10-Q 1 cvgw-20240430x10q.htm 10-Q
0001133470--10-312024Q2false17761000178000000.50P1YP2Y0001133470us-gaap:MexicanTaxAuthorityMember2024-04-300001133470us-gaap:MexicanTaxAuthorityMember2023-10-310001133470us-gaap:CommonStockMember2023-11-012024-04-300001133470us-gaap:CommonStockMember2023-02-012023-04-300001133470us-gaap:CommonStockMember2022-11-012023-04-300001133470us-gaap:RetainedEarningsMember2024-04-300001133470us-gaap:NoncontrollingInterestMember2024-04-300001133470us-gaap:AdditionalPaidInCapitalMember2024-04-300001133470us-gaap:RetainedEarningsMember2024-01-310001133470us-gaap:NoncontrollingInterestMember2024-01-310001133470us-gaap:AdditionalPaidInCapitalMember2024-01-310001133470us-gaap:RetainedEarningsMember2023-10-310001133470us-gaap:NoncontrollingInterestMember2023-10-310001133470us-gaap:AdditionalPaidInCapitalMember2023-10-310001133470us-gaap:RetainedEarningsMember2023-04-300001133470us-gaap:NoncontrollingInterestMember2023-04-300001133470us-gaap:AdditionalPaidInCapitalMember2023-04-300001133470us-gaap:RetainedEarningsMember2023-01-310001133470us-gaap:NoncontrollingInterestMember2023-01-310001133470us-gaap:AdditionalPaidInCapitalMember2023-01-310001133470us-gaap:RetainedEarningsMember2022-10-310001133470us-gaap:NoncontrollingInterestMember2022-10-310001133470us-gaap:AdditionalPaidInCapitalMember2022-10-310001133470us-gaap:CommonStockMember2024-04-300001133470us-gaap:CommonStockMember2024-01-310001133470us-gaap:CommonStockMember2023-10-310001133470us-gaap:CommonStockMember2023-04-300001133470us-gaap:CommonStockMember2023-01-310001133470us-gaap:CommonStockMember2022-10-310001133470cvgw:ManagementIncentivePlan2020Member2021-04-210001133470cvgw:ManagementIncentivePlan2020Member2021-04-212021-04-210001133470us-gaap:RestrictedStockMember2024-02-012024-04-300001133470us-gaap:RestrictedStockUnitsRSUMember2024-01-310001133470us-gaap:RestrictedStockMember2024-01-310001133470us-gaap:RestrictedStockUnitsRSUMember2023-10-310001133470us-gaap:RestrictedStockMember2023-10-310001133470cvgw:ScenarioAggregateMemberus-gaap:RestrictedStockUnitsRSUMember2023-11-012023-11-010001133470us-gaap:RestrictedStockUnitsRSUMember2023-11-012023-11-010001133470srt:MinimumMemberus-gaap:EmployeeStockOptionMember2023-11-012024-04-300001133470srt:MaximumMemberus-gaap:EmployeeStockOptionMember2023-11-012024-04-300001133470us-gaap:NonUsMember2024-02-012024-04-300001133470us-gaap:NonUsMember2023-11-012024-04-300001133470us-gaap:NonUsMember2023-02-012023-04-300001133470us-gaap:NonUsMember2022-11-012023-04-300001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2024-02-012024-04-300001133470srt:SubsidiariesMember2024-02-012024-04-300001133470srt:DirectorMember2024-02-012024-04-300001133470srt:ChiefExecutiveOfficerMember2024-02-012024-04-300001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2023-11-012024-04-300001133470srt:SubsidiariesMember2023-11-012024-04-300001133470srt:DirectorMember2023-11-012024-04-300001133470srt:ChiefExecutiveOfficerMember2023-11-012024-04-300001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2023-02-012023-04-300001133470srt:SubsidiariesMember2023-02-012023-04-300001133470srt:DirectorMember2023-02-012023-04-300001133470srt:ChiefExecutiveOfficerMember2023-02-012023-04-300001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2022-11-012023-04-300001133470srt:SubsidiariesMember2022-11-012023-04-300001133470srt:DirectorMember2022-11-012023-04-300001133470srt:ChiefExecutiveOfficerMember2022-11-012023-04-300001133470country:US2024-04-300001133470country:MX2024-04-300001133470country:US2023-10-310001133470country:MX2023-10-310001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2021-07-012021-07-310001133470cvgw:AvocadosDeJaliscoMembersrt:SubsidiariesMember2024-04-3000011334702024-01-3100011334702023-01-310001133470us-gaap:MexicanTaxAuthorityMembercvgw:EmployeeProfitSharingLiabilityMembercvgw:TaxAssessment2013Member2024-04-300001133470us-gaap:MexicanTaxAuthorityMembercvgw:TaxAssessment2013Member2024-04-300001133470us-gaap:MexicanTaxAuthorityMembercvgw:TaxAssessment2013Member2018-07-012018-07-310001133470us-gaap:MexicanTaxAuthorityMembercvgw:TaxAssessment2013Member2024-02-012024-04-300001133470us-gaap:MexicanTaxAuthorityMembercvgw:TaxAssessment2013Member2023-11-012024-04-300001133470us-gaap:EquityMethodInvesteeMember2024-02-012024-04-300001133470us-gaap:EquityMethodInvesteeMember2023-11-012024-04-300001133470us-gaap:EquityMethodInvesteeMember2023-02-012023-04-300001133470us-gaap:EquityMethodInvesteeMember2022-11-012023-04-300001133470us-gaap:MexicanTaxAuthorityMembercvgw:TaxAssessment2013Member2021-07-310001133470cvgw:BelherMembercvgw:DonMemoMembercvgw:DonMemoMember2024-04-300001133470cvgw:DonMemoMemberus-gaap:EquityMethodInvesteeMember2024-04-300001133470cvgw:DonMemoMemberus-gaap:EquityMethodInvesteeMember2023-10-310001133470us-gaap:RestrictedStockUnitsRSUMember2024-04-300001133470us-gaap:RestrictedStockMember2024-04-300001133470us-gaap:EmployeeStockOptionMember2024-04-300001133470us-gaap:RetainedEarningsMember2024-02-012024-04-300001133470us-gaap:RetainedEarningsMember2023-11-012024-04-300001133470us-gaap:RetainedEarningsMember2023-02-012023-04-300001133470us-gaap:RetainedEarningsMember2022-11-012023-04-300001133470us-gaap:DiscontinuedOperationsHeldforsaleMembercvgw:FreshProductsMember2024-02-012024-04-3000011334702024-04-292024-04-2900011334702023-11-012024-01-310001133470us-gaap:DiscontinuedOperationsHeldforsaleMembercvgw:FreshProductsMember2023-11-012024-04-300001133470us-gaap:DiscontinuedOperationsHeldforsaleMembercvgw:FreshProductsMember2022-11-012023-04-3000011334702023-04-3000011334702022-10-310001133470us-gaap:RestrictedStockUnitsRSUMember2024-02-012024-04-300001133470us-gaap:EmployeeStockOptionMember2024-02-012024-04-300001133470us-gaap:RestrictedStockUnitsRSUMember2023-11-012024-04-300001133470us-gaap:RestrictedStockMember2023-11-012024-04-300001133470us-gaap:EmployeeStockOptionMember2023-11-012024-04-300001133470us-gaap:RestrictedStockUnitsRSUMember2023-02-012023-04-300001133470us-gaap:RestrictedStockMember2023-02-012023-04-300001133470us-gaap:EmployeeStockOptionMember2023-02-012023-04-300001133470us-gaap:RestrictedStockUnitsRSUMember2022-11-012023-04-300001133470us-gaap:RestrictedStockMember2022-11-012023-04-300001133470us-gaap:EmployeeStockOptionMember2022-11-012023-04-300001133470us-gaap:EquityMethodInvesteeMember2024-04-300001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2023-10-310001133470us-gaap:EquityMethodInvesteeMember2023-10-310001133470us-gaap:AdditionalPaidInCapitalMember2024-02-012024-04-300001133470us-gaap:AdditionalPaidInCapitalMember2023-11-012024-04-300001133470us-gaap:AdditionalPaidInCapitalMember2023-02-012023-04-300001133470us-gaap:AdditionalPaidInCapitalMember2022-11-012023-04-300001133470srt:DirectorMember2024-04-300001133470srt:DirectorMember2023-10-3100011334702024-05-310001133470us-gaap:MexicanTaxAuthorityMember2022-04-300001133470cvgw:IntersegmentElimination1Member2024-02-012024-04-300001133470cvgw:IntersegmentElimination1Member2023-11-012024-04-300001133470cvgw:IntersegmentElimination1Member2023-02-012023-04-300001133470cvgw:IntersegmentElimination1Member2022-11-012023-04-300001133470us-gaap:MexicanTaxAuthorityMembercvgw:TaxAssessment2013Member2021-08-182021-08-180001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2024-04-300001133470cvgw:BelherMemberus-gaap:OtherAffiliatesMember2021-07-310001133470us-gaap:EquityMethodInvesteeMember2020-10-310001133470us-gaap:NoncontrollingInterestMember2024-02-012024-04-300001133470us-gaap:NoncontrollingInterestMember2023-11-012024-04-300001133470us-gaap:NoncontrollingInterestMember2023-02-012023-04-300001133470us-gaap:NoncontrollingInterestMember2022-11-012023-04-300001133470cvgw:TomatoesMembercvgw:SegmentGrownMember2024-02-012024-04-300001133470cvgw:PapayasMembercvgw:SegmentGrownMember2024-02-012024-04-300001133470cvgw:OtherFreshProductsMembercvgw:SegmentGrownMember2024-02-012024-04-300001133470cvgw:GuacamoleMembercvgw:SegmentPreparedMember2024-02-012024-04-300001133470cvgw:AvocadosMembercvgw:SegmentGrownMember2024-02-012024-04-300001133470cvgw:TomatoesMember2024-02-012024-04-300001133470cvgw:SegmentPreparedMember2024-02-012024-04-300001133470cvgw:SegmentGrownMember2024-02-012024-04-300001133470cvgw:PapayasMember2024-02-012024-04-300001133470cvgw:OtherFreshProductsMember2024-02-012024-04-300001133470cvgw:GuacamoleMember2024-02-012024-04-300001133470cvgw:AvocadosMember2024-02-012024-04-3000011334702024-02-012024-04-300001133470cvgw:TomatoesMembercvgw:SegmentGrownMember2023-11-012024-04-300001133470cvgw:PapayasMembercvgw:SegmentGrownMember2023-11-012024-04-300001133470cvgw:OtherFreshProductsMembercvgw:SegmentGrownMember2023-11-012024-04-300001133470cvgw:GuacamoleMembercvgw:SegmentPreparedMember2023-11-012024-04-300001133470cvgw:AvocadosMembercvgw:SegmentGrownMember2023-11-012024-04-300001133470cvgw:TomatoesMember2023-11-012024-04-300001133470cvgw:SegmentPreparedMember2023-11-012024-04-300001133470cvgw:SegmentGrownMember2023-11-012024-04-300001133470cvgw:PapayasMember2023-11-012024-04-300001133470cvgw:OtherFreshProductsMember2023-11-012024-04-300001133470cvgw:GuacamoleMember2023-11-012024-04-300001133470cvgw:AvocadosMember2023-11-012024-04-3000011334702023-11-012024-04-300001133470cvgw:TomatoesMembercvgw:SegmentGrownMember2023-02-012023-04-300001133470cvgw:SalsaMembercvgw:SegmentPreparedMember2023-02-012023-04-300001133470cvgw:PapayasMembercvgw:SegmentGrownMember2023-02-012023-04-300001133470cvgw:OtherFreshProductsMembercvgw:SegmentGrownMember2023-02-012023-04-300001133470cvgw:GuacamoleMembercvgw:SegmentPreparedMember2023-02-012023-04-300001133470cvgw:AvocadosMembercvgw:SegmentGrownMember2023-02-012023-04-300001133470cvgw:TomatoesMember2023-02-012023-04-300001133470cvgw:SegmentPreparedMember2023-02-012023-04-300001133470cvgw:SegmentGrownMember2023-02-012023-04-300001133470cvgw:SalsaMember2023-02-012023-04-300001133470cvgw:PapayasMember2023-02-012023-04-300001133470cvgw:OtherFreshProductsMember2023-02-012023-04-300001133470cvgw:GuacamoleMember2023-02-012023-04-300001133470cvgw:AvocadosMember2023-02-012023-04-3000011334702023-02-012023-04-300001133470cvgw:TomatoesMembercvgw:SegmentGrownMember2022-11-012023-04-300001133470cvgw:SalsaMembercvgw:SegmentPreparedMember2022-11-012023-04-300001133470cvgw:PapayasMembercvgw:SegmentGrownMember2022-11-012023-04-300001133470cvgw:OtherFreshProductsMembercvgw:SegmentGrownMember2022-11-012023-04-300001133470cvgw:GuacamoleMembercvgw:SegmentPreparedMember2022-11-012023-04-300001133470cvgw:AvocadosMembercvgw:SegmentGrownMember2022-11-012023-04-300001133470cvgw:TomatoesMember2022-11-012023-04-300001133470cvgw:SegmentPreparedMember2022-11-012023-04-300001133470cvgw:SegmentGrownMember2022-11-012023-04-300001133470cvgw:SalsaMember2022-11-012023-04-300001133470cvgw:PapayasMember2022-11-012023-04-300001133470cvgw:OtherFreshProductsMember2022-11-012023-04-300001133470cvgw:GuacamoleMember2022-11-012023-04-300001133470cvgw:AvocadosMember2022-11-012023-04-3000011334702022-11-012023-04-3000011334702024-04-3000011334702023-10-310001133470us-gaap:DiscontinuedOperationsHeldforsaleMembercvgw:FreshProductsMember2023-02-012023-04-300001133470us-gaap:DiscontinuedOperationsHeldforsaleMembercvgw:FreshProductsMember2024-04-300001133470us-gaap:DiscontinuedOperationsHeldforsaleMembercvgw:FreshProductsMember2023-10-31iso4217:USDxbrli:pureiso4217:MXNxbrli:sharesiso4217:USDxbrli:sharescvgw:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to ______________________

Commission File Number: 000-33385

CALAVO GROWERS, INC.

(Exact name of registrant as specified in its charter)

California

33-0945304

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

1141-A Cummings Road, Santa Paula, California   

93060

(Address of principal executive offices)

(Zip Code)

(805) 525-1245

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading Symbol(s)

   

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

CVGW

 

Nasdaq Global Select Market

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, a 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

Registrant's number of shares of common stock outstanding as of May 31, 2024 was 17,800,095

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains statements relating to future events and results of Calavo Growers, Inc. and its consolidated subsidiaries (referred to in this report as “Calavo,” the “Company,” “we,” “us” or “our”), including certain projections and business trends, that are "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995, that involve risks, uncertainties and assumptions. These statements are based on our current expectations and are not promises or guarantees. If any of the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, any projections of revenue, gross profit, expenses, income/(loss) from unconsolidated entities, earnings, earnings per share, tax provisions, cash flows and currency exchange rates; the impact of acquisitions or debt or equity investments or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and integration (including information technology systems integration) plans; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Calavo and its financial performance, whether attributable to Calavo or any of its unconsolidated entities; any statements regarding pending investigations, legal claims or tax disputes; any statements of expectation or belief; any statements about future risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds, restrictions as a result of trade protection measures such as import/export/customs duties, tariffs and/or quotas); any risks associated with receivables from and/or equity investments in unconsolidated entities; system security risk and cyber-attacks and any statements of assumptions underlying any of the foregoing. The use of words such as "anticipates," "estimates," "expects," "projects," "intends," "plans" and "believes," among others, generally identify forward-looking statements.

Risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements include, but are not limited to, the following: the ability of our management team to work together successfully; the impact of operational and restructuring initiatives on our business, results of operations, and financial condition, including uncertainty as to whether the desired effects will be achieved; and potential long-term adverse effects from reducing capital expenditures; the impact of weather on market prices and operational costs; seasonality of our business; sensitivity of our business to changes in market prices of avocados and other agricultural products and other raw materials including fuel, packaging and paper; potential disruptions to our supply chain; risks associated with potential future acquisitions, including integration; potential exposure to data breaches and other cyber-attacks on our systems or those of our suppliers or customers; dependence on large customers; dependence on key personnel, and access to labor necessary for us to render services; susceptibility to wage inflation; potential for labor disputes; reliance on co-packers for a portion of our production needs; competitive pressures, including from foreign growers; risks of recalls and food-related injuries to our customers; changing consumer preferences; the impact of environmental regulations, including those related to climate change; risks associated with the environment and climate change, especially as they may affect our sources of supply; our ability to develop and transition new products and services and enhance existing products and services to meet customer needs; risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and restrictions as a result of trade protection measures such as import/export/customs duties, tariffs and/or quotas and currency fluctuations); risks associated with receivables from, loans to and/or equity investments in unconsolidated entities; volatility in the value of our common stock; the impact of macroeconomic trends and events; the resolution of pending investigations, legal claims and tax disputes, including an assessment imposed by the Mexican Tax Administrative Service (the “SAT”) and our defenses against collection activities commenced by the SAT; the ability of the parties to reach a binding agreement for the Proposed Transaction (as defined below), the potential that the price, structure, form of consideration (for example, cash, promissory, equity) and other material terms may be materially different than currently expected, the continuing financial and operating performance of the Fresh Cut business during the negotiation process; the possible effect of the announcement of the sale of the Fresh Cut business on our customer, vendor and supplier relationships, operating results and business generally; and if the Company enters into a binding agreement for the Proposed Transaction, the occurrence of any event, change or other circumstance that prevents the completion of the Proposed Transaction, including the failure to satisfy all closing conditions included in such binding agreement.

For a further discussion of these risks and uncertainties and other risks and uncertainties that we face, please see the risk factors described in our most recent Annual Report on Form 10-K for the fiscal year ended October 31, 2023 filed with the Securities and Exchange Commission and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q (including this Quarterly Report on Form 10-Q) and other filings with the Securities and Exchange Commission. Forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

2

CALAVO GROWERS, INC.

INDEX

PAGE

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

Consolidated Balance Sheets –April 30, 2024 and October 31, 2023

4

Consolidated Statements of Operations –Three and Six Months Ended April 30, 2024 and 2023

5

Consolidated Statements of Cash Flows –Three and Six Months Ended April 30, 2024 and 2023

6

Consolidated Statements of Shareholders’ Equity – Three and Six Months Ended April 30, 2024 and 2023

7

Notes to Consolidated Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

Signatures

33

3

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CALAVO GROWERS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

April 30, 

October 31, 

2024

2023

Assets

    

    

    

    

Current assets:

Cash and cash equivalents

$

4,273

$

2,091

Restricted cash

761

Accounts receivable, net of allowances of $4,127 (2024) and $3,364 (2023)

 

56,142

 

33,897

Inventories

 

41,554

 

31,571

Prepaid expenses and other current assets

 

8,188

 

11,739

Advances to suppliers

 

11,196

 

14,684

Current assets held for sale

 

138,927

 

37,533

Income taxes receivable

 

2,064

 

1,094

Total current assets

 

262,344

 

133,370

Property, plant, and equipment, net

 

57,796

 

60,924

Operating lease right-of-use assets

 

16,664

 

18,357

Investments in unconsolidated entities

 

3,107

 

2,902

Deferred income tax assets

 

3,010

 

3,010

Goodwill

 

10,211

 

10,211

Non-current assets held for sale

 

 

105,424

Intangibles, net

275

275

Other assets

 

57,962

 

52,381

$

411,369

$

386,854

Liabilities and shareholders' equity

Current liabilities:

Payable to growers

$

37,491

$

14,788

Trade accounts payable

 

6,505

 

5,097

Accrued expenses

 

19,829

 

15,809

Current liabilities held for sale

 

53,261

 

29,911

Other current liabilities

11,000

11,000

Current portion of term loan

813

647

Current portion of operating leases

 

3,401

 

3,663

Current portion of long-term obligations and finance leases

 

882

 

831

Total current liabilities

 

133,182

 

81,746

Long-term liabilities:

Borrowings pursuant to line of credit, long-term

42,025

35,024

Long-term liabilities held for sale

29,295

Long-term portion of term loan

3,009

3,416

Long-term portion of operating leases

 

15,759

 

17,328

Long-term portion of obligations and finance leases

 

4,708

 

4,645

Deferred income tax liabilities

746

746

Other long-term liabilities

 

4,609

 

4,425

Total long-term liabilities

 

70,856

 

94,879

Commitments and contingencies

Shareholders' equity:

Common stock ($0.001 par value, 100,000 shares authorized; 17,800 (2024) and 17,761 (2023) shares issued and outstanding)

 

18

 

18

Additional paid-in capital

 

177,302

 

176,481

Noncontrolling interest

 

1,439

 

1,392

Retained earnings

 

28,572

 

32,338

Total shareholders' equity

 

207,331

 

210,229

$

411,369

$

386,854

The accompanying notes are an integral part of these consolidated financial statements.

4

CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

Three months ended

Six months ended

April 30, 

April 30, 

2024

2023

2024

2023

Net sales

    

$

184,383

    

$

158,279

    

$

311,989

    

$

291,042

Cost of sales

 

164,026

 

142,608

 

279,164

 

262,286

Gross profit

 

20,357

 

15,671

 

32,825

 

28,756

Selling, general and administrative

 

13,020

 

13,361

 

26,483

 

25,003

Expenses related to Mexican tax matters

202

386

585

2,434

Operating income

 

7,135

1,924

 

5,757

1,319

Interest expense

 

(962)

 

(244)

 

(1,786)

 

(621)

Other income, net

 

520

 

307

 

720

 

647

Income before income taxes and loss from unconsolidated entities

 

6,693

 

1,987

 

4,691

 

1,345

Income tax expense

 

(390)

 

(484)

 

(963)

 

(443)

Net income (loss) from unconsolidated entities

 

204

 

(56)

 

205

 

100

Net income from continuing operations

 

6,507

 

1,447

 

3,933

 

1,002

Net loss from discontinued operations (refer to Note 11)

(408)

(5,407)

(4,091)

(7,757)

Net income (loss)

6,099

(3,960)

(158)

(6,755)

Add: Net income attributable to noncontrolling interest

 

(37)

 

(35)

 

(47)

 

(308)

Net income (loss) attributable to Calavo Growers, Inc.

$

6,062

$

(3,995)

$

(205)

$

(7,063)

Calavo Growers, Inc.’s net income (loss) per share:

Basic

Continuing Operations

$

0.36

$

0.08

$

0.22

$

0.04

Discontinued Operations

$

(0.02)

$

(0.31)

$

(0.23)

$

(0.44)

Net income (loss) attributable to Calavo Growers, Inc

$

0.34

$

(0.23)

$

(0.01)

$

(0.40)

Diluted

Continuing Operations

$

0.36

$

0.08

$

0.22

$

0.04

Discontinued Operations

$

(0.02)

$

(0.31)

$

(0.23)

$

(0.44)

Net income (loss) attributable to Calavo Growers, Inc

$

0.34

$

(0.23)

$

(0.01)

$

(0.40)

Number of shares used in per share computation:

Basic

 

17,800

 

17,721

 

17,800

 

17,697

Diluted

 

17,872

 

17,883

 

17,866

 

17,857

The accompanying notes are an integral part of these consolidated financial statements.

5

CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Six months ended April 30, 

2024

2023

Cash Flows from Operating Activities:

    

    

    

    

Net loss

$

(158)

$

(6,755)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

 

6,633

 

8,453

Non-cash operating lease expense

(720)

45

Net income from unconsolidated entities

 

(205)

 

(100)

Divesture of Calavo Salsa Lisa

624

Provision for uncollectible Mexican IVA taxes receivable

 

165

 

1,404

Stock-based compensation expense

 

1,446

 

3,403

Gain on sale of Temecula packinghouse

 

(108)

 

(108)

Loss on disposal of property, plant, and equipment

 

56

 

40

Effect on cash of changes in operating assets and liabilities:

Accounts receivable, net

 

(21,298)

 

(9,811)

Inventories

 

(9,609)

 

(4,377)

Prepaid expenses and other current assets

 

2,617

 

(1,656)

Advances to suppliers

 

4,088

 

87

Income taxes receivable/payable

 

(970)

 

(934)

Other assets

 

(5,746)

 

(7,430)

Payable to growers

 

22,703

 

6,611

Trade accounts payable, accrued expenses and other liabilities

 

3,256

 

6,726

Net cash provided by (used in) operating activities

 

2,150

 

(3,778)

Cash Flows from Investing Activities:

Purchases of property, plant, and equipment

 

(2,377)

 

(8,461)

Net cash used in investing activities

 

(2,377)

 

(8,461)

Cash Flows from Financing Activities:

Payment of dividend to shareholders

 

(3,561)

 

(6,876)

Proceeds from revolving credit facility

 

83,176

 

130,800

Payments on revolving credit facility

 

(76,175)

 

(109,800)

Payments of minimum withholding taxes on net share settlement of equity awards

(625)

Payments on term loan

 

(241)

 

Payments on long-term obligations and finance leases

 

(926)

 

(869)

Proceeds from stock option exercises

 

 

48

Net cash provided by financing activities

 

1,648

 

13,303

Net increase in cash, cash equivalents and restricted cash

 

1,421

 

1,064

Cash, cash equivalents and restricted cash, beginning of period

 

2,852

 

3,134

Cash, cash equivalents and restricted cash, end of period

$

4,273

$

4,198

Noncash Investing and Financing Activities:

Right of use assets obtained in exchange for new financing lease obligations

$

640

$

1,097

Settlement of Agricola Belher infrastructure advance offset against payable to growers

$

600

$

Property, plant, and equipment included in trade accounts payable and accrued expenses

$

29

$

310

The accompanying notes are an integral part of these consolidated financial statements.

6

CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands)

    

    

    

    

    

    

Additional

Common Stock

Paid-in

Retained

Noncontrolling

Shares

Amount

Capital

Earnings

Interest

Total

Balance, January 31, 2024

17,800

$

18

$

176,823

$

24,290

$

1,402

$

202,533

Issuance of common stock in connection with stock-based compensation, net of tax withholdings

 

 

(26)

 

 

 

(26)

Stock-based compensation expense

 

 

505

 

 

 

505

Dividend declared to shareholders (0.10 per share)

 

 

 

(1,780)

 

 

(1,780)

Avocados de Jalisco noncontrolling interest

 

 

 

 

37

 

37

Net income attributable to Calavo Growers, Inc.

 

 

 

6,062

 

 

6,062

Balance, April 30, 2024

17,800

$

18

$

177,302

$

28,572

$

1,439

$

207,331

    

    

    

    

    

    

Additional

 

Common Stock

Paid-in

Retained

Noncontrolling

 

Shares

Amount

Capital

Earnings

Interest

Total

Balance, January 31, 2023

17,743

 

18

 

172,524

 

42,945

 

1,288

 

216,775

Issuance of common stock in connection with stock-based compensation, net of tax withholdings

41

Stock compensation expense

2,150

2,150

Dividend declared to shareholders (0.10 per share)

(1,774)

(1,774)

Avocados de Jalisco noncontrolling interest

35

35

Net loss attributable to Calavo Growers, Inc.

(3,995)

(3,995)

Balance, April 30, 2023

17,784

 

$

18

 

$

174,674

 

$

37,176

 

$

1,323

 

$

213,191

Additional

 

Common Stock

Paid-in

Retained

Noncontrolling

 

Shares

Amount

Capital

Earnings

Interest

Total

Balance, October 31, 2023

17,761

 

$

18

 

$

176,481

 

$

32,338

 

$

1,392

 

$

210,229

Issuance of common stock in connection with stock-based compensation, net of tax withholdings

39

 

 

(625)

 

 

 

(625)

Stock-based compensation expense

 

 

1,446

 

 

 

1,446

Dividend declared to shareholders (0.10 per share)

(3,561)

(3,561)

Avocados de Jalisco noncontrolling interest

 

 

 

 

47

 

47

Net loss attributable to Calavo Growers, Inc.

 

 

 

(205)

 

 

(205)

Balance, April 30, 2024

17,800

$

18

$

177,302

$

28,572

$

1,439

 

$

207,331

Additional

 

Common Stock

Paid-in

Retained

Noncontrolling

 

Shares

Amount

Capital

Earnings

Interest

Total

Balance, October 31, 2022

17,732

 

$

18

 

$

171,223

 

$

51,115

 

$

1,015

 

$

223,371

Issuance of common stock in connection with stock-based compensation, net of tax withholdings

52

 

 

48

 

 

 

48

Stock-based compensation expense

 

 

3,403

 

 

 

3,403

Dividend declared to shareholders (0.4875 per share)

(6,876)

(6,876)

Avocados de Jalisco noncontrolling interest

 

 

 

 

308

 

308

Net loss attributable to Calavo Growers, Inc.

 

 

 

(7,063)

 

 

(7,063)

Balance, April 30, 2023

17,784

$

18

$

174,674

$

37,176

$

1,323

 

$

213,191

See accompanying notes to consolidated financial statements.

7

CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of the business

Business

Calavo Growers, Inc. (referred to in this report as “Calavo”, the “Company”, “we”, “us” or “our”), is a global leader in the avocado industry and a provider of value-added fresh food. Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers on a worldwide basis. We procure avocados from California, Mexico and other growing regions around the world. Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) create, process and package a portfolio of healthy fresh foods including fresh-cut fruit and vegetables, and prepared foods and (iii) process and package guacamole and salsa. We distribute our products both domestically and internationally and we report our operations in two different business segments: Grown and Prepared.

We and certain of our subsidiaries have entered into non-binding negotiations regarding the potential sale of all of the assets used in our Fresh Cut business and certain related real property (the “Proposed Transaction”). The terms, including price and structure, remain under negotiation, and we are targeting completion of the Proposed Transaction during the third quarter of fiscal 2024. The Fresh Cut business represents substantially all of the business of the Prepared segment other than the guacamole business, which would be retained following the Proposed Transaction.

During the six-months period ended April 30, 2024, management has concluded that the Fresh Cut business meets the requirements to be classified as held for sale and discontinued operations. As a result, the financial results of that business are reported as discontinued operations in the accompanying statements of operations, and its assets and liabilities are reflected as amounts held for sale in the accompanying balance sheets. The Company's reporting segments have also been changed for the effects of the planned divestiture, as described in Note 2. For more information, see Note 11.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows. The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

Retrospective reclassifications have been made to prior period financial statements and disclosures to present the Fresh Cut business unit as discontinued operations (see Note 11, “Assets Held for Sale and Discontinued Operations”). 

Recently Issued Accounting Standards

In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods

8

within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

2. Information regarding our operations in different segments

Prior to the decision to divest our Fresh Cut business (formerly RFG), the Company’s Prepared reporting segment included the Fresh Cut business unit and our guacamole business. As a result of the planned divestiture, the Fresh Cut business unit is no longer included in our Prepared business segment, and is not included in the tables below. All segment information included herein reflects these changes. See Note 11 for further information.

We report our operations in two different business segments: Grown and Prepared. The Grown segment consists of fresh avocados, tomatoes and papayas. The Prepared segment comprises all our guacamole products sold at retail and food service as well as avocado pulp sold to foodservice. These two business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources. Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate. We do not allocate assets, or specifically identify them, to our operating segments. The sales data in the following tables is presented in thousands:

Three months ended April 30, 2024

Three months ended April 30, 2023

Grown

Prepared

Total

Grown

Prepared

Total

    

    

    

    

    

    

Avocados

$

136,055

$

$

136,055

$

122,907

$

$

122,907

Tomatoes

 

28,513

 

 

28,513

 

16,004

 

 

16,004

Papayas

 

2,850

 

 

2,850

 

2,528

 

 

2,528

Other fresh income

 

22

 

 

22

 

50

 

 

50

Guacamole

 

19,640

 

19,640

 

 

19,348

 

19,348

Salsa

 

 

 

 

 

261

 

261

Total gross sales

 

167,440

 

19,640

 

187,080

 

141,489

 

19,609

 

161,098

Less sales allowances

 

(685)

 

(2,012)

 

(2,697)

 

(1,188)

 

(1,631)

 

(2,819)

Net sales

$

166,755

$

17,628

$

184,383

$

140,301

$

17,978

$

158,279

Six months ended April 30, 2024

Six months ended April 30, 2023

Grown

Prepared

Total

Grown

Prepared

Total

    

    

    

    

    

    

Avocados

$

235,686

$

$

235,686

$

225,530

$

$

225,530

Tomatoes

 

39,352

 

 

39,352

 

29,315

 

 

29,315

Papayas

 

5,932

 

 

5,932

 

5,855

 

 

5,855

Other fresh income

 

48

 

 

48

 

65

 

 

65

Guacamole

35,719

35,719

35,700

35,700

Salsa

 

 

 

 

 

707

 

707

Total gross sales

 

281,018

 

35,719

 

316,737

 

260,765

 

36,407

 

297,172

Less sales allowances

 

(1,237)

 

(3,511)

 

(4,748)

 

(2,715)

 

(3,415)

 

(6,130)

Net sales

$

279,781

$

32,208

$

311,989

$

258,050

$

32,992

$

291,042

    

    

    

Grown

Prepared

Total

(All amounts are presented in thousands)

Three months ended April 30, 2024

Net sales

$

166,755

$

17,628

$

184,383

Cost of sales

150,706

13,320

164,026

Gross profit

$

16,049

$

4,308

$

20,357

Three months ended April 30, 2023

Net sales

$

140,301

$

17,978

$

158,279

Cost of sales

127,702

14,906

142,608

Gross profit

$

12,599

$

3,072

$

15,671