Calavo Growers, Inc. Reports Solidly Profitable Fiscal Second Quarter Results.Business Editors 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.--(BUSINESS WIRE)--June 9, 2003 Strong International Sales Growth Underscores Success of Diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. Strategy; Processed Unit Gross Margins Improve on Higher Pricing and Market Acceptance for New Products Calavo Growers, Inc. (Nasdaq:CVGW) a worldwide leader in packing and distributing avocados, 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, announced today that second quarter fiscal 2003 revenues increased $1.2 million, or 2.2 percent, benefiting principally from significant growth in volume of Mexican avocados shipped to markets in the eastern United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . For the three months ended April 30, 2003, Calavo sales climbed to $57.4 million from $56.1 million in the like period one year ago. Net income in the most recent quarter totaled $1.7 million, equal to $0.13 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. This compares with net income of $2.3 million, or $0.19 per diluted share, in the second quarter last year. Per share results for the most recent quarter are based on approximately 11 percent more diluted weighted-average shares outstanding, due to the company's successful subscription rights offering completed in August 2002. Six-month revenues of $101.6 million are virtually unchanged from $101.9 million posted in last year's first half. Net income for the first six months totaled $2.2 million, or $0.17 per diluted share, versus $2.6 million, or $0.23 per diluted share in the comparable period of fiscal 2002. Per share results for the most recent six months reflect 17 percent higher weighted-average shares outstanding. "Calavo's international diversification International diversification The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns. , specifically the large growth in shipment volume of avocados from Mexico during the second quarter, is compelling validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. of our business strategy," said Lee E. Cole, the company's chairman, president and chief executive officer. "The increased revenue generated by our Mexican operations served to compensate for a drop off in the harvest of California avocados. The volume of California avocados marketed by Calavo was adversely impacted by a cyclically lower volume of fruit in the northern growing areas coupled with an erratic er·rat·ic adj. 1. Having no fixed or regular course; wandering. 2. Lacking consistency, regularity, or uniformity: an erratic heartbeat. 3. harvest experienced in the southern growing areas impacted by the Mexfly quarantine quarantine (kwŏr`əntēn), isolation of persons, animals, places, and effects that carry or are suspected of harboring communicable disease. . Despite these challenges we are pleased with our success in recruiting 45 new growers during the second fiscal quarter that will begin delivering their avocados to Calavo," he said. Acknowledging Calavo's processed products business, Cole said that the unit turned in "a very positive showing, characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by stronger pricing that contributed to improvements in gross-profit margins, which were up 0.3 percent over last year. Additionally, we are enjoying highly favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. initial acceptance in the marketplace for the company's new refrigerated re·frig·er·ate tr.v. re·frig·er·at·ed, re·frig·er·at·ing, re·frig·er·ates 1. To cool or chill (a substance). 2. To preserve (food) by chilling. guacamole product offering treated with our newly acquired ultra high-pressure equipment." "This great-tasting product is a significant development in the history of our processed products business. Since its introduction earlier this year, sales of the new product have accelerated from zero to approximately $869,000 for the first six months of this fiscal year. We are forecasting that within one year, the high-pressure guacamole product should account for approximately 10 percent of the processed unit's overall sales," he said. Cole indicated that net income was impacted, in part, by higher second quarter selling, general and administrative expense, which rose sharply year to year as a result of higher employee compensation and transportation costs, among other factors. "As the year proceeds, we expect to see SG&A expense 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. at levels that are in line with last year as a percentage of total revenue," he said. Calavo's balance sheet continues to gain strength and grow increasingly liquid, Cole stated. At April 30, 2003, shareholder equity had risen nearly 12 percent, or $3.6 million, to $34.2 million from $30.6 million at the close of fiscal 2002. The company's current ratio stands at 1.92, reflecting the company's efforts to reduce debt over the past year. Moreover, liquidity has benefited from processed product inventory reductions offset by a seasonal increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying while days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). , or average collection period, has remained steady. California Avocados As a result of decreased volumes of avocados marketed, Calavo's California avocado avocado (ä`vəkä`do, ăv`–), tropical American broad-leaved evergreen tree of the genus Persea of the family Lauraceae (laurel family). sales declined $1.3 million to $35.0 million from $36.3 million in the second quarter last year. Gross margins dipped slightly to $3.7 million from $4.0 million, reflecting diminished yields and efficiencies in operations due to the smaller volume of avocados handled at our packing operations. The company expects that sales, volume of shipments and profit margins for California avocados will increase during the third quarter, as the harvest accelerates in the northern growing region A growing region is an area suited by climate and soil conditions to the cultivation of a certain type of crop. Most crops are cultivated not in one place only, but in several distinct regions in diverse parts of the world. and the company attains greater utilization of overhead. Furthermore, the company remains highly confident in the fundamentals of its California avocado business and the value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. it can deliver to retailers and other customers using its bagging and ripening ripening said of meat. See curing. techniques. International Avocados and Perishable Food Products Sales generated by the international avocados and perishable food products segment increased to $17.9 million for the second quarter as compared to $16.1 million for the same prior-year period. The increase is due principally to a sharp growth in shipment volume to markets in the eastern United States of avocados from Mexico, where pounds packed and distributed jumped 17.0 percent to 10.7 million from 9.1 million year over year. The increase in volume was partially offset by decreased prices and increased marketing expense for imported avocados. Despite the increase in sales, gross margins generated in the international segment dipped slightly in the second period to $1.75 million from $1.8 million last year, reflecting softer pricing and increased marketing expenses. The gross profit percentage also declined to 11.1 percent from 13.1 percent, reflecting the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. factors. Processed Products Third-party processed product sales totaled $6.6 million as compared to $5.9 million for the same prior-year period. Sales of the company's new line of refrigerated high-pressure produced product continue to gain strength. Included in the second quarter are net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight in excess of $699,000 of this newly introduced product. In addition to this modest increase in third-party sales, the company increased gross margins generated by the business to $1.5 million as compared to $1.4 million for the same prior year period. Gross profit percentage increased to 23.3 percent in the most recent period from 23.0 percent last year, reflecting an improvement in average sales prices. Third Quarter Outlook Heading into the second half of the fiscal year, Cole said, "Calavo anticipates an increased volume of California avocados delivered by growers to our packinghouses in the third quarter as the northern seasonal harvest accelerates, particularly in the areas where the company has the greatest market share. This will be offset, however, by a seasonal decline in our international avocado business. With respect to progress in the company's previously announced 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 processed operations into a single, state-of-the-art production facility in Uruapan, Mexico, Cole indicated that the initiative proceeds "on course" and the three-phase plan is expected to be concluded by the end of the calendar year. "We have successfully concluded processed operations in 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., and are focusing on the second and third stages of our restructuring: construction of the new facility in Uruapan and, subsequently, folding in functions currently undertaken at our Mexicali facility. These initiatives have positive implications on the company's longer-term profitability and, when complete, will result in lower transportation costs, elimination of redundant functions and greater overall efficiencies," Cole concluded. About Calavo Calavo Growers, Inc. engages in the procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. and marketing of avocados and other perishable foods and the preparation and distribution of processed avocado products. 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 worldwide 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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, 2002. 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 STATEMENTS OF INCOME (UNAUDITED)
(All amounts in thousands, except per share amounts)
Three months ended Six months ended
April 30, April 30,
2003 2002 2003 2002
-------- ------- -------- --------
Net sales $57,393 $56,144 $101,622 $101,867
Cost of sales 50,422 49,006 90,728 91,148
Gross margin 6,971 7,138 10,894 10,719
Selling, general
and administrative 4,130 3,254 7,321 6,278
Special charges 98 -- 98 --
Operating income 2,743 3,884 3,475 4,441
Other expense (income), net (206) (145) (321) (153)
Income before provision
for income taxes 2,949 4,029 3,796 4,594
Provision for income taxes 1,214 1,758 1,561 2,011
Net income $1,735 $2,271 $2,235 $2,583
Net income per share:
Basic $0.13 $0.20 $0.17 $0.23
Diluted $0.13 $0.19 $0.17 $0.23
Number of shares used in
per share computation:
Basic 12,930 11,637 12,892 11,044
Diluted 12,960 11,670 12,922 11,044
CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(All amounts in thousands, except per share amounts)
April 30, Oct. 31,
2003 2002
-------- -------
Assets
Current assets:
Cash and cash equivalents $854 $921
Accounts receivable, net of allowance for
doubtful accounts of $44 (2003) and $25 (2002) 23,687 17,907
Inventories, net 13,260 12,461
Prepaid expenses and other current assets 3,765 3,945
Loans to growers 418 467
Advances to suppliers 2,014 2,535
Income taxes receivable 499 225
Deferred income taxes 1,252 1,252
Total current assets 45,749 39,713
Property, plant, and equipment, net 9,908 9,497
Investments held to maturity 2,033 1,979
Other assets 3,806 3,943
$61,496 $55,132
Liabilities and shareholders' equity
Current liabilities:
Payable to growers $12,380 $6,368
Trade accounts payable 1,313 1,708
Accrued expenses 5,970 7,015
Short-term borrowings 4,100 3,000
Dividend payable -- 2,567
Current portion of long-term obligations 80 222
Total current liabilities 23,843 20,880
Long-term liabilities:
Long-term obligations, less current portion 2,984 3,180
Deferred income taxes 516 516
Total long-term liabilities 3,500 3,696
Commitments and contingencies
Total shareholders' equity 34,153 30,556
$61,496 $55,132
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