Third Quarter Highlights Include:
- Net Income Grew 40 Percent to $12.4
Million; Adjusted Net Income1 Increased 71 Percent to $15.1
Million
- Diluted EPS Improved to 70 Cents;
Adjusted Diluted EPS1 Totaled 86 Cents
- Operating Income Rose 58 Percent to
$19.2 Million from $12.2 Million
- Gross Profit Increased 33 Percent to
$33.1 Million from $24.9 Million
Looking Forward for Fiscal Year 2018:
- Greater than 20 Percent Growth in
Avocado Volumes
- Double-Digit Gross Profit Growth for
RFG
- Double-Digit Revenue Growth and
Triple-Digit Gross Profit Growth in Calavo Foods
- CEO Cole Reiterates Forecast of Record
Revenue, Double-Digit Increase in Adjusted Diluted EPS
Calavo Growers, Inc. (Nasdaq-GS: CVGW) today reported that
fiscal 2018 third quarter operating income rose 58 percent
year-over-year on a 33 percent increase in gross profit. The
company, a global avocado-industry leader and expanding provider of
value-added fresh food, said that results for the most recent
quarter increased net income and per-share results for the first
nine months of this fiscal year to new all-time highs.
For the three months ended July 31, 2018, net income reached
$12.4 million, equal to $0.70 per diluted share. Excluding certain
items impacting comparability, adjusted net income1 totaled $15.1
million, or $0.86 per diluted share, which compares with $8.8
million, or $0.50 per diluted share, in the corresponding quarter
last year.
Revenues in the most-recent quarter totaled $296.4 million, down
a slight 2 percent from the company’s all-time quarterly record
high of $301.6 million in the fiscal 2017 third period. Gross
profit advanced 33 percent to $33.1 million, equal to 11.2 percent
of revenues, from $24.9 million, or 8.2 percent of revenues, in the
corresponding quarter last year. The company’s operating income
soared by 58 percent to register $19.2 million versus $12.2 million
in the fiscal 2017 like quarter.
Chairman, President and Chief Executive Officer Lee E. Cole
stated: “Calavo posted another strong showing in the fiscal third
quarter. I am extremely pleased by the outstanding operating
performance in each of our three principal business segments which
contributed to our overall results. This solid execution is best
reflected in Calavo’s increase in net income and per-share results
and, by extension, income from operations that climbed by 58
percent year over year.”
Cole continued: “In our Fresh segment, we executed well,
increasing our volume of avocado units sold by 18 percent from last
year’s third period. While consumption tracked significantly
higher, the larger available fruit supply industry-wide resulted in
lower year-over-year fresh avocado market pricing which had the
effect of constraining Calavo’s sales growth in the most-recent
quarter.
“The Renaissance Food Group (RFG) business segment delivered
eight percent higher sales and increased gross profits by 46
percent in the third period. The RFG unit continued its path of
progress in the quarter, deepening penetration with customers and
expanding its portfolio of innovative refrigerated-fresh product
offerings. RFG segment sales and gross profit would have been
higher if not for a widely publicized melon recall.
“We are excited about the continued upward trend line in the
Calavo Foods business segment, which was a meaningful contributor
to overall growth in the quarter. Twenty-five percent revenue
growth in the most recent period is indicative of a great-tasting
lineup of prepared avocado products that are being widely embraced
by a strong client base in the retail grocery and foodservice
channels. Further, the segment continued during the fiscal third
quarter to maintain a gross profit margin percentage in line with
historical levels more commonly experienced in our Foods business.
When compared to last summer’s challenging input-cost conditions,
this translates into a nearly seven-fold expansion in
year-over-year gross profit,” Cole concluded.
Net income for the nine months ended July 31, 2018 increased by
$6.6 million, or 24 percent, to reach a record $33.6 million, or
$1.91 per diluted share, from $27.0 million, equal to $1.54 per
diluted share, in the corresponding period one year ago. Adjusted
net income for the first nine months of fiscal 2018 increased by 39
percent to $38.7 million, or $2.20 per diluted share.
Revenues in the initial nine months this year rose to a record
$808.8 million, an increase from $798.4 million for the like period
in fiscal 2017. Gross profit rose by 10 percent, registering $91.3
million, equal to 11.3 percent of revenues, which compares with
$83.0 million, or 10.4 percent of revenues, in the first nine
months last year. Operating income climbed to $49.1 million, a 19
percent increase from $41.1 million last year.
Sales in the company’s Fresh business segment totaled $149.8
million in the fiscal 2018 third quarter. This compares with Fresh
segment sales of $168.9 million in the third quarter one year ago.
Segment gross profit equaled $14.9 million, or 10.0 percent of
segment sales, in the most-recent period versus $16.9 million, or
10.0 percent of segment sales, in the fiscal 2017 third quarter. As
stated in CEO Cole’s comments above, Fresh segment sales were
impacted principally by lower industry-wide fresh avocado market
prices versus one year ago and, more modestly, by lower
industry-wide tomato market prices. Double-digit unit sales growth
in all Fresh product categories—namely avocados and
tomatoes—resulted in 20 percent increase in total volume to 4.9
million units in the most-recent quarter from 4.1 million in the
like period of fiscal 2017.
In the RFG business segment, sales rose by 8 percent to $121.2
million from $112.5 million in the third quarter last year. RFG
segment gross profit climbed $3.2 million, or 46 percent, growing
to $10.0 million, equal to 8.2 percent of segment sales, from $6.8
million, or 6.1 percent of segment sales, in the year-ago third
period. The company stated that RFG’s year-over-year gross profit
improvements are indicative of progress in attaining operating
efficiencies and economies of scale at production facilities that
opened and expanded last year, as well as continued development of
new fresh food programs with retail customers.
The Calavo Foods business segment saw sales expand in the
most-recent quarter to $25.3 million, a 25 percent increase from
$20.3 million in the fiscal 2017 third period. Gross profit
increased to $8.1 million, or 32.1 percent of segment sales, from
$1.1 million, equal to 5.3 percent of sales, in the third quarter
last year. The top-line improvement is underpinned primarily by an
increase in volume of prepared avocado products sold in the third
quarter. Gross profit and margin both benefited from higher sales,
as well as fruit input costs that, while seasonally higher than in
the second quarter, tracked below last year’s third-quarter
record-high avocado input cost.
Calavo’s total selling, general and administrative (SG&A)
expense in the most recent quarter was higher at $13.9 million, or
4.7 percent of total revenues, from $12.7 million, approximating
4.2 percent of total revenues, in the fiscal 2017 third period. The
rise in SG&A expense owed mainly to higher year-over-year
management incentive plan accruals.
Income (loss) from unconsolidated subsidiaries decreased by $4.2
million to a loss of $3.7 million in the most-recent quarter. This
primarily represents the recording of $3.5 million in non-cash
losses from FreshRealm, LLC. Certain details regarding FreshRealm,
will be included in Calavo’s quarterly report on Form 10-Q soon to
be filed with the U.S. Securities and Exchange Commission for the
three months ended July 31, 2018.
Outlook
Looking toward the fourth quarter and ahead to fiscal 2019, CEO
Cole said he remains “highly confident and enthusiastic about
Calavo’s prospects moving forward. Our proven, complementary
multi-platform model, which is focused on high-growth fresh food
businesses, serves us well and leaves me extremely optimistic about
our future.”
Cole continued: “As the avocado industry continues in a
long-term expansion mode, we are well positioned—with our
best-in-class sourcing, selling and distribution capabilities—to
remain a category leader. The industry continues to forecast
avocado volume growth of more than 20 percent for 2018, and a
strong, all-source supply in fiscal 2019. With our diversified
sourcing model and ample packing capacity in California and Mexico,
we are poised to once again deliver strong volume growth in fiscal
2019.
“Turning to RFG, through Calavo’s extensive investments over the
past several years, we have developed a best-in-class portfolio of
fresh food products with a national footprint that enabled us to
partner with many of the largest retailers in the U.S. As fresh
food continues to gain market share among consumers, RFG remains
very well positioned to expand its existing retail partnerships and
to build meaningful new long-term relationships with retailers. At
the same time, our team remains committed to continued improvement
in manufacturing operation efficiency. Year-over-year sales and
gross profit growth through the remainder of the year is expected
to be generally in line with the growth experienced this quarter,
and we remain very excited for RFG’s prospects continuing into
fiscal 2019.
“Calavo Foods continues to track strongly, with sales growth for
the year still expected to be in the high teens for fiscal 2018.
While higher seasonal input prices may contribute to a slightly
lower gross profit margin in the final quarter compared to the
most-recent period, we expect gross profit margin will remain
generally in line with year-to-date results, which should once
again lead to very robust year-over-year growth in gross profit in
our fourth quarter.”
Cole stated: “We remain optimistic about FreshRealm—an
unconsolidated subsidiary in which Calavo continues to hold a
meaningful ownership stake. During the most recent quarter Calavo
invested an additional $3.5 million into FreshRealm (as part of a
larger equity round) and committed up to $12 million in new debt
financing. We are closely monitoring FreshRealm’s progress and
believe that this additional financing should help give it the
capital infusion to make a meaningful step forward in its
operations.”
FreshRealm CEO Michael Lippold added: “The timing of the capital
infusion coincides with FreshRealm investing further in its own
national infrastructure to support B2B fresh prepped meal-kits, new
business development initiatives, and expanded customer
programs.”
“In sum, with its deep breadth of resources—operating, financial
and human capital—we are poised for growth now and into the future.
Calavo remains on target to post record revenues and gross profit,
accompanied by greater than 20 percent growth in adjusted earnings
per share in fiscal 2018. I look forward to reporting our continued
success,” Cole concluded.
About Calavo Growers, Inc.
Calavo Growers, Inc. is a global avocado-industry leader and an
expanding provider of value-added fresh food serving retail
grocery, foodservice, club stores, mass merchandisers, food
distributors and wholesalers worldwide. The Company’s Fresh segment
procures and markets fresh avocados and select other fresh produce,
including tomatoes and papayas. The Renaissance Food Group (RFG)
segment creates, markets and distributes a portfolio of healthy,
fresh foods, including fresh-cut fruit, fresh-cut vegetables and
prepared foods. The Foods segment manufactures and distributes
guacamole and salsa. Founded in 1924, Calavo’s fresh food products
are sold under the respected Calavo brand name as well as Garden
Highway, Chef Essentials and a variety of private label and store
brands.
Safe Harbor Statement
This news release contains statements relating to future events
and results of Calavo (including certain projections and business
trends) that are "forward-looking statements," as defined in the
Private Securities Litigation and Reform Act of 1995, that involve
risks, uncertainties and assumptions. If any of the risks or
uncertainties ever materialize or the assumptions prove incorrect,
the results of Calavo may differ materially from those expressed or
implied by such forward-looking statements and assumptions. All
statements, other than statements of historical fact, are
statements that could be deemed forward-looking statements,
including, but not limited to, any projections of revenue, gross
profit, expenses, income (loss) from unconsolidated entities,
earnings, earnings per share, tax provisions, cash flows, currency
exchange rates, the impact of acquisitions or other financial
items; any statements of the plans, strategies and objectives of
management for future operations, including execution of
restructuring and integration (including information technology
systems integration) plans; any statements regarding current or
future macroeconomic trends or events and the impact of those
trends and events on Calavo and its financial performance, whether
attributable to Calavo or any of its unconsolidated entities; any
statements regarding pending investigations, legal claims or tax
disputes; any statements of expectation or belief; and any
statements of assumptions underlying any of the foregoing. Risks,
uncertainties and assumptions include the impact of macroeconomic
trends and events; the competitive pressures faced by Calavo's
businesses; the development and transition of new products and
services (and the enhancement of existing products and services) to
meet customer needs; integration and other risks associated with
business combinations; the hiring and retention of key employees;
the resolution of pending investigations, legal claims and tax
disputes; and other risks, including, without limitation, those
items discussed in Calavo’s latest filed Annual Report on Form 10-K
and those detailed from time to time in our other filings with the
Securities and Exchange Commission. These forward-looking
statements are made only as of the date hereof, and the company
undertakes no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events
or otherwise.
1) Adjusted financial metrics, such as adjusted net income
and adjusted EPS, used throughout this release are non-GAAP
measures that exclude items affecting comparability.
Reconciliations of non-GAAP financial measures to GAAP financial
measures are provided in the financial tables that accompany this
release.
CALAVO GROWERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
July 31, October 31,
2018
2017
Assets Current assets: Cash and cash equivalents $ 2,029 $
6,625
Accounts receivable, net of allowances of
$3,787 (2018) and $2,490 (2017)
73,412 69,750 Inventories, net 35,857 30,858 Prepaid expenses and
other current assets 6,688 6,872 Advances to suppliers 5,321 4,346
Income taxes receivable
-
1,377 Total current assets 123,307 119,828 Property,
plant, and equipment, net 121,309 120,072 Investment in Limoneira
Company 47,121 40,362 Investment in unconsolidated entities 33,121
33,019 Deferred income taxes 4,778 9,783 Goodwill 18,262 18,262
Other assets
25,035 22,791
$ 372,933 $
364,117 Liabilities and Shareholders' equity
Current liabilities: Payable to growers $ 22,025 $ 16,524 Trade
accounts payable 16,338 22,911 Accrued expenses 35,799 39,946
Income taxes payable 976 - Short-term borrowings 8,000 20,000
Dividend payable - 16,657 Current portion of long-term obligations
118 129 Total current
liabilities 83,256 116,167 Long-term liabilities: Long-term
obligations, less current portion 350 439 Deferred rent 2,782 2,732
Deferred income taxes
- 657
Total long-term liabilities 3,132 3,828 Commitments and
contingencies Total shareholders’ equity
286,545 244,122 $
372,933 $ 364,117
CALAVO GROWERS, INC.
CONSOLIDATED STATEMENTS OF
INCOME
(in thousands, except per share
amounts)
Three months endedJuly
31,
Nine months endedJuly
31,
2018 2017
2018 2017
Net sales $ 296,419 $ 301,645 $ 808,752 $ 798,361 Cost of
sales
263,349
276,793 717,403
715,332 Gross profit 33,070 24,852
91,349 83,029 Selling, general and administrative
13,893 12,698
42,285 41,950
Operating income 19,177 12,154 49,064 41,079 Interest expense (135
) (227 ) (654 ) (797 ) Other income (loss), net
406 96
831 462 Income
before provision for income taxes and Income (loss) from
unconsolidated entities
19,448
12,023
49,241
40,744
Provision for income taxes 3,403 3,719 12,469 13,883 Income (loss)
from unconsolidated entities
(3,677
) 492
(3,399 ) 90
Net income 12,368 8,796 33,373 26,951
Less: Net loss - noncontrolling
interest
(18 ) 14
238 53
Net income attributable to Calavo Growers, Inc.
$
12,350 $ 8,810
$ 33,611 $
27,004 Calavo Growers, Inc.’s net income
per share: Basic
$ 0.71
$ 0.51 $
1.92 $ 1.55
Diluted
$ 0.70 $
0.50 $ 1.91
$ 1.54
Number of shares used in per share
computation:
Basic
17,481 17,428
17,475 17,412
Diluted
17,581
17,544 17,567
17,507
CALAVO GROWERS, INC.
NET SALES AND GROSS PROFIT BY BUSINESS
SEGMENT
Fresh
products
CalavoFoods
RFG
Total
Three months ended July 31, 2018 Net sales $ 149,834
$ 25,340 $ 121,245 $ 296,419 Cost of sales
134,903 17,199
111,247 263,349 Gross profit
$ 14,931 $
8,141 $ 9,998 $
33,070 Three months ended July 31, 2017
Net sales $ 168,919 $ 20,251 $ 112,475 $ 301,645 Cost of sales
151,971 19,175
105,647 276,793 Gross profit
$ 16,948 $
1,076 $ 6,828 $
24,852
For the three months ended July 31, 2018 and 2017, inter-segment
sales and cost of sales of $0.3 million and $0.6 million
between Fresh products and RFG were eliminated. For the three
months ended July 31, 2018 and 2017, inter-segment sales and cost
of sales of $0.8 million and $0.9 million between Calavo Foods
and RFG were eliminated. For the three months ended July 31, 2018,
inter-segment sales and cost of sales of $0.1 million between
Fresh products and Calavo Foods were eliminated.
Freshproducts
CalavoFoods
RFG
Total
Nine months ended July 31, 2018 Net sales $ 410,554 $
66,290 $ 331,908 $ 808,752 Cost of sales
366,246 44,622
306,535 717,403 Gross profit
$ 44,308 $
21,668 $ 25,373
$ 91,349 Nine months ended July
31, 2017 Net sales $ 436,601 $ 53,876 $ 307,884 $ 798,361 Cost
of sales
388,005 42,108
285,219 715,332 Gross
profit
$ 48,596 $
11,768 $ 22,665
$ 83,029
For the nine months ended July 31, 2018 and 2017, inter-segment
sales and cost of sales of $0.9 million between Fresh products
and RFG were eliminated. For the nine months ended July 31, 2018
and 2017, inter-segment sales and cost of sales of
$2.5 million and $2.3 million between Calavo Foods and RFG
were eliminated. For the nine months ended July 31, 2018,
inter-segment sales and cost of sales of $0.2 million between
Fresh products and Calavo Foods were eliminated.
CALAVO GROWERS, INC.
RECONCILIATION OF ADJUSTED NET INCOME
AND EPS
(in thousands, except per share
amounts)
Three months endedJuly
31,
Nine months endedJuly
31,
2018 2017
2018 2017 Net income
attributable to Calavo Growers, Inc. $ 12,350 $ 8,810 $ 33,611 $
27,004 Non-GAAP adjustments: Non-cash losses recognized from
FreshRealm (a) 3,515 - 3,515 -
One-time, non-cash tax charges from Tax
Cuts and Jobs Act (b)
- - 1,702 - Certain management transition expenses (c) - - 891
1,172 Tax impact of adjustments (d)
(758
) - (1,035
) (398 ) Adjusted net
income attrib. to Calavo Growers, Inc.
$
15,107 $ 8,810
$ 38,684 $
27,778 Calavo Growers Inc. net income
per share: Diluted EPS (GAAP)
$ 0.70
$ 0.50 $
1.91 $ 1.54
Adjusted Diluted EPS
$ 0.86
$ 0.50 $ 2.20
$ 1.59
Number of shares used in per share
computation:
Diluted
17,581
17,544 17,567
17,507 (a) For the three months
ended July 31, 2018, FreshRealm incurred losses totaling $7.1
million, of which we recorded $3.5 million of non-cash losses
during our third fiscal quarter of 2018. Certain details regarding
FreshRealm will be included in Calavo’s quarterly report on Form
10-Q soon to be filed with the U.S. Securities and Exchange
Commission for the three months ended July 31, 2018. (b)
First quarter of fiscal 2018 results include the company’s estimate
for the effects of the Tax Cuts and Jobs Act. Calavo recorded a
one-time, non-cash charge due to the revaluation of our net
deferred tax assets and the transition tax on the deemed
repatriation of foreign earnings. (c) First quarter of
fiscal 2018 and 2017 results include higher stock-based
compensation related to senior management transitions, which does
not impact the underlying cost structure of the company. (d)
Tax impact of non-GAAP adjustments are based on the prevailing tax
rates in each period. For the three and nine months ended July 31,
2018 the prevailing tax rates were 21.6% and 23.5%. For the three
and nine months ended July 31, 2017 the prevailing tax rates were
29.7% and 34.0%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180905005341/en/
Calavo Growers, Inc.Lee E. Cole, 805-525-1245Chairman, President
and CEO
Calavo Growers (NASDAQ:CVGW)
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