Second Quarter Highlights Include:
- Net Income Grows to $14.1 Million from
$12.9 Million Last Year
- Diluted EPS Rises to 80 Cents from 74
Cents in Fiscal 2017 Second Period
- Double-Digit Volume Increase in Fresh
Avocado Units Sold
- Renaissance Food Group Gross Profit
Advances 36 Percent Year Over Year
- Calavo Foods Segment Revenues and Gross
Profit Climb 30-Plus Percent
Looking Forward in Fiscal 2018:
- Approximately 20 Percent Growth in
Avocado-Industry Volumes
- Double-Digit Revenue and Gross Profit
Growth for RFG
- Double-Digit Revenue and Gross Profit
Growth in Calavo Foods
- CEO Cole Forecasts Record Revenue and
Double-Digit Increase in EPS
Calavo Growers, Inc. (Nasdaq-GS: CVGW), a global
avocado-industry leader and expanding provider of value-added fresh
food, today reported increased net income and earnings per share
for the fiscal 2018 second quarter and initial six months.
For the three months ended April 30, 2018, net income totaled
$14.1 million, equal to $0.80 per diluted share. This is a nine
percent increase from the $12.9 million, or $0.74 per diluted
share, in last year’s second quarter. Revenues in the most-recent
period were $264.4 million, decreasing two percent from $270.2
million in the fiscal 2017 second quarter. Gross profit registered
$32.0 million, or 12.1 percent of revenues, versus $36.3 million,
equal to 13.4 percent of revenues, in the corresponding period last
year. Operating income reached $19.1 million in the fiscal 2018
second quarter, which compares with $20.8 million in the same
period one year ago.
Chairman, President and Chief Executive Officer Lee E. Cole
stated: “Calavo completed a solidly profitable second quarter,
making notable advancements across our three principal business
segments. This progress included strong avocado volume growth in
our Fresh segment and higher revenues, gross profit and gross
profit margins in both our Renaissance Food Group (RFG) and Calavo
Foods segments.
“The Fresh business experienced double-digit growth in avocado
unit volume. Avocado market pricing remained near historic norms in
the most-recent quarter versus last year, when the industry
experienced a rapid increase toward historically high market
pricing in the second quarter of 2017. Despite this year’s higher
volume, the combined result was lower year-over-year avocado sales.
Calavo’s Fresh segment gross profit remained strong in the second
quarter, above historic norms, albeit lower than last year when the
industry experienced extraordinary market dynamics in which
consumer demand dramatically exceeded available supply.”
Cole continued: “RFG once again notched revenue gains in the
second quarter owing to expansion in multiple geographies, most
notably its newer facilities in Riverside, Calif. and Jacksonville,
Fla. Also notable in the quarter was RFG’s increase in segment
gross profit and gross profit margin, which rose 36 percent and 190
basis points, respectively, over last year.
“The Calavo Foods business segment continues to be a formidable
contributor to the company’s overall results. As detailed below,
the most-recent quarter was no exception, as Calavo Foods’ revenues
and gross profit both increased in excess of 30 percent,” Cole
added.
Net income for the six months ended April 30, 2018 climbed 17
percent to $21.3 million, or $1.21 per diluted share, from $18.2
million, or $1.04 per diluted share in last year’s first half.
Revenue reached $512.3 million in the initial six months, rising
about three percent from $496.7 million in the same period of
fiscal 2017. Gross profit equaled $58.3 million, or 11.4 percent of
revenues, in this year’s initial six months, a slight increase from
$58.2 million, or 11.7 percent of revenues, a year earlier.
Operating income edged upward to $29.9 million from $28.9 million
for the corresponding fiscal 2017 period.
Sales in the Fresh business segment totaled
$137.9 million, an 11 percent decrease from $155.6 million in the
fiscal 2017 second quarter. Gross profit in the most recent quarter
equaled $15.1 million, or 11.0 percent of Fresh segment sales. This
compares with gross profit of $23.8 million, or 15.3 percent of
segment sales, in the fiscal 2017 second quarter. The company’s
avocado performance in the quarter, as detailed in CEO Cole’s
comments above, was tempered somewhat by lower sales and gross
profit in other fresh produce (tomatoes). Total Fresh units sold in
the most-recent quarter stood at 4.7 million, virtually unchanged
from 4.8 million in the year-earlier second quarter as double-digit
avocado unit growth was offset by lower tomato volumes.
In the RFG business segment, sales rose 7 percent to $104.6
million from $97.7 million in the same quarter last year. Gross
profit climbed more than 35 percent to $9.3 million, or 8.9 percent
of segment sales, from $6.9 million, or 7.0 percent of segment
sales in last year’s corresponding quarter. Delays in certain new
programs and an industry-wide food safety concern over romaine
lettuce constrained RFG’s revenue growth this past quarter.
However, manufacturing efficiencies across the segment’s production
footprint, as well as favorable raw material costs, drove the
considerable increase in year-over-year gross profit.
The fiscal second quarter saw sales in the Calavo Foods business
segment advance by 30 percent, reaching $21.9 million from $16.8
million in the year-earlier period. Calavo Foods gross profit also
rose by nearly 35 percent to $7.6 million, or 34.5 percent of
segment sales, from $5.6 million, or 33.3 percent of segment sales,
in the second quarter last year. Gains resulted from a double-digit
increase in prepared avocado pounds sold and price increases
initiated in late 2017, which have helped to offset fruit input
costs which through the second quarter remain elevated compared to
the prior year.
The company’s total selling, general and administrative
(SG&A) expense decreased by 17 percent in the most-recent
quarter to $12.9 million, equal to 4.9 percent of revenues, from
$15.4 million, or 5.7 percent of revenues in the fiscal 2017 second
period. The prior-year SG&A included an approximately $1.4
million increase in the provision for bad debt, as well as a higher
management incentive plan expense.
Outlook
Looking toward the second half, CEO Cole said: “I remain
enthusiastic and optimistic regarding Calavo’s prospects both in
the current year and beyond, and am confident that we are on target
to post record revenues and a double-digit increase in earnings per
share in fiscal 2018.
“Overall fresh avocado demand and consumption continues to trend
upward, and the larger all-source supply for this year – as much as
20 percent above last year – bodes well for our company as a
category leader. During the second half of the year, we expect to
source from multiple geographic regions, including California,
Mexico, Peru and Colombia, and anticipate continued year-over-year,
double-digit volume increases in avocado units sold. While unit
volumes are expected to remain strong, last year’s second half was
marked by unprecedented avocado market dynamics which may skew
year-over-year avocado comparisons throughout the remainder of the
year,” Cole stated.
The Calavo CEO continued: “We remain bullish about RFG’s
prospects in the second half of this year. We continue to expect
RFG revenue growth to re-accelerate in the fiscal 2018 third and
fourth quarters, leading to ten percent topline growth for the
year. We also expect to see RFG’s year-over-year gross profit
expand as segment gross profit margin, which improved dramatically
in the second period, rises incrementally in the second half of
fiscal 2018.
“Calavo Foods is executing very well and is on a path to
register high-teen revenue growth and gross profit margin in line
with historic levels during this year’s third and fourth quarters.
With strong sales growth and higher year-over-year gross profit
margins, we expect higher gross profit dollars this year.
“FreshRealm, LLC – the unconsolidated subsidiary that Calavo
both seeded and holds a meaningful ownership interest – has secured
multiple new enterprise customer relationships over the past
quarter. Those affiliations are expected to begin rolling out in
the second half of fiscal 2018, which will extend FreshRealm’s
presence in the fresh prepped meal kits at retail segment. We look
forward to watching the FreshRealm business continue to strengthen
in 2018.
“We believe that the company is on a trajectory to post record
revenues and double-digit increase in earnings per share for the
full year. I 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,
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. 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
(in thousands)
April 30, October 31,
2018
2017
Assets Current assets: Cash and cash equivalents $ 2,377 $
6,625 Accounts receivable, net of allowances of $3,234 (2018) and
$2,490 (2017) 76,925 69,750 Inventories, net 39,158 30,858 Prepaid
expenses and other current assets 7,026 6,872 Advances to suppliers
2,719 4,346 Income taxes receivable
-
1,377 Total current assets 128,205 119,828 Property,
plant, and equipment, net 121,803 120,072 Investment in Limoneira
Company 40,241 40,362 Investment in unconsolidated entities 33,297
33,019 Deferred income taxes 8,641 9,783 Goodwill 18,262 18,262
Other assets
24,330 22,791
$ 374,779 $
364,117 Liabilities and Shareholders' equity
Current liabilities: Payable to growers $ 27,373 $ 16,524 Trade
accounts payable 16,420 22,911 Accrued expenses 36,752 39,946
Income taxes payable 1,884 - Short-term borrowings 21,000 20,000
Dividend payable - 16,657 Current portion of long-term obligations
117 129 Total current
liabilities 103,546 116,167 Long-term liabilities: Long-term
obligations, less current portion 383 439 Deferred rent 2,706 2,732
Deferred income taxes
- 657
Total long-term liabilities 3,089 3,828 Commitments and
contingencies Total shareholders’ equity
268,144 244,122 $
374,779 $ 364,117
CALAVO GROWERS, INC.
CONSOLIDATED STATEMENTS OF
INCOME
(in thousands, except per share
amounts)
Three months ended
April 30,
Six months ended
April 30,
2018 2017
2018 2017 Net
sales $ 264,405 $ 270,162 $ 512,333 $ 496,716 Cost of sales
232,436 233,909
454,054 438,539
Gross profit 31,969 36,253 58,279 58,177 Selling, general
and administrative
12,875
15,426 28,392
29,252 Operating income 19,094 20,827 29,887
28,925 Interest expense (288 ) (323 ) (519 ) (570 ) Other income
(loss), net
(26 )
33 703
(36 ) Income before provision for income
taxes 18,780 20,537 30,071 28,319 Provision for income taxes
4,764 7,603
9,066 10,164 Net
income 14,016 12,934 21,005 18,155 Less: Net loss - noncontrolling
interest
106 11
256 39
Net income attributable to Calavo Growers, Inc.
$
14,122 $ 12,945
$ 21,261 $
18,194 Calavo Growers, Inc.’s net income
per share: Basic
$ 0.81
$ 0.74 $
1.22 $ 1.05
Diluted
$ 0.80 $
0.74 $ 1.21
$ 1.04
Number of shares used in per share
computation:
Basic
17,481 17,426
17,472 17,402
Diluted
17,580
17,539 17,561
17,486
CALAVO GROWERS, INC.
NET SALES AND GROSS PROFIT BY BUSINESS
SEGMENT
Fresh
products
Calavo
Foods
RFG
Total
Three months ended April 30, 2018 Net sales $ 137,935
$ 21,913 $ 104,557 $ 264,405 Cost of sales
122,815 14,361
95,260 232,436 Gross profit
$ 15,120 $
7,552 $ 9,297 $
31,969 Three months ended April 30, 2017
Net sales $ 155,623 $ 16,837 $ 97,702 $ 270,162 Cost of sales
131,826 11,237
90,846 233,909 Gross profit
$ 23,797 $
5,600 $ 6,856 $
36,253
For the three months ended April 30, 2018 and 2017,
inter-segment sales and cost of sales of $0.2 million between
Fresh products and RFG were eliminated. For the three months ended
April 30, 2018 and 2017, inter-segment sales and cost of sales of
$0.8 million and $0.6 million between Calavo Foods and RFG
were eliminated.
Fresh
products
Calavo
Foods
RFG
Total
Six months ended April 30, 2018 Net sales $260,720
$40,950 $210,663 $ 512,333 Cost of sales
231,343
27,423 195,288 454,054 Gross
profit
$ 29,377 $13,527 $
15,375 $ 58,279 Six months ended
April 30, 2017 Net sales $267,682 $33,625 $195,409 $ 496,716
Cost of sales
236,034 22,933
179,572 438,539 Gross profit
$
31,648 $10,692 $ 15,837 $
58,177
For the six months ended April 30, 2018 and 2017, inter-segment
sales and cost of sales of $0.6 million and $0.3 million
between Fresh products and RFG were eliminated. For the six months
ended April 30, 2018 and 2017, inter-segment sales and cost of
sales of $1.6 million and $1.4 million between Calavo Foods
and RFG were eliminated. For the six months ended April 30, 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: https://www.businesswire.com/news/home/20180606005411/en/
Calavo Growers, Inc.Lee E. Cole, 805-525-1245Chairman, President
and CEO
Calavo Growers (NASDAQ:CVGW)
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