10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended July 31, 2014

OR

 

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

Commission file number: 000-33385

 

 

CALAVO GROWERS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

California   33-0945304
(State of incorporation)  

(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)

 

 

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  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   ¨

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

Registrant’s number of shares of common stock outstanding as of July 31, 2014 was 15,762,405

 

 

 

 

 


Table of Contents

CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo Growers, Inc. and its consolidated subsidiaries (Calavo, the Company, we, us or our) 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, margins, expenses, earnings, earnings per share, tax provisions, cash flows, currency exchange rates, the impact of acquisitions or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and 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; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic trends and events; the competitive pressures faced by Calavo’s businesses; the development and transition of new products and services (and the enhancement of existing products and services) to meet customer needs; integration and other risks associated with business combinations; the hiring and retention of key employees; the resolution of pending investigations, claims and disputes; and other risks that are described herein, including, but not limited to, the items discussed in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2013, and those detailed from time to time in our other filings with the Securities and Exchange Commission. Calavo assumes no obligation and does not intend to update these forward-looking statements.

 

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Table of Contents

CALAVO GROWERS, INC.

INDEX

 

         PAGE  

PART I. FINANCIAL INFORMATION

  

Item 1.

 

Financial Statements (unaudited):

  
 

Consolidated Condensed Balance Sheets – July 31, 2014 and October 31, 2013

     4   
 

Consolidated Condensed Statements of Income – Three Months and Nine Months Ended July  31, 2014 and 2013

     5   
 

Consolidated Condensed Statements of Comprehensive Income – Three Months and Nine Months Ended July  31, 2014 and 2013

     6   
 

Consolidated Condensed Statements of Cash Flows – Nine Months Ended July 31, 2014 and 2013

     7   
 

Notes to Consolidated Condensed Financial Statements

     8   

Item 2.

 

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

     17   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     25   

Item 4.

 

Controls and Procedures

     25   

PART II. OTHER INFORMATION

  

Item 1.

 

Legal Proceedings

     26   

Item 1A.

 

Risk Factors

     26   

Item 6.

 

Exhibits

     26   
 

Signatures

     27   

 

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Table of Contents
PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share amounts)

 

     July 31,
2014
    October 31,
2013
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 9,436      $ 8,019   

Accounts receivable, net of allowances of $3,127 (2014) and $1,697 (2013)

     63,731        55,060   

Inventories, net

     33,035        28,673   

Prepaid expenses and other current assets

     13,992        10,757   

Advances to suppliers

     1,385        3,213   

Income taxes receivable

     —          2,013   

Deferred income taxes

     1,995        1,995   
  

 

 

   

 

 

 

Total current assets

     123,574        109,730   

Property, plant, and equipment, net

     54,335        52,649   

Investment in Limoneira Company

     38,115        45,531   

Investment in unconsolidated entities

     20,112        1,420   

Goodwill

     18,262        18,262   

Other assets

     10,114        12,347   
  

 

 

   

 

 

 
   $ 264,512      $ 239,939   
  

 

 

   

 

 

 

Liabilities and Shareholders’ equity

    

Current liabilities:

    

Payable to growers

   $ 20,920      $ 14,490   

Trade accounts payable

     16,061        11,699   

Accrued expenses

     26,236        20,939   

Short-term borrowings

     28,740        33,990   

Income tax payable

     3,680        —     

Dividend payable

     —          11,004   

Current portion of long-term obligations

     5,231        5,258   
  

 

 

   

 

 

 

Total current liabilities

     100,868        97,380   

Long-term liabilities:

    

Long-term obligations, less current portion

     3,629        7,792   

Deferred income taxes

     3,302        6,194   
  

 

 

   

 

 

 

Total long-term liabilities

     6,931        13,986   

Commitments and contingencies

    

Noncontrolling interest, Calavo Salsa Lisa

     (146     121   

Shareholders’ equity:

    

Common stock, $0.001 par value, 100,000 shares authorized; 15,762 (2014) and 15,720 (2013) shares issued and outstanding

     15        15   

Additional paid-in capital

     65,584        59,376   

Accumulated other comprehensive income

     8,891        13,414   

Noncontrolling interest, FreshRealm

     —          (6

Retained earnings

     82,369        55,653   
  

 

 

   

 

 

 

Total shareholders’ equity

     156,859        128,452   
  

 

 

   

 

 

 
   $ 264,512      $ 239,939   
  

 

 

   

 

 

 

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

 

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Table of Contents

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)

 

    

Three months ended

July 31,

   

Nine months ended

July 31,

 
     2014     2013     2014     2013  

Net sales

   $ 218,702      $ 194,943      $ 581,761      $ 500,778   

Cost of sales

     197,757        176,865        528,149        458,040   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     20,945        18,078        53,612        42,738   

Selling, general and administrative

     9,431        8,706        26,814        25,717   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     11,514        9,372        26,798        17,021   

Interest expense

     (220     (293     (768     (862

Gain on deconsolidation of FreshRealm

     12,622        —          12,622        —     

Other income, net

     120        209        525        582   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

     24,036        9,288        39,177        16,741   

Provision for income taxes

     8,064        3,163        13,318        5,742   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     15,972        6,125        25,859        10,999   

Add: Net loss attributable to noncontrolling interest

     60        274        858        320   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Calavo Growers, Inc.

   $ 16,032      $ 6,399      $ 26,717      $ 11,319   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

   $ 1.02      $ 0.43      $ 1.70      $ 0.77   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.02      $ 0.43      $ 1.70      $ 0.76   
  

 

 

   

 

 

   

 

 

   

 

 

 

Number of shares used in per share computation:

        

Basic

     15,760        14,848        15,748        14,786   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     15,769        14,870        15,756        14,807   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

 

    

Three months ended

July 31,

   

Nine months ended

July 31,

 
     2014     2013     2014     2013  

Net income

   $ 15,972      $ 6,125      $ 25,859      $ 10,999   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), before tax:

        

Unrealized holding gains (losses) arising during period

     (1,590     6,586        (7,416     (52

Income tax benefit (expense) related to items of other comprehensive income (loss)

     620        (2,568     2,893        20   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

     (970     4,018        (4,523     (32
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     15,002        10,143        21,336        10,967   

Add: Net loss – noncontrolling interest

     60        274        858        320   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income – Calavo Growers, Inc.

   $ 15,062      $ 10,417      $ 22,194      $ 11,287   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

     Nine months ended July 31,  
     2014     2013  

Cash Flows from Operating Activities:

    

Net income

   $ 25,859      $ 10,999   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     5,113        5,011   

Provision for losses on accounts receivable

     88        —     

Income from unconsolidated entities

     13        —     

Interest on contingent consideration

     28        133   

Gain on deconsolidation of FreshRealm

     (12,622     —     

Revalue adjustment on contingent consideration

     —          1,801   

Stock-based compensation expense

     517        288   

Effect on cash of changes in operating assets and liabilities:

    

Accounts receivable

     (8,759     (21,594

Inventories, net

     (4,362     (8,642

Prepaid expenses and other current assets

     (3,280     (1,594

Advances to suppliers

     1,828        406   

Income taxes receivable/payable

     5,884        2,891   

Other assets

     135        62   

Payable to growers

     7,274        21,264   

Trade accounts payable and accrued expenses

     9,769        4,599   
  

 

 

   

 

 

 

Net cash provided by operating activities

     27,485        15,624   

Cash Flows from Investing Activities:

    

Acquisitions of and deposits on property, plant, and equipment

     (7,085     (4,943

Investment in unconsolidated entity

     (125     —     

Investment in Agricola Don Memo

     (1,730     —     

Decrease in cash due to deconsolidation of FreshRealm

     (6,813     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (15,753     (4,943

Cash Flows from Financing Activities:

    

Payment of dividend to shareholders

     (11,005     (9,646

Payments on revolving credit facilities, net

     (5,250     5,810   

Payments on long-term obligations

     (4,190     (3,933

Proceeds from issuance of FreshRealm units

     10,000        —     

Retirement of common stock

     —          (4,788

Exercise of stock options

     130        700   
  

 

 

   

 

 

 

Net cash used in financing activities

     (10,315     (11,857
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     1,417        (1,176

Cash and cash equivalents, beginning of period

     8,019        7,103   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 9,436      $ 5,927   
  

 

 

   

 

 

 

Noncash Investing and Financing Activities:

    

Tax benefit related to stock option exercise

   $ 191      $ 208   
  

 

 

   

 

 

 

Reclassification of RFG cash contingent consideration to additional paid in capital

   $ —        $ 4,220   
  

 

 

   

 

 

 

Collection for Beltran Infrastructure Advance

   $ 845      $ 1,690   
  

 

 

   

 

 

 

Unrealized investment holding losses

   $ (7,416   $ (52
  

 

 

   

 

 

 

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

 

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Table of Contents

 

1. Description of the business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding 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 food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis. We procure avocados principally from California, Mexico, and Chile. Through our various operating facilities, we sort, pack, and/or ripen avocados, tomatoes, pineapples and/or Hawaiian grown papayas. Additionally, we also produce salsa and prepare ready-to-eat produce and deli products.

The accompanying unaudited consolidated condensed 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 of 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 condensed 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, 2013.

Correction of Immaterial Errors Within Previously Issued Consolidated Condensed Financial Statements

In connection with the preparation of our accompanying Consolidated Condensed Financial Statements, we identified an immaterial error in our Consolidated Condensed Balance Sheet as of April 30, 2014, included within our Form 10-Q for the quarter ended April 30, 2014, as a result of the incorrect recognition of cash as of April 30, 2014 for a wire transfer initiated on April 30, 2014, but not received until May 1, 2014. Accordingly, there was a $10.0 million overstatement within “Cash and cash equivalents,” a $5.4 million overstatement of “Additional paid-in capital” and a $4.6 million overstatement of “Noncontrolling interest, FreshRealm.” Additionally, our Consolidated Condensed Statement of Cash Flows presented an overstatement of $10.0 million within “Cash Flows from Financing Activities,” under the line item “Proceeds from issuance of FreshRealm stock.” Our management evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin No. 99, Materiality, and determined that these errors were not material to our previously reported quarterly financial statements as of and for the three and six months ended April 30, 2014. The aforementioned errors have no impact on this Quarterly Report on Form 10-Q, nor any future periodic filings, except that the Consolidated Condensed Statement of Cash Flows for the six months ended April 30, 2014 will be corrected to properly reflect this immaterial error in our Form 10-Q for the quarter ended April 30, 2015.

The effect of recording this immaterial error correction in our consolidated condensed balance sheet as of April 30, 2014 and the related consolidated condensed statement of cash flows for the six months ended April 30, 2014 is as follows:

 

Balance Sheet (in thousands)

   April 30,
2014
As previously
reported
    April 30,
2014
As
corrected
 

Cash and cash equivalents

   $  19,914      $  9,914   

Total assets

   $  259,107      $  249,107   

Additional paid-in capital

   $  65,358      $  59,968   

Noncontrolling interest,FreshRealm

   $  4,301      $ (309 )  

Shareholders’ equity

   $  145,602      $  135,602   

Statement of cash flows (in thousands)

   April 30,
2014
As previously
reported
    April 30,
2014
As
corrected
 

Cash flows from operating activities

   $ 13,263      $ 13,263   

Cash flows used in investing activities

   $ (5,589   $ (5,589

Proceeds from issuance of FreshRealm stock

   $ 10,000      $  —     

Proceeds from financing activities

   $ 4,221      $ (5,779 )  

Cash and cash equivalents, end of period

   $ 19,914      $ 9,914   

The correction of this immaterial error on the consolidated condensed statements of income for the three and six months ended April 30, 2014 was inconsequential and corrected in the three months ended July 31, 2014.

Recently Adopted Accounting Pronouncements

In February 2013, the FASB issued a standard that revised the disclosure requirements for items reclassified out of accumulated other comprehensive income and requires entities to present information about significant items reclassified out of accumulated other comprehensive income by component either (1) on the face of the statement where net income is presented or (2) as a separate disclosure in the notes to the financial statements. This guidance is effective for annual reporting periods beginning after December 15, 2012. The adoption of this standard had no impact on our financial statements.

In July 2013, the FASB issued a standard permitting the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to the United States Treasury rate and London Interbank Offered Rate (“LIBOR”). In addition, the restriction on using different benchmark rates for similar hedges is removed. The Company is required to adopt these provisions prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013. The adoption of this standard had no impact on our financial statements.

Recently Issued Accounting Standards

In March 2013, the FASB issued a standard which requires the release of a Company’s cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance is effective for annual reporting periods beginning after December 15, 2013. The adoption of this amendment will not have a material effect on our financial statements.

In July 2013, the FASB issued a standard to clarify the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists as of the reporting date. This guidance is effective for annual reporting periods beginning after December 15, 2013. The adoption of this amendment will not have a material effect on our financial statements.

 

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Table of Contents
2. Information regarding our operations in different segments

We report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG. These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources. The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products. The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and deli meat products. 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 following table sets forth sales by product category, by segment (in thousands):

 

     Three months ended July 31, 2014     Three months ended July 31, 2013  
     Fresh
products
    Calavo
Foods
    RFG     Total     Fresh
products
    Calavo
Foods
    RFG     Total  

Third-party sales:

                

Avocados

   $ 124,429      $ —        $ —        $ 124,429      $ 117,450      $ —        $ —        $ 117,450   

Tomatoes

     610        —          —          610        3,334        —          —          3,334   

Papayas

     3,369        —          —          3,369        3,179        —          —          3,179   

Pineapples

     1,658        —          —          1,658        1,799        —          —          1,799   

Other fresh products

     265        —          —          265        184        —          —          184   

Food service

     —          13,748        —          13,748        —          11,762        —          11,762   

Retail and club

     —          6,082        72,477        78,559        —          5,466        55,970        61,436   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross sales

     130,331        19,830        72,477        222,638        125,946        17,228        55,970        199,144   

Less sales incentives

     (499     (2,737     (700     (3,936     (312     (2,685     (1,204     (4,201
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net sales

   $ 129,832      $ 17,093      $   71,777      $ 218,702      $ 125,634      $ 14,543      $   54,766      $ 194,943   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Nine months ended July 31, 2014     Nine months ended July 31, 2013  
     Fresh
products
    Calavo
Foods
    RFG     Total     Fresh
products
    Calavo
Foods
    RFG     Total  

Third-party sales:

                

Avocados

   $ 320,506      $ —        $ —        $ 320,506      $ 286,735      $ —        $ —        $ 286,735   

Tomatoes

     19,706        —          —          19,706        22,670        —          —          22,670   

Papayas

     9,793        —          —          9,793        9,559        —          —          9,559   

Pineapples

     4,413        —          —          4,413        4,970        —          —          4,970   

Other fresh products

     409        —          —          409        397        —          —          397   

Food service

     —          36,393        —          36,393        —          32,264        —          32,264   

Retail and club

     —          17,137        185,349        202,486        —          14,437        141,636        156,073   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross sales

     354,827        53,530        185,349        593,706        324,331        46,701        141,636        512,668   

Less sales incentives

     (1,321     (8,464     (2,160     (11,945     (1,142     (8,024     (2,724     (11,890
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net sales

   $ 353,506      $ 45,066      $ 183,189      $ 581,761      $ 323,189      $ 38,677      $ 138,912      $ 500,778   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Fresh
products
     Calavo
Foods
     RFG      Total  
     (All amounts are presented in thousands)  

Three months ended July 31, 2014

           

Net sales

   $ 129,832       $ 17,093       $ 71,777       $ 218,702   

Cost of sales

     120,318         13,253         64,186         197,757   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

   $ 9,514       $ 3,840       $ 7,591       $ 20,945   
  

 

 

    

 

 

    

 

 

    

 

 

 

Three months ended July 31, 2013

           

Net sales

   $ 125,634       $ 14,543       $ 54,766       $ 194,943   

Cost of sales

     116,363         9,860         50,642         176,865   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

   $ 9,271       $ 4,683       $ 4,124       $ 18,078   
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three months ended July 31, 2014 and 2013, inter-segment sales and cost of sales for Fresh products totaling $6.9 million and $5.5 million were eliminated. For the three months ended July 31, 2014 and 2013, inter-segment sales and cost of sales for Calavo Foods totaling $4.4 million and $4.1 million were eliminated.

 

     Fresh
products
     Calavo
Foods
     RFG      Total  
     (All amounts are presented in thousands)  

Nine months ended July 31, 2014

           

Net sales

   $ 353,506       $ 45,066       $ 183,189       $ 581,761   

Cost of sales

     328,101         34,811         165,237         528,149   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

   $ 25,405       $ 10,255       $ 17,952       $ 53,612   
  

 

 

    

 

 

    

 

 

    

 

 

 

Nine months ended July 31, 2013

           

Net sales

   $ 323,189       $ 38,677       $ 138,912       $ 500,778   

Cost of sales

     303,083         26,603         128,354         458,040   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

   $ 20,106       $ 12,074       $ 10,558       $ 42,738   
  

 

 

    

 

 

    

 

 

    

 

 

 

For the nine months ended July 31, 2014 and 2013, inter-segment sales and cost of sales for Fresh products totaling $24.5 million and $24.1 million were eliminated. For the nine months ended July 31, 2014 and 2013, inter-segment sales and cost of sales for Calavo Foods totaling $12.0 million and $10.5 million were eliminated.

 

3. Inventories

Inventories consist of the following (in thousands):

 

     July 31,
2014
     October 31,
2013
 

Fresh fruit

   $ 18,170       $ 13,928   

Packing supplies and ingredients

     6,097         5,511   

Finished prepared foods

     8,768         9,234   
  

 

 

    

 

 

 
   $ 33,035       $ 28,673   
  

 

 

    

 

 

 

Inventories are stated at the lower of cost or market. We periodically review the value of items in inventory and record any necessary reserves of inventory based on our assessment of market conditions. No inventory reserve was considered necessary as of July 31, 2014 and October 31, 2013.

 

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4. Related party transactions

Certain members of our Board of Directors market California avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers. During the three months ended July 31, 2014 and 2013, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $8.0 million and $11.0 million. During the nine months ended July 31, 2014 and 2013, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $9.2 million and $15.6 million. Amounts payable to these board members were $3.0 million and $3.3 million as of July 31, 2014 and October 31, 2013.

During the three months ended July 31, 2014 and 2013, we received $0.1 million as dividend income from Limoneira Company. During the nine months ended July 31, 2014 and 2013, we received $0.2 million as dividend income from Limoneira Company. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company.

The three previous owners and current executives of RFG have a majority ownership of certain entities that provide various services to RFG. RFG’s California operating facility leases a building from LIG partners, LLC (LIG) pursuant to an operating lease. LIG is majority owned by an entity owned by three executives of RFG. For the three months ended July 31, 2014 and 2013, total rent paid to LIG was $0.1 million. For the nine months ended July 31, 2014 and 2013, total rent paid to LIG was $0.4 million. RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease. THNC is majority owned by an entity owned by three executives of RFG. For the three months ended July 31, 2014, total rent paid to THNC was $0.1 million. For the nine months ended July 31, 2014, total rent paid to THNC was $0.2 million. Additionally, RFG sells cut produce and purchases raw materials, obtains transportation services, and shares costs for certain utilities with Third Coast Fresh Distribution (Third Coast). Third Coast is majority owned by an entity owned by three executives of RFG. For the three months ended July 31, 2014 and 2013, total sales made to Third Coast were $0.3 million. For the nine months ended July 31, 2014 and 2013, total sales made to Third Coast were $0.8 million and $1.9 million. For the three months July 31, 2014 and 2013, total purchases made from Third Coast were $0.2 million. For the nine months July 31, 2014 and 2013, total purchases made from Third Coast were $0.3 million and $1.0 million. Amounts due from Third Coast were $0.4 million and $1.0 million at July 31, 2014 and October 31, 2013. Amounts due to Third Coast were $0.1 million at July 31, 2014 and October 31, 2013

 

5. Other assets

Other assets consist of the following (in thousands):

 

     July 31,
2014
     October 31,
2013
 

Intangibles, net

   $ 6,245       $ 7,272   

Grower advances

     716         938   

Loan to Agricola Belher

     845         1,690   

Loan to FreshRealm members

     293         283   

Note receivable from San Rafael

     1,392         1,594   

Other

     623         570   
  

 

 

    

 

 

 
   $ 10,114       $ 12,347   
  

 

 

    

 

 

 

 

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Intangible assets consist of the following (in thousands):

 

            July 31, 2014      October 31, 2013  
     Weighted-
Average
Useful Life
     Gross
Carrying
Value
     Accum.
Amortization
    Net
Book
Value
     Gross
Carrying
Value
     Accum.
Amortization
    Net
Book
Value
 

Customer list/relationships

     8.0 years       $ 7,640       $ (3,093   $ 4,547       $ 7,640       $ (2,364   $ 5,276   

Trade names

     8.3 years         2,760         (1,834     926         2,760         (1,636     1,124   

Trade secrets/recipes

     13.0 years         630         (207     423         630         (137     493   

Brand name intangibles

     indefinite         275         —          275         275         —          275   

Non-competition agreements

     5.0 years         267         (193     74         267         (163     104   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Intangibles, net

      $ 11,572       $ (5,327   $ 6,245       $ 11,572       $ (4,300   $ 7,272   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

We anticipate recording amortization expense of approximately $0.3 million for the remainder of fiscal 2014, with $1.3 million of amortization expense for fiscal year 2015, $1.2 million for fiscal year 2016, $1.1 million for each of the fiscal years 2017 and 2018, and $0.8 million for years thereafter, through fiscal year 2023.

 

6. Stock-Based Compensation

In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the “2011 Plan”). All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan. Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan.

On January 9, 2014, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares). These shares have full voting rights and participate in dividends as if unrestricted. The closing price of our stock on such date was $32.49. On January 1, 2015, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable. These shares were granted pursuant to our 2011 Management Incentive Plan.

On January 27, 2014, our executive officers were granted a total of 10,774 restricted shares. These shares have full voting rights and participate in dividends as if unrestricted. The closing price of our stock on such date was $30.50. These shares vest in one-third increments, on an annual basis, beginning January 1, 2015.

Stock options are granted with exercise prices of not less than the fair market value at grant date, generally vest over one to five years and generally expire two to five years after the grant date. We settle stock option exercises with newly issued shares of common stock.

We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. We measure the fair value of our stock based compensation awards on the date of grant.

A summary of stock option activity, related to our 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts):

 

     Number of Shares     Weighted-Average
Exercise Price
     Aggregate
Intrinsic Value
 

Outstanding at October 31, 2013

     27      $ 15.79         —     

Exercised

     (10   $ 13.25         —     
  

 

 

      

Outstanding at July 31, 2014

     17      $ 17.22       $ 604   
  

 

 

      

 

 

 

Exercisable at July 31, 2014

     13      $ 16.70       $ 466   
  

 

 

      

 

 

 

At July 31, 2014, outstanding stock options had a weighted-average remaining contractual term of 3.8 years. At July 31, 2014, exercisable stock options had a weighted-average remaining contractual term of 3.3 years. The total recognized stock-based compensation expense was insignificant for the three months ended July 31, 2014.

 

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A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

 

     Number of Shares      Weighted-Average
Exercise Price
     Aggregate
Intrinsic Value
 

Outstanding at October 31, 2013

     20       $ 22.64         —     

Outstanding at July 31, 2014

     20       $ 22.64       $ 237   
  

 

 

       

 

 

 

Exercisable at July 31, 2014

     6       $ 22.36       $ 73   
  

 

 

       

 

 

 

At July 31, 2014, outstanding stock options had a weighted-average remaining contractual term of 5.9 years. At July 31, 2014, exercisable stock options had a weighted-average remaining contractual term of 4.0 years. The total recognized stock-based compensation expense was $0.2 million and $0.5 million for the three and nine months ended July 31, 2014.

 

7. Other events

Dividend payment

On December 12, 2013, we paid a $0.70 per share dividend in the aggregate amount of $11.0 million to shareholders of record on November 29, 2013.

Contingencies

From time to time, we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

 

8. Fair value measurements

A fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

 

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The following table sets forth our financial assets and liabilities as of July 31, 2014 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

 

     Level 1      Level 2      Level 3      Total  
     (All amounts are presented in thousands)  

Assets at Fair Value:

           

Investment in Limoneira Company (1)

   $ 38,115       $ —         $ —         $ 38,115   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets at fair value

   $ 38,115       $ —         $ —         $ 38,115   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock. We currently own approximately 12% of Limoneira’s outstanding common stock. These securities are measured at fair value by quoted market prices. Limoneira’s stock price at July 31, 2014 and October 31, 2013 equaled $22.05 per share and $26.34 per share. Unrealized gains and losses are recognized through other comprehensive income. Unrealized investment holding losses arising during the three months ended July 31, 2014 was $1.6 million. Unrealized investment holding losses arising during the nine months ended July 31, 2014 was $7.4 million.

 

     Level 1      Level 2      Level 3      Total  
     (All amounts are presented in thousands)  

Liabilities at fair value:

           

Salsa Lisa contingent consideration (2)

   $ —         $ —         $ 704       $ 704   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities at fair value

   $ —         $ —         $ 704       $ 704   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(2) Each period we revalue the contingent consideration obligations to their fair value and record increases or decreases in the fair value into selling, general and administrative expense. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in assumed discount periods and rates, changes in the assumed timing and amount of revenue and expense estimates. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period. No revalue adjustments were necessary during the three and nine months ended July 31, 2014.

The following is a reconciliation of the beginning and ending amounts of the contingent consideration for Salsa Lisa:

 

     Balance at
October 31,
2013
     Interest      Revalue
Adjustment
     Balance
July 31,
2014
 
     (All amounts are presented in thousands)  

Salsa Lisa contingent consideration

   $ 676       $ 28       $ —         $ 704   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 676       $ 28       $ —         $ 704   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table sets forth our financial assets as of July 31, 2014 that are measured on a non-recurring basis during the period, segregated by level within the fair value hierarchy:

 

     Level 1      Level 2      Level 3      Total  
     (All amounts are presented in thousands)  

Assets at Fair Value:

           

Investment in FreshRealm (3)

   $ —         $ —         $ 16,962       $ 16,962   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets at fair value

   $ —         $ —         $ 16,962       $ 16,962   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(3) See Note 10 for additional information on the deconsolidation of FreshRealm. We estimated the fair value of our noncontrolling interest in FreshRealm by performing a forecast projection analysis. This analysis was conducted with the consultation from a third party consulting firm. Increases or decreases in the fair value calculation can result from changes in assumed discount periods and rates, changes in the assumed timing and amount of revenue and expense estimates. Significant judgment is employed in determining the appropriateness of these assumptions. We recorded a gain on the deconsolidation of FreshRealm of $12.6 million, which has been recorded on the face of the income statement. Our investment in FreshRealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet.

 

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9. Noncontrolling interest

The following table reconciles shareholders’ equity attributable to noncontrolling interest related to the Salsa Lisa acquisition and FreshRealm, LLC (in thousands).

 

Salsa Lisa noncontrolling interest            Three months        
ended

July 31, 2014
            Three months        
ended

July 31, 2013
 

Noncontrolling interest, beginning

   $ (104   $ 311   

Net loss attributable to noncontrolling interest

     (42     (17
  

 

 

   

 

 

 

Noncontrolling interest, ending

   $ (146   $ 294   
  

 

 

   

 

 

 

 

               Nine months          
ended

July 31, 2014
            Nine months        
ended

July 31, 2013
 

Noncontrolling interest, beginning

   $ 121      $       357   

Net loss attributable to noncontrolling interest

     (267     (63
  

 

 

   

 

 

 

Noncontrolling interest, ending

   $ (146   $ 294   
  

 

 

   

 

 

 

 

FreshRealm noncontrolling interest            Three months        
ended

July 31, 2014
            Three months        
ended

July 31, 2013
 

Noncontrolling interest, beginning

   $ 4,031      $ —     

Retroactive net loss attributable to noncontrolling interest FreshRealm

     —          (257

Deconsolidation of FreshRealm

     (4,031     —     
  

 

 

   

 

 

 

Noncontrolling interest, ending

   $ —        $ (257
  

 

 

   

 

 

 

 

               Nine months          
ended

July 31, 2014
            Nine months        
ended

July 31, 2013
 

Noncontrolling interest, beginning

   $ (6   $ —     

New member contribution

           4,610        —     

Retroactive net loss attributable to noncontrolling interest FreshRealm

     —          (257

Loss attributable to noncontrolling interest of FreshRealm

     (573     —     

Deconsolidation of FreshRealm

     (4,031     —     
  

 

 

   

 

 

 

Noncontrolling interest, ending

   $ —        $ (257
  

 

 

   

 

 

 

For the nine months ended July 31, 2014, FreshRealm has incurred $1.0 million in expenses, which has been recorded in selling, general and administrative. For the three and nine months ended July 31, 2013, FreshRealm has incurred $0.5 million in expenses. Since inception, FreshRealm had $2.9 million in cumulative losses. See Note 10 for discussion on the deconsolidation of FreshRealm on May 2, 2014.

 

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Table of Contents
10. Deconsolidation of FreshRealm, LLC

On May 2, 2014, we closed our Second Amended and Restated Limited Liability Company Agreement (Agreement) by and among FreshRealm and the ownership members of FreshRealm. The effective date of this agreement was April 30, 2014. Pursuant to this agreement, Impermanence, LLC (Impermanence) was admitted as an ownership member of FreshRealm. Impermanence contributed $10.0 million to FreshRealm for 28.6% ownership. We agreed to dilute our ownership percentage in FreshRealm, as an injection of significant working capital would reduce the immediate need of Calavo to provide operating funds to FreshRealm and would also serve to preserve the value of our investment.

As a result of the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8% and $4.6 million was attributed to noncontrolling interest. Additionally, effective April 1, 2014, the first $10.0 million of losses will be allocated primarily to Impermanence.

Even though Calavo controlled greater than 50% of the outstanding units of FreshRealm as of May 2, 2014, the minority/non-Calavo unit-holders held substantive participating rights. These rights existed primarily in two forms: (1) two out of a total of four board of director seats and (2) a provision in the Agreement that states that for situations for which the approval of the Members, as defined, (rather than the approval of the board of directors on behalf of the Members) is required by the Agreement, the Members shall act by Super-Majority Vote. Super-Majority Vote is defined in the Agreement as the affirmative vote of the holders of at least seventy percent of the outstanding units that are held by the Members. As such, Calavo cannot control FreshRealm through its two board of director seats, nor its 50.8% ownership. Based on the foregoing, we deconsolidated FreshRealm as of May 2, 2014.

As a result of the deconsolidation, we were required to record a gain related to this transaction. Pursuant to ASC 810-10-40-5, we calculated our gain on deconsolidation by considering: a) the aggregate of (1) the fair value of any retained noncontrolling investment in the former subsidiary at the date the subsidiary is deconsolidated and (2) the carrying amount of any noncontrolling interest in the former subsidiary; less b) the carrying amount of the former subsidiary’s assets and liabilities. See following table:

(As of May 2, 2014, in thousands)

 

Fair value of retained noncontrolling investment

   $ 16,962   

Carrying amount of noncontrolling interest

     4,031   

Carrying amount of FreshRealm’s assets and liabilities

     (8,371
  

 

 

 

Gain on deconsolidation of FreshRealm

   $ 12,622   
  

 

 

 

We estimated the fair value of our noncontrolling interest in FreshRealm by performing a forecast projection analysis. This analysis was conducted with the consultation from a third party consulting firm. See Note 9 to the financial statements for additional information regarding our noncontrolling interest in FreshRealm. See Note 8 to the financial statements for additional information regarding the fair value calculation and assumptions used.

Based on the above, we recorded a gain on the deconsolidation of FreshRealm of $12.6 million, which has been recorded on the face of the income statement. Our investment in FreshRealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet.

As of July 31, 2014, FreshRealm issued additional units to various 3rd parties, which reduced our ownership percentage to exactly 50%.

 

11. Subsequent events

We have evaluated subsequent events to assess the need for potential recognition or disclosure in this Quarterly Report on Form 10-Q. Such events were evaluated through the date these financial statements were issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition in the financial statements.

 

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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This information should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto included in this Quarterly Report, and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K for the year ended October 31, 2013 of Calavo Growers, Inc. (we, Calavo, or the Company).

Recent Developments

Dividend payment

On December 12, 2013, we paid a $0.70 per share dividend in the aggregate amount of $11.0 million to shareholders of record on November 29, 2013.

Contingencies

From time to time, we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

Deconsolidation of FreshRealm, LLC

On May 2, 2014, we closed our Second Amended and Restated Limited Liability Company Agreement (Agreement) by and among FreshRealm and the ownership members of FreshRealm. The effective date of this agreement was April 30, 2014. Pursuant to this agreement, Impermanence, LLC (Impermanence) was admitted as an ownership member of FreshRealm. Impermanence contributed $10.0 million to FreshRealm for 28.6% ownership. We agreed to dilute our ownership percentage in FreshRealm, as an injection of significant working capital would reduce the immediate need of Calavo to provide operating funds to FreshRealm and would also serve to preserve the value of our investment.

As a result of the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8% and $4.6 million was attributed to noncontrolling interest. Additionally, effective April 1, 2014, the first $10.0 million of losses will be allocated primarily to Impermanence.

Even though Calavo controlled greater than 50% of the outstanding units of FreshRealm as of May 2, 2014, the minority/non-Calavo unit-holders held substantive participating rights. These rights existed primarily in two forms: (1) two out of a total of four board of director seats and (2) a provision in the Agreement that states that for situations for which the approval of the Members, as defined, (rather than the approval of the board of directors on behalf of the Members) is required by the Agreement, the Members shall act by Super-Majority Vote. Super-Majority Vote is defined in the Agreement as the affirmative vote of the holders of at least seventy percent of the outstanding units that are held by the Members. As such, Calavo cannot control FreshRealm through its two board of director seats, nor its 50.8% ownership. Based on the foregoing, we deconsolidated FreshRealm as of May 2, 2014.

 

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Table of Contents

As a result of the deconsolidation, we were required to record a gain related to this transaction. Pursuant to ASC 810-10-40-5, we calculated our gain on deconsolidation by considering: a) the aggregate of (1) the fair value of any retained noncontrolling investment in the former subsidiary at the date the subsidiary is deconsolidated and (2) the carrying amount of any noncontrolling interest in the former subsidiary; less b) the carrying amount of the former subsidiary’s assets and liabilities. See following table:

(As of May 2, 2014, in thousands)

 

Fair value of retained noncontrolling investment

   $ 16,962   

Carrying amount of noncontrolling interest

     4,031   

Carrying amount of FreshRealm’s assets and liabilities

     (8,371
  

 

 

 

Gain on deconsolidation of FreshRealm

   $ 12,622   
  

 

 

 

We estimated the fair value of our noncontrolling interest in FreshRealm by performing a forecast projection analysis. This analysis was conducted with the consultation from a third party consulting firm. See Note 9 to the Financial Statements for additional information regarding our noncontrolling interest in FreshRealm. See Note 8 to the Financial Statements for additional information regarding the fair value calculation and assumptions used.

Based on the above, we recorded a gain on the deconsolidation of FreshRealm of $12.6 million, which has been recorded on the face of the income statement. Our investment in FreshRealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet.

As of July 31, 2014, FreshRealm issued additional units to various 3rd parties, which reduced our ownership percentage to exactly 50%.

Net Sales

The following table summarizes our net sales by business segment for each of the three and nine-month periods ended July 31, 2014 and 2013:

 

     Three months ended July 31,     Nine months ended July 31,  

(in thousands)

   2014     Change     2013     2014     Change     2013  

Net sales to third-parties:

            

Fresh products

   $ 129,832        3.3   $ 125,634      $ 353,506        9.4   $ 323,189   

Calavo Foods

     17,093        17.5     14,543        45,066        16.5     38,677   

RFG

     71,777        31.1     54,766        183,189        31.9     138,912   
  

 

 

     

 

 

   

 

 

     

 

 

 

Total net sales

   $ 218,702        12.2   $ 194,943      $ 581,761        16.2   $ 500,778   
  

 

 

     

 

 

   

 

 

     

 

 

 

As a percentage of net sales:

            

Fresh products

     59.4       64.4     60.8       64.6

Calavo Foods

     7.8       7.5     7.7       7.7

RFG

     32.8       28.1     31.5       27.7
  

 

 

     

 

 

   

 

 

     

 

 

 
     100.0       100.0     100.0       100.0
  

 

 

     

 

 

   

 

 

     

 

 

 

Summary

Net sales for the three months ended July 31, 2014, compared to fiscal 2013, increased by $23.8 million, or 12.2%. Net sales for the nine months ended July 31, 2014, compared to fiscal 2013, increased by $81.0 million, or 16.2%. The increases in sales, when compared to the same corresponding prior year periods, are related to increases in sales from all segments. We experienced an increase in RFG sales during the third quarter of fiscal 2014 and the nine months ended July 31, 2014, which was due primarily to increased sales from cut fruit and vegetables platters, as well as an increase in sales of deli products. We experienced an increase in Fresh product sales during the third quarter of fiscal 2014 and the nine months ended July 31, 2014, which was due primarily to increased sales of Mexican sourced avocados. Partially offsetting this increase in Fresh product sales, however, was a decrease in sales of California sourced avocados. We experienced an increase in our Calavo Foods segment during the third quarter of fiscal 2014 and the nine months ended July 31, 2014, which was due primarily to an increase in the sales of our guacamole products. While the procurement of fresh avocados related to our Fresh products segment is very seasonal, our Calavo Foods business is generally not subject to a seasonal effect.

Net sales to third parties by segment exclude value-added services billed by our Uruapan packinghouse and our Uruapan processing plant to the parent company. All intercompany sales are eliminated in our consolidated results of operations.

 

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Fresh products

Third Quarter 2014 vs. Third Quarter 2013

Net sales delivered by the Fresh products business increased by approximately $4.2 million, or 3.3%, for the third quarter of fiscal 2014, when compared to the same period for fiscal 2013. As discussed above, this increase in Fresh product sales during the third quarter of fiscal 2014 was primarily related to increased sales of Mexican sourced avocados, partially offset by a decrease in sales from California sourced avocados. See details below.

Sales of Mexican sourced avocados increased $19.5 million, or 43.8%, for the third quarter of 2014, when compared to the same prior year period. The increase in Mexican sourced avocados was primarily due to an increase in in the pounds sold, which increased by approximately 12.5 million pounds, or 40.5%. In addition, the sales price per carton also increased. The increase for the sales price per carton for Mexican sourced avocados increased by approximately 2.3%. We attribute much of this change to a higher demand for quality avocados.

Partially offsetting this increase was a decrease in sales of California sourced avocados, which decreased $12.9 million, or 17.8%, for the third quarter of 2014, when compared to the same prior year period. The decrease in California sourced avocados was due to a decrease in pounds sold. California sourced avocados sales reflect a decrease in 25.1 million pounds of avocados sold, or 36.6%, when compared to the same prior year period. We attribute most of this decrease in volume to the cyclically smaller California avocado crop for fiscal 2014. Partially offsetting this decrease, however, was the increase in the sales price per carton, which increased by approximately 29.5%. We attribute this increase primarily to a lower overall volume of avocados in the marketplace and an overall increase in the demand of quality avocados.

Sales of tomatoes decreased to $0.6 million for the third quarter of fiscal 2014, compared to $3.3 million for the same period for fiscal 2013. The decrease in sales for tomatoes is due to a decrease in cartons sold to 0.1 million cartons from 0.3 million cartons. In addition to this decrease is a decrease in the sales price per carton, which decreased approximately 72.1%.

Nine Months Ended 2014 vs. Nine Months Ended 2013

Net sales delivered by the Fresh products business increased by approximately $30.3 million, or 9.4%, for the nine months ended July 31, 2014, when compared to the same period for fiscal 2013. As discussed above, this increase in Fresh product sales during the nine months ended July 31, 2014, was primarily related to increased sales of Mexican sourced avocados, partially offset by a decrease in sales from California sourced avocados. See details below.

Sales of Mexican sourced avocados increased $57.2 million, or 31.1%, for the nine months ended July 31, 2014, when compared to the same prior year period. The increase in Mexican sourced avocados was primarily due to an increase in the sales price per carton, which increased by approximately 26.0%. We attribute this increase primarily to a lower overall volume of avocados in the marketplace and an overall increase in the demand of quality avocados. In addition, there was an increase in the pounds sold, which increased by approximately 7.5 million pounds of avocados sold, or 4.1%, when compared to the same prior year period.

Sales of Chilean sourced avocados increased $2.5 million for the nine months ended July 31, 2014, when compared to the same prior year period. The increase in Chilean sourced avocados was due to an increase in pounds sold. Chilean sourced avocados sales reflect an increased in 2.3 million pounds of avocados sold, when compared to the same prior year period. This increase in sales is due to the lower availability of other avocado sources, and an increased focus on obtaining an increased supply of avocados from more diversified sources.

Partially offsetting such increases was a decrease in sales of California sourced avocados, which decreased $26.3 million, or 25.9% for the nine months ended July 31, 2014, when compared to the same prior year period. The decrease in California sourced avocados was due to a decrease in pounds sold. California sourced avocados sales

 

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reflect a decrease in 41.0 million pounds of avocados sold, or 42.3%, when compared to the same prior year period. We attribute most of this decrease in volume to the cyclically smaller California avocado crop for fiscal 2014. Partially offsetting this decrease, however, was the increase in the sales price per carton, which increased by approximately 28.4%. We attribute this increase primarily to a lower overall volume of avocados in the marketplace and an overall increase in the demand for avocados.

Sales of tomatoes decreased to $19.7 million for the nine months ended July 31, 2014, compared to $22.7 million for the same period for fiscal 2013. The decrease in sales for tomatoes is due to a decrease in cartons sold to 1.9 million cartons from 2.6 million cartons. Partially offsetting this decrease is an increase in the sales price per carton, which increased approximately 19.3%. We attribute this increase in the per carton selling price primarily to the 2013 [tomato] suspension agreement, which increased the floor sales price of Mexican tomatoes sold in the U.S. marketplace. We do not anticipate any tomato sales during our 4th fiscal quarter.

We anticipate that net sales related to Mexican sourced avocados will increase during our fourth fiscal quarter of 2014, as compared to the third fiscal quarter of 2014. We anticipate that sales of Mexican grown avocados will increase in the fourth quarter of fiscal 2014, when compared to the same prior year period, due to higher overall volume.

We anticipate that California avocado sales will experience a seasonal and cyclical decrease during our fourth fiscal quarter of 2014, as compared to the third quarter of fiscal 2014. We believe that there will be a decrease in California avocado volume when compared to the fourth fiscal quarter of 2013.

Calavo Foods

Third Quarter 2014 vs. Third Quarter 2013

Sales for Calavo Foods for the quarter ended July 31, 2014, when compared to the same period for fiscal 2013, increased $2.6 million, or 17.5%. This increase is due to an increase in sales of prepared guacamole products which increased approximately $2.7 million, or 19.5%, in the third quarter of fiscal year 2014, when compared to the same prior year period. The increase in sales of prepared guacamole was primarily related to an increase in overall pounds sold, which increased 1.3 million pounds, or 21.1%.

Nine Months Ended 2014 vs. Nine Months Ended 2013

Sales for Calavo Foods for the nine months ended July 31, 2014, when compared to the same period for fiscal 2013, increased $6.4 million, or 16.5%. This increase is due to an increase in sales of prepared guacamole products which increased approximately $6.8 million, or 18.5%, for the nine months ended July 31, 2014, when compared to the same prior year period. The increase in sales of prepared guacamole was primarily related to an increase in overall pounds sold, which increased 3.9 million pounds, or 24.5%, partially offset by a decrease in the average net selling price per pound for both our frozen guacamole products and our refrigerated guacamole products of approximately 2.6%, primarily due to a change in the product mix.

RFG

Third Quarter 2014 vs. Third Quarter 2013

Sales for RFG for the quarter ended July 31, 2014, when compared to the same period for fiscal 2013, increased $17.0 million, or 31.1%. This increase is due primarily to increased sales from cut fruit and vegetable platters, as well as an increase in sales of deli products. The overall increase in sales is primarily due to an increase in sales volume. Collectively, cut fruit, cut vegetable, and deli product sales increased 4.9 million units, or 23.8%. We believe the overall increase in sales volume is primarily due to an increase in demand for the variety of innovative products that we offer.

 

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Nine Months Ended 2014 vs. Nine Months Ended 2013

Sales for RFG for the nine months ended July 31, 2014, when compared to the same period for fiscal 2013, increased $44.3 million, or 31.9%. This increase is due primarily to increased sales from cut fruit and vegetable platters, as well as an increase in sales of deli products. The overall increase in sales is primarily due to an increase in sales volume. Collectively, cut fruit, cut vegetable, and deli product sales increased 15.2 million units, or 29.0%. We believe the overall increase in sales volume is primarily due to an increase in demand for the variety of innovative products that we offer.

Gross Margins

The following table summarizes our gross margins and gross profit percentages by business segment for each of the three and nine-month periods ended July 31, 2014 and 2013:

 

     Three months ended July 31,     Nine months ended July 31,  

(in thousands)

   2014     Change     2013     2014     Change     2013  

Gross margins:

            

Fresh products

   $ 9,514        2.6   $ 9,271      $ 25,405        26.4   $ 20,106   

Calavo Foods

     3,840        (18.0 )%      4,683        10,255        (15.1 )%      12,074   

RFG

     7,591        84.1     4,124        17,952        70.0     10,558   
  

 

 

     

 

 

   

 

 

     

 

 

 

Total gross margins

   $ 20,945        15.9   $ 18,078      $ 53,612        25.4   $ 42,738   
  

 

 

     

 

 

   

 

 

     

 

 

 

Gross profit percentages:

            

Fresh products

     7.3       7.4     7.2       6.2

Calavo Foods

     22.5       32.2     22.8       31.2

RFG

     10.6       7.5     9.8       7.6

Consolidated

     9.6       9.3     9.2       8.5

Summary

Our cost of goods sold consists predominantly of fruit costs, packing materials, freight and handling, labor and overhead (including depreciation) associated with preparing food products and other direct expenses pertaining to products sold. Gross margins increased by approximately $2.9 million, or 15.9%, for the third quarter of fiscal 2014, when compared to the same period for fiscal 2013. Gross margins increased by approximately $10.9 million, or 25.4%, for the first nine months of fiscal 2014 when compared to the same period for fiscal 2013. These increases were attributable to gross margin increases in our Fresh products and RFG segments, partially offset by a decrease in our Calavo Foods segment.

Fresh products

During our three month periods of fiscal 2014, as compared to the same prior year periods, the decrease in our Fresh products segment gross margin percentage was primarily the result of a decrease in the gross margin percentage for California sourced avocados for the three month periods of fiscal 2014, as compared to the same prior year periods. This decrease is due to the smaller California avocado crop in fiscal 2014, which increases per pound operating costs and decreases the overall gross margin. Partially offsetting this decrease, Mexican sourced avocados gross margin percentage increased from 2.1% in prior year to 5.7% in the current year. In the current year, we were able to manage the spread between the sales price and the fruit cost of Mexican sourced avocados more effectively, as average sales prices increased 16.0%, while average costs of goods sold increased 15.0% from the second quarter of fiscal 2014 to the third quarter of fiscal 2014. In the prior year, average sales prices increased 17.8%, while average costs of goods sold increased 19.5% from the second quarter of fiscal 2013 to the third quarter of fiscal 2013.

During our nine months ended July 31, 2014, as compared to the same prior year periods, the increase in our Fresh products segment gross margin percentage was primarily the result of significantly higher Mexican sourced

 

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avocado fruit costs in the prior year that uncharacteristically increased at a pace faster than anticipated in the latter part of March 2013 and remained higher than expected through April 2013. In the prior year, the average sales price of Mexican sourced avocados increased 3.2%, yet average fruit costs increased 31.8% from the first quarter of fiscal 2013 to the second quarter of fiscal 2013. In the current year, we were able to manage the spread between the sales price and the fruit cost of Mexican sourced avocados more effectively, as average sales prices increased 16.8%, while average fruit costs increased 18.4% from the first quarter of fiscal 2014 to the second quarter of fiscal 2014.

Calavo Foods

The Calavo Foods segment gross margin percentage during our three and nine months ended July 31, 2014, when compared to the same prior year periods, decreased primarily due to an increase in fruit costs. Fruit costs increased during our three and nine months ended July 31, 2014, by approximately 16.1% and 20.7%. In addition, gross margins decreased due to an increase in sales of frozen, high volume but low margin customers. Partially offsetting these decreases to the gross margin percentage was the strengthening of the U.S. Dollar compared to the Mexican Peso, which decreased many of our per pound costs. We anticipate that the gross margin percentage for our Calavo Foods segment will continue to experience significant fluctuations during this fiscal year primarily due to the uncertainty of the cost of fruit that will be used in the production process. In addition, any significant fluctuation in the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Fresh products and Calavo Foods segments.

RFG

RFG’s improved gross-margin is reflective of certain economies of scale resulting from significant sales growth (see discussion above), improved labor utilization and improved raw-material quality and yield. Benefits from superior fruit quality/yield extend beyond just lower fruit costs, but also reduce other costs, including the labor needed to process such fruit.

Selling, General and Administrative

 

     Three months ended July 31,     Nine months ended July 31,  
(in thousands)    2014     Change     2013     2014     Change     2013  

Selling, general and administrative

   $ 9,431        8.3   $ 8,706      $ 26,814        4.3   $ 25,717   

Percentage of net sales

     4.3       4.5     4.6       5.1

Selling, general and administrative expenses include costs of marketing and advertising, sales expenses and other general and administrative costs. Selling, general and administrative expenses increased $0.7 million, or 8.3%, for the three months ended July 31, 2014, when compared to the same period for fiscal 2013. This increase was primarily related to higher corporate costs, including, but not limited to, general and administrative costs related to accrued management bonuses (approximately $1.3 million), salaries (approximately $0.4 million), and stock option expense (approximately $0.1 million), partially offset by decreases in the RFG revalue adjustment of contingent consideration (approximately $0.4 million) and the start-up operations of FreshRealm (approximately $0.7 million).

Selling, general and administrative expenses increased $1.1 million, or 4.3%, for the nine months ended July 31, 2014, when compared to the same period for fiscal 2013. This increase was primarily related to higher corporate costs, including, but not limited to, general and administrative costs related to accrued management bonuses (approximately $2.1 million), salaries (approximately $0.6 million), stock option expense (approximately $0.2 million) accounting fees (approximately $0.2 million), bad debt expense (approximately $0.1 million) and employee benefits (approximately $0.1 million), partially offset by a decrease in the RFG revalue adjustment of contingent consideration (approximately $1.7 million), the start-up operations of FreshRealm (approximately $0.4 million), and promotions and advertising (approximately $0.1 million).

 

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Provision for Income Taxes

 

     Three months ended July 31,     Nine months ended July 31,  
(in thousands)    2014     Change     2013     2014     Change     2013  

Provision for income taxes

   $ 8,064        154.9   $ 3,163      $ 13,318        131.9   $ 5,742   

Percentage of income before provision for income taxes

     33.5       34.1     34.0       34.3

For the third quarter of fiscal 2014, our provision for income taxes was $8.1 million, as compared to $3.2 million recorded for the comparable prior year period.

For the first nine months of fiscal 2014, our provision for income taxes was $13.3 million, as compared to $5.7 million recorded for the comparable prior year period. We expect our effective tax rate to approximate 34.9% during fiscal 2014.

Liquidity and Capital Resources

Cash provided by operating activities was $27.5 million for the nine months ended July 31, 2014, compared to $15.6 million provided operations for the similar period in fiscal 2013. Operating cash flows for the nine months ended July 31, 2014 reflect our net income of $25.9 million, net decrease in non-cash activities (depreciation and amortization, stock compensation expense, interest on deferred consideration, gain on deconsolidation of FreshRealm and income from unconsolidated entities) of $6.9 million and a net increase in the noncash components of our operating capital of approximately $8.5 million.

Our operating capital increase includes a net increase in trade accounts payable and accrued expenses of $9.8 million, an increase in payable to growers of $7.3 million, an increase in income taxes payable of $3.7 million, a decrease in income tax receivable of $2.2 million, a decrease in advances to suppliers of $1.8 million, and a decrease in other assets of $0.1 million, partially offset by an increase in prepaid expenses and other current assets of $3.3 million, an increase in inventory of $4.3 million, and a net increase in accounts receivable of $8.8 million.

The increase in payable to growers primarily reflects an increase in California fruit delivered in the month of July 2014, as compared to October 2013. The decrease in advances to suppliers primarily reflects fewer advances made to Agricola Belher related to the receipt of tomatoes in July 2014, compared to October 2013. The increase in inventory is primarily related to an increase in the fresh fruit on hand at July 31, 2014. This was primarily driven by an increase in the volume of California avocados purchased during our third fiscal quarter of 2014, as compared to October 2013. The increase in our accounts receivable, as of July 31, 2014, when compared to October 31, 2013, primarily reflects higher sales recorded in the month of July 2014, as compared to October 2013.

Cash used in investing activities was $15.8 million for the nine months ended July 31, 2014, which related to the purchase of property, plant and equipment items of $7.1 million, the deconsolidation of FreshRealm, net of cash $6.8 million, an investment of $1.7 million to the new joint venture which is expected to operate under the name of Agricola Don Memo, and an investment in an unconsolidated entity of $0.2 million.

Cash used in financing activities was $10.3 million for the nine months ended July 31, 2014, which related principally to the payment of our $11.0 million dividend, payments on our credit facilities totaling $5.2 million and payments on long-term obligations of $4.2 million, partially offset by proceeds received for the issuance of FreshRealm stock of $10.0 million (see Note 10 in the consolidated financial statements for more information) and exercises of stock options of $0.1 million.

Our principal sources of liquidity are our existing cash balances, cash generated from operations and amounts available for borrowing under our existing credit facilities. Cash and cash equivalents as of July 31, 2014 and October 31, 2013 totaled $9.4 million and $8.0 million. Our working capital at July 31, 2014 was $22.7 million, compared to $12.4 million at October 31, 2013.

 

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We believe that cash flows from operations and available credit facilities will be sufficient to satisfy our future capital expenditures, grower recruitment efforts, working capital and other financing requirements. We will continue to evaluate grower recruitment opportunities and exclusivity arrangements with food service companies to fuel growth in each of our business segments. Our non-collateralized, revolving credit facilities with Farm Credit West, PCA and Bank of America, N.A. expire in February 2016. Under the terms of these agreements, we are advanced funds for both working capital and long-term productive asset purchases. Total credit available under these combined borrowing agreements was $65 million, with a weighted-average interest rate of 1.7% at July 31, 2014 and October 31, 2013. Under these credit facilities, we had $28.7 million and $34.0 million outstanding as July 31, 2014 and October 31, 2013. These credit facilities contain various financial covenants, the most significant relating to Tangible Net Worth (as defined), Current Ratio (as defined), and Fixed Charge Coverage Ratio (as defined). We were in compliance with all such covenants at July 31, 2014.

Contractual Obligations

There have been no material changes to our contractual commitments from those previously disclosed in our Annual Report on Form 10-K for our fiscal year ended October 31, 2013. For a summary of the contractual commitments at October 31, 2013, see Part II, Item 7, in our 2013 Annual Report on Form 10-K.

Impact of Recently Issued Accounting Pronouncements

See Note 1 to the consolidated condensed financial statements that are included in this Quarterly Report on Form 10-Q.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial instruments include cash and cash equivalents, accounts receivable, payable to growers, accounts payable, current and long-term borrowings pursuant to our credit facilities with financial institutions, and long-term, fixed-rate obligations. All of our financial instruments are entered into during the normal course of operations and have not been acquired for trading purposes. The table below summarizes interest rate sensitive financial instruments and presents principal cash flows in U.S. dollars, which is our reporting currency, and weighted-average interest rates by expected maturity dates, as of July 31, 2014.

 

(All amounts in thousands)    Expected maturity date July 31,  
     2014      2015      2016      2017      2018      Thereafter      Total      Fair Value  

Assets

                       

Cash and cash equivalents (1)

   $ 9,436       $ —         $ —         $ —         $ —         $ —         $ 9,436       $ 9,436   

Accounts receivable (1)

     63,731         —           —           —           —           —           63,731         63,731   

Advances to suppliers (1)

     1,385         —           —           —           —           —           1,385         1,385   

Liabilities

                       

Payable to growers (1)

   $ 20,920       $ —         $ —         $ —         $ —         $ —         $ 20,920       $ 20,920   

Accounts payable (1)

     16,061         —           —           —           —           —           16,061         16,061   

Current borrowings pursuant to credit facilities (1)

     28,740         —           —           —           —           —           28,740         28,740   

Fixed-rate long-term obligations (2)

     5,231         3,047         112         92         92         286         8,860         8,965   

 

(1) We believe the carrying amounts of cash and cash equivalents, accounts receivable, advances to suppliers, payable to growers, accounts payable, and current borrowings pursuant to credit facilities approximate their fair value due to the short maturity of these financial instruments.
(2) Fixed-rate long-term obligations bear interest rates ranging from 1.7% to 5.7% with a weighted-average interest rate of 2.8%. We believe that loans with a similar risk profile would currently yield a return of 2.5%. We project the impact of an increase or decrease in interest rates of 100 basis points would result in a change of fair value of approximately $136,000.

Except as disclosed with the acquisition of Calavo Salsa Lisa and RFG (and related amendments), we were not a party to any derivative instruments during the fiscal year. It is currently our intent not to use derivative instruments for speculative or trading purposes. Additionally, we do not use any hedging or forward contracts to offset market volatility.

Our Mexican-based operations transact business in Mexican pesos. Funds are transferred by our corporate office to Mexico on a weekly basis to satisfy domestic cash needs. Historically, the consistency of the spot rate for the Mexican peso has led to a small-to-moderate impact on our operating results. We do not anticipate using derivative instruments to hedge fluctuations in the Mexican peso to U.S. dollar exchange rates during fiscal 2014. Total foreign currency losses for the three months ended July 31, 2014, net of gains, was less than $0.1 million. Total foreign currency losses for the three months ended July 31, 2013, net of gains, was $0.1 million. Total foreign currency losses for the nine months ended July 31, 2014 and 2013, net of gains, was $0.1 million and $0.4 million.

 

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective.

There were no changes in the Company’s internal control over financial reporting during the quarter ended July 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

See Item 2 of Part I with respect to the resolution of the Hacienda Suits, which is incorporated by reference, into this Item 1.

We are involved in litigation in the ordinary course of business, none of which we believe will have a material adverse impact on our financial position or results of operations.

 

ITEM 1A. RISK FACTORS

For a discussion of our risk factors, see Part 1, item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended October 31, 2013. There have been no material changes from the risk factors set forth in such Annual Report on Form 10-K. However, the risks and uncertainties that we face are not limited to those set forth in the 2013 Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.

 

ITEM 6. EXHIBITS

 

  31.1    Certification of Chief Executive Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Principal Financial Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
101    The following financial information from the Quarterly Report on Form 10-Q of Calavo Growers, Inc. for the quarter ended July 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Condensed Balance Sheets as of July 31, 2014 and October 31, 2013; (2) Consolidated Condensed Statements of Income for the three and nine months ended July 31, 2014 and 2013; (3) Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended July 31, 2014 and 2013; (4) Consolidated Condensed Statements of Cash Flows for the nine months ended July 31, 2014 and 2013; and (5) Notes to Unaudited Condensed Financial Statements.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Calavo Growers, Inc.
    (Registrant)
Date: September 12, 2014      
    By  

/s/ Lecil E. Cole

      Lecil E. Cole
      Chairman of the Board of Directors, Chief Executive Officer and President
      (Principal Executive Officer)
Date: September 12, 2014      
    By  

/s/ Arthur J. Bruno

      Arthur J. Bruno
      Chief Operating Officer, Chief Financial Officer and Corporate Secretary
      (Principal Financial Officer)

 

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INDEX TO EXHIBITS

 

Exhibit
Number

  

Description

  31.1    Certification of Chief Executive Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Principal Financial Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
101    The following financial information from the Quarterly Report on Form 10-Q of Calavo Growers, Inc. for the quarter ended July 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Condensed Balance Sheets as of July 31, 2014 and October 31, 2013; (2) Consolidated Condensed Statements of Income for the three and nine months ended July 31, 2014 and 2013; (3) Consolidated Condensed Statements of Comprehensive Income for the three nine months ended July 31, 2014 and 2013; (4) Consolidated Condensed Statements of Cash Flows for the nine months ended July 31, 2014 and 2013; and (5) Notes to Unaudited Condensed Financial Statements.

 

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