Home Short payment terms MISSION PRODUCE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

MISSION PRODUCE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes included elsewhere in this quarterly report. This discussion and analysis
contains forward-looking statements based upon our current beliefs, plans and
expectations that involve risks, uncertainties and assumptions. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors. Please refer to the section of this
report under the heading "Forward Looking Statements."

Insight

We are a world leader in sourcing, producing and distributing fresh avocados,
serving retail, wholesale and foodservice customers. We source, produce, pack
and distribute avocados to our customers and provide value-added services
including ripening, bagging, custom packing and logistical management. In
addition, we provide our customers with merchandising and promotional support,
insights on market trends and training designed to increase their retail avocado
sales.

We have two operating segments, which are also reporting segments. These
reporting segments are Marketing and Distribution and International Farming. Our
Marketing and Distribution reporting segment sources fruit from growers and then
distributes the fruit through our global distribution network. Our International
Farming segment owns and operates orchards from which substantially all fruit
produced is sold to our Marketing and Distribution segment. The International
Farming segment's farming activities range from cultivating early-stage
plantings to harvesting from mature trees, and it also earns service revenues
for packing and processing for producers of other crops during the avocado
off-harvest season. The International Farming segment is principally located in
Peru, with smaller operations emerging in other areas of Latin America.

Implementation of the ERP system

On November 1, 2021, we implemented a new enterprise resource planning ("ERP")
system in our Marketing and Distribution segment to improve operational
visibility and financial reporting capabilities. During implementation, we
encountered significant challenges which limited our ability to effectively
manage our business operations, thereby impacting our profitability and
financial results for the first quarter of 2022. Our distribution centers and
packing houses experienced problems with purchasing, receiving and shipping,
which resulted in a high reliance on both third-party fruit and packaged fruit
that we would have otherwise sourced directly in the field and packed in our
facilities. Other issues included delays in automated customer invoicing and
inventory management issues. During the second quarter of 2022, these
operational issues we experienced during the first quarter were largely
resolved. We continue to work with our third-party implementation firm to
improve the system, and thus the financial impact during the second quarter was
primarily limited to ongoing consulting costs.

Operating results

The operating results of our businesses are significantly impacted by the price
and volume of avocados we farm, source and distribute. In addition, our results
have been, and will continue to be, affected by quarterly and annual
fluctuations due to a number of factors, including but not limited to pests and
disease, weather patterns, changes in demand by consumers, food safety
advisories, the timing of the receipt, reduction, or cancellation of significant
customer orders, the gain or loss of significant customers, the availability,
quality and price of raw materials, the utilization of capacity at our various
locations and general economic conditions.

Our financial reporting currency is the U.S. dollar. The functional currency of
substantially all of our subsidiaries is the U.S. dollar and substantially all
of our sales are denominated in U.S. dollars. A significant portion of our
purchases of avocados are denominated in the Mexican Peso and a significant
portion of our growing and harvesting costs are denominated in Peruvian Soles.
Fluctuations in the exchange rates between the U.S. dollar and these local
currencies usually do not have a significant impact on our gross margin because
the impact affects our pricing by comparable amounts. Our margin exposure to
exchange rate fluctuations is short-term in nature, as our sales price
commitments are generally limited to less than one month and orders can
primarily be serviced with procured inventory. Over longer periods of time, we
believe that the impact exchange rate fluctuations will have on our cost of
goods sold will largely be passed on to our customers in the form of higher or
lower prices.










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                                              Three Months Ended                                     Six Months Ended
                                                   April 30,                                             April 30,
                                        2022                       2021                       2022                      2021
(In millions, except for
percentages)                         Dollars        %          Dollars        %           Dollars        %          Dollars        %
Net sales                       $   278.1      100  %       $ 234.7      100  %        $ 494.7      100  %       $ 407.9      100  %
Cost of sales                       258.3       93  %         207.6       88  %          474.4       96  %         358.1       88  %
Gross profit                         19.8        7  %          27.1       12  %           20.3        4  %          49.8       12  %
Selling, general and
administrative expenses              18.7        7  %          16.3        7  %           37.4        8  %          30.9        8  %
Operating income (loss)               1.1        -  %          10.8        

5% (17.1) (3)% 18.9 5% Interest expense

                     (1.1)       -  %          (0.8)       -  %           (2.0)       -  %          (1.7)       -  %
Equity method income (loss)           0.3        -  %          (0.2)       -  %            1.9        -  %           2.1        1  %

Other income (expense)                2.9        1  %          (0.3)       -  %            4.5        1  %          (0.3)       -  %
Income (loss) before income
taxes                                 3.2        1  %           9.5        4  %          (12.7)      (3) %          19.0        5  %
Provision (benefit) for income
taxes                                 0.8        -  %           2.1        1  %           (1.7)       -  %           9.4        2  %
Net income (loss)               $     2.4        1  %       $   7.4        3  %        $ (11.0)      (2) %       $   9.6        2  %


Net sales

Our net sales are generated predominantly from the shipment of fresh avocados to
retail, wholesale and foodservice customers worldwide. Our net sales are
affected by numerous factors, including the balance between the supply of and
demand for our produce and competition from other fresh produce companies. Our
net sales are also dependent on our ability to supply a consistent volume and
quality of fresh produce to the markets we serve.

                                           Three Months Ended              Six Months Ended
                                                April 30,                     April 30,
        (In millions)                             2022         2021           2022         2021
        Net sales:
        Marketing and Distribution    $    273.7          $ 232.4      $   486.0      $ 402.0
        International Farming                4.4              2.3            8.7          5.9
        Total net sales               $    278.1          $ 234.7      $   494.7      $ 407.9


Net sales increased $43.4 million or 18% and $86.8 million or 21% in the three
and six months ended April 30, 2022 compared to the same periods last year,
respectively. Growth was driven by 44% and 46% increases in average per-unit
avocado sales prices in the three and six months ended April 30, 2022, compared
to the same periods last year, respectively, due to lower industry supply out of
Mexico, as well as inflationary pressures. Partially offsetting price gains were
decreases in avocado volume sold of 19% for both the three and six months ended
April 30, 2022 compared to the same periods last year, primarily driven by lower
supply. Domestic volumes declined at a lower relative rate during these periods,
demonstrating the resiliency of demand for avocados amid higher price points in
the U.S. market.

Gross profit

Cost of sales is composed primarily of avocado procurement costs from
independent growers and packers, logistics costs, packaging costs, labor, costs
associated with cultivation (the cost of growing crops), harvesting and
depreciation. Avocado procurement costs from third-party suppliers can vary
significantly between and within fiscal years and correlate closely with market
prices for avocados. While we have long-standing relationships with our growers
and packers, we predominantly purchase fruit on a daily basis at market rates.
As such, the cost to procure products from independent growers can have a
significant impact on our costs.

Logistics costs include land and sea transportation and expenses related to port
facilities and distribution centers. Land transportation costs consist primarily
of third-party trucking services to support North American distribution, while
sea transportation cost consists primarily of third-party shipping of
refrigerated containers from supply markets in South and Central America to
demand markets in North America, Europe and Asia. Variations in containerboard
prices, which affect the cost of boxes and other packaging materials, and fuel
prices can have an impact on our product cost and our profit margins. Variations
in the production yields, and other input costs also affect our cost of sales.

In general, changes in our volume of products sold can have a disproportionate
effect on our gross profit. Within any particular year, a significant portion of
our cost of products are fixed. Accordingly, higher volumes produced on
company-owned farms directly reduce the average cost per pound of fruit grown on
company owned orchards, while lower volumes directly increase the average cost
per pound of fruit grown on company owned orchards. Likewise, higher volumes
processed through packing and distribution facilities directly reduce the
average overhead cost per unit of fruit handled, while lower volumes directly
increase the average overhead cost per unit of fruit handled.









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                                                   Three Months Ended                                Six Months Ended
                                                       April 30,                                        April 30,
                                                      2022                    2021                   2022                    2021
Gross profit (in millions)            $          19.8            $            27.1       $       20.3           $            49.8
Gross profit as a percentage of sales             7.1    %                  11.5 %                4.1   %                  12.2 %


Gross profit decreased $7.3 million or 27%, in the three months ended April 30,
2022 compared to the same period last year to $19.8 million, and gross profit
percentage decreased 440 basis points to 7.1% of revenue. The decreases were
primarily driven by the impact of lower avocado volume sold in our Marketing &
Distribution segment, and its related impact on fixed cost absorption. In
addition, we experienced gross profit decreases in the International Farming
segment were due to the timing of cost incurred and impact of pricing at
early-stage mango farms. The lower gross profit percentage was driven by higher
per-unit sales prices, as per-unit margin represented a lower proportion of the
sales value. Margin is primarily managed on a per-unit basis in our Marketing
and Distribution segment, which can lead to significant movement in gross profit
percentage when sales prices fluctuate.

Gross profit decreased $29.5 million or 59%, in the six months ended April 30,
2022 compared to the same period last year to $20.3 million, and gross profit
percentage decreased 810 basis points to 4.1% of revenue. The decreases were due
to the same factors mentioned above, as well as temporary and unforeseen
operational challenges created by the ERP implementation in our Marketing &
Distribution segment during the first quarter of 2022, which limited our ability
to effectively manage our supply chain.

Selling, general and administrative expenses

Selling, general and administrative expenses primarily include costs associated with selling, professional fees, corporate overhead and other related administrative functions.

                                                   Three Months Ended                            Six Months Ended
                                                        April 30,                                    April 30,
(In millions)                                           2022                2021                    2022                2021
Selling, general and administrative
expenses                                 $      18.7               $     16.3          $      37.4             $     30.9


Selling, general and administrative expenses increased $2.4 million or 15% in
the three months ended April 30, 2022 compared to the same period last year due
to noncapitalizable costs associated with the implementation of our new ERP
system in our Marketing and Distribution segment, higher employee-related costs
driven by increased headcount and labor inflation and higher travel expenses as
COVID-related travel restrictions have eased.

Selling, general and administrative expenses increased $6.5 million or 21% in
the six months ended April 30, 2022 compared to the same period last year due to
the same factors above, as well as higher professional fees and certain
transaction costs. Higher professional fees were in-part related to our change
in SEC filer status from an emerging growth company to a large accelerated filer
on October 31, 2021.

Interest expense

Interest expense consists primarily of interest on borrowings under working capital facilities that we maintain and interest on other long-term debt used to make capital and equity investments.

                                   Three Months Ended                 Six Months Ended
                                        April 30,                        April 30,
          (In millions)                      2022       2021                 2022       2021
          Interest expense   $      1.1              $ 0.8      $     2.0            $ 1.7


Interest expense increased $0.3 million or 37.5% and $0.3 million or 17.6% in
the three and six months ended April 30, 2022 compared to the same periods last
year, respectively. The increases were primarily due to higher interest rates,
as the majority of our outstanding debt is subject to variable rates.

Result according to the equity method

Our material equity method investees include Henry Avocado ("HAC"), Mr. Avocado,
Moruga, and Copaltas.

                                         Three Months Ended                Six Months Ended
                                             April 30,                        April 30,
     (In millions)                               2022        2021                 2022       2021
     Equity method income (loss)   $     0.3             $ (0.2)     $    
1.9            $ 2.1










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Equity method income in the three months ended April 30, 2022 was $0.3 million
compared to a loss of $0.2 million in the same period last year, primarily due
to higher earnings from HAC due to improved per-unit margins.

Equity method income decreased $0.2 million or 10% in the six months ended April
30, 2022 compared to the same period last year as lower earnings from Moruga and
Mr. Avocado were substantially offset by higher earnings from HAC. Moruga was
affected by lower per-unit sales pricing, as well as higher farming costs
associated with the replacement of certain farmable area with the intent of
increasing yields.

Other income (expenses)

Other income (expense) consists of interest income, currency exchange gains or
losses, interest rate derivative gains or losses and other miscellaneous income
and expense items.

                                        Three Months Ended               Six Months Ended
                                            April 30,                        April 30,
       (In millions)                            2022        2021               2022        2021
       Other income (expense)     $     2.9             $ (0.3)     $    4.5           $ (0.3)


Other income was $2.9 million in the three months ended April 30, 2022 compared
to expense of $0.3 million in the same period last year, and $4.5 million in the
six months ended April 30, 2022 compared to expense of $0.3 million in the same
period last year. The changes were primarily due to gains on our interest rate
swaps driven by market movements in short-term interest rates and lower losses
on foreign currency transactions primarily between the U.S. dollar and Mexican
peso compared to the same periods prior year.

Provision (benefit) for income taxes

The provision (benefit) for income taxes consists of the consolidation of tax
provisions, computed on a separate entity basis, in each country in which we
have operations. We recognize the effects of tax legislation in the period in
which the law is enacted. Our deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years we
estimate the related temporary differences to reverse. Realization of deferred
tax assets is dependent upon future earnings, the timing and amount of which are
uncertain.

We recognize a tax benefit from an uncertain tax position only if it is more
likely than not the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized from such positions are then measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon settlement.
Interest and penalties related to unrecognized tax benefits are recognized
within provision for income taxes.

                                                Three Months Ended                           Six Months Ended
                                                    April 30,                                   April 30,
                                                2022                     2021                 2022                2021
Provision (benefit) for income taxes
(in millions)                        $       0.8                $      2.1          $      (1.7)         $      9.4
Effective tax rate                          25.0   %                  22.1  %              13.4  %             49.5  %

Provision for income taxes decreased $1.3 million or 62% during the three months ended April 30, 2022 compared to the same period last year, primarily due to lower pre-tax earnings in the second quarter of fiscal 2022.

We had an income tax benefit of $1.7 million in the six months ended April 30,
2022 compared to a provision for income taxes of $9.4 million for the same
period last year. The benefit from income taxes for the six months ended April
30, 2022 was attributed to pre-tax losses recorded during the period. The prior
year provision for income taxes included a discrete tax expense of $5.1 million,
related to the remeasurement of our deferred tax liabilities in Peru due to the
enactment of tax rate changes for future years.

Segment operating results

Our CEO evaluates and monitors segment performance primarily through segment
sales and segment adjusted earnings before interest expense, income taxes and
depreciation and amortization ("adjusted EBITDA"). We believe that adjusted
EBITDA by segment provides useful information for analyzing the underlying
business results as well as allowing investors a means to evaluate the financial
results of each reportable segment in relation to the Company as a whole. These
measures are not in accordance with, nor are they a substitute for or superior
to, the comparable GAAP financial measures.

Adjusted EBITDA refers to net income (loss), before interest expense, income
taxes, depreciation and amortization expense, stock-based compensation expense,
other income (expense), and income (loss) from equity method investees, further
adjusted by asset impairment and disposals, net of insurance recoveries, farming
costs for nonproductive orchards (which represents land lease costs),
noncapitalizable ERP implementation costs, transaction costs, material legal
settlements, and any special, non-recurring, or one-time items such as
impairments that are excluded from the results the CEO reviews uses to assess
segment performance and results.








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Net sales

                                          Marketing and       International                         Marketing and       International
                                           Distribution             Farming        Total             Distribution             Farming        Total
                                                                                  Three Months Ended
                                                                                       April 30,
(In millions)                                               2022                                                      2021
Third party sales                    $         273.7    $            4.4    $   278.1          $         232.4    $            2.3    $   234.7
Affiliated sales                                   -                 2.6          2.6                        -                 2.0          2.0
Total segment sales                            273.7                 7.0        280.7                    232.4                 4.3        236.7
Intercompany eliminations                          -                (2.6)        (2.6)                       -                (2.0)        (2.0)
Total net sales                      $         273.7    $            4.4    $   278.1          $         232.4    $            2.3    $   234.7
                                                                                   Six Months Ended
                                                                                       April 30,
                                                            2022                                                      2021
Third party sales                    $         486.0    $            8.7    $   494.7          $         402.0    $            5.9    $   407.9
Affiliated sales                                   -                 1.6          1.6                        -                 2.2          2.2
Total segment sales                            486.0                10.3        496.3                    402.0                 8.1        410.1
Intercompany eliminations                          -                (1.6)        (1.6)                       -                (2.2)        (2.2)
Total net sales                      $         486.0    $            8.7    $   494.7          $         402.0    $            5.9    $   407.9


Adjusted EBITDA

                                                   Three Months Ended                            Six Months Ended
                                                        April 30,                                    April 30,
(In millions)                                           2022                2021                    2022                2021
Marketing and Distribution adjusted
EBITDA                                   $      11.7               $     16.2          $       4.0             $     29.9
International Farming adjusted EBITDA           (2.5)                     0.1                 (5.2)                  (1.1)
Total reportable segment adjusted EBITDA         9.2                     16.3                 (1.2)                  28.8
Net income (loss)                                2.4                      7.4                (11.0)                   9.6
Interest expense                                 1.1                      0.8                  2.0                    1.7
Provision (benefit) for income taxes             0.8                      2.1                 (1.7)                   9.4
Depreciation and amortization                    5.6                      4.0                 10.1                    7.6
Equity method (income) loss                     (0.3)                     0.2                 (1.9)                  (2.1)
Stock-based compensation                         0.9                      0.7                  1.7                    1.5
Legal settlement                                   -                      0.8                    -                    0.8
Asset impairment and disposals, net of
insurance recoveries                            (0.1)                       -                    -                      -
Farming costs for nonproductive orchards         0.3                        -                  0.8                      -
Noncapitalizable ERP implementation
costs                                            1.3                        -                  2.8                      -
Transaction costs                                0.1                        -                  0.5                      -
Other (income) expense                          (2.9)                     0.3                 (4.5)                   0.3
Total adjusted EBITDA                    $       9.2               $     16.3          $      (1.2)            $     28.8


Marketing and Distribution

Net sales in our Marketing and Distribution segment increased $41.3 million or
18% and $84.0 million or 21% in the three and six months ended April 30, 2022,
compared to the same periods last year, respectively. The increases were due to
the same drivers impacting consolidated revenue.

Segment adjusted EBITDA decreased $4.5 million or 28% in the three months ended
April 30, 2022 compared to the same period last year due primarily to the impact
of lower avocado volume sold on gross margin and higher selling, general and
administrative expenses.

Segment adjusted EBITDA decreased $25.9 million or 87% in the six months ended
April 30, 2022 compared to the same period last year due to lower gross margin,
attributed to ERP-related issues in the first quarter of 2022 and lower avocado
volume sold, and higher selling, general and administrative expenses as
described above.








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International Farming

Substantially all sales of fruit from our International Farming segment are to
the Marketing and Distribution segment, with the remainder of revenue largely
derived from services provided to third parties. Affiliated sales are
concentrated in the second half of the fiscal year in alignment with the
Peruvian avocado harvest season, which typically runs from April through August
of each year. As a result, adjusted EBITDA for International Farming is
generally concentrated in the third and fourth quarters of the fiscal year in
alignment with sales. The Company operates approximately 300 hectares of mangos
in Peru that are largely in an early-stage of production. The timing of the
mango harvest is concentrated in the fiscal second quarter and, as a result,
mangos have a more pronounced impact on segment financial performance during
this timeframe.

Net sales in our International Farming segment increased $2.1 million or 91% and
$2.8 million or 47% in the three and six months ended April 30, 2022 compared to
the same periods last year, respectively, due to both higher third-party service
revenue and higher mango harvest volumes.

Segment adjusted EBITDA was $(2.5) million in the three months ended April 30,
2022 to compared to $0.1 million in the same period last year primarily due to
the timing of cost incurred and impact of pricing at early-stage mango farms.

Segment adjusted EBITDA decreased $4.1 million or 373% in the six months ended
April 30, 2022 to $(5.2) million, due to losses at early-stage mango farms that
were mainly driven by lower than expected sales prices and higher costs
associated with strategic initiatives in farming maintenance and operations that
are intended to drive yield enhancements.

Cash and capital resources

Operational activities

Operating cash flows are seasonal in nature. We typically see increases in
working capital during the first half of our fiscal year as our supply is
predominantly sourced from Mexico under payment terms that are shorter than
terms established for other source markets. In addition, we are building our
growing crops inventory in our International Farming segment during the first
half of the year for ultimate harvest and sale that will occur during the second
half of the fiscal year. While these increases in working capital can cause
operating cash flows to be unfavorable in individual quarters, it is not
indicative of operating cash performance that we expect to realize for the full
year.

                                                                      Six Months Ended
                                                                         April 30,
(In millions)                                                          2022                2021
Net (loss) income                                            $     (11.0)         $      9.6
Depreciation and amortization                                       10.1                 7.6
Noncash lease expense                                                2.5                 2.0    (1)
Equity method income                                                (1.9)               (2.1)
Stock-based compensation                                             1.7                 1.5
Dividends received from equity method investees                      2.2                   -
Losses (gains) on asset impairment, disposals and sales, net
of insurance recoveries                                                -                 0.3
Deferred income taxes                                               (0.1)                5.0
Other                                                               (2.7)                0.3
Changes in working capital                                         (37.8)              (44.4)   (1)
Net cash used in operating activities                        $     (37.0)   

$(20.2)

(1) Amounts for prior periods differ from those previously presented due to the adoption of ASC 842, Leases, in force November 1, 2020which was first disclosed in our Annual Report on Form 10K for the year ended October 31, 2021.

Net cash used in operating activities was higher by $16.8 million for the six
months ended April 30, 2022 compared to the respective period last year,
reflecting our net loss in fiscal 2022, partially offset by favorable net change
in working capital. Within working capital, favorable changes in grower payables
were partially offset by unfavorable changes in inventory. Changes in grower
payables were due to higher fruit prices compared to prior year. Changes in
inventory were due to increased per-box value of fruit on hand in North America
and higher growing crop inventory in Peru, driven by inflationary pressures on
farming costs and additional productive acreage, compared to last year.








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Investing activities

                                                          Six Months Ended
                                                             April 30,
(In millions)                                                2022         2021
Purchases of property and equipment                   $   (29.1)     $ 

(46.8)

Proceeds from disposal of property, plant and equipment 2.9 2.3

Investment in equity method investees                      (0.3)        

(0.2)

Loans to equity method investees                              -         

(1.5)

Loan repayments from equity method investees                1.0          

1.5

Other                                                      (0.3)        

(0.3)

Net cash used in investing activities                 $   (25.8)     $ 

(45.0)

Fixed assets

In the six months ended April 30, 2022, capital expenditures were concentrated
in the purchase of farmland in Peru as well as land improvements and orchard
development in Peru and Guatemala.

In the six months ended April 30, 2021capital expenditures were for the construction of the Laredo facility, which officially opened in May 2021as well as land improvements and the development of orchards in Peru and Guatemala.

Proceeds from the sale of property, plant and equipment in the six months ended
April 30, 2022 were for land that had been originally intended for use as our
corporate headquarters, and in the six months ended April 30, 2021, proceeds
were primarily from the sale of two multi-unit housing properties in California
that had been used for housing seasonal avocado labor contractors.

Associates

In the six months ended April 30, 2022 and 2021, we made capital contributions
to our joint venture Copaltas, to support the purchase of additional farmland in
Colombia. We also received installment payments in both years on outstanding
loans made to Moruga.

In the six months ended April 30, 2022 we also made a capital contribution to
Mr. Avocado to support the addition of a new distribution facility in southern
China.

In the six months ended April 30, 2021 we issued a $1.5 million loan to Copaltas
to support the working capital needs of the entity and received an installment
payment on our outstanding loan to Moruga.

Financing activities

                                                        Six Months Ended
                                                            April 30,
(In millions)                                                 2022        2021
Borrowings on revolving credit facility            $    20.0          $    -
Payments on revolving credit facility                  (20.0)              -
Principal payments on long-term borrowings              (4.4)           

(3.9)

Main payments on finance lease obligations (0.6) (0.6)

Net cash used in financing activities              $    (5.0)         $ 

(4.5)

Loans and debt repayments

We use a revolving line of credit for short-term working capital purposes. Principal repayments on our term loans and other notes payable are made in accordance with debt schedules.

Capital resources

(In millions)                    April 30, 2022       October 31, 2021
Cash and cash equivalents     $          21.4      $            84.5
Working capital(1)                      126.3                  157.9

(1) Includes cash and cash equivalents








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Capital resources include cash flow from operations, cash and cash equivalents and debt financing.

We have a syndicated credit facility with Bank of America, N.A., comprised of
two term loans and a revolving credit facility ("revolver") that provides up to
$100 million in borrowings. The credit facility also includes a swing line
facility and an accordion feature which allows us to increase the borrowings by
up to $125 million, with bank approval. We did not have any outstanding
borrowings under the revolver as of April 30, 2022 and October 31, 2021.
Interest on the revolver bears rates at a spread over LIBOR that varies with our
leverage ratio. As of April 30, 2022 and October 31, 2021, interest rates on the
revolver were 2.45% and 1.84%, respectively.

In April 2022, we entered into an amendment to our agreement for the credit
facility, which, among other things provides for: (i) an increase to the maximum
annual aggregate purchase consideration for a permitted acquisition from $20
million to $30 million; (ii) an increase to the consolidated total net leverage
ratio for the fiscal quarter ending April 30, 2022 from 2.75:1.0 to 3.75:1.0 and
for the fiscal quarter ending July 31, 2022, from 2.75:1.0 to 3.25:1.0; and
(iii) certain other administrative updates.

As of April 30, 2022, we were required to comply with the following financial
covenants: (a) a quarterly consolidated leverage ratio of not more than 3.75 to
1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less
than 1.50 to 1.00. As of April 30, 2022, our consolidated leverage ratio was
2.56 to 1.00 and our consolidated fixed charge coverage ratio was 1.68 to 1.00
and we were in compliance with all such covenants of the credit facility. The
loans are secured by real property, personal property and the capital stock of
our subsidiaries. We pay fees on unused commitments on the credit facility.

Material cash requirements

Capital expenditure

We have various capital projects in progress for farming expansion and facility
improvements which we intend to fund through our operating cash flow as well as
cash and cash equivalents on hand. For fiscal 2022, we do not expect a material
deviation from amounts spent in recent fiscal years. Cash paid for capital
expenditures for the years ended October 31, 2021 and 2020, were $73.4 million
and $67.3 million, respectively.

Operating leases

We are party to various operating leases for facilities, land, and equipment,
for which our undiscounted cash liabilities were $80.6 million as of April 30,
2022.

Long-term Debt

From April 30, 2022the remaining maturities of our term loans and notes were
$159.9 million. See note 4 to the consolidated financial statements for more information.

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