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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


 

FORM 10-Q

 

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

 

For the quarterly period ended July 31, 2015

 

OR

 

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

 

Commission file number: 000-33385

 

CALAVO GROWERS, INC.

(Exact name of registrant as specified in its charter)

 

California

33-0945304

(State of incorporation)

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

 

1141-A Cummings Road

Santa Paula, California   93060

(Address of principal executive offices) (Zip code)

 

(805) 525-1245

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     

Yes    No

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes     No  

 

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

 

Large accelerated filer  

Accelerated filer 

Non-accelerated filer 

Smaller Reporting Company 

 

(Do not check if a smaller reporting company)

 

 

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

 

Registrant's number of shares of common stock outstanding as of July 31, 2015 was 17,383,295

 


 

 

 


 

CAUTIONARY STATEMENT

 

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo Growers, Inc. and its consolidated subsidiaries (Calavo, the Company, we, us or our)  may differ materially from those expressed or implied by such forward-looking statements and assumptions.  All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, any projections of revenue, margins, expenses, earnings, earnings per share, tax provisions, cash flows, currency exchange rates, the impact of acquisitions or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and integration plans; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Calavo and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic trends and events; the competitive pressures faced by Calavo's businesses; the development and transition of new products and services (and the enhancement of existing products and services) to meet customer needs; integration and other risks associated with business combinations; the hiring and retention of key employees; the resolution of pending investigations, claims and disputes; and other risks that are described herein, including, but not limited to, the items discussed in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014, and those detailed from time to time in our other filings with the Securities and Exchange Commission. Calavo assumes no obligation and does not intend to update these forward-looking statements.

 

2


 

CALAVO GROWERS, INC.

 

INDEX

 

 

 

PAGE

 

 

 

PART I. FINANCIAL INFORMATION 

 

 

 

 

Item 1. 

Financial Statements (unaudited):

 

 

 

 

 

Consolidated Condensed Balance Sheets – July 31, 2015 and October 31, 2014

4

 

 

 

 

Consolidated Condensed Statements of Income – Three Months and Nine Months Ended July 31, 2015 and 2014

5

 

 

 

 

Consolidated Condensed Statements of Comprehensive Income – Three Months and Nine Months Ended July 31, 2015 and 2014

6

 

 

 

 

Consolidated Condensed Statements of Cash Flows – Nine Months Ended July 31, 2015 and 2014

7

 

 

 

 

Notes to Consolidated Condensed Financial Statements

8

 

 

 

Item 2. 

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

18 

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

25 

 

 

 

Item 4. 

Controls and Procedures

25

 

 

 

PART II. OTHER INFORMATION 

 

 

 

 

Item 1. 

Legal Proceedings

26

 

 

 

Item 1A. 

Risk Factors

26 

 

 

 

Item 6. 

Exhibits

26 

 

 

 

 

Signatures

27 

 

 

3


 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS 

 

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

July 31, 

 

October 31, 

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Assets

    

 

    

    

 

    

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,536

 

$

6,744

 

Accounts receivable, net of allowances of $1,797 (2015) and $3,248 (2014)

 

 

66,147

 

 

56,618

 

Inventories, net

 

 

31,574

 

 

30,975

 

Prepaid expenses and other current assets

 

 

19,263

 

 

19,528

 

Advances to suppliers

 

 

2,746

 

 

3,258

 

Income taxes receivable

 

 

978

 

 

2,627

 

Deferred income taxes

 

 

3,294

 

 

3,294

 

Total current assets

 

 

129,538

 

 

123,044

 

Property, plant, and equipment, net

 

 

66,446

 

 

57,352

 

Investment in Limoneira Company

 

 

35,591

 

 

44,355

 

Investment in unconsolidated entities

 

 

19,760

 

 

18,380

 

Deferred income taxes

 

 

15,354

 

 

12,287

 

Goodwill

 

 

18,262

 

 

18,262

 

Other assets

 

 

7,753

 

 

9,784

 

 

 

$

292,704

 

$

283,464

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Payable to growers

 

$

15,035

 

$

6,660

 

Trade accounts payable

 

 

19,510

 

 

15,065

 

Accrued expenses

 

 

19,679

 

 

25,303

 

Short-term borrowings

 

 

36,080

 

 

35,900

 

Dividend payable

 

 

 —

 

 

12,970

 

Current portion of long-term obligations

 

 

3,006

 

 

5,099

 

Total current liabilities

 

 

93,310

 

 

100,997

 

Long-term liabilities:

 

 

 

 

 

 

 

Long-term obligations, less current portion

 

 

624

 

 

2,791

 

Commitments and contingencies

 

 

 

 

 

 

 

Noncontrolling interest, Calavo Salsa Lisa

 

 

270

 

 

270

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock ($0.001 par value, 100,000 shares authorized; 17,383 (2015) and 17,295 (2014) shares issued and outstanding

 

 

17

 

 

17

 

Additional paid-in capital

 

 

146,875

 

 

144,496

 

Accumulated other comprehensive income

 

 

7,016

 

 

12,713

 

Retained earnings

 

 

44,592

 

 

22,180

 

Total shareholders' equity

 

 

198,500

 

 

179,406

 

 

 

$

292,704

 

$

283,464

 

 

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

4


 

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

 

July 31, 

 

July 31, 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

    

$

232,450

    

$

218,702

    

$

648,830

    

$

581,761

 

Cost of sales

 

 

208,172

 

 

198,526

 

 

583,772

 

 

529,052

 

Gross margin

 

 

24,278

 

 

20,176

 

 

65,058

 

 

52,709

 

Selling, general and administrative

 

 

10,620

 

 

9,738

 

 

30,116

 

 

27,175

 

Contingent consideration related to RFG acquisition

 

 

 —

 

 

23,249

 

 

 —

 

 

39,503

 

Operating income (loss)

 

 

13,658

 

 

(12,811)

 

 

34,942

 

 

(13,969)

 

Interest expense

 

 

(195)

 

 

(220)

 

 

(654)

 

 

(768)

 

Gain on deconsolidation of FreshRealm

 

 

 —

 

 

12,622

 

 

 —

 

 

12,622

 

Other income, net

 

 

88

 

 

120

 

 

514

 

 

525

 

Income (loss) before provision for income taxes

 

 

13,551

 

 

(289)

 

 

34,802

 

 

(1,590)

 

Provision (benefit) for income taxes

 

 

4,910

 

 

(1,780)

 

 

12,390

 

 

(2,423)

 

Net income

 

 

8,641

 

 

1,491

 

 

22,412

 

 

833

 

Add: Net loss attributable to

noncontrolling interest

 

 

 —

 

 

60

 

 

 —

 

 

506

 

Net income attributable to Calavo Growers, Inc.

 

$

8,641

 

$

1,551

 

$

22,412

 

$

1,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.50

 

$

0.10

 

$

1.30

 

$

0.08

 

Diluted

 

$

0.50

 

$

0.09

 

$

1.29

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares used in per share computation:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,301

 

 

15,760

 

 

17,291

 

 

15,760

 

Diluted

 

 

17,386

 

 

17,667

 

 

17,354

 

 

17,230

 

 

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

 

5


 

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

 

July 31, 

 

July 31, 

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

    

$

8,641

    

$

1,491

 

$

22,412

    

$

833

 

Other comprehensive loss, before tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized investment losses arising during period

 

 

(4,062)

 

 

(1,590)

 

 

(8,764)

 

 

(7,416)

 

Income tax benefit related to items of other comprehensive loss

 

 

1,422

 

 

620

 

 

3,067

 

 

2,893

 

Other comprehensive loss, net of tax

 

 

(2,640)

 

 

(970)

 

 

(5,697)

 

 

(4,523)

 

Comprehensive income (loss)

 

 

6,001

 

 

521

 

 

16,715

 

 

(3,690)

 

Add: Net loss attributable to noncontrolling interest

 

 

 —

 

 

60

 

 

 —

 

 

506

 

Comprehensive income (loss) – Calavo Growers, Inc.

 

$

6,001

 

$

581

 

$

16,715

 

$

(3,184)

 

 

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

 

 

6


 

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Nine months ended July 31, 

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

    

 

    

    

 

    

 

Net income

 

$

22,412

 

$

833

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,968

 

 

5,113

 

Provision for losses on accounts receivable

 

 

37

 

 

88

 

Loss from unconsolidated entities

 

 

110

 

 

13

 

Interest on contingent consideration

 

 

 —

 

 

28

 

Contingent consideration and non-cash compensation expense related to the acquisition of RFG

 

 

 —

 

 

40,767

 

Stock compensation expense

 

 

2,021

 

 

517

 

Gain on deconsolidation of FreshRealm

 

 

 —

 

 

(12,622)

 

Deferred income taxes

 

 

 —

 

 

(14,984)

 

Effect on cash of changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(9,566)

 

 

(8,759)

 

Inventories, net

 

 

(551)

 

 

(4,362)

 

Prepaid expenses and other current assets

 

 

2,068

 

 

(3,280)

 

Advances to suppliers

 

 

512

 

 

1,828

 

Income taxes receivable

 

 

1,772

 

 

5,127

 

Other assets

 

 

(296)

 

 

135

 

Payable to growers

 

 

9,220

 

 

7,274

 

Trade accounts payable and accrued expenses

 

 

(1,179)

 

 

9,769

 

Net cash provided by operating activities

 

 

32,528

 

 

27,485

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Acquisitions of property, plant, and equipment

 

 

(13,855)

 

 

(7,085)

 

Investment in unconsolidated entities

 

 

 —

 

 

(125)

 

Proceeds received for repayment of San Rafael note

 

 

275

 

 

 —

 

Proceeds from liquidation of Calavo Chile

 

 

262

 

 

 —

 

Decrease in cash due to deconsolidation of FreshRealm

 

 

 —

 

 

(6,813)

 

Investment in FreshRealm

 

 

(800)

 

 

 —

 

Loan to Agricola Don Memo

 

 

(1,803)

 

 

(1,730)

 

Investment in Agricola Don Memo

 

 

(1,000)

 

 

 —

 

Net cash used in investing activities

 

 

(16,921)

 

 

(15,753)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Payment of dividend to shareholders

 

 

(12,970)

 

 

(11,005)

 

Proceeds from (payments on) revolving credit facility

 

 

180

 

 

(5,250)

 

Payments on long-term obligations

 

 

(4,260)

 

 

(4,190)

 

Proceeds from stock option exercises

 

 

235

 

 

130

 

Proceeds from issuance of FreshRealm stock

 

 

 —

 

 

10,000

 

Net cash used in financing activities

 

 

(16,815)

 

 

(10,315)

 

Net increase (decrease) in cash and cash equivalents

 

 

(1,208)

 

 

1,417

 

Cash and cash equivalents, beginning of period

 

 

6,744

 

 

8,019

 

Cash and cash equivalents, end of period

 

$

5,536

 

$

9,436

 

Noncash Investing and Financing Activities:

 

 

 

 

 

 

 

Collection for Agricola Belher Infrastructure Advance

 

$

845

 

$

845

 

Unrealized holding losses

 

$

(8,764)

 

$

(7,416)

 

 

 

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

 

 

 

 

 

 

 

 

 

7


 

 

CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Description of the business

 

Business

 

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we sort, pack, and/or ripen avocados, tomatoes, pineapples and/or Hawaiian grown papayas. Additionally, we also produce salsa and prepare ready-to-eat produce and deli products.

 

The accompanying unaudited consolidated condensed financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows.  The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year.  These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014.

 

Recently Adopted Accounting Pronouncements 

 

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. The adoption of this standard had no impact on our financial statements.

 

Recently Issued Accounting Standards 

 

In April 2015, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") which changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. The amendment in this ASU will be effective for us beginning the first day of our 2016 fiscal year. Early adoption is permitted. We do not expect the adoption of these amendments to have a material impact on our financial statements.

 

In February 2015, the FASB issued an ASU which amends certain requirements in ASC 810 for determining whether a variable interest entity must be consolidated. The amendment in this ASU will be effective for us beginning the first day of our 2016 fiscal year. Early adoption is permitted. We do not expect the adoption of these amendments to have a material impact on our financial statements.

 

In May 2014, the 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

8


 

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.

 

2.  Information regarding our operations in different segments

 

We report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG.  These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources. The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and deli meat products.  Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate.  We do not allocate assets, or specifically identify them to, our operating segments. The following table sets forth sales by product category, by segment (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  July 31, 2015

 

Three months ended  July 31, 2014

 

 

    

    

 

    

    

 

    

 

 

    

 

 

    

    

 

    

    

 

    

 

 

    

 

 

 

 

 

Fresh

 

Calavo

 

    

 

 

    

 

 

Fresh

 

Calavo

 

    

 

 

    

 

 

 

 

products

 

Foods

 

RFG

 

Total

 

products

 

Foods

 

RFG

 

Total

 

Third-party sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avocados

 

$

132,165

 

$

 

$

 

$

132,165

 

$

124,429

 

$

 

$

 

$

124,429

 

Tomatoes

 

 

1,154

 

 

 

 

 

 

1,154

 

 

610

 

 

 

 

 

 

610

 

Papayas

 

 

2,559

 

 

 

 

 

 

2,559

 

 

3,369

 

 

 

 

 

 

3,369

 

Pineapples

 

 

535

 

 

 

 

 

 

535

 

 

1,658

 

 

 

 

 

 

1,658

 

Other fresh products

 

 

72

 

 

 

 

 

 

72

 

 

265

 

 

 

 

 

 

265

 

Food service

 

 

 

 

13,575

 

 

 

 

13,575

 

 

 

 

13,748

 

 

 

 

13,748

 

Retail and club

 

 

 

 

6,331

 

 

79,927

 

 

86,258

 

 

 

 

6,082

 

 

72,477

 

 

78,559

 

Total gross sales

 

 

136,485

 

 

19,906

 

 

79,927

 

 

236,318

 

 

130,331

 

 

19,830

 

 

72,477

 

 

222,638

 

Less sales incentives

 

 

(715)

 

 

(2,421)

 

 

(732)

 

 

(3,868)

 

 

(499)

 

 

(2,737)

 

 

(700)

 

 

(3,936)

 

Net sales

 

$

135,770

 

$

17,485

 

$

79,195

 

$

232,450

 

$

129,832

 

$

17,093

 

$

71,777

 

$

218,702

 

 

 

9


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended July 31, 2015

 

Nine months ended July 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fresh

    

Calavo

    

 

 

    

 

 

    

Fresh

    

Calavo

    

 

 

    

 

 

 

 

 

products

 

Foods

 

RFG

 

Total

 

products

 

Foods

 

RFG

 

Total

 

Third-party sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avocados

 

$

360,334

 

$

 

$

 

$

360,334

 

$

320,506

 

$

 

$

 

$

320,506

 

Tomatoes

 

 

16,813

 

 

 

 

 

 

16,813

 

 

19,706

 

 

 

 

 

 

19,706

 

Papayas

 

 

6,977

 

 

 

 

 

 

6,977

 

 

9,793

 

 

 

 

 

 

9,793

 

Pineapples

 

 

2,165

 

 

 

 

 

 

2,165

 

 

4,413

 

 

 

 

 

 

4,413

 

Other fresh products

 

 

406

 

 

 

 

 

 

406

 

 

409

 

 

 

 

 

 

409

 

Food service

 

 

 

 

37,223

 

 

 

 

37,223

 

 

 

 

36,393

 

 

 

 

36,393

 

Retail and club

 

 

 

 

17,451

 

 

218,547

 

 

235,998

 

 

 

 

17,137

 

 

185,349

 

 

202,486

 

Total gross sales

 

 

386,695

 

 

54,674

 

 

218,547

 

 

659,916

 

 

354,827

 

 

53,530

 

 

185,349

 

 

593,706

 

Less sales incentives

 

 

(1,423)

 

 

(7,673)

 

 

(1,990)

 

 

(11,086)

 

 

(1,321)

 

 

(8,464)

 

 

(2,160)

 

 

(11,945)

 

Net sales

 

$

385,272

 

$

47,001

 

$

216,557

 

$

648,830

 

$

353,506

 

$

45,066

 

$

183,189

 

$

581,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fresh

    

Calavo

    

 

 

    

 

 

 

 

 

products

 

Foods

 

RFG

 

Total

 

 

 

(All amounts are presented in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  July 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

135,770

 

$

17,485

 

$

79,195

 

$

232,450

 

Cost of sales

 

 

126,105

 

 

11,415

 

 

70,652

 

 

208,172

 

Gross margin

 

$

9,665

 

$

6,070

 

$

8,543

 

$

24,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  July 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

129,832

 

$

17,093

 

$

71,777

 

$

218,702

 

Cost of sales

 

 

120,318

 

 

13,253

 

 

64,955

 

 

198,526

 

Gross margin

 

$

9,514

 

$

3,840

 

$

6,822

 

$

20,176

 

 

For the three months ended July 31, 2015 and 2014, inter-segment sales and cost of sales for Fresh products totaling $7.8 million and $6.9 million were eliminated.  For the three months ended July 31, 2015 and 2014, inter-segment sales and cost of sales for Calavo Foods totaling $4.3 million and $4.4 million were eliminated.

 

10


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fresh

    

Calavo

    

 

 

    

 

 

 

 

 

products

 

Foods

 

RFG

 

Total

 

 

 

(All amounts are presented in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended July 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

385,272

 

$

47,001

 

$

216,557

 

$

648,830

 

Cost of sales

 

 

355,991

 

 

31,725

 

 

196,056

 

 

583,772

 

Gross margin

 

$

29,281

 

$

15,276

 

$

20,501

 

$

65,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended July 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

353,506

 

$

45,066

 

$

183,189

 

$

581,761

 

Cost of sales

 

 

328,101

 

 

34,811

 

 

166,140

 

 

529,052

 

Gross margin

 

$

25,405

 

$

10,255

 

$

17,049

 

$

52,709

 

 

For the nine months ended July 31, 2015 and 2014, inter-segment sales and cost of sales for Fresh products totaling $26.9 million and $24.5 million were eliminated.  For the nine months ended July 31, 2015 and 2014, inter-segment sales and cost of sales for Calavo Foods totaling $11.8 million and $12.0 million were eliminated.

 

3.Inventories

 

Inventories consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

July 31, 

 

October 31, 

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Fresh fruit

    

$

17,718

    

$

15,640

 

Packing supplies and ingredients

 

 

6,808

 

 

6,324

 

Finished prepared foods

 

 

7,048

 

 

9,011

 

 

 

$

31,574

 

$

30,975

 

 

Inventories are stated at the lower of cost or market. We periodically review the value of items in inventory and record any necessary reserves of inventory based on our assessment of market conditions.  No inventory reserve was considered necessary as of July 31, 2015 and October 31, 2014.

 

4.Related party transactions

 

Certain members of our Board of Directors market California avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers.  During the three months ended July 31, 2015 and 2014, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $9.1 million and $8.0 million. During the nine months ended July 31, 2015 and 2014, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $15.4 million and $9.2 million.  Amounts payable to these board members were $2.9 million and $0.6 million as of July 31, 2015 and October 31, 2014. 

 

During the three months ended July 31, 2015 and 2014, we received $0.1 million as dividend income from Limoneira Company (Limoneira).  During the nine months ended July 31, 2015 and 2014, we received $0.2 million as dividend income from Limoneira. In addition, we lease office space from Limoneira and paid rental expenses of $0.1 million for the three months ended July 31, 2015 and 2014. In addition, we paid rental expenses of $0.2 million for the nine months ended July 31, 2015 and 2014. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company.

 

During our 3rd fiscal quarter, in conjunction with another round of financing for FreshRealm, LLC (FreshRealm), we invested $0.8 million. Based on the total number of shares issued, our ownership interest in FreshRealm decreased from

11


 

approximately 50% to a total of 49.5%.  Additionally, two officers of Calavo contributed $1.8 million, in exchange for a 2.8% ownership interest, and three board of director members contributed $0.3 million in exchange for 0.44% ownership interest.

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.  RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease.  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).  LIG, THNC and Third Coast are majority owned by entities owned by three employees of Calavo (former/current executives of RFG). See the following tables for the related party activity and balances for fiscal year 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  July 31,

 

 

Nine months ended July 31, 

 

(in thousands)

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent paid to LIG

    

$

  131

 

 

$

131

 

 

$

409

 

 

$

392

 

Rent paid to THNC, LLC

 

$

    76

 

 

$

76