Fresh Del Monte Produce, Inc. (NYSE:FDP) Q2 2022 Earnings Conference Call August 3, 2022 10:00 AM ET Company Participants Ana Miranda - Vice President, Global FP&A and Investor Relations Mohammad Abu-Ghazaleh - Chairman and Chief Executive Officer Monica Vicente - Senior Vice President and Chief Financial Officer Conference Call Participants Jonathan Feeney - Consumer Edge Mitch Pinheiro - Sturdivant Operator Good day, everyone, and welcome to Fresh Del Monte Produce's Second Quarter 2022 Earnings Conferenc ...

——————————— 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 July 01, 2022 OR ☐ 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 It ...

Earnings Call Presentation Q12022 MAY 4, 2022 Mohammad Abu-Ghazaleh Chairman & CEO Monica Vicente SVP, CFO 2 FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements regarding the intent, beliefs or current expectations of the Company or its officers with respect to the Company's plans and future performance, including our focus on driving operational leverage through product innovation, cost management, pricing actions and operational efficiencies. These statements also incl ...

Financial Data and Key Metrics Changes - Net sales increased by $49 million, or approximately 5%, compared to the prior-year period, primarily due to inflation-justified pricing actions [4][8] - Adjusted gross profit for Q1 2022 was $90 million, down from $107 million in the prior-year period, impacted by inflationary pressures [8][9] - Adjusted operating income decreased to $40 million from $58 million in the prior-year period [9] - Adjusted EBITDA for Q1 was $63 million, compared to $82 million in the prior-year period, with an adjusted EBITDA margin of 5.5% compared to 7.6% [10][11] Business Line Data and Key Metrics Changes - Fresh and Value-Added Products segment net sales increased by $42 million, or approximately 7%, driven by higher pricing [11] - Banana segment net sales decreased by $12 million due to lower sales volume in North America, with gross profit dropping to $38 million from $50 million [12] - Other Products and Services segment saw a net sales increase of $19 million, or 49%, mainly due to higher net sales of third-party freight services [12] Market Data and Key Metrics Changes - Sales were negatively impacted by fluctuations in exchange rates, particularly against the Euro and Japanese Yen [8] - The war in Ukraine has exacerbated macroeconomic challenges, including increased costs for fertilizers, fuel, and shipping disruptions [6][7] Company Strategy and Development Direction - The company is focused on long-term operational investments in data-driven technology and smart farming, alongside strategic investments and higher dividends [5] - Vertical integration is viewed as a key differentiator, providing relative protection from elevated shipping rates [7] - The company aims to drive organic growth and new product expansion while implementing pricing actions to minimize margin erosion [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the team's ability to drive growth despite ongoing supply chain constraints and inflationary pressures [7] - The company does not foresee a normalization of gross margins in the near future, but remains optimistic about future performance [7] - The food service segment is still lagging behind pre-COVID levels, indicating potential for future growth [34] Other Important Information - The company declared a quarterly cash dividend of $0.50 per share, up from $0.10 in the prior-year period [15] - Capital expenditures in Q1 2022 were $11 million, significantly lower than $34 million in the prior-year period, with expectations to return to normal levels under $100 million for the year [15] Q&A Session Summary Question: How much control does the company have over pricing? - Management explained that pricing adjustments are based on market conditions and include fuel surcharges that are reviewed quarterly [17] Question: What is the outlook for banana supply and demand? - Management noted that Ecuador's supply has been severely impacted by the war in Ukraine, affecting pricing and availability [21][22] Question: Can the company quantify the revenue or profit impact from sales lost due to supply shortages? - Management acknowledged significant volume losses due to shipping constraints but did not provide specific figures during the call [25][27] Question: How is the company progressing with joint ventures and value-added products? - Management indicated that they are in the initial stages of developing value-added products and optimizing assets for future growth [36]

PART I: FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Q1 2022 net sales increased to $1.14 billion, but gross profit and net income fell, and operating cash flow turned negative [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $3.50 billion, liabilities to $1.58 billion, and equity to $1.87 billion as of April 1, 2022 Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | April 1, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $1,218.0 | $1,096.4 | | **Total assets** | $3,501.8 | $3,398.1 | | **Total current liabilities** | $676.3 | $629.2 | | **Long-term debt and finance leases** | $562.3 | $527.7 | | **Total liabilities** | $1,578.5 | $1,524.6 | | **Total shareholders' equity** | $1,874.6 | $1,824.0 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2022 net sales rose to $1.14 billion, but gross profit and net income attributable to the company declined significantly Q1 2022 vs Q1 2021 Statement of Operations (in millions, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net sales | $1,136.9 | $1,088.3 | | Gross profit | $89.8 | $105.0 | | Operating income | $39.8 | $59.7 | | Net income attributable to Fresh Del Monte | $25.8 | $42.7 | | Diluted EPS | $0.54 | $0.90 | | Dividends declared per share | $0.15 | $0.10 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2022 net cash used in operating activities was $0.3 million, a significant downturn from the prior year's positive cash flow Q1 2022 vs Q1 2021 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(0.3) | $46.8 | | Net cash used in investing activities | $(16.6) | $(25.9) | | Net cash provided by (used in) financing activities | $26.7 | $(12.7) | | Net increase in cash and cash equivalents | $9.2 | $9.9 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail business segments, $156.5 million in tax disputes, a $1.1 billion credit facility, and increased quarterly dividends - The company operates through three reportable segments: Fresh and value-added products, Banana, and Other products and services[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The company is contesting income tax deficiencies of approximately **$156.5 million** (including interest and penalties) from two foreign jurisdictions related to transfer pricing for tax years 2012-2016[40](index=40&type=chunk) - As of April 1, 2022, the company had **$554.1 million** outstanding under its **$1.1 billion** senior unsecured revolving credit facility[69](index=69&type=chunk)[70](index=70&type=chunk) Q1 2022 Net Sales by Segment (in millions) | Segment | Net Sales | | :--- | :--- | | Fresh and value-added products | $672.7 | | Banana | $406.0 | | Other products and services | $58.2 | | **Total** | **$1,136.9** | - The company paid a dividend of **$0.15 per share** in Q1 2022, totaling **$7.2 million**, with a subsequent quarterly dividend declared on May 3, 2022[126](index=126&type=chunk)[127](index=127&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales growth was driven by price increases, but cost inflation eroded gross profit and operating income, with negative operating cash flow [Overview and Economic Environment](index=28&type=section&id=Overview%20and%20Economic%20Environment) The company faces significant inflationary pressures on costs, leading to price increases, with asset optimization program delays - The company is experiencing significant inflationary and cost pressures impacting production and distribution costs, including packaging, fertilizer, labor, fuel, and freight[132](index=132&type=chunk) - To combat rising costs, the company instituted price increases on the majority of its products starting in late 2021[134](index=134&type=chunk) - The Optimization Program, aimed at selling non-strategic assets for approximately **$100 million**, has generated **$58.6 million** in cash proceeds to date, with completion delayed beyond Q1 2022[136](index=136&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q1 2022 net sales increased 5% to $1.14 billion due to price hikes, but gross profit and operating income declined from cost pressures - Net sales increased by **$48.6 million (5%)** in Q1 2022, primarily due to inflation-justified price increases[142](index=142&type=chunk) - Gross profit decreased from **$105.0 million to $89.8 million**, negatively impacted by worsening inflationary pressures on costs for packaging, fertilizers, freight, fuel, and labor[143](index=143&type=chunk) - Operating income decreased by **$19.9 million**, driven by lower gross profit and a net loss on disposal of property, plant, and equipment[147](index=147&type=chunk) [Financial Results by Segment](index=31&type=section&id=Financial%20Results%20by%20Segment) Fresh and Banana segments saw margin declines, while 'Other products and services' sales and gross margin surged from freight services Q1 2022 vs Q1 2021 Segment Performance (in millions) | Segment | Net Sales Q1 2022 | Gross Profit Q1 2022 | Gross Margin Q1 2022 | Net Sales Q1 2021 | Gross Profit Q1 2021 | Gross Margin Q1 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fresh and value-added | $672.7 | $44.4 | 6.6% | $631.0 | $52.2 | 8.3% | | Banana | $406.0 | $37.7 | 9.3% | $418.2 | $50.0 | 12.0% | | Other products/services | $58.2 | $7.7 | 13.1% | $39.1 | $2.8 | 7.3% | - The 'Other products and services' segment's net sales increased by **49%** due to higher sales of third-party freight services, benefiting from elevated shipping rates and demand[158](index=158&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow turned negative at $0.3 million, with $35.0 million net debt borrowings, but $571.9 million credit facility availability - Net cash used in operating activities was **$0.3 million**, a decrease of **$47.1 million** from the prior year, primarily due to lower net income and higher levels of accounts receivable and inventory[163](index=163&type=chunk) - Net cash provided by financing activities was **$26.7 million**, mainly consisting of **$35.0 million** in net debt borrowings, partially offset by **$7.2 million** in dividends paid[170](index=170&type=chunk) - The company maintains a five-year, **$1.1 billion** syndicated senior unsecured revolving credit facility maturing in October 2024 and was in compliance with all covenants as of April 1, 2022[171](index=171&type=chunk)[174](index=174&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposures were reported compared to the 2021 Annual Report on Form 10-K - There were no material changes in market risk from the disclosures in the company's 2021 Form 10-K[195](index=195&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of April 1, 2022, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of April 1, 2022[197](index=197&type=chunk) - No changes to internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[197](index=197&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is contesting **$156.5 million** in foreign income tax deficiencies related to transfer pricing for 2012-2016 - The company is contesting income tax deficiencies related to transfer pricing from two foreign jurisdictions, aggregating approximately **$156.5 million** for tax years 2012-2016[200](index=200&type=chunk) - In one jurisdiction, the company has filed actions in judicial court after losing administrative appeals, while in the other, a judicial action is pending after an administrative appeal was denied[201](index=201&type=chunk)[202](index=202&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Exhibits include CEO/CFO certifications and financial statements presented in Inline XBRL format - The report includes CEO and CFO certifications pursuant to SEC rules 13a-14(a) and 13a-14(b) (Sarbanes-Oxley Act Sections 302 and 906)[204](index=204&type=chunk) - Financial data is provided in an interactive format using Inline XBRL (Extensible Business Reporting Language)[204](index=204&type=chunk)

A Brighter Day TomorrowTM Fresh Del Monte Produce Inc. Investor Relations Presentation February 23, 2022 Forward-Looking Statements This presentation contains certain forward-looking statements regarding the intent, beliefs or current expectations of the Company or its officers with respect to the Company's plans and future performance, including (i) expectations regarding the ability to execute on its long-term strategy, (ii) expectations regarding the ability of the Optimization Program to improve the Com ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Fresh Del Monte is a global, vertically integrated producer and distributor of fresh and prepared food products, primarily under the Del Monte® brand, operating in three segments with North America as its largest market - The company is a leading vertically integrated producer, marketer, and distributor of fresh and fresh-cut fruit and vegetables, with products marketed worldwide under the **Del Monte® brand**[11](index=11&type=chunk) - Business is organized into **three reportable segments**: Fresh and value-added products, Banana, and Other products and services[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) Net Sales by Product Category (2019-2021) | Product Category | 2021 Net Sales ($M) | 2021 % of Total | 2020 Net Sales ($M) | 2020 % of Total | 2019 Net Sales ($M) | 2019 % of Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Fresh and value-added products** | **$2,504.8** | **59%** | **$2,484.1** | **59%** | **$2,704.4** | **60%** | | Pineapples | $534.4 | 13% | $458.9 | 11% | $454.8 | 10% | | Fresh-cut fruit | $493.5 | 12% | $464.8 | 11% | $524.4 | 12% | | Fresh-cut vegetables | $366.3 | 9% | $378.9 | 9% | $455.9 | 10% | | Avocados | $320.2 | 7% | $327.1 | 7% | $375.7 | 9% | | Prepared foods | $281.2 | 6% | $278.3 | 7% | $284.6 | 6% | | Other categories | $528.2 | 12% | $570.2 | 14% | $601.1 | 13% | | **Banana** | **$1,581.1** | **37%** | **$1,602.6** | **38%** | **$1,656.0** | **37%** | | **Other products and services** | **$166.1** | **4%** | **$115.6** | **3%** | **$128.6** | **3%** | | **Total** | **$4,252.0** | **100%** | **$4,202.3** | **100%** | **$4,489.0** | **100%** | - In 2021, **43% of fresh produce** sold was grown on company-controlled farms, with the remaining **57% sourced from independent growers**, and Costa Rica representing **32% of total fresh product sales volume**[22](index=22&type=chunk) - **North America** is the largest market, accounting for **60% of net sales in 2021**, followed by Europe (**16%**), Asia (**12%**), and the Middle East (**10%**)[16](index=16&type=chunk)[55](index=55&type=chunk)[58](index=58&type=chunk) - The company's **top 10 customers** accounted for approximately **30% of net sales in 2021**, with **Walmart** being the largest single customer at **7% of total net sales**[54](index=54&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous risks, including the ongoing impact of the COVID-19 pandemic, significant inflationary pressures, reliance on key suppliers and customers, currency volatility, crop diseases, adverse weather, product contamination, international regulations, and cybersecurity threats - The **COVID-19 pandemic** has adversely affected business through supply chain disruptions, volatile demand, inventory write-downs, and increased logistical costs, with these effects expected to continue[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - Profit margins are volatile due to fluctuating market prices and rising costs for fuel, labor, fertilizers, and packaging, with material inflation in 2021 adversely affecting margins despite late-year price increases[116](index=116&type=chunk)[117](index=117&type=chunk) - The company is dependent on key suppliers, with one grower in the Philippines supplying approximately **12% of banana net sales**[114](index=114&type=chunk) - Banana Fusarium Wilt Tropical Race 4 (**TR4**), a serious crop disease, has been detected in Southeast Asia and remains a significant concern, incurring **$2.2 million in prevention and control costs in 2021**[175](index=175&type=chunk)[176](index=176&type=chunk) - Operations are subject to currency exchange risks, as nearly **34% of sales in 2021** were in foreign currencies, where a weaker U.S. dollar increases production costs abroad and a stronger dollar negatively affects converted sales proceeds[123](index=123&type=chunk) - The company is involved in tax disputes in two foreign jurisdictions regarding transfer pricing, with proposed income tax deficiencies aggregating approximately **$144.8 million** (including interest and penalties) for tax years 2012-2016, which the company strongly contests[172](index=172&type=chunk) - Adverse weather and natural disasters, such as the 2020 hurricanes in Guatemala and 2021 rainstorms in Chile, can destroy crops and disrupt operations, leading to significant inventory write-offs and property damage[179](index=179&type=chunk)[182](index=182&type=chunk) [Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments - None[212](index=212&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) As of 2021, the company owns or leases significant plantation acreage for production in Costa Rica, the Philippines, Guatemala, Kenya, and other countries, alongside 27 distribution centers and various international processing facilities Acres Under Production by Location (2021) | Location | Owned Acres | Leased Acres | Principal Products | | :--- | :--- | :--- | :--- | | Costa Rica | 45,865 | 5,503 | Bananas, Pineapples, Melons | | Philippines | — | 15,611 | Bananas, Pineapples | | Guatemala | 8,475 | 5,589 | Bananas, Melons | | Kenya | — | 8,009 | Pineapples | | Chile | 3,036 | 1,729 | Non-Tropical Fruit | | Panama | — | 2,399 | Bananas | | Brazil | 1,820 | — | Bananas, Other Crops | | United States | 550 | — | Melons and Other Crops | - The company operates **27 distribution centers** in the U.S. and Canada, **15 of which are also fresh-cut facilities**, and owns **11 of these centers**[214](index=214&type=chunk) - Key international properties include a pineapple cannery in Kenya, a juice processing plant in Costa Rica, and integrated poultry operations in Jordan[217](index=217&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in an ongoing environmental cleanup at the Kunia Well Site in Hawaii, with an estimated remaining cost of **$12.9 million**, and is vigorously contesting proposed income tax deficiencies of approximately **$144.8 million** from two foreign jurisdictions related to transfer pricing for tax years 2012-2016 - The company is addressing environmental contamination at the Kunia Well Site in Hawaii under a consent decree with the EPA, with an accrued cleanup cost of **$12.9 million** as of December 31, 2021[150](index=150&type=chunk)[223](index=223&type=chunk)[667](index=667&type=chunk) - Tax authorities in two foreign jurisdictions have issued income tax deficiencies related to transfer pricing for tax years 2012-2016, totaling approximately **$144.8 million** including interest and penalties, which the company strongly disagrees with and is appealing in judicial court[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[227](index=227&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Fresh Del Monte's ordinary shares trade on the New York Stock Exchange under the symbol FDP, with **$0.50 per share** paid in cash dividends in 2021, and a performance graph showing underperformance against relevant indices over five years - The company's Ordinary Shares are traded on the New York Stock Exchange under the symbol **FDP**[230](index=230&type=chunk) - In 2021, the Board of Directors declared and paid cash dividends totaling **$0.50 per share** ($0.10 in Q1/Q2, $0.15 in Q3/Q4)[231](index=231&type=chunk) Five-Year Stock Performance Comparison | | 12/30/2016 | 12/31/2021 | | :--- | :--- | :--- | | Fresh Del Monte Produce Inc. | $100.00 | $48.33 | | S&P Smallcap 600 | $100.00 | $179.58 | | S&P 600 Food Products | $100.00 | $98.80 | [Reserved](index=36&type=section&id=Item%206.%20Reserved) This item is reserved - None [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal 2021, Fresh Del Monte's net sales increased by **1% to $4.25 billion**, while gross profit grew **21% to $303.8 million**, driven by improved demand and higher pricing that helped offset significant inflationary pressures, with the Optimization Program generating **$57.0 million** in cash proceeds and operating cash flow decreasing to **$128.5 million** due to higher inventory Consolidated Financial Highlights (2019-2021) | Metric | 2021 ($M) | 2020 ($M) | 2019 ($M) | | :--- | :--- | :--- | :--- | | Net sales | 4,252.0 | 4,202.3 | 4,489.0 | | Gross profit | 303.8 | 250.9 | 306.4 | | Operating income | 111.0 | 76.5 | 114.1 | - Fiscal year 2021 had **52 weeks**, while fiscal year 2020 had **53 weeks**, with the extra week in 2020 contributing an estimated **$72.0 million in net sales** and **$2.6 million in gross profit**[241](index=241&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk) - The recovery from the COVID-19 pandemic led to significant inflationary pressures in 2021, increasing costs for packaging, fertilizer, labor, fuel, and freight, with price increases implemented in late Q4 2021 to mitigate these impacts[245](index=245&type=chunk) - The company's Optimization Program, initiated in 2020 to sell non-strategic assets, has generated **$57.0 million in cash proceeds** as of December 31, 2021[248](index=248&type=chunk) Cash Flow Summary (2019-2021) | Cash Flow Activity | 2021 ($M) | 2020 ($M) | 2019 ($M) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 128.5 | 180.6 | 169.1 | | Net cash used in investing activities | (82.5) | (108.8) | (52.2) | | Net cash used in financing activities | (53.2) | (85.8) | (108.9) | - Capital expenditures in 2021 were **$98.5 million**, down from **$150.0 million in 2020**, with a significant portion of spending in both years related to six new fuel-efficient refrigerated container ships, the last two of which were received in 2021[296](index=296&type=chunk)[302](index=302&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is primarily exposed to market risks from fluctuations in foreign currency exchange rates and interest rates, with approximately **34% of 2021 net sales** in foreign currencies, and uses derivative financial instruments to hedge a portion of these risks - The company is exposed to significant exchange rate risk, with approximately **34% of net sales in 2021** denominated in foreign currencies[357](index=357&type=chunk) - A hypothetical **10% strengthening of the U.S. dollar** in 2021 would have resulted in an estimated decrease in net sales of **$145.0 million**[359](index=359&type=chunk) - The company is exposed to interest rate risk on its variable rate debt, which totaled **$519.1 million** at the end of 2021, where a **10% increase in interest rates** would have negatively impacted 2021 results by approximately **$0.7 million**[361](index=361&type=chunk) - To mitigate risks, the company uses derivative financial instruments, including foreign exchange forward contracts and interest rate swaps, with the fair value of foreign currency hedges being a net liability of **$13.7 million** and interest rate swaps a net liability of **$29.4 million** as of December 31, 2021[358](index=358&type=chunk)[362](index=362&type=chunk) [Financial Statements and Supplementary Data](index=54&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2021, and the unqualified reports from Ernst & Young LLP on both the financial statements and the effectiveness of internal control over financial reporting - The independent auditor, Ernst & Young LLP, issued an **unqualified opinion** on the consolidated financial statements, stating they present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[389](index=389&type=chunk) - The auditor also issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2021, based on the COSO framework[381](index=381&type=chunk)[390](index=390&type=chunk) Key Balance Sheet Data (As of Year-End) | Account | Dec 31, 2021 ($M) | Jan 1, 2021 ($M) | | :--- | :--- | :--- | | Total Current Assets | 1,096.4 | 1,012.3 | | Total Assets | 3,398.1 | 3,263.3 | | Total Current Liabilities | 629.2 | 554.8 | | Long-term debt and finance leases | 527.7 | 541.8 | | Total Liabilities | 1,524.6 | 1,463.4 | | Total Shareholders' Equity | 1,824.0 | 1,749.7 | Key Income Statement Data (Fiscal Year) | Account | 2021 ($M) | 2020 ($M) | | :--- | :--- | :--- | | Net sales | 4,252.0 | 4,202.3 | | Gross profit | 303.8 | 250.9 | | Operating income | 111.0 | 76.5 | | Net income | 79.9 | 46.3 | | Diluted EPS | $1.68 | $1.03 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=111&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure - None[742](index=742&type=chunk) [Controls and Procedures](index=111&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, a conclusion affirmed by Ernst & Young LLP's unqualified opinion on internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[743](index=743&type=chunk) - Management assessed internal control over financial reporting based on the COSO framework and determined it was effective as of December 31, 2021[745](index=745&type=chunk) - The effectiveness of internal control over financial reporting was audited by Ernst & Young LLP, which issued an unqualified opinion[747](index=747&type=chunk) [Other Information](index=111&type=section&id=Item%209B.%20Other%20Information) There is no other information to report - None[748](index=748&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=111&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable - Not applicable[749](index=749&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees](index=112&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information required for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, director independence, and principal accountant fees and services, is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual General Meeting of Shareholders - Information regarding Directors, Executive Officers, and Corporate Governance will be included in the 2022 Annual General Meeting Proxy Statement and is incorporated by reference[752](index=752&type=chunk) - Details on Executive Compensation are incorporated by reference from the 2022 Proxy Statement[754](index=754&type=chunk) - Security ownership information for beneficial owners and management is incorporated by reference from the 2022 Proxy Statement[755](index=755&type=chunk) - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Proxy Statement[756](index=756&type=chunk) - Principal accountant fees and services are incorporated by reference from the 2022 Proxy Statement[757](index=757&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=113&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, supplemental schedules, and exhibits filed as part of the Form 10-K report, with consolidated financial statements and Schedule II included in Item 8, and a comprehensive list of exhibits provided, many incorporated by reference - This section contains the index of financial statements, schedules, and exhibits filed with the annual report[762](index=762&type=chunk) [Form 10-K Summary](index=117&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[785](index=785&type=chunk)

Call Start: 10:20 Call End: 10:25 January 1, 0000 ET Q4 2021 Earnings Conference Call February 23, 2022, 10:00 AM ET Company Participants Mohammad Abu-Ghazaleh – Chairman and Chief Executive Officer Eduardo Bezerra – Senior Vice President and Chief Financial Officer Christine Cannella – Vice President, Investor Relations Conference Call Participants Operator Good day everyone and welcome to the Fresh Del Monte Produce Fourth Quarter and Full Fiscal Year 2021 Conference Call. Today's conference call is bei ...

Fresh Del Monte Produce Inc. (NYSE:FDP) Q3 2021 Earnings Conference Call November 3, 2021 10:00 AM ET Company Participants Ana Miranda - Investor Relations Mohammad Abu-Ghazaleh - Chairman and Chief Executive Officer Eduardo Bezerra - Senior Vice President and Chief Financial Officer Conference Call Participants Jonathan Feeney - Consumer Edge Operator Good day and welcome to Fresh Del Monte Produce Third Quarter 2021 Earnings Conference Call. Today’s conference is being broadcast live over the internet and ...

[PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents the company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Fresh Del Monte Produce Inc. and its subsidiaries, including balance sheets, statements of operations, comprehensive income, cash flows, and shareholders' equity, along with detailed notes explaining accounting policies, recent pronouncements, asset impairments, income taxes, credit losses, share-based compensation, inventories, debt, commitments, earnings per share, retirement benefits, business segment data, derivative instruments, fair value measurements, and accumulated other comprehensive loss [Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates | Metric | October 1, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | **Assets** | | | | Total current assets | 1,046.6 | 1,012.3 | | Total assets | 3,387.7 | 3,343.3 | | **Liabilities and Shareholders' Equity** | | | | Total current liabilities | 588.6 | 554.8 | | Long-term debt and finance leases | 476.9 | 541.8 | | Total liabilities | 1,506.4 | 1,543.4 | | Total Fresh Del Monte Produce Inc. shareholders' equity | 1,810.4 | 1,728.0 | | Total liabilities, redeemable noncontrolling interest and shareholders' equity | 3,387.7 | 3,343.3 | - Total assets increased by **$44.4 million** from January 1, 2021, to October 1, 2021, reaching **$3,387.7 million**. Total liabilities decreased by **$37.0 million**, while total shareholders' equity increased by **$82.2 million**[14](index=14&type=chunk) [Consolidated Statements of Operations (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including net sales, gross profit, operating income, and net income over specified periods | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net sales | 1,004.8 | 989.7 | 3,234.6 | 3,200.0 | | Gross profit | 48.9 | 67.3 | 264.0 | 214.5 | | Operating income | 1.3 | 26.6 | 120.2 | 77.4 | | Net income attributable to Fresh Del Monte Produce Inc. | 1.3 | 17.4 | 91.2 | 48.3 | | Net income per ordinary share - Basic | 0.03 | 0.37 | 1.92 | 1.01 | | Net income per ordinary share - Diluted | 0.03 | 0.37 | 1.91 | 1.01 | | Dividends declared per ordinary share | 0.15 | 0.05 | 0.35 | 0.20 | - Net sales increased by **2%** in Q3 2021 YoY and **1%** in 9M 2021 YoY. Gross profit decreased by **27%** in Q3 2021 YoY but increased by **23%** in 9M 2021 YoY. Net income attributable to Fresh Del Monte Produce Inc. significantly decreased in Q3 2021 YoY from **$17.4 million** to **$1.3 million**, but nearly doubled in 9M 2021 YoY from **$48.3 million** to **$91.2 million**[16](index=16&type=chunk) [Consolidated Statements of Comprehensive (Loss) Income (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) This section outlines the company's comprehensive income, including net income and other comprehensive income components like unrealized gains/losses on derivatives and foreign currency translation | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income | 1.5 | 16.2 | 90.6 | 47.3 | | Other comprehensive (loss) income: | | | | | | Net unrealized (loss) gain on derivatives, net of tax | (5.7) | 0.3 | 12.3 | (26.9) | | Net unrealized foreign currency translation (loss) gain | (4.9) | 6.1 | (9.2) | 2.5 | | Net change in retirement benefit adjustment, net of tax | (0.3) | (0.1) | (1.2) | 0.4 | | Comprehensive (loss) income | (9.4) | 22.5 | 92.5 | 23.3 | | Comprehensive (loss) income attributable to Fresh Del Monte Produce Inc. | (9.6) | 23.7 | 93.1 | 24.3 | - Comprehensive income attributable to Fresh Del Monte Produce Inc. shifted from a gain of **$23.7 million** in Q3 2020 to a loss of **$9.6 million** in Q3 2021. For the nine months, it significantly increased from **$24.3 million** in 2020 to **$93.1 million** in 2021, primarily driven by a positive shift in unrealized gains on derivatives[21](index=21&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the company's cash inflows and outflows from operating, investing, and financing activities over specified periods | Metric | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :-------------------------------------------- | :--------------------- | :--------------------- | | Net cash provided by operating activities | 151.6 | 173.9 | | Net cash used in investing activities | (67.2) | (82.5) | | Net cash used in financing activities | (86.7) | (111.4) | | Net increase (decrease) in cash and cash equivalents | 2.5 | (19.3) | | Cash and cash equivalents, ending | 19.0 | 14.0 | - Net cash provided by operating activities decreased by **$22.3 million** in the first nine months of 2021 compared to 2020, primarily due to higher inventory levels and receivables, partially offset by higher net income and accounts payable[24](index=24&type=chunk)[217](index=217&type=chunk)[219](index=219&type=chunk)[224](index=224&type=chunk) - Net cash used in investing activities decreased by **$15.3 million**, while net cash used in financing activities decreased by **$24.7 million**[24](index=24&type=chunk)[217](index=217&type=chunk)[219](index=219&type=chunk)[224](index=224&type=chunk) [Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interest (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity%20and%20Redeemable%20Noncontrolling%20Interest) This section details changes in shareholders' equity and noncontrolling interests, reflecting contributions, distributions, and comprehensive income | Metric | October 1, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | Fresh Del Monte Produce Inc. Shareholders' Equity | 1,810.4 | 1,728.0 | | Noncontrolling Interests | 21.5 | 21.7 | | Total Shareholders' Equity | 1,831.9 | 1,749.7 | | Redeemable Noncontrolling Interest | 49.4 | 50.2 | - Total shareholders' equity increased by **$82.2 million** from January 1, 2021, to October 1, 2021, primarily driven by an increase in retained earnings and paid-in capital, partially offset by a decrease in accumulated other comprehensive loss[27](index=27&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies and specific financial items [1. General](index=10&type=section&id=1.%20General) This note describes the company's business operations, global presence, and reportable segments - Fresh Del Monte Produce Inc. is a vertically integrated producer, marketer, and distributor of fresh and fresh-cut fruit and vegetables, and prepared foods, operating globally under the Del Monte brand[34](index=34&type=chunk)[35](index=35&type=chunk) - The business is organized into three reportable segments: Fresh and value-added products, Banana, and Other products and services[36](index=36&type=chunk) [2. Recently Issued Accounting Pronouncements](index=11&type=section&id=2.%20Recently%20Issued%20Accounting%20Pronouncements) This note discusses the adoption and evaluation of recent accounting standards and their impact on financial statements - The company adopted ASU 2020-01 (Investments-Equity Securities) and ASU 2019-12 (Income Taxes) on the first day of fiscal year 2021, neither of which had a material impact on consolidated financial statements[41](index=41&type=chunk)[42](index=42&type=chunk) - The company is evaluating ASU 2020-04 and ASU 2021-01 (Reference Rate Reform) for potential future adoption, as it has LIBOR-based borrowings and interest rate hedges[43](index=43&type=chunk) [3. Asset Impairment and Other Charges (Credits), Net](index=12&type=section&id=3.%20Asset%20Impairment%20and%20Other%20Charges%20%28Credits%29%2C%20Net) This note details asset impairment charges, credits, and other related items affecting the company's financial results | Segment / Item | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :-------------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total asset impairment and other charges (credits), net | 0.1 | (3.5) | (0.3) | (3.8) | | Banana segment: Philippines asset impairment | 0.3 | 0.1 | 0.3 | 0.8 | | Fresh and value-added products segment: Exit costs related to European facility | (0.2) | — | 0.3 | — | | Fresh and value-added products segment: Insurance recovery related to product recall | — | (4.4) | — | (10.4) | - For the nine months ended October 1, 2021, asset impairment and other charges resulted in a net credit of **$(0.3) million**, including a **$(0.8) million** insurance recovery for hurricane damages in Guatemala[45](index=45&type=chunk) - This contrasts with a net credit of **$(3.8) million** in 9M 2020, which included a **$(10.4) million** insurance recovery for a product recall, partially offset by asset impairments and legal settlement charges[45](index=45&type=chunk)[174](index=174&type=chunk) [4. Income Taxes](index=13&type=section&id=4.%20Income%20Taxes) This note provides information on the company's income tax provision, effective tax rates, and ongoing tax disputes | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Income tax (benefit) provision | (6.6) | 4.9 | 9.1 | 9.4 | - The income tax provision decreased in both the third quarter and first nine months of 2021, primarily due to decreased earnings in certain higher tax jurisdictions[50](index=50&type=chunk) - The nine-month provision also includes benefits from the CARES Act NOL carryback provision (**$0.8 million** in 2021 vs. **$1.7 million** in 2020)[47](index=47&type=chunk)[48](index=48&type=chunk) - The company is vigorously contesting **$147.4 million** in transfer pricing tax deficiencies in two foreign jurisdictions for tax years 2012-2016[49](index=49&type=chunk) [5. Allowance for Credit Losses](index=14&type=section&id=5.%20Allowance%20for%20Credit%20Losses) This note outlines the company's allowance for credit losses on trade receivables and advances to growers and suppliers | Metric | October 1, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Trade accounts receivable, net | 354.4 | 359.0 | | Allowance for trade receivable credit losses (end of period) | 13.1 | 15.1 | | Gross advances to growers and suppliers (Current) | 36.7 | 34.3 | | Gross advances to growers and suppliers (Past-Due) | 5.7 | 4.0 | | Allowance for advances to growers and suppliers (end of period) | 1.7 | 2.1 | - The allowance for trade receivable credit losses decreased from **$15.1 million** at the beginning of the period to **$13.1 million** as of October 1, 2021, partly due to a **$2.6 million** reclassification to long-term allowance[56](index=56&type=chunk)[57](index=57&type=chunk) - Gross advances to growers and suppliers increased, with past-due amounts rising from **$4.0 million** to **$5.7 million**[63](index=63&type=chunk) [6. Share-Based Compensation](index=16&type=section&id=6.%20Share-Based%20Compensation) This note describes the company's share-based compensation plans, including expense recognition and types of awards granted | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total share-based compensation expense | 2.1 | 1.6 | 5.8 | 6.2 | - Share-based compensation expense increased to **$2.1 million** in Q3 2021 from **$1.6 million** in Q3 2020, but slightly decreased for the nine months from **$6.2 million** in 2020 to **$5.8 million** in 2021[66](index=66&type=chunk) - Awards include Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) under the 2014 Omnibus Share Incentive Plan, with PSUs vesting based on performance criteria and RSUs vesting over a three-year service period[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) [7. Inventories, net](index=17&type=section&id=7.%20Inventories%2C%20net) This note details the composition of the company's inventories, including finished goods, raw materials, and growing crops | Metric | October 1, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Finished goods | 190.4 | 190.7 | | Raw materials and packaging supplies | 167.5 | 136.8 | | Growing crops | 180.9 | 180.2 | | Total inventories, net | 538.8 | 507.7 | - Total inventories, net, increased by **$31.1 million** from **$507.7 million** at January 1, 2021, to **$538.8 million** at October 1, 2021, primarily driven by a **$30.7 million** increase in raw materials and packaging supplies[74](index=74&type=chunk) [8. Debt and Finance Lease Obligations](index=17&type=section&id=8.%20Debt%20and%20Finance%20Lease%20Obligations) This note provides information on the company's debt instruments, finance lease obligations, and compliance with debt covenants | Metric | October 1, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Senior unsecured revolving credit facility | 476.9 | 541.7 | | Finance lease obligations | 0.1 | 0.3 | | Total debt and finance lease obligations | 477.0 | 542.0 | | Long-term debt and finance lease obligations | 476.9 | 541.8 | - Long-term debt and finance lease obligations decreased by **$64.9 million** from **$541.8 million** at January 1, 2021, to **$476.9 million** at October 1, 2021[75](index=75&type=chunk) - The company maintains a **$1.1 billion** syndicated senior unsecured revolving credit facility maturing in October 2024, with **$476.9 million** outstanding at an interest rate of **1.24%** as of October 1, 2021[76](index=76&type=chunk)[81](index=81&type=chunk)[83](index=83&type=chunk)[226](index=226&type=chunk) - The company was in compliance with all debt covenants[228](index=228&type=chunk) [9. Commitments and Contingencies](index=19&type=section&id=9.%20Commitments%20and%20Contingencies) This note discloses the company's significant commitments and contingencies, including environmental liabilities and legal actions - The company has an estimated clean-up cost of **$12.9 million** to **$28.7 million** for the Kunia Well Site in Hawaii, with **$12.6 million** accrued in other noncurrent liabilities and **$0.3 million** in accounts payable as of October 1, 2021[87](index=87&type=chunk) - Expected expenditures are **$0.4 million** in 2021, **$1.1 million** in 2022, and **$0.9 million** annually from 2023-2025[88](index=88&type=chunk) - Management believes other claims and legal actions are not currently expected to have a material adverse effect on operations, financial position, or cash flows[89](index=89&type=chunk) [10. Earnings Per Share](index=19&type=section&id=10.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share, including the weighted average number of shares outstanding | Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :------------------------------------------------------------------ | :------ | :------ | :------ | :------ | | Net income attributable to Fresh Del Monte Produce Inc. (Millions USD) | 1.3 | 17.4 | 91.2 | 48.3 | | Weighted average number of ordinary shares - Basic | 47,535,873 | 47,355,918 | 47,494,168 | 47,641,712 | | Weighted average number of ordinary shares - Diluted | 47,743,758 | 47,427,723 | 47,661,055 | 47,731,747 | | Net income per ordinary share - Basic | 0.03 | 0.37 | 1.92 | 1.01 | | Net income per ordinary share - Diluted | 0.03 | 0.37 | 1.91 | 1.01 | - Basic and diluted EPS for Q3 2021 were **$0.03**, a significant decrease from **$0.37** in Q3 2020[91](index=91&type=chunk) - For the nine months, basic and diluted EPS increased to **$1.92** and **$1.91**, respectively, from **$1.01** in 9M 2020[91](index=91&type=chunk) [11. Retirement and Other Employee Benefits](index=20&type=section&id=11.%20Retirement%20and%20Other%20Employee%20Benefits) This note details the company's defined benefit pension and post-retirement plans, including net periodic benefit costs | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net periodic benefit costs | 2.4 | 2.8 | 7.3 | 8.3 | | Net periodic benefit costs (other non-U.S.-based plans) | 0.9 | 0.8 | 2.7 | 2.4 | - Net periodic benefit costs for defined benefit pension and post-retirement plans decreased to **$2.4 million** in Q3 2021 from **$2.8 million** in Q3 2020, and to **$7.3 million** in 9M 2021 from **$8.3 million** in 9M 2020[93](index=93&type=chunk) - Service costs are recognized in the Consolidated Statements of Operations, while other components (interest, expected return, amortization) are recorded in other expense, net[94](index=94&type=chunk) [12. Business Segment Data](index=21&type=section&id=12.%20Business%20Segment%20Data) This note provides financial information by business segment and geographic region, including net sales and gross profit | Segment | Q3 2021 Net Sales (Millions USD) | Q3 2020 Net Sales (Millions USD) | 9M 2021 Net Sales (Millions USD) | 9M 2020 Net Sales (Millions USD) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Fresh and value-added products | 601.2 | 600.6 | 1,906.0 | 1,897.8 | | Banana | 365.3 | 361.8 | 1,210.2 | 1,218.4 | | Other products and services | 38.3 | 27.3 | 118.4 | 83.8 | | Totals | 1,004.8 | 989.7 | 3,234.6 | 3,200.0 | | Segment | Q3 2021 Gross Profit (Millions USD) | Q3 2020 Gross Profit (Millions USD) | 9M 2021 Gross Profit (Millions USD) | 9M 2020 Gross Profit (Millions USD) | | :-------------------------- | :---------------------------------- | :---------------------------------- | :---------------------------------- | :---------------------------------- | | Fresh and value-added products | 40.9 | 54.2 | 149.8 | 133.8 | | Banana | 2.4 | 10.8 | 98.2 | 74.3 | | Other products and services | 5.6 | 2.3 | 16.0 | 6.4 | | Totals | 48.9 | 67.3 | 264.0 | 214.5 | | Geographic Region | Q3 2021 Net Sales (Millions USD) | Q3 2020 Net Sales (Millions USD) | 9M 2021 Net Sales (Millions USD) | 9M 2020 Net Sales (Millions USD) | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | North America | 622.0 | 619.4 | 1,951.2 | 1,992.0 | | Europe | 150.7 | 150.0 | 531.2 | 485.2 | | Asia | 111.9 | 107.9 | 380.2 | 355.3 | | Middle East | 108.2 | 102.7 | 323.0 | 329.3 | | Other | 12.0 | 9.7 | 49.0 | 38.2 | | Totals | 1,004.8 | 989.7 | 3,234.6 | 3,200.0 | - Net sales for Fresh and value-added products increased slightly in Q3 2021 and 9M 2021, while Banana segment net sales increased in Q3 but decreased in 9M[98](index=98&type=chunk) - Other products and services showed strong growth in both periods[98](index=98&type=chunk) - Gross profit for Fresh and value-added products and Banana segments decreased significantly in Q3 2021 due to cost pressures, but both showed increases for the nine-month period[98](index=98&type=chunk) [13. Derivative Financial Instruments](index=23&type=section&id=13.%20Derivative%20Financial%20Instruments) This note describes the company's use of derivative instruments to hedge exposure to foreign currency, fuel prices, and interest rates | Derivative Type | Notional Amount (Millions) as of Oct 1, 2021 | | :-------------------------- | :------------------------------------------- | | Euro (foreign currency) | 53.8 | | British pound (foreign currency) | 6.8 | | Japanese yen (foreign currency) | 1,964.0 | | Chilean peso (foreign currency) | 56,583.4 | | Kenya shilling (foreign currency) | 898.5 | | Korean won (foreign currency) | 17,984.5 | | Interest rate contracts | 400.0 | | Derivative Type | Q3 2021 Net Amount in OCI (Millions USD) | Q3 2020 Net Amount in OCI (Millions USD) | 9M 2021 Net Amount in OCI (Millions USD) | 9M 2020 Net Amount in OCI (Millions USD) | | :-------------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Foreign exchange contracts | (6.7) | (2.0) | (0.1) | (3.8) | | Bunker fuel swaps | (1.4) | 0.9 | (0.5) | (1.3) | | Interest rate swaps, net of tax | 2.4 | 1.4 | 12.9 | (21.8) | | Total | (5.7) | 0.3 | 12.3 | (26.9) | - The company uses foreign currency forward contracts, bunker fuel swap agreements, and interest rate swaps to hedge exposure to fluctuations in foreign exchange rates, bunker fuel prices, and variable interest rates[102](index=102&type=chunk)[108](index=108&type=chunk)[112](index=112&type=chunk) - During Q1 2021, the company voluntarily terminated its remaining bunker fuel hedge portfolio due to fleet optimization and changes in forecasted fuel mix, resulting in a **$3.3 million** gain recorded in other expense, net[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) [14. Fair Value Measurements](index=26&type=section&id=14.%20Fair%20Value%20Measurements) This note explains the fair value measurements of financial instruments and assets held for sale, categorized by input levels | Derivative Type (Net Liability) | October 1, 2021 (Millions USD) | January 1, 2021 (Millions USD) | | :------------------------------ | :----------------------------- | :----------------------------- | | Foreign currency contracts | (7.0) | (6.9) | | Bunker fuel contracts | — | 2.4 | | Interest rate contracts | (35.8) | (50.6) | - The fair value of derivative instruments, classified as Level 2, includes foreign exchange, bunker fuel, and interest rate derivatives[122](index=122&type=chunk)[123](index=123&type=chunk) - The net liability position for interest rate swaps decreased from **$50.6 million** to **$35.8 million** due to an increase in variable interest rates[130](index=130&type=chunk) - The company also holds **$20.0 million** in assets held for sale, primarily non-strategic property, plant, and equipment, valued using Level 3 inputs (third-party appraisals)[236](index=236&type=chunk) [15. Accumulated Other Comprehensive Loss](index=27&type=section&id=15.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the components of accumulated other comprehensive loss, including cash flow hedges and foreign currency translation adjustments | Component | Balance at Jan 1, 2021 (Millions USD) | Balance at Oct 1, 2021 (Millions USD) | | :-------------------------------------- | :------------------------------------ | :------------------------------------ | | Cash Flow Hedges | (49.6) | (37.3) | | Foreign Currency Translation Adjustment | (3.3) | (12.5) | | Retirement Benefit Adjustment | (24.1) | (25.3) | | Total Accumulated Other Comprehensive Loss | (77.0) | (75.1) | - Accumulated other comprehensive loss improved from **$(77.0) million** at January 1, 2021, to **$(75.1) million** at October 1, 2021[132](index=132&type=chunk) - This change was primarily driven by a **$12.3 million** net current period other comprehensive income from cash flow hedges, partially offset by a **$9.2 million** loss from foreign currency translation adjustment[132](index=132&type=chunk) | Reclassified from AOCI (9M 2021) | Amount (Millions USD) | Affected Line Item in Statement of Operations | | :------------------------------- | :-------------------- | :-------------------------------------------- | | Foreign currency cash flow hedges (Net sales) | (0.8) | Net sales | | Foreign currency cash flow hedges (Cost of products sold) | — | Cost of products sold | | Bunker fuel swaps (Cost of products sold) | — | Cost of products sold | | Interest rate swaps | 8.5 | Interest expense | | Bunker fuel swaps no longer designated (Cost of products sold) | (4.6) | Cost of products sold | | Bunker fuel swaps no longer designated (Other expense, net) | (1.0) | Other expense, net | | Actuarial losses | 0.7 | Other expense, net | | Total | 2.1 | | [16. Shareholders' Equity](index=29&type=section&id=16.%20Shareholders%27%20Equity) This note provides information on changes in shareholders' equity, including ordinary shares outstanding and dividends declared | Metric | October 1, 2021 | January 1, 2021 | | :------------------------------------ | :-------------- | :-------------- | | Ordinary shares issued and outstanding | 47,544,395 | 47,372,419 | | Dividend Payment Date | Cash per Share (9M 2021) | Cash per Share (9M 2020) | | :-------------------- | :----------------------- | :----------------------- | | September 10, 2021 | 0.15 | 0.05 | | June 11, 2021 | 0.10 | 0.05 | | April 2, 2021 | 0.10 | 0.10 | | Total Dividends Paid (9M) | 16.6 (Millions USD) | 9.6 (Millions USD) | - The number of ordinary shares issued and outstanding increased to **47,544,395** as of October 1, 2021[139](index=139&type=chunk) - Dividends paid for the nine months ended October 1, 2021, totaled **$16.6 million**, an increase from **$9.6 million** in the prior-year period[141](index=141&type=chunk) - The Board declared a quarterly cash dividend of **$0.15** per share payable on December 10, 2021[142](index=142&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and results of operations for the third quarter and first nine months of 2021 compared to 2020. It highlights the impact of the COVID-19 pandemic, inflationary pressures, the Optimization Program, and details financial results by segment, liquidity, capital resources, and critical accounting policies [Overview](index=30&type=section&id=Overview) This section provides an overview of the company's global operations, business structure, and key product segments - Fresh Del Monte Produce Inc. is a global, vertically integrated producer, marketer, and distributor of fresh and fresh-cut fruit and vegetables, and prepared foods under the Del Monte brand[144](index=144&type=chunk)[146](index=146&type=chunk) - The company's business is structured into three reportable segments: Fresh and value-added products, Banana, and Other products and services[147](index=147&type=chunk) [COVID-19 Pandemic Impact](index=30&type=section&id=COVID-19%20Pandemic%20Impact) This section discusses the material impact of the COVID-19 pandemic on operations, including cost inflation and supply chain disruptions - The COVID-19 pandemic has materially impacted operations since Q1 2020, causing volatile supply/demand, reduced foodservice channel demand, and increased production and distribution costs due to inflation (packaging, fertilizer, labor, fuel, inland freight) and strained transportation capacity[145](index=145&type=chunk) - The company announced price increases on bananas, pineapples, and fresh-cut fruit effective November 1, 2021, to partially mitigate these cost pressures, which are expected to continue negatively impacting gross profit[151](index=151&type=chunk) [Optimization Program](index=32&type=section&id=Optimization%20Program) This section details the company's program to dispose of non-strategic assets and consolidate operations for cost savings - The Optimization Program, initiated in fiscal 2020, aims to dispose of non-strategic and underutilized assets across all regions, with anticipated cash proceeds of approximately **$100.0 million**[154](index=154&type=chunk) - As of October 1, 2021, **$52.0 million** in cash proceeds have been received[155](index=155&type=chunk) - The program's completion is delayed beyond Q1 2022 due to challenging market conditions and COVID-119 travel restrictions[155](index=155&type=chunk) - The consolidation of Mann Packing operations has yielded cost savings, but financial results are still negatively impacted by reduced foodservice demand and increased costs[155](index=155&type=chunk) [Income Taxes](index=32&type=section&id=Income%20Taxes) This section addresses the company's ongoing disputes regarding income tax deficiencies related to transfer pricing in foreign jurisdictions - The company is vigorously contesting income tax deficiencies totaling approximately **$147.4 million** (including interest and penalties) related to transfer pricing in two foreign jurisdictions for tax years 2012-2016[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - Appeals have been filed in judicial courts, and the company intends to exhaust all administrative and judicial remedies[160](index=160&type=chunk) [RESULTS OF OPERATIONS](index=33&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's consolidated and segment-specific financial performance [Consolidated Financial Results](index=33&type=section&id=Consolidated%20Financial%20Results) This section analyzes the company's overall net sales, gross profit, and operating income for the reported periods | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net sales | 1,004.8 | 989.7 | 3,234.6 | 3,200.0 | | Gross profit | 48.9 | 67.3 | 264.0 | 214.5 | | Selling, general and administrative expenses | 48.0 | 44.1 | 148.3 | 142.4 | | Operating income | 1.3 | 26.6 | 120.2 | 77.4 | - Net sales increased by **2%** in Q3 2021 and **1%** in 9M 2021, positively impacted by exchange rate fluctuations[162](index=162&type=chunk)[163](index=163&type=chunk) - Gross profit decreased by **27%** in Q3 2021 due to inflation and cost pressures, but increased by **23%** in 9M 2021 due to higher per unit sales prices in bananas and improved performance in fresh and value-added products[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Operating income decreased by **$25.3 million** in Q3 2021 but increased by **$42.8 million** in 9M 2021[175](index=175&type=chunk) [Financial Results by Segment](index=35&type=section&id=Financial%20Results%20by%20Segment) This section breaks down the company's financial performance by its Fresh and value-added products, Banana, and Other products and services segments [Fresh and value-added products](index=35&type=section&id=Fresh%20and%20value-added%20products) This section analyzes the net sales and gross profit performance of the Fresh and value-added products segment | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Sales | 601.2 | 600.6 | 1,906.0 | 1,897.8 | | Gross Profit | 40.9 | 54.2 | 149.8 | 133.8 | - Q3 2021 net sales increased slightly by **$0.6 million**, driven by pineapples and avocados, but gross profit decreased by **$13.3 million** (**25%**) due to higher production and distribution costs[182](index=182&type=chunk)[183](index=183&type=chunk) - For 9M 2021, net sales increased by **$8.2 million**, primarily from pineapples and fresh-cut fruits, and gross profit increased by **$16.0 million** (**12%**) due to higher net sales and lower production costs in some categories, despite ongoing inflationary pressures[192](index=192&type=chunk)[198](index=198&type=chunk) [Banana](index=38&type=section&id=Banana) This section analyzes the net sales and gross profit performance of the Banana segment | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Sales | 365.3 | 361.8 | 1,210.2 | 1,218.4 | | Gross Profit | 2.4 | 10.8 | 98.2 | 74.3 | - Q3 2021 net sales increased by **$3.5 million** (**1%**) due to higher per unit sales prices in Europe and higher sales volume in the Middle East[206](index=206&type=chunk) - However, gross profit decreased by **$8.4 million** (**78%**) due to excess industry supply, lower per unit sales prices, and increased distribution and production costs[207](index=207&type=chunk) - For 9M 2021, net sales decreased by **$8.2 million** (**1%**), but gross profit increased by **$23.9 million** (**32%**) primarily due to higher per unit sales prices in North America and Europe, and a **$2.5 million** insurance recovery, partially offset by inflationary cost pressures[208](index=208&type=chunk)[209](index=209&type=chunk) [Other products and services](index=38&type=section&id=Other%20products%20and%20services) This section analyzes the net sales and gross profit performance of the Other products and services segment | Metric | Q3 2021 (Millions USD) | Q3 2020 (Millions USD) | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Sales | 38.3 | 27.3 | 118.4 | 83.8 | | Gross Profit | 5.6 | 2.3 | 16.0 | 6.4 | - Net sales for other products and services increased significantly by **$11.0 million** (**40%**) in Q3 2021 and **$34.6 million** (**41%**) in 9M 2021, primarily driven by higher sales of third-party freight services and poultry and meats in the Middle East[210](index=210&type=chunk)[211](index=211&type=chunk) - Gross profit also saw substantial increases, rising by **$3.3 million** (**143%**) in Q3 and **$9.6 million** (**150%**) in 9M, directly correlating with the higher net sales[212](index=212&type=chunk)[213](index=213&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows from operating, investing, and financing activities, along with its debt and capital resources [Operating Activities](index=39&type=section&id=Operating%20Activities) This section details the cash generated or used by the company's core business operations | Metric | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | | Net cash provided by operating activities | 151.6 | 173.9 | - Net cash provided by operating activities decreased by **$22.3 million** to **$151.6 million** for the first nine months of 2021, primarily due to higher inventory levels and receivables, partially offset by higher net income and increased accounts payable[217](index=217&type=chunk)[218](index=218&type=chunk) - Working capital slightly increased by **$0.5 million** to **$458.0 million** at October 1, 2021[218](index=218&type=chunk) [Investing Activities](index=39&type=section&id=Investing%20Activities) This section outlines the cash flows related to the acquisition and disposal of long-term assets and investments | Metric | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | | Net cash used in investing activities | (67.2) | (82.5) | | Capital expenditures | (83.4) | (92.9) | | Proceeds from sales of property, plant and equipment | 12.5 | 9.8 | - Net cash used in investing activities decreased by **$15.3 million** to **$67.2 million** for the first nine months of 2021[219](index=219&type=chunk) - This was mainly due to lower capital expenditures (**$83.4 million** vs. **$92.9 million**) for new refrigerated container ships and facility expansions, partially offset by proceeds from asset sales (**$12.5 million**) and derivative settlements (**$4.6 million**)[219](index=219&type=chunk)[220](index=220&type=chunk) [Financing Activities](index=40&type=section&id=Financing%20Activities) This section describes the cash flows associated with debt, equity, and dividend payments | Metric | 9M 2021 (Millions USD) | 9M 2020 (Millions USD) | | :------------------------------------ | :--------------------- | :--------------------- | | Net cash used in financing activities | (86.7) | (111.4) | | Net repayments on debt | (64.9) | (76.0) | | Dividends paid | (16.6) | (9.6) | | Repurchase and retirement of ordinary shares | — | (20.8) | - Net cash used in financing activities decreased by **$24.7 million** to **$86.7 million** for the first nine months of 2021[224](index=224&type=chunk) - This was primarily due to lower net repayments on debt (**$64.9 million** vs. **$76.0 million**) and no share repurchases (compared to **$20.8 million** in 2020), partially offset by higher dividends paid (**$16.6 million** vs. **$9.6 million**)[224](index=224&type=chunk) [Debt Instruments and Debt Service Requirements](index=40&type=section&id=Debt%20Instruments%20and%20Debt%20Service%20Requirements) This section provides details on the company's debt facilities, outstanding balances, interest rates, and covenant compliance - The company has a **$1.1 billion** senior unsecured revolving credit facility maturing October 1, 2024, with **$476.9 million** outstanding at an interest rate of **1.24%** as of October 1, 2021[225](index=225&type=chunk)[226](index=226&type=chunk) - The facility includes an accordion feature for up to **$300 million** in incremental increases[227](index=227&type=chunk) - The company was in compliance with all financial covenants, including a Consolidated Leverage Ratio not exceeding **3.50 to 1.00** and a minimum Consolidated Interest Coverage Ratio of **2.25 to 1.00**[228](index=228&type=chunk) - As of October 1, 2021, the company had **$646.9 million** of borrowing availability under committed working capital facilities[231](index=231&type=chunk) - Management believes current cash, credit facility capacity, and operating cash flows will be sufficient for the next twelve months, but acknowledges uncertainties related to the COVID-19 pandemic and economic environment[232](index=232&type=chunk) [Contractual Obligations](index=41&type=section&id=Contractual%20Obligations) This section summarizes the company's material commitments under contractual obligations - There were no material changes in commitments under contractual obligations as of October 1, 2021, compared to those disclosed in the Annual Report on Form 10-K for the year ended January 1, 2021[233](index=233&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the accounting policies and estimates that require significant management judgment - No material changes occurred to the critical accounting policies or estimates during the third quarter of 2021, as previously discussed in the Form 10-K for the fiscal year ended January 1, 2021[234](index=234&type=chunk) [Fair Value Measurements](index=41&type=section&id=Fair%20Value%20Measurements) This section discusses the fair value of derivative instruments and assets held for sale, and their sensitivity to market changes - The fair value of foreign currency cash flow hedges was a net liability of **$7.0 million** as of October 1, 2021, while interest rate swap cash flow hedges had a net liability of **$35.8 million**, a decrease from **$50.6 million** due to increased variable interest rates[235](index=235&type=chunk)[236](index=236&type=chunk) - The company terminated its bunker fuel hedge portfolio in Q1 2021 due to fleet optimization[237](index=237&type=chunk) - **$10.5 million** of net fair value from designated and dedesignated hedges is expected to transfer to earnings in the next 12 months, with the remaining **$31.1 million** over 7 years[239](index=239&type=chunk) - The fair value of goodwill for the banana and prepared food reporting units, and related trade names/trademarks, remains sensitive to changes in estimated cash flows and discount rates[240](index=240&type=chunk) - No impairment charges were recorded for these assets during the nine months ended October 1, 2021, but performance is continuously monitored[241](index=241&type=chunk) [New Accounting Pronouncements](index=42&type=section&id=New%20Accounting%20Pronouncements) This section refers to disclosures on recently issued accounting pronouncements and their potential impact - Refer to Note 2, 'Recently Issued Accounting Pronouncements,' for a discussion of recent accounting pronouncements[243](index=243&type=chunk) [Seasonality](index=42&type=section&id=Seasonality) This section explains the seasonal variations in the company's net sales and gross profit - Interim results are subject to significant seasonal variations, with a greater portion of net sales and gross profit historically realized during the first two calendar quarters of the year due to fluctuating sales prices based on supply and demand for fresh produce[244](index=244&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section describes the company's exposure to market risks, particularly bunker fuel price fluctuations, and hedging strategies - The company is exposed to bunker fuel price fluctuations and previously used swap agreements to hedge this risk[254](index=254&type=chunk) - However, due to fleet optimization initiatives and changes in forecasted fuel mix, the remaining bunker fuel hedge portfolio was voluntarily terminated in Q1 2021[254](index=254&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports on internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of October 1, 2021[257](index=257&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended October 1, 2021[257](index=257&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, exhibits, and required signatures [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal proceedings, specifically focusing on significant income tax deficiencies related to transfer pricing in foreign jurisdictions - The company is contesting income tax deficiencies of approximately **$147.4 million** (including interest and penalties) from transfer pricing in two foreign jurisdictions for tax years 2012-2016[260](index=260&type=chunk)[261](index=261&type=chunk) - Appeals have been filed in judicial courts, and the company intends to vigorously pursue all administrative and judicial remedies[262](index=262&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, emphasizing current market conditions, inflationary pressures, and supply chain disruptions - Current market conditions, including inflationary pressures, are significantly increasing production and distribution costs (packaging, fertilizers, inland freight, labor, fuel) and causing supply chain disruptions due to strained transportation capacity and labor shortages[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) - These factors have adversely affected gross profit in Q3 2021 and are expected to continue impacting future periods[268](index=268&type=chunk) - Efforts to raise prices may not fully offset these cost increases and could lead to sales losses[270](index=270&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL documents for the Consolidated Balance Sheets, Statements of Operations, Comprehensive (Loss) Income, Cash Flows, Shareholders' Equity, and Notes to Consolidated Financial Statements[272](index=272&type=chunk) [Signatures](index=50&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission on behalf of the company - The report was signed by Youssef Zakharia, President & Chief Operating Officer, and Eduardo Bezerra on November 3, 2021[277](index=277&type=chunk)[278](index=278&type=chunk)