Calavo Growers, Inc. 2014 AnnuAl RePoR t
Calavo Growers, Inc. 1141A Cummings Road, Santa Paula, California 93060 www.calavo.com
Eat. Live. Grow.
Revenue
(dollars in millions)
$522.5
$551.1
$398.4
$782.5
$691.5
2010
2011
2012
2013
2014
Gross Margins
(dollars in millions)
$51.5
$42.3
$60.7
$59.4
$71.2
2010
2011
2012
2013
2014
Net Income
(dollars in millions)
$25.0**
$17.8
$17.1*
$17.3*
$11.1
2010
2011
2012
2013
2014
Earnings Per Share
(in dollars)
$1.22
$0.75
Ours is a company and industry story that continues to unfold—now
90 years in the making.
Calavo Growers, Inc. was the force behind the launch of the modern avocado
industry—and continues leading it to this day. We introduced and established
the market for the delicious, pebble-skinned fruit. In effect, our company has
played an influential role in What We Eat—spawning a near-century-long love
affair between consumers and their avocados that grows with each passing year.
Our avocados and other fresh foods are welcomed into homes—and lives—
finding a place at cherished family dinners or game-day parties with friends. A
taste of a wholesome, delicious Calavo avocado may harken a beloved childhood
memory of being hoisted on dad’s shoulders to pull down fruit right from the tree.
Over this same time span, we have witnessed and responded to the massive
shift in How We Live. People are busier and more time-constrained than
ever—two working-adult families, smaller households and the pace of urban
lives. Demand for fresher, healthier food grows at a staggering clip, as does the
need for convenience. Our success in diversifying into a full-line leader in fresh
refrigerated packaged goods points to our deep understanding of the dynamics
driving today’s consumers.
Most importantly, these achievements underscore Why We Grow, most
notably posting record operating results again in fiscal 2014. We remain focused
squarely on maximizing value for shareholders. Yet, even as our company
grows, we hold true to the values—integrity, quality and stewardship, among
them—that have guided Calavo since its humble roots.
$1.45††
$1.13†
$1.11†
Eat. Live. Grow. There’s nothing more fundamental. There’s nothing
that better defines Calavo.
(*) Adjusted Annual net Income before RFG non-cash contingent consideration
expense equal to $1.3 million (2012) and $19.1 million (2013). After amounts,
net income totaled $15.8 million (2012) and a net loss of $1.8 million (2013).
(**) Adjusted Annual net Income before RFG non-cash contingent
consideration expense of $33.2 million and including gain of $8.3 from
deconsolidation of FreshRealm. After amounts, net income totaled $0.1 million
(†) After RFG non-cash contingent consideration, mentioned above, diluted epS
totaled $1.05 (2012) and a net loss per share of $0.12 (2013).
(††) After RFG non-cash contingent consideration, and including the gain on
deconsolidation of FreshRealm, diluted epS totaled $0.01.
2010
2011
2012
2013
2014
Calavo Growers, Inc. 2014 AnnuAl RepoR t
1 .
Revenue
(dollars in millions)
$522.5
$551.1
$398.4
$782.5
$691.5
2010
2011
2012
2013
2014
Gross Margins
(dollars in millions)
$51.5
$42.3
$60.7
$59.4
$71.2
2010
2011
2012
2013
2014
Net Income
(dollars in millions)
$25.0**
$17.8
$17.1*
$17.3*
$11.1
2010
2011
2012
2013
2014
Earnings Per Share
(in dollars)
$1.22
$0.75
Ours is a company and industry story that continues to unfold—now
90 years in the making.
Calavo Growers, Inc. was the force behind the launch of the modern avocado
industry—and continues leading it to this day. We introduced and established
the market for the delicious, pebble-skinned fruit. In effect, our company has
played an influential role in What We Eat—spawning a near-century-long love
affair between consumers and their avocados that grows with each passing year.
Our avocados and other fresh foods are welcomed into homes—and lives—
finding a place at cherished family dinners or game-day parties with friends. A
taste of a wholesome, delicious Calavo avocado may harken a beloved childhood
memory of being hoisted on dad’s shoulders to pull down fruit right from the tree.
Over this same time span, we have witnessed and responded to the massive
shift in How We Live. People are busier and more time-constrained than
ever—two working-adult families, smaller households and the pace of urban
lives. Demand for fresher, healthier food grows at a staggering clip, as does the
need for convenience. Our success in diversifying into a full-line leader in fresh
refrigerated packaged goods points to our deep understanding of the dynamics
driving today’s consumers.
Most importantly, these achievements underscore Why We Grow, most
notably posting record operating results again in fiscal 2014. We remain focused
squarely on maximizing value for shareholders. Yet, even as our company
grows, we hold true to the values—integrity, quality and stewardship, among
them—that have guided Calavo since its humble roots.
$1.45††
$1.13†
$1.11†
Eat. Live. Grow. There’s nothing more fundamental. There’s nothing
that better defines Calavo.
(*) Adjusted Annual net Income before RFG non-cash contingent consideration
expense equal to $1.3 million (2012) and $19.1 million (2013). After amounts,
net income totaled $15.8 million (2012) and a net loss of $1.8 million (2013).
(**) Adjusted Annual net Income before RFG non-cash contingent
consideration expense of $33.2 million and including gain of $8.3 from
deconsolidation of FreshRealm. After amounts, net income totaled $0.1 million
(†) After RFG non-cash contingent consideration, mentioned above, diluted epS
totaled $1.05 (2012) and a net loss per share of $0.12 (2013).
(††) After RFG non-cash contingent consideration, and including the gain on
deconsolidation of FreshRealm, diluted epS totaled $0.01.
2010
2011
2012
2013
2014
Calavo Growers, Inc. 2014 AnnuAl RepoR t
1 .
our advanced ripening technologies and
Per capita U.S. fresh avocado
One avocado daily as part of a moderate-fat diet improved the cholesterol
sophisticated distribution network keep us on
consumption today registers about 5
ratios of overweight and obese men and women who participated in a recent
the cusp of change. This videm seninterit, qua con
lbs. That’s up two-fold from a
study by The Pennsylvania State University. Researchers concluded that food
tam tere tem ata, ses viris endam ternihilius. Ferei ia vocuppl
decade ago. An abundant, year-round supply of
sources rich in monounsaturated fats, fiber and phytosterols—all found in
fresh fruit sourced from California, Mexico, Chile and
avocados—“...confer greater cardiovascular health benefits...”
peru helps meet rising demand—and drives Calavo’s
market leadership.
et Catin hilicaet vicae qua con tam tere tem ata, ses viris endam
ternihilius. Ferei ia nostribus audemque macto hocri publiam
intraedesus C. Ro, ocultis fica me ex me mod con rebusta, vente,
omniam terum.
Ferei ia vocuppl intraedesus C. Ro, ocultis fica me ex me mod con
Notably, the Penn State diet that included avocado
rebusta, vente, et Catin hilicaet vicae quon tarterid red stium vicaes
provided 35 percent more fiber than those that did not.
consuliam aut ignatum tem iae, C. Ime nox modicup iortem et?
Awareness of the fruit’s healthful properties continues
Alemquam poenti in dit gractorae auc ina, nostribus audemque
to be a driver of increased avocado consumption. In
addition to monounsaturated “good fat,” avocados are
packed with potassium—nearly twice as much as found
in a banana—and have the highest levels of protein
macto hocri publiam omniam terum.
etium publia ac te confirm aximpermius; ne nostra, nonsule
found in any fruit. It is no wonder that avocados
rfermili in Ita rena mo videm seninterit, qua con tam tere tem
were named a 2015 superfood in a recent poll of 500
ata, ses viris endam ternihilius. Ferei ia vocuppl intraedesus C.
dieticians. And, avocados even have the ability to
Ro, ocultis fica me ex me mod con rebusta, vente, et Catin hilicaet
lessen the inflammatory properties of other foods eaten
vicae quon tarterid red stium vicaes consuliam aut ignatum tem
alongside them, including red meat, according to a
iae, C. Ime nox modicup iortem et? Alemquam poenti in dit
study at U.C.L.A.
gractorae auc ina, nostribus audemque macto hocri publiam
Eat...
Eat...
Calavo Growers, Inc. 2014 AnnuAl RepoR t
2 . 3
our advanced ripening technologies and
Per capita U.S. fresh avocado
One avocado daily as part of a moderate-fat diet improved the cholesterol
sophisticated distribution network keep us on
consumption today registers about 5
ratios of overweight and obese men and women who participated in a recent
the cusp of change. This videm seninterit, qua con
lbs. That’s up two-fold from a
study by The Pennsylvania State University. Researchers concluded that food
tam tere tem ata, ses viris endam ternihilius. Ferei ia vocuppl
decade ago. An abundant, year-round supply of
sources rich in monounsaturated fats, fiber and phytosterols—all found in
fresh fruit sourced from California, Mexico, Chile and
avocados—“...confer greater cardiovascular health benefits...”
peru helps meet rising demand—and drives Calavo’s
market leadership.
et Catin hilicaet vicae qua con tam tere tem ata, ses viris endam
ternihilius. Ferei ia nostribus audemque macto hocri publiam
intraedesus C. Ro, ocultis fica me ex me mod con rebusta, vente,
omniam terum.
Ferei ia vocuppl intraedesus C. Ro, ocultis fica me ex me mod con
Notably, the Penn State diet that included avocado
rebusta, vente, et Catin hilicaet vicae quon tarterid red stium vicaes
provided 35 percent more fiber than those that did not.
consuliam aut ignatum tem iae, C. Ime nox modicup iortem et?
Awareness of the fruit’s healthful properties continues
Alemquam poenti in dit gractorae auc ina, nostribus audemque
to be a driver of increased avocado consumption. In
addition to monounsaturated “good fat,” avocados are
packed with potassium—nearly twice as much as found
in a banana—and have the highest levels of protein
macto hocri publiam omniam terum.
etium publia ac te confirm aximpermius; ne nostra, nonsule
found in any fruit. It is no wonder that avocados
rfermili in Ita rena mo videm seninterit, qua con tam tere tem
were named a 2015 superfood in a recent poll of 500
ata, ses viris endam ternihilius. Ferei ia vocuppl intraedesus C.
dieticians. And, avocados even have the ability to
Ro, ocultis fica me ex me mod con rebusta, vente, et Catin hilicaet
lessen the inflammatory properties of other foods eaten
vicae quon tarterid red stium vicaes consuliam aut ignatum tem
alongside them, including red meat, according to a
iae, C. Ime nox modicup iortem et? Alemquam poenti in dit
study at U.C.L.A.
gractorae auc ina, nostribus audemque macto hocri publiam
Eat...
Eat...
Calavo Growers, Inc. 2014 AnnuAl RepoR t
2 . 3
...Fresh.
The Hass Avocado Board has a budget of nearly $50 million in 2015,
principally for advertising, marketing and promotion. A Super Bowl ad
by Avocados from Mexico, “First Draft Ever,” was one of this year’s most
talked about and widely publicized. Evolving demographics, awareness
of healthful benefits and new ways to enjoy avocados—along with
promotion—are driving consumption upward.
Eat...
4 . 5
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Per capita annual U.S. avocado consumption has
risen to 5 pounds, up from 1.5 pounds in the past
two decades. More than half of all American grocery
shoppers today purchase avocados and, as a result
of advanced pre-conditioning technologies such
as Calavo’s ProRipeVIP™, fruit is now available in
produce sections ripe and ready-to-eat—another
boon to consumption. Year-round availability of
fruit, thanks to an abundant supply of avocados
sourced from Mexico and South America, are another
key factor. Add to that shifting demographics—a
burgeoning Hispanic population in the U.S., 97
percent of which buy avocados regularly—and it
adds up to consumption trending toward two billion
pounds annually.
...Fresh.
The Hass Avocado Board has a budget of nearly $50 million in 2015,
principally for advertising, marketing and promotion. A Super Bowl ad
by Avocados from Mexico, “First Draft Ever,” was one of this year’s most
talked about and widely publicized. Evolving demographics, awareness
of healthful benefits and new ways to enjoy avocados—along with
promotion—are driving consumption upward.
Eat...
4 . 5
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Per capita annual U.S. avocado consumption has
risen to 5 pounds, up from 1.5 pounds in the past
two decades. More than half of all American grocery
shoppers today purchase avocados and, as a result
of advanced pre-conditioning technologies such
as Calavo’s ProRipeVIP™, fruit is now available in
produce sections ripe and ready-to-eat—another
boon to consumption. Year-round availability of
fruit, thanks to an abundant supply of avocados
sourced from Mexico and South America, are another
key factor. Add to that shifting demographics—a
burgeoning Hispanic population in the U.S., 97
percent of which buy avocados regularly—and it
adds up to consumption trending toward two billion
pounds annually.
Calavo’s Renaissance Food Group is a rapidly expanding player in the “sweet
spot” of the grocery industry: the fresh-prepared segment. Consulting firm
A.T. Kearney forecasts that dollar sales of the $26 billion fresh-prepared
segment will expand at a 6 to 7 percent compound annual growth rate
(CAGR) through 2017, outpacing the 2 to 3 percent CAGR of retail grocery food
and beverage overall.
RFG is widely hailed for its rate and breadth of product
innovation and the speed-to-shelf applied to every
aspect of its business. Backed by Calavo’s vast resources,
the business unit continues to expand its footprint
in the retail grocery channel through a portfolio of
ultra-fresh, high-quality products marketed under the
Garden Highway and Chef Essentials brands. RFG’s
expansive portfolio of offerings—with new items added
frequently—is enabling the fast-growth unit to penetrate
the grocery channel through produce, meat and deli
departments, as well as the foodservice category and
other high-volume operations.
Live...
Eat...
Calavo Growers, Inc. 2014 AnnuAl RepoR t
6 . 7
Calavo’s Renaissance Food Group is a rapidly expanding player in the “sweet
spot” of the grocery industry: the fresh-prepared segment. Consulting firm
A.T. Kearney forecasts that dollar sales of the $26 billion fresh-prepared
segment will expand at a 6 to 7 percent compound annual growth rate
(CAGR) through 2017, outpacing the 2 to 3 percent CAGR of retail grocery food
and beverage overall.
RFG is widely hailed for its rate and breadth of product
innovation and the speed-to-shelf applied to every
aspect of its business. Backed by Calavo’s vast resources,
the business unit continues to expand its footprint
in the retail grocery channel through a portfolio of
ultra-fresh, high-quality products marketed under the
Garden Highway and Chef Essentials brands. RFG’s
expansive portfolio of offerings—with new items added
frequently—is enabling the fast-growth unit to penetrate
the grocery channel through produce, meat and deli
departments, as well as the foodservice category and
other high-volume operations.
Live...
Eat...
Calavo Growers, Inc. 2014 AnnuAl RepoR t
6 . 7
Smaller households and urban consumers want convenient, healthier and
Per capita U.S. fresh avocado
fresher products. As a result, sales of fresh-cut fruit and snacking vegetables
consumption today registers about 5
grew 20 percent last year, while salad kit sales jumped a formidable 26
lbs. That’s up two-fold from a
percent, according to Nielsen industry data. Convenient produce options that
decade ago. An abundant, year-round supply of
fit the “semi-prepared” bill appeal to consumers who want to feel involved in
fresh fruit sourced from California, Mexico, Chile and
meal preparation, regardless of a lack of cooking skills or kitchen space.
peru helps meet rising demand—and drives Calavo’s
market leadership.
our advanced ripening technologies and
sophisticated distribution network keep us on the
cusp of change. This videm seninterit, qua con tam tere tem
ata, ses viris endam ternihilius. Ferei ia vocuppl intraedesus C.
nostribus audemque macto hocri publiam omniam terum.
Ro, ocultis fica me ex me mod con rebusta, vente, et Catin hilicaet
vicae qua con tam tere tem ata, ses viris endam ternihilius. Ferei ia
Active, busy lifestyles have precipitated these eating
changes. Recognizing this opportunity, Calavo jumped
into the refrigerated fresh food category through its 2011
acquisition of RFG, which has been a resounding success
and a model for future transactions. In RFG, Calavo
identified a well-managed company that understood the
intricacies of the fresh prepared foods segment: factors
such as the supply chain and distribution, frequent
inventory turnover and optimized product assortment.
Leveraging the resources of its new parent, RFG revenues
have expanded more than 150 percent since it became
part of Calavo, while earnings before interest, taxes,
depreciation and amortization (EBITDA) have risen
seven-fold.
...Healthy.
8 . 9
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Smaller households and urban consumers want convenient, healthier and
Per capita U.S. fresh avocado
fresher products. As a result, sales of fresh-cut fruit and snacking vegetables
consumption today registers about 5
grew 20 percent last year, while salad kit sales jumped a formidable 26
lbs. That’s up two-fold from a
percent, according to Nielsen industry data. Convenient produce options that
decade ago. An abundant, year-round supply of
fit the “semi-prepared” bill appeal to consumers who want to feel involved in
fresh fruit sourced from California, Mexico, Chile and
meal preparation, regardless of a lack of cooking skills or kitchen space.
peru helps meet rising demand—and drives Calavo’s
market leadership.
our advanced ripening technologies and
sophisticated distribution network keep us on the
cusp of change. This videm seninterit, qua con tam tere tem
ata, ses viris endam ternihilius. Ferei ia vocuppl intraedesus C.
nostribus audemque macto hocri publiam omniam terum.
Ro, ocultis fica me ex me mod con rebusta, vente, et Catin hilicaet
vicae qua con tam tere tem ata, ses viris endam ternihilius. Ferei ia
Active, busy lifestyles have precipitated these eating
changes. Recognizing this opportunity, Calavo jumped
into the refrigerated fresh food category through its 2011
acquisition of RFG, which has been a resounding success
and a model for future transactions. In RFG, Calavo
identified a well-managed company that understood the
intricacies of the fresh prepared foods segment: factors
such as the supply chain and distribution, frequent
inventory turnover and optimized product assortment.
Leveraging the resources of its new parent, RFG revenues
have expanded more than 150 percent since it became
part of Calavo, while earnings before interest, taxes,
depreciation and amortization (EBITDA) have risen
seven-fold.
...Healthy.
8 . 9
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Calavo is widely recognized as a logistics and distribution powerhouse.
Three Value-Added Depots (VADs), along with six strategically situated RFG
production facilities, provide the company with seamless distribution coverage
of North America. The VADs, equipped with our ProRipeVIP™ technology, allow
the company to ship fresh avocados pre-conditioned to customers’ precise
specifications. Speedy RFG excels in just-in-time distribution with orders
expedited within hours of being received.
Fresh food distribution seems simple in principle
but is highly complex in execution. Time-to-market
efficiency is essential. The benefits are apparent for
perishable products: less chance to deteriorate or
be prone to damage. Our success comes from being
able to meet our customers’ product requirements
wherever they may be and whenever they need them.
Calavo brand equity and its sterling reputation are
a result of freshness, great taste and, most of all,
product quality. Sourcing the highest caliber products
is only one half of the success equation; the other is
our vast capability bringing nature’s bounty to market
in the most efficient ways possible.
Grow...
Calavo Growers, Inc. 2014 AnnuAl RepoR t
10 . 11
Calavo is widely recognized as a logistics and distribution powerhouse.
Three Value-Added Depots (VADs), along with six strategically situated RFG
production facilities, provide the company with seamless distribution coverage
of North America. The VADs, equipped with our ProRipeVIP™ technology, allow
the company to ship fresh avocados pre-conditioned to customers’ precise
specifications. Speedy RFG excels in just-in-time distribution with orders
expedited within hours of being received.
Fresh food distribution seems simple in principle
but is highly complex in execution. Time-to-market
efficiency is essential. The benefits are apparent for
perishable products: less chance to deteriorate or
be prone to damage. Our success comes from being
able to meet our customers’ product requirements
wherever they may be and whenever they need them.
Calavo brand equity and its sterling reputation are
a result of freshness, great taste and, most of all,
product quality. Sourcing the highest caliber products
is only one half of the success equation; the other is
our vast capability bringing nature’s bounty to market
in the most efficient ways possible.
Grow...
Calavo Growers, Inc. 2014 AnnuAl RepoR t
10 . 11
...Strategically.
Our company is steadfast in balancing the dual objectives of reinvesting
sufficient profit to drive the growth of our business while maximizing value
and return to shareholders. Calavo’s annual cash dividend has increased
275 percent since the company’s listing on the Nasdaq Market. $10,000
invested in Calavo common stock on October 31, 2004, along with reinvested
dividends, would have appreciated to more than $60,000 at the close of the
most recent fiscal year.
Calavo’s market capitalization at the close of fiscal
2014 stood at $765 million, an increase of more than
700 percent from $95 million at October 31, 2002.
The company’s rate of compound annual growth in
revenues (CAGR) over the past five years equals
17.8 percent. Numbers like these speak for
themselves but represent only one facet of Calavo’s
equation for success. More importantly, look
behind these metrics. Our operating and financial
resources layer strength upon strength. It begins
with a focused strategic blueprint and disciplined
execution: in sourcing and marketing domestically
and around the globe; in packing and distribution;
in ripening technologies that drive avocado
consumption higher…and higher.
12 . 13
Calavo Growers, Inc. 2014 AnnuAl RepoR t
...Strategically.
Our company is steadfast in balancing the dual objectives of reinvesting
sufficient profit to drive the growth of our business while maximizing value
and return to shareholders. Calavo’s annual cash dividend has increased
275 percent since the company’s listing on the Nasdaq Market. $10,000
invested in Calavo common stock on October 31, 2004, along with reinvested
dividends, would have appreciated to more than $60,000 at the close of the
most recent fiscal year.
Calavo’s market capitalization at the close of fiscal
2014 stood at $765 million, an increase of more than
700 percent from $95 million at October 31, 2002.
The company’s rate of compound annual growth in
revenues (CAGR) over the past five years equals
17.8 percent. Numbers like these speak for
themselves but represent only one facet of Calavo’s
equation for success. More importantly, look
behind these metrics. Our operating and financial
resources layer strength upon strength. It begins
with a focused strategic blueprint and disciplined
execution: in sourcing and marketing domestically
and around the globe; in packing and distribution;
in ripening technologies that drive avocado
consumption higher…and higher.
12 . 13
Calavo Growers, Inc. 2014 AnnuAl RepoR t
To Our Shareholders,
I am pleased to report that Calavo Growers, Inc. posted record results from
operations in its most recent year, and our company is squarely positioned to reach
historic new highs again in fiscal 2015.
While preparing this letter, I mentioned to a colleague that I am more optimistic
than ever about Calavo’s prospects moving forward. My associate replied: “lee,
you say that every year.” You know, I guess I do. But that’s because our company’s
operating performance continues to strengthen and the trend lines of our key
metrics ascend steadily as a result of the successful implementation of Calavo’s
focused strategic agenda.
Notable accomplishments in fiscal 2014 underscore this point. Among these are:
Double-digit growth in revenues and gross margin, with strong sales increases in all three of the company’s principal
business segments;
New highs in adjusted annual net income and earnings per share, significantly outstripping all prior results;
Continued outstanding performance by our Renaissance Food Group, LLC (RFG) business unit, which has surpassed all
expectations; and,
Planned expansion of fresh avocado operations in Mexico through a second packinghouse in a fertile agriculture region
•
•
•
•
of Jalisco state.
To recap our operating results, revenues for the 12 months ended October 31, 2014 rose 13.2 percent to a record $782.5
million, up from $691.5 million in the previous year. Fiscal 2014 gross margin reached an all-time high of $71.2 million,
rising 19.8 percent from $59.4 million one year earlier. On the strength of this outstanding sales and gross margin
expansion, adjusted annual net income soared 44.5 percent to $25.0 million, equal to $1.45 per diluted share, from $17.3
million, or $1.11 per diluted share, in fiscal 2013.
These adjusted net income and EPS amounts are before contingent consideration expense related to the RFG
acquisition of $33.2 million, or $1.93 per share, and a gain after tax of $8.3 million, or $0.48 per share, from the
deconsolidation of FreshRealm, LLC. Including these amounts, fiscal 2014 net income totaled $0.1 million, or $0.01 per
diluted share, which compares with a net loss of $1.8 million, or $0.12 per diluted share, last year.
Calavo’s balance sheet is stronger than ever—flexible and with untapped capacity for leverage. Total assets reached
$283.5 million at fiscal-year end, up from $239.9 million at October 31, 2013. Long-term debt—principally the balance
of borrowings to finance our acquisition of RFG—stood at just $2.8 million at the close of the most recent year, down
from $7.8 million one-year earlier and $13.0 million on October 31, 2012. Since fiscal 2011, the year Calavo acquired RFG,
long-term borrowings have been pared from $18.2 million. Reciprocally, while debt has been reduced, our company’s net
book value per share has risen sharply, climbing to $10.37 at October 31, 2014, from $7.58 at the close of the prior year.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
14 . 15
To Our Shareholders,
I am pleased to report that Calavo Growers, Inc. posted record results from
operations in its most recent year, and our company is squarely positioned to reach
historic new highs again in fiscal 2015.
While preparing this letter, I mentioned to a colleague that I am more optimistic
than ever about Calavo’s prospects moving forward. My associate replied: “lee,
you say that every year.” You know, I guess I do. But that’s because our company’s
operating performance continues to strengthen and the trend lines of our key
metrics ascend steadily as a result of the successful implementation of Calavo’s
focused strategic agenda.
Notable accomplishments in fiscal 2014 underscore this point. Among these are:
Double-digit growth in revenues and gross margin, with strong sales increases in all three of the company’s principal
business segments;
New highs in adjusted annual net income and earnings per share, significantly outstripping all prior results;
Continued outstanding performance by our Renaissance Food Group, LLC (RFG) business unit, which has surpassed all
expectations; and,
Planned expansion of fresh avocado operations in Mexico through a second packinghouse in a fertile agriculture region
•
•
•
•
of Jalisco state.
To recap our operating results, revenues for the 12 months ended October 31, 2014 rose 13.2 percent to a record $782.5
million, up from $691.5 million in the previous year. Fiscal 2014 gross margin reached an all-time high of $71.2 million,
rising 19.8 percent from $59.4 million one year earlier. On the strength of this outstanding sales and gross margin
expansion, adjusted annual net income soared 44.5 percent to $25.0 million, equal to $1.45 per diluted share, from $17.3
million, or $1.11 per diluted share, in fiscal 2013.
These adjusted net income and EPS amounts are before contingent consideration expense related to the RFG
acquisition of $33.2 million, or $1.93 per share, and a gain after tax of $8.3 million, or $0.48 per share, from the
deconsolidation of FreshRealm, LLC. Including these amounts, fiscal 2014 net income totaled $0.1 million, or $0.01 per
diluted share, which compares with a net loss of $1.8 million, or $0.12 per diluted share, last year.
Calavo’s balance sheet is stronger than ever—flexible and with untapped capacity for leverage. Total assets reached
$283.5 million at fiscal-year end, up from $239.9 million at October 31, 2013. Long-term debt—principally the balance
of borrowings to finance our acquisition of RFG—stood at just $2.8 million at the close of the most recent year, down
from $7.8 million one-year earlier and $13.0 million on October 31, 2012. Since fiscal 2011, the year Calavo acquired RFG,
long-term borrowings have been pared from $18.2 million. Reciprocally, while debt has been reduced, our company’s net
book value per share has risen sharply, climbing to $10.37 at October 31, 2014, from $7.58 at the close of the prior year.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
14 . 15
Per capita U.S. fresh avocado
consumption today registers about 5
On the strength of the company’s operating results, our Board of Directors declared a 75 cent per share annual
lbs. That’s up two-fold from a
cash dividend on Calavo common stock, which was paid to owners subsequent to fiscal-year end. The dividend
decade ago. An abundant, year-round supply of
reflects a seven percent increase from 12 months earlier and a 275 percent jump from fiscal 2002, the year Calavo
fresh fruit sourced from California, Mexico, Chile and
shares began trading on the Nasdaq Market. Expressed another way, the most recent payout translates to $13
peru helps meet rising demand—and drives Calavo’s
million returned to our shareholders in the form of Calavo’s cash dividend—further indication of the company’s
market leadership.
solid profitability that enables us to balance the dual objectives of rewarding our owners while investing in the
our advanced ripening technologies and
sophisticated distribution network keep us on the
cusp of change. This videm seninterit, qua con tam tere tem
ata, ses viris endam ternihilius. Ferei ia vocuppl intraedesus C.
nostribus audemque macto hocri publiam omniam terum.
Ro, ocultis fica me ex me mod con rebusta, vente, et Catin hilicaet
vicae qua con tam tere tem ata, ses viris endam ternihilius. Ferei ia
growth of our businesses.
The impact of the rise of the Mexican avocado market, and the opening of the borders for year-round
importation of fruit to all 50 states, cannot be overstated as a factor driving the market. Today, about 60 percent
of United States avocado volume is sourced from Mexico, making possible 12-month availability of fruit. Calavo
was an early entrant to the Mexican avocado market in the late 1990s with packing, and later with prepared food
operations, in Uruapan, Michoacán. Our success in Mexico contributes substantially to our undisputed market
leadership in fresh and prepared avocados in which we command 22 and 35 percent category shares, respectively.
I am pleased to inform you that Calavo is expanding its Mexican operations during the current fiscal year
Nowhere is this successful reinvestment to fuel growth more evident than the company’s acquisition of RFG
through the construction of a second packinghouse in Guzmán, Jalisco, a prime growing region about 45
three years ago. In every respect—from the favorable structure of the transaction itself to the complementary fit
minutes east of Guadalajara. The 70,000-square-foot facility—being built on a sizable piece of company-owned
within our company’s operations to RFG’s outstanding execution since becoming part of Calavo—this deal was a
property that provides room for future growth—will pack fresh avocados for export to both the United States and
win. The purchase was on risk-averse terms to our company, principally compensating the sellers for meeting or
international markets. With the potential of markets such as China and other parts of the Asia-Pacific region, we
exceeding agreed performance targets. And meet them they did.
Last year, sales in the RFG business segment climbed more than 31 percent to $252.3 million from $191.5
million in fiscal 2013. Segment gross margin also grew 135 basis points in fiscal 2014. Since its acquisition by
Calavo, RFG revenues have soared from a “run rate” of $94.1 million in fiscal 2011, while earnings before interest,
taxes, depreciation and amortization (EBITDA) are up 515 percent to $16.0 million from $2.6 million.
I am confident of RFG’s continued strong prospects, and expect sales and gross margin to rise by 20 percent
in fiscal 2015. One component of RFG’s success is directly attributable to the financial and operational resources
available to it as a wholly owned Calavo subsidiary. Another significant factor is the growth rate of the fresh
refrigerated packaged goods category—the fastest growing segment of the retail grocery channel. The unit’s
execution has been flawless as it builds a category leadership position: quick-to-shelf order fulfillment, product
innovation, and the nimble distribution that is a Calavo hallmark.
It is remarkable that, after 90 years, the fresh avocado sector still can be considered a growth industry. But that
is what it is and, by all indications, will continue to be well into the foreseeable future. U.S. per capita consumption
of fresh avocados now exceeds five pounds annually, up from about one and a half pounds two decades ago. I
expect domestic avocado consumption will reach or exceed two billion pounds this year. Just a decade ago, that
figure was 800 million pounds. Popular acceptance and widespread appeal is being fueled by a perfect avocado
storm of outstanding industry promotion, awareness of the fruit’s healthful benefits, and shifting demographics.
Avocados seem to be regularly in the headlines. A recent Penn State study trumpeted the cardiovascular health
benefits of a diet rich with the fruit. A Super Bowl ad by Avocados from Mexico, one of the big game’s most
memorable, resulted in stories across all media that yielded tens of millions of additional impressions. Just weeks
ago, respected magazine The Atlantic published an in-depth story about the rise of the avocado industry. It is a
great read.
16 . 17
Calavo Growers, Inc. 2014 AnnuAl RepoR t
see tremendous opportunity in being an early entrant in Guzmán, just as we were in Uruapan. A number of the
growers with whom Calavo already does business in Michoacán also have avocado groves in Jalisco, providing us
a significant competitive advantage as we enter this new region. Additionally, our new packing operation, which
will be online by mid-year, is a short distance from our company’s successful tomato-growing partnership with
Agricola Belhar, further deepening our ties to the region. Longer term, we will likely build another prepared
products facility in Guzmán that can source its principal ingredient from the sister packinghouse nearby. We fully
expect this capital investment to translate into new revenue and profit drivers; I look forward to sharing more
about Calavo’s progress in Jalisco in the future.
As you can see, the “building blocks” are in place for another outstanding year in fiscal 2015. In addition
to expectations of formidable performances by our Fresh and RFG business units, the Calavo Foods prepared
avocado business segment, which posted record sales in fiscal 2014, is trending strongly. I expect Calavo Foods to
realize double-digit sales and gross margin growth in the current year. With each of Calavo’s three business units
“firing on all cylinders,” you can understand my confidence in the company’s prospects: fiscal 2015 will be another
record year, with revenues and earnings per share surpassing all prior highs.
Let me close by expressing deep appreciation to Calavo’s senior management team for its leadership and our
employees for their dedication. To our board of directors, I offer thanks for your wise counsel and insight. And to
you, Calavo’s owners, I extend gratitude for your confidence and support, which we work hard to justify every day.
Sincerely,
Lee E. Cole
Chairman, President and Chief Executive Officer
March 4, 2015
Per capita U.S. fresh avocado
consumption today registers about 5
On the strength of the company’s operating results, our Board of Directors declared a 75 cent per share annual
lbs. That’s up two-fold from a
cash dividend on Calavo common stock, which was paid to owners subsequent to fiscal-year end. The dividend
decade ago. An abundant, year-round supply of
reflects a seven percent increase from 12 months earlier and a 275 percent jump from fiscal 2002, the year Calavo
fresh fruit sourced from California, Mexico, Chile and
shares began trading on the Nasdaq Market. Expressed another way, the most recent payout translates to $13
peru helps meet rising demand—and drives Calavo’s
million returned to our shareholders in the form of Calavo’s cash dividend—further indication of the company’s
market leadership.
solid profitability that enables us to balance the dual objectives of rewarding our owners while investing in the
our advanced ripening technologies and
sophisticated distribution network keep us on the
cusp of change. This videm seninterit, qua con tam tere tem
ata, ses viris endam ternihilius. Ferei ia vocuppl intraedesus C.
nostribus audemque macto hocri publiam omniam terum.
Ro, ocultis fica me ex me mod con rebusta, vente, et Catin hilicaet
vicae qua con tam tere tem ata, ses viris endam ternihilius. Ferei ia
growth of our businesses.
The impact of the rise of the Mexican avocado market, and the opening of the borders for year-round
importation of fruit to all 50 states, cannot be overstated as a factor driving the market. Today, about 60 percent
of United States avocado volume is sourced from Mexico, making possible 12-month availability of fruit. Calavo
was an early entrant to the Mexican avocado market in the late 1990s with packing, and later with prepared food
operations, in Uruapan, Michoacán. Our success in Mexico contributes substantially to our undisputed market
leadership in fresh and prepared avocados in which we command 22 and 35 percent category shares, respectively.
I am pleased to inform you that Calavo is expanding its Mexican operations during the current fiscal year
Nowhere is this successful reinvestment to fuel growth more evident than the company’s acquisition of RFG
through the construction of a second packinghouse in Guzmán, Jalisco, a prime growing region about 45
three years ago. In every respect—from the favorable structure of the transaction itself to the complementary fit
minutes east of Guadalajara. The 70,000-square-foot facility—being built on a sizable piece of company-owned
within our company’s operations to RFG’s outstanding execution since becoming part of Calavo—this deal was a
property that provides room for future growth—will pack fresh avocados for export to both the United States and
win. The purchase was on risk-averse terms to our company, principally compensating the sellers for meeting or
international markets. With the potential of markets such as China and other parts of the Asia-Pacific region, we
exceeding agreed performance targets. And meet them they did.
Last year, sales in the RFG business segment climbed more than 31 percent to $252.3 million from $191.5
million in fiscal 2013. Segment gross margin also grew 135 basis points in fiscal 2014. Since its acquisition by
Calavo, RFG revenues have soared from a “run rate” of $94.1 million in fiscal 2011, while earnings before interest,
taxes, depreciation and amortization (EBITDA) are up 515 percent to $16.0 million from $2.6 million.
I am confident of RFG’s continued strong prospects, and expect sales and gross margin to rise by 20 percent
in fiscal 2015. One component of RFG’s success is directly attributable to the financial and operational resources
available to it as a wholly owned Calavo subsidiary. Another significant factor is the growth rate of the fresh
refrigerated packaged goods category—the fastest growing segment of the retail grocery channel. The unit’s
execution has been flawless as it builds a category leadership position: quick-to-shelf order fulfillment, product
innovation, and the nimble distribution that is a Calavo hallmark.
It is remarkable that, after 90 years, the fresh avocado sector still can be considered a growth industry. But that
is what it is and, by all indications, will continue to be well into the foreseeable future. U.S. per capita consumption
of fresh avocados now exceeds five pounds annually, up from about one and a half pounds two decades ago. I
expect domestic avocado consumption will reach or exceed two billion pounds this year. Just a decade ago, that
figure was 800 million pounds. Popular acceptance and widespread appeal is being fueled by a perfect avocado
storm of outstanding industry promotion, awareness of the fruit’s healthful benefits, and shifting demographics.
Avocados seem to be regularly in the headlines. A recent Penn State study trumpeted the cardiovascular health
benefits of a diet rich with the fruit. A Super Bowl ad by Avocados from Mexico, one of the big game’s most
memorable, resulted in stories across all media that yielded tens of millions of additional impressions. Just weeks
ago, respected magazine The Atlantic published an in-depth story about the rise of the avocado industry. It is a
great read.
16 . 17
Calavo Growers, Inc. 2014 AnnuAl RepoR t
see tremendous opportunity in being an early entrant in Guzmán, just as we were in Uruapan. A number of the
growers with whom Calavo already does business in Michoacán also have avocado groves in Jalisco, providing us
a significant competitive advantage as we enter this new region. Additionally, our new packing operation, which
will be online by mid-year, is a short distance from our company’s successful tomato-growing partnership with
Agricola Belhar, further deepening our ties to the region. Longer term, we will likely build another prepared
products facility in Guzmán that can source its principal ingredient from the sister packinghouse nearby. We fully
expect this capital investment to translate into new revenue and profit drivers; I look forward to sharing more
about Calavo’s progress in Jalisco in the future.
As you can see, the “building blocks” are in place for another outstanding year in fiscal 2015. In addition
to expectations of formidable performances by our Fresh and RFG business units, the Calavo Foods prepared
avocado business segment, which posted record sales in fiscal 2014, is trending strongly. I expect Calavo Foods to
realize double-digit sales and gross margin growth in the current year. With each of Calavo’s three business units
“firing on all cylinders,” you can understand my confidence in the company’s prospects: fiscal 2015 will be another
record year, with revenues and earnings per share surpassing all prior highs.
Let me close by expressing deep appreciation to Calavo’s senior management team for its leadership and our
employees for their dedication. To our board of directors, I offer thanks for your wise counsel and insight. And to
you, Calavo’s owners, I extend gratitude for your confidence and support, which we work hard to justify every day.
Sincerely,
Lee E. Cole
Chairman, President and Chief Executive Officer
March 4, 2015
Board of Directors
(from left to right)
(from left to right)
gEorgE h. “Bud” BarnES Avocado Grower, Valley Center, California lEcil E. c olE Chairman, President and CEO, Calavo Growers, Inc., Santa
John M. hunt Manager, Embarcadero Ranch, Goleta, California harold S. Edward S President and CEO, Limoneria Company, Santa Paula,
Paula, California Scott n. v an dEr k ar Second Vice Chairman, General Manager, Van Der Kar Family Farms, Carpinteria, California dorca S
California StEvEn w . holliS tEr Managing Member, Rocking Spade, LLC, Arroyo Grande, California Marc l. Brown Attorney/Partner,
h. McFarlanE Owner and Operator, J.K. Thille Ranches, Santa Paula, California JaMES d . hElin President, CEO, JDH Associates, Los Angeles,
Troy Gould PC, Los Angeles, California donald “MikE” SandErS President, S&S Grove Management, Escondido, California Egidio “gEnE“
California J. link lEavEnS First Vice Chairman, General Manager, Leavens Ranches, Ventura, California MichaEl a. “MikE” digrEgorio
carBonE, Jr. Retired CFO, Calavo Growers, Inc., Santa Paula, California
Board & Strategic Advisory Services, Westlake Village, California
Calavo Growers, Inc. 2014 AnnuAl RepoR t
18 . 19
Board of Directors
(from left to right)
(from left to right)
gEorgE h. “Bud” BarnES Avocado Grower, Valley Center, California lEcil E. c olE Chairman, President and CEO, Calavo Growers, Inc., Santa
John M. hunt Manager, Embarcadero Ranch, Goleta, California harold S. Edward S President and CEO, Limoneria Company, Santa Paula,
Paula, California Scott n. v an dEr k ar Second Vice Chairman, General Manager, Van Der Kar Family Farms, Carpinteria, California dorca S
California StEvEn w . holliS tEr Managing Member, Rocking Spade, LLC, Arroyo Grande, California Marc l. Brown Attorney/Partner,
h. McFarlanE Owner and Operator, J.K. Thille Ranches, Santa Paula, California JaMES d . hElin President, CEO, JDH Associates, Los Angeles,
Troy Gould PC, Los Angeles, California donald “MikE” SandErS President, S&S Grove Management, Escondido, California Egidio “gEnE“
California J. link lEavEnS First Vice Chairman, General Manager, Leavens Ranches, Ventura, California MichaEl a. “MikE” digrEgorio
carBonE, Jr. Retired CFO, Calavo Growers, Inc., Santa Paula, California
Board & Strategic Advisory Services, Westlake Village, California
Calavo Growers, Inc. 2014 AnnuAl RepoR t
18 . 19
Selected Consolidated Financial Data
the following information as of and for the years ended october 31, 2013, 2012 and 2011 has been restated to reflect adjustments
to our previously issued financial statements as more fully discussed in Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of operations” and in note 3, “Restatement of previously-Issued Financial Statements” to the Consolidated
Financial Statements included in Item 8 of this Annual Report. the following data should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of operations” and the financial statements of the Company, including the
notes thereto, in Items 7 and 8, respectively, of this Annual Report in order to fully understand factors that may affect the comparability
of the financial data.
the following selected financial data as of october 31, 2014 and 2010 and for the years ended october 31, 2014, 2013, 2012
and 2010 (other than pounds information), are derived from the audited consolidated financial statements of Calavo Growers, Inc.
the financial data as of october 31, 2011 and the year ended october 31, 2011 are derived from our restated financial statements.
We have not amended our previously-filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected
by the restatement. the financial information that has been previously filed or otherwise reported for these periods is superseded by
the information in this Form 10-K, and the financial statements and related financial information contained in such previously-filed reports
should no longer be relied upon.
Historical results are not necessarily indicative of results that may be expected in any future period. the following data should be
read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of operations” and our consolidated
financial statements and notes thereto that are included elsewhere in this Annual Report.
FISCAl YeAR enDeD oCtobeR 31,
2014
2013
2012
2011
2010
(In thousands, except per share data)
ReSt AteD
ReSt AteD
ReSt AteD (11)
Income Statement Data : (1) ( 2 ) ( 3 ) (4 ) ( 8 ) ( 9 )
net sales
Gross margin
Selling, general and administrative
net income attributable to Calavo Growers, Inc.
basic net income per share
Diluted net income per share
Bal ance Sheet Data aS of e nD of Per IoD : (4 ) (10 )
Working capital
total assets
Accrued expenses
Current portion of long-term obligations
long-term debt, less current portion
$ 782,510
$ 691,451
$ 551,119
$ 522,529
$ 398,351
71,228
36,605
97
0.01
0.01
$
$
59,448
33,485
(1,795)
60,665
32,714
15,802
42,931
24,934
10,863
51,530
23,168
17,764
$
$
(0.12)
(0.12)
$
$
1.07
1.05
$
$
0.74
0.74
$
$
1.22
1.22
$ 22,047
$
(3,252)
$
1,287
$
2,323
$ 14,801
283,464
239,939
207,787
185,284
150,198
25,303
36,541
5,099
2,791
5,258
7,792
30,554
5,416
13,039
25,565
5,448
18,244
89,632
15,353
1,369
6,089
88,257
Shareholders’ equity
179,406
119,093
102,719
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
In July 2013, we entered into an Amended and Restated limited liability Company Agreement of FreshRealm. When we deconsolidated FreshRealm (see below),
planned, principal operations had not yet commenced. As a result, FreshRealm has no sales or cost of sales. FreshRealm has incurred $1.0 million and $1.9 million
of expenses related to its development as of october 31, 2014 and 2013, which are included in selling, general and administrative expenses.
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. pursuant to this agreement, Impermanence, llC (Impermanence) was admitted as an ownership member of FreshRealm. As a result of
the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8%. Due to this dilution and lack of super majority on the board of directors of
FreshRealm, Calavo cannot control FreshRealm. based on the foregoing, we deconsolidated FreshRealm as of May 2, 2014. 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 as other income. our investment of $17.0 million in
FreshRealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet.
In october 2012, we entered into a sale agreement with SRD, pursuant to which the Company has agreed to sell to SRD all of our interest, representing one-half
ownership, in Maui Fresh for $2.6 million. this transaction resulted in a gain on sale of approximately $0.5 million.
operating results for fiscal 2014, 2013, 2012 and 2011 and balance sheet data as of end of those respective periods include the acquisition of RFG from the date of
acquisition of June 1, 2011. For fiscal year 2014, RFG net sales, gross margins, and net income before taxes were $252.3 million, $22.1 million and $11.1 million. For
fiscal year 2013, RFG net sales, gross margins, and net income before taxes were $191.5 million, $14.9 million and $5.9 million. For fiscal year 2012, RFG net sales, gross
margins, and net income before taxes were $154.1 million, $12.4 million and $4.5 million. For fiscal year 2011, RFG net sales, gross margins, and net income before taxes
were $56.7 million, $4.3 million and $1.2 million. We have paid the Sellers $14.2 million in cash, net of adjustments based on RFG’s financial condition at closing.
For fiscal year 2011, we made a $3.0 million infrastructure advance to Agricola belher. We collected $0.8 million, $1.7 million, $1.2 million and $1.8 million in fiscal years
2014, 2013, 2011 and 2010 related to infrastructure advances. For fiscal 2012, the 2012 payment was not made and both parties agreed to defer the payment until 2013.
on April 10, 2013, we repurchased 165,000 shares of our common stock from limoneira for cash consideration of $4.8 million at a purchase price of $29.02 per share,
the closing price on April 10, 2013. these shares were cancelled and returned to authorized, but unissued, status.
In october 2013, we contributed $1.0 million to the purchase of 60 hectares of property in Jalisco, Mexico, for the development of facilities to grow tomatoes. In fiscal
2014, we have advanced an additional $3.2 million for construction of greenhouses (bridge loan). the bridge loan will be replaced with a loan from an institutional lender
in the amount of $4.5 million and the bridge loan will be immediately repaid from the proceeds of the new loan. In the second quarter of 2015, we expect to finalize
a joint venture agreement with belher. Such joint venture will operate under the name of Agricola Don Memo. belher and Calavo are expected to have equal one-half
ownership interests in Agricola Don Memo, but belher will ultimately have overall management responsibility for the operations of Agricola Don Memo. the contribution
of $3.2 million has been recorded as a receivable in prepaid and other current assets.
Cost of Sales for fiscal 2014, 2013, and 2012 include non-cash compensation expense related to the acquisition of RFG totaling $1.9 million, $0.7 million, and an
insignificant amount. these non-cash expenses will not continue into fiscal 2015 nor beyond. See note 3 to our Consolidated Financial Statements.
Selling, General, and Administrative expenses for fiscal 2014, 2013 and 2012 include non-cash compensation expense related to the acquisition of RFG totaling $0.7 million,
$0.3 million, and an insignificant amount. these non-cash expenses will not continue into fiscal 2015 nor beyond. See note 3 to our Consolidated Financial Statements.
(10) Included in accrued liabilities as of october 31, 2013, 2012, and 2011 is a non-cash, contingent consideration liability totaling $15.6 million, $11.2 million, and $8.3 million
related to the acquisition of RFG. this liability resolved during fiscal 2014 and will not continue in fiscal 2015 or beyond. See note 3 to our Consolidated Financial Statements.
(11) this has been derived from our restated, unaudited financial statements for the year ended october 31, 2011.
caSh f lowS Prov IDeD B y ( USeD I n ) :
operations
Investing(2)(3)(5)(7)
Financing(6)
other Data :
$ 21,345
$ 13,712
$ 22,011
$
7,866
$ 19,979
(18,551)
(4,069)
(7,746)
(5,050)
(7,449)
(20,907)
(10,233)
14,751
(9,502)
(10,288)
Dividends declared per share
net book value per share
$
$
0.75
10.37
$
$
0.70
7.58
$
$
0.65
6.90
$
$
0.55
6.07
$
$
0.55
6.04
pounds of California avocados sold
74,438
141,400
127,145
84,913
170,650
pounds of non-California avocados sold
258,940
218,244
174,995
156,973
123,700
pounds of processed avocados products sold
26,451
21,636
17,341
18,811
21,651
20 . 21
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Financials.
Selected Consolidated Financial Data
the following information as of and for the years ended october 31, 2013, 2012 and 2011 has been restated to reflect adjustments
to our previously issued financial statements as more fully discussed in Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of operations” and in note 3, “Restatement of previously-Issued Financial Statements” to the Consolidated
Financial Statements included in Item 8 of this Annual Report. the following data should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of operations” and the financial statements of the Company, including the
notes thereto, in Items 7 and 8, respectively, of this Annual Report in order to fully understand factors that may affect the comparability
of the financial data.
the following selected financial data as of october 31, 2014 and 2010 and for the years ended october 31, 2014, 2013, 2012
and 2010 (other than pounds information), are derived from the audited consolidated financial statements of Calavo Growers, Inc.
the financial data as of october 31, 2011 and the year ended october 31, 2011 are derived from our restated financial statements.
We have not amended our previously-filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected
by the restatement. the financial information that has been previously filed or otherwise reported for these periods is superseded by
the information in this Form 10-K, and the financial statements and related financial information contained in such previously-filed reports
should no longer be relied upon.
Historical results are not necessarily indicative of results that may be expected in any future period. the following data should be
read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of operations” and our consolidated
financial statements and notes thereto that are included elsewhere in this Annual Report.
FISCAl YeAR enDeD oCtobeR 31,
2014
2013
2012
2011
2010
(In thousands, except per share data)
ReSt AteD
ReSt AteD
ReSt AteD (11)
Income Statement Data : (1) ( 2 ) ( 3 ) (4 ) ( 8 ) ( 9 )
net sales
Gross margin
Selling, general and administrative
net income attributable to Calavo Growers, Inc.
basic net income per share
Diluted net income per share
Bal ance Sheet Data aS of e nD of Per IoD : (4 ) (10 )
Working capital
total assets
Accrued expenses
Current portion of long-term obligations
long-term debt, less current portion
$ 782,510
$ 691,451
$ 551,119
$ 522,529
$ 398,351
71,228
36,605
97
0.01
0.01
$
$
59,448
33,485
(1,795)
60,665
32,714
15,802
42,931
24,934
10,863
51,530
23,168
17,764
$
$
(0.12)
(0.12)
$
$
1.07
1.05
$
$
0.74
0.74
$
$
1.22
1.22
$ 22,047
$
(3,252)
$
1,287
$
2,323
$ 14,801
283,464
239,939
207,787
185,284
150,198
25,303
36,541
5,099
2,791
5,258
7,792
30,554
5,416
13,039
25,565
5,448
18,244
89,632
15,353
1,369
6,089
88,257
Shareholders’ equity
179,406
119,093
102,719
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
In July 2013, we entered into an Amended and Restated limited liability Company Agreement of FreshRealm. When we deconsolidated FreshRealm (see below),
planned, principal operations had not yet commenced. As a result, FreshRealm has no sales or cost of sales. FreshRealm has incurred $1.0 million and $1.9 million
of expenses related to its development as of october 31, 2014 and 2013, which are included in selling, general and administrative expenses.
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. pursuant to this agreement, Impermanence, llC (Impermanence) was admitted as an ownership member of FreshRealm. As a result of
the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8%. Due to this dilution and lack of super majority on the board of directors of
FreshRealm, Calavo cannot control FreshRealm. based on the foregoing, we deconsolidated FreshRealm as of May 2, 2014. 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 as other income. our investment of $17.0 million in
FreshRealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet.
In october 2012, we entered into a sale agreement with SRD, pursuant to which the Company has agreed to sell to SRD all of our interest, representing one-half
ownership, in Maui Fresh for $2.6 million. this transaction resulted in a gain on sale of approximately $0.5 million.
operating results for fiscal 2014, 2013, 2012 and 2011 and balance sheet data as of end of those respective periods include the acquisition of RFG from the date of
acquisition of June 1, 2011. For fiscal year 2014, RFG net sales, gross margins, and net income before taxes were $252.3 million, $22.1 million and $11.1 million. For
fiscal year 2013, RFG net sales, gross margins, and net income before taxes were $191.5 million, $14.9 million and $5.9 million. For fiscal year 2012, RFG net sales, gross
margins, and net income before taxes were $154.1 million, $12.4 million and $4.5 million. For fiscal year 2011, RFG net sales, gross margins, and net income before taxes
were $56.7 million, $4.3 million and $1.2 million. We have paid the Sellers $14.2 million in cash, net of adjustments based on RFG’s financial condition at closing.
For fiscal year 2011, we made a $3.0 million infrastructure advance to Agricola belher. We collected $0.8 million, $1.7 million, $1.2 million and $1.8 million in fiscal years
2014, 2013, 2011 and 2010 related to infrastructure advances. For fiscal 2012, the 2012 payment was not made and both parties agreed to defer the payment until 2013.
on April 10, 2013, we repurchased 165,000 shares of our common stock from limoneira for cash consideration of $4.8 million at a purchase price of $29.02 per share,
the closing price on April 10, 2013. these shares were cancelled and returned to authorized, but unissued, status.
In october 2013, we contributed $1.0 million to the purchase of 60 hectares of property in Jalisco, Mexico, for the development of facilities to grow tomatoes. In fiscal
2014, we have advanced an additional $3.2 million for construction of greenhouses (bridge loan). the bridge loan will be replaced with a loan from an institutional lender
in the amount of $4.5 million and the bridge loan will be immediately repaid from the proceeds of the new loan. In the second quarter of 2015, we expect to finalize
a joint venture agreement with belher. Such joint venture will operate under the name of Agricola Don Memo. belher and Calavo are expected to have equal one-half
ownership interests in Agricola Don Memo, but belher will ultimately have overall management responsibility for the operations of Agricola Don Memo. the contribution
of $3.2 million has been recorded as a receivable in prepaid and other current assets.
Cost of Sales for fiscal 2014, 2013, and 2012 include non-cash compensation expense related to the acquisition of RFG totaling $1.9 million, $0.7 million, and an
insignificant amount. these non-cash expenses will not continue into fiscal 2015 nor beyond. See note 3 to our Consolidated Financial Statements.
Selling, General, and Administrative expenses for fiscal 2014, 2013 and 2012 include non-cash compensation expense related to the acquisition of RFG totaling $0.7 million,
$0.3 million, and an insignificant amount. these non-cash expenses will not continue into fiscal 2015 nor beyond. See note 3 to our Consolidated Financial Statements.
(10) Included in accrued liabilities as of october 31, 2013, 2012, and 2011 is a non-cash, contingent consideration liability totaling $15.6 million, $11.2 million, and $8.3 million
related to the acquisition of RFG. this liability resolved during fiscal 2014 and will not continue in fiscal 2015 or beyond. See note 3 to our Consolidated Financial Statements.
(11) this has been derived from our restated, unaudited financial statements for the year ended october 31, 2011.
caSh f lowS Prov IDeD B y ( USeD I n ) :
operations
Investing(2)(3)(5)(7)
Financing(6)
other Data :
$ 21,345
$ 13,712
$ 22,011
$
7,866
$ 19,979
(18,551)
(4,069)
(7,746)
(5,050)
(7,449)
(20,907)
(10,233)
14,751
(9,502)
(10,288)
Dividends declared per share
net book value per share
$
$
0.75
10.37
$
$
0.70
7.58
$
$
0.65
6.90
$
$
0.55
6.07
$
$
0.55
6.04
pounds of California avocados sold
74,438
141,400
127,145
84,913
170,650
pounds of non-California avocados sold
258,940
218,244
174,995
156,973
123,700
pounds of processed avocados products sold
26,451
21,636
17,341
18,811
21,651
20 . 21
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Financials.
Management’s Discussion and Analysis
of Financial Condition and results of Operations
You should read the following discussion and analysis of our
financial condition and results of operations together with
“Selected Consolidated Financial Data” and our consolidated
financial statements and notes thereto that appear elsewhere
in this Annual Report. this discussion and analysis contains
forward-looking statements that involve risks, uncertainties, and
assumptions. Actual results may differ materially from those
anticipated in these forward-looking statements as a result of
various factors, including, but not limited to, those presented
under “Risks related to our business” included in Item 1A and
elsewhere in our Annual Report filed on Form 10-K.
Overview
We are a leader in the distribution of avocados, prepared
avocado products, and other perishable food products
throughout the united States. 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 and/or Hawaiian grown papayas.
Additionally, we also produce salsa and prepare ready-to-eat
produce and deli products. We report our operations in three
different business segments: (1) Fresh products, (2) Calavo
Foods and (3) RFG. See note 12 to our consolidated financial
statements for further discussion.
our Fresh products business grades, sizes, packs, cools,
and ripens (if desired) avocados for delivery to our customers.
We presently operate two packinghouses and three operating
and distributing facilities that handle avocados across the united
States. these packinghouses handled approximately 24% of
the California avocado crop during the 2014 fiscal year, based
on data obtained from the California Avocado Commission.
our operating results and the returns we pay our growers are
highly dependent on the volume of avocados delivered to our
packinghouses, as a significant portion of our costs is fixed. our
strategy calls for continued efforts to retain and recruit growers
that meet our business model. Additionally, our Fresh products
business also procures avocados grown in Chile and Mexico, as
well as other various commodities, including tomatoes, papayas,
and pineapples. We operate a packinghouse in Mexico that,
together with certain co-packers that we frequently purchase
fruit from, handled approximately 20% of the Mexican avocado
crop bound for the united States market and approximately 5%
of the avocados exported from Mexico to countries other than
the united States during the 2013-2014 Mexican season, based
on our estimates. our strategy is to increase our market share
of currently sourced avocados to all accepted marketplaces.
We believe our diversified avocado sources provides a level of
supply stability that may, over time, help solidify the demand for
avocados among consumers in the united States and elsewhere
in the world. We believe our efforts in distributing our other
various commodities, such as those shown above, complement
our offerings of avocados. From time to time, we continue
to explore distribution of other crops that provide reasonable
returns to the business.
our Calavo Foods business procures avocados, processes
avocados into a wide variety of guacamole products, and
distributes the processed product to our customers. All of our
prepared avocado products shipped to north America are “cold
pasteurized” and include both frozen and fresh guacamole.
Due to the long shelf-life of our frozen guacamole and the
purity of our fresh guacamole, we believe that we are well
positioned to address the diverse taste and needs of today’s
customers. Additionally, we also prepare various fresh salsa
products. Customers include both food service industry and retail
businesses. We continue to seek to expand our relationships with
major food service companies and develop alliances that will allow
our products to reach a larger percentage of the marketplace.
net sales of frozen products represented approximately 55%
and 54% of total processed segment sales for the years ended
october 31, 2014 and 2013. net sales of our ultra-high pressure
products represented approximately 45% and 46% of total
processed segment sales for the years ended october 31, 2014
and 2013.
our RFG business produces, markets and distributes
nationally a portfolio of healthy, high quality lifestyle products
for consumers via the retail channel. RFG products range from
fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables
and deli meat products. RFG sells under the popular labels
of Garden Highway Fresh Cut, Garden Highway, and Garden
Highway Chef essentials to a wide range of customers.
the operating results of all of our businesses have been, and
will continue to be, affected by quarterly and annual fluctuations
and market downturns due to a number of factors, such as
pests and disease, weather patterns, changes in demand by
consumers, the timing of the receipt, reduction, or cancellation
of significant customer orders, the gain or loss of significant
customers, market acceptance of our products, our ability to
develop, introduce, and market new products on a timely basis,
availability and cost of avocados and supplies from growers and
vendors, new product introductions by our competitors, change
in the mix of avocados and Calavo Foods and RFG products we
sell, and general economic conditions. We believe, however, that
we are currently positioned to address these risks and deliver
favorable operating results for the foreseeable future.
recent DeveloPmentS
Restatement of previously-Issued Financial Statements
In connection with the preparation, review and audit of the
Company’s consolidated financial statements required to be
included in its Annual Report on Form 10-K for the fiscal year
ended october 31, 2014, the Company identified a non-cash
misstatement in its historical consolidated financial statements
related to its treatment of contingent consideration in the
acquisition of RFG in June 2011. In accordance with the earn-out
provisions in the RFG acquisition agreement, if RFG’s operating
results exceeded defined thresholds, additional purchase price
was required to be paid by the Company, subject to a ceiling.
RFG’s results substantially exceeded defined thresholds and
expectations and, accordingly, RFG’s former owners received
the maximum earn-out payment permitted pursuant to the
acquisition agreement.
the total cumulative amount of non-cash operating expense,
primarily related to the revaluation of RFG earn-out liability,
that needed to be recorded is approximately $88.1 million,
accounted for over the period from the date of acquisition of RFG
(i.e. June 1, 2011) through the period ended october 31, 2014.
Initially, we recorded the contingent consideration, which
was settleable in common stock, as an equity instrument
and therefore did not record expense based on the changes
in fair value of the contingent consideration. However, the
contingent consideration should have been accounted for as
a liability requiring re-measurement to fair value. Additionally,
certain amounts of the consideration have been recorded as
compensation expense. See following table for the adjustments
relating to total contingent consideration and non-cash
compensation for the acquisition of RFG for fiscal years 2014,
2013, and 2012:
2014
2013
2012
Contingent Consideration
$ 51,082
$ 31,066
$ 2,157
non-cash compensation
recorded in cost of sales
1,807
676
non-cash compensation
recorded in selling, general
and administrative
722
268
1
1
total
$ 53,611
$ 32,010
$ 2,159
the Company has also identified certain immaterial
adjustments primarily relating to non-controlling interest,
diluted number of shares outstanding, and income tax expense
related to fiscal years ended october 31, 2014, october 31,
2013, and october 31, 2012, which are reflected in the restated
consolidated financial statements for the Relevant periods. See
note 3, “Restatement of previously-Issued Financial Statements”
to the Consolidated Financial Statements for more information.
We have not amended our previously-filed Annual Reports
on Form 10-K or Quarterly Reports on Form 10-Q for the periods
affected by the restatement. the financial information that has
been previously filed or otherwise reported for these periods
is superseded by the information in this Form 10-K, and the
financial statements and related financial information contained
in such previously-filed reports should no longer be relied upon.
Dividend payment
on December 8, 2014, we paid a $0.75 per share dividend in
the aggregate amount of $13.0 million to shareholders of record
on november 17, 2014.
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.
In January 2015, various class action lawsuits have been
initiated against the company related to the restatement of
previously-issued financial statements, we believe these are
without merit and will defend ourselves vigorously. See Item 3
of this Annual Report on Form 10-K which is incorporated
by reference herein.
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:
Calavo Growers, Inc. 2014 AnnuAl RepoR t
22 . 23
Management’s Discussion and Analysis
of Financial Condition and results of Operations
You should read the following discussion and analysis of our
financial condition and results of operations together with
“Selected Consolidated Financial Data” and our consolidated
financial statements and notes thereto that appear elsewhere
in this Annual Report. this discussion and analysis contains
forward-looking statements that involve risks, uncertainties, and
assumptions. Actual results may differ materially from those
anticipated in these forward-looking statements as a result of
various factors, including, but not limited to, those presented
under “Risks related to our business” included in Item 1A and
elsewhere in our Annual Report filed on Form 10-K.
Overview
We are a leader in the distribution of avocados, prepared
avocado products, and other perishable food products
throughout the united States. 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 and/or Hawaiian grown papayas.
Additionally, we also produce salsa and prepare ready-to-eat
produce and deli products. We report our operations in three
different business segments: (1) Fresh products, (2) Calavo
Foods and (3) RFG. See note 12 to our consolidated financial
statements for further discussion.
our Fresh products business grades, sizes, packs, cools,
and ripens (if desired) avocados for delivery to our customers.
We presently operate two packinghouses and three operating
and distributing facilities that handle avocados across the united
States. these packinghouses handled approximately 24% of
the California avocado crop during the 2014 fiscal year, based
on data obtained from the California Avocado Commission.
our operating results and the returns we pay our growers are
highly dependent on the volume of avocados delivered to our
packinghouses, as a significant portion of our costs is fixed. our
strategy calls for continued efforts to retain and recruit growers
that meet our business model. Additionally, our Fresh products
business also procures avocados grown in Chile and Mexico, as
well as other various commodities, including tomatoes, papayas,
and pineapples. We operate a packinghouse in Mexico that,
together with certain co-packers that we frequently purchase
fruit from, handled approximately 20% of the Mexican avocado
crop bound for the united States market and approximately 5%
of the avocados exported from Mexico to countries other than
the united States during the 2013-2014 Mexican season, based
on our estimates. our strategy is to increase our market share
of currently sourced avocados to all accepted marketplaces.
We believe our diversified avocado sources provides a level of
supply stability that may, over time, help solidify the demand for
avocados among consumers in the united States and elsewhere
in the world. We believe our efforts in distributing our other
various commodities, such as those shown above, complement
our offerings of avocados. From time to time, we continue
to explore distribution of other crops that provide reasonable
returns to the business.
our Calavo Foods business procures avocados, processes
avocados into a wide variety of guacamole products, and
distributes the processed product to our customers. All of our
prepared avocado products shipped to north America are “cold
pasteurized” and include both frozen and fresh guacamole.
Due to the long shelf-life of our frozen guacamole and the
purity of our fresh guacamole, we believe that we are well
positioned to address the diverse taste and needs of today’s
customers. Additionally, we also prepare various fresh salsa
products. Customers include both food service industry and retail
businesses. We continue to seek to expand our relationships with
major food service companies and develop alliances that will allow
our products to reach a larger percentage of the marketplace.
net sales of frozen products represented approximately 55%
and 54% of total processed segment sales for the years ended
october 31, 2014 and 2013. net sales of our ultra-high pressure
products represented approximately 45% and 46% of total
processed segment sales for the years ended october 31, 2014
and 2013.
our RFG business produces, markets and distributes
nationally a portfolio of healthy, high quality lifestyle products
for consumers via the retail channel. RFG products range from
fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables
and deli meat products. RFG sells under the popular labels
of Garden Highway Fresh Cut, Garden Highway, and Garden
Highway Chef essentials to a wide range of customers.
the operating results of all of our businesses have been, and
will continue to be, affected by quarterly and annual fluctuations
and market downturns due to a number of factors, such as
pests and disease, weather patterns, changes in demand by
consumers, the timing of the receipt, reduction, or cancellation
of significant customer orders, the gain or loss of significant
customers, market acceptance of our products, our ability to
develop, introduce, and market new products on a timely basis,
availability and cost of avocados and supplies from growers and
vendors, new product introductions by our competitors, change
in the mix of avocados and Calavo Foods and RFG products we
sell, and general economic conditions. We believe, however, that
we are currently positioned to address these risks and deliver
favorable operating results for the foreseeable future.
recent DeveloPmentS
Restatement of previously-Issued Financial Statements
In connection with the preparation, review and audit of the
Company’s consolidated financial statements required to be
included in its Annual Report on Form 10-K for the fiscal year
ended october 31, 2014, the Company identified a non-cash
misstatement in its historical consolidated financial statements
related to its treatment of contingent consideration in the
acquisition of RFG in June 2011. In accordance with the earn-out
provisions in the RFG acquisition agreement, if RFG’s operating
results exceeded defined thresholds, additional purchase price
was required to be paid by the Company, subject to a ceiling.
RFG’s results substantially exceeded defined thresholds and
expectations and, accordingly, RFG’s former owners received
the maximum earn-out payment permitted pursuant to the
acquisition agreement.
the total cumulative amount of non-cash operating expense,
primarily related to the revaluation of RFG earn-out liability,
that needed to be recorded is approximately $88.1 million,
accounted for over the period from the date of acquisition of RFG
(i.e. June 1, 2011) through the period ended october 31, 2014.
Initially, we recorded the contingent consideration, which
was settleable in common stock, as an equity instrument
and therefore did not record expense based on the changes
in fair value of the contingent consideration. However, the
contingent consideration should have been accounted for as
a liability requiring re-measurement to fair value. Additionally,
certain amounts of the consideration have been recorded as
compensation expense. See following table for the adjustments
relating to total contingent consideration and non-cash
compensation for the acquisition of RFG for fiscal years 2014,
2013, and 2012:
2014
2013
2012
Contingent Consideration
$ 51,082
$ 31,066
$ 2,157
non-cash compensation
recorded in cost of sales
1,807
676
non-cash compensation
recorded in selling, general
and administrative
722
268
1
1
total
$ 53,611
$ 32,010
$ 2,159
the Company has also identified certain immaterial
adjustments primarily relating to non-controlling interest,
diluted number of shares outstanding, and income tax expense
related to fiscal years ended october 31, 2014, october 31,
2013, and october 31, 2012, which are reflected in the restated
consolidated financial statements for the Relevant periods. See
note 3, “Restatement of previously-Issued Financial Statements”
to the Consolidated Financial Statements for more information.
We have not amended our previously-filed Annual Reports
on Form 10-K or Quarterly Reports on Form 10-Q for the periods
affected by the restatement. the financial information that has
been previously filed or otherwise reported for these periods
is superseded by the information in this Form 10-K, and the
financial statements and related financial information contained
in such previously-filed reports should no longer be relied upon.
Dividend payment
on December 8, 2014, we paid a $0.75 per share dividend in
the aggregate amount of $13.0 million to shareholders of record
on november 17, 2014.
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.
In January 2015, various class action lawsuits have been
initiated against the company related to the restatement of
previously-issued financial statements, we believe these are
without merit and will defend ourselves vigorously. See Item 3
of this Annual Report on Form 10-K which is incorporated
by reference herein.
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:
Calavo Growers, Inc. 2014 AnnuAl RepoR t
22 . 23
(AS oF MAY 2, 2014, In tHouSAnDS)
promotional allowances
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 16 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%.
CritiCAl ACCOunting eStiMA teS
our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the united States of
America. the preparation of these financial statements requires
us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. on an
ongoing basis, we re-evaluate all of our estimates, including
those related to the areas of customer and grower receivables,
inventories, useful lives of property, plant and equipment,
promotional allowances, income taxes, retirement benefits, and
commitments and contingencies. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from
other sources. Additionally, we frequently engage 3rd party
valuation experts to assist us with estimates described below.
Actual results may materially differ from these estimates under
different assumptions or conditions as additional information
becomes available in future periods.
Management has discussed the development and selection
of critical accounting estimates with the Audit Committee of
the board of Directors and the Audit Committee has reviewed
our disclosure relating to critical accounting estimates in this
Annual Report.
We provide for promotional allowances at the time of sale,
based on our historical experience. our estimates are generally
based on evaluating the relationship between promotional
allowances and gross sales. the derived percentage is then
applied to the current period’s sales revenues in order to arrive
at the appropriate debit to sales allowances for the period.
the offsetting credit is made to accrued liabilities. When certain
amounts of specific customer accounts are subsequently
identified as promotional, they are written off against this
allowance. Actual amounts may differ from these estimates and
such differences are recognized as an adjustment to net sales
in the period they are identified. A 1% change in the derived
percentage for the entire year would impact results of operations
by approximately $0.7 million.
Income taxes
We account for deferred tax liabilities and assets for the
future consequences of events that have been recognized in our
consolidated financial statements or tax returns. Measurement
of the deferred items is based on enacted tax laws. In the event
the future consequences of differences between financial
reporting bases and tax bases of our assets and liabilities
result in a deferred tax asset, we perform an evaluation of the
probability of being able to realize the future benefits indicated
by such asset. A valuation allowance related to a deferred tax
asset is recorded when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
As a multinational corporation, we are subject to taxation
in many jurisdictions, and the calculation of our tax liabilities
involves dealing with uncertainties in the application of complex
tax laws and regulations in various taxing jurisdictions. If we
ultimately determine that the payment of these liabilities will be
unnecessary, the liability will be reversed and we will recognize a
tax benefit during the period in which it is determined the liability
no longer applies. Conversely, we record additional tax charges
in a period in which it is determined that a recorded tax liability
is less than the ultimate assessment is expected to be.
the application of tax laws and regulations is subject to
legal and factual interpretation, judgment and uncertainty. tax
laws and regulations themselves are subject to change as a
result of changes in fiscal policy, changes in legislation, the
evolution of regulations and court rulings. therefore, the actual
liability for u.S. or foreign taxes may be materially different from
management’s estimates, which could result in the need to
record additional tax liabilities or potentially reverse previously
recorded tax liabilities.
Goodwill and acquired intangible assets
We believe the following are the more significant judgments
Goodwill, defined as unidentified asset(s) acquired in
and estimates used in the preparation of our consolidated
financial statements.
conjunction with a business acquisition, is tested for impairment
on an annual basis and between annual tests whenever events
or changes in circumstances indicate that the carrying amount
24 . 25
Calavo Growers, Inc. 2014 AnnuAl RepoR t
may not be recoverable. Goodwill is tested at the reporting unit
level, which is defined as an operating segment or one level
below the operating segment. Goodwill impairment testing is a
two-step process. the first step of the goodwill impairment test,
used to identify potential impairment, compares the fair value
of a reporting unit with its carrying amount, including goodwill.
If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired, and
the second step of the impairment test would be unnecessary.
If the carrying amount of a reporting unit exceeds its fair
value, the second step of the goodwill impairment test must
be performed to measure the amount of impairment loss, if
any. the second step of the goodwill impairment test, used
to measure the amount of impairment loss, compares the
implied fair value of reporting unit goodwill with the carrying
amount of that goodwill. If the carrying amount of reporting
unit goodwill exceeds the implied fair value of that goodwill,
an impairment loss must be recognized in an amount equal to
that excess. Goodwill impairment testing requires significant
judgment and management estimates, including, but not limited
to, the determination of (i) the number of reporting units,
(ii) the goodwill and other assets and liabilities to be allocated
to the reporting units and (iii) the fair values of the reporting
units. the estimates and assumptions described above, along
with other factors such as discount rates, will significantly
affect the outcome of the impairment tests and the amounts
of any resulting impairment losses. We performed our annual
assessment of goodwill and determined that no impairment
existed as of october 31, 2014.
Allowance for accounts receivable
We provide an allowance for estimated uncollectible
accounts receivable balances based on historical experience
and the aging of the related accounts receivable. If the financial
condition of our customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional
allowances may be required.
reSultS OF OperA tiOnS
the following table sets forth certain items from our
consolidated statements of income, expressed as percentages
of our total net sales, for the periods indicated:
YeAR enDeD oCtobeR 31,
2014
2013
2012
net sales
Gross margins
Selling, general and
administrative
ReSt AteD
ReSt AteD
100.0%
100.0%
100.0%
9.1%
8.6%
11.0%
4.7%
4.8%
5.9%
Contingent consideration
related to RFG acquisition
6.5%
4.8%
operating income
(2.1)%
(1.0)%
Interest income
0.0%
0.0%
0.5%
4.6%
0.0%
Interest expense
(0.1)%
(0.2)%
(0.2)%
other income, net
0.1%
0.1%
net income (loss)
(0.0)%
(0.4)%
0.2%
2.8%
Contingent consideration
net SaleS
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements. each period, we
revalue our contingent consideration obligations to their fair
value and record increases or decreases in the fair value into
contingent consideration, cost of sales and/or selling, general
and administrative expense. Increases or decreases in the fair
value of the contingent consideration obligations can result
from changes in the assumed timing and amount of revenue
and expense estimates, changes in the probability of payment
scenarios, changes in stock values, as well as changes in capital
market conditions, which impact the discount rate used in the
fair valuation. 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. total net increase to the contingent considerations
in fiscal years 2014, 2013 and 2012 totaled $53.1 million,
$33.6 million (restated) and $2.6 million (restated).
We believe that the fundamentals for our products continue
to be favorable. Firstly, Americans continue to eat more
avocados. united States (u.S.) avocado demand continues to
grow, with per capita use in 2012/13 reaching 5.6 pounds per
person, up 10 percent from the previous year, and approximately
130% higher the estimate of a decade ago. We believe that
the healthy eating trend that has been developing in the
united States contributes to such growth, as avocados, which
are cholesterol and sodium free, are dense in fiber, vitamin
b6, antioxidants, potassium, folate, and contain unsaturated
fat, which help lower cholesterol. Also, a growing number of
research studies seem to suggest that phytonutrients, which
avocados are rich in, help fight chronic illnesses, such as heart
disease and cancer.
Additionally, we believe that the demographic changes in
the u.S. will greatly impact the consumption of avocados and
avocado-based products. the Hispanic community currently
accounts for approximately 17% of the u.S. population, and the
total number of Hispanics is estimated to triple by the year 2050.
Avocados are considered a staple item purchased by Hispanic
consumers, as the per-capita avocado consumption in Mexico
is considered significantly higher than that of the u.S.
(AS oF MAY 2, 2014, In tHouSAnDS)
promotional allowances
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 16 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%.
CritiCAl ACCOunting eStiMA teS
our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the united States of
America. the preparation of these financial statements requires
us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. on an
ongoing basis, we re-evaluate all of our estimates, including
those related to the areas of customer and grower receivables,
inventories, useful lives of property, plant and equipment,
promotional allowances, income taxes, retirement benefits, and
commitments and contingencies. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from
other sources. Additionally, we frequently engage 3rd party
valuation experts to assist us with estimates described below.
Actual results may materially differ from these estimates under
different assumptions or conditions as additional information
becomes available in future periods.
Management has discussed the development and selection
of critical accounting estimates with the Audit Committee of
the board of Directors and the Audit Committee has reviewed
our disclosure relating to critical accounting estimates in this
Annual Report.
We provide for promotional allowances at the time of sale,
based on our historical experience. our estimates are generally
based on evaluating the relationship between promotional
allowances and gross sales. the derived percentage is then
applied to the current period’s sales revenues in order to arrive
at the appropriate debit to sales allowances for the period.
the offsetting credit is made to accrued liabilities. When certain
amounts of specific customer accounts are subsequently
identified as promotional, they are written off against this
allowance. Actual amounts may differ from these estimates and
such differences are recognized as an adjustment to net sales
in the period they are identified. A 1% change in the derived
percentage for the entire year would impact results of operations
by approximately $0.7 million.
Income taxes
We account for deferred tax liabilities and assets for the
future consequences of events that have been recognized in our
consolidated financial statements or tax returns. Measurement
of the deferred items is based on enacted tax laws. In the event
the future consequences of differences between financial
reporting bases and tax bases of our assets and liabilities
result in a deferred tax asset, we perform an evaluation of the
probability of being able to realize the future benefits indicated
by such asset. A valuation allowance related to a deferred tax
asset is recorded when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
As a multinational corporation, we are subject to taxation
in many jurisdictions, and the calculation of our tax liabilities
involves dealing with uncertainties in the application of complex
tax laws and regulations in various taxing jurisdictions. If we
ultimately determine that the payment of these liabilities will be
unnecessary, the liability will be reversed and we will recognize a
tax benefit during the period in which it is determined the liability
no longer applies. Conversely, we record additional tax charges
in a period in which it is determined that a recorded tax liability
is less than the ultimate assessment is expected to be.
the application of tax laws and regulations is subject to
legal and factual interpretation, judgment and uncertainty. tax
laws and regulations themselves are subject to change as a
result of changes in fiscal policy, changes in legislation, the
evolution of regulations and court rulings. therefore, the actual
liability for u.S. or foreign taxes may be materially different from
management’s estimates, which could result in the need to
record additional tax liabilities or potentially reverse previously
recorded tax liabilities.
Goodwill and acquired intangible assets
We believe the following are the more significant judgments
Goodwill, defined as unidentified asset(s) acquired in
and estimates used in the preparation of our consolidated
financial statements.
conjunction with a business acquisition, is tested for impairment
on an annual basis and between annual tests whenever events
or changes in circumstances indicate that the carrying amount
24 . 25
Calavo Growers, Inc. 2014 AnnuAl RepoR t
may not be recoverable. Goodwill is tested at the reporting unit
level, which is defined as an operating segment or one level
below the operating segment. Goodwill impairment testing is a
two-step process. the first step of the goodwill impairment test,
used to identify potential impairment, compares the fair value
of a reporting unit with its carrying amount, including goodwill.
If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired, and
the second step of the impairment test would be unnecessary.
If the carrying amount of a reporting unit exceeds its fair
value, the second step of the goodwill impairment test must
be performed to measure the amount of impairment loss, if
any. the second step of the goodwill impairment test, used
to measure the amount of impairment loss, compares the
implied fair value of reporting unit goodwill with the carrying
amount of that goodwill. If the carrying amount of reporting
unit goodwill exceeds the implied fair value of that goodwill,
an impairment loss must be recognized in an amount equal to
that excess. Goodwill impairment testing requires significant
judgment and management estimates, including, but not limited
to, the determination of (i) the number of reporting units,
(ii) the goodwill and other assets and liabilities to be allocated
to the reporting units and (iii) the fair values of the reporting
units. the estimates and assumptions described above, along
with other factors such as discount rates, will significantly
affect the outcome of the impairment tests and the amounts
of any resulting impairment losses. We performed our annual
assessment of goodwill and determined that no impairment
existed as of october 31, 2014.
Allowance for accounts receivable
We provide an allowance for estimated uncollectible
accounts receivable balances based on historical experience
and the aging of the related accounts receivable. If the financial
condition of our customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional
allowances may be required.
reSultS OF OperA tiOnS
the following table sets forth certain items from our
consolidated statements of income, expressed as percentages
of our total net sales, for the periods indicated:
YeAR enDeD oCtobeR 31,
2014
2013
2012
net sales
Gross margins
Selling, general and
administrative
ReSt AteD
ReSt AteD
100.0%
100.0%
100.0%
9.1%
8.6%
11.0%
4.7%
4.8%
5.9%
Contingent consideration
related to RFG acquisition
6.5%
4.8%
operating income
(2.1)%
(1.0)%
Interest income
0.0%
0.0%
0.5%
4.6%
0.0%
Interest expense
(0.1)%
(0.2)%
(0.2)%
other income, net
0.1%
0.1%
net income (loss)
(0.0)%
(0.4)%
0.2%
2.8%
Contingent consideration
net SaleS
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements. each period, we
revalue our contingent consideration obligations to their fair
value and record increases or decreases in the fair value into
contingent consideration, cost of sales and/or selling, general
and administrative expense. Increases or decreases in the fair
value of the contingent consideration obligations can result
from changes in the assumed timing and amount of revenue
and expense estimates, changes in the probability of payment
scenarios, changes in stock values, as well as changes in capital
market conditions, which impact the discount rate used in the
fair valuation. 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. total net increase to the contingent considerations
in fiscal years 2014, 2013 and 2012 totaled $53.1 million,
$33.6 million (restated) and $2.6 million (restated).
We believe that the fundamentals for our products continue
to be favorable. Firstly, Americans continue to eat more
avocados. united States (u.S.) avocado demand continues to
grow, with per capita use in 2012/13 reaching 5.6 pounds per
person, up 10 percent from the previous year, and approximately
130% higher the estimate of a decade ago. We believe that
the healthy eating trend that has been developing in the
united States contributes to such growth, as avocados, which
are cholesterol and sodium free, are dense in fiber, vitamin
b6, antioxidants, potassium, folate, and contain unsaturated
fat, which help lower cholesterol. Also, a growing number of
research studies seem to suggest that phytonutrients, which
avocados are rich in, help fight chronic illnesses, such as heart
disease and cancer.
Additionally, we believe that the demographic changes in
the u.S. will greatly impact the consumption of avocados and
avocado-based products. the Hispanic community currently
accounts for approximately 17% of the u.S. population, and the
total number of Hispanics is estimated to triple by the year 2050.
Avocados are considered a staple item purchased by Hispanic
consumers, as the per-capita avocado consumption in Mexico
is considered significantly higher than that of the u.S.
We anticipate avocado products will further penetrate
the united States marketplace driven by year-round availability
of fresh avocados due to imports, a rapidly growing Hispanic
population, and the promotion of the health benefits of
avocados. As the largest marketer of avocado products in
the united States, we believe that we are well positioned to
leverage this trend and to grow our Fresh products and Calavo
Foods segments of our business. Additionally, we also believe
that avocados and avocado based products will further penetrate
other marketplaces that we currently operate in, as interest in
avocados continues to expand.
In october 2002, the uSDA announced the creation of a
Hass Avocado board to promote the sale of Hass variety
avocados in the u.S. marketplace. this board provides a basis
for a unified funding of promotional activities based on an
assessment on all avocados sold in the u.S. marketplace. the
California Avocado Commission, which receives its funding
from California avocado growers, has historically shouldered
the promotional and advertising costs supporting avocado
sales. We believe that the incremental funding of promotional
and advertising programs in the u.S. will, in the long term,
positively impact average selling prices and will favorably impact
our avocado businesses. During fiscal 2014, 2013 and 2012,
on behalf of avocado growers, we remitted approximately
$1.7 million, $2.0 million and $0.9 million to the California
Avocado Commission. During fiscal 2014, 2013 and 2012, we
remitted approximately $7.1 million, $8.0 million and $5.7 million
to the Hass Avocado board related to avocados.
We also believe that our diversified fresh products, primarily
tomatoes, papayas and pineapples, are positioned for future
growth and expansion.
the tomato is the fourth most popular fresh-market
vegetable behind potatoes, lettuce, and onions in the united
States. Although stabilizing in the first decade of the 2000s,
annual average fresh-market tomato consumption remains
well above that of the previous decade. over the past few
decades, per capita use of tomatoes has been on the rise due
to the enduring popularity of salads, salad bars, and submarine
sandwiches. perhaps of greater importance has been the
introduction of improved and new tomato varieties, heightened
consumer interest in a wider range of tomatoes, a surge of new
immigrants who eat vegetable-intensive diets, and expanding
national emphasis on health and nutrition.
papayas have become more popular as the consumption in
the united States has more than doubled in the past decade.
papayas have high nutritional benefits. they are rich in Anti-
oxidants, the b vitamins, folate and pantothenic acid; and the
minerals, potassium and magnesium; and fiber. together, these
nutrients promote the health of the cardiovascular system and
also provide protection against colon cancer.
Additionally, through the acquisition of RFG, we substantially
expanded and accelerated the Company’s presence in the fast-
growing refrigerated fresh packaged foods category through
an array of retail product lines for produce, deli, meat and
food service departments. RFG products range from fresh-cut
fruit, ready-to-eat vegetables, recipe-ready vegetables and deli
meat products. RFG sells under the popular labels of Garden
Highway Fresh Cut, Garden Highway, and Garden Highway Chef
essentials to a wide range of customers.
Sales of products and related costs of products sold are
recognized when persuasive evidence of an arrangement exists,
delivery has occurred, the price is fixed or determinable and
collectability is reasonably assured. Service revenue, including
freight, ripening, storage, bagging and palletization charges,
is recorded when services are performed and sales of the
related products are delivered. We provide for sales returns
and promotional allowances at the time of shipment, based
on our experience.
the following tables set forth sales by product category and
sales incentives, by segment (dollars in thousands):
YeAR enDeD oCtobeR 31, 2014
YeAR enDeD oCtobeR 31, 2013
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
tot Al
th IrD - Part y S aleS :
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
$ 433,581 $
— $
— $ 433,581 $ 407,678 $
— $
— $ 407,678
19,705
12,619
5,086
1,037
—
—
—
—
—
—
48,085
—
—
—
—
—
19,705
22,623
12,619
13,077
5,086
1,037
48,085
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
13,077
5,739
601
43,616
18,789
195,376
214,165
22,334
255,074
277,408
total gross sales
472,028
70,419
255,074
797,521
449,718
62,405
195,376
707,499
less sales incentives
(1,079)
(11,140)
(2,792)
(15,011)
(1,349)
(10,791)
(3,908)
(16,048)
net sales
$ 470,949 $ 59,279 $ 252,282 $ 782,510 $ 448,369 $ 51,614 $ 191,468 $ 691,451
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
$ 407,678 $
— $
— $ 407,678 $ 318,556 $
— $
— $ 318,556
22,623
13,077
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
11,404
13,077
12,753
5,739
601
43,616
6,840
1,788
—
—
—
—
—
—
36,289
—
—
—
—
—
11,404
12,753
6,840
1,788
36,289
19,758
157,333
177,091
18,789
195,376
214,165
th IrD - Part y S aleS :
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
total gross sales
449,718
62,405
195,376
707,499
351,341
56,047
157,333
564,721
less sales incentives
(1,349)
(10,791)
(3,908)
(16,048)
(759)
(9,623)
(3,220)
(13,602)
net sales
$ 448,369 $ 51,614 $ 191,468 $ 691,451 $ 350,582 $ 46,424 $ 154,113 $ 551,119
net sales to third parties by segment exclude inter-segment
sales and cost of sales. For fiscal years 2014, 2013, and 2012,
inter-segment sales and cost of sales for Fresh products totaling
$33.7 million, $29.9 million and $22.2 million were eliminated.
the following table summarizes our net sales by business segment:
For fiscal years 2014, 2013, and 2012, inter-segment sales and
cost of sales for Calavo Foods totaling $16.4 million, $14.3 million,
and $11.6 million were eliminated.
2014
CHAnGe
2013
CHAnGe
2012
(Dollars in thousands)
net S aleS :
Fresh products
Calavo Foods
RFG
total net sales
aS a P ercentage of net S aleS :
Fresh products
Calavo Foods
RFG
Summary
$ 470,949
5.0%
$ 448,369
27.9%
$ 350,582
59,279
14.9%
51,614
11.2%
46,424
252,282
31.8%
191,468
24.2%
154,113
$ 782,510
13.2%
$ 691,451
25.5%
$ 551,119
60.2%
7.6%
32.2%
64.8%
7.5%
27.7%
63.6%
8.4%
28.0%
100.0%
100.0%
100.0%
net sales for the year ended october 31, 2014, compared to
2013, increased by $91.1 million, or 13.2%. 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 fiscal year 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 fiscal 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
fiscal year 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. See detailed explanations below.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
26 . 27
We anticipate avocado products will further penetrate
the united States marketplace driven by year-round availability
of fresh avocados due to imports, a rapidly growing Hispanic
population, and the promotion of the health benefits of
avocados. As the largest marketer of avocado products in
the united States, we believe that we are well positioned to
leverage this trend and to grow our Fresh products and Calavo
Foods segments of our business. Additionally, we also believe
that avocados and avocado based products will further penetrate
other marketplaces that we currently operate in, as interest in
avocados continues to expand.
In october 2002, the uSDA announced the creation of a
Hass Avocado board to promote the sale of Hass variety
avocados in the u.S. marketplace. this board provides a basis
for a unified funding of promotional activities based on an
assessment on all avocados sold in the u.S. marketplace. the
California Avocado Commission, which receives its funding
from California avocado growers, has historically shouldered
the promotional and advertising costs supporting avocado
sales. We believe that the incremental funding of promotional
and advertising programs in the u.S. will, in the long term,
positively impact average selling prices and will favorably impact
our avocado businesses. During fiscal 2014, 2013 and 2012,
on behalf of avocado growers, we remitted approximately
$1.7 million, $2.0 million and $0.9 million to the California
Avocado Commission. During fiscal 2014, 2013 and 2012, we
remitted approximately $7.1 million, $8.0 million and $5.7 million
to the Hass Avocado board related to avocados.
We also believe that our diversified fresh products, primarily
tomatoes, papayas and pineapples, are positioned for future
growth and expansion.
the tomato is the fourth most popular fresh-market
vegetable behind potatoes, lettuce, and onions in the united
States. Although stabilizing in the first decade of the 2000s,
annual average fresh-market tomato consumption remains
well above that of the previous decade. over the past few
decades, per capita use of tomatoes has been on the rise due
to the enduring popularity of salads, salad bars, and submarine
sandwiches. perhaps of greater importance has been the
introduction of improved and new tomato varieties, heightened
consumer interest in a wider range of tomatoes, a surge of new
immigrants who eat vegetable-intensive diets, and expanding
national emphasis on health and nutrition.
papayas have become more popular as the consumption in
the united States has more than doubled in the past decade.
papayas have high nutritional benefits. they are rich in Anti-
oxidants, the b vitamins, folate and pantothenic acid; and the
minerals, potassium and magnesium; and fiber. together, these
nutrients promote the health of the cardiovascular system and
also provide protection against colon cancer.
Additionally, through the acquisition of RFG, we substantially
expanded and accelerated the Company’s presence in the fast-
growing refrigerated fresh packaged foods category through
an array of retail product lines for produce, deli, meat and
food service departments. RFG products range from fresh-cut
fruit, ready-to-eat vegetables, recipe-ready vegetables and deli
meat products. RFG sells under the popular labels of Garden
Highway Fresh Cut, Garden Highway, and Garden Highway Chef
essentials to a wide range of customers.
Sales of products and related costs of products sold are
recognized when persuasive evidence of an arrangement exists,
delivery has occurred, the price is fixed or determinable and
collectability is reasonably assured. Service revenue, including
freight, ripening, storage, bagging and palletization charges,
is recorded when services are performed and sales of the
related products are delivered. We provide for sales returns
and promotional allowances at the time of shipment, based
on our experience.
the following tables set forth sales by product category and
sales incentives, by segment (dollars in thousands):
YeAR enDeD oCtobeR 31, 2014
YeAR enDeD oCtobeR 31, 2013
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
tot Al
th IrD - Part y S aleS :
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
$ 433,581 $
— $
— $ 433,581 $ 407,678 $
— $
— $ 407,678
19,705
12,619
5,086
1,037
—
—
—
—
—
—
48,085
—
—
—
—
—
19,705
22,623
12,619
13,077
5,086
1,037
48,085
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
13,077
5,739
601
43,616
18,789
195,376
214,165
22,334
255,074
277,408
total gross sales
472,028
70,419
255,074
797,521
449,718
62,405
195,376
707,499
less sales incentives
(1,079)
(11,140)
(2,792)
(15,011)
(1,349)
(10,791)
(3,908)
(16,048)
net sales
$ 470,949 $ 59,279 $ 252,282 $ 782,510 $ 448,369 $ 51,614 $ 191,468 $ 691,451
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
$ 407,678 $
— $
— $ 407,678 $ 318,556 $
— $
— $ 318,556
22,623
13,077
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
11,404
13,077
12,753
5,739
601
43,616
6,840
1,788
—
—
—
—
—
—
36,289
—
—
—
—
—
11,404
12,753
6,840
1,788
36,289
19,758
157,333
177,091
18,789
195,376
214,165
th IrD - Part y S aleS :
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
total gross sales
449,718
62,405
195,376
707,499
351,341
56,047
157,333
564,721
less sales incentives
(1,349)
(10,791)
(3,908)
(16,048)
(759)
(9,623)
(3,220)
(13,602)
net sales
$ 448,369 $ 51,614 $ 191,468 $ 691,451 $ 350,582 $ 46,424 $ 154,113 $ 551,119
net sales to third parties by segment exclude inter-segment
sales and cost of sales. For fiscal years 2014, 2013, and 2012,
inter-segment sales and cost of sales for Fresh products totaling
$33.7 million, $29.9 million and $22.2 million were eliminated.
the following table summarizes our net sales by business segment:
For fiscal years 2014, 2013, and 2012, inter-segment sales and
cost of sales for Calavo Foods totaling $16.4 million, $14.3 million,
and $11.6 million were eliminated.
2014
CHAnGe
2013
CHAnGe
2012
(Dollars in thousands)
net S aleS :
Fresh products
Calavo Foods
RFG
total net sales
aS a P ercentage of net S aleS :
Fresh products
Calavo Foods
RFG
Summary
$ 470,949
5.0%
$ 448,369
27.9%
$ 350,582
59,279
14.9%
51,614
11.2%
46,424
252,282
31.8%
191,468
24.2%
154,113
$ 782,510
13.2%
$ 691,451
25.5%
$ 551,119
60.2%
7.6%
32.2%
64.8%
7.5%
27.7%
63.6%
8.4%
28.0%
100.0%
100.0%
100.0%
net sales for the year ended october 31, 2014, compared to
2013, increased by $91.1 million, or 13.2%. 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 fiscal year 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 fiscal 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
fiscal year 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. See detailed explanations below.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
26 . 27
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.
approximately 19.6%. 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.
Fresh products
Fiscal 2014 vs. Fiscal 2013:
net sales delivered by the Fresh products business increased
by approximately $22.6 million, or 5.0%, for the year ended
october 31, 2014, when compared to fiscal 2013. As discussed
above, this increase in Fresh product sales during 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 $91.9 million,
or 39.2%, for the year ended october 31, 2014, when compared
to the same prior year period. the increase in Mexican sourced
avocados was due primarily to an increase in the sales price per
carton, which increased by approximately 18.8%. We attribute
this increase primarily to a lower overall volume of California
avocados in the marketplace, due to a smaller crop, and an
overall increase in the demand of quality avocados. In addition,
there was an increase in the pounds sold, which increased by
approximately 37.4 million pounds of avocados sold, or 17.2%,
when compared to the same prior year period.
Sales of Chilean sourced avocados increased $2.9 million for
the year ended october 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 2.7 million pounds of avocados sold,
when compared to the same prior year period. this increase in
sales is due to the lower availability of California avocados, 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 $69.3 million,
or 40.4% for the year ended october 31, 2014, when compared
to the same prior year period. the decrease in California
sourced avocados was primarily due to a decrease in pounds
sold. California sourced avocados sales reflect a decrease in
67.0 million pounds of avocados sold, or 47.4%, 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 13.3%. 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 year
ended october 31, 2014, compared to $22.6 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
We anticipate that sales volume of California grown avocados
will increase in fiscal 2015, due to a larger expected California
avocado crop. We anticipate that sales of Mexican grown avocados
will increase in fiscal 2015, when compared to the same prior year
period, due to higher overall volume. In addition, we anticipate that
sales volume of tomatoes will increase in fiscal 2015.
Fiscal 2013 vs. Fiscal 2012:
net sales delivered by the Fresh products business increased
by approximately $97.8 million, or 27.9%, for the year ended
october 31, 2013, when compared to fiscal 2012. As discussed
above, this increase in Fresh product sales during fiscal year 2013
was primarily related to increased sales of Mexican and California
sourced avocados, as well as tomatoes. partially offsetting these
increases in Fresh product sales, however, was a decrease in
sales of Chilean sourced avocados. See details below.
Sales of Mexican sourced avocados increased $52.9 million,
or 29.1%, for the year ended october 31, 2013, when compared
to the same prior year period. the increase in Mexican sourced
avocados was primarily due to an increase in pounds sold.
Mexican sourced avocados sales reflect an increase in 50.3 million
pounds of avocados sold, or 30.0%, when compared to the same
prior year period. We attribute much of this increase in volume
to the larger Mexican avocado crop in the current year, as well as
current initiatives to expand our customer base and market share.
partially offsetting this increase, however, was the decrease in the
sales price per carton, which decreased by approximately 0.7%.
We attribute this decrease primarily to a higher overall volume
of avocados in the marketplace, as well as the aforementioned
change in strategy to increase avocado market share.
Sales of California sourced avocados increased $42.7 million,
or 33.0%, for the year ended october 31, 2013, when compared
to the same prior year period. the increase in California sourced
avocados was primarily due to an increase in the sales price
per carton and an increase in pounds sold. California sourced
avocados experienced an increase in the sales price per carton
of approximately 19.6%. We attribute this increase primarily
to a higher overall demand of avocados in the marketplace.
Additionally there was an increase in pounds sold, which
increased 14.3 million pounds, or 11.2%, when compared to the
same prior year period. We attribute much of this increase in
volume to the larger California avocado crop in the current year.
Sales of tomatoes increased $11.2 million, or 98.4%, for
the year ended october 31, 2013, when compared to the same
period for fiscal 2012. the increase in sales for tomatoes is
primarily due to a combination of an increase in the number of
cartons sold and an increase in the sales price per carton. Warmer
than expected weather was experienced in both Florida and
Mexico growing areas which delayed the start of the respective
harvests and reduced the number of units available in prior year.
28 . 29
Calavo Growers, Inc. 2014 AnnuAl RepoR t
We attribute some of this increase in the per carton selling price
to the lower volume of quality tomatoes in the u.S. marketplace.
partially offsetting the increases described in the paragraphs
above was a decrease in sales of Chilean sourced avocados,
which decreased $5.7 million, or 95.9%, for the year ended
october 31, 2013, when compared to the same period for fiscal
2012. the decrease in Chilean sourced avocados was due to
a decrease in pounds sold. Chilean sourced avocados sales
reflect a decrease in 5.4 million pounds of avocados sold, when
compared to the same prior year period. this decrease in sales
is due to the high availability of other avocado sources, and an
increased focus on Mexican and California sourced avocados for
the year ended october 31, 2013.
Calavo Foods
Fiscal 2014 vs. Fiscal 2013:
Sales for Calavo Foods for the year ended october 31, 2014,
when compared to the same period for fiscal 2013, increased
$7.7 million, or 14.9%. this increase is due to an increase in sales
of prepared guacamole products which increased approximately
$8.1 million, or 16.5%, for the year ended october 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 4.8 million pounds, or
22.3%, 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 4.4%, primarily
due to a change in the product mix.
Fiscal 2013 vs. Fiscal 2012:
Sales for Calavo Foods for the year ended october 31, 2013,
when compared to the same period for fiscal 2012, increased
$5.2 million, or 11.2%. this increase is due to an increase in sales
of prepared guacamole products which increased approximately
$6.0 million, or 13.9%, for the year ended october 31, 2013, 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 4.3 million pounds, or 24.8%,
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 8.0%. the decrease in the
average net selling price is primarily related to an increase in sales
to high volume but lower margin customers. partially offsetting this
increase is a decrease of sales of Calavo Salsa lisa products
of $0.5 million or 21.8% and tortilla chips of $0.4 million or 32.7%.
RFG
Fiscal 2014 vs. Fiscal 2013:
Sales for RFG for the year ended october 31, 2014, when
compared to the same prior year period, increased $60.8 million,
or 31.8%. this increase is due primarily to increased sales from
packaged fresh cut fruit, packaged fresh cut vegetables and fresh
prepared and packaged deli style salads, sandwiches and wraps.
the overall increase in sales is primarily due to an increase in sales
volume. Collectively, cut fruit, cut vegetable, and deli product sales
increased 18.8 million units, or 25.9%. We believe the overall
increase in sales volume is primarily due to an increase in demand
for the variety of innovative packaged fresh food products that
we offer. As point of note, under Calavo ownership RFG revenues
have grown from a fiscal 2011 “run rate” of $94.1 million to
$252.3 million for the fiscal year ended oct. 31, 2014.
Fiscal 2013 vs. Fiscal 2012:
Sales for RFG for the year ended october 31, 2013, when
compared to the same prior year period, increased $37.4 million,
or 24.2%. this increase is due primarily to increased sales
from packaged fresh cut fruit, packaged fresh cut vegetables
and fresh prepared and packaged deli style salads, sandwiches
and wraps. the overall increase in sales is primarily due to an
increase in sales volume. Collectively, cut fruit, cut vegetable,
and deli product sales increased 13.8 million units, or 24.0%.
We believe the overall increase in sales volume is primarily due
to an increase in demand for the variety of innovative packaged
fresh food products that we offer.
groSS margInS
the following table summarizes our gross margins and gross
profit percentages by business segment:
(Dollars in thousands)
groSS m argInS :
Fresh products
Calavo Foods
RFG
total gross margins
groSS P rofIt P ercentageS :
Fresh products
Calavo Foods
RFG
Consolidated
2014
CHAnGe
2013
CHAnGe
2012
(ReSt AteD)
(ReSt AteD)
$ 36,129
13,010
22,089
$ 71,228
15.8%
(2.8)%
48.6%
19.8%
$ 31,193
13,388
14,867
$ 59,448
(9.0)%
(4.4)%
20.2%
(2.0)%
$ 34,295
14,002
12,368
$ 60,665
7.7%
21.9%
8.8%
9.1%
7.0%
25.9%
7.8%
8.6%
9.8%
30.2%
8.0%
11.0%
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.
approximately 19.6%. 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.
Fresh products
Fiscal 2014 vs. Fiscal 2013:
net sales delivered by the Fresh products business increased
by approximately $22.6 million, or 5.0%, for the year ended
october 31, 2014, when compared to fiscal 2013. As discussed
above, this increase in Fresh product sales during 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 $91.9 million,
or 39.2%, for the year ended october 31, 2014, when compared
to the same prior year period. the increase in Mexican sourced
avocados was due primarily to an increase in the sales price per
carton, which increased by approximately 18.8%. We attribute
this increase primarily to a lower overall volume of California
avocados in the marketplace, due to a smaller crop, and an
overall increase in the demand of quality avocados. In addition,
there was an increase in the pounds sold, which increased by
approximately 37.4 million pounds of avocados sold, or 17.2%,
when compared to the same prior year period.
Sales of Chilean sourced avocados increased $2.9 million for
the year ended october 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 2.7 million pounds of avocados sold,
when compared to the same prior year period. this increase in
sales is due to the lower availability of California avocados, 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 $69.3 million,
or 40.4% for the year ended october 31, 2014, when compared
to the same prior year period. the decrease in California
sourced avocados was primarily due to a decrease in pounds
sold. California sourced avocados sales reflect a decrease in
67.0 million pounds of avocados sold, or 47.4%, 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 13.3%. 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 year
ended october 31, 2014, compared to $22.6 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
We anticipate that sales volume of California grown avocados
will increase in fiscal 2015, due to a larger expected California
avocado crop. We anticipate that sales of Mexican grown avocados
will increase in fiscal 2015, when compared to the same prior year
period, due to higher overall volume. In addition, we anticipate that
sales volume of tomatoes will increase in fiscal 2015.
Fiscal 2013 vs. Fiscal 2012:
net sales delivered by the Fresh products business increased
by approximately $97.8 million, or 27.9%, for the year ended
october 31, 2013, when compared to fiscal 2012. As discussed
above, this increase in Fresh product sales during fiscal year 2013
was primarily related to increased sales of Mexican and California
sourced avocados, as well as tomatoes. partially offsetting these
increases in Fresh product sales, however, was a decrease in
sales of Chilean sourced avocados. See details below.
Sales of Mexican sourced avocados increased $52.9 million,
or 29.1%, for the year ended october 31, 2013, when compared
to the same prior year period. the increase in Mexican sourced
avocados was primarily due to an increase in pounds sold.
Mexican sourced avocados sales reflect an increase in 50.3 million
pounds of avocados sold, or 30.0%, when compared to the same
prior year period. We attribute much of this increase in volume
to the larger Mexican avocado crop in the current year, as well as
current initiatives to expand our customer base and market share.
partially offsetting this increase, however, was the decrease in the
sales price per carton, which decreased by approximately 0.7%.
We attribute this decrease primarily to a higher overall volume
of avocados in the marketplace, as well as the aforementioned
change in strategy to increase avocado market share.
Sales of California sourced avocados increased $42.7 million,
or 33.0%, for the year ended october 31, 2013, when compared
to the same prior year period. the increase in California sourced
avocados was primarily due to an increase in the sales price
per carton and an increase in pounds sold. California sourced
avocados experienced an increase in the sales price per carton
of approximately 19.6%. We attribute this increase primarily
to a higher overall demand of avocados in the marketplace.
Additionally there was an increase in pounds sold, which
increased 14.3 million pounds, or 11.2%, when compared to the
same prior year period. We attribute much of this increase in
volume to the larger California avocado crop in the current year.
Sales of tomatoes increased $11.2 million, or 98.4%, for
the year ended october 31, 2013, when compared to the same
period for fiscal 2012. the increase in sales for tomatoes is
primarily due to a combination of an increase in the number of
cartons sold and an increase in the sales price per carton. Warmer
than expected weather was experienced in both Florida and
Mexico growing areas which delayed the start of the respective
harvests and reduced the number of units available in prior year.
28 . 29
Calavo Growers, Inc. 2014 AnnuAl RepoR t
We attribute some of this increase in the per carton selling price
to the lower volume of quality tomatoes in the u.S. marketplace.
partially offsetting the increases described in the paragraphs
above was a decrease in sales of Chilean sourced avocados,
which decreased $5.7 million, or 95.9%, for the year ended
october 31, 2013, when compared to the same period for fiscal
2012. the decrease in Chilean sourced avocados was due to
a decrease in pounds sold. Chilean sourced avocados sales
reflect a decrease in 5.4 million pounds of avocados sold, when
compared to the same prior year period. this decrease in sales
is due to the high availability of other avocado sources, and an
increased focus on Mexican and California sourced avocados for
the year ended october 31, 2013.
Calavo Foods
Fiscal 2014 vs. Fiscal 2013:
Sales for Calavo Foods for the year ended october 31, 2014,
when compared to the same period for fiscal 2013, increased
$7.7 million, or 14.9%. this increase is due to an increase in sales
of prepared guacamole products which increased approximately
$8.1 million, or 16.5%, for the year ended october 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 4.8 million pounds, or
22.3%, 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 4.4%, primarily
due to a change in the product mix.
Fiscal 2013 vs. Fiscal 2012:
Sales for Calavo Foods for the year ended october 31, 2013,
when compared to the same period for fiscal 2012, increased
$5.2 million, or 11.2%. this increase is due to an increase in sales
of prepared guacamole products which increased approximately
$6.0 million, or 13.9%, for the year ended october 31, 2013, 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 4.3 million pounds, or 24.8%,
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 8.0%. the decrease in the
average net selling price is primarily related to an increase in sales
to high volume but lower margin customers. partially offsetting this
increase is a decrease of sales of Calavo Salsa lisa products
of $0.5 million or 21.8% and tortilla chips of $0.4 million or 32.7%.
RFG
Fiscal 2014 vs. Fiscal 2013:
Sales for RFG for the year ended october 31, 2014, when
compared to the same prior year period, increased $60.8 million,
or 31.8%. this increase is due primarily to increased sales from
packaged fresh cut fruit, packaged fresh cut vegetables and fresh
prepared and packaged deli style salads, sandwiches and wraps.
the overall increase in sales is primarily due to an increase in sales
volume. Collectively, cut fruit, cut vegetable, and deli product sales
increased 18.8 million units, or 25.9%. We believe the overall
increase in sales volume is primarily due to an increase in demand
for the variety of innovative packaged fresh food products that
we offer. As point of note, under Calavo ownership RFG revenues
have grown from a fiscal 2011 “run rate” of $94.1 million to
$252.3 million for the fiscal year ended oct. 31, 2014.
Fiscal 2013 vs. Fiscal 2012:
Sales for RFG for the year ended october 31, 2013, when
compared to the same prior year period, increased $37.4 million,
or 24.2%. this increase is due primarily to increased sales
from packaged fresh cut fruit, packaged fresh cut vegetables
and fresh prepared and packaged deli style salads, sandwiches
and wraps. the overall increase in sales is primarily due to an
increase in sales volume. Collectively, cut fruit, cut vegetable,
and deli product sales increased 13.8 million units, or 24.0%.
We believe the overall increase in sales volume is primarily due
to an increase in demand for the variety of innovative packaged
fresh food products that we offer.
groSS margInS
the following table summarizes our gross margins and gross
profit percentages by business segment:
(Dollars in thousands)
groSS m argInS :
Fresh products
Calavo Foods
RFG
total gross margins
groSS P rofIt P ercentageS :
Fresh products
Calavo Foods
RFG
Consolidated
2014
CHAnGe
2013
CHAnGe
2012
(ReSt AteD)
(ReSt AteD)
$ 36,129
13,010
22,089
$ 71,228
15.8%
(2.8)%
48.6%
19.8%
$ 31,193
13,388
14,867
$ 59,448
(9.0)%
(4.4)%
20.2%
(2.0)%
$ 34,295
14,002
12,368
$ 60,665
7.7%
21.9%
8.8%
9.1%
7.0%
25.9%
7.8%
8.6%
9.8%
30.2%
8.0%
11.0%
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 $11.8 million, or 19.8%, for
the year ended october 31, 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.
note that RFG’s Cost of Sales for fiscal 2014, 2013, and 2012
include non-cash compensation expense related to the sale/
acquisition of RFG totaling $1.8 million, and $0.7 million, and an
insignificant amount. See note 3 to our Consolidated Financial
Statements. If we did not include this non-cash expense, RFG’s
gross margin and resulting gross profit percentages would be
as follows:
2014
CHAnGe
2013
CHAnGe
2012
(Dollars in thousands)
groSS m argInS :
RFG
groSS P rofIt P ercentageS :
RFG
Fresh products
Fiscal 2014 vs. Fiscal 2013:
During fiscal 2014, as compared to the same prior year
period, the increase in our Fresh products segment gross margin
percentage was primarily the result of increased margins for
Mexican sourced avocados that increased from 5.0% in fiscal
2013 to 8.1% in fiscal 2014. 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
fruit costs increased 15.0%, we were able to increase sales
prices by approximately 18.8%. In addition, the u.S. Dollar to
Mexican peso exchange rate weakened in fiscal year 2013,
while in fiscal 2014 the u.S. Dollar to Mexican peso exchange
rate strengthened. note that any significant fluctuations 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.
partially offsetting this increase in gross margin percentage
was a decrease in the gross margin percentage for California
sourced avocados for fiscal 2014, as compared to the same prior
year periods. Gross margin percentages related to California
avocados are largely dependent on production yields achieved
at our packinghouses, current market prices of avocados, our
packing and marketing fee, and volume of avocados packed.
A significant portion of our costs are fixed. As such, a lower
volume of fruit going through our packinghouses will decrease
our gross margin percentage. pounds of California avocados
sold decreased 47.4% in fiscal 2014 as compared to fiscal 2013.
this had the effect of increasing our per pound costs, which,
as a result, negatively impacted gross margins.
the gross margin and/or gross profit percentage for
consignment sales, including certain Chilean avocados, tomatoes
and pineapples, are dependent on the volume of fruit we
23,896
53.7%
15,543
25.7%
12,369
9.5%
8.1%
8.0%
handle, the average selling prices, and the competitiveness
of the returns that we provide to third-party growers/packers.
the gross margin we earn is generally based on a commission
agreed to with each party, which usually is a percent of the
overall selling price. Although we generally do not take legal
title to such avocados and perishable products, we do assume
responsibilities (principally assuming credit risk, inventory loss
and delivery risk, and limited pricing risk) that are consistent
with acting as a principal in the transaction. Accordingly, our
results of operations include sales and cost of sales from the
sale of avocados and perishable products procured under
consignment arrangements. For fiscal years 2014, we generated
gross margins of $3.0 million from consigned sales. this is
a $0.1 million increase in gross margin for consigned sales
compared to previous year. Sales of Chilean sourced avocados
increased $2.9 million for the year ended october 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
2.7 million pounds of avocados sold, when compared to the
same prior year period. this increase in sales is due to the lower
availability of California avocados, and an increased focus on
obtaining an increased supply of avocados from more diversified
sources. Sales of tomatoes decreased to $19.7 million for
the year ended october 31, 2014, compared to $22.6 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 19.6%. 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.
Fiscal 2013 vs. Fiscal 2012:
During fiscal 2013, as compared to the same prior year
period, the decrease in our Fresh products segment gross
margin percentage was primarily the result of higher Mexican
sourced avocado fruit costs year-over-year. In addition, the u.S.
Dollar to Mexican peso exchange rate weakened in fiscal year
2013, when compared to the same prior period. We also focused
on our current initiatives to expand our customer base and
market share. Contributing to the decrease in the gross margin
percentage was a decrease in the gross margin percentage for
California sourced avocados for fiscal 2013, as compared to the
same prior year periods. this decrease was primarily attributed
to our current increased focus on initiatives to expand our
customer base and market share. the combined effect of these
negatively impacted gross margins.
the gross margin and/or gross profit percentage for
consignment sales, including certain Chilean avocados and
tomatoes, are dependent on the volume of fruit we handle, the
average selling prices, and the competitiveness of the returns
that we provide to third-party growers/packers. the gross margin
we earn is generally based on a commission agreed to with
each party, which usually is a percent of the overall selling price.
Although we generally do not take legal title to such avocados
and perishable products, we do assume responsibilities
(principally assuming credit risk, inventory loss and delivery
risk, and limited pricing risk) that are consistent with acting as a
principal in the transaction. Accordingly, our results of operations
include sales and cost of sales from the sale of avocados and
perishable products procured under consignment arrangements.
For fiscal years 2013, we generated gross margins of
$2.9 million from consigned sales. this is a $0.5 million increase
in gross margin for consigned sales compared to previous year.
this increase is due to an increase in tomato sales of 98.4% for
fiscal 2013, when compared to the same prior year period. the
increase in sales for tomatoes is primarily due to a combination
of an increase in the number of cartons sold and an increase in
the sales price per carton. Warmer than expected weather was
experienced in both Florida and Mexico growing areas which
delayed the start of the respective harvests and reduced the
number of units available in prior year. We attribute some of
this increase in the per carton selling price to the lower volume
of quality tomatoes in the u.S. marketplace. partially offsetting
the increase in tomato sales is the decrease in Chilean avocado
sales, which decreased $5.7 million, or 95.9%, for the year
ended october 31, 2013, when compared to the same period for
fiscal 2012. the decrease in Chilean sourced avocados was due
to a decrease in pounds sold. Chilean sourced avocados sales
reflect a decrease in 5.4 million pounds of avocados sold, when
compared to the same prior year period. this decrease in sales
is due to the high availability of other avocado sources, and an
increased focus on Mexican and California sourced avocados for
the year ended october 31, 2013.
Calavo Foods
Fiscal 2014 vs. Fiscal 2013:
the Calavo Foods segment gross margin percentage during
our year ended october 31, 2014, when compared to the same
prior year periods, decreased primarily due to an increase in
fruit costs. Fruit costs increased during our year ended october
31, 2014, by approximately 2.8%. 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. note that 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
Calavo Foods segments.
Fiscal 2013 vs. Fiscal 2012:
Gross profit percentages for Calavo Foods for the year ended
october 31, 2013, as compared to the same prior year period,
decreased primarily as a result of higher fruit and operating costs
for our prepared guacamole products. Fruit costs for the year
ended october 31, 2013, increased 19.7%, when compared to
the same prior year period. We believe these increases in fruit
costs are primarily due to an overall higher demand for avocados
in the marketplace. In addition, the weakening of the u.S. Dollar
compared to the Mexican peso, year-over-year, increased our per
pound costs. All of these combined had the effect of increasing
our per pound costs, which, as a result, negatively impacted
gross margins. In addition, included in the cost of sales was an
impairment of $0.6 million for certain intangible assets related
to the Calavo Salsa lisa reporting unit. this impairment was a
result of less than anticipated sales since acquisition and was
calculated via a forecast projection analysis, with consultation
from a third party consulting firm. We anticipate that the gross
margin percentage for our Calavo Foods segment will continue
to experience significant fluctuations due to the uncertainty of
the cost of fruit that will be used in the production process.
RFG
Fiscal 2014 vs. Fiscal 2013:
not considering the non-cash compensation expense as
described above, gross profit for RFG for the year ended october 31,
2014, when compared to the same prior year period, increased
$8.4 million, or 53.7%. 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.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
30 . 31
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 $11.8 million, or 19.8%, for
the year ended october 31, 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.
note that RFG’s Cost of Sales for fiscal 2014, 2013, and 2012
include non-cash compensation expense related to the sale/
acquisition of RFG totaling $1.8 million, and $0.7 million, and an
insignificant amount. See note 3 to our Consolidated Financial
Statements. If we did not include this non-cash expense, RFG’s
gross margin and resulting gross profit percentages would be
as follows:
2014
CHAnGe
2013
CHAnGe
2012
(Dollars in thousands)
groSS m argInS :
RFG
groSS P rofIt P ercentageS :
RFG
Fresh products
Fiscal 2014 vs. Fiscal 2013:
During fiscal 2014, as compared to the same prior year
period, the increase in our Fresh products segment gross margin
percentage was primarily the result of increased margins for
Mexican sourced avocados that increased from 5.0% in fiscal
2013 to 8.1% in fiscal 2014. 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
fruit costs increased 15.0%, we were able to increase sales
prices by approximately 18.8%. In addition, the u.S. Dollar to
Mexican peso exchange rate weakened in fiscal year 2013,
while in fiscal 2014 the u.S. Dollar to Mexican peso exchange
rate strengthened. note that any significant fluctuations 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.
partially offsetting this increase in gross margin percentage
was a decrease in the gross margin percentage for California
sourced avocados for fiscal 2014, as compared to the same prior
year periods. Gross margin percentages related to California
avocados are largely dependent on production yields achieved
at our packinghouses, current market prices of avocados, our
packing and marketing fee, and volume of avocados packed.
A significant portion of our costs are fixed. As such, a lower
volume of fruit going through our packinghouses will decrease
our gross margin percentage. pounds of California avocados
sold decreased 47.4% in fiscal 2014 as compared to fiscal 2013.
this had the effect of increasing our per pound costs, which,
as a result, negatively impacted gross margins.
the gross margin and/or gross profit percentage for
consignment sales, including certain Chilean avocados, tomatoes
and pineapples, are dependent on the volume of fruit we
23,896
53.7%
15,543
25.7%
12,369
9.5%
8.1%
8.0%
handle, the average selling prices, and the competitiveness
of the returns that we provide to third-party growers/packers.
the gross margin we earn is generally based on a commission
agreed to with each party, which usually is a percent of the
overall selling price. Although we generally do not take legal
title to such avocados and perishable products, we do assume
responsibilities (principally assuming credit risk, inventory loss
and delivery risk, and limited pricing risk) that are consistent
with acting as a principal in the transaction. Accordingly, our
results of operations include sales and cost of sales from the
sale of avocados and perishable products procured under
consignment arrangements. For fiscal years 2014, we generated
gross margins of $3.0 million from consigned sales. this is
a $0.1 million increase in gross margin for consigned sales
compared to previous year. Sales of Chilean sourced avocados
increased $2.9 million for the year ended october 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
2.7 million pounds of avocados sold, when compared to the
same prior year period. this increase in sales is due to the lower
availability of California avocados, and an increased focus on
obtaining an increased supply of avocados from more diversified
sources. Sales of tomatoes decreased to $19.7 million for
the year ended october 31, 2014, compared to $22.6 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 19.6%. 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.
Fiscal 2013 vs. Fiscal 2012:
During fiscal 2013, as compared to the same prior year
period, the decrease in our Fresh products segment gross
margin percentage was primarily the result of higher Mexican
sourced avocado fruit costs year-over-year. In addition, the u.S.
Dollar to Mexican peso exchange rate weakened in fiscal year
2013, when compared to the same prior period. We also focused
on our current initiatives to expand our customer base and
market share. Contributing to the decrease in the gross margin
percentage was a decrease in the gross margin percentage for
California sourced avocados for fiscal 2013, as compared to the
same prior year periods. this decrease was primarily attributed
to our current increased focus on initiatives to expand our
customer base and market share. the combined effect of these
negatively impacted gross margins.
the gross margin and/or gross profit percentage for
consignment sales, including certain Chilean avocados and
tomatoes, are dependent on the volume of fruit we handle, the
average selling prices, and the competitiveness of the returns
that we provide to third-party growers/packers. the gross margin
we earn is generally based on a commission agreed to with
each party, which usually is a percent of the overall selling price.
Although we generally do not take legal title to such avocados
and perishable products, we do assume responsibilities
(principally assuming credit risk, inventory loss and delivery
risk, and limited pricing risk) that are consistent with acting as a
principal in the transaction. Accordingly, our results of operations
include sales and cost of sales from the sale of avocados and
perishable products procured under consignment arrangements.
For fiscal years 2013, we generated gross margins of
$2.9 million from consigned sales. this is a $0.5 million increase
in gross margin for consigned sales compared to previous year.
this increase is due to an increase in tomato sales of 98.4% for
fiscal 2013, when compared to the same prior year period. the
increase in sales for tomatoes is primarily due to a combination
of an increase in the number of cartons sold and an increase in
the sales price per carton. Warmer than expected weather was
experienced in both Florida and Mexico growing areas which
delayed the start of the respective harvests and reduced the
number of units available in prior year. We attribute some of
this increase in the per carton selling price to the lower volume
of quality tomatoes in the u.S. marketplace. partially offsetting
the increase in tomato sales is the decrease in Chilean avocado
sales, which decreased $5.7 million, or 95.9%, for the year
ended october 31, 2013, when compared to the same period for
fiscal 2012. the decrease in Chilean sourced avocados was due
to a decrease in pounds sold. Chilean sourced avocados sales
reflect a decrease in 5.4 million pounds of avocados sold, when
compared to the same prior year period. this decrease in sales
is due to the high availability of other avocado sources, and an
increased focus on Mexican and California sourced avocados for
the year ended october 31, 2013.
Calavo Foods
Fiscal 2014 vs. Fiscal 2013:
the Calavo Foods segment gross margin percentage during
our year ended october 31, 2014, when compared to the same
prior year periods, decreased primarily due to an increase in
fruit costs. Fruit costs increased during our year ended october
31, 2014, by approximately 2.8%. 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. note that 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
Calavo Foods segments.
Fiscal 2013 vs. Fiscal 2012:
Gross profit percentages for Calavo Foods for the year ended
october 31, 2013, as compared to the same prior year period,
decreased primarily as a result of higher fruit and operating costs
for our prepared guacamole products. Fruit costs for the year
ended october 31, 2013, increased 19.7%, when compared to
the same prior year period. We believe these increases in fruit
costs are primarily due to an overall higher demand for avocados
in the marketplace. In addition, the weakening of the u.S. Dollar
compared to the Mexican peso, year-over-year, increased our per
pound costs. All of these combined had the effect of increasing
our per pound costs, which, as a result, negatively impacted
gross margins. In addition, included in the cost of sales was an
impairment of $0.6 million for certain intangible assets related
to the Calavo Salsa lisa reporting unit. this impairment was a
result of less than anticipated sales since acquisition and was
calculated via a forecast projection analysis, with consultation
from a third party consulting firm. We anticipate that the gross
margin percentage for our Calavo Foods segment will continue
to experience significant fluctuations due to the uncertainty of
the cost of fruit that will be used in the production process.
RFG
Fiscal 2014 vs. Fiscal 2013:
not considering the non-cash compensation expense as
described above, gross profit for RFG for the year ended october 31,
2014, when compared to the same prior year period, increased
$8.4 million, or 53.7%. 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.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
30 . 31
Fiscal 2013 vs. Fiscal 2012:
not considering the non-cash compensation expense
as described above, gross profit for RFG for the year ended
october 31, 2013, when compared to the same prior year period,
increased $3.2 million, or 25.7%. this increase is due primarily
to increased sales from packaged fresh cut fruit, packaged
fresh cut vegetables and fresh prepared and packaged deli style
salads, sandwiches and wraps. the overall increase in sales is
primarily due to an increase in sales volume. Collectively, cut
fruit, cut vegetable, and deli product sales increased 13.8 million
units, or 24.0%. We believe the overall increase in sales volume
is primarily due to an increase in demand for the variety of
innovative packaged fresh food products that we offer.
SellIng, general anD aDmInIStratIve
2014
CHAnGe
2013
CHAnGe
2012
(Dollars in thousands)
(ReSt AteD)
(ReSt AteD)
Selling, general and administrative
$ 36,605
9.3%
$ 33,485
2.4%
$ 32,714
percentage of net sales
4.7%
4.8%
5.9%
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 $3.1 million, or 9.3%, for the year ended
october 31, 2014, when compared to the same prior year
period. 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 $1.2 million), non-cash
compensation related to RFG acquisition (approximately
$0.5 million), stock option expense (approximately $0.4 million),
accounting fees (approximately $0.4 million), bad debt expense
(approximately $0.2 million), employee benefits (approximately
$0.2 million), other administration fees (approximately
$0.2 million) and broker commissions (approximately
$0.1 million), partially offset by a decrease in the expenses
related to the start-up operations of FreshRealm (approximately
$0.9 million), write-down of contingent consideration related
to Salsa lisa (approximately $0.3 million), promotions and
advertising (approximately $0.1 million) and legal fees
(approximately $0.1 million).
Selling, general and administrative expenses increased
$0.8 million, or 2.4%, for the year ended october 31, 2013,
when compared to the same prior year period. this increase
was primarily due to the start-up operations of FreshRealm
(approximately $1.9 million), as well as higher corporate
costs, including, but not limited to, salaries (approximately
$0.7 million), non-cash compensation related to RFG acquisition
(approximately $0.3 million), accounting fees (approximately
$0.2 million), and legal fees (approximately $0.2 million), partially
offset by decreases in management bonuses (approximately
$2.2 million), consulting fees (approximately $0.1 million), data
processing (approximately $0.1 million) and a decrease in the
revalue adjustments on contingent consideration related to
the acquisition of Calavo Salsa lisa compared to prior year
(approximately $0.1 million).
contIngent conSIDeratIon
relateD to rfg acQUISItIon
(Dollars in thousands)
2014
CHAnGe
2013
CHAnGe
2012
(ReSt AteD)
(ReSt AteD)
IntereSt Income
(Dollars in thousands)
Interest income
percentage of net sales
2014
CHAnGe
2013
CHAnGe
2012
$
228
(10.6)%
$
255
11.4%
$
229
0.0%
0.0%
0.0%
Interest income was primarily generated from our loans
to growers. the increase in interest income in fiscal 2014 as
compared to 2013 is due to the borrowings by California avocado
growers decreasing in the current year compared to the prior year.
the increase in interest income in fiscal 2013 as compared
to 2012 is due to the borrowings by California avocado growers
increasing in the current year compared to the prior year.
IntereSt eXPenSe
(Dollars in thousands)
Interest expense
percentage of net sales
2014
CHAnGe
2013
CHAnGe
2012
983
0.1%
(10.5)%
$
1,098
(4.7)%
$
1,152
0.2%
0.2%
Interest expense is primarily generated from our line of credit
borrowings, as well as our term loan agreements with Farm Credit
West, pCA (FCW) and bank of America, n.A. (boA). For fiscal
2014, as compared to fiscal 2013, the decrease in interest expense
was primarily related to a lower average outstanding balance on
our non-collateralized, revolving credit facilities with FCW and boA.
For fiscal 2013, as compared to fiscal 2012, the decrease
in interest expense was primarily related to a lower average
outstanding balance on our non-collateralized, revolving credit
facilities with FCW and boA.
other Income, net
(Dollars in thousands)
other income, net
percentage of net sales
2014
CHAnGe
2013
CHAnGe
2012
$
473
5.6%
$
448
(49.5)%
$
887
0.1%
0.1%
0.2%
other income, net includes dividend income, as well as
certain other transactions that are outside of the normal course of
operations. other Income stayed relatively consistent in fiscal 2014
compared to fiscal 2013. During fiscal 2014 and 2013, we received
$0.3 million as dividend income from limoneira. During fiscal 2012,
we received $0.2 million as dividend income from limoneira.
the decrease in fiscal year 2013, compared to 2012 is due
the sale to San Rafael of all our interest, representing one-half
ownership, in Maui Fresh International in prior year. this
transaction resulted in a prior year gain on sale of approximately
$0.5 million.
not included in the other income discussion above, is the
gain on the deconsolidation of FreshRealm that is disclosed on
its own line on the income statement. For further discussion
on the $12.6 million gain in fiscal 2014, see note 18 of the
consolidated financial statements.
Contingent consideration related to RFG acquisition
$ 51,082
55.4%
$ 32,867
1,177.9%
$
2,572
ProvISIon (BenefIt) for Income taXeS
2014
CHAnGe
2013
CHAnGe
2012
percentage of net sales
6.5%
4.8%
0.5%
(Dollars in thousands)
(ReSt AteD)
(ReSt AteD)
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
We revalued contingent consideration obligations to their fair
value and recorded increases or decreases in the fair value into
contingent consideration expense. Increases or decreases in
the fair value of the contingent consideration obligations resulted
from changes in the assumed timing and amount of revenue
and expense estimates, changes in the probability of payment
scenarios, as well as changes in capital market conditions, which
impacted the discount rate used in the fair valuation. Significant
judgment was employed in determining the appropriateness
of these assumptions as of the acquisition date and for each
subsequent period. RFG and Salsa lisa are the two acquisitions
that have contingent consideration. RFG’s results substantially
exceeded defined thresholds and expectations and, accordingly,
RFG’s former owners received the maximum earn-out payment
permitted pursuant to the acquisition agreement. this caused
the significant increase in contingent consideration for fiscal
year 2014 and 2013. As discussed in note 3 and note 17,
RFG’s former owners received the maximum earn-out payment
permitted pursuant to the acquisition agreement, as amended,
and there will be no future expenses related to this acquisition.
provision for income taxes
$
(3,916)
(16.9)%
$
(4,715)
(146.2)%
$ 10,213
effective tax rate
(94.8)%
(63.7)%
39.5%
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
the benefit for income taxes of $3.9 million is attributable to
the revaluation adjustment of $88.1 million related to contingent
consideration which was spread between fiscal year 2014
through fiscal year 2011. the revalued contingent consideration
and non-cash compensation expense resulted in $53.7 million,
$32.0 million, and $2.2 million additional GAAp expense recorded
in fiscal years 2014, 2013, and 2012, respectively. the current
year revaluation expense drove pre-tax book income into a
loss position, thus causing a benefit for income taxes as this
revaluation adjustment is capitalized and amortized as goodwill
over the remaining useful life for income tax purposes resulting
in a taxable income position for the current year.
32 . 33
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Fiscal 2013 vs. Fiscal 2012:
not considering the non-cash compensation expense
as described above, gross profit for RFG for the year ended
october 31, 2013, when compared to the same prior year period,
increased $3.2 million, or 25.7%. this increase is due primarily
to increased sales from packaged fresh cut fruit, packaged
fresh cut vegetables and fresh prepared and packaged deli style
salads, sandwiches and wraps. the overall increase in sales is
primarily due to an increase in sales volume. Collectively, cut
fruit, cut vegetable, and deli product sales increased 13.8 million
units, or 24.0%. We believe the overall increase in sales volume
is primarily due to an increase in demand for the variety of
innovative packaged fresh food products that we offer.
SellIng, general anD aDmInIStratIve
2014
CHAnGe
2013
CHAnGe
2012
(Dollars in thousands)
(ReSt AteD)
(ReSt AteD)
Selling, general and administrative
$ 36,605
9.3%
$ 33,485
2.4%
$ 32,714
percentage of net sales
4.7%
4.8%
5.9%
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 $3.1 million, or 9.3%, for the year ended
october 31, 2014, when compared to the same prior year
period. 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 $1.2 million), non-cash
compensation related to RFG acquisition (approximately
$0.5 million), stock option expense (approximately $0.4 million),
accounting fees (approximately $0.4 million), bad debt expense
(approximately $0.2 million), employee benefits (approximately
$0.2 million), other administration fees (approximately
$0.2 million) and broker commissions (approximately
$0.1 million), partially offset by a decrease in the expenses
related to the start-up operations of FreshRealm (approximately
$0.9 million), write-down of contingent consideration related
to Salsa lisa (approximately $0.3 million), promotions and
advertising (approximately $0.1 million) and legal fees
(approximately $0.1 million).
Selling, general and administrative expenses increased
$0.8 million, or 2.4%, for the year ended october 31, 2013,
when compared to the same prior year period. this increase
was primarily due to the start-up operations of FreshRealm
(approximately $1.9 million), as well as higher corporate
costs, including, but not limited to, salaries (approximately
$0.7 million), non-cash compensation related to RFG acquisition
(approximately $0.3 million), accounting fees (approximately
$0.2 million), and legal fees (approximately $0.2 million), partially
offset by decreases in management bonuses (approximately
$2.2 million), consulting fees (approximately $0.1 million), data
processing (approximately $0.1 million) and a decrease in the
revalue adjustments on contingent consideration related to
the acquisition of Calavo Salsa lisa compared to prior year
(approximately $0.1 million).
contIngent conSIDeratIon
relateD to rfg acQUISItIon
(Dollars in thousands)
2014
CHAnGe
2013
CHAnGe
2012
(ReSt AteD)
(ReSt AteD)
IntereSt Income
(Dollars in thousands)
Interest income
percentage of net sales
2014
CHAnGe
2013
CHAnGe
2012
$
228
(10.6)%
$
255
11.4%
$
229
0.0%
0.0%
0.0%
Interest income was primarily generated from our loans
to growers. the increase in interest income in fiscal 2014 as
compared to 2013 is due to the borrowings by California avocado
growers decreasing in the current year compared to the prior year.
the increase in interest income in fiscal 2013 as compared
to 2012 is due to the borrowings by California avocado growers
increasing in the current year compared to the prior year.
IntereSt eXPenSe
(Dollars in thousands)
Interest expense
percentage of net sales
2014
CHAnGe
2013
CHAnGe
2012
983
0.1%
(10.5)%
$
1,098
(4.7)%
$
1,152
0.2%
0.2%
Interest expense is primarily generated from our line of credit
borrowings, as well as our term loan agreements with Farm Credit
West, pCA (FCW) and bank of America, n.A. (boA). For fiscal
2014, as compared to fiscal 2013, the decrease in interest expense
was primarily related to a lower average outstanding balance on
our non-collateralized, revolving credit facilities with FCW and boA.
For fiscal 2013, as compared to fiscal 2012, the decrease
in interest expense was primarily related to a lower average
outstanding balance on our non-collateralized, revolving credit
facilities with FCW and boA.
other Income, net
(Dollars in thousands)
other income, net
percentage of net sales
2014
CHAnGe
2013
CHAnGe
2012
$
473
5.6%
$
448
(49.5)%
$
887
0.1%
0.1%
0.2%
other income, net includes dividend income, as well as
certain other transactions that are outside of the normal course of
operations. other Income stayed relatively consistent in fiscal 2014
compared to fiscal 2013. During fiscal 2014 and 2013, we received
$0.3 million as dividend income from limoneira. During fiscal 2012,
we received $0.2 million as dividend income from limoneira.
the decrease in fiscal year 2013, compared to 2012 is due
the sale to San Rafael of all our interest, representing one-half
ownership, in Maui Fresh International in prior year. this
transaction resulted in a prior year gain on sale of approximately
$0.5 million.
not included in the other income discussion above, is the
gain on the deconsolidation of FreshRealm that is disclosed on
its own line on the income statement. For further discussion
on the $12.6 million gain in fiscal 2014, see note 18 of the
consolidated financial statements.
Contingent consideration related to RFG acquisition
$ 51,082
55.4%
$ 32,867
1,177.9%
$
2,572
ProvISIon (BenefIt) for Income taXeS
2014
CHAnGe
2013
CHAnGe
2012
percentage of net sales
6.5%
4.8%
0.5%
(Dollars in thousands)
(ReSt AteD)
(ReSt AteD)
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
We revalued contingent consideration obligations to their fair
value and recorded increases or decreases in the fair value into
contingent consideration expense. Increases or decreases in
the fair value of the contingent consideration obligations resulted
from changes in the assumed timing and amount of revenue
and expense estimates, changes in the probability of payment
scenarios, as well as changes in capital market conditions, which
impacted the discount rate used in the fair valuation. Significant
judgment was employed in determining the appropriateness
of these assumptions as of the acquisition date and for each
subsequent period. RFG and Salsa lisa are the two acquisitions
that have contingent consideration. RFG’s results substantially
exceeded defined thresholds and expectations and, accordingly,
RFG’s former owners received the maximum earn-out payment
permitted pursuant to the acquisition agreement. this caused
the significant increase in contingent consideration for fiscal
year 2014 and 2013. As discussed in note 3 and note 17,
RFG’s former owners received the maximum earn-out payment
permitted pursuant to the acquisition agreement, as amended,
and there will be no future expenses related to this acquisition.
provision for income taxes
$
(3,916)
(16.9)%
$
(4,715)
(146.2)%
$ 10,213
effective tax rate
(94.8)%
(63.7)%
39.5%
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
the benefit for income taxes of $3.9 million is attributable to
the revaluation adjustment of $88.1 million related to contingent
consideration which was spread between fiscal year 2014
through fiscal year 2011. the revalued contingent consideration
and non-cash compensation expense resulted in $53.7 million,
$32.0 million, and $2.2 million additional GAAp expense recorded
in fiscal years 2014, 2013, and 2012, respectively. the current
year revaluation expense drove pre-tax book income into a
loss position, thus causing a benefit for income taxes as this
revaluation adjustment is capitalized and amortized as goodwill
over the remaining useful life for income tax purposes resulting
in a taxable income position for the current year.
32 . 33
Calavo Growers, Inc. 2014 AnnuAl RepoR t
QuArterly reSultS OF OperA tiOnS
the following operating results for each of the eight fiscal
quarters in the period ended october 31, 2014 (except for the
current quarter ending october 31, 2014) has been restated to
reflect adjustments to our previously issued financial statements
as more fully discussed in note 3, “Restatement of previously-
Issued Financial Statements” to the Consolidated Financial
Statements included in Item 8 of this Form 10-K. the information
should be read in conjunction with our audited consolidated
financial statements included in this Annual Report. Historically,
we receive and sell a substantially smaller volume of California
avocados in our first fiscal quarter.
See note 19, “Selected Quarterly Financial Data (unaudited)”
to the Consolidated Financial Statements for information on the
adjustments made related to the restatement of previously-
issued financial statements.
liQuiDity AnD CApit Al reSOurCeS
operating activities for fiscal 2014, 2013 and 2012 provided
cash flows of $21.3 million, $13.7 million, and $22.0 million.
Fiscal year 2014 operating cash flows reflect our net loss of
$0.2 million, net decrease of noncash charges (depreciation
and amortization, income from unconsolidated entities,
provision for losses on accounts receivable, interest on deferred
compensation, deferred income taxes, revalue adjustment on
contingent consideration and non-cash compensation expense,
impairment on intangible assets, stock compensation expense
and gain from deconsolidation of FreshRealm) of $33.3 million
and a net decrease from changes in the non-cash components
of our working capital accounts of approximately $11.8 million.
Fiscal year 2014 decreases in operating cash flows, caused
by working capital changes, includes an increase in prepaid
expenses and other current assets of $8.8 million, a decrease
in payable to growers of $7.0 million, an increase in accounts
receivable of $1.7 million, an increase in inventory of $2.3 million
and an increase in income tax receivable of $0.6 million, partially
offset by an increase in trade accounts payable and accrued
expenses of $8.6 million.
the decrease in payable to our growers primarily reflects
a decrease in California fruit delivered in the month of
october 2014, as compared to the month of october 2013.
the increase in prepaid expenses and other current assets is
primarily due to an increase in the receivable of Mexican IVA
taxes related to the increase of purchases of Mexican avocados
as compared to prior year. the increase in our accounts
receivable balance as of october 31, 2014, when compared
to october 31, 2013, primarily reflects an increase in sales in
our Foods and RFG segments in the month of october 2014,
as compared to october 2013. the increase in our inventory
balance is primarily related to an increase in Mexico avocado
inventory on hand at october 31, 2014, as compared to the same
prior year period. the increase in our trade accounts payable
and accrued expenses is mainly due to an increase in purchases
of Mexican avocados from co-packers in the month of october
2014, as compared to october 2013. In addition, this increase is
also attributed to an increase in freight accruals due to an overall
increase in the volume of Mexican avocados in the month of
october 2014, as compared to october 2013.
Cash used in investing activities was $18.6 million,
$7.7 million, and $7.4 million for fiscal years 2014, 2013, and
2012. Fiscal year 2014 cash flows used in investing activities
include capital expenditures of $11.6 million, the deconsolidation
of FreshRealm, net of cash $6.8 million, and investments in
unconsolidated entities of $0.2 million.
Cash used in financing activities was $4.1 million, $5.1 million
and $10.2 million for fiscal years 2014, 2013 and 2012. Cash
used during fiscal year 2014 primarily related to the payment
of a dividend of $11.0 million and payments on long-term
debt obligations of $5.1 million. partially offsetting these
proceeds, however, includes proceeds received for the issuance
of FreshRealm stock of $10.0 million, proceeds from our
non-collateralized, revolving credit facilities totaling $1.9 million,
and exercises of stock options of $0.1 million.
our principal sources of liquidity are our existing cash
reserves, cash generated from operations and amounts available
for borrowing under our existing credit facilities. Cash and cash
equivalents as of october 31, 2014 and 2013 totaled $6.7 million
and $8.0 million. our working capital at october 31, 2014 was
$22.0 million, compared to a negative $3.3 million (restated) at
october 31, 2013.
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.
effective May 31, 2011, the Company and FCW, entered
into a term Revolving Credit Agreement (Revolving Agreement).
under the terms of the Revolving Agreement, we are advanced
funds for working capital purposes, the purchase and installation
of capital items, as well as other corporate needs of the
Company. total credit available under the borrowing agreement
is $40 million, up from $30 million, and expires on February 1,
2016. this increase was at our request and not due to any
immediate cash flows needs. the credit facility and term loan
contain various financial covenants, the most significant relating
to tangible net worth (as defined), Fixed Charge Coverage Ratio
(as defined) and Current Ratio (as defined).
effective September 30, 2011, the Company and bank of
America, n.A. (boA), entered into an agreement, Amendment
no. 4 to loan Agreement (the Agreement), which amended
our existing credit facility with boA. under the terms of the
Agreement, we are advanced funds primarily for working capital
purposes. total credit available under the borrowing agreement
is now $25 million, up from $15 million and now expires on
February 1, 2016. We are currently working on additional
financing based on expected future growth of the company.
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 october 31, 2014 and 2013. under
these credit facilities, we had $35.9 million and $34.0 million
outstanding as october 31, 2014 and 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 october 31, 2014.
the following table summarizes contractual obligations pursuant
to which we are required to make cash payments. the information
is presented as of our fiscal year ended october 31, 2014:
ContRACtuAl oblIGA tIonS
pAYMentS Due bY peRIoD
totAl
leSS tHAn
1 YeAR
1-3 YeARS
3-5 YeARS
MoRe tHAn
5 YeARS
long-term debt obligations (including interest)
$
8,170
$
5,294
$
2,390
$
215
$
271
Revolving credit facilities
Defined benefit plan
operating lease commitments
35,900
35,900
196
27,670
35
3,353
—
70
—
70
—
21
6,690
6,059
11,568
total
$ 71,936
$ 44,582
$
9,150
$
6,344
$ 11,860
the California avocado industry is subject to a state
marketing order whereby handlers are required to collect
assessments from the growers and remit such assessments
to the California Avocado Commission (CAC). the assessments
are primarily for advertising and promotions. the amount of the
assessment is based on the dollars paid to the growers for their
fruit, and, as a result, is not determinable until the value of the
payments to the growers has been calculated.
With similar precision, amounts remitted to the Hass
Avocado board (HAb) in connection with their assessment
program are likewise not determinable until the fruit is actually
delivered to us. HAb assessments are primarily used to fund
marketing and promotion efforts.
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 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.
recently ISSUeD accoUntIng StanDarDS
In May 2014, the Financial Accounting Standards board
(“FASb”) amended the existing accounting standards for revenue
recognition. the amendments are based on the principle that
revenue should be recognized to depict the transfer of promised
goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. We are required to adopt
the amendments in the first quarter of fiscal 2018. early adoption
is not permitted. the amendments may be applied retrospectively
to each prior period presented or retrospectively with the
cumulative effect recognized as of the date of initial application.
We do not expect the adoption of these amendments to have a
material impact on our financial statements.
In July 2013, the FASb issued a standard permitting the Fed
In April 2014, the FASb issued guidance which changes the
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.
criteria for identifying a discontinued operation. the guidance
limits the definition of a discontinued operation to the disposal
of a component or group of components that is disposed of or
is classified as held for sale and represents a strategic shift that
has, or will have, a major effect on an entity’s operations and
financial results. We are required to adopt the guidance in the
first quarter of fiscal 2016, with early adoption permitted for
transactions that have not been reported in financial statements
previously issued. We do not expect the adoption of this
guidance to have a material impact on our financial statements
Calavo Growers, Inc. 2014 AnnuAl RepoR t
34 . 35
QuArterly reSultS OF OperA tiOnS
the following operating results for each of the eight fiscal
quarters in the period ended october 31, 2014 (except for the
current quarter ending october 31, 2014) has been restated to
reflect adjustments to our previously issued financial statements
as more fully discussed in note 3, “Restatement of previously-
Issued Financial Statements” to the Consolidated Financial
Statements included in Item 8 of this Form 10-K. the information
should be read in conjunction with our audited consolidated
financial statements included in this Annual Report. Historically,
we receive and sell a substantially smaller volume of California
avocados in our first fiscal quarter.
See note 19, “Selected Quarterly Financial Data (unaudited)”
to the Consolidated Financial Statements for information on the
adjustments made related to the restatement of previously-
issued financial statements.
liQuiDity AnD CApit Al reSOurCeS
operating activities for fiscal 2014, 2013 and 2012 provided
cash flows of $21.3 million, $13.7 million, and $22.0 million.
Fiscal year 2014 operating cash flows reflect our net loss of
$0.2 million, net decrease of noncash charges (depreciation
and amortization, income from unconsolidated entities,
provision for losses on accounts receivable, interest on deferred
compensation, deferred income taxes, revalue adjustment on
contingent consideration and non-cash compensation expense,
impairment on intangible assets, stock compensation expense
and gain from deconsolidation of FreshRealm) of $33.3 million
and a net decrease from changes in the non-cash components
of our working capital accounts of approximately $11.8 million.
Fiscal year 2014 decreases in operating cash flows, caused
by working capital changes, includes an increase in prepaid
expenses and other current assets of $8.8 million, a decrease
in payable to growers of $7.0 million, an increase in accounts
receivable of $1.7 million, an increase in inventory of $2.3 million
and an increase in income tax receivable of $0.6 million, partially
offset by an increase in trade accounts payable and accrued
expenses of $8.6 million.
the decrease in payable to our growers primarily reflects
a decrease in California fruit delivered in the month of
october 2014, as compared to the month of october 2013.
the increase in prepaid expenses and other current assets is
primarily due to an increase in the receivable of Mexican IVA
taxes related to the increase of purchases of Mexican avocados
as compared to prior year. the increase in our accounts
receivable balance as of october 31, 2014, when compared
to october 31, 2013, primarily reflects an increase in sales in
our Foods and RFG segments in the month of october 2014,
as compared to october 2013. the increase in our inventory
balance is primarily related to an increase in Mexico avocado
inventory on hand at october 31, 2014, as compared to the same
prior year period. the increase in our trade accounts payable
and accrued expenses is mainly due to an increase in purchases
of Mexican avocados from co-packers in the month of october
2014, as compared to october 2013. In addition, this increase is
also attributed to an increase in freight accruals due to an overall
increase in the volume of Mexican avocados in the month of
october 2014, as compared to october 2013.
Cash used in investing activities was $18.6 million,
$7.7 million, and $7.4 million for fiscal years 2014, 2013, and
2012. Fiscal year 2014 cash flows used in investing activities
include capital expenditures of $11.6 million, the deconsolidation
of FreshRealm, net of cash $6.8 million, and investments in
unconsolidated entities of $0.2 million.
Cash used in financing activities was $4.1 million, $5.1 million
and $10.2 million for fiscal years 2014, 2013 and 2012. Cash
used during fiscal year 2014 primarily related to the payment
of a dividend of $11.0 million and payments on long-term
debt obligations of $5.1 million. partially offsetting these
proceeds, however, includes proceeds received for the issuance
of FreshRealm stock of $10.0 million, proceeds from our
non-collateralized, revolving credit facilities totaling $1.9 million,
and exercises of stock options of $0.1 million.
our principal sources of liquidity are our existing cash
reserves, cash generated from operations and amounts available
for borrowing under our existing credit facilities. Cash and cash
equivalents as of october 31, 2014 and 2013 totaled $6.7 million
and $8.0 million. our working capital at october 31, 2014 was
$22.0 million, compared to a negative $3.3 million (restated) at
october 31, 2013.
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.
effective May 31, 2011, the Company and FCW, entered
into a term Revolving Credit Agreement (Revolving Agreement).
under the terms of the Revolving Agreement, we are advanced
funds for working capital purposes, the purchase and installation
of capital items, as well as other corporate needs of the
Company. total credit available under the borrowing agreement
is $40 million, up from $30 million, and expires on February 1,
2016. this increase was at our request and not due to any
immediate cash flows needs. the credit facility and term loan
contain various financial covenants, the most significant relating
to tangible net worth (as defined), Fixed Charge Coverage Ratio
(as defined) and Current Ratio (as defined).
effective September 30, 2011, the Company and bank of
America, n.A. (boA), entered into an agreement, Amendment
no. 4 to loan Agreement (the Agreement), which amended
our existing credit facility with boA. under the terms of the
Agreement, we are advanced funds primarily for working capital
purposes. total credit available under the borrowing agreement
is now $25 million, up from $15 million and now expires on
February 1, 2016. We are currently working on additional
financing based on expected future growth of the company.
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 october 31, 2014 and 2013. under
these credit facilities, we had $35.9 million and $34.0 million
outstanding as october 31, 2014 and 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 october 31, 2014.
the following table summarizes contractual obligations pursuant
to which we are required to make cash payments. the information
is presented as of our fiscal year ended october 31, 2014:
ContRACtuAl oblIGA tIonS
pAYMentS Due bY peRIoD
totAl
leSS tHAn
1 YeAR
1-3 YeARS
3-5 YeARS
MoRe tHAn
5 YeARS
long-term debt obligations (including interest)
$
8,170
$
5,294
$
2,390
$
215
$
271
Revolving credit facilities
Defined benefit plan
operating lease commitments
35,900
35,900
196
27,670
35
3,353
—
70
—
70
—
21
6,690
6,059
11,568
total
$ 71,936
$ 44,582
$
9,150
$
6,344
$ 11,860
the California avocado industry is subject to a state
marketing order whereby handlers are required to collect
assessments from the growers and remit such assessments
to the California Avocado Commission (CAC). the assessments
are primarily for advertising and promotions. the amount of the
assessment is based on the dollars paid to the growers for their
fruit, and, as a result, is not determinable until the value of the
payments to the growers has been calculated.
With similar precision, amounts remitted to the Hass
Avocado board (HAb) in connection with their assessment
program are likewise not determinable until the fruit is actually
delivered to us. HAb assessments are primarily used to fund
marketing and promotion efforts.
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 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.
recently ISSUeD accoUntIng StanDarDS
In May 2014, the Financial Accounting Standards board
(“FASb”) amended the existing accounting standards for revenue
recognition. the amendments are based on the principle that
revenue should be recognized to depict the transfer of promised
goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. We are required to adopt
the amendments in the first quarter of fiscal 2018. early adoption
is not permitted. the amendments may be applied retrospectively
to each prior period presented or retrospectively with the
cumulative effect recognized as of the date of initial application.
We do not expect the adoption of these amendments to have a
material impact on our financial statements.
In July 2013, the FASb issued a standard permitting the Fed
In April 2014, the FASb issued guidance which changes the
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.
criteria for identifying a discontinued operation. the guidance
limits the definition of a discontinued operation to the disposal
of a component or group of components that is disposed of or
is classified as held for sale and represents a strategic shift that
has, or will have, a major effect on an entity’s operations and
financial results. We are required to adopt the guidance in the
first quarter of fiscal 2016, with early adoption permitted for
transactions that have not been reported in financial statements
previously issued. We do not expect the adoption of this
guidance to have a material impact on our financial statements
Calavo Growers, Inc. 2014 AnnuAl RepoR t
34 . 35
In July 2013, the FASb issued a new accounting standard
requiring the presentation of certain unrecognized tax benefits
as reductions to deferred tax assets rather than as liabilities in
the Consolidated balance Sheets when a net operating loss
carryforward, a similar tax loss or a tax credit carryforward exists.
We are required to adopt this new standard on a prospective
basis in the first quarter of fiscal 2015; however, early adoption is
permitted as is retrospective application. We will adopt the new
standard in the first fiscal quarter of 2015 on a prospective basis.
Adoption of the new standard is not expected to have a material
effect on our Consolidated Financial Statements.
QuAntit Ative AnD QuAlit Ative 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 october 31, 2014.
expeCteD MA tuRItY DA te oCtobeR 31,
2015
2016
2017
2018
2019
tHeReAFteR
tot Al
FAIR VAlue
(All amounts in thousands)
aSSetS
Cash and cash equivalents(1)
$
6,744 $
— $
— $
— $
— $
— $
6,744 $
6,744
Accounts receivable(1)
Advances to suppliers(1)
56,618
3,258
—
—
—
—
—
—
—
—
—
—
56,618
56,618
3,258
3,258
lIaBIlI tIeS
payable to growers(1)
$
6,660 $
— $
— $
— $
— $
— $
6,660 $
6,660
Accounts payable(1)
15,065
Current borrowings pursuant
to credit facilities(1)
35,900
—
—
—
—
Fixed-rate long-term
obligations(2)
5,099
2,241
109
—
—
89
—
—
92
—
15,065
15,065
—
35,900
35,900
260
7,890
7,988
(1)
(2)
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.
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 $117,000.
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 2015.
total foreign currency losses for fiscal years 2014 and 2013, net
of gains, were $0.1 million and $0.4 million. total foreign currency
gains for fiscal 2012, net of losses was $0.1 million.
36 . 37
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Consolidated Balance Sheets
oCtobeR 31,
(in thousands)
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of allowances of $3,248 (2014) and $1,697 (2013)
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Dividend payable
Current portion of long-term obligations
total current liabilities
lonG -teRM lIAbIlItIeS :
long-term obligations, less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value, 100,000 shares authorized;
17,295 and 15,720 shares outstanding at october 31, 2014 and 2013)
Additional paid-in capital
Accumulated other comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
total shareholders’ equity
See accompanying notes to consolidated financial statements.
2014
2013
ReSt AteD
$
6,744
$
8,019
56,618
30,975
19,528
3,258
2,627
3,294
55,060
28,673
10,757
3,213
2,013
1,995
123,044
109,730
57,352
44,355
18,380
12,287
18,262
9,784
52,649
45,531
1,420
—
18,262
12,347
$ 283,464
$ 239,939
$
6,660
$ 14,490
15,065
25,303
35,900
12,970
5,099
11,699
36,541
33,990
11,004
5,258
100,997
112,982
2,791
—
2,791
270
17
144,496
12,713
—
22,180
179,406
$ 283,464
7,792
129
7,921
(57)
15
70,790
13,414
(180)
35,054
119,093
$ 239,939
In July 2013, the FASb issued a new accounting standard
requiring the presentation of certain unrecognized tax benefits
as reductions to deferred tax assets rather than as liabilities in
the Consolidated balance Sheets when a net operating loss
carryforward, a similar tax loss or a tax credit carryforward exists.
We are required to adopt this new standard on a prospective
basis in the first quarter of fiscal 2015; however, early adoption is
permitted as is retrospective application. We will adopt the new
standard in the first fiscal quarter of 2015 on a prospective basis.
Adoption of the new standard is not expected to have a material
effect on our Consolidated Financial Statements.
QuAntit Ative AnD QuAlit Ative 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 october 31, 2014.
expeCteD MA tuRItY DA te oCtobeR 31,
2015
2016
2017
2018
2019
tHeReAFteR
tot Al
FAIR VAlue
(All amounts in thousands)
aSSetS
Cash and cash equivalents(1)
$
6,744 $
— $
— $
— $
— $
— $
6,744 $
6,744
Accounts receivable(1)
Advances to suppliers(1)
56,618
3,258
—
—
—
—
—
—
—
—
—
—
56,618
56,618
3,258
3,258
lIaBIlI tIeS
payable to growers(1)
$
6,660 $
— $
— $
— $
— $
— $
6,660 $
6,660
Accounts payable(1)
15,065
Current borrowings pursuant
to credit facilities(1)
35,900
—
—
—
—
Fixed-rate long-term
obligations(2)
5,099
2,241
109
—
—
89
—
—
92
—
15,065
15,065
—
35,900
35,900
260
7,890
7,988
(1)
(2)
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.
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 $117,000.
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 2015.
total foreign currency losses for fiscal years 2014 and 2013, net
of gains, were $0.1 million and $0.4 million. total foreign currency
gains for fiscal 2012, net of losses was $0.1 million.
36 . 37
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Consolidated Balance Sheets
oCtobeR 31,
(in thousands)
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of allowances of $3,248 (2014) and $1,697 (2013)
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Dividend payable
Current portion of long-term obligations
total current liabilities
lonG -teRM lIAbIlItIeS :
long-term obligations, less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value, 100,000 shares authorized;
17,295 and 15,720 shares outstanding at october 31, 2014 and 2013)
Additional paid-in capital
Accumulated other comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
total shareholders’ equity
See accompanying notes to consolidated financial statements.
2014
2013
ReSt AteD
$
6,744
$
8,019
56,618
30,975
19,528
3,258
2,627
3,294
55,060
28,673
10,757
3,213
2,013
1,995
123,044
109,730
57,352
44,355
18,380
12,287
18,262
9,784
52,649
45,531
1,420
—
18,262
12,347
$ 283,464
$ 239,939
$
6,660
$ 14,490
15,065
25,303
35,900
12,970
5,099
11,699
36,541
33,990
11,004
5,258
100,997
112,982
2,791
—
2,791
270
17
144,496
12,713
—
22,180
179,406
$ 283,464
7,792
129
7,921
(57)
15
70,790
13,414
(180)
35,054
119,093
$ 239,939
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Operations
YeAR enDeD oCtobeR 31,
(in thousands)
net income (loss)
2014
2013
ReSt AteD
2012
ReSt AteD
$
(215)
$
(2,684)
$ 15,630
other comprehensive income (loss), before tax:
unrealized investment gains (losses) arising during period
(1,175)
Income tax benefit (expense) related to items of other
comprehensive income (loss)
other comprehensive income (loss), net of tax
Comprehensive income (loss)
Add: net loss attributable to noncontrolling interest
474
(701)
(916)
312
6,690
(2,666)
4,024
1,340
889
8,850
(3,395)
5,455
21,085
172
Comprehensive income (loss) – Calavo Growers, Inc.
$
(469)
$
2,229
$ 21,257
YeAR enDeD oCtobeR 31,
(in thousands, except per share amounts)
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to RFG acquisition
operating income (loss)
equity (losses) in earnings from unconsolidated entities
Interest income
Interest expense
Gain on deconsolidation of FreshRealm
other income, net
Income (loss) before provision for income taxes
provision (benefit) for income taxes
net income (loss)
Add: net loss attributable to noncontrolling interest
net income (loss) attributable to Calavo Growers, Inc.
cal avo g row erS, Inc.’S net I ncome ( loSS ) P er S hare :
basic
Diluted
nUmBer of S hareS US eD I n P er S hare comPUtatIon :
basic
Diluted
2014
$ 782,510
711,282
2013
ReSt AteD
$ 691,451
632,003
2012
ReSt AteD
$ 551,119
490,454
71,228
36,605
51,082
(16,459)
(12)
228
(983)
12,622
473
(4,131)
(3,916)
(215)
312
97
0.01
0.01
15,765
17,220
$
$
$
59,448
33,485
32,867
(6,904)
(100)
255
(1,098)
—
448
(7,399)
(4,715)
(2,684)
889
60,665
32,714
2,572
25,379
500
229
(1,152)
—
887
25,843
10,213
15,630
172
$
(1,795)
$ 15,802
$
$
(0.12)
(0.12)
$
$
1.07
1.05
14,856
14,856
14,795
15,100
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
38 . 39
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Operations
YeAR enDeD oCtobeR 31,
(in thousands)
net income (loss)
2014
2013
ReSt AteD
2012
ReSt AteD
$
(215)
$
(2,684)
$ 15,630
other comprehensive income (loss), before tax:
unrealized investment gains (losses) arising during period
(1,175)
Income tax benefit (expense) related to items of other
comprehensive income (loss)
other comprehensive income (loss), net of tax
Comprehensive income (loss)
Add: net loss attributable to noncontrolling interest
474
(701)
(916)
312
6,690
(2,666)
4,024
1,340
889
8,850
(3,395)
5,455
21,085
172
Comprehensive income (loss) – Calavo Growers, Inc.
$
(469)
$
2,229
$ 21,257
YeAR enDeD oCtobeR 31,
(in thousands, except per share amounts)
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to RFG acquisition
operating income (loss)
equity (losses) in earnings from unconsolidated entities
Interest income
Interest expense
Gain on deconsolidation of FreshRealm
other income, net
Income (loss) before provision for income taxes
provision (benefit) for income taxes
net income (loss)
Add: net loss attributable to noncontrolling interest
net income (loss) attributable to Calavo Growers, Inc.
cal avo g row erS, Inc.’S net I ncome ( loSS ) P er S hare :
basic
Diluted
nUmBer of S hareS US eD I n P er S hare comPUtatIon :
basic
Diluted
2014
$ 782,510
711,282
2013
ReSt AteD
$ 691,451
632,003
2012
ReSt AteD
$ 551,119
490,454
71,228
36,605
51,082
(16,459)
(12)
228
(983)
12,622
473
(4,131)
(3,916)
(215)
312
97
0.01
0.01
15,765
17,220
$
$
$
59,448
33,485
32,867
(6,904)
(100)
255
(1,098)
—
448
(7,399)
(4,715)
(2,684)
889
60,665
32,714
2,572
25,379
500
229
(1,152)
—
887
25,843
10,213
15,630
172
$
(1,795)
$ 15,802
$
$
(0.12)
(0.12)
$
$
1.07
1.05
14,856
14,856
14,795
15,100
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
38 . 39
Consolidated Statements of Shareholders’ equity
Consolidated Statements of Cash Flows
CoMMon StoCK
SHAReS
AMount
ADDItIonAl
pAID-In
CApIt Al
ACCuMulA teD
otHeR
CoMpRe-
HenSIVe
InCoMe
RetAIneD
eARnInGS
non-
ContRollInG
InteReSt,
FReSHReAlM
14,770
14
43,986
3,935
41,697
(in thousands)
Balance, october 31, 2011
(restated)
exercise of stock options and
income tax benefit of $139
Stock compensation expense
non-cash compensation related
to RFG acquisition*
Restricted stock issued
unrealized loss on limoneira
investment, net
Dividend declared to shareholders
net income attributable to
Calavo Growers, Inc*
Balance, october 31, 2012
(restated)
exercise of stock options and
income tax benefit of $59
Stock compensation expense
Restricted stock issued
Issuance of stock related to
RFG Contingent consideration
and non-cash compensation*
Retirement of stock purchased
from limoneira
unrealized gain on limoneira
investment, net
Dividend declared to shareholders
FreshRealm noncontrolling
interest contribution
net loss attributable to
FreshRealm*
net loss attributable to
Calavo Growers, Inc. *
54
—
—
11
—
—
—
14,835
39
—
12
999
(165)
—
—
—
—
—
Balance, october 31, 2013
(restated)
exercise of stock options and
income tax benefit of $191
Stock compensation expense
Issuance of stock related to
RFG Contingent Consideration and
non-cash compensation, net tax
Restricted stock issued
unrealized loss on limoneira
investment, net
Dividend declared to shareholders
FreshRealm noncontrolling interest
contribution
Deconsolidation of FreshRealm
net loss attributable to FreshRealm
net income attributable to
Calavo Growers, Inc.
15,720
8
—
1,532
35
—
—
—
—
—
—
Balance, october 31, 2014
17,295
$
*Restated
See accompanying notes to consolidated financial statements.
totAl
89,632
930
417
95
—
5,455
(9,612)
15,802
801
376
—
28,974
(4,788)
4,024
(11,038)
362
(542)
930
417
95
—
—
—
—
—
—
—
—
—
—
—
—
5,455
—
—
(9,612)
—
15,802
—
—
—
—
—
—
—
—
45,428
9,390
47,887
—
102,719
—
—
—
—
—
—
—
—
—
—
4,024
—
—
(11,038)
—
—
—
—
—
—
—
801
376
—
28,973
(4,788)
—
—
—
—
—
—
—
362
(542)
—
—
—
(1,795)
—
(1,795)
70,790
13,414
35,054
(180)
119,093
318
727
67,288
—
—
—
5,373
—
—
—
—
—
—
—
—
—
—
—
(701)
—
—
(12,971)
—
—
—
—
—
—
—
97
$ 144,496
$ 12,713
$ 22,180
$
—
—
—
—
—
—
4,627
(4,030)
(417)
318
727
67,290
—
(701)
(12,971)
10,000
(4,030)
(417)
—
—
97
$ 179,406
—
—
—
—
—
—
—
14
—
—
—
1
—
—
—
—
—
—
15
—
—
2
—
—
—
—
—
—
—
17
40 . 41
Calavo Growers, Inc. 2014 AnnuAl RepoR t
YeAR enDeD oCtobeR 31,
(in thousands)
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
Income (loss) from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation expense
related to the acquisition of RFG
Contingent consideration related to acquisition of Salsa lisa
Stock compensation expense
Gain on deconsolidation of FreshRealm
loss on disposal of property, plant, and equipment
Distribution from unconsolidated entity
Gain on sale of Maui Fresh International
Intangible assets impairment on Calavo Salsa lisa
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in unconsolidated entity
proceeds from sale of Maui Fresh International
Decrease in cash due to deconsolidation of FreshRealm
Investment in Agricola Don Memo
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility
payments on revolving credit facility
proceeds from issuance of long-term obligations
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
proceeds from issuance of FreshRealm stock
tax benefit of stock option exercises
net cash used in financing activities
net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPlemental InformatI on :
Cash paid during the year for:
Interest
Income taxes
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Issuance of stock related to RFG contingent consideration
Declared dividends payable
notes receivable issued for sale of Maui Fresh International
Construction in progress included in trade accounts payable
and accrued expenses
Collection for Agricola belher Infrastructure Advance
unrealized holding gains (losses)
See accompanying notes to consolidated financial statements.
2014
2013
ReSt AteD
2012
ReSt AteD
$
(215)
$
(2,684)
$
15,630
6,926
154
15
37
53,611
(491)
727
(12,622)
115
—
—
—
(15,076)
(1,712)
(2,302)
(8,816)
(45)
(648)
48
(6,985)
8,624
21,345
(11,613)
(125)
—
(6,813)
—
(18,551)
(11,005)
242,340
(240,430)
—
(5,160)
—
127
10,000
59
(4,069)
(1,275)
8,019
6,744
986
11,355
191
66,988
12,971
—
—
845
(1,175)
$
$
$
$
$
$
$
$
$
$
6,367
1
100
146
33,811
(230)
376
—
30
—
—
615
(12,121)
(16,191)
(5,725)
(3,567)
(844)
781
135
7,705
5,007
13,712
(6,746)
—
—
—
(1,000)
(7,746)
(9,646)
200,670
(186,850)
—
(5,405)
(4,788)
751
79
139
(5,050)
916
7,103
8,019
1,087
5,532
59
28,973
11,004
—
—
1,690
6,690
$
$
$
$
$
$
$
$
$
$
5,909
68
(501)
128
2,574
5
417
—
136
288
(519)
87
(1,673)
(2,837)
(5,161)
(639)
980
475
14
3,394
3,236
22,011
(7,749)
—
300
—
—
(7,449)
(8,123)
158,200
(155,890)
—
(5,237)
—
791
—
26
(10,233)
4,329
2,774
7,103
1,146
9,274
139
—
9,612
2,204
28
—
8,850
$
$
$
$
$
$
$
$
$
$
Consolidated Statements of Shareholders’ equity
Consolidated Statements of Cash Flows
CoMMon StoCK
SHAReS
AMount
ADDItIonAl
pAID-In
CApIt Al
ACCuMulA teD
otHeR
CoMpRe-
HenSIVe
InCoMe
RetAIneD
eARnInGS
non-
ContRollInG
InteReSt,
FReSHReAlM
14,770
14
43,986
3,935
41,697
(in thousands)
Balance, october 31, 2011
(restated)
exercise of stock options and
income tax benefit of $139
Stock compensation expense
non-cash compensation related
to RFG acquisition*
Restricted stock issued
unrealized loss on limoneira
investment, net
Dividend declared to shareholders
net income attributable to
Calavo Growers, Inc*
Balance, october 31, 2012
(restated)
exercise of stock options and
income tax benefit of $59
Stock compensation expense
Restricted stock issued
Issuance of stock related to
RFG Contingent consideration
and non-cash compensation*
Retirement of stock purchased
from limoneira
unrealized gain on limoneira
investment, net
Dividend declared to shareholders
FreshRealm noncontrolling
interest contribution
net loss attributable to
FreshRealm*
net loss attributable to
Calavo Growers, Inc. *
54
—
—
11
—
—
—
14,835
39
—
12
999
(165)
—
—
—
—
—
Balance, october 31, 2013
(restated)
exercise of stock options and
income tax benefit of $191
Stock compensation expense
Issuance of stock related to
RFG Contingent Consideration and
non-cash compensation, net tax
Restricted stock issued
unrealized loss on limoneira
investment, net
Dividend declared to shareholders
FreshRealm noncontrolling interest
contribution
Deconsolidation of FreshRealm
net loss attributable to FreshRealm
net income attributable to
Calavo Growers, Inc.
15,720
8
—
1,532
35
—
—
—
—
—
—
Balance, october 31, 2014
17,295
$
*Restated
See accompanying notes to consolidated financial statements.
totAl
89,632
930
417
95
—
5,455
(9,612)
15,802
801
376
—
28,974
(4,788)
4,024
(11,038)
362
(542)
930
417
95
—
—
—
—
—
—
—
—
—
—
—
—
5,455
—
—
(9,612)
—
15,802
—
—
—
—
—
—
—
—
45,428
9,390
47,887
—
102,719
—
—
—
—
—
—
—
—
—
—
4,024
—
—
(11,038)
—
—
—
—
—
—
—
801
376
—
28,973
(4,788)
—
—
—
—
—
—
—
362
(542)
—
—
—
(1,795)
—
(1,795)
70,790
13,414
35,054
(180)
119,093
318
727
67,288
—
—
—
5,373
—
—
—
—
—
—
—
—
—
—
—
(701)
—
—
(12,971)
—
—
—
—
—
—
—
97
$ 144,496
$ 12,713
$ 22,180
$
—
—
—
—
—
—
4,627
(4,030)
(417)
318
727
67,290
—
(701)
(12,971)
10,000
(4,030)
(417)
—
—
97
$ 179,406
—
—
—
—
—
—
—
14
—
—
—
1
—
—
—
—
—
—
15
—
—
2
—
—
—
—
—
—
—
17
40 . 41
Calavo Growers, Inc. 2014 AnnuAl RepoR t
YeAR enDeD oCtobeR 31,
(in thousands)
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
Income (loss) from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation expense
related to the acquisition of RFG
Contingent consideration related to acquisition of Salsa lisa
Stock compensation expense
Gain on deconsolidation of FreshRealm
loss on disposal of property, plant, and equipment
Distribution from unconsolidated entity
Gain on sale of Maui Fresh International
Intangible assets impairment on Calavo Salsa lisa
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in unconsolidated entity
proceeds from sale of Maui Fresh International
Decrease in cash due to deconsolidation of FreshRealm
Investment in Agricola Don Memo
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility
payments on revolving credit facility
proceeds from issuance of long-term obligations
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
proceeds from issuance of FreshRealm stock
tax benefit of stock option exercises
net cash used in financing activities
net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPlemental InformatI on :
Cash paid during the year for:
Interest
Income taxes
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Issuance of stock related to RFG contingent consideration
Declared dividends payable
notes receivable issued for sale of Maui Fresh International
Construction in progress included in trade accounts payable
and accrued expenses
Collection for Agricola belher Infrastructure Advance
unrealized holding gains (losses)
See accompanying notes to consolidated financial statements.
2014
2013
ReSt AteD
2012
ReSt AteD
$
(215)
$
(2,684)
$
15,630
6,926
154
15
37
53,611
(491)
727
(12,622)
115
—
—
—
(15,076)
(1,712)
(2,302)
(8,816)
(45)
(648)
48
(6,985)
8,624
21,345
(11,613)
(125)
—
(6,813)
—
(18,551)
(11,005)
242,340
(240,430)
—
(5,160)
—
127
10,000
59
(4,069)
(1,275)
8,019
6,744
986
11,355
191
66,988
12,971
—
—
845
(1,175)
$
$
$
$
$
$
$
$
$
$
6,367
1
100
146
33,811
(230)
376
—
30
—
—
615
(12,121)
(16,191)
(5,725)
(3,567)
(844)
781
135
7,705
5,007
13,712
(6,746)
—
—
—
(1,000)
(7,746)
(9,646)
200,670
(186,850)
—
(5,405)
(4,788)
751
79
139
(5,050)
916
7,103
8,019
1,087
5,532
59
28,973
11,004
—
—
1,690
6,690
$
$
$
$
$
$
$
$
$
$
5,909
68
(501)
128
2,574
5
417
—
136
288
(519)
87
(1,673)
(2,837)
(5,161)
(639)
980
475
14
3,394
3,236
22,011
(7,749)
—
300
—
—
(7,449)
(8,123)
158,200
(155,890)
—
(5,237)
—
791
—
26
(10,233)
4,329
2,774
7,103
1,146
9,274
139
—
9,612
2,204
28
—
8,850
$
$
$
$
$
$
$
$
$
$
notes to Consolidated Financial Statements
1. DeSCriptiOn OF the BuSineSS
InventorIeS
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. We distribute our products
both domestically and internationally and report our operations
in three different business segments: Fresh products, Calavo
Foods and Renaissance Food Group, llC (RFG). See note 18
for more information on the deconsolidation of FreshRealm, llC
(FreshRealm).
2.
BASiS OF preSent AtiOn AnD SigniFiCAnt
ACCOunting pOliCieS
the accompanying consolidated financial statements were
prepared in accordance with accounting principles generally
accepted in the united States.
our consolidated financial statements include the
accounts of Calavo Growers, Inc. and our wholly owned
subsidiaries, Calavo de Mexico S.A. de C.V., Calavo Foods de
Mexico S.A. de C.V., Calavo Inversiones (Chile) limitada,
Maui Fresh International, Inc. (Maui), Hawaiian Sweet, Inc. (HS),
Hawaiian pride, llC (Hp), and RFG. We consolidate our entity
Calavo Salsa lisa, llC (CSl), in which we have a 65 percent
ownership interest. All intercompany accounts and transactions
have been eliminated in consolidation.
caSh anD caSh eQUIvalentS
We consider all highly liquid financial instruments purchased
with an original maturity date of three months or less to
be cash equivalents. the carrying amounts of cash and cash
equivalents approximate their fair values.
PrePaID eXPenSeS anD other cUrrent aSSetS
prepaid expenses and other current assets consist
primarily of non-trade receivables, infrastructure advances and
prepaid expenses. non-trade receivables were $17.0 million
and $8.3 million at october 31, 2014 and 2013. Included in
non-trade receivables are $11.9 million and $6.6 million related
to Mexican IVA (i.e. value-added) taxes. Infrastructure advances
are discussed below. prepaid expenses totaling $1.7 million
and $1.6 million at october 31, 2014 and 2013, are primarily for
insurance, rent and other items.
Inventories are stated at the lower of cost or market.
Cost is computed on a monthly weighted-average basis, which
approximates the first-in, first-out method; market is based
upon estimated replacement costs. Costs included in inventory
primarily include the following: fruit, picking and hauling,
overhead, labor, materials and freight.
ProPerty, Plant, anD eQUIPment
property, plant, and equipment are stated at cost and
depreciated over their estimated useful lives using the straight-
line method. leasehold improvements are stated at cost and
amortized over the lesser of their estimated useful lives or the
term of the lease, using the straight-line method. useful lives
are as follows: buildings and improvements - 7 to 50 years;
leasehold improvements - the lesser of the term of the lease
or 7 years; equipment - 7 to 25 years; information systems
hardware and software – 3 to 15 years. Significant repairs and
maintenance that increase the value or extend the useful life of
our fixed asset are capitalized. Replaced fixed assets are written
off. ordinary maintenance and repairs are charged to expense.
We capitalize software development costs for internal use
beginning in the application development stage and ending
when the asset is placed into service. Costs capitalized include
coding and testing activities and various implementation costs.
these costs are limited to (1) external direct costs of materials
and services consumed in developing or obtaining internal-use
computer software; (2) payroll and payroll-related costs for
employees who are directly associated with and who devote
time to the internal-use computer software project to the extent
of the time spent directly on the project; and (3) interest cost
incurred while developing internal-use computer software. See
note 5 for further information.
gooDwIll anD acQUIreD IntangIBle aSSetS
Goodwill is tested for impairment on an annual basis
and between annual tests whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. Goodwill is tested at the reporting unit level, which
is defined as an operating segment or one level below the
operating segment. Goodwill impairment testing is a two-step
process. the first step of the goodwill impairment test, used
to identify potential impairment, compares the fair value of a
reporting unit with its carrying amount, including goodwill. If
the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired, and
the second step of the impairment test would be unnecessary.
If the carrying amount of a reporting unit exceeds its fair
value, the second step of the goodwill impairment test must
be performed to measure the amount of impairment loss, if
any. the second step of the goodwill impairment test, used
to measure the amount of impairment loss, compares the
implied fair value of reporting unit goodwill with the carrying
amount of that goodwill. If the carrying amount of reporting
unit goodwill exceeds the implied fair value of that goodwill,
an impairment loss must be recognized in an amount equal to
that excess. Goodwill impairment testing requires significant
judgment and management estimates, including, but not limited
to, the determination of (i) the number of reporting units, (ii) the
goodwill and other assets and liabilities to be allocated to the
reporting units and (iii) the fair values of the reporting units.
the estimates and assumptions described above, along with
other factors such as discount rates, will significantly affect
the outcome of the impairment tests and the amounts of any
resulting impairment losses. For fiscal years 2014 and 2013,
we performed our annual assessment of goodwill and noted
no impairments as of october 31, 2014 and 2013.
the following table reconciles by segment goodwill
and the impairment losses recognized for the year ended
october 31, 2012, 2013 and 2014 (in thousands):
FReSH pRoDuCtS
CAlAVo FooDS
RFG
totAl
Goodwill, beginning november 1, 2011
$
3,997
$
Calavo Salsa lisa Goodwill impairment losses
Goodwill, ending october 31, 2012
Calavo Salsa lisa Goodwill impairment losses
Goodwill, october 31, 2013
Calavo Salsa lisa Goodwill impairment losses
—
3,997
—
3,997
—
Goodwill, october 31, 2014
$
3,997
$
87
(87)
—
—
—
—
—
$ 14,265
$ 18,349
—
14,265
—
14,265
—
(87)
18,262
—
18,262
—
$ 14,265
$ 18,262
long-lIveD aSSetS
long-lived assets, including fixed assets and intangible
assets (other than goodwill), are continually monitored and
are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of any
such asset may not be recoverable. the determination of
recoverability is based on an estimate of undiscounted cash
flows expected to result from the use of an asset and its
eventual disposition. the estimate of undiscounted cash flows
is based upon, among other things, certain assumptions about
future operating performance, growth rates and other factors.
estimates of undiscounted cash flows may differ from actual
cash flows due to, among other things, technological changes,
economic conditions, changes to the business model or changes
in operating performance. If the sum of the undiscounted cash
flows (excluding interest) is less than the carrying value, an
impairment loss will be recognized, measured as the amount by
which the carrying value exceeds the fair value of the asset. For
fiscal year 2013, we performed our annual assessment of long-
lived assets and determined that an impairment of $0.6 million
existed related to the trade name and trade secrets/recipes of
CSl. For fiscal year 2014, we performed our annual assessment
of long-lived assets and determined that no impairment existed
as of october 31, 2014.
InveStmentS
We account for non-marketable investments using the
equity method of accounting if the investment gives us the
ability to exercise significant influence over, but not control,
an investee. Significant influence generally exists when we have
an ownership interest representing between 20% and 50%
of the voting stock of the investee. under the equity method
of accounting, investments are stated at initial cost
and are adjusted for subsequent additional investments and
our proportionate share of earnings or losses and distributions.
In June 2009, we (through our wholly owned subsidiary:
Calavo Inversiones (Chile) limitada) entered into a joint venture
agreement with exportadora M5, S.A. (M5) for the purpose
of selling and distributing Chilean sourced avocados. Such
joint venture operates under the name of Calavo Chile and
commenced operations in July 2009. M5 and Calavo each have
an equal one-half ownership interest in Calavo Chile, but M5 has
overall management responsibility for the operations of Calavo
Chile. We use the equity method to account for this investment.
In october 2013, we contributed $1.0 million to the
purchase of 60 hectares of property in Jalisco, Mexico, for the
development of facilities to grow tomatoes. In fiscal 2014,
we have advanced an additional $3.2 million for construction
of greenhouses in the form of a bridge loan. this bridge loan
will be replaced with a loan from an institutional lender in the
amount of $4.5 million and the bridge loan will be repaid as soon
as possible from the proceeds of the new loan. In the second
quarter of 2015, we expect to finalize a joint venture agreement
with Agricola belher (belher). Such joint venture will operate
under the name of Agricola Don Memo. belher and Calavo are
expected to have equal one-half ownership interests in Agricola
Don Memo, but belher will ultimately have overall management
responsibility for the operations of Agricola Don Memo. the
contribution of $3.2 million has been recorded as a receivable
in prepaid and other current assets.
effective May 2014, we closed our Second Amended
and Restated limited liability Company Agreement by
and among FreshRealm and the ownership members of
FreshRealm. pursuant to this agreement, Impermanence,
llC (Impermanence) was admitted as an ownership member
of FreshRealm. Impermanence contributed $10.0 million
Calavo Growers, Inc. 2014 AnnuAl RepoR t
42 . 43
notes to Consolidated Financial Statements
1. DeSCriptiOn OF the BuSineSS
InventorIeS
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. We distribute our products
both domestically and internationally and report our operations
in three different business segments: Fresh products, Calavo
Foods and Renaissance Food Group, llC (RFG). See note 18
for more information on the deconsolidation of FreshRealm, llC
(FreshRealm).
2.
BASiS OF preSent AtiOn AnD SigniFiCAnt
ACCOunting pOliCieS
the accompanying consolidated financial statements were
prepared in accordance with accounting principles generally
accepted in the united States.
our consolidated financial statements include the
accounts of Calavo Growers, Inc. and our wholly owned
subsidiaries, Calavo de Mexico S.A. de C.V., Calavo Foods de
Mexico S.A. de C.V., Calavo Inversiones (Chile) limitada,
Maui Fresh International, Inc. (Maui), Hawaiian Sweet, Inc. (HS),
Hawaiian pride, llC (Hp), and RFG. We consolidate our entity
Calavo Salsa lisa, llC (CSl), in which we have a 65 percent
ownership interest. All intercompany accounts and transactions
have been eliminated in consolidation.
caSh anD caSh eQUIvalentS
We consider all highly liquid financial instruments purchased
with an original maturity date of three months or less to
be cash equivalents. the carrying amounts of cash and cash
equivalents approximate their fair values.
PrePaID eXPenSeS anD other cUrrent aSSetS
prepaid expenses and other current assets consist
primarily of non-trade receivables, infrastructure advances and
prepaid expenses. non-trade receivables were $17.0 million
and $8.3 million at october 31, 2014 and 2013. Included in
non-trade receivables are $11.9 million and $6.6 million related
to Mexican IVA (i.e. value-added) taxes. Infrastructure advances
are discussed below. prepaid expenses totaling $1.7 million
and $1.6 million at october 31, 2014 and 2013, are primarily for
insurance, rent and other items.
Inventories are stated at the lower of cost or market.
Cost is computed on a monthly weighted-average basis, which
approximates the first-in, first-out method; market is based
upon estimated replacement costs. Costs included in inventory
primarily include the following: fruit, picking and hauling,
overhead, labor, materials and freight.
ProPerty, Plant, anD eQUIPment
property, plant, and equipment are stated at cost and
depreciated over their estimated useful lives using the straight-
line method. leasehold improvements are stated at cost and
amortized over the lesser of their estimated useful lives or the
term of the lease, using the straight-line method. useful lives
are as follows: buildings and improvements - 7 to 50 years;
leasehold improvements - the lesser of the term of the lease
or 7 years; equipment - 7 to 25 years; information systems
hardware and software – 3 to 15 years. Significant repairs and
maintenance that increase the value or extend the useful life of
our fixed asset are capitalized. Replaced fixed assets are written
off. ordinary maintenance and repairs are charged to expense.
We capitalize software development costs for internal use
beginning in the application development stage and ending
when the asset is placed into service. Costs capitalized include
coding and testing activities and various implementation costs.
these costs are limited to (1) external direct costs of materials
and services consumed in developing or obtaining internal-use
computer software; (2) payroll and payroll-related costs for
employees who are directly associated with and who devote
time to the internal-use computer software project to the extent
of the time spent directly on the project; and (3) interest cost
incurred while developing internal-use computer software. See
note 5 for further information.
gooDwIll anD acQUIreD IntangIBle aSSetS
Goodwill is tested for impairment on an annual basis
and between annual tests whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. Goodwill is tested at the reporting unit level, which
is defined as an operating segment or one level below the
operating segment. Goodwill impairment testing is a two-step
process. the first step of the goodwill impairment test, used
to identify potential impairment, compares the fair value of a
reporting unit with its carrying amount, including goodwill. If
the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is considered not impaired, and
the second step of the impairment test would be unnecessary.
If the carrying amount of a reporting unit exceeds its fair
value, the second step of the goodwill impairment test must
be performed to measure the amount of impairment loss, if
any. the second step of the goodwill impairment test, used
to measure the amount of impairment loss, compares the
implied fair value of reporting unit goodwill with the carrying
amount of that goodwill. If the carrying amount of reporting
unit goodwill exceeds the implied fair value of that goodwill,
an impairment loss must be recognized in an amount equal to
that excess. Goodwill impairment testing requires significant
judgment and management estimates, including, but not limited
to, the determination of (i) the number of reporting units, (ii) the
goodwill and other assets and liabilities to be allocated to the
reporting units and (iii) the fair values of the reporting units.
the estimates and assumptions described above, along with
other factors such as discount rates, will significantly affect
the outcome of the impairment tests and the amounts of any
resulting impairment losses. For fiscal years 2014 and 2013,
we performed our annual assessment of goodwill and noted
no impairments as of october 31, 2014 and 2013.
the following table reconciles by segment goodwill
and the impairment losses recognized for the year ended
october 31, 2012, 2013 and 2014 (in thousands):
FReSH pRoDuCtS
CAlAVo FooDS
RFG
totAl
Goodwill, beginning november 1, 2011
$
3,997
$
Calavo Salsa lisa Goodwill impairment losses
Goodwill, ending october 31, 2012
Calavo Salsa lisa Goodwill impairment losses
Goodwill, october 31, 2013
Calavo Salsa lisa Goodwill impairment losses
—
3,997
—
3,997
—
Goodwill, october 31, 2014
$
3,997
$
87
(87)
—
—
—
—
—
$ 14,265
$ 18,349
—
14,265
—
14,265
—
(87)
18,262
—
18,262
—
$ 14,265
$ 18,262
long-lIveD aSSetS
long-lived assets, including fixed assets and intangible
assets (other than goodwill), are continually monitored and
are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of any
such asset may not be recoverable. the determination of
recoverability is based on an estimate of undiscounted cash
flows expected to result from the use of an asset and its
eventual disposition. the estimate of undiscounted cash flows
is based upon, among other things, certain assumptions about
future operating performance, growth rates and other factors.
estimates of undiscounted cash flows may differ from actual
cash flows due to, among other things, technological changes,
economic conditions, changes to the business model or changes
in operating performance. If the sum of the undiscounted cash
flows (excluding interest) is less than the carrying value, an
impairment loss will be recognized, measured as the amount by
which the carrying value exceeds the fair value of the asset. For
fiscal year 2013, we performed our annual assessment of long-
lived assets and determined that an impairment of $0.6 million
existed related to the trade name and trade secrets/recipes of
CSl. For fiscal year 2014, we performed our annual assessment
of long-lived assets and determined that no impairment existed
as of october 31, 2014.
InveStmentS
We account for non-marketable investments using the
equity method of accounting if the investment gives us the
ability to exercise significant influence over, but not control,
an investee. Significant influence generally exists when we have
an ownership interest representing between 20% and 50%
of the voting stock of the investee. under the equity method
of accounting, investments are stated at initial cost
and are adjusted for subsequent additional investments and
our proportionate share of earnings or losses and distributions.
In June 2009, we (through our wholly owned subsidiary:
Calavo Inversiones (Chile) limitada) entered into a joint venture
agreement with exportadora M5, S.A. (M5) for the purpose
of selling and distributing Chilean sourced avocados. Such
joint venture operates under the name of Calavo Chile and
commenced operations in July 2009. M5 and Calavo each have
an equal one-half ownership interest in Calavo Chile, but M5 has
overall management responsibility for the operations of Calavo
Chile. We use the equity method to account for this investment.
In october 2013, we contributed $1.0 million to the
purchase of 60 hectares of property in Jalisco, Mexico, for the
development of facilities to grow tomatoes. In fiscal 2014,
we have advanced an additional $3.2 million for construction
of greenhouses in the form of a bridge loan. this bridge loan
will be replaced with a loan from an institutional lender in the
amount of $4.5 million and the bridge loan will be repaid as soon
as possible from the proceeds of the new loan. In the second
quarter of 2015, we expect to finalize a joint venture agreement
with Agricola belher (belher). Such joint venture will operate
under the name of Agricola Don Memo. belher and Calavo are
expected to have equal one-half ownership interests in Agricola
Don Memo, but belher will ultimately have overall management
responsibility for the operations of Agricola Don Memo. the
contribution of $3.2 million has been recorded as a receivable
in prepaid and other current assets.
effective May 2014, we closed our Second Amended
and Restated limited liability Company Agreement by
and among FreshRealm and the ownership members of
FreshRealm. pursuant to this agreement, Impermanence,
llC (Impermanence) was admitted as an ownership member
of FreshRealm. Impermanence contributed $10.0 million
Calavo Growers, Inc. 2014 AnnuAl RepoR t
42 . 43
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%. even though Calavo controlled
greater than 50% of the outstanding units of FreshRealm, 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, is required by the Agreement,
the Members shall act by Super-Majority Vote. 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 in May 2014.
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. our investment of $17.0 million in FreshRealm
million 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%. See note 18
for more information on the deconsolidation of FreshRealm.
marketaBle SecUrItIeS
our marketable securities consist of our investment in
limoneira Company (limoneira) stock. We currently own
approximately 12% of limoneira’s outstanding common stock.
these securities are carried at fair value as determined from
quoted market prices. the estimated fair value, cost, and gross
unrealized gain related to such investment was $44.4 million,
$23.5 million and $20.9 million as of october 31, 2014. the
estimated fair value, cost, and gross unrealized gain related
to such investment was $45.5 million, $23.5 million and
$22.0 million as of october 31, 2013.
agreed to sell and distribute such tomatoes, make advances
to belher for operating purposes, provide additional advances
as shipments are made during the season (subject to limitations,
as defined), and return the proceeds from such tomato sales
to belher, net of our commission and aforementioned advances.
pursuant to such amended agreement with belher, we advanced
belher a total of $3.0 million, up from $2.0 million in the original
agreement, during fiscal 2011. Additionally, the amended
agreement calls for us to continue to advance $3.0 million per
annum for operating purposes through 2019. these advances
will be collected through settlements by the end of each year.
As of october 31, 2014 and 2013, we have total advances of
$3.0 million to belher pursuant to this agreement, which is
recorded in advances to suppliers.
InfraStrUctUre aDvanceS
pursuant to our infrastructure agreement, we make
advances to be used solely for the acquisition, construction,
and installation of improvements to and on certain land owned/
controlled by belher, as well as packing line equipment.
Advances incur interest at 4.7% at october 31, 2014 and 2013.
As of october 31, 2014, we have advanced a total of $1.6 million
($0.8 million included in prepaid expenses and other current
assets and $0.8 million included in other long-term assets). As
of october 31, 2013, we have advanced a total of $2.5 million
($0.8 million included in prepaid expenses and other current
assets and $1.7 million included in other long-term assets).
belher is to annually repay these advances in no less than 20%
increments through July 2016. Interest is to be paid monthly or
annually, as defined. belher may prepay, without penalty, all or
any portion of the advances at any time. based on an unusually
poor tomato season, belher did not make a payment in fiscal
2012 pursuant to such agreement. both parties agreed to defer
such payment until 2013 and such payment was made as
expected. In order to secure their obligations pursuant to both
agreements discussed above, belher granted us a first-priority
security interest in certain assets, including cash, inventory and
fixed assets, as defined.
aDvanceS to SUPPlIerS
accrUeD eXPenSeS
We advance funds to third-party growers primarily in Chile and
Included in accrued expenses at october 31, 2014 and 2013
Mexico for various farming needs. typically, we obtain collateral
(i.e. fruit, fixed assets, etc.) that approximates the value at risk,
prior to making such advances. We continuously evaluate the
ability of these growers to repay advances in order to evaluate
the possible need to record an allowance. no such allowance was
required at october 31, 2014, nor october 31, 2013.
pursuant to our distribution agreement, which was amended
in fiscal 2011, with Agricola belher (belher) of Mexico, a
producer of fresh vegetables, primarily tomatoes, for export to
the u.S. market, belher agreed, at their sole cost and expense,
to harvest, pack, export, ship, and deliver tomatoes exclusively
to our company, primarily our Arizona facility. In exchange, we
are liabilities related to the receipt of goods and/or services
for which an invoice has not yet been received. these totaled
approximately $4.7 million and $3.7 million. Additionally,
included in accrued expenses at october 31, 2013 are liabilities
related to contingent consideration and non-cash compensation
related to the acquisition of RFG. these totaled approximately
$15.6 million.
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
44 . 45
Calavo Growers, Inc. 2014 AnnuAl RepoR t
revenUe recognItIon
aDvertISIng eXPenSe
Sales of products and related costs of products sold are
recognized when (i) persuasive evidence of an arrangement
exists, (ii) delivery has occurred, (iii) the price is fixed or
determinable and (iv) collectability is reasonably assured.
these terms are typically met upon shipment of product to the
customer. Service revenue, including freight, ripening, storage,
bagging and palletization charges, is recorded when services are
performed and sales of the related products are delivered.
ShIPPIng anD hanDlIng
We include shipping and handling fees billed to customers in
net revenues. Amounts incurred by us for freight are included in
cost of goods sold.
PromotIonal allowanceS
We provide for promotional allowances at the time of
sale, based on our historical experience. our estimates are
generally based on evaluating the historical relationship between
promotional allowances and gross sales. the derived percentage
is then applied to the current period’s sales revenues in order
to arrive at the appropriate debit to sales allowances for the
period. the offsetting credit is made to accrued expenses. When
certain amounts of specific customer accounts are subsequently
identified as promotional, they are written off against this
allowance. Actual amounts may differ from these estimates and
such differences are recognized as an adjustment to net sales in
the period they are identified.
allowance for accoUntS receIvaBle
We provide an allowance for estimated uncollectible
accounts receivable balances based on historical experience and
the aging of the related accounts receivable.
conSIgnment arrangementS
We frequently enter into consignment arrangements with
avocado, pineapple and tomato growers and packers located
outside of the united States and growers of certain perishable
products in the united States. Although we generally do not
take legal title to these avocados and perishable products, we
do assume responsibilities (principally assuming credit risk,
inventory loss and delivery risk, and limited pricing risk) that
are consistent with acting as a principal in the transaction.
Accordingly, the accompanying financial statements include
sales and cost of sales from the sale of avocados and perishable
products procured under consignment arrangements. Amounts
recorded for each of the fiscal years ended october 31,
2014, 2013 and 2012 in the financial statements pursuant to
consignment arrangements are as follows (in thousands):
Sales
Cost of Sales
Gross Margin
2014
2013
2012
$ 30,721
$ 30,620
$ 28,297
27,759
27,679
25,893
$ 2,962
$ 2,941
$ 2,404
Advertising costs are expensed when incurred. Such costs
were approximately $0.2 million, $0.1 million, and $0.2 million
for fiscal years 2014, 2013, and 2012.
reSearch anD DeveloPment
Research and development costs are expensed as incurred
and are generally included as a component of selling, general
and administrative expense. FreshRealm, a development
stage company, comprises the majority of our research and
development costs. total research and development costs for
fiscal years 2014 and 2013 were approximately $0.8 million and
$1.5 million. total research and development costs for fiscal
years 2012 was less than $0.1 million.
other Income, net
Included in other income, net is dividend income totaling
$0.5 million for fiscal year 2014. Dividend income totaled
$0.4 million for fiscal year 2013 and 2012. See note 10 for
related party disclosure related to other income.
USe of eStImateS
the preparation of financial statements in conformity with
accounting principles generally accepted in the united States
requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial
statements and accompanying notes. Among the significant
estimates affecting the financial statements are those related
to valuation allowances for accounts receivable, goodwill,
grower advances, inventories, long-lived assets, valuation of and
estimated useful lives of identifiable intangible assets, stock-
based compensation, promotional allowances and income taxes.
on an ongoing basis, management reviews its estimates based
upon currently available information. Actual results could differ
materially from those estimates.
Income taXeS
We account for deferred tax liabilities and assets for the
future consequences of events that have been recognized in our
consolidated financial statements or tax returns. Measurement
of the deferred items is based on enacted tax laws. In the event
the future consequences of differences between financial
reporting bases and tax bases of our assets and liabilities
result in a deferred tax asset, we perform an evaluation of the
probability of being able to realize the future benefits indicated
by such asset. A valuation allowance related to a deferred tax
asset is recorded when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
We recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on
the technical merits of the position. the tax benefits recognized
in the financial statements from such a position should be
measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement.
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%. even though Calavo controlled
greater than 50% of the outstanding units of FreshRealm, 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, is required by the Agreement,
the Members shall act by Super-Majority Vote. 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 in May 2014.
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. our investment of $17.0 million in FreshRealm
million 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%. See note 18
for more information on the deconsolidation of FreshRealm.
marketaBle SecUrItIeS
our marketable securities consist of our investment in
limoneira Company (limoneira) stock. We currently own
approximately 12% of limoneira’s outstanding common stock.
these securities are carried at fair value as determined from
quoted market prices. the estimated fair value, cost, and gross
unrealized gain related to such investment was $44.4 million,
$23.5 million and $20.9 million as of october 31, 2014. the
estimated fair value, cost, and gross unrealized gain related
to such investment was $45.5 million, $23.5 million and
$22.0 million as of october 31, 2013.
agreed to sell and distribute such tomatoes, make advances
to belher for operating purposes, provide additional advances
as shipments are made during the season (subject to limitations,
as defined), and return the proceeds from such tomato sales
to belher, net of our commission and aforementioned advances.
pursuant to such amended agreement with belher, we advanced
belher a total of $3.0 million, up from $2.0 million in the original
agreement, during fiscal 2011. Additionally, the amended
agreement calls for us to continue to advance $3.0 million per
annum for operating purposes through 2019. these advances
will be collected through settlements by the end of each year.
As of october 31, 2014 and 2013, we have total advances of
$3.0 million to belher pursuant to this agreement, which is
recorded in advances to suppliers.
InfraStrUctUre aDvanceS
pursuant to our infrastructure agreement, we make
advances to be used solely for the acquisition, construction,
and installation of improvements to and on certain land owned/
controlled by belher, as well as packing line equipment.
Advances incur interest at 4.7% at october 31, 2014 and 2013.
As of october 31, 2014, we have advanced a total of $1.6 million
($0.8 million included in prepaid expenses and other current
assets and $0.8 million included in other long-term assets). As
of october 31, 2013, we have advanced a total of $2.5 million
($0.8 million included in prepaid expenses and other current
assets and $1.7 million included in other long-term assets).
belher is to annually repay these advances in no less than 20%
increments through July 2016. Interest is to be paid monthly or
annually, as defined. belher may prepay, without penalty, all or
any portion of the advances at any time. based on an unusually
poor tomato season, belher did not make a payment in fiscal
2012 pursuant to such agreement. both parties agreed to defer
such payment until 2013 and such payment was made as
expected. In order to secure their obligations pursuant to both
agreements discussed above, belher granted us a first-priority
security interest in certain assets, including cash, inventory and
fixed assets, as defined.
aDvanceS to SUPPlIerS
accrUeD eXPenSeS
We advance funds to third-party growers primarily in Chile and
Included in accrued expenses at october 31, 2014 and 2013
Mexico for various farming needs. typically, we obtain collateral
(i.e. fruit, fixed assets, etc.) that approximates the value at risk,
prior to making such advances. We continuously evaluate the
ability of these growers to repay advances in order to evaluate
the possible need to record an allowance. no such allowance was
required at october 31, 2014, nor october 31, 2013.
pursuant to our distribution agreement, which was amended
in fiscal 2011, with Agricola belher (belher) of Mexico, a
producer of fresh vegetables, primarily tomatoes, for export to
the u.S. market, belher agreed, at their sole cost and expense,
to harvest, pack, export, ship, and deliver tomatoes exclusively
to our company, primarily our Arizona facility. In exchange, we
are liabilities related to the receipt of goods and/or services
for which an invoice has not yet been received. these totaled
approximately $4.7 million and $3.7 million. Additionally,
included in accrued expenses at october 31, 2013 are liabilities
related to contingent consideration and non-cash compensation
related to the acquisition of RFG. these totaled approximately
$15.6 million.
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
44 . 45
Calavo Growers, Inc. 2014 AnnuAl RepoR t
revenUe recognItIon
aDvertISIng eXPenSe
Sales of products and related costs of products sold are
recognized when (i) persuasive evidence of an arrangement
exists, (ii) delivery has occurred, (iii) the price is fixed or
determinable and (iv) collectability is reasonably assured.
these terms are typically met upon shipment of product to the
customer. Service revenue, including freight, ripening, storage,
bagging and palletization charges, is recorded when services are
performed and sales of the related products are delivered.
ShIPPIng anD hanDlIng
We include shipping and handling fees billed to customers in
net revenues. Amounts incurred by us for freight are included in
cost of goods sold.
PromotIonal allowanceS
We provide for promotional allowances at the time of
sale, based on our historical experience. our estimates are
generally based on evaluating the historical relationship between
promotional allowances and gross sales. the derived percentage
is then applied to the current period’s sales revenues in order
to arrive at the appropriate debit to sales allowances for the
period. the offsetting credit is made to accrued expenses. When
certain amounts of specific customer accounts are subsequently
identified as promotional, they are written off against this
allowance. Actual amounts may differ from these estimates and
such differences are recognized as an adjustment to net sales in
the period they are identified.
allowance for accoUntS receIvaBle
We provide an allowance for estimated uncollectible
accounts receivable balances based on historical experience and
the aging of the related accounts receivable.
conSIgnment arrangementS
We frequently enter into consignment arrangements with
avocado, pineapple and tomato growers and packers located
outside of the united States and growers of certain perishable
products in the united States. Although we generally do not
take legal title to these avocados and perishable products, we
do assume responsibilities (principally assuming credit risk,
inventory loss and delivery risk, and limited pricing risk) that
are consistent with acting as a principal in the transaction.
Accordingly, the accompanying financial statements include
sales and cost of sales from the sale of avocados and perishable
products procured under consignment arrangements. Amounts
recorded for each of the fiscal years ended october 31,
2014, 2013 and 2012 in the financial statements pursuant to
consignment arrangements are as follows (in thousands):
Sales
Cost of Sales
Gross Margin
2014
2013
2012
$ 30,721
$ 30,620
$ 28,297
27,759
27,679
25,893
$ 2,962
$ 2,941
$ 2,404
Advertising costs are expensed when incurred. Such costs
were approximately $0.2 million, $0.1 million, and $0.2 million
for fiscal years 2014, 2013, and 2012.
reSearch anD DeveloPment
Research and development costs are expensed as incurred
and are generally included as a component of selling, general
and administrative expense. FreshRealm, a development
stage company, comprises the majority of our research and
development costs. total research and development costs for
fiscal years 2014 and 2013 were approximately $0.8 million and
$1.5 million. total research and development costs for fiscal
years 2012 was less than $0.1 million.
other Income, net
Included in other income, net is dividend income totaling
$0.5 million for fiscal year 2014. Dividend income totaled
$0.4 million for fiscal year 2013 and 2012. See note 10 for
related party disclosure related to other income.
USe of eStImateS
the preparation of financial statements in conformity with
accounting principles generally accepted in the united States
requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial
statements and accompanying notes. Among the significant
estimates affecting the financial statements are those related
to valuation allowances for accounts receivable, goodwill,
grower advances, inventories, long-lived assets, valuation of and
estimated useful lives of identifiable intangible assets, stock-
based compensation, promotional allowances and income taxes.
on an ongoing basis, management reviews its estimates based
upon currently available information. Actual results could differ
materially from those estimates.
Income taXeS
We account for deferred tax liabilities and assets for the
future consequences of events that have been recognized in our
consolidated financial statements or tax returns. Measurement
of the deferred items is based on enacted tax laws. In the event
the future consequences of differences between financial
reporting bases and tax bases of our assets and liabilities
result in a deferred tax asset, we perform an evaluation of the
probability of being able to realize the future benefits indicated
by such asset. A valuation allowance related to a deferred tax
asset is recorded when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
We recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on
the technical merits of the position. the tax benefits recognized
in the financial statements from such a position should be
measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement.
As a multinational corporation, we are subject to taxation
in many jurisdictions, and the calculation of our tax liabilities
involves dealing with uncertainties in the application of complex
tax laws and regulations in various taxing jurisdictions. If we
ultimately determine that the payment of these liabilities will be
unnecessary, the liability will be reversed and we will recognize a
tax benefit during the period in which it is determined the liability
no longer applies. Conversely, we record additional tax charges
in a period in which it is determined that a recorded tax liability
|is less than the ultimate assessment is expected to be.
the application of tax laws and regulations is subject to
legal and factual interpretation, judgment and uncertainty. tax
laws and regulations themselves are subject to change as a
result of changes in fiscal policy, changes in legislation, the
evolution of regulations and court rulings. therefore, the actual
liability for u.S. or foreign taxes may be materially different from
management’s estimates, which could result in the need to
record additional tax liabilities or potentially reverse previously
recorded tax liabilities.
BaSIc anD DIlUteD net Income Per Share
basic earnings per share is calculated using the weighted-
average number of common shares outstanding during the
period without consideration of the dilutive effect of stock
options and contingent consideration. the basic weighted-
average number of common shares outstanding was 15,765,000,
14,856,000, and 14,795,000 for fiscal years 2014, 2013, and
2012. Diluted earnings per common share is calculated using the
weighted-average number of common shares outstanding during
the period after consideration of the dilutive effect of stock
options and the effect of contingent consideration shares, which
were 1,455,000, and 305,000 (restated) for fiscal years 2014 and
2012. For fiscal year 2013, no dilutive shares were considered
due to the impact of anti-dilution.
Stock-BaSeD comPenSatIon
We account for awards of equity instruments issued to
employees under the fair value method of accounting and
recognize such amounts in their statements of operations. 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.
the value of each option award that contains a market
condition is estimated using a lattice-based option valuation
model, while all other option awards are valued using the
black-Scholes-Merton option valuation model. We primarily
consider the following assumptions when using these models:
(1) expected volatility, (2) expected dividends, (3) expected life
and (4) risk-free interest rate. Such models also consider the
intrinsic value in the estimation of fair value of the option award.
Forfeitures are estimated when recognizing compensation
expense, and the estimate of forfeitures will be adjusted over
the requisite service period to the extent that actual forfeitures
differ, or are expected to differ, from such estimates. Changes
in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact
the amount of compensation expense to be recognized in
future periods.
We measure the fair value of our stock option awards on the
date of grant. no options were granted in fiscal years 2014 and
2012. the following assumptions were used in the estimated
grant date fair value calculations for stock options issued in 2013:
Risk-free interest rate
expected volatility
Dividend yield
expected life (years)
2013
0.70%
44.30%
2.60%
5.0
For the years ended october 31, 2014, 2013 and 2012, we
recognized compensation expense of $727,000, $376,000, and
$417,000 related to non-acquisition stock-based compensation.
Contingent consideration treated as non-cash compensation
expense totaled $2.5 million, $0.9 million, and less than
$0.1 million in fiscal years 2014, 2013, and 2012. See note 3 and
note 14 for further information.
the expected stock price volatility rates were based on the
historical volatility of our common stock. the risk free interest
rate was based on the u.S. treasury yield curve in effect at the
time of grant for periods approximating the expected life of
the option. the expected life represents the average period of
time that options granted are expected to be outstanding, as
calculated using the simplified method described in the Securities
and exchange Commission’s Staff Accounting bulletin no. 107.
the black-Scholes-Merton and lattice-based option valuation
models were developed for use in estimating the fair value
of traded options that have no vesting restrictions and are
fully transferable. because options held by our directors and
employees have characteristics significantly different from those
of traded options, in our opinion, the existing models do not
necessarily provide a reliable single measure of the fair value
of these options.
foreIgn cUrrency tranSlatIon anD remeaSUrement
our foreign operations are subject to exchange rate
fluctuations and foreign currency transaction costs. the
functional currency of our foreign subsidiaries is the united
States dollar. As a result, monetary assets and liabilities are
translated into u.S. dollars at exchange rates as of the balance
sheet date and non-monetary assets, liabilities and equity are
translated at historical rates. Sales and expenses are translated
using a weighted-average exchange rate for the period. Gains
and losses resulting from those remeasurements are included
in income. Gains and losses resulting from foreign currency
transactions are also recognized currently in income. total
foreign currency losses for fiscal 2014, net of gains, were
$0.1 million. total foreign currency losses for fiscal 2013, net
of gains, were $0.4 million. total foreign currency gains for
fiscal 2012, net of losses, were $0.1 million.
faIr v alUe of fInancIal InStrUmentS
We believe that the carrying amounts of cash and cash
equivalents, accounts receivable, and accounts payable
approximates fair value based on either their short-term nature or
on terms currently available to the Company in financial markets.
We believe that our fixed-rate long-term obligations have a fair
value of approximately $8.0 million as of october 31, 2014, with
a corresponding carrying value of approximately $7.9 million.
DerIvatIve fInancIal InStrUmentS
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.
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.
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.
recently ISSUeD accoUntIng StanDarDS
In May 2014, the Financial Accounting Standards board
(“FASb”) amended the existing accounting standards for revenue
recognition. the amendments are based on the principle that
revenue should be recognized to depict the transfer of promised
goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. We are required to adopt
the amendments in the first quarter of fiscal 2018. early adoption
is not permitted. the amendments may be applied retrospectively
to each prior period presented or retrospectively with the
cumulative effect recognized as of the date of initial application.
We do not expect the adoption of these amendments to have a
material impact on our financial statements.
In April 2014, the FASb issued guidance which changes the
criteria for identifying a discontinued operation. the guidance
limits the definition of a discontinued operation to the disposal
of a component or group of components that is disposed of or
is classified as held for sale and represents a strategic shift that
has, or will have, a major effect on an entity’s operations and
financial results. We are required to adopt the guidance in the
first quarter of fiscal 2016, with early adoption permitted for
transactions that have not been reported in financial statements
previously issued. We do not expect the adoption of this
guidance to have a material impact on our financial statements
In July 2013, the FASb issued a new accounting standard
requiring the presentation of certain unrecognized tax benefits
as reductions to deferred tax assets rather than as liabilities in
the Consolidated balance Sheets when a net operating loss
carryforward, a similar tax loss or a tax credit carryforward exists.
We are required to adopt this new standard on a prospective
basis in the first quarter of fiscal 2015; however, early adoption is
permitted as is retrospective application. We will adopt the new
standard in the first fiscal quarter of 2015 on a prospective basis.
Adoption of the new standard is not expected to have a material
effect on our Consolidated Financial Statements.
comPrehenSIve Income (loSS)
Comprehensive income (loss) is defined as all changes
in a company’s net assets, except changes resulting from
transactions with shareholders. For the fiscal year ended
october 31, 2014, other comprehensive loss includes
the unrealized loss on our limoneira investment totaling
$0.7 million, net of income taxes. limoneira’s stock price at
october 31, 2014 equaled $25.66 per share. For the fiscal year
ended october 31, 2013, other comprehensive income includes
the unrealized gain on our limoneira investment totaling
$4.0 million, net of income taxes. limoneira’s stock price at
october 31, 2013 equaled $26.34 per share. For the fiscal year
ended october 31, 2012, other comprehensive income includes
the unrealized loss on our limoneira investment totaling
$5.5 million, net of income taxes. limoneira’s stock price at
october 31, 2012 equaled $22.47 per share.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
46 . 47
As a multinational corporation, we are subject to taxation
in many jurisdictions, and the calculation of our tax liabilities
involves dealing with uncertainties in the application of complex
tax laws and regulations in various taxing jurisdictions. If we
ultimately determine that the payment of these liabilities will be
unnecessary, the liability will be reversed and we will recognize a
tax benefit during the period in which it is determined the liability
no longer applies. Conversely, we record additional tax charges
in a period in which it is determined that a recorded tax liability
|is less than the ultimate assessment is expected to be.
the application of tax laws and regulations is subject to
legal and factual interpretation, judgment and uncertainty. tax
laws and regulations themselves are subject to change as a
result of changes in fiscal policy, changes in legislation, the
evolution of regulations and court rulings. therefore, the actual
liability for u.S. or foreign taxes may be materially different from
management’s estimates, which could result in the need to
record additional tax liabilities or potentially reverse previously
recorded tax liabilities.
BaSIc anD DIlUteD net Income Per Share
basic earnings per share is calculated using the weighted-
average number of common shares outstanding during the
period without consideration of the dilutive effect of stock
options and contingent consideration. the basic weighted-
average number of common shares outstanding was 15,765,000,
14,856,000, and 14,795,000 for fiscal years 2014, 2013, and
2012. Diluted earnings per common share is calculated using the
weighted-average number of common shares outstanding during
the period after consideration of the dilutive effect of stock
options and the effect of contingent consideration shares, which
were 1,455,000, and 305,000 (restated) for fiscal years 2014 and
2012. For fiscal year 2013, no dilutive shares were considered
due to the impact of anti-dilution.
Stock-BaSeD comPenSatIon
We account for awards of equity instruments issued to
employees under the fair value method of accounting and
recognize such amounts in their statements of operations. 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.
the value of each option award that contains a market
condition is estimated using a lattice-based option valuation
model, while all other option awards are valued using the
black-Scholes-Merton option valuation model. We primarily
consider the following assumptions when using these models:
(1) expected volatility, (2) expected dividends, (3) expected life
and (4) risk-free interest rate. Such models also consider the
intrinsic value in the estimation of fair value of the option award.
Forfeitures are estimated when recognizing compensation
expense, and the estimate of forfeitures will be adjusted over
the requisite service period to the extent that actual forfeitures
differ, or are expected to differ, from such estimates. Changes
in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact
the amount of compensation expense to be recognized in
future periods.
We measure the fair value of our stock option awards on the
date of grant. no options were granted in fiscal years 2014 and
2012. the following assumptions were used in the estimated
grant date fair value calculations for stock options issued in 2013:
Risk-free interest rate
expected volatility
Dividend yield
expected life (years)
2013
0.70%
44.30%
2.60%
5.0
For the years ended october 31, 2014, 2013 and 2012, we
recognized compensation expense of $727,000, $376,000, and
$417,000 related to non-acquisition stock-based compensation.
Contingent consideration treated as non-cash compensation
expense totaled $2.5 million, $0.9 million, and less than
$0.1 million in fiscal years 2014, 2013, and 2012. See note 3 and
note 14 for further information.
the expected stock price volatility rates were based on the
historical volatility of our common stock. the risk free interest
rate was based on the u.S. treasury yield curve in effect at the
time of grant for periods approximating the expected life of
the option. the expected life represents the average period of
time that options granted are expected to be outstanding, as
calculated using the simplified method described in the Securities
and exchange Commission’s Staff Accounting bulletin no. 107.
the black-Scholes-Merton and lattice-based option valuation
models were developed for use in estimating the fair value
of traded options that have no vesting restrictions and are
fully transferable. because options held by our directors and
employees have characteristics significantly different from those
of traded options, in our opinion, the existing models do not
necessarily provide a reliable single measure of the fair value
of these options.
foreIgn cUrrency tranSlatIon anD remeaSUrement
our foreign operations are subject to exchange rate
fluctuations and foreign currency transaction costs. the
functional currency of our foreign subsidiaries is the united
States dollar. As a result, monetary assets and liabilities are
translated into u.S. dollars at exchange rates as of the balance
sheet date and non-monetary assets, liabilities and equity are
translated at historical rates. Sales and expenses are translated
using a weighted-average exchange rate for the period. Gains
and losses resulting from those remeasurements are included
in income. Gains and losses resulting from foreign currency
transactions are also recognized currently in income. total
foreign currency losses for fiscal 2014, net of gains, were
$0.1 million. total foreign currency losses for fiscal 2013, net
of gains, were $0.4 million. total foreign currency gains for
fiscal 2012, net of losses, were $0.1 million.
faIr v alUe of fInancIal InStrUmentS
We believe that the carrying amounts of cash and cash
equivalents, accounts receivable, and accounts payable
approximates fair value based on either their short-term nature or
on terms currently available to the Company in financial markets.
We believe that our fixed-rate long-term obligations have a fair
value of approximately $8.0 million as of october 31, 2014, with
a corresponding carrying value of approximately $7.9 million.
DerIvatIve fInancIal InStrUmentS
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.
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.
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.
recently ISSUeD accoUntIng StanDarDS
In May 2014, the Financial Accounting Standards board
(“FASb”) amended the existing accounting standards for revenue
recognition. the amendments are based on the principle that
revenue should be recognized to depict the transfer of promised
goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. We are required to adopt
the amendments in the first quarter of fiscal 2018. early adoption
is not permitted. the amendments may be applied retrospectively
to each prior period presented or retrospectively with the
cumulative effect recognized as of the date of initial application.
We do not expect the adoption of these amendments to have a
material impact on our financial statements.
In April 2014, the FASb issued guidance which changes the
criteria for identifying a discontinued operation. the guidance
limits the definition of a discontinued operation to the disposal
of a component or group of components that is disposed of or
is classified as held for sale and represents a strategic shift that
has, or will have, a major effect on an entity’s operations and
financial results. We are required to adopt the guidance in the
first quarter of fiscal 2016, with early adoption permitted for
transactions that have not been reported in financial statements
previously issued. We do not expect the adoption of this
guidance to have a material impact on our financial statements
In July 2013, the FASb issued a new accounting standard
requiring the presentation of certain unrecognized tax benefits
as reductions to deferred tax assets rather than as liabilities in
the Consolidated balance Sheets when a net operating loss
carryforward, a similar tax loss or a tax credit carryforward exists.
We are required to adopt this new standard on a prospective
basis in the first quarter of fiscal 2015; however, early adoption is
permitted as is retrospective application. We will adopt the new
standard in the first fiscal quarter of 2015 on a prospective basis.
Adoption of the new standard is not expected to have a material
effect on our Consolidated Financial Statements.
comPrehenSIve Income (loSS)
Comprehensive income (loss) is defined as all changes
in a company’s net assets, except changes resulting from
transactions with shareholders. For the fiscal year ended
october 31, 2014, other comprehensive loss includes
the unrealized loss on our limoneira investment totaling
$0.7 million, net of income taxes. limoneira’s stock price at
october 31, 2014 equaled $25.66 per share. For the fiscal year
ended october 31, 2013, other comprehensive income includes
the unrealized gain on our limoneira investment totaling
$4.0 million, net of income taxes. limoneira’s stock price at
october 31, 2013 equaled $26.34 per share. For the fiscal year
ended october 31, 2012, other comprehensive income includes
the unrealized loss on our limoneira investment totaling
$5.5 million, net of income taxes. limoneira’s stock price at
october 31, 2012 equaled $22.47 per share.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
46 . 47
noncontrollIng IntereSt
the following table reconciles shareholders’ equity
attributable to noncontrolling interest related to the Salsa lisa
acquisition and FreshRealm, llC (in thousands). See note 18
for additional information related to FreshRealm. See note 3,
“Restatement of previously-Issued Financial Statements” to
the Consolidated Financial Statements for information on the
adjustments made related to the restatement of previously-
issued financial statements.
SAlSA lISA non-
ContRollInG InteReSt
YeAR enDeD
oCtobeR 31, 2014
YeAR enDeD
oCtobeR 31, 2013
ReSt AteD
noncontrolling interest,
beginning (Restated)
net loss attributable to
noncontrolling interest
of Salsa lisa
other
noncontrolling interest, ending
$
$
(57)
$
290
(152)
479
270
(347)
—
$
(57)
FReSHReAlM non-
ContRollInG InteReSt
YeAR enDeD
oCtobeR 31, 2014
YeAR enDeD
oCtobeR 31, 2013
ReSt AteD
noncontrolling interest,
beginning (Restated)
noncontrolling interest
contribution
net loss attributable to
noncontrolling interest
of FreshRealm
$
(180)
$
—
4,627
362
Deconsolidation of FreshRealm
(4,030)
(417)
(542)
—
noncontrolling interest, ending
$
—
$
(180)
We recorded an immaterial error correction of $479,000 in
the current year whereby the noncontrolling interest for Salsa
lisa should have been recorded historically at the greater of the
noncontrolling interest balance adjusted for the attribution of
losses or the amount redeemable pursuant to the acquisition
agreement. 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
financial statements. of this amount, $257,000 has been
included in net loss attributable to noncontrolling interest.
3.
reSt AteMent OF previOuSly-iSSueD
FinAnCiAl St AteMentS
In connection with the preparation, review and audit of the
Company’s consolidated financial statements required to be
included in its Annual Report on Form 10-K for the fiscal year
ended october 31, 2014, the Company identified a non-cash
misstatement in its historical consolidated financial statements
related to its treatment of contingent consideration resulting
from the acquisition of RFG in June 2011. In accordance with
the earn-out provisions in the RFG acquisition agreement, if
RFG’s operating results exceeded defined thresholds, additional
purchase price was required to be paid by the Company, subject
to a ceiling. RFG’s results substantially exceeded defined
thresholds and expectations and, accordingly, RFG’s former
owners received the maximum earn-out payment permitted
pursuant to the acquisition agreement.
the total cumulative amount of non-cash operating expense,
primarily related to the revaluation of RFG earn-out liability,
that needed to be recorded was approximately $88.1 million,
accounted for over the period from the date of acquisition of
RFG (i.e. June 1, 2011) through the period ended october 31,
2014. Initially, we recorded the contingent consideration, which
was settleable in common stock, as an equity instrument
and therefore did not record expense based on the changes
in fair value of the contingent consideration. However, the
contingent consideration should have been accounted for as
a liability requiring re-measurement to fair value. Additionally,
certain amounts of the consideration have been recorded as
compensation expense. See following table for the adjustments
relating to total contingent consideration and non-cash
compensation for the acquisition of RFG for fiscal years 2014,
2013, and 2012:
2014
2013
2012
Contingent Consideration
$ 51,082
$ 31,066
$ 2,157
non-cash compensation
recorded in cost of sales
1,807
676
non-cash compensation
recorded in selling, general
and administrative
722
268
1
1
total
$ 53,611
$ 32,010
$ 2,159
the Company has also identified certain immaterial
adjustments primarily relating to non-controlling interest,
diluted number of shares outstanding, and income tax expense
related to fiscal years ended october 31, 2014, october 31,
2013, and october 31, 2012, which are reflected in the restated
consolidated financial statements.
We have not amended our previously-filed Annual Reports
on Form 10-K or Quarterly Reports on Form 10-Q for the periods
affected by the restatement. the financial information that has
been previously filed or otherwise reported for these periods
is superseded by the information in this Form 10-K, and the
financial statements and related financial information contained
in such previously-filed reports should no longer be relied upon.
See note 19, “Selected Quarterly Financial Data (unaudited)”
to the Consolidated Financial Statements for information on the
adjustments made related to the restatement of previously-
issued interim financial statements.
the following tables summarize the impact of the
restatement on our previously reported statements of
consolidated operations for fiscal years 2013 and 2012
(in thousands, except per share data):
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 691,451
$
—
$ 691,451
$ 551,119
$
631,327
676
632,003
490,453
60,124
33,217
1,801
25,106
(100)
255
(1,098)
448
24,611
7,866
16,745
(676)
268
31,066
(32,010)
—
—
—
—
(32,010)
(12,581)
(19,429)
59,448
33,485
32,867
(6,904)
(100)
255
(1,098)
448
(7,399)
(4,715)
(2,684)
60,666
32,713
415
27,538
500
229
(1,152)
887
28,002
11,055
16,947
—
1
(1)
1
2,157
(2,159)
—
—
—
—
(2,159)
(842)
(1,317)
$ 551,119
490,454
60,665
32,714
2,572
25,379
500
229
(1,152)
887
25,843
10,213
15,630
604
285
889
105
67
172
$ 17,349
$
(19,144)
$
(1,795)
$ 17,052
$
(1,250)
$ 15,802
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related
to RFG acquisition
operating income (loss)
equity (losses) in earnings from
unconsolidated entities
Interest income
Interest expense
other income, net
Income (loss) before provision
for income taxes
provision (benefit) for income taxes
net income (loss)
Add: net loss attributable to
noncontrolling interest
net income (loss) attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
(loss) per share:
basic
Diluted
$
$
1.17
1.17
$
$
(1.29)
(1.29)
$
$
(0.12)
(0.12)
$
$
1.15
1.15
$
$
(0.08)
(0.10)
$
$
1.07
1.05
number of shares used in
per share computation:
basic
Diluted
14,856
14,863
—
(7)
14,856
14,856
14,795
14,808
—
292
14,795
15,100
48 . 49
Calavo Growers, Inc. 2014 AnnuAl RepoR t
noncontrollIng IntereSt
the following table reconciles shareholders’ equity
attributable to noncontrolling interest related to the Salsa lisa
acquisition and FreshRealm, llC (in thousands). See note 18
for additional information related to FreshRealm. See note 3,
“Restatement of previously-Issued Financial Statements” to
the Consolidated Financial Statements for information on the
adjustments made related to the restatement of previously-
issued financial statements.
SAlSA lISA non-
ContRollInG InteReSt
YeAR enDeD
oCtobeR 31, 2014
YeAR enDeD
oCtobeR 31, 2013
ReSt AteD
noncontrolling interest,
beginning (Restated)
net loss attributable to
noncontrolling interest
of Salsa lisa
other
noncontrolling interest, ending
$
$
(57)
$
290
(152)
479
270
(347)
—
$
(57)
FReSHReAlM non-
ContRollInG InteReSt
YeAR enDeD
oCtobeR 31, 2014
YeAR enDeD
oCtobeR 31, 2013
ReSt AteD
noncontrolling interest,
beginning (Restated)
noncontrolling interest
contribution
net loss attributable to
noncontrolling interest
of FreshRealm
$
(180)
$
—
4,627
362
Deconsolidation of FreshRealm
(4,030)
(417)
(542)
—
noncontrolling interest, ending
$
—
$
(180)
We recorded an immaterial error correction of $479,000 in
the current year whereby the noncontrolling interest for Salsa
lisa should have been recorded historically at the greater of the
noncontrolling interest balance adjusted for the attribution of
losses or the amount redeemable pursuant to the acquisition
agreement. 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
financial statements. of this amount, $257,000 has been
included in net loss attributable to noncontrolling interest.
3.
reSt AteMent OF previOuSly-iSSueD
FinAnCiAl St AteMentS
In connection with the preparation, review and audit of the
Company’s consolidated financial statements required to be
included in its Annual Report on Form 10-K for the fiscal year
ended october 31, 2014, the Company identified a non-cash
misstatement in its historical consolidated financial statements
related to its treatment of contingent consideration resulting
from the acquisition of RFG in June 2011. In accordance with
the earn-out provisions in the RFG acquisition agreement, if
RFG’s operating results exceeded defined thresholds, additional
purchase price was required to be paid by the Company, subject
to a ceiling. RFG’s results substantially exceeded defined
thresholds and expectations and, accordingly, RFG’s former
owners received the maximum earn-out payment permitted
pursuant to the acquisition agreement.
the total cumulative amount of non-cash operating expense,
primarily related to the revaluation of RFG earn-out liability,
that needed to be recorded was approximately $88.1 million,
accounted for over the period from the date of acquisition of
RFG (i.e. June 1, 2011) through the period ended october 31,
2014. Initially, we recorded the contingent consideration, which
was settleable in common stock, as an equity instrument
and therefore did not record expense based on the changes
in fair value of the contingent consideration. However, the
contingent consideration should have been accounted for as
a liability requiring re-measurement to fair value. Additionally,
certain amounts of the consideration have been recorded as
compensation expense. See following table for the adjustments
relating to total contingent consideration and non-cash
compensation for the acquisition of RFG for fiscal years 2014,
2013, and 2012:
2014
2013
2012
Contingent Consideration
$ 51,082
$ 31,066
$ 2,157
non-cash compensation
recorded in cost of sales
1,807
676
non-cash compensation
recorded in selling, general
and administrative
722
268
1
1
total
$ 53,611
$ 32,010
$ 2,159
the Company has also identified certain immaterial
adjustments primarily relating to non-controlling interest,
diluted number of shares outstanding, and income tax expense
related to fiscal years ended october 31, 2014, october 31,
2013, and october 31, 2012, which are reflected in the restated
consolidated financial statements.
We have not amended our previously-filed Annual Reports
on Form 10-K or Quarterly Reports on Form 10-Q for the periods
affected by the restatement. the financial information that has
been previously filed or otherwise reported for these periods
is superseded by the information in this Form 10-K, and the
financial statements and related financial information contained
in such previously-filed reports should no longer be relied upon.
See note 19, “Selected Quarterly Financial Data (unaudited)”
to the Consolidated Financial Statements for information on the
adjustments made related to the restatement of previously-
issued interim financial statements.
the following tables summarize the impact of the
restatement on our previously reported statements of
consolidated operations for fiscal years 2013 and 2012
(in thousands, except per share data):
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 691,451
$
—
$ 691,451
$ 551,119
$
631,327
676
632,003
490,453
60,124
33,217
1,801
25,106
(100)
255
(1,098)
448
24,611
7,866
16,745
(676)
268
31,066
(32,010)
—
—
—
—
(32,010)
(12,581)
(19,429)
59,448
33,485
32,867
(6,904)
(100)
255
(1,098)
448
(7,399)
(4,715)
(2,684)
60,666
32,713
415
27,538
500
229
(1,152)
887
28,002
11,055
16,947
—
1
(1)
1
2,157
(2,159)
—
—
—
—
(2,159)
(842)
(1,317)
$ 551,119
490,454
60,665
32,714
2,572
25,379
500
229
(1,152)
887
25,843
10,213
15,630
604
285
889
105
67
172
$ 17,349
$
(19,144)
$
(1,795)
$ 17,052
$
(1,250)
$ 15,802
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related
to RFG acquisition
operating income (loss)
equity (losses) in earnings from
unconsolidated entities
Interest income
Interest expense
other income, net
Income (loss) before provision
for income taxes
provision (benefit) for income taxes
net income (loss)
Add: net loss attributable to
noncontrolling interest
net income (loss) attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
(loss) per share:
basic
Diluted
$
$
1.17
1.17
$
$
(1.29)
(1.29)
$
$
(0.12)
(0.12)
$
$
1.15
1.15
$
$
(0.08)
(0.10)
$
$
1.07
1.05
number of shares used in
per share computation:
basic
Diluted
14,856
14,863
—
(7)
14,856
14,856
14,795
14,808
—
292
14,795
15,100
48 . 49
Calavo Growers, Inc. 2014 AnnuAl RepoR t
the following tables summarize the impact of the restatement on our previously reported consolidated statements of comprehensive
the following table summarizes the impact of the restatement on our previously reported consolidated balance sheet for year ending
income (loss) for fiscal years 2013 and 2012:
october 31, 2013 (in thousands):
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
oCtobeR 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
net income (loss)
$ 16,745
$
(19,429)
$
(2,684)
$ 16,947
$
(1,317)
$ 15,630
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
aSSetS
CuRR ent ASS e tS :
other comprehensive income,
before tax:
unrealized investment gains
arising during period
Income tax expense related to items
of other comprehensive income
other comprehensive income,
net of tax
Comprehensive income
Add: net loss attributable to
noncontrolling interest
Comprehensive income –
Calavo Growers, Inc.
6,690
(2,666)
4,024
20,769
—
—
—
(19,429)
6,690
8,850
(2,666)
(3,395)
4,024
1,340
5,455
22,402
—
—
—
(1,317)
8,850
(3,395)
5,455
21,085
604
285
889
105
67
172
$ 21,373
$
(19,144)
$
2,229
$ 22,507
$
(1,250)
$ 21,257
Cash and cash equivalents
$
8,019
$
Accounts receivable, net of allowances of $1,697 (2013)
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Goodwill
other assets
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Income tax payable
Dividend payable
Current portion of long-term obligations
total current liabilities
lonG -teRM lIAbIlItIeS :
long-term obligations, less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
55,060
28,673
10,757
3,213
2,013
1,995
109,730
52,649
45,531
1,420
18,262
12,347
$ 239,939
$ 14,490
11,699
20,939
33,990
—
11,004
5,258
97,380
7,792
6,194
13,986
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15,602
—
—
—
—
$
8,019
55,060
28,673
10,757
3,213
2,013
1,995
109,730
52,649
45,531
1,420
18,262
12,347
$ 239,939
$ 14,490
11,699
36,541
33,990
—
11,004
5,258
15,602
112,982
—
(6,065)
(6,065)
7,792
129
7,921
noncontrolling interest, Calavo Salsa lisa
121
(178)
(57)
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value, 100,000 shares authorized;
15,720 shares outstanding at october 31, 2013)
Additional paid-in capital
Accumulated other comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
total shareholders’ equity
15
59,376
13,414
(6)
55,653
128,452
$ 239,939
—
11,414
—
(174)
(20,599)
(9,359)
$
—
Calavo Growers, Inc. 2014 AnnuAl RepoR t
15
70,790
13,414
(180)
35,054
119,093
$ 239,939
50 . 51
the following tables summarize the impact of the restatement on our previously reported consolidated statements of comprehensive
the following table summarizes the impact of the restatement on our previously reported consolidated balance sheet for year ending
income (loss) for fiscal years 2013 and 2012:
october 31, 2013 (in thousands):
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
oCtobeR 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
net income (loss)
$ 16,745
$
(19,429)
$
(2,684)
$ 16,947
$
(1,317)
$ 15,630
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
aSSetS
CuRR ent ASS e tS :
other comprehensive income,
before tax:
unrealized investment gains
arising during period
Income tax expense related to items
of other comprehensive income
other comprehensive income,
net of tax
Comprehensive income
Add: net loss attributable to
noncontrolling interest
Comprehensive income –
Calavo Growers, Inc.
6,690
(2,666)
4,024
20,769
—
—
—
(19,429)
6,690
8,850
(2,666)
(3,395)
4,024
1,340
5,455
22,402
—
—
—
(1,317)
8,850
(3,395)
5,455
21,085
604
285
889
105
67
172
$ 21,373
$
(19,144)
$
2,229
$ 22,507
$
(1,250)
$ 21,257
Cash and cash equivalents
$
8,019
$
Accounts receivable, net of allowances of $1,697 (2013)
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Goodwill
other assets
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Income tax payable
Dividend payable
Current portion of long-term obligations
total current liabilities
lonG -teRM lIAbIlItIeS :
long-term obligations, less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
55,060
28,673
10,757
3,213
2,013
1,995
109,730
52,649
45,531
1,420
18,262
12,347
$ 239,939
$ 14,490
11,699
20,939
33,990
—
11,004
5,258
97,380
7,792
6,194
13,986
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15,602
—
—
—
—
$
8,019
55,060
28,673
10,757
3,213
2,013
1,995
109,730
52,649
45,531
1,420
18,262
12,347
$ 239,939
$ 14,490
11,699
36,541
33,990
—
11,004
5,258
15,602
112,982
—
(6,065)
(6,065)
7,792
129
7,921
noncontrolling interest, Calavo Salsa lisa
121
(178)
(57)
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value, 100,000 shares authorized;
15,720 shares outstanding at october 31, 2013)
Additional paid-in capital
Accumulated other comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
total shareholders’ equity
15
59,376
13,414
(6)
55,653
128,452
$ 239,939
—
11,414
—
(174)
(20,599)
(9,359)
$
—
Calavo Growers, Inc. 2014 AnnuAl RepoR t
15
70,790
13,414
(180)
35,054
119,093
$ 239,939
50 . 51
the following tables summarize the impact of the restatement on our previously reported consolidated statements of cash flows for
YeAR enDeD oCtobeR 31, 2012
AS RepoR teD
ADJuStMentS
ReSt AteD
fiscal years 2013 and 2012 (in thousands):
YeAR enDeD oCtobeR 31,2013
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 16,745
$
(19,429)
$
(2,684)
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
Income (loss) from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Contingent consideration related to the acquisition of Salsa lisa
Stock compensation expense
loss on disposal of property, plant, and equipment
Intangible assets impairment on Calavo Salsa lisa
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in Agricola Don Memo
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on revolving credit facility, net
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
proceeds from issuance of FreshRealm stock
tax benefit of stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPlemental InformatI on :
Cash paid during the year for:
Interest
Income taxes
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
6,367
1
100
146
1,801
(230)
376
30
615
(6,917)
(16,191)
(5,725)
(3,567)
(844)
8,158
135
7,705
5,007
13,712
(6,746)
(1,000)
(7,746)
(9,646)
200,670
(186,850)
(5,405)
(4,788)
751
79
139
(5,050)
916
7,103
$
8,019
$
$
$
1,087
5,532
59
—
—
—
—
32,010
—
—
—
—
(5,204)
—
—
—
—
(7,377)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
Conversion of cash consideration to stock consideration for RFG acquisition
$ 11,711
$ 17,262
Declared dividends payable
Collection for Agricola belher Infrastructure Advance
unrealized holding gains (losses)
$ 11,004
$
$
1,690
6,690
$
$
$
—
—
—
52 . 53
Calavo Growers, Inc. 2014 AnnuAl RepoR t
6,367
1
100
146
33,811
(230)
376
30
615
(12,121)
(16,191)
(5,725)
(3,567)
(844)
781
135
7,705
5,007
13,712
(6,746)
(1,000)
(7,746)
(9,646)
200,670
(186,850)
(5,405)
(4,788)
751
79
139
(5,050)
916
7,103
8,019
1,087
5,532
59
$
$
$
$
$ 28,973
$ 11,004
$
$
1,690
6,690
caSh f lowS from oP er atIng a c tIvItIeS :
net income
adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
loss from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Contingent consideration related to the acquisition of Salsa lisa
Stock compensation expense
loss on disposal of property, plant, and equipment
Distribution from unconsolidated entity
Gain on sale of Maui Fresh International
Intangible assets impairment on Calavo Salsa lisa
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
proceeds from sale of Maui Fresh International
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on revolving credit facility, net
payments on long-term obligations
proceeds from stock option exercises
tax benefit of stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPlemental InformatI on :
Cash paid during the year for:
Interest
Income taxes
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Declared dividends payable
notes receivable issued for sale of Maui Fresh International
Construction in progress included in trade accounts payable
and accrued expenses
unrealized holding gains (losses)
$ 16,947
$
(1,317)
$ 15,630
5,909
68
(501)
128
415
5
417
136
288
(519)
87
(818)
(2,837)
(5,161)
(639)
980
462
14
3,394
3,236
22,011
(7,749)
300
(7,449)
(8,123)
158,200
(155,890)
(5,237)
791
26
(10,233)
4,329
2,774
$
7,103
$
$
$
$
$
$
$
1,146
9,274
139
9,612
2,204
28
8,850
—
—
—
—
2,159
—
—
—
—
—
—
(855)
—
—
—
—
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
$
$
$
$
5,909
68
(501)
128
2,574
5
417
136
288
(519)
87
(1,673)
(2,837)
(5,161)
(639)
980
475
14
3,394
3,236
22,011
(7,749)
300
(7,449)
(8,123)
158,200
(155,890)
(5,237)
791
26
(10,233)
4,329
2,774
7,103
1,146
9,274
139
9,612
2,204
28
8,850
$
$
$
$
$
$
$
$
the following tables summarize the impact of the restatement on our previously reported consolidated statements of cash flows for
YeAR enDeD oCtobeR 31, 2012
AS RepoR teD
ADJuStMentS
ReSt AteD
fiscal years 2013 and 2012 (in thousands):
YeAR enDeD oCtobeR 31,2013
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 16,745
$
(19,429)
$
(2,684)
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
Income (loss) from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Contingent consideration related to the acquisition of Salsa lisa
Stock compensation expense
loss on disposal of property, plant, and equipment
Intangible assets impairment on Calavo Salsa lisa
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in Agricola Don Memo
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on revolving credit facility, net
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
proceeds from issuance of FreshRealm stock
tax benefit of stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPlemental InformatI on :
Cash paid during the year for:
Interest
Income taxes
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
6,367
1
100
146
1,801
(230)
376
30
615
(6,917)
(16,191)
(5,725)
(3,567)
(844)
8,158
135
7,705
5,007
13,712
(6,746)
(1,000)
(7,746)
(9,646)
200,670
(186,850)
(5,405)
(4,788)
751
79
139
(5,050)
916
7,103
$
8,019
$
$
$
1,087
5,532
59
—
—
—
—
32,010
—
—
—
—
(5,204)
—
—
—
—
(7,377)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
Conversion of cash consideration to stock consideration for RFG acquisition
$ 11,711
$ 17,262
Declared dividends payable
Collection for Agricola belher Infrastructure Advance
unrealized holding gains (losses)
$ 11,004
$
$
1,690
6,690
$
$
$
—
—
—
52 . 53
Calavo Growers, Inc. 2014 AnnuAl RepoR t
6,367
1
100
146
33,811
(230)
376
30
615
(12,121)
(16,191)
(5,725)
(3,567)
(844)
781
135
7,705
5,007
13,712
(6,746)
(1,000)
(7,746)
(9,646)
200,670
(186,850)
(5,405)
(4,788)
751
79
139
(5,050)
916
7,103
8,019
1,087
5,532
59
$
$
$
$
$ 28,973
$ 11,004
$
$
1,690
6,690
caSh f lowS from oP er atIng a c tIvItIeS :
net income
adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
loss from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Contingent consideration related to the acquisition of Salsa lisa
Stock compensation expense
loss on disposal of property, plant, and equipment
Distribution from unconsolidated entity
Gain on sale of Maui Fresh International
Intangible assets impairment on Calavo Salsa lisa
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
proceeds from sale of Maui Fresh International
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on revolving credit facility, net
payments on long-term obligations
proceeds from stock option exercises
tax benefit of stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPlemental InformatI on :
Cash paid during the year for:
Interest
Income taxes
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Declared dividends payable
notes receivable issued for sale of Maui Fresh International
Construction in progress included in trade accounts payable
and accrued expenses
unrealized holding gains (losses)
$ 16,947
$
(1,317)
$ 15,630
5,909
68
(501)
128
415
5
417
136
288
(519)
87
(818)
(2,837)
(5,161)
(639)
980
462
14
3,394
3,236
22,011
(7,749)
300
(7,449)
(8,123)
158,200
(155,890)
(5,237)
791
26
(10,233)
4,329
2,774
$
7,103
$
$
$
$
$
$
$
1,146
9,274
139
9,612
2,204
28
8,850
—
—
—
—
2,159
—
—
—
—
—
—
(855)
—
—
—
—
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
$
$
$
$
5,909
68
(501)
128
2,574
5
417
136
288
(519)
87
(1,673)
(2,837)
(5,161)
(639)
980
475
14
3,394
3,236
22,011
(7,749)
300
(7,449)
(8,123)
158,200
(155,890)
(5,237)
791
26
(10,233)
4,329
2,774
7,103
1,146
9,274
139
9,612
2,204
28
8,850
$
$
$
$
$
$
$
$
4.
inventOrieS
5. prOperty, plAnt, AnD eQuipMent
the intangible assets consist of the following (in thousands):
Inventories consist of the following (in thousands):
property, plant, and equipment consist of the following
oCtobeR 31, 2014
oCtobeR 31, 2013
2014
2013
(in thousands):
buildings and improvements
21,713
20,304
trade names
8.4 years
2,760
(1,900)
oCtobeR 31,
Fresh fruit
packing supplies and ingredients
Finished prepared foods
$ 15,640
$ 13,928
6,324
9,011
5,511
9,234
$ 30,975
$ 28,673
We assess the recoverability of inventories through an
ongoing review of inventory levels in relation to sales and
forecasts and product marketing plans. When the inventory
on hand, at the time of the review, exceeds the foreseeable
demand, the value of inventory that is not expected to be sold
is written down. the amount of the write-down is the excess of
historical cost over estimated realizable value (generally zero).
once established, these write-downs are considered permanent
adjustments to the cost basis of the excess inventory.
the assessment of the recoverability of inventories and the
amounts of any write-downs are based on currently available
information and assumptions about future demand and market
conditions. Demand for processed avocado products may
fluctuate significantly over time, and actual demand and market
conditions may be more or less favorable than our projections.
In the event that actual demand is lower than originally
projected, additional inventory write-downs may be required.
We did not record any lower of cost or market adjustments
during fiscal years 2014 and 2013.
oCtobeR 31,
land
2014
2013
$ 7,023
$ 7,023
leasehold improvements
4,435
1,671
equipment
55,467
50,426
Information systems – hardware
and software
Construction in progress
less accumulated depreciation
and amortization
7,564
1,057
7,188
1,535
97,259
88,147
(39,907)
(35,498)
$ 57,352
$ 52,649
Depreciation expense was $5.3 million, $4.6 million and
$4.2 million for fiscal years 2014, 2013, and 2012, of which
$0.6 million was related to depreciation on capital leases for
fiscal year 2014, 2013, and 2012.
property, plant, and equipment include various capital leases
which total $3.4 million and $3.6 million, less accumulated
depreciation of $1.7 million and $1.2 million as of october 31, 2014
and 2013.
We capitalize software development costs for internal use
beginning in the application development stage and ending when
the asset is placed into service. We amortize such costs using
the straight-line basis over estimated useful lives.
6. Other ASSetS
other assets consist of the following (in thousands):
oCtobeR 31,
Intangibles, net
Grower advances
loan to Agricola belher
loan to FreshRealm members
2014
2013
$ 5,925
$ 7,272
642
845
296
938
1,690
283
notes receivable from San Rafael
1,343
1,594
other
733
570
$ 9,784
$ 12,347
effective July 31, 2013, we entered into with certain
noncontrolling members an Amended and Restated limited
liability Company Agreement of FreshRealm. As part of
this agreement, we loaned certain noncontrolling members
$0.3 million for their part of the contribution into FreshRealm.
Customer list/relationships
8.0 years
$
7,640
$
(3,323)
$
4,317
$
7,640
$
(2,364)
$
5,276
WeIGHteD-
AVeRAGe
uSeFul lIFe
GRoSS
CARRYInG
V Alue
ACCuM.
AMoR tIzA tIon
net booK
V Alue
GRoSS
CARRYInG
V Alue
ACCuM.
AMoR tIzA tIon
net booK
VAlue
trade secrets/recipes
brand name intangibles
13.0 years
indefinite
non-competition agreements
5.0 years
630
275
267
(220)
—
(204)
860
410
275
63
2,760
(1,636)
1,124
630
275
267
(137)
—
(163)
493
275
104
Intangibles, net
$ 11,572
$
(5,647)
$
5,925
$ 11,572
$
(4,300)
$
7,272
We recorded amortization expense of approximately
$1.3 million, $1.4 million, and $1.4 million for fiscal years 2014,
2013, and 2012. We anticipate recording amortization expense of
approximately $1.3 million, $1.2 million, $1.1 million, $1.1 million,
and $0.7 million for fiscal years 2015 through 2019. the
remainder of approximately $0.2 million will be amortized over
fiscal years 2020 through 2023.
facilities, we had $35.9 million and $34.0 million outstanding as
october 31, 2014 and 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 october 31, 2014.
For fiscal year 2013, we performed our annual assessment
8. eMplOyee BeneFit plAnS
of long-lived assets and determined that an impairment of
$0.6 million existed related to the trade name and trade secrets/
recipes of CSl. this impairment was a result of less than
anticipated sales since acquisition and was calculated via a
forecast projection analysis, with consultation from a third party
consulting firm.
7. revOlving CreDit F ACilitieS
effective May 31, 2011, the Company and Farm Credit West,
pCA (FCW), entered into a term Revolving Credit Agreement
(Revolving Agreement). under the terms of the Revolving
Agreement, we are advanced funds for working capital purposes,
the purchase and installation of capital items, as well as other
corporate needs of the Company. total credit available under the
borrowing agreement is $40 million, up from $30 million, and
expires on February 1, 2016.
effective September 30, 2011, the Company and bank of
America, n.A. (boA), entered into an agreement, Amendment
no. 4 to loan Agreement (the Agreement), which amended
our existing credit facility with boA. under the terms of the
Agreement, we are advanced funds primarily for working capital
purposes. total credit available under the borrowing agreement
is now $25 million, up from $15 million and now expires on
February 1, 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 $65.0 million, with a weighted-average interest
rate of 1.7% at october 31, 2014 and 2013. under these credit
We sponsor two defined contribution retirement plans
for salaried and hourly employees. We have three additional
defined contribution retirement plans bringing the total to five.
expenses for these plans approximated $943,000, $807,000,
and $811,000 for fiscal years 2014, 2013 and 2012, which are
included in selling, general and administrative expenses in the
accompanying financial statements.
We also sponsor a non-qualified defined benefit plan for
two retired executives. pension expenses, including actuarial
losses, approximated $9,000, $12,000 and $16,000 for the year
ended october 31, 2014, 2013, and 2012. these amounts are
included in selling, general and administrative expenses in the
accompanying financial statements.
Components of the change in projected benefit obligation
for fiscal year ends consist of the following (in thousands):
2014
2013
change I n P rojec teD
BenefIt oBl IgatIon :
projected benefit obligation
at beginning of year
$
218
$
245
Interest cost
Actuarial loss
benefits paid
9
4
8
4
(35)
(39)
projected benefit obligation
at end of year (unfunded)
$
196
$
218
Calavo Growers, Inc. 2014 AnnuAl RepoR t
54 . 55
4.
inventOrieS
5. prOperty, plAnt, AnD eQuipMent
the intangible assets consist of the following (in thousands):
Inventories consist of the following (in thousands):
property, plant, and equipment consist of the following
oCtobeR 31, 2014
oCtobeR 31, 2013
2014
2013
(in thousands):
buildings and improvements
21,713
20,304
trade names
8.4 years
2,760
(1,900)
oCtobeR 31,
Fresh fruit
packing supplies and ingredients
Finished prepared foods
$ 15,640
$ 13,928
6,324
9,011
5,511
9,234
$ 30,975
$ 28,673
We assess the recoverability of inventories through an
ongoing review of inventory levels in relation to sales and
forecasts and product marketing plans. When the inventory
on hand, at the time of the review, exceeds the foreseeable
demand, the value of inventory that is not expected to be sold
is written down. the amount of the write-down is the excess of
historical cost over estimated realizable value (generally zero).
once established, these write-downs are considered permanent
adjustments to the cost basis of the excess inventory.
the assessment of the recoverability of inventories and the
amounts of any write-downs are based on currently available
information and assumptions about future demand and market
conditions. Demand for processed avocado products may
fluctuate significantly over time, and actual demand and market
conditions may be more or less favorable than our projections.
In the event that actual demand is lower than originally
projected, additional inventory write-downs may be required.
We did not record any lower of cost or market adjustments
during fiscal years 2014 and 2013.
oCtobeR 31,
land
2014
2013
$ 7,023
$ 7,023
leasehold improvements
4,435
1,671
equipment
55,467
50,426
Information systems – hardware
and software
Construction in progress
less accumulated depreciation
and amortization
7,564
1,057
7,188
1,535
97,259
88,147
(39,907)
(35,498)
$ 57,352
$ 52,649
Depreciation expense was $5.3 million, $4.6 million and
$4.2 million for fiscal years 2014, 2013, and 2012, of which
$0.6 million was related to depreciation on capital leases for
fiscal year 2014, 2013, and 2012.
property, plant, and equipment include various capital leases
which total $3.4 million and $3.6 million, less accumulated
depreciation of $1.7 million and $1.2 million as of october 31, 2014
and 2013.
We capitalize software development costs for internal use
beginning in the application development stage and ending when
the asset is placed into service. We amortize such costs using
the straight-line basis over estimated useful lives.
6. Other ASSetS
other assets consist of the following (in thousands):
oCtobeR 31,
Intangibles, net
Grower advances
loan to Agricola belher
loan to FreshRealm members
2014
2013
$ 5,925
$ 7,272
642
845
296
938
1,690
283
notes receivable from San Rafael
1,343
1,594
other
733
570
$ 9,784
$ 12,347
effective July 31, 2013, we entered into with certain
noncontrolling members an Amended and Restated limited
liability Company Agreement of FreshRealm. As part of
this agreement, we loaned certain noncontrolling members
$0.3 million for their part of the contribution into FreshRealm.
Customer list/relationships
8.0 years
$
7,640
$
(3,323)
$
4,317
$
7,640
$
(2,364)
$
5,276
WeIGHteD-
AVeRAGe
uSeFul lIFe
GRoSS
CARRYInG
V Alue
ACCuM.
AMoR tIzA tIon
net booK
V Alue
GRoSS
CARRYInG
V Alue
ACCuM.
AMoR tIzA tIon
net booK
VAlue
trade secrets/recipes
brand name intangibles
13.0 years
indefinite
non-competition agreements
5.0 years
630
275
267
(220)
—
(204)
860
410
275
63
2,760
(1,636)
1,124
630
275
267
(137)
—
(163)
493
275
104
Intangibles, net
$ 11,572
$
(5,647)
$
5,925
$ 11,572
$
(4,300)
$
7,272
We recorded amortization expense of approximately
$1.3 million, $1.4 million, and $1.4 million for fiscal years 2014,
2013, and 2012. We anticipate recording amortization expense of
approximately $1.3 million, $1.2 million, $1.1 million, $1.1 million,
and $0.7 million for fiscal years 2015 through 2019. the
remainder of approximately $0.2 million will be amortized over
fiscal years 2020 through 2023.
facilities, we had $35.9 million and $34.0 million outstanding as
october 31, 2014 and 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 october 31, 2014.
For fiscal year 2013, we performed our annual assessment
8. eMplOyee BeneFit plAnS
of long-lived assets and determined that an impairment of
$0.6 million existed related to the trade name and trade secrets/
recipes of CSl. this impairment was a result of less than
anticipated sales since acquisition and was calculated via a
forecast projection analysis, with consultation from a third party
consulting firm.
7. revOlving CreDit F ACilitieS
effective May 31, 2011, the Company and Farm Credit West,
pCA (FCW), entered into a term Revolving Credit Agreement
(Revolving Agreement). under the terms of the Revolving
Agreement, we are advanced funds for working capital purposes,
the purchase and installation of capital items, as well as other
corporate needs of the Company. total credit available under the
borrowing agreement is $40 million, up from $30 million, and
expires on February 1, 2016.
effective September 30, 2011, the Company and bank of
America, n.A. (boA), entered into an agreement, Amendment
no. 4 to loan Agreement (the Agreement), which amended
our existing credit facility with boA. under the terms of the
Agreement, we are advanced funds primarily for working capital
purposes. total credit available under the borrowing agreement
is now $25 million, up from $15 million and now expires on
February 1, 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 $65.0 million, with a weighted-average interest
rate of 1.7% at october 31, 2014 and 2013. under these credit
We sponsor two defined contribution retirement plans
for salaried and hourly employees. We have three additional
defined contribution retirement plans bringing the total to five.
expenses for these plans approximated $943,000, $807,000,
and $811,000 for fiscal years 2014, 2013 and 2012, which are
included in selling, general and administrative expenses in the
accompanying financial statements.
We also sponsor a non-qualified defined benefit plan for
two retired executives. pension expenses, including actuarial
losses, approximated $9,000, $12,000 and $16,000 for the year
ended october 31, 2014, 2013, and 2012. these amounts are
included in selling, general and administrative expenses in the
accompanying financial statements.
Components of the change in projected benefit obligation
for fiscal year ends consist of the following (in thousands):
2014
2013
change I n P rojec teD
BenefIt oBl IgatIon :
projected benefit obligation
at beginning of year
$
218
$
245
Interest cost
Actuarial loss
benefits paid
9
4
8
4
(35)
(39)
projected benefit obligation
at end of year (unfunded)
$
196
$
218
Calavo Growers, Inc. 2014 AnnuAl RepoR t
54 . 55
4.10%
4.60%
lItIgatIon
the following is a reconciliation of the unfunded status
of the plans at fiscal year ends included in accrued expenses
(in thousands):
projected benefit obligation
$
196
$
unrecognized net (gain) loss
—
2014
2013
218
—
Recorded pension liabilities
$
196
$
218
Significant assumptions used in the determination of pension
expense consist of the following:
2014
2013
Discount rate on projected
benefit obligation
9. COMMitMentS AnD COntingenCieS
commItmentS anD gUaranteeS
We lease facilities and certain equipment under non-cancelable
operating leases expiring at various dates through 2021. We
are committed to make minimum cash payments under these
agreements as of october 31, 2014, as follows (in thousands):
2015
2016
2017
2018
2019
thereafter
$ 3,353
3,358
3,332
3,201
2,859
11,568
$ 27,671
total rent expense amounted to approximately $3.8 million,
$3.5 million and $3.0 million for the years ended october 31, 2014,
2013, and 2012. Rent to limoneira, for our corporate office,
amounted to approximately $0.3 million for fiscal years 2014,
2013, and 2012. In fiscal 2014, we renewed our lease with
limoneira for our corporate facility through fiscal 2020 at an
annual rental of $0.3 million per annum (subject to annual
CpI increases, as defined).
In fiscal 2014, we renewed the lease of our distribution
facility in Garland texas through fiscal 2029 at an annual rental
of $0.8 million per annum (subject to annual CpI increases,
as defined).
We have two additional facilities in California, one being the
corporate office of RFG in Rancho Cordova, and the other being
a fresh processing facility in Sacramento. RFG also has one other
fresh processing facility in Houston, texas. both facilities process
cut fruits and vegetables, salads, sandwiches, and wraps.
the RFG corporate office in Rancho Cordova has an operating
lease through June 2018. total rent for fiscal 2014 and 2013
was approximately $0.4 million. total rent for fiscal 2012 was
approximately $0.3 million. the processing facility in Sacramento
has an operating lease through May 2021. total rent for fiscal
2014 and 2013 was approximately $0.5 million. total rent for
fiscal 2012 was approximately $0.5 million. the processing facility
in Houston has an operating lease through May 2021. total rent
for fiscal 2014 and 2013 was approximately $0.3 million. total
rent for fiscal 2012 was approximately $0.3 million.
We indemnify our directors and have the power to
indemnify each of our officers, employees and other agents,
to the maximum extent permitted by applicable law. the
maximum amount of potential future payments under such
indemnifications is not determinable. no amounts have been
accrued in the accompanying financial statements related to
these indemnifications.
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.
In January 2015, various class action lawsuits have been
initiated against the company related to the restatement of
previously-issued financial statements. We believe these
lawsuits are without merit and will defend ourselves vigorously.
We do not expect that such legal claims and litigation will
ultimately have a material adverse effect on our consolidated
financial position or results of operations.
10. relA teD-pArty trAnSACtiOnS
Certain members of our board of Directors market avocados
through Calavo pursuant to marketing agreements substantially
similar to the marketing agreements that we enter into with
other growers. During the years ended october 31, 2014,
2013, and 2012, the aggregate amount of avocados procured
from entities owned or controlled by members of our board
of Directors was $10.5 million, $20.9 million and $21.1 million.
Accounts payable to these board members was $0.1 million and
$3.3 million as of october 31, 2014, and 2013.
During fiscal years 2014 and 2013, we received $0.3 million
as dividend income from limoneira. During fiscal year 2012,
we received $0.2 million as dividend income from limoneira.
on April 10, 2013, we repurchased 165,000 shares of our
common stock from limoneira at a purchase price of $29.02
per share, the closing price on April 10, 2013. the total amount
wired to limoneira was $4.8 million. these shares were
cancelled and returned to authorized, but unissued, status.
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 such three
executives of RFG. For the year ended october 31, 2014 and
2013, total rent paid to lIG was $0.5 million. RFG’s texas
operating facility leases a building from tHnC, llC (tHnC)
pursuant to an operating lease. tHnC is majority owned by an
56 . 57
Calavo Growers, Inc. 2014 AnnuAl RepoR t
cUrrent:
Federal
State
Foreign
entity owned by such three executives of RFG. For the year
ended october 31, 2014 and 2013, total rent paid to tHnC was
$0.3 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 such
three executives of RFG. For the year ended october 31, 2014
and 2013, total sales made to third Coast were $1.0 million and
$2.3 million. For the year ended october 31, 2014 and 2013,
total purchases made from third Coast were $0.4 million and
$1.1 million. Amounts due from third Coast were $0.4 million
and $1.0 million as of october 31, 2014 and 2013. Amounts due
to third Coast were less than $0.1 million as of october 31, 2014
and 2013.
11. inCOMe tAxeS
the income tax provision (benefit) consists of the following
Significant components of our deferred taxes assets
(liabilities) as of october 31, are as follows (in thousands):
2014
2013
ReSt AteD
Allowances for accounts receivable
$ 1,312
$
Inventories
State taxes
Credits and incentives
Accrued liabilities
478
202
300
1,002
634
417
269
—
675
Current deferred income taxes
$ 3,294
$ 1,995
property, plant, and equipment
(6,373)
(6,892)
Intangible assets
34,697
15,610
unrealized gain, limoneira investment
(8,199)
(8,674)
for the years ended october 31, (in thousands):
Investment in FreshRealm
2014
2013
2012
Stock-based compensation
ReSt AteD
ReSt AteD
State taxes
Credits and incentives
$ 7,379
$ 5,587
$ 8,225
other
(7,594)
355
(1,690)
1,287
(196)
—
369
(847)
713
(242)
939
842
1,261
549
1,233
2,428
long-term deferred income taxes
$ 12,287
$
37
total current
9,160
7,397
11,886
DeferreD :
Federal
State
Foreign
(10,392)
(9,536)
(2,870)
(2,548)
186
(28)
(935)
(693)
(45)
total deferred
(13,076)
(12,112)
(1,673)
total income tax provision
$ (3,916)
$ (4,715)
$ 10,213
At october 31, 2014 and 2013, gross deferred tax assets
totaled approximately $39.7 million and $18.6 million, while
gross deferred tax liabilities totaled approximately $24.1 million
and $16.6 million. Deferred income taxes reflect the net of
temporary differences between the carrying amount of assets
and liabilities for financial reporting and income tax purposes.
the october 31, 2014 net increase in deferred intangible
assets by $19.1 million is mostly attributable to the RFG
contingent liability payout during the year. the payout of the
contingent liability resulted in additional RFG tax basis goodwill
equal to the fair market value of the stock issued, which
increased the Company’s net intangibles deferred tax asset.
A reconciliation of the significant differences between
the federal statutory income tax rate and the effective income
tax rate on pretax income for the years ended october 31,
is as follows:
2014
2013
2012
ReSt AteD
ReSt AteD
Federal statutory tax rate
35.0%
35.0%
35.0%
State taxes, net of
federal effects
Foreign income taxes
greater (less) than u.S.
Hacienda assessment
Section 199 deduction
tax Credits
other
22.3
11.8
1.5
5.8
—
15.8
15.2
0.7
6.1
—
8.2
(0.9)
3.5
(2.9)
6.8
(0.8)
—
(0.1)
94.8%
63.7%
39.5%
4.10%
4.60%
lItIgatIon
the following is a reconciliation of the unfunded status
of the plans at fiscal year ends included in accrued expenses
(in thousands):
projected benefit obligation
$
196
$
unrecognized net (gain) loss
—
2014
2013
218
—
Recorded pension liabilities
$
196
$
218
Significant assumptions used in the determination of pension
expense consist of the following:
2014
2013
Discount rate on projected
benefit obligation
9. COMMitMentS AnD COntingenCieS
commItmentS anD gUaranteeS
We lease facilities and certain equipment under non-cancelable
operating leases expiring at various dates through 2021. We
are committed to make minimum cash payments under these
agreements as of october 31, 2014, as follows (in thousands):
2015
2016
2017
2018
2019
thereafter
$ 3,353
3,358
3,332
3,201
2,859
11,568
$ 27,671
total rent expense amounted to approximately $3.8 million,
$3.5 million and $3.0 million for the years ended october 31, 2014,
2013, and 2012. Rent to limoneira, for our corporate office,
amounted to approximately $0.3 million for fiscal years 2014,
2013, and 2012. In fiscal 2014, we renewed our lease with
limoneira for our corporate facility through fiscal 2020 at an
annual rental of $0.3 million per annum (subject to annual
CpI increases, as defined).
In fiscal 2014, we renewed the lease of our distribution
facility in Garland texas through fiscal 2029 at an annual rental
of $0.8 million per annum (subject to annual CpI increases,
as defined).
We have two additional facilities in California, one being the
corporate office of RFG in Rancho Cordova, and the other being
a fresh processing facility in Sacramento. RFG also has one other
fresh processing facility in Houston, texas. both facilities process
cut fruits and vegetables, salads, sandwiches, and wraps.
the RFG corporate office in Rancho Cordova has an operating
lease through June 2018. total rent for fiscal 2014 and 2013
was approximately $0.4 million. total rent for fiscal 2012 was
approximately $0.3 million. the processing facility in Sacramento
has an operating lease through May 2021. total rent for fiscal
2014 and 2013 was approximately $0.5 million. total rent for
fiscal 2012 was approximately $0.5 million. the processing facility
in Houston has an operating lease through May 2021. total rent
for fiscal 2014 and 2013 was approximately $0.3 million. total
rent for fiscal 2012 was approximately $0.3 million.
We indemnify our directors and have the power to
indemnify each of our officers, employees and other agents,
to the maximum extent permitted by applicable law. the
maximum amount of potential future payments under such
indemnifications is not determinable. no amounts have been
accrued in the accompanying financial statements related to
these indemnifications.
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.
In January 2015, various class action lawsuits have been
initiated against the company related to the restatement of
previously-issued financial statements. We believe these
lawsuits are without merit and will defend ourselves vigorously.
We do not expect that such legal claims and litigation will
ultimately have a material adverse effect on our consolidated
financial position or results of operations.
10. relA teD-pArty trAnSACtiOnS
Certain members of our board of Directors market avocados
through Calavo pursuant to marketing agreements substantially
similar to the marketing agreements that we enter into with
other growers. During the years ended october 31, 2014,
2013, and 2012, the aggregate amount of avocados procured
from entities owned or controlled by members of our board
of Directors was $10.5 million, $20.9 million and $21.1 million.
Accounts payable to these board members was $0.1 million and
$3.3 million as of october 31, 2014, and 2013.
During fiscal years 2014 and 2013, we received $0.3 million
as dividend income from limoneira. During fiscal year 2012,
we received $0.2 million as dividend income from limoneira.
on April 10, 2013, we repurchased 165,000 shares of our
common stock from limoneira at a purchase price of $29.02
per share, the closing price on April 10, 2013. the total amount
wired to limoneira was $4.8 million. these shares were
cancelled and returned to authorized, but unissued, status.
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 such three
executives of RFG. For the year ended october 31, 2014 and
2013, total rent paid to lIG was $0.5 million. RFG’s texas
operating facility leases a building from tHnC, llC (tHnC)
pursuant to an operating lease. tHnC is majority owned by an
56 . 57
Calavo Growers, Inc. 2014 AnnuAl RepoR t
cUrrent:
Federal
State
Foreign
entity owned by such three executives of RFG. For the year
ended october 31, 2014 and 2013, total rent paid to tHnC was
$0.3 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 such
three executives of RFG. For the year ended october 31, 2014
and 2013, total sales made to third Coast were $1.0 million and
$2.3 million. For the year ended october 31, 2014 and 2013,
total purchases made from third Coast were $0.4 million and
$1.1 million. Amounts due from third Coast were $0.4 million
and $1.0 million as of october 31, 2014 and 2013. Amounts due
to third Coast were less than $0.1 million as of october 31, 2014
and 2013.
11. inCOMe tAxeS
the income tax provision (benefit) consists of the following
Significant components of our deferred taxes assets
(liabilities) as of october 31, are as follows (in thousands):
2014
2013
ReSt AteD
Allowances for accounts receivable
$ 1,312
$
Inventories
State taxes
Credits and incentives
Accrued liabilities
478
202
300
1,002
634
417
269
—
675
Current deferred income taxes
$ 3,294
$ 1,995
property, plant, and equipment
(6,373)
(6,892)
Intangible assets
34,697
15,610
unrealized gain, limoneira investment
(8,199)
(8,674)
for the years ended october 31, (in thousands):
Investment in FreshRealm
2014
2013
2012
Stock-based compensation
ReSt AteD
ReSt AteD
State taxes
Credits and incentives
$ 7,379
$ 5,587
$ 8,225
other
(7,594)
355
(1,690)
1,287
(196)
—
369
(847)
713
(242)
939
842
1,261
549
1,233
2,428
long-term deferred income taxes
$ 12,287
$
37
total current
9,160
7,397
11,886
DeferreD :
Federal
State
Foreign
(10,392)
(9,536)
(2,870)
(2,548)
186
(28)
(935)
(693)
(45)
total deferred
(13,076)
(12,112)
(1,673)
total income tax provision
$ (3,916)
$ (4,715)
$ 10,213
At october 31, 2014 and 2013, gross deferred tax assets
totaled approximately $39.7 million and $18.6 million, while
gross deferred tax liabilities totaled approximately $24.1 million
and $16.6 million. Deferred income taxes reflect the net of
temporary differences between the carrying amount of assets
and liabilities for financial reporting and income tax purposes.
the october 31, 2014 net increase in deferred intangible
assets by $19.1 million is mostly attributable to the RFG
contingent liability payout during the year. the payout of the
contingent liability resulted in additional RFG tax basis goodwill
equal to the fair market value of the stock issued, which
increased the Company’s net intangibles deferred tax asset.
A reconciliation of the significant differences between
the federal statutory income tax rate and the effective income
tax rate on pretax income for the years ended october 31,
is as follows:
2014
2013
2012
ReSt AteD
ReSt AteD
Federal statutory tax rate
35.0%
35.0%
35.0%
State taxes, net of
federal effects
Foreign income taxes
greater (less) than u.S.
Hacienda assessment
Section 199 deduction
tax Credits
other
22.3
11.8
1.5
5.8
—
15.8
15.2
0.7
6.1
—
8.2
(0.9)
3.5
(2.9)
6.8
(0.8)
—
(0.1)
94.8%
63.7%
39.5%
We intend to reinvest our accumulated foreign earnings,
See note 3, “Restatement of previously-Issued Financial
which approximated $13.2 million at october 31, 2014,
indefinitely. As a result, we have not provided any deferred
income taxes on such unremitted earnings. For fiscal years 2014,
2013 and 2012, income (loss) before income taxes related to
domestic operations was approximately $(0.6) million, $(10.6)
million, and $22.0 million. For fiscal years 2014, 2013 and 2012,
income before income taxes related to foreign operations was
approximately $3.6 million, $2.9 million and $3.8 million.
As of october 31, 2014 and 2013, we did not have a liability
for unrecognized tax benefits related to various federal and state
income tax matters. the tax effected amount would reduce our
effective income tax rate if recognized.
the benefit for income taxes of $3.9 million is attributable to
the revaluation adjustment of $88.1 million related to contingent
consideration which was spread between fiscal year 2014
through fiscal year 2011. the revalued contingent consideration
and non-cash compensation expense resulted in $53.6 million,
$32.0 million, and $2.2 million additional GAAp expense recorded
in fiscal years 2014, 2013, and 2012, respectively. the current
year revaluation expense drove pre-tax book income into a
loss position, thus causing a benefit for income taxes as this
revaluation adjustment is capitalized and amortized as goodwill
over the remaining useful life for income tax purposes resulting
in a taxable income position for the current year.
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
12. SegMent inFOrMA tiOn
As discussed in note 1, 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, tortilla chips 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):
For fiscal years 2014, 2013 and 2012, inter-segment sales
and cost of sales of $50.1 million, $44.2 million, and $33.8 million
were eliminated in consolidation.
the following table sets forth sales by product category,
by segment (in thousands):
YeAR enDeD oCtobeR 31, 2014
YeAR enDeD oCtobeR 31, 2013
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
tot Al
th IrD - Part y S aleS :
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
$ 433,581 $
— $
— $ 433,581 $ 407,678 $
— $
— $ 407,678
19,705
12,619
5,086
1,037
—
—
—
—
—
—
48,085
—
—
—
—
—
19,705
22,623
12,619
13,077
5,086
1,037
48,085
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
13,077
5,739
601
43,616
18,789
195,376
214,165
22,334
255,074
277,408
total gross sales
472,028
70,419
255,074
797,521
449,718
62,405
195,376
707,499
less sales incentives
(1,079)
(11,140)
(2,792)
(15,011)
(1,349)
(10,791)
(3,908)
(16,048)
net sales
$ 470,949 $ 59,279 $ 252,282 $ 782,510 $ 448,369 $ 51,614 $ 191,468 $ 691,451
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
tot Al
FReSH pRoDuCtS
CAlAVo FooDS
RFG
totAl
th IrD - Part y S aleS :
(All amounts are presented in thousands)
y ear enDeD o c toBer 31, 2014
net sales
Cost of sales
Gross margin
y ear enDeD o c toBer 31, 2013
net sales
Cost of sales(1)
Gross margin
y ear enDeD o c toBer 31, 2012
net sales
Cost of sales(1)
Gross margin
$ 470,949
434,820
$ 36,129
$ 448,369
417,176
$ 31,193
$ 350,582
316,287
$
34,295
$ 59,279
46,269
$ 13,010
$ 51,614
38,226
$ 13,388
$ 46,424
32,422
$ 14,002
$ 252,282
230,193
$ 22,089
$ 191,468
176,601
$ 14,867
$ 154,113
141,745
$ 12,368
$ 782,510
711,282
$ 71,228
$ 691,451
632,003
$ 59,448
$ 551,119
490,454
$ 60,665
(1) Cost of sales for RFG and the corresponding totals have been restated for the years ended october 31, 2013 and 2012.
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
$ 407,678 $
— $
— $ 407,678 $ 318,556 $
— $
— $ 318,556
22,623
13,077
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
11,404
13,077
12,753
5,739
601
43,616
6,840
1,788
—
—
—
—
—
—
36,289
—
—
—
—
—
11,404
12,753
6,840
1,788
36,289
19,758
157,333
177,091
18,789
195,376
214,165
total gross sales
449,718
62,405
195,376
707,499
351,341
56,047
157,333
564,721
less sales incentives
(1,349)
(10,791)
(3,908)
(16,048)
(759)
(9,623)
(3,220)
(13,602)
net sales
$ 448,369 $ 51,614 $ 191,468 $ 691,451 $ 350,582 $ 46,424 $ 154,113 $ 551,119
net sales to third parties by segment exclude inter-segment
long-lived assets attributed to geographic areas as of
sales and cost of sales. For fiscal years 2014, 2013, and 2012,
inter-segment sales and cost of sales for Fresh products totaling
$33.7 million, $29.9 million and $22.2 million were eliminated.
For fiscal years 2014, 2013, and 2012, inter-segment sales
and cost of sales for Calavo Foods totaling $16.4 million,
$14.3 million, and $11.6 million were eliminated.
Sales to customers outside the united States were
approximately $32.8 million, $37.2 million and $28.8 million
for fiscal years 2014, 2013, and 2012.
october 31, are as follows (in thousands):
2014
2013
unIteD St AteS
MexICo
ConSolIDA teD
$ 36,052
$ 21,300
$ 57,352
$ 31,250
$ 21,399
$ 52,649
Calavo Growers, Inc. 2014 AnnuAl RepoR t
58 . 59
We intend to reinvest our accumulated foreign earnings,
See note 3, “Restatement of previously-Issued Financial
which approximated $13.2 million at october 31, 2014,
indefinitely. As a result, we have not provided any deferred
income taxes on such unremitted earnings. For fiscal years 2014,
2013 and 2012, income (loss) before income taxes related to
domestic operations was approximately $(0.6) million, $(10.6)
million, and $22.0 million. For fiscal years 2014, 2013 and 2012,
income before income taxes related to foreign operations was
approximately $3.6 million, $2.9 million and $3.8 million.
As of october 31, 2014 and 2013, we did not have a liability
for unrecognized tax benefits related to various federal and state
income tax matters. the tax effected amount would reduce our
effective income tax rate if recognized.
the benefit for income taxes of $3.9 million is attributable to
the revaluation adjustment of $88.1 million related to contingent
consideration which was spread between fiscal year 2014
through fiscal year 2011. the revalued contingent consideration
and non-cash compensation expense resulted in $53.6 million,
$32.0 million, and $2.2 million additional GAAp expense recorded
in fiscal years 2014, 2013, and 2012, respectively. the current
year revaluation expense drove pre-tax book income into a
loss position, thus causing a benefit for income taxes as this
revaluation adjustment is capitalized and amortized as goodwill
over the remaining useful life for income tax purposes resulting
in a taxable income position for the current year.
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
12. SegMent inFOrMA tiOn
As discussed in note 1, 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, tortilla chips 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):
For fiscal years 2014, 2013 and 2012, inter-segment sales
and cost of sales of $50.1 million, $44.2 million, and $33.8 million
were eliminated in consolidation.
the following table sets forth sales by product category,
by segment (in thousands):
YeAR enDeD oCtobeR 31, 2014
YeAR enDeD oCtobeR 31, 2013
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
tot Al
th IrD - Part y S aleS :
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
$ 433,581 $
— $
— $ 433,581 $ 407,678 $
— $
— $ 407,678
19,705
12,619
5,086
1,037
—
—
—
—
—
—
48,085
—
—
—
—
—
19,705
22,623
12,619
13,077
5,086
1,037
48,085
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
13,077
5,739
601
43,616
18,789
195,376
214,165
22,334
255,074
277,408
total gross sales
472,028
70,419
255,074
797,521
449,718
62,405
195,376
707,499
less sales incentives
(1,079)
(11,140)
(2,792)
(15,011)
(1,349)
(10,791)
(3,908)
(16,048)
net sales
$ 470,949 $ 59,279 $ 252,282 $ 782,510 $ 448,369 $ 51,614 $ 191,468 $ 691,451
YeAR enDeD oCtobeR 31, 2013
YeAR enDeD oCtobeR 31, 2012
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
totAl
FReSH
pRoDuCtS
CAlAVo
FooDS
RFG
tot Al
FReSH pRoDuCtS
CAlAVo FooDS
RFG
totAl
th IrD - Part y S aleS :
(All amounts are presented in thousands)
y ear enDeD o c toBer 31, 2014
net sales
Cost of sales
Gross margin
y ear enDeD o c toBer 31, 2013
net sales
Cost of sales(1)
Gross margin
y ear enDeD o c toBer 31, 2012
net sales
Cost of sales(1)
Gross margin
$ 470,949
434,820
$ 36,129
$ 448,369
417,176
$ 31,193
$ 350,582
316,287
$
34,295
$ 59,279
46,269
$ 13,010
$ 51,614
38,226
$ 13,388
$ 46,424
32,422
$ 14,002
$ 252,282
230,193
$ 22,089
$ 191,468
176,601
$ 14,867
$ 154,113
141,745
$ 12,368
$ 782,510
711,282
$ 71,228
$ 691,451
632,003
$ 59,448
$ 551,119
490,454
$ 60,665
(1) Cost of sales for RFG and the corresponding totals have been restated for the years ended october 31, 2013 and 2012.
Avocados
tomatoes
papayas
pineapples
other fresh products
Food service
Retail and club
$ 407,678 $
— $
— $ 407,678 $ 318,556 $
— $
— $ 318,556
22,623
13,077
5,739
601
—
—
—
—
—
—
43,616
—
—
—
—
—
22,623
11,404
13,077
12,753
5,739
601
43,616
6,840
1,788
—
—
—
—
—
—
36,289
—
—
—
—
—
11,404
12,753
6,840
1,788
36,289
19,758
157,333
177,091
18,789
195,376
214,165
total gross sales
449,718
62,405
195,376
707,499
351,341
56,047
157,333
564,721
less sales incentives
(1,349)
(10,791)
(3,908)
(16,048)
(759)
(9,623)
(3,220)
(13,602)
net sales
$ 448,369 $ 51,614 $ 191,468 $ 691,451 $ 350,582 $ 46,424 $ 154,113 $ 551,119
net sales to third parties by segment exclude inter-segment
long-lived assets attributed to geographic areas as of
sales and cost of sales. For fiscal years 2014, 2013, and 2012,
inter-segment sales and cost of sales for Fresh products totaling
$33.7 million, $29.9 million and $22.2 million were eliminated.
For fiscal years 2014, 2013, and 2012, inter-segment sales
and cost of sales for Calavo Foods totaling $16.4 million,
$14.3 million, and $11.6 million were eliminated.
Sales to customers outside the united States were
approximately $32.8 million, $37.2 million and $28.8 million
for fiscal years 2014, 2013, and 2012.
october 31, are as follows (in thousands):
2014
2013
unIteD St AteS
MexICo
ConSolIDA teD
$ 36,052
$ 21,300
$ 57,352
$ 31,250
$ 21,399
$ 52,649
Calavo Growers, Inc. 2014 AnnuAl RepoR t
58 . 59
13. lOng-terM OBligA tiOnS
At october 31, 2014, annual current and long-term obligation
A summary of stock option activity is as follows (in thousands,
long-term obligations at fiscal year ends consist of the
payments are scheduled as follows (in thousands):
except for share amounts):
totAl
$ 5,099
2,241
109
89
92
260
$ 7,890
$
totAl
814
218
168
128
108
231
1,667
(129)
following (in thousands):
YeAR enDInG oCtobeR 31:
2014
2013
Farm Credit West, pCA, (FCW)
term loan, bearing interest at 1.7%
$ 2,504
$ 4,007
bank of America, n.A. (boA) term loan,
bearing interest at 1.7%
2,548
4,077
FCW, term loan, bearing interest
at 5.7%
Capital leases
less current portion
1,300
1,538
2,600
2,366
7,890
13,050
(5,099)
(5,258)
2015
2016
2017
2018
2019
thereafter
At october 31, 2014, capital lease payments are scheduled
as follows (in thousands):
$ 2,791
$ 7,792
YeAR enDInG oCtobeR 31:
In conjunction with such acquisition, the Company and FCW
entered into a term loan Agreement (term Agreement), effective
May 31, 2011. under the terms of the term Agreement, we were
advanced $15 million for the purchase of RFG. pursuant to this
agreement, we are required to make 60 monthly principal and
interest payments, from July 1, 2011 to June 1, 2016. there is
no prepayment penalty associated with this term Agreement.
this term Agreement also replaces in its entirety the original
term loan Agreement dated June 1, 2005 by and between
the Company and FCW. there was no significant change
in terms between the original term loan Agreement and this
new agreement.
effective September 30, 2011, the Company and bank of
America, n.A. (boA), entered into an agreement, Amendment
no. 4 to loan Agreement (the Agreement), which amended
our existing credit facility with boA. this agreement included
a variable rate term loan in the amount of approximately
$7.1 million. these proceeds were used to retire approximately
50% of the outstanding balance (as of September 30, 2011) of
the term loan owed to FCW related to the purchase of RFG (see
above). this effectively split the funding of the amounts due
at closing for that acquisition between both banks. the credit
facility and term loan contain various financial covenants, the
most significant relating to tangible net Worth (as defined), Fixed
Charge Coverage Ratio (as defined) and Current Ratio (as defined).
In conjunction with the purchase of RFG, we assumed
various capital leases related to machinery and equipment.
these leases bear interest at a weighted average interest rate
of approximately 4.0%. the total obligation acquired related to
these capital leases were $4.0 million, with $1.1 million being
classified as in the current portion.
2015
2016
2017
2018
2019
thereafter
Minimum lease payments
less interest
present value of future minimum lease payments
$ 1,538
14. StOCk-BASeD COMpenSA tiOn
the 2005 Stock IncentIve Plan
the 2005 Stock Incentive plan, was a stock-based
compensation plan, under which employees and directors may
be granted options to purchase shares of our common stock.
In June 2012, this plan has been terminated without affecting
the outstanding stock options related to this plan.
Stock options were granted with exercise prices of not less
than the fair market value at grant date, generally vested over
one to five years and generally expired two to five years after the
grant date. We settle stock option exercises with newly issued
shares of common stock.
We measured compensation cost for all stock-based awards
pursuant to this plan 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 measured the fair value of our stock based
compensation awards on the date of grant.
60 . 61
Calavo Growers, Inc. 2014 AnnuAl RepoR t
outstanding at
october 31, 2011
exercised
outstanding at
october 31, 2012
exercised
outstanding at
october 31, 2013
exercised
outstanding at
october 31, 2014
exercisable at
october 31, 2014
nuMbeR
oF SHAReS
WeIGHteD-
AVeRAGe
exeRCISe
pRICe
AGGReGA te
IntRInSIC
VAlue
72
$ 13.75
(37)
$ 13.54
35
$ 15.16
(8)
$ 12.84
27
$ 15.79
(10)
$ 13.25
17
$ 17.22
$
856
15
$ 17.03
$
758
the weighted average remaining life of such outstanding
options is 3.6 years and the total intrinsic value of options
exercised during fiscal 2014 was $0.3 million. the weighted
average remaining life of such exercisable options is 3.3 years.
the fair value of shares vested during the year ended october
31, 2014, 2013, and 2012 was approximately $0.8 million,
$0.6 million, and $0.3 million.
the 2011 management IncentIve Plan
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.
In January 2013, our board of Directors approved the
issuance of options to acquire a total of 10,000 shares of our
common stock by one member of our board of Directors. Such
grant vests in equal increments over a five-year period and has
an exercise price of $23.48 per share. Vested options have a
term of five years from the vesting date. the market price of
our common stock at the grant date was $23.48. the estimated
fair market value of such option grant was approximately
$0.1 million. the total compensation cost not yet recognized as
of october 31, 2014 was approximately $0.1 million, which will
be recognized over the remaining service period of 60 months.
In January 2012, all 12 of our non-employee directors were
granted 1,000 restricted shares each (total of 12,000 shares).
these shares have full voting rights and participate in dividends
as if unrestricted. the closing price of our stock on such date
was $27.68. this grant of restricted stock incurred $0.2 million in
stock compensation expenses in fiscal 2012. As of January 2013,
11,000 shares vested, because such board members were still
serving on the board at this time. the remaining 1,000 shares
vested in May 2012 with the passing of one of our directors.
In January 2013, all 12 of our non-employee directors were
granted 1,000 restricted shares each (total of 12,000 shares).
these shares have full voting rights and participate in dividends
as if unrestricted. the closing price of our stock on such date
was $24.71. this grant of restricted stock incurred $0.2 million
in stock compensation expenses in fiscal 2013. As of January
2014, all shares have vested, because such board members
were still serving on the board at this time.
In January 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. this grant of restricted stock incurred $0.6 million
in stock compensation expenses in fiscal 2014. As of January 1,
2015, these shares will vest and be unrestricted.
In January 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. this grant of restricted stock incurred $0.1 million in stock
compensation expenses in fiscal 2014.
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
AGGReGA te
IntRInSIC
VAlue
outstanding at
october 31, 2011
exercised
outstanding at
october 31, 2012
Granted
exercised
outstanding at
october 31, 2013
outstanding at
october 31, 2014
exercisable at
october 31, 2014
65
$ 21.82
(15)
$ 21.82
50
$ 21.82
10
$ 23.48
(40)
$ 21.82
20
$ 22.64
20
$ 22.64
$
525
8
$ 22.22
$
213
the weighted average remaining life of such outstanding
options is 5.6 years. the weighted average remaining life of such
exercisable options is 4.1 years. the fair value of shares vested
during the year ended october 31, 2014, was $0.2 million.
13. lOng-terM OBligA tiOnS
At october 31, 2014, annual current and long-term obligation
A summary of stock option activity is as follows (in thousands,
long-term obligations at fiscal year ends consist of the
payments are scheduled as follows (in thousands):
except for share amounts):
totAl
$ 5,099
2,241
109
89
92
260
$ 7,890
$
totAl
814
218
168
128
108
231
1,667
(129)
following (in thousands):
YeAR enDInG oCtobeR 31:
2014
2013
Farm Credit West, pCA, (FCW)
term loan, bearing interest at 1.7%
$ 2,504
$ 4,007
bank of America, n.A. (boA) term loan,
bearing interest at 1.7%
2,548
4,077
FCW, term loan, bearing interest
at 5.7%
Capital leases
less current portion
1,300
1,538
2,600
2,366
7,890
13,050
(5,099)
(5,258)
2015
2016
2017
2018
2019
thereafter
At october 31, 2014, capital lease payments are scheduled
as follows (in thousands):
$ 2,791
$ 7,792
YeAR enDInG oCtobeR 31:
In conjunction with such acquisition, the Company and FCW
entered into a term loan Agreement (term Agreement), effective
May 31, 2011. under the terms of the term Agreement, we were
advanced $15 million for the purchase of RFG. pursuant to this
agreement, we are required to make 60 monthly principal and
interest payments, from July 1, 2011 to June 1, 2016. there is
no prepayment penalty associated with this term Agreement.
this term Agreement also replaces in its entirety the original
term loan Agreement dated June 1, 2005 by and between
the Company and FCW. there was no significant change
in terms between the original term loan Agreement and this
new agreement.
effective September 30, 2011, the Company and bank of
America, n.A. (boA), entered into an agreement, Amendment
no. 4 to loan Agreement (the Agreement), which amended
our existing credit facility with boA. this agreement included
a variable rate term loan in the amount of approximately
$7.1 million. these proceeds were used to retire approximately
50% of the outstanding balance (as of September 30, 2011) of
the term loan owed to FCW related to the purchase of RFG (see
above). this effectively split the funding of the amounts due
at closing for that acquisition between both banks. the credit
facility and term loan contain various financial covenants, the
most significant relating to tangible net Worth (as defined), Fixed
Charge Coverage Ratio (as defined) and Current Ratio (as defined).
In conjunction with the purchase of RFG, we assumed
various capital leases related to machinery and equipment.
these leases bear interest at a weighted average interest rate
of approximately 4.0%. the total obligation acquired related to
these capital leases were $4.0 million, with $1.1 million being
classified as in the current portion.
2015
2016
2017
2018
2019
thereafter
Minimum lease payments
less interest
present value of future minimum lease payments
$ 1,538
14. StOCk-BASeD COMpenSA tiOn
the 2005 Stock IncentIve Plan
the 2005 Stock Incentive plan, was a stock-based
compensation plan, under which employees and directors may
be granted options to purchase shares of our common stock.
In June 2012, this plan has been terminated without affecting
the outstanding stock options related to this plan.
Stock options were granted with exercise prices of not less
than the fair market value at grant date, generally vested over
one to five years and generally expired two to five years after the
grant date. We settle stock option exercises with newly issued
shares of common stock.
We measured compensation cost for all stock-based awards
pursuant to this plan 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 measured the fair value of our stock based
compensation awards on the date of grant.
60 . 61
Calavo Growers, Inc. 2014 AnnuAl RepoR t
outstanding at
october 31, 2011
exercised
outstanding at
october 31, 2012
exercised
outstanding at
october 31, 2013
exercised
outstanding at
october 31, 2014
exercisable at
october 31, 2014
nuMbeR
oF SHAReS
WeIGHteD-
AVeRAGe
exeRCISe
pRICe
AGGReGA te
IntRInSIC
VAlue
72
$ 13.75
(37)
$ 13.54
35
$ 15.16
(8)
$ 12.84
27
$ 15.79
(10)
$ 13.25
17
$ 17.22
$
856
15
$ 17.03
$
758
the weighted average remaining life of such outstanding
options is 3.6 years and the total intrinsic value of options
exercised during fiscal 2014 was $0.3 million. the weighted
average remaining life of such exercisable options is 3.3 years.
the fair value of shares vested during the year ended october
31, 2014, 2013, and 2012 was approximately $0.8 million,
$0.6 million, and $0.3 million.
the 2011 management IncentIve Plan
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.
In January 2013, our board of Directors approved the
issuance of options to acquire a total of 10,000 shares of our
common stock by one member of our board of Directors. Such
grant vests in equal increments over a five-year period and has
an exercise price of $23.48 per share. Vested options have a
term of five years from the vesting date. the market price of
our common stock at the grant date was $23.48. the estimated
fair market value of such option grant was approximately
$0.1 million. the total compensation cost not yet recognized as
of october 31, 2014 was approximately $0.1 million, which will
be recognized over the remaining service period of 60 months.
In January 2012, all 12 of our non-employee directors were
granted 1,000 restricted shares each (total of 12,000 shares).
these shares have full voting rights and participate in dividends
as if unrestricted. the closing price of our stock on such date
was $27.68. this grant of restricted stock incurred $0.2 million in
stock compensation expenses in fiscal 2012. As of January 2013,
11,000 shares vested, because such board members were still
serving on the board at this time. the remaining 1,000 shares
vested in May 2012 with the passing of one of our directors.
In January 2013, all 12 of our non-employee directors were
granted 1,000 restricted shares each (total of 12,000 shares).
these shares have full voting rights and participate in dividends
as if unrestricted. the closing price of our stock on such date
was $24.71. this grant of restricted stock incurred $0.2 million
in stock compensation expenses in fiscal 2013. As of January
2014, all shares have vested, because such board members
were still serving on the board at this time.
In January 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. this grant of restricted stock incurred $0.6 million
in stock compensation expenses in fiscal 2014. As of January 1,
2015, these shares will vest and be unrestricted.
In January 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. this grant of restricted stock incurred $0.1 million in stock
compensation expenses in fiscal 2014.
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
AGGReGA te
IntRInSIC
VAlue
outstanding at
october 31, 2011
exercised
outstanding at
october 31, 2012
Granted
exercised
outstanding at
october 31, 2013
outstanding at
october 31, 2014
exercisable at
october 31, 2014
65
$ 21.82
(15)
$ 21.82
50
$ 21.82
10
$ 23.48
(40)
$ 21.82
20
$ 22.64
20
$ 22.64
$
525
8
$ 22.22
$
213
the weighted average remaining life of such outstanding
options is 5.6 years. the weighted average remaining life of such
exercisable options is 4.1 years. the fair value of shares vested
during the year ended october 31, 2014, was $0.2 million.
15. DiviDenDS
on December 8, 2014, we paid a $0.75 per share dividend
in the aggregate amount of $13.0 million to shareholders of
record on november 17, 2014. 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.
16. 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).
the following table sets forth our financial assets and
liabilities as of october 31, 2014 that are measured on a
recurring basis during the period, segregated by level within
the fair value hierarchy:
aSSetS at fa Ir valU e :
(All amounts are presented in thousands)
Investment in limoneira Company(1)
total assets at fair value
leVel 1
leVel 2
leVel 3
totAl
$ 44,355
$ 44,355
—
—
$
—
—
$
$ 44,355
$ 44,355
(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 october 31, 2014 and october 31, 2013
equaled $25.66 per share and $26.34 per share. unrealized gains and losses are recognized through other comprehensive income. unrealized investment holding losses
arising during the year ended october 31, 2014 was $1.2 million. unrealized investment holding gains arising during the year ended october 31, 2013, and 2012 was
$6.7 million, and $8.9 million.
the following table sets forth our financial assets as of october 31, 2014 that are measured on a non-recurring basis during the period,
segregated by level within the fair value hierarchy:
aSSetS at fa Ir valU e :
(All amounts are presented in thousands)
Investment in FreshRealm(3)
total assets at fair value
leVel 1
leVel 2
leVel 3
totAl
$
$
—
—
$
$
—
—
$ 16,962
$ 16,962
$ 16,962
$ 16,962
(3)
See note 18 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.
the following is a reconciliation of the beginning and ending amounts of the contingent consideration for RFG:
(All amounts are presented in thousands)
RFG contingent consideration (Restated)(1)
$ 15,602
—
$ 53,611
$
(69,213)
—
bAlAnCe A t
10/31/13
InteReSt
ReVAlue
ADJuStMent
SettleD
bAlAnCe A t
10/31/14
(All amounts are presented in thousands)
RFG contingent consideration (Restated) (1)
$ 10,667
$
97
$ 33,811
$
(28,973)
$ 15,602
bAlAnCe A t
10/31/12
InteReSt
ReVAlue
ADJuStMent
SettleD
bAlAnCe A t
10/31/13
(1) We have amended our acquisition agreement with RFG in regards to the cash payment portion of the Stage 2 & 3 earnouts. See note 17.
See note 3, “Restatement of previously-Issued Financial Statements” to the Consolidated Financial Statements for information
on the adjustments made related to the restatement of previously-issued financial statements.
17. AMenDMentS tO rFg ACQuiSitiOn AgreeMent
amenDment no. 1 to rfg acQUISItIon agreement
Calavo, RFG and liberty Fresh Foods, llC, Kenneth Catchot,
Cut Fruit, llC, James Catchot, James Gibson, Jose o. Castillo,
Donald l. Johnson and RFG nominee trust (collectively, the
“Sellers”) entered into Amendment no. 1 of the Agreement and
plan of Merger dated July 31, 2013 (the “First Amendment”).
Calavo, RFG and the Sellers are parties to an Agreement
and plan of Merger dated as of May 25, 2011 (the “Merger
Agreement”) pursuant to which, among other things, Calavo
acquired RFG from the Sellers and Calavo agreed to make
earn-out payments to the Sellers upon the satisfaction of certain
performance requirements specified in the Merger Agreement.
the Merger Agreement states that, upon the attainment
of the Stage 2 Maximum earn-out trigger prior to the end
of the earn-out period, Calavo shall be obligated to pay the
Stage 2 Maximum earn-out Consideration to the Sellers. the
Merger Agreement states that the Stage 2 Maximum earn-out
Consideration shall be $5,000,000 in cash and 827,000 shares
of Calavo common stock. the Merger Agreement states that
the Stage 2 Maximum earn-out trigger shall be met if, for any
12-month period during the earn-out period, (1) the ebItDA for
RFG is equal to or greater than $8,000,000 and (2) the Revenue
for RFG is equal to or greater than $130,000,000.
Calavo, RFG and the Sellers have amended the Merger
Agreement by the First Amendment to provide, among other
things, that: (1) Calavo shall deliver $5,000,000 of Common
Stock to the Sellers, as part of the Stage 2 Maximum earn-out
Consideration instead of delivering $5,000,000 of cash to the
Sellers; (2) the Sellers shall receive specified price protection
from Calavo with respect to the sale of such Common Stock;
and (3) Calavo shall file with the Securities and exchange
Commission (the “SeC”) a Registration Statement on Form
S-3 (the “Registration Statement”) which shall cover the public
resale of such Common Stock by the Sellers during the period
specified in the First Amendment.
price protection, as defined, is broken into two parts: (1)
additional shares of our common stock (“price protection
Shares” or “ppS”) and (2) a potential cash payment. During
the thirty-day period starting on the later of the date that the
Additional Shares are issued to the Sellers or the date that
the Registration Statement is declared effective by the SeC
(the “Initial price protection period”), the Sellers shall have
price protection for any Additional Shares sold by the Sellers
on the nasdaq Stock Market. We shall be obligated to issue
additional shares of ppS to the Sellers only if the Sellers sell
any Additional Shares on the nasdaq Stock Market during the
Initial price protection period for a price that is less than the
Valuation price. the dollar value of the price protection Shares
required to be issued by Calavo shall equal the difference
between (1) the aggregate sales price of all Additional Shares
sold by the Sellers on the nasdaq Stock Market during the Initial
price protection period for sales prices that were less than the
Valuation price and (2) the aggregate sales price that the trust
would have received for such Additional Shares if they had been
sold for the Valuation price. the amount calculated pursuant to
the immediately preceding sentence is referred to in the First
Amendment as the “Shortfall”, and the closing price of our
stock on the nasdaq Stock Market that is used to determine the
number of price protection shares that we must issue is referred
to as the “Initial price protection Valuation.”
If, during the thirty-day period immediately following its
receipt of the ppS, the Sellers sell any of the ppS on the nasdaq
Stock Market for a sales price that is less than the Initial price
protection Valuation, Calavo shall be obligated to deliver to the
Sellers a cash payment equal to the difference between (a) the
aggregate sales price of all price protection Shares sold by the
Sellers on the nasdaq Stock Market during such thirty-day period
for sales prices that were less than the Initial price protection
Valuation and (b) the aggregate sales price that the Sellers would
have received for such price protection Shares if they had been
sold for the Initial price protection Valuation. Such cash payment
shall be made by Calavo within twenty days after Calavo and the
Sellers have agreed upon the amount of such shortfall.
As a result of this transaction, we evaluated the fair market
value of the cash derivative per the Merger Agreement with the
equity derivative per this First Amendment, noting no significant
difference. Further, we also believe the estimated fair market value
of the cash derivative per this First Amendment is not material.
Additionally, we have reclassified the RFG contingent
consideration liability of $4.2 million from accrued expenses to
additional paid in capital as of July 31, 2013.
During our fourth fiscal quarter, RFG attained the Stage
2 Maximum earn-out trigger. As such, and pursuant to this
amendment, we filed the Registration Statement and issued
172,117 shares of common stock, valued at $29.05, to the
Sellers in october 2013. From october 2013 to november 2013,
the Sellers sold all 172,117 shares for $5.0 million.
amenDment no. 2 to rfg acQUISItIon agreement
Calavo, RFG and liberty Fresh Foods, llC, Kenneth Catchot,
Cut Fruit, llC, James Catchot, James Gibson, Jose o. Castillo,
Donald l. Johnson and RFG nominee trust (collectively, the
“Sellers”) entered into Amendment no. 2 of the Agreement and
plan of Merger dated october 1, 2013 (the “Second Amendment”).
Calavo, RFG and the Sellers are parties to an Agreement
and plan of Merger dated as of May 25, 2011, as amended by
Amendment no. 1 thereto, dated July 28, 2013 (as so amended
the “Merger Agreement”), pursuant to which, among other
things, Calavo acquired RFG from the Sellers and Calavo agreed
to make earn-out payments to the Sellers upon the satisfaction
of certain performance requirements specified in the
Merger Agreement.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
62 . 63
15. DiviDenDS
on December 8, 2014, we paid a $0.75 per share dividend
in the aggregate amount of $13.0 million to shareholders of
record on november 17, 2014. 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.
16. 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).
the following table sets forth our financial assets and
liabilities as of october 31, 2014 that are measured on a
recurring basis during the period, segregated by level within
the fair value hierarchy:
aSSetS at fa Ir valU e :
(All amounts are presented in thousands)
Investment in limoneira Company(1)
total assets at fair value
leVel 1
leVel 2
leVel 3
totAl
$ 44,355
$ 44,355
—
—
$
—
—
$
$ 44,355
$ 44,355
(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 october 31, 2014 and october 31, 2013
equaled $25.66 per share and $26.34 per share. unrealized gains and losses are recognized through other comprehensive income. unrealized investment holding losses
arising during the year ended october 31, 2014 was $1.2 million. unrealized investment holding gains arising during the year ended october 31, 2013, and 2012 was
$6.7 million, and $8.9 million.
the following table sets forth our financial assets as of october 31, 2014 that are measured on a non-recurring basis during the period,
segregated by level within the fair value hierarchy:
aSSetS at fa Ir valU e :
(All amounts are presented in thousands)
Investment in FreshRealm(3)
total assets at fair value
leVel 1
leVel 2
leVel 3
totAl
$
$
—
—
$
$
—
—
$ 16,962
$ 16,962
$ 16,962
$ 16,962
(3)
See note 18 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.
the following is a reconciliation of the beginning and ending amounts of the contingent consideration for RFG:
(All amounts are presented in thousands)
RFG contingent consideration (Restated)(1)
$ 15,602
—
$ 53,611
$
(69,213)
—
bAlAnCe A t
10/31/13
InteReSt
ReVAlue
ADJuStMent
SettleD
bAlAnCe A t
10/31/14
(All amounts are presented in thousands)
RFG contingent consideration (Restated) (1)
$ 10,667
$
97
$ 33,811
$
(28,973)
$ 15,602
bAlAnCe A t
10/31/12
InteReSt
ReVAlue
ADJuStMent
SettleD
bAlAnCe A t
10/31/13
(1) We have amended our acquisition agreement with RFG in regards to the cash payment portion of the Stage 2 & 3 earnouts. See note 17.
See note 3, “Restatement of previously-Issued Financial Statements” to the Consolidated Financial Statements for information
on the adjustments made related to the restatement of previously-issued financial statements.
17. AMenDMentS tO rFg ACQuiSitiOn AgreeMent
amenDment no. 1 to rfg acQUISItIon agreement
Calavo, RFG and liberty Fresh Foods, llC, Kenneth Catchot,
Cut Fruit, llC, James Catchot, James Gibson, Jose o. Castillo,
Donald l. Johnson and RFG nominee trust (collectively, the
“Sellers”) entered into Amendment no. 1 of the Agreement and
plan of Merger dated July 31, 2013 (the “First Amendment”).
Calavo, RFG and the Sellers are parties to an Agreement
and plan of Merger dated as of May 25, 2011 (the “Merger
Agreement”) pursuant to which, among other things, Calavo
acquired RFG from the Sellers and Calavo agreed to make
earn-out payments to the Sellers upon the satisfaction of certain
performance requirements specified in the Merger Agreement.
the Merger Agreement states that, upon the attainment
of the Stage 2 Maximum earn-out trigger prior to the end
of the earn-out period, Calavo shall be obligated to pay the
Stage 2 Maximum earn-out Consideration to the Sellers. the
Merger Agreement states that the Stage 2 Maximum earn-out
Consideration shall be $5,000,000 in cash and 827,000 shares
of Calavo common stock. the Merger Agreement states that
the Stage 2 Maximum earn-out trigger shall be met if, for any
12-month period during the earn-out period, (1) the ebItDA for
RFG is equal to or greater than $8,000,000 and (2) the Revenue
for RFG is equal to or greater than $130,000,000.
Calavo, RFG and the Sellers have amended the Merger
Agreement by the First Amendment to provide, among other
things, that: (1) Calavo shall deliver $5,000,000 of Common
Stock to the Sellers, as part of the Stage 2 Maximum earn-out
Consideration instead of delivering $5,000,000 of cash to the
Sellers; (2) the Sellers shall receive specified price protection
from Calavo with respect to the sale of such Common Stock;
and (3) Calavo shall file with the Securities and exchange
Commission (the “SeC”) a Registration Statement on Form
S-3 (the “Registration Statement”) which shall cover the public
resale of such Common Stock by the Sellers during the period
specified in the First Amendment.
price protection, as defined, is broken into two parts: (1)
additional shares of our common stock (“price protection
Shares” or “ppS”) and (2) a potential cash payment. During
the thirty-day period starting on the later of the date that the
Additional Shares are issued to the Sellers or the date that
the Registration Statement is declared effective by the SeC
(the “Initial price protection period”), the Sellers shall have
price protection for any Additional Shares sold by the Sellers
on the nasdaq Stock Market. We shall be obligated to issue
additional shares of ppS to the Sellers only if the Sellers sell
any Additional Shares on the nasdaq Stock Market during the
Initial price protection period for a price that is less than the
Valuation price. the dollar value of the price protection Shares
required to be issued by Calavo shall equal the difference
between (1) the aggregate sales price of all Additional Shares
sold by the Sellers on the nasdaq Stock Market during the Initial
price protection period for sales prices that were less than the
Valuation price and (2) the aggregate sales price that the trust
would have received for such Additional Shares if they had been
sold for the Valuation price. the amount calculated pursuant to
the immediately preceding sentence is referred to in the First
Amendment as the “Shortfall”, and the closing price of our
stock on the nasdaq Stock Market that is used to determine the
number of price protection shares that we must issue is referred
to as the “Initial price protection Valuation.”
If, during the thirty-day period immediately following its
receipt of the ppS, the Sellers sell any of the ppS on the nasdaq
Stock Market for a sales price that is less than the Initial price
protection Valuation, Calavo shall be obligated to deliver to the
Sellers a cash payment equal to the difference between (a) the
aggregate sales price of all price protection Shares sold by the
Sellers on the nasdaq Stock Market during such thirty-day period
for sales prices that were less than the Initial price protection
Valuation and (b) the aggregate sales price that the Sellers would
have received for such price protection Shares if they had been
sold for the Initial price protection Valuation. Such cash payment
shall be made by Calavo within twenty days after Calavo and the
Sellers have agreed upon the amount of such shortfall.
As a result of this transaction, we evaluated the fair market
value of the cash derivative per the Merger Agreement with the
equity derivative per this First Amendment, noting no significant
difference. Further, we also believe the estimated fair market value
of the cash derivative per this First Amendment is not material.
Additionally, we have reclassified the RFG contingent
consideration liability of $4.2 million from accrued expenses to
additional paid in capital as of July 31, 2013.
During our fourth fiscal quarter, RFG attained the Stage
2 Maximum earn-out trigger. As such, and pursuant to this
amendment, we filed the Registration Statement and issued
172,117 shares of common stock, valued at $29.05, to the
Sellers in october 2013. From october 2013 to november 2013,
the Sellers sold all 172,117 shares for $5.0 million.
amenDment no. 2 to rfg acQUISItIon agreement
Calavo, RFG and liberty Fresh Foods, llC, Kenneth Catchot,
Cut Fruit, llC, James Catchot, James Gibson, Jose o. Castillo,
Donald l. Johnson and RFG nominee trust (collectively, the
“Sellers”) entered into Amendment no. 2 of the Agreement and
plan of Merger dated october 1, 2013 (the “Second Amendment”).
Calavo, RFG and the Sellers are parties to an Agreement
and plan of Merger dated as of May 25, 2011, as amended by
Amendment no. 1 thereto, dated July 28, 2013 (as so amended
the “Merger Agreement”), pursuant to which, among other
things, Calavo acquired RFG from the Sellers and Calavo agreed
to make earn-out payments to the Sellers upon the satisfaction
of certain performance requirements specified in the
Merger Agreement.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
62 . 63
the Merger Agreement provides that, upon the attainment
of the Stage 3 Maximum earn-out trigger or the Stage 3 Scale
earn-out trigger, as applicable, Calavo shall be obligated to make
a Stage 3 earn-out payment to the Sellers consisting of either the
Stage 3 Maximum earn-out Consideration or the Stage 3 Scale
earn-out Consideration, each of which shall consist of a specified
amount of cash and a specified number of Merger Shares.
pursuant to the Second Amendment, Calavo, RFG and the
Sellers amended the Merger Agreement to provide, among
other things, that: (1) with respect to the portion of the Stage 3
Maximum earn-out Consideration or the Stage 3 Scale earn-out
Consideration, as applicable, that is currently required by the
Merger Agreement to be paid in cash to the Sellers, Calavo shall
have the right to elect to pay all or a portion of such cash amount
by delivery of additional Merger Shares to the RFG nominee
trust (the “trust”), for the benefit of the Sellers; (2) the Sellers
shall receive specified price protection from Calavo with respect
to the trust’s sale of shares of Common Stock on the nasdaq
Stock Market, up to the total number of shares of Common
Stock issued to the trust pursuant to this Second Amendment;
and (3) Calavo shall file with the SeC a Registration Statement on
Form S-3 covering the trust’s resale on the nasdaq Stock Market
of any additional Merger Shares issued pursuant to the Second
Amendment for sales that occur during the period specified in
this Second Amendment. Any additional Merger Shares issued
by Calavo in lieu of cash payments to the Sellers will be valued
for this purpose at the closing price of Calavo Common Stock as
reported on the nasdaq Stock Market at the time of issuance.
price protection, as defined, is broken into two parts: (1)
additional shares of our common stock (“price protection
Shares” or “ppS”) and (2) a potential cash payment. During
the 120-day period starting on the later of the date that the
Additional Shares are issued to the Sellers or the date that the
Registration Statement is declared effective by the SeC (the
“Initial price protection period”), the Sellers shall have price
protection for any Additional Shares sold by the Sellers on the
nasdaq Stock Market. We shall be obligated to issue additional
shares of ppS to the Sellers only if the Sellers sell any Additional
Shares on the nasdaq Stock Market during the Initial price
protection period for a price that is less than the Valuation price.
the dollar value of the price protection Shares required to be
issued by Calavo shall equal the difference between (1) the
aggregate sales price of all Additional Shares sold by the Sellers
on the nasdaq Stock Market during the Initial price protection
period for sales prices that were less than the Valuation price
and (2) the aggregate sales price that the trust would have
received for such Additional Shares if they had been sold for
the Valuation price. the amount calculated pursuant to the
immediately preceding sentence is referred to in the Second
Amendment as the “Shortfall”, and the closing price of our
stock on the nasdaq Stock Market that is used to determine the
number of price protection shares that we must issue is referred
to as the “Initial price protection Valuation.”
If, during the 120-day period immediately following its
receipt of the ppS, the Sellers sell any of the ppS on the
nasdaq Stock Market for a sales price that is less than the
Initial price protection Valuation (First-Stage price protection
Shortfall), Calavo shall be obligated to deliver to the Sellers
additional shares “Second-Stage price protection Shares”
equal to the difference between (a) the aggregate sales price
of all price protection Shares sold by the Sellers on the nasdaq
Stock Market during such 120-day period for sales prices that
were less than the Initial price protection Valuation and (b) the
aggregate sales price that the Sellers would have received for
such price protection Shares if they had been sold for the Initial
price protection Valuation. If additional shortfalls continue to
occur (Second-Stage price protection Shortfall) a cash payment
shall be made by Calavo within twenty days after Calavo and the
Sellers have agreed upon the amount of such shortfall.
on october 23, 2014, based on the results of operations to
date, the Stage 3 Maximum earn-out trigger was met and we
issued 434,783 shares of unregistered Calavo common stock
to the Sellers. Additionally, on october 23, 2014, we issued
1,097,213 shares of unregistered Calavo common stock, with
a value on the date of issuance totaling $50 million, to a trust
for the benefit of the Sellers. Shortly after, we filed a Form
S-3 registration statement, registering the resale of these
1,097,213 shares.
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
18. DeCOnSOliDA tiOn OF FreShreAlM, llC
As a result of the deconsolidation, we were required to record
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.
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 16 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%.
64 . 65
Calavo Growers, Inc. 2014 AnnuAl RepoR t
the Merger Agreement provides that, upon the attainment
of the Stage 3 Maximum earn-out trigger or the Stage 3 Scale
earn-out trigger, as applicable, Calavo shall be obligated to make
a Stage 3 earn-out payment to the Sellers consisting of either the
Stage 3 Maximum earn-out Consideration or the Stage 3 Scale
earn-out Consideration, each of which shall consist of a specified
amount of cash and a specified number of Merger Shares.
pursuant to the Second Amendment, Calavo, RFG and the
Sellers amended the Merger Agreement to provide, among
other things, that: (1) with respect to the portion of the Stage 3
Maximum earn-out Consideration or the Stage 3 Scale earn-out
Consideration, as applicable, that is currently required by the
Merger Agreement to be paid in cash to the Sellers, Calavo shall
have the right to elect to pay all or a portion of such cash amount
by delivery of additional Merger Shares to the RFG nominee
trust (the “trust”), for the benefit of the Sellers; (2) the Sellers
shall receive specified price protection from Calavo with respect
to the trust’s sale of shares of Common Stock on the nasdaq
Stock Market, up to the total number of shares of Common
Stock issued to the trust pursuant to this Second Amendment;
and (3) Calavo shall file with the SeC a Registration Statement on
Form S-3 covering the trust’s resale on the nasdaq Stock Market
of any additional Merger Shares issued pursuant to the Second
Amendment for sales that occur during the period specified in
this Second Amendment. Any additional Merger Shares issued
by Calavo in lieu of cash payments to the Sellers will be valued
for this purpose at the closing price of Calavo Common Stock as
reported on the nasdaq Stock Market at the time of issuance.
price protection, as defined, is broken into two parts: (1)
additional shares of our common stock (“price protection
Shares” or “ppS”) and (2) a potential cash payment. During
the 120-day period starting on the later of the date that the
Additional Shares are issued to the Sellers or the date that the
Registration Statement is declared effective by the SeC (the
“Initial price protection period”), the Sellers shall have price
protection for any Additional Shares sold by the Sellers on the
nasdaq Stock Market. We shall be obligated to issue additional
shares of ppS to the Sellers only if the Sellers sell any Additional
Shares on the nasdaq Stock Market during the Initial price
protection period for a price that is less than the Valuation price.
the dollar value of the price protection Shares required to be
issued by Calavo shall equal the difference between (1) the
aggregate sales price of all Additional Shares sold by the Sellers
on the nasdaq Stock Market during the Initial price protection
period for sales prices that were less than the Valuation price
and (2) the aggregate sales price that the trust would have
received for such Additional Shares if they had been sold for
the Valuation price. the amount calculated pursuant to the
immediately preceding sentence is referred to in the Second
Amendment as the “Shortfall”, and the closing price of our
stock on the nasdaq Stock Market that is used to determine the
number of price protection shares that we must issue is referred
to as the “Initial price protection Valuation.”
If, during the 120-day period immediately following its
receipt of the ppS, the Sellers sell any of the ppS on the
nasdaq Stock Market for a sales price that is less than the
Initial price protection Valuation (First-Stage price protection
Shortfall), Calavo shall be obligated to deliver to the Sellers
additional shares “Second-Stage price protection Shares”
equal to the difference between (a) the aggregate sales price
of all price protection Shares sold by the Sellers on the nasdaq
Stock Market during such 120-day period for sales prices that
were less than the Initial price protection Valuation and (b) the
aggregate sales price that the Sellers would have received for
such price protection Shares if they had been sold for the Initial
price protection Valuation. If additional shortfalls continue to
occur (Second-Stage price protection Shortfall) a cash payment
shall be made by Calavo within twenty days after Calavo and the
Sellers have agreed upon the amount of such shortfall.
on october 23, 2014, based on the results of operations to
date, the Stage 3 Maximum earn-out trigger was met and we
issued 434,783 shares of unregistered Calavo common stock
to the Sellers. Additionally, on october 23, 2014, we issued
1,097,213 shares of unregistered Calavo common stock, with
a value on the date of issuance totaling $50 million, to a trust
for the benefit of the Sellers. Shortly after, we filed a Form
S-3 registration statement, registering the resale of these
1,097,213 shares.
See note 3, “Restatement of previously-Issued Financial
Statements” to the Consolidated Financial Statements for
information on the adjustments made related to the restatement
of previously-issued financial statements.
18. DeCOnSOliDA tiOn OF FreShreAlM, llC
As a result of the deconsolidation, we were required to record
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.
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 16 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%.
64 . 65
Calavo Growers, Inc. 2014 AnnuAl RepoR t
19. SeleCteD QuArterly FinAnCiAl DA tA (unAuDiteD)
the following operating results for each of the eight fiscal quarters in the period ended october 31, 2014 (except for the current quarter
ending october 31, 2014) has been restated to reflect adjustments to our previously issued financial statements as more fully discussed
in note 3, “Restatement of previously-Issued Financial Statements”.
the Company has also identified certain immaterial adjustments primarily relating to non-controlling interest, diluted number of shares
outstanding, and income tax expense related to fiscal years ended october 31, 2014, october 31, 2013, which are reflected in the restated
consolidated financial statements for the Relevant periods.
the following tables summarize the impact of the restatement on our previously reported interim consolidated statements of operations
(in thousands, except per share data):
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income (loss)
Interest expense
other income, net
Income (loss) before provision
for income taxes
provision (benefit) for income taxes
net income (loss)
Add: net loss attributable to
noncontrolling interest
net income (loss) attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
(loss) per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
tHRee MontHS enDeD JAnuARY 31, 2014
tHRee MontHS enDeD JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 168,165
$
154,475
13,690
8,272
—
5,418
(256)
135
5,297
1,822
3,475
—
49
(49)
20
9,218
(9,287)
—
—
(9,287)
(3,898)
(5,389)
$ 168,165
$ 139,499
$
154,524
126,375
13,641
8,292
9,218
(3,869)
(256)
135
(3,990)
(2,076)
(1,914)
13,124
7,576
1,245
4,303
(252)
138
4,189
1,508
2,681
—
1
(1)
—
$ 139,499
126,376
13,123
7,576
8,152
(8,153)
—
—
(8,153)
(4,020)
(4,133)
9,397
(3,850)
(252)
138
(3,964)
(2,512)
(1,452)
500
(352)
148
26
16
42
$
3,975
$
(5,741)
$
(1,766)
$
2,707
$
(4,117)
$
(1,410)
$
$
0.25
0.25
$
$
(0.36)
(0.36)
$
$
(0.11)
(0.11)
$
$
0.18
0.18
$
$
(0.28)
(0.28)
$
$
(0.10)
(0.10)
15,726
15,736
—
(10)
15,726
15,726
14,834
14,854
—
(20)
14,834
14,834
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income
Add: net loss attributable to
noncontrolling interest
net income attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
tHRee MontHS enDeD ApRIl 30, 2014
tHRee MontHS enDeD ApRIl 30, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 194,894
$
175,917
18,977
9,111
—
9,866
(292)
270
9,844
3,432
6,412
—
85
(85)
34
7,036
(7,155)
—
—
(7,155)
(1,999)
(5,156)
$ 194,894
$ 166,336
$
176,002
154,800
18,892
9,145
11,536
7,991
—
61
(61)
24
$ 166,336
154,861
11,475
8,015
7,036
2,711
(292)
270
2,689
1,433
1,256
199
3,346
(317)
235
3,264
1,071
2,193
1,926
(2,011)
—
—
(2,011)
(292)
(1,719)
2,125
1,335
(317)
235
1,253
779
474
35
298
—
298
20
15
$
6,710
$
(5,156)
$
1,554
$
2,213
$
(1,704)
$
509
$
$
0.43
0.43
$
$
(0.33)
(0.34)
$
$
0.10
0.09
$
$
0.15
0.15
$
$
(0.12)
(0.12)
$
$
0.03
0.03
15,755
15,764
—
1,412
15,755
17,176
14,819
14,839
—
756
14,819
15,595
Calavo Growers, Inc. 2014 AnnuAl RepoR t
66 . 67
19. SeleCteD QuArterly FinAnCiAl DA tA (unAuDiteD)
the following operating results for each of the eight fiscal quarters in the period ended october 31, 2014 (except for the current quarter
ending october 31, 2014) has been restated to reflect adjustments to our previously issued financial statements as more fully discussed
in note 3, “Restatement of previously-Issued Financial Statements”.
the Company has also identified certain immaterial adjustments primarily relating to non-controlling interest, diluted number of shares
outstanding, and income tax expense related to fiscal years ended october 31, 2014, october 31, 2013, which are reflected in the restated
consolidated financial statements for the Relevant periods.
the following tables summarize the impact of the restatement on our previously reported interim consolidated statements of operations
(in thousands, except per share data):
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income (loss)
Interest expense
other income, net
Income (loss) before provision
for income taxes
provision (benefit) for income taxes
net income (loss)
Add: net loss attributable to
noncontrolling interest
net income (loss) attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
(loss) per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
tHRee MontHS enDeD JAnuARY 31, 2014
tHRee MontHS enDeD JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 168,165
$
154,475
13,690
8,272
—
5,418
(256)
135
5,297
1,822
3,475
—
49
(49)
20
9,218
(9,287)
—
—
(9,287)
(3,898)
(5,389)
$ 168,165
$ 139,499
$
154,524
126,375
13,641
8,292
9,218
(3,869)
(256)
135
(3,990)
(2,076)
(1,914)
13,124
7,576
1,245
4,303
(252)
138
4,189
1,508
2,681
—
1
(1)
—
$ 139,499
126,376
13,123
7,576
8,152
(8,153)
—
—
(8,153)
(4,020)
(4,133)
9,397
(3,850)
(252)
138
(3,964)
(2,512)
(1,452)
500
(352)
148
26
16
42
$
3,975
$
(5,741)
$
(1,766)
$
2,707
$
(4,117)
$
(1,410)
$
$
0.25
0.25
$
$
(0.36)
(0.36)
$
$
(0.11)
(0.11)
$
$
0.18
0.18
$
$
(0.28)
(0.28)
$
$
(0.10)
(0.10)
15,726
15,736
—
(10)
15,726
15,726
14,834
14,854
—
(20)
14,834
14,834
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income
Add: net loss attributable to
noncontrolling interest
net income attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
tHRee MontHS enDeD ApRIl 30, 2014
tHRee MontHS enDeD ApRIl 30, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 194,894
$
175,917
18,977
9,111
—
9,866
(292)
270
9,844
3,432
6,412
—
85
(85)
34
7,036
(7,155)
—
—
(7,155)
(1,999)
(5,156)
$ 194,894
$ 166,336
$
176,002
154,800
18,892
9,145
11,536
7,991
—
61
(61)
24
$ 166,336
154,861
11,475
8,015
7,036
2,711
(292)
270
2,689
1,433
1,256
199
3,346
(317)
235
3,264
1,071
2,193
1,926
(2,011)
—
—
(2,011)
(292)
(1,719)
2,125
1,335
(317)
235
1,253
779
474
35
298
—
298
20
15
$
6,710
$
(5,156)
$
1,554
$
2,213
$
(1,704)
$
509
$
$
0.43
0.43
$
$
(0.33)
(0.34)
$
$
0.10
0.09
$
$
0.15
0.15
$
$
(0.12)
(0.12)
$
$
0.03
0.03
15,755
15,764
—
1,412
15,755
17,176
14,819
14,839
—
756
14,819
15,595
Calavo Growers, Inc. 2014 AnnuAl RepoR t
66 . 67
SIx MontHS enDeD JAnuARY 31, 2014
SIx MontHS enDeD JAnuARY 31, 2013
tHRee MontHS enDeD Jul Y 31, 2014
tHRee MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
Gain on deconsolidation of FreshRealm
12,622
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income
Add: net loss attributable to
noncontrolling interest
net income attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
$ 218,702
$
—
$ 218,702
$ 194,943
$
—
$ 194,943
197,757
769
198,526
176,865
181
177,046
20,945
9,431
(769)
307
20,176
9,738
18,078
8,349
—
23,249
23,249
11,514
(24,325)
(12,811)
(220)
120
24,036
8,064
15,972
—
—
—
(24,325)
(9,844)
(14,481)
(220)
12,622
120
(289)
(1,780)
1,491
357
9,372
(293)
—
209
9,288
3,163
6,125
(181)
72
2,974
(3,227)
—
—
—
(3,227)
636
(3,863)
17,897
8,421
3,331
6,145
(293)
—
209
6,061
3,799
2,262
60
—
60
274
136
410
$ 16,032
$
(14,481)
$
1,551
$
6,399
$
(3,727)
$
2,672
$
$
1.02
1.02
$
$
(0.92)
(0.93)
$
$
0.10
0.09
$
$
0.43
0.43
$
$
(0.25)
(0.26)
$
$
0.18
0.17
15,760
15,769
—
1,898
15,760
17,667
14,848
14,870
—
946
14,848
15,816
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income
Add: net loss attributable to
noncontrolling interest
net income (loss) attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
(loss) per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
$ 363,059
$
—
$ 363,059
$ 305,835
$
330,392
134
330,526
281,175
32,667
17,383
(134)
54
—
16,254
15,284
(16,442)
(548)
405
—
—
32,533
17,437
16,254
(1,158)
(548)
405
15,141
(16,442)
(1,301)
5,254
9,887
(5,897)
(10,545)
(643)
(658)
24,660
15,567
1,444
7,649
(569)
373
7,453
2,579
4,874
—
62
(62)
24
10,078
(10,164)
—
—
(10,164)
(4,312)
(5,852)
$ 305,835
281,237
24,598
15,591
11,522
(2,515)
(569)
373
(2,711)
(1,733)
(978)
798
(352)
446
46
31
77
$ 10,685
$
(10,897)
$
(212)
$
4,920
$
(5,821)
$
(901)
$
$
0.68
0.68
$
$
(0.69)
(0.69)
$
$
(0.01)
(0.01)
$
$
0.33
0.33
$
$
(0.39)
(0.39)
$
$
(0.06)
(0.06)
15,755
15,764
—
(9)
15,755
15,755
14,819
14,839
—
(20)
14,819
14,819
68. 69
Calavo Growers, Inc. 2014 AnnuAl RepoR t
SIx MontHS enDeD JAnuARY 31, 2014
SIx MontHS enDeD JAnuARY 31, 2013
tHRee MontHS enDeD Jul Y 31, 2014
tHRee MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
Gain on deconsolidation of FreshRealm
12,622
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income
Add: net loss attributable to
noncontrolling interest
net income attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
$ 218,702
$
—
$ 218,702
$ 194,943
$
—
$ 194,943
197,757
769
198,526
176,865
181
177,046
20,945
9,431
(769)
307
20,176
9,738
18,078
8,349
—
23,249
23,249
11,514
(24,325)
(12,811)
(220)
120
24,036
8,064
15,972
—
—
—
(24,325)
(9,844)
(14,481)
(220)
12,622
120
(289)
(1,780)
1,491
357
9,372
(293)
—
209
9,288
3,163
6,125
(181)
72
2,974
(3,227)
—
—
—
(3,227)
636
(3,863)
17,897
8,421
3,331
6,145
(293)
—
209
6,061
3,799
2,262
60
—
60
274
136
410
$ 16,032
$
(14,481)
$
1,551
$
6,399
$
(3,727)
$
2,672
$
$
1.02
1.02
$
$
(0.92)
(0.93)
$
$
0.10
0.09
$
$
0.43
0.43
$
$
(0.25)
(0.26)
$
$
0.18
0.17
15,760
15,769
—
1,898
15,760
17,667
14,848
14,870
—
946
14,848
15,816
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income
Add: net loss attributable to
noncontrolling interest
net income (loss) attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
(loss) per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
$ 363,059
$
—
$ 363,059
$ 305,835
$
330,392
134
330,526
281,175
32,667
17,383
(134)
54
—
16,254
15,284
(16,442)
(548)
405
—
—
32,533
17,437
16,254
(1,158)
(548)
405
15,141
(16,442)
(1,301)
5,254
9,887
(5,897)
(10,545)
(643)
(658)
24,660
15,567
1,444
7,649
(569)
373
7,453
2,579
4,874
—
62
(62)
24
10,078
(10,164)
—
—
(10,164)
(4,312)
(5,852)
$ 305,835
281,237
24,598
15,591
11,522
(2,515)
(569)
373
(2,711)
(1,733)
(978)
798
(352)
446
46
31
77
$ 10,685
$
(10,897)
$
(212)
$
4,920
$
(5,821)
$
(901)
$
$
0.68
0.68
$
$
(0.69)
(0.69)
$
$
(0.01)
(0.01)
$
$
0.33
0.33
$
$
(0.39)
(0.39)
$
$
(0.06)
(0.06)
15,755
15,764
—
(9)
15,755
15,755
14,819
14,839
—
(20)
14,819
14,819
68. 69
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Gain on deconsolidation of FreshRealm
12,622
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income (loss)
Add: net loss attributable to
noncontrolling interest
net income attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
nIne MontHS enDeD Jul Y 31, 2014
nIne MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 581,761
$
—
$ 581,761
$ 500,778
$
—
$ 500,778
528,149
903
529,052
458,040
243
458,283
53,612
26,814
(903)
361
52,709
27,175
—
39,503
39,503
26,798
(40,767)
(13,969)
(768)
525
39,177
13,318
25,859
—
—
—
(40,767)
(15,741)
(25,026)
(768)
12,622
525
(1,590)
(2,423)
833
42,738
23,916
1,801
17,021
(862)
—
582
16,741
5,742
10,999
(243)
96
13,052
(13,391)
—
—
—
(13,391)
(3,676)
(9,715)
42,495
24,012
14,853
3,630
(862)
—
582
3,350
2,066
1,284
858
(352)
506
320
167
487
$ 26,717
$
(25,378)
$
1,339
$ 11,319
$
(9,548)
$
1,771
$
$
1.70
1.69
$
$
(1.62)
(1.61)
$
$
0.08
0.08
$
$
0.76
0.76
$
$
(0.64)
(0.65)
$
$
0.12
0.11
15,760
15,769
—
1,461
15,760
17,230
14,848
14,870
—
805
14,848
15,675
tHRee MontHS enDeD
oCtobeR 31, 2014
tHRee MontHS enDeD oCtobeR 31, 2013
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to RFG acquisition
operating income
Interest expense
other income, net
Income before provision for income taxes
provision for income taxes
net income (loss)
Add: net loss attributable to noncontrolling interest
$ 200,749
182,230
18,519
9,430
11,579
(2,490)
(215)
164
(2,541)
(1,493)
(1,048)
(194)
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 190,673
$
—
$ 190,673
173,287
433
173,720
17,386
9,301
(433)
172
—
18,014
16,953
9,473
18,014
8,085
(18,619)
(10,534)
(236)
21
7,870
2,124
5,746
284
—
—
(236)
21
(18,619)
(10,749)
(8,905)
(9,714)
118
(6,781)
(3,968)
402
net income attributable to Calavo Growers, Inc.
$
(1,242)
$
6,030
$
(9,596)
$
(3,566)
Calavo Growers, Inc.’s net income (loss) per share:
basic
Diluted
number of shares used in per share computation:
basic
Diluted
$
$
(0.08)
(0.08)
15,815
15,815
$
$
.40
.40
$
$
(0.64)
(0.64)
$
$
(0.24)
(0.24)
15,030
15,038
—
(8)
15,030
15,030
the following table summarizes the impact of the restatement on our previously reported interim consolidated statements of comprehensive
operations for fiscal years 2014 and 2013:
tHRee MontHS enDeD JAnuARY 31, 2014
tHRee MontHS enDeD JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
net income (loss)
$
3,475
$
(5,389)
$
(1,914)
$
2,681
$
(4,133)
$
(1,452)
other comprehensive income (loss),
before tax:
unrealized investment losses
arising during period
Income tax benefit related to items
of other comprehensive income
(9,628)
3,755
other comprehensive loss, net of tax
(5,873)
—
—
—
Comprehensive income (loss)
(2,398)
(5,389)
(9,628)
(1,244)
3,755
(5,873)
(7,787)
485
(759)
—
—
—
(1,244)
485
(759)
1,922
(4,133)
(2,211)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
500
(352)
148
26
16
42
$
(1,898)
$
(5,741)
$
(7,639)
$
1,948
$
(4,117)
$
(2,169)
Calavo Growers, Inc. 2014 AnnuAl RepoR t
70 . 71
Gain on deconsolidation of FreshRealm
12,622
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to
RFG acquisition
operating income
Interest expense
other income, net
Income before provision
for income taxes
provision for income taxes
net income (loss)
Add: net loss attributable to
noncontrolling interest
net income attributable to
Calavo Growers, Inc.
Calavo Growers, Inc.’s net income
per share:
basic
Diluted
number of shares used in
per share computation:
basic
Diluted
nIne MontHS enDeD Jul Y 31, 2014
nIne MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 581,761
$
—
$ 581,761
$ 500,778
$
—
$ 500,778
528,149
903
529,052
458,040
243
458,283
53,612
26,814
(903)
361
52,709
27,175
—
39,503
39,503
26,798
(40,767)
(13,969)
(768)
525
39,177
13,318
25,859
—
—
—
(40,767)
(15,741)
(25,026)
(768)
12,622
525
(1,590)
(2,423)
833
42,738
23,916
1,801
17,021
(862)
—
582
16,741
5,742
10,999
(243)
96
13,052
(13,391)
—
—
—
(13,391)
(3,676)
(9,715)
42,495
24,012
14,853
3,630
(862)
—
582
3,350
2,066
1,284
858
(352)
506
320
167
487
$ 26,717
$
(25,378)
$
1,339
$ 11,319
$
(9,548)
$
1,771
$
$
1.70
1.69
$
$
(1.62)
(1.61)
$
$
0.08
0.08
$
$
0.76
0.76
$
$
(0.64)
(0.65)
$
$
0.12
0.11
15,760
15,769
—
1,461
15,760
17,230
14,848
14,870
—
805
14,848
15,675
tHRee MontHS enDeD
oCtobeR 31, 2014
tHRee MontHS enDeD oCtobeR 31, 2013
net sales
Cost of sales
Gross margin
Selling, general and administrative
Contingent consideration related to RFG acquisition
operating income
Interest expense
other income, net
Income before provision for income taxes
provision for income taxes
net income (loss)
Add: net loss attributable to noncontrolling interest
$ 200,749
182,230
18,519
9,430
11,579
(2,490)
(215)
164
(2,541)
(1,493)
(1,048)
(194)
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 190,673
$
—
$ 190,673
173,287
433
173,720
17,386
9,301
(433)
172
—
18,014
16,953
9,473
18,014
8,085
(18,619)
(10,534)
(236)
21
7,870
2,124
5,746
284
—
—
(236)
21
(18,619)
(10,749)
(8,905)
(9,714)
118
(6,781)
(3,968)
402
net income attributable to Calavo Growers, Inc.
$
(1,242)
$
6,030
$
(9,596)
$
(3,566)
Calavo Growers, Inc.’s net income (loss) per share:
basic
Diluted
number of shares used in per share computation:
basic
Diluted
$
$
(0.08)
(0.08)
15,815
15,815
$
$
.40
.40
$
$
(0.64)
(0.64)
$
$
(0.24)
(0.24)
15,030
15,038
—
(8)
15,030
15,030
the following table summarizes the impact of the restatement on our previously reported interim consolidated statements of comprehensive
operations for fiscal years 2014 and 2013:
tHRee MontHS enDeD JAnuARY 31, 2014
tHRee MontHS enDeD JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
net income (loss)
$
3,475
$
(5,389)
$
(1,914)
$
2,681
$
(4,133)
$
(1,452)
other comprehensive income (loss),
before tax:
unrealized investment losses
arising during period
Income tax benefit related to items
of other comprehensive income
(9,628)
3,755
other comprehensive loss, net of tax
(5,873)
—
—
—
Comprehensive income (loss)
(2,398)
(5,389)
(9,628)
(1,244)
3,755
(5,873)
(7,787)
485
(759)
—
—
—
(1,244)
485
(759)
1,922
(4,133)
(2,211)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
500
(352)
148
26
16
42
$
(1,898)
$
(5,741)
$
(7,639)
$
1,948
$
(4,117)
$
(2,169)
Calavo Growers, Inc. 2014 AnnuAl RepoR t
70 . 71
tHRee MontHS enDeD ApRIl 30, 2014
tHRee MontHS enDeD ApRl 30, 2013
tHRee MontHS enDeD Jul Y 31, 2014
tHRee MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
net income
$
6,412
$
(5,156)
$
1,256
$
2,193
$
(1,719)
$
474
net income
$ 15,972
$
(14,481)
$
1,491
$
6,125
$
(3,863)
$
2,262
other comprehensive income (loss),
before tax:
unrealized investment gains (losses)
arising during period
3,803
Income tax benefit (expense)
related to items of other
comprehensive income
other comprehensive income (loss),
net of tax
Comprehensive income (loss)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
—
—
—
(5,156)
3,803
(5,393)
—
(5,393)
(1,483)
2,103
2,320
3,576
(3,290)
(1,097)
—
—
(1,719)
2,103
(3,290)
(2,816)
(1,483)
2,320
8,732
other comprehensive income (loss),
before tax:
unrealized investment gains (losses)
arising during period
Income tax benefit (expense)
related to items of other
comprehensive income
other comprehensive income (loss),
net of tax
(1,590)
—
(1,590)
6,586
Comprehensive income (loss)
15,002
(14,481)
620
(970)
—
—
620
(2,568)
(970)
521
4,018
10,143
—
—
—
(3,863)
6,586
(2,568)
4,018
6,280
298
—
298
20
15
35
$
9,030
$
(5,156)
$
3,874
$
(1,077)
$
(1,704)
$
(2,781)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
60
—
60
274
136
410
$ 15,062
$
(14,481)
$
581
$ 10,417
$
(3,727)
$
6,690
SIx MontHS enDeD ApRIl 30, 2014
SIx MontHS enDeD ApRIl 30, 2013
nIne MontHS enDeD Jul Y 31, 2014
nIne MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
net income (loss)
$
9,887
$
(10,545)
$
(658)
$
4,874
$
(5,852)
$
(978)
net income (loss)
$ 25,859
$
(25,026)
$
833
$ 10,999
$
(9,715)
$
1,284
other comprehensive income (loss),
before tax:
unrealized investment losses
arising during period
Income tax benefit related to items
of other comprehensive income
(5,825)
2,272
other comprehensive loss, net of tax
(3,553)
—
—
—
Comprehensive income (loss)
6,334
(10,545)
(5,825)
(6,638)
2,272
(3,553)
(4,211)
2,589
(4,049)
825
—
—
—
(5,852)
(6,638)
2,589
(4,049)
(5,027)
other comprehensive income (loss),
before tax:
unrealized investment losses arising
during period
Income tax benefit related to items
of other comprehensive income
(7,416)
2,893
other comprehensive loss, net of tax
(4,523)
—
—
—
Comprehensive income (loss)
21,336
(25,026)
(7,416)
2,893
(4,523)
(3,690)
(52)
20
(32)
—
—
—
(52)
20
(32)
10,967
(9,715)
1,252
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
798
(352)
446
46
31
77
$
7,132
$
(10,897)
$
(3,765)
$
871
$
(5,821)
$
(4,950)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
858
(352)
506
320
167
487
$ 22,194
$
(25,378)
$
(3,184)
$ 11,287
$
(9,548)
$
1,739
72. 73
Calavo Growers, Inc. 2014 AnnuAl RepoR t
tHRee MontHS enDeD ApRIl 30, 2014
tHRee MontHS enDeD ApRl 30, 2013
tHRee MontHS enDeD Jul Y 31, 2014
tHRee MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
net income
$
6,412
$
(5,156)
$
1,256
$
2,193
$
(1,719)
$
474
net income
$ 15,972
$
(14,481)
$
1,491
$
6,125
$
(3,863)
$
2,262
other comprehensive income (loss),
before tax:
unrealized investment gains (losses)
arising during period
3,803
Income tax benefit (expense)
related to items of other
comprehensive income
other comprehensive income (loss),
net of tax
Comprehensive income (loss)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
—
—
—
(5,156)
3,803
(5,393)
—
(5,393)
(1,483)
2,103
2,320
3,576
(3,290)
(1,097)
—
—
(1,719)
2,103
(3,290)
(2,816)
(1,483)
2,320
8,732
other comprehensive income (loss),
before tax:
unrealized investment gains (losses)
arising during period
Income tax benefit (expense)
related to items of other
comprehensive income
other comprehensive income (loss),
net of tax
(1,590)
—
(1,590)
6,586
Comprehensive income (loss)
15,002
(14,481)
620
(970)
—
—
620
(2,568)
(970)
521
4,018
10,143
—
—
—
(3,863)
6,586
(2,568)
4,018
6,280
298
—
298
20
15
35
$
9,030
$
(5,156)
$
3,874
$
(1,077)
$
(1,704)
$
(2,781)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
60
—
60
274
136
410
$ 15,062
$
(14,481)
$
581
$ 10,417
$
(3,727)
$
6,690
SIx MontHS enDeD ApRIl 30, 2014
SIx MontHS enDeD ApRIl 30, 2013
nIne MontHS enDeD Jul Y 31, 2014
nIne MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
net income (loss)
$
9,887
$
(10,545)
$
(658)
$
4,874
$
(5,852)
$
(978)
net income (loss)
$ 25,859
$
(25,026)
$
833
$ 10,999
$
(9,715)
$
1,284
other comprehensive income (loss),
before tax:
unrealized investment losses
arising during period
Income tax benefit related to items
of other comprehensive income
(5,825)
2,272
other comprehensive loss, net of tax
(3,553)
—
—
—
Comprehensive income (loss)
6,334
(10,545)
(5,825)
(6,638)
2,272
(3,553)
(4,211)
2,589
(4,049)
825
—
—
—
(5,852)
(6,638)
2,589
(4,049)
(5,027)
other comprehensive income (loss),
before tax:
unrealized investment losses arising
during period
Income tax benefit related to items
of other comprehensive income
(7,416)
2,893
other comprehensive loss, net of tax
(4,523)
—
—
—
Comprehensive income (loss)
21,336
(25,026)
(7,416)
2,893
(4,523)
(3,690)
(52)
20
(32)
—
—
—
(52)
20
(32)
10,967
(9,715)
1,252
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
798
(352)
446
46
31
77
$
7,132
$
(10,897)
$
(3,765)
$
871
$
(5,821)
$
(4,950)
Add: net loss attributable to
noncontrolling interest
Comprehensive income (loss) –
Calavo Growers, Inc.
858
(352)
506
320
167
487
$ 22,194
$
(25,378)
$
(3,184)
$ 11,287
$
(9,548)
$
1,739
72. 73
Calavo Growers, Inc. 2014 AnnuAl RepoR t
the following table summarizes the impact of the restatement on our previously reported interim consolidated balance sheet for fiscal
ApRIl 30, 2014
ApRIl 30, 2013
years 2014 and 2013:
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of
allowances of $2,289 (2014) and
$1,697 (2013)
Inventories, net
prepaid expenses and other
current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
JAnuARY 31, 2014
JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$
6,346
$
—
$
6,346
$
9,067
$
—
$
9,067
60,060
27,659
11,965
3,419
2,235
1,995
113,679
53,050
35,902
1,544
—
18,262
12,034
—
—
—
—
(1,731)
—
(1,731)
—
—
—
9,255
—
60,060
27,659
11,965
3,419
504
1,995
111,948
53,050
35,902
1,544
9,255
18,262
—
12,034
48,367
22,331
8,013
1,324
2,807
2,222
94,131
50,966
37,596
520
—
18,262
14,949
$ 234,471
$
7,524
$ 241,995
$ 216,424
$
—
—
—
—
(90)
—
(90)
—
—
—
—
—
—
(90)
48,367
22,331
8,013
1,324
2,717
2,222
94,041
50,966
37,596
520
—
18,262
14,949
$ 216,334
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Current portion of long-term obligations
$
total current liabilities
lonG -teRM lIAbIlItIeS :
long-term obligations,
less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value,
100,000 shares authorized; 15,752
and 15,720 shares outstanding at
January 31, 2014 and January 31, 2013)
Additional paid-in capital
Accumulated other
comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
4,720
12,330
23,802
52,690
5,245
98,787
6,841
2,439
9,280
$
—
—
24,833
—
—
24,833
$
4,720
12,330
48,635
52,690
5,245
123,620
—
(2,439)
(2,439)
6,841
—
6,841
$
5,985
9,498
27,832
32,780
5,329
81,424
12,073
10,179
22,252
$
$
—
—
16,244
—
—
16,244
—
(5,084)
(5,084)
5,985
9,498
44,076
32,780
5,329
97,668
12,073
5,095
17,168
(69)
—
(69)
331
(83)
248
15
59,606
7,541
(316)
59,627
—
11,470
—
—
(26,340)
15
71,076
7,541
(316)
33,287
14
51,757
8,631
—
52,015
—
(5,595)
—
—
(5,572)
14
46,162
8,631
—
46,443
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of
allowances of $2,789 (2014)
and $1,697 (2013)
Inventories, net
prepaid expenses and
other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
64,093
32,261
13,528
39
773
1,995
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
132,603
55,568
39,705
1,533
—
18,262
11,436
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 19,914
$
(10,000)
$
9,914
$
7,119
$
—
$
7,119
—
—
—
—
(773)
—
(10,773)
—
—
—
8,826
—
—
64,093
32,261
13,528
39
—
1,995
121,830
55,568
39,705
1,533
8,826
18,262
11,436
59,349
25,434
8,539
31
3,083
2,222
105,777
51,230
32,203
520
—
18,262
13,540
—
—
—
—
(101)
—
(101)
—
—
—
—
—
—
(101)
59,349
25,434
8,539
31
2,982
2,222
105,676
51,230
32,203
520
—
18,262
13,540
$ 221,431
$ 259,107
$
(1,947)
$ 257,160
$ 221,532
$
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Income taxes payable
Current portion of long-term obligations
$ 19,117
15,850
22,568
41,030
—
5,321
total current liabilities
103,886
$
—
—
31,944
—
14
—
31,958
$ 19,117
15,850
54,512
41,030
14
5,321
135,844
$ 17,301
12,535
24,155
35,140
—
5,747
94,878
$
—
—
18,174
—
—
—
18,174
$ 17,301
12,535
42,329
35,140
—
5,747
113,052
lonG -teRM lIAbIlItIeS :
long-term obligations,
less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value,
100,000 shares authorized; 15,760
and 15,720 shares outstanding at
April 30, 2014 and April 30, 2013)
Additional paid-in capital
Accumulated other
comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
5,801
3,922
9,723
—
(3,922)
(3,922)
5,801
—
5,801
11,097
8,076
19,173
—
(5,387)
(5,387)
11,097
2,689
13,786
(104)
—
(104)
311
(98)
213
15
65,358
9,861
4,031
66,337
—
6,123
—
(4,610)
(31,496)
15
71,481
9,861
(579)
34,841
14
47,587
5,341
—
54,228
—
(5,514)
—
—
(7,276)
14
42,073
5,341
—
46,952
94,380
total shareholders’ equity
126,473
(14,870)
111,603
112,417
(11,167)
101,250
$ 234,471
$
7,524
$ 241,995
$ 216,424
$
(90)
$ 216,334
$ 259,107
$
(1,947)
$ 257,160
$ 221,532
$
(101)
$ 221,431
Calavo Growers, Inc. 2014 AnnuAl RepoR t
74 . 75
total shareholders’ equity
145,602
(29,983)
115,619
107,170
(12,790)
the following table summarizes the impact of the restatement on our previously reported interim consolidated balance sheet for fiscal
ApRIl 30, 2014
ApRIl 30, 2013
years 2014 and 2013:
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of
allowances of $2,289 (2014) and
$1,697 (2013)
Inventories, net
prepaid expenses and other
current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
JAnuARY 31, 2014
JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$
6,346
$
—
$
6,346
$
9,067
$
—
$
9,067
60,060
27,659
11,965
3,419
2,235
1,995
113,679
53,050
35,902
1,544
—
18,262
12,034
—
—
—
—
(1,731)
—
(1,731)
—
—
—
9,255
—
60,060
27,659
11,965
3,419
504
1,995
111,948
53,050
35,902
1,544
9,255
18,262
—
12,034
48,367
22,331
8,013
1,324
2,807
2,222
94,131
50,966
37,596
520
—
18,262
14,949
$ 234,471
$
7,524
$ 241,995
$ 216,424
$
—
—
—
—
(90)
—
(90)
—
—
—
—
—
—
(90)
48,367
22,331
8,013
1,324
2,717
2,222
94,041
50,966
37,596
520
—
18,262
14,949
$ 216,334
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Current portion of long-term obligations
$
total current liabilities
lonG -teRM lIAbIlItIeS :
long-term obligations,
less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value,
100,000 shares authorized; 15,752
and 15,720 shares outstanding at
January 31, 2014 and January 31, 2013)
Additional paid-in capital
Accumulated other
comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
4,720
12,330
23,802
52,690
5,245
98,787
6,841
2,439
9,280
$
—
—
24,833
—
—
24,833
$
4,720
12,330
48,635
52,690
5,245
123,620
—
(2,439)
(2,439)
6,841
—
6,841
$
5,985
9,498
27,832
32,780
5,329
81,424
12,073
10,179
22,252
$
$
—
—
16,244
—
—
16,244
—
(5,084)
(5,084)
5,985
9,498
44,076
32,780
5,329
97,668
12,073
5,095
17,168
(69)
—
(69)
331
(83)
248
15
59,606
7,541
(316)
59,627
—
11,470
—
—
(26,340)
15
71,076
7,541
(316)
33,287
14
51,757
8,631
—
52,015
—
(5,595)
—
—
(5,572)
14
46,162
8,631
—
46,443
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of
allowances of $2,789 (2014)
and $1,697 (2013)
Inventories, net
prepaid expenses and
other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
64,093
32,261
13,528
39
773
1,995
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
132,603
55,568
39,705
1,533
—
18,262
11,436
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
$ 19,914
$
(10,000)
$
9,914
$
7,119
$
—
$
7,119
—
—
—
—
(773)
—
(10,773)
—
—
—
8,826
—
—
64,093
32,261
13,528
39
—
1,995
121,830
55,568
39,705
1,533
8,826
18,262
11,436
59,349
25,434
8,539
31
3,083
2,222
105,777
51,230
32,203
520
—
18,262
13,540
—
—
—
—
(101)
—
(101)
—
—
—
—
—
—
(101)
59,349
25,434
8,539
31
2,982
2,222
105,676
51,230
32,203
520
—
18,262
13,540
$ 221,431
$ 259,107
$
(1,947)
$ 257,160
$ 221,532
$
lIaBIlI tIeS anD S hareholD erS’ e QUIt y
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Income taxes payable
Current portion of long-term obligations
$ 19,117
15,850
22,568
41,030
—
5,321
total current liabilities
103,886
$
—
—
31,944
—
14
—
31,958
$ 19,117
15,850
54,512
41,030
14
5,321
135,844
$ 17,301
12,535
24,155
35,140
—
5,747
94,878
$
—
—
18,174
—
—
—
18,174
$ 17,301
12,535
42,329
35,140
—
5,747
113,052
lonG -teRM lIAbIlItIeS :
long-term obligations,
less current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value,
100,000 shares authorized; 15,760
and 15,720 shares outstanding at
April 30, 2014 and April 30, 2013)
Additional paid-in capital
Accumulated other
comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
5,801
3,922
9,723
—
(3,922)
(3,922)
5,801
—
5,801
11,097
8,076
19,173
—
(5,387)
(5,387)
11,097
2,689
13,786
(104)
—
(104)
311
(98)
213
15
65,358
9,861
4,031
66,337
—
6,123
—
(4,610)
(31,496)
15
71,481
9,861
(579)
34,841
14
47,587
5,341
—
54,228
—
(5,514)
—
—
(7,276)
14
42,073
5,341
—
46,952
94,380
total shareholders’ equity
126,473
(14,870)
111,603
112,417
(11,167)
101,250
$ 234,471
$
7,524
$ 241,995
$ 216,424
$
(90)
$ 216,334
$ 259,107
$
(1,947)
$ 257,160
$ 221,532
$
(101)
$ 221,431
Calavo Growers, Inc. 2014 AnnuAl RepoR t
74 . 75
total shareholders’ equity
145,602
(29,983)
115,619
107,170
(12,790)
JulY 31, 2014
JulY 31, 2013
the following table summarizes the impact of the restatement on our previously reported interim consolidated statement of cash flows
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
for fiscal years 2014 and 2013:
$
9,436
$
—
$
9,436
$
5,927
$
—
$
5,927
net income (loss)
$
2,681
$
(4,133)
$
(1,452)
tHRee MontHS enDeD JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
caSh f lowS from oP er atIng a c tIvItIeS :
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of
allowances of $3,127 (2014)
and $1,697 (2013)
Inventories, net
prepaid expenses and
other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
63,731
33,035
15,492
1,385
—
1,995
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
125,074
54,565
38,115
18,382
—
18,262
10,114
—
—
—
—
—
—
—
—
—
—
17,912
—
—
63,731
33,035
15,492
1,385
—
1,995
125,074
54,565
38,115
18,382
17,912
18,262
10,114
60,464
31,590
8,784
1,963
1,519
2,222
112,469
51,798
38,789
520
—
18,262
13,186
—
—
—
—
(114)
—
(114)
—
—
—
—
—
—
(114)
60,464
31,590
8,784
1,963
1,405
2,222
112,355
51,798
38,789
520
—
18,262
13,186
$ 234,910
$ 264,512
$ 17,912
$ 282,424
$ 235,024
$
lIaBIlItIeS anD ShareholDerS’ eQUIty
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Income tax payable
Current portion of long-term obligations
$ 20,920
16,061
26,236
28,740
3,680
5,231
$
—
—
56,122
—
(591)
—
$ 20,920
16,061
82,358
28,740
3,089
5,231
total current liabilities
100,868
55,531
156,399
$ 28,049
13,308
19,140
25,980
—
5,679
92,156
$
—
—
25,540
—
—
—
25,540
$ 28,049
13,308
44,680
25,980
—
5,679
117,696
lonG -teRM lIAbIlItIeS :
long-term obligations, less
current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value,
100,000 shares authorized; 15,762
and 15,720 shares outstanding at
July 31, 2014 and July 31, 2013)
Additional paid-in capital
Accumulated other
comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
3,629
3,302
6,931
—
(3,302)
(3,302)
3,629
—
3,629
8,843
12,085
20,928
—
(4,764)
(4,764)
8,843
7,321
16,164
(146)
—
(146)
37
(234)
(197)
15
65,584
8,891
—
82,369
—
11,660
—
—
(45,977)
15
77,244
8,891
—
36,392
14
51,904
9,358
—
60,627
—
(9,653)
—
—
(11,003)
14
42,251
9,358
—
49,624
total shareholders’ equity
156,859
(34,317)
122,542
121,903
(20,656)
101,247
$ 264,512
$ 17,912
$ 282,424
$ 235,024
$
(114)
$ 234,910
76 . 77
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Contingent consideration related to the acquisition of Salsa lisa
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
tax benefit of stock option exercises
net cash provided by financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
1,607
35
1,245
—
116
—
(9,497)
617
22
1,045
87
13
(2,490)
5,887
1,368
(1,548)
(1,548)
(9,646)
12,610
(1,053)
233
2,144
1,964
7,103
Cash and cash equivalents, end of year
$
9,067
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Construction in progress included in trade accounts payable
unrealized holding (losses)
$
132
28
$
(1,244)
$
$
$
—
—
8,153
—
—
(4,058)
—
—
—
—
38
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,607
35
9,398
—
116
(4,058)
(9,497)
617
22
1,045
125
13
(2,490)
5,887
1,368
(1,548)
(1,548)
(9,646)
12,610
(1,053)
233
2,144
1,964
7,103
$
9,067
$
132
28
$
(1,244)
JulY 31, 2014
JulY 31, 2013
the following table summarizes the impact of the restatement on our previously reported interim consolidated statement of cash flows
AS RepoR teD
ADJuStMentS
ReSt AteD
AS RepoR teD
ADJuStMentS
ReSt AteD
for fiscal years 2014 and 2013:
$
9,436
$
—
$
9,436
$
5,927
$
—
$
5,927
net income (loss)
$
2,681
$
(4,133)
$
(1,452)
tHRee MontHS enDeD JAnuARY 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
caSh f lowS from oP er atIng a c tIvItIeS :
aSSetS
CuRR ent ASS e tS :
Cash and cash equivalents
Accounts receivable, net of
allowances of $3,127 (2014)
and $1,697 (2013)
Inventories, net
prepaid expenses and
other current assets
Advances to suppliers
Income taxes receivable
Deferred income taxes
63,731
33,035
15,492
1,385
—
1,995
total current assets
property, plant, and equipment, net
Investment in limoneira Company
Investment in unconsolidated entities
Deferred income taxes
Goodwill
other assets
125,074
54,565
38,115
18,382
—
18,262
10,114
—
—
—
—
—
—
—
—
—
—
17,912
—
—
63,731
33,035
15,492
1,385
—
1,995
125,074
54,565
38,115
18,382
17,912
18,262
10,114
60,464
31,590
8,784
1,963
1,519
2,222
112,469
51,798
38,789
520
—
18,262
13,186
—
—
—
—
(114)
—
(114)
—
—
—
—
—
—
(114)
60,464
31,590
8,784
1,963
1,405
2,222
112,355
51,798
38,789
520
—
18,262
13,186
$ 234,910
$ 264,512
$ 17,912
$ 282,424
$ 235,024
$
lIaBIlItIeS anD ShareholDerS’ eQUIty
CuRRent lIAbIlItIeS :
payable to growers
trade accounts payable
Accrued expenses
Short-term borrowings
Income tax payable
Current portion of long-term obligations
$ 20,920
16,061
26,236
28,740
3,680
5,231
$
—
—
56,122
—
(591)
—
$ 20,920
16,061
82,358
28,740
3,089
5,231
total current liabilities
100,868
55,531
156,399
$ 28,049
13,308
19,140
25,980
—
5,679
92,156
$
—
—
25,540
—
—
—
25,540
$ 28,049
13,308
44,680
25,980
—
5,679
117,696
lonG -teRM lIAbIlItIeS :
long-term obligations, less
current portion
Deferred income taxes
total long-term liabilities
Commitments and contingencies
noncontrolling interest, Calavo Salsa lisa
SHAReHolDeRS’ eQuIt Y:
Common stock ($0.001 par value,
100,000 shares authorized; 15,762
and 15,720 shares outstanding at
July 31, 2014 and July 31, 2013)
Additional paid-in capital
Accumulated other
comprehensive income
noncontrolling interest, FreshRealm
Retained earnings
3,629
3,302
6,931
—
(3,302)
(3,302)
3,629
—
3,629
8,843
12,085
20,928
—
(4,764)
(4,764)
8,843
7,321
16,164
(146)
—
(146)
37
(234)
(197)
15
65,584
8,891
—
82,369
—
11,660
—
—
(45,977)
15
77,244
8,891
—
36,392
14
51,904
9,358
—
60,627
—
(9,653)
—
—
(11,003)
14
42,251
9,358
—
49,624
total shareholders’ equity
156,859
(34,317)
122,542
121,903
(20,656)
101,247
$ 264,512
$ 17,912
$ 282,424
$ 235,024
$
(114)
$ 234,910
76 . 77
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Contingent consideration related to the acquisition of Salsa lisa
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
tax benefit of stock option exercises
net cash provided by financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
1,607
35
1,245
—
116
—
(9,497)
617
22
1,045
87
13
(2,490)
5,887
1,368
(1,548)
(1,548)
(9,646)
12,610
(1,053)
233
2,144
1,964
7,103
Cash and cash equivalents, end of year
$
9,067
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Construction in progress included in trade accounts payable
unrealized holding (losses)
$
132
28
$
(1,244)
$
$
$
—
—
8,153
—
—
(4,058)
—
—
—
—
38
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,607
35
9,398
—
116
(4,058)
(9,497)
617
22
1,045
125
13
(2,490)
5,887
1,368
(1,548)
(1,548)
(9,646)
12,610
(1,053)
233
2,144
1,964
7,103
$
9,067
$
132
28
$
(1,244)
SIx MontHS enDeD ApRIl 30, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
nIne MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
caSh f lowS from oP er atIng a c tIvItIeS :
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
$
4,874
$
(5,852)
$
(978)
net income
$ 10,999
$
(9,715)
$
1,284
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
3,293
84
1,444
191
—
(20,479)
(2,486)
(1,349)
2,338
(113)
143
10,516
5,027
3,483
(3,092)
(3,092)
(9,646)
14,970
(1,611)
(4,788)
700
(375)
16
7,103
Cash and cash equivalents, end of year
$
7,119
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Collection for Agricola belher Infrastructure Advance
unrealized holding (losses)
$
$
208
1,690
(6,638)
$
$
$
$
—
—
10,164
—
(4,361)
—
—
—
—
49
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,293
84
11,608
191
(4,361)
(20,479)
(2,486)
(1,349)
2,338
(64)
143
10,516
5,027
3,483
(3,092)
(3,092)
(9,646)
14,970
(1,611)
(4,788)
700
(375)
16
7,103
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
net cash used in financing activities
net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
5,011
133
1,801
288
—
(21,594)
(8,642)
(1,594)
406
2,891
62
21,264
4,599
15,624
(4,943)
(4,943)
(9,646)
5,810
(3,933)
(4,788)
700
(11,857)
(1,176)
7,103
$
7,119
Cash and cash equivalents, end of year
$
5,927
$
—
—
13,391
—
(3,738)
—
—
—
—
62
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,011
133
15,192
288
(3,738)
(21,594)
(8,642)
(1,594)
406
2,953
62
21,264
4,599
15,624
(4,943)
(4,943)
(9,646)
5,810
(3,933)
(4,788)
700
(11,857)
(1,176)
7,103
$
5,927
$
$
208
1,690
(6,638)
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
$
208
$
—
$
208
Calavo Growers, Inc. 2014 AnnuAl RepoR t
78 . 79
SIx MontHS enDeD ApRIl 30, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
nIne MontHS enDeD Jul Y 31, 2013
AS RepoR teD
ADJuStMentS
ReSt AteD
caSh f lowS from oP er atIng a c tIvItIeS :
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
$
4,874
$
(5,852)
$
(978)
net income
$ 10,999
$
(9,715)
$
1,284
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
3,293
84
1,444
191
—
(20,479)
(2,486)
(1,349)
2,338
(113)
143
10,516
5,027
3,483
(3,092)
(3,092)
(9,646)
14,970
(1,611)
(4,788)
700
(375)
16
7,103
Cash and cash equivalents, end of year
$
7,119
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Collection for Agricola belher Infrastructure Advance
unrealized holding (losses)
$
$
208
1,690
(6,638)
$
$
$
$
—
—
10,164
—
(4,361)
—
—
—
—
49
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,293
84
11,608
191
(4,361)
(20,479)
(2,486)
(1,349)
2,338
(64)
143
10,516
5,027
3,483
(3,092)
(3,092)
(9,646)
14,970
(1,611)
(4,788)
700
(375)
16
7,103
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
Retirement of stock purchased from limoneira
proceeds from stock option exercises
net cash used in financing activities
net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
5,011
133
1,801
288
—
(21,594)
(8,642)
(1,594)
406
2,891
62
21,264
4,599
15,624
(4,943)
(4,943)
(9,646)
5,810
(3,933)
(4,788)
700
(11,857)
(1,176)
7,103
$
7,119
Cash and cash equivalents, end of year
$
5,927
$
—
—
13,391
—
(3,738)
—
—
—
—
62
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,011
133
15,192
288
(3,738)
(21,594)
(8,642)
(1,594)
406
2,953
62
21,264
4,599
15,624
(4,943)
(4,943)
(9,646)
5,810
(3,933)
(4,788)
700
(11,857)
(1,176)
7,103
$
5,927
$
$
208
1,690
(6,638)
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
$
208
$
—
$
208
Calavo Growers, Inc. 2014 AnnuAl RepoR t
78 . 79
tHRee MontHS enDeD JAnuARY 31, 2014
AS RepoR teD
ADJuStMentS
ReSt AteD
SIx MontHS enDeD ApRIl 30, 2014
AS RepoR teD
ADJuStMentS
ReSt AteD
caSh f lowS from oP er atIng a c tIvItIeS :
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
$
3,475
$
(5,389)
$
(1,914)
net income (loss)
$
9,887
$
(10,545)
$
(658)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Income (loss) from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash used in operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in unconsolidated entity
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
proceeds from stock option exercises
net cash provided by financing activities
net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
1,689
1
9
—
93
—
(5,000)
1,014
(1,208)
(206)
(100)
(103)
(9,769)
3,485
(6,620)
(1,674)
(125)
(1,799)
(11,005)
18,700
(964)
15
6,746
(1,673)
8,019
Cash and cash equivalents, end of year
$
6,346
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
unrealized holding (losses)
$
$
122
(9,628)
$
$
$
—
—
—
9,287
—
(5,463)
—
—
—
—
1,565
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,689
1
9
9,287
93
(5,463)
(5,000)
1,014
(1,208)
(206)
1,465
(103)
(9,769)
3,485
(6,620)
(1,674)
(125)
(1,799)
(11,005)
18,700
(964)
15
6,746
(1,673)
8,019
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
loss from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in unconsolidated entity
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
proceeds from issuance of FreshRealm stock
proceeds from stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
$
6,346
Cash and cash equivalents, beginning of year
3,378
12
18
—
303
—
(9,033)
(3,588)
(2,771)
3,174
1,415
78
4,628
5,762
13,263
(5,464)
(125)
(5,589)
(11,005)
7,040
(1,928)
10,000
114
4,221
11,895
8,019
—
—
—
16,442
—
(6,518)
—
—
—
—
621
—
—
—
—
—
—
—
—
—
—
(10,000)
—
(10,000)
(10,000)
—
3,378
12
18
16,442
303
(6,518)
(9,033)
(3,588)
(2,771)
3,174
2,036
78
4,628
5,762
13,263
(5,464)
(125)
(5,589)
(11,005)
7,040
(1,928)
—
114
(5,779)
1,895
8,019
Cash and cash equivalents, end of year
$ 19,914
$
(10,000)
$
9,914
$
$
122
(9,628)
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
unrealized holding (losses)
$
$
175
(5,825)
$
$
—
—
$
$
175
(5,825)
80. 81
Calavo Growers, Inc. 2014 AnnuAl RepoR t
tHRee MontHS enDeD JAnuARY 31, 2014
AS RepoR teD
ADJuStMentS
ReSt AteD
SIx MontHS enDeD ApRIl 30, 2014
AS RepoR teD
ADJuStMentS
ReSt AteD
caSh f lowS from oP er atIng a c tIvItIeS :
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
$
3,475
$
(5,389)
$
(1,914)
net income (loss)
$
9,887
$
(10,545)
$
(658)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Income (loss) from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash used in operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in unconsolidated entity
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
proceeds from stock option exercises
net cash provided by financing activities
net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
1,689
1
9
—
93
—
(5,000)
1,014
(1,208)
(206)
(100)
(103)
(9,769)
3,485
(6,620)
(1,674)
(125)
(1,799)
(11,005)
18,700
(964)
15
6,746
(1,673)
8,019
Cash and cash equivalents, end of year
$
6,346
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
unrealized holding (losses)
$
$
122
(9,628)
$
$
$
—
—
—
9,287
—
(5,463)
—
—
—
—
1,565
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,689
1
9
9,287
93
(5,463)
(5,000)
1,014
(1,208)
(206)
1,465
(103)
(9,769)
3,485
(6,620)
(1,674)
(125)
(1,799)
(11,005)
18,700
(964)
15
6,746
(1,673)
8,019
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
loss from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Investment in unconsolidated entity
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
proceeds from issuance of FreshRealm stock
proceeds from stock option exercises
net cash used in financing activities
net increase in cash and cash equivalents
$
6,346
Cash and cash equivalents, beginning of year
3,378
12
18
—
303
—
(9,033)
(3,588)
(2,771)
3,174
1,415
78
4,628
5,762
13,263
(5,464)
(125)
(5,589)
(11,005)
7,040
(1,928)
10,000
114
4,221
11,895
8,019
—
—
—
16,442
—
(6,518)
—
—
—
—
621
—
—
—
—
—
—
—
—
—
—
(10,000)
—
(10,000)
(10,000)
—
3,378
12
18
16,442
303
(6,518)
(9,033)
(3,588)
(2,771)
3,174
2,036
78
4,628
5,762
13,263
(5,464)
(125)
(5,589)
(11,005)
7,040
(1,928)
—
114
(5,779)
1,895
8,019
Cash and cash equivalents, end of year
$ 19,914
$
(10,000)
$
9,914
$
$
122
(9,628)
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
unrealized holding (losses)
$
$
175
(5,825)
$
$
—
—
$
$
175
(5,825)
80. 81
Calavo Growers, Inc. 2014 AnnuAl RepoR t
nIne MontHS enDeD Jul Y 31, 2014
AS RepoR teD
ADJuStMentS
ReSt AteD
20. SuBSeQuent eventS
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
$ 25,859
$
(25,026)
$
833
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
loss from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Gain on deconsolidation of FreshRealm
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Decrease in cash due to deconsolidation of FreshRealm
Investment in Agricola Don Memo
Investment in unconsolidated entity
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
proceeds from stock option exercises
proceeds from issuance of FreshRealm stock
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
5,113
88
13
28
—
517
(12,622)
—
(8,759)
(4,362)
(3,280)
1,828
5,884
135
7,274
9,769
27,485
(7,085)
(6,813)
(1,730)
(125)
(15,753)
(11,005)
(5,250)
(4,190)
130
10,000
(10,315)
1,417
8,019
Cash and cash equivalents, end of year
$
9,436
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Collection for Agricola belher Infrastructure Advance
unrealized holding (losses)
$
$
$
191
845
(7,416)
$
$
$
$
—
—
—
—
40,767
—
—
(14,984)
—
—
—
—
(757)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,113
88
13
28
40,767
517
(12,622)
(14,984)
(8,759)
(4,362)
(3,280)
1,828
5,127
135
7,274
9,769
27,485
(7,085)
(6,813)
(1,730)
(125)
(15,753)
(11,005)
(5,250)
(4,190)
130
10,000
(10,315)
1,417
8,019
$
9,436
$
$
$
191
845
(7,416)
We have evaluated subsequent events to assess the need
for potential recognition or disclosure in this Annual Report on
Form 10-K. Such events were evaluated through the date these
financial statements were issued.
Controls and procedures
DiSClOSure COntrOlS AnD prOCeDureS
Disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) promulgated under the exchange
Act, are controls and other procedures that are designed to ensure
that information required to be disclosed by us in the reports that
we file or submit under the exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms of the SeC. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information we are required to disclose in the reports
that we file or submit under the exchange Act is accumulated and
communicated to our management, including our Chief executive
officer and Chief Financial officer, as appropriate to allow timely
decisions regarding required disclosures.
As of october 31, 2014, our management, with the
participation of our Chief executive officer and Chief Financial
officer, carried out an evaluation of the effectiveness of our
disclosure controls and procedures pursuant to Rule 13a-15(e)
promulgated under the exchange Act. based on that evaluation
and as a result of the material weakness in internal control over
financial reporting as set forth below, the Company’s Chief
executive officer and Chief Financial officer concluded that the
Company’s disclosure controls and procedures were not effective
as of october 31, 2014. our management’s annual report on
internal control over financial reporting is set forth below.
MAnAgeMent’S repOrt On internAl COntrOl
Over FinAnCiAl repOrting
our management is responsible for establishing and
maintaining adequate internal control over financial reporting
as such term is defined in exchange Act Rules 13a-15(f) and
15d-15(f). Internal control over financial reporting refers to the
process designed by, or under the supervision of, our Chief
executive officer and Chief Financial officer, and effected by our
board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles.
With the participation of the Chief executive officer and
Chief Financial officer, our management conducted an evaluation
of the effectiveness of our internal control over financial
reporting based on the framework and criteria established in
the 1992 “Internal Control—Integrated Framework,” issued by
the Committee of Sponsoring organizations of the treadway
Commission. based upon this evaluation, our Chief executive
officer and Chief Financial officer concluded that, as of
october 31, 2014, our internal controls over financial reporting
In January 2015, various class action lawsuits have been
initiated against the company related to the restatement of
previously-issued financial statements, we believe these are
without merit and will defend ourselves vigorously.
were not effective due to a material weakness in our controls
over our accounting for contingent consideration as such applies
to business combinations.
As of october 31, 2014, there was a material weakness in
the Company’s controls over its accounting for and reporting
of contingent consideration as such applies to business
combinations. Specifically, our controls did not properly identify
the failure to apply generally accepted accounting principles with
respect to what qualifies as an equity instrument vs. a liability
instrument in a business combination. Initially, we recorded
the contingent consideration, which was settleable in common
stock, as an equity instrument and therefore did not record
expense based on the changes in fair value of the contingent
consideration. However, the contingent consideration should
have been accounted for as a liability requiring re-measurement
to fair value. As a result, material errors to the recorded
contingent consideration occurred and were not timely detected.
ernst & Young llp, an independent registered public
accounting firm, issued an attestation report on the Company’s
internal control over financial reporting as of october 31, 2014,
as stated in their report which is included herein.
remeDIatIon effortS to aDDreSS materIal weakneSS
to remediate the material weakness described above, we
are currently evaluating the controls and procedures we will
design and put in place to address this material weakness and
plan to implement appropriate measures as part of this effort.
these controls and procedures may include engagement of
independent consultants to aid the Company in its review of
future acquisitions for proper accounting.
Any actions we have taken or may take to remediate this
material weakness are subject to continued management
review supported by testing, as well as oversight by the Audit
Committee of our board of Directors. We cannot assure you,
in any way, even if we involve an independent consultant,
that material weaknesses or significant deficiencies will not
occur in the future and that we will be able to remediate such
weaknesses or deficiencies in a timely manner, which could
impair our ability to accurately and timely report our financial
position, results of operations or cash flows.
changeS In Internal control over fInancIal rePortIng
except as described above, there has been no change
in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) promulgated under the exchange
Act) during our fiscal quarter ended october 31, 2014, that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
82 . 83
nIne MontHS enDeD Jul Y 31, 2014
AS RepoR teD
ADJuStMentS
ReSt AteD
20. SuBSeQuent eventS
caSh f lowS from oP er atIng a c tIvItIeS :
net income (loss)
$ 25,859
$
(25,026)
$
833
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
provision for losses on accounts receivable
loss from unconsolidated entities
Interest on contingent consideration
Contingent consideration and non-cash compensation
related to the acquisition of RFG
Stock compensation expense
Gain on deconsolidation of FreshRealm
Deferred income taxes
effect on cash of changes in operating assets and liabilities:
Accounts receivable
Inventories, net
prepaid expenses and other current assets
Advances to suppliers
Income taxes receivable
other assets
payable to growers
trade accounts payable and accrued expenses
net cash provided by operating activities
caSh f lowS from Inve StIng a c tIvItIeS :
Acquisitions of property, plant, and equipment
Decrease in cash due to deconsolidation of FreshRealm
Investment in Agricola Don Memo
Investment in unconsolidated entity
net cash used in investing activities
caSh f lowS from fI nancIng a c tIvItIeS :
payment of dividend to shareholders
proceeds from revolving credit facility, net
payments on long-term obligations
proceeds from stock option exercises
proceeds from issuance of FreshRealm stock
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
5,113
88
13
28
—
517
(12,622)
—
(8,759)
(4,362)
(3,280)
1,828
5,884
135
7,274
9,769
27,485
(7,085)
(6,813)
(1,730)
(125)
(15,753)
(11,005)
(5,250)
(4,190)
130
10,000
(10,315)
1,417
8,019
Cash and cash equivalents, end of year
$
9,436
noncaSh InveStIng anD fI nancIng a c tIvItIeS :
tax receivable increase related to stock option exercise
Collection for Agricola belher Infrastructure Advance
unrealized holding (losses)
$
$
$
191
845
(7,416)
$
$
$
$
—
—
—
—
40,767
—
—
(14,984)
—
—
—
—
(757)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,113
88
13
28
40,767
517
(12,622)
(14,984)
(8,759)
(4,362)
(3,280)
1,828
5,127
135
7,274
9,769
27,485
(7,085)
(6,813)
(1,730)
(125)
(15,753)
(11,005)
(5,250)
(4,190)
130
10,000
(10,315)
1,417
8,019
$
9,436
$
$
$
191
845
(7,416)
We have evaluated subsequent events to assess the need
for potential recognition or disclosure in this Annual Report on
Form 10-K. Such events were evaluated through the date these
financial statements were issued.
Controls and procedures
DiSClOSure COntrOlS AnD prOCeDureS
Disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) promulgated under the exchange
Act, are controls and other procedures that are designed to ensure
that information required to be disclosed by us in the reports that
we file or submit under the exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms of the SeC. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information we are required to disclose in the reports
that we file or submit under the exchange Act is accumulated and
communicated to our management, including our Chief executive
officer and Chief Financial officer, as appropriate to allow timely
decisions regarding required disclosures.
As of october 31, 2014, our management, with the
participation of our Chief executive officer and Chief Financial
officer, carried out an evaluation of the effectiveness of our
disclosure controls and procedures pursuant to Rule 13a-15(e)
promulgated under the exchange Act. based on that evaluation
and as a result of the material weakness in internal control over
financial reporting as set forth below, the Company’s Chief
executive officer and Chief Financial officer concluded that the
Company’s disclosure controls and procedures were not effective
as of october 31, 2014. our management’s annual report on
internal control over financial reporting is set forth below.
MAnAgeMent’S repOrt On internAl COntrOl
Over FinAnCiAl repOrting
our management is responsible for establishing and
maintaining adequate internal control over financial reporting
as such term is defined in exchange Act Rules 13a-15(f) and
15d-15(f). Internal control over financial reporting refers to the
process designed by, or under the supervision of, our Chief
executive officer and Chief Financial officer, and effected by our
board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles.
With the participation of the Chief executive officer and
Chief Financial officer, our management conducted an evaluation
of the effectiveness of our internal control over financial
reporting based on the framework and criteria established in
the 1992 “Internal Control—Integrated Framework,” issued by
the Committee of Sponsoring organizations of the treadway
Commission. based upon this evaluation, our Chief executive
officer and Chief Financial officer concluded that, as of
october 31, 2014, our internal controls over financial reporting
In January 2015, various class action lawsuits have been
initiated against the company related to the restatement of
previously-issued financial statements, we believe these are
without merit and will defend ourselves vigorously.
were not effective due to a material weakness in our controls
over our accounting for contingent consideration as such applies
to business combinations.
As of october 31, 2014, there was a material weakness in
the Company’s controls over its accounting for and reporting
of contingent consideration as such applies to business
combinations. Specifically, our controls did not properly identify
the failure to apply generally accepted accounting principles with
respect to what qualifies as an equity instrument vs. a liability
instrument in a business combination. Initially, we recorded
the contingent consideration, which was settleable in common
stock, as an equity instrument and therefore did not record
expense based on the changes in fair value of the contingent
consideration. However, the contingent consideration should
have been accounted for as a liability requiring re-measurement
to fair value. As a result, material errors to the recorded
contingent consideration occurred and were not timely detected.
ernst & Young llp, an independent registered public
accounting firm, issued an attestation report on the Company’s
internal control over financial reporting as of october 31, 2014,
as stated in their report which is included herein.
remeDIatIon effortS to aDDreSS materIal weakneSS
to remediate the material weakness described above, we
are currently evaluating the controls and procedures we will
design and put in place to address this material weakness and
plan to implement appropriate measures as part of this effort.
these controls and procedures may include engagement of
independent consultants to aid the Company in its review of
future acquisitions for proper accounting.
Any actions we have taken or may take to remediate this
material weakness are subject to continued management
review supported by testing, as well as oversight by the Audit
Committee of our board of Directors. We cannot assure you,
in any way, even if we involve an independent consultant,
that material weaknesses or significant deficiencies will not
occur in the future and that we will be able to remediate such
weaknesses or deficiencies in a timely manner, which could
impair our ability to accurately and timely report our financial
position, results of operations or cash flows.
changeS In Internal control over fInancIal rePortIng
except as described above, there has been no change
in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) promulgated under the exchange
Act) during our fiscal quarter ended october 31, 2014, that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Calavo Growers, Inc. 2014 AnnuAl RepoR t
82 . 83
report of independent registered public Accounting Firm
report of independent registered public Accounting Firm
the BOArD OF DireCtOrS AnD ShArehOlDerS OF CAlA
vO grOwerS, inC.
the BOArD OF DireCtOrS AnD ShArehOlDerS OF CAlA
vO grOwerS, inC.
We have audited the accompanying consolidated balance sheets of Calavo Growers, Inc. as of october 31, 2014 and 2013 (restated),
We have audited Calavo Growers, Inc.’s internal control over financial reporting as of october 31, 2014, based on criteria established
and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the
years ended october 31, 2014, october 31, 2013 (restated) and october 31, 2012 (restated). our audits also included the financial
statement schedule listed in the Index at Item 15(a)(2). these financial statements and schedule are the responsibility of the Company’s
management. our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the public Company Accounting oversight board (united States). those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Calavo Growers, Inc. at october 31, 2014 and 2013 (restated), and the consolidated results of its operations and its cash flows for the
years ended october 31, 2014, october 31, 2013 (restated) and october 31, 2012 (restated), in conformity with u.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in note 3 to the consolidated financial statements, the october 31, 2013 and 2012 consolidated financial statements
have been restated to correct errors for the improper accounting for business combination contingent consideration.
We also have audited, in accordance with the standards of the public Company Accounting oversight board (united States), Calavo
Growers, Inc.’s internal control over financial reporting as of october 31, 2014, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring organizations of the treadway Commission (1992 framework) and our report dated
January 30, 2015 expressed an adverse opinion thereon.
los Angeles, California
January 30, 2015
in Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the treadway Commission (1992
framework) (the CoSo criteria). Calavo Growers, Inc.’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the public Company Accounting oversight board (united States). those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. the following material weakness has been identified and included in management’s report on internal control
over financial reporting. Management has identified a material weakness in the design and operation of the Company’s controls over
its accounting for business combination contingent consideration. We also have audited, in accordance with the standards of the public
Company Accounting oversight board (united States), the consolidated balance sheets of Calavo Growers, Inc. as of october 31, 2014
and 2013 (restated) and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash
flows for the years ended october 31, 2014, october 31, 2013 (restated) and october 31, 2012 (restated). this material weakness was
considered in determining the nature, timing and extent of audit tests applied in our audit of those financial statements, and this report
does not affect our report dated January 30, 2015, which expressed an unqualified opinion on those financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control
criteria, Calavo Growers, Inc. has not maintained effective internal control over financial reporting as of october 31, 2014, based on the
CoSo criteria.
los Angeles, California
January 30, 2015
84 . 85
Calavo Growers, Inc. 2014 AnnuAl RepoR t
report of independent registered public Accounting Firm
report of independent registered public Accounting Firm
the BOArD OF DireCtOrS AnD ShArehOlDerS OF CAlA
vO grOwerS, inC.
the BOArD OF DireCtOrS AnD ShArehOlDerS OF CAlA
vO grOwerS, inC.
We have audited the accompanying consolidated balance sheets of Calavo Growers, Inc. as of october 31, 2014 and 2013 (restated),
We have audited Calavo Growers, Inc.’s internal control over financial reporting as of october 31, 2014, based on criteria established
and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the
years ended october 31, 2014, october 31, 2013 (restated) and october 31, 2012 (restated). our audits also included the financial
statement schedule listed in the Index at Item 15(a)(2). these financial statements and schedule are the responsibility of the Company’s
management. our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the public Company Accounting oversight board (united States). those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Calavo Growers, Inc. at october 31, 2014 and 2013 (restated), and the consolidated results of its operations and its cash flows for the
years ended october 31, 2014, october 31, 2013 (restated) and october 31, 2012 (restated), in conformity with u.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in note 3 to the consolidated financial statements, the october 31, 2013 and 2012 consolidated financial statements
have been restated to correct errors for the improper accounting for business combination contingent consideration.
We also have audited, in accordance with the standards of the public Company Accounting oversight board (united States), Calavo
Growers, Inc.’s internal control over financial reporting as of october 31, 2014, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring organizations of the treadway Commission (1992 framework) and our report dated
January 30, 2015 expressed an adverse opinion thereon.
los Angeles, California
January 30, 2015
in Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the treadway Commission (1992
framework) (the CoSo criteria). Calavo Growers, Inc.’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the public Company Accounting oversight board (united States). those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. the following material weakness has been identified and included in management’s report on internal control
over financial reporting. Management has identified a material weakness in the design and operation of the Company’s controls over
its accounting for business combination contingent consideration. We also have audited, in accordance with the standards of the public
Company Accounting oversight board (united States), the consolidated balance sheets of Calavo Growers, Inc. as of october 31, 2014
and 2013 (restated) and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash
flows for the years ended october 31, 2014, october 31, 2013 (restated) and october 31, 2012 (restated). this material weakness was
considered in determining the nature, timing and extent of audit tests applied in our audit of those financial statements, and this report
does not affect our report dated January 30, 2015, which expressed an unqualified opinion on those financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control
criteria, Calavo Growers, Inc. has not maintained effective internal control over financial reporting as of october 31, 2014, based on the
CoSo criteria.
los Angeles, California
January 30, 2015
84 . 85
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Market for registrant’s Common equity, related
Stockholder Matters and issuer purchases of equity Securities
Corporate information
In March 2002, our common stock began trading on the otC bulletin board under the symbol “CVGW.” In July 2002, our common
stock began trading on the nasdaq national Market under the symbol “CVGW” and currently trades on the nasdaq Global Select Market.
the following tables set forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on
the nasdaq Global Select Market.
FISCAl 2014
First Quarter
Second Quarter
third Quarter
Fourth Quarter
HIGH
loW
FISCAl 2013
HIGH
loW
$ 32.49
$ 36.17
$ 35.23
$ 48.63
$ 28.30
First Quarter
$ 28.69
Second Quarter
$ 29.91
third Quarter
$ 35.51
Fourth Quarter
$ 24.74
$ 29.06
$ 31.68
$ 30.77
$ 20.88
$ 24.57
$ 25.66
$ 24.19
As of november 30, 2014, there were approximately 948 stockholders of record of our common stock.
As previously reported on Current Reports on Form 8-K, we issued 1,531,996 shares of unregistered Calavo common stock per the
RFG Amended Acquisition Agreement, in october 2014. We filed an S-3 registration statement registering the resale of 1,097,213 of
these shares in october 2014.
DiviDenD pOliCy
our dividend policy is to provide for an annual dividend payment, as determined by the board of Directors. We anticipate paying
dividends in the first quarter of our fiscal year.
on December 8, 2014, we paid a $0.75 per share dividend in the aggregate amount of $13.0 million to shareholders of record
on november 17, 2014.
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.
Shareowner return performance graph
the following graph compares the performance of our common stock with the performance of the nasdaq Market Index and a peer
Group of major diversified companies in our same industry for approximately the 60-month period beginning on october 31, 2009 and
ending october 31, 2014. In making this comparison, we have assumed an investment of $100 in Calavo Growers, Inc. common stock,
the nasdaq Market Index , and the peer Group Index as of october 31, 2009. We have also assumed the reinvestment of all dividends.
comP arISon of 5-year cUmUlatIve total retUrn*
Among Calavo Growers, Inc., the nASDAQ Composite Index, and a peer Group
$400
$350
$300
$250
$200
$150
$100
$50
$0
10/09
10/10
10/11
10/12
10/13
10/14
Calavo Growers, Inc.
nASDAQ Composite
peer Group
*$100 invested on 10/31/09 in stock or index, including reinvestment of dividends. Fiscal year ending october 31.
offIcerS
aUDIt commIttee
heaDQUarterS
lecil e. cole
Chairman, president
and Chief executive officer
arthur j. Bruno
Chief operating officer
Chief Financial officer
Corporate Secretary
rob wedin
Vice president
Fresh Sales and Marketing
al ahmer
Vice president
Foods Division Sales
and operations
mike Browne
Vice president
Fresh operations
james e. Snyder
Corporate Controller
Chief Accounting officer
offIcer—calavo De meXIco
Dionisio ortiz
Vice president, operations
PrIncIP al BoarD commItteeS
eXecUtIve commIttee
lecil e. cole
Chairman
j. link leavens
First Vice Chairman
Scott n. van Der kar
Second Vice Chairman
Dorcas h. thille
Donald “mike” Sanders
harold S. edwards
egidio “gene” carbone, jr.
Chairman
george h. Barnes
john m. hunt
Steven w. hollister
michael a. “mike” Digregorio
nomInatIng &
governance commIttee
john m. hunt
Chairman
george h. Barnes
marc Brown
comPenSatIon commIttee
Steven w. hollister
Chairman
james D. helin
calavo growers, Inc.
1141A Cummings Road
Santa paula, California 93060
telephone 805.525.1245
Fax 805.921.3219
www.calavo.com
general coUnSel
troy gould Pc
los Angeles, California
InDePenDent regIStereD PUBlIc
accoUntIng fIrm
ernst & young llP
los Angeles, California
InveStor & corPorate
relatIonS coUnSel
foleyfreisleben llc
los Angeles, California
michael a. “mike” Digregorio
form 10-k
A copy of the company’s annual
report as filed upon Form 10-K
is available upon request to the
Corporate Controller or online
from the Securities and exchange
Commission at www.sec.gov.
tranSfer agent & regIStrar
computershare
trust Company, n.A.
Canton, Massachusetts
common Stock lIStIng
Shares of the company’s common stock
are listed on the nasdaq Global Select
Market under the symbol CVGW.
oPeratIng DIrectorS & managerS
Bruce Spurrell
Director, purchasing
and Risk Management
john agapin
Director, Systems Analysis
and planning
michael f. Derr
Director, Fresh packing
michael angelo
Director, national Fresh Sales
Patricia D. vorhies
Director, Human Resources
gary m. gunther
Director, Fresh operations
Special projects
michael lippold
Director, Strategic Development
joseph malagone
packinghouse Manager, Santa paula
francisco orozco
packinghouse Manager, temecula
Calavo Growers, Inc. 2014 AnnuAl RepoR t
86 . 87
Market for registrant’s Common equity, related
Stockholder Matters and issuer purchases of equity Securities
Corporate information
In March 2002, our common stock began trading on the otC bulletin board under the symbol “CVGW.” In July 2002, our common
stock began trading on the nasdaq national Market under the symbol “CVGW” and currently trades on the nasdaq Global Select Market.
the following tables set forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on
the nasdaq Global Select Market.
FISCAl 2014
First Quarter
Second Quarter
third Quarter
Fourth Quarter
HIGH
loW
FISCAl 2013
HIGH
loW
$ 32.49
$ 36.17
$ 35.23
$ 48.63
$ 28.30
First Quarter
$ 28.69
Second Quarter
$ 29.91
third Quarter
$ 35.51
Fourth Quarter
$ 24.74
$ 29.06
$ 31.68
$ 30.77
$ 20.88
$ 24.57
$ 25.66
$ 24.19
As of november 30, 2014, there were approximately 948 stockholders of record of our common stock.
As previously reported on Current Reports on Form 8-K, we issued 1,531,996 shares of unregistered Calavo common stock per the
RFG Amended Acquisition Agreement, in october 2014. We filed an S-3 registration statement registering the resale of 1,097,213 of
these shares in october 2014.
DiviDenD pOliCy
our dividend policy is to provide for an annual dividend payment, as determined by the board of Directors. We anticipate paying
dividends in the first quarter of our fiscal year.
on December 8, 2014, we paid a $0.75 per share dividend in the aggregate amount of $13.0 million to shareholders of record
on november 17, 2014.
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.
Shareowner return performance graph
the following graph compares the performance of our common stock with the performance of the nasdaq Market Index and a peer
Group of major diversified companies in our same industry for approximately the 60-month period beginning on october 31, 2009 and
ending october 31, 2014. In making this comparison, we have assumed an investment of $100 in Calavo Growers, Inc. common stock,
the nasdaq Market Index , and the peer Group Index as of october 31, 2009. We have also assumed the reinvestment of all dividends.
comP arISon of 5-year cUmUlatIve total retUrn*
Among Calavo Growers, Inc., the nASDAQ Composite Index, and a peer Group
$400
$350
$300
$250
$200
$150
$100
$50
$0
10/09
10/10
10/11
10/12
10/13
10/14
Calavo Growers, Inc.
nASDAQ Composite
peer Group
*$100 invested on 10/31/09 in stock or index, including reinvestment of dividends. Fiscal year ending october 31.
offIcerS
aUDIt commIttee
heaDQUarterS
lecil e. cole
Chairman, president
and Chief executive officer
arthur j. Bruno
Chief operating officer
Chief Financial officer
Corporate Secretary
rob wedin
Vice president
Fresh Sales and Marketing
al ahmer
Vice president
Foods Division Sales
and operations
mike Browne
Vice president
Fresh operations
james e. Snyder
Corporate Controller
Chief Accounting officer
offIcer—calavo De meXIco
Dionisio ortiz
Vice president, operations
PrIncIP al BoarD commItteeS
eXecUtIve commIttee
lecil e. cole
Chairman
j. link leavens
First Vice Chairman
Scott n. van Der kar
Second Vice Chairman
Dorcas h. thille
Donald “mike” Sanders
harold S. edwards
egidio “gene” carbone, jr.
Chairman
george h. Barnes
john m. hunt
Steven w. hollister
michael a. “mike” Digregorio
nomInatIng &
governance commIttee
john m. hunt
Chairman
george h. Barnes
marc Brown
comPenSatIon commIttee
Steven w. hollister
Chairman
james D. helin
calavo growers, Inc.
1141A Cummings Road
Santa paula, California 93060
telephone 805.525.1245
Fax 805.921.3219
www.calavo.com
general coUnSel
troy gould Pc
los Angeles, California
InDePenDent regIStereD PUBlIc
accoUntIng fIrm
ernst & young llP
los Angeles, California
InveStor & corPorate
relatIonS coUnSel
foleyfreisleben llc
los Angeles, California
michael a. “mike” Digregorio
form 10-k
A copy of the company’s annual
report as filed upon Form 10-K
is available upon request to the
Corporate Controller or online
from the Securities and exchange
Commission at www.sec.gov.
tranSfer agent & regIStrar
computershare
trust Company, n.A.
Canton, Massachusetts
common Stock lIStIng
Shares of the company’s common stock
are listed on the nasdaq Global Select
Market under the symbol CVGW.
oPeratIng DIrectorS & managerS
Bruce Spurrell
Director, purchasing
and Risk Management
john agapin
Director, Systems Analysis
and planning
michael f. Derr
Director, Fresh packing
michael angelo
Director, national Fresh Sales
Patricia D. vorhies
Director, Human Resources
gary m. gunther
Director, Fresh operations
Special projects
michael lippold
Director, Strategic Development
joseph malagone
packinghouse Manager, Santa paula
francisco orozco
packinghouse Manager, temecula
Calavo Growers, Inc. 2014 AnnuAl RepoR t
86 . 87
Calavo Growers, Inc. is a leading packer and marketer of fresh and prepared avocados
throughout the united States and other countries globally, as well as an expanding distributor
of other diversified produce items sold under the company’s well-respected brand name and its
Maui Fresh label, a wholly owned subsidiary. the company supplies wholesale, retail, restaurant
and institutional food service customers on a world-wide basis through its three principal
operating units—Fresh products, Calavo Foods and Renaissance Food Group, llC (RFG).
Calavo packs, markets and distributes about 22 percent of the available all-source fresh avocado
supply to the united States and Canada, nearly twice the market share of its closest competitor.
the company sources these avocados from California, Mexico and Chile to satisfy year-round
domestic demand, for export and for use in prepared products. Calavo is also a leading marketer
of fresh fruit grown in the Hawaiian Islands, including papayas and other tropical-produce items.
other diversified fresh produce items include Calavo-brand tomatoes and pineapples, as well as
Hispanic specialties such as a wide range of chilies.
the company’s Calavo Foods business unit manufactures and distributes prepared items
including fresh refrigerated guacamole and other avocado products, as well as guacamole
hummus. under the Calavo Salsa lisa brand, the company produces and sells six varieties
of wholesome refrigerated fresh salsa made with all-natural ingredients. the company also
distributes Calavo premium tortilla Chips. Calavo’s RFG business unit, acquired in June 2011, is
a leader in the fast-growing refrigerated fresh packaged goods category through an array of retail
product lines for produce, deli, meat and food-service departments sold under brands that
include Garden Highway and Chef essentials.
Founded in 1924 as a grower-owned cooperative, Calavo today is publicly traded on the
nasdaq Global Select Market under the ticker symbol CVGW. employing nearly 2,000 people, the
company is headquartered in Santa paula, California, where it also operates one of three fresh-
avocado packinghouses and a Value Added Depot, housing sales, distribution and advanced
ripening technologies. Calavo’s additional two packinghouses are located in temecula, California
and uruapan, Michoacán, Mexico, where the company also operates its prepared-avocado
manufacturing facility. there are additional Value Added Depots equipped with the company’s
proprietary proRipeVIp® technology in Dallas, texas and Swedesboro, new Jersey. RFG operates
six production and distribution centers strategically situated across the united States.
Calavo.
Creative Direction: Dan mcnulty Designed: mc BrandStudios www.mc-brandstudios.com Concept/editorial: foleyfreisleben llc www.folfry.com photography: marcelo coelho www.marcelocoelho.com
printing: jano graphics www.janographics.com
88 .
Calavo Growers, Inc. 2014 AnnuAl RepoR t
Senior Management
(from left to right)
Arthur J. BrunO Chief OperatingOfficer, Chief Financial Officer and Corporate Secretary rOB weDin Vice President, Fresh Sales and Marketing
Al AhMer Vice President, Foods Division Sales and Operations Mike BrOwne Vice President, Fresh Operations
Calavo Growers, Inc. is a leading packer and marketer of fresh and prepared avocados
throughout the united States and other countries globally, as well as an expanding distributor
of other diversified produce items sold under the company’s well-respected brand name and its
Maui Fresh label, a wholly owned subsidiary. the company supplies wholesale, retail, restaurant
and institutional food service customers on a world-wide basis through its three principal
operating units—Fresh products, Calavo Foods and Renaissance Food Group, llC (RFG).
Calavo packs, markets and distributes about 22 percent of the available all-source fresh avocado
supply to the united States and Canada, nearly twice the market share of its closest competitor.
the company sources these avocados from California, Mexico and Chile to satisfy year-round
domestic demand, for export and for use in prepared products. Calavo is also a leading marketer
of fresh fruit grown in the Hawaiian Islands, including papayas and other tropical-produce items.
other diversified fresh produce items include Calavo-brand tomatoes and pineapples, as well as
Hispanic specialties such as a wide range of chilies.
the company’s Calavo Foods business unit manufactures and distributes prepared items
including fresh refrigerated guacamole and other avocado products, as well as guacamole
hummus. under the Calavo Salsa lisa brand, the company produces and sells six varieties
of wholesome refrigerated fresh salsa made with all-natural ingredients. the company also
distributes Calavo premium tortilla Chips. Calavo’s RFG business unit, acquired in June 2011, is
a leader in the fast-growing refrigerated fresh packaged goods category through an array of retail
product lines for produce, deli, meat and food-service departments sold under brands that
include Garden Highway and Chef essentials.
Founded in 1924 as a grower-owned cooperative, Calavo today is publicly traded on the
nasdaq Global Select Market under the ticker symbol CVGW. employing nearly 2,000 people, the
company is headquartered in Santa paula, California, where it also operates one of three fresh-
avocado packinghouses and a Value Added Depot, housing sales, distribution and advanced
ripening technologies. Calavo’s additional two packinghouses are located in temecula, California
and uruapan, Michoacán, Mexico, where the company also operates its prepared-avocado
manufacturing facility. there are additional Value Added Depots equipped with the company’s
proprietary proRipeVIp® technology in Dallas, texas and Swedesboro, new Jersey. RFG operates
six production and distribution centers strategically situated across the united States.
Calavo.
Creative Direction: Dan mcnulty Designed: mc BrandStudios www.mc-brandstudios.com Concept/editorial: foleyfreisleben llc www.folfry.com photography: marcelo coelho www.marcelocoelho.com
printing: jano graphics www.janographics.com
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Calavo Growers, Inc. 2014 AnnuAl RepoR t
Senior Management
(from left to right)
Arthur J. BrunO Chief OperatingOfficer, Chief Financial Officer and Corporate Secretary rOB weDin Vice President, Fresh Sales and Marketing
Al AhMer Vice President, Foods Division Sales and Operations Mike BrOwne Vice President, Fresh Operations
Calavo Growers, Inc. 2014 AnnuAl RePoR t
Calavo Growers, Inc. 1141A Cummings Road, Santa Paula, California 93060 www.calavo.com
Eat. Live. Grow.