10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-33385

CALAVO GROWERS, INC.

(Exact name of registrant as specified in its charter)

California	33-0945304
(State of incorporation)	(I.R.S. Employer Identification No.)

1141-A Cummings Road

Santa Paula, California   93060

(Address of principal executive offices) (Zip code)

(805) 525-1245

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     

Yes ☒   No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,  a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller Reporting Company ☐
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

Registrant's number of shares of common stock outstanding as of July 31, 2016 was 17,438,408

CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo Growers, Inc. and its consolidated subsidiaries (Calavo, the Company, we, us or our) may differ materially from those expressed or implied by such forward-looking statements and assumptions.  All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, any projections of revenue, margins, expenses, earnings, earnings per share, tax provisions, cash flows, currency exchange rates, the impact of acquisitions or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and integration plans; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Calavo and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic trends and events; the competitive pressures faced by Calavo's businesses; the development and transition of new products and services (and the enhancement of existing products and services) to meet customer needs; integration and other risks associated with business combinations; the hiring and retention of key employees; the resolution of pending investigations, claims and disputes; and other risks that are described herein, including, but not limited to, the items discussed in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2015, and those detailed from time to time in our other filings with the Securities and Exchange Commission. Calavo assumes no obligation and does not intend to update these forward-looking statements.

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CALAVO GROWERS, INC.

INDEX

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.
	Consolidated Condensed Balance Sheets – July 31, 2016 and October 31, 2015	4
	Consolidated Condensed Statements of Income – Three Months and Nine Months Ended July 31, 2016 and 2015	5
	Consolidated Condensed Statements of Comprehensive Income – Three Months and Nine Months Ended July 31, 2016 and 2015	6
	Consolidated Condensed Statements of Cash Flows – Nine Months Ended July 31, 2016 and 2015	7
	Notes to Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	28
Item 6.	Exhibits	28
	Signatures	29

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PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS 

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share amounts)

	July 31,		October 31,
	2016		2015
Assets
Current assets:
Cash and cash equivalents	$	14,650	$	7,171
Accounts receivable, net of allowances of $1,805 (2016) $2,312 (2015)		86,575		58,606
Inventories, net		36,410		26,351
Prepaid expenses and other current assets		13,317		15,763
Advances to suppliers		2,000		2,820
Income taxes receivable		—		6,111
Total current assets		152,952		116,822
Property, plant, and equipment, net		80,060		69,448
Investment in Limoneira Company		30,578		27,415
Investment in unconsolidated entities		20,890		19,720
Deferred income taxes		17,588		19,277
Goodwill		18,262		18,262
Other assets		14,295		14,001
	$	334,625	$	284,945
Liabilities and shareholders' equity
Current liabilities:
Payable to growers	$	39,991	$	3,924
Trade accounts payable		23,667		19,600
Accrued expenses		25,837		21,311
Income taxes payable		4,675		—
Short-term borrowings		18,500		36,910
Dividend payable		—		13,907
Current portion of long-term obligations		137		2,206
Total current liabilities		112,807		97,858
Long-term liabilities:
Long-term obligations, less current portion		485		586
Deferred rent		2,315		—
Deferred income taxes		234		234
Total long-term liabilities		3,034		820
Commitments and contingencies
Noncontrolling interest, Calavo Salsa Lisa		285		285
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,438 (2016) and 17,385 (2015) shares issued and outstanding)		17		17
Additional paid-in capital		148,811		147,063
Accumulated other comprehensive income		4,428		2,419
Noncontrolling interest		989		1,011
Retained earnings		64,254		35,472
Total shareholders' equity		218,499		185,982
	$	334,625	$	284,945

The accompanying notes are an integral part of these consolidated condensed financialstatements.

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)

	Three months ended				Nine months ended
	July 31,				July 31,
	2016		2015		2016		2015
Net sales	$	263,146	$	232,450	$	688,024	$	648,830
Cost of sales		230,502		208,172		607,575		583,772
Gross margin		32,644		24,278		80,449		65,058
Selling, general and administrative		12,287		10,620		34,866		30,116
Operating income		20,357		13,658		45,583		34,942
Interest expense		(210)		(195)		(612)		(654)
Other income (expense), net		(115)		88		399		514
Income before provision for income taxes		20,032		13,551		45,370		34,802
Provision for income taxes		7,323		4,910		16,609		12,390
Net income		12,709		8,641		28,761		22,412
Less: Net loss attributable to noncontrolling interest		36		—		22		—
Net income attributable to Calavo Growers, Inc.	$	12,745	$	8,641	$	28,783	$	22,412
Calavo Growers, Inc.’s net income per share:
Basic	$	0.73	$	0.50	$	1.66	$	1.30
Diluted	$	0.73	$	0.50	$	1.65	$	1.29
Number of shares used in per share computation:
Basic		17,351		17,301		17,340		17,291
Diluted		17,447		17,386		17,425		17,354

The accompanying notes are an integral part of these consolidated condensed financialstatements.

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three months ended				Nine months ended
	July 31,				July 31,
	2016		2015		2016		2015
Net income	$	12,709	$	8,641	$	28,761	$	22,412
Other comprehensive income (loss), before tax:
Unrealized investment gains (losses) arising during period		(346)		(4,062)		3,164		(8,764)
Income tax benefit (expense) related to items of other comprehensive loss		126		1,422		(1,155)		3,067
Other comprehensive income (loss), net of tax		(220)		(2,640)		2,009		(5,697)
Comprehensive income		12,489		6,001		30,770		16,715
Less: Net loss attributable to noncontrolling interest		36		—		22		—
Comprehensive income – Calavo Growers, Inc.	$	12,525	$	6,001	$	30,792	$	16,715

The accompanying notes are an integral part of these consolidated condensed financialstatements.

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine months ended July 31,
	2016		2015
Cash Flows from Operating Activities:
Net income	$	28,761	$	22,412
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,507		5,968
Provision for losses on accounts receivable		—		37
Loss from unconsolidated entities		132		110
Stock compensation expense		1,577		2,021
Deferred income taxes		598		—
Effect on cash of changes in operating assets and liabilities:
Accounts receivable		(27,969)		(9,566)
Inventories, net		(10,059)		(551)
Prepaid expenses and other current assets		(3,438)		2,068
Advances to suppliers		820		512
Income taxes receivable/payable		10,897		1,772
Other assets		478		(296)
Payable to growers		36,064		9,220
Deferred rent		1,705		—
Trade accounts payable and accrued expenses		8,968		(1,179)
Net cash provided by operating activities		55,041		32,528
Cash Flows from Investing Activities:
Acquisitions of property, plant, and equipment		(15,772)		(13,855)
Proceeds received for repayment of San Rafael note		28		275
Proceeds from liquidation of Calavo Chile		—		262
Investment in FreshRealm		—		(800)
Loan to Agricola Don Memo		—		(1,803)
Proceeds received for repayment of loan to Agricola Don Memo		4,000		—
Investment in Agricola Don Memo		(1,300)		(1,000)
Net cash used in investing activities		(13,044)		(16,921)
Cash Flows from Financing Activities:
Payment of dividend to shareholders		(13,907)		(12,970)
Proceeds from revolving credit facility		178,730		199,540
Payments on revolving credit facility		(197,140)		(199,360)
Deferred financing costs		(91)		—
Payments on long-term obligations		(2,170)		(4,260)
Proceeds from stock option exercises		60		235
Net cash used in financing activities		(34,518)		(16,815)
Net increase (decrease) in cash and cash equivalents		7,479		(1,208)
Cash and cash equivalents, beginning of period		7,171		6,744
Cash and cash equivalents, end of period	$	14,650	$	5,536
Noncash Investing and Financing Activities:
Construction in progress included in trade accounts payable and accrued expenses	$	172	$	—
Collection for Agricola Belher Infrastructure Advance	$	—	$	845
Unrealized holding gains (losses)	$	3,164	$	(8,764)

The accompanying notes are an integral part of these consolidated condensed financialstatements.

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of the business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa. 

The accompanying unaudited consolidated condensed financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows.  The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year.  These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In November 2015, the FASB issued an ASU, which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current

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item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We do not expect the adoption of these amendments to have a material impact on our financial statements.

2.  Information regarding our operations in different segments

We report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG.  These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources. The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and other fresh prepared food products.  Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate.  We do not allocate assets, or specifically identify them to, our operating segments. The following table sets forth sales by product category, by segment (in thousands):

	Three months ended  July 31, 2016								Three months ended  July 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	151,364	$	—	$	—	$	151,364	$	132,165	$	—	$	—	$	132,165
Tomatoes		2,581		—		—		2,581		1,154		—		—		1,154
Papayas		2,614		—		—		2,614		2,559		—		—		2,559
Other fresh products		433		—		—		433		607		—		—		607
Food service		—		12,929		—		12,929		—		13,575		—		13,575
Retail and club		—		6,056		91,631		97,687		—		6,331		79,927		86,258
Total gross sales		156,992		18,985		91,631		267,608		136,485		19,906		79,927		236,318
Less sales incentives		(863)		(2,700)		(899)		(4,462)		(715)		(2,421)		(732)		(3,868)
Net sales	$	156,129	$	16,285	$	90,732	$	263,146	$	135,770	$	17,485	$	79,195	$	232,450

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	Nine months ended July 31, 2016								Nine months ended July 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	354,785	$	—	$	—	$	354,785	$	360,334	$	—	$	—	$	360,334
Tomatoes		34,375		—		—		34,375		16,813		—		—		16,813
Papayas		7,054		—		—		7,054		6,977		—		—		6,977
Other fresh products		854		—		—		854		2,571		—		—		2,571
Food service		—		37,998		—		37,998		—		37,223		—		37,223
Retail and club		—		16,636		248,176		264,812		—		17,451		218,547		235,998
Total gross sales		397,068		54,634		248,176		699,878		386,695		54,674		218,547		659,916
Less sales incentives		(1,804)		(7,508)		(2,542)		(11,854)		(1,423)		(7,673)		(1,990)		(11,086)
Net sales	$	395,264	$	47,126	$	245,634	$	688,024	$	385,272	$	47,001	$	216,557	$	648,830

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Three months ended  July 31, 2016
Net sales	$	156,129	$	16,285	$	90,732	$	263,146
Cost of sales		137,845		10,484		82,173		230,502
Gross margin	$	18,284	$	5,801	$	8,559	$	32,644
Three months ended  July 31, 2015
Net sales	$	135,770	$	17,485	$	79,195	$	232,450
Cost of sales		126,105		11,415		70,652		208,172
Gross margin	$	9,665	$	6,070	$	8,543	$	24,278

For the three months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $1.4 million and $0.6 million between Fresh products and RFG were eliminated.  For the three months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $0.7 million and $0.6 million between Calavo Foods and RFG were eliminated.

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Nine months ended July 31, 2016
Net sales	$	395,264	$	47,126	$	245,634	$	688,024
Cost of sales		352,424		29,228		225,923		607,575
Gross margin	$	42,840	$	17,898	$	19,711	$	80,449
Nine months ended July 31, 2015
Net sales	$	385,272	$	47,001	$	216,557	$	648,830
Cost of sales		355,991		31,725		196,056		583,772
Gross margin	$	29,281	$	15,276	$	20,501	$	65,058

For the nine months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $2.8 million and $1.2 million between Fresh products and RFG were eliminated.  For the nine months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $2.0 million and $1.3 million between Calavo Foods and RFG were eliminated.

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3.Inventories

Inventories consist of the following (in thousands):

	July 31,		October 31,
	2016		2015
Fresh fruit	$	21,175	$	11,939
Packing supplies and ingredients		7,077		6,347
Finished prepared foods		8,158		8,065
	$	36,410	$	26,351

Inventories are stated at the lower of cost or market. We periodically review the value of items in inventory and record any necessary reserves of inventory based on our assessment of market conditions.  No inventory reserve was considered necessary as of July 31, 2016 and October 31, 2015.

4.Related party transactions

Certain members of our Board of Directors market California avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers.  During the three months ended July 31, 2016 and 2015, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $19.9 million and $9.1 million.  During the nine months ended July 31, 2016 and 2015, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $23.5 million and $15.4 million.  Amounts payable to these Board members were $7.9 million as of July 31, 2016.  We did not have any amounts payable to these Board members as of October 31, 2015.

During the three months ended July 31, 2016 and 2015, we received $0.1 million as dividend income from Limoneira Company (Limoneira).  During the nine months ended July 31, 2016 and 2015, we received $0.3 million and $0.2 million as dividend income from Limoneira.  In addition, we lease office space from Limoneira and paid rental expenses of $0.1 million for the three months ended July 31, 2016 and 2015. We paid rental expenses of $0.2 million for the nine months ended July 31, 2016 and 2015.  Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. We have a 12% ownership interest in Limoneira. Additionally, our Chief Executive Officer is a member of the Limoneira Board of Directors.

We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During the three months ended July 31, 2016, Calavo Growers, Inc. paid fees totaling approximately $0.1 million to TroyGould PC. During the nine months ended July 31, 2016, Calavo Growers, Inc. paid fees totaling approximately $0.2 million to TroyGould PC.  During the three and nine months ended July 31, 2015, Calavo Growers, Inc. paid fees totaling approximately $0.1 million to TroyGould PC.

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and formed Agricola Don Memo, S.A. de C.V. (Don Memo). Belo and Calavo Sub have an equal one-half ownership interest in Don Memo in exchange for $2 million each.  Pursuant to a management service agreement, Belo, through its officers and employees, has day-to-day power and authority to manage the operations. Belo is entitled to a management fee, as defined, which is payable annually in July of each year.  Additionally, Calavo Sub is entitled to commission, for the sale of produce in the Mexican National Market, United States, Canada, and any other overseas market.

We loaned a total of $4.0 million to Don Memo since its formation. These monies, effectively a bridge loan, were replaced with a new loan to Don Memo from Bank of America, N.A. (BoA) during our first fiscal quarter of 2016 and our bridge loan was repaid from the proceeds of the new loan. Also, in January 2016, Calavo and BoA, entered into a Continuing and Unconditional Guaranty agreement (the Guaranty). Under the terms of the Guaranty, Calavo

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unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Don Memo to BoA. Belo has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed in January 2016.

Additionally, in the third quarter of fiscal 2016 we invested an additional $1.3 million into Don Memo.  In total we have contributed $3.3 million, representing Calavo Sub’s 50% ownership in Don Memo, which is included as an investment in unconsolidated entities on our balance sheet.  We make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under this program to Don Memo, net of our commission and aforementioned advances. As of July 31, 2016 and October 31, 2015, we advanced $0.9 million and $1.8 million to Don Memo, which is netted with payable to growers. During the three and nine months ended July 31, 2016, we incurred $1.4 million and $3.5 million of expenses to Don Memo pursuant to our consignment agreement.

We had grower advances due from Belher of $2.0 million and $3.0 million as of July 31, 2016 and October 31, 2015.  In addition, we had infrastructure advances due from Belher of $1.8 million as of July 31, 2016 and October 31, 2015.  Of these infrastructure advances $1.0 million was recorded as receivable in prepaid and other current assets.  The remaining $0.8 million of these infrastructure advances are recorded in other assets. During the three months ended July 31, 2016 and 2015, we incurred $0.5 million and $0.1 million to Belher pursuant to our consignment agreement. During the nine months ended July 31, 2016 and 2015, we incurred $26.0 million and $14.2 million of expenses to Belher pursuant to our consignment agreement.

In August 2015, we entered into Shareholder’s Agreement with various partners and created Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”).  Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados.  This entity is approximately 80% owned by Calavo and was consolidated in our financial statements.  Avocados de Jalisco has built a packinghouse located in Jalisco, Mexico and such packinghouse is expected to be operational at the end of the fourth quarter of 2016.  As of  July 31, 2016 and October 31, 2015, we have made preseason advances of approximately $0.2 million and $0.3 million to various partners of Avocados de Jalisco.

The three previous owners and current executives of RFG have a majority ownership of certain entities that provide various services to RFG.  RFG’s California operating facility leases a building from LIG partners, LLC (LIG) pursuant to an operating lease.  RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease.  Additionally, RFG sells cut produce and purchases raw materials, obtains transportation services, and shares costs for certain utilities with Third Coast Fresh Distribution (Third Coast).  LIG, THNC and Third Coast are majority owned by entities owned by three employees of Calavo (former/current executives of RFG). See the following tables for the related party activity and balances for fiscal year 2016 and 2015:

	Three months ended  July 31,
(in thousands)	2016		2015
Rent paid to LIG	$	133	$	131
Rent paid to THNC, LLC	$	77	$	76
Sales to Third Coast	$	-	$	31
Purchases from Third Coast	$	-	$	86

	Nine months ended  July 31,
(in thousands)	2016		2015
Rent paid to LIG	$	395	$	392
Rent paid to THNC, LLC	$	229	$	228
Sales to Third Coast	$	-	$	270
Purchases from Third Coast	$	-	$	203

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5.Other assets

Other assets consist of the following (in thousands):

	July 31,		October 31,
	2016		2015
Intangibles, net	$	3,660	$	4,613
Mexican IVA (i.e. value-added) taxes receivable		7,061		5,853
Grower advances		123		346
Loan to Agricola Belher		800		800
Loan to FreshRealm members		315		307
Notes receivable from San Rafael		1,305		1,286
Other		1,031		796
	$	14,295	$	14,001

Intangible assets consist of the following (in thousands):

		July 31, 2016						October 31, 2015
	Weighted-	Gross				Net		Gross				Net
	Average	Carrying		Accum.		Book		Carrying		Accum.		Book
	Useful Life	Value		Amortization		Value		Value		Amortization		Value
Customer list/relationships	8.0 years	$	7,640	$	(4,997)	$	2,643	$	7,640	$	(4,282)	$	3,358
Trade names	8.2 years		2,760		(2,342)		418		2,760		(2,164)		596
Trade secrets/recipes	9.3 years		630		(306)		324		630		(270)		360
Brand name intangibles	indefinite		275		—		275		275		—		275
Non-competition agreements	5.0 years		267		(267)		—		267		(243)		24
Intangibles, net		$	11,572	$	(7,912)	$	3,660	$	11,572	$	(6,959)	$	4,613

We anticipate recording amortization expense of approximately $0.3 million for the remainder of fiscal 2016, with $1.1 million for fiscal year 2017 and 2018, $0.7 million for fiscal year 2019, and $0.2 million for years thereafter, through fiscal year 2023.

See Note 11, for additional information related to Mexican IVA taxes.

6.Stock-Based Compensation

In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the “2011 Plan”).  All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan.  Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan.

On January 4, 2016, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.46.  On January 3, 2017, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable.  These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.3 million for the three months ended July 31, 2016.  The total recognized stock-based compensation expense for these grants was $0.6 million for the nine months ended July 31, 2016. 

On January 8, 2016, our executive officers were granted a total of 24,582 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.68.  These shares vest in one-third increments, on an annual basis, beginning January 8, 2017. These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.1

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million for the three months ended July 31, 2016.  The total recognized stock-based compensation expense for these grants was $0.2 million for the nine months ended July 31, 2016. 

A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Grant Price		Intrinsic Value
Outstanding at October 31, 2015	75	$	39.01
Vested	(39)	$	39.5
Granted	51	$	48.58
Outstanding at July 31, 2016	87	$	44.76	$	5,745

The total recognized stock-based compensation expense for restricted stock was $0.6 million and $1.6 million for the three and nine months ended July 31, 2016. 

Stock options are granted with exercise prices of not less than the fair market value at grant date, generally vest over one to five years and generally expire two to five years after the grant date.  We settle stock option exercises with newly issued shares of common stock.

We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest.  We measure the fair value of our stock based compensation awards on the date of grant.

A summary of stock option activity, related to our 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Exercise Price		Intrinsic Value
Outstanding at October 31, 2015	10	$	18.28
Exercised	(2)	$	19.20
Outstanding at July 31, 2016	8	$	18.05	$	527
Exercisable at July 31, 2016	8	$	18.05	$	527

At July 31, 2016, outstanding and exercisable stock options had a weighted-average remaining contractual term of 2.8 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and nine months ended July 31, 2016. 

A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2015	14	$	23.00
Exercised	(1)	$	21.80
Outstanding at July 31, 2016	13	$	23.09	$	556
Exercisable at July 31, 2016	7	$	23.24	$	298

At July 31, 2016, outstanding and exercisable stock options had a weighted-average remaining contractual term of 4.6 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and nine months ended July 31, 2016. 

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7.Other events

Dividend payment

On December 8, 2015, we paid a $0.80 per share dividend in the aggregate amount of $13.9 million to shareholders of record on November 17, 2015.

Revolving credit facility

In June 2016, we entered into a new Credit Agreement with Bank of America, N.A. (“Bank of America”) as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West (“FCW”), as joint lead arranger. The Credit Agreement provides for a five-year, $80 million syndicated senior unsecured revolving credit facility maturing on June 14, 2021(the”Credit Facility”), which replaces the Company’s prior revolving credit facilities, which were scheduled to expire on July 1, 2016.

    Provided there exists no default, upon notice to Bank of America, the Company may from time to time, request an increase in the Credit Facility by an amount not exceeding $50 million (the “Accordion”). Any future exercises of the Accordion would require additional commitments from existing or new lenders.

    Borrowings under the Credit Facility will be at the Company’s discretion either at a Eurodollar Rate (“LIBOR”) loan plus applicable margin or a base rate loan plus applicable margin. The applicable margin will be based on the Company’s Consolidated Leverage Ratio and can range from 1.00% to 1.50% for LIBOR loans and 0.00% to 0.50% for Base Rate Loans. The Credit Facility also includes a commitment fee on the unused commitment amount at a rate per annum of 0.15%.

   The Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. We were in compliance with all such covenants at July 31, 2016. 

    The Credit Facility also contains customary events of default. If any event of default occurs and is continuing, Bank of America may take the following actions: (a) declare the commitment of each lender to make loans and any obligation of the Issuer to make credit extensions to be terminated; (b) declare the unpaid principal amount of all outstanding loans, all interest, and all other amounts to be immediately due and payable; (c) require that Calavo cash collateralize the obligations; and (d) exercise on behalf of itself, the lenders and the Issuer all rights and remedies available to it.

    The Company’s obligations under the Credit Agreement are unconditionally guaranteed by our subsidiary, RFG.

Riverside

    In August 2016, we entered into an Agreement to Sell and Purchase and Escrow Instructions (the “Agreement”) with Fresh Foods, LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company will purchase from the Seller certain real property, consisting of land, a refrigerated building and select production and office equipment located at 1730 Eastridge Avenue, Riverside, California (the “Property”).

    Subject to adjustments and prorations as provided for in the Agreement, the purchase price for the Property will be approximately $20.0 million. The Company has deposited $0.3 million pursuant to the Agreement. The Agreement contains customary representations and warranties, covenants, closing conditions and termination provisions. The Agreement contemplates a buyer due diligence period that would lead to a closing date on or before October 22, 2016 unless the Company elects not to proceed with the purchase of the Property on or prior to such date. The Company’s wholly owned subsidiary RFG intends to operate the refrigerated facility as part of its network of USDA and organic certified fresh food facilities strategically located across the US. The Company expects to pay for all costs associated with the Property with cash on hand and available credit facilities.

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Mexico tax audits

    We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions.  Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States.  During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (“CDM”), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (“MFM”) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary.  MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (“VAT”).  During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations.  Representative of the subsidiary intend to meet and present our rebuttal to representatives of the MFM in the near future.  We expect that the MFM will complete their review and issue a final assessment with respect to the fiscal 2011 tax audit no later than approximately February 2017.

    Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico is currently under examination related to fiscal year 2013.  Under Mexican law, the SAT has until approximately March 2017 to complete their review.

    We believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position; however, there is still a possibility that an adverse outcome of these matters could have a material effect on our consolidated financial condition.

8.Fair value measurements

A fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability.  A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table sets forth our financial assets and liabilities as of July 31, 2016 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	30,578		-		-	$	30,578
Total assets at fair value	$	30,578	$	-	$	-	$	30,578

(1) The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are measured at fair value by quoted market prices.  Limoneira’s stock price at July 31, 2016 and October 31, 2015 equaled $17.69 per share and $15.86 per share.  Unrealized gains and losses are recognized through other comprehensive income. Unrealized investment holding losses arising during the three months ended July 31, 2016 and 2015 was $0.3 million and $4.1 million. Unrealized investment holding gains arising during the nine months ended July 31, 2016 was $3.2 million. Unrealized investment holding losses arising during the nine months ended July 31, 2015 was $8.8 million.

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9.Noncontrolling interest

The following table reconciles shareholders’ equity attributable to noncontrolling interest related to Salsa Lisa and Avocados de Jalisco (in thousands). 

	Three months		Three months
	ended		ended
Salsa Lisa noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Net loss attributable to noncontrolling interest of Salsa Lisa		—		—
Noncontrolling interest, ending	$	285	$	270

	Nine months		Nine months
	ended		ended
Salsa Lisa noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Net loss attributable to noncontrolling interest of Salsa Lisa		—		—
Noncontrolling interest, ending	$	285	$	270

	Three months		Three months
		ended		ended
Avocados de Jalisco noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	1,025	$	—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(36)		—
Noncontrolling interest, ending	$	989	$	—

	Nine months		Nine months
	ended		ended
Avocados de Jalisco noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(22)		—
Noncontrolling interest, ending	$	989	$	—

10.Earnings per share

Basic and diluted net income per share is calculated as follows (U.S. dollars in thousands, exept share and per share data):

	Three months ended  July 31,
	2016		2015
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	12,745	$	8,641
Denominator:
Weighted average shares - Basic		17,350,883		17,301,131
Effect on dilutive securities – Restricted stock/options		96,161		84,984
Weighted average shares - Diluted		17,447,044		17,386,115
Net income per share attributable to Calavo Growers, Inc:
Basic	$	0.73	$	0.50
Diluted	$	0.73	$	0.50

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	Nine months ended July 31,
	2016		2015
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	28,783	$	22,412
Denominator:
Weighted average shares - Basic		17,340,270		17,290,847
Effect on dilutive securities – Restricted stock/options		84,614		63,256
Weighted average shares - Diluted		17,424,884		17,354,103
Net income per share attributable to Calavo Growers, Inc:
Basic	$	1.66	$	1.30
Diluted	$	1.65	$	1.29

11.Mexican IVA taxes receivable

Included in prepaids & other current assets and other assets are tax receivables due from the Mexican government for value-added taxes (IVA) paid in advance.  CDM is charged IVA by vendors on certain expenditures in Mexico, which, insofar as they identify with the exportation of goods, translate into monthly favorable VAT balance.

As of July 31, 2016 and October 31, 2015, IVA receivables totaled $14.5 million and $11.6 million.  Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.  Beginning in fiscal 2014 and continuing into fiscal 2016, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation.  Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations.  We believe these factors and others have contributed to delays in the processing of IVA claims by the Mexican tax authorities.  Currently, we are in the process of collecting such balances through regular administrative processes, but certain amounts may ultimately need to be recovered via legal means.  We believe that our operations in Mexico are properly documented and that the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts.  It is possible, however, that a portion of this amount will not be recovered.  We will continue to monitor the collection of these receivables with our outside consultants.

As of July 31, 2016, $7.4 million and $7.1 million of IVA were recorded in prepaids & other current assets and other assets.  As of October 31, 2015, $5.7 million and $5.9 million of IVA receivables were recorded in prepaids & other current assets and other assets.

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This information should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto included in this Quarterly Report, and the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K for the year ended October 31, 2015 of Calavo Growers, Inc. (we, Calavo, or the Company). 

Recent Developments

Dividend payment

On December 8, 2015, we paid a $0.80 per share dividend in the aggregate amount of $13.9 million to shareholders of record on November 17, 2015.

Revolving credit facility

In June 2016, we entered into a new Credit Agreement with Bank of America, N.A. (“Bank of America”) as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West (“FCW”), as joint lead arranger. The Credit Agreement provides for a five-year, $80 million syndicated senior unsecured revolving credit facility maturing on June 14, 2021, which replaces the Company’s prior revolving credit facilities, which were scheduled to expire on July 1, 2016.

    Provided there exists no default, upon notice to Bank of America, the Company may from time to time, request an increase in the Credit Facility by an amount not exceeding $50 million (the “Accordion”). Any future exercises of the Accordion would require additional commitments from existing or new lenders.

    Borrowings under the Credit Facility will be at the Company’s discretion either at a Eurodollar Rate (“LIBOR”) loan plus applicable margin or a base rate loan plus applicable margin. The applicable margin will be based on the Company’s Consolidated Leverage Ratio and can range from 1.00% to 1.50% for LIBOR loans and 0.00% to 0.50% for Base Rate Loans. The Credit Facility also includes a commitment fee on the unused commitment amount at a rate per annum of 0.15%.

Riverside

    In August 2016, we entered into an Agreement to Sell and Purchase and Escrow Instructions (the “Agreement”) with Fresh Foods, LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company will purchase from the Seller certain real property, consisting of land, a refrigerated building and select production and office equipment located at 1730 Eastridge Avenue, Riverside, California (the “Property”).

    Subject to adjustments and prorations as provided for in the Agreement, the purchase price for the Property will be approximately $20.0 million. The Company has deposited $0.3 million pursuant to the Agreement. The Agreement contains customary representations and warranties, covenants, closing conditions and termination provisions. The Agreement contemplates a buyer due diligence period that would lead to a closing date on or before October 22, 2016 unless the Company elects not to proceed with the purchase of the Property on or prior to such date. The Company’s wholly owned subsidiary RFG intends to operate the refrigerated facility as part of its network of USDA and organic certified fresh food facilities strategically located across the US. The Company expects to pay for all costs associated with the Property with cash on hand and available credit facilities.

Mexico tax audits

   We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions.  Accordingly, in the normal course of business, we are subject to

19

examination by taxing authorities, primarily in Mexico and the United States.  During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (“CDM”), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (“MFM”) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary.  MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (“VAT”).  During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations.  Representative of the subsidiary intend to meet and present our rebuttal to representatives of the MFM in the near future.  We expect that the MFM will complete their review and issue a final assessment with respect to the fiscal 2011 tax audit no later than approximately February 2017.

    Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico is currently under examination related to fiscal year 2013.  Under Mexican law, the SAT has until approximately March 2017 to complete their review.

    We believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position; however, there is still a possibility that an adverse outcome of these matters could have a material effect on our consolidated financial condition.

Net Sales

The following table summarizes our net sales by business segment for each of the three and nine months ended July 31, 2016 and 2015:

	Three months ended  July 31,								Nine months ended July 31,
(in thousands)	2016			Change		2015			2016			Change		2015
Net sales:
Fresh products	$	156,129		15.0	%	$	135,770		$	395,264		2.6	%	$	385,272
Calavo Foods		16,285		(6.9)	%		17,485			47,126		0.3	%		47,001
RFG		90,732		14.6	%		79,195			245,634		13.4	%		216,557
Total net sales	$	263,146		13.2	%	$	232,450		$	688,024		6.0	%	$	648,830
As a percentage of net sales:
Fresh products		59.3	%				58.4	%		57.4	%				59.4	%
Calavo Foods		6.2	%				7.5	%		6.8	%				7.2	%
RFG		34.5	%				34.1	%		35.8	%				33.4	%
		100.0	%				100.0	%		100.0	%				100.0	%

Summary

Net sales for the three months ended July 31, 2016, compared to fiscal 2015, increased by $30.7 million, or 13.2%.  The increase in sales, when compared to the same prior year period, are related to increased sales from the Fresh products and RFG segments, partially offset by decreased sales in the Calavo Foods segment.  Net sales for the nine months ended July 31, 2016, compared to fiscal 2015, increased by $39.2 million, or 6.0%.  The increase in sales, when compared to the same prior year period, is related to an increase in sales in each of our three business segments.

For the quarter ended July 31, 2016, the increase in sales in the Fresh products segment is due to an increase in sales of California avocados, resulting from a combination of an increase in pounds sold and higher sales prices per carton, partially offset by decreased sales of Mexican avocados. The increase in RFG sales was due primarily to increased sales from fresh prepared food  and fresh-cut fruit and vegetable products. Partially offsetting the increases in Fresh Product and RFG segment sales are decreased sales in the Calavo Foods segment.  Our decrease in Calavo Foods sales during the third quarter of fiscal 2016, was due primarily to decreased sales of our guacamole products.

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For the nine months ended July 31, 2016, our RFG segment had the largest percentage increase in sales, followed by our Fresh products segment, as shown above.  The increase in RFG sales was due primarily to increased sales from fresh prepared food and fresh-cut fruit and vegetable products. Our increase in Fresh product sales was due primarily to increased sales of California avocados and tomatoes, partially offset by decreased sales of Mexican avocados.

While the procurement of fresh avocados related to our Fresh products segment is seasonal, our Calavo Foods and RFG segments are generally not as seasonal. 

Net sales to third parties by segment exclude value-added services billed by our Uruapan packinghouse and our Uruapan processing plant to the parent company.  All intercompany sales are eliminated in our consolidated results of operations.

Fresh products

Third Quarter 2016 vs. Third Quarter 2015

Net sales delivered by the Fresh products business increased by approximately $20.4 million, or 15.0%, for the third quarter of fiscal 2016, when compared to the same period for fiscal 2015.  As discussed above, this increase in Fresh product sales during the third quarter of fiscal 2016 was primarily related to increased sales of California avocados, partially offset by decreased sales of Mexican avocados.

Sales of California sourced avocados increased $49.7 million, or 99.0%, for the third quarter of 2016, when compared to the same prior year period.  The increase in California sourced avocados was primarily due to an increase of 30.3 million pounds of avocados sold, or 79.5%. We attribute most of this increase in volume to the larger California avocado crop in fiscal 2016, compared to the same prior year period. In addition, the average sales price per carton increased approximately 10.9% from the same prior year period, primarily due to a lower supply of avocados in the market from non-California sources. 

Sales of  tomatoes increased to $2.6 million for the third quarter of fiscal 2016, compared to $1.2 million for the same period for fiscal 2015.  The increase in sales of tomatoes is due to an increase in cartons sold of approximately 0.2 million cartons or 204.9%. 

Partially offsetting these increases was a decrease in sales of Mexican sourced avocados, which decreased $26.2 million, or 34.0%, for the third quarter of 2016, when compared to the same prior year period.  The decrease in Mexican sourced avocados was primarily due to a decrease in pounds sold of 21.3 million or 36.0%.  This decrease in the pounds sold was partially due to a strike by Michoacan growers in the third quarter of fiscal 2016. 

Nine Months Ended 2016 vs. Nine Months Ended 2015

Net sales delivered by the Fresh products business increased by approximately $10.0 million, or 2.6%, for the nine months ended July 31, 2016, when compared to the same period for fiscal 2015.  This increase in Fresh product sales during the nine months ended July 31, 2016, was primarily related to increased sales of California avocados and tomatoes, partially offset by decreases in sales of Mexican sourced avocados.

Sales of California sourced avocados increased $36.4 million, or 42.2%, for the nine months ended July 31, 2016, when compared to the same prior year period.  The increase in California sourced avocados was primarily due to an increase of 28.2 million pounds of avocados sold, or 43.1%. We attribute most of this increase in volume to the larger California avocado crop in fiscal 2016, compared to the same prior year period.

Sales of tomatoes increased to $34.4 million for the nine months ended July 31, 2016, compared to $16.8 million for the same period for fiscal 2015.  The increase in sales of tomatoes is due to an increase in cartons sold of approximately 1.0 million cartons or 55.3%. In addition, tomatoes experienced an increase in the sales price per carton of approximately 31.7%, due to a lower availability of tomatoes in the market, primarily resulting from a change in weather patterns.

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Partially offsetting these increases was a decrease in sales of Mexican sourced avocados, which decreased $37.8 million, or 14.1%, for the nine months ended July 31, 2016, when compared to the same prior year period.  The decrease in Mexican sourced avocados was primarily due to a decrease in the average sales price per carton of approximately 15.8% from the same prior year period. The decrease in the average sales price per carton is primarily due to a higher supply of avocados in the market.  Partially offsetting this decrease was an increase in pounds sold of Mexican sourced avocados, which increased approximately 4.5 million pounds or 2.1%.

Overall, we anticipate that the combined total of California and Mexico sourced avocados will decrease in sales during our fourth fiscal quarter of 2016, compared to the third quarter of 2016. We anticipate that net sales related to Mexican sourced avocados will increase during our fourth fiscal quarter of 2016, as compared to the third fiscal quarter of 2016.  We anticipate that sales of Mexican grown avocados will increase in the fourth quarter of fiscal 2016, when compared to the same prior year period, due to higher overall pricing. We anticipate that California avocado sales will experience a seasonal decrease during our fourth fiscal quarter of 2016, as compared to the third quarter of fiscal 2016. We believe that there will be an increase in California avocado volume when compared to the fourth fiscal quarter of 2015.

Calavo Foods

Third Quarter 2016 vs. Third Quarter 2015

Sales for Calavo Foods for the quarter ended July 31, 2016, when compared to the same period for fiscal 2015, decreased $1.2 million, or 6.9%.  This decrease is primarily due to a decrease in sales of guacamole products of approximately $1.4 million, or 8.2%, in the third quarter of fiscal year 2016, when compared to the same prior year period. This decrease in our guacamole products is primarily due to an 8.1% decrease in pounds sold, due primarily to a decrease in foodservice sales.  Partially offsetting this decrease, is an increase in sales of salsa of approximately $0.2 million or 27.6%.  This increase in salsa sales is primarily due to an increase in pounds sold.

Nine Months Ended 2016 vs. Nine Months Ended 2015

Sales for Calavo Foods for the nine months ended July 31, 2016, when compared to the same period for fiscal 2015, increased $0.1 million, or 0.3%.  This increase is primarily due to an increase in sales of salsa products of approximately $1.1 million, or 78.6%, in the nine months ended July 31, 2016, when compared to the same prior year period. The increase in sales of salsa was primarily related to an increase in overall pounds sold.  Partially offsetting this increase, was a decrease in sales of guacamole products of approximately $1.0 million, or 2.3%, in the nine months ended July 31, 2016, when compared to the same prior year period. 

RFG

Third Quarter 2016 vs. Third Quarter 2015

Sales for RFG for the quarter ended July 31, 2016, when compared to the same period for fiscal 2015, increased $11.5 million, or 14.6%.  This increase is due primarily to increased sales from fresh prepared food and fresh-cut fruit and vegetable products. The overall increase in sales is primarily due to an increase in sales volume, which we believe results from an increase in demand for the variety of convenient products that we offer. 

Nine Months Ended 2016 vs. Nine Months Ended 2015

Sales for RFG for the nine months ended July 31, 2016, when compared to the same period for fiscal 2015, increased $29.1 million, or 13.4%.  This increase is due primarily to increased sales from fresh prepared food and fresh-cut fruit and vegetable products. The overall increase in sales is primarily due to an increase in sales volume, which we believe results from an increase in demand for the variety of convenient products that we offer. 

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Gross Margins

The following table summarizes our gross margins and gross margin percentages by business segment for the three and nine months ended July 31, 2016 and 2015:

	Three months ended  July 31,								Nine months ended July 31,
	2016			Change		2015			2016			Change		2015
Gross Margins:
Fresh products	$	18,284		89.2	%	$	9,665		$	42,840		46.3	%	$	29,281
Calavo Foods		5,801		(4.4)	%		6,070			17,898		17.2	%		15,276
RFG		8,559		0.2	%		8,543			19,711		(3.9)	%		20,501
Total gross margins	$	32,644		34.5	%	$	24,278		$	80,449		23.7	%	$	65,058
Gross margin percentages:
Fresh products		11.7	%				7.1	%		10.8	%				7.6	%
Calavo Foods		35.6	%				34.7	%		38.0	%				32.5	%
RFG		9.4	%				10.8	%		8.0	%				9.5	%
Consolidated		12.4	%				10.4	%		11.7	%				10.0	%

Summary

Our cost of goods sold consists predominantly of fruit costs, packing materials, freight and handling, labor and overhead (including depreciation) associated with preparing food products and other direct expenses pertaining to products sold.  Gross margins increased by approximately $8.4 million, or 34.5%, for the third quarter of fiscal 2016, when compared to the same period for fiscal 2015. This increase in our gross margins, when compared to the same prior year periods, is related to increases in gross margins (in dollar terms) across the Fresh products and RFG segments, partially offset by a decrease in gross margin for the Calavo Foods segment. Gross margins increased by approximately $15.4 million, or 23.7%, for the first nine months of fiscal 2016 when compared to the same period for fiscal 2015.  This increase in our gross margins, when compared to the same prior year periods, is related to increases in gross margins (in dollar and gross margin percentage terms) across the Fresh products and Calavo Foods segments, partially offset by a decrease in gross margins for RFG.

Fresh products

During our three and nine months ended July 31, 2016, as compared to the same prior year period, the increase in our Fresh products segment gross margin percentage was primarily the result of increased margins for California sourced avocados. For the third quarter of 2016, compared to the same prior year period, the gross margin percentage for California sourced avocados increased from 0.4% in 2015 to 13.8% in 2016. For the third quarter of 2016, compared to the same prior year period, the gross margin percentage for Mexican sourced avocados decreased from 11.4% in 2015 to 8.0% in 2016.  For the third quarter of 2016, the increased volume of California sourced avocados lowered per pound production costs, and we were able to manage fruit costs effectively. For the nine months ended July 31, 2016, compared to the same prior year period, the gross margin percentage for California sourced avocados increased from 0.3% in 2015 to 11.4% in 2016.  For the nine months ended July 31, 2016, compared to the same prior year period, the gross margin percentage for Mexican sourced avocados increased from 9.7% in 2015 to 10.7% in 2016.  For the nine months ended fiscal 2016, we were able to manage fruit cost of California and Mexican sourced avocados effectively. In addition, the U.S. Dollar to Mexican Peso exchange rate continues to strengthen in fiscal 2016. Note that any significant fluctuations in the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Fresh products segment.

The gross margin and/or gross margin percentage for consignment sales, such as tomatoes, are dependent on the volume of fruit we handle, the average selling prices, and the competitiveness of the returns that we provide to third-party growers/packers.  The gross margin we earn is generally based on a commission agreed to with each party, which usually is a percentage of the overall selling price.  In the third quarter of fiscal year 2016 we generated gross margins of $0.2 million from consigned tomato sales. This is an improvement of $0.1 million from $0.1 million in the

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corresponding prior year period.  For the nine months ended July 31, 2016 we generated gross margins of $4.0 million from consigned tomato sales. This is an improvement of $2.2 million from $1.8 million in the corresponding prior year period.  The increase in gross profit is primarily due to an increase in overall sales for tomatoes, resulting from an increase in cartons sold and an increase in the sales price per carton. 

Calavo Foods

The Calavo Foods segment gross margin percentage during our three months ended July 31, 2016, when compared to the same prior year period, decreased primarily due to an increase in fruit costs. The Calavo Foods segment gross margin percentage during our nine months ended July 31, 2016, when compared to the same prior year period, increased due in part to a decrease in fruit costs. In addition, the U.S. Dollar to Mexican Peso exchange rate strengthened in fiscal 2016 compared to the same prior year period. Note that any significant fluctuation in the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Calavo Foods segment. 

RFG

RFG’s increased gross margin for the three months ended July 31, 2016, is due to an overall increase in sales.   RFG’s decreased gross margin percentage for the nine months ended July 31, 2016, is due to the lingering effects of adverse weather conditions (related to El Nino) that impacted certain fruit and vegetable growing regions and caused reduced raw material availability, increased raw material prices, and reduced processing yields in our first fiscal quarter of 2016 and to a lesser extent in our second fiscal quarter of 2016. Similar to the Calavo Foods segment, RFG has agreed upon pricing with many of their customers.  This causes difficulty when raw material prices increase to correspondingly increase their sales prices to effectively offset the increased cost.  Note that any significant fluctuation in raw material availability, price and/or quality may have a material impact on future gross margins for our RFG segment.   

Selling, General and Administrative

	Three months ended  July 31,								Nine months ended July 31,
	2016			Change		2015			2016			Change		2015
	(Dollars in thousands)								(Dollars in thousands)
Selling, general and administrative	$	12,287		15.7	%	$	10,620		$	34,866		15.8	%	$	30,116
Percentage of net sales		4.7	%				4.6	%		5.1	%				4.6	%

Selling, general and administrative expenses include costs of marketing and advertising, sales expenses and other general and administrative costs.  Selling, general and administrative expenses increased $1.7 million, or 15.7%, for the three months ended July 31, 2016, when compared to the same period for fiscal 2015.  This increase was primarily related to higher corporate costs, including, but not limited to, accrued bonuses (approximately $0.9 million), and salaries (approximately $0.9 million, due in part to higher headcount), partially offset by a decrease in stock based compensation (approximately $0.4 million).

Selling, general and administrative expenses increased $4.8 million, or 15.8%, for the nine months ended July 31, 2016, when compared to the same period for fiscal 2015.  This increase was primarily related to higher corporate costs, including, but not limited to, accrued bonuses (approximately $2.0 million), salaries (approximately $1.9 million, due in part to higher headcount), and insurance (approximately $0.5 million).

Provision for Income Taxes

	Three months ended  July 31,								Nine months ended July 31,
	2016			Change		2015			2016			Change		2015
Provision for income taxes	$	7,323		49.1	%	$	4,910		$	16,609		34.1	%	$	12,390
Effective tax rate		36.6	%				36.2	%		36.6	%				35.6	%

For the third quarter of fiscal 2016, our provision for income taxes was $7.3 million, as compared to $4.9 million in the comparable prior year period. For the nine months ended July 31, 2016, our provision for income taxes was $16.6

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million, as compared to $12.4 million in the comparable prior year period. We currently expect our annual effective tax rate to be approximately 36.6% during fiscal 2016.

Liquidity and Capital Resources

Cash provided by operating activities was $55.0 million for the nine months ended July 31, 2016, compared to cash provided by operations of $32.5 million for the similar period in fiscal 2015.  Operating cash flows for the nine months ended July 31, 2016 reflect our net income of $28.8 million, net increase in non-cash activities (depreciation and amortization, stock compensation expense, deferred income taxes, and income from unconsolidated entities) of $8.8 million and a net increase in the noncash components of our operating capital of approximately $17.4 million.

Our operating capital increase includes an increase in payable to growers of $36.1 million, a net increase in trade accounts payable and accrued expenses of $9.0 million, a decrease in income tax receivable of $6.2 million, an increase in income tax payable of $4.7 million, an increased in deferred rent of $1.7 million, a decrease in advances to suppliers of $0.8 million and a decrease in other assets of $0.4 million, partially offset by a net increase in accounts receivable of $28.0 million, an increase in inventory of $10.1 million, and an increase in prepaid expenses and other current assets of $3.4 million.

The increase in payable to growers primarily reflects an increase in the volume and value of California fruit delivered in the month of July 2016, as compared to October 2015. The increase in accounts payable and accrued expenses is primarily related to an increase in our payables related to California avocados. The decrease in income tax receivable and the increase in income taxes payable primarily reflects the tax impact of the current year’s net income. The increase in deferred rent is due to the new lease in Jacksonville Florida. The decrease in advances to suppliers primarily reflects fewer advances made to our related party Agricola Belher related to the receipt of tomatoes in July 2016, compared to October 2015. The increase in our accounts receivable, as of July 31, 2016 when compared to October 31, 2015, primarily reflects higher sales recorded in the month of July 2016, as compared to October 2015. The increase in inventory is primarily related to an increase in the fresh fruit on hand at July 31, 2016 which was primarily driven by an increase in the volume and value of California avocados purchased during July 2016, as compared to October 2015. The net increase in our prepaid assets and other assets is due primarily to an increase in our Mexican IVA tax receivable in fiscal 2016.

Cash used in investing activities was $13.0 million for the nine months ended July 31, 2016, which primarily related to the purchase of $15.7 million of property, plant and equipment items for expansion projects in the RFG and Fresh products segments and an additional investment in Agricola Don Memo of $1.3 million, partially offset by proceeds received from the repayment of the loan to Agricola Don Memo of $4.0 million.

Cash used in financing activities was $34.5 million for the nine months ended July 31, 2016, which related principally to the payment of our $13.9 million dividend, payments on our credit facilities totaling $18.4 million, payments on long-term obligations of $2.2 million and deferred financing costs of $0.1 million, partially offset by proceeds from the exercise of stock options of $0.1 million.

Our principal sources of liquidity are our existing cash balances, cash generated from operations and amounts available for borrowing under our existing Credit Facility.  Cash and cash equivalents as of July 31, 2016 and October 31, 2015 totaled $14.7 million and $7.2 million. Our working capital at July 31, 2016 was $40.1 million, compared to $19.0 million at October 31, 2015.

We believe that cash flows from operations and the available Credit Facility will be sufficient to satisfy our future capital expenditures, grower recruitment efforts, working capital and other financing requirements for the next twelve months.  We will continue to evaluate grower recruitment opportunities, expanded relationships with retail and club customers, and exclusivity arrangements with food service companies to fuel growth in each of our business segments.  We entered into a new unsecured, revolving credit facility with Bank of America as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West, as joint lead arranger. Under the terms of this agreement, we are advanced funds for both working capital and long-term productive asset purchases.  Total credit available under this  new agreement is $80 million, and will expire in June 2021. Upon notice to Bank of America, we may from time to time, request an increase in the Credit Facility by an amount not

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exceeding $50 million. For our current and past line of credit agreements the weighted-average interest rate was 1.9% and 1.7% at July 31, 2016 and October 31, 2015.  Under these credit facilities, we had $18.5 million and $36.9 million outstanding as July 31, 2016 and October 31, 2015. 

This new Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. We were in compliance with all such covenants at July 31, 2016. 

Contractual Obligations

There have been no material changes to our contractual commitments, other than the new credit agreement mentioned above, from those previously disclosed in our Annual Report on Form 10-K for our fiscal year ended October 31, 2015. For a summary of the contractual commitments at October 31, 2015, see Part II, Item 7, in our 2015 Annual Report on Form 10-K.

Impact of Recently Issued Accounting Pronouncements

See Note 1 to the consolidated condensed financial statements that are included in this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial instruments include cash and cash equivalents, accounts receivable, payable to growers, accounts payable, current and long-term borrowings pursuant to our credit facilities with financial institutions, and long-term, fixed-rate obligations.  All of our financial instruments are entered into during the normal course of operations and have not been acquired for trading purposes.  The table below summarizes interest rate sensitive financial instruments and presents principal cash flows in U.S. dollars, which is our reporting currency, and weighted-average interest rates by expected maturity dates, as of July 31, 2016.

(All amounts in thousands)	Expected maturity date July 31,
	2016		2017		2018		2019		2020		Thereafter		Total		Fair Value
Assets
Cash and cash equivalents (1)	$	14,650	$	—	$	—	$	—	$	—	$	—	$	14,650	$	14,650
Accounts receivable (1)		86,575		—		—		—		—		—		86,575		86,575
Liabilities
Payable to growers (1)	$	39,991	$	—	$	—	$	—	$	—	$	—	$	39,991	$	39,991
Accounts payable (1)		23,667		—		—		—		—		—		23,667		23,667
Current borrowings pursuant to credit facilities (1)		18,500		—		—		—		—		—		18,500		18,500
Fixed-rate long-term obligations (2)		137		111		89		92		92		101		622		505

(1) We believe the carrying amounts of cash and cash equivalents, accounts receivable, advances to suppliers, payable to growers, accounts payable, and current borrowings pursuant to credit facilities approximate their fair value due to the short maturity of these financial instruments.

(2) Fixed-rate long-term obligations bear interest rates ranging from 3.5% to 4.3% with a weighted-average interest rate of 4.3%.  We believe that loans with a similar risk profile would currently yield a return of 2.6%.  We project the impact of an increase or decrease in interest rates of 100 basis points would result in a change of fair value of approximately $11,000.

We were not a party to any derivative instruments during the fiscal year.  It is currently our intent not to use derivative instruments for speculative or trading purposes. Additionally, we do not use any hedging or forward contracts to offset market volatility. 

Our Mexican-based operations transact business primarily in Mexican pesos.  Funds are transferred by our corporate office to Mexico on a weekly basis to satisfy domestic cash needs. We do not currently use derivative instruments to hedge fluctuations in the Mexican peso to U.S. dollar exchange rates.  Management does, however, evaluate this opportunity from time to time. Total foreign currency translation losses for the three months ended July 31, 2016 and 2015, net of gains, was $1.0 million and $0.3 million. Total foreign currency translation losses for the nine months ended July 31, 2016 and 2015, net of gains, was $1.1 million and $1.4 million.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report.  Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective.

There were no changes in the Company’s internal control over financial reporting during the quarter ended July 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in litigation in the ordinary course of business, none of which we believe will have a material adverse impact on our financial position or results of operations.

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ITEM 1A. RISK FACTORS

For a discussion of our risk factors, see Part 1, item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended October 31, 2015.  There have been no material changes from the risk factors set forth in such Annual Report on Form 10-K.  However, the risks and uncertainties that we face are not limited to those set forth in the 2015 Form 10-K.  Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.

ITEM 6. EXHIBITS

10.1	Agreement to Sell and Purchase and Escrow Instructions with Fresh Foods, LLC, a Delaware limited liability company dated August 3, 2016.
31.1	Certification of Chief Executive Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
101	The following financial information from the Quarterly Report on Form 10-Q of Calavo Growers, Inc. for the quarter ended July 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Condensed Balance Sheets as of July 31, 2016 and October 31, 2015; (2) Consolidated Condensed Statements of Income for the three and nine months ended July 31, 2016 and 2015; (3) Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended July 31, 2016 and 2015; (4) Consolidated Condensed Statements of Cash Flows for the nine months ended July 31, 2016 and 2015; and (5) Notes to Unaudited Condensed Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Calavo Growers, Inc.
	(Registrant)
Date: September 8, 2016
	By	/s/ Lecil E. Cole
		Lecil E. Cole
		Chairman of the Board of Directors, and
		Chief Executive Officer
		(Principal Executive Officer)
Date: September 8, 2016
	By	/s/ B. John Lindeman
		B. John Lindeman
		Chief Financial Officer and Corporate Secretary
		(Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit
Number	Description
10.1	Agreement to Sell and Purchase and Escrow Instructions with Fresh Foods, LLC, a Delaware limited liability company dated August 3, 2016.
31.1	Certification of Chief Executive Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to 15 U.S.C. § 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
101	The following financial information from the Quarterly Report on Form 10-Q of Calavo Growers, Inc. for the quarter ended July 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Condensed Balance Sheets as of July 31, 2016 and October 31, 2015; (2) Consolidated Condensed Statements of Income for the three and nine months ended July 31, 2016 and 2015; (3) Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended July 31, 2016 and 2015; (4) Consolidated Condensed Statements of Cash Flows for the nine months ended July 31, 2016 and 2015; and (5) Notes to Unaudited Condensed Financial Statements.

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EX-10.1

Exhibit 10.1

AGREEMENT TO SELL AND PURCHASE AND ESCROW INSTRUCTIONS

THIS AGREEMENT TO SELL AND PURCHASE AND ESCROW INSTRUCTIONS (this “Agreement”) is dated as of July 25, 2016 and entered into by and between FRESH FOODS, LLC, a Delaware limited liability company (“Seller”) and CALAVO GROWERS INC., a California corporation (“Purchaser”).  Seller and Purchaser hereby agree as follows:

1.   Agreement of Purchase and Sale.

For the consideration hereinafter set forth, but subject to the terms, provisions, covenants and conditions herein contained, Seller hereby agrees to convey, and Purchaser hereby agrees to purchase and acquire in accordance with the terms set forth herein:

A.  All of Seller’s right, title and interest in that certain land (the “Land”) situated in the County of Riverside, State of California, described in attached Exhibit “A”.

B.  All of Seller’s right, title and interest in any improvements affixed to the Land including that certain building more commonly known as “1730 Eastridge Avenue” (collectively, the “Improvements”).

C.  All of Seller’s right, title and interest in all privileges, entitlements, easements and appurtenances pertaining to the Land and the Improvements, including any right, title and interest of Seller (but without warranty whether statutory, express or implied) in and to adjacent streets, alleys or rights-of-way.

D.  All of Seller’s right, title and interest in the furniture, fixtures and equipment (“FF&E”) described in Exhibit “B-1” (the “Included FF&E”).  The FF&E described in  Exhibit “B-2” (the “Excluded FF&E”) shall be excluded from the purchase and sale of the Property (as hereinafter defined).  Exhibits “B-1” and “B-2” shall be documented, as approved by Purchaser and Seller, and attached to this Agreement on or before the twentieth (20th) day following the mutual execution of this Agreement.

E.  All of Seller’s right, title and interest in any intangible rights relating to the Land and/or the Improvements.

The items described in Sections 1.A. through 1.E above are hereinafter called the “Property.”

2.   Purchase Price.

A.  Amount of Purchase Price.  The total purchase price (the “Purchase Price”) to be paid by Purchaser to Seller for the Property shall be TWENTY MILLION DOLLARS ($20,000,000), payable all in cash.  Seller acknowledges and agrees that Purchaser is in the fresh produce business, and the Purchase Price has been agreed to be based on Purchaser’s intent to acquire and operate a functional refrigerated facility.

B.  Payment of Purchase Price. 

The Purchase Price shall be paid as follows:

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As part of the Opening of Escrow (as defined below), Purchaser shall deliver to First American Title Insurance Company located at 3281 Guasti Road, Suite 440, Ontario, California 91761, Attention:  Christine Siegel (“Escrow Holder”) a deposit of Three Hundred Ten Thousand Dollars ($310,000) (the “Deposit”).  The Deposit shall be in the form of wire transfer or cash.  Escrow Holder shall place the Deposit in an interest‑bearing account.  All interest earned on the Deposit shall be included within the meaning of the term “Deposit” in this Agreement.  Provided no Purchaser’s Objection (as defined herein below) has been made and remains uncured by Seller or unwaived by Purchaser, the Deposit shall become nonrefundable at 5:00 p.m. (California time) on the Contingency Termination Date (as hereinafter defined).  In the event of a default hereunder by Purchaser or Seller, the Deposit shall be refunded or applied as provided in Section 13 below.

By 1:00 p.m. (California time) on the last business day immediately before the Close of Escrow, Purchaser shall deposit into Escrow immediately available funds in the amount which, when added to the Deposit, will equal the Purchase Price plus any additional amounts necessary to cover Purchaser’s costs and/or prorations under this Agreement.

C.  Allocation of Purchase Price.  Prior to the last day of the Contingency Period (as hereinafter defined), Purchaser and Seller shall reasonably allocate the Purchase Price between the Land and the Improvements, on the one hand, and the Included FF&E, on the other hand, in accordance with their fair market values as agreed by the parties consistent with Section 1060 of the Internal Revenue Code of 1986, as amended.  When finalized, the allocation shall be set forth on a schedule which shall be prepared prior to Closing; and such allocation shall be binding upon the parties for all applicable federal, state, local and foreign tax purposes.  The Seller and Purchaser covenant to report gain or loss or cost basis, as the case may be, in a manner consistent with such allocation on all tax returns filed by any of them after Closing and not to voluntarily take any inconsistent position therewith in any administrative or judicial proceeding relating to such returns.  The Seller, as appropriate, and Purchaser shall exchange mutually acceptable and completed Internal Revenue Service Forms 8594 (including supplemental forms, if required), which they shall use to report the transaction contemplated hereunder to the Internal Revenue Service in accordance with such allocation.

3.   Escrow Instructions.

A.  Opening of Escrow.  As soon as reasonably practicable following the mutual execution of this Agreement, but in no event later than two (2) business days following the mutual execution of this Agreement, the parties shall open an escrow (“Escrow”) with the Escrow Holder in order to consummate the purchase and sale in accordance with the terms and provisions hereof.  This Agreement shall be deposited in the Escrow and the provisions hereof shall constitute joint primary escrow instructions to the Escrow Holder; provided, however, that the parties shall execute such additional instructions as requested by the Escrow Holder not inconsistent with the provisions hereof and that do not change the original understanding of the parties and that state that, in the event of a conflict between the terms of this Agreement and the additional escrow instructions, the terms of this Agreement shall control.  The date as of which the Escrow Holder shall receive (i) the Deposit and (ii) executed counterparts of this Agreement from both Seller

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and Purchaser shall constitute the “Opening of Escrow.”  Notwithstanding the fact that this Agreement is executed by Seller and Purchaser, this Agreement shall not be binding or enforceable prior to the Opening of Escrow.  Upon request of either or both of the parties hereto, Escrow Holder shall deliver written confirmation of the date of the Opening of Escrow to the parties in the manner set forth in Section 15 of this Agreement.

B.  Documents and Funds Delivered to or by Escrow.  The following shall be delivered into the Escrow or by Escrow Holder in connection with the transfer of the Property: 

(1) Delivery by Seller in Escrow.  At least one (1) business day prior to the Closing Date, or such earlier date as is required by Escrow Holder, but not, in any event, until after Purchaser has performed its obligations under Section 3.B(2) hereof, Seller shall deposit into Escrow:

(a)  a grant deed (the “Grant Deed”) to the Property in recordable form, duly executed by Seller and acknowledged and in substantially the same form as set forth in attached Exhibit “C”;

(b)  three (3) originals of a bill of sale (the “Bill of Sale”), duly executed by Seller in substantially the same form as set forth in attached Exhibit “D”;

(c)  three (3) originals of an affidavit from Seller which satisfies the requirements of Section 1445 of the Internal Revenue Code, as amended (the “Section 1445 Affidavit”), duly executed by Seller in substantially the same form as set forth in attached Exhibit “E”;

(d)  three (3) originals of a Withholding Exemption Certificate, Form 593 (the “Form 593”), duly executed by Seller in substantially the same form as set forth in attached Exhibit “F”;  

(e)  one (1) original of appropriate authorizing documents evidencing that Seller has the authority to enter into this Agreement, carry out the terms of this Agreement and sell the Property and evidencing that the individual or individuals executing this Agreement and any other documents contemplated hereunder or related hereto have the authority to so execute such documents; and

(f)  such other instruments and documents as may be reasonably requested by Escrow Holder relating to Seller, to the Property and as otherwise required to transfer the Property to Purchaser pursuant to the terms and conditions of this Agreement.

(2)  Delivery by Purchaser in Escrow.   At least one (1) business day prior to the Closing Date, or such earlier date as is required by Escrow Holder, Purchaser shall deposit into Escrow:

(a)  one (1) original Preliminary Change of Ownership Form, duly executed by Purchaser, in substantially the same form as set forth in attached Exhibit “G” (the “PCOR”); and

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(b)  such instruments and documents as may be reasonably requested by Escrow Holder relating to Purchaser, to the Property and/or as otherwise required to transfer the Property to Purchaser pursuant to the terms and conditions of this Agreement.

(3)  Delivery by Escrow.  At least two (2) business days prior to the Closing Date, Escrow Holder shall deliver to Purchaser and Seller a pro forma closing statement (the “Closing Statement”) which sets forth, in a manner satisfactory to Purchaser and Seller, the prorations and other credits and debits contemplated by this Agreement.

C.   Conditions to Close.

Escrow shall not close unless and until the following conditions precedent and contingencies have been satisfied or waived in writing by the party for whose benefit the conditions have been included:

(1)  All contingencies described in Section 4 below have either been satisfied or waived in writing or deemed waived by the party for whose benefit such conditions run.

(2)  All funds and instruments described in this Section 3 and elsewhere in this Agreement have been delivered to the Escrow Holder.

(3)  The Title Company (as hereinafter defined) is in a position and is prepared to issue to Purchaser the Title Policy described in Section 5 below.

(4)  All representations and warranties made by Seller in Section 8 below and Purchaser in Section 9 below shall be true and correct in all material respects as of the Closing Date.

(5)  Purchaser shall have performed, observed and complied with all covenants, agreements and conditions required by this Agreement to be performed, observed and/or complied with by Purchaser prior to, or as of, the Closing.

(6)  Seller shall have performed, observed and complied with all covenants, agreements and conditions required by this Agreement to be performed, observed and/or complied with by Seller prior to, or as of, the Closing.

(7)  Seller shall, within three (3) days after the mutual execution of this Agreement, request that Tesco Treasury Services PLC (“Tesco”) deliver into Escrow, with a copy to Purchaser, a Demand for Payoff in form and substance satisfactory to Escrow and Title Company (the “Demand”) and a Substitution of Trustee and Deed of Partial Reconveyance (the “Reconveyance”), in form and substance satisfactory to the Title Company to issue the Title Policy and reconvey that certain Deed of Trust, Assignment of Leases and Rents, Security Agreement and Financing Statement (the “Original TescoDeed of Trust”) dated as of November 25, 2013, executed by Campus Opco, LLC, as grantor, to First American Title Insurance Company, as trustee, for the benefit of Tesco, as beneficiary, which Original Tesco Deed of Trust was recorded on November 27, 2013 as Instrument No. 2013-0557414 in the Official Records of the County of Riverside, California (the “Official Records”), and re-recorded on

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December 4, 2013 as Instrument No. 2013-0565907 in the Official Records, which Original Tesco Deed of Trust was amended by that certain Amendment to Deed of Trust, Assignment of Leases and Rents, Security Agreement and Financing Statement (the “Amendment to Tesco Deed of Trust”) dated as of July 31, 2015 and recorded on October 15, 2015 as Instrument No. 2015-0453636 in the Official Records (collectively, the “Tesco Deed of Trust”).  Not later than thirty (30) days after the Opening of Escrow, Tesco shall have delivered into Escrow, with a copy to Purchaser, the Demand and the Reconveyance, in form and substance satisfactory to the Escrow and Title Company to issue the Title Policy and reconvey the Tesco Deed of Trust.  This condition is for the benefit of both Seller and Purchaser, and is not waivable.  If the Demand and a fully executed and recordable Reconveyance satisfactory to the Title Company to issue the Title Policy clear of the Tesco Deed of Trust are not delivered to Escrow Holder, with a copy to Purchaser, within thirty (30) days after the Opening of Escrow, Purchaser and Seller shall have the absolute right and option to cancel and terminate this Agreement upon written notice to the other and Escrow Holder.  In such event, Purchaser shall be entitled, as its sole remedy, to receive from Escrow Holder the return of its Deposit and Purchaser’s Refrigeration Testing Fund Deposit (as hereinafter defined) and receive from Seller’s Refrigeration Testing Fund Deposit (as hereinafter defined) and, if Seller’s Refrigeration Testing Fund Deposit is not sufficient, from Seller, Purchaser’s actual, documented, reasonable out-of-pocket due diligence expenses in the investigation, inspection and studies concerning the Property.  Seller shall be entitled to receive from Escrow Holder the balance, if any, of Seller’s Refrigeration Testing Fund Deposit.

If this Agreement has not been terminated by Purchaser within the Contingency Period and the parties proceed to Closing, then unless there has been a written Purchaser Objection within the Contingency Period that has not been satisfied or waived, any condition not otherwise satisfied or waived as of the Closing shall be deemed fully satisfied or waived by the party for whose benefit the condition had been included as of the Closing.

D.  Recordation and Transfer.  Upon satisfaction of the conditions set forth in Section 3.C., Escrow Holder shall transfer the Property as follows: Cause the Grant Deed to be recorded in the Official Records of Riverside County, California; Deliver to Purchaser and Seller at least one fully executed original of the Section 1445 Affidavit, the Bill of Sale, the Form 593 and a conformed copy of the recorded Grant Deed;

(1)  Deliver to the parties entitled thereto any other closing documents; and cause the Title Policy in form and substance described in Section 5 below, to be delivered to the Purchaser, and

(2)  Disburse all funds deposited with Escrow Holder by Purchaser in payment of the Purchase Price for the Property as follows:

(a)  deliver to Tesco the amount pursuant to the Demand, required to reconvey the Tesco Deed of Trust from the Property (as approved by Seller in the Seller’s Closing Statement) in accordance with written instructions from Tesco;

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(b)  retain in Escrow (the “Refrigeration Escrow Holdback”) the Refrigeration Escrow Amount (as hereinafter defined) in accordance with the terms of Section 45 below.

(c)  deliver to Seller the Purchase Price pursuant to instructions to be delivered by Seller to Escrow Holder, less the amount of all items, costs and prorations chargeable to the account of Seller; and

(d)  disburse the remaining balance of the funds deposited by Purchaser to Purchaser upon the Close of Escrow pursuant to instructions to be delivered by Purchaser to Escrow Holder less amounts chargeable to Purchaser.

E.  Close of Escrow.  Escrow shall close upon the recordation of the Grant Deed in accordance with the terms and conditions hereof (“Close of Escrow” or “Closing Date” or “Closing”).  The Close of Escrow shall occur no later than fifteen (15) days after the expiration of the Contingency Period unless otherwise extended pursuant to the terms hereof or in writing by mutual agreement between Purchaser and Seller.  If the Closing Date does not fall on a Tuesday, Wednesday or Thursday, Escrow shall close on the Tuesday following such date. 

4.   Purchaser’s Contingencies.  

In the event that any contingency set forth in this Section 4 has not been either satisfied or waived as of the Contingency Termination Date (as hereinafter defined (subject to the notice of waiver and election to cure provisions set forth in Section 4.C)), this Agreement shall be terminated, the Deposit shall be returned to Purchaser, Purchaser shall deliver all documents provided to Purchaser by Seller together with any final reports prepared by Purchaser’s consultants (to the extent assignable) (other than confidential attorney client or attorney work product privileged documents, or information relating to analysis of usability or feasibility of the Property or work product, marketing studies, and information relating to Purchaser itself) relating in any way to the Property (the “Due Diligence Reports”) to Seller without warranty as to the accuracy or completeness of any such Due Diligence Reports, and the Escrow shall thereupon be canceled, and neither party shall have any further obligation to the other except for Purchaser’s obligations which are expressly stated to survive.  Costs for cancellation of Escrow and all Title Company costs shall be shared equally by Purchaser and Seller.  The “Contingency Period” as used herein means the period commencing on the Opening of Escrow and continuing until 5:00 p.m. (California Time) on the date that is sixty (60) days following the date of mutual execution and delivery of this Agreement to Escrow Holder (as such date may be extended pursuant to the express terms of this Agreement); provided, however, that if such date is not a business day, the last day of the Contingency Period shall be extended to terminate on the next business day (the “Contingency Termination Date”).

A.  Survey, Title Commitment and Other Property Documents.

(1)  As soon as reasonably practicable after the Opening of Escrow, but not later than five (5) days after the mutual execution of this Agreement, Seller shall (i) deliver to Purchaser any survey (“Survey”) of the Property in Seller’s possession or under its

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control, (ii)  cause First American Title Insurance Company (the “Title Company”) to furnish to Purchaser a preliminary title report (herein called the “Title Report”) issued by the Title Company, and (iii) cause the Title Company to deliver to Purchaser legible copies of all documents referred to as exceptions to title in the Title Report.  Purchaser may also obtain at its sole cost and expense a new or supplemental survey of the Property. 

(2)  As soon as reasonably practicable following the mutual execution of this Agreement, but in any event within five (5) days after the mutual execution of this Agreement, Purchaser shall provide to Seller a list of key Property documents to be provided to Purchaser by Seller (the “Key Documents List”).  As soon as reasonably practicable after the Opening of Escrow, but not later than five (5) days after Seller’s receipt of the Key Documents List, Seller shall make available to Purchaser copies of all documents related to the Property which are within Seller’s possession or under its control, including any documents within Seller’s possession that are on the Key Documents List (“Property Documents”) (but excluding any confidential or privileged information, budgets, correspondence or documents relating to Seller’s acquisition of the Property, or information relating to prior prospective sales of the Property, work product, marketing studies, and information relating to Seller itself (the “Excluded Information”)).  For the purpose of this paragraph environmental reports or environmental studies concerning the Property shall not be deemed as privileged or confidential. If the Seller is late in delivering any of the foregoing to the Purchaser, the Contingency Period shall be extended one day for each day that Seller is late in delivering any of such Property Documents to Purchaser.  SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER TO PURCHASER AS TO THE ACCURACY OR COMPLETENESS OF THE CONTENT OF ANY DOCUMENTS OR OTHER INFORMATION DELIVERED TO PURCHASER PURSUANT TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE ACCURACY OR COMPLETENESS OF THE CONTENT OF THE PROPERTY DOCUMENTS.  However, Seller assures Purchaser that it does not know of any fact or circumstance that would make Seller doubt the accuracy of such third party materials which it has not otherwise disclosed to Purchaser, in writing.

(3)  Certain disclosures relating to the Property may be required under California Public Resources Code Section 2621.9(a) (Earthquake Fault Zone), California Public Resources Code Section 2694(a) (Seismic Hazard Zone), California Government Code Section 8589.3(a) (Special Flood Hazard Area), and/or California Government Code Section 8589.4(a) (Area of Potential Flooding).  Purchaser agrees that Seller will have no liability arising out of any failure by Seller or Agent to make any disclosure described in the immediately preceding sentence.  A copy of the natural hazard disclosure statement is set forth in Exhibit “H” attached hereto and Purchaser approves the same.

(4)  The term “Permitted Encumbrances” as used herein includes:

(a)  any easement, right-of-way, encroachment, conflict, discrepancy, overlapping of improvements, protrusion, lien, encumbrance, restriction, condition, covenant or other matter with respect to the Property that is reflected or addressed on the

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Survey or the Title Report which Purchaser has not disapproved in accordance with the provisions of Section 4.C. below; and

(b)  any Purchaser’s Objection that is cured by Seller or which remains uncured, for whatever reason, and Purchaser waives such Purchaser’s Objection pursuant to Section 4.C. below.

B.  Inspection.

(1) Purchaser shall have the right to physically inspect on a non-intrusive basis, and to the extent Purchaser desires, to cause one or more representatives of Purchaser to physically inspect on a non-intrusive basis, the Property.  If the inspection, including a Phase I Environmental Inspection, recommends a further inspection requiring borings or other invasive testing, Purchaser shall prepare and deliver to Seller during the Contingency Period a written proposal for such testing setting forth the proposed scope of the invasive testing (the “Invasive Testing Proposal”), which Seller may approve or disapprove in its sole and absolute discretion.  If Seller disapproves Purchaser’s request for invasive testing (Phase II Investigation), and Purchaser elects to terminate this Agreement during the Contingency Period, Purchaser shall be entitled, as its sole remedy, to terminate this Agreement and receive from Escrow Holder the return of its Deposit and Purchaser’s Refrigeration Testing Fund Deposit and receive from Seller’s Refrigeration Testing Fund Deposit and, if Seller’s Refrigeration Testing Fund Deposit is not sufficient, from Seller, (a) one hundred percent (100%) of Purchaser’s actual, documented out-of-pocket expenses for the testing and operation of the Refrigeration System and (b) Purchaser’s other actual, documented, reasonable out-of-pocket due diligence expenses in the investigation, inspection and studies concerning the Property.  Seller shall be entitled to receive from Escrow Holder the balance, if any, of Seller’s Refrigeration Testing Fund Deposit.  Purchaser shall make all inspections in good faith and with due diligence.  Except as otherwise provided in Section 4.B.(2) below, all inspection fees, appraisal fees, engineering fees and other expenses of any kind incurred by Purchaser relating to the inspection of the Property will be solely Purchaser’s expense.  Seller shall cooperate with Purchaser in all reasonable respects in making such inspections.  The scope of any environmental inspection to be conducted by Purchaser’s environmental consultant in excess of a Phase I environmental assessment shall be in accordance with the terms of the agreed upon Invasive Testing Proposal.  Nothing herein shall authorize any subsurface testing or drilling on the Property by Purchaser or its environmental consultant unless specifically provided for in the agreed upon Invasive Testing Proposal.  Purchaser shall have the right to contact governmental officials in connection with various rights of use of the Property, and Seller hereby reserves the right to have a representative present at the time of making any such inspection or interviews, but shall not interfere with or delay the scheduling of such inspection or interview.  Purchaser shall notify Seller not less than one (1) business day in advance of making any such inspection or interviews.  In making any inspection or interviews hereunder, Purchaser will treat, and will cause any representative of Purchaser to treat, all information obtained by Purchaser pursuant to the terms of this Agreement as strictly confidential except for such information which Purchaser is required to disclose to its consultants, attorneys, agents, contractors, representatives, lenders and transferees in accordance with Section 43 below.

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(2)  During the last thirty (30) days of the Contingency Period, Purchaser shall have the right to inspect, start-up, test and monitor the refrigeration system located on the Property (the “Refrigeration System”) strictly in accordance with the terms of this Section 4.B.(2); provided, however, Purchaser shall have the right during the first thirty (30) days of the Contingency Period to spend up to $30,000 from the Refrigeration Testing Fund (hereinafter defined) to engage contractors and subcontractors and otherwise in the planning, permitting and staging the start-up and testing;

(a)  Purchaser and Seller hereby agree that Mericle Mechanical, Inc. and SCS Tracer Environmental (collectively, “Contractor”) and such other subcontractors as may be mutually agreed upon by Seller and Purchaser (the “Subcontractors”) shall be the only persons entitled to inspect, start-up (i.e., recharge with ammonia and turn on the Refrigeration System), test and monitor the Refrigeration System;

(b)  Representatives of Seller and Purchaser shall both be present at the Property at the time of the start-up of the Refrigeration System;

(c)  It is agreed that within ten (10) business days of the Opening of Escrow Seller and Purchaser shall each deposit into a refrigeration testing fund with Escrow (the “Refrigeration Testing Fund”), the amount of $100,000 (the “Seller’s Refrigeration Testing Fund Deposit” and the “Purchaser’s Refrigeration Testing Fund Deposit,” respectively), for a total of $200,000. Purchaser’s Refrigeration Testing Fund Deposit and Seller’s Refrigeration Testing Fund Deposit shall be disbursed pari-passu by Escrow on demand by Purchaser for all of the costs and expenses associated with or relating to the inspection, repair, testing, monitoring, permitting, insuring, and operation of  the Refrigeration System during the Escrow Period (the “Refrigeration Testing Costs”);

(d)  If Purchaser terminates this Agreement during the Contingency Period on account of a Major Material Problem (as hereinafter defined) with the Refrigeration System, Purchaser shall receive from Escrow Holder the return of its Deposit and from the Refrigeration Testing Fund Purchaser’s Refrigeration Testing Fund Deposit and from Seller’s Refrigeration Testing Fund Deposit the reimbursement of its documented, out of pocket, Refrigeration Testing Costs not to exceed the sum of one hundred thousand dollars ($100,000).  The balance of Refrigeration Testing Fund shall be returned to Seller;

(e)  If Purchaser terminates this Agreement during the Contingency Period for any reason other than a Major Material Problem with the Refrigeration System or the failure to timely deliver any of the Key Documents, or for no stated reason, Purchaser’s sole remedy shall be to receive from Escrow the amount of its Deposit and Escrow Holder shall return to Seller the remaining amount of Seller’s Refrigeration Testing Deposit and Escrow Holder shall return to Purchaser the remainder of the Refrigeration Testing Fund;

(f)  If the Closing occurs, Escrow Holder shall return to Seller the Seller’s Refrigeration Testing Fund Deposit less Purchaser’s documented, out of pocket

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Refrigeration Costs not to exceed one hundred thousand dollars ($100,000) and Purchaser shall be entitled to the remainder of the Refrigeration Testing Fund; and

(g)  Once the Refrigeration System is started-up (and continuing at Purchaser’s option until the Close of Escrow or the termination of this Agreement due to Seller’s default or post-closing at a date Purchaser chooses (if any) to shut down the Refrigeration System), it will be Purchaser’s responsibility, at its sole cost and expense to operate (in accordance with applicable laws), and monitor on a continuous 24/7 basis and shut down, if necessary, the Refrigeration System subject to the amounts in the Refrigeration Testing Fund.  In connection therewith, if there is a problem with the Refrigeration System, Purchaser shall promptly notify Seller, in writing, of such problem together with a description of the problem; provided, however, that in the event of an emergency, Purchaser shall notify Seller orally, with written notice to follow.

(3)  Purchaser agrees to maintain, at Purchaser’s sole cost and expense, worker’s compensation and comprehensive liability insurance policies to cover its activities on the Property (including, the inspection, start-up, testing and operation of the Refrigeration System) and to keep the Property free and clear of all mechanics’ and materialmen’s liens or other liens arising out of any of its activities or those of its representatives, agents or contractors.  At least two (2) business days before entering on the Property, Purchaser shall deliver to Seller a certificate of insurance evidencing insurance coverage in compliance with the terms of this Subsection 4(B.)(3).  Purchaser shall maintain and keep in effect, at Purchaser’s sole expense, at all times during the period of this Escrow, a comprehensive liability insurance policy having a combined liability limit of at least Five Million Dollars ($5,000,000) and property damage limits of at least Two Million Dollars ($2,000,000).  The insurance policy shall be primary and noncontributing with any insurance which may be carried by Seller, and shall name Seller as an additional insured.  The insurance policy shall also provide that it may not be canceled or modified without at least thirty (30) days prior written notice to Seller.

(4)  Purchaser agrees to indemnify, defend and hold Seller and its members, agents (and their respective members, officers, directors, shareholders, partners, principals, subsidiaries, employees, attorneys, contractors and agents) (collectively, the “Seller Parties”) harmless from any and all injuries (including bodily injury and property damage), losses, liens, claims, judgments, liabilities, costs, expenses and/or damages (including reasonable attorneys’ fees and court costs) sustained by or threatened against Seller Parties which result from or arise out of any testing or inspections by Purchaser or its representatives pursuant to this Section 4(B.) and/or the operation of the Refrigeration System until the Close of Escrow or termination of this Agreement; provided, however, Purchaser shall not be liable prior to the Closing for discovering or remediating any hazardous materials on the Property.  Subject to the foregoing, Purchaser agrees to return the Property to substantially the same condition in which the Property was prior to Purchaser’s making any inspection.

(5)  Purchaser shall provide to Seller, within five (5) business days following Purchaser’s receipt thereof, copies of all reports, studies, test results and similar data obtained by Purchaser in the course of its due diligence investigation (other than

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confidential attorney client or attorney work product privileged documents or information relating to analysis of usability or feasibility of the Property or work product, marketing studies, and information relating to Purchaser itself) relating in any way to the Property if there is no prohibition against such delivery in the contract between Purchaser and the entity preparing the report, study, test result, or other data, and there is no charge for delivery of such reports to Seller (unless Seller agrees to pay the charge).  For the purpose of this paragraph environmental reports and studies shall not be deemed to be privileged or confidential.  PURCHASER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER TO SELLER AS TO THE ACCURACY OR COMPLETENESS OF THE CONTENT OF ANY DOCUMENTS OR OTHER INFORMATION DELIVERED TO SELLER PURSUANT TO THIS AGREEMENT THAT WERE PREPARED BY THIRD PARTIES, INCLUDING, WITHOUT LIMITATION, THE ACCURACY OR COMPLETENESS OF THE CONTENT OF THE DUE DILIGENCE DOCUMENTS THAT WERE PREPARED BY THIRD PARTIES; PROVIDED, HOWEVER, SELLER KNOWS OF NO FACT OR CIRCUMSTANCE THAT WOULD MAKE SUCH DOCUMENTS OR OTHER INFORMATION FALSE OR MISLEADING.

C.  Objection, Cure and Waiver Rights.  Purchaser shall, no later than 5:00 p.m. (California time) on the Contingency Termination Date, notify Seller, in writing and in the manner set forth in Section 15, of Purchaser’s objections relating to any matters set forth above and setting forth the reasons therefor or Purchaser's determination, to be made in Purchaser's sole and absolute discretion, for any reason or no reason, to not purchase the Property and to terminate this Agreement and the Escrow (“Purchaser’s Objections”).  Upon the expiration of the Contingency Period, except for Purchaser’s Objections if they are raised on or before the last day of the Contingency Period and delivered in accordance with Section 15, Purchaser shall be deemed to have accepted each and every aspect of the Property.  If Purchaser, in its sole and absolute discretion, does not disapprove the form and substance of the Survey, all matters shown thereon, all exceptions to the Title Report and other items shown thereon, on or before the last day of the Contingency Period, then all such matters shall be included in the term “Permitted Encumbrances” as used herein.  Upon receipt of notice of any Purchaser’s Objection that is curable, Seller shall have the right, to be exercised within five (5) business days of receipt of Purchaser’s notice, to notify Purchaser in writing that it intends to cure any such disapproved matter that is curable.  Failure of Seller to deliver a written notice to Purchaser that it intends to cure any of Purchaser’s Objection(s) that are curable within such five (5) business day period shall constitute Seller’s refusal to cure said matter(s).  Purchaser shall thereupon have three (3) business days in which to notify Escrow Holder and Seller in writing that Purchaser waives its previous disapproval.  Failure to provide such notice shall constitute Purchaser’s unwillingness to waive said disapproved matter, Escrow shall thereupon automatically terminate, and neither party shall have any further liability or obligation to the other except for Purchaser’s obligations which are expressly stated to survive.  If Seller has elected to cure any matter disapproved by Purchaser, Seller shall thereupon commence to cure said matter, and shall have until the Close of Escrow to cure such matter.  In the event Seller provides written notice stating Seller’s intention to cure any of Purchaser’s Objection(s) and Seller fails to cure said matter by the scheduled Close of Escrow, Purchaser shall have the right by providing written notice

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within three (3) days after the scheduled Close of Escrow to either (i) waive such Purchaser’s Objection, or (ii) terminate the Escrow, and neither party shall have any further liability or obligation to the other except for Purchaser’s obligations which are expressly stated to survive.  In the event Purchaser fails to provide said written notice of termination or waiver within said three (3) day period, the Escrow shall terminate as provided above.  Notwithstanding anything to the contrary set forth in this Agreement, Purchaser may, within the Contingency Period, deliver to Seller notice of Purchaser's election, in its sole and absolute discretion, not to proceed to the Closing for any reason or no reason, in which event the Escrow shall terminate, and neither party shall have any further liability or obligation to the other except for Seller’s and Purchaser’s obligations which are expressly stated to survive.  If Purchaser’s Objection is a determination, in its sole and absolute discretion, that it does not elect to purchase the Property for a non-curable reason or for no reason, the notice and cure procedure for Seller’s cure of a Purchaser’s Objection set forth above shall not apply.

Within five (5) business days following any termination of Escrow pursuant to this Agreement, Purchaser shall deliver to Seller without additional consideration and free of claims of third parties, all information, studies and Due Diligence Reports Purchaser or any agent of Purchaser has obtained with respect to the Property or the condition of the Property and all of the Property Documents so long as there is no prohibition against such delivery in the contract between Purchaser and the entity preparing the report, study, test result, or other data, and no charge for providing the reports to Seller (unless Seller agrees to pay such charge); provided, however, Purchaser shall not deliver to Seller confidential attorney client or attorney work product privileged documents or information (excepting environmental reports even if marked confidential attorney-client privileged or attorney work product privileged) relating to analysis of usability or feasibility of the Property or work product, marketing studies, and information relating to Purchaser itself.  PURCHASER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER TO SELLER AS TO THE ACCURACY OR COMPLETENESS OF THE CONTENT OF ANY DOCUMENTS OR OTHER INFORMATION DELIVERED TO SELLER PURSUANT TO THIS AGREEMENT THAT WERE PREPARED BY THIRD PARTIES, INCLUDING, WITHOUT LIMITATION, THE ACCURACY OR COMPLETENESS OF THE CONTENT OF THE DUE DILIGENCE DOCUMENTS THAT WERE PREPARED BY THIRD PARTIES; PROVIDED, HOWEVER, SELLER KNOWS OF NO FACT OR CIRCUMSTANCE THAT WOULD MAKE SUCH DOCUMENTS OR OTHER INFORMATION FALSE OR MISLEADING.

5.   Title Insurance Policy.

Upon the transfer of the Property, Escrow Holder shall cause title to the Property to be insured effective as of Closing by a CLTA owner’s policy of title insurance (“Title Policy”) issued by the Title Company with liability in the amount of the Purchase Price, insuring title to the Property to be vested in Purchaser, subject only to current real estate taxes and assessments not delinquent and the Permitted Encumbrances; provided, however, that Purchaser may request that the foregoing policy be an ALTA Extended Coverage owner’s policy so long as (i) a survey acceptable to the Title Company has been obtained, at Purchaser’s expense, or Purchaser agrees to a waiver to the survey coverage; (ii) Purchaser pays the cost of the ALTA Policy in excess of the cost of the CLTA Policy, and (iii) there is no delay in the Close of Escrow due to Purchaser’s

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request to obtain an ALTA policy.  The issuance of the Title Policy shall be in lieu of any express or implied warranty of Seller concerning title to the Property (except those contained in or from the Grant Deed).  Except to the extent of any withholding of information by Seller to Purchaser and Title Company as to the condition of title (i.e., actual knowledge of unrecorded easements or encroachments or claims of ownership or rights to possession or use), Purchaser agrees that its only remedy arising by reason of any defect in title shall be against the Title Company.  Purchaser’s acceptance of the Grant Deed from Seller for the Property at the Closing and the issuance of a Title Policy to Purchaser by the Title Company at the Closing shall conclusively establish that Seller conveyed title to the Property to Purchaser as required by this Agreement and shall discharge in full Seller’s obligations under this Section 5 hereof with respect to title to the Property, in the absence of fraud.

Seller shall indemnify, defend, and hold harmless Purchaser, its officers, directors, and employees, and the Property, from and against any claim, obligation, liability, lawsuit, demand, loss or cost (including, without limitation, reasonable attorneys’ fees and costs) as a result of claims by Tesco that funds are owing to Tesco as a result of the Tesco Deed of Trust.

6.   Covenants of Purchaser.

A.  Purchaser covenants and agrees with Seller that prior to the Closing, Purchaser will not unreasonably interfere with or hinder the operation of the Property prior to the delivery of possession thereof to Purchaser following the Closing hereunder.  Subject to the terms of Section 4 above, Purchaser, its employees, contractors, consultants, third party inspectors, agents, and representatives shall have reasonable access to the Property for undertaking Purchaser’s due diligence, including physical inspections.

B.  Except as provided in Section 4.B. above, Purchaser shall not have the right to (i) enter into any contract, agreement or commitment with respect to the Property or any development thereof; (ii) undertake any on‑site development work which is intrusive in nature, such as the removal or movement of any soil; or (iii) undertake any activity which could result in the assertion of any mechanics’, materialmens’ or similar liens or claims against the Property or any portion thereof.

7.   Covenants of Seller.

During the period from the Opening of Escrow until the earlier of termination of this Agreement or the Close of Escrow, Seller agrees to the following:

A.  Seller shall not cause to exist any encumbrance, charge or lien or allow any easements affecting all or any portion of the Property to be placed upon the Property unless such encumbrance, charge, lien or easement is in effect as of the date of this Agreement and shown in the Title Report or unless such encumbrance, charge, lien or easement has been approved in writing by Purchaser or will be removed by Seller prior to the Close of Escrow.

B.  Following the Contingency Termination Date, Seller shall not enter into any service, management or other contract relating to the Property which will survive the

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Close of Escrow without the prior written consent of Purchaser, which consent will not be unreasonably withheld.  With respect to Purchaser’s consent, Purchaser shall be required to provide its consent within five (5) days following a request.  If Purchaser fails to provide Seller with notice of response, Purchaser shall be deemed to have approved any such service contract or modification to service contract.  Notwithstanding the foregoing, Seller may negotiate backup offers for the sale of the Property from the date of the execution of this Agreement until the Close of Escrow or the termination of this Agreement so long as such back-up offers are not accepted by Seller and do not interfere with Purchaser’s rights to conduct its due diligence or close under this Agreement

C.  Seller shall not sell or remove any of the Included FF&E from the Improvements or the Land.  At any time after the twentieth (20th)  day after the date of mutual execution of this Agreement, Seller may sell or remove any of the Excluded FF&E.  Purchaser and Seller have together inspected all of the FF&E located at the Property and have agreed as to all items of Included FF&E.  As soon as reasonably possible, but in any event on or before the twentieth (20th) day after the mutual execution of this Agreement, Purchaser shall have tagged each item that will be an item of Included FF&E, the parties will document the list of Included FF&E and Excluded FF&E, in accordance with the agreed to tagged items and attach the itemizations as Exhibits “B-1” and “B-2”.  Seller shall notify Purchaser not less than five (5) days in advance of removing any Excluded FF&E from the Property, and Purchaser may elect to be present at such time of removal; provided, however, Purchaser shall not delay the scheduled day of removal.

D.  Prior to the Close of Escrow, Seller shall have repaired the water leak which is believed to be coming from a water heater (which is to be repaired or replaced), shall have replaced or repaired to a commercially reasonable condition all observable damage to the floors, walls, molding, or other portions of the Improvements that were damaged by the water leak (which is believed to affect two floors of the building), shall have examined the area for and remediated any indications of mold, and shall assign to Purchaser all warranties for the repair of the water heater and the repair of portions of the Improvements damaged by the water leak.

8.   Representations of Seller.

A.  Seller represents to Purchaser as of the date hereof that:

(1) Seller is a limited liability company duly formed, validly existing, the execution and delivery by Seller of, and Seller’s performance under, this Agreement are within Seller’s powers and have been duly authorized by all requisite action, and the person executing this Agreement on behalf of Seller has the authority to do so.

(2) This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, subject to laws applicable generally to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting or limiting the right of contracting parties generally.

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(3) The execution, delivery and performance by Seller of this Agreement: (A) does not and will not violate any provision of the organizational documents of Seller; (B) does not and will not violate any law or permit applicable to Seller or require Seller to obtain any approval, consent or waiver of, or make any filing with, any governmental authority which has not been obtained or made; and (C) does not result in a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of any contract by which Seller is bound.

(4) To Seller’s knowledge, as of the date of this Agreement, the Property is not the subject of any condemnation or similar proceeding, and Seller has not received written notice of any environmental, zoning, redevelopment agency plan or other land use regulation proceedings which could reasonably be expected to detrimentally affect the value, use and operation of the Property, and to Seller’s knowledge, as of the date of this Agreement, no such condemnation or other similar or above-described proceeding is threatened or pending.

(5) Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”) (i.e., Seller is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder).

(6) Seller (a) is not in receivership or dissolution; (b) has not made any assignment for the benefit of creditors; (c) has not admitted in writing its inability to pay its debts as they mature; (d) has not been adjudicated a bankrupt; (e) has not filed a petition in voluntary bankruptcy, a petition or answer seeking reorganization, or an arrangement with creditors under the Federal Bankruptcy Law or any other similar law or statute of the United States or any state, or (f) does not have any such petition described in Subparagraph (e) above filed against Seller.

(7) Except as set forth in Section 14 hereof, Seller has not authorized any broker or finder to act on its behalf in connection with the sale and purchase hereunder and Seller has not dealt with any broker or finder purporting to act on behalf of Seller or otherwise.

(8) Except as disclosed on Schedule 8.A.(8) attached hereto, there are no contracts or agreements, written or oral, for any services related to the Property or that obligate the owner of the Property to pay for any goods or services in connection with its ownership or use or occupancy of the Property that will survive the Close of Escrow.  There are no leases, subleases, licenses, concessions, or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of the Property that will survive the Close of Escrow.

(9) There are no outstanding options or rights of first refusal to purchase or lease the Property, or any portion thereof or interest therein.

(10)    As of the Close of Escrow, all Included FF&E will be owned free and clear of any liens and encumbrances.

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(11)    Seller has provided to Purchaser a written disclosure and a description of all material physical defects of the Property of which Seller has actual knowledge (without any duty of inquiry or investigation), including without limitation, defects in the physical aspects of the Improvements and building systems (including HVAC, roof, plumbing, loading doors, electrical and lighting systems, life safety systems, security systems and mechanical equipment) geological or drainage or soil problems, leakage and other information that a reasonably prudent buyer would consider material, and including any non-confidential correspondence, reports and disclosures in the possession or under the control of Seller related to the condition of the Property.

(12)    Except as set forth on Schedule 8.A.(12) attached hereto, Seller has no actual knowledge (without any duty of inquiry or investigation) of any aspect or condition of the Property which materially violates applicable laws, rules, regulations, codes or covenants, conditions or restrictions, or of improvements or alterations made to the Property without a permit where one was required, or of any unfulfilled order or direction of any applicable government agency or of any casualty insurance company that any work of investigation, remediation, repair, maintenance or improvement is to be performed on the Property (which has not been performed).

(13)    Except as set forth on Schedule 8.A.(13) attached hereto, Seller has no actual knowledge (without any duty of inquiry or investigation) of the past or present existence of any above or below ground storage tanks on the Property or of the current existence on the Property of asbestos, transformers containing PCB’s, or any hazardous, toxic substance whose nature and/or quantity of existence, use, manufacture or effect render it subject to federal, state, or local regulation, investigation, remediation or removal as potentially injurious to public health or welfare or the environment.  Seller has no knowledge of the existence on the Property of hazardous levels of any mold or fungi defined as toxic under applicable state or federal law.

(14)    Seller has no knowledge that any actions, suits or proceedings are pending or threatened before any court, arbitration tribunal, governmental department, commission, board, bureau, agency or instrumentality that would affect the Property or the right or ability of Seller to convey the Property, or the ability of Purchaser to occupy or utilize the Property.

(15)    As of the Close of Escrow, the Improvements shall consist of a functioning food-grade refrigerated warehouse that is capable of cooling and maintaining, on a reliable, consistent, and efficient basis, temperatures of 34 to 36 degrees F. on a 24 hour per day, 7 day per week basis during all outdoor temperature ranges for the entire 100,000 square feet of the refrigerated portion of the building.

(16)    As of the Close of Escrow, the water leak as described above has been repaired in a good and workman like manner and all damage to the floors, walls, molding and other portions of the Improvements that were damaged by the water leakage have been totally and completely repaired; that there were no known signs of mold discovered in connection therewith or that any known mold has been remediated; and there are no outstanding bills or claims with respect to any of such work.

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B.  As used in this Section 8, the term “to Seller’s knowledge” (i) shall mean and apply to the actual knowledge of Steve Mortensen (the  “Involved Party”), who is the person currently with Seller who is most knowledgeable about the Property and not to any other parties, (ii) shall mean the actual knowledge of such Involved Party, without any duty of investigation or inquiry of any kind; (iii) shall not mean such Involved Party is charged with knowledge of the acts, omissions and/or knowledge of the predecessors in title to the Property or with knowledge of the acts, omissions and/or knowledge of Seller’s agents or employees; and (iv) shall not apply to or be construed to apply to information or material which may generally or incidentally be in the possession of Seller, but which is not actually known to the Involved Party.  Nothing herein shall be construed to imply or mean that the Involved Party has any personal liability for a breach of a representation or warranty.

C.  If Purchaser is aware that any of the representations contained in Section 8.A. above are not true and correct as of the date hereof or at Closing, Purchaser shall allow Seller thirty (30) days after its written notice within which to cure such breach; it being acknowledged by the parties that Seller shall only be permitted to cure a false representation by either (i) curing the underlying matter giving rise to such false representation (i.e., by causing an undisclosed item to be terminated rather than simply disclosing such undisclosed item) or (ii) causing the Title Company to insure over any false representation which related to title to the Property.  If Seller fails to cure such breach within thirty (30) days after written notice thereof, Purchaser’s sole remedy (subject to Section 8.D. below) shall be to: (i) waive such misrepresentations and close this transaction, or (ii) terminate this Agreement by written notice thereof to Seller and to Escrow Holder and the Deposit and Purchaser’s Refrigeration Testing Fund Deposit shall be returned to Purchaser and Escrow Holder shall deliver to Purchaser from Seller’s Refrigeration Testing Fund Deposit the amount of Purchaser’s actual, documented, out of pocket Refrigeration Testing Costs in which event the parties shall have no further right or obligation hereunder except for Seller’s and Purchaser’s obligations which are expressly stated to survive.  Purchaser hereby acknowledges and agrees that, upon the Close of Escrow, any claim of Purchaser that any representation of Seller herein is not true and correct shall be automatically waived in full by Purchaser, provided the information or basis from which any such claim arises is proved to have been known to Purchaser on or prior to the Closing.

D.  The representations of Seller set forth in Section 8.A. herein shall survive the Close of Escrow for a period of one (1) year.  Any claim of Purchaser based on an alleged breach or failure of any of Seller’s representations of which Purchaser had no knowledge as of the Closing or any other claim by Purchaser against Seller in connection with this transaction shall be made within one (1) year following the Closing or shall automatically be null, void and of no force or effect whatsoever and Purchaser’s remedies for any such claims (exclusive of claims related to the Refrigeration System for which there is a separate Refrigeration System Escrow Holdback in Escrow and except with respect to claims for Seller’s fraud and except for matters of reimbursement for cost and expenses as expressly set forth in this Agreement) shall be limited to recovery of actual damages not to exceed Two Million Dollars ($2,000,000).  In the event the Closing occurs, Purchaser hereby expressly waives, relinquishes and releases any right or remedy

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available to it at law, in equity or under this Agreement to make a claim against Seller for damages that Purchaser may incur, or to rescind this Agreement and the transactions contemplated hereby, as the result of any of Seller’s representations or warranties being untrue, inaccurate or incorrect if Purchaser knew that such representation or warranty was untrue, inaccurate or incorrect at the time of the Closing and Purchaser nevertheless closes hereunder.  For purposes hereof, a claim shall be deemed “made” only upon an official filing of an action with respect to such claim with a court of competent jurisdiction.  Notwithstanding the foregoing, any claim of Purchaser based on Seller’s alleged fraud (including fraudulent conveyances) shall be made within the applicable statute of limitations and there shall be no cap on damages based on such claim(s).

9.   Representations and Releases Provided By Purchaser.

A.   Purchaser represents to Seller as of the date hereof that:

(1)  Purchaser is a corporation duly formed, validly existing, the execution and delivery by Purchaser of, and Purchaser’s performance under, this Agreement are within Purchaser’s corporate powers and have been duly authorized by all requisite action, and the person executing this Agreement on behalf of Purchaser has the corporate authority to do so.

(2)  This Agreement constitutes the legal, valid and binding obligation of Purchaser enforceable in accordance with its terms, subject to laws applicable generally to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting or limiting the rights of contracting parties generally.

(3)  The execution, delivery and performance by Purchaser of this Agreement:  (A) does not and will not violate any provision of the organizational documents of Purchaser; (B) does not and will not violate any law or permit applicable to Purchaser or require Purchaser to obtain any approval, consent or waiver of, or make any filing with, any governmental authority which has not been obtained or made, except as would not reasonably be expected to prevent, impair or materially delay the ability of Purchaser to consummate the transactions contemplated hereby; and (C) does not result in a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of any contract by which Purchaser is bound, except as would not reasonably be expected to prevent, impair or materially delay the ability of Purchaser to consummate the transactions contemplated hereby.

(4)  Purchaser (a) is not in receivership or dissolution, (b) has not made any assignment for the benefit of creditors, (c) has not admitted in writing its inability to pay its debts as they mature, (d) has not been adjudicated a bankrupt, (e) has not filed a petition in voluntary bankruptcy, a petition or answer seeking reorganization, or an arrangement with creditors under the federal bankruptcy law, or any other similar law or statute of the United States or any state, or (f) does not have any such petition described in (e) above filed against Purchaser.

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(5)  Purchaser has not authorized any broker or finder to act on its behalf in connection with the sale and purchase hereunder and Purchaser has not dealt with any broker or finder purporting to act on behalf of Purchaser or otherwise.

B.  If Seller is aware that any of the representations contained in Section 9.A. are not true and correct as of the date hereof or at Closing, Seller may, at its option, (i) waive such misrepresentations and close this transaction, or (ii) terminate this Agreement by written notice thereof to Purchaser and to Escrow Holder and the Deposit shall be paid to Seller, in which event the parties shall have no further right or obligation hereunder except for Purchaser’s obligations which are expressly stated to survive.  Seller hereby acknowledges and agrees that, upon the Close of Escrow, any claim of Seller that any representation of Purchaser herein is not true and correct shall be automatically waived in full by Seller, provided the information or basis from which any such claim arises is proven to have been known to Seller on or prior to the Closing.

C.  The representations of Purchaser set forth in Section 9.A. herein shall survive the Close of Escrow for a period of one (1) year.  Any claim of Seller based on an alleged breach or failure of any of Purchaser’s representations of which Seller had no knowledge as of the Closing or any other claim by Seller against Purchaser in connection with this transaction shall be made within one (1) year following the Closing or shall automatically be null, void and of no force or effect whatsoever.  Upon the Closing, any claim by Seller based on an alleged breach or failure of any of Purchaser’s representatives of which Seller is proven to have had knowledge will be waived.  For purposes hereof, a claim shall be deemed “made” only upon an official filing of an action with respect to such claim with a court of competent jurisdiction.  Notwithstanding the foregoing, any claim of Seller based on Purchaser’s fraud must be made within the applicable statute of limitations.

D.  PURCHASER ACKNOWLEDGES AND AGREES THAT, OTHER THAN THE LIMITED REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 8.A HEREOF OR ELSEWHERE HEREIN, AND ANY WARRANTIES CONTAINED IN ANY ANCILLARY DOCUMENTS EXECUTED BY SELLER IN CONNECTION WITH THIS AGREEMENT (INCLUDING THE STATUTORY REPRESENTATIONS AND WARRANTIES CONTAINED IN THE GRANT DEED) (COLLECTIVELY, THE “SURVIVING REPRESENTATIONS”), SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE PROPERTY OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  PRIOR TO THE EXPIRATION OF THE CONTINGENCY PERIOD, PURCHASER WILL HAVE HAD THE OPPORTUNITY TO CONDUCT ANY AND ALL INSPECTIONS OF THE PROPERTY TO ITS FULL AND COMPLETE SATISFACTION.  PURCHASER ACKNOWLEDGES THAT IT IS FULLY CAPABLE OF EVALUATING THE PROPERTY’S SUITABILITY FOR PURCHASER’S INTENDED USE.  THE PROPERTY IS BEING SOLD AND CONVEYED HEREUNDER AND, UNLESS PURCHASER TERMINATES THIS AGREEMENT IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE CONTINGENCY PERIOD, PURCHASER AGREES TO ACCEPT THE PROPERTY “AS IS,” “WHERE IS” AND “WITH ALL FAULTS” AND

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SUBJECT TO ANY CONDITION WHICH MAY EXIST AND ANY MATTER THAT MAY BE DISCLOSED BY A PHYSICAL INSPECTION OR SURVEY OF THE PROPERTY, WITHOUT ANY REPRESENTATION OR WARRANTY BY SELLER EXCEPT FOR THE SURVIVING REPRESENTATIONS.  SELLER SHALL REASONABLY REPAIR ANY DAMAGE TO THE PROPERTY CAUSED BY ITS REMOVAL OF ANY OF THE EXCLUDED FF&E.  THE PURCHASE PRICE IS A NEGOTIATED PURCHASE PRICE REPRESENTING THE FACT THAT THE PROPERTY IS BEING PURCHASED BY PURCHASER ON AN “AS IS,” “WHERE IS” AND “WITH ALL FAULTS” BASIS AND SUBJECT ONLY TO THE SURVIVING REPRESENTATIONS.  PURCHASER HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT (i) PURCHASER SHALL BE SOLELY RESPONSIBLE FOR DETERMINING THE STATUS AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, SURVEY MATTERS, ENVIRONMENTAL CONDITIONS, ENVIRONMENTAL REGULATIONS, ZONING CLASSIFICATIONS, BUILDING REGULATIONS AND GOVERNMENTAL ENTITLEMENT AND DEVELOPMENT REQUIREMENTS APPLICABLE TO THE PROPERTY AND PURCHASER WILL HAVE THE OPPORTUNITY TO HAVE, PRIOR TO THE EXPIRATION OF THE CONTINGENCY PERIOD, THOROUGHLY INSPECTED AND EXAMINED THE PROPERTY TO THE EXTENT DEEMED NECESSARY BY PURCHASER IN ORDER TO ENABLE PURCHASER TO EVALUATE THE PURCHASE OF THE PROPERTY AND (ii) PURCHASER IS RELYING SOLELY UPON SUCH INSPECTIONS, EXAMINATION, AND EVALUATION OF THE PROPERTY BY PURCHASER IN PURCHASING THE PROPERTY ON AN “AS IS,” “WHERE IS” AND “WITH ALL FAULTS” BASIS, WITHOUT REPRESENTATIONS (OTHER THAN THE SURVIVING REPRESENTATIONS), WARRANTIES OR COVENANTS, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE.  PURCHASER HEREBY WAIVES AND RELINQUISHES ALL RIGHTS AND PRIVILEGES ARISING OUT OF, OR WITH RESPECT OR IN RELATION TO, ANY REPRESENTATIONS (OTHER THAN THE SURVIVING REPRESENTATIONS), WARRANTIES OR COVENANTS, WHETHER EXPRESS OR IMPLIED, WHICH MAY HAVE BEEN MADE OR GIVEN, OR WHICH MAY BE DEEMED TO HAVE BEEN MADE OR GIVEN, BY SELLER.  PURCHASER HEREBY FURTHER ACKNOWLEDGES AND AGREES THAT WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXCLUDED FROM THE TRANSACTION CONTEMPLATED HEREBY, AS ARE ANY WARRANTIES ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE, AND THAT SELLER HAS NOT WARRANTED, AND DOES NOT HEREBY WARRANT, THAT THE PROPERTY NOW OR IN THE FUTURE WILL MEET OR COMPLY WITH THE REQUIREMENTS OF ANY LAW OR REGULATION OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR JURISDICTION.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER HEREBY ASSUMES ALL RISK AND LIABILITY (AND AGREES THAT SELLER SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL, OR OTHER DAMAGES) RESULTING OR ARISING FROM OR RELATING TO THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIR, OR OPERATION OF THE PROPERTY

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EXCEPT IN THE CASE OF A SURVIVING REPRESENTATION THAT IS NOT ACCURATE AND THAT IS NOT PROVEN TO HAVE BEEN KNOWN BY PURCHASER PRIOR TO THE CLOSE OF ESCROW.  PURCHASER ACKNOWLEDGES AND AGREES THAT THE SALE PROVIDED FOR HEREIN IS MADE WITHOUT ANY WARRANTY BY SELLER, EXCEPT FOR THE SURVIVING REPRESENTATIONS, AS TO THE NATURE OR QUALITY OF THE PROPERTY; THE DEVELOPMENT POTENTIAL OF THE PROPERTY; THE PRIOR HISTORY OF OR ACTIVITIES ON THE PROPERTY; THE QUALITY OF LABOR AND/OR MATERIALS INCLUDED IN ANY OF THE IMPROVEMENTS; THE FITNESS OF THE PROPERTY FOR AND/OR THE SOIL CONDITIONS EXISTING AT THE PROPERTY FOR ANY PARTICULAR PURPOSE OR DEVELOPMENT POTENTIAL; THE PRESENCE OR SUSPECTED PRESENCE OF HAZARDOUS WASTE OR SUBSTANCES ON, ABOUT, OR UNDER THE PROPERTY OR THE IMPROVEMENTS; THE STATUS OF ANY WASTEWATER DISCHARGE PERMIT COMPLIANCE OR THE ZONING OR OTHER LEGAL STATUS OF THE PROPERTY.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND AGREES THAT NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY THE EXECUTION HEREOF PURCHASER HEREBY ACKNOWLEDGES THAT NO PERSON HAS MADE, ANY REPRESENTATION, AGREEMENT, STATEMENT, WARRANTY, GUARANTY OR PROMISE REGARDING THE PROPERTY, OR THE TRANSACTION CONTEMPLATED HEREIN, OR REGARDING THE ZONING, CONSTRUCTION, PHYSICAL CONDITION OR OTHER STATUS OF THE PROPERTY, AND NO REPRESENTATION, WARRANTY, AGREEMENT, STATEMENT, GUARANTY OR PROMISE, IF ANY, MADE BY ANY PERSON ACTING ON BEHALF OF SELLER WHICH IS NOT CONTAINED HEREIN SHALL BE VALID OR BINDING UPON SELLER.

E.  UPON THE CLOSING, OTHER THAN WITH RESPECT TO A BREACH OF A SURVIVING REPRESENTATION OF SELLER, PURCHASER AGREES TO RELEASE THE SELLER PARTIES FROM ANY AND ALL CLAIMS, JUDGMENTS, LIABILITIES, PENALTIES, FINES, COSTS, EXPENSES OR DAMAGES WHICH IN ANY WAY AND AT ANY TIME RELATE TO OR ARISE FROM, DIRECTLY OR INDIRECTLY, THE PROPERTY OR SELLER’S OWNERSHIP THEREOF (EXCEPT THAT PURCHASER IS NOT RELEASING SELLER PARTIES FROM PURCHASER’S ABILITY TO PURSUE CROSS-CLAIMS AND COUNTERCLAIMS AGAINST SELLER PARTIES RESULTING FROM THIRD PARTY AND GOVERNMENTAL ACTIONS OR PROCEEDINGS AGAINST PURCHASER FOR MATTERS OCCURRING DURING OR PRIOR TO SELLER’S OWNERSHIP OF THE PROPERTY).  PURCHASER ACKNOWLEDGES THAT IT IS FAMILIAR WITH AND VOLUNTARILY WAIVES ANY RIGHT OR BENEFIT ARISING FROM SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA WHICH PROVIDES AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF

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KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Purchaser:	Seller:
CALAVO GROWERS INC.,	FRESH FOODS, LLC,
a California corporation	a Delaware limited liability company
By:	By:
Name:	Name:
Title:	Title:

F.  NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, THE PROVISIONS SET FORTH IN SECTIONS 9.D. AND 9.E. SHALL SURVIVE THE CLOSE OF ESCROW.

10.   Condemnation.

Promptly upon obtaining knowledge of the institution of the proceedings for the condemnation of any part of the Property, Seller or Purchaser will notify the other of the pendency of such proceedings.  In the event of the condemnation of any portion of the Property or the sale of any portion of the Property in lieu of condemnation prior to the Closing which would not cause the remainder of the Property to no longer be reasonably suitable for Purchaser’s intended use, this Agreement shall remain in full force and effect (unless terminated by Purchaser during the Contingency Period), and Purchaser shall take title to the remainder of the Property with the assignment of such proceeds and subject to such condemnation and without reduction in the Purchase Price; provided, however, that if any such proceeding is reasonably likely to result in the remainder of the Property no longer being reasonably suitable for Purchaser’s intended use, then Purchaser may terminate this Agreement by notice in writing to Seller within ten (10) business days following the date on which Purchaser received notice from Seller or otherwise became aware of such condemnation of the Property or conveyance in lieu thereof, in which event the Deposit shall be returned to Purchaser and the parties shall have no further right or obligation hereunder except for Purchaser’s obligations which are expressly stated to survive.  If Purchaser does not elect to terminate within said ten (10) business day period, Purchaser shall be deemed to waive all rights to terminate pursuant to this provision and this Agreement shall remain in full force and effect, without reduction in the Purchase Price, but with any condemnation proceeds being assigned to Purchaser.  Seller and Purchaser agree that California Civil Code Section 1662 shall not be applicable to this transaction.

11.   Risk of Loss.

Except as expressly provided in this Agreement to the contrary, all risk of loss of any kind concerning the Property shall be borne exclusively by Seller until the Close of Escrow.  In the event of damage or destruction to a material portion of the Property whether or not it would cause the remainder of the Property to no longer be reasonably suitable for Purchaser’s intended use, at any time prior to the Close of Escrow, Seller shall immediately give Purchaser notice

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thereof and then Purchaser shall elect, by delivering a written notice to Seller within five (5) business days of its receipt of notice from Seller of such damage, either: (y) to terminate this Agreement in which event Purchaser and Seller shall share equally all Escrow costs, the Deposit shall be returned to Purchaser and neither party shall have any further obligation to the other, except for  Seller’s and Purchaser’s obligations which are expressly stated to survive, or (z) to proceed with the purchase of the Property and consummate this Agreement in accordance with its terms.  Purchaser’s failure to deliver to Seller notice of its election within the 5 business-day period shall be deemed Purchaser’s election to not proceed with the purchase of the Property.  If Purchaser elects option (z), Seller shall, at the Closing, assign to Purchaser Seller’s right, if any, to receive any insurance proceeds payable in connection with such damage or destruction unless such damage or destruction has been repaired.  Nothing set forth herein affects or negates Purchaser's right to terminate this Agreement for any reason, including an event of damage or destruction, prior to the Contingency Termination Date.

12.   Prorations and Costs.

A.  All real estate taxes relating to the Property shall be prorated as of 12:01 am (California time) on the Closing Date (such that all taxes, costs and expenses accruing on the Closing Date shall be charged to Purchaser and all income and revenue from the Property (if any) on the Closing Date shall be for the account of Purchaser).  If Closing shall occur before the actual taxes for the then current year are known, the apportionment of taxes shall be upon the basis of taxes for the Property for the immediately preceding year, provided that, if the taxes for the current year are thereafter determined to be more or less than the taxes for the preceding year (after any appeal of the assessed valuation thereof is concluded), Seller and Purchaser promptly shall adjust the proration of such taxes and Seller or Purchaser, as the case may be, shall pay to the other any amount required as a result of such adjustment.  All special taxes or assessments due and payable prior to the Closing Date shall be prorated as of 12:01 am on the Closing Date, and those due and payable after the Closing Date shall be paid by Purchaser.  All taxes, whether retroactive or not, imposed as a result of this transaction (but not the transaction pursuant to which Seller acquired the Property) or due to a change in the use of the Property after Closing, from the use prior to Closing, shall be paid by Purchaser.

B.  The present insurance coverage and public utility service on the Property shall be terminated as of the Closing Date.  Accordingly, there shall be no proration of insurance premiums or public utility bills.

C.  All income from, and expenses of, the Property, including but not limited to operating expenses, maintenance charges and service charges, shall be prorated as of 12:01 a.m. (California time) on the Closing Date.  The parties hereby agree to fully cooperate with each other for a period of sixty (60) days following the Closing to correctly adjust and prorate all costs and expenses which cannot be accurately adjusted and prorated as of the Closing.

D.  Documentary transfer taxes and local transfer or conveyance taxes, if any, shall be paid by Seller.

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E.  Sales tax, if any, on the Included FF&E shall be paid by Purchaser and Purchaser shall defend and indemnify Seller with respect thereto.

F.  Any escrow fee charged by the Escrow Holder shall be paid one-half (1/2) by Seller and one-half (1/2) by Purchaser.  Purchaser shall pay the fee for the recording of the Grant Deed.  Seller shall pay for the cost of a CLTA owner’s policy of title insurance.  The additional premium for ALTA coverage or for any additional title insurance requested by Purchaser shall be at Purchaser’s sole cost and expense.  Except as otherwise provided in this Agreement, all costs related to satisfying any “due diligence” requirements or requests which Purchaser deems necessary in its analysis of the Property shall be the sole obligation of Purchaser.  Each party shall be responsible for the payment of its own attorneys’ fees incurred in connection with the transaction which is the subject of this Agreement.

G.  The obligations of Seller and Purchaser under this Section 12 shall survive the Closing.

13.   Remedies.

A.  IN THE EVENT THAT SELLER SHALL FAIL TO CONSUMMATE THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT DUE TO A DEFAULT BY SELLER THAT RESULTS IN THE INABILITY TO PROCEED TO CLOSING, PURCHASER, AS ITS SOLE AND EXCLUSIVE REMEDY, MAY EITHER (i) TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT AND PURSUE SELLER FOR ACTUAL DAMAGES, INCLUDING ALL REASONABLE AND DOCUMENTED OUT-OF-POCKET COSTS INCURRED BY PURCHASER IN CONNECTION WITH THE INSPECTION, TESTING AND OPERATION OF THE REFRIGERATION SYSTEM; PROVIDED, HOWEVER, EXCEPT WITH RESPECT TO A CLAIM FOR FRAUD (INCLUDING FRAUDULENT CONVEYANCE), IN NO EVENT SHALL PURCHASER BE ENTITLED TO A RECOVERY OR CLAIM AGAINST PURCHASER FOR ACTUAL DAMAGES IN EXCESS OF AN AMOUNT EQUAL TO TWO MILLION DOLLARS ($2,000,000) AND SELLER SHALL NOT BE LIABLE TO PURCHASER FOR ANY PUNITIVE, SPECULATIVE OR CONSEQUENTIAL DAMAGES; OR (ii) BRING AN ACTION FOR SPECIFIC PERFORMANCE OF THIS AGREEMENT OR ANY OTHER EQUITABLE RELIEF WHATSOEVER, WITHOUT PROVING DAMAGES OR POSTING A BOND OR OTHER SECURITY, AND WITHOUT WAIVING THE RIGHT TO MONETARY DAMAGES.  PURCHASER SPECIFICALLY ACKNOWLEDGES THAT IT SHALL NOT HAVE ANY REMEDY WHATSOEVER AGAINST SELLER FOR ANY DEFAULT BY SELLER UNDER THIS AGREEMENT UNLESS PURCHASER IS IN FULL COMPLIANCE WITH ALL THE TERMS AND CONDITIONS HEREOF WITH WHICH PURCHASER IS REQUIRED TO COMPLY AT THE TIME OF SELLER’S DEFAULT (I.E., IF SELLER HAS SOLD THE PROPERTY TO ANOTHER PARTY, PURCHASER IS NOT REQUIRED TO DELIVER THE PURCHASE PRICE INTO ESCROW IN ORDER TO PURSUE ITS REMEDIES, BUT MAY BE REQUIRED TO SHOW EVIDENCE OF ABILITY TO PERFORM).  SELLER ACKNOWLEDGES AND AGREES THAT NO TECHNICAL

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OR NON-MATERIAL DEFAULT BY PURCHASER THAT DOES NOT RESULT IN THE INABILITY OF SELLER TO SELL THE PROPERTY UNDER THIS AGREEMENT SHALL IN ANY WAY AFFECT ANY RIGHTS OR REMEDIES OF PURCHASER AGAINST SELLER HEREUNDER AND THAT THIS LIQUIDATED DAMAGES PROVISION SHALL NOT APPLY IN SUCH CASE.

NOTHING CONTAINED IN THIS PARAGRAPH SHALL SERVE TO WAIVE OR OTHERWISE LIMIT PURCHASER'S RIGHTS TO OBTAIN FROM SELLER ALL COSTS AND EXPENSES OF ENFORCING THIS LIQUIDATED DAMAGE PROVISION, INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPERT COSTS AND FEES, PURSUANT TO SECTION 17.

B.  IF, ON OR BEFORE THE LAST DAY OF THE CONTINGENCY PERIOD PURCHASER HAS NOTIFIED SELLER IN WRITING THAT ALL CONTINGENCIES AND CONDITIONS TO CLOSING FOR THE BENEFIT OF PURCHASER HAVE BEEN SATISFIED OR WAIVED, IN THE EVENT THAT PURCHASER SHOULD FAIL TO CONSUMMATE THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT DUE TO A DEFAULT BY PURCHASER THAT RESULTS IN THE INABILITY TO PROCEED TO CLOSING, THEN SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY, MAY TERMINATE THIS AGREEMENT BY NOTIFYING PURCHASER THEREOF AND RECEIVE THE DEPOSIT AS LIQUIDATED DAMAGES.  THE PARTIES AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER’S DEFAULT ON ITS OBLIGATIONS.  ALTHOUGH THE AMOUNT OF SUCH DAMAGES IS DIFFICULT OR IMPOSSIBLE TO DETERMINE, THE PARTIES AGREE THAT THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF SELLER’S LOSS IN THE EVENT OF PURCHASER’S DEFAULT.  THUS, SELLER SHALL ACCEPT THE DEPOSIT AS LIQUIDATED DAMAGES BUT NOT AS A PENALTY.  IN CONSIDERATION OF SELLER RECEIVING THE LIQUIDATED DAMAGES, SELLER WILL BE DEEMED TO HAVE WAIVED ALL OF ITS CLAIMS AGAINST PURCHASER FOR DAMAGES IF, BUT ONLY IF, PURCHASER HAS SIGNED AND DELIVERED TO ESCROW HOLDER WITHIN TEN (10) BUSINESS DAYS AFTER NOTICE FROM SELLER OF PURCHASER’S FAILURE, ESCROW CANCELLATION INSTRUCTIONS AND ALL OTHER DOCUMENTS REASONABLY REQUIRED BY ESCROW HOLDER TO UNCONDITIONALLY INSTRUCT AND ENABLE ESCROW HOLDER TO CANCEL ESCROW AND PAY TO SELLER THE DEPOSIT THEN HELD BY ESCROW HOLDER.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 13.B., IF PURCHASER BRINGS AN ACTION AGAINST SELLER FOR AN ALLEGED BREACH OR DEFAULT BY SELLER OF ITS OBLIGATIONS UNDER THIS AGREEMENT, AND, IN CONNECTION WITH THAT ACTION, RECORDS A LIS PENDENS OR OTHERWISE ENJOINS OR RESTRICTS SELLER’S ABILITY TO SELL OR TRANSFER THE PROPERTY (“PURCHASER’S ACTION”), SELLER SHALL NOT BE RESTRICTED BY THE PROVISIONS OF THIS SECTION 13.B. FROM SEEKING EXPUNGEMENT OR RELIEF FROM THAT LIS PENDENS, INJUNCTION OR OTHER RESTRAINT, AND RECOVERING

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DAMAGES, COSTS OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES) WHICH SELLER MAY SUFFER OR INCUR AS A RESULT OF PURCHASER’S ACTION, AND THE AMOUNT OF ANY SUCH DAMAGES AWARDED TO SELLER SHALL NOT BE LIMITED TO THE LIQUIDATED DAMAGES SET FORTH HEREIN.  PURCHASER ACKNOWLEDGES AND AGREES THAT NO TECHNICAL OR NON-MATERIAL DEFAULT BY SELLER THAT DOES NOT RESULT IN THE INABILITY OF PURCHASER TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT SHALL IN ANY WAY AFFECT ANY RIGHTS OR REMEDIES OF SELLER AGAINST PURCHASER HEREUNDER AND THAT THIS LIQUIDATED DAMAGES PROVISION SHALL NOT APPLY IN SUCH CASE.  EXCEPT AS OTHERWISE PROVIDED IN THE SENTENCE ABOVE, IN CONSIDERATION OF SELLER RECEIVING THE LIQUIDATED DAMAGES, SELLER WILL BE DEEMED TO HAVE WAIVED ALL OF ITS CLAIMS AGAINST PURCHASER FOR DAMAGES.  FURTHERMORE, IN NO EVENT SHALL THIS SECTION 13.B. HAVE ANY APPLICATION TO OR LIMIT SELLER’S RIGHTS AGAINST PURCHASER IN CONNECTION WITH ANY OF THE FOLLOWING:  (i) SECTION 14 OF THIS AGREEMENT, (ii) SECTION 17 OF THIS AGREEMENT, or (iii) ANY DUTY OR OBLIGATION OF PURCHASER TO INDEMNIFY SELLER AS PROVIDED IN THIS AGREEMENT, INCLUDING IN CONNECTION WITH PURCHASER’S INSPECTION, TESTING AND OPERATION OF THE REFRIGERATION SYSTEM.

SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THE FOREGOING LIQUIDATED DAMAGES PROVISION AND BY THEIR SIGNATURES IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.

Purchaser:	Seller:
CALAVO GROWERS INC.,	FRESH FOODS, LLC,
a California corporation	a Delaware limited liability company
By:	By:
Name:	Name:
Title:	Title:

14.   Real Estate Commissions.

Seller agrees to pay upon the Closing of the transaction contemplated hereby, and not otherwise, a real estate sales commission to Seller’s broker, Sagent Advisors (“Seller’s Broker”) pursuant to a separate agreement.  Said commission to the Seller’s Broker shall in no event be payable unless and until the transaction contemplated hereby is closed in accordance with the terms of this Agreement; if such transaction is not closed for any reason, including, without limitation, failure of title or default by Seller or Purchaser or termination of this Agreement pursuant to the terms hereof, then such commission will not be deemed to have been earned and shall not be due or payable.  Each party hereto agrees to indemnify and hold harmless the other party from and against any and all losses, liens, claims, judgments, liabilities, costs, expenses or

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damages (including reasonable attorneys’ fees and court costs) of any kind or character arising out of or resulting from any agreement, arrangement or understanding (except as set forth above with respect to the Seller’s Broker) alleged to have been made by such party or on its behalf with any broker or finder in connection with this Agreement or the transaction contemplated hereby.  The obligations of Seller and Purchaser under this Section 14 shall survive the Closing.

15.   Notices.

Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery delivered by a representative of the party giving such notice, or (b) overnight delivery by recognized overnight courier, or (c) United States mail, postage prepaid, registered or certified mail, (d) facsimile, or (e) electronic mail, addressed as follows:

If to Seller, to:	Fresh Foods, LLC
	9130 W. Sunset Blvd.
	Los Angeles, California 90069
	Attention: Legal Department
	Facsimile:  (310) 789-1791
	E-mail:  legal@yucaipaco.com
With a copy to:	Pillsbury Winthrop Shaw Pittman LLP
	725 South Figueroa Street, Suite 2800
	Los Angeles, California 90017
	Attention:  William S. Waller, Esq.
	Facsimile:  (213) 629-1033
	E-mail:  william.waller@pillsburylaw.com
If to Purchaser, to:	Calavo Growers Inc.
	1141A Cummings Road
	Santa Paula, CA 93060
	Attention:  B. John Lindeman
	Facsimile:  (805) 921-3208
	E-mail:  Johnl@calavo.com
With a copy to:	TroyGould PC
	1801 Century Park East, Suite 1600
	Los Angeles, California 90067
	Attention:  Kenneth R. Blumer, Esq.
	Facsimile:  (310) 789-1400
	E-mail:  kblumer@troygould.com

or to such other address or to the attention of such other person as hereafter shall be designated in writing by the applicable party sent in accordance herewith.  Any such notice or communication shall be deemed to have been delivered either at the time of personal delivery actually received by the addressee or a representative of the addressee at the address provided above or, if delivered on a business day in the case of delivery service or certified or registered mail, as of the earlier of the date delivered or the date 72 hours following the date deposited in the United

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States mail at the address provided herein, or if by telecopier, upon electronic confirmation of good receipt by the receiving telecopier.  Purchaser and Seller hereby agree that notices may be given hereunder by the parties’ respective counsel and that, if any communication is to be given hereunder by Purchaser’s or Seller’s counsel, such counsel may communicate directly with all principals as required to comply with the provisions of this Section 15.

16.   Assignment.

Purchaser may assign its rights under this Agreement to an entity:  (a) which is affiliated with Purchaser; (b) in which Purchaser has an economic interest; and (c) in which Purchaser has day-to-day managerial control (a “Permitted Assignee”) by delivering (on or prior to the expiration of the Contingency Period) a written notice of such assignment to Seller and Escrow Holder together with an assignment and assumption agreement substantially in the form attached hereto as Exhibit “I”.  Otherwise, Purchaser shall not have the right to assign its interest in this Agreement without obtaining the prior written consent of Seller, which consent may be withheld by Seller in its sole and absolute discretion.  Purchaser hereby agrees that any assignment by Purchaser in contravention of this provision shall be void and shall not relieve Purchaser of its obligations and liabilities hereunder.  To the extent any assignment of Purchaser’s interest in this Agreement is consented to by Seller, the term “Purchaser,” as used in this Agreement, shall include such permitted assignee.  Any assignment permitted hereunder or by Seller shall not relieve Purchaser of its obligations hereunder and shall not delay the Closing in any way.  If the event of an assignment by Purchaser, Purchaser hereby waives all of its rights, defenses and benefits which might be available to Purchaser under California law, including, without limitation, those provided in California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, and any successor sections.

17.   Attorneys’ Fees and Legal Expenses.

Should either party hereto institute any action or proceeding in court or through arbitration to enforce any provision hereof or for damages by reason of any alleged breach of any provision of this Agreement or for any other remedy, the prevailing party shall be entitled to receive from the losing party all of its costs and expenses, including, without limitation, reasonable attorneys’ fees and all court and/or arbitration costs, costs of appeal and disbursements actually and reasonably incurred in connection with said proceeding. The obligations of Seller and Purchaser under this Section 17 shall survive the Closing.

18.   Section Headings.

The Section headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several Sections hereof.

19.   Entire Agreement.

This Agreement embodies the entire agreement between the parties hereto and supersedes any prior understandings or written or oral agreements between the parties concerning the sale of the Property.  Each party to this Agreement has substantial experience with the subject matter of this Agreement and each party has fully participated in the negotiation and drafting of this Agreement and has been advised by counsel of its choice with respect to the subject matter

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hereof. Accordingly, this Agreement shall be construed without regard to the rule that ambiguities in a document are to be construed against the drafter.

20.   Applicability.

The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns, except as expressly set forth herein.

21.   Time.

TIME IS OF THE ESSENCE IN THE PERFORMANCE OF THE PARTIES’ OBLIGATIONS UNDER THIS AGREEMENT.

22.   Gender and Number.

Within this Agreement, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires.

23.   Reporting of Foreign Investment.

Seller and Purchaser agree to comply with any and all reporting requirements applicable to the transaction which is the subject of this Agreement which are set forth in any law, statute, ordinance, rule, regulation, order or determination of any governmental authority, including, but not limited to, The International Investment Survey Act of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of 1984 and further agree upon request of one party to furnish the other party with evidence of such compliance.

24.   Counterpart Execution.

This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which together shall constitute one document.

25.   Applicable Law.

This Agreement shall be construed and interpreted in accordance with the laws of the State of California, without regard to the conflict of laws rules of such state.

26.   Time Calculations.

Should the calculation of any of the various time periods provided for herein result in an obligation becoming due on a Saturday, Sunday or legal holiday, then the due date of such obligation or scheduled time of occurrence of such event shall be delayed until the next business day.

27.   No Recordation.

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Seller and Purchaser hereby acknowledge that neither this Agreement nor any memorandum or affidavit thereof shall be recorded with the county recorder of the applicable California county.  Should Purchaser ever record or attempt to record this Agreement, or a memorandum or affidavit thereof, or any other similar document, then, notwithstanding anything herein to the contrary, said recordation or attempt at recordation shall constitute a default by Purchaser hereunder, and, in addition to the other remedies provided for herein, Seller shall have the express right to terminate this Agreement by filing a notice of said termination in the proper place for said filing.

28.   Merger Provision.

Except as expressly set forth herein, any and all rights of action of a party for any breach by the other party of any representation, warranty or covenant contained in this Agreement shall merge with the Grant Deed and other instruments executed at Closing, shall terminate at the Closing and shall not survive the Closing.  Notwithstanding anything contained herein to the contrary, the following provisions of this Agreement shall not merge with the Grant Deed and shall survive the Close of Escrow or a termination of this Agreement for the term set forth in such provisions:  Sections 4.B, 8, 9, 12, 13, 14, 17, 29, 30, 39, 42, 43, 45 and 46.

29.   Further Assurances.

Purchaser and Seller agree to execute all documents and instruments reasonably required in order to consummate the purchase and sale herein contemplated and to do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Agreement.

30.   Exoneration.

Purchaser acknowledges and agrees that notwithstanding anything to the contrary set forth in this Agreement, except with respect to Seller’s fraud and/or Seller’s failure to comply with Seller’s obligations under Section 45 below, under no circumstances shall Purchaser have any recourse whatsoever against the assets of Seller (except for matters of reimbursement for costs and expenses as expressly set forth in this Agreement, including, without limitation, those set forth in Sections 3.C.(7), 4.B.(1), 4.B(2) and 8.D above), and under no circumstances shall Purchaser have any recourse against Seller’s members, officers, directors, partners, shareholders, employees or managers for satisfaction of any claims, and Purchaser shall look to the Property only (subject to other limitations set forth in Section 13 hereof) for satisfaction of any claims and not to assets of members, officers, directors, partners, shareholders, employees or managers of Seller.

31.   Possession.

Seller shall deliver possession of the Property to Purchaser as of the Close of Escrow, including all keys in Seller’s possession and originals of documents delivered hereunder.

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32.   Severability.

If any portion of this Agreement is held to be unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect.

33.   Additional Instructions to Escrow Holder.

Notwithstanding anything to the contrary contained in this Agreement, Escrow Holder’s General Provisions are incorporated by reference herein to the extent they are not inconsistent with the provisions of this Agreement.  If there is any inconsistency between those General Provisions and any of the provisions of this Agreement, the provisions of this Agreement shall control.  If any requirements relating to the duties or obligations of Escrow Holder are unacceptable to Escrow Holder, or if Escrow Holder requires additional instructions, the parties agree to make any deletions, substitutions and additions, as counsel for Purchaser and Seller shall mutually approve, and which do not materially alter the terms of this Agreement.  Any supplemental instructions shall be signed only as an accommodation to Escrow Holder and shall not be deemed to modify or amend the rights of Purchaser and Seller, as between Purchaser and Seller, unless those signed supplemental instructions expressly so provide.

34.   Amendments.

This Agreement may be amended only by written agreement signed by both of the parties hereto.

35.   Exhibits Incorporated by Reference.

All exhibits attached to this Agreement are incorporated into this Agreement by reference.

36.   Preliminary Change of Ownership Report.

Purchaser shall be fully responsible for all matters in connection with the filing of a Preliminary Change of Ownership Report in accordance with the California Revenue and Taxation Code Section 480.3.

37.   Not an Offer.

Seller’s delivery of unsigned copies of this Agreement is solely for the purpose of review by the party to whom delivered, and neither the delivery nor any prior communications between the parties, whether oral or written, shall in any way be construed as an offer by Seller, nor in any way imply that Seller is under any obligation to enter the transaction which is the subject of this Agreement.  The signing of this Agreement by Purchaser constitutes an offer which shall not be deemed accepted by Seller unless and until Seller has signed this Agreement and delivered a duplicate original to Purchaser.

38.   INTENTIONALLY DELETED.

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39.   Tax Deferred Exchanges.

Purchaser or any entity encompassing Purchaser may desire to acquire the Property through a reverse tax deferred exchange which qualifies for non-recognition of gain under Section 1031 of the Code.  Seller shall cooperate with Purchaser in attempting to effectuate such exchange, including, but not limited to, the execution of such documentation as may be reasonably necessary to effect such exchange, provided that (i) Seller shall not incur any additional liability in connection with an exchange for the benefit of Purchaser, (ii) the date of Closing shall not be extended as a result of the exchange, without Seller’s prior written consent, which consent Seller may withhold in its sole and absolute discretion, (iii) any additional costs and charges attributable to the exchange, including, but not limited to, attorneys’ fees, brokers’ commissions and other transaction related expenses shall be paid for by Purchaser, and (iv) Purchaser acknowledges and agrees that Seller and/or its attorneys are not giving Purchaser any advice (including tax advice) in connection therewith.  Purchaser and Seller further agree that Purchaser may substitute an Exchange Accommodator Titleholder (“EAT”) (as defined in Rev. Proc. 2000-37) to act in place of Purchaser as the purchaser of the Property.  Seller agrees to accept all required performance from EAT and to render its performance of all of its obligations to EAT.  Seller agrees that performance by EAT will be treated as performance by Purchaser.  Purchaser shall unconditionally guarantee the full and timely performance by EAT of each and every one of the representations, warranties, covenants, indemnities, obligations and undertakings of EAT.  As guarantor, Purchaser shall be treated as a primary obligor with respect to these representations, warranties, covenants, indemnities, obligations and undertakings, and, in the event of breach, Seller may proceed directly against Purchaser, subject to the terms and conditions of this Agreement, on this guarantee without the need to join EAT as a party to any action against Purchaser.  Purchaser unconditionally waives any defense that it might have as guarantor that it would not have if it had made or undertaken these representations, warranties, covenants, indemnities, obligations and undertakings directly.  In the event of the breach of any representations, warranties, covenants, obligations and undertakings by Purchaser or EAT or in the event of any claim upon any indemnity of Purchaser or EAT (whether the representation, warranty, covenant, indemnity, obligation or undertaking is express or implied), Seller’s exclusive recourse shall be against the Purchaser in accordance with the terms of this Agreement and Seller shall have no recourse of any type against the EAT arising from this transaction.

40.   IRS Form 1099-S Designation.

In order to comply with information reporting requirements of Section 6045(e) of the Code and the Treasury Regulations thereunder, the parties agree (i) to execute an IRS Form 1099-S Designation Agreement in the form attached hereto as Exhibit “J” at or prior to the Closing to designate the Escrow Holder as the party who shall be responsible for reporting the contemplated sale of the Property to the Internal Revenue Service (the “IRS”) on IRS Form 1099-S; (ii) to provide the Escrow Holder with the information necessary to complete Form 1099-S; (iii) that the Escrow Holder shall not be liable for the actions taken under this Section 40, or for the consequences of those actions, except as they may be the result of gross negligence or willful misconduct on the part of the Escrow Holder; and (iv) that the Escrow Holder shall be indemnified by the parties for any costs of expenses incurred as a result of the actions taken under this Section 40, except as they may be the result of gross negligence or willful misconduct on the part of the Escrow Holder.  The Escrow Holder shall provide all

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parties to this transaction with copies of the IRS Forms 1099-S filed with the IRS and with any other documents used to complete IRS Form 1099-S.

41.   Nonrefundable Consideration.

Contemporaneously with the execution and delivery of this Agreement, Purchaser has delivered to Seller, and Seller hereby acknowledges the receipt of, a check in the amount of ONE HUNDRED AND NO/100 DOLLARS ($100.00) (“Independent Contract Consideration”), which amount the parties bargained for and agreed to as consideration for Purchaser’s exclusive right to inspect and purchase the Property pursuant to this Agreement and for Seller’s execution, delivery, and performance of this Agreement.  The Independent Contract Consideration is in addition to and independent of any other consideration or payment provided in this Agreement, is non-refundable, is fully earned, and shall be retained by Seller notwithstanding any other provision of this Agreement.

42.   Post-Closing Storage of Excluded FF&E.

For a period of twenty-eight (28) days following the Closing, Seller shall be permitted to store the Excluded FF&E on the Property without cost or charge to Seller, and, upon not less than two (2) business days prior written notice, Seller shall have access to the Property during normal business hours within such period to remove such Excluded FF&E from the Property.

43.   Confidentiality.

Notwithstanding anything to the contrary contained elsewhere herein, Purchaser hereby acknowledges that all information furnished by Seller to Purchaser or obtained by Purchaser in the course of Purchaser’s investigation of the Property, or in any way arising from or relating to any and all studies or entries upon the Property by Purchaser, its agents or representatives, shall be treated as confidential information, and further, that if any such confidential information is disclosed to third parties, Seller may suffer damages and irreparable harm.  In connection therewith, Purchaser hereby expressly understands, acknowledges, covenants and agrees (a) that Purchaser will not make any press release (except in the form mutually agreed upon by Seller and Purchaser) or other public disclosure concerning this transaction and, until the Close of Escrow, Purchaser will not disclose any of the contents or information contained in or obtained as a result of any Due Diligence Reports or any other studies made in connection with Purchaser’s investigation of the Property, in any form whatsoever (including, but not limited to, any oral information received by Purchaser during the course of Purchaser’s inspection of the Property), to any party other than (i) the Seller, Seller’s employees, agents or representatives, or Purchaser’s agents, employees, representatives, consultants or potential institutional lenders, without the prior express written consent of Seller (which consent shall not be unreasonably withheld), (ii) in response to lawful process or subpoena or other valid or enforceable order of a court of competent jurisdiction or as otherwise required to comply with laws or in connection with a dispute or litigation or arbitration between Purchaser and Seller; (iii) or to Purchaser’s lenders and their respective directors, officers, employees, agents and consultants; and (iv) to any permitted transferee or assignee of Purchaser and their respective directors, officers, employees and agents; (b) that in making any disclosure of such information as permitted hereunder, Purchaser will advise said parties of the confidentiality of such information and the potential of

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damage to Seller and the liability of Purchaser and such other party as a result of any disclosure of such information by said party; (c) to furnish Seller with copies of all Due Diligence Reports or other studies made in connection with Purchaser’s inspection, study or investigation of the Property within a reasonable time (not to exceed ten (10) days) of receipt of same by Purchaser on the terms set forth in Section 4. B.(3); and (d) that Seller is relying on Purchaser’s covenant not to disclose any of the contents or information contained in any such Due Diligence Reports or investigations to third parties (all of which is deemed to be confidential information by the provisions of this Section 43).  In the event this Agreement is terminated, Purchaser agrees to return to Seller all information, studies, and Due Diligence Reports Purchaser or Purchaser’s agents have obtained or commissioned with respect to the Property or the condition of the Property, on the terms set forth in Section 4. B(3) together with all documents Seller provided to Purchaser.  This provision shall survive the early termination of this Agreement; provided, however, that if Purchaser purchases the Property, the terms of this Section 43 will cease to apply except for Purchaser’s agreement to not make a press release or other public disclosure concerning the confidential aspects of this transaction.

44.   Excluded FF&E.

Separate and apart from this Agreement, and without affecting the Purchase Price or any of the rights and obligations of Seller and Purchaser under this Agreement, Purchaser shall have the right (without any preferential treatment whatsoever) to participate in the auction for the Excluded FF&E and shall receive timely written notice of all such public sales and auctions.

45.   Refrigeration System Escrow Holdback.

(a)  Upon the Close of Escrow, Escrow Holder shall holdback in Escrow the sum of Two Million Dollars ($2,000,000) (the “Refrigeration System Holdback Amount”) from the Seller’s sale proceeds (the “Refrigeration System Escrow Holdback”).  Escrow Holder shall place the Refrigeration System Holdback Amount in an interest-bearing account, with all interest thereon accruing for the benefit of Seller.

(b)  The Refrigeration System Escrow Holdback shall be established to ensure that funds are available for a limited time period to fund any Major Material Problems with the Refrigeration System.  “Major Material Problems” are defined as repairs (not resulting from Purchaser’s negligence or willful misconduct) determined by the Contractor to be reasonably necessary to restore the Refrigeration System to Normal Operating Condition and which repairs are estimated by Contractor to cost greater than Five Thousand Dollars ($5,000) (the “Threshold Amount”) each.  “Normal Operating Condition” is defined to mean that there is a functioning food-grade refrigerated warehouse that is capable of cooling and maintaining, on a reliable, consistent, and efficient basis, temperatures of 34 to 36 degrees F. on a 24 hour per day, 7 day per week basis during all outdoor temperature ranges for the entire 100,000 square feet of the refrigerated portion of the building.  Purchaser shall be responsible, at its sole cost and expense, for each repair to the Refrigeration System that does not cost more than the Threshold Amount.  Once the Threshold Amount has been reached for each repair, all additional Refrigeration System repairs with respect to such identified Refrigeration System problem shall be conclusively deemed to be a Major Material Problem.

34

(c)  If Purchaser reasonably determines that repairs to the Refrigeration System are required in excess of the Threshold Amount, Purchaser shall deliver to Seller written notice of such proposed Refrigeration System repair, together with a reasonably detailed description of the proposed Refrigeration System repair; the estimated cost of such proposed Refrigeration System repair; a written statement from the Contractor stating that such proposed Refrigeration System repair constitutes a “Major Material Problem” (the “Purchaser’s Notice of Major Material Problem”).  Seller shall have ten (10) business days to review such request from Purchaser, and shall be given access to the Land and Improvements to conduct its own inspection of the Refrigeration System using its own contractor.

(d)  If Seller does not agree that such proposed Refrigeration System repair constitutes a Major Material Problem, then Seller shall notify Purchaser, in writing, of its determination, in writing, within ten (10) business days of Seller’s receipt of Purchaser’s Notice of Major Material Problem (“Seller’s Notice of Disagreement”).  Seller and Purchaser shall meet within ten (10) days of Seller’s Notice of Disagreement to try to resolve, in good faith, their disagreement.  If Seller and Purchaser are unable to resolve their disagreement within fifteen (15) days of Seller’s Notice of Disagreement, then either Seller or Purchaser may submit such matter for resolution by arbitration pursuant to Section 46 below.

(e)  Once Seller and Purchaser are in agreement as to the amount of the Major Material Problem or the amount of the Major Material Problem is determined by arbitration pursuant to Section 46 below (the “Major Material Problem Determination Amount”) then either Seller or Purchaser shall notify Escrow Holder, in writing, of the amount of the Major Material Problem Determination Amount to be disbursed from the Refrigeration System Escrow Holdback, and Escrow Holder shall promptly disburse to Purchaser the Major Material Problem Determination Amount.

(f)  If there are no pending Purchaser’s Notices of a Major Material Problem that have not been resolved by Seller and Purchaser or by arbitration within ninety (90) days following the Close of Escrow, then Escrow Holder shall, on the ninety-first (91) day following the Close of Escrow, distribute to Seller from the Refrigeration System Escrow Holdback the lesser of (i) One Million Dollars ($1,000,000) and (ii) the balance remaining in the Refrigeration System Escrow Holdback less the amount of any Purchaser’s Notices of Major Material Problem that has not been resolved by Seller and Purchaser or by arbitration as of such date.

(g)  One Hundred Eighty (180) days following the Close of Escrow, Escrow Holder shall distribute to Seller the balance in the Refrigeration System Holdback less the amount of any Purchaser’s Notice of Major Material Problem that has not been resolved by Seller and Purchaser or by arbitration as of such date.  Once such amounts have been resolved by Seller and Purchaser or by arbitration, then the balance remaining in the Refrigeration System Escrow Holdback shall be promptly released to Seller upon Seller’s delivery to Escrow Holder of a written demand by Seller to disburse such amount to Seller.

35

(h)  The terms of this Section 45 shall exclusively govern the rights and remedies of the parties with respect to any problems with the Refrigeration System or any damages resulting from any problems with the Refrigeration System.  Accordingly, Purchaser acknowledges and agrees that, other than to draw on the Refrigeration System Escrow Holdback in accordance with the terms of this Section 45, Purchaser shall not be entitled to any damages from any Seller Party with respect to the Refrigeration System, including, without limitation, any breach by Seller of any representations and warranties by Seller regarding the Refrigeration  System, whether express or implied.

46.   ARBITRATION OF DISPUTES.

A.  IF ANY CLAIM OR DISPUTE ARISES UNDER THIS AGREEMENT, THEN SUCH DISPUTE SHALL BE RESOLVED BY ARBITRATION TO BE CONDUCTED IN THE COUNTY OF LOS ANGLES ADMINISTERED BY JAMS BEFORE A SINGLE ARBITRATOR PURSUANT TO ITS COMPREHENSIVE ARBITRATION RULES AND PROCEDURES OR ITS STREAMLINED ARBITRATION RULES AND PROCEDURES,AS APPLICABLE, EXCEPT THAT SUCH RULES ARE MODIFIED AS SET FORTH HEREIN. THE ARBITRATION SHALL BE CONDUCTED AND THE ISSUES DETERMINED IN COMPLIANCE WITH ALL JUDICIAL RULES AND ALL STATUTORY AND DECISIONAL LAW OF THE STATE OF CALIFORNIA. THE PREVAILING PARTY IN THE ARBITRATION SHALL BE ENTITLED TO RECEIVE AS PART OF THE JUDGMENT IN ITS FAVOR AN AWARD OF ALL ACTUAL ATTORNEYS FEES AND COSTS INCURRED WITH RESPECT TO THE ARBITRATION, PLUS INTEREST AT THE HIGHEST RATE PERMITTED BY LAW AS NOT BEING USURIOUS FROM AND AS OF THE DATE OF THE ALLEGED BREACH. THE JUDGMENT ENTERED UPON THE DECISION OF THE ARBITRATOR SHALL BE SUBJECT TO ALL POST-TRIAL PROCEDURES AND TO APPEAL IN THE SAME MANNER AS AN APPEAL FROM ANY ORDER OF JUDGMENT IN A CIVIL ACTION.

B.  PRIOR TO THE APPOINTMENT OF THE ARBITRATOR, AND WITHIN 10 DAYS FROM THE DATE OF COMMENCEMENT OF THE ARBITRATION, THE PARTIES SHALL SUBMIT THE DISPUTE TO JAMS FOR MEDIATION. THE PARTIES WILL COOPERATE WITH JAMS AND WITH ONE ANOTHER IN SELECTING A MEDIATOR FROM JAMS PANEL OF NEUTRALS, AND IN PROMPTLY SCHEDULING THE MEDIATION PROCEEDINGS. THE PARTIES COVENANT THAT THEY WILL PARTICIPATE IN THE MEDIATION IN GOOD FAITH, AND THAT THEY WILL SHARE EQUALLY IN ITS COSTS. ALL OFFERS, PROMISES, CONDUCT AND STATEMENTS, WHETHER ORAL OR WRITTEN, MADE IN THE COURSE OF THE MEDIATION BY ANY OF THE PARTIES, THEIR AGENTS, EMPLOYEES, EXPERTS AND ATTORNEYS, AND BY THE MEDIATOR OR ANY JAMS EMPLOYEES, ARE CONFIDENTIAL, PRIVILEGED AND INADMISSIBLE FOR ANY PURPOSE, INCLUDING IMPEACHMENT, IN ANY ARBITRATION OR OTHER PROCEEDING INVOLVING THE PARTIES, PROVIDED THAT EVIDENCE THAT IS OTHERWISE ADMISSIBLE OR DISCOVERABLE SHALL NOT BE RENDERED INADMISSIBLE OR NON-

36

DISCOVERABLE AS A RESULT OF ITS USE IN THE MEDIATION. IF THE DISPUTE IS NOT RESOLVED WITHIN THIRTY (30) DAYS FROM THE DATE OF THE SUBMISSION OF THE DISPUTE TO MEDIATION (OR SUCH LATER DATE AS THE PARTIES MAY MUTUALLY AGREE IN WRITING), THE ADMINISTRATION OF THE ARBITRATION SHALL PROCEED FORTHWITH. THE MEDIATION MAY CONTINUE, IF THE PARTIES SO AGREE, AFTER THE APPOINTMENT OF THE ARBITRATOR.  THE MEDIATOR SHALL BE DISQUALIFIED FROM SERVING AS ARBITRATOR IN THE CASE.  THE PENDENCY OF A MEDIATION SHALL NOT PRECLUDE A PARTY FROM SEEKING PROVISIONAL REMEDIES IN AID OF THE ARBITRATION FROM A COURT OF APPROPRIATE JURISDICTION, AND THE PARTIES AGREE NOT TO DEFEND AGAINST ANY APPLICATION FOR PROVISIONAL RELIEF ON THE GROUND THAT A MEDIATION IS PENDING.

C.  THIS ARBITRATION AGREEMENT MAY BE SPECIFICALLY ENFORCED BY THE FILING OF A COMPLAINT OR PETITION OR MOTION SEEKING SPECIFIC ENFORCEMENT OR BY MOTION DIRECTED TO THE ORANGE COUNTY SUPERIOR COURT.

D.  NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION, ABOVE. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION, ABOVE, TO NEUTRAL ARBITRATION.

Purchaser’s Initials Seller’s Initials

[Signatures on the Following Page]

37

IN WITNESS WHEREOF, this Agreement is executed as of the date set forth above.

“SELLER”	“PURCHASER”
FRESH FOODS, LLC,	CALAVO GROWERS INC.,
a Delaware limited liability company	a California corporation
By:	By:
Name:	Name:
Title:	Title:

An original fully executed copy of this Agreement has been received by the Escrow Holder this _____ day of July, 2016, and by the execution hereof the Escrow Holder hereby covenants and agrees to be bound by the terms of this Agreement.

“Escrow Holder”

FIRST AMERICAN TITLE INSURANCE COMPANY

By:

Name:

Title:

38

The registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any omitted schedule or exhibit.

39

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

15 U.S.C. § 7241

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lecil E. Cole, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Calavo Growers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 8, 2016	/s/  Lecil E. Cole
	Lecil E. Cole
	Chairman of the Board of Directors,
	and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

15 U.S.C. § 7241

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, B. John Lindeman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Calavo Growers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 8, 2016	/s/  B. John Lindeman
	B. John Lindeman
	Chief Financial Officer and Corporate Secretary
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

Each of the undersigned, the Chairman of the Board and Chief Executive Officer, Chief Financial Officer, and Corporate Secretary of Calavo Growers, Inc. (the Company), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the Report), fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  September 8, 2016

/s/  Lecil E. Cole

Lecil E. Cole

Chairman of the Board and

Chief Executive Officer

/s/  B. John Lindeman

B. John Lindeman

Chief Financial Officer and

Corporate Secretary

XML

Document and Entity Information	9 Months Ended
	Jul. 31, 2016 shares
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Registrant Name	CALAVO GROWERS INC
Entity Central Index Key	0001133470
Current Fiscal Year End Date	--10-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	17,438,408

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jul. 31, 2016	Oct. 31, 2015
Current assets:
Cash and cash equivalents	$ 14,650	$ 7,171
Accounts receivable, net of allowances of $1,805 (2016) $2,312 (2015)	86,575	58,606
Inventories, net	36,410	26,351
Prepaid expenses and other current assets	13,317	15,763
Advances to suppliers	2,000	2,820
Income taxes receivable		6,111
Total current assets	152,952	116,822
Property, plant, and equipment, net	80,060	69,448
Investment in Limoneira Company	30,578	27,415
Investment in unconsolidated entities	20,890	19,720
Deferred income taxes	17,588	19,277
Goodwill	18,262	18,262
Other assets	14,295	14,001
Total assets	334,625	284,945
Current liabilities:
Payable to growers	39,991	3,924
Trade accounts payable	23,667	19,600
Accrued expenses	25,837	21,311
Income taxes payable	4,675
Short-term borrowings	18,500	36,910
Dividend payable		13,907
Current portion of long-term obligations	137	2,206
Total current liabilities	112,807	97,858
Long-term liabilities:
Long-term obligations, less current portion	485	586
Deferred rent	2,315
Deferred income taxes	234	234
Total long-term liabilities	3,034	820
Commitments and contingencies
Noncontrolling interest, Calavo Salsa Lisa	285	285
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,438 (2016) and 17,385 (2015) shares issued and outstanding	17	17
Additional paid-in capital	148,811	147,063
Accumulated other comprehensive income	4,428	2,419
Noncontrolling interest	989	1,011
Retained earnings	64,254	35,472
Total shareholders' equity	218,499	185,982
Total liabilities and shareholders' equity	$ 334,625	$ 284,945

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (PARENTHETICAL) - USD ($) shares in Thousands, $ in Thousands	Jul. 31, 2016	Oct. 31, 2015
Statement of Financial Position [Abstract]
Allowances of accounts receivable	$ 1,805	$ 2,312
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	17,438	17,385
Common stock, shares outstanding	17,438	17,385

XML

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Income Statement [Abstract]
Net sales	$ 263,146	$ 232,450	$ 688,024	$ 648,830
Cost of sales	230,502	208,172	607,575	583,772
Gross margin	32,644	24,278	80,449	65,058
Selling, general and administrative	12,287	10,620	34,866	30,116
Operating income	20,357	13,658	45,583	34,942
Interest expense	(210)	(195)	(612)	(654)
Other income (expense), net	(115)	88	399	514
Income before provision for income taxes	20,032	13,551	45,370	34,802
Provision for income taxes	7,323	4,910	16,609	12,390
Net income	12,709	8,641	28,761	22,412
Less: Net loss attributable to noncontrolling interest	36		22
Net income attributable to Calavo Growers, Inc.	$ 12,745	$ 8,641	$ 28,783	$ 22,412
Calavo Growers, Inc.'s net income per share:
Basic	$ 0.73	$ 0.50	$ 1.66	$ 1.30
Diluted	$ 0.73	$ 0.50	$ 1.65	$ 1.29
Number of shares used in per share computation:
Basic	17,350,883	17,301,131	17,340,270	17,290,847
Diluted	17,447,044	17,386,115	17,424,884	17,354,103

XML

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 12,709	$ 8,641	$ 28,761	$ 22,412
Other comprehensive income (loss), before tax:
Unrealized investment gains (losses) arising during period	(346)	(4,062)	3,164	(8,764)
Income tax benefit (expense) related to items of other comprehensive loss	126	1,422	(1,155)	3,067
Other comprehensive income (loss), net of tax	(220)	(2,640)	2,009	(5,697)
Comprehensive income	12,489	6,001	30,770	16,715
Less: Net loss attributable to noncontrolling interest	36		22
Comprehensive income – Calavo Growers, Inc	$ 12,525	$ 6,001	$ 30,792	$ 16,715

XML

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Cash Flows from Operating Activities:
Net income	$ 28,761	$ 22,412
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,507	5,968
Provision for losses on accounts receivable		37
Loss from unconsolidated entities	132	110
Stock compensation expense	1,577	2,021
Deferred income taxes	598
Effect on cash of changes in operating assets and liabilities:
Accounts receivable	(27,969)	(9,566)
Inventories, net	(10,059)	(551)
Prepaid expenses and other current assets	(3,438)	2,068
Advances to suppliers	820	512
Income taxes receivable/payable	10,897	1,772
Other assets	478	(296)
Payable to growers	36,064	9,220
Deferred rent	1,705
Trade accounts payable and accrued expenses	8,968	(1,179)
Net cash provided by operating activities	55,041	32,528
Cash Flows from Investing Activities:
Acquisitions of property, plant, and equipment	(15,772)	(13,855)
Proceeds received for repayment of San Rafael note	28	275
Proceeds from liquidation of Calavo Chile		262
Investment in FreshRealm		(800)
Loan to Agricola Don Memo		(1,803)
Proceeds received for repayment of loan to Agricola Don Memo	4,000
Investment in Agricola Don Memo	(1,300)	(1,000)
Net cash used in investing activities	(13,044)	(16,921)
Cash Flows from Financing Activities:
Payment of dividend to shareholders	(13,907)	(12,970)
Proceeds from revolving credit facility	178,730	199,540
Payments on revolving credit facility	(197,140)	(199,360)
Deferred financing costs	(91)
Payments on long-term obligations	(2,170)	(4,260)
Proceeds from stock option exercises	60	235
Net cash used in financing activities	(34,518)	(16,815)
Net increase (decrease) in cash and cash equivalents	7,479	(1,208)
Cash and cash equivalents, beginning of period	7,171	6,744
Cash and cash equivalents, end of period	14,650	5,536
Noncash Investing and Financing Activities:
Construction in progress included in trade accounts payable and accrued expenses	172
Collection for Agricola Belher Infrastructure Advance		845
Unrealized holding gains (losses)	$ 3,164	$ (8,764)

XML

Description of the business

9 Months Ended

Jul. 31, 2016

Accounting Policies [Abstract]

Description of the business

1. Description of the business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa. 

The accompanying unaudited consolidated condensed financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows.  The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year.  These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In November 2015, the FASB issued an ASU, which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We do not expect the adoption of these amendments to have a material impact on our financial statements.

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Information regarding our operations in different segments

9 Months Ended

Jul. 31, 2016

Segment Reporting [Abstract]

Information regarding our operations in different segments

2.  Information regarding our operations in different segments

We report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG.  These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources. The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and other fresh prepared food products.  Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate.  We do not allocate assets, or specifically identify them to, our operating segments. The following table sets forth sales by product category, by segment (in thousands):

	Three months ended  July 31, 2016								Three months ended  July 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	151,364	$	—	$	—	$	151,364	$	132,165	$	—	$	—	$	132,165
Tomatoes		2,581		—		—		2,581		1,154		—		—		1,154
Papayas		2,614		—		—		2,614		2,559		—		—		2,559
Other fresh products		433		—		—		433		607		—		—		607
Food service		—		12,929		—		12,929		—		13,575		—		13,575
Retail and club		—		6,056		91,631		97,687		—		6,331		79,927		86,258
Total gross sales		156,992		18,985		91,631		267,608		136,485		19,906		79,927		236,318
Less sales incentives		(863)		(2,700)		(899)		(4,462)		(715)		(2,421)		(732)		(3,868)
Net sales	$	156,129	$	16,285	$	90,732	$	263,146	$	135,770	$	17,485	$	79,195	$	232,450

	Nine months ended July 31, 2016								Nine months ended July 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	354,785	$	—	$	—	$	354,785	$	360,334	$	—	$	—	$	360,334
Tomatoes		34,375		—		—		34,375		16,813		—		—		16,813
Papayas		7,054		—		—		7,054		6,977		—		—		6,977
Other fresh products		854		—		—		854		2,571		—		—		2,571
Food service		—		37,998		—		37,998		—		37,223		—		37,223
Retail and club		—		16,636		248,176		264,812		—		17,451		218,547		235,998
Total gross sales		397,068		54,634		248,176		699,878		386,695		54,674		218,547		659,916
Less sales incentives		(1,804)		(7,508)		(2,542)		(11,854)		(1,423)		(7,673)		(1,990)		(11,086)
Net sales	$	395,264	$	47,126	$	245,634	$	688,024	$	385,272	$	47,001	$	216,557	$	648,830

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Three months ended  July 31, 2016
Net sales	$	156,129	$	16,285	$	90,732	$	263,146
Cost of sales		137,845		10,484		82,173		230,502
Gross margin	$	18,284	$	5,801	$	8,559	$	32,644
Three months ended  July 31, 2015
Net sales	$	135,770	$	17,485	$	79,195	$	232,450
Cost of sales		126,105		11,415		70,652		208,172
Gross margin	$	9,665	$	6,070	$	8,543	$	24,278

For the three months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $1.4 million and $0.6 million between Fresh products and RFG were eliminated.  For the three months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $0.7 million and $0.6 million between Calavo Foods and RFG were eliminated.

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Nine months ended July 31, 2016
Net sales	$	395,264	$	47,126	$	245,634	$	688,024
Cost of sales		352,424		29,228		225,923		607,575
Gross margin	$	42,840	$	17,898	$	19,711	$	80,449
Nine months ended July 31, 2015
Net sales	$	385,272	$	47,001	$	216,557	$	648,830
Cost of sales		355,991		31,725		196,056		583,772
Gross margin	$	29,281	$	15,276	$	20,501	$	65,058

For the nine months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $2.8 million and $1.2 million between Fresh products and RFG were eliminated.  For the nine months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $2.0 million and $1.3 million between Calavo Foods and RFG were eliminated.

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Inventories

9 Months Ended

Jul. 31, 2016

Inventory Disclosure [Abstract]

Inventories

3.Inventories

Inventories consist of the following (in thousands):

	July 31,		October 31,
	2016		2015
Fresh fruit	$	21,175	$	11,939
Packing supplies and ingredients		7,077		6,347
Finished prepared foods		8,158		8,065
	$	36,410	$	26,351

Inventories are stated at the lower of cost or market. We periodically review the value of items in inventory and record any necessary reserves of inventory based on our assessment of market conditions.    No inventory reserve was considered necessary as of July 31, 2016 and October 31, 2015.

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Related party transactions

9 Months Ended

Jul. 31, 2016

Related Party Transactions [Abstract]

Related party transactions

4.Related party transactions

Certain members of our Board of Directors market California avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers.  During the three months ended July 31, 2016 and 2015, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $19.9 million and $9.1 million.  During the nine months ended July 31, 2016 and 2015, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $23.5 million and $15.4 million.  Amounts payable to these Board members were $7.9 million as of July 31, 2016.  We did not have any amounts payable to these Board members as of October 31, 2015.

During the three months ended July 31, 2016 and 2015, we received $0.1 million as dividend income from Limoneira Company (Limoneira).  During the nine months ended July 31, 2016 and 2015, we received $0.3 million and $0.2 million as dividend income from Limoneira.  In addition, we lease office space from Limoneira and paid rental expenses of $0.1 million for the three months ended July 31, 2016 and 2015. We paid rental expenses of $0.2 million for the nine months ended July 31, 2016 and 2015.  Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. We have a 12% ownership interest in Limoneira. Additionally, our Chief Executive Officer is a member of the Limoneira Board of Directors.

We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During the three months ended July 31, 2016, Calavo Growers, Inc. paid fees totaling approximately $0.1 million to TroyGould PC. During the nine months ended July 31, 2016, Calavo Growers, Inc. paid fees totaling approximately $0.2 million to TroyGould PC.  During the three and nine months ended July 31, 2015, Calavo Growers, Inc. paid fees totaling approximately $0.1 million to TroyGould PC.

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and formed Agricola Don Memo, S.A. de C.V. (Don Memo). Belo and Calavo Sub have an equal one-half ownership interest in Don Memo in exchange for $2 million each.  Pursuant to a management service agreement, Belo, through its officers and employees, has day-to-day power and authority to manage the operations. Belo is entitled to a management fee, as defined, which is payable annually in July of each year.  Additionally, Calavo Sub is entitled to commission, for the sale of produce in the Mexican National Market, United States, Canada, and any other overseas market.

We loaned a total of $4.0 million to Don Memo since its formation. These monies, effectively a bridge loan, were replaced with a new loan to Don Memo from Bank of America, N.A. (BoA) during our first fiscal quarter of 2016 and our bridge loan was repaid from the proceeds of the new loan. Also, in January 2016, Calavo and BoA, entered into a Continuing and Unconditional Guaranty agreement (the Guaranty). Under the terms of the Guaranty, Calavo unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Don Memo to BoA. Belo has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed in January 2016.

Additionally, in the third quarter of fiscal 2016 we invested an additional $1.3 million into Don Memo.  In total we have contributed $3.3 million, representing Calavo Sub’s 50% ownership in Don Memo, which is included as an investment in unconsolidated entities on our balance sheet.  We make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under this program to Don Memo, net of our commission and aforementioned advances. As of July 31, 2016 and October 31, 2015, we advanced $0.9 million and $1.8 million to Don Memo, which is netted with payable to growers. During the three and nine months ended July 31, 2016, we incurred $1.4 million and $3.5 million of expenses to Don Memo pursuant to our consignment agreement.

We had grower advances due from Belher of $2.0 million and $3.0 million as of July 31, 2016 and October 31, 2015.  In addition, we had infrastructure advances due from Belher of $1.8 million as of July 31, 2016 and October 31, 2015.  Of these infrastructure advances $1.0 million was recorded as receivable in prepaid and other current assets.  The remaining $0.8 million of these infrastructure advances are recorded in other assets. During the three months ended July 31, 2016 and 2015, we incurred $0.5 million and $0.1 million to Belher pursuant to our consignment agreement. During the nine months ended July 31, 2016 and 2015, we incurred $26.0 million and $14.2 million of expenses to Belher pursuant to our consignment agreement.

In August 2015, we entered into Shareholder’s Agreement with various partners and created Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”).  Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados.  This entity is approximately 80% owned by Calavo and was consolidated in our financial statements.  Avocados de Jalisco has built a packinghouse located in Jalisco, Mexico and such packinghouse is expected to be operational at the end of the fourth quarter of 2016.  As of  July 31, 2016 and October 31, 2015, we have made preseason advances of approximately $0.2 million and $0.3 million to various partners of Avocados de Jalisco.

The three previous owners and current executives of RFG have a majority ownership of certain entities that provide various services to RFG.  RFG’s California operating facility leases a building from LIG partners, LLC (LIG) pursuant to an operating lease.  RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease.  Additionally, RFG sells cut produce and purchases raw materials, obtains transportation services, and shares costs for certain utilities with Third Coast Fresh Distribution (Third Coast).  LIG, THNC and Third Coast are majority owned by entities owned by three employees of Calavo (former/current executives of RFG). See the following tables for the related party activity and balances for fiscal year 2016 and 2015:

	Three months ended  July 31,
(in thousands)	2016		2015
Rent paid to LIG	$	133	$	131
Rent paid to THNC, LLC	$	77	$	76
Sales to Third Coast	$	-	$	31
Purchases from Third Coast	$	-	$	86

	Nine months ended  July 31,
(in thousands)	2016		2015
Rent paid to LIG	$	395	$	392
Rent paid to THNC, LLC	$	229	$	228
Sales to Third Coast	$	-	$	270
Purchases from Third Coast	$	-	$	203

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Other assets

9 Months Ended

Jul. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other assets

5.Other assets

Other assets consist of the following (in thousands):

	July 31,		October 31,
	2016		2015
Intangibles, net	$	3,660	$	4,613
Mexican IVA (i.e. value-added) taxes receivable		7,061		5,853
Grower advances		123		346
Loan to Agricola Belher		800		800
Loan to FreshRealm members		315		307
Notes receivable from San Rafael		1,305		1,286
Other		1,031		796
	$	14,295	$	14,001

Intangible assets consist of the following (in thousands):

		July 31, 2016						October 31, 2015
	Weighted-	Gross				Net		Gross				Net
	Average	Carrying		Accum.		Book		Carrying		Accum.		Book
	Useful Life	Value		Amortization		Value		Value		Amortization		Value
Customer list/relationships	8.0 years	$	7,640	$	(4,997)	$	2,643	$	7,640	$	(4,282)	$	3,358
Trade names	8.2 years		2,760		(2,342)		418		2,760		(2,164)		596
Trade secrets/recipes	9.3 years		630		(306)		324		630		(270)		360
Brand name intangibles	indefinite		275		—		275		275		—		275
Non-competition agreements	5.0 years		267		(267)		—		267		(243)		24
Intangibles, net		$	11,572	$	(7,912)	$	3,660	$	11,572	$	(6,959)	$	4,613

We anticipate recording amortization expense of approximately $0.3 million for the remainder of fiscal 2016, with $1.1 million for fiscal year 2017 and 2018,  $0.7 million for fiscal year 2019, and $0.2 million for years thereafter, through fiscal year 2023.

See Note 11, for additional information related to Mexican IVA taxes.

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Stock-Based Compensation

9 Months Ended

Jul. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

6.Stock-Based Compensation

In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the “2011 Plan”).  All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan.  Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan.

On January 4, 2016, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.46.  On January 3, 2017, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable.  These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.3 million for the three months ended July 31, 2016.  The total recognized stock-based compensation expense for these grants was $0.6 million for the nine months ended July 31, 2016. 

On January 8, 2016, our executive officers were granted a total of 24,582 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.68.  These shares vest in one-third increments, on an annual basis, beginning January 8, 2017. These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.1 million for the three months ended July 31, 2016.  The total recognized stock-based compensation expense for these grants was $0.2 million for the nine months ended July 31, 2016. 

A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Grant Price		Intrinsic Value
Outstanding at October 31, 2015	75	$	39.01
Vested	(39)	$	39.5
Granted	51	$	48.58
Outstanding at July 31, 2016	87	$	44.76	$	5,745

The total recognized stock-based compensation expense for restricted stock was $0.6 million and $1.6 million for the three and nine months ended July 31, 2016. 

Stock options are granted with exercise prices of not less than the fair market value at grant date, generally vest over one to five years and generally expire two to five years after the grant date.  We settle stock option exercises with newly issued shares of common stock.

We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest.  We measure the fair value of our stock based compensation awards on the date of grant.

A summary of stock option activity, related to our 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Exercise Price		Intrinsic Value
Outstanding at October 31, 2015	10	$	18.28
Exercised	(2)	$	19.20
Outstanding at July 31, 2016	8	$	18.05	$	527
Exercisable at July 31, 2016	8	$	18.05	$	527

At July 31, 2016, outstanding and exercisable stock options had a weighted-average remaining contractual term of 2.8 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and nine months ended July 31, 2016. 

A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2015	14	$	23.00
Exercised	(1)	$	21.80
Outstanding at July 31, 2016	13	$	23.09	$	556
Exercisable at July 31, 2016	7	$	23.24	$	298

At July 31, 2016, outstanding and exercisable stock options had a weighted-average remaining contractual term of 4.6 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and nine months ended July 31, 2016. 

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Other events

9 Months Ended

Jul. 31, 2016

Text Block [Abstract]

Other events

7.Other events

Dividend payment

On December 8, 2015, we paid a $0.80 per share dividend in the aggregate amount of $13.9 million to shareholders of record on November 17, 2015.

Revolving credit facility

In June 2016, we entered into a new Credit Agreement with Bank of America, N.A. (“Bank of America”) as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West (“FCW”), as joint lead arranger. The Credit Agreement provides for a five-year, $80 million syndicated senior unsecured revolving credit facility maturing on June 14, 2021(the”Credit Facility”), which replaces the Company’s prior revolving credit facilities, which were scheduled to expire on July 1, 2016.

    Provided there exists no default, upon notice to Bank of America, the Company may from time to time, request an increase in the Credit Facility by an amount not exceeding $50 million (the “Accordion”). Any future exercises of the Accordion would require additional commitments from existing or new lenders.

    Borrowings under the Credit Facility will be at the Company’s discretion either at a Eurodollar Rate (“LIBOR”) loan plus applicable margin or a base rate loan plus applicable margin. The applicable margin will be based on the Company’s Consolidated Leverage Ratio and can range from 1.00% to 1.50% for LIBOR loans and 0.00% to 0.50% for Base Rate Loans. The Credit Facility also includes a commitment fee on the unused commitment amount at a rate per annum of 0.15%.

   The Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. We were in compliance with all such covenants at July 31, 2016. 

    The Credit Facility also contains customary events of default. If any event of default occurs and is continuing, Bank of America may take the following actions: (a) declare the commitment of each lender to make loans and any obligation of the Issuer to make credit extensions to be terminated; (b) declare the unpaid principal amount of all outstanding loans, all interest, and all other amounts to be immediately due and payable; (c) require that Calavo cash collateralize the obligations; and (d) exercise on behalf of itself, the lenders and the Issuer all rights and remedies available to it.

    The Company’s obligations under the Credit Agreement are unconditionally guaranteed by our subsidiary, RFG.

Riverside

    In August 2016, we entered into an Agreement to Sell and Purchase and Escrow Instructions (the “Agreement”) with Fresh Foods, LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company will purchase from the Seller certain real property, consisting of land, a refrigerated building and select production and office equipment located at 1730 Eastridge Avenue, Riverside, California (the “Property”).

    Subject to adjustments and prorations as provided for in the Agreement, the purchase price for the Property will be approximately $20.0 million. The Company has deposited $0.3 million pursuant to the Agreement. The Agreement contains customary representations and warranties, covenants, closing conditions and termination provisions. The Agreement contemplates a buyer due diligence period that would lead to a closing date on or before October 22, 2016 unless the Company elects not to proceed with the purchase of the Property on or prior to such date. The Company’s wholly owned subsidiary RFG intends to operate the refrigerated facility as part of its network of USDA and organic certified fresh food facilities strategically located across the US. The Company expects to pay for all costs associated with the Property with cash on hand and available credit facilities.

Mexico tax audits

    We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions.  Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States.  During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (“CDM”), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (“MFM”) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary.  MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (“VAT”).  During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations.  Representative of the subsidiary intend to meet and present our rebuttal to representatives of the MFM in the near future.  We expect that the MFM will complete their review and issue a final assessment with respect to the fiscal 2011 tax audit no later than approximately February 2017.

    Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico is currently under examination related to fiscal year 2013.  Under Mexican law, the SAT has until approximately March 2017 to complete their review.

    We believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position; however, there is still a possibility that an adverse outcome of these matters could have a material effect on our consolidated financial condition.

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Fair value measurements

9 Months Ended

Jul. 31, 2016

Fair Value Disclosures [Abstract]

Fair value measurements

8.Fair value measurements

A fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability.  A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table sets forth our financial assets and liabilities as of July 31, 2016 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	30,578		-		-	$	30,578
Total assets at fair value	$	30,578	$	-	$	-	$	30,578

(1) The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are measured at fair value by quoted market prices.  Limoneira’s stock price at July 31, 2016 and October 31, 2015 equaled $17.69 per share and $15.86 per share.  Unrealized gains and losses are recognized through other comprehensive income. Unrealized investment holding losses arising during the three months ended July 31, 2016 and 2015 was $0.3 million and $4.1 million. Unrealized investment holding gains arising during the nine months ended July 31, 2016 was $3.2 million. Unrealized investment holding losses arising during the nine months ended July 31, 2015 was $8.8 million.

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Noncontrolling interest

9 Months Ended

Jul. 31, 2016

Noncontrolling Interest [Abstract]

Noncontrolling interest

9.Noncontrolling interest

The following table reconciles shareholders’ equity attributable to noncontrolling interest related to Salsa Lisa and Avocados de Jalisco (in thousands). 

	Three months		Three months
	ended		ended
Salsa Lisa noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Net loss attributable to noncontrolling interest of Salsa Lisa		—		—
Noncontrolling interest, ending	$	285	$	270

	Nine months		Nine months
	ended		ended
Salsa Lisa noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Net loss attributable to noncontrolling interest of Salsa Lisa		—		—
Noncontrolling interest, ending	$	285	$	270

	Three months		Three months
		ended		ended
Avocados de Jalisco noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	1,025	$	—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(36)		—
Noncontrolling interest, ending	$	989	$	—

	Nine months		Nine months
	ended		ended
Avocados de Jalisco noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(22)		—
Noncontrolling interest, ending	$	989	$	—

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Earnings per share

9 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

Earnings per share

10.Earnings per share

Basic and diluted net income per share is calculated as follows (U.S. dollars in thousands, exept share and per share data):

	Three months ended  July 31,
	2016		2015
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	12,745	$	8,641
Denominator:
Weighted average shares - Basic		17,350,883		17,301,131
Effect on dilutive securities – Restricted stock/options		96,161		84,984
Weighted average shares - Diluted		17,447,044		17,386,115
Net income per share attributable to Calavo Growers, Inc:
Basic	$	0.73	$	0.50
Diluted	$	0.73	$	0.50

	Nine months ended July 31,
	2016		2015
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	28,783	$	22,412
Denominator:
Weighted average shares - Basic		17,340,270		17,290,847
Effect on dilutive securities – Restricted stock/options		84,614		63,256
Weighted average shares - Diluted		17,424,884		17,354,103
Net income per share attributable to Calavo Growers, Inc:
Basic	$	1.66	$	1.30
Diluted	$	1.65	$	1.29

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Mexican IVA taxes receivable

9 Months Ended

Jul. 31, 2016

Value Added Tax Receivable [Abstract]

Mexican IVA taxes receivable

11.Mexican IVA taxes receivable

Included in prepaids & other current assets and other assets are tax receivables due from the Mexican government for value-added taxes (IVA) paid in advance.  CDM is charged IVA by vendors on certain expenditures in Mexico, which, insofar as they identify with the exportation of goods, translate into monthly favorable VAT balance.

As of July 31, 2016 and October 31, 2015, IVA receivables totaled $14.5 million and $11.6 million.  Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.  Beginning in fiscal 2014 and continuing into fiscal 2016, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation.  Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations.  We believe these factors and others have contributed to delays in the processing of IVA claims by the Mexican tax authorities.  Currently, we are in the process of collecting such balances through regular administrative processes, but certain amounts may ultimately need to be recovered via legal means.  We believe that our operations in Mexico are properly documented and that the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts.  It is possible, however, that a portion of this amount will not be recovered.  We will continue to monitor the collection of these receivables with our outside consultants.

As of July 31, 2016, $7.4 million and $7.1 million of IVA were recorded in prepaids & other current assets and other assets.  As of October 31, 2015, $5.7 million and $5.9 million of IVA receivables were recorded in prepaids & other current assets and other assets.

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Description of the business (Policies)

9 Months Ended

Jul. 31, 2016

Fair Value Disclosures [Abstract]

Business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa. 

The accompanying unaudited consolidated condensed financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows.  The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year.  These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015.

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In November 2015, the FASB issued an ASU, which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We do not expect the adoption of these amendments to have a material impact on our financial statements.

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Information regarding our operations in different segments (Tables)

9 Months Ended

Jul. 31, 2016

Segment Reporting [Abstract]

Sales by Product Category, by Segment

The following table sets forth sales by product category, by segment (in thousands):

	Three months ended  July 31, 2016								Three months ended  July 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	151,364	$	—	$	—	$	151,364	$	132,165	$	—	$	—	$	132,165
Tomatoes		2,581		—		—		2,581		1,154		—		—		1,154
Papayas		2,614		—		—		2,614		2,559		—		—		2,559
Other fresh products		433		—		—		433		607		—		—		607
Food service		—		12,929		—		12,929		—		13,575		—		13,575
Retail and club		—		6,056		91,631		97,687		—		6,331		79,927		86,258
Total gross sales		156,992		18,985		91,631		267,608		136,485		19,906		79,927		236,318
Less sales incentives		(863)		(2,700)		(899)		(4,462)		(715)		(2,421)		(732)		(3,868)
Net sales	$	156,129	$	16,285	$	90,732	$	263,146	$	135,770	$	17,485	$	79,195	$	232,450

	Nine months ended July 31, 2016								Nine months ended July 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	354,785	$	—	$	—	$	354,785	$	360,334	$	—	$	—	$	360,334
Tomatoes		34,375		—		—		34,375		16,813		—		—		16,813
Papayas		7,054		—		—		7,054		6,977		—		—		6,977
Other fresh products		854		—		—		854		2,571		—		—		2,571
Food service		—		37,998		—		37,998		—		37,223		—		37,223
Retail and club		—		16,636		248,176		264,812		—		17,451		218,547		235,998
Total gross sales		397,068		54,634		248,176		699,878		386,695		54,674		218,547		659,916
Less sales incentives		(1,804)		(7,508)		(2,542)		(11,854)		(1,423)		(7,673)		(1,990)		(11,086)
Net sales	$	395,264	$	47,126	$	245,634	$	688,024	$	385,272	$	47,001	$	216,557	$	648,830

Gross Margin

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Three months ended  July 31, 2016
Net sales	$	156,129	$	16,285	$	90,732	$	263,146
Cost of sales		137,845		10,484		82,173		230,502
Gross margin	$	18,284	$	5,801	$	8,559	$	32,644
Three months ended  July 31, 2015
Net sales	$	135,770	$	17,485	$	79,195	$	232,450
Cost of sales		126,105		11,415		70,652		208,172
Gross margin	$	9,665	$	6,070	$	8,543	$	24,278

For the three months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $1.4 million and $0.6 million between Fresh products and RFG were eliminated.  For the three months ended July 31, 2016 and 2015, inter-segment sales and cost of sales of $0.7 million and $0.6 million between Calavo Foods and RFG were eliminated.

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Nine months ended July 31, 2016
Net sales	$	395,264	$	47,126	$	245,634	$	688,024
Cost of sales		352,424		29,228		225,923		607,575
Gross margin	$	42,840	$	17,898	$	19,711	$	80,449
Nine months ended July 31, 2015
Net sales	$	385,272	$	47,001	$	216,557	$	648,830
Cost of sales		355,991		31,725		196,056		583,772
Gross margin	$	29,281	$	15,276	$	20,501	$	65,058

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Inventories (Tables)

9 Months Ended

Jul. 31, 2016

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following (in thousands):

	July 31,		October 31,
	2016		2015
Fresh fruit	$	21,175	$	11,939
Packing supplies and ingredients		7,077		6,347
Finished prepared foods		8,158		8,065
	$	36,410	$	26,351

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Related party transactions (Tables)

9 Months Ended

Jul. 31, 2016

Related Party Transactions [Abstract]

Schedule of related party transactions

	Three months ended  July 31,
(in thousands)	2016		2015
Rent paid to LIG	$	133	$	131
Rent paid to THNC, LLC	$	77	$	76
Sales to Third Coast	$	-	$	31
Purchases from Third Coast	$	-	$	86

	Nine months ended  July 31,
(in thousands)	2016		2015
Rent paid to LIG	$	395	$	392
Rent paid to THNC, LLC	$	229	$	228
Sales to Third Coast	$	-	$	270
Purchases from Third Coast	$	-	$	203

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Other assets (Tables)

9 Months Ended

Jul. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Assets

Other assets consist of the following (in thousands):

	July 31,		October 31,
	2016		2015
Intangibles, net	$	3,660	$	4,613
Mexican IVA (i.e. value-added) taxes receivable		7,061		5,853
Grower advances		123		346
Loan to Agricola Belher		800		800
Loan to FreshRealm members		315		307
Notes receivable from San Rafael		1,305		1,286
Other		1,031		796
	$	14,295	$	14,001

Schedule of Intangible Assets

Intangible assets consist of the following (in thousands):

		July 31, 2016						October 31, 2015
	Weighted-	Gross				Net		Gross				Net
	Average	Carrying		Accum.		Book		Carrying		Accum.		Book
	Useful Life	Value		Amortization		Value		Value		Amortization		Value
Customer list/relationships	8.0 years	$	7,640	$	(4,997)	$	2,643	$	7,640	$	(4,282)	$	3,358
Trade names	8.2 years		2,760		(2,342)		418		2,760		(2,164)		596
Trade secrets/recipes	9.3 years		630		(306)		324		630		(270)		360
Brand name intangibles	indefinite		275		—		275		275		—		275
Non-competition agreements	5.0 years		267		(267)		—		267		(243)		24
Intangibles, net		$	11,572	$	(7,912)	$	3,660	$	11,572	$	(6,959)	$	4,613

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Stock-Based Compensation (Tables)

9 Months Ended

Jul. 31, 2016

Restricted Stock Activity

		Weighted-Average		Aggregate
	Number of Shares	Grant Price		Intrinsic Value
Outstanding at October 31, 2015	75	$	39.01
Vested	(39)	$	39.5
Granted	51	$	48.58
Outstanding at July 31, 2016	87	$	44.76	$	5,745

2005 Stock Incentive Plan [Member]

Stock Option Activity, Related to Incentive Plan

A summary of stock option activity, related to our 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Exercise Price		Intrinsic Value
Outstanding at October 31, 2015	10	$	18.28
Exercised	(2)	$	19.20
Outstanding at July 31, 2016	8	$	18.05	$	527
Exercisable at July 31, 2016	8	$	18.05	$	527

2011 Management Incentive Plan [Member]

Stock Option Activity, Related to Incentive Plan

A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2015	14	$	23.00
Exercised	(1)	$	21.80
Outstanding at July 31, 2016	13	$	23.09	$	556
Exercisable at July 31, 2016	7	$	23.24	$	298

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Fair value measurements (Tables)

9 Months Ended

Jul. 31, 2016

Fair Value Disclosures [Abstract]

Financial Assets and Liabilities Measured on Recurring and Non-Recurring Basis

The following table sets forth our financial assets and liabilities as of July 31, 2016 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	30,578		-		-	$	30,578
Total assets at fair value	$	30,578	$	-	$	-	$	30,578

(1) The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are measured at fair value by quoted market prices.  Limoneira’s stock price at July 31, 2016 and October 31, 2015 equaled $17.69 per share and $15.86 per share.  Unrealized gains and losses are recognized through other comprehensive income. Unrealized investment holding losses arising during the three months ended July 31, 2016 and 2015 was $0.3 million and $4.1 million. Unrealized investment holding gains arising during the nine months ended July 31, 2016 was $3.2 million. Unrealized investment holding losses arising during the nine months ended July 31, 2015 was $8.8 million.

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Noncontrolling interest (Tables)

9 Months Ended

Jul. 31, 2016

Noncontrolling Interest [Abstract]

Reconciles Shareholders' Equity Attributable to Noncontrolling Interest

	Three months		Three months
	ended		ended
Salsa Lisa noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Net loss attributable to noncontrolling interest of Salsa Lisa		—		—
Noncontrolling interest, ending	$	285	$	270

	Nine months		Nine months
	ended		ended
Salsa Lisa noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Net loss attributable to noncontrolling interest of Salsa Lisa		—		—
Noncontrolling interest, ending	$	285	$	270

	Three months		Three months
		ended		ended
Avocados de Jalisco noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	1,025	$	—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(36)		—
Noncontrolling interest, ending	$	989	$	—

	Nine months		Nine months
	ended		ended
Avocados de Jalisco noncontrolling interest	July 31, 2016		July 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(22)		—
Noncontrolling interest, ending	$	989	$	—

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Earnings per share (Tables)

9 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

Schedule of basic and diluted net income per share

	Three months ended  July 31,
	2016		2015
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	12,745	$	8,641
Denominator:
Weighted average shares - Basic		17,350,883		17,301,131
Effect on dilutive securities – Restricted stock/options		96,161		84,984
Weighted average shares - Diluted		17,447,044		17,386,115
Net income per share attributable to Calavo Growers, Inc:
Basic	$	0.73	$	0.50
Diluted	$	0.73	$	0.50

	Nine months ended July 31,
	2016		2015
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	28,783	$	22,412
Denominator:
Weighted average shares - Basic		17,340,270		17,290,847
Effect on dilutive securities – Restricted stock/options		84,614		63,256
Weighted average shares - Diluted		17,424,884		17,354,103
Net income per share attributable to Calavo Growers, Inc:
Basic	$	1.66	$	1.30
Diluted	$	1.65	$	1.29

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Information Regarding Our Operations in Different Segments - Additional Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016 USD ($)	Jul. 31, 2015 USD ($)	Jul. 31, 2016 USD ($) segment	Jul. 31, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment			3
Inter-segment sales and cost of sales eliminated	$ 263,146	$ 232,450	$ 688,024	$ 648,830
Fresh products [Member]
Segment Reporting Information [Line Items]
Inter-segment sales and cost of sales eliminated	156,129	135,770	395,264	385,272
Fresh products [Member] | Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Inter-segment sales and cost of sales eliminated	1,400	600	2,800	1,200
Calavo Foods [Member]
Segment Reporting Information [Line Items]
Inter-segment sales and cost of sales eliminated	16,285	17,485	47,126	47,001
Calavo Foods [Member] | Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Inter-segment sales and cost of sales eliminated	$ 700	$ 600	$ 2,000	$ 1,300

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Information Regarding Our Operations in Different Segments - Sales by Product Category, by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Segment Reporting Information [Line Items]
Total gross sales	$ 267,608	$ 236,318	$ 699,878	$ 659,916
Less sales incentives	(4,462)	(3,868)	(11,854)	(11,086)
Net sales	263,146	232,450	688,024	648,830
Avocados [Member]
Segment Reporting Information [Line Items]
Total gross sales	151,364	132,165	354,785	360,334
Tomatoes [Member]
Segment Reporting Information [Line Items]
Total gross sales	2,581	1,154	34,375	16,813
Papayas [Member]
Segment Reporting Information [Line Items]
Total gross sales	2,614	2,559	7,054	6,977
Other fresh products [Member]
Segment Reporting Information [Line Items]
Total gross sales	433	607	854	2,571
Food service [Member]
Segment Reporting Information [Line Items]
Total gross sales	12,929	13,575	37,998	37,223
Retail and club [Member]
Segment Reporting Information [Line Items]
Total gross sales	97,687	86,258	264,812	235,998
Fresh products [Member]
Segment Reporting Information [Line Items]
Total gross sales	156,992	136,485	397,068	386,695
Less sales incentives	(863)	(715)	(1,804)	(1,423)
Net sales	156,129	135,770	395,264	385,272
Fresh products [Member] | Avocados [Member]
Segment Reporting Information [Line Items]
Total gross sales	151,364	132,165	354,785	360,334
Fresh products [Member] | Tomatoes [Member]
Segment Reporting Information [Line Items]
Total gross sales	2,581	1,154	34,375	16,813
Fresh products [Member] | Papayas [Member]
Segment Reporting Information [Line Items]
Total gross sales	2,614	2,559	7,054	6,977
Fresh products [Member] | Other fresh products [Member]
Segment Reporting Information [Line Items]
Total gross sales	433	607	854	2,571
Calavo Foods [Member]
Segment Reporting Information [Line Items]
Total gross sales	18,985	19,906	54,634	54,674
Less sales incentives	(2,700)	(2,421)	(7,508)	(7,673)
Net sales	16,285	17,485	47,126	47,001
Calavo Foods [Member] | Food service [Member]
Segment Reporting Information [Line Items]
Total gross sales	12,929	13,575	37,998	37,223
Calavo Foods [Member] | Retail and club [Member]
Segment Reporting Information [Line Items]
Total gross sales	6,056	6,331	16,636	17,451
RFG
Segment Reporting Information [Line Items]
Total gross sales	91,631	79,927	248,176	218,547
Less sales incentives	(899)	(732)	(2,542)	(1,990)
Net sales	90,732	79,195	245,634	216,557
RFG | Retail and club [Member]
Segment Reporting Information [Line Items]
Total gross sales	$ 91,631	$ 79,927	$ 248,176	$ 218,547

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Information Regarding Our Operations in Different Segments - Gross Margin (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Segment Reporting Information [Line Items]
Net sales	$ 263,146	$ 232,450	$ 688,024	$ 648,830
Cost of sales	230,502	208,172	607,575	583,772
Gross margin	32,644	24,278	80,449	65,058
Fresh products [Member]
Segment Reporting Information [Line Items]
Net sales	156,129	135,770	395,264	385,272
Cost of sales	137,845	126,105	352,424	355,991
Gross margin	18,284	9,665	42,840	29,281
Calavo Foods [Member]
Segment Reporting Information [Line Items]
Net sales	16,285	17,485	47,126	47,001
Cost of sales	10,484	11,415	29,228	31,725
Gross margin	5,801	6,070	17,898	15,276
RFG
Segment Reporting Information [Line Items]
Net sales	90,732	79,195	245,634	216,557
Cost of sales	82,173	70,652	225,923	196,056
Gross margin	$ 8,559	$ 8,543	$ 19,711	$ 20,501

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands	Jul. 31, 2016	Oct. 31, 2015
Inventory Disclosure [Abstract]
Fresh fruit	$ 21,175	$ 11,939
Packing supplies and ingredients	7,077	6,347
Finished prepared foods	8,158	8,065
Total, Inventories	$ 36,410	$ 26,351

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Related-Party Transactions (Details) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2015 USD ($)	Jul. 31, 2016 USD ($)	Jul. 31, 2015 USD ($)	Jul. 31, 2016 USD ($) Owner item	Jul. 31, 2015 USD ($)	Jan. 31, 2016 USD ($)	Oct. 31, 2015 USD ($)	Aug. 31, 2015
Infrastructure Advance Agreement With Belher [Member]
Related Party Transaction [Line Items]
Infrastructure advances due		$ 1,800		$ 1,800			$ 1,800
Prepaid Expenses and Other Current Assets [Member] | Infrastructure Advance Agreement With Belher [Member]
Related Party Transaction [Line Items]
Infrastructure advances due		1,000		1,000			1,000
Other Long Term Assets [Member] | Infrastructure Advance Agreement With Belher [Member]
Related Party Transaction [Line Items]
Infrastructure advances due		800		800			800
Avocados de Jalisco noncontrolling interest [Member]
Related Party Transaction [Line Items]
Ownership interest								80.00%
Preseason advances		200		200			300
Director
Related Party Transaction [Line Items]
Accounts payable to related parties		7,900		7,900
Limoneira
Related Party Transaction [Line Items]
Dividend income from Limoneira		100	$ 100	300	$ 200
Rent paid		$ 100	100	$ 200	200
Ownership interest		12.00%		12.00%
TroyGould PC
Related Party Transaction [Line Items]
Legal fees		$ 100	100	$ 200	100
RFG
Related Party Transaction [Line Items]
Number of previous or current employees with majority owned related party entities | Owner				3
LIG, THNC and Third Coast
Related Party Transaction [Line Items]
Number of previous or current employees with majority owned related party entities | item				3
LIG
Related Party Transaction [Line Items]
Rent paid		133	131	$ 395	392
THNC
Related Party Transaction [Line Items]
Rent paid		77	76	229	228
Third Coast
Related Party Transaction [Line Items]
Purchases from related parties			86		203
Sales made to related parties			$ 31		$ 270
Calavo Sub
Related Party Transaction [Line Items]
Investment in unconsolidated entities		3,300		3,300
Calavo Sub | Belo
Related Party Transaction [Line Items]
Ownership interest	50.00%		50.00%		50.00%
Amount paid for 50% ownership	$ 2,000
Agricola Belher
Related Party Transaction [Line Items]
Advances to supplier		2,000		2,000			3,000
Agricola Don Memo
Related Party Transaction [Line Items]
Amount loaned to Don Memo since its formation		4,000		4,000
Additional investment amount		1,300
Advances to supplier		900		900			$ 1,800
Agricola Don Memo | Bank Of America | Financial Guarantee [Member]
Related Party Transaction [Line Items]
Guarantor obligation on behalf of subsidiary, maximum exposure						$ 4,500
Avocados [Member] | Director
Related Party Transaction [Line Items]
Purchases from related parties		19,900	$ 9,100	23,500	$ 15,400
Tomatoes [Member] | Agricola Belher
Related Party Transaction [Line Items]
Purchases from related parties		500	$ 100	26,000	$ 14,200
Tomatoes [Member] | Agricola Don Memo
Related Party Transaction [Line Items]
Purchases from related parties		$ 1,400		$ 3,500

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Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Thousands	Jul. 31, 2016	Oct. 31, 2015
Statement of Financial Position [Abstract]
Intangibles, net	$ 3,660	$ 4,613
Mexican IVA (i.e. value-added) taxes receivable	7,061	5,853
Grower advances	123	346
Loan to Agricola Belher	800	800
Loan to FreshRealm members	315	307
Notes receivable from San Rafael	1,305	1,286
Other	1,031	796
Other assets	$ 14,295	$ 14,001

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Other Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Jul. 31, 2016	Oct. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Finite and indefinite lived intangible assets gross	$ 11,572	$ 11,572
Accum. Amortization	(7,912)	(6,959)
Intangibles, net	3,660	4,613
Brand name intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying value and net book value	$ 275	275
Customer list/relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	8 years
Gross Carrying Value	$ 7,640	7,640
Accum. Amortization	(4,997)	(4,282)
Net Book Value	$ 2,643	3,358
Trade names [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	8 years 2 months 12 days
Gross Carrying Value	$ 2,760	2,760
Accum. Amortization	(2,342)	(2,164)
Net Book Value	$ 418	596
Trade secrets/recipes [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	9 years 3 months 18 days
Gross Carrying Value	$ 630	630
Accum. Amortization	(306)	(270)
Net Book Value	$ 324	360
Non-competition agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	5 years
Gross Carrying Value	$ 267	267
Accum. Amortization	$ (267)	(243)
Net Book Value		$ 24

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Other Assets - Additional Information (Details) $ in Millions	Jul. 31, 2016 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense for remainder of fiscal 2016	$ 0.3
Amortization expense for the year 2017	1.1
Amortization expense for the year 2018	1.1
Amortization expense for the year 2019	0.7
Amortization expense for the years 2020-2023	$ 0.2

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Stock-Based Compensation - Additional Information (Details) $ / shares in Units, $ in Millions			3 Months Ended	9 Months Ended
	Jan. 08, 2016 $ / shares shares	Jan. 04, 2016 director $ / shares shares	Jul. 31, 2016 USD ($)	Jul. 31, 2016 USD ($) shares	Apr. 30, 2011 shares
Stock Options [Member] | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				1 year
Expiration period, after grant date				2 years
Stock Options [Member] | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				5 years
Expiration period, after grant date				5 years
2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares authorized under ESPP					1,500,000
Number of non-employee directors | director		12
2011 Management Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted per non-employee		1,750
Restricted shares granted		21,000		51,000
Recognized stock-based compensation expense | $			$ 0.6	$ 1.6
2011 Management Incentive Plan [Member] | Restricted Stock [Member] | Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock price | $ / shares		$ 48.46
Recognized stock-based compensation expense | $			0.3	0.6
2011 Management Incentive Plan [Member] | Restricted Stock [Member] | Executive Officers [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted	24,582
Stock price | $ / shares	$ 48.68
Recognized stock-based compensation expense | $			$ 0.1	$ 0.2
Shares vesting schedule per year				.33

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Stock-Based Compensation - Summary of Restricted Stock Activity (Details) - Restricted Stock [Member] - 2011 Management Incentive Plan [Member] - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	Jan. 04, 2016	Jul. 31, 2016	Oct. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance		75,000
Vested, Number of Shares		(39,000)
Granted, Number of Shares	21,000	51,000
Outstanding, Number of Shares, Ending Balance		87,000
Outstanding, Weighted-Average Grant Price		$ 44.76	$ 39.01
Vested, Weighted-Average Grant Price		39.5
Granted, Weighted-Average Grant Price		$ 48.58
Aggregate Intrinsic Value		$ 5,745

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Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Jul. 31, 2016	Oct. 31, 2015
2005 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding stock options, weighted-average remaining contractual term	2 years 9 months 18 days
Exercisable stock options, weighted-average remaining contractual term	2 years 9 months 18 days
2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding stock options, weighted-average remaining contractual term	4 years 7 months 6 days
Exercisable stock options, weighted-average remaining contractual term	4 years 7 months 6 days
Stock Options [Member] | 2005 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	10
Exercised, Number of Shares	(2)
Outstanding, Number of Shares, Ending Balance	8
Exercisable, Number of Shares	8
Outstanding, Weighted-Average Exercise Price	$ 18.05	$ 18.28
Exercised, Weighted-Average Exercise Price	19.20
Exercisable, Weighted-Average Exercise Price	$ 18.05
Outstanding, Aggregate Intrinsic Value	$ 527
Exercisable, Aggregate Intrinsic Value	$ 527
Stock Options [Member] | 2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	14
Exercised, Number of Shares	(1)
Outstanding, Number of Shares, Ending Balance	13
Exercisable, Number of Shares	7
Outstanding, Weighted-Average Exercise Price	$ 23.09	$ 23.00
Exercised, Weighted-Average Exercise Price	21.80
Exercisable, Weighted-Average Exercise Price	$ 23.24
Outstanding, Aggregate Intrinsic Value	$ 556
Exercisable, Aggregate Intrinsic Value	$ 298

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Other Events (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended		9 Months Ended
	Dec. 08, 2015	Aug. 31, 2016	Jun. 30, 2016	Jul. 31, 2016	Jul. 31, 2015
Dividend payment	$ 0.80
Dividend aggregate amount to shareholders	$ 13,900			$ 13,907	$ 12,970
Revolving Credit Facility
Credit agreement term			5 years
Credit available under borrowing agreement			$ 80,000
Additional borrowing capacity			$ 50,000
Commitment fee (as a percent)				0.15%
Revolving Credit Facility | Minimum
Quarterly consolidated fixed charge coverage ratio				1.15%
Revolving Credit Facility | Minimum | LIBOR
Applicable margin (as a percent)				1.00%
Revolving Credit Facility | Minimum | Base Rate
Applicable margin (as a percent)				0.00%
Revolving Credit Facility | Maximum
Quarterly consolidated leverage ratio				2.50%
Revolving Credit Facility | Maximum | LIBOR
Applicable margin (as a percent)				1.50%
Revolving Credit Facility | Maximum | Base Rate
Applicable margin (as a percent)				0.50%
Subsequent Event | Riverside Property | Fresh Foods LLC
Property
Purchase price		$ 20,000
Amount deposited		$ 300

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Fair Value Measurements - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015	Oct. 31, 2015
Limoneira
Assets at Fair Value:
Percentage of outstanding shares of Limoneira's shares owned	12.00%		12.00%
Limoneira's stock price	$ 17.69		$ 17.69		$ 15.86
Unrealized investment holding income (losses)	$ 300	$ 4,100	$ 3,200	$ 8,800
Fair Value, Measurements, Recurring [Member]
Assets at Fair Value:
Total assets at fair value	30,578		30,578
Fair Value, Measurements, Recurring [Member] | Limoneira
Assets at Fair Value:
Total assets at fair value	30,578		30,578
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets at Fair Value:
Total assets at fair value	30,578		30,578
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Limoneira
Assets at Fair Value:
Total assets at fair value	$ 30,578		$ 30,578

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Noncontrolling Interest - Shareholders' Equity Attributable to Noncontrolling Interest (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning			$ 1,011
Net loss attributable to noncontrolling interest	$ 36		22
Noncontrolling interest, ending	989		989
Salsa Lisa noncontrolling interest [Member]
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning	285	$ 270	285	$ 270
Net loss attributable to noncontrolling interest
Noncontrolling interest, ending	285	270	285	270
Avocados de Jalisco noncontrolling interest [Member]
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning	1,025		1,011
Net loss attributable to noncontrolling interest	(36)		(22)
Noncontrolling interest, ending	$ 989		$ 989

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Earnings Per Share [Abstract]
Net income attributable to Calavo Growers, Inc.	$ 12,745	$ 8,641	$ 28,783	$ 22,412
Weighted average shares - Basic	17,350,883	17,301,131	17,340,270	17,290,847
Effect on dilutive securities - Restricted stock/options	96,161	84,984	84,614	63,256
Weighted average shares - Diluted	17,447,044	17,386,115	17,424,884	17,354,103
Basic	$ 0.73	$ 0.50	$ 1.66	$ 1.30
Diluted	$ 0.73	$ 0.50	$ 1.65	$ 1.29

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Mexican IVA taxes receivable (Details) - USD ($) $ in Thousands	Jul. 31, 2016	Oct. 31, 2015
Value Added Tax Receivable [Abstract]
IVA receivables balance	$ 14,500	$ 11,600
Mexican IVA (i.e. value-added) tax receivable recorded in prepaids & other current assets	7,400	5,700
Mexican IVA (i.e. value-added) tax receivable recorded in other assets	$ 7,061	$ 5,853