Calavo Growers, Inc. Announces Third Quarter 2023 Financial Results
- Avocado margins improved
- Established new credit facility
- Quarterly cash dividend declared
- 24% decrease in total net sales
- Net income decreased from last year
SANTA PAULA, Calif., Sept. 06, 2023 (GLOBE NEWSWIRE) -- Calavo Growers, Inc. (Nasdaq-GS: CVGW), a global avocado-industry leader and provider of convenient, ready-to-eat fresh food, today reported its financial results for the fiscal third quarter ended July 31, 2023.
Third Quarter Financial Overview
- Total net sales of
$259.9 million , a24% decrease from the prior year quarter- Grown segment net sales decreased
30% to$144.5 million - Prepared segment net sales decreased
14% to$115.8 million
- Grown segment net sales decreased
- Gross profit of
$25.0 million , compared to$18.5 million for the prior year quarter- Grown segment gross profit increased
$9.6 million to$21.4 million - Prepared segment gross profit decreased
$3.1 million to$3.7 million
- Grown segment gross profit increased
- Net income of
$6.6 million , or$0.37 per diluted share, compared to$1.3 million , or$0.07 per diluted share, for the same period last year - Adjusted net income of
$7.2 million , or$0.41 per diluted share, compared to adjusted net income of$2.9 million , or$0.16 per diluted share for the prior year quarter - Adjusted EBITDA of
$13.8 million compared to$8.1 million for the same period last year
Adjusted net income, adjusted net income per diluted share, and adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Financial Measures” below.
Third Quarter Highlights
- Avocado margins meaningfully improved sequentially and versus the prior year quarter
- Established new credit facility with borrowing capacity of up to
$100 million to improve liquidity and financial flexibility - Onboarded new customer volume in Prepared with approximately
$0.7 million of start-up costs in the quarter; expect sequential improvement in Prepared in fourth quarter - The Board of Directors declared a quarterly cash dividend of
$0.10 per share to be paid on Oct. 11, 2023 to investors of record on Sept. 27, 2023
Management Commentary
“I am pleased with our performance in the third quarter. We achieved strong avocado margins as we concentrated our efforts on the fundamentals of our flagship avocado business,” said Lee E. Cole, President and Chief Executive Officer of Calavo Growers, Inc.
“Our Prepared segment earnings improved sequentially versus the second quarter as we onboarded new customer volume in Fresh Cut, despite some start-up costs. Our Guacamole business continues to perform well with lower fruit input costs and improved manufacturing efficiency. We expect earnings in Prepared to continue improving in the fourth quarter as we focus on adding volume and making our operations more efficient,” said Cole.
“I am happy to be back at Calavo, leading the company that I helped to build. Going forward, we will remain focused on execution across the portfolio, and we remain confident in the long-term earnings potential of the company.”
Third Quarter 2023 Consolidated Financial Review
Total net sales for the third quarter 2023 were
Gross profit for the third quarter was
Selling, general and administrative (SG&A) expenses for the third quarter totaled
Net profit for the third quarter was
Adjusted net income was
Adjusted EBITDA was
Balance Sheet and Liquidity
The company ended the quarter with
Segment Performance
Grown
Grown segment gross profit improved
Prepared
Prepared segment gross profit declined
Outlook
We expect fourth quarter gross profit in Grown to exceed prior year levels. We expect fourth quarter gross profit in Prepared to increase sequentially led by improvements in Fresh Cut.
Non-GAAP Financial Measures
This press release includes non-GAAP measures EBITDA, adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per diluted share, which are not prepared in accordance with U.S. generally accepted accounting principles, or “GAAP.”
EBITDA is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) interest income and expense, (2) income tax (benefit) provision, (3) depreciation and amortization and (4) stock-based compensation expense. Adjusted EBITDA is EBITDA with further adjustments for (1) non-cash net losses (income) recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items. Adjusted EBITDA is a primary metric by which management evaluates the operating performance of the business, on which certain operating expenditures and internal budgets are based. Additionally, the Company’s senior management is compensated in part on the basis of Adjusted EBITDA. The adjustments to calculate EBITDA and adjusted EBITDA are items recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.
Adjusted net income is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items. Adjusted net income (loss) and the related measure of adjusted net income (loss) per diluted share exclude certain items that are recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. We believe adjusted net income (loss) affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the GAAP measure of net income (loss) attributable to Calavo Growers, Inc.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the financial tables below.
Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. Non-GAAP information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. None of these metrics are presented as measures of liquidity. The way the Company measures EBITDA and adjusted EBITDA may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in Company agreements.
About Calavo Growers, Inc.
Calavo Growers, Inc. (Nasdaq: CVGW) is a global leader in quality produce, including avocados, tomatoes and papayas, and a pioneer of healthy fresh-cut fruit, vegetables and prepared foods. Calavo products are sold under the trusted Calavo brand name, proprietary sub-brands, private label and store brands.
Founded in 1924, Calavo has a rich culture of innovation, sustainable practices and market growth. The company serves retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide. Calavo is headquartered in Santa Paula, California, with processing plants and packing facilities throughout the U.S. and Mexico. Learn more about The Family of Fresh™ at calavo.com.
Safe Harbor Statement
This press release contains statements relating to future events and results of Calavo (including financial projections and business trends) that are “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995, that involve risks, uncertainties and assumptions. These statements are based on our current expectations and are not promises or guarantees. If any of the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo may differ materially from those expressed or implied by such forward-looking statements and assumptions. The use of words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. Risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements include, but are not limited to, the following: the ability of our new management team to work together successfully; the impact of operational and restructuring initiatives on our business, results of operations, and financial condition, including uncertainty as to whether the desired effects will be achieved and potential long-term adverse effects from reducing capital expenditures; the impact of weather on market prices and operational costs; seasonality of our business; sensitivity of our business to changes in market prices of avocados and other agricultural products and other raw materials including fuel, packaging and paper; potential disruptions to our supply chain; risks associated with potential future acquisitions, including integration; potential exposure to data breaches and other cyber-attacks on our systems or those of our suppliers or customers; dependence on large customers; dependence on key personnel and access to labor necessary for us to render services; susceptibility to wage inflation; potential for labor disputes; reliance on co-packers for a portion of our production needs; competitive pressures, including from foreign growers; risks of recalls and food-related injuries to our customers; changing consumer preferences; the impact of environmental regulations, including those related to climate change; risks associated with the environment and climate change, especially as they may affect our sources of supply; our ability to develop and transition new products and services and enhance existing products and services to meet customer needs; risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and restrictions as a result of COVID-19 and trade protection measures such as import/export/customs duties, tariffs and/or quotas and currency fluctuations); risks associated with receivables from, loans to and/or equity investments in unconsolidated entities; volatility in the value of our common stock; the impact of macroeconomic trends and events; and the resolution of pending investigations, legal claims and tax disputes, including an assessment imposed by the Mexican Tax Administrative Service (the “SAT”) and our defenses against collection activities commenced by the SAT.
For a further discussion of these risks and uncertainties and other risks and uncertainties that we face, please see the risk factors described in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. Forward-looking statements contained in this press release are made only as of the date of this press release, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Investor Contact |
Julie Kegley, Senior Vice President |
Financial Profiles, Inc. |
calavo@finprofiles.com |
310-622-8246 |
CALAVO GROWERS, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) | |||||||
July 31, | October 31, | ||||||
2023 | 2022 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,402 | $ | 2,060 | |||
Restricted cash | 761 | 1,074 | |||||
Accounts receivable, net of allowances of | 76,417 | 59,016 | |||||
Inventories | 38,878 | 38,830 | |||||
Prepaid expenses and other current assets | 12,913 | 8,868 | |||||
Advances to suppliers | 15,839 | 12,430 | |||||
Income taxes receivable | 4,150 | 3,396 | |||||
Total current assets | 150,360 | 125,674 | |||||
Property, plant, and equipment, net | 114,224 | 113,310 | |||||
Operating lease right-of-use assets | 49,744 | 54,518 | |||||
Investments in unconsolidated entities | 3,383 | 3,782 | |||||
Deferred income taxes | 5,776 | 5,433 | |||||
Goodwill | 28,653 | 28,653 | |||||
Intangibles, net | 6,074 | 7,206 | |||||
Other assets | 56,726 | 47,170 | |||||
$ | 414,940 | $ | 385,746 | ||||
Liabilities and shareholders' equity | |||||||
Current liabilities: | |||||||
Payable to growers | $ | 22,712 | $ | 20,223 | |||
Trade accounts payable | 16,425 | 10,436 | |||||
Accrued expenses | 42,183 | 51,795 | |||||
Other current liabilities | 11,000 | 11,000 | |||||
Current portion of term loan | 404 | — | |||||
Current portion of operating leases | 6,911 | 6,925 | |||||
Current portion of long-term obligations and finance leases | 1,674 | 1,574 | |||||
Total current liabilities | 101,309 | 101,953 | |||||
Long-term liabilities: | |||||||
Borrowings pursuant to line of credit, long-term | 36,768 | 1,200 | |||||
Long-term portion of term loan | 3,055 | — | |||||
Long-term portion of operating leases | 47,281 | 52,140 | |||||
Long-term portion of obligations and finance leases | 5,198 | 4,447 | |||||
Other long-term liabilities | 2,229 | 2,635 | |||||
Total long-term liabilities | 94,531 | 60,422 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Total shareholders' equity | 219,100 | 223,371 | |||||
$ | 414,940 | $ | 385,746 |
CALAVO GROWERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
July 31, | July 31, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Net sales | $ | 259,875 | $ | 341,991 | $ | 730,768 | $ | 947,501 | |||||||||
Cost of sales | 234,850 | 323,477 | 676,274 | 894,017 | |||||||||||||
Gross profit | 25,025 | 18,514 | 54,494 | 53,484 | |||||||||||||
Selling, general and administrative | 17,842 | 16,659 | 52,271 | 48,404 | |||||||||||||
Expenses (recovery) related to Mexican tax matters | (1,203 | ) | 303 | 1,231 | 1,148 | ||||||||||||
Impairment and charges related to Florida facility closure | — | — | — | 959 | |||||||||||||
Operating income | 8,386 | 1,552 | 992 | 2,973 | |||||||||||||
Interest expense | (793 | ) | (485 | ) | (1,482 | ) | (1,272 | ) | |||||||||
Other income, net | 230 | 278 | 862 | 1,433 | |||||||||||||
Unrealized net income (loss) on Limoneira shares | — | 1,225 | — | (5,803 | ) | ||||||||||||
Income (loss) before income taxes and loss from unconsolidated entities | 7,823 | 2,570 | 372 | (2,669 | ) | ||||||||||||
Income tax benefit (expense) | (617 | ) | (984 | ) | (21 | ) | 363 | ||||||||||
Net loss from unconsolidated entities | (498 | ) | (269 | ) | (398 | ) | (812 | ) | |||||||||
Net income (loss) | 6,708 | 1,317 | (47 | ) | (3,118 | ) | |||||||||||
Add: Net loss (income) attributable to noncontrolling interest | (82 | ) | (17 | ) | (390 | ) | 185 | ||||||||||
Net income (loss) attributable to Calavo Growers, Inc. | $ | 6,626 | $ | 1,300 | $ | (437 | ) | $ | (2,933 | ) | |||||||
Calavo Growers, Inc.’s net income (loss) per share: | |||||||||||||||||
Basic | $ | 0.37 | $ | 0.07 | $ | (0.02 | ) | $ | (0.17 | ) | |||||||
Diluted | $ | 0.37 | $ | 0.07 | $ | (0.02 | ) | $ | (0.17 | ) | |||||||
Number of shares used in per share computation: | |||||||||||||||||
Basic | 17,756 | 17,667 | 17,746 | 17,661 | |||||||||||||
Diluted | 17,856 | 17,769 | 17,746 | 17,661 |
CALAVO GROWERS, INC. NET SALES AND GROSS PROFIT BY BUSINESS SEGMENT (UNAUDITED) (in thousands) | ||||||||||||||
Interco. | ||||||||||||||
Grown | Prepared | Elimins. | Total | |||||||||||
(All amounts are presented in thousands) | ||||||||||||||
Three months ended July 31, 2023 | ||||||||||||||
Net sales | $ | 144,543 | $ | 115,806 | $ | (474 | ) | $ | 259,875 | |||||
Cost of sales | 123,190 | 112,134 | (474 | ) | 234,850 | |||||||||
Gross profit | $ | 21,353 | $ | 3,672 | $ | — | $ | 25,025 | ||||||
Three months ended July 31, 2022 | ||||||||||||||
Net sales | $ | 207,589 | $ | 134,872 | $ | (470 | ) | $ | 341,991 | |||||
Cost of sales | 195,818 | 128,129 | (470 | ) | 323,477 | |||||||||
Gross profit | $ | 11,771 | $ | 6,743 | $ | — | $ | 18,514 | ||||||
Interco. | ||||||||||||||
Grown | Prepared | Elimins. | Total | |||||||||||
(All amounts are presented in thousands) | ||||||||||||||
Nine months ended July 31, 2023 | ||||||||||||||
Net sales | $ | 403,285 | $ | 328,649 | $ | (1,166 | ) | $ | 730,768 | |||||
Cost of sales | 359,852 | 317,588 | (1,166 | ) | 676,274 | |||||||||
Gross profit | $ | 43,433 | $ | 11,061 | $ | — | $ | 54,494 | ||||||
Nine months ended July 31, 2022 | ||||||||||||||
Net sales | $ | 581,171 | $ | 367,889 | $ | (1,559 | ) | $ | 947,501 | |||||
Cost of sales | 539,577 | 355,999 | (1,559 | ) | 894,017 | |||||||||
Gross profit | $ | 41,594 | $ | 11,890 | $ | — | $ | 53,484 | ||||||
For the three months ended July 31, 2023 and 2022, intercompany sales and cost of sales of
CALAVO GROWERS, INC.
RECONCILIATION OF ADJUSTED NET INCOME AND EPS (UNAUDITED)
(in thousands, except per share amounts)
The following table presents adjusted net income and adjusted diluted EPS, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., and Diluted EPS, which are the most directly comparable GAAP measures. See “Non-GAAP Financial Measures” earlier in this release.
Three months ended July 31, | Nine months ended July 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income (loss) attributable to Calavo Growers, Inc. | $ | 6,626 | $ | 1,300 | $ | (437 | ) | $ | (2,933 | ) | ||||||
Non-GAAP adjustments: | ||||||||||||||||
Non-cash losses recognized from unconsolidated entities (a) | 498 | 269 | 398 | 812 | ||||||||||||
Loss from FreshRealm and other related expenses (b) | — | 580 | — | 580 | ||||||||||||
Net loss (income) on Limoneira shares (c) | — | (1,225 | ) | — | 5,803 | |||||||||||
Rent expense add back (d) | 108 | 108 | 324 | 324 | ||||||||||||
Restructure costs - consulting, management recruiting and severance (e) | 1,426 | 1,198 | 5,186 | 4,473 | ||||||||||||
Expenses (recovery) related to Mexican tax matters (f) | (1,203 | ) | 789 | 1,231 | 1,634 | |||||||||||
Impairment, losses and charges related to property, plant and equipment (g) | — | — | 235 | 959 | ||||||||||||
Legal settlement and related expenses (h) | — | — | 700 | — | ||||||||||||
Tax impact of adjustments (i) | (208 | ) | (163 | ) | (2,019 | ) | (3,380 | ) | ||||||||
Adjusted net income attributed to Calavo Growers, Inc. | $ | 7,247 | $ | 2,856 | $ | 5,618 | $ | 8,272 | ||||||||
Calavo Growers, Inc.’s net income (loss) per share: | ||||||||||||||||
Diluted EPS (GAAP) | $ | 0.37 | $ | 0.07 | $ | (0.02 | ) | $ | (0.17 | ) | ||||||
Adjusted net income per diluted share | $ | 0.41 | $ | 0.16 | $ | 0.32 | $ | 0.47 | ||||||||
Number of shares used in per share computation: | ||||||||||||||||
Diluted | 17,856 | 17,769 | 17,746 | 17,726 |
(a) For the three months ended July 31, 2023 and 2022, we realized losses of
(b) For the three and nine months ended July 31, 2022, we recognized a return to provision discrete tax expense of
(c) For the three and nine months ended July 31, 2022, we recorded
(d) For the three months ended July 31, 2023 and 2022, we incurred
(e) For the three and nine months ended July 31, 2023, we recorded
For the three and nine months ended July 31, 2022, we recorded
(f) For the three months ended July 31, 2023 and 2022, we incurred
For the three and nine months ended July 31,2023, we recorded a gain of
For the three and nine months ended July 31, 2022, we recognized a return to provision discrete tax expense of
(g) On April 1, 2023, we completed the divesture of our salsa business in our Prepared segment and incurred
On October 18, 2021, we announced the closure of RFG’s food processing operations in Green Cove Springs (near Jacksonville), Florida as part of our Project Uno profit improvement program. As of November 15, 2021, the Green Cove Springs facility of RFG ceased operations. We incurred
(h) For the nine months ended July 31, 2023, we accrued
(i) Tax impact of non-GAAP adjustments is based on effective year-to-date tax rates.
CALAVO GROWERS, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (UNAUDITED)
(in thousands, except per share amounts)
The following table presents EBITDA and adjusted EBITDA, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., which is the most directly comparable GAAP measure. See “Non-GAAP Financial Measures” earlier in this release.
Three months ended July 31, | Nine months ended July 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income (loss) attributable to Calavo Growers, Inc. | $ | 6,626 | $ | 1,300 | $ | (437 | ) | $ | (2,933 | ) | ||||||
Interest Income | (117 | ) | (136 | ) | (480 | ) | (402 | ) | ||||||||
Interest Expense | 793 | 485 | 1,482 | 1,272 | ||||||||||||
Provision (benefit) for Income Taxes | 617 | 984 | 21 | (363 | ) | |||||||||||
Depreciation and Amortization | 4,362 | 4,067 | 12,815 | 12,472 | ||||||||||||
Stock-Based Compensation | 979 | 754 | 4,382 | 2,123 | ||||||||||||
EBITDA | $ | 13,260 | $ | 7,454 | $ | 17,783 | $ | 12,169 | ||||||||
Adjustments: | ||||||||||||||||
Non-cash losses recognized from unconsolidated entities (a) | 498 | 269 | 398 | 812 | ||||||||||||
Net loss (income) on Limoneira shares (c) | — | (1,225 | ) | — | 5,803 | |||||||||||
Rent expense add back (d) | 108 | 108 | 324 | 324 | ||||||||||||
Restructure costs - consulting and management recruiting and severance (e) | 1,096 | 1,198 | 3,626 | 4,335 | ||||||||||||
Expenses (recovery) related to Mexican tax matters (f) | (1,203 | ) | 303 | 1,231 | 1,148 | |||||||||||
Impairment, losses and charges related to property, plant and equipment (g) | — | — | 235 | 929 | ||||||||||||
Legal settlement and related expenses (h) | — | — | 700 | — | ||||||||||||
Adjusted EBITDA | $ | 13,759 | $ | 8,107 | $ | 24,297 | $ | 25,520 |
See prior page for footnote references