Document and Entity Information
Document and Entity Information | 3 Months Ended |
Jan. 31, 2019shares | |
Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Jan. 31, 2019 |
Document Fiscal Year Focus | 2,019 |
Document Fiscal Period Focus | Q1 |
Entity Registrant Name | CALAVO GROWERS INC |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Central Index Key | 1,133,470 |
Current Fiscal Year End Date | --10-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 17,597,734 |
CONSOLIDATED CONDENSED BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands | Jan. 31, 2019 | Oct. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 4,211 | $ 1,520 |
Accounts receivable, net of allowances of $4,528 (2019) $3,227 (2018) | 73,323 | 66,143 |
Inventories, net | 38,463 | 35,044 |
Prepaid expenses and other current assets | 8,033 | 16,727 |
Advances to suppliers | 4,332 | 5,555 |
Income taxes receivable | 2,296 | 3,521 |
Total current assets | 130,658 | 128,510 |
Property, plant, and equipment, net | 122,522 | 122,143 |
Investment in Limoneira Company | 36,951 | 42,609 |
Investment in unconsolidated entities | 18,507 | 24,805 |
Deferred income taxes | 4,377 | 4,377 |
Goodwill | 18,262 | 18,262 |
Loans to FreshRealm | 19,942 | |
Other assets | 29,046 | 27,030 |
Total assets | 380,265 | 367,736 |
Current liabilities: | ||
Payable to growers | 10,247 | 14,001 |
Trade accounts payable | 16,917 | 13,735 |
Accrued expenses | 39,528 | 38,521 |
Short-term borrowings | 39,000 | 15,000 |
Dividend payable | 17,568 | |
Current portion of long-term obligations | 112 | 118 |
Total current liabilities | 105,804 | 98,943 |
Long-term liabilities: | ||
Long-term obligations, less current portion | 271 | 314 |
Deferred rent | 2,895 | 2,678 |
Other long-term liabilities | 842 | 842 |
Total long-term liabilities | 4,008 | 3,834 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock ($0.001 par value, 100,000 shares authorized; 17,598 (2019) and 17,567 (2018) shares issued and outstanding) | 18 | 18 |
Additional paid-in capital | 158,941 | 157,928 |
Accumulated other comprehensive income | 12,141 | |
Noncontrolling interest | 1,742 | 1,748 |
Retained earnings | 109,752 | 93,124 |
Total shareholders' equity | 270,453 | 264,959 |
Total liabilities and shareholders' equity | $ 380,265 | $ 367,736 |
CONSOLIDATED CONDENSED BALANC_2
CONSOLIDATED CONDENSED BALANCE SHEETS (PARENTHETICAL) - USD ($) shares in Thousands, $ in Thousands | Jan. 31, 2019 | Oct. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowances of accounts receivable | $ 4,528 | $ 3,227 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 17,598 | 17,567 |
Common stock, shares outstanding | 17,598 | 17,567 |
CONSOLIDATED CONDENSED STATEMEN
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Income Statement [Abstract] | ||
Net sales | $ 258,032 | $ 247,928 |
Cost of sales | 227,195 | 221,618 |
Gross profit | 30,837 | 26,310 |
Selling, general and administrative | 14,276 | 15,517 |
Operating income | 16,561 | 10,793 |
Interest expense | (254) | (231) |
Other income, net | 510 | 126 |
Unrealized and realized net loss on Limoneira shares | (4,505) | |
Income before provision for income taxes and income/(loss) from unconsolidated entities | 12,312 | 10,688 |
Provision for income taxes | 1,533 | 4,302 |
Income/(loss) from unconsolidated entities | (6,298) | 603 |
Net income | 4,481 | 6,989 |
Less: Net loss attributable to noncontrolling interest | 6 | 150 |
Net income attributable to Calavo Growers, Inc. | $ 4,487 | $ 7,139 |
Calavo Growers, Inc.’s net income per share: | ||
Basic | $ 0.26 | $ 0.41 |
Diluted | $ 0.26 | $ 0.41 |
Number of shares used in per share computation: | ||
Basic | 17,500 | 17,446 |
Diluted | 17,558 | 17,525 |
CONSOLIDATED CONDENSED STATEM_2
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 4,481 | $ 6,989 |
Other comprehensive income, before tax: | ||
Unrealized investment losses | (3,111) | |
Income tax benefit related to items of other comprehensive income | 1,089 | |
Other comprehensive loss, net of tax | (2,022) | |
Comprehensive income | 4,481 | 4,967 |
Less: Net loss attributable to noncontrolling interest | 6 | 150 |
Comprehensive income – Calavo Growers, Inc. | $ 4,487 | $ 5,117 |
CONSOLIDATED CONDENSED STATEM_3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Cash Flows from Operating Activities: | ||
Net income | $ 4,481 | $ 6,989 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,392 | 3,211 |
Loss (income) from unconsolidated entities | 6,298 | (603) |
Unrealized and realized net loss on Limoneira shares | 4,505 | |
Stock-based compensation expense | 966 | 1,832 |
Deferred income taxes | 1,453 | |
Effect on cash of changes in operating assets and liabilities: | ||
Accounts receivable, net | (7,181) | (2,905) |
Inventories, net | (3,419) | (326) |
Prepaid expenses and other current assets | (418) | (920) |
Advances to suppliers | 1,223 | 2,454 |
Income taxes receivable/payable | 1,225 | 2,745 |
Other assets | (2,735) | (1,465) |
Payable to growers | (3,753) | 780 |
Deferred rent | 217 | (13) |
Trade accounts payable, accrued expenses and other long-term liabilities | 5,570 | (5,335) |
Net cash provided by operating activities | 10,371 | 7,897 |
Cash Flows from Investing Activities: | ||
Acquisitions of and deposits on property, plant, and equipment | (3,867) | (5,394) |
Proceeds received for repayment of San Rafael note | 112 | 112 |
Proceeds received from Limoneira stock sales | 1,153 | |
Loan to FreshRealm | (10,500) | |
Net cash used in investing activities | (13,102) | (5,282) |
Cash Flows from Financing Activities: | ||
Payment of dividend to shareholders | (17,568) | (16,657) |
Proceeds from revolving credit facility | 89,500 | 58,000 |
Payments on revolving credit facility | (65,500) | (46,500) |
Payment of minimum withholding taxes on net share settlement of equity awards | (1,008) | (1,158) |
Payments on long-term obligations | (49) | (36) |
Proceeds from stock option exercises | 47 | 53 |
Net cash provided by (used in) financing activities | 5,422 | (6,298) |
Net increase (decrease) in cash and cash equivalents | 2,691 | (3,683) |
Cash and cash equivalents, beginning of period | 1,520 | |
Cash and cash equivalents, end of period | 4,211 | 2,942 |
Noncash Investing and Financing Activities: | ||
Property, plant, and equipment included in trade accounts payable and accrued expenses | $ 573 | 1,063 |
Noncash transfer of noncontrolling interest | 1,001 | |
Unrealized investment gain | $ (3,111) |
Description of the business
Description of the business | 3 Months Ended |
Jan. 31, 2019 | |
Description of the business | |
Description of the business | 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 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 three different business segments: Fresh products, Calavo Foods and Renaissance Food Group (RFG). 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, 2018. Recently Adopted Accounting Pronouncements In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for fiscal years and interim period within those fiscal years beginning after December 15, 2017. The Company adopted this new standard at the beginning of fiscal 2019. With the adoption of this new standard, we reclassed unrealized gains of $12.1 million in accumulated other comprehensive income to retained earnings as of November 1, 2018. Additionally, for the three months ended January 31, 2019, we sold 51,271 shares of Limoneira stock and recorded a loss of $0.1 million in our consolidated statements of income. Limoneira’s stock price at January 31, 2019 and October 31, 2018 equaled $22.03 per share and $24.65 per share. Our remaining shares of Limoneira stock, totaling 1,677,299 at January 31, 2019, were revalued to $22.03 per share and, as a result, we recorded a loss of $4.4 million in our consolidated statements of income. In May 2014, the FASB issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The Company adopted this new standard at the beginning of fiscal 2019 using the modified retrospective transition method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to the opening balance of retained earnings on the first day of our 2019 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated financial statements. See Note 14 for further information. Recently Issued Accounting Standards In June 2018, the FASB issued an ASU , Improvements to Nonemployee Share-Based Payment Accounting . The FASB issued this update to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU will be effective for us beginning the first day of our 2020 fiscal year. We are evaluating the impact of the update of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements. In February 2018, the FASB issued an ASU, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income , which amends Accounting Standards Codification ("ASC") 220, Income Statement — Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act, (the "Act"). In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. This ASU is effective for us the first day of our 2020 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements. In January 2017, the FASB issued an ASU, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The ASU permits an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning the first day of our 2021 fiscal year and is not expected to have a significant impact upon adoption. In February 2016, the FASB issued an ASU, Leases , which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2020 fiscal year. Early adoption is permitted. Although we are in the process of evaluating the impact of adoption of ASU 2016-02 on our consolidated financial statements, we currently expect the most significant changes will be related to the recognition of material new long-term right-of-use assets and lease liabilities on our consolidated balance sheet. |
Information regarding our opera
Information regarding our operations in different segments | 3 Months Ended |
Jan. 31, 2019 | |
Segment Reporting [Abstract] | |
Information regarding our operations in different segments | 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 avocado products, including guacamole and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, fresh-cut vegetables, vegetables and prepared foods. 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. Data in the following tables is presented in thousands: Three months ended January 31, 2019 Three months ended January 31, 2018 Fresh Calavo Fresh Calavo products Foods RFG Total products Foods RFG Total Avocados $ 103,995 $ — $ — $ 103,995 $ 108,929 $ — $ — $ 108,929 Tomatoes 11,392 — — 11,392 12,084 — — 12,084 Papayas 2,939 — — 2,939 2,805 — — 2,805 Other fresh products 80 — — 80 34 — — 34 Prepared avocado products — 24,252 — 24,252 — 21,803 — 21,803 Salsa — 853 — 853 — 865 — 865 Fresh-cut fruit & vegetables and prepared foods — — 119,541 119,541 — — 106,776 106,776 Total gross sales 118,406 25,105 119,541 263,052 123,852 22,668 106,776 253,296 Less sales incentives (957) (2,034) (477) (3,468) (652) (2,778) (670) (4,100) Less inter-company eliminations (595) (957) — (1,552) (415) (853) — (1,268) Net sales $ 116,854 $ 22,114 $ 119,064 $ 258,032 $ 122,785 $ 19,037 $ 106,106 $ 247,928 Fresh Calavo products Foods RFG Total Three months ended January 31, 2019 Net sales before intercompany eliminations $ 117,449 $ 23,071 $ 119,064 $ 259,584 Intercompany eliminations (595) (957) — (1,552) Net sales 116,854 22,114 119,064 258,032 Cost of sales before intercompany eliminations 96,591 16,327 115,829 228,747 Intercompany eliminations (527) (645) (380) (1,552) Cost of sales 96,064 15,682 115,449 227,195 Gross profit $ 20,790 $ 6,432 $ 3,615 $ 30,837 Three months ended January 31, 2018 Net sales before intercompany eliminations $ 123,200 $ 19,890 $ 106,106 $ 249,196 Intercompany eliminations (415) (853) — (1,268) Net sales 122,785 19,037 106,106 247,928 Cost of sales before intercompany eliminations 108,905 13,620 100,361 222,886 Intercompany eliminations (377) (558) (333) (1,268) Cost of sales 108,528 13,062 100,028 221,618 Gross profit $ 14,257 $ 5,975 $ 6,078 $ 26,310 For the three months ended January 31, 2019 and 2018, inter-segment sales and cost of sales of $0.5 million and $0.4 million between Fresh products and RFG were eliminated. For the three months ended January 31, 2019 and 2018, inter-segment sales and cost of sales of $1.0 million and $0.9 million between Calavo Foods and RFG were eliminated. For the three months ended January 31, 2019 and 2018, inter-segment sales and cost of sales of $0.1 million between Fresh products and Calavo Foods were eliminated. |
Inventories
Inventories | 3 Months Ended |
Jan. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | 3. Inventories consist of the following (in thousands): January 31, October 31, 2019 2018 Fresh fruit $ 14,921 $ 12,902 Packing supplies and ingredients 11,871 10,889 Finished prepared foods 11,671 11,253 $ 38,463 $ 35,044 Inventories are stated at the lower of cost or net realizable value. We periodically review the value of items in inventory and record any necessary write downs of inventory based on our assessment of market conditions. No additional inventory reserve was considered necessary as of January 31, 2019 and October 31, 2018. |
Related party transactions
Related party transactions | 3 Months Ended |
Jan. 31, 2019 | |
Related-Party Transactions [Abstract] | |
Related party transactions | 4. 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. For the three months ended January 31, 2019, we did not procure any avocados from entities owned or controlled by members of our Board of Directors. During the three months ended January 31, 2018, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $0.1 million. We did not have any amounts payable to these Board members as of January 31, 2019 and October 31, 2018. During the three months ended January 31, 2019 and 2018, we received $0.1 million as dividend income from Limoneira Company (Limoneira). In addition, we lease office space from Limoneira for our corporate office. We paid to rent expense to Limoneira totaling $0.1 million for the three months ended January 31, 2019 and 2018. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. As of January 31, 2019, we own less than 10% ownership interest in Limoneira. Effective December 2018, our Chief Executive Officer retired from Limoneira’s Board of Directors. We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During each of the three months ended January 31, 2019 and 2018, Calavo Growers, Inc. paid fees totaling less than $0.1 million to TroyGould PC. In January 2016, our unconsolidated subsidiary, Agricola Don Memo, S.A. de C.V. (Don Memo), entered into a loan agreement totaling $4.5 million with Bank of America, N.A. (BoA). This entity is accounted for using the equity method. These proceeds were used by Don Memo to repay debt owed to Calavo. Also in January 2016, Calavo and BoA, entered into a Continuing and Unconditional Guaranty Agreement (the Guaranty). Under the terms of the Guaranty, Calavo unconditionally guaranteed and promised to pay BoA any and all Indebtedness, as defined, of our unconsolidated subsidiary Don Memo to BoA. Belo also entered into a similar guarantee with BoA. In December 2018, Don Memo received third party financing and repaid its loan to BoA , and as a result, we were able to remove this guarantee to BoA. As of January 31, 2019 and October 31, 2018, we had an investment of $5.4 million and $5.2 million, representing Calavo Sub’s 50% ownership in Don Memo, which was included as an investment in unconsolidated entities on our balance sheet. We make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Don Memo, net of our commission and aforementioned advances. As of January 31, 2019 and October 31, 2018, we had outstanding advances of $2.0 million and $2.5 million to Don Memo. During the three months ended January 31, 2019 and 2018, we recorded $5.7 million and $3.7 million of cost of sales to Don Memo pursuant to our consignment agreement. We make advances to Belher for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Belher, net of our commission and aforementioned advances. We had grower advances due from Belher totaling $4.0 million as of January 31, 2019 and October 31, 2018, which are netted against the grower payable. In addition, we had infrastructure advances due from Belher of $3.4 million as of January 31, 2019 and October 31, 2018. $0.8 million of these infrastructure advances were recorded as a receivable in prepaid and other current assets. The remaining $2.6 million of these infrastructure advances were recorded in other assets. During the three months ended January 31, 2019 and 2018, we recorded $5.3 million and $5.9 million of cost of sales to Belher pursuant to our consignment agreement. In August 2015, we entered into Shareholder’s Agreement with various partners and created Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”). Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados. As of January 31, 2019, this entity was approximately 83% owned by Calavo and was consolidated in our financial statements. Avocados de Jalisco built a packinghouse located in Jalisco, Mexico, which began operations in June of 2017. As of January 31, 2019 and October 31, 2018, we have made preseason advances of approximately $0.1 million to various partners of Avocados de Jalisco. During the three months ended January 31, 2019 and 2018, we purchased approximately $1.0 million and $0.2 million of avocados from the partners of Avocados de Jalisco. In January 2018, we transferred $1.0 million of interest to the Avocados de Jalisco noncontrolling members. As of January 31, 2019 and October 31, 2018, we had an investment of $13.1 million and $19.9 million in FreshRealm, LLC (“FreshRealm”). We record the amount of our investment in FreshRealm in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income/ (loss) in unconsolidated entities” in our Consolidated Condensed Statement of Income. See Note 13 for additional information. Effective July 31, 2018, we entered into a Note and Membership Unit Purchase Agreement (“NMUPA”) with FreshRealm, pursuant to which we agreed to provide additional financing, subject to certain terms and conditions. Pursuant to such NMUPA, we entered into a Subscription Agreement, whereby we purchased $3.5 million of equity units in FreshRealm, on July 31, 2018. FreshRealm concurrently entered into subscription agreements with certain third-party investors for an additional $3.5 million of equity investments. As of January 31, 2019, our ownership percentage in FreshRealm was approximately 37%. Additionally, pursuant to the NMUPA, we entered into a $12 million Senior Promissory Note and corresponding Security Agreement (collectively, the “Agreements”) with FreshRealm, effective August 10, 2018. We funded $9 million of this loan commitment during the fourth quarter of fiscal 2018 and funded the remaining loan commitment amount of $3 million during the first quarter of fiscal 2019. During our second quarter of fiscal 2019, we amended this note, due October 31, 2019, and, among other things, included a provision whereby we have the option to extend repayment of this note to November 1, 2020. We also loaned FreshRealm an additional $7.5 million, in several unsecured notes during our first quarter of fiscal 2019. During our second fiscal quarter of 2019, we consolidated those notes into one $7.5 million note receivable balance due from FreshRealm, due October 31, 2019. Similar to the amended note described above, we included a provision whereby we have the option to extend repayment of this note to November 1, 2020. Also, during our fiscal second quarter, we lent an additional $1.5 million on an unsecured basis to FreshRealm. As of January 31, 2019 and October 31, 2018, we have note receivables from FreshRealm totaling $19.9 million and $9.0 million. See Note 13 for further information. Three officers and five members of our board of directors have investments in FreshRealm. In addition, as of January 31, 2019 and October 31, 2018, we have a loan to FreshRealm members of approximately $0.2 million and $0.3 million. In October and December 2017, our Chairman and Chief Executive Officer invested $7.0 million and $1.5 million into FreshRealm. In January 2018, one of our non-executive directors invested $1.8 million into FreshRealm. In the second quarter of fiscal 2018, two of our non-executive directors invested $1.2 million into FreshRealm. In the first quarter of fiscal 2019, FreshRealm entered into a supply contract with a large multi-national, multi-channel retailer. Calavo co-signed an addendum to this agreement to provide assurance to the customer that Calavo will assume responsibility for performance, in the event that FreshRealm cannot perform, provided that the customer must work in good faith to make reasonable adjustments to logistical elements in the contract, if requested by Calavo. We provide storage services to FreshRealm from our New Jersey and Texas Value-Added Depots, and our RFG Riverside facility. We have received $0.1 million in storage services revenue from FreshRealm in the three months ended January 31, 2019 and 2018. For the three months ended January 31, 2019 and 2018, RFG has sold $1.6 million and $1.5 million of products to FreshRealm. The previous owners of RFG, one of which is currently an officer of Calavo, have a majority ownership of certain entities that provide various services to RFG, specifically LIG Partners, LLC and THNC, LLC. One of RFG’s California operating facilities 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. See the following tables for the related party activity for the three months ended January 31, 2019 and 2018: Three months ended January 31, (in thousands) 2019 2018 Rent paid to LIG $ 139 $ 139 Rent paid to THNC, LLC $ 198 $ 199 |
Other assets
Other assets | 3 Months Ended |
Jan. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | 5. Other assets consist of the following (in thousands): January 31, October 31, 2019 2018 Intangibles, net $ 833 $ 1,109 Mexican IVA (i.e. value-added) taxes receivable (see note 11) 24,042 21,859 Infrastructure advance to Agricola Belher 2,600 2,600 Notes receivable from San Rafael — 39 Other 1,571 1,423 $ 29,046 $ 27,030 Intangible assets consist of the following (in thousands): January 31, 2019 October 31, 2018 Weighted- Gross Net Gross Net Average Carrying Accum. Book Carrying Accum. Book Useful Life Value Amortization Value Value Amortization Value Customer list/relationships 8.0 years $ 7,640 $ (7,336) $ 304 $ 7,640 $ (7,106) $ 534 Trade names 8.6 years 2,760 (2,705) 55 2,760 (2,672) 88 Trade secrets/recipes 9.3 years 630 (431) 199 630 (418) 212 Brand name intangibles indefinite 275 — 275 275 — 275 Intangibles, net $ 11,305 $ (10,472) $ 833 $ 11,305 $ (10,196) $ 1,109 We anticipate recording amortization expense of approximately $0.4 million for the remainder of fiscal 2019, $0.1 million for fiscal year 2020, $0.1 million for fiscal year 2021, $0.1 million for fiscal year 2022, and less than $0.1 million for thereafter, through fiscal year 2023. See Note 11 for additional information related to Mexican IVA taxes. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Jan. 31, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | 6. In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the “2011 Plan”). All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan. Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan. On January 2, 2019, 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 $71.56. On January 2, 2020, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable. These shares were granted pursuant to our 2011 Plan. The total recognized stock-based compensation expense for these grants was $0.2 million for the three months ended January 31, 2019. On December 14, 2018, our executive officers were granted a total of 14,522 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 $85.67. These shares vest in one-third increments, on an annual basis, beginning December 14, 2019. These shares were granted pursuant to our 2011 Plan. The total recognized stock-based compensation expense for these grants was $0.1 million for the three months ended January 31, 2019. A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts): Weighted-Average Aggregate Number of Shares Grant Price Intrinsic Value Outstanding at October 31, 2018 85 $ 68.82 Vested (51) $ 70.48 Granted 35 $ 77.33 Outstanding at January 31, 2019 69 $ 71.74 $ 5,321 The total recognized stock-based compensation expense for restricted stock was $1.0 million and $1.8 million for the three months ended January 31, 2019 and 2018. Total unrecognized stock-based compensation expense totaled $4.7 million as of January 31, 2019, and will be amortized through fiscal year 2021. Stock options are granted with exercise prices of not less than the fair market value at grant date, generally vest over one to five years and generally expire two to five years after the grant date. We settle stock option exercises with newly issued shares of common stock. We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. We measure the fair value of our stock based compensation awards on the date of grant. A summary of stock option activity, related to our 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts): Weighted-Average Aggregate Number of Shares Exercise Price Intrinsic Value Outstanding at October 31, 2018 4 $ 19.20 Outstanding at January 31, 2019 4 $ 19.20 $ 370 Exercisable at January 31, 2019 4 $ 19.20 $ 370 At January 31, 2019, outstanding and exercisable stock options had a weighted-average remaining contractual term of 1.1 years. The total recognized and unrecognized stock-based compensation expense was insignificant for the three months ended January 31, 2019. A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts): Weighted-Average Aggregate Exercise Intrinsic Number of Shares Price Value Outstanding at October 31, 2018 20 $ 40.07 Exercised (2) $ 23.48 Outstanding at January 31, 2019 18 $ 41.91 $ 710 Exercisable at January 31, 2019 12 $ 25.10 $ 675 At January 31, 2019, outstanding and exercisable stock options had a weighted-average remaining contractual term of 4.4 years. The total recognized and unrecognized stock-based compensation expense was insignificant for the three months ended January 31, 2019. |
Other events
Other events | 3 Months Ended |
Jan. 31, 2019 | |
Other Events [Abstract] | |
Other events | 7. Dividend payment On December 7, 2018, we paid a $1.00 per share dividend in the aggregate amount of $17.6 million to shareholders of record on November 16, 2018. Litigation From time to time, we are also involved in other litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements. Mexico tax audits We conduct business both domestically and internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States. During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (CDM), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (MFM) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary. MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (VAT). During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations and requested the adoption of a conclusive agreement before the PRODECON (Local Tax Ombudsman) so that a full discussion of the case between us, the MFM and the PRODECON, as appropriate, can lead to a reconsideration of the MFM findings. During our third and fourth fiscal quarters of 2017, several meetings between MFM, PRODECON and us took place and on November 28, 2017, the initial PRODECON process concluded. In April 2018, we filed a second formal agreement before the PRODECON, so that we can continue the discussion of the case between us, the MFM and the PRODECON. During this meeting and discussion period, the statutory period that MFM has in order to issue the tax assessment has been suspended. Currently, we are waiting for the response of the MFM and the PRODECON regarding our next meeting date. We believe we have the legal arguments and documentation to sustain the positions challenged by tax authorities. Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico, is currently under examination related to fiscal year 2013. In January 2017, we received preliminary observations from SAT outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers, and VAT. We provided a written rebuttal to these preliminary observations during our second fiscal quarter of 2017, which the SAT is in process of analyzing. During our third fiscal quarter of 2017, we requested the adoption of a conclusive agreement before the PRODECON (Local Tax Ombudsman), so that a full discussion of the case between us, the SAT and the PRODECON, as appropriate, can lead to a reconsideration of the SATs findings. During this meeting and discussion period, the statutory period that SAT had in order to issue the tax assessment was suspended. During our first fiscal quarter of 2018, we had an initial meeting with officials from the SAT and the PRODECON, which led to a further exchange of supporting information and documentation. Although several meetings and discussions with the PRODECON and the SAT were conducted during our fiscal third quarter of 2018, we were unable to materially resolve our case with the SAT through the PRODECON process. As a result, on July 12, 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment (the “2013 Assessment”) totaling approximately $2.62 billion Mexican pesos related to Income Tax, Flat Rate Business Tax, and Value Added Tax, related to this fiscal 2013 tax audit. Additionally, the tax authorities have determined an employee’s profit sharing liability, totaling approximately $118 million Mexican pesos as well. We have consulted with both an internationally recognized tax advisor, as well as a global law firm with offices throughout Mexico, and we continue to believe this tax assessment is without merit. In August 2018, we filed an administrative appeal on the 2013 Assessment. The filing of an administrative appeal in Mexico is a process in which the taxpayer appeals to a different office within the Mexican tax authorities forcing the legal office within the SAT to rule on the matter. This process preserves the taxpayer’s right to litigate in tax court if the administrative appeal process ends without a favorable or just resolution. Here, CDM has appealed our case to the SAT’s central legal department in Mexico City. Furthermore, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2013 Assessment. We believe this recent ruling significantly undermines the 2013 Assessment we received in July 2018. We continue to believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position, results of operations and cash flows. |
Fair value measurements
Fair value measurements | 3 Months Ended |
Jan. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | 8. 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 January 31, 2019 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy: Level 1 Level 2 Level 3 Total (All amounts are pres e nted in thousands) Assets at Fair Value: Investment in Limoneira Company (1) $ 36,951 - - $ 36,951 Total assets at fair value $ 36,951 - - $ 36,951 (1) The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock. We currently own less than 10% of Limoneira’s outstanding common stock. These securities are measured at fair value using quoted market prices. For the three months ended January 31, 2019 we recognized a loss of $4.5 million on the consolidated condensed statement of income. In the prior year, unrealized gains and losses were recognized through other comprehensive income. Unrealized investment holding losses arising during the three months ended January 31, 2018 were $3.1 million. |
Noncontrolling interest
Noncontrolling interest | 3 Months Ended |
Jan. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling interest | 9. The following table reconciles shareholders’ equity attributable to noncontrolling interest related to Avocados de Jalisco (in thousands). Three months ended Three months ended Avocados de Jalisco noncontrolling interest January 31, 2019 January 31, 2018 Noncontrolling interest, beginning $ 1,748 $ 1,016 Noncash transfer of noncontrolling interest — 1,001 Net loss attributable to noncontrolling interest of Avocados de Jalisco (6) (150) Noncontrolling interest, ending $ 1,742 $ 1,867 |
Earnings per share
Earnings per share | 3 Months Ended |
Jan. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings per share | 10. Basic and diluted net income per share is calculated as follows (data in thousands, except per share data): Three months ended January 31, 2019 2018 Numerator: Net Income attributable to Calavo Growers, Inc. $ 4,487 $ 7,139 Denominator: Weighted average shares – Basic 17,500 17,446 Effect on dilutive securities – Restricted stock/options 58 79 Weighted average shares – Diluted 17,558 17,525 Net income per share attributable to Calavo Growers, Inc: Basic $ 0.26 $ 0.41 Diluted $ 0.26 $ 0.41 |
Mexican IVA taxes receivable
Mexican IVA taxes receivable | 3 Months Ended |
Jan. 31, 2019 | |
Value Added Tax Receivable [Abstract] | |
Mexican IVA taxes receivable | 11. Included in other assets are tax receivables due from the Mexican government for value-added taxes (IVA) paid in advance. CDM is charged IVA by vendors on certain expenditures in Mexico, which, insofar as they relate to the exportation of goods, translate into IVA amounts receivable from the Mexican government. As of January 31, 2019 and October 31, 2018, CDM IVA receivables totaled $24.0 million and $21.9 million. Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis. Beginning in fiscal 2014 and continuing into fiscal 2019, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation. Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations. We believe these factors and others have contributed to delays in the processing of IVA claims by the Mexican tax authorities. Currently, we are in the process of collecting such balances through regular administrative processes, but certain amounts may ultimately need to be recovered via legal means. During the first quarter of fiscal 2017, tax authorities informed us that their internal opinion, based on the information provided by the local SAT office in Uruapan, considers that CDM is not properly documented relative to its declared tax structure and therefore CDM cannot claim the refundable IVA balance. CDM has strong arguments and supporting documentation to sustain its declared tax structure for IVA and income tax purposes. CDM started an administrative appeal for the IVA related to the request of the months of July, August and September of 2015 (the “2015 Appeal”) in order to assert its argument that CDM is properly documented and to therefore change the SAT’s internal assessment. In August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on the 2015 Appeal indicating that they believe CDM’s legal interpretation of its declared tax structure is indeed accurate. While favorable on this central matter of CDMs declared tax structure, the ruling, however, still does not recognize the taxpayers right to a full refund for the IVA related to the months of July, August and September 2015. Therefore, CDM may need to file a substance-over-form annulment suit in the Federal Tax Court to recover its full refund for IVA over the subject period. In spite of the favorable ruling from the SAT’s central legal department in Mexico City, as discussed above, the local SAT office in Uruapan continues to believe that CDM is not properly documented relative to its declared tax structure. As a result, they believe CDM cannot claim certain refundable IVA balances, specifically in regards to our IVA refunds related to the months of January through June of 2013. CDM has strong arguments and supporting documentation to sustain its declared tax structure for IVA and income tax purposes. CDM started an administrative appeal for the IVA related to the request of the months of January, February of March of 2013 and for the period of April, May and June of 2013 our global tax law advisory firm with offices throughout Mexico is working in the administrative appeal through which CDM will challenge the determination made by the tax authorities, which must be filed no later than March 8, 2019. We believe that our operations in Mexico are properly documented. Furthermore, our internationally recognized tax advisors believe that there are legal grounds to prevail in the Federal Tax Court and that therefore, the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts. |
Income Taxes
Income Taxes | 3 Months Ended |
Jan. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 12. Income Taxes Our tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse. On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Except for certain provisions, the Tax Act was effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer with an October 31 fiscal year end, the majority of the new provisions, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income and introducing new limitations on certain business deductions, did not apply until our 2019 fiscal year. For fiscal 2018, the most significant impacts included: lowering of the U.S. federal corporate income tax rate; remeasuring certain net deferred tax assets and liabilities; and requiring the transition tax on the deemed repatriation of certain foreign earnings. In the first quarter of fiscal 2018, we recorded $1.7 million in one-time, non-cash charges related to the revaluation of our net deferred tax assets (approximately $1.4 million) and the transition tax on the deemed repatriation of foreign earnings (approximately $0.3 million). On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) allowing taxpayers to record a reasonable estimate of the impact of the U.S. legislation when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In accordance with SAB 118, the estimated income tax charge of $1.7 million represents the Company’s best estimate based on interpretation of the U.S. legislation. As a result, the actual impact on the net deferred tax liability may vary from the estimated amount due to uncertainties in the Company’s preliminary review. At January 31, 2019, the Company has completed its accounting for the tax effects of the 2017 Tax Cuts & Jobs Act and no material adjustments have been made on the provisional amounts recorded at January 31, 2018. |
FreshRealm
FreshRealm | 3 Months Ended |
Jan. 31, 2019 | |
Variable Interest Entity | |
Variable Interest Entity | 13. FreshRealm Based on the NMUPA and related Agreements, as described in Note 4, we reconsidered whether FreshRealm is a variable interest entity (“VIE”). A VIE refers to a legal business structure in which an investor has a controlling interest in, despite not having a majority of voting rights; or a structure involving equity investors that do not have sufficient resources to support the ongoing operating needs of the business. Due primarily to FreshRealm utilizing substantially more debt to finance its activities, in addition to its existing equity, we continue to believe that FreshRealm should be considered a VIE. In evaluating whether we are the primary beneficiary of FreshRealm, we considered several factors, including whether we (a) have the power to direct the activities that most significantly impact FreshRealm’s economic performance and (b) the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE. We were not the primary beneficiary of FreshRealm at January 31, 2019 because the nature of our involvement with the activities of FreshRealm does not give us the power to direct the activities that most significantly impact its economic performance. We do not have a future obligation to fund losses or debts on behalf of FreshRealm. We may, however, voluntarily contribute funds. In the accompanying statements of income, we have presented the income (loss) from unconsolidated entities, after the provision for income taxes for all periods presented. We record the amount of our investment in FreshRealm, totaling $13.1 million at January 31, 2019, in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income/(loss) in unconsolidated entities” on our Consolidated Condensed Statement of Income. For the three months ended January 31, 2019, FreshRealm incurred losses totaling $11.4 million. Effective December 16, 2018, FreshRealm completed a “check the box” tax election to change their entity classification for tax purposes to that of a corporation. To effect this change, FreshRealm, among other things, amended its operating agreement to eliminate the appropriate language related to the flow-through tax consequences of its prior tax status (Seventh Amended and Restated LLC Agreement) and checked the appropriate box on Form 8832 which it then filed with the Internal Revenue Service (IRS). As a result, losses incurred by FreshRealm from November 1, 2018 to December 15, 2018 were recorded in accordance with FASB Accounting Standards Codification (“ASC”) 810, ASC 323, and ASC 970, which mandate that the recognition of losses for an unconsolidated subsidiary be handled in a manner consistent with cash distributions upon liquidation of the entity when such distributions are different than the investors percentage ownership. As such, we recorded 100% of FreshRealm’s losses from November 1, 2018 through December 15, 2018 totaling $4.2 million. Losses incurred by FreshRealm from December 16, 2018 to January 31, 2019 (after the change in tax status was effective) were recorded to reflect our proportionate share of FreshRealm losses. From December 16, 2018 to January 31, 2019, our ownership percentage was approximately 37% and accordingly, we recorded losses from December 16, 2018 through January 31, 2019 totaling $2.7 million. As a result of FreshRealm’s recent change in tax status (described above), future operating results for FreshRealm will be allocated to its owners based on ownership percentage. As of January 31, 2019, and October 31, 2018, we have note receivables from FreshRealm totaling $19.9 million and $9.0 million. See Note 4 for further information. In the first quarter of fiscal 2019, FreshRealm entered into a supply contract with a large multinational, multi-channel retailer. Calavo co-signed an addendum to this agreement to provide assurance to the customer that Calavo will assume responsibility for performance, in the event that FreshRealm cannot perform, provided that the customer must work in good faith to make reasonable adjustments to logistical elements in the contract, if requested by Calavo. Except for the performance guarantee noted above (for which we are unable to quantify our current exposure, if any), our exposure to the obligations of FreshRealm is generally limited to our interests in it. We believe our maximum exposure to loss in FreshRealm is the carrying value of our investment and our loans to it, which totaled $13.1 million and $19.9 million, as of January 31, 2019. Our maximum exposure to loss could increase in the future if FreshRealm receives additional financing (i.e. equity or debt) from Calavo or any other investor/lender. We are under no obligation to provide FreshRealm additional financing. Unconsolidated Significant Subsidiary As described in footnote 4, we own approximately 37% of FreshRealm as of January 31, 2019 and October 31, 2018. In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies for interim reports on Form 10-Q, we must determine if our unconsolidated subsidiaries are considered, “significant subsidiaries”. In evaluating our investments, there are two tests utilized to determine if our subsidiaries are considered significant subsidiaries: the income test and the investment test. Rule 10-01(b)(1) of Regulation S-X requires summarized income statement information of an unconsolidated subsidiary in an interim report if either of the two tests exceed 20%. Pursuant to Rule 10-01(b)(1) of Regulation S-X, this requires summarized income statement information of FreshRealm in our first fiscal quarter Form 10-Q. As disclosed in our October 31, 2018 10-K, we still plan to file FreshRealm’s financial statements by April 1, 2019 as an amendment to our Form 10-K. The following table shows summarized financial information for FreshRealm (in thousands) : Income Statement: Three months ended January 31, 2019 2018 Net sales $ 8,888 $ 5,034 Gross loss (2,891) (2,157) Selling, general and administrative (6,003) (3,952) Other (2,484) (279) Net loss $ (11,378) $ (6,388) |
Revenue recognition
Revenue recognition | 3 Months Ended |
Jan. 31, 2019 | |
Revenue recognition | |
Revenue recognition | 14. Revenue recognition Effective at the beginning of our fiscal 2019, the Company adopted Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers," and all the related amendments (Accounting Standards Codification (ASC) 606) using the modified retrospective method of adoption. ASC 606 consists of a comprehensive revenue recognition standard, which requires the recognition of revenue when control of promised goods are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled. The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of net consideration expected to be received in exchange for transferring products. Revenue from product sales is governed primarily by customer pricing and related purchase orders (“contracts”) which specify shipping terms and certain aspects of the transaction price including rebates, discounts and other sales incentives. Contracts are at standalone pricing. The performance obligation in these contracts is determined by each of the individual purchase orders and the respective stated quantities, with revenue being recognized at a point in time when obligations under the terms of the agreement are satisfied. This generally occurs with the transfer of control of our products to the customer and the product is delivered. The Company's customers have an implicit and explicit right to return non-conforming products. A provision for payment discounts and product return allowances, which is estimated, is recorded as a reduction of sales in the same period that the revenue is recognized. Sales Incentives and Other Promotional Programs The Company routinely offers sales incentives and discounts through various regional and national programs to our customers and consumers. These programs include product discounts or allowances, product rebates, product returns, one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. The costs associated with these activities are accounted for as reductions to the transaction price of the Company’s products and are, therefore, recorded as reductions to gross sales at the time of sale. The Company bases its estimates of incentive costs on historical trend experience with similar programs, actual incentive terms per customer contractual obligations and expected levels of performance of trade promotions, utilizing customer and sales organization inputs. The Company maintains liabilities at the end of each period for the estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are generally not material and are recognized in earnings in the period such differences are determined. Reserves for product returns, accrued rebates and promotional accruals are included in the condensed consolidated balance sheets as part of accrued expenses. Principle vs. Agent Considerations We frequently enter into consignment arrangements with avocado and tomato growers and packers located outside of the U.S. and growers of certain perishable products in the U.S. We evaluated whether its performance obligation is a promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent) using a control model. This evaluation determined that the Company is in control of establishing the transaction price, managing all aspects of the shipments process and taking the risk of loss for delivery, collection, and returns. Based on the Company’s evaluation of the control model, it determined that all of the Company’s major businesses act as the principal rather than the agent within their revenue arrangements and such revenues are reported on a gross basis. Practical Expedients The Company elected the following practical expedients upon its adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). •Shipping and handling costs - The company elected to account for shipping and handling activities that occur before the customer has obtained control of a good as fulfillment activities rather than as a promised service. •Measurement of transaction price - The Company has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on, and concurrent with, a specific revenue-producing transaction and collected by the Company from a customer for sales taxes. •Contract costs - The Company has elected to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period is one year or less. The adoption of ASC 606 did not have an impact on our consolidated results of operations for the three months ended January 31, 2019. |
Amendment to Credit Agreement
Amendment to Credit Agreement | 3 Months Ended |
Jan. 31, 2019 | |
Amendment to Credit Agreement | |
Amendment to Credit Agreement | 15. Amendment to Credit Agreement Effective March 1, 2019, we entered into a Second Amendment to Credit Agreement (the “Second Amendment”) with Farm Credit West, PCA, and Bank of America, N.A., relating to our Credit Agreement dated as of June 14, 2016 and the First Amendment to Credit Agreement dated as of August 29, 2016. The Second Amendment, among other things, excludes financial results of FreshRealm from Calavo’s financial reporting requirements and covenant calculations and provides flexibility in making investments in joint ventures and non-wholly owned subsidiaries of Calavo. |
Sale of Temecula, California Pa
Sale of Temecula, California Packinghouse | 3 Months Ended |
Jan. 31, 2019 | |
Sale of Temecula, California Packinghouse | |
Sale of Temecula, California Packinghouse | 16. Sale of Temecula, California Packinghouse In January 2019, we entered into an agreement to sell our Temecula, California packinghouse for $7.1 million in cash and, concurrently, leaseback a portion of the facility representing approximately one-third of the total square footage. The contract is subject to terms that are usual and customary for real estate sales of this nature and is expected to close during our second fiscal quarter of 2019. Included in our Property, Plant and Equipment is our Temecula, California packinghouse that is currently being held-for-sale. The Net Book Value of this held-for-sale property is approximately $0.7 million. |
Description of the business (Po
Description of the business (Policies) | 3 Months Ended |
Jan. 31, 2019 | |
Description of the business | |
Business | Business Calavo Growers, Inc. (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 three different business segments: Fresh products, Calavo Foods and Renaissance Food Group (RFG). 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, 2018. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for fiscal years and interim period within those fiscal years beginning after December 15, 2017. The Company adopted this new standard at the beginning of fiscal 2019. With the adoption of this new standard, we reclassed unrealized gains of $12.1 million in accumulated other comprehensive income to retained earnings as of November 1, 2018. Additionally, for the three months ended January 31, 2019, we sold 51,271 shares of Limoneira stock and recorded a loss of $0.1 million in our consolidated statements of income. Limoneira’s stock price at January 31, 2019 and October 31, 2018 equaled $22.03 per share and $24.65 per share. Our remaining shares of Limoneira stock, totaling 1,677,299 at January 31, 2019, were revalued to $22.03 per share and, as a result, we recorded a loss of $4.4 million in our consolidated statements of income. In May 2014, the FASB issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The Company adopted this new standard at the beginning of fiscal 2019 using the modified retrospective transition method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to the opening balance of retained earnings on the first day of our 2019 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated financial statements. See Note 14 for further information. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In June 2018, the FASB issued an ASU , Improvements to Nonemployee Share-Based Payment Accounting . The FASB issued this update to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU will be effective for us beginning the first day of our 2020 fiscal year. We are evaluating the impact of the update of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements. In February 2018, the FASB issued an ASU, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income , which amends Accounting Standards Codification ("ASC") 220, Income Statement — Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act, (the "Act"). In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. This ASU is effective for us the first day of our 2020 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements. In January 2017, the FASB issued an ASU, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The ASU permits an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning the first day of our 2021 fiscal year and is not expected to have a significant impact upon adoption. In February 2016, the FASB issued an ASU, Leases , which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2020 fiscal year. Early adoption is permitted. Although we are in the process of evaluating the impact of adoption of ASU 2016-02 on our consolidated financial statements, we currently expect the most significant changes will be related to the recognition of material new long-term right-of-use assets and lease liabilities on our consolidated balance sheet. |
Information regarding our ope_2
Information regarding our operations in different segments (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of sales by product and segment | Data in the following tables is presented in thousands: Three months ended January 31, 2019 Three months ended January 31, 2018 Fresh Calavo Fresh Calavo products Foods RFG Total products Foods RFG Total Avocados $ 103,995 $ — $ — $ 103,995 $ 108,929 $ — $ — $ 108,929 Tomatoes 11,392 — — 11,392 12,084 — — 12,084 Papayas 2,939 — — 2,939 2,805 — — 2,805 Other fresh products 80 — — 80 34 — — 34 Prepared avocado products — 24,252 — 24,252 — 21,803 — 21,803 Salsa — 853 — 853 — 865 — 865 Fresh-cut fruit & vegetables and prepared foods — — 119,541 119,541 — — 106,776 106,776 Total gross sales 118,406 25,105 119,541 263,052 123,852 22,668 106,776 253,296 Less sales incentives (957) (2,034) (477) (3,468) (652) (2,778) (670) (4,100) Less inter-company eliminations (595) (957) — (1,552) (415) (853) — (1,268) Net sales $ 116,854 $ 22,114 $ 119,064 $ 258,032 $ 122,785 $ 19,037 $ 106,106 $ 247,928 |
Schedule of segment gross margin | Fresh Calavo products Foods RFG Total Three months ended January 31, 2019 Net sales before intercompany eliminations $ 117,449 $ 23,071 $ 119,064 $ 259,584 Intercompany eliminations (595) (957) — (1,552) Net sales 116,854 22,114 119,064 258,032 Cost of sales before intercompany eliminations 96,591 16,327 115,829 228,747 Intercompany eliminations (527) (645) (380) (1,552) Cost of sales 96,064 15,682 115,449 227,195 Gross profit $ 20,790 $ 6,432 $ 3,615 $ 30,837 Three months ended January 31, 2018 Net sales before intercompany eliminations $ 123,200 $ 19,890 $ 106,106 $ 249,196 Intercompany eliminations (415) (853) — (1,268) Net sales 122,785 19,037 106,106 247,928 Cost of sales before intercompany eliminations 108,905 13,620 100,361 222,886 Intercompany eliminations (377) (558) (333) (1,268) Cost of sales 108,528 13,062 100,028 221,618 Gross profit $ 14,257 $ 5,975 $ 6,078 $ 26,310 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following (in thousands): January 31, October 31, 2019 2018 Fresh fruit $ 14,921 $ 12,902 Packing supplies and ingredients 11,871 10,889 Finished prepared foods 11,671 11,253 $ 38,463 $ 35,044 |
Related party transactions (Tab
Related party transactions (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Related-Party Transactions [Abstract] | |
Schedule of related party transactions | Three months ended January 31, (in thousands) 2019 2018 Rent paid to LIG $ 139 $ 139 Rent paid to THNC, LLC $ 198 $ 199 |
Other assets (Tables)
Other assets (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | Other assets consist of the following (in thousands): January 31, October 31, 2019 2018 Intangibles, net $ 833 $ 1,109 Mexican IVA (i.e. value-added) taxes receivable (see note 11) 24,042 21,859 Infrastructure advance to Agricola Belher 2,600 2,600 Notes receivable from San Rafael — 39 Other 1,571 1,423 $ 29,046 $ 27,030 |
Schedule of Intangible Assets | Intangible assets consist of the following (in thousands): January 31, 2019 October 31, 2018 Weighted- Gross Net Gross Net Average Carrying Accum. Book Carrying Accum. Book Useful Life Value Amortization Value Value Amortization Value Customer list/relationships 8.0 years $ 7,640 $ (7,336) $ 304 $ 7,640 $ (7,106) $ 534 Trade names 8.6 years 2,760 (2,705) 55 2,760 (2,672) 88 Trade secrets/recipes 9.3 years 630 (431) 199 630 (418) 212 Brand name intangibles indefinite 275 — 275 275 — 275 Intangibles, net $ 11,305 $ (10,472) $ 833 $ 11,305 $ (10,196) $ 1,109 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Restricted Stock Activity | A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts): Weighted-Average Aggregate Number of Shares Grant Price Intrinsic Value Outstanding at October 31, 2018 85 $ 68.82 Vested (51) $ 70.48 Granted 35 $ 77.33 Outstanding at January 31, 2019 69 $ 71.74 $ 5,321 |
2005 Stock Incentive Plan [Member] | |
Stock Option Activity, Related to Incentive Plan | A summary of stock option activity, related to our 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts): Weighted-Average Aggregate Number of Shares Exercise Price Intrinsic Value Outstanding at October 31, 2018 4 $ 19.20 Outstanding at January 31, 2019 4 $ 19.20 $ 370 Exercisable at January 31, 2019 4 $ 19.20 $ 370 |
2011 Management Incentive Plan [Member] | |
Stock Option Activity, Related to Incentive Plan | A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts): Weighted-Average Aggregate Exercise Intrinsic Number of Shares Price Value Outstanding at October 31, 2018 20 $ 40.07 Exercised (2) $ 23.48 Outstanding at January 31, 2019 18 $ 41.91 $ 710 Exercisable at January 31, 2019 12 $ 25.10 $ 675 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Financial Assets Measured on a Recurring Basis | Level 1 Level 2 Level 3 Total (All amounts are pres e nted in thousands) Assets at Fair Value: Investment in Limoneira Company (1) $ 36,951 - - $ 36,951 Total assets at fair value $ 36,951 - - $ 36,951 (1) The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock. We currently own less than 10% of Limoneira’s outstanding common stock. These securities are measured at fair value using quoted market prices. For the three months ended January 31, 2019 we recognized a loss of $4.5 million on the consolidated condensed statement of income. In the prior year, unrealized gains and losses were recognized through other comprehensive income. Unrealized investment holding losses arising during the three months ended January 31, 2018 were $3.1 million. |
Noncontrolling interest (Tables
Noncontrolling interest (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
Reconciles Shareholders' Equity Attributable to Noncontrolling Interest | The following table reconciles shareholders’ equity attributable to noncontrolling interest related to Avocados de Jalisco (in thousands). Three months ended Three months ended Avocados de Jalisco noncontrolling interest January 31, 2019 January 31, 2018 Noncontrolling interest, beginning $ 1,748 $ 1,016 Noncash transfer of noncontrolling interest — 1,001 Net loss attributable to noncontrolling interest of Avocados de Jalisco (6) (150) Noncontrolling interest, ending $ 1,742 $ 1,867 |
Earnings per share (Tables)
Earnings per share (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted net income per share | Basic and diluted net income per share is calculated as follows (data in thousands, except per share data): Three months ended January 31, 2019 2018 Numerator: Net Income attributable to Calavo Growers, Inc. $ 4,487 $ 7,139 Denominator: Weighted average shares – Basic 17,500 17,446 Effect on dilutive securities – Restricted stock/options 58 79 Weighted average shares – Diluted 17,558 17,525 Net income per share attributable to Calavo Growers, Inc: Basic $ 0.26 $ 0.41 Diluted $ 0.26 $ 0.41 |
FreshRealm (Tables)
FreshRealm (Tables) | 3 Months Ended |
Jan. 31, 2019 | |
Variable Interest Entity | |
Summarized financial information for FreshRealm | As disclosed in our October 31, 2018 10-K, we still plan to file FreshRealm’s financial statements by April 1, 2019 as an amendment to our Form 10-K. The following table shows summarized financial information for FreshRealm (in thousands) : Income Statement: Three months ended January 31, 2019 2018 Net sales $ 8,888 $ 5,034 Gross loss (2,891) (2,157) Selling, general and administrative (6,003) (3,952) Other (2,484) (279) Net loss $ (11,378) $ (6,388) |
Description of the business (De
Description of the business (Details) $ / shares in Units, $ in Millions | 3 Months Ended | |||
Jan. 31, 2019USD ($)segment$ / sharesshares | Jan. 31, 2018USD ($) | Nov. 01, 2018USD ($) | Oct. 31, 2018$ / shares | |
Number of reportable segments | segment | 3 | |||
Limoneira [Member] | ||||
Sale of securities | shares | 51,271 | |||
Realized gain (loss) | $ (0.1) | |||
Investment share price (in dollars per share) | $ / shares | $ 22.03 | $ 24.65 | ||
Investment shares held (in shares) | shares | 1,677,299 | |||
Unrealized gains (losses) recorded | $ (4.4) | $ (3.1) | ||
ASU 2016-01 | ||||
Increase to equity | $ 12.1 |
Information regarding our ope_3
Information regarding our operations in different segments - Sales by Product (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Segment reporting information | ||
Net sales | $ 258,032 | $ 247,928 |
Fresh products [Member] | ||
Segment reporting information | ||
Net sales | 116,854 | 122,785 |
Calavo Foods [Member] | ||
Segment reporting information | ||
Net sales | 22,114 | 19,037 |
RFG [Member] | ||
Segment reporting information | ||
Net sales | 119,064 | 106,106 |
Operating segments | ||
Segment reporting information | ||
Less sales incentives | (3,468) | (4,100) |
Net sales | 263,052 | 253,296 |
Operating segments | Avocados [Member] | ||
Segment reporting information | ||
Net sales | 103,995 | 108,929 |
Operating segments | Tomatoes [Member] | ||
Segment reporting information | ||
Net sales | 11,392 | 12,084 |
Operating segments | Papayas [Member] | ||
Segment reporting information | ||
Net sales | 2,939 | 2,805 |
Operating segments | Other fresh products [Member] | ||
Segment reporting information | ||
Net sales | 80 | 34 |
Operating segments | Prepared avocado products [Member] | ||
Segment reporting information | ||
Net sales | 24,252 | 21,803 |
Operating segments | Salsa [Member] | ||
Segment reporting information | ||
Net sales | 853 | 865 |
Operating segments | Fresh-cut fruit & vegetables and prepared foods [Member] | ||
Segment reporting information | ||
Net sales | 119,541 | 106,776 |
Operating segments | Fresh products [Member] | ||
Segment reporting information | ||
Less sales incentives | (957) | (652) |
Net sales | 118,406 | 123,852 |
Operating segments | Fresh products [Member] | Avocados [Member] | ||
Segment reporting information | ||
Net sales | 103,995 | 108,929 |
Operating segments | Fresh products [Member] | Tomatoes [Member] | ||
Segment reporting information | ||
Net sales | 11,392 | 12,084 |
Operating segments | Fresh products [Member] | Papayas [Member] | ||
Segment reporting information | ||
Net sales | 2,939 | 2,805 |
Operating segments | Fresh products [Member] | Other fresh products [Member] | ||
Segment reporting information | ||
Net sales | 80 | 34 |
Operating segments | Calavo Foods [Member] | ||
Segment reporting information | ||
Less sales incentives | (2,034) | (2,778) |
Net sales | 25,105 | 22,668 |
Operating segments | Calavo Foods [Member] | Prepared avocado products [Member] | ||
Segment reporting information | ||
Net sales | 24,252 | 21,803 |
Operating segments | Calavo Foods [Member] | Salsa [Member] | ||
Segment reporting information | ||
Net sales | 853 | 865 |
Operating segments | RFG [Member] | ||
Segment reporting information | ||
Less sales incentives | (477) | (670) |
Net sales | 119,541 | 106,776 |
Operating segments | RFG [Member] | Fresh-cut fruit & vegetables and prepared foods [Member] | ||
Segment reporting information | ||
Net sales | 119,541 | 106,776 |
Intercompany eliminations | ||
Segment reporting information | ||
Net sales | (1,552) | (1,268) |
Intercompany eliminations | Fresh products [Member] | ||
Segment reporting information | ||
Net sales | (595) | (415) |
Intercompany eliminations | Calavo Foods [Member] | ||
Segment reporting information | ||
Net sales | $ (957) | $ (853) |
Information regarding our ope_4
Information regarding our operations in different segments - Gross Profit (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Segment reporting information | ||
Net sales | $ 258,032 | $ 247,928 |
Cost of sales | 227,195 | 221,618 |
Gross profit | 30,837 | 26,310 |
Fresh products [Member] | ||
Segment reporting information | ||
Net sales | 116,854 | 122,785 |
Cost of sales | 96,064 | 108,528 |
Gross profit | 20,790 | 14,257 |
Calavo Foods [Member] | ||
Segment reporting information | ||
Net sales | 22,114 | 19,037 |
Cost of sales | 15,682 | 13,062 |
Gross profit | 6,432 | 5,975 |
RFG [Member] | ||
Segment reporting information | ||
Net sales | 119,064 | 106,106 |
Cost of sales | 115,449 | 100,028 |
Gross profit | 3,615 | 6,078 |
Elimination between Fresh products and RFG [member] | ||
Segment reporting information | ||
Sales and Cost of Sales Eliminated | 500 | 400 |
Elimination between Calavo Foods and RFG [member] | ||
Segment reporting information | ||
Sales and Cost of Sales Eliminated | 1,000 | 900 |
Elimination between Fresh products and Calavo Foods [member] | ||
Segment reporting information | ||
Sales and Cost of Sales Eliminated | 100 | |
Operating segments | ||
Segment reporting information | ||
Revenue less sales incentives | 259,584 | 249,196 |
Net sales | 263,052 | 253,296 |
Cost of sales | 228,747 | 222,886 |
Operating segments | Fresh products [Member] | ||
Segment reporting information | ||
Revenue less sales incentives | 117,449 | 123,200 |
Net sales | 118,406 | 123,852 |
Cost of sales | 96,591 | 108,905 |
Operating segments | Calavo Foods [Member] | ||
Segment reporting information | ||
Revenue less sales incentives | 23,071 | 19,890 |
Net sales | 25,105 | 22,668 |
Cost of sales | 16,327 | 13,620 |
Operating segments | RFG [Member] | ||
Segment reporting information | ||
Revenue less sales incentives | 119,064 | 106,106 |
Net sales | 119,541 | 106,776 |
Cost of sales | 115,829 | 100,361 |
Intercompany eliminations | ||
Segment reporting information | ||
Net sales | (1,552) | (1,268) |
Cost of sales | (1,552) | (1,268) |
Intercompany eliminations | Fresh products [Member] | ||
Segment reporting information | ||
Net sales | (595) | (415) |
Cost of sales | (527) | (377) |
Intercompany eliminations | Calavo Foods [Member] | ||
Segment reporting information | ||
Net sales | (957) | (853) |
Cost of sales | (645) | (558) |
Intercompany eliminations | RFG [Member] | ||
Segment reporting information | ||
Cost of sales | $ (380) | $ (333) |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jan. 31, 2019 | Oct. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Fresh fruit | $ 14,921 | $ 12,902 |
Packing supplies and ingredients | 11,871 | 10,889 |
Finished prepared foods | 11,671 | 11,253 |
Total, Inventories | 38,463 | 35,044 |
Adjustment for inventory net realizable value | $ 0 | $ 0 |
Related-Party Transactions (Det
Related-Party Transactions (Details) $ in Thousands | Jul. 31, 2018USD ($) | Jan. 31, 2018USD ($)director | Jan. 31, 2019USD ($) | Jan. 31, 2019USD ($)itemdirector | Apr. 30, 2018USD ($)director | Jan. 31, 2018USD ($) | Oct. 31, 2018USD ($) | Apr. 30, 2019USD ($) | Dec. 31, 2017USD ($) | Oct. 31, 2017USD ($) | Jan. 31, 2016USD ($) |
Related Party Transaction [Line Items] | |||||||||||
Investment in unconsolidated entities | $ 18,507 | $ 18,507 | $ 24,805 | ||||||||
Related party note receivable, non-current | 2,600 | 2,600 | 2,600 | ||||||||
Noncash transfer of noncontrolling interest | $ 1,001 | ||||||||||
Loans to FreshRealm | 19,942 | 19,942 | |||||||||
FreshRealm [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Investment in unconsolidated entities | 13,100 | 13,100 | 19,900 | ||||||||
Investment in unconsolidated entities | $ 3,500 | ||||||||||
Subscription agreements issued to third-party investors | 3,500 | ||||||||||
Loans to FreshRealm | 19,900 | $ 19,900 | 9,000 | ||||||||
Number of officers | item | 3 | ||||||||||
Number of board of directors | director | 5 | ||||||||||
Loans to FreshRealm members | $ 200 | $ 200 | 300 | ||||||||
Revenue from related parties | $ 100 | 100 | |||||||||
FreshRealm [Member] | Subsequent Event [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Loans to FreshRealm | $ 1,500 | ||||||||||
FreshRealm [Member] | FreshRealm [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
VIE ownership (as a percent) | 37.00% | 37.00% | |||||||||
FreshRealm [Member] | Chairman and Chief Executive Officer [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Investment in unconsolidated entities | $ 1,500 | $ 7,000 | |||||||||
FreshRealm [Member] | Non Executive Directors [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Investment in unconsolidated entities | $ 1,800 | 1,800 | |||||||||
Investment in unconsolidated entities | $ 1,200 | ||||||||||
Number of board of directors | director | 1 | 2 | |||||||||
FreshRealm [Member] | RFG [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Revenue from related parties | $ 1,600 | 1,500 | |||||||||
FreshRealm [Member] | NMUPA | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Loan receivable commitment | $ 12,000 | ||||||||||
Loans to FreshRealm | $ 3,000 | 3,000 | 9,000 | ||||||||
FreshRealm [Member] | $7.5 million Note | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Loans to FreshRealm | $ 7,500 | 7,500 | |||||||||
Directors | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Purchases from related parties | 100 | ||||||||||
Limoneira [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Dividend income from Limoneira | 100 | 100 | |||||||||
Rent paid | $ 100 | 100 | |||||||||
Limoneira [Member] | Maximum [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Non-equity method investment ownership (as a percent) | 10.00% | 10.00% | |||||||||
TroyGould PC | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Legal fees | $ 100 | 100 | |||||||||
Don Memo | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Purchases from related parties | 5,700 | 3,700 | |||||||||
Investment in unconsolidated entities | $ 5,400 | $ 5,400 | 5,200 | ||||||||
Ownership interest | 50.00% | 50.00% | |||||||||
Advances to supplier | $ 2,000 | $ 2,000 | 2,500 | ||||||||
Don Memo | Don Memo | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Debt amount | $ 4,500 | ||||||||||
Agricola Belher [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Purchases from related parties | 5,300 | 5,900 | |||||||||
Advances to supplier | 4,000 | 4,000 | 4,000 | ||||||||
Related party note receivable | 3,400 | 3,400 | 3,400 | ||||||||
Related party note receivable, current | 800 | 800 | 800 | ||||||||
Related party note receivable, non-current | 2,600 | 2,600 | 2,600 | ||||||||
Avocados de Jalisco | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Purchases from related parties | 1,000 | 200 | |||||||||
Advances to supplier | $ 100 | $ 100 | $ 100 | ||||||||
Noncash transfer of noncontrolling interest | $ 1,000 | ||||||||||
Avocados de Jalisco | Avocados de Jalisco | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Subsidiary ownership (as a percent) | 83.00% | 83.00% | |||||||||
LIG [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent paid | $ 139 | 139 | |||||||||
THNC [Member] | |||||||||||
Related Party Transaction [Line Items] | |||||||||||
Rent paid | $ 198 | $ 199 |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Thousands | Jan. 31, 2019 | Oct. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Intangibles, net | $ 833 | $ 1,109 |
Mexican IVA (i.e. value-added) taxes receivable | 24,042 | 21,859 |
Infrastructure advance to Agricola Belher | 2,600 | 2,600 |
Notes receivable from San Rafael | 39 | |
Other | 1,571 | 1,423 |
Other assets | $ 29,046 | $ 27,030 |
Other Assets - Schedule of Inta
Other Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Oct. 31, 2018 | |
Finite-Lived Intangible Assets | ||
Accum. Amortization | $ (10,472) | $ (10,196) |
Finite and indefinite lived intangible assets gross | 11,305 | 11,305 |
Intangibles, net | 833 | 1,109 |
Brand name intangibles [Member] | ||
Finite-Lived Intangible Assets | ||
Gross carrying value and net book value | $ 275 | 275 |
Customer list/relationships [Member] | ||
Finite-Lived Intangible Assets | ||
Weighted-Average Useful Life | 8 years | |
Gross Carrying Value | $ 7,640 | 7,640 |
Accum. Amortization | (7,336) | (7,106) |
Net Book Value | $ 304 | 534 |
Trade names [Member] | ||
Finite-Lived Intangible Assets | ||
Weighted-Average Useful Life | 8 years 7 months 6 days | |
Gross Carrying Value | $ 2,760 | 2,760 |
Accum. Amortization | (2,705) | (2,672) |
Net Book Value | $ 55 | 88 |
Trade secrets/recipes [Member] | ||
Finite-Lived Intangible Assets | ||
Weighted-Average Useful Life | 9 years 3 months 18 days | |
Gross Carrying Value | $ 630 | 630 |
Accum. Amortization | (431) | (418) |
Net Book Value | $ 199 | $ 212 |
Other Assets - Amortization (De
Other Assets - Amortization (Details) $ in Millions | Jan. 31, 2019USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Amortization expense for remainder of fiscal 2019 | $ 0.4 |
Amortization expense for 2020 | 0.1 |
Amortization expense for 2021 | 0.1 |
Amortization expense for 2022 | 0.1 |
Amortization expense for the year 2023 | $ 0.1 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) $ / shares in Units, $ in Millions | Jan. 02, 2019director$ / sharesshares | Dec. 14, 2018$ / sharesshares | Jan. 31, 2019USD ($)shares | Jan. 31, 2018USD ($) | Apr. 30, 2011shares |
Restricted Stock [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Restricted shares granted | 35,000 | ||||
Restricted Stock [Member] | Non-employee directors [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of non-employee directors | director | 12 | ||||
Restricted shares granted per non-employee | 1,750 | ||||
Restricted shares granted | 21,000 | ||||
Share price | $ / shares | $ 71.56 | ||||
Recognized stock-based compensation expense | $ | $ 0.2 | ||||
Restricted Stock [Member] | Executive officers [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Restricted shares granted | 14,522 | ||||
Share price | $ / shares | $ 85.67 | ||||
Recognized stock-based compensation expense | $ | $ 0.1 | ||||
Annual incremental vesting percentage | 33.00% | ||||
Stock Options [Member] | Minimum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 1 year | ||||
Expiration period, after grant date | 2 years | ||||
Stock Options [Member] | Maximum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 5 years | ||||
Expiration period, after grant date | 5 years | ||||
2011 Management Incentive Plan [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common stock shares authorized under plan | 1,500,000 | ||||
2011 Management Incentive Plan [Member] | Restricted Stock [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Recognized stock-based compensation expense | $ | $ 1 | $ 1.8 | |||
Unrecognized stock based compensation expenses | $ | $ 4.7 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Activity (Details) - Restricted Stock [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Oct. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding, Number of Shares, Beginning Balance | 85 | |
Vested, Number of Shares | (51) | |
Granted, Number of Shares | 35 | |
Outstanding, Number of Shares, Ending Balance | 69 | |
Outstanding, Weighted-Average Grant Price | $ 71.74 | $ 68.82 |
Vested, Weighted-Average Grant Price | 70.48 | |
Granted, Weighted-Average Grant Price | $ 77.33 | |
Aggregate Intrinsic Value | $ 5,321 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Option Activity (Details) - Stock Options [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Oct. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding, Number of Shares, Beginning Balance | 20 | |
Exercised, Number of Shares | (2) | |
Outstanding, Weighted-Average Exercise Price | $ 40.07 | |
Exercised, Weighted-Average Exercise Price | $ 23.48 | |
2005 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding, Number of Shares, Beginning Balance | 4 | |
Outstanding, Number of Shares, Ending Balance | 4 | |
Exercisable, Number of Shares | 4 | |
Outstanding, Weighted-Average Exercise Price | $ 19.20 | $ 19.20 |
Exercisable, Weighted-Average Exercise Price | $ 19.20 | |
Outstanding, Aggregate Intrinsic Value | $ 370 | |
Exercisable, Aggregate Intrinsic Value | $ 370 | |
Outstanding stock options, weighted-average remaining contractual term | 1 year 1 month 6 days | |
Exercisable stock options, weighted-average remaining contractual term | 1 year 1 month 6 days | |
2011 Management Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Outstanding, Number of Shares, Ending Balance | 18 | |
Exercisable, Number of Shares | 12 | |
Outstanding, Weighted-Average Exercise Price | $ 41.91 | |
Exercisable, Weighted-Average Exercise Price | $ 25.10 | |
Outstanding, Aggregate Intrinsic Value | $ 710 | |
Exercisable, Aggregate Intrinsic Value | $ 675 | |
Outstanding stock options, weighted-average remaining contractual term | 4 years 4 months 24 days | |
Exercisable stock options, weighted-average remaining contractual term | 4 years 4 months 24 days |
Other Events (Details)
Other Events (Details) $ / shares in Units, $ in Thousands, $ in Millions | Dec. 07, 2018$ / shares | Jul. 12, 2018MXN ($) | Jan. 31, 2019USD ($) | Jan. 31, 2018USD ($) |
Dividend declared per share | $ / shares | $ 1 | |||
Dividend amount paid to shareholders | $ 17,568 | $ 16,657 | ||
Mexican Tax Authority [Member] | ||||
Final tax assessment related to Income Tax, Flat Rate Business Tax, and Value Added Tax | $ 2,620 | |||
Employee profit sharing liability | $ 118 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Assets at Fair Value: | ||
Unrealized and realized net loss on Limoneira shares | $ (4,505) | |
Limoneira [Member] | ||
Assets at Fair Value: | ||
Unrealized and realized net loss on Limoneira shares | (4,500) | |
Unrealized gains (losses) recorded | $ (4,400) | $ (3,100) |
Limoneira [Member] | Maximum [Member] | ||
Assets at Fair Value: | ||
Non-equity method investment ownership (as a percent) | 10.00% | |
Fair Value, Measurements, Recurring [Member] | ||
Assets at Fair Value: | ||
Total assets at fair value | $ 36,951 | |
Fair Value, Measurements, Recurring [Member] | Limoneira [Member] | ||
Assets at Fair Value: | ||
Investment in Limoneira Company | 36,951 | |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | ||
Assets at Fair Value: | ||
Total assets at fair value | 36,951 | |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Limoneira [Member] | ||
Assets at Fair Value: | ||
Investment in Limoneira Company | $ 36,951 |
Noncontrolling Interest (Detail
Noncontrolling Interest (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Noncontrolling Interest [Line Items] | ||
Noncontrolling interest, beginning | $ 1,748 | |
Noncash transfer of noncontrolling interest | $ 1,001 | |
Net loss attributable to noncontrolling interest of Avocados de Jalisco | (6) | (150) |
Noncontrolling interest, ending | 1,742 | |
Avocados de Jalisco | ||
Noncontrolling Interest [Line Items] | ||
Noncontrolling interest, beginning | 1,748 | 1,016 |
Noncash transfer of noncontrolling interest | 1,001 | |
Net loss attributable to noncontrolling interest of Avocados de Jalisco | (6) | (150) |
Noncontrolling interest, ending | $ 1,742 | $ 1,867 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Earnings Per Share [Abstract] | ||
Net income attributable to Calavo Growers, Inc. | $ 4,487 | $ 7,139 |
Weighted average shares - Basic | 17,500 | 17,446 |
Effect on dilutive securities - Restricted stock/options | 58 | 79 |
Weighted average shares - Diluted | 17,558 | 17,525 |
Basic | $ 0.26 | $ 0.41 |
Diluted | $ 0.26 | $ 0.41 |
Mexican IVA taxes receivable (D
Mexican IVA taxes receivable (Details) - USD ($) $ in Millions | Jan. 31, 2019 | Oct. 31, 2018 |
Value Added Tax Receivable [Abstract] | ||
IVA receivables balance | $ 24 | $ 21.9 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | Dec. 22, 2017 | Jan. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Non-cash charges related to the revaluation of our net deferred tax assets and the transition tax on the deemed repatriation of foreign earnings | $ 1.7 | |
Revaluation of net deferred tax assets | 1.4 | |
Transition tax on deemed repatriation of foreign earnings | $ 0.3 | |
Estimated income tax charge | $ 1.7 |
FreshRealm (Details)
FreshRealm (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | ||
Dec. 15, 2018 | Jan. 31, 2019 | Jan. 31, 2019 | Jan. 31, 2018 | Oct. 31, 2018 | |
Variable Interest Entity [Line Items] | |||||
Investment in unconsolidated entities | $ 18,507 | $ 18,507 | $ 24,805 | ||
Income (loss) from unconsolidated entities | (6,298) | $ 603 | |||
Loans to FreshRealm | 19,942 | 19,942 | |||
FreshRealm [Member] | |||||
Variable Interest Entity [Line Items] | |||||
Investment in unconsolidated entities | 13,100 | 13,100 | 19,900 | ||
Income (loss) from unconsolidated entities | $ (4,200) | (2,700) | |||
Loans to FreshRealm | $ 19,900 | $ 19,900 | $ 9,000 | ||
FreshRealm [Member] | FreshRealm [Member] | |||||
Variable Interest Entity [Line Items] | |||||
VIE ownership (as a percent) | 37.00% | 37.00% |
FreshRealm - Summarized financi
FreshRealm - Summarized financial information (Details) - FreshRealm [Member] - USD ($) $ in Thousands | 3 Months Ended | |
Jan. 31, 2019 | Jan. 31, 2018 | |
Income Statement: | ||
Net sales | $ 8,888 | $ 5,034 |
Gross loss | (2,891) | (2,157) |
Selling, general and administrative | (6,003) | (3,952) |
Other | (2,484) | (279) |
Net loss | $ (11,378) | $ (6,388) |
Sale of Temecula, California _2
Sale of Temecula, California Packinghouse (Details) - Disposal, Held-for-sale - Temecula, California Packinghouse $ in Millions | Jan. 31, 2019USD ($) |
Disposal | |
Consideration for sale | $ 7.1 |
Portion retained by the entity (as a percent) | 33.00% |
Net book value of warehouse | $ 0.7 |