Calavo Growers, Inc. Announces Fiscal 2008 First Quarter Results
Calavo Growers, Inc. (Nasdaq:CVGW), the worldwide leader in avocado marketing and an expanding provider of other fresh-commodity-produce items, today announced solid profitability for its fiscal 2008 first quarter propelled by record revenues that advanced 26 percent from the corresponding period last year. Top-line growth was paced principally by Mexican avocados and diversified products, as well as Calavo’s processed business segment.
For the three months ended Jan. 31, 2008, net sales climbed $15 million, reaching $72.2 million and eclipsing the previous record of $57.2 million set in last year’s first quarter. Net income in the most recent period totaled $732,000, equal to $0.05 per diluted share — the second highest initial-quarter profit in company history. This compares to net income of $1.3 million, or $0.09 per diluted share in the fiscal 2007 first quarter.
“Calavo’s first quarter success is compelling validation of our diversification strategy,” said Chairman, President and Chief Executive Officer Lee E. Cole. “The expanding portfolio of fresh products — already proving to be incremental revenue and profit drivers — worked to offset what is historically the company’s smallest quarter.
“First-quarter profit was constrained by comparatively scant California fresh-avocado volumes, owing to seasonality and later-than-usual harvesting by the growers. Our company’s ability to mitigate this challenge and achieve record sales and strong profitability is case-in-point for the rationale to leverage the Calavo brand with other complementary, high-quality products,” said Cole.
The Calavo CEO stated that revenues from diversified products vaulted more than double to $11.6 million in this year’s first period from $5.0 million in the corresponding period of fiscal 2007. “Particularly notable, too, is the fact that this sharp growth rate includes pineapple sales for only two months of the initial quarter,” said Cole.
Among other notable accomplishments during the first quarter, Cole indicated:
Processed product segment sales rose 15 percent to nearly $10.5 million from $9.1 million in the like period last year. Gross margins remained robust despite a 60-plus percent year-over-year increase in the price of avocados used in the processed unit. “Posting these results in view of rocketing fruit costs is both gratifying and speaks to the efficiencies we’ve achieved in our processed product operations,” Cole said.
Sales, general and administrative (SG&A) expense increased only modestly while supporting the aforementioned $15 million top-line growth. As a percentage of total revenues, SG&A declined approximately 140 basis points to 6.6 percent from approximately 8.0 percent in the fiscal 2007 first quarter.
“The SG&A expense trend line offers another compelling case for our diversification strategy: We folded one new product into our lineup during the first quarter, while incurring no substantial costs or capital expense. Similarly, Calavo can support a broad array of future additional products across our existing sales and distribution infrastructure–a cornerstone of our growth initiatives,” said Cole.
He continued, “Nonetheless, even as Calavo accelerates diversification, we place considerable precedence on expense containment and being financially disciplined managers of our various businesses. With costs rising rapidly across the broader economic landscape, we’re keeping the collective eye trained on every aspect of our operations.”
Outlook: The Picture Ahead
Looking forward, fiscal 2008 is shaping up to be “enormously promising,” Cole said. “The current-year forecast for the California avocado harvest is a projected 360 million pounds–approximately 100 million pounds more than 2007–of which we expect to pack about 35 percent, using history as a guide. As the California crop ramps up, the additional volumes will begin reaching our packinghouses in the second quarter and shift into high gear during the third period. It will prove a boon to our packing operations, which thrive on volume and enable us to spread the attendant fixed costs across more pounds–a factor that challenged us in the first quarter and much of last year.”
Cole continued, “We’re off to a great start in diversified products and I’m genuinely enthused about what this promising group of products means to our company’s future. Calavo will continue to gain operating traction throughout the balance of fiscal 2008. Near term, we’ll experience the favorable effect of a full quarter of pineapple sales in the second period and are projecting higher tomato and papaya sales ahead, as well. Bear in mind, these new products provide a strong ‘calling card’ with our customers and we’re only beginning to mine the potential cross-selling, marketing and merchandising opportunities.”
“As for processed products, our ultra-high-pressure guacamole continues to add customers at both foodservice and retail levels, most recently with the addition of 1,500 Safeway, Inc. stores and the Whole Foods Market chain,” the Calavo CEO stated. “We’re enjoying popular acceptance for this great-tasting product that now accounts for approximately 40 percent of total processed product revenues. Our objective is to continue to expand segment sales and to adjust to such factors as high ingredient costs, which we’ve demonstrated ably. “
“Each of the above-referenced business segments is projected to fuel revenue growth in the second quarter and beyond,” said Cole. “The company is on target to achieve the 25 percent increase in sales previously forecast for fiscal 2008. Things are taking shape quite favorably and Calavo moves ahead in very enviable financial and operational positions.
“While we concentrate on integrating the new diversified products, our management team continues to evaluate prospective acquisitions and fold-in opportunities for other commodity items that can drive long-term growth and shareholder value. Any opportunities will have to meet our strict criteria, in particular being accretive to earnings. We remain keenly focused on continued successful implementation of our strategic business agenda,” Cole concluded.
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 Reform Act of 1995. Actual results and events may differ from those projected as a result of certain risks and uncertainties. These risks and uncertainties include but are not limited to: increased competition, conducting substantial amounts of business internationally, pricing pressures on agricultural products, adverse weather and growing conditions confronting avocado growers, new governmental regulations, as well as other risks and uncertainties detailed from time to time in the company’s Securities and Exchange Commission filings, including, without limitation, the company’s Report on Form 10-K for the year ended October 31, 2007. 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.
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(All amounts in thousands, except per share amounts)
January 31,
October 31,
2008
2007
Assets
Current assets:
Cash and cash equivalents
$
1,667
$
967
Accounts receivable, net of allowances
of $2,580 (2008) and $2,271 (2007)
31,644
25,992
Inventories, net
12,352
8,359
Prepaid expenses and other current assets
6,399
4,911
Advances to suppliers
2,337
2,292
Income tax receivable
1,123
1,539
Deferred income taxes
2,525
2,525
Total current assets
58,047
46,585
Property, plant, and equipment, net
20,893
20,888
Investment in Limoneira
38,029
48,962
Investment in Maui Fresh, LLC
461
403
Goodwill
3,591
3,591
Other assets
7,874
7,589
$
128,895
$
128,018
Liabilities and shareholders’ equity
Current liabilities:
Payable to growers
$
1,723
$
2,414
Trade accounts payable
2,742
2,643
Accrued expenses
16,726
12,227
Short-term borrowings
18,450
6,630
Dividend payable
—
5,030
Current portion of long-term obligations
1,307
1,307
Total current liabilities
40,948
30,251
Long-term liabilities:
Long-term obligations, less current portion
13,106
13,106
Deferred income taxes
6,438
10,658
Total long-term liabilities
19,544
23,764
Total shareholders’ equity
68,403
74,003
$
128,895
$
128,018
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(All amounts in thousands, except per share amounts)
Three months ended
January 31,
2008
2007
Net sales
$
72,241
$
57,244
Cost of sales
66,212
50,325
Gross margin
6,029
6,919
Selling, general and administrative
4,750
4,582
Operating income
1,279
2,337
Interest expense
(348
)
(300
)
Other income, net
261
144
Income before provision for income taxes
1,192
2,181
Provision for income taxes
460
850
Net income
$
732
$
1,331
Net income per share:
Basic
$
0.05
$
0.09
Diluted
$
0.05
$
0.09
Number of shares used in per share computation:
Basic
14,375
14,293
Diluted
14,503
14,359