Mission Produce, Inc.AVO
Mission Produce, Inc. Income Taxes Disclosure
Income Taxes
The components of the provision for income taxes were as follows:
| Years Ended October 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 4.5 | $ | 12.1 | $ | 3.2 | |||||||||||
| State | 1.6 | 2.2 | 0.6 | ||||||||||||||
| Foreign | 13.4 | 12.3 | 4.8 | ||||||||||||||
| Total current | 19.5 | 26.6 | 8.6 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 0.2 | (1.7) | (2.9) | ||||||||||||||
| State | 0.1 | (0.3) | (0.1) | ||||||||||||||
| Foreign | 1.6 | (6.0) | (3.4) | ||||||||||||||
| Total deferred | 1.9 | (8.0) | (6.4) | ||||||||||||||
| Provision for income taxes | $ | 21.4 | $ | 18.6 | $ | 2.2 | |||||||||||
U.S. and foreign components of income (loss) before income taxes were as follows:
| Years Ended October 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. | $ | 21.2 | $ | 48.7 | $ | 8.2 | |||||||||||
| Foreign | 40.7 | 11.7 | (9.1) | ||||||||||||||
Income (loss) before income taxes | $ | 61.9 | $ | 60.4 | $ | (0.9) | |||||||||||
A reconciliation of the provision for income taxes computed at the federal statutory tax rate to income taxes as reflected in the financial statements is as follows. Certain reconciling items that were presented in other, net in previous periods have been reclassified to conform with current period presentation.
| Years Ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State income taxes, net of federal tax benefit | 1.4 | % | 2.4 | % | (37.4) | % | |||||||||||
| Non-deductible executive compensation | 2.5 | % | 1.8 | % | (38.7) | % | |||||||||||
| Foreign rate differential | 3.6 | % | 2.6 | % | 55.5 | % | |||||||||||
| Excess tax benefits from share-based compensation | — | % | 0.3 | % | (14.6) | % | |||||||||||
| Prior year adjustments | (0.4) | % | 0.6 | % | (7.0) | % | |||||||||||
| Change in valuation allowance | 1.2 | % | 1.7 | % | (142.5) | % | |||||||||||
| Foreign tax credits | — | % | (0.1) | % | — | % | |||||||||||
| Peru income tax rate change | (0.6) | % | (2.5) | % | — | % | |||||||||||
| Change in unrecognized tax benefits | 0.7 | % | 0.5 | % | (60.7) | % | |||||||||||
| Foreign tax losses not benefitted | 4.3 | % | 2.2 | % | (71.5) | % | |||||||||||
| Mexican advance payment write-off | — | % | — | % | (190.3) | % | |||||||||||
| ASC 740-30 (formerly APB 23) change | — | % | — | % | 189.1 | % | |||||||||||
| Other, net | 0.9 | % | 0.3 | % | 40.5 | % | |||||||||||
Effective tax rate(1) | 34.6 | % | 30.8 | % | (256.6) | % | |||||||||||
(1) May not sum due to rounding.
Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of deferred tax assets and liabilities were as follows:
| October 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Accrued expenses | $ | 7.7 | $ | 7.1 | |||||||
| Net operating loss and other carryforwards | 12.2 | 12.2 | |||||||||
| Inventory | 0.5 | 1.0 | |||||||||
| Operating lease liabilities | 15.9 | 14.9 | |||||||||
| Allowances, reserves, and other | 2.3 | 2.0 | |||||||||
| Total deferred tax assets | 38.6 | 37.2 | |||||||||
| Less: valuation allowance | (3.6) | (2.9) | |||||||||
| Total net deferred tax assets | $ | 35.0 | $ | 34.3 | |||||||
| Equity interest in unconsolidated subsidiaries | (4.4) | (3.8) | |||||||||
| Property, plant and equipment | (25.6) | (23.8) | |||||||||
| Operating lease right-of-use assets | (13.9) | (13.6) | |||||||||
| Total deferred tax liabilities | (43.9) | (41.2) | |||||||||
| Total net deferred tax assets/(liabilities) | $ | (8.9) | $ | (6.9) | |||||||
As of October 31, 2025, the Company had foreign net operating loss carryforwards of $49.8 million, all of which, carry forward indefinitely.
The net change in the valuation allowance for deferred tax assets was $(0.7) million and $(1.0) million for the years ended October 31, 2025 and 2024, respectively. Our valuation allowances primarily relate to deferred tax assets in jurisdictions with current and historical losses as well as deferred tax assets which would generate capital losses and can only be realizable upon generation of future capital gains.
Accumulated foreign earnings were $256.1 million as of October 31, 2025, all of which are to be indefinitely reinvested, as it is our intent to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations.
The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
A reconciliation of the total amounts of unrecognized tax benefits (exclusive of interest and penalties) is as follows:
| October 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Unrecognized tax benefits beginning of year | $ | 7.0 | $ | 7.6 | |||||||
Increases related to prior year positions | 0.3 | 0.3 | |||||||||
| Lapse of statute of limitation | — | (0.2) | |||||||||
| Foreign currency remeasurement | 0.6 | (0.7) | |||||||||
| Unrecognized tax benefits end of year | $ | 7.9 | $ | 7.0 | |||||||
If recognized, the total amount of unrecognized tax benefits as of October 31, 2025 and 2024 would impact the effective tax rate. There is potential for significant changes to unrecognized tax benefits by the end of fiscal year 2024 with regards to the 2013 tax assessment as discussed below.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company recorded $1.0 million, $(0.7) million, and $1.1 million of interest and penalties and the respective foreign currency gain or loss in the years ended October 31, 2025, 2024 and 2023, respectively, in the consolidated statements of net income (loss) and had $9.7 million and $8.7 million for interest and penalties accrued as of October 31, 2025 and 2024, respectively, which have been included in other long-term liabilities in the consolidated balance sheets.
We conduct business both domestically and internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in the United States, Mexico and Peru. The Company is no longer subject to U.S. federal tax examinations for the fiscal years prior to and including October 31, 2020, nor is it subject to U.S. state income tax examinations for fiscal years prior to and including October 31, 2019. The Company is no longer subject to income tax examinations in Mexico for calendar years prior to and including December 31, 2018, except for the 2013 calendar year, which is under audit as discussed below. The Company is no longer subject to income tax examinations in Peru for calendar years prior to and including December 31, 2018.
The Company’s wholly owned subsidiary in Mexico is currently under audit for the fiscal year 2013 and received certain proposed adjustments during fiscal year 2018 from the Mexican taxing authorities pertaining to disallowed deductions. During June 2018, the Company filed an administrative appeal challenging the 2013 tax assessment, which in June 2019 the authorities issued a resolution revoking the tax assessment and ordering the tax auditors to appraise some evidence and re-issue a new assessment in connection with one of the intermediaries. The Mexican subsidiary filed a tax lawsuit since the tax auditors did not appraise the evidence offered in connection with a significant portion of the disallowed deductions, which the Company is currently waiting for the resolution of the trial. The Company believes that it has adequately provided taxes for this matter.
In March 2020, the Company's wholly owned subsidiary in Mexico made an advance payment of income taxes related to disallowed deductions for tax years 2014-2017, which the Company paid but then immediately challenged in Court. At the time of payment and during the litigation the Company did not record an unrecognized tax benefit related to the deduction because we believed it was more likely than not that the tax position would be sustained. The case was lost in fiscal year 2023 and management decided not to appeal; accordingly, a $1.7 million charge was recognized in the provision for income taxes in fiscal year 2023.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We continue to evaluate the provisions of the OBBBA as they become effective. At this time, we do not expect the OBBBA to have a material impact on our consolidated financial statements.
On September 10, 2025, Peru enacted tax law which provided benefits to agribusiness entities. The new law subjects us to lower Peruvian corporate income tax rates than the rate in effect on the date of repeal of 25%, as follows: 15% for calendar years 2026 to 2035 and 29.5% thereafter. We remeasured our deferred tax balances based on the applicable tax rate in the year the deferred balances are expected to reverse. The decrease to the net deferred tax asset resulted in a $1.5 million increase to tax expense.
In December 2021, the Organization for Economic Cooperation and Development (“OECD”), which is an international public policy setting organization comprised of member countries including the U.S., published a proposal for the establishment of a global minimum tax rate of 15% (the “Pillar Two rule”). The OECD has recommended that the Pillar Two rule become effective for fiscal years beginning after January 1, 2024, which is our fiscal 2025. To date, member states are in various stages of
implementation and the OECD continues to refine technical guidance. We are closely monitoring developments of the Pillar Two rule and are currently evaluating the potential impact in each of the countries we operate in.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 18, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Dec 21, 2023 | |
| 2022 | Dec 22, 2022 | |
| 2021 | Dec 22, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.