Calavo Growers, Inc. Announces Fiscal 2005 Second Quarter and First Half Results.SANTA PAULA Santa Paula (săn`tə pôl`ə), city (1990 pop. 25,062), Ventura co., S Calif., on the Santa Clara River in a fertile valley that yields citrus fruits, avocados, vegetables, flowers, nursery products, and walnuts; laid out 1875, inc. , Calif. -- Calavo Growers Growers are the people, animals, plants, and various living creatures that assist in the growing of plants and other living creatures. More specifically, the term "growers" refers to individual people who put forth effort to grow plants for food and medicinal use, including the , Inc. (Nasdaq:CVGW): Quarterly Highlights Include: --International Avocado avocado (ä`vəkä`do, ăv`–), tropical American broad-leaved evergreen tree of the genus Persea of the family Lauraceae (laurel family). Segment Sales Rise By $3.5 million --Maui Fresh Registers Solid Contribution to International Segment Results --Ultra-High-Pressure Guacamole Accounts for More Than 20 Percent of Total Processed Product Sales --Company Completes Corporate Relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. to Santa Paula, Calif. Calavo Growers, Inc. (Nasdaq:CVGW), the global leader in packing and marketing fresh and processed avocados and other perishable per·ish·a·ble adj. Subject to decay, spoilage, or destruction. n. Something, especially foodstuff, subject to decay or spoilage. Often used in the plural. food products, today reported that net income for the fiscal 2005 second quarter totaled $2.5 million, equal to $0.18 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, which compares with $2.3 million, or $0.17 per diluted share, in the comparable period one year earlier. Results in the most-recent quarter include a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. pre-tax gain approximating $1.7 million from the sale of the company's former corporate headquarters in Santa Ana Santa Ana, city, El Salvador Santa Ana (sän'tä ä`nä), city (1993 pop. 129,873), W El Salvador. It is the second largest city in the country and the commercial and processing center for a sugarcane, coffee, and cattle region. , Calif. For the three months ended April 30, 2005, Calavo posted revenues of $60.2 million versus $76.4 million in the year-earlier second quarter, owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de sharply lower sales in its California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). avocado business segment due, in part, to the timing of the domestic harvest by Calavo's growers. Earlier, Calavo had issued guidance that its California growers moderate their harvesting as a result of the over-supply of avocados in the marketplace by competing packers that served to adversely impact pricing. A cyclically smaller current-year domestic crop, persistent heavy rains in California, the initial uncertainty over the effect and impact of the year-round introduction of Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum avocados in the U.S. marketplace, and lower per-pound pricing also were factors in the quarterly drop in revenue. Lee E. Cole, the company's chairman, president and chief executive officer, stated: "Calavo advised its growers to moderate how they pick their fruit, recognizing that too many pounds of avocados were flooding into the market, even as the size of the crop cyclically contracted from last year. As a result, we now are seeing increased volume into our two California packinghouses and expect to realize strong quarter-to-quarter advances in both pounds and pricing during the third period, as well as increased domestic market share and returns to growers." Cole continued, saying: "Despite challenging industry conditions, it is gratifying grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. that Calavo nonetheless successfully generated more than $2 million in quarterly operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. from its three business units." The company posted net income of $920,000, or $0.07 per diluted share, on sales of $107.9 million for the six months ended April 30, 2005. This compares with profit of $2.0 million, or $0.15 per diluted share, on sales of $125.5 million in last year's first half. Cole stated that the difference in the company's bottom line year over year can be traced substantially to the before-tax effect of approximately $1.7 million in unique items incurred in fiscal 2005 -- and accounted for in cost of sales and sales, general and administrative (SG&A) expenses -- relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc , among other items, substantial expenditure for implementing the procedures and financial controls required under Section 404 of the Sarbanes-Oxley Act See SOX. (SOX (1) (Schema for Object-oriented XML) An XML schema developed by Veo Systems and Muzino Communications, which was submitted to the W3C. SOX is based on DTD, but adds data typing and reuse mechanisms. ). Of nearly $1 million in unusual SG&A items incurred year to date, more than $560,000 result from SOX implementation alone, while other exceptional costs incurred include sharply higher professional fees (approximately $160,000) related to special assignments, and the recent relocation of the company's headquarters to Santa Paula (nearly $120,000), among other items. "Our company remains steadfastly committed to the highest levels of corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and reporting," said Cole, "but the standards and practices as currently legislated by SOX come at substantial expense to Calavo and its shareholders. "We are confident that these costs will normalize normalize to convert a set of data by, for example, converting them to logarithms or reciprocals so that their previous non-normal distribution is converted to a normal one. over time as certain Section 404 procedures become routine, but in the short term, the company expects to continue incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. substantial SOX-related expense. "Unique expenses aside, the company maintains its focused commitment to a rigorous cost discipline and keeping a firm rein on operating expenditures," Cole added. California Avocados Second quarter sales in the California Avocado segment fell to $24.5 million from $44.1 million in the corresponding period last year. As stated above, a confluence confluence /con·flu·ence/ (kon´floo-ins) 1. a running together; a meeting of streams.con´fluent 2. in embryology, the flowing of cells, a component process of gastrulation. of factors, most notably the company's recommendation to growers to moderate their harvest -- but also a cyclically smaller crop, lower per-pound pricing, unusually wet weather, the initial uncertainty over the effect and impact of the year-round introduction of Mexican avocados in the U.S. marketplace, and a larger volume of fruit from regions where Calavo enjoys less market share -- contributed to the fall-off in segment sales. As a result, the company's share of the California market in the second quarter declined to 27 percent, which is expected to rise markedly to historic levels in the current period as packing volumes increase. International Avocados and Perishable Products International Avocado sales surged to more than $29.0 million in the second period, a gain of nearly $3.5 million from $25.6 million in the like quarter one year ago. U.S.D.A. import limits on Mexican avocados were formally lifted on Feb. 1, 2005, and the company acted on the opening of the market by importing 641,000 cases of fruit in the most recent period versus 472,000 in last year's second quarter. Carton pricing declined slightly year-to-year. The company disclosed that its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. Maui Fresh enjoyed "strong second quarter results which made a solid contribution to operating profit." Processed Products Sales of $6.6 million in the Processed Product segment during the second period are substantially unchanged from the corresponding fiscal 2004 quarter. The company continues to experience increasing acceptance and demand for its ultra-high-pressure guacamole, which accounted for 22 percent of segment sales in the second quarter, up from 15 percent last year. The company disclosed that, during the second quarter, the Albertson's and Ralph's supermarket chains signed on to stock the ultra-high-pressure product. As previously disclosed, the company's restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of its processed products business was completed in the fiscal 2005 first quarter, while operations at Calavo's Uruapan, Michoacan, Mexico facility continue to be improved and focus is turned to business-development initiatives. Summary and Third Quarter Outlook Cole stated: "Moving forward, we anticipate substantial recovery in California Avocado segment sales and market share as volume continues to build at our domestic packinghouses, making allowance for the cyclically smaller 2005 crop size and lower per-pound prices from one year ago. During the second period, we demonstrated an ability to offset, at least in part, the smaller California crop through our market leadership in the import of Mexican avocados which gained velocity with the removal of import restrictions. We will continue to focus on the strategic advantage afforded by our Mexican-market leadership to meet domestic and international demand. "I have stressed repeatedly -- and it merits saying again -- that our management team does not run the company for quarter-to-quarter results. Instead, we are committed to a focused, long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategic agenda that will result over time in greater profitability, shareholder value and a larger, more diversified diversified (di·verˑ·s Calavo. Even as we face challenges -- SOX, volume issues, unseasonable un·sea·son·a·ble adj. 1. Not suitable to or appropriate for the season. 2. Not characteristic of the time of year: unseasonable weather. 3. Poorly timed; inopportune. weather and the effect of imports, among them -- we remain fully confident we're on the right path. We anticipate that the effects of this agenda will continue to evidence themselves in a strengthened operating performance and we expect to complete another successful year," the Calavo CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. concluded. About Calavo Calavo Growers, Inc. is a worldwide leader in the procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended October 31, 2004. These forward-looking statements are made only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" , 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)
April 30, October 31,
2005 2004
---------- ------------
Assets
Current assets:
Cash and cash equivalents $1,058 $636
Accounts receivable, net of allowances
of $1,612 (2005) and $1,087 (2004) 26,125 21,131
Inventories, net 13,167 11,375
Prepaid expenses and other current assets 4,683 4,598
Loans to growers 152 209
Advances to suppliers 160 2,413
Income tax receivable 214 803
Deferred income taxes 1,775 1,775
---------- ------------
Total current assets 47,334 42,940
Property, plant, and equipment, net 16,868 17,427
Building held for sale -- 1,658
Goodwill 3,591 3,591
Other assets 1,482 1,782
---------- ------------
$69,275 $67,398
========== ============
Liabilities and shareholders' equity
Current liabilities:
Payable to growers $10,070 $5,789
Trade accounts payable 2,237 2,490
Accrued expenses 10,287 8,234
Short-term borrowings 710 2,000
Dividend payable -- 4,052
Current portion of long-term obligations 19 22
---------- ------------
Total current liabilities 23,323 22,587
Long-term liabilities:
Long-term obligations, less current portion 18 34
Deferred income taxes 840 840
---------- ------------
Total long-term liabilities 858 874
Commitments and contingencies
Total shareholders' equity 45,094 43,937
---------- ------------
$69,275 $67,398
========== ============
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(All amounts in thousands, except per share amounts)
Three months ended Six months ended
April 30, April 30,
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Net sales $60,206 $76,421 $107,877 $125,464
Cost of sales 53,851 68,668 99,570 114,627
--------- -------- --------- ---------
Gross margin 6,355 7,753 8,307 10,837
Selling, general and
administrative 4,307 3,969 8,820 7,656
--------- -------- --------- ---------
Operating income (loss) 2,048 3,784 (513) 3,181
Other income, net 1,909 106 1,991 220
--------- -------- --------- ---------
Income before provision for
income taxes 3,957 3,890 1,478 3,401
Provision for income taxes 1,490 1,556 558 1,361
--------- -------- --------- ---------
Net income $2,467 $2,334 $920 $2,040
========= ======== ========= =========
Net income per share:
Basic $0.18 $0.17 $0.07 $0.15
========= ======== ========= =========
Diluted $0.18 $0.17 $0.07 $0.15
========= ======== ========= =========
Number of shares used in per
share computation:
Basic 13,507 13,507 13,507 13,488
========= ======== ========= =========
Diluted 13,580 13,589 13,581 13,571
========= ======== ========= =========
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