FRESH DEL MONTE PRODUCE INC [FDP] Filings

10-Q 1 fdp-20240927.htm 10-Q fdp-20240927

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————————

FORM 10-Q

———————————

(Mark One)

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

For the quarterly period ended September 27, 2024

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

For the transition period from to

333-07708

(Commission file number)

———————————

FRESH DEL MONTE PRODUCE INC.

(Exact Name of Registrant as Specified in Its Charter)

———————————


Cayman Islands			N/A
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S Employer Identification No.)

c/o H&C Corporate Services Limited
P.O. Box 698, 4th Floor, Apollo House, 87 Mary Street
George Town,	Grand Cayman,	KY1-1107
Cayman Islands			N/A
(Address of Registrant’s Principal Executive Office)			(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 Office)

———————————

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary Shares, $0.01 Par Value Per Share	FDP	New York Stock Exchange

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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐
Smaller reporting company	☐
Emerging growth company	☐

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

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

As of October 25, 2024, there were 47,941,861 ordinary shares of Fresh Del Monte Produce Inc. issued and outstanding.

TABLE OF CONTENTS


		Page
PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

	Consolidated Balance Sheets (unaudited) as of September 27 , 2024 and December 29, 2023.	1

	Consolidated Statements of Operations (unaudited) for the quarters and nin e months ended September 27, 2024 and September 2 9 , 2023.	2

	Consolidated Statements of Comprehensive Income (unaudited) for the quarters and nine months ended September 27, 2024 and September 2 9 , 202 3.	3

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 27, 2024 and September 2 9 , 202 3.	4

	Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited) for the quarters and nine months ended September 27, 2024 and September 2 9 , 202 3.	5

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26

Item 3. Quantitative and Qualitative Disclosures About Market Risk		39

Item 4. Controls and Procedures		39

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		40

Item 5. Other Information		40

Item 6. Exhibits		41

Signatures		42

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(U.S. dollars in millions, except share and per share data)


	September 27, 2024		December 29, 2023
Assets
Current assets:
Cash and cash equivalents	$	50.8	$	33.8
Trade accounts receivable, net of allowance of $29.4 and $20.8, respectively	390.3		387.0
Other accounts receivable, net of allowance of $7.5 and $5.6, respectively	82.0		95.1
Inventories, net	588.7		599.9
Assets held for sale	25.6		4.5
Prepaid expenses and other current assets	28.9		24.0
Total current assets	1,166.3		1,144.3
Investments in and advances to unconsolidated companies	36.2		22.2
Property, plant and equipment, net	1,203.2		1,256.4
Operating lease right-of-use assets	194.7		213.8
Goodwill	402.2		401.9
Intangible assets, net	33.2		33.3
Deferred income taxes	52.6		51.5
Other noncurrent assets	68.5		60.7
Total assets	$	3,156.9	$	3,184.1
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	489.6	$	479.0
Current maturities of debt and finance leases	1.5		1.4
Current maturities of operating leases	38.8		48.6
Income taxes and other taxes payable	27.0		11.6

Total current liabilities	556.9		540.6
Long-term debt and finance leases	274.8		406.1
Retirement benefits	83.5		82.3
Deferred income taxes	77.3		72.7
Operating leases, less current maturities	130.5		142.1
Other noncurrent liabilities	26.3		27.6
Total liabilities	1,149.3		1,271.4
Commitments and contingencies (See note 9)
Redeemable noncontrolling interests	—		—
Shareholders' equity:
Preferred shares, $0.01 par value; 50,000,000 shares authorized; none issued or outstanding	—		—
Ordinary shares, $0.01 par value; 200,000,000 shares authorized; 47,939,120 and 47,629,018 issued and outstanding, respectively	0.5		0.5
Paid-in capital	602.9		597.7
Retained earnings	1,427.0		1,341.4
Accumulated other comprehensive loss	(39.2)		(43.3)
Total Fresh Del Monte Produce Inc. shareholders' equity	1,991.2		1,896.3
Noncontrolling interests	16.4		16.4
Total shareholders' equity	2,007.6		1,912.7
Total liabilities, redeemable noncontrolling interest and shareholders' equity	$	3,156.9	$	3,184.1

See accompanying notes.

Table of Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(U.S. dollars in millions, except share and per share data)


	Quarter ended				Nine months ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net sales	$	1,019.5	$	1,003.1	$	3,267.0	$	3,312.1
Cost of products sold	925.7		928.7		2,977.8		3,023.9
Gross profit	93.8		74.4		289.2		288.2
Selling, general and administrative expenses	47.9		48.1		148.6		142.6
Gain on disposal of property, plant and equipment, net and subsidiary	8.2		1.6		26.6		35.8
Asset impairment and other charges, net	0.2		2.5		1.2		9.5
Operating income	53.9		25.4		166.0		171.9
Interest expense	4.4		6.0		14.8		20.5
Interest income	0.2		0.6		0.8		1.1
Other (income) expense, net	(0.1)		7.1		5.2		22.7
Income before income taxes	49.8		12.9		146.8		129.8
Income tax provision	7.9		4.1		25.6		24.9
Net income	$	41.9	$	8.8	$	121.2	$	104.9
Less: Net (loss) income attributable to redeemable and noncontrolling interests	(0.2)		0.4		(0.6)		9.8
Net income attributable to Fresh Del Monte Produce Inc.	$	42.1	$	8.4	$	121.8	$	95.1
Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Basic	$	0.88	$	0.17	$	2.54	$	1.98
Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Diluted	$	0.88	$	0.17	$	2.54	$	1.97
Dividends declared per ordinary share	$	0.25	$	0.20	$	0.75	$	0.55
Weighted average number of ordinary shares:
Basic	47,936,254		48,121,978		47,855,020		48,015,874
Diluted	48,023,238		48,261,757		47,967,458		48,209,443

See accompanying notes.

Table of Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(U.S. dollars in millions)


	Quarter ended				Nine months ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net income	$	41.9	$	8.8	$	121.2	$	104.9
Other comprehensive income:
Net unrealized (loss) gain on derivatives, net of tax	(6.3)		4.8		0.5		9.1
Net unrealized foreign currency translation gain (loss)	10.0		(5.5)		3.3		(2.8)
Net change in retirement benefit adjustment, net of tax	1.3		0.4		0.3		0.4
Comprehensive income	$	46.9	$	8.5	$	125.3	$	111.6
Less: comprehensive (loss) income attributable to redeemable and noncontrolling interests	(0.2)		0.4		(0.6)		9.8
Comprehensive income attributable to Fresh Del Monte Produce Inc.	$	47.1	$	8.1	$	125.9	$	101.8

See accompanying notes.

Table of Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(U.S. dollars in millions)


	Nine months ended
	September 27, 2024		September 29, 2023
Operating activities:
Net income	$	121.2	$	104.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	59.2		64.9
Amortization of debt issuance costs	0.4		0.4
Share-based compensation expense	4.8		7.6
Asset impairments	0.7		8.1
Change in uncertain tax positions	(1.3)		0.5

Gain on disposal of property, plant and equipment, net and subsidiary	(26.6)		(35.8)

Deferred income taxes	3.4		(5.0)



Other, net	(4.0)		(0.5)
Changes in operating assets and liabilities
Receivables	(0.4)		(7.1)
Inventories	12.7		74.7
Prepaid expenses and other current assets	(6.6)		(3.4)
Accounts payable and accrued expenses	26.2		(33.8)
Other assets and liabilities	(2.5)		4.6
Net cash provided by operating activities	187.2		180.1
Investing activities:
Capital expenditures	(34.1)		(40.7)
Proceeds from sales of property, plant and equipment and subsidiary	35.6		115.5
Insurance proceeds received for damage to property, plant and equipment, net	5.7		—



Investments in and advances to unconsolidated companies	(6.2)		(4.4)
Other investing activities	—		(0.5)
Net cash provided by investing activities	1.0		69.9
Financing activities:
Proceeds from debt	315.4		383.2
Payments on debt	(445.8)		(522.0)
Purchase of redeemable noncontrolling interest	—		(5.2)
Distributions to noncontrolling interests	—		(17.9)

Share-based awards settled in cash for taxes	(0.9)		(0.8)

Dividends paid	(35.9)		(26.4)

Payment of deferred financing costs	(2.2)		—
Other financing activities	(2.7)		(2.1)
Net cash used in financing activities	(172.1)		(191.2)
Effect of exchange rate changes on cash	0.9		1.9
Net increase in cash and cash equivalents	17.0		60.7
Cash and cash equivalents, beginning	33.8		17.2
Cash and cash equivalents, ending	$	50.8	$	77.9
Supplemental cash flow information:
Cash paid for interest	$	14.4	$	19.5
Cash paid for income taxes	$	11.8	$	12.2
Non-cash financing and investing activities:

Right-of-use assets obtained in exchange for new operating lease obligations	$	28.1	$	46.3

Dividends on restricted share units	$	0.4	$	0.4
Other accounts receivable obtained from disposition of subsidiary	$	—	$	3.0
Note receivable received in exchange for minority interest in subsidiary	$	0.5	$	—
Non-cash conversion of note receivable in exchange for investment in unconsolidated company	$	0.7	$	—

See accompanying notes.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

(Unaudited) (U.S. dollars in millions, except share data)


	Ordinary Shares Outstanding	Ordinary Shares		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Fresh Del Monte Produce Inc. Shareholders' Equity		Noncontrolling Interests		Total Shareholders' Equity		Redeemable Noncontrolling Interest
Balance as of December 29, 2023	47,629,018	$	0.5	$	597.7	$	1,341.4	$	(43.3)	$	1,896.3	$	16.4	$	1,912.7	$	—


Settlement of restricted stock units	267,114	—		—		—		—		—		—		—		—
Share-based payment expense	—	—		0.6		—		—		0.6		—		0.6		—





Dividend declared	—	—		0.4		(12.3)		—		(11.9)		—		(11.9)		—
Comprehensive income:
Net income	—	—		—		26.1		—		26.1		—		26.1		—
Unrealized gain on derivatives, net of tax	—	—		—		—		5.8		5.8		—		5.8		—

Net unrealized foreign currency translation loss	—	—		—		—		(4.6)		(4.6)		—		(4.6)		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		(0.6)		(0.6)		—		(0.6)		—
Comprehensive income										26.7		—		26.7		—
Balance as of March 29, 2024	47,896,132	$	0.5	$	598.7	$	1,355.2	$	(42.7)	$	1,911.7	$	16.4	$	1,928.1	$	—


Settlement of restricted stock units	39,536	—		—		—		—		—		—		—		—
Share-based payment expense	—	—		2.2		—		—		2.2		—		2.2		—



Dividend declared	—	—		—		(11.9)		—		(11.9)		—		(11.9)		—


Comprehensive income:
Net income (loss)	—	—		—		53.6		—		53.6		(0.3)		53.3		—
Unrealized gain on derivatives, net of tax	—	—		—		—		1.0		1.0		—		1.0		—
Net unrealized foreign currency translation loss	—	—		—		—		(2.1)		(2.1)		—		(2.1)		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		(0.4)		(0.4)		—		(0.4)		—
Comprehensive income (loss)										52.1		(0.3)		51.8		—
Balance as of June 28, 2024	47,935,668	$	0.5	$	600.9	$	1,396.9	$	(44.2)	$	1,954.1	$	16.1	$	1,970.2	$	—


Settlement of restricted stock units	3,452	—		—		—		—		—		—		—		—
Share-based payment expense	—	—		2.0		—		—		2.0		—		2.0		—

Capital contribution from noncontrolling interest	—	—		—		—		—		—		0.5		0.5		—

Dividend declared	—	—		—		(12.0)		—		(12.0)		—		(12.0)		—
Comprehensive income (loss):
Net income (loss)	—	—		—		42.1		—		42.1		(0.2)		41.9		—
Unrealized loss on derivatives, net of tax	—	—		—		—		(6.3)		(6.3)		—		(6.3)		—
Net unrealized foreign currency translation gain	—	—		—		—		10.0		10.0		—		10.0		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		1.3		1.3		—		1.3		—
Comprehensive income (loss)										47.1		(0.2)		46.9		—
Balance as of September 27, 2024	47,939,120	$	0.5	$	602.9	$	1,427.0	$	(39.2)	$	1,991.2	$	16.4	$	2,007.6	$	—

Table of Contents


	Ordinary Shares Outstanding	Ordinary Shares		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Fresh Del Monte Produce Inc. Shareholders' Equity		Noncontrolling Interests		Total Shareholders' Equity		Redeemable Noncontrolling Interest
Balance at December 30, 2022	47,838,680	$	0.5	$	548.1	$	1,397.6	$	(41.5)	$	1,904.7	$	20.9	$	1,925.6	$	49.4
Exercises of stock options	2,418	—		—		—
Settlement of restricted stock units	157,648	—		—		—		—		—		—		—		—
Share-based payment expense	—	—		2.3		—		—		2.3		—		2.3		—

Distribution to noncontrolling interests	—	—		—		—		—		—		—		—		(0.3)

Dividend declared	—	—		0.3		(7.5)		—		(7.2)		—		(7.2)		—
Comprehensive income:
Net income	—	—		—		39.0		—		39.0		8.5		47.5		0.3
Unrealized gain on derivatives, net of tax	—	—		—		—		—		—		—		—		—

Net unrealized foreign currency translation gain	—	—		—		—		2.0		2.0		—		2.0		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		(0.4)		(0.4)		—		(0.4)		—
Comprehensive income										40.6		8.5		49.1		0.3
Balance as of March 31, 2023	47,998,746	$	0.5	$	550.7	$	1,429.1	$	(39.9)	$	1,940.4	$	29.4	$	1,969.8	$	49.4

Settlement of restricted stock units	88,203	—		—		—		—		—		—		—		—
Share-based payment expense	—	—		2.8		—		—		2.8		—		2.8		—


Dividend declared	—	—		0.1		(9.7)		—		(9.6)		—		(9.6)		—
Distribution to noncontrolling interests	—	—		—		—		—		—		(14.3)		(14.3)		(1.1)
Settlement of redeemable noncontrolling interests	—	—		42.7		—		—		42.7		—		42.7		(47.9)
Comprehensive income:
Net income (loss)	—	—		—		47.7		—		47.7		1.0		48.7		(0.4)
Unrealized gain on derivatives, net of tax	—	—		—		—		4.3		4.3		—		4.3		—

Net unrealized foreign currency translation gain	—	—		—		—		0.7		0.7		—		0.7		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		0.4		0.4		—		0.4		—
Comprehensive income (loss)										53.1		1.0		54.1		(0.4)
Balance as of June 30, 2023	48,086,949	$	0.5	$	596.3	$	1,467.1	$	(34.5)	$	2,029.4	$	16.1	$	2,045.5	$	—
Settlement of restricted stock units	39,529	—		—		—		—		—		—		—		—


Share-based payment expense	—	—		2.4		—		—		2.4		—		2.4		—



Dividend declared	—	—		0.1		(9.7)		—		(9.6)		—		(9.6)		—
Comprehensive income (loss):
Net income	—	—		—		8.4		—		8.4		0.4		8.8		—
Unrealized gain on derivatives, net of tax	—	—		—		—		4.8		4.8		—		4.8		—
Net unrealized foreign currency translation loss	—	—		—		—		(5.5)		(5.5)		—		(5.5)		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		0.4		0.4		—		0.4		—
Comprehensive income										8.1		0.4		8.5		—
Balance as of September 29, 2023	48,126,478	$	0.5	$	598.8	$	1,465.8	$	(34.8)	$	2,030.3	$	16.5	$	2,046.8	$	—

See accompanying notes.

Table of Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. General

Reference in this Report to “Fresh Del Monte”, “we”, “our” and “us” and the “Company” refer to Fresh Del Monte Produce Inc. and its subsidiaries, unless the context indicates otherwise.

Nature of Business

We were incorporated under the laws of the Cayman Islands in 1996. 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, 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 production operations are located in North, Central and South America, Asia and Africa. Our products are sourced from company-owned operations and through supply contracts with independent growers.

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 (which includes fresh-cut salads), 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 third-party freight and logistic services business and our Jordanian poultry and meats business.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements for the quarter and nine months ended September 27, 2024 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for fair presentation have been included. Operating results for the quarter and nine months ended September 27, 2024 are subject to significant seasonal variations and are not necessarily indicative of the results that may be expected for the year ending December 27, 2024. For further information, refer to the Consolidated Financial Statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 29, 2023.

We are required to evaluate events occurring after September 27, 2024 for recognition and disclosure in the unaudited Consolidated Financial Statements for the quarter and nine months ended September 27, 2024. Events are evaluated based on whether they represent information existing as of September 27, 2024, which require recognition in the unaudited Consolidated Financial Statements, or new events occurring after September 27, 2024 which do not require recognition but require disclosure if the event is significant to the unaudited Consolidated Financial Statements. We evaluated events occurring subsequent to September 27, 2024 through the date of issuance of these unaudited Consolidated Financial Statements.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

Redeemable Noncontrolling Interest

As part of the Mann Packing acquisition in 2018, we acquired a put option exercisable by the 25% shareholder of one of the acquired subsidiaries. The put option allowed the noncontrolling shareholder to sell its 25% noncontrolling interest to us for a multiple of the subsidiary's adjusted earnings. As the put option was outside of our control, the carrying value of the 25% noncontrolling interest was presented as a redeemable noncontrolling interest outside of permanent equity on our Consolidated Balance Sheet. At each reporting period, the redeemable noncontrolling interest was recognized at the higher of (1) the initial carrying amount adjusted for accumulated earnings and distributions or (2) the contractually-defined redemption value as of the balance sheet date.

During the year ended December 29, 2023, the noncontrolling shareholder exercised its put option right and accordingly, we closed the purchase of the remaining 25% of this subsidiary for $5.2 million in cash consideration. The transaction was accounted for as an equity transaction, with the differential between the redeemable noncontrolling interest carrying amount at the time of closing and the cash purchase price being recognized as a $42.7 million increase in paid-in capital within shareholders' equity on our Consolidated Balance Sheet.

2. Recently Issued Accounting Pronouncements

New Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU amends Accounting Standards Codification (ASC) 280 to enhance the nature and frequency of segment disclosures. Specifically, the update requires disclosure of significant segment expenses regularly provided to the Chief Operating Decision Maker ("CODM") included within the reported measures of a segment's profit or loss, the amount and composition of other segment items in order to reconcile to the reported measures of a segment's profit or loss, the CODM's title and position, and how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and how to allocate resources. The ASU also requires that annual disclosures about a reportable segment's profit or loss and assets required by Topic 280 be made in interim periods. ASU 2023-07 is effective for years beginning after December 15, 2023 and interim periods beginning after December 15, 2024 with early adoption permitted. We have evaluated the impact of the adoption of this ASU and concluded it has no impact on our financial condition, results of operations and cash flows.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU amends ASC 740 to enhance the nature of disclosures for income taxes. Specifically, the ASU requires public business entities to disclose additional information in categories defined within the ASU within the reconciliation of the effective tax rate to the statutory rate for federal, state and foreign income taxes. Additionally, the ASU requires disclosure of taxes paid, net of refunds received, disaggregated by federal, state and foreign taxes. ASU 2023-09 is effective for years beginning after December 15, 2024 with early adoption permitted. We have evaluated the impact of the adoption of this ASU and concluded it has no impact on our financial condition, results of operations and cash flows.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

3. Asset Impairment and Other Charges, Net

The following represents a summary of asset impairment and other (credits) charges, net recorded during the quarters and nine months ended September 27, 2024 and September 29, 2023 (U.S. dollars in millions):


	Quarter ended						Nine months ended
	September 27, 2024						September 27, 2024
	Long-lived and other asset impairment		Exit activity and other charges		Total		Long-lived and other asset impairment		Exit activity and other charges		Total
Banana segment:
California Air Resource Board reserve (1)	$	—	$	—	$	—	$	—	$	0.5	$	0.5
Philippines impairment of banana-related fixed assets	—		—		—		1.2		—		1.2
Fresh and value-added products segment:
Insurance recovery related to South American warehouse	—		—		—		—		(2.0)		(2.0)
Reduction in repair reserves related to 2023 flooding in Greece (2)	—		—		—		(0.5)		—		(0.5)
Chile property and equipment damage due to rain and windstorms			0.2		0.2		—		0.2		0.2


Other:
Legal settlement (3)	—		—		—		—		1.8		1.8



Total asset impairment and other charges, net	$	—	$	0.2	$	0.2	$	0.7	$	0.5	$	1.2


	Quarter ended						Nine months ended
	September 29, 2023						September 29, 2023
	Long-lived and other asset impairment		Exit activity and other charges		Total		Long-lived and other asset impairment		Exit activity and other charges		Total
Banana segment:
Impairment of low-yielding banana farms in the Philippines	$	3.7	$	—	$	3.7	$	3.7	$	—	$	3.7
Fresh and value-added products segment:
Impairment and write-off of property and equipment due to flooding in Greece (4)	0.9		—		0.9		0.9		—		0.9
Impairment of low productivity grape vines in South America and related costs	—		—		—		1.7		0.1		1.8
Other:
2023 cybersecurity incident expenses (5)	—		(2.8)		(2.8)		—		1.3		1.3
Impairment of assets related to idle land in Central and South America	0.7		—		0.7		1.8		—		1.8
Total asset impairment and other charges, net	$	5.3	$	(2.8)	$	2.5	$	8.1	$	1.4	$	9.5

(1) During the nine months ended September 27, 2024, we recorded a $0.5 million reserve relating to a potential regulatory matter. Refer to Note 9, “Commitments and Contingencies.”

(2) Due to damages caused by severe flooding in Greece during the third quarter of 2023, we recorded reserves related to estimated damages to our property, plant and equipment. During the nine months ended September 27, 2024, we determined it was appropriate to reduce this reserve by $0.5 million based on actual repair charges incurred.

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(3) During the nine months ended September 27, 2024, we entered into a settlement agreement with respect to a litigation matter by a former employee regarding a legacy claim stemming from the 1970s. Accordingly, we incurred charges of $1.8 million, net of insurance reimbursements, associated with the settlement as of September 27, 2024. Refer to Note 9, “Commitments and Contingencies.”

(4) During the nine months ended September 29, 2023, we incurred costs related to property and equipment damage of $0.9 million, primarily related to severe flooding caused by heavy rainstorms in Greece.

(5) During the nine months ended September 29, 2023, we incurred cybersecurity expenses of $1.3 million, primarily related to the engagement of specialized legal counsel and other incident response advisors.

4. Income Taxes

In connection with the examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $173.9 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.

In one of the foreign jurisdictions, we are currently contesting tax assessments related to the 2012-2015 audit years and the 2016 audit year in both the administrative court and the judicial court. During 2019 and 2020, we filed actions contesting the tax assessment in the administrative office. Our initial challenge to each of these tax assessments was rejected, and we subsequently lost our appeals at the administrative court. We have subsequently filed actions to contest each of these tax assessments in the country’s judicial courts. In addition, we have filed a request for injunction to the judicial court to stay the tax authorities' collection efforts for these two tax assessments, pending final judicial decisions. The court granted our injunction with respect to the 2016 audit year, however denied our injunction with respect to the 2012-2015 audit years. We timely appealed the denial of the injunction, and on August 10, 2022 the appellate court overturned the denial and granted our injunction for the 2012-2015 audit years with a trial date set for July 4, 2025. Pursuant to local law, we registered real estate collateral with an approximate fair market value of $7.0 million in connection with the grant of the 2016 audit year injunction. This real estate collateral has a net book value of $3.8 million as of the quarter ended September 27, 2024. In addition, in connection with the grant of the 2012-2015 audit year injunction, we registered real estate collateral with an approximate fair market value of $29.4 million, and a net book value of $4.6 million as of the quarter ended September 27, 2024. The registration of this real estate collateral does not affect our operations in the country.

In the other foreign jurisdiction, the administrative court denied our appeal, and on March 4, 2020 we filed an action in the judicial court to contest the administrative court's decision. The case is still pending.

We will continue to vigorously contest the adjustments and intend to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.

Additionally, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. Pursuant to the implementation dates prescribed in the Directive, it is expected the rules will be effective for the Company for the 2025 fiscal year. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries, however, we may not be able to completely mitigate the impact of the legislation which could have an adverse material effect on our financial condition, results of operations and cash flows.

Income tax provision was $7.9 million for the quarter ended September 27, 2024 compared with $4.1 million for the quarter ended September 29, 2023 and was $25.6 million for the nine months ended September 27, 2024 compared with $24.9 million for the nine months ended September 29, 2023. The increase in both periods is primarily due to increased earnings in certain higher tax jurisdictions partially offset by the prior year tax effects related to the sale of stock of a subsidiary and asset sales in Saudi Arabia and North America.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

5. Allowance for Credit Losses

We estimate expected credit losses on our trade receivables and financing receivables in accordance with Accounting Standards Codification (“ASC”) 326 - Financial Instruments - Credit Losses.

Trade Receivables

Trade receivables as of September 27, 2024 and December 29, 2023 were $390.3 million and $387.0 million, net of allowances of $29.4 million and $20.8 million, respectively. Our allowance for trade receivables as of September 27, 2024 consists of two components: a $10.7 million allowance for credit losses and a $18.7 million allowance for customer claims accounted for under the scope of ASC 606 - Revenue Recognition. As of December 29, 2023, our allowance for trade receivables consisted of a $7.4 million allowance for credit losses and a $13.4 million allowance for customer claims accounted for under the scope of ASC 606 - Revenue Recognition.

As a result of our robust credit monitoring practices, the industry in which we operate, and the nature of our customer base, the credit losses associated with our trade receivables have historically been insignificant in comparison to our annual net sales. We measure the allowance for credit losses on trade receivables on a collective (pool) basis when similar risk characteristics exist. We generally pool our trade receivables based on the geographic region or country to which the receivables relate. Receivables that do not share similar risk characteristics are evaluated for collectability on an individual basis.

Our historical credit loss experience provides the basis for our estimation of expected credit losses. We generally use a three-year average annual loss rate as a starting point for our estimation, and make adjustments to the historical loss rate to account for differences in current conditions impacting the collectability of our receivable pools. We generally monitor macroeconomic indicators to assess whether adjustments are necessary to reflect current conditions.

The table below presents a rollforward of our trade receivable allowance for credit losses for the nine months ended September 27, 2024 and September 29, 2023 (U.S. dollars in millions):


	Nine months ended
Trade receivables		September 27, 2024		September 29, 2023
Allowance for credit losses:
Balance, beginning of period		$	7.4	$	9.3
Provision for uncollectible amounts		3.4		0.8
Deductions to allowance related to write-offs		—		(2.5)
Recoveries of amounts previously written off		(0.1)		—


Balance, end of period		$	10.7	$	7.6

Financing Receivables

Financing receivables are included in other accounts receivable, net on our Consolidated Balance Sheets and are recognized at amortized cost less an allowance for estimated credit losses. Financing receivables include seasonal advances to growers and suppliers, which are usually short-term in nature, and other financing receivables.

A significant portion of the fresh produce we sell is acquired through supply contracts with independent growers. In order to ensure the consistent high quality of our products and packaging, we make advances to independent growers and suppliers. These growers and suppliers typically sell all of their production to us and make payments on their advances as a deduction to the agreed upon selling price of the fruit or packaging material. The majority of the advances to growers and suppliers are for terms less than one year and typically span a growing season. In certain cases, there may be longer term advances with terms of up to five years.

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We measure the allowance for credit losses on advances to suppliers and growers on a collective (pool) basis when similar risk characteristics exist. We generally pool our advances based on the country to which they relate, and further disaggregate them based on their current or past-due status. We generally consider an advance to a grower to be past due when the advance is not fully paid within the respective growing season. The allowance for advances to growers and suppliers that do not share similar risk characteristics are determined on a case-by-case basis, depending on the expected production for the season and other contributing factors. The advances are typically collateralized by property liens and pledges of the respective season’s produce. Occasionally, we agree to a payment plan with these growers or take steps to recover the advance via established collateral. We may write-off uncollectible financing receivables after our collection efforts are exhausted.

Our historical credit loss experience provides the basis for our estimation of expected credit losses. We generally use a three-year average annual loss rate as a starting point for our estimation, and make adjustments to the historical loss rate to account for differences in current or expected future conditions. We generally monitor macroeconomic indicators as well as other factors, including unfavorable weather conditions and crop diseases, which may impact the collectability of the advances when assessing whether adjustments to the historical loss rate are necessary.

The following table details the advances to growers and suppliers based on their credit risk profile (U.S. dollars in millions):


	September 27, 2024				December 29, 2023
	Current		Past-Due		Current		Past-Due
Gross advances to growers and suppliers	$	13.5	$	17.4	$	25.1	$	10.8

The allowance for advances to growers and suppliers for the nine months ended September 27, 2024 and September 29, 2023 were as follows (U.S. dollars in millions):


	Nine months ended
		September 27, 2024		September 29, 2023
Allowance for advances to growers and suppliers:
Balance, beginning of period		$	7.5	$	4.9
Provision for uncollectible amounts		4.5		2.9
Deductions to allowance related to write-offs		(0.8)		—
Balance, end of period		$	11.2	$	7.8

6. Share-Based Compensation

We maintain various compensation plans for officers, other employees, and non-employee members of our Board of Directors. On June 2, 2022, our shareholders approved and ratified the 2022 Omnibus Share Incentive Plan (the “2022 Plan”). The 2022 Plan allows us to grant equity-based compensation awards including restricted stock units (“RSUs”), performance stock units (“PSUs”), stock options, and restricted stock awards. The 2022 Plan replaces and supersedes the 2014 Omnibus Share Incentive Plan (the “Prior Plan”). No awards can be granted under the Prior Plan upon adoption of the 2022 Plan. Under the 2022 Plan, the Board of Directors is authorized to award up to (i) 2,800,000 ordinary shares plus (ii) any ordinary shares remaining available for future awards under the Prior Plan at the time of adoption (of which there were approximately 241,263) plus (iii) any ordinary shares with respect to awards and Prior Plan awards that are forfeited, canceled, expire unexercised, or are settled in cash following adoption of the 2022 Plan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

Share-based compensation expense related to RSUs and PSUs is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations and was comprised in the relevant period as follows (U.S. dollars in millions):


	Quarter ended				Nine months ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023

RSUs/PSUs	$	2.0	$	2.4	$	4.8	$	7.6

Restricted Stock Units and Performance Stock Units

The following table lists the RSUs and PSUs awarded under the 2022 Plan during the nine months ended September 27, 2024 and September 29, 2023:



Date of Award	Type of award	Units awarded	Price per share
For the nine months ended September 27, 2024
September 6, 2024	PSU	2,651	$	29.18
May 8, 2024	PSU	5,048	$	24.13
May 7, 2024	RSU	43,134	24.34
April 1, 2024	PSU	7,394