Fresh Del Monte Produce (FDP) - 2025 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's analysis Item 1. Financial Statements Presents unaudited consolidated financial statements and detailed notes for Fresh Del Monte Produce Inc Consolidated Balance Sheets Summarizes the company's financial position, including assets, liabilities, and equity, at specific dates | Metric | June 27, 2025 (Millions USD) | December 27, 2024 (Millions USD) | Change (Millions USD) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Assets | | | | | | Cash and cash equivalents | 85.5 | 32.6 | 52.9 | 162.3% | | Total current assets | 1,182.3 | 1,132.9 | 49.4 | 4.4% | | Total assets | 3,164.9 | 3,096.2 | 68.7 | 2.2% | | Liabilities | | | | | | Total current liabilities | 567.7 | 533.1 | 34.6 | 6.5% | | Long-term debt and finance leases | 205.2 | 248.9 | (43.7) | -17.6% | | Total liabilities | 1,086.6 | 1,089.4 | (2.8) | -0.3% | | Shareholders' Equity | | | | | | Total shareholders' equity | 2,078.3 | 2,006.8 | 71.5 | 3.6% | - Cash and cash equivalents significantly increased by $52.9 million (162.3%) from December 27, 2024, to June 27, 2025[12] - Long-term debt and finance leases decreased by $43.7 million (-17.6%) over the six-month period[12] Consolidated Statements of Operations Details the company's revenues, expenses, and net income for the reported periods | Metric (Millions USD) | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | 6M 2025 | 6M 2024 | Change (YoY) | % Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | :------------- | :------ | :------ | :----------- | :------------- | | Net sales | 1,182.5 | 1,139.7 | 42.8 | 3.8% | 2,280.8 | 2,247.5 | 33.3 | 1.5% | | Gross profit | 120.1 | 113.2 | 6.9 | 6.1% | 212.2 | 195.4 | 16.8 | 8.6% | | Operating income | 68.3 | 68.2 | 0.1 | 0.1% | 113.2 | 112.2 | 1.0 | 0.9% | | Net income attributable to Fresh Del Monte Produce Inc. | 56.8 | 53.6 | 3.2 | 6.0% | 87.9 | 79.7 | 8.2 | 10.3% | | Basic EPS | 1.19 | 1.12 | 0.07 | 6.3% | 1.83 | 1.67 | 0.16 | 9.6% | | Diluted EPS | 1.18 | 1.12 | 0.06 | 5.4% | 1.82 | 1.66 | 0.16 | 9.6% | | Dividends declared per ordinary share | 0.30 | 0.25 | 0.05 | 20.0% | 0.60 | 0.50 | 0.10 | 20.0% | - Net sales increased by 3.8% in Q2 2025 and 1.5% in the first six months of 2025 compared to the prior-year periods, primarily driven by higher per unit selling prices and favorable exchange rates[15] - Net income attributable to Fresh Del Monte Produce Inc. grew by 6.0% in Q2 2025 and 10.3% in the first six months of 2025[15] - Dividends declared per ordinary share increased by 20% for both the quarter and six-month periods[15] Consolidated Statements of Comprehensive Income Reports net income and other comprehensive income components, reflecting total non-owner changes in equity | Metric (Millions USD) | Q2 2025 | Q2 2024 | Change (QoQ) | 6M 2025 | 6M 2024 | Change (YoY) | | :------------------------------------------------ | :------ | :------ | :----------- | :------ | :------ | :----------- | | Net income | 57.4 | 53.3 | 4.1 | 89.3 | 79.4 | 9.9 | | Net unrealized (loss) gain on derivatives, net of tax | (6.3) | 1.0 | (7.3) | (8.7) | 6.8 | (15.5) | | Net unrealized foreign currency translation gain (loss) | 16.3 | (2.1) | 18.4 | 23.2 | (6.7) | 29.9 | | Net change in retirement benefit adjustment, net of tax | (0.6) | (0.4) | (0.2) | (0.9) | (1.0) | 0.1 | | Comprehensive income attributable to Fresh Del Monte Produce Inc. | 66.2 | 52.1 | 14.1 | 101.5 | 78.8 | 22.7 | - Comprehensive income attributable to Fresh Del Monte Produce Inc. increased by $14.1 million (27.1%) in Q2 2025 and $22.7 million (28.8%) in the first six months of 2025[17] - A significant shift occurred in net unrealized foreign currency translation, moving from a loss in 2024 to a substantial gain in 2025 for both the quarter and six-month periods[17] Consolidated Statements of Cash Flows Outlines cash inflows and outflows from operating, investing, and financing activities | Metric (Millions USD) | 6M 2025 | 6M 2024 | Change (YoY) | % Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | :------------- | | Net cash provided by operating activities | 159.2 | 143.7 | 15.5 | 10.8% | | Net cash (used in) provided by investing activities | (24.4) | 1.6 | (26.0) | -1625.0% | | Net cash used in financing activities | (81.2) | (144.3) | 63.1 | 43.7% | | Net increase in cash and cash equivalents | 52.9 | 4.0 | 48.9 | 1222.5% | | Cash and cash equivalents, ending | 85.5 | 37.8 | 47.7 | 126.2% | - Net cash provided by operating activities increased by $15.5 million (10.8%) for the first six months of 2025, driven by higher net income and working capital fluctuations[22][163] - Investing activities shifted from providing $1.6 million in cash in 6M 2024 to using $24.4 million in 6M 2025, primarily due to increased capital expenditures and investments in unconsolidated companies, partially offset by lower proceeds from asset sales[22][165][166] - Net cash used in financing activities decreased by $63.1 million (43.7%), mainly due to lower net repayments on debt, despite increased dividends paid and share repurchases[22][167][168] Consolidated Statements of Shareholders' Equity Shows changes in shareholders' equity, including net income, dividends, and share repurchases | Metric (Millions USD) | June 27, 2025 | December 27, 2024 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Total Fresh Del Monte Produce Inc. shareholders' equity | 2,060.4 | 1,990.5 | 69.9 | | Retained Earnings | 1,488.7 | 1,435.4 | 53.3 | | Accumulated Other Comprehensive Loss | (36.8) | (50.4) | 13.6 | - Total shareholders' equity increased by $69.9 million from December 27, 2024, to June 27, 2025, primarily driven by net income and a reduction in accumulated other comprehensive loss[25] - The company repurchased 253,850 ordinary shares for $7.6 million during the six months ended June 27, 2025, under a $150 million stock repurchase program approved in February 2025[25][113][175] - Dividends paid totaled $28.8 million for the six months ended June 27, 2025, an increase from $23.9 million in the prior-year period[25][115] Notes to Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements 1. General Describes Fresh Del Monte Produce Inc.'s business, operations, 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[29] - The business is organized into three reportable segments: Fresh and value-added products, Banana, and Other products and services[29][33] 2. Recently Issued Accounting Pronouncements Discusses new accounting standards and their potential impact on the company's financial reporting - The FASB issued ASU 2024-03 (effective after Dec 15, 2026) requiring additional expense disaggregation disclosures, which the company is currently evaluating for impact[34] - ASU 2023-09 (effective after Dec 15, 2024) enhances income tax disclosures but is expected to have no impact on the company's financial condition, results of operations, or cash flows[35] 3. Investments in and Advances to Unconsolidated Companies Details the company's equity method investments and related income | Metric (Millions USD) | June 27, 2025 | December 27, 2024 | | :------------------------------------ | :------------ | :---------------- | | Investments in and advances to unconsolidated companies | 54.1 | 39.9 | | Income from equity method investments (Q2) | 7.8 | 3.6 | | Income from equity method investments (6M) | 7.8 | 3.4 | | Unfunded commitments | 2.6 | N/A | - Investments in unconsolidated companies, primarily in food, nutrition, and agricultural technology, increased to $54.1 million as of June 27, 2025, from $39.9 million at December 27, 2024[36] - Proportionate share of income from these investments more than doubled for both the quarter and six months ended June 27, 2025, compared to the prior year[37] 4. Asset Impairment and Other Charges (Credits), Net Reports non-recurring charges or credits related to asset impairments and other items | Item (Millions USD) | Q2 2025 | 6M 2025 | Q2 2024 | 6M 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Total asset impairment and other charges (credits), net | 0.6 | 0.6 | (1.3) | 1.0 | | Impairment of leased grape farm in Chile | 0.6 | 0.6 | — | — | | Insurance recovery related to South American warehouse | — | — | (2.0) | (2.0) | | Legal settlement | — | — | — | 1.8 | | California Air Resource Board reserve | — | — | — | 0.5 | - For Q2 and 6M 2025, asset impairment and other charges, net, totaled $0.6 million, primarily due to impairment of a leased grape farm in Chile[38] - In 6M 2024, charges included a $1.8 million legal settlement and a $0.5 million CARB reserve, partially offset by a $2.0 million insurance recovery[38] 5. Income Taxes Addresses the company's income tax provisions, significant tax disputes, and new tax regulations - The company is contesting $237.2 million in income tax deficiencies (including interest and penalties) related to transfer pricing in three foreign jurisdictions for tax years 2012-2021[39] - Real estate collateral totaling $8.4 million net book value ($37.4 million fair market value) has been registered in one foreign jurisdiction to secure injunctions against tax collection efforts[40] | Metric (Millions USD) | Q2 2025 | Q2 2024 | Change (QoQ) | 6M 2025 | 6M 2024 | Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | :------ | :------ | :----------- | | Income tax provision | 14.1 | 12.3 | 1.8 | 21.0 | 17.6 | 3.4 | - The income tax provision increased for both the quarter and six months ended June 27, 2025, primarily due to increased earnings in higher tax jurisdictions[46] - The EU's Pillar Two Directive, establishing a 15% minimum effective tax rate, became effective for the company in fiscal year 2025, with an immaterial global minimum tax liability determined to date[44] - The U.S. enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, with provisions effective from 2025-2027, and the company is currently assessing its impact[45] 6. Allowance for Credit Losses Explains the company's provisions for uncollectible trade receivables and advances to suppliers | Metric (Millions USD) | June 27, 2025 | December 27, 2024 | | :------------------------------------ | :------------ | :---------------- | | Trade accounts receivable, net | 439.9 | 393.2 | | Allowance for trade receivables (total) | 37.5 | 35.0 | | Allowance for trade receivables (credit losses component) | 12.3 | 11.5 | | Allowance for advances to growers and suppliers | 16.1 | 12.1 | - The allowance for trade receivable credit losses increased to $12.3 million as of June 27, 2025, from $11.5 million at the beginning of the period[51] - The allowance for advances to growers and suppliers increased to $16.1 million as of June 27, 2025, from $12.1 million at the beginning of the period, with a provision for uncollectible amounts of $4.0 million for the six months[56] 7. Share-Based Compensation Details expenses and terms related to the company's equity-based compensation plans | Metric (Millions USD) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Share-based compensation expense (RSUs/PSUs) | 2.5 | 2.2 | 4.9 | 2.8 | - Share-based compensation expense for RSUs and PSUs increased to $4.9 million for the six months ended June 27, 2025, from $2.8 million in the prior-year period[58] - The 2022 Omnibus Share Incentive Plan allows for equity-based awards, with PSUs vesting based on performance criteria and RSUs vesting annually over three years (or one year for Board members)[57][60][61] 8. Inventories, net Provides a breakdown of inventory components and changes over the period | Inventory Type (Millions USD) | June 27, 2025 | December 27, 2024 | | :------------------------------------ | :------------ | :---------------- | | Finished goods | 183.8 | 200.2 | | Raw materials and packaging supplies | 169.7 | 157.6 | | Growing crops | 198.7 | 237.5 | | Total inventories, net | 552.2 | 595.3 | - Total inventories, net, decreased to $552.2 million as of June 27, 2025, from $595.3 million at December 27, 2024, primarily due to lower finished goods and growing crops[65] 9. Debt and Finance Lease Obligations Outlines the company's debt structure, credit facilities, and lease obligations | Metric (Millions USD) | June 27, 2025 | December 27, 2024 | | :------------------------------------ | :------------ | :---------------- | | Senior unsecured revolving credit facility | 201.0 | 244.1 | | Finance lease obligations | 5.8 | 6.3 | | Total debt and finance lease obligations | 206.8 | 250.4 | | Long-term debt and finance lease obligations | 205.2 | 248.9 | - Total debt and finance lease obligations decreased to $206.8 million as of June 27, 2025, from $250.4 million at December 27, 2024, primarily due to reduced borrowings on the revolving credit facility[66] - The company entered into a new $0.75 billion syndicated senior unsecured revolving credit facility in February 2024, maturing on February 21, 2029, with $549.0 million available borrowings as of June 27, 2025[68][72] - The credit facility includes financial covenants such as a Consolidated Leverage Ratio not exceeding 3.75 to 1.00 and a minimum Consolidated Interest Coverage Ratio of 2.25 to 1.00, with which the company was in compliance as of June 27, 2025[70] 10. Commitments and Contingencies Discloses potential future obligations and legal matters - The estimated clean-up cost for the Kunia Well Site is $2.7 million, with $2.5 million accrued in noncurrent liabilities as of June 27, 2025[76] - The company settled a $0.5 million contingent reserve related to a California Air Resource Board (CARB) violation during Q1 2025[77] - A legal settlement of $1.8 million (net of insurance) for a legacy claim by a former employee was incurred during the first six months of 2024[78] 11. Earnings Per Share Presents basic and diluted earnings per share calculations | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net income attributable to Fresh Del Monte Produce Inc. (Millions USD) | 56.8 | 53.6 | 87.9 | 79.7 | | Weighted average ordinary shares - Basic | 47,953,982 | 47,919,451 | 47,955,160 | 47,814,403 | | Weighted average ordinary shares - Diluted | 48,172,414 | 47,975,217 | 48,220,517 | 47,939,568 | | Basic EPS | 1.19 | 1.12 | 1.83 | 1.67 | | Diluted EPS | 1.18 | 1.12 | 1.82 | 1.66 | - Basic EPS increased to $1.19 in Q2 2025 from $1.12 in Q2 2024, and to $1.83 in 6M 2025 from $1.67 in 6M 2024[80] - Diluted EPS increased to $1.18 in Q2 2025 from $1.12 in Q2 2024, and to $1.82 in 6M 2025 from $1.66 in 6M 2024[80] 12. Retirement and Other Employee Benefits Details costs associated with the company's pension and post-retirement benefit plans | Metric (Millions USD) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net periodic benefit costs | 2.8 | 3.5 | 5.6 | 7.0 | | Service cost | 1.6 | 1.8 | 3.2 | 3.6 | | Interest cost | 1.9 | 2.1 | 3.8 | 4.2 | | Expected return on assets | (0.8) | (0.8) | (1.6) | (1.7) | - Net periodic benefit costs for defined benefit pension and post-retirement plans decreased to $2.8 million in Q2 2025 and $5.6 million in 6M 2025, from $3.5 million and $7.0 million respectively in the prior-year periods[81] 13. Business Segment Data Provides financial performance data for the company's operating segments and geographic regions | Segment (Millions USD) | Q2 2025 Net Sales | Q2 2025 Gross Profit | Q2 2024 Net Sales | Q2 2024 Gross Profit | | :------------------------------------ | :------------------ | :------------------- | :------------------ | :------------------- | | Fresh and value-added products | 722.6 | 84.9 | 694.1 | 77.9 | | Banana | 410.0 | 30.0 | 394.3 | 29.8 | | Other products and services | 49.9 | 5.2 | 51.3 | 5.5 | | Total | 1,182.5 | 120.1 | 1,139.7 | 113.2 | | Segment (Millions USD) | 6M 2025 Net Sales | 6M 2025 Gross Profit | 6M 2024 Net Sales | 6M 2024 Gross Profit | | :------------------------------------ | :------------------ | :------------------- | :------------------ | :------------------- | | Fresh and value-added products | 1,405.7 | 154.1 | 1,370.8 | 133.9 | | Banana | 773.7 | 46.8 | 773.8 | 51.5 | | Other products and services | 101.4 | 11.3 | 102.9 | 10.0 | | Total | 2,280.8 | 212.2 | 2,247.5 | 195.4 | - Fresh and value-added products segment saw net sales increase by 4.1% in Q2 2025 and 2.5% in 6M 2025, driven by higher per unit selling prices of pineapple, fresh-cut fruits, and avocados, along with favorable exchange rates and tariff-related price adjustments[84][146][153] - Banana segment net sales increased by 4.0% in Q2 2025 due to higher per unit selling prices and favorable Euro exchange rates, but slightly decreased in 6M 2025 due to lower sales volume in North America and Asia[84][149][156] | Geographic Region (Millions USD) | Q2 2025 Net Sales | Q2 2024 Net Sales | 6M 2025 Net Sales | 6M 2024 Net Sales | | :------------------------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | North America | 684.8 | 680.9 | 1,331.6 | 1,335.7 | | Europe | 252.6 | 225.9 | 474.4 | 435.2 | | Middle East | 109.2 | 93.6 | 215.6 | 192.9 | | Asia | 111.7 | 113.3 | 201.0 | 219.9 | | Other | 24.2 | 26.0 | 58.2 | 63.8 | | Total | 1,182.5 | 1,139.7 | 2,280.8 | 2,247.5 | | Product (Millions USD) | Q2 2025 Net Sales | Q2 2024 Net Sales | 6M 2025 Net Sales | 6M 2024 Net Sales | | :------------------------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | Fresh-cut fruit | 159.1 | 144.6 | 289.1 | 264.4 | | Fresh-cut vegetables | 73.1 | 85.0 | 141.3 | 166.4 | | Pineapples | 190.4 | 169.0 | 352.4 | 332.6 | | Avocados | 99.5 | 100.4 | 206.1 | 179.9 | | Non-tropical fruit | 51.5 | 47.3 | 103.1 | 107.9 | | Prepared foods | 72.7 | 66.9 | 143.6 | 136.4 | | Melons | 33.0 | 28.1 | 87.8 | 81.3 | | Vegetables | 21.1 | 28.0 | 36.8 | 53.5 | | Other fruit and vegetables | 22.2 | 24.8 | 45.5 | 48.4 | | Total fresh and value-added products | 722.6 | 694.1 | 1,405.7 | 1,370.8 | | Banana | 410.0 | 394.3 | 773.7 | 773.8 | | Other products and services | 49.9 | 51.3 | 101.4 | 102.9 | | Total | 1,182.5 | 1,139.7 | 2,280.8 | 2,247.5 | 14. Derivative Financial Instruments Describes the company's use of derivatives for hedging and their fair value - The company uses derivative financial instruments, primarily foreign currency forward contracts, to hedge exposure to fluctuations in foreign exchange rates and variable interest rates[89][94] | Foreign Currency Contract | Notional Amount (Millions) | | :------------------------ | :------------------------- | | Euro (EUR) | 102.3 | | British pound (GBP) | 2.9 | | Japanese yen (JPY) | 2,745.8 | | Costa Rican colon (CRC) | 45,965.6 | | Chilean peso (CLP) | 6,354.4 | | Kenyan shilling (KES) | 1,433.3 | | Mexican peso (MXP) | 277.0 | | Metric (Millions USD) | June 27, 2025 | December 27, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total asset derivatives | 2.8 | 0.3 | | Total liability derivatives | 9.7 | — | | Net fair value of foreign exchange contracts (liability) asset | (6.9) | 0.3 | - The net fair value of foreign exchange contracts shifted from a $0.3 million asset position at December 27, 2024, to a $6.9 million liability position at June 27, 2025[99][104] - An interest rate swap was terminated in July 2024 for $7.3 million cash proceeds, with $3.8 million remaining in accumulated other comprehensive loss to be reclassified to earnings over the remaining life of the hedged debt[97][98] 15. Fair Value Measurements Explains the valuation methods and fair value of certain assets and liabilities - Derivative instruments (foreign currency and interest rate) are measured at fair value using observable market inputs (Level 2) via a discounted cash flow model[103] - The fair value of the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and trade names are sensitive to differences between estimated and actual cash flows and changes in discount rates[107] | Asset Type (Millions USD) | June 27, 2025 | | :------------------------------------ | :------------ | | Assets held for sale | 11.8 | | - Idle farmland in Italy | 7.4 | | - Facilities and farmland in Central America | 2.0 | | - Two carrier vessels | 2.0 | | - Office and facilities in Chile | 0.4 | - Assets held for sale totaled $11.8 million as of June 27, 2025, primarily consisting of idle farmland in Italy and facilities/farmland in Central America[108] 16. Accumulated Other Comprehensive Loss Details changes in components of other comprehensive income/loss | Component (Millions USD) | Balance at Dec 27, 2024 | Net current period other comprehensive (loss) income | Balance at June 27, 2025 | | :------------------------------------ | :---------------------- | :--------------------------------------------------- | :----------------------- | | Cash Flow Hedges | 5.6 | (8.7) | (3.1) | | Foreign Currency Translation Adjustment | (45.2) | 23.2 | (22.0) | | Retirement Benefit Adjustment | (10.8) | (0.9) | (11.7) | | Total Accumulated Other Comprehensive Loss | (50.4) | 13.6 | (36.8) | - Accumulated other comprehensive loss improved from $(50.4) million at December 27, 2024, to $(36.8) million at June 27, 2025, primarily due to a significant net unrealized foreign currency translation gain[110] | Reclassified from AOCI (Millions USD) | 6M 2025 | 6M 2024 | Affected line item | | :------------------------------------ | :------ | :------ | :----------------- | | Foreign currency cash flow hedges (Net sales) | 5.4 | (0.8) | Net sales | | Foreign currency cash flow hedges (Cost of products sold) | (0.4) | 3.1 | Cost of products sold | | Interest rate swaps | (1.7) | (4.6) | Interest expense | | Actuarial losses | 0.2 | 0.4 | Other expense, net | 17. Shareholders' Equity Provides information on outstanding shares, stock repurchases, and dividends - As of June 27, 2025, there were 47,974,946 ordinary shares issued and outstanding[112] - The Board approved a $150 million stock repurchase program on February 21, 2025, under which 253,850 shares were repurchased for $7.6 million during the first six months of 2025[113][175] | Dividend Payment Date | Cash Dividend per Ordinary Share | | :-------------------- | :----------------------------- | | June 6, 2025 | $0.30 | | March 28, 2025 | $0.30 | | June 7, 2024 | $0.25 | | March 29, 2024 | $0.25 | - Total dividends paid for the six months ended June 27, 2025, were $28.8 million, up from $23.9 million in the prior-year period[115] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of financial performance, liquidity, and capital resources Overview Introduces Fresh Del Monte Produce Inc.'s business model, vision, and operating segments - Fresh Del Monte Produce Inc. is a leading vertically integrated producer, marketer, and distributor of fresh and fresh-cut fruit and vegetables, and prepared foods, operating globally under the Del Monte brand[117] - The company's vision is to inspire healthy lifestyles through wholesome and convenient products, with a strategy founded on six goals[118] - The business comprises three reportable segments: Fresh and value-added products, Banana, and Other products and services[117][121] Current Macroeconomic Environment Discusses external factors like geopolitical conflicts and trade policies impacting the business - Geopolitical conflicts, particularly shipping disruptions in the Red Sea, have negatively impacted the business through increased shipping times and logistical pressures[120] - Changes in U.S. trade policy, including new tariffs, have significantly increased the cost of products sold, though the company has largely mitigated this through increased selling prices in North America[122][123] - The company is actively monitoring macroeconomic trends and region-specific matters to mitigate impacts on its business and financial condition[124] Income Taxes Provides management's perspective on tax disputes, new tax directives, and their potential financial impact - The company is vigorously contesting $237.2 million in income tax deficiencies related to transfer pricing in three foreign jurisdictions for tax years 2012-2021, with ongoing administrative and judicial proceedings[125][126][127][128] - The EU's Pillar Two Directive, establishing a 15% minimum effective tax rate, became effective for the company in fiscal year 2025, with an immaterial global minimum tax liability determined to date[130] - The recently enacted U.S. One Big Beautiful Bill Act (OBBBA) includes significant tax provisions effective from 2025-2027, and the company is currently assessing its impact[131] RESULTS OF OPERATIONS Analyzes consolidated financial performance, including net sales, gross profit, and net income | Metric (Millions USD) | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | 6M 2025 | 6M 2024 | Change (YoY) | % Change (YoY) | | :------------------------------------ | :------ | :------ | :------ | :------------- | :------ | :------ | :------ | :------------- | | Net sales | 1,182.5 | 1,139.7 | 42.8 | 3.8% | 2,280.8 | 2,247.5 | 33.3 | 1.5% | | Gross profit | 120.1 | 113.2 | 6.9 | 6.1% | 212.2 | 195.4 | 16.8 | 8.6% | | Operating income | 68.3 | 68.2 | 0.1 | 0.1% | 113.2 | 112.2 | 1.0 | 0.9% | | Interest expense | 3.2 | 5.2 | (2.0) | -38.5% | 6.7 | 10.4 | (3.7) | -35.6% | | Other (income) expense, net | (6.2) | (2.3) | (3.9) | 169.6% | (3.4) | 5.4 | (8.8) | -163.0% | | Income tax provision | 14.1 | 12.3 | 1.8 | 14.6% | 21.0 | 17.6 | 3.4 | 19.3% | - Net sales increased by 3.8% in Q2 2025 and 1.5% in 6M 2025, primarily due to higher per unit selling prices in fresh and value-added products and banana segments, and favorable exchange rates[133] - Gross profit increased by 6.1% in Q2 2025 and 8.6% in 6M 2025, driven by higher net sales, partially offset by increased production, procurement, and distribution costs, including tariff-related charges[134] - Interest expense decreased significantly by 38.5% in Q2 2025 and 35.6% in 6M 2025 due to lower average debt balances[141] - Other (income) expense, net, shifted to a gain of $6.2 million in Q2 2025 and $3.4 million in 6M 2025, primarily due to equity earnings from unconsolidated companies and lower foreign currency losses[142] Financial Results by Segment Examines the financial performance of each business segment, including sales and gross profit | Segment (Millions USD) | Q2 2025 Net Sales | Q2 2025 Gross Profit | Q2 2024 Net Sales | Q2 2024 Gross Profit | Q2 2025 Gross Margin | Q2 2024 Gross Margin | | :------------------------------------ | :------------------ | :------------------- | :------------------ | :------------------- | :------------------- | :------------------- | | Fresh and value-added products | 722.6 | 84.9 | 694.1 | 77.9 | 11.7% | 11.2% | | Banana | 410.0 | 30.0 | 394.3 | 29.8 | 7.3% | 7.6% | | Other products and services | 49.9 | 5.2 | 51.3 | 5.5 | 10.4% | 10.7% | | Segment (Millions USD) | 6M 2025 Net Sales | 6M 2025 Gross Profit | 6M 2024 Net Sales | 6M 2024 Gross Profit | 6M 2025 Gross Margin | 6M 2024 Gross Margin | | :------------------------------------ | :------------------ | :------------------- | :------------------ | :------------------- | :------------------- | :------------------- | | Fresh and value-added products | 1,405.7 | 154.1 | 1,370.8 | 133.9 | 11.0% | 9.8% | | Banana | 773.7 | 46.8 | 773.8 | 51.5 | 6.0% | 6.7% | | Other products and services | 101.4 | 11.3 | 102.9 | 10.0 | 11.1% | 9.7% | - Fresh and value-added products segment's gross margin increased to 11.7% in Q2 2025 and 11.0% in 6M 2025, driven by higher net sales despite increased costs[148][155] - Banana segment's gross margin decreased to 7.3% in Q2 2025 and 6.0% in 6M 2025, primarily due to higher per unit production and procurement costs from adverse weather and increased distribution costs[150][157] - Other products and services segment experienced a decrease in Q2 2025 net sales and gross profit due to lower per unit selling prices in poultry and meats, but saw an increase in 6M 2025 gross profit due to higher selling prices[151][152][158] Liquidity and Capital Resources Discusses the company's cash flow, debt, and ability to meet financial obligations - Principal liquidity sources include cash from operations, $796 million in credit facilities (with $577 million available capacity), and $85.5 million in existing cash and cash equivalents[159] | Cash Flow Summary (Millions USD) | 6M 2025 | 6M 2024 | Change | | :------------------------------------ | :------ | :------ | :----- | | Net cash provided by operating activities | 159.2 | 143.7 | 15.5 | | Net cash (used in) provided by investing activities | (24.4) | 1.6 | (26.0) | | Net cash used in financing activities | (81.2) | (144.3) | 63.1 | | Net increase in cash and cash equivalents | 52.9 | 4.0 | 48.9 | | Cash and cash equivalents, ending | 85.5 | 37.8 | 47.7 | - Working capital increased by $14.8 million to $614.6 million at June 27, 2025, driven by higher cash and receivables, partially offset by lower inventory and higher accounts payable[164] - The company repurchased 253,850 shares for $7.6 million under its $150 million stock repurchase program during the first six months of 2025[161][175] - The company believes its current liquidity and cash flows will be sufficient to meet cash requirements and service debt for the next twelve months, while remaining in compliance with credit facility covenants[174] Critical Accounting Policies and Estimates Highlights key accounting policies and estimates requiring significant management judgment - There were no material changes to the company's critical accounting policies or estimates during the second quarter of 2025, as compared to those disclosed in the Annual Report on Form 10-K for the fiscal year ended December 27, 2024[177] Fair Value Measurements Explains the valuation of financial instruments and assets held for sale - The fair value of foreign currency cash flow hedges shifted to a net liability of $6.9 million as of June 27, 2025, from a net asset of $0.3 million at December 27, 2024, due to weakening exchange rates and new hedges[178] - The company expects $5.2 million of net loss from cash flow hedges in accumulated other comprehensive loss to be transferred to earnings within the next 12 months[180] - The fair value of goodwill and trade names in the banana and prepared food reporting units are sensitive to estimated cash flows and discount rates, with potential for impairment if strategies to improve sales and profitability are unsuccessful[180][181] New Accounting Pronouncements Summarizes recently issued accounting standards and their expected impact - Refer to Note 2 for a discussion of recently issued accounting pronouncements, including ASU 2024-03 (expense disaggregation) and ASU 2023-09 (income tax disclosures)[183] Seasonality Describes the seasonal nature of the company's business and its effect on financial results - Interim results are subject to significant seasonal variations, with a greater portion of net sales and gross profit historically realized during the first two quarters of the year due to fluctuating sales prices based on supply and demand[184] Forward-Looking Statements Identifies statements about future performance and potential risks and uncertainties - The report contains forward-looking statements regarding future financial and operational performance, impact of tariffs, use of borrowed funds, share repurchases, geopolitical conflicts, inflationary pressures, market conditions, capital resources, derivative instruments, legal/tax matters, environmental cleanup, and business plans[186][187] - These statements are subject to various risks, uncertainties, and assumptions, including inflationary pressures, trade restrictions, political/economic risks, severe weather, competition, foreign currency fluctuations, and potential asset impairments[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk States no material changes in market risk since the last annual report - No material changes in market risk have occurred since the disclosures in the Annual Report on Form 10-K for the fiscal year ended December 27, 2024[190] Item 4. Controls and Procedures Assesses the effectiveness of disclosure controls and internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 27, 2025[191] - No material changes to internal control over financial reporting occurred during the quarter ended June 27, 2025[191] PART II. OTHER INFORMATION This section provides additional information beyond the financial statements, including legal and governance matters Item 1. Legal Proceedings Details ongoing legal and tax-related disputes the company is actively contesting - The company is actively contesting tax assessments related to transfer pricing in two foreign jurisdictions for audit years 2012-2016, with cases pending in administrative and judicial courts[193][194] - In one jurisdiction, injunctions were granted to stay tax collection efforts, secured by real estate collateral[193] Item 5. Other Information Reports on Rule 10b5-1 plans and executive compensation agreements - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended June 27, 2025[195] - Executive Retention and Severance Agreements were approved for named executive officers, providing severance payments and benefits upon qualifying termination or Change of Control Termination, subject to restrictive covenants and a clawback policy[196][197] Item 6. Exhibits Lists all supplementary documents filed with the Form 10-Q - Exhibits include the Form of Executive Retention and Severance Agreement, CEO and CFO certifications, and Inline XBRL documents for the consolidated financial statements[202] SIGNATURES - The report is signed by Mohammed Abbas, Executive Vice President & Chief Operating Officer, and Monica Vicente, Senior Vice President & Chief Financial Officer, on July 30, 2025[206]