UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) For the transition period from ______________________ to ______________________ |
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Securities registered pursuant to Section 12(b) of the Act:
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes
Registrant's number of shares of common stock outstanding as of April 30, 2022 was
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains statements relating to future events and results of Calavo Growers, Inc. and its consolidated subsidiaries (referred to in this report as “Calavo,” the “Company,” “we,” “us” or “our”), including certain projections and business trends, that are "forward-looking statements," as defined in the Private Securities Litigation and Reform Act of 1995, that involve risks, uncertainties and assumptions. These statements are based on our current expectations and are not promises or guarantees. If any of the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, any projections of revenue, gross profit, expenses, gain/(loss) on Limoneira shares, income/(loss) from unconsolidated entities, earnings, earnings per share, tax provisions, cash flows and currency exchange rates; the impact of COVID-19 on our business, results of operations and financial condition; the impact of acquisitions or debt or equity investments or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and integration (including information technology systems integration) plans; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Calavo and its financial performance, whether attributable to Calavo or any of its unconsolidated entities; any statements regarding pending investigations, legal claims or tax disputes; any statements of expectation or belief; any risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and COVID-19 and trade protection measures such as import/export/customs duties, tariffs and/or quotas); any risks associated with receivables from and/or equity investments in unconsolidated entities; system security risk and cyber-attacks and any statements of assumptions underlying any of the foregoing.
Risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements include, but are not limited to, the following: the ability of our future management team to work together successfully; the impact of Project Uno initiatives on our business, results of operations, and financial condition, including uncertainty as to whether the desired effects will be achieved; the impact of the COVID-19 pandemic on our business, results of operations, and financial condition, including, but not limited to, disruptions in the manufacturing of our products and the operations of the related supply chains supporting our ability to deliver our products to consumers, impacts on our employees and uncertainty regarding our ability to implement health and safety measures for our employees, uncertainties regarding consumer demand for our products, impact on our food service customers, increased costs, the impact of governmental trade restrictions imposed as a result of COVID-19 and the possible adverse impact of COVID-19 on our goodwill and other intangible assets; our ability to raise prices, particularly in our RFG and Foods segments, to offset increases in costs of goods sold, and the impact of such price increases on future net sales; seasonality of our business; sensitivity of our business to changes in market prices of avocados and other agricultural products and other raw materials including fuel, packaging and paper; potential disruptions to our supply chain; risks associated with potential future acquisitions, including integration; potential exposure to data breaches and other cyber-attacks on our systems or those of our suppliers or customers; dependence on large customers; dependence on key personnel, including personnel that have not yet been hired, and the ability of our future management team to work together successfully; potential for labor disputes; reliance on co-packers for a portion of our production needs; competitive pressures, including from foreign growers; risks of recalls and food-related injuries to our customers; changing consumer preferences; the impact of environmental regulations, including those related to climate change; risks associated with the environment and climate change, especially as they may affect our sources of supply; our ability to develop and transition new products and services and enhance existing products and services to meet customer needs; risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and COVID-19 and trade protection measures such as import/export/customs duties, tariffs and/or quotas and currency fluctuations); risks associated with receivables from, loans to and/or equity investments in unconsolidated entities, volatility in the value of our common stock; the impact of macroeconomic trends and events; and the resolution of pending investigations, legal claims and tax disputes, including an assessment imposed by the Mexican Tax Administrative Service (the “SAT”) and our defenses against collection activities commenced by the SAT.
For a further discussion of these risks and uncertainties and other risks and uncertainties that we face, please see the risk factors described in our most recent Annual Report on Form 10-K for the fiscal year ended October 31, 2021 filed with the Securities and Exchange Commission and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q (including this Quarterly Report on Form 10-Q) and other filings with the Securities and Exchange Commission. Forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we
2
undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
CALAVO GROWERS, INC.
INDEX
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED, in thousands)
April 30, | October 31, | ||||||
2022 | 2021 | ||||||
Assets |
|
|
|
| |||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Restricted cash | | | |||||
Accounts receivable, net of allowances of $ |
| |
| | |||
Inventories |
| |
| | |||
Prepaid expenses and other current assets |
| |
| | |||
Advances to suppliers |
| |
| | |||
Income taxes receivable |
| |
| | |||
Total current assets |
| |
| | |||
Property, plant, and equipment, net |
| |
| | |||
Operating lease right-of-use assets |
| |
| | |||
Investment in Limoneira Company |
| |
| | |||
Investments in unconsolidated entities |
| |
| | |||
Deferred income taxes |
| |
| | |||
Goodwill |
| |
| | |||
Intangibles, net | | | |||||
Other assets |
| |
| | |||
$ | | $ | | ||||
Liabilities and shareholders' equity | |||||||
Current liabilities: | |||||||
Payable to growers | $ | | $ | | |||
Trade accounts payable |
| |
| | |||
Accrued expenses |
| |
| | |||
Dividend payable |
| — |
| | |||
Other current liabilities | | | |||||
Current portion of operating leases |
| |
| | |||
Current portion of long-term obligations and finance leases |
| |
| | |||
Total current liabilities |
| |
| | |||
Long-term liabilities: | |||||||
Borrowings pursuant to credit facilities, long-term | | | |||||
Long-term operating leases, less current portion |
| |
| | |||
Long-term obligations and finance leases, less current portion |
| |
| | |||
Other long-term liabilities |
| |
| | |||
Total long-term liabilities |
| |
| | |||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Common stock ($ |
| |
| | |||
Additional paid-in capital |
| |
| | |||
Noncontrolling interest |
| |
| | |||
Retained earnings |
| |
| | |||
Total shareholders' equity |
| |
| | |||
$ | | $ | |
4
The accompanying notes are an integral part of these consolidated condensed financial statements.
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
Three months ended | Six months ended | ||||||||||||
April 30, | April 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||
Net sales |
| $ | |
| $ | |
| $ | |
| $ | | |
Cost of sales |
| |
| |
| |
| | |||||
Gross profit |
| |
| |
| |
| | |||||
Selling, general and administrative |
| |
| |
| |
| | |||||
Expenses related to Mexican tax matters | | — | | — | |||||||||
Impairment and charges related to RFG Florida facility closure | | — | | — | |||||||||
Gain on sale of Temecula packinghouse |
| ( |
| ( |
| ( |
| ( | |||||
Operating income |
| | |
| |
| | ||||||
Interest expense |
| ( |
| ( |
| ( |
| ( | |||||
Other income, net |
| |
| |
| |
| | |||||
Unrealized net gain (loss) on Limoneira shares |
| ( |
| |
| ( |
| | |||||
Income (loss) before income taxes and loss from unconsolidated entities |
| ( |
| |
| ( |
| | |||||
Income tax (provision) benefit |
| |
| ( |
| |
| ( | |||||
Net loss from unconsolidated entities |
| ( |
| ( |
| ( |
| ( | |||||
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 |
| |
| |
| |
| |
The accompanying notes are an integral part of these consolidated condensed financial statements.
5
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six months ended April 30, | |||||||
2022 | 2021 | ||||||
Cash Flows from Operating Activities: |
|
|
|
| |||
Net income (loss) | $ | ( | $ | | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization |
| |
| | |||
Non-cash operating lease expense | | | |||||
Net loss from unconsolidated entities |
| |
| | |||
Unrealized net loss (gain) on Limoneira shares |
| |
| ( | |||
Impairment and non-cash charges related to closure of RFG Florida facility | | — | |||||
Stock-based compensation expense |
| |
| | |||
Gain on sale of Temecula packinghouse |
| ( |
| ( | |||
Effect on cash of changes in operating assets and liabilities: | |||||||
Accounts receivable, net |
| ( |
| ( | |||
Inventories |
| ( |
| ( | |||
Prepaid expenses and other current assets |
| |
| | |||
Advances to suppliers |
| ( |
| ( | |||
Income taxes receivable/payable |
| |
| | |||
Other assets |
| ( |
| ( | |||
Payable to growers |
| |
| | |||
Trade accounts payable, accrued expenses and other liabilities |
| |
| | |||
Net cash provided by operating activities |
| |
| | |||
Cash Flows from Investing Activities: | |||||||
Purchases of property, plant, and equipment |
| ( |
| ( | |||
Infrastructure advance to tomato growers | — | ( | |||||
Net cash used in investing activities |
| ( |
| ( | |||
Cash Flows from Financing Activities: | |||||||
Payment of dividend to shareholders |
| ( |
| ( | |||
Proceeds from revolving credit facility |
| |
| | |||
Payments on revolving credit facility |
| ( |
| ( | |||
Payments of minimum withholding taxes on net share settlement of equity awards | ( | ( | |||||
Payments on long-term obligations and finance leases |
| ( |
| ( | |||
Proceeds from stock option exercises |
| |
| | |||
Net cash provided by (used in) financing activities |
| ( |
| | |||
Net increase in cash, cash equivalents and restricted cash |
| |
| | |||
Cash, cash equivalents and restricted cash, beginning of period |
| |
| | |||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | |||
Noncash Investing and Financing Activities: | |||||||
Right of use assets obtained in exchange for new financing lease obligations | $ | — | $ | | |||
Property, plant, and equipment included in trade accounts payable and accrued expenses | $ | | $ | |
The accompanying notes are an integral part of these consolidated condensed financial statements.
6
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
|
|
|
|
|
| ||||||||||||
Additional | |||||||||||||||||
Common Stock | Paid-in | Retained | Noncontrolling | ||||||||||||||
Shares | Amount | Capital | Earnings | Interest | Total | ||||||||||||
Balance, October 31, 2020 | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | | |
Exercise of stock options and income tax benefit | |
| — |
| |
| — |
| — |
| | ||||||
Payment of min. withholding of taxes on net share settlement of equity awards | — | — | ( | — | — | ( | |||||||||||
Stock compensation expense | — |
| — |
| |
| — |
| — |
| | ||||||
Restricted stock issued | |
| — |
| — |
| — |
| — |
| — | ||||||
Avocados de Jalisco noncontrolling interest contribution | — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Net income attributable to Calavo Growers, Inc. | — |
| — |
| — |
| |
| — |
| | ||||||
Balance, January 31, 2021 | |
| |
| |
| |
| |
| | ||||||
Stock compensation expense | — |
| — |
| |
| — |
| — |
| | ||||||
Payments of minimum withholding taxes on net share settlement of equity awards | ( |
| — |
| ( |
| — |
| — |
| ( | ||||||
Avocados de Jalisco noncontrolling interest contribution | — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Net income attributable to Calavo Growers, Inc. | — |
| — |
| — |
| |
| — |
| | ||||||
Balance, April 30, 2021 | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
|
|
|
|
|
| ||||||||||||
Additional |
| ||||||||||||||||
Common Stock | Paid-in | Retained | Noncontrolling |
| |||||||||||||
Shares | Amount | Capital | Earnings | Interest | Total | ||||||||||||
Balance, October 31, 2021 | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | | |
Exercise of stock options and income tax benefit | |
| — |
| |
| — |
| — |
| | ||||||
Payment of min. withholding of taxes on net share settlement of equity awards | — | — | ( | — | — | ( | |||||||||||
Stock compensation expense | — |
| — |
| |
| — |
| — |
| | ||||||
Restricted stock issued | |
| — |
| — |
| — |
| — |
| — | ||||||
Avocados de Jalisco noncontrolling interest contribution | — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Net loss attributable to Calavo Growers, Inc. | — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Balance, January 31, 2022 | |
| |
| |
| |
| |
| | ||||||
Stock compensation expense | — | — | | — | — | | |||||||||||
Restricted stock issued | | — | — | — | — | — | |||||||||||
Payments of minimum withholding taxes on net share settlement of equity awards | — | — | ( | — | — | ( | |||||||||||
Avocados de Jalisco noncontrolling interest contribution | — | — | — | — | ( | ( | |||||||||||
Net loss attributable to Calavo Growers, Inc. | — | — | — | ( | — | ( | |||||||||||
Balance, April 30, 2022 | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
See accompanying notes to consolidated condensed financial statements.
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CALAVO GROWERS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of the business
Business
Calavo Growers, Inc. (referred to in this report as “Calavo”, the “Company”, “we’, “us” or “our”), is a global leader in the avocado industry and a provider of value-added fresh food. Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers on a worldwide basis. We procure avocados from California, Mexico and other growing regions around the world. Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) create, process and package a portfolio of healthy fresh foods including fresh-cut fruit and vegetables, and prepared foods and (iii) process and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in
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 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, 2021.
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which amends and simplifies the accounting for income taxes by removing certain exceptions and providing new guidance to reduce complexity in certain aspects of the current guidance. This guidance was adopted by the Company during the first quarter of 2022 and did not impact the Company’s financial statements or related disclosures.
2. Information regarding our operations in different segments
We report our operations in three different business segments: (1) Fresh products, (2) RFG, and (3) Calavo Foods. These
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assets, or specifically identify them, to our operating segments.
Three months ended April 30, 2022 | Three months ended April 30, 2021 | ||||||||||||||||||||||||
| Fresh |
|
| Calavo |
|
| Fresh |
|
| Calavo |
| ||||||||||||||
products | RFG | Foods | Total | products | RFG | Foods | Total | ||||||||||||||||||
Avocados | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Tomatoes |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Papayas |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Other fresh income |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Fresh-cut fruit | — | | — | | — | | — | | |||||||||||||||||
Fresh-cut vegetables | — | | — | | — | | — | | |||||||||||||||||
Prepared products |
| — |
| |
| |
| |
| — |
| |
| |
| | |||||||||
Salsa |
| — |
| — |
| |
| |
| — |
| — |
| |
| | |||||||||
Total gross sales |
| |
| |
| |
| |
| |
| |
| |
| | |||||||||
Less sales allowances |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | |||||||||
Less inter-company eliminations | ( | — | ( | ( | ( | — | ( | ( | |||||||||||||||||
Net sales | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | |
Six months ended April 30, 2022 | Six months ended April 30, 2021 | ||||||||||||||||||||||||
| Fresh |
|
| Calavo |
|
| Fresh |
|
| Calavo |
| ||||||||||||||
products | RFG | Foods | Total | products | RFG | Foods | Total | ||||||||||||||||||
Avocados | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Tomatoes |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Papayas |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Other fresh income |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Fresh-cut fruit | — | | — | | — | | — | | |||||||||||||||||
Fresh-cut vegetables |
| — |
| |
| — |
| |
| — |
| |
| — |
| | |||||||||
Prepared products | — |