Calavo Growers, Inc. Announces Fiscal 2005 Fourth Quarter and Full-Year Operating Results.

SANTA PAULA, Calif. -- Calavo Growers, Inc. (Nasdaq:CVGW), the global leader in the packing and marketing of fresh and processed avocados and other perishable food products, today reported lower revenue and profit for the fourth quarter and fiscal year. Results were constrained by a cyclically smaller California crop, which significantly hampered performance in the company's core domestic business segment, as well as the onerous costs related to implementing provisions required under Section 404 of the Sarbanes-Oxley Act (SOX).

For the three months ended October 31, 2005, the company posted a net loss of $517,000, equal to $0.04 per diluted share, on net sales of $62.2 million. This compares with net income of $1.1 million, or $0.08 per diluted share, on net sales $65.4 million in the corresponding period last year.

Twelve-month net income totaled $3.3 million, or $0.24 per diluted share, in the recently concluded year, versus $6.2 million, or $0.46 per diluted share, recorded in fiscal 2004. Net revenues approximated $258.8 million in fiscal 2005, which compares with sales of $274.2 million one year earlier.

"Calavo enjoyed outstanding growth in both its international and processed-products business segments, where fourth quarter revenues alone rose 83 and 25 percent, respectively, from the corresponding period last year," said Chairman, President and Chief Executive Officer Lee E. Cole. "These gains, while enormously gratifying, were not sufficient to offset results in the company's California avocado division, which was adversely impacted by the cyclically smaller overall harvest, and accounts for the difference on our top line from last year."

Cole continued: "As indication of its effect, this industry-wide downturn saw the total California avocado crop contract to 300 million pounds in the most recent year from 432 million pounds in 2004, according to California Avocado Commission figures. While our market share (as percentage of the state's total harvest) remained strong, the substantially smaller crop resulted in Calavo selling 54 million fewer pounds of California fruit year-to-year. Our packinghouses are scale-driven facilities and, consequently, lower volumes adversely affect production efficiencies by spreading fixed costs across fewer pounds."

SOX Costs Remain High; CEO Cole Calls Out for Small-Cap Relief

In addition to the effects of the smaller California avocado crop, Cole indicated that considerable expenditures related to implementing provisions required under Section 404 of the SOX further constrained Calavo's profitability and were a significant factor in the difference in the company's bottom line in the fourth quarter and for the year. The effect of these costs in fiscal 2005--along with a series of other unique items incurred this year and recognized in cost of sales and sales, general and administrative expense (SG&A)--totals $2.6 million, with some $2.0 million attributable to SOX implementation, including $0.9 million in the fourth quarter alone. The remaining items are primarily non-recurring and are principally comprised of higher professional fees, costs associated with the relocation of Calavo's corporate headquarters to Santa Paula last March, and the final costs of winding down our operations at our Mexicali, Mexico facility.

Excluding these additional costs and despite the lower top-line figure, SG&A as a percentage of total revenue was virtually unchanged from last year, indicative of Calavo's rigorous cost discipline and expense containment.

Cole stated: "Calavo is committed to best practices in corporate governance and full transparency in its financial reporting. Nonetheless, we consider Section 404 requirements as currently enacted overreaching and draconian to small-cap public companies and their shareholders. As such, we fully support recommendations for relief from some of these provisions currently pending before the Securities and Exchange Commission's Advisory Committee on Smaller Cap Public Companies.

"I say once again that SOX expense strips from smaller companies the dollars for reinvestment in the business, profit growth and ultimately shareholder returns," stated Cole emphatically.

Balance Sheet Strength: Shareholders' Equity Surges

Referencing the company's robust financial condition, Cole stated that the "balance sheet is strong, flexible and possesses ample capacity for leverage." The Calavo CEO indicated that shareholders' equity at fiscal-year end totaled nearly $65 million, climbing more than 47 percent from Oct. 31, 2004. This translates to book value per common share of $4.51 versus $3.25 one year earlier, as a result principally of unrealized stock gains from Calavo's investment in Limoneira Company in June 2005, and Limoneira's reciprocal investment in Calavo.

"At year end, Calavo's unrealized, pre-tax gains in Limoneira common stock totaled more than $22 million," Cole stated. This paper profit, which is excluded from earnings, comes in addition to securing the packing business of Limoneira, a diversified farming and land-holding company, which is one of the two largest avocado growers in California.

Other Notable Fiscal 2005 Accomplishments

Despite the challenging conditions in the California market last year, Cole noted that Calavo recorded a number of "other significant achievements that measurably strengthen the company and further our strategic business agenda." In addition to consummating the Limoneira transaction last spring, he referenced other notable items including:

--Sharp sales gains in Calavo's International business unit, with net segment revenues leaping 36.5 percent for the year, following the USDA's lifting of import restrictions on Mexican avocados; and,

--Growing revenues and gross margin in the Processed Products division, where net sales jumped 11.2 percent from one year ago, fueled by increasing market penetration at the retail level for the company's ultra-high-pressure guacamole.

The Calavo CEO said: "Our Uruapan, Michoacan, Mexico processed-products facility in particular is a source of immense pride. As anticipated at the beginning of fiscal 2005, we have improved the plant's performance on the strength of growing sales of ultra-high-pressure guacamole and other products and are realizing gains in gross margins in the unit.

"Retail demand for the guacamole product continues to grow. During the past year, the product reached consumers, as distribution was opened with a number of leading grocery chains," Cole indicated.

Fiscal 2006 Outlook and Perspective

Turning to the current fiscal year, Cole stated that he is looking ahead "with great anticipation, confidence and optimism across all segments of our operations."

Cole stated: "By virtually all company and industry forecasts, we anticipate an extremely large California crop during the current year, particularly in growing regions where Calavo enjoys its greatest market share. Consequently, we believe that the company will realize substantial packing efficiencies that directly benefit both sales and gross margins. The California crop in fiscal 2006 is shaping up to be bountiful--in marked contrast to the small harvest in the recent year.

"In the International business segment, we expect robust fresh avocado exports from our Mexican packinghouse to the United States and other countries, especially as the domestic market continues adapting to the easing of import-limits. International avocado pricing may ease slightly from last year (reflecting the expected larger California crop). However, Calavo stands to gain in the form of lower fruit costs in its Processed Products division, which relies entirely on Mexican avocados, favorably benefiting product gross margins," he continued.

Regarding the Processed Products division, CEO Cole indicated that, despite already vigorous performance, still stronger results are expected. "We are anticipating continued gains in the unit, with growth in revenues and gross margins forthcoming during fiscal 2006, fueled principally by ultra-high-pressure sales. The best is still to come in Processed Products--stay tuned," he said.

Cole also stated that the company expects SOX expenses "to significantly decrease over fiscal 2006. Lower costs associated with compliance in the second year will favorably benefit our operating results. Nonetheless, it is small consolation and nothing short of a regulatory relief is the ultimate answer for smaller public companies.

About Calavo

Calavo Growers, Inc. is a worldwide leader in the procurement and marketing of fresh avocados and other perishable foods, as well as the manufacturing and distribution of processed avocado products. Founded in 1924, Calavo's expertise in marketing and distributing avocados, processed avocados, and other perishable foods allows the company to deliver a wide array of fresh and processed food products to food distributors, produce wholesalers, supermarkets, and restaurants on a global basis.

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, 2005. 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, except share amounts)

                                                        October 31,
                                                    ------------------
                                                       2005     2004
                                                    ------------------

Assets
Current assets:
   Cash and cash equivalents                          $1,133     $636
   Accounts receivable, net of allowances
    of $2,688 (2005) and $1,087 (2004)                19,253   21,131
   Inventories, net                                   10,096   11,375
   Prepaid expenses and other current assets           5,879    4,807
   Advances to suppliers                               1,141    2,413
   Income taxes receivable                               893      803
   Deferred income taxes                               2,651    1,775
                                                    ------------------
     Total current assets                             41,046   42,940
Property, plant, and equipment, net                   16,897   17,427
Building held for sale                                     -    1,658
Investment in Limoneira                               45,634        -
Goodwill                                               3,591    3,591
Other assets                                           1,314    1,782
                                                    ------------------
                                                    $108,482  $67,398
                                                    ==================

Liabilities and shareholders' equity
Current liabilities:
   Payable to growers                                 $1,753   $5,789
   Trade accounts payable                              1,892    2,490
   Accrued expenses                                   12,482    8,234
   Short-term borrowings                               1,424    2,000
   Dividend payable                                    4,564    4,052
   Current portion of long-term obligations            1,313       22
                                                    ------------------
     Total current liabilities                        23,428   22,587
Long-term liabilities:
   Long-term obligations, less current portion        11,719       34
   Deferred income taxes                               8,589      840
                                                    ------------------
     Total long-term liabilities                      20,308      874
Commitments and contingencies
     Total shareholders' equity                       64,746   43,937
                                                    ------------------
                                                    $108,482  $67,398
                                                    ==================


                         CALAVO GROWERS, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except per share amounts)


                                    Three months
                                       ended            Year ended
                                     October 31,        October 31,
                                  ---------------- -------------------
                                    2005    2004       2005     2004
                                  ---------------- -------------------

Net sales                         $62,246 $65,436   $258,822 $274,218
Cost of sales                      58,013  59,425    237,088  248,814
                                  ---------------- -------------------
Gross margin                        4,233   6,011     21,734   25,404
Selling, general and
 administrative                     4,943   4,416     18,588   15,920
Restructuring charge                    -     185          -      185
                                  ---------------- -------------------
Operating income (loss)              (710)  1,410      3,146    9,299
Other income, net                     213     167      2,357      478
                                  ---------------- -------------------
Income before provision (benefit)
 for income taxes                    (497)  1,577      5,503    9,777
Provision (benefit) for income
 taxes                                 20     467      2,181    3,567
                                  ---------------- -------------------
Net income (loss)                   $(517) $1,110     $3,322   $6,210
                                  ================ ===================
Net income (loss) per share:
 Basic                             $(0.04)  $0.08      $0.24    $0.46
                                  ================ ===================
 Diluted                           $(0.04)  $0.08      $0.24    $0.46
                                  ================ ===================
Number of shares used in per share
 computation:
 Basic                             14,371  13,507     13,892   13,497
                                  ================ ===================
 Diluted                           14,432  13,591     13,985   13,582
                                  ================ ===================