales and marketing office for our prepared food products.
Middle East and North Africa

In 2020, 10% of our net sales were in the Middle East and North Africa.  We distribute our products through independent distributors and company-operated distribution facilities.

The leased distribution/manufacturing center in Dubai, United Arab Emirates (“UAE”) is a state-of-the-art facility with just-in-time delivery capabilities that includes fresh-cut fruit and vegetable operations, an ultra-fresh juice manufacturing operation and prepared food distribution. We distribute these products in the UAE and export them to other Middle East countries. In Saudi Arabia, through our 60%-owned joint venture, we own two distribution centers with banana ripening, cold storage facilities, fresh-cut fruit and vegetable operations, and prepared food manufacturing capabilities for juices, potatoes and sandwiches.  One of the distribution centers is located in Riyadh, the capital city of Saudi Arabia, and the other distribution center is located in Jeddah, the second largest city in the country. These strategically located distribution centers distribute our fresh produce and prepared food products to these growing markets.  In the UAE and in Saudi Arabia, we also distribute our products using our own innovative retail concept through our Food and Beverage (F&B) stores. These F&B stores are small retail kiosks selling our fresh-cut produce, juice and other prepared food products and are strategically located in airports, schools, hospitals and inside hyper-markets.

In Jordan, we own a vertically integrated poultry business including poultry farms, hatcheries, feed mill, slaughterhouse and a meat processing plant. We are a leading provider of poultry products to retail stores and foodservice operators in that country. In Jordan, we also own a meat processing operation that provides meat products for the local market and for export to other Middle East and North African markets. As part of our vertical integration and expansion strategy in this region, we developed a 10 hectares ultra-modern hydroponic greenhouse in Jordan which we are in the process of transforming into a lettuce farm to supply our fresh cut facilities. We opened our first F&B store in this country.

In Qatar, we have a sales and marketing office to serve the expanding brand presence in the country and an F&B store located at the Doha airport. In Turkey, our sales office located in Mersin is responsible for sourcing various types of fruit serving our units across the region in addition to selling and distributing a range of prepared food products to distributors. We have an F&B store in Kuwait in addition to a leased facility to service the Kuwaiti and Iraqi markets with our fresh produce products and fresh-cut fruit and vegetables. In Tunisia, we have an office giving us presence in the North Africa region which imports fresh produce products to sell in the local market. We also have an office in Morocco which distributes our products locally and exports locally-sourced fresh produce, allowing us to further expand our coverage in the North Africa Region. We believe that the Middle East, North Africa and Central Asian countries represent an area for sales growth and development of our fresh and prepared food products. Utilizing our extensive knowledge of this region, we plan to continue capitalizing on this opportunity with increased focus in these markets.

Asia
 
In 2020, 11% of our net sales were in Asia.  We distribute our products in Asia through direct marketing and large distributors. Our principal markets in this region are Japan, South Korea, mainland China and Hong Kong. In Japan, we distribute 100% of the products we sold in 2020 through our own direct sales and marketing organization and we operate two fresh-cut facilities. Our products are distributed from four distribution centers located at strategic ports in Japan which include cold storage.

We engage in direct sales and marketing activities in South Korea and Hong Kong. In other Asian markets, including mainland China, we sell to local distributors. We have one distribution center and banana ripening facility in Hong Kong. In South Korea, we have three distribution centers that utilize state-of-the art ripening technology which increase our ability to offer value-added services to our customers. In South Korea, we also operate a fresh-cut fruit and vegetable facility from which we supply a major foodservice customer.
 
South America
 
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In South America, we have direct sales and marketing activities in Chile and utilize local distributors in this region. Our sales in these markets focus mainly on non-tropical fruit including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis. In Chile, we distribute our Costa Rican grown Del Monte Gold® Extra Sweet pineapple. In Brazil, we utilize local distributors for our locally grown banana sales.

Competition
 
We compete based on a variety of factors, including the appearance, taste, size, shelf life and overall quality of our fresh produce, price and distribution terms, the timeliness of our deliveries to customers and the availability of our produce items. The fresh produce business is highly competitive, and the effect of competition is intensified because our products are perishable. Competition in the sale of bananas, pineapples, avocados, non-tropical fruit and the other fresh fruit and vegetables that we sell comes from competing producers and distributors. Our sales are also affected by the availability of seasonal and alternative produce. While historically our main competitors have been multinational banana and pineapple producers, our diversified range of product offerings has resulted in additional competition from a variety of companies. These companies include local and regional producers and distributors in each of our fresh produce and fresh-cut product categories.
 
The extent of competition varies by product. In the banana market, we continue to face competition from a limited number of large multinational companies. At times, particularly when demand is greater than supply, we also face competition from a large number of relatively small banana producers. Unlike the pineapple and non-tropical fruit markets, there are few barriers to entry into the banana market. Supplies of bananas can be increased relatively quickly due to bananas having a short growing cycle and the limited capital investment required for banana growing. As a result of changes in supply and demand, plus seasonal factors, banana prices fluctuate significantly.

In the pineapple and non-tropical fruit markets, we believe that the high degree of capital investment and cultivation expertise required, as well as the longer length of the growing cycle, makes it relatively difficult to enter the market. In addition, our profitability has depended significantly on gross profit generated on the sale of our Del Monte Gold® Extra Sweet pineapples. In 2020, our overall pineapple sales volume was relatively flat compared to the prior year period and our average per unit sales prices increased 1%. Increased competition in the production and sale of Del Monte Gold® Extra Sweet pineapples could adversely affect our results. We expect these competitive pressures to continue in 2021.

The fresh-cut produce market is highly fragmented, and we compete with a wide variety of local and regional distributors of branded and unbranded fresh-cut produce and, in the case of certain fresh-cut vegetables, a small number of large, branded producers and distributors. However, we believe that our principal competitive opportunity is to capitalize on the growing trend of retail chains and independent grocers to outsource their own on-premises fresh-cut operations. We believe that our sales strategy, which emphasizes not only our existing sources of fresh produce, but also a full range of value-added services, strict compliance with food safety standards and our national distribution capability, positions us to increase our share of this market.
 
The prepared food products market is mature and characterized by high levels of competition and consumer awareness. Consumer choices are driven by price and/or quality. Large retailers with their “buyers own label” (“BOL”) products appeal to price-conscious consumers, while brand names are the key differentiator for quality-focused consumers. In the prepared food markets in Europe, Africa, North America, and the Middle East, we compete with various local producers, large retailers with their BOL products, and large international branded companies. It is in the branded section that our prepared food products, specifically, canned fruit and pineapple in many European countries, hold a leading position in these markets. The mature state of the market in Western Europe, together with the strength and sophistication of the large retailers there, account in part for the increasing presence of BOL products in many food and beverage categories. In order to reduce our costs and increase our competitiveness in the prepared foods business, particularly in Europe, we use distributors in certain key European markets to perform product distribution and sales and marketing activities. Under these arrangements, the sales, warehousing, logistics, marketing and promotion functions are all performed by the distributor.  In the United Kingdom, we have outsourced our beverage production.  This strategy takes advantage of lower cost and established marketing and distribution networks and enables us to reduce costs and increase our competitiveness in these mature markets.

Quality Assurance
 
To ensure the consistent high quality of our products, we have quality assurance operations placed throughout our global operations under the direction of our corporate quality assurance team. This quality assurance team maintains and enforces detailed quality specifications for all our products so that they meet or exceed our high quality standards and any applicable regulatory requirements. Our specifications require extensive sampling of our fresh produce at each stage of the production and distribution process using external appearance, internal quality, size, color, porosity, translucency, sweetness and other criteria. Our goal is that only fresh produce meeting our stringent quality specifications is sold under the Del Monte® brand.
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We are able to maintain the high quality of our products by growing a substantial portion of our own produce and working closely with our independent growers. We insist that all produce supplied by our independent growers meet the same stringent quality requirements as the produce grown on our farms. Accordingly, we monitor our independent growers to ensure that their produce will meet our agricultural and quality control standards, offer technical assistance on certain aspects of production and packing and, in some cases, manage the farms. The quality assurance process begins on the farms and continues as harvested products enter our packing facilities. Where appropriate, we cool the fresh produce at our packing facilities to maximize quality and optimize shelf life.

As an indication of our worldwide commitment to quality, food safety, and sustainability, many of our operations are third party certified in globally recognized standards developed for the safe and sustainable production and distribution of quality foods.  These standards include the International Organization for Standardization’s ISO 22000 and the Global Food Safety (GFS) Initiative benchmarked standards of Primus GFS, Global G.A.P, and we are in compliance with all components of the FDA's Food Safety Modernization Act. All of our operations that produce or handle high risk foods (tomatoes, melons or leafy greens) apply Hazard Analysis & Critical Control Points ("HACCP") principles. HACCP is a management system in which food safety is addressed through the analysis and control of biological, chemical and physical hazard from raw material production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Our certification also includes SCS Global Services’ Sustainably Grown Certified and the Sustainable Agriculture Network’s Rain Forest Alliance for sustainable agriculture and food production, and our Costa Rica Banana operation has been certified as Carbon Neutral by SCS Global Services since 2015. Taken together, these certifications reflect our commitment to quality and the strictest standards of food safety.

Government Regulation

Agriculture and the sale and distribution of fresh produce are subject to extensive regulation by government authorities in the countries where the produce is grown and the countries where it is marketed. We have internal policies and procedures to comply with the most stringent regulations applicable to our products, as well as a technical staff to monitor pesticide usage and compliance with applicable laws and regulations. We believe we are in material compliance with these laws and regulations.
 
We are also subject to various government regulations in countries where we market our products. The countries in which we market a material amount of our products are the United States, Canada, the countries of the EU, Japan, China, South Korea, Jordan, the UAE and Saudi Arabia. These government regulations include:
 
sanitary regulations, particularly in the United States and the EU;
 
regulations governing pesticide use in all source countries and residue standards in all market countries, particularly in the United States, Canada, United Kingdom, Germany and Japan and South Korea;

ongoing Endocrine Disruptor Assessment programs in the EU and United States may potentially impact availability, use and residue tolerance of some pesticides; and

regulations governing traceability, packaging and labeling, particularly in the United States and the EU.
 
Failure to comply with applicable regulations could result in an order barring the sale of part or all of a particular shipment of our products or, in an extreme case, the sale of any of our products for a specified period. In addition, we believe there has been an increasing emphasis on the part of consumers, as well as retailers, wholesalers, distributors and foodservice operators, on food safety issues, which could result in our business and operations being subject to increasingly stringent food safety regulations or guidelines.

European Union Banana Import Regulations

In December 2007, most of the African, Caribbean and Pacific countries (ACP) signed a bilateral agreement with the EU that allows ACP bananas duty free access to the EU market without quantitative limitation commencing January, 1, 2008.

In December 2009, the EU entered into an agreement with certain Latin America banana exporting countries to settle a long running dispute over banana import tariffs. This agreement was ratified in May 2010. Under this agreement, the EU gradually reduced import tariffs on bananas from Latin America on an annual basis to €114 per ton as of January 1, 2019, except for countries under Free Trade Agreements (FTA's). Countries under FTA's that signed bilateral agreements with the EU in 2012 are benefiting from accelerated but gradual reduction of import duties. The FTA's are in effect for Central American countries,
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Colombia, and Peru. The duty for FTA countries was €89 per ton for 2018, €82 in 2019 and was reduced to €75 per ton effective January 1, 2020. Our Colombia and Central America sourced bananas benefit from this FTA agreement.

The United Kingdom withdrew from the EU on January 31, 2020, commonly referred to as “Brexit”. While existing legislation is such that tariffs on bananas will remain consistent with those realized under the EU, we cannot predict if future legislative changes will impact our cost of importing bananas into the United Kingdom.

Environmental Proceedings
 
The management, use and disposal of some chemicals and pesticides are inherent aspects of our production operations. These activities and other aspects of production are subject to various environmental laws and regulations, depending upon the country of operation. In addition, in some countries of operation, environmental laws can require the investigation and, if necessary, remediation of contamination related to past or current operations. We are not a party to any dispute or legal proceeding relating to environmental matters where we believe that the risk associated with the dispute or legal proceeding would be material, except as described in Item 3.  Legal Proceedings and Note 15, “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 8.  Financial Statements and Supplementary Data.

On May 10, 1993, the U.S. Environmental Protection Agency (the "EPA") identified a certain site at our plantation in Hawaii for potential listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. See Item 3.  Legal Proceedings and Note 15, “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data.

Research and Development, Patents and Licenses, Etc.

Our research and development programs have led to improvements in agricultural and growing practices, as well as product packaging and technology. These programs are directed mainly at reducing the cost and risk of pesticides, using natural biological agents to control pests and diseases, testing new varieties of our principal fruit varieties for improved crop yield and resistance to wind damage and improving post-harvest handling. We have been seeking to increase the productivity of low-grade soils for improved banana growth and experimenting with various other types of fresh produce. Our research and development efforts are conducted by our staff of professionals and include studies conducted in laboratories, as well as on-site field analysis and experiments. We have research teams directing or actively involved in the development of new fruit varieties in the United States, Costa Rica, and Brazil.

 Some of the research and development projects include:
 
the development of the Del Monte Gold® Extra Sweet pineapple and other pineapple and melon varieties, including our proprietary Pinkglow™ pineapple
 
improved irrigation methods and soil preparation for melon planting 
 
In addition, subsequent to fiscal 2020, we announced a partnership with Queensland University of Technology, located in Brisbane, Australia, to lead innovation toward the development of disease-resistant bananas. The partnership will help to identify new ways of growing bananas that are resistant to Tropical Race 4 (TR4), a serious vascular crop disease that affects one of our principal products, the Cavendish variety of bananas.

We have the exclusive right to use the Del Monte® brand for fresh fruit, fresh vegetables and other fresh and fresh-cut produce and certain other specified products on a royalty-free basis under a worldwide, perpetual license from Del Monte Corporation, an unaffiliated company that owns the Del Monte® trademark. Del Monte Corporation and several other unaffiliated companies manufacture, distribute and sell under the Del Monte®  brand canned or processed fruit, vegetables and other produce, as well as dried fruit, snacks and other products. Our licenses allow us to use the trademark “Del Monte®” and the words “Del Monte®” in association with any design or logotype associated with the brand. The licenses also give us certain other trademarks and trademark rights, on or in connection with the production, manufacture, sale and distribution of fresh fruit, fresh vegetables, other fresh produce and certain other specified products. In addition, the licenses allow us to use certain patents and trade secrets in connection with the production, manufacture, sale and distribution of our fresh fruit, fresh vegetables, other fresh produce and certain other specified products.
     
We have a royalty-free perpetual license to use the Del Monte® trademark in connection with the production, manufacture, sale and distribution of all food and beverage products in Europe, Africa, and the Middle East and certain Central Asian countries.
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We can also produce, market and distribute certain prepared food products in North America based on an agreement with Del Monte Pacific utilizing the Del Monte® brand.

We sell produce under several other brands for which we have obtained registered trademarks, including UTC®, Rosy®, Fruit Express®, Just Juice®, Fruitini® and other regional brands.

We also sell products under the Mann Packing family of brands including Mann's Logo®, Arcadian Harvest®, Nourish Bowls®, Broccolini®, Caulilini®, Better Burger Leaf® and Romaleaf®.
 
Seasonality
     
Due to seasonal sales price fluctuations, we have historically realized a greater portion of our net sales and of our gross profit during the first two calendar quarters of the year. The sales price of any fresh produce item fluctuates throughout the year due to the supply of and demand for that particular item, as well as the pricing and availability of other fresh produce items, many of which are seasonal in nature. For example, the production of bananas is continuous throughout the year and production is usually higher in the second half of the year, but the demand for bananas varies because of the availability of other fruit. As a result, demand for bananas is seasonal and generally results in higher sales prices during the first six months of the calendar year. We make most of our sales of non-tropical fruit from October to May. As a result of greater demand during the fourth quarter, the prepared food business is expected to have higher net sales and gross profit during this period.

These seasonal fluctuations are illustrated in the table below, which presents certain unaudited quarterly financial information for the periods indicated. Specifically in 2020, net sales and gross profit for most products were negatively impacted, mainly in the second and third quarter, due to the COVID-19 pandemic.

 
 Year ended
January 1, 2021December 27, 2019
Net sales:  
First quarter$1,118.0 $1,154.2 
Second quarter1,092.3 1,239.4 
Third quarter989.7 1,070.2 
Fourth quarter1,002.3 1,025.2 
Total$4,202.3 $4,489.0 
Gross profit: 
First quarter$68.5 $95.1 
Second quarter78.7 97.6 
Third quarter67.3 76.2 
Fourth quarter36.4 37.5 
Total$250.9 $306.4 

Human Capital Management

We believe in nurturing people, from consumers eating our products to our employees, suppliers, customers and the communities in which we live and work.

Employees
     
Our employees are our greatest asset and are directly responsible for our success in delivering fresh, quality products to consumers. Our current workforce is comprised of approximately 8,365 full-time, salaried employees and 29,235 full-time, hourly employees. Additionally, we employed over 10,300 seasonal, hourly employees, who enabled us to pack our in-season fruits and vegetables. Approximately 99% of our workforce are employed in production locations. We provide our employees with competitive fixed and/or variable pay, and for eligible employees, we currently provide access to health and retirement benefits. In each of our regions, we work with local officials to calculate fair wages for our team members. We are competitive with local practices; on average, we pay above minimum wage at our farms in Central America, the Philippines, and Kenya.


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Diversity and Inclusion

We strive to foster a culture of diversity and inclusion (“D&I”) so all employees feel respected and no employee feels discriminated against. We are proud of our diversity across our organization and especially our leadership team, of which 25% identifies as Hispanic, 17% identifies as Black and 25% identifies as Middle Eastern. We embrace diversity throughout our company as we have employees across six different generations and many different backgrounds. In 2019, we launched an internal diversity audit to better understand diversity, equity and inclusion within our organization. We have adopted this audit and are currently in the process of our second iteration. In 2021, a formal council comprised of senior leadership will work to connect our D&I efforts with our overall business strategy to communicate our goals, develop mechanisms to achieve those goals and track our progress. We believe a diverse workforce fosters innovation and cultivates an environment of unique perspectives. As a result, diversity and inclusion help us meet the needs of our customers around the world.

Engagement and Opportunities

Evolving our culture to increase employee engagement and productivity is a primary focus of our strategic plan as we believe an engaged workforce leads to a more innovative, productive and profitable company. Our employees are supported with training and development opportunities to pursue their careers and ensure compliance with our policies. We also utilize a centralized employee intranet to reach out to all employees and allow them to stay connected, remain informed and communicate their thoughts and values.

Health

We support the health and well-being of our employees by offering health care benefits. While these benefits vary across our different regions, we are competitive with local practices. In response to the coronavirus pandemic, we implemented extensive safety programs to protect our employees from COVID-19. In the first eight months of 2020, we donated 14.9 million pounds of produce that helped feed North American families. We also donated more than two million pounds to families in Central America. In the UK, we donated 80,000 bags of fresh produce to essential workers. In Guatemala, we made financial donations to help support the development of a field hospital. And, in the Philippines, Kenya and Chile, we partnered with local officials and organizations to assist with sanitation efforts. We are dedicated to helping our workforce, consumers, communities and customers persevere through these tough times.

Safety

We are committed to building a culture of safety with the goal of zero incidents. We enforce our Supplier Code of Conduct to ensure our suppliers uphold these standards and eliminate labor violations in our supply chain. We require that all our suppliers are certified against Global Food and Safety Initiative benchmarked standards or other standards needed to ensure the safety of their products. We are also supporting innovations to enhance soils, crop yields and resiliency to strengthen our farmers’ livelihoods.

Community Outreach

We care for our employees and their communities by giving back and responding in times of crisis. We support our grower and community partners through our “Farm2Family” corporate giving program, through which we contribute to farm advocacy (conservation and education), hunger relief, disaster relief, family care and healthy living. In 2020, we donated over 8 million pounds of food and gave $760,000 to local community groups. We have also responded to the impacts of numerous natural disasters and are recognized by Feeding America as a Disaster Relief Partner. In 2020, we raised over $90,000 to support the communities in Guatemala impacted by Hurricane Eta and Iota.

Globally, we launch and support a variety of projects each year, from providing clean water, to funding schools, to planting trees. We seek to continue to grow, support and evolve these efforts in a way that meets the changing needs of our individual communities around the world.

Workforce Governance

Our Board of Directors currently oversees all human capital resources. Our Governance Committee currently oversees our policies and programs related to sustainability, risk management, corporate social responsibility and the environment. Additionally, our Compensation Committee is dedicated to carrying out incentive programs and working with our employees to
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strategically align talent within the Company. Within our Compensation Committee, our Human Resources officer is responsible for advising and providing insight to best practices regarding human resource issues.

Organizational Structure
 
We are organized under the laws of the Cayman Islands and, as set forth in our Amended and Restated Memorandum of Association, we are a holding company for the various subsidiaries that conduct our business on a worldwide basis. Our significant subsidiaries, all of which are directly or indirectly wholly owned, are:

 
SubsidiaryCountry of Incorporation
Corporacion de Desarrollo Agricola Del Monte S.A.Costa Rica
Del Monte Fresh Produce CompanyUnited States
Del Monte Fresh Produce N.A., Inc.United States
Del Monte Fund B.V.Curacao
Del Monte International GmbHSwitzerland
Del Monte Fresh Produce SarlLuxembourg
Mann Packing Co., IncUnited States


Availability of Reports and Additional Information

Our legal name is Fresh Del Monte Produce Inc., and we use the commercial name Del Monte Fresh Produce. We are an exempted holding company, incorporated under the laws of the Cayman Islands on August 29, 1996. At January 1, 2021, the close of our most recent fiscal year, members of the Abu-Ghazaleh family directly owned approximately 29.7% of our outstanding Ordinary Shares.

Our principal executive office is located at 190 Elgin Avenue, George Town, Grand Cayman, KY1-9005, Cayman Islands. The address of our U.S. executive office is Del Monte Fresh Produce Company, 241 Sevilla Avenue, Coral Gables, Florida 33134. Our telephone number at our U.S. executive office is (305) 520-8400. Our Internet address is www.freshdelmonte.com. We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), on our website under “Investor Relations - SEC Filings,” as soon as reasonably practicable after we file electronically such material with, or furnish it to, the United States Securities and Exchange Commission (the “Commission”). Information on our website is not a part of this Report on Form 10-K. Copies of our annual report may be obtained, free of charge, upon written request to Attention: Investor Relations, c/o Del Monte Fresh Produce Company, 241 Sevilla Avenue, Coral Gables, Florida 33134.

The volume data included in this annual report has been obtained from our records. Except for volume data for Fresh Del Monte, the market share, volume and consumption data contained in this annual report have been compiled by us based upon data and other information obtained from third-party sources, primarily from the Food and Agriculture Organization of the United Nations, and from our surveys of customers and other company-compiled data. Except as otherwise indicated, volume data contained in this Report is shown in millions of 40-pound equivalent boxes.




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Item 1A.Risk Factors

We are subject to many risks and uncertainties that may affect our future financial performance and our stock price. Some of the risks and uncertainties that may cause our financial performance to vary or that may materially or adversely affect our financial performance or stock price are discussed below.

Risks Related to Our Business and Operations

The COVID-19 pandemic and resulting worldwide economic conditions are adversely affecting, and will continue to adversely affect, our business operations, financial condition, results of operations, and cash flows.

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This has spread globally and in March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic began to have a material adverse impact on our results of operations in fiscal 2020, and we expect it to continue to adversely affect our business.

For example, in the first quarter of 2020, the COVID-19 pandemic resulted in service cancellations and containers that were unable to clear at certain of our Chinese ports. As a result, we had to redirect our products to markets such as Japan, Korea, and Hong Kong which adversely affected our results of operations due to oversupply in these markets. Additionally, government imposed mandatory closures and restrictions across various of our key global markets have resulted in volatile supply and demand conditions, primarily of our higher price point products such as pineapples, avocados, and fresh-cut fruit and vegetables as well as reduced demand in our foodservice distribution channel. As a result of these circumstances, the COVID-19 pandemic had a negative impact on net sales in fiscal 2020, resulting in an estimated $303.6 million in lost sales in our fresh and value-added products and banana segments, as compared with our net sales during the year ended December 27, 2019 for these segments. We also recorded $23.8 million of other product-related charges as a direct result of the pandemic which principally include inventory write-offs resulting from the reduced demand for certain of our products in fiscal 2020, which are presented in cost of products sold in our Consolidated Statement of Operations. In addition, the COVID-19 pandemic and related government restrictions have caused us to incur incremental costs in order to implement social distancing protocols and more frequent cleaning cycles, particularly in our farming operations in Central America.

In early 2021, health agencies in certain regions where we operate (including North America and Europe) approved vaccines for combating the COVID-19 virus. While administration of the vaccines has begun, mass distribution is unlikely to occur until late 2021 as local governments have prioritized initial distribution to certain healthcare and essential workers as well as those more susceptible to the effects of the virus. As a result, continued government-imposed restrictions aimed at mitigating the spread of the virus across our key global markets are expected to continue to negatively impact our future operating results during the first quarter of 2021. The extent of the impact of the COVID-19 pandemic on our financial performance, including our ability to execute our strategic initiatives, will depend on future developments, including the duration and spread of the pandemic and related government restrictions, all of which are uncertain and cannot be predicted. Additionally, if the COVID-19 pandemic results in a global recession, the negative impacts of the pandemic on our operating results may worsen or be prolonged.

In addition, our ability to continue to supply our products is highly dependent on our workforce which is a key component of our vertically integrated network, including our workers involved in the growing, harvesting, transportation and distribution of our products. Our ability to maintain the safety of our workforce may be significantly impacted by individuals contracting or being exposed to COVID-19, and our operations and financial results may be negatively affected as a result. While we are following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of our workforce, including implementing remote working arrangements across our administrative offices and varying procedures and protocols at various facilities, such as implementation of social distancing, thermal screenings, the use of protective screens and face masks, and imposing visitor and travel restrictions, we cannot be certain that these measures will be successful in ensuring the health of our workforce. For example, during fiscal 2020, some of our workers contracted the COVID-19 virus, which resulted in a temporary facility closure in one location, reduced production hours, increased cleaning and logistical costs, as well as an adverse impact on our net sales due to the perishability of our products. Additional workforce disruptions of this nature may significantly impact our ability to maintain our operations and may adversely affect our financial results. Staffing shortages or employee relations issues related to COVID-19 may lead to increased compensation expenses. Governments in our major regions may impose new laws or regulations around work and/or travel restrictions which may make it challenging for us to meet our staffing needs, or cause us to incur additional labor costs as a result. We may also experience additional costs related to increased workers’ compensation claims, health and safety inspections and group health insurance expenses as a result of the COVID-19 pandemic. We may also be subject to lawsuits from employees and others exposed to COVID-19 at our production and other facilities. Such actions may involve large demands, as well as substantial defense costs.
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Our professional and general liability insurance may not cover all claims against us. In addition, our operations and financial results may be further adversely affected by federal or state laws, regulations, orders, or other governmental or regulatory actions addressing the current COVID-19 pandemic which could result in direct or indirect restrictions on our business, potentially adversely affecting our financial condition, results of operations and cash flows.

The COVID-19 pandemic may have an adverse impact on our liquidity and capital resources.

Our ability to meet our financial obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. For example, with the COVID-19 pandemic, our operating results during fiscal 2020 were materially adversely impacted. While we believe that currently, our cash flows from operations and sources of funding, including available credit under our existing credit facilities, will sufficiently support our liquidity needs, we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. During fiscal 2020, we took several steps to conserve our liquidity position including reducing our quarterly cash dividend from ten cents ($0.10) per share in the first quarter of 2020 to five cents ($0.05) per share in the second and third quarters of 2020 and delaying certain of our planned capital expenditures to 2021. In the event of a sustained market deterioration, we may need additional liquidity which would require us to evaluate available alternative strategies such as selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital, strategies of which could be unsuccessful.

Additionally, our current credit facility imposes certain operating and financial restrictions on us. Our failure to comply with the obligations under this facility, including maintenance of financial ratios, could result in an event of default, which, if not cured or waived, would permit the lender to accelerate the indebtedness due under the facility. Given the uncertainty surrounding the pandemic, we cannot predict whether future developments associated with COVID-19 will result in noncompliance with our obligations under the facility.

We could realize losses and suffer liquidity problems due to declines in sales prices for bananas, pineapples and other fresh produce.

Our profitability depends largely upon our profit margins and sales volumes of bananas, pineapples and other fresh produce. In 2018, 2019 and 2020, banana sales accounted for the most significant portion of our total net sales when compared with our remaining product categories.

Supply of bananas can be increased relatively quickly due to the banana’s relatively short growing cycle and the limited capital investment required for banana growing. As a result of imbalances in supply and demand and import regulations, banana prices fluctuate; consequently, our operating results could be adversely affected.

Sales prices for bananas, pineapples and other fresh produce are difficult to predict and it is possible that they will decline in the future. In recent years, there has been increasing consolidation among food retailers, wholesalers and distributors, and consolidation could continue. We believe the increasing consolidation may contribute to further downward pressure on our sales prices. In the event of a decline in sales prices or sales volumes, we could realize significant losses, experience liquidity problems and suffer a weakening in our financial condition. A significant portion of our costs are fixed, so that fluctuations in the sales prices have an immediate impact on our profitability. Our profitability is also affected by our production costs, which may increase due to factors beyond our control.

Due to fluctuations in the supply of and demand for fresh produce, our results of operations are seasonal, and we realize a greater portion of our net sales and gross profit during the first two quarters of each year.

In part as a result of seasonal sales price fluctuations, we have historically realized a greater portion of our gross profit during the first two quarters of each year. The sales price of any fresh produce item fluctuates throughout the year due to the supply of and demand for that particular item, as well as the pricing and availability of other fresh produce items, many of which are seasonal in nature. For example, the production of bananas is continuous throughout the year and production is usually higher in the second half of the year, but the demand for bananas during that period varies because of the availability of seasonal and alternative fruit. As a result, demand for bananas is seasonal and generally results in higher sales prices during the first six months of each calendar year.  





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Our agricultural plantings are potentially subject to damage from crop disease or insect infestations, which could adversely impact our operating results and financial condition.

Fresh produce is vulnerable to crop disease and insect infestations which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions. Crop diseases or insect infestations may adversely affect our supply of one or more fresh produce items, reduce our sales volumes, increase our unit production costs or prevent or impair our ability to ship products as planned.

For example, in the third quarter of 2019, Tropical Race 4, or TR4, a serious vascular crop disease that affects one of our principal products, the Cavendish variety of bananas, was discovered at plantations in Colombia. The disease, which was originally identified in South East Asia and has now spread across 19 countries, destroys banana crops and makes affected banana plants barren. We continue to monitor TR4 in Colombia and are working with agricultural experts and qualified agencies to improve our existing quarantine and other prevention strategies as well as to develop contingency plans. However, there is a risk that TR4 will spread to our farms in Latin America or our suppliers’ farms in Latin America and destroy all or a portion of the banana crops and adversely affect our purchased fruit cost and our profitability. In addition, we have and will continue to incur costs to improve our quarantine and other prevention strategies and to discover solutions to the spread of the disease, which may adversely impact our operating profit. While we are seeking to identify a replacement to the Cavendish variety of banana that appeals broadly to consumers and is resistant to these types of diseases, including through our partnership with Queensland University of Technology aimed at identifying new ways of growing bananas that are resistant to TR4, this initiative may require material expenditure of capital and may not be successful. A long-term reduction in the supply of bananas resulting from the TR4 disease could result in a significant increase in the price of bananas, adversely affecting our margins and/or consumer demand, and our results of operation.

Severe weather, natural disasters and other conditions affecting the environment, including the effects of climate change, could result in substantial losses and weaken our financial condition.

Severe weather conditions, such as floods, droughts, windstorms, hurricanes and wildfires, and natural disasters, such as earthquakes, may adversely affect our supply of one or more fresh produce items, reduce our sales volumes, increase our unit production costs or prevent or impair our ability to ship products as planned. When severe weather, natural disasters and other adverse environmental conditions (i) destroy crops planted on our farms or our suppliers’ farms or (ii) prevent us from exporting these crops on a timely basis, we may lose our investment in those crops and/or our purchased fruit cost may increase. These risks can be exacerbated when a substantial portion of our production of a specific product is grown in one region, provided by a limited number of suppliers, or when it endangers one of our primary products. As a result of climate change, these severe weather conditions may occur with higher frequency or may be less predictable in the future.

For example, in the fourth quarter of 2020, two hurricanes, Eta and Iota, impacted our farm operations in Guatemala. The hurricanes resulted in the destruction of certain areas of our banana and melon plantations which were flooded due to heavy rainfall, resulting in $12.0 million in inventory write-offs for fiscal 2020 which are reflected in cost of products sold in our consolidated statement of operations. In addition, the hurricanes also resulted in damages to our property, plant, and equipment on the farms, including to our banana plantations, levees, drainage equipment, and other related fixed assets. As a result, we recorded $4.8 million of impairment charges in connection with the storms, reflected in asset impairments and other charges, net in our consolidated statement of operations for fiscal 2020.

Future severe weather events or natural disasters could result in significant disruptions to our operations, and have a material adverse effect on our business, results of operations, and financial condition.

Water scarcity in our growing regions could adversely affect our agricultural operations, financial condition, results of operations and cash flows.

Water is vital to the production of the fresh produce products on which our business relies. In recent years, exposure to water deficits in particular regions around the globe has become more evident. For example, water shortages in Brazil negatively impacted our banana production in the last five years, and our pineapple farms in Kenya were affected by a drought associated with El Nino during 2016, 2017, and 2019. In order to mitigate water risk, we have invested heavily to upgrade existing infrastructure to more efficient irrigation systems like drip or low pressure/low volume sprinkler systems, both in Kenya and Guatemala. In addition, we conduct an analysis of water related issues in the specific river basin where new development might be planned has become part of the due-diligence process before investing in agriculture operations, which has resulted in increased costs.

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If water available to our operations becomes scarce or the quality of that water deteriorates, we may incur increased production costs or face production constraints that may materially adversely affect our financial condition, results of operations and cash flows.

The markets in which we operate are highly competitive, which could adversely affect our profitability.

The banana and fresh and value-added products markets are highly competitive, and the effect of competition is intensified because most of our products are perishable. Competition in our product categories is based on various factors including price, product quality, brand recognition and loyalty, effectiveness of marketing and promotional activity, and the ability to identify and satisfy consumer preferences. The extent of competition generally varies by product. To compete successfully, we must be able to strategically source fresh produce and value-added products of uniformly high quality and sell and distribute them on a timely and regular basis.

In the banana and pineapple markets, we primarily compete with a limited number of multinational and large regional producers. In the case of our other fresh fruit and vegetable products, we compete with numerous small producers, as well as regional competitors. The fresh-cut produce market is highly fragmented, and we compete with a wide variety of local and regional distributors of branded and unbranded fresh-cut produce and, in the case of certain fresh-cut vegetables, a small number of large, branded producers and distributors. The prepared food markets are mature markets characterized by high levels of competition and consumer awareness. In addition, our profitability has depended significantly on the sale of our Del Monte Gold® Extra Sweet pineapples. Increased competition in the production and sale of Del Monte Gold® Extra Sweet pineapples or our other product categories could adversely affect our results. We expect these competitive pressures to continue.

We are subject to material currency exchange risks because our operations involve transactions denominated in various currencies, which could negatively affect our operating results.

We conduct operations in many areas of the world involving transactions denominated in various currencies, and our results of operations, as expressed in dollars, may be significantly affected by fluctuations in rates of exchange between currencies. Although a substantial portion of our net sales (34% in 2020) is denominated in non U.S. dollar currencies, we incur a significant portion of our costs in U.S. dollars. Although we periodically enter into currency forward contracts as a hedge against currency exposures, we may not enter into these contracts during any particular period or these contracts may not adequately offset currency fluctuations. We generally are unable to adjust our non U.S. dollar local currency sales prices to compensate for fluctuations in the exchange rate of the U.S. dollar against the relevant local currency. In addition, there is normally a time lag between our costs incurred and collection of the related sales proceeds. Accordingly, if the U.S. dollar appreciates relative to the currencies in which we receive sales proceeds, our operating results may be negatively affected. Our costs are also affected by fluctuations in the value, relative to the U.S. dollar, of the currencies of countries in which we have significant production operations, with a weaker U.S. dollar resulting in increased production costs.

Our strategy of diversifying our product line, expanding into new geographic markets and increasing the value-added services that we provide to our customers may not be successful.

We are diversifying our product line through acquisitions and internal growth. In addition, we have expanded our service offerings to include a higher proportion of value-added services, such as the preparation of fresh-cut produce, ripening, customized sorting and packing, direct-to-store delivery and in-store merchandising and promotional support. This strategy represents a significant departure from our traditional business of delivering our products to our customers at the port. In recent periods, we have made significant investments in distribution centers, new growing operations and prepared food facilities through capital expenditures and have expanded our business into new geographic markets. In 2018, we made a significant investment in the fresh-cut and value-added vegetable category by acquiring Mann Packing. We may not be successful in anticipating the demand for these products and services, in establishing the requisite infrastructure to meet customer demands or the provision of these value-added services. During recent years, we incurred significant asset impairment and other charges as a result of our continuing efforts to align our diversified product lines with market demand. If we are unable to successfully develop and integrate the diversified product lines in our fresh-cut and value-added vegetable category we may not realize all of the anticipated synergies and other benefits of our acquisition of Mann Packing, or if the business of Mann Packing or the markets in which it operates deteriorate, it could have an adverse effect on our business, financial condition and results of operations.

If we are not successful in our diversification efforts, our business, financial condition or results of operations could be materially and adversely affected.

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Impairment of our goodwill, other intangible assets, and long-lived assets has resulted in significant charges that adversely impacted our operating results, and these assets are subject to the risk of future impairments which could adversely impact our operating results.

We review goodwill and other intangible assets for impairment on an annual basis or earlier if indicators for impairment are present. The goodwill associated with our banana reporting unit and the goodwill and trade names and trademarks associated with our prepared food reporting unit are highly sensitive to differences between estimated and actual cash flows and changes in the related discount rates used to evaluate their fair value. If our banana and prepared foods reporting units do not perform to expected levels, the goodwill and other intangible assets associated with these reporting units may be at risk for impairment in the future. For example, the COVID-19 pandemic negatively impacted our results of operations during fiscal 2020, including in our banana segment. Given the uncertainty surrounding the pandemic, we cannot predict whether future developments associated with COVID-19 will result in projected cash flows that lead to impairment of our intangible assets. If incurred, future impairment of our intangible assets could have a material adverse effect on our results of operations.

Additionally, we record impairments on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. During fiscal 2020, we incurred $11.8 million in long-lived asset impairment charges primarily relating to hurricane damages to our operations in Central America, impairments of property and equipment in North America, the Middle East, and Europe, and impairments to our banana operation in the Philippines due to our decision to abandon certain low-yield areas. Additional asset impairments may be recognized based on future decisions and conditions.

Demand for our products is subject to changing consumer preferences, and a reduction in demand for any one or more of our products could negatively impact our sales and profits.

Consumer preferences for particular food products are subject to fluctuations over time.  Our ability to market and sell our products successfully depends in part on our ability to identify changing consumer preferences and respond to those changes by offering products that appeal broadly to consumers in light of current demands.  Shifts in consumer preferences that can impact demand for our products at any given time can result from a number of factors, including dietary trends, attention to particular nutritional aspects of our products, concerns regarding the health effects of particular ingredients and attention given to ingredient sourcing practices.  Consumer demand for our products also may be impacted by any public commentary that consumers may make regarding our products or similar products, as well as by changes in the level of advertising or promotional support that we employ or that are employed by relevant industry groups or third parties that provide competing products.  If consumer preferences trend negatively with respect to any one or more of our products, our sales volumes may decline as a result.

The loss of one or more of our largest customers, or a reduction in the level of purchases made by these customers, could negatively impact our sales and profits.

Sales to Wal-Mart, Inc., our largest customer, amounted to approximately 9% of our total net sales in fiscal 2020, and our top 10 customers collectively accounted for approximately 33% of our total net sales. We expect that a significant portion of our revenues will continue to be derived from a relatively small number of customers. We believe these customers make purchase decisions based on a combination of price, product quality, consumer demand, customer service performance, desired inventory levels and other factors that may be important to them at the time the purchase decisions are made. Changes in our customers' strategies or purchasing patterns, including a reduction in the number of brands they carry, may adversely affect our sales. Additionally, our customers may face financial or other difficulties which may impact their operations and cause them to reduce their level of purchases from us, which could adversely affect our results of operations. Customers also may respond to any price increase that we may implement by reducing their purchases from us, resulting in reduced sales of our products. If sales of our products to one or more of our largest customers are reduced, this reduction may have a material adverse effect on our business, financial condition, and results of operations. Any bankruptcy or other business disruption involving one of our significant customers also could adversely affect our results of operations.

Increased prices for fuel, packaging materials or short-term refrigerated ship charter rates could increase our costs significantly.

Our costs are determined in large part by the prices of fuel and packaging materials, including containerboard, plastic, resin and tin plate. We may be adversely affected if sufficient quantities of these materials are not available to us. Any significant increase in the cost of these items could also materially and adversely affect our operating results. Other than the cost of our products (including packaging), logistics (sea and inland transportation) costs represent the largest component of cost of products sold. Third-party containerized shipping rates are also a significant component of our logistic costs. During 2019, cost
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of fuel increased 1%, containerboard increased 2% and fertilizer increased slightly by 0.4% resulting in an increase of cost of product sold of $3.4 million. During 2020, cost of fuel decreased 18%, containerboard decreased 16% and fertilizer decreased by 10% resulting in a decrease of cost of product sold of $36.0 million. In addition, we are subject to the volatility of the charter ship market because one of our ships is chartered. The remaining term for our chartered ship is four to six months. As a result, significant increases in fuel, packaging material, fertilizer and charter rates would materially and adversely affect our results.

During fiscal 2020, we entered into bunker fuel swap agreements which allowed us to lock in fuel prices for portions of our fuel expenses throughout fiscal years 2020 and 2021. We designated our bunker fuel swap agreements as cash flow hedges. Our bunker fuel swap agreements can either offset increases in market fuel prices or can result in higher costs if market fuel prices decline. As such, there can be no assurance that our hedging arrangements will be successful in mitigating higher fuel costs in future periods.

Compliance with regulation aimed at mitigating the effects of climate change, as discussed elsewhere in these Risk Factors, could also increase the cost of fuel for our shipping and logistics operations.  We might be unable to adjust our product pricing to reflect our increased costs. Even if we are able to adjust our product pricing, our customer's buying patterns could change to reflect a greater reliance on local production rather than imports.

We are subject to the risk of product contamination and product liability claims which could materially and adversely affect our results and financial condition.

The sales of our products involve the risk of injury to consumers. Such injuries may result from tampering by unauthorized personnel, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, or residues introduced during the growing, packing, storage, handling or transportation phases. We cannot be sure that consumption of our products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our brand image. In addition, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against third parties, including our customers and suppliers. However, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage, resulting in significant cash outlays that would materially and adversely affect our results and financial condition.

For instance, in the fourth quarter of 2019, our Mann Packing business voluntarily recalled a series of vegetable products processed at the Salinas Valley, California production facility and sold to select retailers in the United States and Canada. The voluntary recall was a response to a notification by the Food and Drug Administration (FDA) and the Canadian Food Inspection Agency of a potential contamination with Listeria monocytogenes, an organism which can cause serious and sometimes fatal infections in young children, frail or elderly people, and others with weakened immune systems. In connection with the recall, we voluntarily suspended operations at that Salinas Valley production facility from October 31, 2019 through November 8, 2019.

The voluntary recall had a negative effect on net sales in 2019, primarily of fresh-cut vegetables, resulting in an estimated $21.0 million in lost sales associated with the recalled products as compared to our original expectations for such products. In addition, we recorded a reduction in net sales of approximately $6.0 million in the fourth quarter of 2019 to account for customer claims and customer-related charges. We also incurred $4.4 million in inventory write-offs in the fourth quarter of 2019 as a result of the voluntary recall which are presented in cost of products sold in our Consolidated Statement of Operations. In addition, we recorded $0.5 million in asset impairment and other charges, net.

While we resumed production and began shipping product to our customers in November 2019, we have not fully returned to our pre-recall distribution levels and our net sales in 2020 continued to be negatively impacted by the recall as a result. We anticipate that sales of our fresh-cut vegetable and other recalled vegetable products may be reduced in future periods as compared to our original expectations for such products. Further, while there have been no illnesses or injuries reported to date, the occurrence of any illnesses or injuries could have serious consequences on sales of our fresh-cut vegetables and sales of our other products, our brands and reputation, any of which could harm our business.

We are subject to legal and environmental risks that could result in significant cash outlays.

We are involved in several legal and environmental matters that, if not resolved in our favor, could require significant cash outlays and could materially and adversely affect our results of operations and financial condition. In addition, we may be subject to product liability claims if personal injury results from the consumption of any of our products.

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The EPA has placed a certain site at our former plantation in Oahu, Hawaii on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. Under an order entered into with the EPA, we completed a remedial investigation and engaged in a feasibility study to determine the extent of the environmental contamination. The remedial investigation report was finalized in January 1999 and approved by the EPA in February 1999. A final draft feasibility study was submitted for EPA review in December 1999 and updated in December 2001 and October 2002, and approved by the EPA in April 2003. In September 2003, the EPA issued the Record of Decision (“ROD”). The EPA estimated in the ROD that the remediation costs associated with the cleanup of our plantation would range from $12.9 million to $25.4 million. The undiscounted estimates are between $13.0 million and $28.7 million. As of January 1, 2021, there are $12.7 million included in other noncurrent liabilities and $0.3 million included in accounts payable and accrued expenses in our Consolidated Balance Sheets relating to the Kunia Well Site clean-up. Going forward, we expect to expend approximately $0.4 million in 2021, and $3.8 million for 2022 through 2025 on this matter. See Item 3.  Legal Proceedings and Note 15, “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 8.  Financial Statements and Supplementary Data.  

Environmental and other regulation of our business could adversely impact us by increasing our production cost or restricting our ability to import certain products into the United States.

Our business depends on the use of fertilizers, pesticides and other agricultural products. The use and disposal of these products in some jurisdictions are subject to regulation by various agencies. A decision by a regulatory agency to significantly restrict the use of such products that have traditionally been used in the cultivation of one of our principal products could have an adverse impact on us. For example, most uses of methyl bromide, a pesticide used for fumigation of imported produce (principally melons) for which there is currently no known substitute, were phased out in the United States in 2006. Also, under the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Food, Drug and Cosmetic Act and the Food Quality Protection Act of 1996, the EPA is undertaking a series of regulatory actions relating to the evaluation and use of pesticides in the food industry.  Similarly, in the EU, regulation (EC) No. 1107/2009 which became effective on June 14, 2011, fundamentally changed the pesticide approval process from the current risk base to hazard criteria based on the intrinsic properties of the substance.  Future actions regarding the availability and use of pesticides could have an adverse effect on us by increasing our production cost or restricting our ability to import certain products into the United States. In addition, if a regulatory agency were to determine that we are not in compliance with a regulation in that agency’s jurisdiction, this could result in substantial penalties and a ban on the sale of part or all of our products in that jurisdiction.

Environmental regulation of our business, as a response to climate change, could adversely impact us by increasing our compliance costs and could have a material adverse effect on our results and financial condition.

There has been a broad range of proposed and promulgated state, national and international regulation aimed at reducing the effects of climate change. Such regulations apply or could apply in countries where we have interests or could have interests in the future. Such regulation could result in additional costs in the form of taxes and investments of capital to maintain compliance with laws and regulations.

Climate change regulations continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, it is possible that such regulation could have a material effect in the foreseeable future on our business, results of operations, capital expenditures or financial position.

We are exposed to political, economic and other risks from operating a multinational business which could have a material adverse effect on our results and financial condition.

Our business is multinational and subject to the political, economic and other risks that are inherent in operating in numerous countries, including:
a change in laws and regulations or imposition of currency restrictions and other restraints;
the imposition of import and export duties and quotas;
the risk that the government may expropriate assets;
the imposition of burdensome tariffs and quotas;
political changes and economic crises that may lead to changes in the business environment in which we operate;
international conflict, including terrorist acts, that could significantly impact our business, financial condition and results of operations;
public health epidemics which have the potential to impact employees and the global economy;
economic sanctions that may be imposed on some countries, which could disrupt the markets for products that we sell, even if we do not sell directly into the target country;
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potential violations or alleged violations of the various laws, regulations, safety codes, employment practices, human rights standards, and other obligations, norms, and ethical standards associated with our multinational operations that may result in litigation costs and damage to our reputation, even if we are ultimately not found responsible;
economic downturns, political instability and war or civil disturbances that may disrupt our, our suppliers' and our customers' production and distribution logistics or limit sales in individual markets; and
disruptions in our, our suppliers' and our customers' ability to access capital and credit markets.

As it relates to the regulatory environment, banana import regulations have in prior years restricted our access to the EU banana market and increased the cost of doing business in the EU.  In December 2009, the EU entered into an agreement with certain Latin America banana exporting countries to settle a long running dispute over banana import tariffs. This agreement was ratified in May 2010. Under this agreement, the EU gradually reduced import tariffs on bananas from Latin America on an annual basis to €114 per ton as of January 1, 2019, except for countries under Free Trade Agreements (FTA's). Countries under FTA's that signed bilateral agreements with the EU in 2012 are benefiting from accelerated but gradual reduction of import duties. The FTA's are in effect for Central American countries, Colombia, and Peru. The duty for FTA countries was €89 per ton for 2018, €82 in 2019 and was reduced to €75 per ton on January 1, 2020. Our Colombia and Central America sourced bananas benefit from this FTA agreement. We cannot predict the impact of further changes to the banana import tariffs or new quotas on the EU banana market. Additionally, we cannot predict the impact to banana import tariffs that may result from the United Kingdom’s departure from the EU. The United Kingdom withdrew from the EU on January 31, 2020, commonly referred to as “Brexit”. While existing legislation is such that tariffs on bananas will remain consistent with those realized under the EU, we cannot predict if future legislative changes will impact our cost of importing bananas into the United Kingdom.

Costa Rica and Ecuador, countries in which we operate, have established “minimum” export prices for bananas that are used as the reference point in banana purchase contracts from independent producers, thus limiting our ability to negotiate lower purchase prices. These minimum export price requirements could potentially increase the cost of sourcing bananas in countries that have established such requirements.

We are also subject to a variety of government regulations in countries where we market our products, including the United States, the EU, Asia, countries of the Middle East and Africa. Examples of the types of regulation we face include:

sanitary regulations;
regulations governing pesticide use and residue levels; and
regulations governing packaging and labeling.
 
If we fail to comply with applicable regulations, it could result in an order barring the sale of part or all of a particular shipment of our products or, possibly, the sale of any of our products for a specified period. Such a development could result in significant losses and could weaken our financial condition.

Acts or omissions of other companies could adversely affect the value of the Del Monte® brand which could have a material adverse effect on our results and financial condition.

We depend on the Del Monte® brand in marketing our products. We share the Del Monte® brand with unaffiliated companies that manufacture, distribute and sell canned or processed fruit and vegetables, dried fruit, snacks and other products. Acts or omissions by these companies, including an instance of food-borne contamination or disease, may adversely affect the value of the Del Monte® brand. As a result, our reputation and the value of the Del Monte® brand may be adversely affected by negative consumer perception.

We may not be able to successfully consummate and manage ongoing acquisition, joint venture and business partnership activities, which could have an adverse impact on our results.
Our growth strategy is based in part on growth through acquisitions or expansion. Accordingly, we may acquire other businesses or enter into joint ventures or other business partnerships from time to time. These types of transactions inherently involve a number of risks, including risks related to:
identifying appropriate acquisition candidates or business partners;
potential difficulties in successfully integrating acquired operations;
the quality of products produced by acquired businesses or business partners in comparison to the products we historically have provided;
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any loss of key employees of acquired operations or any inability to hire or retain key employees necessary to integrate an acquired business or otherwise implement our growth strategy;
potential diversion of our capital and management attention away from other important business matters;
financial risks, such as potential unknown liabilities of any acquired business;
potential issues with the financial disclosures, accounting practices or internal control systems of any acquired business, joint venture or business partner; and
in the case of joint ventures and business partnerships, increased potential risks associated with the lesser degree of control that we may be able to exert due to our arrangements with our business partners.

We may incur additional costs and certain redundant expenses in connection with our acquisitions and investments, which may have an adverse impact on our operating margins. Future acquisitions may result in dilutive issuances of equity securities, the incurrence of additional debt, use of significant portions of our cash reserves, asset impairments (including charges related to goodwill and other intangible assets) and restructuring and other charges. The incurrence of debt in connection with any future acquisitions also could restrict our ability to obtain working capital or other financing necessary to operate our business. Our recent and future acquisitions or investments may not be successful, and if we fail to realize the anticipated benefits of these acquisitions or investments, our business, operating results and financial position could be harmed.
Increases in wage and benefit costs, changes in laws and other labor regulations, and labor disruptions could impact our financial results and decrease our profitability.
Our expenses relating to employee labor, including employee health benefits, are significant. Our ability to control our employee and related labor costs is generally subject to numerous external factors, including prevailing wage rates and new or revised employment and labor regulations. Unfavorable changes in employee and related labor costs could impact our business, results of operations and financial condition.

In addition, a material portion of our employees who work on our farms work under various syndicatos, works councils, collective bargaining agreements or other agreements with similar types of entities. Our inability to maintain favorable relationships with these entities could result in labor disputes, including work stoppages, which could have a material adverse effect on the portion of our business affected by the dispute, which could impact our business, financial position and results of operations.

Changes in tax laws in any of the jurisdictions in which we operate or in which we establish holding companies, or adverse outcomes from tax audits could cause fluctuations in our overall tax rate and adversely impact our operating results.

Our income taxes consist of the consolidation of tax provisions computed on a separate entity basis, for each country in which we have operations.  Changes in the sources of income, agreements we have with taxing authorities in various jurisdictions, or tax filing positions taken in these jurisdictions, could cause our overall tax rate to fluctuate significantly from our own past tax rates.  In addition, changes in rules related to Accounting for Income Taxes or changes in applicable tax laws and regulations, including tax laws that impact our current company structure, could adversely affect our tax expense, profitability, and cash flows. For example, in the U.S., the new administration may implement substantial changes to fiscal and tax policies, which could include comprehensive tax reform. We cannot predict the impact, if any, of these potential changes to our business. However, it is possible that these changes could adversely affect our business, financial position and results of operations.

We must comply with complex and evolving tax regulations in the various jurisdictions in which we operate, which subjects us to international tax compliance risks. Some tax jurisdictions in which we operate have complex and subjective rules regarding income tax, value-added tax, sales or excise tax, tariffs, duties and transfer tax. From time to time, our subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties should the taxing authority assert different interpretations, or different allocations or valuations which could be material and could reduce our income and cash flow from our international operations. The imposition of any penalties and costs of litigation, regardless of an eventual ruling in our favor, in connection with current or future tax disputes related to our international operations could materially adversely affect our business, financial condition and operating results.

In addition, adverse outcomes from tax audits in any of our major tax or operating jurisdictions, such as the United States, Luxembourg, Switzerland, Costa Rica, Guatemala, Kenya, or Japan, could materially adversely impact our operating results. For example, in connection with a current examination of the tax returns in two of these foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $145.5 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and we expect to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters. However, there can be no assurance that these matters will be resolved in our favor, and an adverse outcome of either matter, or any future tax
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examinations involving similar assertions, could have a material effect on our financial condition, results of operations and cash flows.

Any failure to adequately store, maintain and deliver quality perishable foods could materially adversely affect our business, financial condition and operating results.

Our ability to adequately store, maintain and deliver quality perishable foods is critical to our business.  We store food products, which are highly perishable, in refrigerated fulfillment centers and ship them to our customers while maintaining appropriate temperatures in transit and use refrigerated delivery trucks to support temperature control for shipments to certain locations.  Keeping our food products at specific temperatures maintains freshness and enhances food safety.  In the event of extended power outages, natural disasters or other catastrophic occurrences, failures of the refrigeration systems in our fulfillment centers or third party delivery trucks, failure to use adequate packaging to maintain appropriate temperatures, or other circumstances both within and beyond our control, our inability to store perishable inventory at specific temperatures could result in significant product inventory losses as well as increased risk of food safety risks.  We also contract with third parties to conduct certain fulfillment processes and operations on our behalf or to sell our product in a retail environment.  Any failure by such third party to adequately store, maintain or transport perishable foods could negative impact the safety, quality and merchantability of our products and the experience of our customers. The occurrence of any of these risks could materially adversely affect our business, financial condition and operating results.

We are subject to transportation risks.

An extended interruption in our ability to ship our products or disruption in the distribution of our products could have a material adverse effect on our business, financial condition and results of operations. While we believe we are adequately insured and would attempt to transport our products by alternative means if we were to experience an interruption, we cannot be sure that we would be able to do so or be successful in doing so in a timely and cost-effective manner.

Risks Related to Our Information Systems

Our electronic information and our information system assets may be made unavailable, leaked, or altered due to a cybersecurity incident, which could adversely affect the results of our operations, and we cannot predict the extent or duration of these incidents.
Although our computer systems are distributed in many geographic areas, they are connected together in a private network. A widespread cybersecurity incident may significantly disrupt our operations and business processes. In such case, we may have to operate manually, which may result in significant delay in the delivery of our products to our customers or damage our perishable products. Our customers could refuse to continue to do business with us and prematurely terminate or reduce existing contracts resulting in a significant adverse effect on our business.
We have intellectual property, trade secrets and confidential business information stored in electronic formats that could be leaked to competitors or the public due to cybersecurity incidents which may result in loss of competitive position and market share.
We also have personal confidential information stored in our systems. This information, if stolen or leaked, could result in significant financial and legal risk.
We may be targeted by computer hackers from the internet, from business partners’ networks connected to our network, or from employees for specific purposes such as financial gain, political or ideological motives or otherwise simply to damage our reputation, which may result in significant decline in consumer preference for our products in certain geographic regions or globally and could potentially reduce our market share.
Although we believe we have implemented reasonable industry best practices, processes and technologies to protect our information and information systems, recovery from the above computer incidents could be expensive. Rapidly raising and maintaining higher standards of cybersecurity practices in our business globally may require significant initial investment and higher operating costs and therefore could negatively impact our operating income.



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Risks Related to Our Financing
Our indebtedness could limit our financial and operating flexibility and subject us to other risks.

Our ability to obtain additional debt financing or refinance our debt on acceptable terms, if at all, in the future for working capital, capital expenditures or acquisitions may be limited either by financial considerations or due to covenants in existing debt agreements.

Our ability to meet our financial obligations will depend on our future performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. Our ability to meet our financial obligations also may be adversely affected by the seasonal nature of our business, the cyclical nature of agricultural commodity prices, the susceptibility of our product sourcing to crop disease, severe weather and other adverse environmental conditions and other factors.

Since we are a holding company, our ability to meet our financial obligations depends primarily on receiving sufficient funds from our subsidiaries. The payment of dividends or other distributions to us by our subsidiaries may be restricted by the provisions of our credit agreements and other contractual requirements and by applicable legal restrictions on payment of dividends and other distributions.

If we were unable to meet our financial obligations, we would be forced to pursue one or more alternative strategies, such as selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital, strategies which could be unsuccessful. Additional sales of our equity capital could substantially dilute the ownership interest of existing shareholders.

Our current credit facility imposes certain operating and financial restrictions on us. Our failure to comply with the obligations under this facility, including maintenance of financial ratios, could result in an event of default, which, if not cured or waived, would permit the lender to accelerate the indebtedness due under the facility.

Changes in interest rates and cessation of LIBOR could adversely affect our earnings and/or cash flows.

Because a significant number of our loans are made at variable interest rates, our business results are subject to fluctuations in interest rates. Certain loans extended to us are made at variable rates that use LIBOR as a benchmark for establishing the interest rate. LIBOR is the subject of recent proposals for reform. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. These reforms will cause LIBOR to cease to exist and will cause the establishment of an alternative reference rate(s). The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S. dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. If LIBOR ceases to exist after 2021, a comparable or successor reference rate as approved by the Administrative Agent under the Credit Agreement will apply or such other reference rate as may be agreed by us and the lenders under the Credit Agreement. To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows. These consequences cannot be entirely predicted and could have an adverse impact on the market value for, or value of, LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us. Changes in market interest rates may influence our financing costs, returns on financial investments and the valuation of derivative contracts and could reduce our earnings and cash flows.

We manage interest rate risks with a variety of techniques that include the selective use of derivatives. If LIBOR ceases to exist, there is no assurance that the interest rate on our interest rate swaps will conform to the new interest under our Credit Agreement. There can further be no assurance that fluctuations in interest rates will not have a material adverse impact on our earnings and cash flows. If the fallback LIBOR rate to our interest rate swaps differs from the fallback LIBOR rate under our Credit Agreement, our interest rate swaps may be ineffective and require us to mark-to-market the ineffective portion of the interest rate swap through our income statement. Accordingly, if any of the derivative instruments we use to hedge our exposure to these various types of risk is ineffective, it may have an adverse impact on our earnings and cash flows.

Risks Related to Our Corporate Structure
Our principal shareholders are able to significantly influence all matters requiring shareholder approval.

Members of the Abu-Ghazaleh family, including our Chairman and Chief Executive Officer and one of our directors, are our principal shareholders. As of February 12, 2021, they together directly owned 29.6% of our outstanding Ordinary Shares, and
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our Chairman and Chief Executive Officer holds, and is expected to continue to hold, an irrevocable proxy to vote all of these shares. We expect our principal shareholders to continue to use their interest in our Ordinary Shares to significantly influence the direction of our management, the election of our board of directors and to determine substantially all other matters requiring shareholder approval. The concentration of our beneficial ownership may have the effect of delaying, deterring or preventing a change in control, may discourage bids for the Ordinary Shares at a premium over their market price and may otherwise adversely affect the market price of the Ordinary Shares.

A substantial number of our Ordinary Shares are available for sale in the public market, and sales of those shares could adversely affect our share price.

Future sales of our Ordinary Shares by our principal shareholders, or the perception that such sales could occur, could adversely affect the prevailing market price of our Ordinary Shares. Of the 47,375,570 Ordinary Shares outstanding as of February 12, 2021, 14,011,290 Ordinary Shares are owned by the principal shareholders and are “restricted securities.” These “restricted securities” (i) are subject to a registration rights agreement and can be registered upon demand in certain circumstances and (ii) are eligible for sale in the public market without registration under the Securities Act of 1933 (the “Securities Act”), subject to compliance with the resale volume limitations and other restrictions of Rule 144 under the Securities Act. In addition, approximately nine million of the Ordinary Shares owned by the principal shareholders have been pledged to secure payment of loans, including margin loans. Any margin call or similar action by a lender that results in a forced sale of a substantial number of Ordinary Shares pledged by the principal shareholders could adversely affect the market price of our Ordinary Shares.

Our organizational documents contain a variety of anti-takeover provisions that could delay, deter or prevent a change in control.

Various provisions of our organizational documents and Cayman Islands law may delay, deter or prevent a change in control of us that is not approved by our board of directors. These provisions include:

a classified board of directors;

a prohibition on shareholder action through written consents;

a requirement that general meetings of shareholders be called only by a majority of the board of directors or by the Chairman of the Board;

advance notice requirements for shareholder proposals and nominations;

limitations on the ability of shareholders to amend, alter or repeal our organizational documents; and

the authority of the board of directors to issue preferred shares with such terms as the board of directors may determine.

In addition, a change of control would constitute an event of default under our current credit facility, which would have a material adverse effect on us. These provisions also could delay, deter or prevent a takeover attempt.

Our shareholders have limited rights under Cayman Islands law.

We are incorporated under the laws of the Cayman Islands, and our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association and by the Companies Law of the Cayman Islands. Principles of law relating to matters, such as the validity of corporate procedures, the fiduciary duties of our management, directors and controlling shareholders and the rights of our shareholders differ from those that would apply if we were incorporated in a jurisdiction within the United States. Further, the rights of shareholders under Cayman Islands law are not as clearly established as the rights of shareholders under legislation or judicial precedent applicable in most U.S. jurisdictions. As a result, our public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than they might have as shareholders of a corporation incorporated in a U.S. jurisdiction. In addition, there is doubt as to whether the courts of the Cayman Islands would enforce, either in an original action or in an action for enforcement of judgments of U.S. courts, liabilities that are predicated upon the U.S. federal securities laws.




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General Risks
Our success depends on the services of our senior executives, the loss of any one of which could disrupt our operations.

Our ability to maintain our competitive position is dependent to a large degree on the services of our senior management team and other key employees. Our future success depends upon our ability to attract and retain executive officers and other senior management, especially to support our current operations as well as our current business strategy. Our business may be negatively affected if we are unable to retain our existing senior management personnel or attract additional qualified senior management personnel. Competition for these individuals is intense and our business may be adversely affected if we are not effective in filling critical leadership positions or in assimilating new executive talent into our organization.

Item 1B. Unresolved Staff Comments

None.

Item 2.Properties
The following table summarizes the approximate plantation acreage under production that are owned or leased by us and the principal products grown on such plantations by location as of the end of 2020:
 
 Acres Under Production 
LocationAcres OwnedAcres LeasedProducts
Costa Rica44,503 4,987 Bananas, Pineapples, Melons
Philippines— 15,260 Bananas, Pineapples
Guatemala7,537 6,146 Bananas, Melons
Kenya— 7,915 Pineapples
Uruguay3,615 4,169 Citrus
Chile3,096 1,680 Non-Tropical Fruit
Panama— 1,940 Bananas
Brazil1,820 — Bananas, Other Crops
United States856 — Melons and Other Crops
 
Our significant properties include the following, which all relate to our fresh and value-added products or bananas segment unless otherwise noted:
 
North America

We operate a total of 29 distribution centers in the United States and Canada, of which 15 are also fresh-cut facilities. We own 12 of our distribution centers, including our distribution center in Houston, Texas, a 200,000 square foot distribution center in Dallas, Texas, distribution centers in Plant City, Florida and Goodyear, Arizona, a repack facility in Winder, Georgia, and in Kankakee, Illinois, and Portland, Oregon. We also operate a state-of-the-art distribution center with a fresh-cut facility in Ontario, Canada on owned land. In 2020, we commenced operations at a new production facility on owned land in Gonzales, California and we also own one production facility in the Salinas valley of California as well as a manufacturing facility and a cooling facility, both in Yuma, Arizona. The remaining 17 distribution centers are leased from third parties. All of our distribution centers have ripening capabilities and/or other value-added services. We own an avocado packing facility in Uruapan, Mexico. We also lease four port facilities that include cold storage capabilities.

Europe

We own and operate a distribution center in the Frankfurt area of Germany. We also own and operate a fresh-cut fruit facility in Wisbech, England. In Rungis, France, a suburb of Paris, we have a leased distribution center with banana ripening capability and operate a fresh-cut produce facility. In Larissa, Greece, we own and operate a production facility for prepared fruit, tomato products and snacks.
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Asia

Our products are distributed from four leased distribution centers located at strategic ports in Japan with cold storage. In Japan, we also operate two fresh-cut fruit facilities. One is owned and the other one is leased. In Hong Kong, we lease a distribution center. In addition, we lease two distribution centers in South Korea and own one facility that includes a fresh-cut fruit and vegetable operation. Our distribution centers include state-of-the art ripening technology and other value-added services.

Central America
    
In Costa Rica, we own a juice processing plant and an IQF (individually quick frozen) fruit processing plant. In Costa Rica and Guatemala, we own and operate greenhouses where we produce tomatoes and other vegetables for export and for the local market. In Panama, we are developing a banana operation on leased land that will eventually include approximately 10,000 acres. At the end of 2020, approximately 1,900 acres of this leased land were under production.

South America

In Brazil, we own approximately 28,000 acres of land of which 1,800 acres are under production. In Uruguay, we own approximately 7,800 acres of which 4,200 acres contain a citrus plantation that is leased to a third party.

Africa

In Thika, Kenya, we own and operate a warehouse, a pineapple cannery, a fresh pineapple packing facility, and a juice production facility.

Middle East

In Jordan, we own an integrated poultry business including poultry farms, hatcheries, a feed mill, a poultry slaughterhouse and a meat processing plant which relate to our other products and services segment. In Jordan, we also own a 25 acre hydroponic on leased land. In the UAE, we lease a combined distribution/manufacturing center in Dubai. This state-of-the-art facility includes fresh-cut fruit and vegetable operations, an ultra fresh juice manufacturing operation and prepared food manufacturing. In Saudi Arabia, we own 60% of a joint venture that operates two owned distribution centers strategically located in Jeddah and Riyadh, with banana ripening, cold storage facilities and fresh-cut products and prepared food manufacturing capabilities.  

Other Properties

We own our U.S. executive headquarters building in Coral Gables, Florida, our Central America regional headquarters building in San Jose, Costa Rica and our South America regional headquarters building in Santiago, Chile. We own our office space in Guatemala City, Guatemala and Amman, Jordan. Our remaining office space in North America, Europe, Asia, Central and South America and the Middle East is leased from third parties.

Item 3.Legal Proceedings

Kunia Well Site

Refer to Note 15, Commitments and Contingencies for further information regarding this matter.

Tax related matters

In connection with a current examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $145.5 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit. On September 10, 2020, we were notified that we lost our final appeal at the Administrative level in one of the foreign jurisdictions under audit for the years 2012-2015, and likewise on December 21, 2020 for the audit year 2016. For 2012-2015, we have filed a request for an injunction in the judicial courts which would defer payment, if any, until the end of the judicial process. We intend to follow the same procedure for the year 2016. Additionally, we also plan to file an administrative injunction with the Tax Administration. In parallel with the administrative procedure, we had filed an appeal in judicial court on April 30, 2020. We strongly believe we
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will prevail at the judicial level. If not, we will appeal to the Supreme Court. We will continue to vigorously contest the adjustments and expect to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.


Item 4.Mine Safety Disclosures

Not applicable.

PART II
 
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for our Ordinary Shares

Our Ordinary Shares are traded solely on the New York Stock Exchange, under the symbol FDP, and commenced trading on October 24, 1997, the date of our initial public offering.

As of February 12, 2021, we had 253 shareholders of record, which excludes shareholders whose shares were held by brokerage firms, depositories and other institutional firms.

Dividends

Holders of our Ordinary Shares are entitled to receive dividends when and if they are declared by our Board of Directors. Our Board of Directors declared and paid a cash dividend of $0.10 per share during the first and fourth quarters of 2020 and a cash dividend of $0.05 per share during the second and third quarters of 2020. In addition, on February 23, 2021, our Board of Directors declared a cash dividend of $0.10 per share, payable on April 2, 2021 to shareholders of record on March 10, 2021. The declaration, amount and payment of future dividends, if any, will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, restrictions in our debt agreements and other factors that our Board of Directors deem relevant.




























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Performance Graph

The following graph compares the cumulative five-year total return of holders of FDP ordinary shares with the cumulative total returns of the S&P 500, S&P 500 Food Products, S&P Smallcap 600, and S&P 600 Food Products indexes. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from January 1, 2016 to January 1, 2021.

We have elected to replace the S&P 500 and S&P 500 Food Products indexes with the S&P Smallcap 600 and S&P 600 Food Products indexes because we believe they will provide a more appropriate comparison to us considering they include companies that are more similar to us in size than the previous indexes. In this transition year, in accordance with Item 201(e) of the Regulation S-K, the stock performance graph below includes the two new indexes (S&P Smallcap 600 and S&P 600 Food Products) and the two indexes previously used in the immediately preceding year (S&P 500 and S&P 500 Food Products).

fdp-20210101_g5.jpg

 1/1/201612/30/201612/29/201712/28/201812/27/20191/1/2021
Fresh Del Monte Produce Inc.100.00 157.57 125.34 75.21 94.15 65.34 
S&P 500100.00 111.96 136.40 130.42 171.49 203.04 
S&P Smallcap 600100.00 126.56 143.30 131.15 161.03 179.20 
S&P 500 Food Products100.00 112.60 111.18 90.88 113.23 119.37 
S&P 600 Food Products100.00 126.50 122.50 109.70 130.20 124.20 
 
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
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Item 6.Reserved


Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the information contained in our consolidated financial statements and the notes thereto. The following discussion includes forward-looking statements that involve certain risks and uncertainties, including, but not limited to, those described in Item 1A. Risk Factors. Our actual results may differ materially from those discussed below. See “Special Note Regarding Forward-Looking Statements” and Item 1A. Risk Factors.

Overview

We are one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and marketer of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa and the Middle East. We market our products worldwide under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability since 1892. Our major sales markets are organized as follows: North America, Europe (which includes Kenya), the Middle East (which includes North Africa) and Asia. Our global sourcing and logistics system allows us to provide regular delivery of consistently high-quality produce and value-added services to our customers. Our major producing operations are located in North, Central and South America, Asia and Africa.

Following our acquisition of Mann Packing in 2018 and the realignment of our business strategy to increase focus on our fresh and value-added products business as well as our core banana business, we changed our reportable segments in fiscal 2019 to better reflect the way we manage our operations. Our business is comprised of three reportable segments, two of which represent our primary businesses of fresh and value-added products and banana, and one that represents our other ancillary businesses.

Fresh and value-added products - includes pineapples, fresh-cut fruit, fresh-cut vegetables, melons, vegetables, non-tropical fruit (including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis), other fruit and vegetables, avocados, and prepared foods (including prepared fruit and vegetables, juices, other beverages, and meals and snacks).

Banana

Other products and services - includes our ancillary businesses consisting of sales of poultry and meat products, a plastic product business, and third-party freight services.

Certain reclassifications of prior period balances have been made for the years ended December 27, 2019 and December 28, 2018 to conform to current presentation which impacted cost of products sold, selling, general, and administrative expenses, and our segment data disclosures.

Fiscal Year

Our fiscal year end is the last Friday of the calendar year or the first Friday subsequent to the end of the calendar year, whichever is closest to the end of the calendar year. Fiscal year 2020 had 53 weeks and ended on January 1, 2021. Fiscal year 2019 had 52 weeks and ended on December 27, 2019. Fiscal year 2018 had 52 weeks and ended on December 28, 2018.

COVID-19 Pandemic Impact

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. The virus has spread globally and in March 2020, the World Health Organization declared COVID-19 a pandemic. We have taken various preventative and protective measures in response to the COVID-19 pandemic to support our team members, customers, suppliers, and local communities. At our production facilities where food safety has always been a top priority, we introduced additional operating procedures and safety protocols to include social distancing, thermal screenings and increased cleaning cycles to protect our production teams. We activated our supply chain contingency plans to mitigate any disruptions in our ability to service our customers. Additionally, we implemented remote working arrangements across various of our administrative locations, having as many global employees as possible working remotely. These measures have allowed us to maintain our commitment to providing healthy, convenient and safe Del Monte® branded products around the world during this critical time.
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The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic had a material adverse impact on our results of operations during fiscal 2020. Government imposed mandatory closures and restrictions across various of our key global markets have resulted in volatile supply and demand conditions, particularly of our higher price point products such as pineapples, avocados, and fresh-cut fruit and vegetables, as well as reduced demand in our foodservice distribution channel and shifting demand in retail. Additionally, during the first quarter of 2020, our results were negatively impacted by service cancellations and containers that were unable to clear at certain of our Chinese ports. As a result, we had to redirect our products to markets such as Japan, Korea, and Hong Kong which had a negative impact on our financial performance due to oversupply in these markets. In addition to negatively impacting our net sales, the COVID-19 pandemic and related government restrictions have resulted in increased costs for our business, particularly in our farming operations in Central America where we have incurred incremental costs to implement social distancing protocols and more frequent cleaning cycles. We continue to work collaboratively with our network of third-party growers and suppliers to mitigate the impact of COVID-19 on our supply chain and costs. Furthermore, during fiscal 2020, some of our workers contracted the COVID-19 virus which resulted in a temporary facility closure in one location, reduced production hours, increased cleaning and logistical costs, as well as an adverse impact on our net sales due to the perishability of our products.

In early 2021, health agencies in certain regions where we operate (including North America and Europe) approved vaccines for combating the COVID-19 virus. While administration of the vaccines has begun, mass distribution is unlikely to occur until late 2021 as local governments have prioritized initial distribution to certain healthcare and essential workers as well as those more susceptible to the effects of the virus. As a result, government-imposed restrictions aimed at mitigating the spread of the virus across our key global markets and the related volatility in supply and demand conditions are expected to continue to negatively impact our future operating results. While we expect the impacts of COVID-19 to continue to have an effect on our business, the extent of the impact will depend on future developments, including the duration of the pandemic and related government restrictions, all of which are uncertain and cannot be predicted.

In addition, we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. During fiscal 2020 we took several steps to conserve our liquidity position in response to the pandemic including reducing our quarterly cash dividend from ten cents ($0.10) per share in the first quarter of 2020 to five cents ($0.05) per share in the second and third quarters of 2020 and delaying certain of our planned capital expenditures to 2021. As a result of our improved cash flow, our Board of Directors was able to declare an increased quarterly cash dividend of ten cents ($0.10) per share in the fourth quarter of 2020 and the first quarter of 2021.

Refer to the "Results of Operations" and “Liquidity and Capital Resources” sections below, as well as Part I. Item 1A, “Risk Factors” for further discussion.
 
Optimization Program

During fiscal 2020, we performed a comprehensive review of our asset portfolio aimed at identifying non-strategic and underutilized assets to dispose of while reducing costs and driving further efficiencies in our operations (hereon referred to as the “Optimization Program”). As a result of the review, we identified assets across all of our regions which we plan to sell through the first quarter of 2022 for total anticipated cash proceeds of approximately $100.0 million. These assets primarily consist of underutilized facilities and land, some of which are currently reflected in assets held for sale on our Consolidated Balance Sheet as of fiscal 2020. During fiscal 2020, we received cash proceeds of approximately $40.0 million in connection with asset sales under the Optimization Program. The gain on the sales of these assets is reflected in the $22.2 million net gain on the sale of property, plant, and equipment on our Consolidated Statement of Operations for fiscal 2020.

Included as part of this Optimization Program is the consolidation of our Mann Packing operations from four facilities into one facility in Gonzales, California. The consolidation of Mann Packing will allow us the unique advantage of processing fresh-cut fruit and fresh-cut vegetables in one facility in the Salinas Valley and will optimize labor and distribution costs. During the third quarter of 2020, we completed our move to Gonzales which we anticipate will enable us to improve gross profit in our fresh and value-added products segment by approximately $10 million on an annual basis, a benefit expected to be achieved by the fourth quarter of 2021.

Net Sales

Our net sales are affected by numerous factors, including mainly the balance between the supply of and demand for our products 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. As a result of seasonal sales price fluctuations, we have
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historically realized a greater portion of our net sales and gross profit during the first two calendar quarters of the year. For example, seasonal variations in demand for bananas as a result of increased supply and competition from other fruit are reflected in the seasonal fluctuations of banana prices, with the first six months of each year generally exhibiting stronger demand and higher prices, except in those years where an excess supply exists.  In our fresh and value-added products segment, there are seasonal variations in sales of our prepared foods, which generally realize the largest portion of net sales in the third and fourth quarters of the year, and our non-tropical fruit products which reach peak sales season from October to May.

Our strategy for net sales growth is focused on protecting and growing our core business as well as driving innovation and expansion of our value-added categories, including through the development of new products and by targeting the convenience store and foodservice trade in our major global markets. In North America, we expect additional net sales growth by further expanding the market reach of our Mann Packing products including fresh and fresh-cut vegetables and meals and snacks.

Since our financial reporting currency is the U.S. dollar, our net sales are significantly affected by fluctuations in the value of the currency in which we conduct our sales versus the dollar, with a weaker dollar versus such currencies resulting in increased net sales in dollar terms. Including the effect of our foreign currency hedges, net sales in 2020 were negatively impacted by $16.3 million primarily due to fluctuations in exchange rates versus the euro, Korean won, and Chilean peso.

Cost of Products Sold

Cost of products sold is primarily composed of two elements:

Product costs - primarily composed of cultivation (the cost of growing crops), harvesting, packaging, labor, depreciation and farm administration. Product cost for produce obtained from independent growers is composed of procurement and packaging costs.

Logistics costs - include land and sea transportation and expenses related to port facilities and distribution centers. Sea transportation cost is the most significant component of logistics costs and is comprised of:

Ship operating expenses - include operations, maintenance, depreciation, insurance, fuel (the cost of which is subject to commodity price fluctuations), and port charges.

Chartered ship costs - include the cost of chartering the ships, fuel and port charges.

Container equipment-related costs - include leasing expense and in the case of owned equipment, also depreciation expense.

Third-party containerized shipping costs - include the cost of using third-party shipping in our logistics operations.

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 sold is fixed, both with respect to our operations and with respect to the cost of produce purchased from independent growers from whom we have agreed to purchase all the products they produce. Accordingly, higher volumes produced on company-owned farms directly reduce the average per-box cost, while lower volumes directly increase the average per-box cost. In addition, because the volume that will actually be produced on our farms and by independent growers in any given year depends on a variety of factors, including weather, that are beyond our control or the control of our independent growers, it is difficult to predict volumes and per-box costs.

Variations in containerboard prices, which affect the cost of boxes and other packaging materials, and fuel prices can have a significant impact on our product cost and our profit margins. Also, variations in the production yields, fertilizers and other input costs and the cost to procure products from independent growers can have a significant impact on our costs. Containerboard, plastic, resin and fuel prices have historically been volatile.

Since our financial reporting currency is the U.S. dollar, our costs are affected by fluctuations in the value of the currency in which we have significant operations versus the dollar, with lower cost resulting from a stronger U.S. dollar. During 2020, cost of products sold was positively impacted by approximately $5.5 million primarily driven by a stronger dollar as compared to the Chilean peso and Mexican peso, partially offset by the negative impact of a weaker dollar compared to the Philippine peso.
 


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Income Taxes
 
The provision for income taxes in 2020 was $5.0 million. Income taxes consist of the consolidation of the tax provisions, computed on a separate entity basis, in each country in which we have operations. Since we are a non-U.S. company with substantial operations outside the United States, a substantial portion of our results of operations is not subject to U.S. taxation. Several of the countries in which we operate have lower tax rates than the United States. We are subject to U.S. taxation on our operations in the United States. From time to time, tax authorities in various jurisdictions in which we operate audit our tax returns and review our tax positions. There are audits presently pending in various countries. There can be no assurance that any tax audits, or changes in existing tax laws or interpretations in countries in which we operate will not result in an increased effective tax rate for us.

In connection with a current examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $145.5 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit.

On September 10, 2020, we were notified that we lost our final appeal at the Administrative level in one of the foreign jurisdictions under audit for the years 2012-2015, and likewise on December 21, 2020 for the audit year 2016. For the years 2012-2015, we have filed a request for an injunction in the judicial courts which would defer payment, if any, until the end of the judicial process. We intend to follow the same procedure for the year 2016. Additionally, we also plan to file an administrative injunction with the Tax Administration.

In parallel with the administrative procedure, we filed an appeal in judicial court on April 30, 2020. We strongly believe we will prevail at the judicial level. If not, we will appeal to the Supreme Court. We will continue to vigorously contest the adjustments and expect to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.

We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. Accordingly, we have not accrued any additional amounts based upon the proposed adjustments. There can be no assurance that these matters will be resolved in our favor, and an adverse outcome of either matter, or any future tax examinations involving similar assertions, could have a material effect on our financial condition, results of operations and cash flows.

RESULTS OF OPERATIONS
 
The following table presents, for each of the periods indicated, certain income statement data expressed as a percentage of net sales:

 
 Year ended
January 1, 2021December 27, 2019December 28, 2018
Statement of Income Data:   
Net sales100.0 %100.0 %100.0 %
Gross profit6.0 6.8 6.4 
Selling, general and
administrative expenses
4.7 4.5 4.5 
Operating income 1.8 2.5 0.9 
Interest expense0.5 0.6 0.5 
Net income (loss) attributable to Fresh Del Monte Produce Inc.1.2 1.5 (0.5)
 
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The following tables present for each of the periods indicated (i) net sales by geographic region, (ii) net sales by segment and (iii) gross profit by segment and, in each case, the percentage of the total represented thereby: