SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————————

(Commission file number)

———————————

FRESH DEL MONTE PRODUCE ~~INC~~.INC.

(Exact Name of Registrant as Specified in Its Charter)

Cayman Islands

N/A

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S Employer
Identification No.)

~~Cayman Islands~~

~~N/A~~

~~(State or Other Jurisdiction of~~

~~Incorporation or Organization)~~

~~(I.R.S Employer~~

~~Identification No.)~~

c/o Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town,

Grand Cayman,

KY1-9005

Cayman Islands

N/A

(Address of Registrant’s Principal Executive Office)

(Zip Code)

(~~305~~) (305) 520-8400

c/o Del Monte Fresh Produce Company

Coral Gables, Florida 33134

(Address of Registrant’s U.S. Executive Office)



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

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

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

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



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

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

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

As of July ~~19, 2019~~,17, 2020, there were ~~48,355,899~~47,341,099 ordinary shares of Fresh Del Monte Produce Inc. issued and outstanding.

~~Forward-Looking Statements~~

This report, information included in future filings by us and information contained in written material, press releases and oral statements, issued by or on behalf of us contains, or may contain, statements that constitute forward-looking statements. In this report, these statements appear in a number of places and include statements regarding the intent, beliefs or current expectations of us or our officers (including statements preceded by, followed by or that include the words “believes”, “expects”, “anticipates” or similar expressions) with respect to various matters, including our plans and future performance. These forward-looking statements involve risks and uncertainties. Fresh Del Monte’s actual plans and performance may differ materially from those in the forward-looking statements as a result of various factors, including (i) the uncertain global economic environment and the timing and strength of a recovery in the markets we serve, and the extent to which adverse economic conditions continue to affect our sales volume and results, including our ability to command premium prices for certain of our principal products, or increase competitive pressures within the industry, (ii) the impact of governmental initiatives in the United States and abroad to spur economic activity, including the effects of significant government monetary or other market interventions on inflation, price controls and foreign exchange rates, (iii) the impact of governmental trade restrictions, including adverse governmental regulation that may impact our ability to access certain markets such as uncertainty surrounding the recent vote in the United Kingdom to leave the European Union (often referred as Brexit), including spillover effects to other Eurozone countries, (iv) our anticipated cash needs in light of our liquidity, (v) the continued ability of our distributors and suppliers to have access to sufficient liquidity to fund their operations, (vi) trends and other factors affecting our financial condition or results of operations from period to period, including changes in product mix or consumer demand for branded products such as ours, particularly as consumers remain price-conscious in the current economic environment; anticipated price and expense levels; the impact of crop disease, severe weather conditions, such as flooding, or natural disasters, such as earthquakes, on crop quality and yields and on our ability to grow, procure or export our products; the impact of prices for petroleum-based products and packaging materials; and the availability of sufficient labor during peak growing and harvesting seasons, (vii) the impact of pricing and other actions by our competitors, particularly during periods of low consumer confidence and spending levels, (viii) the impact of foreign currency fluctuations, (ix) our plans for expansion of our business (including through acquisitions) and cost savings, (x) our ability to successfully integrate acquisitions into our operations, (xi) the impact of impairment or other charges associated with exit activities, crop or facility damage or otherwise, (xii) the timing and cost of resolution of pending and future legal and environmental proceedings or investigations, (xiii) the impact of changes in tax accounting or tax laws (or interpretations thereof), and the impact of settlements of adjustments proposed by the Internal Revenue Service or other taxing authorities in connection with our tax audits, and (xiv) the cost and other implications of changes in regulations applicable to our business, including potential legislative or regulatory initiatives in the United States or elsewhere directed at mitigating the effects of climate change. All forward-looking statements in this report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our plans and performance may also be affected by the factors described in Item 1A-“Risk Factors” in our Annual Report on Form 10-K for the year ended ~~December 28, 2018~~ ~~along with other reports that we have on file with the Securities and Exchange Commission.~~

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

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

June 28,
2019 December 28,
2018
Assets
Current assets:
Cash and cash equivalents $ 16.2
$ 21.3
Trade accounts receivable, net of allowance of
$14.2 and $14.6, respectively
417.4
378.3
Other accounts receivable, net of allowance of
$6.8 and $7.2, respectively
78.8
95.2
Inventories, net 530.7
565.3
Assets held for sale 26.4
45.4
Prepaid expenses and other current assets 25.2
33.3
Total current assets 1,094.7
1,138.8

Investments in and advances to unconsolidated companies 2.5
6.1
Property, plant and equipment, net 1,416.1
1,392.2
Operating lease right-of-use assets 182.1
—
Goodwill 423.7
423.4
Intangible assets, net 162.8
166.9
Deferred income taxes 93.6
68.1
Other noncurrent assets 43.1
59.7
Total assets $ 3,418.6
$ 3,255.2
Liabilities and shareholders' equity

Current liabilities:

Accounts payable and accrued expenses $ 497.4
$ 576.6
Current maturities of debt and finance leases 640.0
0.5
Current maturities of operating leases 49.9
—
Income taxes and other taxes payable 13.1
8.9
Total current liabilities 1,200.4
586.0

Long-term debt and finance leases 0.4
661.9
Retirement benefits 93.0
91.3
Deferred income taxes 126.6
93.0
Operating leases, less current maturities 104.6
—
Other noncurrent liabilities 71.2
53.4
Total liabilities 1,596.2
1,485.6
Commitments and contingencies (See note 11)

Redeemable noncontrolling interest 53.8
51.8
Shareholders' equity:

Preferred shares, $0.01 par value; 50,000,000 shares
authorized; none issued or outstanding
—
—
Ordinary shares, $0.01 par value; 200,000,000 shares authorized;
48,301,093 and 48,442,296 issued and outstanding, respectively

0.5
0.5
Paid-in capital 530.7
527.1
Retained earnings 1,270.8
1,206.0
Accumulated other comprehensive loss (58.6 ) (41.6 )
Total Fresh Del Monte Produce Inc. shareholders' equity 1,743.4
1,692.0
Noncontrolling interests 25.2
25.8
Total shareholders' equity 1,768.6
1,717.8
Total liabilities, redeemable noncontrolling interest and shareholders' equity $ 3,418.6
$ 3,255.2

Ordinary shares, $0.01 par value; 200,000,000 shares authorized;  47,340,692and 48,014,628 issued and outstanding, respectively

See accompanying notes.

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

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


	Quarter ended						Six months ended
	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
Net sales	$	1,092.3	$	1,239.4	$	2,210.3	$	2,393.6
Cost of products sold	1,013.6		1,141.8		2,063.1		2,200.9
Gross profit	78.7		97.6		147.2		192.7
Selling, general and administrative expenses	45.6		45.3		98.3		99.6
Gain on disposal of property, plant and equipment, net	1.4		5.7		1.6		9.2
Asset impairment and other charges (credits), net	1.4		0.8		(0.4)		3.8
Operating income	33.1		57.2		50.9		98.5
Interest expense	5.6		6.9		11.0		13.8
Interest income	—		0.1		0.1		0.2
Other (expense) income, net	(5.2)		(2.9)		(4.4)		8.4
Income before income taxes	22.3		47.5		35.6		93.3
Provision for income taxes	4.2		8.5		4.5		17.1
Net income	$	18.1	$	39.0	$	31.1	$	76.2
Less: Net income attributable to redeemable and noncontrolling interests	0.2		0.9		0.2		2.0
Net income attributable to Fresh Del Monte Produce Inc.	$	17.9	$	38.1	$	30.9	$	74.2
Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Basic	$	0.38	$	0.79	$	0.65	$	1.53
Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Diluted	$	0.38	$	0.78	$	0.64	$	1.53
Dividends declared per ordinary share	$	0.05	$	—	$	0.15	$	—
Weighted average number of ordinary shares:
Basic	47,557,820		48,533,444		47,818,922		48,540,571
Diluted	47,614,553		48,582,135		47,918,071		48,624,956

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Net sales $ 1,239.4
$ 1,272.4
$ 2,393.6
$ 2,378.5
Cost of products sold 1,143.1
1,194.1
2,204.0
2,193.7
Gross profit 96.3
78.3
189.6
184.8
Selling, general and administrative expenses 44.0
49.9
96.5
98.5
Gain on disposal of property, plant and
equipment, net
5.7
5.7
9.2
5.9
Asset impairment and other charges, net 0.8
20.3
3.8
21.9
Operating income 57.2
13.8
98.5
70.3
Interest expense 6.9
6.1
13.8
9.8
Interest income 0.1
0.4
0.2
0.5
Other (expense) income, net (2.9 ) (7.3 ) 8.4
(10.7 )
Income before income taxes 47.5
0.8
93.3
50.3
Provision for income taxes 8.5
6.4
17.1
12.7
Net income (loss) $ 39.0
$ (5.6 ) $ 76.2
$ 37.6
Less: Net income attributable to redeemable and noncontrolling interests 0.9
2.3
2.0
4.0
     Net income (loss) attributable to Fresh Del Monte Produce Inc. $ 38.1
$ (7.9 ) $ 74.2
$ 33.6
     Net income (loss) per ordinary share attributable to Fresh Del Monte Produce Inc. - Basic $ 0.79
$ (0.16 ) $ 1.53
$ 0.69
     Net income (loss) per ordinary share attributable to Fresh Del Monte Produce Inc. - Diluted $ 0.78
$ (0.16 ) $ 1.53
$ 0.69
Dividends declared per ordinary share $ —
$ 0.15
$ —
$ 0.30
Weighted average number of ordinary shares:

Basic 48,533,444
48,753,227
48,540,571
48,767,411
Diluted 48,582,135
48,753,227
48,624,956
49,012,397

See accompanying notes.

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(U.S. dollars in millions)


	Quarter ended						Six months ended
	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
Net income	$	18.1	$	39.0	$	31.1	$	76.2
Other comprehensive (loss) income:
Net unrealized gain (loss) on derivatives, net of tax	3.3		(12.7)		(27.2)		(16.8)
Net unrealized foreign currency translation gain (loss)	0.9		0.5		(3.6)		(0.3)
Net change in retirement benefit adjustment, net of tax	—		0.2		0.5		0.1
Comprehensive income	$	22.3	$	27.0	$	0.8	$	59.2
Less: Comprehensive income attributable to redeemable and noncontrolling interests	0.2		0.9		0.2		2.0
Comprehensive income attributable to Fresh Del Monte Produce Inc.	$	22.1	$	26.1	$	0.6	$	57.2

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Net income (loss) $ 39.0
$ (5.6 ) $ 76.2
$ 37.6
Other comprehensive income:
Net unrealized (loss) gain on derivatives, net of tax (12.7 ) 4.7
(16.8 ) 2.9
Net unrealized foreign currency translation gain (loss) 0.5
(9.1 ) (0.3 ) (4.8 )
Net change in retirement benefit adjustment, net of tax 0.2
0.4
0.1
0.5
Comprehensive income (loss) $ 27.0
$ (9.6 ) $ 59.2
$ 36.2
Less: Comprehensive income attributable to redeemable and noncontrolling interests 0.9
2.3
2.0
4.0
Comprehensive income (loss) attributable to Fresh Del
Monte Produce Inc.
$ 26.1
$ (11.9 ) $ 57.2
$ 32.2

See accompanying notes.

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(U.S. dollars in millions)

See accompanying notes.

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

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


	Ordinary Shares Outstanding	Ordinary Shares		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Fresh Del Monte Produce Inc. Shareholders' Equity		Noncontrolling Interests		Total Shareholders' Equity		Redeemable Noncontrolling Interest
Balance as of December 27, 2019	48,014,628	$	0.5	$	531.4	$	1,252.7	$	(65.4)	$	1,719.2	$	24.5	$	1,743.7	$	55.3

Settlement of restricted stock awards	7,374	—		—		—		—		—		—		—		—
Settlement of restricted stock units	150,301	—		—		—		—		—		—		—		—
Share-based payment expense	—	—		2.6		—		—		2.6		—		2.6		—
Cumulative effect adjustment of ASC 326 adoption	—	—		—		(1.2)		—		(1.2)		—		(1.2)		—



Repurchase and retirement of ordinary shares	(291,399)	—		(2.3)		(5.5)		—		(7.8)		—		(7.8)		—
Dividend declared	—	—		0.4		(5.2)		—		(4.8)		—		(4.8)		—
Comprehensive income:
Net income (loss)	—	—		—		13.0		—		13.0		(0.2)		12.8		0.2
Unrealized loss on derivatives, net of tax	—	—		—		—		(30.5)		(30.5)		—		(30.5)		—

Net unrealized foreign currency translation loss	—	—		—		—		(4.5)		(4.5)		—		(4.5)		—
Change in retirement benefit adjustment, net of tax	—	—		—		—		0.5		0.5		—		0.5		—
Comprehensive income (loss)										(21.5)		(0.2)		(21.7)		0.2
Balance as of March 27, 2020	47,880,904	$	0.5	$	532.1	$	1,253.8	$	(99.9)	$	1,686.5	$	24.3	$	1,710.8	$	55.5

Settlement of restricted stock awards	235	—		—		—		—		—		—		—		—
Settlement of restricted stock units	9,389	—				—		—		—		—		—		—
Share-based payment expense	—	—		2.0		—		—		2.0		—		2.0		—

Repurchase and retirement of ordinary shares	(549,836)	—		(3.9)		(9.1)		—		(13.0)		—		(13.0)		—
Dividend declared	—	—		—		(2.4)		—		(2.4)		—		(2.4)		—
Comprehensive income:
Net income (loss)	—	—		—		17.9		—		17.9		0.6		18.5		(0.4)
Unrealized gain on derivatives, net of tax	—	—		—		—		3.3		3.3		—		3.3		—
Net unrealized foreign currency translation gain	—	—		—		—		0.9		0.9		—		0.9		—

Comprehensive income (loss)										22.1		0.6		22.7		(0.4)
Balance as of June 26, 2020	47,340,692	$	0.5	$	530.2	$	1,260.2	$	(95.7)	$	1,695.2	$	24.9	$	1,720.1	$	55.1

Ordinary Shares Outstanding Ordinary Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Fresh Del Monte Produce Inc. Shareholders' Equity Noncontrolling Interests Total Shareholders'
Equity Redeemable Noncontrolling Interest
Balance as of December 28, 2018 48,442,296
$ 0.5
$ 527.1
$ 1,206.0
$ (41.6 ) $ 1,692.0
$ 25.8
$ 1,717.8
$ 51.8
Exercises of stock options 13,250
—
0.2
—
—
0.2
—
0.2
—
Issuance of restricted stock awards 30,891
—
—
—
—
—
—
—
—
Issuance of restricted stock units 165,318
—
—
—
—
—
—
—
—
Share-based payment expense —
—
4.2
—
—
4.2
—
4.2
—
Cumulative effect adjustment of ASC 842 related to leases —
—
—
(3.0 ) —
(3.0 ) —
(3.0 ) —
Capital contribution from, distribution to noncontrolling interests —
—
—
—
—
—
(0.3 ) (0.3 ) (0.2 )
Dividend declared —
—
—
—
—
—
—
—
—
Comprehensive income:
Net (loss) income —
—
—
36.1
—
36.1
(0.1 ) 36.0
1.2
Unrealized loss on derivatives, net of tax —
—
—
—
(4.1 ) (4.1 ) —
(4.1 ) —
Net unrealized foreign currency translation loss —
—
—
—
(0.8 ) (0.8 ) —
(0.8 ) —
Change in retirement benefit adjustment, net of tax —
—
—
—
(0.1 ) (0.1 ) —
(0.1 ) —
Comprehensive income (loss)

31.1
(0.1 ) 31.0
1.2
Balance as of March 29, 2019 48,651,755
$ 0.5
$ 531.5
$ 1,239.1
$ (46.6 ) $ 1,724.5
$ 25.4
$ 1,749.9
$ 52.8
Exercises of stock options 5,000
—
0.1
—
—
0.1
—
0.1
—
Issuance of restricted stock awards 2,830
—
—
—
—
—
—
—
—
Issuance of restricted stock units 7,077
—

—
—
—
—
—
—
Share-based payment expense —
—
1.9
—
—
1.9
—
1.9
—
Capital contribution from, distribution to noncontrolling interests —
—
—
—
—
—
(0.1 ) (0.1 ) 0.1
Repurchase and retirement of ordinary shares (365,569 ) —
(2.8 ) (6.4 ) —
(9.2 ) —
(9.2 ) —
Dividend declared —
—
—
—
—
—
—
—
—
Comprehensive income:
Net (loss) income —
—
—
38.1
—
38.1
(0.1 ) 38.0
0.9
Unrealized loss on derivatives,net of tax —
—
—
—
(12.7 ) (12.7 ) —
(12.7 ) —
Net unrealized foreign currency translation loss —
—
—
—
0.5
0.5
—
0.5
—
Change in retirement benefit adjustment, net of tax —
—
—
—
0.2
0.2
—
0.2
—
Comprehensive income (loss)

26.1
(0.1 ) 26.0
0.9
Balance as of June 28, 2019 48,301,093
$ 0.5
$ 530.7
$ 1,270.8
$ (58.6 ) $ 1,743.4
$ 25.2
$ 1,768.6
$ 53.8

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

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

See accompanying notes.

Table of Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.1. General

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

We were incorporated under the laws of the Cayman Islands in 1996 and are engaged primarily in the worldwide production, marketing, and distribution of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa and the Middle East.

~~transportation and marketing of fresh produce and prepared food products.~~

We source our fresh produce products which include bananas, pineapples, melons and nontropical fruit (including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis), avocados, and vegetables, primarily from Central ~~America,~~and South ~~America, North~~ America, Africa, and the Philippines. We can also produce, market and distribute certain prepared food products in North America based on our agreement with Del Monte Pacific Limited and its subsidiary Del Monte Foods, Inc. We source our prepared food products from Africa, Europe, ~~and~~ the Middle East, and ~~distribute our~~North America. Our products ~~in North America, Europe, Middle East, Asia, South America and Africa. Products~~ are sourced from ~~our~~ company-owned ~~farms,~~operations, through joint venture arrangements and through supply contracts with independent growers. We have the exclusive right to use the ~~DEL MONTE®~~Del Monte^® brand for fresh fruit, fresh vegetables and other fresh and fresh-cut produce and certain other specified products on a royalty-free basis under a worldwide, perpetual license from Del Monte Corporation, an unaffiliated company that owns the ~~DEL MONTE®~~Del Monte^® trademark. We are also a producer, marketer and distributor of prepared fruit and vegetables, juices and snacks and, we hold a perpetual, royalty-free license to use the ~~DEL MONTE®~~Del Monte^® brand for prepared foods throughout Europe, Africa, the Middle East and certain Central Asian countries. Del Monte Corporation and several other unaffiliated companies manufacture, distribute and sell under the ~~DEL MONTE®~~Del Monte^® brand canned or processed fruit, vegetables and other produce, as well as dried fruit, snacks and other products in certain geographic regions. We can also produce, market and distribute certain prepared food products in North America utilizing the ~~DEL MONTE®~~Del Monte^® brand. We have entered into an agreement with Del Monte Foods, Inc. to jointly; (a) produce, market and sell prepared, chilled and refrigerated (i) juices, (ii) cut-fruit and (iii) avocado/guacamole products produced using high pressure technology; and (b) develop ~~DEL MONTE®~~Del Monte^® branded restaurants, cafes and other retail outlets.

The accompanying unaudited Consolidated Financial Statements for the quarter and six months ended June ~~28, 2019~~26, 2020 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for fair presentation have been included. Operating results for the quarter and six months ended June ~~28, 2019~~26, 2020 are subject to significant seasonal variations and are not necessarily indicative of the results that may be expected for the year ending ~~December 27, 2019. Certain reclassification of prior period balances have been made to conform to current presentation.~~January 1, 2021. For further information, refer to the Consolidated Financial Statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 27, 2019.

Certain reclassification of prior period balances have been made to conform to current presentation. Specifically, our segment data disclosures for the quarter and six months ended June 28, ~~2018.~~2019 have been adjusted to reflect a reclassification of cost of products sold between our banana and fresh and value-added products segments as the result of a refinement in our overhead costs allocation methodology. Refer to Note 12. "Business Segment Data" for further information on our segment disclosures.

Our Consolidated Statement of Operations for the quarter ended June 28, 2019 reflects a $1.3 million adjustment to correct the presentation of payroll and payroll-related costs associated with sales personnel from cost of products sold to selling, general, and administrative expenses. For the six months ended June 28, 2019, the adjustment from cost of products sold to selling, general, and administrative expenses is $3.1 million. This reclassification adjustment was identified in connection with an internal reorganization of our sales force and is not material to our Consolidated Financial Statements. The total adjustment from cost of products sold to selling, general, and administrative expenses for the year ended December 27, 2019 is $5.8 million, and our Consolidated Statement of Operations for the respective year will be reflected accordingly in our future filings with the Securities and Exchange Commission ("SEC"). Refer to Note 12. "Business Segment Data" for further information.

We are required to evaluate events occurring after June ~~28, 2019~~26, 2020 for recognition and disclosure in the unaudited Consolidated Financial Statements for the quarter and six months ended June ~~28, 2019.~~26, 2020. Events are evaluated based on whether they represent information existing as of June ~~28, 2019,~~26, 2020, which require recognition in the unaudited Consolidated Financial Statements, or new events occurring after June ~~28, 2019,~~26, 2020, which do not require recognition but require disclosure if the event is significant to the unaudited Consolidated Financial Statements. We evaluated events occurring subsequent to June ~~28, 2019~~26, 2020 through the date of issuance of these unaudited Consolidated Financial Statements.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

2.2. Recently Issued Accounting Pronouncements

New Accounting Pronouncements Adopted

~~In October 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU" ) 2018-16,~~ ~~Derivatives and Hedging (Topic 815): Inclusion of the Secured OvernightFinancing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~. This ASU expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting. The provisions of ASU 2018-16 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. This ASU is effective for us beginning the first day of our 2019 fiscal year. We will not substitute the benchmark rates in use for the SOFR or OIS rates. Thus, the adoption of this ASU does not have an impact to our financial condition, results of operations and cash flows.

~~In July 2018, the FASB issued ASU 2018-09,~~ ~~Codification Improvements. The FASB issued this ASU to facilitate amendments~~

to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 29, 2018. We adopted this standard the first day of our 2019 fiscal year. We evaluated the impact of the amendment to the advertising expense recognition for collaborative agreements and concluded the amendment follows our current accounting practice. Furthermore, we assessed the potential impact of the amendment to Subtopic 805-740 for tax allocations relating to the Mann Packing acquisition; given separate financial statements are not being issued for Mann Packing the amendment did not apply. The adoption of this ASU did not have an impact to our financial condition, results of operations and cash flows.

~~In June 2018, the FASB issued ASU 2018-07,~~ ~~Improvements to Nonemployee Share-Based Payment Accounting. The FASB is~~

~~issuing this update to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for~~

share-based payments to employees, with certain exceptions. This ASU is effective for us beginning the first day of our 2019 fiscal year. The adoption of this ASU did not have a material impact on our financial condition, results of operations and cash flows.

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects From Accumulated Other ComprehensiveIncome,~~ ~~which amends Accounting Standards Codification ("ASC") 220,~~ ~~Income Statement — Reporting Comprehensive Income~~, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act, (the "Act"). In addition, under the ASU, an entity is required to provide certain disclosures regarding stranded tax effects. This ASU is effective for us the first day of our 2019 fiscal year. We made the election not to reclassify stranded tax effects to retained earnings. The tax effects unrelated to the Act are released from accumulated other comprehensive income using either the specific identification approach or the portfolio approach based on the nature of the underlying item.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, and has subsequently issued several supplemental and/or clarifying ASU's (collectively, "Topic 842"), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases may result in the lessee recognizing a right of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization

~~of the right-of-use asset, and for operating leases, the lessee would recognize lease expense on a straight-line basis.~~

We adopted Topic 842 on the first day of our 2019 fiscal year, utilizing the modified retrospective adoption method with an effective date of December 29, 2018 (the first day of our 2019 fiscal year). Therefore, the Consolidated Financial Statements for 2019 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company's historical accounting policy. Due to the adoption of Topic 842, we booked a retained earnings adjustment of $3.0 million due to deferred taxes.

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~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~2. Recently Issued Accounting Pronouncements (continued)~~

The standard provides a number of optional practical expedients and policy elections in transition. We have elected to apply the package of practical expedients under which we will not reassess under the standard our prior conclusions about lease classification and initial direct costs, and the expedient to not assess existing or expired land easements. We have elected the short-term lease recognition exemption for all leases that qualify, meaning we will recognize expense on a straight-line basis and will not include the recognition of a right-of-use asset or lease liability. We have elected the policy to combine lease and non-lease components for all asset classes.

~~See Note 9,~~ ~~"Leases" for more information.~~

~~New Accounting Pronouncements Not Yet Adopted~~

In April 2019, the FASB issued ASU 2019-04, Codification Improvements, , Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This ASU provides amendments which ~~will~~ affect the recognition and measurement of financial instruments, including derivatives and ~~hedging.These amendments will be effective for us beginning~~fair value hedges. We adopted this ASU on the first day of our 2020 fiscal year. ~~We are evaluating the impact of the~~The adoption of this ASU did not have a material impact on our ~~financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our~~consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This ASU resolves the diversity in practice concerning the manner in which entities account for transactions based on their assessment of the economics of a collaborative arrangement. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer and precludes recognizing as revenue consideration received from a collaborative arrangement if the participant is not a customer. ~~This~~We adopted this ASU ~~will be effective for us beginning~~on the first day of our 2020 fiscal year. ~~We are evaluating the impact of the~~The adoption of this ASU did not have a material impact on our ~~financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our~~consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. ~~The new guidance is effective for fiscal years beginning after December 15, 2019. This~~We adopted this ASU ~~will be effective for us beginning~~on the first day of our 2020 fiscal year. ~~We are evaluating the impact of the~~The adoption of this ASU did not have a material impact on our ~~financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our~~consolidated financial statements.

In September 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. ~~This~~We adopted this ASU ~~will be effective for us beginning~~prospectively on the first day of our 2020 fiscal year. ~~We are evaluating the impact of the~~The adoption of this ASU did not have a material impact on our ~~financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our~~consolidated financial statements.

In August 2018, the FASB issued ASU ~~2018-14~~2018-13, Fair Value Measurement (Topic 820), ~~Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20)~~Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements. . This ASU ~~amends Accounting Standards Codification (ASC) 715~~includes additional disclosure requirements for recurring Level 3 fair value measurements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive (loss) income, disclosure of the range and weighted average of significant unobservable inputs used to ~~add additional disclosures, remove~~develop Level 3 fair value measurements and a narrative description of measurement uncertainty related to Level 3 measurements. We adopted this ASU on the first day of our 2020 fiscal year. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments,

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

2. Recently Issued Accounting Pronouncements (continued)

New Accounting Pronouncements Not Yet Adopted

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional guidance to companies to ease the potential burden associated with transitioning away from reference rates that are expected to be discontinued. The new guidance provides optional expedients and exceptions to apply generally accepted accounting principles to contract modifications and hedging relationships, subject to certain criteria, that reference LIBOR or another reference rate expected to be discontinued. Companies can adopt the ASU immediately, however the guidance will only be available through December 31, 2022. We are currently evaluating this ASU and its impact on our consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)- Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this update clarify certain ~~required disclosures. Early adoption is permitted.~~interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. This ASU will be effective for us beginning the first day of our 2021 fiscal year. We are evaluating the impact of the adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our consolidated financial statements.

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~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~2. Recently Issued Accounting Pronouncements (continued)~~

In ~~August 2018,~~December 2019, the FASB issued ASU ~~2018-13,~~ 2019-12,~~Fair Value Measurement~~ Income Taxes (Topic ~~820), Disclosure Framework - Changes~~740): Simplifying the Accounting for Income Taxes. The ASU introduces new guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction, and also provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. The ASU also makes changes to the ~~Disclosure Requirements~~current guidance for ~~Fair Value Measurements.~~ ~~This ASU includes additional disclosure requirements for recurring Level 3 fair value measurements, including disclosure~~making intraperiod allocations and determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of ~~changes in unrealized gains and losses for the period included in~~accounting, among other comprehensive income, disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and narrative description of measurement uncertainty related to Level 3 measurements. Early adoption is permitted.changes. This ASU will be effective for us beginning the first day of our ~~2020~~2021 fiscal year. We are evaluating the impact of the adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our consolidated financial statements.

In ~~June 2016,~~August 2018, the FASB issued ASU ~~2016-13,~~ 2018-14~~Financial Instruments - Measurement of Credit Losses on Financial Instruments,~~, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20)

and subsequent amendments to the guidance, ASU 2018-19 in November 2018 and ASU 2019-05 in May 2019 including codification improvements to Topic 326 in ASU 2019-04. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. ASU 2019-05 provides entities that have certain instruments with an option to irrevocably elect the fair value option. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic.. This ASU ~~will be effective for us beginning the first day of our 2020 fiscal year.~~amends Accounting Standards Codification (ASC) 715 to add additional disclosures, remove certain disclosures that are not considered cost beneficial and to clarify certain required disclosures. Early adoption is ~~permitted beginning the first day of our 2019~~permitted. This ASU is effective for fiscal ~~year.~~years ending after December 15, 2020. We ~~have commenced an initial analysis, conducted internal learning initiatives and have a team in place to evaluate the disclosure requirements and analyze~~are evaluating the impact of the adoption of this ASU on our financial ~~condition, results of operations and cash flows, and we are not able to estimate the effect the adoption of the new standard will have on our financial statements.~~statement disclosures.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

3. Asset Impairment and Other Charges (Credits), Net

The following represents a summary of asset impairment and other charges (credits), net recorded during the quarters and six months ended June ~~28, 2019~~26, 2020 and June ~~29, 2018~~28, 2019 (U.S. dollars in millions):


	Quarter ended										Six months ended
	June 26, 2020										June 26, 2020
	Long-lived and other asset impairment		Exit activity and other charges (credits)		Total		Long-lived and other asset impairment		Exit activity and other charges (credits)		Total
Banana segment:
California Air Resource Board reserve⁽¹⁾	$	—	$	0.5	$	0.5	$	—	$	1.3	$	1.3

Philippine exit activities of certain low-yield areas	0.7		—		0.7		0.7		—		0.7





Fresh and value-added products segment:
California Air Resource Board reserve⁽¹⁾	—		0.3		0.3		—		0.7		0.7
Impairment of production facilities⁽²⁾	1.1		—		1.1		2.1		—		2.1
Insurance recovery related to product recall⁽³⁾	—		(2.0)		(2.0)		—		(6.0)		(6.0)






North America reorganization charges⁽⁴⁾	—		0.7		0.7		—		0.7		0.7
Other fresh and value-added products segment charges	—		0.1		0.1		—		0.1		0.1
Total asset impairment and other charges (credits), net	$	1.8	$	(0.4)	$	1.4	$	2.8	$	(3.2)	$	(0.4)

	Quarter ended										Six months ended
	June 28, 2019										June 28, 2019
	Long-lived and other asset impairment		Exit activity and other charges (credits)		Total		Long-lived and other asset impairment		Exit activity and other charges (credits)		Total
Banana segment:
Philippine exit activities of certain low-yield areas	$	—	$	0.3	$	0.3	$	—	$	0.5	$	0.5

Fresh and value-added products segment:




Other fresh and value-added products segment charges	0.4		—		0.4		0.4		—		0.4
Impairment of equity investment⁽⁵⁾	0.1		—		0.1		2.9		—		2.9
Total asset impairment and other charges (credits), net	$	0.5	$	0.3	$	0.8	$	3.3	$	0.5	$	3.8

Quarter ended Six months ended
June 28, 2019 June 28, 2019
Long-lived
and other
asset
impairment
Exit activity and other
charges Total Long-lived
and other
asset
impairment
Exit activity and other
charges Total
Banana segment:
Philippine previously announced exit activities of certain low-yield areas $ —
$ 0.3
$ 0.3
$ —
$ 0.5
$ 0.5
Fresh and value-added products segment:

Other fresh and value-added products segment charges 0.4
—
0.4
0.4
—
0.4
Impairment of equity investment (1) 0.1
—
0.1
2.9
—
2.9
Total asset impairment and
other charges, net
$ 0.5
$ 0.3
$ 0.8
$ 3.3
$ 0.5
$ 3.8

Quarter ended Six months ended
June 29, 2018 June 29, 2018
Long-lived
and other
asset
impairment
Exit activity
and other
charges Total Long-lived
and other
asset
impairment
Exit activity and other
charges Total
Banana segment:
Philippine exit activities of certain low-yield areas $ 18.3
$ —
$ 18.3
$ 18.3
$ —
$ 18.3
Fresh and value added products
segment:

Chile severance due to restructuring as a result of cost reduction initiatives —
1.6
1.6
—
1.6
1.6
Acquisition costs related to
Mann Packing (2) —
0.1
0.1
—
2.6
2.6
Sanger insurance recoveries due to inclement weather conditions —
—
—
—
(0.9 ) (0.9 )
Other fresh and value-added segment charges —
0.3
0.3
—
0.3
0.3
Total asset impairment and
other charges (credits), net
$ 18.3
$ 2.0
$ 20.3
$ 18.3
$ 3.6
$ 21.9

⁽¹⁾ $2.0 million reserve relating to a potential liability arising from our third-party shipping logistics operation. This liability relates to both our banana and fresh and value-added products segments. Refer to Note 9. "Commitments and Contingencies" for further information regarding this matter.

⁽²⁾$2.1 million asset impairment charges for the six months ended June 26, 2020 related to impairment of production facilities in North America and Europe.

⁽³⁾ $(6.0) million insurance recovery related to a voluntary recall of vegetable products in North America which was announced in the fourth quarter of 2019.

~~(1) Equity~~

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

3. Asset Impairment and Other Charges (Credits), Net (continued)

⁽⁴⁾$0.7 million charge for the quarter and six months ended June 26, 2020 related to severance expense incurred in connection with the reorganization of our sales and marketing function in North America.

⁽⁵⁾ $2.9 million impairment of equity investment ~~relates~~related to our 10% equity ownership interest in Three Limes, Inc., d/b/a The Purple ~~Carrot, which~~Carrot. This investment was sold ~~at a loss during the quarter ended June 28, 2019. Refer to Note 16,~~ ~~"Fair Value Measurements."~~

~~(2) Acquisition costs relate to the Mann Packing Co. Inc. and subsidiaries ("Mann Packing") Acquisition. Refer to Note 4~~, ~~"Acquisition."~~

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~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~3. Asset Impairment and Other Charges, Net (continued)~~

~~Exit Activity and Other Reserves~~

~~Exit activity and other reserve balances are recorded~~ in the ~~Consolidated Balance Sheets in accounts payable and accrued expenses for the current portion and in other noncurrent liabilities for the noncurrent portion. The following is a rollforward~~second quarter of ~~2019 exit activity and other reserves (U.S. dollars in millions):~~2019.

Exit activity and
other reserve
balance at
December 28, 2018 Impact to
earnings Cash paid Foreign exchange impact Exit activity and
other reserve
balance at
June 28, 2019
Contract termination and other exit activity charges $ 0.5
0.5
(0.9 ) —
$ 0.1
$ 0.5
$ 0.5
$ (0.9 ) $ —
$ 0.1

During the six months ended June 28, 2019, we paid approximately $0.9 million in contract terminations related to the previously announced Philippines restructuring, and we expect to make the remaining payment of ~~$0.1 million~~ ~~during 2019. We do not expect additional charges related to the exit activities mentioned above that would significantly impact our results of operations or financial condition.~~

4. ~~Acquisition~~

On February 26, 2018, we completed the acquisition of 100% of the voting interests of Mann Packing Company, Inc and subsidiaries ("Mann Packing"). The results of Mann Packing's operations have been included in our consolidated financial statements since that date.

We purchased all of Mann Packing's outstanding capital stock for an aggregate consideration of $357.2 million funded by a $229.7 million three-day promissory note and $127.5 million in cash. The three-day promissory note was settled with cash on hand and borrowings under our Credit Facility.

We acquired net assets of $357.2 million, including a put option exercisable by the 25% noncontrolling interest shareholder of one of the acquired subsidiaries. The fair value of the redeemable noncontrolling interest at the acquisition date was $47.4 million. The fair value of the definite-lived intangible assets including customer lists, trade names and trademarks at the acquisition date were $139.8 million. The $162.0 million allocated to goodwill on our Consolidated Balance Sheets represents the excess of the purchase price over the values of assets acquired and liabilities assumed. The goodwill is expected to be mostly deductible for tax purposes.

~~We disclosed the acquisition of Mann Packing in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2018.~~

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~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~4. Acquisition (continued)~~

~~Our consolidated results include the following financial information of Mann Packing for the partial period from February 27, 2018 to June 29, 2018 :~~

Period from February 27, 2018 to June 29, 2018
Net sales $ 197.5
Net income attributable to
Fresh Del Monte Produce, Inc. $ 3.7

~~The following unaudited pro forma combined financial information presents our results including Mann Packing as if the business combination had occurred at the beginning of fiscal year 2018:~~

Six months ended
June 29,
2018
Net sales $ 2,457.7

Net income attributable to
Fresh Del Monte Produce, Inc. $ 37.6
⁽¹⁾

(1) Unaudited pro forma results for the six months ended June 29, 2018 were positively adjusted by $9.6 million, consisting of $11.5 million of nonrecurring transaction related compensation benefits, advisory, legal, accounting, valuation and other professional fees, partially offset by $1.9 million of interest expense as a result of increased borrowings under our Credit Facility.

5. Income Taxes

In connection with a current examination of the tax returns in ~~two~~2 foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately ~~$148.9~~$162.1 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit. We will continue to vigorously contest the adjustments and expect to exhaust all administrative and judicial remedies necessary to resolve the matters, which could be a lengthy process. We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. Accordingly, we have not accrued any additional amounts based upon the proposed adjustments. There can be no assurance that these matters will be resolved in our favor, and an adverse outcome of either matter, or any future tax examinations involving similar assertions, could have a material effect on our financial condition, results of operations and cash flows.

Provision for income taxes was $4.5 million for the first six months of 2020 compared to $17.1 million for the first six months of 2019. The decrease in the provision for income taxes of $12.6 million is primarily due to lower earnings in certain taxable jurisdictions. The tax provision for the first six months of 2020 also includes a $1.7 million benefit relating to the NOL carryback provision of the Coronavirus Aid, Relief and Economic Security Act (CARES) Act, which was enacted on March 27, 2020.

Member States of the European Union in which our European distributors operate have enacted, or are in the process of drafting, anti-hybrid legislation which may impact our ability to deduct the cost of certain purchases in those jurisdictions. We are actively analyzing the enacted and proposed draft legislation to assess whether, and to what extent, these provisions impact the Company.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

5. Allowance for Credit Losses

6We estimate expected credit losses on our trade receivables and financing receivables in accordance with Accounting Standards Codification ("ASC") 326 - Financial Instruments - Credit Losses. We adopted this accounting standard on the first day of our 2020 fiscal year using a modified-retrospective approach. As a result, the consolidated financial statements for 2020 are presented under the new standard, while the comparative prior year period is not adjusted and continues to be reported in accordance with our historical accounting policy.

Trade Receivables

Trade receivables as of June 26, 2020 were $377.2 million, net of an allowance of $21.6 million. Our allowance for trade receivables consists of two components: a $9.8 million allowance for credit losses and an $11.8 million allowance for customer claims accounted for under the scope of ASC 606 - Revenue Recognition.

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

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

The table below presents a rollforward of our trade receivable allowance for credit losses for the six months ended June 26, 2020.


	Six months ended
Trade Receivables	June 26, 2020
Allowance for credit losses:
Balance, beginning of period⁽¹⁾	$	8.9
Provision for uncollectible amounts⁽²⁾	0.9
Deductions to allowance related to write-offs	—
Recoveries of amounts previously written off	—
Balance, end of period	$	9.8

⁽¹⁾Beginning balance includes $1.0 million increase reflecting the impact of our adoption of ASC 326 on the first day of fiscal 2020. See Note 2. "Recently Issued Accounting Pronouncements" for additional information.

⁽²⁾Provision for the six months ended June 26, 2020 includes $0.2 million of estimated trade receivable credit losses relating to our foodservice customer base as a direct result of the COVID-19 pandemic. Given the developments surrounding the pandemic, including the government imposed mandatory closures and social distancing initiatives, we revised our receivable pools to separately identify our foodservice customers and judgmentally adjusted our historical loss rates to account for the current circumstances which are negatively impacting their financial condition. While the provision included in our operating results reflects our best estimate as of June 26, 2020, there are significant uncertainties about what the effects of the COVID-19 pandemic will ultimately be.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

5. Allowance for Credit Losses (continued)

Financing Receivables

Financing receivables are included in other accounts receivable, ~~less allowances~~net on our ~~accompanying~~ Consolidated Balance Sheets and are recognized at ~~net realizable value, which approximates fair value. Other accounts receivable may~~amortized cost less an allowance for estimated credit losses. Financing receivables include ~~value-added taxes receivables,~~ seasonal advances to growers and suppliers, which are usually short-term in nature, and other financing receivables.

A significant portion of the fresh produce we sell is acquired through supply contracts with independent growers. In order to ensure the consistent high quality of our products and packaging, we make advances to independent growers and suppliers. These growers and suppliers typically sell all of their production to us and make payments on their advances as a deduction to the agreed upon selling price of the fruit or packaging material. The majority of the advances to growers and suppliers are for terms less than one year and typically span a growing season. In certain cases, there may be longer term advances with terms of up to 4 years.

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

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

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

June 28, 2019 December 28, 2018
Short-term Long-term Short-term Long-term
Gross advances to growers and suppliers $ 37.9
$ 6.1
$ 51.9
$ 3.7
Allowance for advances to growers and suppliers (past due) (1.8 ) (1.0 ) (2.1 ) (0.7 )
Net advances to growers and suppliers $ 36.1
$ 5.1
$ 49.8
$ 3.0


	June 26, 2020						December 27, 2019
	Current Status		Past-Due		Current Status		Past-Due
Gross advances to growers and suppliers	$	33.4	$	4.6	$	33.8	$	8.3

~~The short-term and long-term portions of the financing receivables included above are classified in the Consolidated Balance Sheets in other accounts receivable and other noncurrent assets.~~

The allowance for advances to growers and suppliers and the related financing receivables for the ~~quarters and~~ six months ended June 26, 2020 and June 28, 2019 ~~and~~ ~~June 29, 2018~~were as follows (U.S. dollars in millions):


	Six months ended
	June 26, 2020		June 28, 2019
Allowance for advances to growers and suppliers:
Balance, beginning of period⁽¹⁾	$	2.3	$	2.8
Provision for uncollectible amounts	(0.1)		—
Deductions to allowance related to write-offs	(0.1)		—
Balance, end of period	$	2.1	$	2.8

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Allowance for advances to growers and suppliers:
Balance, beginning of period $ 2.8
$ 2.3
$ 2.8
$ 2.9
Provision for uncollectible amounts —
0.5
—
0.8
Deductions to allowance related to write-offs —
—
—
(0.9 )
Balance, end of period $ 2.8
$ 2.8
$ 2.8
$ 2.8

⁽¹⁾Beginning balance includes $0.2 million increase reflecting the impact of our adoption of ASC 326 on the first day of fiscal 2020. See Note 2. "Recently Issued Accounting Pronouncements" for additional information.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

6. Share-Based Compensation

7
~~. Share-Based Compensation~~

Our shareholders approved and ratified the 2014 Omnibus Share Incentive Plan (the “2014 Plan”), which allows us to grant equity-based compensation awards, including stock options, restricted stock awards and restricted stock units including performance stock units. We disclosed the significant terms of the 2014 Plan and prior plans in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December ~~28, 2018.~~27, 2019.

Stock-based compensation expense related to stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs") and performance stock units ("PSUs") is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations and is comprised as follows (U.S. dollars in millions):

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Stock options $ —
$ —
$ —
$ 0.1
RSUs/PSUs 1.8
2.3
5.1
5.9
RSAs 0.1
—
1.0
1.0
Total $ 1.9
$ 2.3
$ 6.1
$ 7.0


	Quarter ended						Six months ended
	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019

RSUs/PSUs	2.0		1.8		4.4		5.1
RSAs	—		0.1		0.3		1.0
Total	$	2.0	$	1.9	$	4.7	$	6.1

We received no proceeds from the exercise of stock-based options of ~~$0.3~~for the six months ended June 26, 2020 and $0.3 million for the six months ended June 28, ~~2019 and~~ ~~$0.8 million~~ ~~for the six months ended June 29, 2018.~~2019.

Restricted Stock Awards

A share of restricted stock is one of our ordinary shares that has restrictions on transferability until certain vesting conditions are met.

For RSAs awarded under the 2014 Plan, 50% of each award of our restricted stock vested on the date it was granted. The remaining 50% of each award vests upon the six-month anniversary of the date on which the recipient ceases to serve as a member of our Board of Directors. Restricted stock ~~awarded during the six months ended June 28, 2019 and June 29, 2018~~awards allow directors to retain all of their awards once they cease to serve as a member of our Board of Directors and is considered a nonsubstantive service condition in accordance with the guidance provided by ASC 718 on “Compensation – Stock Compensation.” Accordingly, we recognize compensation cost immediately for restricted stock awards granted to non-management members of the Board of Directors. Subsequent to the first quarter of 2020, members of our Board of Directors will no longer receive RSAs and will instead receive RSUs.

The following table lists RSAs awarded under the 2014 plan for the six months ended June ~~28, 2019~~26, 2020 and June ~~29, 2018:~~28, 2019:


Date of award	Shares of restricted stock awarded	Price per share
For the six months ended June 26, 2020
April 10, 2020	235	32.00
January 2, 2020	7,374	34.42
For the six months ended June 28, 2019
May 1, 2019	2,830	29.44
January 2, 2019	30,891	28.32

Date of award Shares of
restricted stock
awarded Price per share
May 1, 2019 2,830 $ 29.44
January 2, 2019 30,891 28.32
January 2, 2018 21,304 46.93

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

6. Share-Based Compensation (continued)

Restricted Stock Units/Performance Stock Units

Under the 2014 Plan, each RSU/PSU represents a contingent right to receive ~~one~~1 of our ordinary shares. The PSUs are subject to meeting minimum performance criteria set by the Compensation Committee of our Board of Directors. The actual number of shares the recipient receives is determined based on the results achieved versus performance goals. Those performance goals are based on exceeding a measure of our earnings. Depending on the results achieved, the actual number of shares that an award recipient receives at the end of the period may range from 0% to 100% of the award units granted. Provided such criteria are met, the PSUs will vest in three equal annual installments on each of the next three anniversary dates provided that the recipient remains employed with us. The RSUs will vest 20% on the award date and 20% on each of the next four anniversaries.

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~7. Share-Based Compensation (continued)~~

RSUs and PSUs do not have the voting rights of ordinary shares and the shares underlying the RSUs and PSUs are not considered issued and outstanding. However, shares underlying RSUs/PSUs are included in the calculation of diluted earnings per share to the extent the performance criteria are met, if any.

The fair market value for RSUs and PSUs is based on the closing price of our stock on the award date. Forfeitures are recognized as they occur.

The following table lists the various RSUs and PSUs awarded under the 2014 Plan for the six months ended June ~~28, 2019~~26, 2020 and June ~~29, 2018~~28, 2019 (U.S. dollars in millions, except share and per share data):

Date of award Type of award Units awarded Price per share
March 25, 2019 RSU 5,000 $ 26.55
February 20, 2019 PSU 85,000 27.71
February 20, 2019 RSU 133,750 27.71
February 21, 2018
⁽¹⁾
PSU 85,000 46.35
February 21, 2018 RSU 125,000 46.35

⁽¹⁾~~The 2018 PSU's were forefeited as a result of not meeting the performance metric.~~


Date of Award	Type of award	Units awarded	Price per share
For the six months ended June 26, 2020
April 28, 2020	RSU	21,348	$	35.13
March 30, 2020	RSU	2,500	$	29.61
March 23, 2020	RSU	2,500	$	33.53
March 2, 2020	PSU	86,954	$	28.74
March 2, 2020	RSU	161,093	$	28.74
For the six months ended June 28, 2019
March 25, 2019	RSU	5,000	$	26.55
February 20, 2019	PSU	85,000	$	27.71
February 20, 2019	RSU	133,750	$	27.71

RSUs and PSUs are eligible to earn Dividend Equivalent Units ("DEUs") equal to the cash dividend paid to ordinary shareholders. DEUs are subject to the same performance and/or service conditions as the underlying RSUs and PSUs and are forfeitable.

We recognize expense related to RSUs and PSUs based on the fair market value, as determined on the date of award, ratably over the vesting period, provided the performance condition, if any, is probable.

8.7. Inventories, net

Inventories consisted of the following (U.S. dollars in millions):

June 28,
2019 December 28, 2018
Finished goods $ 204.3
$ 217.4
Raw materials and packaging supplies 171.7
167.0
Growing crops 154.7
180.9
Total inventories, net $ 530.7
$ 565.3


	June 26, 2020		December 27, 2019
Finished goods	$	183.6	$	203.5
Raw materials and packaging supplies	152.5		155.8
Growing crops	160.3		192.5
Total inventories, net	$	496.4	$	551.8

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~9. Leases~~

As of the first day of our 2019 fiscal year beginning December 29, 2018, we adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet using the modified retrospective approach. Prior year financial statements were not adjusted under the new standard and, therefore, those amounts are not presented below. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. We do not separate lease and nonlease components of contracts.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

We lease agricultural land and certain property, plant and equipment, including office facilities and refrigerated containers, under operating leases. We also enter into ship charter agreements for the transport of our fresh produce to markets worldwide. The lease term consists of the noncancellable period of the lease and the periods covered by options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company's lease agreements do not contain any residual value guarantees.

~~In Panama, we are developing a banana operation on leased land of which the remaining portion is pending delivery. Future lease payments will be $0.5 million annually for 40 years.~~

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~9. Leases (continued)~~

~~Lease Position~~

~~The following table presents the lease-related assets and liabilities recorded on the balance sheet as of June 28, 2019 (U.S. dollars in millions):~~

Classification on the Balance Sheet June 28, 2019
Assets
Operating lease assets Operating lease right-of-use assets $ 182.1
Finance lease assets Property, plant and equipment, net 1.2
Total lease assets $ 183.3

Liabilities
Current
Operating Current maturities of operating leases $ 49.9
Finance Current maturities of debt and finance leases 0.4
Noncurrent
Operating Operating leases, less current maturities 104.6
Finance Long-term debt and finance leases, less current maturities 0.4
Total lease liabilities $ 155.3

Weighted-average remaining lease term:
Operating leases 7.4 years
Finance leases 1.9 years
Weighted-average discount rate:
Operating leases ⁽¹⁾
8.92 %
Finance leases 4.44 %

~~(1) Upon adoption of the new lease standard, discount rates used for existing leases were established at December 29, 2018.~~

~~Lease Costs~~

~~The following table presents certain information related to the lease costs for finance and operating leases for the quarter and six months ended June 28, 2019 (U.S. dollars in millions):~~

June 28,
2019
Quarter ended Six months ended
Finance lease cost
Amortization of lease assets $ —
$ 0.1
Operating lease cost 23.4
$ 46.7
Short-term lease cost 1.9
$ 4.3
Variable lease cost 1.6
$ 2.9
Total lease cost $ 26.9
$ 54.0

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~9 . Leases (continued)~~

~~Other Information~~

~~The following table presents supplemental cash flow information related to the leases for the quarter and six months ended June 28, 2019 (U.S. dollars in millions):~~

June 28,
2019

Quarter
ended
Six months ended
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases $ 21.6
$ 42.1
Financing cash flows for finance leases 0.2
$ 0.3

The changes in the operating lease right-of-use assets were $26.1 million, and $21.5 million for the changes in the liability accounts recorded in connection with the recognition of operating lease expenses for six months ended June 28, 2019. These changes have been reflected within Other noncurrent asset and liabilities in our Consolidated Statement of Cash Flows.

~~Undiscounted Cash Flows~~

The following table reconciles the undiscounted cash flows for each of the first five years and total remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of June 28, 2019 (U.S. dollars in millions):

Operating Leases Finance Leases
Remainder of 2019 $ 44.1
$ 0.2
2020 37.7
0.3
2021 25.3
0.3
2022 17.5
—
2023 15.3
—
Thereafter 78.3
—
Total lease payments 218.2
0.8
Less: imputed interest 63.7
—
Total lease liabilities $ 154.5
$ 0.8

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

10.8. Debt and Finance Lease Obligations

The following is a summary of long-term debt and finance lease obligations (U.S. dollars in millions):


	June 26, 2020		December 27, 2019
Senior unsecured revolving credit facility (see Credit Facility below)	$	534.9	$	586.6

Finance lease obligations	0.4		0.5
Total debt and finance lease obligations	535.3		587.1
Less: Current maturities	(0.3)		(0.3)
Long-term debt and finance lease obligations	$	535.0	$	586.8

June 28,
2019 December 28,
2018
Senior unsecured revolving credit facility⁽¹⁾ (see Credit Facility below)
$ 639.6
$ 661.3
Finance lease obligations 0.8
1.1
Total debt and finance lease obligations 640.4
662.4
Less: Current maturities ⁽¹⁾
(640.0 ) (0.5 )
Long-term debt and finance lease obligations $ 0.4
$ 661.9

⁽¹⁾~~The Senior unsecured revolving credit facility matures~~ ~~April 15, 2020~~ ~~and is classified as current.~~

Credit Facility

On ~~April 16, 2015,~~October 1, 2019, we entered into a ~~five-year $800 million syndicated senior unsecured revolving credit facility maturing on April 15, 2020 (the "Credit Facility"~~Second Amended and Restated Credit Agreement (as amended, the “Second A&R Credit Agreement”) with Bank of America, N.A. as administrative agent and ~~Merrill Lynch, Pierce, Fenner & Smith~~BofA Securities, Inc. as sole lead arranger and sole ~~book manager. Borrowings~~bookrunner and certain other lenders. The Second A&R Credit Agreement provides for a five-year, $1.1 billion syndicated senior unsecured revolving credit facility maturing on October 1, 2024 (the “Revolving Credit Facility”), which replaced our Prior Credit Facility entered into on April 16, 2015, which was scheduled to expire on April 15, 2020. As a result, we reclassified our current maturing debt to long-term. Certain of our direct and indirect subsidiaries have guaranteed the obligations under the Second A&R Credit Agreement.

Amounts borrowed under the Revolving Credit Facility ~~bear~~accrue interest, at our election, at either (i) the Eurocurrency Rate (as defined in the Second A&R Credit Agreement) plus a ~~spread over LIBOR~~margin that ~~varies with~~ranges from 1.0% to 1.5% or (ii) the Base Rate (as defined in the Second A&R Credit Agreement) plus a margin that ranges from 0% to 0.5%, in each case based on our ~~leverage ratio.~~Consolidated Leverage Ratio (as defined in the Second A&R Credit Agreement). The Second A&R Credit ~~Facility also includes a swing line facility and a letter of~~Agreement revised the interest rate grid to provide for five pricing levels for interest rate margins, as compared to three pricing levels in the prior credit facility.

~~On September 27, 2018, we amended certain covenant~~The Second A&R Credit Agreement provides for an accordion feature that permits us, without the consent of the other lenders, to request that one or more lenders provide us with increases in revolving credit facility or term loans up to an aggregate of $300 million (“Incremental Increases”). The aggregate amount of Incremental Increases can be further increased to the extent that after giving effect to the proposed increase in revolving credit facility commitments or term loans our Consolidated Leverage Ratio, on a pro forma basis, would not exceed 2.5 to 1. Our ability to request such increases in the revolving credit facility or term loans is subject to our compliance with customary conditions set forth in the Second A&R Credit Agreement including compliance, on a pro forma basis, with the financial covenants and ratios ofset forth therein. Upon our ~~Credit Facility. On February 27, 2018, we exercised an option~~request, each lender may decide, in its sole discretion, whether to increase all or a portion of its revolving credit facility commitment or provide term loans.

The Second A&R Credit Agreement provides covenants substantially the ~~total commitments under~~same as those contained in the prior credit agreement, except that (1) the restricted payments covenant has been revised to permit us to declare or pay cash dividends in any fiscal year up to an amount that does not exceed the greater of (i) an amount equal to the greater of (A) 50% of the Consolidated Net Income (as defined in the Second A&R Credit ~~Facility from $800~~Agreement) for the immediately preceding fiscal year or (B) $25 million or (ii) the greatest amount which would not cause the Consolidated Leverage Ratio (determined on a pro forma basis) to ~~$1.1 billion.~~ exceed 3.25 to 1.00 and (2) the restricted payments covenant has been revised to provide an allowance for stock repurchases to be an amount not exceeding the greater of (i) $150 million in the aggregate or (ii) the amount that, after giving pro forma effect thereto and any related borrowings, will not cause the Consolidated Leverage Ratio to exceed 3.25 to 1.00. All other material terms of the prior credit agreement remain unchanged.

Debt issuance costs of ~~$0.3~~$2.1 million and $2.3 million are included in other noncurrent assets on our Consolidated Balance Sheets as of ~~the six months ended~~ June ~~28, 2019.~~26, 2020 and December 27, 2019, respectively.

We have a renewable 364-day, $25.0 million commercial stand-by letter of credit facility with Rabobank Nederland.

Table of Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

8. Debt and Finance Lease Obligations (continued)

The following is a summary of the material terms of the Credit Facility and other working capital facilities at June ~~28, 2019~~26, 2020 (U.S. dollars in millions):


	Term	Maturity date	Interest rate	Borrowing limit		Available borrowings
Bank of America credit facility	5 years	October 1, 2024	2.10%	$	1,100.0	$	565.1
Rabobank letter of credit facility	364 days	June 16, 2021	Varies	25.0		13.4
Other working capital facilities	Varies	Varies	Varies	20.3		10.1
								$	1,145.3	$	588.6

Term Maturity
date Interest rate Borrowing
limit Available
borrowings
Bank of America credit facility 5 years April 15, 2020 3.95% $ 1,100.0
$ 460.4
Rabobank letter of credit facility 364 days June 18, 2019 Varies 25.0
16.6
Other working capital facilities Varies Varies Varies 23.3
13.9
$ 1,148.3
$ 490.9

The current margin for LIBOR advances is ~~1.50%~~1.375%. We intend to use funds borrowed under the Revolving Credit Facility from time to time for general corporate purposes, ~~which may include the repayment, redemption or refinancing of our existing indebtedness,~~ working capital, ~~needs,~~ capital expenditures ~~funding of possible acquisitions, possible share repurchases~~ and ~~satisfaction of~~ other ~~obligations.~~investment opportunities.

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

The Second A&R Credit ~~Facility~~Agreement requires us to comply with financial and other covenants, including limitations on capital expenditures, the amount of dividends that can be paid in the future, the amount and types of liens and indebtedness, material asset sales and mergers. As of June ~~28, 2019~~,26, 2020, we were in compliance with all of the covenants contained in the Second A&R Credit ~~Facility.~~Agreement. The Revolving Credit Facility is unsecured and is guaranteed by certain of our subsidiaries. The Revolving Credit Facility permits borrowings under the revolving commitment with an interest rate determined based on our leverage ratio and spread over LIBOR. In addition, we pay a fee on unused commitments.

Our Credit Facility matures on April 15, 2020 and represents our principal method of supplementing operating cash flows for our working capital and other liquidity requirements. We plan to refinance our Credit Facility before maturity, based on our history of earnings and positive cash flows along with our long-standing relationships with our current bank group and our credit rating. We believe that our operating cash flows, together with our ability to renew the Credit Facility will be adequate to meet our operating, investing and financing needs in the foreseeable future. There are no assurances that volatility and uncertainty in the global capital markets will not impair our ability to access these markets in terms that are favorable to us.

As of June ~~28, 2019~~,26, 2020, we applied ~~$8.4~~$11.6 million to letters of credit under the Rabobank Nederland and Bank of America ~~letter of~~revolving credit facilities, in respect of certain contingent obligations and other governmental agency guarantees, combined with guarantees for purchases of raw materials and equipment and other trade related letters of credit. We also had ~~$17.5~~$18.9 million in other letters of credit and bank guarantees not included in the Rabobank letter of credit or Bank of America ~~letter of~~revolving credit facilities.

~~As of June 28,~~During 2018, we entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to our variable rate LIBOR-based borrowings from our Revolving Credit Facility. Refer to Note ~~15,~~13, “Derivative Financial Instruments”.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

11.9. Commitments and Contingencies

During the fourth quarter of 2019, our Mann Packing business voluntarily recalled a series of vegetable products sold to select customers in the United States and Canada primarily in our fresh and value-added products segment. The voluntary recall had a negative effect on net sales, primarily of fresh-cut vegetables, and also resulted in approximately $6.0 million of customer claims and customer-related charges during the fourth quarter of 2019. During the six months ended June 26, 2020, we recorded an insurance recovery of $6.0 million related to this product recall, presented in asset impairment and other charges, net, in our Consolidated Statement of Operations.

Kunia Well Site

In 1980, elevated levels of certain chemicals were detected in the soil and ground-water at a plantation leased by ~~one~~1 of our U.S. subsidiaries in Honolulu, Hawaii (the “Kunia Well Site”). Shortly thereafter, our subsidiary discontinued the use of the Kunia Well Site and provided an alternate water source to area well users and the subsidiary commenced its own voluntary cleanup operation.

In 1993, the Environmental Protection Agency (“EPA”) identified the Kunia Well Site for potential listing on the National Priorities List (“NPL”) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. On December 16, 1994, the EPA issued a final rule adding the Kunia Well Site to the NPL.

On September 28, 1995, our subsidiary entered into an order (the “Order”) with the EPA to conduct the remedial investigation and the feasibility study of the Kunia Well Site. Under the terms of the Order, our subsidiary submitted a remedial investigation report in November 1998 and a final draft feasibility study in December 1999 (which was updated from time to time) for review by the EPA. The EPA approved the remedial investigation report in February 1999 and the feasibility study on April 22, 2003.

As a result of communications with the EPA in 2001, we recorded a charge of $15.0 million in the third quarter of 2001 to increase the recorded liability to the estimated expected future cleanup cost for the Kunia Well Site to $19.1 million. Based on conversations with the EPA in the third quarter of 2002 and consultation with our legal counsel and other experts, we recorded a charge of $7.0 million during the third quarter of 2002 to increase the accrual for the expected future clean-up costs for the Kunia Well Site to $26.1 million.

On September 25, 2003, the EPA issued the Record of Decision (“ROD”). The EPA estimates in the ROD that the remediation costs associated with the cleanup of the Kunia Well Site will range from $12.9 million to $25.4 million and will last approximately 10 years. It remains to be determined how long the remediation will actually last.

~~On January 13, 2004, the EPA deleted a portion of the Kunia Well Site (Northeast section) from the NPL. On May 2,~~ 2005, our subsidiary signed a Consent Decree ("Consent Decree") with the ~~EPA~~Environmental Protection Agency ("EPA") for the performance of the clean-up work for the Kunia Well Site. ~~On September 27, 2005, the U.S. District Court for Hawaii approved and entered the Consent Decree.~~ Based on findings from remedial investigations, ~~at the Kunia Well Site,~~ our subsidiary continues to evaluate with the EPA the clean-up work currently in progress in accordance with the Consent Decree.

The estimates associated with the clean-up costs are between ~~$13.4~~$13.2 million and $28.7 million. The estimate on which our accrual is based totals ~~$13.4~~$13.2 million. As of June ~~28, 2019, we recorded $13.1~~26, 2020, $12.9 million was included in other noncurrent liabilities and $0.3 million included in accounts payable and accrued expenses in our Consolidated Balance Sheets for the Kunia Well Site clean-up. We expect to expend approximately ~~$0.3 million in 2019, $1.1~~$0.4 million in 2020, ~~$1.0~~$1.1 million in 2021 and $0.9 million in each of the years 2022, ~~and~~ 2023 and 2024.

California Air Resource Board

On June 8, 2018, the ~~remaining amounts~~California Air Resource Board (“CARB”) issued a Notice of Violation (“NOV”) to ~~be expended~~the Company regarding violations of certain California anti-air pollution regulations by ships that were subject to a time charter by the Company from Star Reefers Pool, Inc. (“Star”), an unrelated non-U.S. third party. In accordance with the terms of the time charter, Star was contractually required to maintain compliance with the CARB requirements, Star’s personnel managed the relevant vessels, Star supplied the crew and Star maintained at all times possession and control of their ships. Pursuant to the terms of the charter agreement, the Company had the temporary right to have its goods loaded and conveyed and made available at the relevant California berth equipment necessary for Star’s compliance with the CARB regulations. Since receiving the NOV, the Company has sought to enforce its contractual rights to have Star engage with CARB regarding potential liability and resolve any open violations. The Company ultimately terminated its commercial relationship with Star. While a formal complaint by CARB has not been filed, several tolling agreements have been executed and the Company is discussing a settlement of the allegations with CARB directly as liability under the regulations is considered joint and several. The Company has fully cooperated with and assisted CARB in ~~subsequent years.~~its audits for alleged violations over 2015-2019. During the six months ended June 26, 2020, the Company recognized a $2.0 million contingent reserve with respect to this matter.

Business Litigation

On March 14, 2019, we settled a business transaction litigation matter for $17.0 million in our favor. The settlement resulted in a gain of approximately $16.7 million, net of $0.3 million related to other miscellaneous expenses which is reflected in other (expense) income, net on our Consolidated Statements of Operations for the six months ended June 28, 2019.

Additional Information

In addition to the foregoing, we are involved from time to time in various claims and legal actions incident to our operations, both as plaintiff and defendant. In the opinion of management, after consulting with legal counsel, none of these other claims are currently expected to have a material adverse effect on the results of operations, financial position or our cash flows.

We intend to vigorously defend ourselves in all of the above matters.

~~Business Litigation~~

On March 14, 2019, we settled a business transaction litigation matter for $17.0 million in our favor. The settlement resulted in a gain of approximately $16.7 million, net of $0.3 million in litigation expenses and is included in other income, net on our Consolidated Statements of Operations.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

12.10. Earnings Per Share

Basic and diluted net income per ordinary share is calculated as follows (U.S. dollars in millions, except share and per share data):


	Quarter ended						Six months ended
	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
Numerator:
Net income attributable to Fresh Del Monte Produce Inc.	$	17.9	$	38.1	$	30.9	$	74.2

Denominator:
Weighted average number of ordinary shares - Basic	47,557,820		48,533,444		47,818,922		48,540,571
Effect of dilutive securities - share-based awards	56,733		48,691		99,149		84,385
Weighted average number of ordinary shares - Diluted	47,614,553		48,582,135		47,918,071		48,624,956

Antidilutive awards ⁽¹⁾	201,520		162,922		201,520		162,922

Net income per ordinary share attributable to Fresh Del Monte Produce Inc.:
Basic	$	0.38	$	0.79	$	0.65	$	1.53
Diluted	$	0.38	$	0.78	$	0.64	$	1.53

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Numerator:
Net income (loss) attributable to Fresh Del Monte
Produce Inc.
$ 38.1
$ (7.9 ) $ 74.2
$ 33.6

Denominator:

Weighted average number of ordinary shares -
Basic
48,533,444
48,753,227
48,540,571
48,767,411
Effect of dilutive securities - share-based
employee options and awards
48,691
—
84,385
244,986
Weighted average number of ordinary shares -
Diluted
48,582,135
48,753,227
48,624,956
49,012,397

Antidilutive awards ⁽¹⁾
162,922
739,106
162,922
30,562

Net income (loss) per ordinary share attributable to Fresh Del Monte Produce Inc.:

Basic $ 0.79
$ (0.16 ) $ 1.53
$ 0.69
Diluted $ 0.78
$ (0.16 ) $ 1.53
$ 0.69

⁽¹⁾Certain unvested RSUs and PSUs are not included in the calculation of net income per ordinary share because the effect would have been antidilutive.


⁽¹⁾	~~Certain unvested RSUs and PSUs are not included in the calculation of net income per ordinary share because the effect would have been antidilutive.~~

Refer to Note 18,16, “Shareholders’ Equity”, for disclosures related to the stock repurchase program and retired shares.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

13.11. Retirement and Other Employee Benefits

The following table sets forth the net periodic benefit costs of our defined benefit pension plans and post-retirement benefit plans (U.S. dollars in millions):


	Quarter ended						Six months ended
	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
Service cost	$	1.6	$	1.4	$	3.2	$	2.8
Interest cost	1.5		1.7		2.9		3.4
Expected return on assets	(0.6)		(0.8)		(1.2)		(1.6)
Amortization of net actuarial loss	0.3		0.1		0.6		0.2
Net periodic benefit costs	$	2.8	$	2.4	$	5.5	$	4.8

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Service cost $ 1.4
$ 1.5
$ 2.8
$ 3.0
Interest cost 1.7
1.6
3.4
3.2
Expected return on assets (0.8 ) (0.9 ) (1.6 ) (1.8 )
Amortization of net actuarial loss 0.1
0.2
0.2
0.4
Net periodic benefit costs $ 2.4
$ 2.4
$ 4.8
$ 4.8

We provide certain other retirement benefits to certain employees who are not U.S.-based and are not included above. Generally, benefits under these programs are based on an employee’s length of service and level of compensation. These programs are immaterial to our consolidated financial statements. The net periodic benefit costs related to other non-U.S.-based plans is $0.8 million for the ~~quarter~~quarters ended June 26, 2020 and June 28, ~~2019 and $0.7 million for the quarter ended June 29, 2018.~~2019. The net periodic benefit costs related to other non-U.S.-based plans is $1.6 million for the six months ended June 26, 2020 and June 28, ~~2019 and $1.4 million for the six months ended June 29, 2018.~~2019.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

14.12. Business Segment Data

We are principally engaged in ~~one major line of business,~~ the production, distribution and marketing of fresh and value-added products and bananas. Our products are sold in markets throughout the world with our major producing operations located in North, Central and South America, Europe, Asia and Africa.

During March 2019, we changed our reportable segments to reflect the manner in which we manage our business. Based on changes to our organization structure and how our Chief Operating Decision Maker “CODM” reviews operating results and makes decisions about resource allocations. We have twoOur operations are organized into 2 reportable segments that represent our primary businesses ~~which include fresh~~ and ~~value-added products and bananas. We also have other products and services~~one reportable segment ~~which includes~~that represents our ancillary businesses. ~~Prior period amounts were adjusted retrospectively to reflect the changes in our segment data.~~

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

•Banana

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

We evaluate performance based on several factors, of which net sales and gross profit by product are the primary financial measures (U.S. dollars in millions):


	Quarter ended													Quarter ended
	June 28, 2019				June 29, 2018									June 26, 2020						June 28, 2019
Segments:	Net Sales		Gross Profit		Net Sales				Gross Profit				Segments:	Net Sales		Gross Profit		Net Sales		Gross Profit
Fresh and value-added products	$	764.3	$	58.1	$	780.7			$	51.3			Fresh and value-added products	$	636.2	$	37.1	$	764.3	$	57.5
Banana	440.0		35.0		457.8				23.8				Banana	429.6		39.0		440.0		36.9
Other products and services	35.1		3.2		33.9				3.2				Other products and services	26.5		2.6		35.1		3.2
Totals	$	1,239.4	$	96.3	$	1,272.4			$	78.3			Totals	$	1,092.3	$	78.7	$	1,239.4	$	97.6

	Six months ended													Six months ended
	June 28, 2019				June 29, 2018									June 26, 2020						June 28, 2019
Segments:	Net Sales		Gross Profit		Net Sales				Gross Profit				Segments:	Net Sales		Gross Profit		Net Sales		Gross Profit
Fresh and value-added products	$	1,454.3	$	119.5	$	1,397.3	⁽¹	⁾	$	102.6	⁽¹	⁾	Fresh and value-added products	$	1,297.2	$	79.6	$	1,454.3	$	119.0
Banana	871.5		68.0		910.9				75.9				Banana	856.6		63.5		871.5		71.6
Other products and services	67.8		2.1		70.3				6.3				Other products and services	56.5		4.1		67.8		2.1
Totals	$	2,393.6	$	189.6	$	2,378.5			$	184.8			Totals	$	2,210.3	$	147.2	$	2,393.6	$	192.7

Quarter ended Six months ended
Net Sales by geographic region: June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
North America $ 816.8
$ 814.8
$ 1,565.6
$ 1,478.3
⁽¹⁾
Europe 171.2
175.8
342.5
369.9

Asia 131.1
135.8
251.8
248.4

Middle East 109.3
126.0
207.1
241.9

Other 11.0
20.0
26.6
40.0

Totals $ 1,239.4
$ 1,272.4
$ 2,393.6
$ 2,378.5


	Quarter ended						Six months ended
Net Sales by geographic region:	June 26, 2020		June 28, 2019		June 26, 2020		June 28, 2019
North America	$	667.1	$	816.8	$	1,372.7	$	1,565.6
Europe	164.0		171.2		335.2		342.5
Asia	134.1		131.1		247.3		251.8
Middle East	114.2		109.3		226.6		207.1
Other	12.9		11.0		28.5		26.6
Totals	$	1,092.3	$	1,239.4	$	2,210.3	$	2,393.6

⁽¹⁾
~~Includes Net Sales~~

Our segment data disclosures for the quarter and six months ended June 28, 2019 have been adjusted to reflect a reclassification of ~~$197.5 million~~cost of products sold between our banana and ~~Gross Profit~~fresh and value-added products segments as the result of ~~$17.9~~a refinement in our overhead cost allocation methodology. This reclassification resulted in an increase to our banana segment gross profit of $1.5 million for the ~~period from February 27, 2018 to~~quarter ended June ~~29, 2018 related to Mann Packing. Refer to Note 4, “Acquisition~~”,28, 2019 and $2.8 million for ~~further discussion on~~ the ~~Mann Packing acquisition.~~

six months ended June 28, 2019, and a corresponding

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~14.~~12. Business Segment Data (continued)

decrease in our fresh and value-added products segment gross profit. On a full year basis for the year ended December 27, 2019, the reclassification results in an increase to our banana segment gross profit and corresponding decrease to our fresh and value-added products segment gross profit of $5.6 million and will be reflected accordingly in our future filings with the SEC.

Our segment data disclosures for the quarter ended June 28, 2019 also reflect the impact of a reclassification adjustment to correct the presentation of payroll and payroll-related costs associated with our sales personnel from cost of products sold to selling, general, and administrative expenses. The reclassification adjustment resulted in an increase of $0.4 million to gross profit in our banana segment and an increase of $0.9 million to gross profit in our fresh and value-added products segment for the quarter ended June 28, 2019. For the six months ended June 28, 2019, the reclassification adjustment resulted in an increase of $0.8 million to gross profit in our banana segment and an increase of $2.3 million to gross profit in our fresh and value-added products segment. For the full year ended December 27, 2019, the adjustment results in an increase to our banana segment gross profit of $1.6 million, and an increase of $4.2 million to our fresh and value-added products segment gross profit. Refer to Note 1. "General" for further information regarding this adjustment.

The following table indicates our net sales by ~~product:~~product and the percentage of the total:


	Quarter ended														Six months ended
	June 26, 2020						June 28, 2019						June 26, 2020				June 28, 2019

Fresh and value-added products:
Fresh-cut fruit	110.4		10	%	146.1		12	%	228.2		10	%	263.7		11	%
Fresh-cut vegetables	86.3		8	%	119.4		10	%	189.2		9	%	238.0		10	%
Gold pineapples	113.9		10	%	126.1		10	%	216.0		10	%	237.4		10	%
Avocados	93.5		9	%	124.9		10	%	187.0		9	%	213.6		9	%
Non-tropical fruit	75.2		7	%	69.5		6	%	137.6		6	%	130.9		5	%
Prepared foods	66.7		6	%	69.7		6	%	131.3		6	%	140.2		6	%
Melons	20.0		2	%	25.0		2	%	63.9		3	%	69.7		3	%
Tomatoes	10.2		1	%	15.4		1	%	23.8		1	%	28.9		1	%
Vegetables	35.0		3	%	42.8		3	%	74.3		3	%	84.3		4	%
Other fruit and vegetables	25.0		2	%	25.4		2	%	45.9		2	%	47.6		2	%
Total fresh and value-added products	$	636.2	58	%	$	764.3	62	%	$	1,297.2	59	%	$	1,454.3	61	%
Banana	429.6		39	%	440.0		35	%	856.6		39	%	871.5		36	%
Other products and services	26.5		3	%	35.1		3	%	56.5		2	%	67.8		3	%
Totals	$	1,092.3	100	%	$	1,239.4	100	%	$	2,210.3	100	%	$	2,393.6	100	%

Quarter ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Fresh and value-added products:
Fresh-cut fruit 147.0
12 % 146.9
12 % 265.6
11 % 264.7
11 %
Fresh-cut vegetables 121.4
10 % 125.2
10 % 243.9
10 % 187.8
8 %
  Gold pineapples 126.1
10 % 139.4
11 % 237.4
10 % 259.5
11 %
  Avocados 124.9
10 % 95.1
7 % 213.5
9 % 179.2
8 %
  Non-tropical fruit 69.5
6 % 86.5
7 % 130.9
6 % 152.6
6 %
Prepared foods 66.8
5 % 68.2
5 % 132.5
6 % 123.2
5 %
  Melons 25.0
2 % 34.3
3 % 69.7
3 % 85.5
4 %
  Tomatoes 15.4
1 % 19.0
1 % 28.9
1 % 35.1
2 %
  Vegetables 40.6
3 % 38.7
3 % 79.3
3 % 57.6
2 %
  Other fruit and vegetables 27.6
2 % 27.4
2 % 52.6
2 % 52.1
2 %
Total fresh and value-added products $ 764.3
61 % $ 780.7
61 % $ 1,454.3
61 % $ 1,397.3
59 %
Banana 440.0
36 % 457.8
36 % $ 871.5
36 % $ 910.9
38 %
Other products and services 35.1
3 % 33.9
3 % $ 67.8
3 % $ 70.3
3 %
Totals $ 1,239.4
100 %
$ 1,272.4
100 % $ 2,393.6
100 % $ 2,378.5
100 %

15.13. Derivative Financial Instruments

Our derivative financial instruments reduce our exposure to fluctuations in foreign exchange rates, ~~and~~ variable interest ~~rates.~~rates and bunker fuel prices. We ~~predominantly~~ designate our derivative financial instruments as cash flow hedges.

Counterparties expose us to credit loss in the event of non-performance on hedges. We monitor our exposure to counterparty non-performance risk both at inception of the hedge and at least quarterly thereafter.

~~Because of the high degree of effectiveness between the hedging instrument and the underlying exposure being hedged, fluctuations~~Fluctuations in the value of the derivative instruments are generally offset by changes in the cash flows ~~or fair value~~ of the underlying exposures being hedged. In addition, we perform an assessment of hedge effectiveness, both at inception and at least quarterly thereafter, to determine whether the financial instruments that are used in hedging transactions are effective at offsetting changes in the cash flows or fair value of the related underlying exposures. A cash flow hedge requires that the change in the fair value of a derivative instrument be recognized in other comprehensive (loss) income, a component of shareholders’ equity, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~15.~~13. Derivative Financial Instruments (continued)

Certain of our derivative instruments contain provisions that require the current credit relationship between us and our counterparty to be maintained throughout the term of the derivative instruments. If that credit relationship changes, certain provisions could be triggered, and the counterparty could request immediate collateralization of derivative instruments in a net liability position above a certain threshold. ~~There are~~The aggregate fair value of all derivative instruments with a credit-risk-related contingent feature that are in a liability position on June ~~28, 2019, however they are immaterial to our financial condition and results of operation.~~26, 2020 is $62.8 million. As of June ~~28, 2019,~~26, 2020, no triggering event has occurred and thus we are not required to post collateral. If the credit-risk-related contingent features underlying these agreements were triggered on June 28, 2019, we would not be required to post collateral to the counterparty, because the collateralization threshold has not been met.

Derivative instruments are disclosed on a gross basis. There are various rights of setoff associated with our derivative instruments that are subject to an enforceable master netting arrangement or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties, individually, these financial rights are not material.

Foreign Currency Hedges

We are exposed to fluctuations in currency exchange rates against the U.S. dollar on our results of operations and financial condition, and we mitigate that exposure by entering into foreign currency forward contracts. Certain of our subsidiaries periodically enter into foreign currency forward contracts in order to hedge portions of forecasted sales or cost of sales denominated in foreign currencies, which generally mature within one year. Our foreign currency hedges were entered into for the purpose of hedging portions of our ~~2019~~ ~~and~~ 2020 foreign currency exposure.

The foreign currency forward contracts qualifying as cash flow hedges were designated as single-purpose cash flow hedges of forecasted cash flows.

We had the following outstanding foreign currency forward contracts as of June ~~28, 2019~~26, 2020 (in millions):

Foreign currency contracts qualifying as cash flow hedges:

Notional amount

Euro

EUR

114.2

British pound

GBP

19.8

Japanese yen

JPY

2,120.7

~~Foreign currency contracts qualifying as cash flow hedges:~~

~~Notional amount~~

~~Euro~~

~~EUR~~

~~81.7~~

~~British pound~~

~~GBP~~

~~3.7~~

~~Japanese yen~~

~~JPY~~

~~5,024.6~~

Korean won

KRW

~~14,985.6~~22,035.0

Bunker Fuel Hedges

��

We had the following outstanding bunker fuel swap contracts as of June 26, 2020:

Bunker fuel swap contracts:

Notional amount

0.5% U.S. Gulf Coast ⁽¹⁾

298,438

barrels

3% U.S. Gulf Coast ⁽¹⁾

95,413

metric tons

0.5% Singapore

48,087

metric tons

⁽¹⁾ During the quarter ended June 26, 2020, we dedesignated certain portions of our bunker fuel cash flow hedges due to decreases in our forecasted fuel consumption for certain fuel types which was partially driven by the delay of the receipt of two of our six new refrigerated container vessels due to the COVID-19 pandemic. The notional amounts which were dedesignated consisted of 138,872 barrels of fuel related to our 0.5% U.S. Gulf Coast contracts and 9,554 metric tons of fuel related to our 3% U.S. Gulf Coast contracts. During the quarter ended June 26, 2020, we reclassified a $0.5 million loss related to our discontinued cash flow hedges from accumulated other comprehensive loss to other (expense) income, net. This reclassification reflected

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~15.~~13. Derivative Financial Instruments (continued)

the value of our dedesignated bunker fuel contracts for which the related forecasted transactions are no longer probable of occurring in the originally specified time period or within the following two months as required by the accounting guidance.

Interest Rate Contracts

We are exposed to fluctuations in variable interest rates on our results of operations and financial condition and we mitigate that exposure by entering into interest rate swaps. We entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to our variable rate LIBOR-based borrowings through 2028.

Gains or losses on interest rate swaps are recorded in other comprehensive (loss) income and will be subsequently reclassified into earnings ~~as interest expense~~ as the interest expense on debt is recognized in earnings. At June ~~28, 2019,~~26, 2020, the notional value of interest rate contracts outstanding was $400.0 million, with $200.0 million maturing in 2024 and the remaining $200.0 million maturing in 2028. Refer to Note ~~10,~~8, “Debt and Finance Lease Obligations.”

The following table reflects the fair values of derivative instruments, which are designated as level 2 in the fair value hierarchy, as of June ~~28, 2019~~26, 2020 and December ~~28, 2018~~27, 2019 (U.S. dollars in millions):

Derivatives designated as hedging instruments ⁽¹⁾
Foreign exchange contracts Interest rate swaps Total
Balance Sheet location:
June 28,
2019 ⁽²⁾
December 28,
2018 June 28,
2019 December 28,
2018 June 28,
2019 December 28,
2018
Asset derivatives:
Prepaid expenses and other current assets $ 3.0
$ 1.6
$ —
$ —
$ 3.0
$ 1.6
Total asset derivatives $ 3.0
$ 1.6

$ —
$ —
$ 3.0
$ 1.6

Liability derivatives:

Accounts payable and accrued expenses $ 0.4
$ 0.8
$ —
$ —
$ 0.4
$ 0.8
Other long-term liabilities —
—
28.9
7.6
28.9
7.6
Total liability derivatives $ 0.4
$ 0.8
$ 28.9
$ 7.6
$ 29.3
$ 8.4


	Derivatives designated as hedging instruments ⁽¹⁾
	Foreign exchange contracts						Bunker fuel swaps						Interest rate swaps				Total
Balance Sheet location:	June 26, 2020		December 27, 2019		June 26, 2020		December 27, 2019		June 26, 2020		December 27, 2019		June 26, 2020		December 27, 2019
Asset derivatives:
Prepaid expenses and other current assets	$	1.5	$	1.7	$	—	$	—	$	—	$	—	$	1.5	$	1.7

Total asset derivatives	$	1.5	$	1.7	$	—	$	—	$	—	$	—	$	1.5	$	1.7

Liability derivatives:
Accounts payable and accrued expenses	$	2.3	$	0.7	$	1.6	$	—	$	—	$	—	$	3.9	$	0.7
Other long-term liabilities	—		—		1.5		—		56.7		30.3		58.2		30.3
Total liability derivatives	$	2.3	$	0.7	$	3.1	$	—	$	56.7	$	30.3	$	62.1	$	31.0

⁽¹⁾ See Note ~~16,~~14, "Fair Value Measurements", for fair value disclosures.

⁽²⁾

At June 26, 2020, $0.4 million is included in accounts payable and accrued expenses and $0.3 million is included in other long-term liabilities for the portions of our bunker fuel swap contracts which are no longer designated as hedging instruments.

We expect that ~~$2.6~~$2.0 million of the net fair value of designated and dedesignated hedges recognized as a net ~~gain~~loss in accumulated other comprehensive ~~income ("AOCI")~~loss will be transferred to earnings during the next 12 months and the remaining net loss of ~~$28.9~~$57.8 million over a period of 108 years, along with the earnings effect of the related forecasted transactions.

2824

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~15.~~13. Derivative Financial Instruments (continued)

The following table reflects the effect of derivative instruments on the Consolidated Statements of Operations for the quarters and six months ended June ~~28, 2019~~26, 2020 and June ~~29, 2018~~28, 2019 (U.S. dollars in millions):


Derivatives in cash flow hedging relationships	Amount of gain (loss) recognized in other comprehensive (loss) income on derivatives							Location of (loss) gain reclassified from accumulated other comprehensive loss into income	Amount of gain (loss) reclassified from accumulated other comprehensive loss into income
	Quarter ended								Quarter ended
	June 26, 2020		June 28, 2019			June 26, 2020			June 28, 2019
Foreign exchange contracts	$	(0.6)	$	(2.2)	Net sales	$	1.6		$	1.7
Foreign exchange contracts	(0.4)		0.1		Cost of products sold	0.5			0.5
Bunker fuel swaps	6.1		—		Cost of products sold	(1.1)			—

Interest rate swaps, net of tax	(1.8)		(12.1)		Interest expense	(2.4)			(0.4)
Total	$	3.3	$	(14.2)		$	(1.4)		$	1.8

	Six months ended								Six months ended
	June 26, 2020		June 28, 2019			June 26, 2020			June 28, 2019
Foreign exchange contracts	$	(1.6)	$	1.0	Net sales	$	2.6		$	2.4
Foreign exchange contracts	(0.1)		0.8		Cost of products sold	0.6			0.6
Bunker fuel swaps	(2.2)		—		Cost of products sold	(1.1)			—

Interest rate swaps, net of tax	(23.3)		(21.3)		Interest expense	(3.6)			(0.7)
Total	$	(27.2)	$	(19.5)		$	(1.5)		$	2.3

Derivatives in effective cash flow
hedging relationships
Amount of gain (loss) recognized in other
comprehensive income on derivatives
(effective portion) Location of (loss) income
reclassified
from AOCI into
income (effective
portion) Amount of (loss) income reclassified from
AOCI into income (effective portion)
Quarter ended Quarter ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Foreign exchange
contracts $ (2.2 ) $ 6.0
Net sales $ 1.7
$ 0.9
Foreign exchange
contracts 0.1
0.7
Cost of products sold 0.5
0.1
Interest rate swaps (12.1 ) (2.0 ) Interest expense (0.4 ) (0.1 )
Total $ (14.2 ) $ 4.7
$ 1.8
$ 0.9

Six months ended Six months ended
June 28,
2019 June 29,
2018 June 28,
2019 June 29,
2018
Foreign exchange
contracts $ 1.0
$ 4.2
Net sales $ 2.4
$ 0.2
Foreign exchange
contracts 0.8
0.7
Cost of products sold 0.6
0.3
Interest rate swaps (21.3 ) (2.0 ) Interest expense (0.7 ) (0.1 )
Total $ (19.5 ) $ 2.9
$ 2.3
$ 0.4

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

14. Fair Value Measurements

We measure fair value for financial instruments, such as derivatives and equity securities, on an ongoing basis. We measure fair value for non-financial assets when a valuation is necessary, such as for impairment of long-lived and indefinite-lived assets. Fair value is measured in accordance with the ASC on “Fair Value ~~Measurements and Disclosures.” The ASC on “Fair Value Measurements and Disclosures~~” defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value.

of Derivative Instruments

~~We may choose to mitigate the risk of fluctuations in currency~~Our derivative assets or liabilities include foreign exchange, ~~rates and interest rates on our results of operations and financial condition by entering into foreign currency~~bunker fuel and interest rate ~~swap cash flow hedges. We account for the~~derivatives that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk as well as an evaluation of ~~the related hedge contracts as prepaid expenses and other current assets, other non-current assets, accounts payable and accrued expenses or other non-current liabilities.~~our counterparties' credit risks. We use an income approach to value our outstanding foreign currency, ~~and~~ interest rate ~~hedges. An income approach~~and bunker fuel hedges, which consists of a discounted cash flow model that takes into account the present value of future cash flows under the terms of the contract using current market information as of the measurement date such as foreign currency and bunker fuel spot ~~and~~rates, forward ~~rates, interest~~ rates and interest ~~rate curves.~~rates. Additionally, we include an element of default risk based on observable inputs into the fair value calculation. ~~Due to~~Based on these inputs, the ~~fact that certain inputs to fair value these~~ derivative ~~instruments can be observed, they~~assets or liabilities are classified aswithin Level 2.

2 of the valuation hierarchy.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~16.~~14. Fair Value Measurements (continued)

The following table provides a summary of the fair values of ~~assets and liabilities~~our derivative financial instruments measured on a recurring basis under the ASC on “Fair Value Measurements and Disclosures” (U.S. dollars in millions):


	Fair value measurements
	Foreign currency forward contracts, net (liability) asset						Bunker fuel contracts, net liability ⁽¹⁾					Interest rate contracts, net liability
	June 26, 2020		December 27, 2019		June 26, 2020			December 27, 2019		June 26, 2020		December 27, 2019
Quoted prices in active markets for identical assets (Level 1)	$	—	$	—	$	—		$	—	$	—	$	—
Significant observable inputs (Level 2)	(0.8)		1.0		(3.8)			—		(56.7)		(30.3)
Significant unobservable inputs (Level 3)	—		—		—			—		—		—

Fair value measurements
Foreign currency forward contracts, net asset (liability) Interest rate contracts, net (liability) asset
June 28,
2019 December 28,
2018 June 28,
2019 December 28,
2018
Quoted prices in active markets for identical assets (Level 1) $ —
$ —
$ —
$ —
Significant observable inputs (Level 2) 2.6
0.8
(28.9 ) (7.6 )
Significant unobservable inputs (Level 3) —
—
—
—
⁽¹⁾Includes both designated and dedesignated cash flow hedges. Refer to Note 13, “Derivative Financial Instruments”, for the balances of each.

In estimating our fair value disclosures for financial instruments, we use the following methods and assumptions:

Cash and cash equivalents: The carrying amount reported in the Consolidated Balance Sheets for these items approximates fair value due to their liquid nature and are classified as Level 1.

Trade accounts receivable and other accounts receivable, net: The carrying value reported in the Consolidated Balance Sheets for these items is net of allowances, which includes a degree of counterparty non-performance risk and are classified as Level 2.

Accounts payable and other current liabilities: The carrying value reported in the Consolidated Balance Sheets for these items approximates their fair value, which is the likely amount for which the liability with short settlement periods would be transferred to a market participant with a similar credit standing as ours and are classified as Level 2.

~~Finance and Operating leases:~~ The carrying value of our finance leases reported in the Consolidated Balance Sheets approximates their fair value based on current interest rates, which contain an element of default risk. The fair value of our finance leases is estimated using Level 2 inputs based on quoted prices for those or similar instruments. For the operating leases we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Refer to Note 10, “~~Debt and Finance Lease Obligations” and Note 9, "Leases."~~

Long-term debt: The carrying value of our long-term debt reported in the Consolidated Balance Sheets approximates their fair value since they bear interest at variable rates which contain an element of default risk. The fair value of our long-term debt is estimated using Level 2 inputs based on quoted prices for those or similar instruments. Refer to Note ~~10,~~8, “Debt and Finance Lease Obligations.”

Fair Value of Non-Financial Assets

The purchase price allocation for the Mann Packing acquisition reflected in the accompanying financial statements and includes $162.0 million allocated to goodwill representing the excess of the purchase price over the fair values of assets acquired and liabilities assumed and is subject to revision. The fair value of the net assets acquired are estimated using Level 3 inputs based on unobservable inputs except for items such as working capital which are valued using Level 2 inputs due to mix of quoted prices for similar instruments and cash and cash equivalents valued as Level 1 due to its highly liquid nature. We primarily utilized the cost approach for the valuation of the personal and real property. For the definite-lived intangible assets including customer list intangibles and trade names and trademark were valued primarily using an income approach methodology.

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

~~16. Fair Value Measurements (continued)~~

The Mann Packing acquisition includes a put option exercisable by the 25% shareholder of one of the acquired subsidiaries. The put option allows the noncontrolling owner to sell his 25% noncontrolling interest to us for a multiple of the subsidiary's adjusted earnings. As the put option is outside of our control, the estimated value of the 25% noncontrolling interest is presented as a redeemable noncontrolling interest outside of permanent equity on our Consolidated Balance Sheets. The fair value of the redeemable noncontrolling interest and put option at the acquisition date was valued based on a mix of the income approach for determining the value of the redeemable noncontrolling interest and market approach for determining the most advantageous redemption point for the put option using a Monte Carlo simulation method. The fair value assigned to this interest is estimated using Level 3 inputs based on unobservable inputs. Refer to Note 4 "~~Acquisition~~" for further discussion on the acquisition of Mann Packing and also refer to further information regarding the Mann Packing acquisition in the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2018.

The fair value of the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and remaining trade names and trademarks are highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of these assets. We disclosed the sensitivity related to the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and remaining trade names and trademarks in our notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December ~~28, 2018.~~27, 2019.

In addition, certain definite-lived intangible assets related to our fresh and value-added products segment are sensitive to changes in estimated cash flows. To the extent that future developments result in estimated cash flows that are less than currently estimated levels, it could lead to impairment of these assets.

As of June ~~28, 2019, we have $26.4~~26, 2020, $8.2 million of property, plant and equipment ~~meeting~~met the criteria of assets held for ~~sale primarily~~sale: $5.1 million is related to ~~the discontinuance of tomato production assets including~~vacant land ~~buildings and machinery and equipment~~located in the ~~United States~~Kingdom of Saudi Arabia, $1.5 million and $0.8 million consists of farm land and associated assets in Chile and Nicaragua, and the ~~fresh and value-added products segment.~~remaining $0.8 million are carrier vessels. These assets are recognized at the lower of cost or fair value less cost to sell. During the quarter ended June ~~28, 2019,~~26, 2020, we received proceeds of ~~$21.8~~$1.6 million from the sale of ~~certain tomato lands~~surplus land in Chile and recorded a gain on disposal of property, plant and equipment, net of ~~$5.7~~$1.4 million.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

~~The Company recorded asset impairment and other charges during the quarter ended June 28, 2019, that do not fall under the scope of fair value measurement. Refer to Note 3,~~ ~~"Asset Impairment and Other Charges, Net"~~.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~The following is a tabular presentation of the non-recurring fair value measurements recorded during~~14. Fair Value Measurements (continued)

During the first six months of 2019, ~~along with the level within the fair value hierarchy in which the fair value measurement in their entirety fall (U.S. dollars in millions):~~

Fair value measurements for the six months ended June 28, 2019
Total Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Equity Investment $ 1.4
$ —
$ —
$ 1.4
$ 1.4
$ —
$ —
$ 1.4

~~During the first quarter of 2019,~~ we ~~had~~recorded a ~~charge of $2.8~~$2.9 million ~~in asset~~ impairment ~~and other charges, net~~ related to an equity ~~investment of $4.2 million in Purple Carrot. We calculated the fair value of $1.4 million using the market approach.~~investment. The fair value of ~~these assets are~~this asset is classified as Level 3 in the fair value hierarchy due to the mix of unobservable inputs utilized. During the second quarter of 2019, we sold the equity ~~investment in Purple Carrot, and we also had an additional charge of $0.1 million in asset impairment and other charges, net related to the sale.~~

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~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

investment.

17
.

15. Accumulated Other Comprehensive ~~Income (Loss)~~Loss

The following table includes the changes in accumulated other comprehensive ~~(loss) income attributable to U.S.~~loss by component under the ASC on “Comprehensive Income” (U.S. dollars in millions):

Changes in accumulated other comprehensive income (loss) by component ⁽¹⁾
Six months ended June 28, 2019
Changes in fair Value of Effective cash Flow hedges Foreign Currency Translation Adjustment Retirement Benefit Adjustment Total

Balance at December 28, 2018 $ (5.8 ) $ (14.9 ) $ (20.9 ) $ (41.6 )
Other comprehensive (loss) before
reclassifications (14.5 )
⁽³⁾
(0.3 )
⁽²⁾
(0.2 ) (15.0 )
Amounts reclassified from accumulated
other comprehensive (loss) income (2.3 ) —
0.3
(2.0 )
Net current period other comprehensive
(loss) (16.8 ) (0.3 ) 0.1
(17.0 )
Balance at June 28, 2019 $ (22.6 ) $ (15.2 ) $ (20.8 ) $ (58.6 )

Six months ended June 29, 2018
Balance at December 29, 2017 $ (1.4 ) $ (6.7 ) $ (22.5 ) $ (30.6 )
Other comprehensive income (loss)
before reclassifications 3.3
(4.8 )
⁽²⁾
0.1

(1.4 )
Amounts reclassified from accumulated
other comprehensive (loss) income (0.4 ) —
0.4
—
Net current period other comprehensive
income (loss) 2.9
(4.8 ) 0.5
(1.4 )
Balance at June 29, 2018 $ 1.5
$ (11.5 ) $ (22.0 ) $ (32.0 )


	Changes in Accumulated Other Comprehensive Loss by Component ⁽¹⁾
	Six months ended June 26, 2020
	Changes in Fair Value of Cash Flow Hedges			Foreign Currency Translation Adjustment			Retirement Benefit Adjustment		Total
Balance at December 27, 2019	$	(25.5)		$	(15.8)		$	(24.1)	$	(65.4)
Other comprehensive (loss) income before reclassifications	(29.2)		⁽³⁾	(3.6)		⁽²⁾	(0.1)		(32.9)
Amounts reclassified from accumulated other comprehensive loss	2.0		⁽⁴⁾	—			0.6		2.6
Net current period other comprehensive (loss) income	(27.2)			(3.6)			0.5		(30.3)
Balance at June 26, 2020	$	(52.7)		$	(19.4)		$	(23.6)	$	(95.7)


	Six months ended June 28, 2019
Balance at December 28, 2018	$	(5.8)		$	(14.9)		$	(20.9)	$	(41.6)
Other comprehensive (loss) income before reclassifications	(14.5)		⁽³⁾	(0.3)		⁽²⁾	(0.2)		(15.0)
Amounts reclassified from accumulated other comprehensive loss	(2.3)			—			0.3		(2.0)
Net current period other comprehensive (loss) income	(16.8)			(0.3)			0.1		(17.0)
Balance at June 28, 2019	$	(22.6)		$	(15.2)		$	(20.8)	$	(58.6)

⁽¹⁾ All amounts are net of tax and noncontrolling interest.

⁽²⁾ Includes a gain of ~~$2.2~~$1.6 million and ~~a loss of $1.0~~$2.2 million for the six months ended June ~~28, 2019~~26, 2020 and six months ended June ~~29, 2018,~~28, 2019, respectively, on intra-entity foreign currency transactions that are of a long-term-investment nature.

⁽³⁾ Includes a tax effect of $3.4 million and $2.8 million for the six months ended June 26, 2020 and six months ended June 28, ~~2019.~~2019, respectively. Additionally, includes the bunker fuel swap contracts entered into in the first quarter of 2020. Refer to Note 13, “Derivative Financial Instruments”, for further information on our derivatives.

⁽⁴⁾Includes amounts reclassified for both designated and dedesignated cash flow hedges. Refer to the following table for the amounts of each.

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FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

~~17.~~15. Accumulated Other Comprehensive ~~Income (Loss)~~Loss (continued)

The following table includes details about amounts reclassified from accumulated other comprehensive ~~(loss) income~~loss by component

(U.S. dollars in millions):


	Amount reclassified from accumulated other comprehensive loss
	June 26, 2020						June 28, 2019
Details about accumulated other comprehensive loss components	Quarter ended		Six months ended		Quarter ended		Six months ended		Affected line item in the statement where net income is presented
Changes in fair value of cash flow hedges:
Designated as hedging instruments:
Foreign currency cash flow hedges	$	(1.6)	$	(2.6)	$	(1.7)	$	(2.4)	Net sales
Foreign currency cash flow hedges	(0.5)		(0.6)		(0.5)		(0.6)		Cost of products sold
Bunker fuel swaps	1.1		1.1		—		—		Cost of products sold
Interest rate swaps	2.4		3.6		0.4		0.7		Interest expense
Bunker fuel swaps no longer designated as hedging instruments	0.5		0.5		—		—		Other (expense) income, net
Total	$	1.9	$	2.0	$	(1.8)	$	(2.3)

Amortization of retirement benefits:
Actuarial losses	0.3		0.6		0.1		0.3		Other (expense) income, net
Total	$	0.3	$	0.6	$	0.1	$	0.3

Amount reclassified from accumulated
other comprehensive income (loss)

June 28, 2019 June 29, 2018
Details about accumulated other comprehensive income (loss) components Quarter ended Six months ended Quarter ended Six months ended Affected line item in the statement where net income is present
Changes in fair value of effective cash flow hedges:
Foreign currency cash flow hedges $ (1.7 ) $ (2.4 ) $ (0.9 ) $ (0.2 ) Net sales
Foreign currency cash flow hedges (0.5 ) (0.6 ) (0.1 ) (0.3 ) Cost of products sold
Interest rate swaps 0.4
0.7
0.1
0.1
Interest expense
Total $ (1.8 ) $ (2.3 ) $ (0.9 ) $ (0.4 )

Amortization of retirement benefits:
Actuarial losses ⁽¹⁾
0.1
0.3
0.2
0.4
Other expense, net
Total $ 0.1
$ 0.3
$ 0.2
$ 0.4

⁽¹⁾~~Refer to Note 13, "Retirement and Other Employee Benefits" for additional information on reclassification~~Table of ~~certain net periodic pension costs due to adoption of ASU 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ ~~regarding the presentation of components of net periodic pension costs.~~Contents

FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)

Our shareholders have authorized 50,000,000 preferred shares at $0.01 par value, of which ~~none~~NaN are issued or outstanding at June ~~28, 2019,~~26, 2020, and 200,000,000 ordinary shares at $0.01 par value, of which ~~48,301,093~~47,340,692 are issued and outstanding at June ~~28, 2019~~.26, 2020.

~~Ordinary share activity is summarized as follows:~~

Six months ended
June 28,
2019 June 29,
2018
Ordinary shares issued (retired) as a result of:
Stock option exercises 18,250
36,500
Restricted stock grants 33,721
21,304
Restricted and performance
stock units 172,395
180,254
Ordinary shares
repurchased and retired (365,569 ) (218,232 )

~~Table of Contents~~

~~FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)~~

On February 21, 2018, our Board of Directors approved a three-year stock repurchase program of up to ~~$300~~$300.0 million of our ordinary shares. We have repurchased ~~$28.8~~$58.3 million of ordinary shares, or ~~877,869~~2,294,829 ordinary shares, under the aforementioned repurchase program and retired all the repurchased shares. As of June ~~28, 2019,~~26, 2020, we have a maximum dollar value of ~~$271.2~~$241.7 million that we can purchase under the approved stock repurchase program.

~~Subsequent to the quarter ended June 28, 2019, we repurchased 356,549 ordinary shares for $8.7 million with an average price per share of $24.35.~~

Dividend activity is summarized as follows:


Six months ended
June 26, 2020
Dividend Date	Cash Dividend Declared, per Ordinary Share



June 5, 2020	$	0.050
March 27, 2020	$	0.100

Six months ended
June 29, 2018
Dividend Date Cash Dividend Declared, per Ordinary Share
June 1, 2018 $ 0.150
March 30, 2018 $ 0.150

We paid ~~no dividends in the six months ended June 28, 2019 and~~ ~~$14.6~~$7.2 million in dividends in the six months ended June ~~29, 2018.~~26, 2020 and no dividends were paid in the six months ended June 28, 2019.

Subsequent to the quarter ended June 26, 2020, there were no ordinary share repurchases. In addition, on July 28, 2020, our Board of Directors declared an interim cash dividend of five cents $0.05 per share, payable on September 4, 2020 to shareholders of record on August 12, 2020.

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

We are one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut

fruit and vegetables, as well as a leading producer and marketer of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa and the Middle East. We market our products worldwide under the ~~DEL MONTE~~Del Monte^® brand, a symbol of product innovation, quality, freshness and reliability since 1892. Our global sourcing and logistics system allows us to provide regular delivery of consistently high-quality produce and value-added services to our customers. Our major producing operations are located in North, Central and South America, Asia and Africa.

Following our acquisition of Mann Packing, integrated during 2018, and the realignment of our business strategy to increase focus on our fresh and value-added products business as well as our core banana business we changed our reportable segments during March 2019 to better reflect the manner in which we manage our business. Based on changes to our organization structure and how our Chief Operating Decision Maker reviews operating results and makes decisions about resource allocations, we haveOur operations are organized into two reportable segments that represent our primary businesses ~~which include banana~~ and ~~fresh and value-added products. We also have the other products and services~~one reportable segment ~~which includes~~that represents our ancillary ~~businesses. Prior period amounts were adjusted retrospectively to reflect the changes in our segment data.~~businesses:

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

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

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

COVID-19 Pandemic Impact

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus continues to spread globally and in March 2020, the World Health Organization declared COVID-19 a pandemic. We have taken various preventative and protective measures in response to the COVID-19 pandemic to support our team members, customers, suppliers, and local communities. At our production facilities where food safety has always been a top priority, we introduced additional operating procedures and safety protocols to include social distancing, thermal screenings and increased cleaning cycles to protect our production teams. We activated our supply chain contingency plans to mitigate any disruptions in our ability to service our customers. Additionally, we implemented remote working arrangements across various of our administrative locations, having as many global employees as possible working remotely. These measures have allowed us to maintain our commitment to providing healthy, convenient and safe Del Monte^® branded products around the world during this critical time.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The COVID-19 pandemic has had a material adverse impact on our results of operations during the quarter and six months ended June 26, 2020. Government imposed mandatory closures and restrictions across various of our key global markets have resulted in volatile supply and demand conditions, particularly of our higher price point products such as pineapples, avocados, and fresh-cut fruit and vegetables, as well as reduced demand in our foodservice distribution channel and shifting demand in retail. We continue to work collaboratively with our network of third-party growers and suppliers to mitigate the impact of COVID-19 on our supply chain and costs. Additionally, in the six months ended June 26, 2020, our results were negatively impacted by service cancellations and containers that were unable to clear at certain of our Chinese ports. As a result, we had to redirect our products to markets such as Japan, Korea, and Hong Kong which had a negative impact on our financial performance due to oversupply in these markets. During the quarter ended June 26, 2020, some of our workers contracted the COVID-19 virus, which resulted in temporary facility closures, reduced production hours, increased cleaning and logistical costs, as well as an adverse impact on our net sales due to the perishability of our products. While we expect the COVID-19 pandemic to continue to negatively impact our operating results, the extent of the impact will depend on future developments, including the duration and spread of the pandemic and related government restrictions, all of which are uncertain and cannot be predicted.

In addition, we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. During the quarter ended June 26, 2020, we began taking several steps to conserve our liquidity position including reducing our interim cash dividend from ten cents ($0.10) per share in the first quarter of 2020 to five cents ($0.05) per share in the second and third quarters of 2020 and delaying certain of our planned capital expenditures to the second half of 2020 and 2021.

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

The following tables present for each of the periods indicated (i) net sales by geographic region and (ii) net sales and gross profit by segment, and in each case, the percentage of the total represented thereby (U.S. dollars in millions):


	Quarter ended														Six months ended
Region	June 26, 2020						June 28, 2019						June 26, 2020				June 28, 2019
North America	$	667.1	61	%	$	816.8	66	%	$	1,372.7	62	%	$	1,565.6	65	%
Europe	164.0		15	%	171.2		14	%	335.2		15	%	342.5		14	%
Asia	134.1		12	%	131.1		10	%	247.3		11	%	251.8		10	%
Middle East	114.2		11	%	109.3		9	%	226.6		10	%	207.1		9	%
Other	12.9		1	%	11.0		1	%	28.5		2	%	26.6		2	%
Totals	$	1,092.3	100	%	$	1,239.4	100	%	$	2,210.3	100	%	$	2,393.6	100	%


	Quarter ended
	June 26, 2020														June 28, 2019
Segment	Net Sales						Gross Profit						Net Sales				Gross Profit
Fresh and value-added products	$	636.2	58	%	$	37.1	47	%	$	764.3	62	%	$	57.5	59	%
Banana	429.6		39	%	39.0		50	%	440.0		35	%	36.9		38	%
Other products and services	26.5		3	%	2.6		3	%	35.1		3	%	3.2		3	%
Totals	$	1,092.3	100	%	$	78.7	100	%	$	1,239.4	100	%	$	97.6	100	%

	Six months ended
	June 26, 2020														June 28, 2019
	Net Sales						Gross Profit						Net Sales				Gross Profit
Fresh and value-added products	$	1,297.2	59	%	$	79.6	54	%	$	1,454.3	61	%	$	119.0	62	%
Banana	856.6		39	%	63.5		43	%	871.5		36	%	71.6		37	%
Other products and services	56.5		2	%	4.1		3	%	67.8		3	%	2.1		1	%
Totals	$	2,210.3	100	%	$	147.2	100	%	$	2,393.6	100	%	$	192.7	100	%

Net Sales. Net sales for the second quarter of 2020 were $1,092.3 million compared with $1,239.4 million for the second quarter of 2019. The decrease in net sales of $147.1 million was attributable to lower net sales in all of our business segments. The COVID-19 pandemic negatively impacted our net sales during the second quarter of 2020 by an estimated $132.0 million in our fresh and value-added products and banana segments, as compared to our original expectations for these segments which were developed prior to the pandemic. These negative impacts were primarily the result of volatile supply and demand conditions resulting from the pandemic, as well as reduced demand in our foodservice distribution channel and shifting demand in retail due to government imposed mandatory closures and restrictions across various of our key global markets. The effect of government imposed mandatory closures and restrictions and the lack of family gatherings for Easter, Mother’s Day, Father’s Day, school graduations and summer events specifically in North America has significantly reduced demand for many of our fresh and value-added products.

•Fresh and value-added products - Net sales in the fresh and value-added products segment decreased $128.1 million, primarily as a result of lower net sales of fresh-cut fruit and vegetables, avocados, pineapples, and prepared foods. The COVID-19 pandemic negatively affected our net sales of fresh and value-added products by an estimated $117.0 million in the quarter ended June 26, 2020 when compared with our original expectations which were developed prior to the pandemic.

•Banana - Net sales of bananas decreased by $10.4 million principally due to lower net sales in North America and Europe, partially offset by higher net sales in the Middle East and Asia. We estimate that COVID-19 negatively affected our banana net sales by $15.0 million during the second quarter of 2020 when compared to our original expectations which were developed prior to the pandemic. Worldwide banana sales volume decreased 1%.

Cost of Products Sold.Cost of products sold was $1,013.6 million for the second quarter of 2020 compared with $1,141.8 million for the second quarter of 2019, a decrease of $128.2 million. The decrease was primarily attributable to lower sales volumes in our fresh and value-added products and banana business segments. Partially offsetting this decrease were higher ocean freight costs and $10.6 million of other product-related charges which principally include $9.0 million of inventory write-offs attributable to our fresh and value-added products segment, primarily consisting of write-offs of pineapples, melons, and fresh-cut vegetables, and $1.6 million of inventory write-offs related to our banana segment. These inventory write-offs were due to lower demand in our foodservice distribution channel, shifting demand in retail, and volatile supply and demand conditions caused by the COVID-19 pandemic.

Gross Profit. Gross profit was $78.7 million for the second quarter of 2020 compared with $97.6 million for the second quarter of 2019, a decrease of $18.9 million. This decrease was attributable to lower gross profit in our fresh and value-added products segment, partially offset by higher gross profit in our banana segment.

•Fresh and value-added products - Gross profit in the fresh and value-added products segment decreased $20.4 million principally due to lower gross profit on pineapples and fresh-cut fruit and vegetables, partially offset by higher gross profit on prepared food products and avocados.

•Banana - Gross profit in the banana segment increased $2.1 million primarily due to lower fruit cost, principally lower procurement and packaging material costs. Partially offsetting this increase in gross profit were lower sales volumes, lower per unit sales prices and inventory write-offs driven by the COVID-19 pandemic. Worldwide banana per unit sale prices decreased 1% and per unit costs decreased 2%.

Selling, General and Administrative Expenses.Selling, general and administrative expenses of $45.6 million for the second quarter of 2020 were in line with the $45.3 million in expenses for the second quarter of 2019. The decrease in travel, administrative, and promotional expenses in most of our regions was offset by an increase in selling and marketing expenses recognized in the quarter.

Gain on Disposal of Property, Plant and Equipment, Net.The gain on disposal of property, plant and equipment, net, of $1.4 million during the second quarter of 2020 related primarily to the sale of surplus land in Chile. The gain on disposal of property, plant and equipment during the first quarter of 2019 of $5.7 million related primarily to the sale of a refrigerated vessel and other surplus equipment.

Asset Impairment and Other Charges (Credits), Net. Asset impairment and other charges (credits), net, was $1.4 million during the second quarter of 2020, as compared with $0.8 million during the second quarter of 2019.

Asset impairment and other charges (credits), net, for the second quarter of 2020 were comprised of the following:

•$(2.0) million insurance recovery related to a voluntary product recall in our fresh and value-added products segment;

•a $0.8 million reserve relating to a potential liability arising from our third-party shipping logistics operation, related to the banana and fresh and value-added products segments;

•$1.1 million in asset impairment charges of production facilities in North America and Europe related to our fresh and value-added products segment;

•$0.7 million in severance expense for the reorganization of the sales and marketing function in North America related to the fresh and value-added products and banana segments;

•$0.7 million in asset impairment charges relating to low-yielding banana plants in the Philippines.

Asset impairment and other charges (credits), net, for the second quarter of 2019 were comprised of the following:

•$0.3 million in contract termination charges related to our decision to abandon certain low-yield areas of our banana operations in the Philippines;

•$0.4 million in asset impairment charges related to our Chilean non-tropical fruit operation; and

•$0.1 million in asset impairment charges related to our equity investment in Purple Carrot, made in 2018.

Operating Income.Operating income for the second quarter of 2020 decreased by $24.1 million from $57.2 million in the second quarter of 2019 to $33.1 million in the second quarter of 2020. This decrease was due to lower gross profit, lower gains on disposal of property, plant and equipment, net, and higher asset impairment and other charges (credits), net.

Interest Expense. Interest expense was $5.6 million for the second quarter of 2020 as compared with $6.9 million for the second quarter of 2019. The decrease was due to lower interest rates combined with lower average loan balances.

Other (Expense) Income, Net. Other (expense) income, net, was $(5.2) million for the second quarter of 2020 as compared to $(2.9) million for the second quarter of 2019. The increase in other expense of $2.3 million was principally attributable to higher foreign exchange losses during the second quarter of 2020 as compared with the second quarter of 2019.

Provision for Income Taxes. Provision for income taxes was $4.2 million for the second quarter of 2020 compared to $8.5 million for the second quarter of 2019. The decrease in the provision for income taxes of $4.3 million is primarily due to lower earnings in certain taxable jurisdictions.

•Fresh and value-added products - Net sales in the fresh and value-added products segment decreased $157.1 million principally as a result of lower net sales of fresh-cut fruit and vegetables, avocados, pineapples and prepared food products. The COVID-19 pandemic negatively affected our net sales of fresh and value-added products by an estimated $138.0 million in the six months ended June 26, 2020 as compared to our original expectations which were developed prior to the pandemic.

•Banana - Net sales of bananas decreased by $14.9 million principally due to lower net sales in North America, Europe and Asia, partially offset by higher net sales in the Middle East. We estimate that COVID-19 negatively affected our banana net sales by $21.0 million during the first six months of 2020 when compared to our original expectations which were developed prior to the pandemic. Worldwide banana sales volume was flat as compared with the prior year.

Cost of Products Sold. Cost of products sold was $2,063.1 million for the first six months of 2020 compared with $2,200.9 million for the first six months of 2019, a decrease of $137.8 million. The decrease was primarily attributable to lower sales volumes in our fresh and value-added products business segment and lower banana fruit and distribution costs. Partially offsetting this decrease were higher ocean freight costs and $18.6 million of other product-related charges which principally include $16.8 million of inventory write-offs attributable to our fresh and value-added products segment, primarily consisting of

write-offs of pineapples, fresh-cut vegetables, and melons, and $1.8 million of inventory write-offs related to our banana segment. These inventory write-offs were due to lower demand in our foodservice distribution channel, shifting demand in retail, and volatile supply and demand conditions caused by the COVID-19 pandemic.

Gross Profit. Gross profit was $147.2 million for the first six months of 2020 compared with $192.7 million for the first six months of 2019, a decrease of $45.5 million. This decrease was attributable to lower gross profit in our fresh and value-added products and banana business segments.

•Fresh and value-added products - Gross profit in the fresh and value-added products segment decreased $39.4 million principally due to lower gross profit on fresh-cut fruit and vegetables products, pineapples and melons, partially offset by higher gross profit on prepared food products.

•Banana - Gross profit in the banana segment decreased by $8.1 million principally due to lower sales volumes in North America, Europe and Asia. Also contributing to the decrease in gross profit were lower per unit sales prices in Europe and Asia, higher ocean freight costs and inventory write-offs related to the COVID-19 pandemic. Worldwide banana per unit sales prices decreased 1% and per unit cost decreased 1%.

Selling, General and Administrative Expenses.Selling, general and administrative expenses decreased $1.3 million from $99.6 million for the first six months of 2019 to $98.3 million for the first six months of 2020. The decrease was due to lower advertising and promotional expenses in Europe and North America, lower travel expenses and lower executive compensation.

Gain on Disposal of Property, Plant and Equipment, Net. The gain on disposal of property, plant and equipment, net, was $1.6 million during the first six months of 2020 and was primarily related to the sale of surplus land in Chile. During the first six months of 2019, the gain on disposal of property, plant and equipment of $9.2 million consisted primarily of the sale of a refrigerated vessel and surplus land in Florida.

Asset Impairment and Other Charges (Credits), Net.Asset impairment and other charges (credits), net was $(0.4) million during the first six months of 2020 and $3.8 million during the first six months of 2019.

Asset impairments and other charges (credits), net, for the first six months of 2020 were comprised of the following:

•$(6.0) million insurance recovery related to a voluntary product recall in our fresh and value-added products segment;

•$2.0 million reserve relating to a potential liability arising from our third-party shipping logistics operation, related to the banana and fresh and value-added products segments;

•$2.1 million in asset impairment charges of production facilities in North America and Europe related to our fresh and value-added products segment;

•$0.7 million in severance expense for the reorganization of the sales and marketing function in North America related to the fresh and value-added products and banana segments;

•$0.7 million in asset impairment charges relating to low-yielding banana plants in the Philippines.

Asset impairments and other charges (credits), net, for the first six months of 2019 were comprised of the following:

•$0.5 million in contract termination charges related to our decision to abandon certain low-yield areas in our banana operations in the Philippines;

•$0.4 million in asset impairment related to our Chilean non-tropical fruit operation; and

•$2.9 million in asset impairment charges related to our equity investment in Purple Carrot.

Operating Income. Operating income decreased by $47.6 million from $98.5 million in the first six months of 2019 to $50.9 million for the first six months of 2020. The decrease in operating income was due to lower gross profit and lower gain on disposal of property, plant and equipment, partially offset by lower selling, general and administrative expenses and lower asset impairments and other charges (credits), net.

Interest Expense.Interest expense decreased by $2.8 million from $13.8 million for the first six months of 2019 to $11.0 million for the first six months of 2020 principally due to lower interest rates and lower average debt balances.

Other (Expense) Income, Net. Other (expense) income, net, was expense of $(4.4) million for the first six months of 2020 as compared with other income of $8.4 million for the first six months of 2019. The change in other (expense) income, net, of $12.8 million was principally attributable to a net gain of $16.7 million as a result of the settlement of a business transaction litigation that was recorded during the first six months of 2019. Partially offsetting the increase in other expense were higher foreign exchange losses during the first six months of 2019 as compared with the first six months of 2020.

Provision for Income Taxes. Provision for income taxes was $4.5 million for the first six months of 2020 as compared with $17.1 million for the first six months of 2019. The decrease in the provision for income taxes of $12.6 million is primarily due to lower earnings in certain taxable jurisdictions. The tax provision for the six months ended June 26, 2020 also includes a $1.7 million benefit relating to the NOL carryback provision of the Coronavirus Aid, Relief and Economic Security Act (CARES) Act, which was enacted on March 27, 2020.


	Six months ended
	June 26, 2020	June 28, 2019
Summary cash flow information:
Net cash provided by operating activities	110.5	65.0
Net cash used in investing activities	(33.2)	(41.5)
Net cash used in financing activities	(79.4)	(36.3)
Effect of exchange rate changes on cash	0.3	7.7
Net decrease in cash and cash equivalents	(1.8)	(5.1)
Cash and cash equivalents, beginning	33.3	21.3
Cash and cash equivalents, ending	31.5	16.2

Operating Activities

Net cash provided by operating activities was $110.5 million for the first six months of 2020 compared with $65.0 million for the first six months of 2019, ~~compared with $162.3 million~~an increase of $45.5 million. The increase was primarily attributable to lower payments of accounts payable and accrued expenses due to timing and lower levels of inventory and accounts receivable. Partially offsetting this increase was lower net income for the first six months of ~~2018,~~2020 compared with the first six months of 2019.

At June 26, 2020, we had working capital of $452.1 million compared with $488.6 million at December 27, 2019, a decrease of $97.3 million. The decrease was primarily attributable to lower balances of accounts payable and accrued expenses principally as a result of higher payments to vegetable growers due to timing combined with other changes in operating assets and liabilities, partially offset by higher net income.

~~At June 28, 2019, we had a negative working capital of $105.7 million compared with working capital of $552.8 million at December 28, 2018, a decrease of $658.5~~$36.5 million. The decrease in working capital was principally ~~due~~attributable to the reclassification of our credit facility of $639.6 million from long-term debt to current maturities of debt due to the facility maturity date of April 15, 2020. Also contributing to the decrease in working capital were lower levels of finished goods and growing crop inventories, primarily due to seasonal ~~variations and~~variations. Partially offsetting this decrease was lower levels of ~~assets held for sale and prepaid expenses and other current assets. Partially offsetting these decreases were lower~~ accounts payable and accrued expenses, ~~and higher trade accounts receivables. The decrease in accounts payable and accrued expenses was~~ primarily ~~due to~~the result of higher payments to vegetable growers in California during the first six months of 2020.

Investing Activities

Net cash used in investing activities for the first six months of 2020 was $33.2 million compared with $41.5 million for the first six months of 2019. ~~The increase~~Net cash used in ~~trade account receivable is~~investing activities for the first six months of 2020 primarily ~~due~~consisted of capital expenditures of $35.9 million, partially offset by proceeds from sales of property, plant and equipment of $2.2 million. Capital expenditures for the first six months of 2020 primarily consisted of expansion and improvements to ~~seasonality.~~fresh-cut facilities in North America, Europe and Asia; expansion and improvements to our banana and pineapple operations in Central America; and progress payments for the construction of six new refrigerated container ships, one ship of which was received subsequent to the quarter ended June 26, 2020. These capital expenditures for the first six months of 2020 relate to both our banana and fresh and value-added products business segments. Proceeds from the sale of property, plant and equipment for the first six months of 2020 consisted primarily of the sale of surplus land in Chile.

Net cash used in investing activities for the first six months of 2019 ~~was $41.5 million compared with $451.1 million for the first six months of 2018. Net cash used in investing activities for the first six months of 2019~~primarily consisted of capital expenditures of $70.2 million, partially offset by proceeds from sales of property, plant and equipment of $28.0 ~~million and proceeds from the sale of an investment of $0.7~~ million. Capital expenditures for the first six months of 2019 consisted primarily of expenditures for the construction of a new production facility in California related to our fresh-cut and prepared vegetables categories, a new avocado packing and sorting facility in Mexico, a new fresh-cut fruit facility in Japan and progress payments for the construction of the six new refrigerated container ships. Also included in capital

expenditures during the first six months of 2019 were expansion and improvements to our banana and pineapple operations in Central America and the Philippines, and expansion and improvements to production and distribution facilities in North America, Kenya and the Middle East related to our fresh and value-added products business segment. Proceeds from the sale of property, plant and equipment for the first six months of 2019 consisted primarily of the sale of a refrigerated vessel and surplus land in Florida.

Financing Activities

Net cash used in ~~investing~~financing activities for the first six months of ~~2018 consisted of capital expenditures of $81.8~~2020 was $79.4 million ~~purchase of a business of $373.3~~compared with $36.3 million ~~and investments in unconsolidated companies of $4.2 million, partially offset by proceeds from sale of property, plant and equipment of $8.2 million. Capital expenditures~~ for the first six months of 2018 consisted primarily of $29.1 million of initial payments for the building on five of six new refrigerated container ships; expansion and improvements of our distribution and fresh-cut fruit and vegetable facilities2019. Net cash used in ~~North America related to the other fresh produce and banana segments; expansion and improvements to our production operations in Costa Rica, Chile and Jordan related to the other fresh produce~~

segment; expansion and improvements to our banana operations in the Philippines and Central America; and expansion and improvements to our production facilities in the Middle East and Europe related to the prepared food and other fresh produce segments. Investments in unconsolidated companies is comprised of a 10% equity interest in Three Limes, Inc., d/b/a The Purple Carrot, a privately-held company providing plant-based meal kits in North America ("Purple Carrot"). Purchase of a business relates to the purchase of Mann Packing Company, Inc and subsidiaries ("Mann Packing") and a small herb farm in Jordan. Proceeds from sale of property, plant and equipmentfinancing activities for the first six months of ~~2018~~2020 primarily consisted ~~primarily~~ of ~~the sale~~net repayments on debt of ~~surplus land in the United Kingdom~~$49.8 million, repurchase and ~~other surplus equipment.~~retirement of ordinary shares of $20.8 million, and dividends paid of $7.2 million.

On February 26, 2018, we acquired Mann Packing by purchasing all of its outstanding capital stock for an aggregate consideration of $357.2 million, net of cash received. This acquisition was funded by a three-day promissory note of $229.7 million, entered into at the seller's request, and cash of $127.5 million. The three-day promissory note was settled with cash on hand and borrowings under our Credit Facility. Mann Packing is an award-winning innovator and leading grower, processor and supplier of a broad variety of fresh and value-added vegetable products in North America. Mann Packing's strength in the vegetable category, one of the fastest growing fresh food segments, is allowing us to diversify our business, leverage our distribution network, infrastructure and increase our market reach. In addition, this transaction is expected to provide us with the following synergies:

~~Marketing and overhead synergies resulting from opportunities to pursue co-branding and better pricing potential utilizing the DEL MONTE~~^® ~~brand.~~

Net cash used in financing activities for the first six months of 2019 ~~was $36.3 million compared with net cash provided by $303.6 million for the first six months of 2018. Net cash used in financing activities for the first six months of 2019~~primarily consisted of net ~~payments~~repayments on debt of $24.7 ~~million, distributions to noncontrolling interest, net, of $1.8 million, share-based awards settled in cash for taxes of $0.9~~ million and repurchase and retirement of ordinary shares of $9.2 ~~million, partially offset by proceeds from stock options exercised of $0.3~~ million.

~~Net cash provided by financing activities for the first six months of 2018 consisted of net borrowings on debt of $329.4 million~~Debt Instruments and proceeds from stock options exercised of $0.8 million, partially offset by distributions to noncontrolling interest, net, of $1.8 million, stock-based awards settled in cash for taxes of $0.4 million, dividends paid of $14.6 million and repurchase and retirement of ordinary shares of $9.8 million.Debt Service Requirements

On ~~April 16, 2015,~~October 1, 2019, we and certain of our subsidiaries entered into a ~~five-year, $800.0 million syndicated senior unsecured revolving credit facility maturing on April 15, 2020~~Second Amended and Restated Credit Agreement (the ~~"Credit Facility"~~“Second A&R Credit Agreement”) with the financial institutions and other lenders named therein, including Bank of America, N.A. as administrative agent and ~~Merrill Lynch, Pierce, Fenner & Smith~~BofA Securities, Inc. as sole lead arranger and sole ~~book manager. Borrowings under the~~bookrunner. The Second A&R Credit ~~Facility bear interest at~~Agreement provides for a spread over the London Interbank Offer Rate ("LIBOR") that varies with our leverage ratio. The margin for LIBOR advances under the Credit Facility currently is 1.50%. The Credit Facility also includes a swing line facility, a letter offive-year, $1.1 billion syndicated senior unsecured revolving credit facility ~~and a feature~~(the “Revolving Credit Facility”) maturing on October 1, 2024, which ~~allows, with bank approval, an increase in availability of up~~replaced our prior revolving credit facility, which had been scheduled to an additional $300.0 million. On February 27, 2018, we exercised this option and increased the revolving borrowing capacity of the Credit Facility from $800.0 million to $1.1 billion. On September 27, 2018, we amended certain covenant ratios of our Credit Facility. All other terms of the Credit Facility substantially remained the same. On June 28, 2018, we entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to our variable rate LIBOR-based borrowings under our Credit Facility.

Certain covenants of our Credit Facility restrict the payment of dividends unless certain ratios are met. These ratios were not met as of the end of our 2018 fiscal year. Accordingly, our Board of Directors suspended the quarterly cash dividend.

~~Our Credit Facility matures~~expire on April 15, 2020 (the “Prior Credit Facility"). Certain of our direct and ~~represents our principal method of supplementing operating cash flows for our working capital and other liquidity requirements. We plan to refinance our~~indirect subsidiaries have guaranteed the obligations under the Second A&R Credit ~~Facility during the third and fourth quarter of 2019. Our expectation is based on our history of earnings and positive cash flows along with our long-standing relationships with~~

our current bank group and our credit rating. There are no assurances that volatility and uncertainty in the global capital markets will not impair our ability to access these markets in terms that are favorable to us.

Agreement. We intend to use funds borrowed under the Second A&R Credit ~~Facility~~Agreement from time to time for general corporate purposes, ~~which may include the repayment or refinancing of our existing indebtedness,~~ working capital, ~~needs,~~ capital expenditures ~~funding~~and other investment opportunities.

~~We have~~the Second A&R Credit Agreement, amounts borrowed under the Revolving Credit Facility accrue interest, at our election, at either (i) the Eurocurrency Rate (as defined in the Second A&R Credit Agreement) plus a ~~renewable 364-day, $25.0 million commercial and stand-by letter of credit facility with Rabobank Nederland.~~

margin that ranges from 1.0% to 1.5% or (ii) the Base Rate (as defined in the Second A&R Credit Agreement) plus a margin that ranges from 0% to 0.5%, in each case based on our Consolidated Leverage Ratio (as defined in the Second A&R Credit Agreement). The Second A&R Credit Agreement revised the interest rate grid to provide for five pricing levels for interest rate margins, as compared to three pricing levels in the Prior Credit Facility. At June ~~28, 2019,~~26, 2020, we had ~~$639.6~~borrowings of $534.9 million outstanding under the Revolving Credit Facility bearing interest at a per annum rate of ~~3.95%~~2.10%. In addition, we pay an unused commitment fee.

The Second A&R Credit ~~Facility is unsecured as long as we maintain a certain leverage ratio and also~~Agreement requires us to comply with certain financial and other covenants. Specifically, the Second A&R Credit Agreement requires us to maintain a 1) Consolidated Leverage Ratio of not more than 3.50 to 1.00 at any time during any period of four consecutive fiscal quarters, subject to certain exceptions and 2) a minimum Consolidated Interest Coverage Ratio of not less than 2.25 to 1.00 as of the end of any fiscal quarter. Additionally, consistent with the prior credit agreement, the Second A&R Credit Agreement requires us to comply with certain other covenants, including limitations on capital expenditures, stock repurchases, the amount of dividends that can be paid in the future, the amount and types of liens and indebtedness, material asset sales, and mergers. However, certain of these covenants were revised under the Second A&R Credit Agreement, including 1) the restricted payments covenant which was revised to permit us to declare or pay cash dividends in any fiscal year up to an amount that does not exceed the greater of (i) an amount equal to the greater of (A) 50% of the Consolidated Net Income (as defined in the Second A&R Credit Agreement) for the immediately preceding fiscal year or (B) $25 million or (ii) the greatest amount which would not cause the Consolidated Leverage Ratio (determined on a pro forma basis) to exceed 3.25 to 1.00 and (2) the restricted payments covenant which was revised to provide an annual allowance for stock repurchases to be an amount not exceeding the greater of (i) $150 million in the aggregate or (ii) the amount that, after giving pro forma effect thereto and any related borrowings, will not cause the Consolidated Leverage Ratio to exceed 3.25 to

1.00. As of June ~~28, 2019,~~26, 2020, we were in compliance with all of the financial and other covenants contained in the Second A&R Credit ~~Facility.~~Agreement.

We have a renewable 364-day, $25.0 million commercial and stand-by letter of credit facility with Rabobank Nederland.

At June ~~28, 2019,~~26, 2020, we had ~~$490.9~~$588.6 million ~~available~~of borrowing availability under committed working capital facilities, primarily under the Revolving Credit Facility. At June ~~28, 2019,~~26, 2020, we ~~had~~ applied ~~$8.4~~$11.6 million to letters of credit under the Rabobank Nederland and Bank of America ~~letter of~~revolving credit facilities, in respect of certain contingent obligations and other governmental agencies and purchases of equipment and raw material guarantees and other trade related letters of credit. We also had ~~$17.5~~$18.9 million in other letters of credit and bank guarantees not included in the Rabobank letter of credit or Bank of America revolving credit facilities.

~~As of June 28, 2019,~~While we ~~had $640.4 million of debt and finance leases, including the current portion, consisting of $639.6 million of current maturities of debt and $0.8 million of finance leases.~~

~~Based~~believe that our cash on ~~our operating plan, combined with our~~hand, borrowing ~~limit~~capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months, we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. During the quarter ended June 26, 2020, we began taking several steps to conserve our liquidity position including reducing our interim cash dividend from ten cents ($0.10) per share in the first quarter of 2020 to five cents ($0.05) per share in the second and third quarters of 2020 and delaying certain of our planned capital expenditures to the second half of 2020 and 2021. Our liquidity assumptions, the adequacy of our available funding sources, and our ability to ~~renew the~~meet our Credit Facility ~~we believe we will have sufficient resources to meet our cash obligations for the foreseeable future.~~covenants are dependent on many additional factors, including those set forth in Part II. Item 1A, “Risk Factors” of this quarterly report Form 10-Q.

Contractual Obligations

As of June ~~28,~~26, 2020, there were no other material changes in commitments under contractual obligations, compared to the contractual obligations disclosed in our Annual Reporton Form 10-K for the year ended December 27, 2019.

We are exposed to fluctuations in currency exchange rates against the U.S. dollar on our results of operations and financial condition and we mitigate that exposure by entering into foreign currency forward contracts. Certain of our subsidiaries periodically enter into foreign currency forward contracts in order to hedge portions of forecasted sales or cost of sales denominated in foreign currencies with forward contracts and options, which generally expire within one year. The fair value of our foreign currency cash flow hedges was a net liability position of $0.8 million as of June 26, 2020 compared to a net asset position of $1.0 million as of December 27, 2019 due to relative strengthening or weakening of exchange rates when compared to contracted rates.

We are exposed to fluctuations in variable interest rates on our results of operations and financial condition, and we ~~had cash and cash equivalents of $16.2 million.~~

mitigate that exposure by entering into interest rate swaps, from time to time. During ~~2017 and~~ 2018, we entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to a definitive agreement for the building of six new refrigerated container ships to be delivered commencing in 2020. We made payments of $36.4 million in 2018 and expect to make payments of approximately $12.4 million in 2019, $105.8 million in 2020 and $20.7 million in 2021 for these six ships. The shipbuilding program is expected to lead to the replacementportion of our ~~entire U.S. east coast fleet of vessels. We expect to fund these capital expenditures~~variable rate LIBOR-based borrowings through ~~operating cash flows and bank borrowings.~~

~~During the six months ended June 28, 2019, we paid approximately $0.9 million in contract terminations related to Philippines restructuring, and we expect to make the remaining payment of~~ ~~$0.1 million~~ ~~during 2019. We do not expect additional charges related to the exit activities mentioned above that would significantly impact our results of operations or financial condition.~~

In connection with a current examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $148.9 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit. We will continue to vigorously contest the adjustments and expect to exhaust all administrative and judicial remedies necessary to resolve the matters, which could be a lengthy process. We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. Accordingly, we have not accrued any additional amounts based upon the proposed adjustments. There can be no assurance that these matters will be resolved in our favor, and an adverse outcome of either matter, or any future tax examinations involving similar assertions, could have a material effect on our financial condition, results of operations and cash flows.

2028. The fair value of our interest rate ~~swaps and foreign currency~~swap cash flow hedges ~~changed from~~was a net liability position of ~~$6.8~~$56.7 million as of June 26, 2020 compared to $30.3 million as of December ~~28, 2018,~~27, 2019. The increase in our liability position is due to the relative weakening of variable interest rates when compared to our contracted rates.

We are exposed to fluctuations in bunker fuel prices on our results of operations and financial condition, and we mitigate that exposure by entering into bunker fuel swap agreements which permit us to lock in bunker fuel prices. During the six months ended June 26, 2020, one of our subsidiaries entered into bunker fuel swap agreements in order to hedge portions of our fuel costs incurred by our owned and chartered vessels throughout 2020 and 2021. The fair value of our bunker fuel swap cash flow hedges was a net liability position of ~~$26.3~~$3.1 million as of June ~~28, 2019~~26, 2020. During the quarter ended June 26, 2020, we dedesignated certain portions of our bunker fuel cash flow hedges due to decreases in our forecasted fuel consumption for certain fuel types which was partially driven by the delay of the receipt of two of our six new refrigerated container vessels due to the ~~fact that future LIBOR interest rates at the time~~COVID-19 pandemic. The fair value of the ~~hedge~~dedesignated bunker fuel swap contracts was ~~entered into were expected to be higher than the current forward LIBOR interest rates~~a net liability position of $0.7 million as of June ~~28, 2019.~~26, 2020.

We enter into derivative instruments with counterparties that are highly rated and do not expect a deterioration of our counterparty’s credit ratings; however, the deterioration of our counterparty’s credit ratings would affect the Consolidated Financial Statements in the recognition of the fair value of the hedges that would be transferred to earnings as the contracts settle. We expect that a net ~~gain~~loss of ~~$2.6~~$2.0 million will be transferred to earnings during the next 12 months and the remaining net loss of ~~$28.9~~$57.8 million over a period of 108 years, along with the earnings effect of the related forecasted transactions.

The following tables present for each of the periods indicated (i) net sales by geographic region and (ii) net sales and gross profit by product category, and in each case, the percentage of the total represented thereby (U.S. dollars in millions, except percent data):

Quarter ended Six months ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
North America $ 816.8
66 % $ 814.8
64 % $ 1,565.6
65 % $ 1,478.3
62 %
Europe 171.2
14 % 175.8
14 % 342.5
14 % 369.9
16 %
Asia 131.1
10 % 135.8
11 % 251.8
10 % 248.4
10 %
Middle East 109.3
9 % 126.0
10 % 207.1
9 % 241.9
10 %
Other 11.0
1 % 20.0
1 % 26.6
2 % 40.0
2 %
Totals $ 1,239.4
100 % $ 1,272.4
100 % $ 2,393.6
100 % $ 2,378.5

100 %

Quarter ended
June 28, 2019 June 29, 2018
Net Sales Gross Profit Net Sales Gross Profit
Fresh and value-added products $ 764.3
62 % $ 58.1
60 % $ 780.7
61 % $ 51.3
66 %
Banana 440.0
35 % 35.0
37 % 457.8
36 % 23.8
30 %
Other products and services 35.1
3 % 3.2
3 % 33.9
3 % 3.2
4 %
Totals $ 1,239.4
100 % $ 96.3
100 % $ 1,272.4
100 % $ 78.3
100 %

Six months ended
June 28, 2019 June 29, 2018
Net Sales Gross Profit Net Sales Gross Profit
Fresh and value-added products $ 1,454.3
61 % $ 119.5
63 % $ 1,397.3
59 % $ 102.6
56 %
Banana 871.5
36 % 68.0
36 % 910.9
38 % 75.9
41 %
Other products and services 67.8
3 % 2.1
1 % 70.3
3 % 6.3
3 %
Totals $ 2,393.6
100 % $ 189.6
100 % $ 2,378.5
100 % $ 184.8
100 %

~~Second Quarter 2019 Compared with Second Quarter of 2018~~

~~Net Sales.~~ Net sales for the second quarter of 2019 were $1,239.4 million compared with $1,272.4 million for the second quarter of 2018. The decrease in net sales of $33.0 million was principally attributable to lower net sales in our fresh and value-added and banana segments.

~~Cost of Products Sold.~~ Cost of products sold was $1,143.1 million for the second quarter of 2019 compared with $1,194.1 million for the second quarter of 2018, a decrease of $51.0 million. The decrease was primarily attributable to lower sales volumes in our banana and fresh and value-added business segments. Partially offsetting this decrease were higher ocean freight cost, principally the result of higher fuel costs combined with higher fruit cost, primarily due to lower yields in our Central America growing operations and higher avocado procurement costs.

~~Gross Profit.~~ Gross profit was $96.3 million for the second quarter of 2019 compared with $78.3 million for the second quarter of 2018, an increase of $18.0 million. This increase was attributable to higher gross profit in our banana and fresh and value-added business segments.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses decreased $5.9 million from $49.9 million in the second quarter of 2018 to $44.0 million for the second quarter of 2019. The decrease was principally due to lower selling, marketing and administrative expenses in the Middle East and North America, partially offset by higher legal and executive compensation expense.

~~Gain on Disposal of Property, Plant and Equipment, Net.~~ The gain on disposal of property, plant and equipment, net, of $5.7 million during the second quarter of 2019 related primarily to the sale of surplus land in Florida. The gain on disposal of property, plant and equipment, net, of $5.7 million during the second quarter of 2018 was primarily related to the sale of surplus land in the United Kingdom, partially offset by the disposal of non-tropical plants in Chile due to varietal changes.

~~Asset Impairment and Other Charges, Net.~~ ~~Asset impairment and other charges, net, was $0.8 million during the second quarter of 2019, as compared with $20.3 million during the second quarter of 2018.~~

~~Asset impairment and other charges, net, for the second quarter of 2019 were:~~

~~Asset impairment and other charges, net, for the second quarter of 2018 were:~~

~~Operating Income.~~ Operating income for the second quarter of 2019 increased by $43.4 million from $13.8 million in the second quarter of 2018 to $57.2 million for the second quarter of 2019. This increase was due to higher gross profit, lower selling, general and administrative expenses and lower asset impairment and other charges, net.

~~Interest Expense.~~ Interest expense was $6.9 million for the second quarter of 2019 as compared with $6.1 million for the second quarter of 2018. The increase was due to higher borrowing rates, partially offset by lower average loan balances.

~~Other (Expense) Income, Net.~~ Other (expense) income, net, was expense of $2.9 million for the second quarter of 2019 as compared with expense of $7.3 million for the second quarter of 2018. The change in other expense, net, of $4.4 million was principally attributable to lower foreign exchange losses during the second quarter of 2019 as compared with the second quarter of 2018.

~~Provision for Income Taxes~~. Provision for income taxes was $8.5 million for the second quarter of 2019 compared to $6.4 million for the second quarter of 2018. The increase in the provision for income taxes of $2.1 million is primarily due to higher earnings in certain higher tax jurisdictions.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses decreased $2.0 million from $98.5 million for the first six months of 2018 to $96.5 million for the first six months of 2019. The decrease was due to lower selling, marketing and administrative expenses in the Middle East, Europe and Asia principally due to cost saving initiatives, partially offset by higher marketing and administrative expenses in North America primarily as a result of the Mann Packing acquisition.

~~Asset impairments and other charges, net, for the first six months of 2019 were:~~

~~Asset impairments and other charges (credits), net, for the first six months of 2018 were:~~

~~Other (expense) income, Net.~~ Other (expense) income, net, was income of $8.4 million for the first six months of 2019 as compared with other expense of $10.7 million for the first six months of 2018. The change in other (expense) income, net, of $19.1 million was principally attributable to a net gain of $16.7 million as a result of the settlement of a business transaction litigation combined with lower foreign exchange losses during the first six months of 2019 as compared with the first six months of 2018.

~~Provision for Income Taxes~~. Provision for income taxes was $17.1 million for the first six months of 2019 as compared with $12.7 million for the first six months of 2018. The increase in the provision for income taxes of $4.4 million is primarily due to higher earnings.



				Page
PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

		Consolidated Balance Sheets (unaudited) as of June ~~28, 2019~~26 , 2020 and December ~~28, 2018.~~27, 2019.		1

		Consolidated Statements of Operations (unaudited) for the quarters ended June 26 , 2020 and ~~six months ended~~ June 28 ~~2019 and June 29, 2018.~~, 2019.		2

		Consolidated Statements of Comprehensive Income (unaudited) for the quarters ended June 26 , 2020 and ~~six months ended~~ June 28 ~~2019 and June 29, 2018.~~, 2019.		3

		Consolidated Statements of Cash Flows (unaudited) for the ~~six months~~quarters ended June 26 , 2020 and June 28 ~~2019 and June 29, 2018.~~, 2019.		4

		Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest (unaudited) for the quarters ended June 26 , 2020 and ~~six months ended~~ June 28 ~~2019 and June 29, 2018.~~, 2019.		5

		Notes to Consolidated Financial Statements (unaudited)		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations					3531

Item 3. Quantitative and Qualitative Disclosures About Market Risk					44

Item 4. Controls and Procedures					45

PART II. OTHER INFORMATION

~~Item 1. Legal Proceedings~~				46

Item 1A. Risk Factors			46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds					4648

Item ~~4. Mine Safety Disclosures~~6. Exhibits					4749

~~Item 6. Exhibits~~Signatures				47

~~Signatures~~	4850



	June 28, 2019			December 28, 2018
Assets
Current assets:
Cash and cash equivalents	$	16.2		$	21.3
Trade accounts receivable, net of allowance of $14.2 and $14.6, respectively	417.4			378.3
Other accounts receivable, net of allowance of $6.8 and $7.2, respectively	78.8			95.2
Inventories, net	530.7			565.3
Assets held for sale	26.4			45.4
Prepaid expenses and other current assets	25.2			33.3
Total current assets	1,094.7			1,138.8

Investments in and advances to unconsolidated companies	2.5			6.1
Property, plant and equipment, net	1,416.1			1,392.2
Operating lease right-of-use assets	182.1			—
Goodwill	423.7			423.4
Intangible assets, net	162.8			166.9
Deferred income taxes	93.6			68.1
Other noncurrent assets	43.1			59.7
Total assets	$	3,418.6		$	3,255.2
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses	$	497.4		$	576.6
Current maturities of debt and finance leases	640.0			0.5
Current maturities of operating leases	49.9			—
Income taxes and other taxes payable	13.1			8.9
Total current liabilities	1,200.4			586.0

Long-term debt and finance leases	0.4			661.9
Retirement benefits	93.0			91.3
Deferred income taxes	126.6			93.0
Operating leases, less current maturities	104.6			—
Other noncurrent liabilities	71.2			53.4
Total liabilities	1,596.2			1,485.6
Commitments and contingencies (See note 11)
Redeemable noncontrolling interest	53.8			51.8
Shareholders' equity:
Preferred shares, $0.01 par value; 50,000,000 shares authorized; none issued or outstanding	—			—
Ordinary shares, $0.01 par value; 200,000,000 shares authorized; 48,301,093 and 48,442,296 issued and outstanding, respectively	0.5			0.5
Paid-in capital	530.7			527.1
Retained earnings	1,270.8			1,206.0
Accumulated other comprehensive loss	(58.6		)	(41.6		)
Total Fresh Del Monte Produce Inc. shareholders' equity	1,743.4			1,692.0
Noncontrolling interests	25.2			25.8
Total shareholders' equity	1,768.6			1,717.8
Total liabilities, redeemable noncontrolling interest and shareholders' equity	$	3,418.6		$	3,255.2



	Exit activity and other reserve balance at December 28, 2018		Impact to earnings		Cash paid			Foreign exchange impact		Exit activity and other reserve balance at June 28, 2019
Contract termination and other exit activity charges	$	0.5	0.5		(0.9		)	—		$	0.1
	$	0.5	$	0.5	$	(0.9	)	$	—	$	0.1



	Period from February 27, 2018 to June 29, 2018
Net sales	$	197.5
Net income attributable to Fresh Del Monte Produce, Inc.	$	3.7



	Six months ended
	June 29, 2018
Net sales	$	2,457.7
Net income attributable to Fresh Del Monte Produce, Inc.	$	37.6	⁽¹⁾



	June 28, 2019						December 28, 2018
	Short-term			Long-term			Short-term			Long-term
Gross advances to growers and suppliers	$	37.9		$	6.1		$	51.9		$	3.7
Allowance for advances to growers and suppliers (past due)	(1.8		)	(1.0		)	(2.1		)	(0.7		)
Net advances to growers and suppliers	$	36.1		$	5.1		$	49.8		$	3.0



Classification on the Balance Sheet		June 28, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	182.1
Finance lease assets	Property, plant and equipment, net	1.2
Total lease assets		$	183.3

Liabilities
Current
Operating	Current maturities of operating leases	$	49.9
Finance	Current maturities of debt and finance leases	0.4
Noncurrent
Operating	Operating leases, less current maturities	104.6
Finance	Long-term debt and finance leases, less current maturities	0.4
Total lease liabilities		$	155.3

Weighted-average remaining lease term:
Operating leases		7.4 years
Finance leases		1.9 years
Weighted-average discount rate:
Operating leases ⁽¹⁾		8.92		%
Finance leases		4.44		%



	June 28, 2019
	Quarter ended		Six months ended
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	21.6	$	42.1
Financing cash flows for finance leases	0.2		$	0.3



	Operating Leases		Finance Leases
Remainder of 2019	$	44.1	$	0.2
2020	37.7		0.3
2021	25.3		0.3
2022	17.5		—
2023	15.3		—
Thereafter	78.3		—
Total lease payments	218.2		0.8
Less: imputed interest	63.7		—
Total lease liabilities	$	154.5	$	0.8



Derivatives in effective cash flow hedging relationships	Amount of gain (loss) recognized in other comprehensive income on derivatives (effective portion)						Location of (loss) income reclassified from AOCI into income (effective portion)	Amount of (loss) income reclassified from AOCI into income (effective portion)
	Quarter ended							Quarter ended
	June 28, 2019			June 29, 2018				June 28, 2019			June 29, 2018
Foreign exchange contracts	$	(2.2	)	$	6.0		Net sales	$	1.7		$	0.9
Foreign exchange contracts	0.1			0.7			Cost of products sold	0.5			0.1
Interest rate swaps	(12.1		)	(2.0		)	Interest expense	(0.4		)	(0.1		)
Total	$	(14.2	)	$	4.7			$	1.8		$	0.9

	Six months ended							Six months ended
	June 28, 2019			June 29, 2018				June 28, 2019			June 29, 2018
Foreign exchange contracts	$	1.0		$	4.2		Net sales	$	2.4		$	0.2
Foreign exchange contracts	0.8			0.7			Cost of products sold	0.6			0.3
Interest rate swaps	(21.3		)	(2.0		)	Interest expense	(0.7		)	(0.1		)
Total	$	(19.5	)	$	2.9			$	2.3		$	0.4



	Fair value measurements
	Foreign currency forward contracts, net asset (liability)				Interest rate contracts, net (liability) asset
	June 28, 2019		December 28, 2018		June 28, 2019			December 28, 2018
Quoted prices in active markets for identical assets (Level 1)	$	—	$	—	$	—		$	—
Significant observable inputs (Level 2)	2.6		0.8		(28.9		)	(7.6		)
Significant unobservable inputs (Level 3)	—		—		—			—



	Fair value measurements for the six months ended June 28, 2019
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity Investment	$	1.4	$	—	$	—	$	1.4
	$	1.4	$	—	$	—	$	1.4



	Changes in accumulated other comprehensive income (loss) by component ⁽¹⁾
	Six months ended June 28, 2019
	Changes in fair Value of Effective cash Flow hedges				Foreign Currency Translation Adjustment				Retirement Benefit Adjustment			Total

Balance at December 28, 2018	$	(5.8	)		$	(14.9	)		$	(20.9	)	$	(41.6	)
Other comprehensive (loss) before
reclassifications	(14.5		)	⁽³⁾	(0.3		)	⁽²⁾	(0.2		)	(15.0		)
Amounts reclassified from accumulated
other comprehensive (loss) income	(2.3		)		—				0.3			(2.0		)
Net current period other comprehensive
(loss)	(16.8		)		(0.3		)		0.1			(17.0		)
Balance at June 28, 2019	$	(22.6	)		$	(15.2	)		$	(20.8	)	$	(58.6	)

	Six months ended June 29, 2018
Balance at December 29, 2017	$	(1.4	)		$	(6.7	)		$	(22.5	)	$	(30.6	)
Other comprehensive income (loss)
before reclassifications	3.3				(4.8		)	⁽²⁾	0.1			(1.4		)
Amounts reclassified from accumulated
other comprehensive (loss) income	(0.4		)		—				0.4			—
Net current period other comprehensive
income (loss)	2.9				(4.8		)		0.5			(1.4		)
Balance at June 29, 2018	$	1.5			$	(11.5	)		$	(22.0	)	$	(32.0	)


◦	~~Net sales of non-tropical fruit decreased principally due our rationalization of sales volumes resulting in planned reduction of certain low margin products.~~


◦	Net sales of melons decreased due to lower industry volumes resulting from unfavorable growing condition in Central America which resulted in lower export quality fruit. Partially offsetting this decrease were higher per unit sales prices.


◦	~~Net sales of fresh-cut vegetables decreased primarily due to lower customer demand in North America, partially offset by higher per unit sales price.~~


◦	Net sales of tomatoes decreased due lower sales volumes partially offset by higher per unit sales prices. The decrease in sales volumes is attributable to the discontinuance of our U.S. growing operations during late summer of 2018.


◦	Net sales of avocados increased principally due to higher per unit sales prices in North America primarily as a result of lower industry supplies and continued strong customer demand. Partially offsetting this increase were lower sales volumes.


◦	~~Net sales of vegetables increased due to higher sales volumes, partially offset by lower per unit sales price. During 2018 lettuce sales were negatively affected by industry recalls.~~


◦	North America banana net sales decreased due to lower sales volumes principally as a result of lower supplies from our Central America operations that resulted from adverse weather conditions, partially offset by a slight increase in per unit sales price.


◦	~~Asia banana net sales decreased primarily as a result of lower industry volumes, partially offset by a slight increase in per unit sales prices.~~


◦	Middle East banana net sales decreased due to lower sales volumes as a result of reduced supplies from the Philippines. Also contributing to the decrease in net sales were lower per unit sales prices primarily as a result of unfavorable market conditions.


◦	~~Europe banana net sales increased due to higher per unit sales prices primarily as a result of lower industry supplies.~~


◦	~~Gross profit on melons increased due to higher per unit sales prices in North America primarily as a result of low industry volumes, partially offset by higher ocean freight and fruit costs.~~


◦	Gross profit on non-tropical fruit increased principally due to lower per unit cost of grapes, stonefruit and berries and higher per unit selling prices of stonefruit. The restructuring of our Chilean business in the prior year has significantly improved our profitability in this product category.


◦	Gross profit on fresh-cut fruit increased primarily due to lower costs and higher sales volume in North America. Partially offsetting this increase were lower sales volumes and higher costs in the Middle East and lower per unit sales prices in Europe and Asia.


◦	~~Gross profit on fresh-cut vegetables decreased due to lower sales volumes and higher costs in North America.~~


◦	~~Gross profit on avocados decreased due to significantly higher fruit procurement costs partially offset by higher per unit sales price.~~


◦	~~Net sales of fresh-cut vegetables increased primarily due to the sales of Mann Packing products in North America which was acquired at the end of February 2018.~~


◦	~~Net sales of avocados increased due to higher sales volumes and per unit sales prices in North America principally as a result of tight industry supplies and higher customer demand.~~


◦	~~Net sales of vegetables increased primarily due to the sales of Mann Packing products in North America which was acquired at the end of February 2018.~~