First Quarter Highlights Include:
- Net Income Rises 36 Percent to $7.1
Million—$9.5 Million after Adjusting for One-Time, Non-Cash Tax
Charge and Certain Management Transition Expenses—from $5.2 Million
Last Year
- Diluted EPS Advances to 41 Cents from
30 Cents in Fiscal 2017 First Period
- Gross Margin up 20 Percent—$26.3
Million Versus $21.9 Million One Year Ago
- Revenue Climbs to $247.9 Million on
Higher Sales in All Segments
Looking Forward:
- Company Reaffirms Forecast for
Double-Digit Increase in Consolidated Revenue and EPS for Fiscal
2018
- Avocado Industry Forecast Consumption
to Increase Approximately 20 Percent in Fiscal 2018
Calavo Growers, Inc. (Nasdaq-GS: CVGW) today reported that
fiscal 2018 first quarter net income rose 36 percent from the
corresponding period last year. The company, a global avocado
industry leader and expanding provider of value-added fresh food,
said that results were paced by higher revenue in each of its three
business segments.
Net income for the three months ended January 31, 2018 climbed
to a new first-quarter record of $7.1 million, equal to $0.41 per
diluted share, from $5.2 million, or $0.30 per diluted share in the
initial period of fiscal 2017. First-quarter results include the
company’s current estimate for the effects of H.R. 1, commonly
known as the “Tax Cuts and Jobs Act.” This resulted in Calavo
recording a one-time, non-cash charge of approximately $1.7 million
due to the revaluation of our net deferred tax assets and the
transition tax on the deemed repatriation of foreign earnings,
partially offset by a lower effective income tax rate of
approximately 26.0 percent. The quarter also included approximately
$0.9 million in operating expense ($0.7 million after-tax) related
to senior-management-team transitions. Excluding these items,
adjusted net income for the first quarter of fiscal 2018 increased
58 percent to $9.5 million, or $0.54 per diluted share, from
adjusted net income of $6.0 million, or $0.34 per diluted share,
adjusted for management transition expenses realized last year.
Revenue advanced to $247.9 million in the most-recent quarter,
which is a new first-period high and a 9.4 percent increase from
$226.6 million in last year’s first quarter. Gross profit increased
by $4.4 million or 20 percent to a first quarter record of $26.3
million, equal to 10.6 percent of total revenue, from $21.9
million, or 9.7 percent of total revenue, in last year’s first
quarter. Operating income soared 33 percent to $10.8 million in the
most recent quarter from $8.1 million in the year-earlier initial
period. Adjusted for the management transition expense described
above, operating income for the fiscal 2018 first quarter would
have been $11.7 million versus a comparable $9.3 million last
year.
Chairman, President and CEO Lee E. Cole stated: “Calavo began
fiscal 2018 in fine form, reaching new first-quarter highs for
revenue, gross profit, operating income and net income. These
results reflect top-line growth across all three business units
and, in particular, the outstanding performances in our Fresh and
Calavo Foods segments where sales and gross margin dollars rose
sharply to drive overall net income and per-share results.
“Our Fresh segment executed very well in the quarter, posting
unit volume gains in avocados and other fresh produce, namely
tomatoes. Fresh avocado sourcing, production and sales management
continue to anchor Calavo’s strong earnings growth, but we also saw
solid, incremental contribution from our other produce categories,
too,” said Cole.
The Calavo CEO continued: “The Renaissance Food Group (RFG)
business segment continued its revenue growth trend once again in
the first quarter. While temporary delays in new program rollouts
and an unusual event in a specific geographic region (discussed
further below) slowed RFG’s growth, we remain confident about our
prospects ahead. RFG continued to make progress in the quarter by
expanding its breadth of production capabilities and adding scale
across its national distribution footprint.
“The Calavo Foods business segment notched solid sales and gross
margin gains in the first quarter, making a meaningful contribution
to overall results. In the first quarter, gross profit margin
improved sharply on a sequential basis from the second half of
fiscal 2017. While our primary raw material costs remained higher
year-over-year in the first quarter of 2018, increased selling
prices have helped return the segment to historical gross profit
percentage levels.”
Sales in the Fresh business segment advanced to $122.8 million,
a 10 percent increase from $112.1 million in the fiscal 2017 first
quarter. Gross profit climbed 82 percent to $14.3 million, equal to
11.6 percent of segment sales, from $7.9 million, or 7.0 percent of
segment sales, in the like quarter last year. Total Fresh units
packed and sold in the most-recent period equaled 4.1 million, an
increase of 13.2 percent from 3.6 million in the year-earlier first
quarter.
In the RFG business segment, sales rose by 8.6 percent to $106.1
million from $97.7 million in last year’s first quarter. Gross
profit in the most-recent quarter equaled $6.1 million, or 5.7
percent of segment sales. This compares to gross profit of $9.0
million, approximating 9.2 percent of segment sales in the fiscal
2017 initial period. Top line growth in the RFG segment is
attributable to expanded customer penetration, broader geographic
reach, and enlarged range of product offerings. Gross profit
dollars and margin in the quarter were impacted by the continued
ramp up of newer facilities, including the Riverside facility (open
less than one year) and reduced service levels at the Houston
facility resulting from labor shortages (related to the city’s
massive rebuilding in the aftermath of Hurricane Harvey).
Calavo Foods business segment sales climbed 13.4 percent to
$19.0 million from $16.8 million in the prior-year first quarter.
Gross profit in the segment climbed 17.4 percent to $6.0 million,
equal to 31.4 percent of segment sales, from $5.1 million, or 30.3
percent of segment sales, in the first quarter of fiscal 2017. On a
sequential basis, Calavo Foods’ segment gross profit rebounded
sharply from $1.6 million, or 7.7 percent of segment sales, posted
in the fiscal 2017 fourth quarter, as a result of the price
increases initiated last year to compensate for higher
year-over-year fruit costs.
Calavo’s total selling, general and administrative (SG&A)
expense in the most recent quarter equaled $15.5 million, or 6.3
percent of revenues, which compares with $13.8 million, or 6.1
percent of revenues in the fiscal 2017 initial period. SG&A in
the quarter includes additional stock-based compensation related to
the above-referenced senior management transition of $0.9 million,
which does not impact the underlying cost structure of the company.
The increase in SG&A in the quarter was primarily related to
higher salary and benefits expense resulting from costs related to
incentive shares that vested during the first quarter as well as
higher headcount.
Outlook
CEO Cole said that Calavo’s start to fiscal 2018 leaves him
“confident and optimistic about the company’s path ahead and that
it remains on a trajectory to post record revenues and earnings per
share” in the current year.
Cole stated: “We continue to see strong fresh avocado demand and
it will be met with a larger all-source industry supply that is
forecast to increase approximately 20 percent. Avocado
consumption—both domestically and internationally—continues to
trend upward and we are well-positioned to help satisfy this
demand. For these reasons, I am affirming our previous forecast of
double-digit revenue growth in the Fresh business segment.
“We expect RFG’s growth rate will trend higher sequentially
across the remaining three quarters of fiscal 2018. Similarly, we
expect RFG’s gross profit margins to improve sequentially across
fiscal 2018 as new retail programs rollout, enabling newer plants
to further scale, and the transitory circumstances in Houston
subside which we are already beginning to witness. Due to the
delays we experienced in the first quarter, we are now anticipating
mid-teen growth in net sales and we continue to expect higher
growth in gross profit for the full year 2018.”
The Calavo CEO continued: “Calavo Foods is on track to meet our
previously forecast double-digit revenue growth this fiscal year.
As we move closer to the second half of the year, we anticipate a
moderation in our year-over-year raw material costs—which are
already lower on a sequential basis—that should result in gross
profit margins remaining at more historic levels.
“We turn next to our unconsolidated subsidiary, FreshRealm, LLC,
which Calavo seeded and continues to hold a meaningful ownership
interest. FreshRealm, utilizing advanced technology, is becoming
the leading innovator in delivering meal-kits to the retail and
direct-to-consumer marketplaces. Notably, Weight Watchers
International recently announced a strategic partnership with
FreshRealm to roll out Weight Watchers branded meal kits later in
2018. We are excited about this partnership as well as a number of
other significant partnership opportunities FreshRealm has secured
or is in the process of developing, and look forward to watching
the FreshRealm business grow in 2018.
“With an outstanding first quarter as Calavo’s cornerstone, I
expect the company to continue on its path of strong revenue and
profit growth as fiscal 2018 progresses. Consequently, I am
re-affirming our guidance offered in mid-December that called for
double-digit growth in both revenue and earnings per share. In
addition, we now anticipate our earnings per share to get a further
boost in fiscal 2018 as a result of the new Tax Cuts and Jobs Act,
which is expected to lower our effective tax rate for the remainder
of fiscal 2018. We look forward to reporting our continued
achievements as the year progresses,” 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
(tomatoes). The Renaissance Food Group segment ("RFG") 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. 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 international 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 latest filed Annual Report on
Form 10-K. 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 BALANCE SHEETS
(UNAUDITED)
(in thousands)
January 31, October 31,
2018
2017
Assets Current assets: Cash and cash equivalents $ 2,942 $
6,625 Accounts receivable, net of allowances of $3,638 (2018) and
$2,490 (2017) 72,655 69,750 Inventories, net 31,184 30,858 Prepaid
expenses and other current assets 7,680 6,872 Advances to suppliers
1,892 4,346 Income taxes receivable
-
1,377 Total current assets 116,353 119,828 Property,
plant, and equipment, net 121,766 120,072 Investment in Limoneira
Company 37,251 40,362 Investment in unconsolidated entities 33,622
33,019 Deferred income taxes 9,419 9,783 Goodwill 18,262 18,262
Other assets
23,975 22,791
$ 360,648 $
364,117 Liabilities and shareholders' equity
Current liabilities: Payable to growers $ 17,304 $ 16,524 Trade
accounts payable 20,676 22,911 Accrued expenses 35,575 39,946
Income tax payable 1,368 - Short-term borrowings 31,500 20,000
Dividend payable - 16,657 Current portion of long-term obligations
123 129 Total current
liabilities 106,546 116,167 Long-term liabilities: Long-term
obligations, less current portion 409 439 Deferred rent 2,719 2,732
Other long-term liabilities
-
657 Total long-term liabilities 3,128 3,828
Commitments and contingencies Total shareholders' equity
250,974 244,122 $
360,648 $ 364,117
CALAVO GROWERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share
amounts)
Three months endedJanuary
31,
2018
2017
Net sales $ 247,928 $ 226,554 Cost of sales
221,618 204,630
Gross profit 26,310 21,924
Selling, general and administrative
15,517 13,826
Operating income 10,793 8,098 Interest expense (231 ) (247 ) Other
income (expense), net
729
(69 ) Income before provision for income
taxes 11,291 7,782 Provision for income taxes
4,302 2,561 Net
income 6,989 5,221 Less: Net loss attributable to noncontrolling
interest
150 28
Net income attributable to Calavo Growers, Inc.
$ 7,139 $
5,249 Calavo Growers, Inc.’s net income
per share: Basic
$ 0.41
$ 0.30 Diluted
$
0.41 $ 0.30
Number of shares used in per share computation: Basic
17,446 17,374
Diluted
17,525
17,430
CALAVO GROWERS, INC.
NET SALES AND GROSS PROFIT BUSINESS
SEGMENT (UNAUDITED)
(in thousands)
Fresh
products
Calavo
Foods
RFG
Total
(All amounts are presented in
thousands)
Three months ended January 31, 2018 Net sales $ 122,785 $
19,037 $ 106,106 $ 247,928 Cost of sales
108,528 13,062
100,028 221,618 Gross profit
$ 14,257 $
5,975 $ 6,078 $
26,310 Three months ended January 31,
2017 Net sales $ 112,059 $ 16,788 $ 97,707 $ 226,554 Cost of
sales
104,208 11,697
88,725 204,630 Gross profit
$ 7,851 $ 5,091
$ 8,982 $
21,924
For the three months ended January 31, 2018 and 2017,
inter-segment sales and cost of sales of $0.4 million and
$0.1 million between Fresh products and RFG were eliminated.
For the three months ended January 31, 2018 and 2017, inter-segment
sales and cost of sales of $0.9 million between Calavo Foods
and RFG were eliminated. For the three months ended January 31,
2018, inter-segment sales and cost of sales of $0.1 million
between Fresh products and Calavo Foods were eliminated.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180307005414/en/
Calavo Growers, Inc.Lee E. ColeChairman, President and CEO(805)
525-1245
Calavo Growers (NASDAQ:CVGW)
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