Calavo Growers, Inc. Posts Sharply Higher Fiscal 2012 Second Quarter and Six-Month Results before Giving Effect to Mexican Tax

  Calavo Growers, Inc. Posts Sharply Higher Fiscal 2012 Second Quarter and
  Six-Month Results before Giving Effect to Mexican Tax Item

Second Quarter Highlights Include:

  *Net Income Rises 84 Percent to $4.4 Million Before Effect of Unexpected
    Item; $1.9 Million Mexican Tax Charge Reduces Net Income to $2.5 Million
    (Versus $2.4 Million Last Year)
  *Revenues Advance 17 Percent from $118.7 Million to $139.0 Million
    (Including $36.1 Million Renaissance Food Group)
  *Gross Margin Climbs 57 Percent to $14.7 Million from $9.3 Million in Last
    Year’s Second Quarter
  *Fresh Unit Volume Climbs 40 Percent, Paced by 23 Percent Increase in
  *CEO Cole Reiterates Expectation for Record Fiscal 2012 Net Income Before
    Tax Charge

Business Wire

SANTA PAULA, Calif. -- June 04, 2012

Calavo Growers, Inc. (Nasdaq-GS: CVGW), a global avocado-industry leader and
an expanding provider of value-added fresh food, today reported that fiscal
2012 second quarter net income nearly doubled on a 17 percent increase in
revenues from the corresponding period last year, before the effect of an
unanticipated $1.9 million income tax expense related to an unfavorable ruling
in a disputed matter with Mexico’s tax authority’s examination of the 2004 tax

Operating results for the most-recent quarter include those of Renaissance
Food Group, LLC (RFG), which the company acquired on June 1, 2011. RFG’s
results are now included as a separate business segment distinct from the
company’s legacy Calavo Foods business segment.

For the three months ended April 30, 2012, net income before the Mexican tax
item rose 84 percent to $4.4 million, equal to $0.30 cents per diluted share,
from $2.4 million, or $0.16 per diluted share, in the fiscal 2011 second
quarter. Including the effect of the Mexican tax ruling, which the company
learned of after the close of the second fiscal quarter, net income was $2.5
million, or $0.17 per diluted share.

Revenues increased to $139.0 million from $118.7 million in the like quarter
one year earlier.

Second-quarter gross margin climbed 57 percent to $14.7 million, or 10.6
percent of total revenues, from $9.3 million, equal to 7.9 percent of total
revenues in the fiscal 2011 comparable quarter. Operating income rose 87
percent to $7.1 million from $3.8 million in the last fiscal year’s second

As previously disclosed, the company had been awaiting the resolution of two
outstanding assessments by Mexico’s tax authority related to the examination
of the 2004 tax year. Contrary to the expectations of management and the
company’s outside legal advisors in Mexico, the Mexican appellate court upheld
an earlier ruling against Calavo. The company does not believe that further
appeal of the ruling will be beneficial. The assessment of approximately $1.9
million was recorded as an income tax expense for the second fiscal quarter.
The company stated that this unexpected item relates solely to resolution of
issues pertaining to the tax-year-ended December 31, 2004.

Chairman, President and Chief Executive Officer Lee E. Cole stated: “We were
deeply disappointed by the ruling of the Mexican appellate court, which we and
our legal counsel believe was unsupported by the facts. Despite this
unwarranted non-recurring expense, by virtually all financial yardsticks
Calavo registered an outstanding performance in the fiscal 2012 second
quarter. The company posted solid top-line growth, paced by incremental
revenue contribution from RFG. Calavo’s sharply higher year-over-year total
gross margin propelled net income and per-share results in the most recent
period, principally due to a 23 percent increase in fresh avocado units from
the fiscal 2011 second quarter. And as point of considerable note, we also
experienced year-over-year unit growth in all diversified fresh products.

“As expected, fresh avocado volume in California snapped back strongly from
last year’s cyclically smaller harvest, contributing to operating efficiencies
across our unit-driven infrastructure. Increased volume in California,
continuing strong cost controls and favorable sourcing of fresh avocados from
Mexico combined to positively impact total gross margin, which increased
nearly 300 basis points from last year. Lower fruit costs in Mexico, compared
to year-ago levels, are having the anticipated beneficial effect on gross
margin in our prepared avocado business, which is capitalizing on the
substantial available supply. Most importantly, consumer demand for avocados
continues to expand.”

For the six months ended April 30, 2012, net income before the effect of the
unexpected tax item totaled $7.1 million, or $0.48 per diluted share, a 51
percent increase from $4.7 million, equal to $0.32 per diluted share, in the
corresponding period last year. After giving effect to the Mexican tax
expense, net income was $5.2 million, or $0.35 per diluted share.

Six-month revenues rose 22 percent to $256.4 million from $210.0 million in
the first half of fiscal 2011. Gross margin in the fiscal 2012 initial six
months grew 49 percent to $26.6 million, equal to 10.4 percent of total
revenues, from $17.9 million, or 8.5 percent of total revenues, in last year’s
first half. Operating income in the most recent six months expanded to $11.5
million, a 54 percent increase from $7.4 million in the like period last year.

Second quarter revenues in Calavo’s Fresh business segment totaled $91.7
million, a decrease of 15 percent from $107.7 million in the corresponding
period last year. Despite delivering significantly higher unit volume of both
fresh avocados and tomatoes, the year-over-year decline in segment revenues is
principally attributable to lower sales prices in the marketplace resulting
primarily from an abundant industry supply. Total Fresh segment volume
advanced 40 percent to 4.7 million units from 3.3 million units in the fiscal
2011 second quarter. Fresh gross margin equaled $8.0 million, or 8.7 percent
of segment sales, versus $7.5 million, or 7.0 percent of segment sales, in the
corresponding quarter last year.

In the Calavo Foods business segment—encompassing the company’s legacy
products, including prepared avocados, Salsa Lisa, and tortilla chips—revenues
totaled $11.2 million, substantially unchanged from $11.1 million in the
second quarter of fiscal 2011. With respect to prepared avocado products—that
business segment’s cornerstone—the company benefited from favorable fruit
costs, as well as improved pricing and production efficiencies. Gross margin
rose two-fold to $3.9 million, equal to 35 percent of segment sales, from $1.8
million, or 16.2 percent of Calavo Foods’ sales, in last year’s second

Sales in the RFG business segment in the second quarter of fiscal 2012 totaled
$36.1 million. Gross margin totaled $2.8 million, equal to 7.8 percent of
segment sales. The company cited several second-quarter operating achievements
in the RFG unit, including new retail grocery accounts, acceptance by
retailers of more of the unit’s brands, and strong demand from consumers. RFG
continues to demonstrate success in the development of new products and in
utilizing just-in-time production and delivery of fresh product to serve both
grocery retailers and consumers.

Selling, general and administrative (SG&A) expense in the most recent quarter
totaled $7.6 million, equal to 5.5 percent of revenues, versus $5.5 million,
or 4.7 percent of revenues, in last year’s second period. The year-over-year
increase in SG&A principally reflects the addition of RFG, as well as accruals
for contingent purchase consideration related to the RFG transaction, and an
increase in stock-based compensation expense. SG&A as a percentage of gross
margin—a key metric for the company—fell by more than 700 basis points to 52
percent in the fiscal 2012 second period from 59 percent in the year-ago like


“As we turn the corner into the second half of the fiscal year with operating
momentum squarely behind Calavo, we foresee a continued strengthening picture
ahead,” said CEO Cole.

“In the Fresh segment, the company will benefit in the third quarter from its
peak packing period for California avocados, with the expected large volume
driving production efficiencies and further gross margin improvement. The
supply of Mexican-grown avocados at more favorable prices compared to a year
ago, supplementing strong domestic fresh fruit production, positions Calavo
well to capitalize on expanding consumer demand.

“We anticipate that the beneficial market conditions in Mexico will continue
translating to lower fruit costs in our prepared avocado conditions and, as a
result, we expect to see strong—likely record—margins in the segment.”

Cole continued: “On a related note, the company’s capital investment in
expansion of our Uruapan, Mexico, packinghouse, due to be completed in July,
will double fresh avocado capacity at that facility. Upon completion, Calavo
will possess the capability to pack 600 million pounds of fresh avocados to
keep pace with growing consumer demand and maintain our industry-leadership

“Since becoming part of the Calavo family of fresh foods a year ago, RFG has
shown strong sales growth, due to an outstanding lineup of value-added,
high-quality products. We continue to be enthusiastic about RFG’s pace of
product innovation, as well as its keen ability to identify consumer trends
and preferences. We also value the significantly larger footprint RFG provides
to Calavo in the grocery channel as a result of our combined portfolio of
branded offerings.

“I am enormously confident in the multiple revenue and profit engines driving
Calavo. We are executing our business agenda extremely well against the
ambitious targets we set for ourselves. We have considerable operational and
financial strength, as well as a breadth of other resources, at our disposal.
With so much to build upon, I am optimistic that the company will register
record operating results in fiscal 2012, with net income and per share results
at new all-time highs before the effect of the Mexican tax charge,” Cole

About Calavo

Calavo Growers, Inc. is a global avocado-industry leader. The company also
procures and markets diversified fresh produce items, ranging from tomatoes to
tropical produce. An expanding provider of value-added fresh food, the
company’s Calavo Foods business segment manufactures and distributes
guacamole, guacamole hummus, salsa and tortilla chips under the respected
Calavo brand name. Calavo Foods’ wholly owned subsidiary, Renaissance Food
Group, LLC, creates, markets and distributes a portfolio of healthy,
high-quality lifestyle products for consumers through fast-growing brands that
include Garden Highway and Chef Essentials. Founded in 1924, Calavo serves
food distributors, produce wholesalers, supermarket retailers and restaurant
chains worldwide.

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 Annual Report on Form
10-K for the year ended October 31, 2011. 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.



(in thousands)
                                         April 30,                 October 31,
                                         2012                      2011
Current assets:
Cash and cash equivalents                $ 4,682                   $   2,774
Accounts receivable, net of
allowances of $2,718 (2012) and            51,512                      36,101
$2,285 (2011)
Inventories, net                           25,032                      17,787
Prepaid expenses and other current         6,797                       6,220
Advances to suppliers                      1,342                       3,349
Income taxes receivable                    —                           3,111
Deferred income taxes                     2,136                      2,136
Total current assets                       91,501                      71,478
Property, plant, and equipment,            48,606                      47,091
Investment in Limoneira Company            29,057                      29,991
Investment in unconsolidated               2,498                       2,292
Goodwill                                   18,349                      18,349
Other assets                              15,242                     16,122
                                         $ 205,253                 $   185,323
Liabilities and shareholders’
Current liabilities:
Payable to growers                       $ 12,535                  $   5,082
Trade accounts payable                     9,010                       7,038
Accrued expenses                           19,367                      19,285
Income tax payable                         471                         —
Short-term borrowings                      33,190                      17,860
Dividend payable                           —                           8,123
Current portion of long-term              5,473                      5,448
Total current liabilities                  80,046                      62,836
Long-term liabilities:
Long-term obligations, less                16,189                      18,244
current portion
Deferred income taxes                     7,638                      8,002
Total long-term liabilities                23,827                      26,246
Commitments and contingencies:
Noncontrolling interest                    421                         555
Total Calavo Grower’s                     100,959                    95,686
shareholders’ equity
                                         $ 205,253                 $   185,323



(in thousands, except per share amounts)
                     Three months ended                      Six months ended

                     April 30,                               April 30,
                     2012           2011                  2012           2011
Net sales            $ 138,992         $ 118,720             $ 256,386         $ 210,039
Cost of sales         124,297         109,386             229,789         192,175 
Gross margin           14,695            9,334                 26,597            17,864
general and           7,618           5,549               15,112          10,425  
Operating              7,077             3,785                 11,485            7,439
Interest               (311    )         (235    )             (609    )         (439    )
Other income,         469             458                 706             684     
Income before
provision for          7,235             4,008                 11,582            7,684
income taxes
Provision for         4,700           1,634               6,395           3,020   
income taxes
Net income             2,535             2,374                 5,187             4,664
Add: Net loss
–                     13              30                  40              51      
Net income
attributable         $ 2,548          $ 2,404              $ 5,227          $ 4,715   
to Calavo
Growers, Inc.
Inc.’s net
income per
Basic                $ 0.17           $ 0.16               $ 0.35           $ 0.32    
Diluted              $ 0.17           $ 0.16               $ 0.35           $ 0.32    
Number of
shares used in
per share
Basic                 14,787          14,726              14,779          14,724  
Diluted               14,802          14,734              14,792          14,731  



          (in thousands)
                       Fresh           Calavo
                                                      RFG            Total
                       products        Foods
                     (All amounts are presented in thousands)
          Net          $ 91,732        $ 11,202       $ 36,058       $ 138,992
          of            83,767         7,283         33,247        124,297
          Gross        $ 7,965         $ 3,919        $ 2,811        $ 14,695
          Net          $ 107,650       $ 11,070       $ —            $ 118,720
          of            100,107        9,279         —             109,386
          Gross        $ 7,543         $ 1,791        $ —            $ 9,334

For the three months ended April 30, 2012 and 2011, inter-segment sales and
cost of sales for Fresh products totaling $6.3million and $4.3million were
eliminated. For the three months ended April 30, 2012 and 2011, inter-segment
sales and cost of sales for Calavo Foods totaling $2.9million and
$2.8million were eliminated.

                       Fresh           Calavo
                                                      RFG            Total
                       products        Foods
                      (All amounts are presented in thousands)
          Net          $ 162,868       $ 22,481       $ 71,037       $ 256,386
          of            148,934        15,154        65,701        229,789
          Gross        $ 13,934        $ 7,327        $ 5,336        $ 26,597
          Net          $ 188,306       $ 21,733       $ —            $ 210,039
          of            174,784        17,391        —             192,175
          Gross        $ 13,522        $ 4,342        $ —            $ 17,864

For the six months ended April 30, 2012 and 2011, inter-segment sales and cost
of sales for Fresh products totaling $11.3million and $8.6million were
eliminated. For the six months ended April 30, 2012 and 2011, inter-segment
sales and cost of sales for Calavo Foods totaling $5.8million were


Calavo Growers, Inc.
Lee E. Cole
Chairman, President and CEO
(805) 525-1245
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