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 April 30, 2019

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CVGW	Nasdaq Global Market

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 every Interactive Data File required to be submitted 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 such files).    Yes  ☒   No  ☐

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

Emerging Growth Company ☐
Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller Reporting Company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.☐

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 April 30, 2019 was 17,599,734

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, gross profit, expenses, gain/(loss) on Limoneira shares, income/(loss) from unconsolidated entities, earnings, earnings per share, tax provisions, cash flows, currency exchange rates, the impact of acquisitions or equity investments or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and integration (including information technology systems 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, whether attributable to Calavo or any of its unconsolidated entities; any statements regarding pending investigations, legal claims or tax disputes; any statements of expectation or belief;any risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, such as import/export/customs duties, tariffs and/or quotas);  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, legal claims and tax disputes; any risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, such as import/export/customs duties, tariffs and/or quotas); 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, 2018, 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 – April 30, 2019 and October 31, 2018	4
	Consolidated Condensed Statements of Income – Three and Six Months Ended April 30, 2019 and 2018	5
	Consolidated Condensed Statements of Comprehensive Income – Three and Six Months Ended April 30, 2019 and 2018	6
	Consolidated Condensed Statements of Cash Flows – Six Months Ended April 30, 2019 and 2018	7
	Consolidated Statements of Shareholders’ Equity	8
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 6.	Exhibits	34
	Signatures	36

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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)

	April 30,		October 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	7,361	$	1,520
Accounts receivable, net of allowances of $4,694 (2019) $3,227 (2018)		83,392		66,143
Inventories, net		49,616		35,044
Prepaid expenses and other current assets		7,878		16,727
Advances to suppliers		4,136		5,555
Income taxes receivable		—		3,521
Total current assets		152,383		128,510
Property, plant, and equipment, net		125,696		122,143
Investment in Limoneira Company		38,310		42,609
Investment in unconsolidated entities		15,370		24,805
Deferred income taxes		4,377		4,377
Goodwill		18,262		18,262
Loans to FreshRealm		24,680		—
Other assets		30,126		27,030
	$	409,204	$	367,736
Liabilities and shareholders' equity
Current liabilities:
Payable to growers	$	25,632	$	14,001
Trade accounts payable		13,903		13,735
Accrued expenses		43,178		38,521
Income taxes payable		421		—
Short-term borrowings		26,500		15,000
Dividend payable		—		17,568
Current portion of long-term obligations		221		118
Total current liabilities		109,855		98,943
Long-term liabilities:
Long-term obligations, less current portion		3,434		314
Deferred rent		3,224		2,678
Other long-term liabilities		5,063		842
Total long-term liabilities		11,721		3,834
Commitments and contingencies
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,600 (2019) and 17,567 (2018) shares issued and outstanding)		18		18
Additional paid-in capital		159,838		157,928
Accumulated other comprehensive income		—		12,141
Noncontrolling interest		1,675		1,748
Retained earnings		126,097		93,124
Total shareholders' equity		287,628		264,959
	$	409,204	$	367,736

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

4

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)

	Three months ended				Six months ended
	April 30,				April 30,
	2019		2018		2019		2018
Net sales	$	286,236	$	264,405	$	544,268	$	512,333
Cost of sales		249,399		232,436		476,594		454,054
Gross profit		36,837		31,969		67,674		58,279
Selling, general and administrative		15,657		12,875		29,933		28,392
Gain on sale of Temecula packinghouse		1,927		—		1,927		—
Operating income		23,107		19,094		39,668		29,887
Interest expense		(365)		(288)		(619)		(519)
Other income, net		886		299		1,396		425
Unrealized and realized net gain (loss) on Limoneira shares		1,359		—		(3,146)		—
Income before provision for income taxes and loss from unconsolidated entities		24,987		19,105		37,299		29,793
Provision for income taxes		5,573		4,764		7,106		9,066
Income (loss) from unconsolidated entities		(3,136)		(325)		(9,434)		278
Net income		16,278		14,016		20,759		21,005
Less: Net loss attributable to noncontrolling interest		67		106		73		256
Net income attributable to Calavo Growers, Inc.	$	16,345	$	14,122	$	20,832	$	21,261
Calavo Growers, Inc.’s net income per share:
Basic	$	0.93	$	0.81	$	1.19	$	1.22
Diluted	$	0.93	$	0.80	$	1.18	$	1.21
Number of shares used in per share computation:
Basic		17,530		17,481		17,514		17,472
Diluted		17,609		17,580		17,582		17,561

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

5

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three months ended				Six months ended
	April 30,				April 30,
	2019		2018		2019		2018
Net income	$	16,278	$	14,016	$	20,759	$	21,005
Other comprehensive income, before tax:
Unrealized investment gains (losses)		—		2,990		—		(121)
Income tax benefit (expense) related to items of other comprehensive income		—		(778)		—		311
Other comprehensive loss, net of tax		—		2,212		—		190
Comprehensive income		16,278		16,228		20,759		21,195
Less: Net loss attributable to noncontrolling interest		67		106		73		256
Comprehensive income – Calavo Growers, Inc.	$	16,345	$	16,334	$	20,832	$	21,451

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)

	Six months ended April 30,
	2019		2018
Cash Flows from Operating Activities:
Net income	$	20,759	$	21,005
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,770		6,561
Provision for losses (gains) on accounts receivable		83		(8)
Loss (income) from unconsolidated entities		9,435		(278)
Unrealized and realized net loss on Limoneira shares		3,146		—
Interest income on loans to FreshRealm		(980)		—
Stock-based compensation expense		1,826		2,774
Gain on sale of Temecula packinghouse		(1,927)		—
Deferred income taxes		—		1,453
Effect on cash of changes in operating assets and liabilities:
Accounts receivable, net		(17,332)		(7,167)
Inventories, net		(14,572)		(8,300)
Prepaid expenses and other current assets		(367)		(224)
Advances to suppliers		1,419		1,627
Income taxes receivable/payable		3,942		3,261
Other assets		(3,657)		(2,263)
Payable to growers		11,631		10,849
Deferred rent		547		(26)
Trade accounts payable, accrued expenses and other long-term liabilities		5,880		(8,076)
Net cash provided by operating activities		26,603		21,188
Cash Flows from Investing Activities:
Acquisitions of and deposits on property, plant, and equipment		(7,467)		(8,838)
Proceeds received for repayment of San Rafael note		225		232
Proceeds received from Limoneira stock sales		1,154		—
Proceeds from sale of Temecula packinghouse		7,100		—
Loans to FreshRealm		(14,700)		—
Net cash used in investing activities		(13,688)		(8,606)
Cash Flows from Financing Activities:
Payment of dividend to shareholders		(17,568)		(16,657)
Proceeds from revolving credit facility		140,500		119,000
Payments on revolving credit facility		(129,000)		(118,000)
Payment of minimum withholding taxes on net share settlement of equity awards		(1,008)		(1,158)
Payments on long-term obligations		(83)		(68)
Proceeds from stock option exercises		85		53
Net cash used in financing activities		(7,074)		(16,830)
Net increase (decrease) in cash and cash equivalents		5,841		(4,248)
Cash and cash equivalents, beginning of period		1,520		6,625
Cash and cash equivalents, end of period	$	7,361	$	2,377
Noncash Investing and Financing Activities:
Capital lease related to Temecula packinghouse	$	3,306	$	—
Property, plant, and equipment included in trade accounts payable and accrued expenses	$	598	$	725
Noncash transfer of noncontrolling interest	$	—	$	1,001
Unrealized investment gain	$	—	$	(121)

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

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CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

						Accumulated
				Additional		Other
	Common Stock			Paid-in		Comprehensive		Retained		Noncontrolling
	Shares	Amount		Capital		Income		Earnings		Interest		Total
Balance, October 31, 2017	17,533		18		154,243		10,434		78,411		1,016		244,122
Exercise of stock options and income tax benefit	3		—		53		—		—		—		53
Stock compensation expense	—		—		941		—		—		—		941
Restricted stock issued	7		—		891		—		—		—		891
Unrealized gain on Limoneira investment, net	—		—		—		(2,022)		—		—		(2,022)
Noncash transfer of noncontrolling interest	—		—		(1,001)		—		—		1,001		—
Avocados de Jalisco noncontrolling interest contribution	—		—		—		—		—		(150)		(150)
Net income attributable to Calavo Growers, Inc.	—		—		—		—		7,139		—		7,139
Balance, January 31, 2018	17,543		18		155,127		8,412		85,550		1,867		250,974
Stock compensation expense	—		—		942		—		—		—		942
Restricted stock issued	24		—		—		—		—		—		—
Unrealized gain on Limoneira investment, net	—		—		—		2,212		—		—		2,212
Avocados de Jalisco noncontrolling interest contribution	—		—		—		—		—		(106)		(106)
Net income attributable to Calavo Growers, Inc.	—		—		—		—		14,122		—		14,122
Balance, April 30, 2018	17,567	$	18	$	156,069	$	10,624	$	99,672	$	1,761	$	268,144

						Accumulated
				Additional		Other
	Common Stock			Paid-in		Comprehensive		Retained		Noncontrolling
	Shares	Amount		Capital		Income		Earnings		Interest		Total
Balance, October 31, 2018	17,567		18		157,928		12,141		93,124		1,748		264,959
Exercise of stock options and income tax benefit	2		—		47		—		—		—		47
Stock compensation expense	—		—		966		—		—		—		966
Restricted stock issued	29		—		—		—		—		—		—
Unrealized gains on Limoneira investment reclassed to retained earnings	—		—		—		(12,141)		12,141		—		—
Avocados de Jalisco noncontrolling interest contribution	—		—		—		—		—		(6)		(6)
Net income attributable to Calavo Growers, Inc.	—		—		—		—		4,487		—		4,487
Balance, January 31, 2019	17,598		18		158,941		—		109,752		1,742		270,453
Exercise of stock options and income tax benefit	2		—		37		—		—		—		37
Stock compensation expense	—		—		860		—		—		—		860
Avocados de Jalisco noncontrolling interest contribution	—		—		—		—		—		(67)		(67)
Net income attributable to Calavo Growers, Inc.	—		—		—		—		16,345		—		16,345
Balance, April 30, 2019	17,600	$	18	$	159,838	$	—	$	126,097	$	1,675	$	287,628

See accompanying notes to consolidated 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 a 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 retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers on a worldwide basis. We procure avocados from California, Mexico and other growing regions around the world.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) create, process and package a portfolio of healthy fresh foods including fresh-cut fruit and vegetables, and prepared foods and (iii) process and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and Renaissance Food Group (RFG). 

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 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, 2018.

Recently Adopted Accounting Pronouncements

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 fiscal years and interim period within those fiscal years beginning after December 15, 2017. The Company adopted this new standard at the beginning of fiscal 2019. With the adoption of this new standard, we reclassed unrealized gains of $12.1 million in accumulated other comprehensive income to retained earnings as of November 1, 2018. Additionally, for the six months ended April 30, 2019, we sold 51,271 shares of Limoneira stock and recorded a loss of $0.1 million in our consolidated statements of income.  Limoneira’s stock price at April 30, 2019, January 31, 2019 and October 31, 2018 equaled $22.84 per share, $22.03 per share, and $24.65 per share. Our remaining shares of Limoneira stock, totaling 1,677,299, were revalued to $22.84 per share at April 30, 2019 and, as a result, we recorded a gain of $1.4 million for the three months ended April 30, 2019 and we recorded a loss of $3.0 million for the six months ended April 30, 2019 in our consolidated statements of income.

In May 2014, the FASB issued a comprehensive new revenue recognition standard which superseded previous existing revenue recognition guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The Company adopted this new standard at the beginning of fiscal 2019 using the modified retrospective transition method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to the opening balance of retained earnings on the first day of our 2019 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated financial statements. See Note 14 for further information.

9

Recently Issued Accounting Standards

In September 2018, the FASB issuedand ASU, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. This ASU will be effective for us beginning the first day of our 2021 fiscal year. We are evaluating the impact of the adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In June 2018, the FASB issued an ASU, Improvements to Nonemployee Share-Based Payment Accounting. The FASB issued this update to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU will be effective for us beginning the first day of our 2020 fiscal year. We are evaluating the impact of the update of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In February 2018, the FASB issued an ASU, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which amends Accounting Standards Codification ("ASC") 220, Income Statement — Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act, (the "Act"). In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. This ASU is effective for us the first day of our 2020 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In January 2017, the FASB issued an ASU, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The ASU permits an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning the first day of our 2021 fiscal year and is not expected to have a significant impact upon adoption.

In February 2016, the FASB issued an ASU, Leases, 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 2020 fiscal year. Early adoption is permitted. Although we are in the process of evaluating the impact of adoption of ASU 2016-02 on our consolidated financial statements, we currently expect the most significant changes will be related to the recognition of material new long-term right-of-use assets and lease liabilities on our consolidated balance sheet.

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 operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents operations related to the purchase, manufacturing, and distribution of prepared

10

avocado products, including guacamole and salsa. The RFG segment represents operations related to the manufacturing and distribution of fresh-cut fruit, fresh-cut vegetables, vegetables and prepared foods.  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. Data in the following tables is presented in thousands:

	Three months ended April 30, 2019								Three months ended April 30, 2018
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Avocados	$	135,086	$	—	$	—	$	135,086	$	127,743	$	—	$	—	$	127,743
Tomatoes		14,515		—		—		14,515		7,963		—		—		7,963
Papayas		1,809		—		—		1,809		2,852		—		—		2,852
Other fresh products		108		—		—		108		69		—		—		69
Prepared avocado products		—		23,631		—		23,631		—		25,235		—		25,235
Salsa		—		669		—		669		—		740		—		740
Fresh-cut fruit & veg. and prepared foods		—		—		114,641		114,641		—		—		104,982		104,982
Total gross sales		151,518		24,300		114,641		290,459		138,627		25,975		104,982		269,584
Less sales incentives		(112)		(2,259)		(649)		(3,020)		(438)		(3,271)		(425)		(4,134)
Less inter-company eliminations		(471)		(732)		—		(1,203)		(254)		(791)		—		(1,045)
Net sales	$	150,935	$	21,309	$	113,992	$	286,236	$	137,935	$	21,913	$	104,557	$	264,405

	Six months ended April 30, 2019								Six months ended April 30, 2018
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Avocados	$	239,080	$	—	$	—	$	239,080	$	236,672	$	—	$	—	$	236,672
Tomatoes		25,907		—		—		25,907		20,047		—		—		20,047
Papayas		4,748		—		—		4,748		5,657		—		—		5,657
Other fresh products		189		—		—		189		104		—		—		104
Prepared avocado products		—		47,883		—		47,883		—		47,038		—		47,038
Salsa		—		1,522		—		1,522		—		1,605		—		1,605
Fresh-cut fruit & veg. and prepared foods		—		—		234,182		234,182		—		—		211,758		211,758
Total gross sales		269,924		49,405		234,182		553,511		262,480		48,643		211,758		522,881
Less sales incentives		(1,069)		(4,293)		(1,126)		(6,488)		(1,092)		(6,049)		(1,095)		(8,236)
Less inter-company eliminations		(1,066)		(1,689)		—		(2,755)		(668)		(1,644)		—		(2,312)
Net sales	$	267,789	$	43,423	$	233,056	$	544,268	$	260,720	$	40,950	$	210,663	$	512,333

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	Fresh		Calavo
	products		Foods		RFG		Total
Three months ended April 30, 2019
Net sales before intercompany eliminations	$	151,406	$	22,041	$	113,992	$	287,439
Intercompany eliminations		(471)		(732)		—		(1,203)
Net sales		150,935		21,309		113,992		286,236
Cost of sales before intercompany eliminations		123,583		15,496		111,523		250,602
Intercompany eliminations		(414)		(507)		(282)		(1,203)
Cost of sales		123,169		14,989		111,241		249,399
Gross profit	$	27,766	$	6,320	$	2,751	$	36,837
Three months ended April 30, 2018
Net sales before intercompany eliminations	$	138,189	$	22,704	$	104,557	$	265,450
Intercompany eliminations		(254)		(791)		—		(1,045)
Net sales		137,935		21,913		104,557		264,405
Cost of sales before intercompany eliminations		123,052		14,840		95,589		233,481
Intercompany eliminations		(237)		(479)		(329)		(1,045)
Cost of sales		122,815		14,361		95,260		232,436
Gross profit	$	15,120	$	7,552	$	9,297	$	31,969

	Fresh		Calavo
	products		Foods		RFG		Total
Six months ended April 30, 2019
Net sales before intercompany eliminations	$	268,855	$	45,112	$	233,056	$	547,023
Intercompany eliminations		(1,066)		(1,689)		—		(2,755)
Net sales		267,789		43,423		233,056		544,268
Cost of sales before intercompany eliminations		220,174		31,823		227,352		479,349
Intercompany eliminations		(941)		(1,152)		(662)		(2,755)
Cost of sales		219,233		30,671		226,690		476,594
Gross profit	$	48,556	$	12,752	$	6,366	$	67,674
Six months ended April 30, 2018
Net sales before intercompany eliminations	$	261,388	$	42,594	$	210,663	$	514,645
Intercompany eliminations		(668)		(1,644)		—		(2,312)
Net sales		260,720		40,950		210,663		512,333
Cost of sales before intercompany eliminations		231,955		28,461		195,950		456,366
Intercompany eliminations		(612)		(1,038)		(662)		(2,312)
Cost of sales		231,343		27,423		195,288		454,054
Gross profit	$	29,377	$	13,527	$	15,375	$	58,279

For the three months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.4 million and $0.2 million between Fresh products and RFG were eliminated.  For the six months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.9 million and $0.6 million between Fresh products and RFG were eliminated.  For the three months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.7 million and $0.8 million between Calavo Foods and RFG were eliminated.  For the six months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $1.7 million and $1.6 million between Calavo Foods and RFG were eliminated.  For the three months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.1 million between Fresh products and Calavo Foods were eliminated. For the six months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.2 million and $0.1 million between Fresh products and Calavo Foods were eliminated.

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Sales to customers outside the U.S. were approximately $10.1 million, and $10.7 million for the three months ended April 30, 2019 and 2018. Sales to customers outside the U.S. were approximately $19.2 million, and $18.2 million for the six months ended April 30, 2019 and 2018.

Long-lived assets attributed to geographic areas as of April 30, 2019 and October 31, 2018, are as follows (in thousands):

	United States		Mexico		Consolidated
April 30, 2019	$	93,340	$	32,356	$	125,696
October 31, 2018	$	88,600	$	33,543	$	122,143

3.Inventories

Inventories consist of the following (in thousands):

	April 30,		October 31,
	2019		2018
Fresh fruit	$	25,017	$	12,902
Packing supplies and ingredients		11,630		10,889
Finished prepared foods		12,969		11,253
	$	49,616	$	35,044

Inventories are stated at the lower of cost or net realizable value. We periodically review the value of items in inventory and record any necessary write downs of inventory based on our assessment of market conditions.  No additional inventory reserve was considered necessary as of April 30, 2019 and October 31, 2018.

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. For the three months ended April 30, 2019 and 2018, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $2.1 million and $1.9 million.  During the six months ended April 30, 2019 and 2018, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $2.1 million and $2.0 million. Amounts payable to these Board members were $2.0 million as of April 30, 2019.We did not have any amounts payable to these Board members as of October 31, 2018.

During the three months ended April 30, 2019 and 2018, we received $0.1 million as dividend income from Limoneira Company (Limoneira). During the six months ended April 30, 2019 and 2018, we received $0.2 million as dividend income from Limoneira.  In addition, we lease office space from Limoneira for our corporate office. We paid to rent expense to Limoneira totaling $0.1 million for the three and six months ended April 30, 2019 and 2018. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. As of April 30, 2019, we own less than 10% ownership interest in Limoneira. Effective December 2018, our Chief Executive Officer retired from Limoneira’s 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 each of the three months ended April 30, 2019 and 2018, Calavo Growers, Inc. paid fees totaling less than $0.1 million to TroyGould PC. During each of the six months ended April 30, 2019 and 2018, Calavo Growers, Inc. paid fees totaling less than $0.2 million and $0.1 million to TroyGould PC.

As of April 30, 2019 and October 31, 2018, we had an investment of $5.0 million and $5.2 million, representing Calavo Sub’s 50% ownership in Agricola Don Memo, S.A. de C.V. (Don Memo), which was included as an investment in unconsolidated entities on our balance sheet.  We make advances to Don Memo for operating purposes, provide

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additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Don Memo, net of our commission and aforementioned advances. As of April 30, 2019 and October 31, 2018, we had outstanding advances of $2.8 million and $2.5 million to Don Memo. During the three months ended April 30, 2019 and 2018, we recorded $0.2 million and $0.1 million of cost of sales to Don Memo pursuant to our consignment agreement. During the six months ended April 30, 2019 and 2018, we recorded $5.9 million and $3.8 million of cost of sales to Don Memo pursuant to our consignment agreement.

We make advances to Agricola Belher (Belher) for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Belher, net of our commission and aforementioned advances. We had grower advances due from Belher totaling $4.0 million as of April 30, 2019 and October 31, 2018, which are netted against the grower payable.  In addition, we had infrastructure advances due from Belher of $3.4 million as of April 30, 2019 and October 31, 2018.  $0.8 million of these infrastructure advances were recorded as a receivable in prepaid and other current assets.  The remaining $2.6 million of these infrastructure advances were recorded in other assets. During the three months ended April 30, 2019 and 2018, we recorded $12.4 million and $6.7 million of cost of sales to Belher pursuant to our consignment agreement. During the six months ended April 30, 2019 and 2018, we recorded $17.6 million and $12.6 million of cost of sales 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.  As of April 30, 2019, this entity was approximately 83% owned by Calavo and was consolidated in our financial statements.  Avocados de Jalisco built a packinghouse located in Jalisco, Mexico, which began operations in June of 2017. As of April 30, 2019, and October 31, 2018, we have made preseason advances of approximately $0.1 million to various partners of Avocados de Jalisco. During the three months ended April 30, 2019, we purchased approximately $1.0 million of avocados from the partners of Avocados de Jalisco. During the six months ended April 30, 2019 and 2018, we purchased approximately $2.0 million and $0.2 million of avocados from the partners of Avocados de Jalisco. In January 2018, we transferred $1.0 million of interest to the Avocados de Jalisco noncontrolling members.

As of April 30, 2019 and October 31, 2018, we had an investment of $10.3 million and $19.9 million in FreshRealm, LLC (“FreshRealm”). We record the amount of our investment in FreshRealm in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income/ (loss) in unconsolidated entities” in our Consolidated Condensed Statement of Income. See Note 13 for additional information.

Effective July 31, 2018, we entered into a Note and Membership Unit Purchase Agreement (“NMUPA”) with FreshRealm, pursuant to which we agreed to provide additional financing, subject to certain terms and conditions.  Pursuant to such NMUPA, we entered into a Subscription Agreement, whereby we purchased $3.5 million of equity units in FreshRealm, on July 31, 2018.  FreshRealm concurrently entered into subscription agreements with certain third-party investors for an additional $3.5 million of equity investments.  As of April 30, 2019, our ownership percentage in FreshRealm was approximately 37%. 

Additionally, pursuant to the NMUPA, we entered into a $12 million Senior Promissory Note and corresponding Security Agreement (collectively, the “Agreements”) with FreshRealm, effective August 10, 2018. We funded $9 million of this loan commitment during the fourth quarter of fiscal 2018 and funded the remaining loan commitment amount of $3 million during the first quarter of fiscal 2019.  During our second quarter of fiscal 2019, we amended this note, due October 31, 2019, and, among other things, included a provision whereby we have the option to extend repayment of this note to November 1, 2020.

During our first quarter of fiscal 2019 we loaned FreshRealm an additional $7.5 million, in unsecured notes receivable due October 31, 2019 with an option to extend repayment of this note to November 1, 2020.  During our second quarter of fiscal 2019, we lent an additional $4.2 million on an unsecured basis to FreshRealm under similar terms. As of April 30, 2019 and October 31, 2018, we have note receivables from FreshRealm totaling $24.7 million and $9.0 million. At October 31, 2018, note receivables from FreshRealm of $9.0 million was included in prepaids and other current assets.  These loans to FreshRealm bear interest at 10% which is due by the final maturity date.  At April 30,

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2019 we have a receivable of $1.0 million related to interest that we have recorded with Loans to FreshRealm on the balance sheet. See Note 13 for further information.

Three officers and five members of our board of directors have investments in FreshRealm.  In addition, as of April 30, 2019 and October 31, 2018, we have a loan to FreshRealm members of approximately $0.2 million and $0.3 million. In October and December 2017, our Chairman and Chief Executive Officer invested $7.0 million and $1.5 million into FreshRealm.  In January 2018, one of our non-executive directors invested $1.8 million into FreshRealm. In the second quarter of fiscal 2018, two of our non-executive directors invested $1.2 million into FreshRealm.

In the first quarter of fiscal 2019, FreshRealm entered into a supply contract with a large multi-national, multi-channel retailer.  Calavo co-signed an addendum to this agreement to provide assurance to the customer that Calavo will assume responsibility for performance, in the event that FreshRealm cannot perform, provided that the customer must work in good faith to make reasonable adjustments to logistical elements in the contract, if requested by Calavo. 

 We provide storage services to FreshRealm from select Value-Added Depots and RFG facilities.  We have received $0.1 million in storage services revenue from FreshRealm in the three months ended April 30, 2019 and 2018. We have received $0.2 million in storage services revenue from FreshRealm in the six months ended April 30, 2019 and 2018. For the three months ended April 30, 2019 and 2018, RFG has sold $0.3 million and $2.4 million of products to FreshRealm. For the six months ended April 30, 2019 and 2018, RFG has sold $1.9 million and $3.9 million of products to FreshRealm.

The previous owners of RFG, one of which is currently an officer of Calavo, have a majority ownership of certain entities that provide various services to RFG, specifically LIG Partners, LLC and THNC, LLC.  One of RFG’s California operating facilities 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.  See the following tables for the related party activity for the three and six months ended April 30, 2019 and 2018:

	Three months ended April 30,
(in thousands)	2019		2018
Rent paid to LIG	$	122	$	139
Rent paid to THNC, LLC	$	198	$	199

	Six months ended April 30,
(in thousands)	2018		2018
Rent paid to LIG	$	261	$	278
Rent paid to THNC, LLC	$	397	$	398

5.Other assets

Other assets consist of the following (in thousands):

	April 30,		October 31,
	2019		2018
Mexican IVA (i.e. value-added) taxes receivable (see note 11)	$	25,404	$	21,859
Infrastructure advance to Agricola Belher		2,600		2,600
Intangibles, net		556		1,109
Other		1,566		1,462
	$	30,126	$	27,030

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Intangible assets consist of the following (in thousands):

		April 30, 2019						October 31, 2018
	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	$	(7,568)	$	72	$	7,640	$	(7,106)	$	534
Trade names	9.2 years		2,760		(2,738)		22		2,760		(2,672)		88
Trade secrets/recipes	9.3 years		630		(443)		187		630		(418)		212
Brand name intangibles	indefinite		275		—		275		275		—		275
Intangibles, net		$	11,305	$	(10,749)	$	556	$	11,305	$	(10,196)	$	1,109

We anticipate recording amortization expense of approximately $0.1 million for the remainder of fiscal 2019, $0.1 million for fiscal year 2020, $0.1 million for fiscal year 2021, $0.1 million for fiscal year 2022, and less than $0.1 million for 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 2, 2019, 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 $71.56.  On January 2, 2020, 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 Plan. The total recognized stock-based compensation expense for these grants was $0.5 million for the three months ended April 30, 2019.  The total recognized stock-based compensation expense for these grants was $0.6 million for the six months ended April 30, 2019. 

On December 14, 2018, our executive officers were granted a total of 14,522 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 $85.67.  These shares vest in one-third increments, on an annual basis, beginning December 14, 2019. These shares were granted pursuant to our 2011 Plan. The total recognized stock-based compensation expense for these grants was $0.2 million for the three months ended April 30, 2019.  The total recognized stock-based compensation expense for these grants was $0.2 million for the six months ended April 30, 2019. 

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, 2018	85	$	68.82
Vested	(51)	$	70.48
Granted	35	$	77.33
Outstanding at April 30, 2019	69	$	71.74	$	6,624

The total recognized stock-based compensation expense for restricted stock was $0.9 million for the three months ended April 30, 2019 and 2018. The total recognized stock-based compensation expense for restricted stock was $1.8 million for the six months ended April 30, 2019 and 2018. Total unrecognized stock-based compensation expense totaled $3.8 million as of April 30, 2019, and will be amortized through fiscal year 2021.

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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, 2018	4	$	19.20
Exercised	(2)	$	19.20
Outstanding at April 30, 2019	2	$	19.20	$	192
Exercisable at April 30, 2019	2	$	19.20	$	192

At April 30, 2019, outstanding and exercisable stock options had a weighted-average remaining contractual term of 1.3 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and six months ended April 30, 2019. 

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, 2018	20	$	40.07
Exercised	(2)	$	23.48
Outstanding at April 30, 2019	18	$	41.91	$	971
Exercisable at April 30, 2019	12	$	25.10	$	849

At April 30, 2019, outstanding and exercisable stock options had a weighted-average remaining contractual term of 4.2 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and six months ended April 30, 2019. 

7.Other events

Dividend payment

On December 7, 2018, we paid a $1.00 per share dividend in the aggregate amount of $17.6 million to shareholders of record on November 16, 2018.

Litigation

From time to time, we are also involved in other litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

Mexico tax audits

We conduct business both domestically and 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)

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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 the period from our fourth fiscal quarter of 2016 through our first fiscal quarter of 2019, we attempted to resolve our case with the MFM through working meetings attended by representatives of the MFM, CDM and PRODECON (Local Tax Ombudsman).  However,  we were unable to materially resolve our case with the MFM through the PRODECON process.

As a result,  in April 2019, the MFM issued a final tax assessment to CDM (“the 2011 Assessment”) totaling approximately $2.19 billion Mexican pesos related to Income Tax, Flat Rate Business Tax and Value Added Tax, corresponding to fiscal year 2011 tax audit.  We have consulted with an internationally recognized tax advisor and continue to believe this tax assessment is without merit.   Therefore, we intend to file an administrative appeal challenging the MFM’s 2011 assessment on or before June 12, 2019. The filing of an administrative appeal in Mexico is a process in which the taxpayer appeals to a different office within the Mexican tax authorities forcing the legal office within the MFM to rule on the matter.  This process preserves the taxpayer’s right to litigate in tax court if the administrative appeal process ends without a favorable or just resolution.  Furthermore, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2011 Assessment.  We believe this recent ruling undermines the Assessment we received in April 2019.  We believe we have the legal arguments and documentation to sustain the positions challenged by the MFM.

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.  In January 2017, we received preliminary observations from SAT outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers, and VAT. We provided a written rebuttal to these preliminary observations during our second fiscal quarter of 2017.  During the period from our third fiscal quarter of 2017 through our third fiscal quarter of 2018, we attempted to resolve our case with the SAT through working meetings attended by representatives of the SAT, CDM and the PRODECON. However, we were unable to materially resolve our case with the SAT through the PRODECON process.

As a result, in July 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment (the “2013 Assessment”) totaling approximately $2.62 billion Mexican pesos related to Income Tax, Flat Rate Business Tax, and Value Added Tax, related to this fiscal 2013 tax audit.  Additionally, the tax authorities have determined an employee’s profit sharing liability, totaling approximately $118 million Mexican pesos.

We have consulted with both an internationally recognized tax advisor, as well as a global law firm with offices throughout Mexico, and we continue to believe that this tax assessment is without merit.  In August 2018, we filed an administrative appeal on the 2013 Assessment.  Here, CDM has appealed our case to the SAT’s central legal department in Mexico City.  Furthermore, and as noted in the preceding paragraphs, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2013 Assessment.  We believe this recent ruling significantly undermines the 2013 Assessment we received in July 2018.

We continue to believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position, results of operations and cash flows.

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).

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The following table sets forth our financial assets and liabilities as of April 30, 2019 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)	$	38,310		-		-	$	38,310
Total assets at fair value	$	38,310		-		-	$	38,310

(1)    The investment in Limoneira Company consists of marketable securities in the Limoneira Company common stock.  We currently own less than 10% of Limoneira’s outstanding common stock.  These securities are measured at fair value using quoted market prices.  For the three months ended April 30, 2019, we recognized gains of $1.4 million on the consolidated condensed statement of income.  For the six months ended April 30, 2019, we recognized losses of $3.1 million on the consolidated condensed statement of income. In the prior year, unrealized gains and losses were recognized through other comprehensive income. Unrealized investment holding gains arising during the three months ended April 30, 2018 were $3.0 million. Unrealized investment holding losses arising during the six months ended April 30, 2018 were $0.1 million.  

9.Noncontrolling interest

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

	Three months ended April 30,
Avocados de Jalisco noncontrolling interest	2019		2018
Noncontrolling interest, beginning	$	1,742	$	1,867
Noncash transfer of noncontrolling interest		—		—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(67)		(106)
Noncontrolling interest, ending	$	1,675	$	1,761

	Six months ended April 30,
Avocados de Jalisco noncontrolling interest	2019		2018
Noncontrolling interest, beginning	$	1,748	$	1,016
Noncash transfer of noncontrolling interest		—		1,001
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(73)		(256)
Noncontrolling interest, ending	$	1,675	$	1,761

10.Earnings per share

Basic and diluted net income per share is calculated as follows (data in thousands, except per share data):

		Three months ended April 30,
	2019		2018
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	16,345	$	14,122
Denominator:
Weighted average shares – Basic		17,530		17,481
Effect on dilutive securities – Restricted stock/options		79		99
Weighted average shares – Diluted		17,609		17,580
Net income per share attributable to Calavo Growers, Inc:
Basic	$	0.93	$	0.81
Diluted	$	0.93	$	0.80

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	Six months ended April 30,
	2019		2018
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	20,832	$	21,261
Denominator:
Weighted average shares - Basic		17,514		17,472
Effect on dilutive securities – Restricted stock/options		68		89
Weighted average shares - Diluted		17,582		17,561
Net income per share attributable to Calavo Growers, Inc:
Basic	$	1.19	$	1.22
Diluted	$	1.18	$	1.21

11.Mexican IVA taxes receivable

Included in 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 relate to the exportation of goods, translate into IVA amounts receivable from the Mexican government.

As of April 30, 2019 and October 31, 2018,  CDM IVA receivables totaled $25.4 million and $21.9 million.  Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.  Beginning in fiscal 2014 and continuing into fiscal 2019, 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 and/or administrative appeals. 

During the first quarter of fiscal 2017, tax authorities informed us that their internal opinion, based on the information provided by the local SAT office in Uruapan, considers that CDM is not properly documented relative to its declared tax structure and therefore CDM cannot claim the refundable IVA balance.  CDM has strong arguments and supporting documentation to sustain its declared tax structure for IVA and income tax purposes.  CDM started an administrative appeal for the IVA related to the request of the months of July, August and September of 2015 (the “2015 Appeal”) in order to assert its argument that CDM is properly documented and to therefore change the SAT’s internal assessment. In August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on the 2015 Appeal indicating that they believe CDM’s legal interpretation of its declared tax structure is indeed accurate.  While favorable on this central matter of CDMs declared tax structure, the ruling, however, still does not recognize the taxpayers right to a full refund for the IVA related to the months of July, August and September 2015.  Therefore, in October 2018, CDM filed a substance-over-form annulment suit in the Federal Tax Court to recover its full refund for IVA over the subject period, which is currently pending resolution.

In spite of the favorable ruling from the SAT’s central legal department in Mexico City, as discussed above, the local SAT audit office in Uruapan continues to believe that CDM is not properly documented relative to its declared tax structure.  As a result, they believe CDM cannot claim certain refundable IVA balances, specifically in regards to our IVA refunds related to the months of January through June of 2013.  CDM has strong arguments and supporting documentation to sustain its declared tax structure for IVA and income tax purposes.  In March 2019, CDM (with the assistance of our internationally recognized tax advisory firm), filed an administrative appeal for the IVA related to the request of the months of January through June of 2013. A response to the administrative appeal that we filed is currently pending resolution.

We believe that our operations in Mexico are properly documented.  Furthermore, our internationally recognized tax advisors believe that there are legal grounds to prevail in the Federal Tax Court and that therefore, the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts. 

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12.  Income Taxes

     Our tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse.

     On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).  Except for certain provisions, the Tax Act was effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer with an October 31 fiscal year end, the majority of the new provisions, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income and introducing new limitations on certain business deductions, did not apply until our 2019 fiscal year. For fiscal 2018, the most significant impacts included: lowering of the U.S. federal corporate income tax rate; remeasuring certain net deferred tax assets and liabilities; and requiring the transition tax on the deemed repatriation of certain foreign earnings. In the first quarter of fiscal 2018, we recorded $1.7 million in one-time, non-cash charges related to the revaluation of our net deferred tax assets (approximately $1.4 million) and the transition tax on the deemed repatriation of foreign earnings  (approximately $0.3 million). 

13.  FreshRealm

Based on the NMUPA and related Agreements, as described in Note 4, we reconsidered whether FreshRealm is a variable interest entity (“VIE”).  A VIE refers to a legal business structure in which an investor has a controlling interest in, despite not having a majority of voting rights; or a structure involving equity investors that do not have sufficient resources to support the ongoing operating needs of the business. Due primarily to FreshRealm utilizing substantially more debt to finance its activities, in addition to its existing equity, we continue to believe that FreshRealm should be considered a VIE.  In evaluating whether we are the primary beneficiary of FreshRealm, we considered several factors, including whether we (a) have the power to direct the activities that most significantly impact FreshRealm’s economic performance and (b) the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE.  We were not the primary beneficiary of FreshRealm at April 30, 2019 because the nature of our involvement with the activities of FreshRealm does not give us the power to direct the activities that most significantly impact its economic performance.  We do not have a future obligation to fund losses or debts on behalf of FreshRealm.  We may, however, voluntarily contribute funds. In the accompanying statements of income, we have presented the income (loss) from unconsolidated entities, subsequent to the provision for income taxes for all periods presented. 

We record the amount of our investment in FreshRealm, totaling $10.3. million at April 30, 2019, in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income/(loss) in unconsolidated entities” on our Consolidated Condensed Statement of Income. 

For the three months ended April 30, 2019, FreshRealm incurred losses totaling $7.4 million. For the six months ended April 30, 2019, FreshRealm incurred losses totaling $18.7 million.  Effective December 16, 2018, FreshRealm completed a “check the box” tax election to change their entity classification for tax purposes to that of a corporation.  To effect this change, FreshRealm, among other things, amended its operating agreement to eliminate the appropriate language related to the flow-through tax consequences of its prior tax status (Seventh Amended and Restated LLC Agreement) and checked the appropriate box on Form 8832 which it then filed with the Internal Revenue Service (IRS).  As a result, losses incurred by FreshRealm from November 1, 2018 to December 15, 2018 were recorded in accordance with FASB Accounting Standards Codification (“ASC”) 810, ASC 323, and ASC 970, which mandate that the recognition of losses for an unconsolidated subsidiary be handled in a manner consistent with cash distributions upon liquidation of the entity when such distributions are different than the investors percentage ownership. As such, we recorded 100% of FreshRealm’s losses from November 1, 2018 through December 15, 2018 totaling $4.2 million. Losses incurred by FreshRealm from December 16, 2018 to January 31, 2019 (after the change in tax status was effective) were recorded to reflect our proportionate share of FreshRealm losses.  From December 16, 2018 to January 31, 2019, our ownership percentage was approximately 37% and accordingly, we recorded losses from December 16, 2018 through January 31, 2019 totaling $2.7 million, for a total of $6.9 million in our first fiscal quarter of 2019. Our

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ownership remains at 37% for our second fiscal quarter of 2019, and we recorded losses of approximately $2.7 million. As a result of FreshRealm’s recent change in tax status (described above), future operating results for FreshRealm will be allocated to its owners based on ownership percentage.

As of April 30, 2019, and October 31, 2018, we have note receivables from FreshRealm totaling $24.7 million and $9.0 million. See Note 4 for further information.

In the first quarter of fiscal 2019, FreshRealm entered into a supply contract with a large multinational, multi-channel retailer.  Calavo co-signed an addendum to this agreement to provide assurance to the customer that Calavo will assume responsibility for performance, in the event that FreshRealm cannot perform, provided that the customer must work in good faith to make reasonable adjustments to logistical elements in the contract, if requested by Calavo.

Except for the performance guarantee noted above (for which we are unable to quantify our current exposure, if any), our exposure to the obligations of FreshRealm is generally limited to our interests in it.  We believe our maximum exposure to loss in FreshRealm is the carrying value of our investment and our loans to it, which totaled $10.3 million and $24.7 million, as of April 30, 2019.  Our maximum exposure to loss could increase in the future if FreshRealm receives additional financing (i.e. equity or debt) from Calavo or any other investor/lender.  We are under no obligation to provide FreshRealm additional financing.

Unconsolidated Significant Subsidiary

As described in footnote 4, we own approximately 37% of FreshRealm as of April 30, 2019 and October 31, 2018.  In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies for interim reports on Form 10-Q, we must determine if our unconsolidated subsidiaries are considered, “significant subsidiaries”.  In evaluating our investments, there are two tests utilized to determine if our subsidiaries are considered significant subsidiaries: the income test and the investment test.  Rule 10-01(b)(1) of Regulation S-X requires summarized income statement information of an unconsolidated subsidiary in an interim report if either of the two tests exceed 20%.  Pursuant to Rule 10-01(b)(1) of Regulation S-X, this requires summarized income statement information of FreshRealm in our second fiscal quarter Form 10-Q. 

The following table shows summarized financial information for FreshRealm (in thousands):

Income Statement:

	Three months ended  April 30,
	2019		2018
Net sales	$	3,701	$	7,490
Gross loss		(1,480)		(2,646)
Selling, general and administrative		(4,525)		(4,228)
Other		(1,366)		(538)
Net loss	$	(7,371)	$	(7,412)
	Six months ended  April 30,
	2019		2018
Net sales	$	12,589	$	12,524
Gross loss		(4,371)		(4,803)
Selling, general and administrative		(10,528)		(8,180)
Other		(3,850)		(817)
Net loss	$	(18,749)	$	(13,800)

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14.  Revenue recognition

Effective at the beginning of our fiscal 2019, the Company adopted Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers," and all the related amendments (Accounting Standards Codification (ASC) 606) using the modified retrospective method of adoption. ASC 606 consists of a comprehensive revenue recognition standard, which requires the recognition of revenue when control of promised goods are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled.

The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of net consideration expected to be received in exchange for transferring products. Revenue from product sales is governed primarily by customer pricing and related purchase orders (“contracts”) which specify shipping terms and certain aspects of the transaction price including rebates, discounts and other sales incentives. Contracts are at standalone pricing. The performance obligation in these contracts is determined by each of the individual purchase orders and the respective stated quantities, with revenue being recognized at a point in time when obligations under the terms of the agreement are satisfied. This generally occurs with the transfer of control of our products to the customer and the product is delivered. The Company's customers have an implicit and explicit right to return non-conforming products. A provision for payment discounts and product return allowances, which is estimated, is recorded as a reduction of sales in the same period that the revenue is recognized.

Sales Incentives and Other Promotional Programs

The Company routinely offers sales incentives and discounts through various regional and national programs to our customers and consumers. These programs include product discounts or allowances, product rebates, product returns, one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. The costs associated with these activities are accounted for as reductions to the transaction price of the Company’s products and are, therefore, recorded as reductions to gross sales at the time of sale. The Company bases its estimates of incentive costs on historical trend experience with similar programs, actual incentive terms per customer contractual obligations and expected levels of performance of trade promotions, utilizing customer and sales organization inputs. The Company maintains liabilities at the end of each period for the estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are generally not material and are recognized in earnings in the period such differences are determined. Reserves for product returns, accrued rebates and promotional accruals are included in the condensed consolidated balance sheets as part of accrued expenses.

Principle vs. Agent Considerations

We frequently enter into consignment arrangements with avocado and tomato growers and packers located outside of the U.S. and growers of certain perishable products in the U.S. We evaluated whether its performance obligation is a promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent) using a control model. This evaluation determined that the Company is in control of establishing the transaction price, managing all aspects of the shipments process and taking the risk of loss for delivery, collection, and returns. Based on the Company’s evaluation of the control model, it determined that all of the Company’s major businesses act as the principal rather than the agent within their revenue arrangements and such revenues are reported on a gross basis.

Practical Expedients

The Company elected the following practical expedients upon its adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606).

· Shipping and handling costs- The company elected to account for shipping and handling activities that occur before the customer has obtained control of a good as fulfillment activities rather than as a promised service.

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· Measurement of transaction price- The Company has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on, and concurrent with, a specific revenue-producing transaction and collected by the Company from a customer for sales taxes.

· Contract costs- The Company has elected to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period is one year or less.

The adoption of ASC 606 did not have an impact on our consolidated results of operations for the three and six months ended April 30, 2019.

15.  Amendment to Credit Agreement

Effective March 1, 2019, we entered into a Second Amendment to Credit Agreement (the “Second Amendment”) with Farm Credit West, PCA, and Bank of America, N.A., relating to our Credit Agreement dated as of June 14, 2016 and the First Amendment to Credit Agreement dated as of August 29, 2016.  The Second Amendment, among other things, excludes financial results of FreshRealm from Calavo’s financial reporting requirements and covenant calculations and provides flexibility in making investments in joint ventures and non-wholly owned subsidiaries of Calavo. 

16.  Sale of Temecula, California Packinghouse

In April 2019, we sold our Temecula, California packinghouse for $7.1 million in cash ($6.7 million, net of transaction costs (primarily sales commissions) totaling $0.4 million) and, concurrently, leased back a portion of the facility representing approximately one-third of the total square footage.  This generated a gain of $6.4 million.  Since our leaseback of the building is classified as a capital lease and covers substantially all of the leased property, the gain recognized currently is the amount of the gain in excess of the recorded amount of the leased asset.  As a result, we recognized a gain of approximately $1.9 million in the second quarter and recorded a deferred gain of $4.5 million, which will be recognized over the life of the lease (i.e. straight-line over 15 years).

In connection with the leaseback of this packinghouse, we calculated the present value of the minimum lease payments related to the building and have capitalized $3.3 million as a capital lease in our property, plant and equipment and recorded $3.3 million as a lease obligation. 

17.  Subsequent event

    During our third quarter of fiscal year 2019, we entered into a 10-year building and equipment lease.  This facility is in Conley, GA and is primarily intended to process fresh-cut fruits and vegetables related to our RFG business segment.  Annual rent for the facility and equipment approximates $0.9 million and $0.6 million over the life of the lease.

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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 fiscal year ended October 31, 2018 of Calavo Growers, Inc. (we, Calavo, or the Company). 

Recent Developments

Dividend payment

On December 7, 2018, we paid a $1.00 per share dividend in the aggregate amount of $17.6 million to shareholders of record on November 16, 2018.

Litigation

From time to time, we are also involved in other litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

Mexico tax audits

We conduct business both domestically and 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 the period from our fourth fiscal quarter of 2016 through our first fiscal quarter of 2019, we attempted to resolve our case with the MFM through working meetings attended by representatives of the MFM, CDM and PRODECON (Local Tax Ombudsman).  However, we were unable to materially resolve our case with the MFM through the PRODECON process.

As a result, in April 2019, the MFM issued a final tax assessment to CDM (“the 2011 Assessment”) totaling approximately $2.19 billion Mexican pesos related to Income Tax, Flat Rate Business Tax and Value Added Tax, corresponding to fiscal year 2011 tax audit.  We have consulted with an internationally recognized tax advisor and continue to believe this tax assessment is without merit.   Therefore, we intend to file an administrative appeal challenging the MFM’s 2011 assessment on or before June 12, 2019. The filing of an administrative appeal in Mexico is a process in which the taxpayer appeals to a different office within the Mexican tax authorities forcing the legal office within the MFM to rule on the matter.  This process preserves the taxpayer’s right to litigate in tax court if the administrative appeal process ends without a favorable or just resolution.  Furthermore, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2011 Assessment.  We believe this recent ruling undermines the 2011 Assessment we received in April 2019.  We believe we have the legal arguments and documentation to sustain the positions challenged by the MFM.

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.  In January 2017, we received preliminary observations from SAT outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers, and VAT. We provided a written rebuttal to these preliminary observations during our second fiscal quarter of 2017.  During the period from our third fiscal quarter of 2017 through our third fiscal quarter of 2018, we attempted to resolve our case

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with the SAT through working meetings attended by representatives of the SAT, CDM and the PRODECON. However, we were unable to materially resolve our case with the SAT through the PRODECON process.

As a result, in July 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment (the “2013 Assessment”) totaling approximately $2.62 billion Mexican pesos related to Income Tax, Flat Rate Business Tax, and Value Added Tax, related to this fiscal 2013 tax audit.  Additionally, the tax authorities have determined an employee’s profit sharing liability, totaling approximately $118 million Mexican pesos.

We have consulted with both an internationally recognized tax advisor, as well as a global law firm with offices throughout Mexico, and we continue to believe that this tax assessment is without merit.  In August 2018, we filed an administrative appeal on the 2013 Assessment.  Here, CDM has appealed our case to the SAT’s central legal department in Mexico City.  Furthermore, and as noted in the preceding paragraphs, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2013 Assessment.  We believe this recent ruling significantly undermines the 2013 Assessment we received in July 2018.

We continue to believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position, results of operations and cash flows.

Unrealized and realized net loss on Limoneira Stock

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 fiscal years and interim period within those fiscal years beginning after December 15, 2017. The Company adopted this new standard at the beginning of fiscal 2019. With the adoption of this new standard, we reclassed unrealized gains of $12.1 million in accumulated other comprehensive income to retained earnings as of November 1, 2018. Additionally, for the six months ended April 30, 2019, we sold 51,271 shares of Limoneira stock and recorded a loss of $0.1 million in our consolidated statements of income.  Limoneira’s stock price at April 30, 2019, January 31, 2019 and October 31, 2018 equaled $22.84 per share, $22.03 per share, and $24.65 per share. Our remaining shares of Limoneira stock, totaling 1,677,299, were revalued to $22.84 per share at April 30, 2019 and, as a result, we recorded a gain of $1.4 million for the three months ended April 30, 2019 and we recorded a loss of $3.0 million for the six months ended April 30, 2019 in our consolidated statements of income.

Second Amendment to Credit Agreement

Effective March 1, 2019, we entered into a Second Amendment to Credit Agreement (the “Second Amendment”) with Farm Credit West, PCA, and Bank of America, N.A., relating to our Credit Agreement dated as of June 14, 2016 and the First Amendment to Credit Agreement dated as of August 29, 2016.  The Second Amendment, among other things, excludes financial results of FreshRealm from Calavo’s financial reporting requirements and covenant calculations and provides flexibility in making investments in joint ventures and non-wholly owned subsidiaries of Calavo.

Sale of Temecula, California Packinghouse

In April 2019, we sold our Temecula, California packinghouse for $7.1 million in cash ($6.7 million, net of transaction costs (primarily sales commissions) totaling $0.4 million) and, concurrently, leased back a portion of the facility representing approximately one-third of the total square footage.  This generated a gain of $6.4 million.  Since our leaseback of the building is classified as a capital lease and covers substantially all of the leased property, the gain recognized currently is the amount of the gain in excess of the recorded amount of the leased asset.  As a result, we recognized a gain of approximately $1.9 million in the second quarter and recorded a deferred gain of $4.5 million, which will be recognized over the life of the lease (i.e. straight-line over 15 years).

In connection with the leaseback of this packinghouse, we calculated the present value of the minimum lease payments related to the building and have capitalized $3.3 million as a capital lease in our property, plant and equipment and recorded $3.3 million as a lease obligation

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Net Sales

The following table summarizes our net sales by business segment for each of the three and six months ended April 30, 2019 and 2018:

	Three months ended April 30,								Six months ended April 30,
	2019			Change		2018			2019			Change		2018
Net sales:
Fresh products	$	150,935		9.4	%	$	137,935		$	267,789		2.7	%	$	260,720
Calavo Foods		21,309		(2.8)	%		21,913			43,423		6.0	%		40,950
RFG		113,992		9.0	%		104,557			233,056		10.6	%		210,663
Total net sales	$	286,236		8.3	%	$	264,405		$	544,268		6.2	%	$	512,333
As a percentage of net sales:
Fresh products		52.7	%				52.2	%		49.2	%				50.9	%
Calavo Foods		7.5	%				8.3	%		8.0	%				8.0	%
RFG		39.8	%				39.5	%		42.8	%				41.1	%
		100.0	%				100.0	%		100.0	%				100.0	%

Summary

Net sales for the three months ended April 30, 2019, compared to the corresponding period in fiscal 2018, increased by $21.8 million, or approximately 8%. The increase in sales, when compared to the same corresponding prior year periods, was primarily related to gains in the Fresh products segment and RFG, partially offset by a decline in Calavo Foods. Net sales for the six months ended April 30, 2019, compared to the corresponding period in fiscal 2018, increased by $31.9 million, or approximately 6%, with gains in all three segments.

For the quarter ended April 30, 2019, our Fresh products segment had our largest percentage increase in sales, followed by our RFG segment. Calavo Foods decreased, as shown above. The increase in Fresh products sales was due primarily to an increase in sales of avocados and tomatoes. The increase in RFG sales was due primarily to increased sales from fresh-cut fruit & vegetables and prepared foods products. The decrease in Calavo Foods was due primarily to a decrease in pounds sold of prepared avocado products.  See discussion below for further details. 

For the six months ended April 30, 2019, RFG had our largest percentage increase in sales, followed by Calavo Foods and our Fresh products segment.  The increase in RFG sales was due primarily to increased sales from fresh-cut fruit & vegetables and prepared foods products. The increase in Fresh products sales was due primarily to an increase in sales of avocados and tomatoes. The increase in Calavo Foods sales was due primarily to increased sales of our prepared avocado products. See discussion below for further details.

All three segments of our business are subject to seasonal trends which can impact the volume and/or quality of fruit sourced in any particular quarter.  All intercompany sales are eliminated in our consolidated results of operations.

Fresh products

Second Quarter 2019 vs. Second Quarter 2018

Net sales for the Fresh products business increased by approximately $13.0 million, or 9%, for the second quarter of fiscal 2019, when compared to the same period for fiscal 2018.  This increase in Fresh product sales during the second quarter of fiscal 2019 was primarily related to increased sales of avocados and tomatoes. 

Sales of avocados increased $7.5 million, or 6%, for the second quarter of 2019, when compared to the same prior year period.  This increase in avocado sales was primarily due to a 7% increase in the in the volume of avocados sold during the quarter. Our average avocado sales price per carton declined by 1% compared to last years’ second quarter, however market prices increased substantially toward the end of the period.

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Sales of tomatoes increased $6.5 million, or 84%, for the second quarter of 2019, when compared to the same prior year period.  This increase in tomato sales was primarily due to an 81% increase in the volume of tomatoes sold during the quarter.

Six Months Ended 2019 vs. Six Months Ended 2018

Net sales for the Fresh products business increased by approximately $7.1 million, or 3%, for the six months ended April 30, 2019, when compared to the same period for fiscal 2018.  This increase in Fresh product sales during the first six months of fiscal 2019 was primarily related to increased sales of avocados and tomatoes.

Sales of avocados increased $2.1 million, or 1%, for the six months ended April 30, 2019, when compared to the same prior year period.  This increase in avocado sales was primarily due to a 7% increase in the in the volume of avocados sold during the six month period, offset by a decrease in the average sales prices per carton of 6%.

Sales of tomatoes increased $5.8 million, or 30%, for the six months ended April 30, 2019, when compared to the same prior year period.  This increase in tomato sales was primarily due to a 40% increase in the in the volume of tomatoes sold during the six month period, partially offset by a 7% decrease in the sales prices per carton.

Calavo Foods

Second Quarter 2019 vs. Second Quarter 2018

Sales for Calavo Foods for the quarter ended April 30, 2019, when compared to the same period for fiscal 2018, decreased $0.6 million, or 3%.  Sales of prepared avocado products decreased by approximately $0.5 million, or 2%, for the quarter ended April 30, 2019, when compared to the same prior year period. This decrease was the result of a decrease in the total volume of pounds sold. 

Six Months Ended 2019 vs. Six Months Ended 2018

Sales for Calavo Foods for six months ended April 30, 2019, when compared to the same period for fiscal 2018, increased $2.5 million, or 6%.  Sales of prepared avocado products increased by approximately $2.6 million, or 7%, for the six months ended April 30, 2019, when compared to the same prior year period. This increase was the result of both an increase in the total volume of pounds sold and an increase in the average sales price per pound. 

RFG

Second Quarter 2019 vs. Second Quarter 2018

Sales for RFG for the quarter ended April 30, 2019, when compared to the same period for fiscal 2018, increased $9.4 million, or 9%.  The overall increase in sales is primarily due to higher sales volume from expanded retail partnerships in multiple geographies, most notably in a few regions in which the Company has added production capacity, including a partial quarter from RFG’s newest manufacturing facility in Atlanta, GA.  Offsetting those increases were lower sales from one specific geographic region, which was adversely impacted by issues experienced at RFG’s co-packer servicing that specific geographic region.

Six Months Ended 2019 vs. Six Months Ended 2018

Sales for RFG for the six months ended April 30, 2019, when compared to the same period for fiscal 2018, increased $22.4 million, or 11%.  The overall increase in sales is primarily due to higher sales volume from expanded retail partnerships in multiple geographies, most notably in a few regions in which the Company has added production capacity.  This increase was partially offset by impacts related to the FDA’s romaine lettuce advisory in November (which affected all manufacturing locations), issues experienced in Q2 at RFG’s co-packer servicing one specific

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geographic region, as well as raw material challenges that constrained output for certain key products during Q1 and a portion of Q2.

Gross Profit

The following table summarizes our gross profit and gross profit percentages by business segment for the three and six months ended April 30, 2019 and 2018:

	Three months ended April 30,								Six months ended April 30,
	2019			Change		2018			2019			Change		2018
Gross Profit:
Fresh products	$	27,766		83.6	%	$	15,120		$	48,556		65.3	%	$	29,377
Calavo Foods		6,320		(16.3)	%		7,552			12,752		(5.7)	%		13,527
RFG		2,751		(70.4)	%		9,297			6,366		(58.6)	%		15,375
Total gross profit	$	36,837		15.2	%	$	31,969		$	67,674		16.1	%	$	58,279
Gross profit percentages:
Fresh products		18.4	%				11.0	%		18.1	%				11.3	%
Calavo Foods		29.7	%				34.5	%		29.4	%				33.0	%
RFG		2.4	%				8.9	%		2.7	%				7.3	%
Consolidated		12.9	%				12.1	%		12.4	%				11.4	%

Summary

Our cost of goods sold consists predominantly of ingredient costs (primarily fruit and other whole foods), packing materials, freight and handling, labor and overhead (including depreciation) associated with preparing food products, and other direct expenses pertaining to products sold. Gross profit increased by approximately $4.9 million, or 15%, for the second quarter of fiscal 2019, when compared to the same period for fiscal 2018. The increase was primarily attributable to gross profit increases in our Fresh products segment, partially offset by decreases in the RFG segment and the Calavo Foods segment. Gross profit increased by approximately $9.4 million, or 16%, for the first six months of fiscal 2019, when compared to the same period for fiscal 2018. The increase was primarily attributable to gross profit increases in our Fresh products segment, partially offset by decreases in the RFG segment and the Calavo Foods segment.

Fresh products

During our three months ended April 30, 2019, as compared to the same prior year period, the increase in our Fresh products segment gross profit percentage was the result of increased profit for avocados. For the second quarter ended April 30, 2019, compared to the same prior year period, the gross profit percentage for avocados increased to 19.4% in 2019 from 11.0% in 2018.  The increase was primarily related to our strength in fresh avocado sourcing, production and sales management during a period of strong consumer demand. In addition, the U.S. Dollar to Mexican Peso exchange rate was stronger in the second quarter 2019, when compared to the same prior year period.  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 profits for our Fresh products segment.

During our six months ended April 30, 2019, as compared to the same prior year period, the increase in our Fresh products segment gross profit percentage was the result of increased profit for avocados. For the six months ended April 30, 2019, compared to the same prior year period, the gross profit percentage for avocados increased to 19.1% in 2019 from 11.3% in 2018.  The increase was primarily related to our strength in fresh avocado sourcing, production and sales management during the six month period. In addition, the U.S. Dollar to Mexican Peso exchange rate was stronger in the second quarter 2019, when compared to the same prior year period.  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 profits for our Fresh products segment.

29

Calavo Foods

Calavo Foods gross profit percentage decreased to 29.7% from 34.5% of net sales, during our three months ended April 30, 2019 compared to the same prior year period; however, gross profit percentage was slightly higher on a sequential basis (relative to our first fiscal quarter ended January 31, 2019).  Calavo Foods gross profit percentage decreased to 29.4% from 33.0% of net sales, during our six months ended April 30, 2019 compared to the same prior year periods. The decrease in Calavo Foods gross profit percentage was due primarily to higher production, raw material costs and freight costs during the period. Note that any significant fluctuation in the cost of fruit used in the production process or the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross profit for our Calavo Foods segments.

RFG

RFG’s gross profit percentage for the quarter ended April 30, 2019 was 2.4%, compared to 8.9% in the same prior year period. RFG’s gross profit percentage for the six months ended April 30, 2019 was 2.7%, compared to 7.3% in the same prior year period. The raw material issues described in detail during Q1 continued into a portion of Q2, though in general conditions improved as the second quarter progressed.  Additionally, sales and gross profit in one specific geographic region served by RFG were significantly constrained in Q2 as a result of issues experienced at RFG’s co-packer servicing that region.  Further, RFG had approximately $1.1 million in pre-opening cost related to the new Pacific Northwest production facility during the six months ended April 30, 2019.

Selling, General and Administrative

	Three months ended April 30,								Six months ended April 30,
	2019			Change		2018			2019			Change		2018
	(Dollars in thousands)								(Dollars in thousands)
Selling, general and administrative	$	15,657		21.6	%	$	12,875		$	29,933		5.4	%	$	28,392
Percentage of net sales		5.5	%				4.9	%		5.5	%				5.5	%

     Selling, general and administrative expenses of $15.7 million for the three months ended April 30, 2019 include costs of marketing and advertising, sales expenses (including broker commissions) and other general and administrative costs.  Selling, general and administrative expenses increased by $2.8 million, or 21.6%, for the three months ended April 30, 2019, when compared to the same period for fiscal 2018. This increase was primarily related to an increase in accrued management bonuses (approximately $1.8 million), transaction costs, including sales commission, related to the sale of the Temecula packinghouse (approximately $0.4 million), and salaries (approximately $0.2 million).

     Selling, general and administrative expenses of $29.9 million for the six months ended April 30, 2019 include costs of marketing and advertising, sales expenses (including broker commissions) and other general and administrative costs.  Selling, general and administrative expenses increased by $1.5 million, or 5.4%, for the six months ended April 30, 2019, when compared to the same period for fiscal 2018. This increase was primarily related to an increase in accrued management bonuses (approximately $1.8 million), and transaction costs, including sales commission, related to the sale of the Temecula packinghouse (approximately $0.4 million), partially offset by a decrease of $0.9 million due to senior management transition expenses recognized in the first quarter of fiscal 2018 related to the stock grant issued to two officers who retired.

30

Income (loss) from unconsolidated entities

	Three months ended April 30,								Six months ended April 30,
	2019			Change		2018			2019			Change		2018
	(Dollars in thousands)								(Dollars in thousands)
Income (loss) from unconsolidated entities	$	(3,136)		864.9	%	$	(325)		$	(9,434)		(3,493.5)	%	$	278
Percentage of net sales		(1.1)	%				(0.1)	%		(1.7)	%				0.1	%

Income (loss) from unconsolidated entities includes our allocation of earnings or losses from our investments in FreshRealm and Don Memo. For the three months ended April 30, 2019, we recognized $0.4 million of losses related to Don Memo compared to $0.3 million in the three months ended April 30, 2018.  For the six months ended April 30, 2019, we recognized $0.2 million of income related to Don Memo compared to $0.3 million of income in the prior comparable period.  For the three months ended April 30, 2019, we recognized $2.7 million of losses related to FreshRealm.  For the six months ended April 30, 2019, we recognized $9.6 million of losses related to FreshRealm.  While we are unable to determine with certainty the future operating results of FreshRealm and future non-Calavo investments, if any, we anticipate recording additional non-cash losses from FreshRealm during the remainder of fiscal 2019. As a result of FreshRealm’s recent change in tax status (described earlier), we expect that future operating results for FreshRealm will be allocated to its owners based on ownership percentage, (as of April 30, 2019 our ownership was approximately 37%). As of April 30, 2019, our total investment in and loan balance to Freshrealm was approximately $10.3 million, and $24.7 million, respectively.  See Note 13 in our consolidated financial statements for more information.

Provision for Income Taxes

	Three months ended April 30,								Six months ended April 30,
	2019			Change		2018			2019			Change		2018
Provision for income taxes	$	5,573		17.0	%	$	4,764		$	7,106		(21.6)	%	$	9,066
Effective tax rate		25.5	%				25.4	%		25.5	%				30.1	%

Our tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. In the first quarter ended in fiscal 2019 and 2018, we recorded an income tax benefit of approximately $0.1 million and $0.4 million, pursuant to ASU 2016-09, Improvements to Employee Share-based Payment Accounting. In addition, in the first quarter of fiscal 2018, we recorded $1.7 million in one-time, non-cash charges related to the revaluation of our net deferred tax assets (approx. $1.4 million) and the transition tax on the deemed repatriation of foreign earnings (approx. $0.3 million). We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse based on the Tax Act and a change accelerating certain tax deductions on our 2017 federal tax return. 

Liquidity and Capital Resources

Cash provided by operating activities was $26.6 million for the six months ended April 30, 2019, compared to cash provided by operating activities of $21.2 million for the similar period in fiscal 2018.  Cash provided by operating activities for the six months ended April 30, 2019 reflect primarily our net income of $20.8 million, non-cash activities (depreciation and amortization, stock-based compensation expense, deferred taxes, (loss)/income from unconsolidated entities net losses on Limoneira shares, interest income on loans to FreshRealm and gain on the sale of the Temecula packinghouse) of $18.3 million and a net decrease in the components of our operating capital of approximately $12.5 million.

The working capital decrease results from an increase in accounts receivable of $17.3 million, an increase in inventory of $14.6 million, an increase in other assets of $3.7 million and an increase in prepaid expenses and other current assets of $0.4 million, partially offset by an increase in payable to growers of $11.6 million, a net increase in accounts payable and accrued expenses of $5.9 million, a decrease in income taxes receivable of $3.5 million, a decrease in advances to suppliers of $1.4 million, an increase of $0.5 million in deferred rent and a decrease of $0.4 million in income tax payable.

31

The increase in our accounts receivable, as of April 30, 2019 when compared to October 31, 2018, primarily reflects higher sales recorded in the month of April 2019 (due to higher avocado prices), as compared to October 2018. The increase in inventory is related to an increase in both the volume and cost of avocados on hand, an increase in frozen guacamole inventory pounds, and increased RFG inventories at April 30, 2019 when compared to October 31, 2018. The increase in other assets is due to an increase in long-term Mexican IVA tax receivable (see Note 11 to our consolidated condensed financial statements). The increase in prepaids and other current assets is due primarily to increased current Mexican IVA tax receivable. The increase in payable to growers primarily reflects an increase in our Mexican avocado grower liability related both to increased volume and higher avocado pricing. The increase in accounts payable and accrued expenses is primarily related to an increase in our payables related to RFG. The decrease in income taxes receivable is primarily related to the taxes on current year earnings. The decrease in advances to suppliers primarily reflects liabilities from Tomato sales that offset more pre-season advances in April 2019, compared to October 2018.

Cash used in investing activities was $13.7 million for the six months ended April 30, 2019, which primarily related to loans to FreshRealm of $14.7 million, and property, plant and equipment purchases of $7.5 million, partially offset by proceeds received on the sale of the Temecula packinghouse of $7.1 million, by proceeds received on the sales of Limoneira stock of $1.2 million and proceeds received from the repayment of the San Rafael note of $0.2 million.

Cash used by financing activities was $7.1 million for the six months ended April 30, 2019, which related principally to the payment of our $17.6 million dividend and the payment of minimum withholding taxes on net share settlement of equity awards of $1.0 million, partially offset by the proceeds received on our credit facilities totaling $11.5 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 April 30, 2019 and October 31, 2018 totaled $7.4 million and $1.5 million. The cash balance as of April 30, 2019 includes approximately $6.7 million held in escrow by an exchange accommodator in connection with a possible 1031 exchange from the Temecula packinghouse sale. Our working capital at April 30, 2019 was $42.5 million, compared to $29.6 million at October 31, 2018.

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 at least the next twelve months.  We will continue to evaluate grower recruitment opportunities and expand relationships with retail and/or foodservice customers to fuel growth in each of our business segments.  We have a 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 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 exceeding $50 million. For our current credit agreement the weighted-average interest rate was 3.7% and 3.4% at April 30, 2019 and October 31, 2018.  Under these credit facilities, we had $26.5 million and $15.0 million outstanding as April 30, 2019 and October 31, 2018. 

This 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 are in compliance with all such covenants. 

Contractual Obligations

There have been no material changes to our contractual commitments, from those previously disclosed in our Annual Report on Form 10-K for our fiscal year ended October 31, 2018. For a summary of the contractual commitments at October 31, 2018, see Part II, Item 7, in our 2018 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.

32

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 April 30, 2019.

(All amounts in thousands)	Expected maturity date April 30,
	2020		2021		2022		2023		2024		Thereafter		Total		Fair Value
Assets
Cash and cash equivalents (1)	$	7,361	$	—	$	—	$	—	$	—	$	—	$	7,361	$	7,361
Accounts receivable (1)		83,392		—		—		—		—		—		83,392		83,392
Liabilities
Payable to growers (1)	$	25,632	$	—	$	—	$	—	$	—	$	—	$	25,632	$	25,632
Accounts payable (1)		13,903		—		—		—		—		—		13,903		13,903
Current borrowings pursuant to credit facilities (1)		26,500		—		—		—		—		—		26,500		26,500
Fixed-rate long-term obligations (2)		221		248		251		155		165		2,615		3,655		3,656

(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 3.6% to 4.3% with a weighted-average interest rate of 3.6%.  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 $160,000.

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 a significant portion of business 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 transaction losses for the three months ended April 30, 2019, net of losses, was $0.2 million. Total foreign currency transaction losses for the six months ended April 30, 2019, net of losses, was insignificant. Total foreign currency transaction losses for the three and six months ended April 30, 2018, net of gains, were $0.1 million and $0.3 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 April 30, 2019  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

From time to time, we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

33

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, 2018.  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 2018 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

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 April 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Condensed Balance Sheets as of April 30, 2019 and October 31, 2018; (2) Consolidated Condensed Statements of Income for the three and six months ended April 30, 2019 and 2018; (3) Consolidated Condensed Statements of Comprehensive Income for the three and six months ended April 30, 2019 and 2018; (4) Consolidated Condensed Statements of Cash Flows for the six months ended April 30, 2019 and 2018; and (5) Notes to Unaudited Condensed Consolidated Financial Statements.

34

INDEX TO EXHIBITS

Exhibit
Number	Description
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 April 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Condensed Balance Sheets as of April 30, 2019 and October 31, 2018; (2) Consolidated Condensed Statements of Income for the three and six months ended April 30, 2019 and 2018; (3) Consolidated Condensed Statements of Comprehensive Income for the three and six months ended April 30, 2019 and 2018; (4) Consolidated Condensed Statements of Cash Flows for the six months ended April 30, 2019 and 2018; and (5) Notes to Unaudited Condensed Consolidated Financial Statements.

35

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: June 6, 2019
	By	/s/ Lecil E. Cole
		Lecil E. Cole
		Chairman of the Board of Directors, President, and
		Chief Executive Officer
		(Principal Executive Officer)
Date: June 6, 2019
	By	/s/ B. John Lindeman
		B. John Lindeman
		Chief Financial Officer and Corporate Secretary
		(Principal Financial Officer)

36

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:  June 6, 2019	/s/  Lecil E. Cole
	Lecil E. Cole
	Chairman of the Board of Directors, President
	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:  June 6, 2019	/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 April 30, 2019, 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:  June 6, 2019

/s/  Lecil E. Cole

Lecil E. Cole

Chairman of the Board, President and

Chief Executive Officer

/s/  B. John Lindeman

B. John Lindeman

Chief Financial Officer and

Corporate Secretary

XML

Document and Entity Information	6 Months Ended
	Apr. 30, 2019 shares
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Apr. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	CALAVO GROWERS INC
Entity Small Business	false
Entity Emerging Growth Company	false
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	17,599,734

XML

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Apr. 30, 2019	Oct. 31, 2018
Current assets:
Cash and cash equivalents	$ 7,361	$ 1,520
Accounts receivable, net of allowances of $4,694 (2019) $3,227 (2018)	83,392	66,143
Inventories, net	49,616	35,044
Prepaid expenses and other current assets	7,878	16,727
Advances to suppliers	4,136	5,555
Income taxes receivable		3,521
Total current assets	152,383	128,510
Property, plant, and equipment, net	125,696	122,143
Investment in Limoneira Company	38,310	42,609
Investment in unconsolidated entities	15,370	24,805
Deferred income taxes	4,377	4,377
Goodwill	18,262	18,262
Loans to FreshRealm	24,680
Other assets	30,126	27,030
Total assets	409,204	367,736
Current liabilities:
Payable to growers	25,632	14,001
Trade accounts payable	13,903	13,735
Accrued expenses	43,178	38,521
Income taxes payable	421
Short-term borrowings	26,500	15,000
Dividend payable		17,568
Current portion of long-term obligations	221	118
Total current liabilities	109,855	98,943
Long-term liabilities:
Long-term obligations, less current portion	3,434	314
Deferred rent	3,224	2,678
Other long-term liabilities	5,063	842
Total long-term liabilities	11,721	3,834
Commitments and contingencies
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,600 (2019) and 17,567 (2018) shares issued and outstanding)	18	18
Additional paid-in capital	159,838	157,928
Accumulated other comprehensive income		12,141
Noncontrolling interest	1,675	1,748
Retained earnings	126,097	93,124
Total shareholders' equity	287,628	264,959
Total liabilities and shareholders' equity	$ 409,204	$ 367,736

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CONSOLIDATED CONDENSED BALANCE SHEETS (PARENTHETICAL) - USD ($) shares in Thousands, $ in Thousands	Apr. 30, 2019	Oct. 31, 2018
Statement of Financial Position [Abstract]
Allowances of accounts receivable	$ 4,694	$ 3,227
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	17,600	17,567
Common stock, shares outstanding	17,600	17,567

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Income Statement [Abstract]
Net sales	$ 286,236	$ 264,405	$ 544,268	$ 512,333
Cost of sales	249,399	232,436	476,594	454,054
Gross profit	36,837	31,969	67,674	58,279
Selling, general and administrative	15,657	12,875	29,933	28,392
Gain on sale of Temecula packinghouse	1,927		1,927
Operating income	23,107	19,094	39,668	29,887
Interest expense	(365)	(288)	(619)	(519)
Other income, net	886	299	1,396	425
Unrealized and realized net gain (loss) on Limoneira shares	1,359		(3,146)
Income before provision for income taxes and loss from unconsolidated entities	24,987	19,105	37,299	29,793
Provision for income taxes	5,573	4,764	7,106	9,066
Income (loss) from unconsolidated entities	(3,136)	(325)	(9,434)	278
Net income	16,278	14,016	20,759	21,005
Less: Net loss attributable to noncontrolling interest	67	106	73	256
Net income attributable to Calavo Growers, Inc.	$ 16,345	$ 14,122	$ 20,832	$ 21,261
Calavo Growers, Inc.’s net income per share:
Basic	$ 0.93	$ 0.81	$ 1.19	$ 1.22
Diluted	$ 0.93	$ 0.80	$ 1.18	$ 1.21
Number of shares used in per share computation:
Basic	17,530	17,481	17,514	17,472
Diluted	17,609	17,580	17,582	17,561

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CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 16,278	$ 14,016	$ 20,759	$ 21,005
Other comprehensive income, before tax:
Unrealized investment gains (losses)		2,990		(121)
Income tax benefit (expense) related to items of other comprehensive income		(778)		311
Other comprehensive loss, net of tax		2,212		190
Comprehensive income	16,278	16,228	20,759	21,195
Less: Net loss attributable to noncontrolling interest	67	106	73	256
Comprehensive income – Calavo Growers, Inc.	$ 16,345	$ 16,334	$ 20,832	$ 21,451

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Cash Flows from Operating Activities:
Net income	$ 20,759	$ 21,005
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,770	6,561
Provision for losses (gains) on accounts receivable	83	(8)
Loss (income) from unconsolidated entities	9,435	(278)
Unrealized and realized net loss on Limoneira shares	3,146
Interest income on loans to FreshRealm	(980)
Stock-based compensation expense	1,826	2,774
Gain on sale of Temecula packinghouse	(1,927)
Deferred income taxes		1,453
Effect on cash of changes in operating assets and liabilities:
Accounts receivable, net	(17,332)	(7,167)
Inventories, net	(14,572)	(8,300)
Prepaid expenses and other current assets	(367)	(224)
Advances to suppliers	1,419	1,627
Income taxes receivable/payable	3,942	3,261
Other assets	(3,657)	(2,263)
Payable to growers	11,631	10,849
Deferred rent	547	(26)
Trade accounts payable, accrued expenses and other long-term liabilities	5,880	(8,076)
Net cash provided by operating activities	26,603	21,188
Cash Flows from Investing Activities:
Acquisitions of and deposits on property, plant, and equipment	(7,467)	(8,838)
Proceeds received for repayment of San Rafael note	225	232
Proceeds from sale of Temecula packinghouse	7,100
Proceeds received from Limoneira stock sales	1,154
Loans to FreshRealm	(14,700)
Net cash used in investing activities	(13,688)	(8,606)
Cash Flows from Financing Activities:
Payment of dividend to shareholders	(17,568)	(16,657)
Proceeds from revolving credit facility	140,500	119,000
Payments on revolving credit facility	(129,000)	(118,000)
Payment of minimum withholding taxes on net share settlement of equity awards	(1,008)	(1,158)
Payments on long-term obligations	(83)	(68)
Proceeds from stock option exercises	85	53
Net cash used in financing activities	(7,074)	(16,830)
Net increase (decrease) in cash and cash equivalents	5,841	(4,248)
Cash and cash equivalents, beginning of period	1,520	6,625
Cash and cash equivalents, end of period	7,361	2,377
Noncash Investing and Financing Activities:
Capital lease related to Temecula packinghouse	3,306
Property, plant, and equipment included in trade accounts payable and accrued expenses	$ 598	725
Noncash transfer of noncontrolling interest		1,001
Unrealized investment gain		$ (121)

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income [Member]	Retained Earnings [Member]	Noncontrolling Interest [Member]	Total
Beginning balance at Oct. 31, 2017	$ 18	$ 154,243	$ 10,434	$ 78,411	$ 1,016	$ 244,122
Beginning balance, shares at Oct. 31, 2017	17,533
Exercise of stock options and income tax benefit		53				53
Exercise of stock options and income tax benefit, shares	3
Stock compensation expense		941				941
Restricted stock issued		891				891
Restricted stock issued, shares	7
Unrealized gain on Limoneira investment, net			(2,022)			(2,022)
Salsa Lisa contingent consideration adjustment		(1,001)			1,001
Avocados de Jalisco noncontrolling interest contribution					(150)	(150)
Net income attributable to Calavo Growers, Inc.				7,139		7,139
Ending balance at Jan. 31, 2018	$ 18	155,127	8,412	85,550	1,867	250,974
Ending balance, shares at Jan. 31, 2018	17,543
Beginning balance at Oct. 31, 2017	$ 18	154,243	10,434	78,411	1,016	244,122
Beginning balance, shares at Oct. 31, 2017	17,533
Net income attributable to Calavo Growers, Inc.						21,261
Ending balance at Apr. 30, 2018	$ 18	156,069	10,624	99,672	1,761	268,144
Ending balance, shares at Apr. 30, 2018	17,567
Beginning balance at Jan. 31, 2018	$ 18	155,127	8,412	85,550	1,867	250,974
Beginning balance, shares at Jan. 31, 2018	17,543
Stock compensation expense		942				942
Restricted stock issued, shares	24
Unrealized gain on Limoneira investment, net			2,212			2,212
Avocados de Jalisco noncontrolling interest contribution					(106)	(106)
Net income attributable to Calavo Growers, Inc.				14,122		14,122
Ending balance at Apr. 30, 2018	$ 18	156,069	10,624	99,672	1,761	268,144
Ending balance, shares at Apr. 30, 2018	17,567
Beginning balance at Oct. 31, 2018	$ 18	157,928	12,141	93,124	1,748	264,959
Beginning balance, shares at Oct. 31, 2018	17,567
Exercise of stock options and income tax benefit		47				47
Exercise of stock options and income tax benefit, shares	2
Stock compensation expense		966				966
Restricted stock issued, shares	29
Avocados de Jalisco noncontrolling interest contribution					(6)	(6)
Net income attributable to Calavo Growers, Inc.				4,487		4,487
Ending balance at Jan. 31, 2019	$ 18	158,941		109,752	1,742	270,453
Ending balance, shares at Jan. 31, 2019	17,598
Beginning balance at Oct. 31, 2018	$ 18	157,928	12,141	93,124	1,748	264,959
Beginning balance, shares at Oct. 31, 2018	17,567
Net income attributable to Calavo Growers, Inc.						20,832
Ending balance at Apr. 30, 2019	$ 18	159,838		126,097	1,675	287,628
Ending balance, shares at Apr. 30, 2019	17,600
Unrealized gains on Limoneira investment reclassed to retained earnings			$ (12,141)	12,141
Beginning balance at Jan. 31, 2019	$ 18	158,941		109,752	1,742	270,453
Beginning balance, shares at Jan. 31, 2019	17,598
Exercise of stock options and income tax benefit		37				37
Exercise of stock options and income tax benefit, shares	2
Stock compensation expense		860				860
Avocados de Jalisco noncontrolling interest contribution					(67)	(67)
Net income attributable to Calavo Growers, Inc.				16,345		16,345
Ending balance at Apr. 30, 2019	$ 18	$ 159,838		$ 126,097	$ 1,675	$ 287,628
Ending balance, shares at Apr. 30, 2019	17,600

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Description of the business

6 Months Ended

Apr. 30, 2019

Description of the business

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 a 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 retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers on a worldwide basis. We procure avocados from California, Mexico and other growing regions around the world.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) create, process and package a portfolio of healthy fresh foods including fresh-cut fruit and vegetables, and prepared foods and (iii) process and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and Renaissance Food Group (RFG). 

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 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, 2018.

Recently Adopted Accounting Pronouncements

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 fiscal years and interim period within those fiscal years beginning after December 15, 2017. The Company adopted this new standard at the beginning of fiscal 2019. With the adoption of this new standard, we reclassed unrealized gains of $12.1 million in accumulated other comprehensive income to retained earnings as of November 1, 2018. Additionally, for the six months ended April 30, 2019, we sold 51,271 shares of Limoneira stock and recorded a loss of $0.1 million in our consolidated statements of income.  Limoneira’s stock price at April 30, 2019, January 31, 2019 and October 31, 2018 equaled $22.84 per share, $22.03 per share, and $24.65 per share. Our remaining shares of Limoneira stock, totaling 1,677,299, were revalued to $22.84 per share at April 30, 2019 and, as a result, we recorded a gain of $1.4 million for the three months ended April 30, 2019 and we recorded a loss of $3.0 million for the six months ended April 30, 2019 in our consolidated statements of income.

In May 2014, the FASB issued a comprehensive new revenue recognition standard which superseded previous existing revenue recognition guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The Company adopted this new standard at the beginning of fiscal 2019 using the modified retrospective transition method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to the opening balance of retained earnings on the first day of our 2019 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated financial statements. See Note 14 for further information.

Recently Issued Accounting Standards

In September 2018, the FASB issuedand ASU, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. This ASU will be effective for us beginning the first day of our 2021 fiscal year. We are evaluating the impact of the adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In June 2018, the FASB issued an ASU, Improvements to Nonemployee Share-Based Payment Accounting. The FASB issued this update to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU will be effective for us beginning the first day of our 2020 fiscal year. We are evaluating the impact of the update of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In February 2018, the FASB issued an ASU, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which amends Accounting Standards Codification ("ASC") 220, Income Statement — Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act, (the "Act"). In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. This ASU is effective for us the first day of our 2020 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In January 2017, the FASB issued an ASU, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The ASU permits an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning the first day of our 2021 fiscal year and is not expected to have a significant impact upon adoption.

In February 2016, the FASB issued an ASU, Leases, 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 2020 fiscal year. Early adoption is permitted. Although we are in the process of evaluating the impact of adoption of ASU 2016-02 on our consolidated financial statements, we currently expect the most significant changes will be related to the recognition of material new long-term right-of-use assets and lease liabilities on our consolidated balance sheet. 

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Information regarding our operations in different segments

6 Months Ended

Apr. 30, 2019

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 operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents operations related to the purchase, manufacturing, and distribution of prepared avocado products, including guacamole and salsa. The RFG segment represents operations related to the manufacturing and distribution of fresh-cut fruit, fresh-cut vegetables, vegetables and prepared foods.  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. Data in the following tables is presented in thousands:

	Three months ended April 30, 2019								Three months ended April 30, 2018
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Avocados	$	135,086	$	—	$	—	$	135,086	$	127,743	$	—	$	—	$	127,743
Tomatoes		14,515		—		—		14,515		7,963		—		—		7,963
Papayas		1,809		—		—		1,809		2,852		—		—		2,852
Other fresh products		108		—		—		108		69		—		—		69
Prepared avocado products		—		23,631		—		23,631		—		25,235		—		25,235
Salsa		—		669		—		669		—		740		—		740
Fresh-cut fruit & veg. and prepared foods		—		—		114,641		114,641		—		—		104,982		104,982
Total gross sales		151,518		24,300		114,641		290,459		138,627		25,975		104,982		269,584
Less sales incentives		(112)		(2,259)		(649)		(3,020)		(438)		(3,271)		(425)		(4,134)
Less inter-company eliminations		(471)		(732)		—		(1,203)		(254)		(791)		—		(1,045)
Net sales	$	150,935	$	21,309	$	113,992	$	286,236	$	137,935	$	21,913	$	104,557	$	264,405

	Six months ended April 30, 2019								Six months ended April 30, 2018
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Avocados	$	239,080	$	—	$	—	$	239,080	$	236,672	$	—	$	—	$	236,672
Tomatoes		25,907		—		—		25,907		20,047		—		—		20,047
Papayas		4,748		—		—		4,748		5,657		—		—		5,657
Other fresh products		189		—		—		189		104		—		—		104
Prepared avocado products		—		47,883		—		47,883		—		47,038		—		47,038
Salsa		—		1,522		—		1,522		—		1,605		—		1,605
Fresh-cut fruit & veg. and prepared foods		—		—		234,182		234,182		—		—		211,758		211,758
Total gross sales		269,924		49,405		234,182		553,511		262,480		48,643		211,758		522,881
Less sales incentives		(1,069)		(4,293)		(1,126)		(6,488)		(1,092)		(6,049)		(1,095)		(8,236)
Less inter-company eliminations		(1,066)		(1,689)		—		(2,755)		(668)		(1,644)		—		(2,312)
Net sales	$	267,789	$	43,423	$	233,056	$	544,268	$	260,720	$	40,950	$	210,663	$	512,333

	Fresh		Calavo
	products		Foods		RFG		Total
Three months ended April 30, 2019
Net sales before intercompany eliminations	$	151,406	$	22,041	$	113,992	$	287,439
Intercompany eliminations		(471)		(732)		—		(1,203)
Net sales		150,935		21,309		113,992		286,236
Cost of sales before intercompany eliminations		123,583		15,496		111,523		250,602
Intercompany eliminations		(414)		(507)		(282)		(1,203)
Cost of sales		123,169		14,989		111,241		249,399
Gross profit	$	27,766	$	6,320	$	2,751	$	36,837
Three months ended April 30, 2018
Net sales before intercompany eliminations	$	138,189	$	22,704	$	104,557	$	265,450
Intercompany eliminations		(254)		(791)		—		(1,045)
Net sales		137,935		21,913		104,557		264,405
Cost of sales before intercompany eliminations		123,052		14,840		95,589		233,481
Intercompany eliminations		(237)		(479)		(329)		(1,045)
Cost of sales		122,815		14,361		95,260		232,436
Gross profit	$	15,120	$	7,552	$	9,297	$	31,969

	Fresh		Calavo
	products		Foods		RFG		Total
Six months ended April 30, 2019
Net sales before intercompany eliminations	$	268,855	$	45,112	$	233,056	$	547,023
Intercompany eliminations		(1,066)		(1,689)		—		(2,755)
Net sales		267,789		43,423		233,056		544,268
Cost of sales before intercompany eliminations		220,174		31,823		227,352		479,349
Intercompany eliminations		(941)		(1,152)		(662)		(2,755)
Cost of sales		219,233		30,671		226,690		476,594
Gross profit	$	48,556	$	12,752	$	6,366	$	67,674
Six months ended April 30, 2018
Net sales before intercompany eliminations	$	261,388	$	42,594	$	210,663	$	514,645
Intercompany eliminations		(668)		(1,644)		—		(2,312)
Net sales		260,720		40,950		210,663		512,333
Cost of sales before intercompany eliminations		231,955		28,461		195,950		456,366
Intercompany eliminations		(612)		(1,038)		(662)		(2,312)
Cost of sales		231,343		27,423		195,288		454,054
Gross profit	$	29,377	$	13,527	$	15,375	$	58,279

For the three months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.4 million and $0.2 million between Fresh products and RFG were eliminated.  For the six months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.9 million and $0.6 million between Fresh products and RFG were eliminated.  For the three months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.7 million and $0.8 million between Calavo Foods and RFG were eliminated.  For the six months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $1.7 million and $1.6 million between Calavo Foods and RFG were eliminated.  For the three months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.1 million between Fresh products and Calavo Foods were eliminated. For the six months ended April 30, 2019 and 2018, inter-segment sales and cost of sales of $0.2 million and $0.1 million between Fresh products and Calavo Foods were eliminated.

Sales to customers outside the U.S. were approximately $10.1 million, and $10.7 million for the three months ended April 30, 2019 and 2018. Sales to customers outside the U.S. were approximately $19.2 million, and $18.2 million for the six months ended April 30, 2019 and 2018.

Long-lived assets attributed to geographic areas as of April 30, 2019 and October 31, 2018, are as follows (in thousands):

	United States		Mexico		Consolidated
April 30, 2019	$	93,340	$	32,356	$	125,696
October 31, 2018	$	88,600	$	33,543	$	122,143

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Inventories

6 Months Ended

Apr. 30, 2019

Inventory Disclosure [Abstract]

Inventories

3.Inventories

Inventories consist of the following (in thousands):

	April 30,		October 31,
	2019		2018
Fresh fruit	$	25,017	$	12,902
Packing supplies and ingredients		11,630		10,889
Finished prepared foods		12,969		11,253
	$	49,616	$	35,044

Inventories are stated at the lower of cost or net realizable value. We periodically review the value of items in inventory and record any necessary write downs of inventory based on our assessment of market conditions.    No additional inventory reserve was considered necessary as of April 30, 2019 and October 31, 2018.

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Related party transactions

6 Months Ended

Apr. 30, 2019

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. For the three months ended April 30, 2019 and 2018, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $2.1 million and $1.9 million.  During the six months ended April 30, 2019 and 2018, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $2.1 million and $2.0 million. Amounts payable to these Board members were $2.0 million as of April 30, 2019.We did not have any amounts payable to these Board members as of October 31, 2018.

During the three months ended April 30, 2019 and 2018, we received $0.1 million as dividend income from Limoneira Company (Limoneira). During the six months ended April 30, 2019 and 2018, we received $0.2 million as dividend income from Limoneira.  In addition, we lease office space from Limoneira for our corporate office. We paid to rent expense to Limoneira totaling $0.1 million for the three and six months ended April 30, 2019 and 2018. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. As of April 30, 2019, we own less than 10% ownership interest in Limoneira. Effective December 2018, our Chief Executive Officer retired from Limoneira’s 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 each of the three months ended April 30, 2019 and 2018, Calavo Growers, Inc. paid fees totaling less than $0.1 million to TroyGould PC. During each of the six months ended April 30, 2019 and 2018, Calavo Growers, Inc. paid fees totaling less than $0.2 million and $0.1 million to TroyGould PC.

As of April 30, 2019 and October 31, 2018, we had an investment of $5.0 million and $5.2 million, representing Calavo Sub’s 50% ownership in Agricola Don Memo, S.A. de C.V. (Don Memo), which was 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 our marketing program to Don Memo, net of our commission and aforementioned advances. As of April 30, 2019 and October 31, 2018, we had outstanding advances of $2.8 million and $2.5 million to Don Memo. During the three months ended April 30, 2019 and 2018, we recorded $0.2 million and $0.1 million of cost of sales to Don Memo pursuant to our consignment agreement. During the six months ended April 30, 2019 and 2018, we recorded $5.9 million and $3.8 million of cost of sales to Don Memo pursuant to our consignment agreement.

We make advances to Agricola Belher (Belher) for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Belher, net of our commission and aforementioned advances. We had grower advances due from Belher totaling $4.0 million as of April 30, 2019 and October 31, 2018, which are netted against the grower payable.  In addition, we had infrastructure advances due from Belher of $3.4 million as of April 30, 2019 and October 31, 2018.  $0.8 million of these infrastructure advances were recorded as a receivable in prepaid and other current assets.  The remaining $2.6 million of these infrastructure advances were recorded in other assets. During the three months ended April 30, 2019 and 2018, we recorded $12.4 million and $6.7 million of cost of sales to Belher pursuant to our consignment agreement. During the six months ended April 30, 2019 and 2018, we recorded $17.6 million and $12.6 million of cost of sales 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.  As of April 30, 2019, this entity was approximately 83% owned by Calavo and was consolidated in our financial statements.  Avocados de Jalisco built a packinghouse located in Jalisco, Mexico, which began operations in June of 2017. As of April 30, 2019, and October 31, 2018, we have made preseason advances of approximately $0.1 million to various partners of Avocados de Jalisco. During the three months ended April 30, 2019, we purchased approximately $1.0 million of avocados from the partners of Avocados de Jalisco. During the six months ended April 30, 2019 and 2018, we purchased approximately $2.0 million and $0.2 million of avocados from the partners of Avocados de Jalisco. In January 2018, we transferred $1.0 million of interest to the Avocados de Jalisco noncontrolling members.

As of April 30, 2019 and October 31, 2018, we had an investment of $10.3 million and $19.9 million in FreshRealm, LLC (“FreshRealm”). We record the amount of our investment in FreshRealm in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income/ (loss) in unconsolidated entities” in our Consolidated Condensed Statement of Income. See Note 13 for additional information.

Effective July 31, 2018, we entered into a Note and Membership Unit Purchase Agreement (“NMUPA”) with FreshRealm, pursuant to which we agreed to provide additional financing, subject to certain terms and conditions.  Pursuant to such NMUPA, we entered into a Subscription Agreement, whereby we purchased $3.5 million of equity units in FreshRealm, on July 31, 2018.  FreshRealm concurrently entered into subscription agreements with certain third-party investors for an additional $3.5 million of equity investments.  As of April 30, 2019, our ownership percentage in FreshRealm was approximately 37%. 

Additionally, pursuant to the NMUPA, we entered into a $12 million Senior Promissory Note and corresponding Security Agreement (collectively, the “Agreements”) with FreshRealm, effective August 10, 2018. We funded $9 million of this loan commitment during the fourth quarter of fiscal 2018 and funded the remaining loan commitment amount of $3 million during the first quarter of fiscal 2019.  During our second quarter of fiscal 2019, we amended this note, due October 31, 2019, and, among other things, included a provision whereby we have the option to extend repayment of this note to November 1, 2020.

During our first quarter of fiscal 2019 we loaned FreshRealm an additional $7.5 million, in unsecured notes receivable due October 31, 2019 with an option to extend repayment of this note to November 1, 2020.  During our second quarter of fiscal 2019, we lent an additional $4.2 million on an unsecured basis to FreshRealm under similar terms. As of April 30, 2019 and October 31, 2018, we have note receivables from FreshRealm totaling $24.7 million and $9.0 million. At October 31, 2018, note receivables from FreshRealm of $9.0 million was included in prepaids and other current assets.  These loans to FreshRealm bear interest at 10% which is due by the final maturity date.  At April 30, 2019 we have a receivable of $1.0 million related to interest that we have recorded with Loans to FreshRealm on the balance sheet. See Note 13 for further information.

Three officers and five members of our board of directors have investments in FreshRealm.  In addition, as of April 30, 2019 and October 31, 2018, we have a loan to FreshRealm members of approximately $0.2 million and $0.3 million. In October and December 2017, our Chairman and Chief Executive Officer invested $7.0 million and $1.5 million into FreshRealm.  In January 2018, one of our non-executive directors invested $1.8 million into FreshRealm. In the second quarter of fiscal 2018, two of our non-executive directors invested $1.2 million into FreshRealm.

In the first quarter of fiscal 2019, FreshRealm entered into a supply contract with a large multi-national, multi-channel retailer.  Calavo co-signed an addendum to this agreement to provide assurance to the customer that Calavo will assume responsibility for performance, in the event that FreshRealm cannot perform, provided that the customer must work in good faith to make reasonable adjustments to logistical elements in the contract, if requested by Calavo. 

 We provide storage services to FreshRealm from select Value-Added Depots and RFG facilities.  We have received $0.1 million in storage services revenue from FreshRealm in the three months ended April 30, 2019 and 2018. We have received $0.2 million in storage services revenue from FreshRealm in the six months ended April 30, 2019 and 2018. For the three months ended April 30, 2019 and 2018, RFG has sold $0.3 million and $2.4 million of products to FreshRealm. For the six months ended April 30, 2019 and 2018, RFG has sold $1.9 million and $3.9 million of products to FreshRealm.

The previous owners of RFG, one of which is currently an officer of Calavo, have a majority ownership of certain entities that provide various services to RFG, specifically LIG Partners, LLC and THNC, LLC.  One of RFG’s California operating facilities 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.  See the following tables for the related party activity for the three and six months ended April 30, 2019 and 2018:

	Three months ended April 30,
(in thousands)	2019		2018
Rent paid to LIG	$	122	$	139
Rent paid to THNC, LLC	$	198	$	199

	Six months ended April 30,
(in thousands)	2018		2018
Rent paid to LIG	$	261	$	278
Rent paid to THNC, LLC	$	397	$	398

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Other assets

6 Months Ended

Apr. 30, 2019

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

Other Assets

5.Other assets

Other assets consist of the following (in thousands):

	April 30,		October 31,
	2019		2018
Mexican IVA (i.e. value-added) taxes receivable (see note 11)	$	25,404	$	21,859
Infrastructure advance to Agricola Belher		2,600		2,600
Intangibles, net		556		1,109
Other		1,566		1,462
	$	30,126	$	27,030

Intangible assets consist of the following (in thousands):

		April 30, 2019						October 31, 2018
	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	$	(7,568)	$	72	$	7,640	$	(7,106)	$	534
Trade names	9.2 years		2,760		(2,738)		22		2,760		(2,672)		88
Trade secrets/recipes	9.3 years		630		(443)		187		630		(418)		212
Brand name intangibles	indefinite		275		—		275		275		—		275
Intangibles, net		$	11,305	$	(10,749)	$	556	$	11,305	$	(10,196)	$	1,109

We anticipate recording amortization expense of approximately $0.1 million for the remainder of fiscal 2019, $0.1 million for fiscal year 2020, $0.1 million for fiscal year 2021, $0.1 million for fiscal year 2022, and less than $0.1 million for thereafter, through fiscal year 2023.

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

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Stock-Based Compensation

6 Months Ended

Apr. 30, 2019

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 2, 2019, 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 $71.56.  On January 2, 2020, 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 Plan. The total recognized stock-based compensation expense for these grants was $0.5 million for the three months ended April 30, 2019.  The total recognized stock-based compensation expense for these grants was $0.6 million for the six months ended April 30, 2019. 

On December 14, 2018, our executive officers were granted a total of 14,522 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 $85.67.  These shares vest in one-third increments, on an annual basis, beginning December 14, 2019. These shares were granted pursuant to our 2011 Plan. The total recognized stock-based compensation expense for these grants was $0.2 million for the three months ended April 30, 2019.  The total recognized stock-based compensation expense for these grants was $0.2 million for the six months ended April 30, 2019. 

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, 2018	85	$	68.82
Vested	(51)	$	70.48
Granted	35	$	77.33
Outstanding at April 30, 2019	69	$	71.74	$	6,624

The total recognized stock-based compensation expense for restricted stock was $0.9 million for the three months ended April 30, 2019 and 2018. The total recognized stock-based compensation expense for restricted stock was $1.8 million for the six months ended April 30, 2019 and 2018. Total unrecognized stock-based compensation expense totaled $3.8 million as of April 30, 2019, and will be amortized through fiscal year 2021.

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, 2018	4	$	19.20
Exercised	(2)	$	19.20
Outstanding at April 30, 2019	2	$	19.20	$	192
Exercisable at April 30, 2019	2	$	19.20	$	192

At April 30, 2019, outstanding and exercisable stock options had a weighted-average remaining contractual term of 1.3 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and six months ended April 30, 2019. 

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, 2018	20	$	40.07
Exercised	(2)	$	23.48
Outstanding at April 30, 2019	18	$	41.91	$	971
Exercisable at April 30, 2019	12	$	25.10	$	849

At April 30, 2019, outstanding and exercisable stock options had a weighted-average remaining contractual term of 4.2 years.  The total recognized and unrecognized stock-based compensation expense was insignificant for the three and six months ended April 30, 2019. 

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Other events

6 Months Ended

Apr. 30, 2019

Other Events [Abstract]

Other events

7.Other events

Dividend payment

On December 7, 2018, we paid a $1.00 per share dividend in the aggregate amount of $17.6 million to shareholders of record on November 16, 2018.

Litigation

From time to time, we are also involved in other litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

Mexico tax audits

We conduct business both domestically and 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 the period from our fourth fiscal quarter of 2016 through our first fiscal quarter of 2019, we attempted to resolve our case with the MFM through working meetings attended by representatives of the MFM, CDM and PRODECON (Local Tax Ombudsman).  However, we were unable to materially resolve our case with the MFM through the PRODECON process.

As a result,  in April 2019, the MFM issued a final tax assessment to CDM (“the 2011 Assessment”) totaling approximately $2.19 billion Mexican pesos related to Income Tax, Flat Rate Business Tax and Value Added Tax, corresponding to fiscal year 2011 tax audit.  We have consulted with an internationally recognized tax advisor and continue to believe this tax assessment is without merit.   Therefore, we intend to file an administrative appeal challenging the MFM’s 2011 assessment on or before June 12, 2019. The filing of an administrative appeal in Mexico is a process in which the taxpayer appeals to a different office within the Mexican tax authorities forcing the legal office within the MFM to rule on the matter.  This process preserves the taxpayer’s right to litigate in tax court if the administrative appeal process ends without a favorable or just resolution.  Furthermore, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2011 Assessment.  We believe this recent ruling undermines the Assessment we received in April 2019.  We believe we have the legal arguments and documentation to sustain the positions challenged by the MFM.

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.  In January 2017, we received preliminary observations from SAT outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers, and VAT. We provided a written rebuttal to these preliminary observations during our second fiscal quarter of 2017.  During the period from our third fiscal quarter of 2017 through our third fiscal quarter of 2018, we attempted to resolve our case with the SAT through working meetings attended by representatives of the SAT, CDM and the PRODECON. However, we were unable to materially resolve our case with the SAT through the PRODECON process.

As a result, in July 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment (the “2013 Assessment”) totaling approximately $2.62 billion Mexican pesos related to Income Tax, Flat Rate Business Tax, and Value Added Tax, related to this fiscal 2013 tax audit.  Additionally, the tax authorities have determined an employee’s profit sharing liability, totaling approximately $118 million Mexican pesos.

We have consulted with both an internationally recognized tax advisor, as well as a global law firm with offices throughout Mexico, and we continue to believe that this tax assessment is without merit.  In August 2018, we filed an administrative appeal on the 2013 Assessment.  Here, CDM has appealed our case to the SAT’s central legal department in Mexico City.  Furthermore, and as noted in the preceding paragraphs, in August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on another tax matter (see footnote 11 regarding VAT refunds) indicating that they believe that our legal interpretation is accurate on a matter that is also central to the 2013 Assessment.  We believe this recent ruling significantly undermines the 2013 Assessment we received in July 2018.

We continue to believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position, results of operations and cash flows.

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Fair value measurements

6 Months Ended

Apr. 30, 2019

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 April 30, 2019 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)	$	38,310		-		-	$	38,310
Total assets at fair value	$	38,310		-		-	$	38,310

(1)    The investment in Limoneira Company consists of marketable securities in the Limoneira Company common stock.  We currently own less than 10% of Limoneira’s outstanding common stock.  These securities are measured at fair value using quoted market prices.  For the three months ended April 30, 2019, we recognized gains of $1.4 million on the consolidated condensed statement of income.  For the six months ended April 30, 2019, we recognized losses of $3.1 million on the consolidated condensed statement of income. In the prior year, unrealized gains and losses were recognized through other comprehensive income. Unrealized investment holding gains arising during the three months ended April 30, 2018 were $3.0 million. Unrealized investment holding losses arising during the six months ended April 30, 2018 were $0.1 million.

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Noncontrolling interest

6 Months Ended

Apr. 30, 2019

Noncontrolling Interest [Abstract]

Noncontrolling interest

9.Noncontrolling interest

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

	Three months ended April 30,
Avocados de Jalisco noncontrolling interest	2019		2018
Noncontrolling interest, beginning	$	1,742	$	1,867
Noncash transfer of noncontrolling interest		—		—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(67)		(106)
Noncontrolling interest, ending	$	1,675	$	1,761

	Six months ended April 30,
Avocados de Jalisco noncontrolling interest	2019		2018
Noncontrolling interest, beginning	$	1,748	$	1,016
Noncash transfer of noncontrolling interest		—		1,001
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(73)		(256)
Noncontrolling interest, ending	$	1,675	$	1,761

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Earnings per share

6 Months Ended

Apr. 30, 2019

Earnings Per Share [Abstract]

Earnings per share

10.Earnings per share

Basic and diluted net income per share is calculated as follows (data in thousands, except per share data):

		Three months ended April 30,
	2019		2018
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	16,345	$	14,122
Denominator:
Weighted average shares – Basic		17,530		17,481
Effect on dilutive securities – Restricted stock/options		79		99
Weighted average shares – Diluted		17,609		17,580
Net income per share attributable to Calavo Growers, Inc:
Basic	$	0.93	$	0.81
Diluted	$	0.93	$	0.80

	Six months ended April 30,
	2019		2018
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	20,832	$	21,261
Denominator:
Weighted average shares - Basic		17,514		17,472
Effect on dilutive securities – Restricted stock/options		68		89
Weighted average shares - Diluted		17,582		17,561
Net income per share attributable to Calavo Growers, Inc:
Basic	$	1.19	$	1.22
Diluted	$	1.18	$	1.21

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Mexican IVA taxes receivable

6 Months Ended

Apr. 30, 2019

Value Added Tax Receivable [Abstract]

Mexican IVA taxes receivable

11.Mexican IVA taxes receivable

Included in 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 relate to the exportation of goods, translate into IVA amounts receivable from the Mexican government.

As of April 30, 2019 and October 31, 2018, CDM IVA receivables totaled $25.4 million and $21.9 million.  Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.  Beginning in fiscal 2014 and continuing into fiscal 2019, 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 and/or administrative appeals. 

During the first quarter of fiscal 2017, tax authorities informed us that their internal opinion, based on the information provided by the local SAT office in Uruapan, considers that CDM is not properly documented relative to its declared tax structure and therefore CDM cannot claim the refundable IVA balance.  CDM has strong arguments and supporting documentation to sustain its declared tax structure for IVA and income tax purposes.  CDM started an administrative appeal for the IVA related to the request of the months of July, August and September of 2015 (the “2015 Appeal”) in order to assert its argument that CDM is properly documented and to therefore change the SAT’s internal assessment. In August 2018, we received a favorable ruling from the SAT’s central legal department in Mexico City on the 2015 Appeal indicating that they believe CDM’s legal interpretation of its declared tax structure is indeed accurate.  While favorable on this central matter of CDMs declared tax structure, the ruling, however, still does not recognize the taxpayers right to a full refund for the IVA related to the months of July, August and September 2015.  Therefore, in October 2018, CDM filed a substance-over-form annulment suit in the Federal Tax Court to recover its full refund for IVA over the subject period, which is currently pending resolution.

In spite of the favorable ruling from the SAT’s central legal department in Mexico City, as discussed above, the local SAT audit office in Uruapan continues to believe that CDM is not properly documented relative to its declared tax structure.  As a result, they believe CDM cannot claim certain refundable IVA balances, specifically in regards to our IVA refunds related to the months of January through June of 2013.  CDM has strong arguments and supporting documentation to sustain its declared tax structure for IVA and income tax purposes.  In March 2019, CDM (with the assistance of our internationally recognized tax advisory firm), filed an administrative appeal for the IVA related to the request of the months of January through June of 2013. A response to the administrative appeal that we filed is currently pending resolution.

We believe that our operations in Mexico are properly documented.  Furthermore, our internationally recognized tax advisors believe that there are legal grounds to prevail in the Federal Tax Court and that therefore, the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts. 

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Income Taxes

6 Months Ended

Apr. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

12.  Income Taxes

     Our tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. We recognize the effects of tax legislation in the period in which the law is enacted. Our deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years we estimate the related temporary differences to reverse.

     On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).  Except for certain provisions, the Tax Act was effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer with an October 31 fiscal year end, the majority of the new provisions, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income and introducing new limitations on certain business deductions, did not apply until our 2019 fiscal year. For fiscal 2018, the most significant impacts included: lowering of the U.S. federal corporate income tax rate; remeasuring certain net deferred tax assets and liabilities; and requiring the transition tax on the deemed repatriation of certain foreign earnings. In the first quarter of fiscal 2018, we recorded $1.7 million in one-time, non-cash charges related to the revaluation of our net deferred tax assets (approximately $1.4 million) and the transition tax on the deemed repatriation of foreign earnings (approximately $0.3 million).

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FreshRealm

6 Months Ended

Apr. 30, 2019

Variable Interest Entity

Variable Interest Entity

13.  FreshRealm

Based on the NMUPA and related Agreements, as described in Note 4, we reconsidered whether FreshRealm is a variable interest entity (“VIE”).  A VIE refers to a legal business structure in which an investor has a controlling interest in, despite not having a majority of voting rights; or a structure involving equity investors that do not have sufficient resources to support the ongoing operating needs of the business. Due primarily to FreshRealm utilizing substantially more debt to finance its activities, in addition to its existing equity, we continue to believe that FreshRealm should be considered a VIE.  In evaluating whether we are the primary beneficiary of FreshRealm, we considered several factors, including whether we (a) have the power to direct the activities that most significantly impact FreshRealm’s economic performance and (b) the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE.  We were not the primary beneficiary of FreshRealm at April 30, 2019 because the nature of our involvement with the activities of FreshRealm does not give us the power to direct the activities that most significantly impact its economic performance.  We do not have a future obligation to fund losses or debts on behalf of FreshRealm.  We may, however, voluntarily contribute funds. In the accompanying statements of income, we have presented the income (loss) from unconsolidated entities, subsequent to the provision for income taxes for all periods presented. 

We record the amount of our investment in FreshRealm, totaling $10.3. million at April 30, 2019, in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income/(loss) in unconsolidated entities” on our Consolidated Condensed Statement of Income. 

For the three months ended April 30, 2019, FreshRealm incurred losses totaling $7.4 million. For the six months ended April 30, 2019, FreshRealm incurred losses totaling $18.7 million.  Effective December 16, 2018, FreshRealm completed a “check the box” tax election to change their entity classification for tax purposes to that of a corporation.  To effect this change, FreshRealm, among other things, amended its operating agreement to eliminate the appropriate language related to the flow-through tax consequences of its prior tax status (Seventh Amended and Restated LLC Agreement) and checked the appropriate box on Form 8832 which it then filed with the Internal Revenue Service (IRS).  As a result, losses incurred by FreshRealm from November 1, 2018 to December 15, 2018 were recorded in accordance with FASB Accounting Standards Codification (“ASC”) 810, ASC 323, and ASC 970, which mandate that the recognition of losses for an unconsolidated subsidiary be handled in a manner consistent with cash distributions upon liquidation of the entity when such distributions are different than the investors percentage ownership. As such, we recorded 100% of FreshRealm’s losses from November 1, 2018 through December 15, 2018 totaling $4.2 million. Losses incurred by FreshRealm from December 16, 2018 to January 31, 2019 (after the change in tax status was effective) were recorded to reflect our proportionate share of FreshRealm losses.  From December 16, 2018 to January 31, 2019, our ownership percentage was approximately 37% and accordingly, we recorded losses from December 16, 2018 through January 31, 2019 totaling $2.7 million, for a total of $6.9 million in our first fiscal quarter of 2019. Our ownership remains at 37% for our second fiscal quarter of 2019, and we recorded losses of approximately $2.7 million. As a result of FreshRealm’s recent change in tax status (described above), future operating results for FreshRealm will be allocated to its owners based on ownership percentage.

As of April 30, 2019, and October 31, 2018, we have note receivables from FreshRealm totaling $24.7 million and $9.0 million. See Note 4 for further information.

In the first quarter of fiscal 2019, FreshRealm entered into a supply contract with a large multinational, multi-channel retailer.  Calavo co-signed an addendum to this agreement to provide assurance to the customer that Calavo will assume responsibility for performance, in the event that FreshRealm cannot perform, provided that the customer must work in good faith to make reasonable adjustments to logistical elements in the contract, if requested by Calavo.

Except for the performance guarantee noted above (for which we are unable to quantify our current exposure, if any), our exposure to the obligations of FreshRealm is generally limited to our interests in it.  We believe our maximum exposure to loss in FreshRealm is the carrying value of our investment and our loans to it, which totaled $10.3 million and $24.7 million, as of April 30, 2019.  Our maximum exposure to loss could increase in the future if FreshRealm receives additional financing (i.e. equity or debt) from Calavo or any other investor/lender.  We are under no obligation to provide FreshRealm additional financing.

Unconsolidated Significant Subsidiary

As described in footnote 4, we own approximately 37% of FreshRealm as of April 30, 2019 and October 31, 2018.  In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies for interim reports on Form 10-Q, we must determine if our unconsolidated subsidiaries are considered, “significant subsidiaries”.  In evaluating our investments, there are two tests utilized to determine if our subsidiaries are considered significant subsidiaries: the income test and the investment test.  Rule 10-01(b)(1) of Regulation S-X requires summarized income statement information of an unconsolidated subsidiary in an interim report if either of the two tests exceed 20%.  Pursuant to Rule 10-01(b)(1) of Regulation S-X, this requires summarized income statement information of FreshRealm in our second fiscal quarter Form 10-Q. 

The following table shows summarized financial information for FreshRealm (in thousands):

Income Statement:

	Three months ended  April 30,
	2019		2018
Net sales	$	3,701	$	7,490
Gross loss		(1,480)		(2,646)
Selling, general and administrative		(4,525)		(4,228)
Other		(1,366)		(538)
Net loss	$	(7,371)	$	(7,412)
	Six months ended  April 30,
	2019		2018
Net sales	$	12,589	$	12,524
Gross loss		(4,371)		(4,803)
Selling, general and administrative		(10,528)		(8,180)
Other		(3,850)		(817)
Net loss	$	(18,749)	$	(13,800)

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Revenue recognition

6 Months Ended

Apr. 30, 2019

Revenue recognition

Revenue recognition

14.  Revenue recognition

Effective at the beginning of our fiscal 2019, the Company adopted Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers," and all the related amendments (Accounting Standards Codification (ASC) 606) using the modified retrospective method of adoption. ASC 606 consists of a comprehensive revenue recognition standard, which requires the recognition of revenue when control of promised goods are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled.

The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of net consideration expected to be received in exchange for transferring products. Revenue from product sales is governed primarily by customer pricing and related purchase orders (“contracts”) which specify shipping terms and certain aspects of the transaction price including rebates, discounts and other sales incentives. Contracts are at standalone pricing. The performance obligation in these contracts is determined by each of the individual purchase orders and the respective stated quantities, with revenue being recognized at a point in time when obligations under the terms of the agreement are satisfied. This generally occurs with the transfer of control of our products to the customer and the product is delivered. The Company's customers have an implicit and explicit right to return non-conforming products. A provision for payment discounts and product return allowances, which is estimated, is recorded as a reduction of sales in the same period that the revenue is recognized.

Sales Incentives and Other Promotional Programs

The Company routinely offers sales incentives and discounts through various regional and national programs to our customers and consumers. These programs include product discounts or allowances, product rebates, product returns, one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. The costs associated with these activities are accounted for as reductions to the transaction price of the Company’s products and are, therefore, recorded as reductions to gross sales at the time of sale. The Company bases its estimates of incentive costs on historical trend experience with similar programs, actual incentive terms per customer contractual obligations and expected levels of performance of trade promotions, utilizing customer and sales organization inputs. The Company maintains liabilities at the end of each period for the estimated incentive costs incurred but unpaid for these programs. Differences between estimated and actual incentive costs are generally not material and are recognized in earnings in the period such differences are determined. Reserves for product returns, accrued rebates and promotional accruals are included in the condensed consolidated balance sheets as part of accrued expenses.

Principle vs. Agent Considerations

We frequently enter into consignment arrangements with avocado and tomato growers and packers located outside of the U.S. and growers of certain perishable products in the U.S. We evaluated whether its performance obligation is a promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent) using a control model. This evaluation determined that the Company is in control of establishing the transaction price, managing all aspects of the shipments process and taking the risk of loss for delivery, collection, and returns. Based on the Company’s evaluation of the control model, it determined that all of the Company’s major businesses act as the principal rather than the agent within their revenue arrangements and such revenues are reported on a gross basis.

Practical Expedients

The Company elected the following practical expedients upon its adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606).

· Shipping and handling costs- The company elected to account for shipping and handling activities that occur before the customer has obtained control of a good as fulfillment activities rather than as a promised service.

· Measurement of transaction price- The Company has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on, and concurrent with, a specific revenue-producing transaction and collected by the Company from a customer for sales taxes.

· Contract costs- The Company has elected to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period is one year or less.

The adoption of ASC 606 did not have an impact on our consolidated results of operations for the three and six months ended April 30, 2019.

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Amendment to Credit Agreement

6 Months Ended

Apr. 30, 2019

Amendment to Credit Agreement

Amendment to Credit Agreement

15.  Amendment to Credit Agreement

Effective March 1, 2019, we entered into a Second Amendment to Credit Agreement (the “Second Amendment”) with Farm Credit West, PCA, and Bank of America, N.A., relating to our Credit Agreement dated as of June 14, 2016 and the First Amendment to Credit Agreement dated as of August 29, 2016.  The Second Amendment, among other things, excludes financial results of FreshRealm from Calavo’s financial reporting requirements and covenant calculations and provides flexibility in making investments in joint ventures and non-wholly owned subsidiaries of Calavo. 

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Sale of Temecula, California Packinghouse

6 Months Ended

Apr. 30, 2019

Sale of Temecula, California Packinghouse

Sale of Temecula, California Packinghouse

16.  Sale of Temecula, California Packinghouse

In April 2019, we sold our Temecula, California packinghouse for $7.1 million in cash ($6.7 million, net of transaction costs (primarily sales commissions) totaling $0.4 million) and, concurrently, leased back a portion of the facility representing approximately one-third of the total square footage.  This generated a gain of $6.4 million.  Since our leaseback of the building is classified as a capital lease and covers substantially all of the leased property, the gain recognized currently is the amount of the gain in excess of the recorded amount of the leased asset.  As a result, we recognized a gain of approximately $1.9 million in the second quarter and recorded a deferred gain of $4.5 million, which will be recognized over the life of the lease (i.e. straight-line over 15 years).

In connection with the leaseback of this packinghouse, we calculated the present value of the minimum lease payments related to the building and have capitalized $3.3 million as a capital lease in our property, plant and equipment and recorded $3.3 million as a lease obligation. 

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Subsequent Event

6 Months Ended

Apr. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

17.  Subsequent event

    During our third quarter of fiscal year 2019, we entered into a 10-year building and equipment lease.  This facility is in Conley, GA and is primarily intended to process fresh-cut fruits and vegetables related to our RFG business segment.  Annual rent for the facility and equipment approximates $0.9 million and $0.6 million over the life of the lease.

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Description of the business (Policies)

6 Months Ended

Apr. 30, 2019

Description of the business

Business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and a 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 retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers on a worldwide basis. We procure avocados from California, Mexico and other growing regions around the world.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) create, process and package a portfolio of healthy fresh foods including fresh-cut fruit and vegetables, and prepared foods and (iii) process and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and Renaissance Food Group (RFG). 

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 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, 2018.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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 fiscal years and interim period within those fiscal years beginning after December 15, 2017. The Company adopted this new standard at the beginning of fiscal 2019. With the adoption of this new standard, we reclassed unrealized gains of $12.1 million in accumulated other comprehensive income to retained earnings as of November 1, 2018. Additionally, for the six months ended April 30, 2019, we sold 51,271 shares of Limoneira stock and recorded a loss of $0.1 million in our consolidated statements of income.  Limoneira’s stock price at April 30, 2019, January 31, 2019 and October 31, 2018 equaled $22.84 per share, $22.03 per share, and $24.65 per share. Our remaining shares of Limoneira stock, totaling 1,677,299, were revalued to $22.84 per share at April 30, 2019 and, as a result, we recorded a gain of $1.4 million for the three months ended April 30, 2019 and we recorded a loss of $3.0 million for the six months ended April 30, 2019 in our consolidated statements of income.

In May 2014, the FASB issued a comprehensive new revenue recognition standard which superseded previous existing revenue recognition guidance. The standard is intended to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. The standard also requires expanded disclosures surrounding revenue recognition. During fiscal 2017, the FASB issued additional clarification guidance on the new revenue recognition standard which also included certain scope improvements and practical expedients. The Company adopted this new standard at the beginning of fiscal 2019 using the modified retrospective transition method, under which the cumulative effect of initially applying the new guidance is recognized as an adjustment to the opening balance of retained earnings on the first day of our 2019 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated financial statements. See Note 14 for further information.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In September 2018, the FASB issuedand ASU, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. This ASU will be effective for us beginning the first day of our 2021 fiscal year. We are evaluating the impact of the adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In June 2018, the FASB issued an ASU, Improvements to Nonemployee Share-Based Payment Accounting. The FASB issued this update to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU will be effective for us beginning the first day of our 2020 fiscal year. We are evaluating the impact of the update of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In February 2018, the FASB issued an ASU, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which amends Accounting Standards Codification ("ASC") 220, Income Statement — Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act, (the "Act"). In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. This ASU is effective for us the first day of our 2020 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.

In January 2017, the FASB issued an ASU, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The ASU permits an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU will be effective for us beginning the first day of our 2021 fiscal year and is not expected to have a significant impact upon adoption.

In February 2016, the FASB issued an ASU, Leases, 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 2020 fiscal year. Early adoption is permitted. Although we are in the process of evaluating the impact of adoption of ASU 2016-02 on our consolidated financial statements, we currently expect the most significant changes will be related to the recognition of material new long-term right-of-use assets and lease liabilities on our consolidated balance sheet.

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Information regarding our operations in different segments (Tables)

6 Months Ended

Apr. 30, 2019

Segment Reporting [Abstract]

Schedule of sales by product and segment

Data in the following tables is presented in thousands:

	Three months ended April 30, 2019								Three months ended April 30, 2018
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Avocados	$	135,086	$	—	$	—	$	135,086	$	127,743	$	—	$	—	$	127,743
Tomatoes		14,515		—		—		14,515		7,963		—		—		7,963
Papayas		1,809		—		—		1,809		2,852		—		—		2,852
Other fresh products		108		—		—		108		69		—		—		69
Prepared avocado products		—		23,631		—		23,631		—		25,235		—		25,235
Salsa		—		669		—		669		—		740		—		740
Fresh-cut fruit & veg. and prepared foods		—		—		114,641		114,641		—		—		104,982		104,982
Total gross sales		151,518		24,300		114,641		290,459		138,627		25,975		104,982		269,584
Less sales incentives		(112)		(2,259)		(649)		(3,020)		(438)		(3,271)		(425)		(4,134)
Less inter-company eliminations		(471)		(732)		—		(1,203)		(254)		(791)		—		(1,045)
Net sales	$	150,935	$	21,309	$	113,992	$	286,236	$	137,935	$	21,913	$	104,557	$	264,405

	Six months ended April 30, 2019								Six months ended April 30, 2018
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Avocados	$	239,080	$	—	$	—	$	239,080	$	236,672	$	—	$	—	$	236,672
Tomatoes		25,907		—		—		25,907		20,047		—		—		20,047
Papayas		4,748		—		—		4,748		5,657		—		—		5,657
Other fresh products		189		—		—		189		104		—		—		104
Prepared avocado products		—		47,883		—		47,883		—		47,038		—		47,038
Salsa		—		1,522		—		1,522		—		1,605		—		1,605
Fresh-cut fruit & veg. and prepared foods		—		—		234,182		234,182		—		—		211,758		211,758
Total gross sales		269,924		49,405		234,182		553,511		262,480		48,643		211,758		522,881
Less sales incentives		(1,069)		(4,293)		(1,126)		(6,488)		(1,092)		(6,049)		(1,095)		(8,236)
Less inter-company eliminations		(1,066)		(1,689)		—		(2,755)		(668)		(1,644)		—		(2,312)
Net sales	$	267,789	$	43,423	$	233,056	$	544,268	$	260,720	$	40,950	$	210,663	$	512,333

Schedule of segment gross margin

	Fresh		Calavo
	products		Foods		RFG		Total
Three months ended April 30, 2019
Net sales before intercompany eliminations	$	151,406	$	22,041	$	113,992	$	287,439
Intercompany eliminations		(471)		(732)		—		(1,203)
Net sales		150,935		21,309		113,992		286,236
Cost of sales before intercompany eliminations		123,583		15,496		111,523		250,602
Intercompany eliminations		(414)		(507)		(282)		(1,203)
Cost of sales		123,169		14,989		111,241		249,399
Gross profit	$	27,766	$	6,320	$	2,751	$	36,837
Three months ended April 30, 2018
Net sales before intercompany eliminations	$	138,189	$	22,704	$	104,557	$	265,450
Intercompany eliminations		(254)		(791)		—		(1,045)
Net sales		137,935		21,913		104,557		264,405
Cost of sales before intercompany eliminations		123,052		14,840		95,589		233,481
Intercompany eliminations		(237)		(479)		(329)		(1,045)
Cost of sales		122,815		14,361		95,260		232,436
Gross profit	$	15,120	$	7,552	$	9,297	$	31,969

	Fresh		Calavo
	products		Foods		RFG		Total
Six months ended April 30, 2019
Net sales before intercompany eliminations	$	268,855	$	45,112	$	233,056	$	547,023
Intercompany eliminations		(1,066)		(1,689)		—		(2,755)
Net sales		267,789		43,423		233,056		544,268
Cost of sales before intercompany eliminations		220,174		31,823		227,352		479,349
Intercompany eliminations		(941)		(1,152)		(662)		(2,755)
Cost of sales		219,233		30,671		226,690		476,594
Gross profit	$	48,556	$	12,752	$	6,366	$	67,674
Six months ended April 30, 2018
Net sales before intercompany eliminations	$	261,388	$	42,594	$	210,663	$	514,645
Intercompany eliminations		(668)		(1,644)		—		(2,312)
Net sales		260,720		40,950		210,663		512,333
Cost of sales before intercompany eliminations		231,955		28,461		195,950		456,366
Intercompany eliminations		(612)		(1,038)		(662)		(2,312)
Cost of sales		231,343		27,423		195,288		454,054
Gross profit	$	29,377	$	13,527	$	15,375	$	58,279

Schedule of long-lived assets by geographic areas

Long-lived assets attributed to geographic areas as of April 30, 2019 and October 31, 2018, are as follows (in thousands):

	United States		Mexico		Consolidated
April 30, 2019	$	93,340	$	32,356	$	125,696
October 31, 2018	$	88,600	$	33,543	$	122,143

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Inventories (Tables)

6 Months Ended

Apr. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following (in thousands):

	April 30,		October 31,
	2019		2018
Fresh fruit	$	25,017	$	12,902
Packing supplies and ingredients		11,630		10,889
Finished prepared foods		12,969		11,253
	$	49,616	$	35,044

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Related party transactions (Tables)

6 Months Ended

Apr. 30, 2019

Related-Party Transactions [Abstract]

Schedule of related party transactions

	Three months ended April 30,
(in thousands)	2019		2018
Rent paid to LIG	$	122	$	139
Rent paid to THNC, LLC	$	198	$	199

	Six months ended April 30,
(in thousands)	2018		2018
Rent paid to LIG	$	261	$	278
Rent paid to THNC, LLC	$	397	$	398

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Other assets (Tables)

6 Months Ended

Apr. 30, 2019

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

Schedule of Other Assets

Other assets consist of the following (in thousands):

	April 30,		October 31,
	2019		2018
Mexican IVA (i.e. value-added) taxes receivable (see note 11)	$	25,404	$	21,859
Infrastructure advance to Agricola Belher		2,600		2,600
Intangibles, net		556		1,109
Other		1,566		1,462
	$	30,126	$	27,030

Schedule of Intangible Assets

Intangible assets consist of the following (in thousands):

		April 30, 2019						October 31, 2018
	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	$	(7,568)	$	72	$	7,640	$	(7,106)	$	534
Trade names	9.2 years		2,760		(2,738)		22		2,760		(2,672)		88
Trade secrets/recipes	9.3 years		630		(443)		187		630		(418)		212
Brand name intangibles	indefinite		275		—		275		275		—		275
Intangibles, net		$	11,305	$	(10,749)	$	556	$	11,305	$	(10,196)	$	1,109

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Stock-Based Compensation (Tables)

6 Months Ended

Apr. 30, 2019

Restricted Stock Activity

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, 2018	85	$	68.82
Vested	(51)	$	70.48
Granted	35	$	77.33
Outstanding at April 30, 2019	69	$	71.74	$	6,624

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, 2018	4	$	19.20
Exercised	(2)	$	19.20
Outstanding at April 30, 2019	2	$	19.20	$	192
Exercisable at April 30, 2019	2	$	19.20	$	192

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, 2018	20	$	40.07
Exercised	(2)	$	23.48
Outstanding at April 30, 2019	18	$	41.91	$	971
Exercisable at April 30, 2019	12	$	25.10	$	849

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Fair Value Measurements (Tables)

6 Months Ended

Apr. 30, 2019

Fair Value Disclosures [Abstract]

Financial Assets Measured on a Recurring Basis

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	38,310		-		-	$	38,310
Total assets at fair value	$	38,310		-		-	$	38,310

(1)    The investment in Limoneira Company consists of marketable securities in the Limoneira Company common stock.  We currently own less than 10% of Limoneira’s outstanding common stock.  These securities are measured at fair value using quoted market prices.  For the three months ended April 30, 2019, we recognized gains of $1.4 million on the consolidated condensed statement of income.  For the six months ended April 30, 2019, we recognized losses of $3.1 million on the consolidated condensed statement of income. In the prior year, unrealized gains and losses were recognized through other comprehensive income. Unrealized investment holding gains arising during the three months ended April 30, 2018 were $3.0 million. Unrealized investment holding losses arising during the six months ended April 30, 2018 were $0.1 million.

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Noncontrolling interest (Tables)

6 Months Ended

Apr. 30, 2019

Noncontrolling Interest [Abstract]

Reconciles Shareholders' Equity Attributable to Noncontrolling Interest

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

	Three months ended April 30,
Avocados de Jalisco noncontrolling interest	2019		2018
Noncontrolling interest, beginning	$	1,742	$	1,867
Noncash transfer of noncontrolling interest		—		—
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(67)		(106)
Noncontrolling interest, ending	$	1,675	$	1,761

	Six months ended April 30,
Avocados de Jalisco noncontrolling interest	2019		2018
Noncontrolling interest, beginning	$	1,748	$	1,016
Noncash transfer of noncontrolling interest		—		1,001
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(73)		(256)
Noncontrolling interest, ending	$	1,675	$	1,761

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Earnings per share (Tables)

6 Months Ended

Apr. 30, 2019

Earnings Per Share [Abstract]

Schedule of basic and diluted net income per share

Basic and diluted net income per share is calculated as follows (data in thousands, except per share data):

		Three months ended April 30,
	2019		2018
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	16,345	$	14,122
Denominator:
Weighted average shares – Basic		17,530		17,481
Effect on dilutive securities – Restricted stock/options		79		99
Weighted average shares – Diluted		17,609		17,580
Net income per share attributable to Calavo Growers, Inc:
Basic	$	0.93	$	0.81
Diluted	$	0.93	$	0.80

	Six months ended April 30,
	2019		2018
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	20,832	$	21,261
Denominator:
Weighted average shares - Basic		17,514		17,472
Effect on dilutive securities – Restricted stock/options		68		89
Weighted average shares - Diluted		17,582		17,561
Net income per share attributable to Calavo Growers, Inc:
Basic	$	1.19	$	1.22
Diluted	$	1.18	$	1.21

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FreshRealm (Tables)

6 Months Ended

Apr. 30, 2019

Variable Interest Entity

Summarized financial information for FreshRealm

The following table shows summarized financial information for FreshRealm (in thousands):

Income Statement:

	Three months ended  April 30,
	2019		2018
Net sales	$	3,701	$	7,490
Gross loss		(1,480)		(2,646)
Selling, general and administrative		(4,525)		(4,228)
Other		(1,366)		(538)
Net loss	$	(7,371)	$	(7,412)
	Six months ended  April 30,
	2019		2018
Net sales	$	12,589	$	12,524
Gross loss		(4,371)		(4,803)
Selling, general and administrative		(10,528)		(8,180)
Other		(3,850)		(817)
Net loss	$	(18,749)	$	(13,800)

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Description of the business (Details) $ / shares in Units, $ in Millions	3 Months Ended	6 Months Ended
	Apr. 30, 2019 USD ($) $ / shares shares	Apr. 30, 2019 USD ($) segment $ / shares shares	Jan. 31, 2019 $ / shares	Nov. 01, 2018 USD ($)	Oct. 31, 2018 $ / shares
Number of reportable segments | segment		3
Limoneira [Member]
Sale of securities | shares		51,271
Loss on sale of investments		$ 0.1
Realized loss		3.0
Realized gain (loss)	$ 1.4	$ (3.1)
Investment share price (in dollars per share) | $ / shares	$ 22.84	$ 22.84	$ 22.03		$ 24.65
Investment shares held (in shares) | shares	1,677,299	1,677,299
ASU 2016-01
Increase to equity				$ 12.1

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Information regarding our operations in different segments - Sales by Product (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Segment reporting information
Net sales	$ 286,236	$ 264,405	$ 544,268	$ 512,333
Fresh products [Member]
Segment reporting information
Net sales	150,935	137,935	267,789	260,720
Calavo Foods [Member]
Segment reporting information
Net sales	21,309	21,913	43,423	40,950
RFG [Member]
Segment reporting information
Net sales	113,992	104,557	233,056	210,663
Operating segments
Segment reporting information
Less sales incentives	(3,020)	(4,134)	(6,488)	(8,236)
Net sales	290,459	269,584	553,511	522,881
Operating segments | Avocados [Member]
Segment reporting information
Net sales	135,086	127,743	239,080	236,672
Operating segments | Tomatoes [Member]
Segment reporting information
Net sales	14,515	7,963	25,907	20,047
Operating segments | Papayas [Member]
Segment reporting information
Net sales	1,809	2,852	4,748	5,657
Operating segments | Other fresh products [Member]
Segment reporting information
Net sales	108	69	189	104
Operating segments | Prepared avocado products [Member]
Segment reporting information
Net sales	23,631	25,235	47,883	47,038
Operating segments | Salsa [Member]
Segment reporting information
Net sales	669	740	1,522	1,605
Operating segments | Fresh-cut fruit & veg. and prepared foods [Member]
Segment reporting information
Net sales	114,641	104,982	234,182	211,758
Operating segments | Fresh products [Member]
Segment reporting information
Less sales incentives	(112)	(438)	(1,069)	(1,092)
Net sales	151,518	138,627	269,924	262,480
Operating segments | Fresh products [Member] | Avocados [Member]
Segment reporting information
Net sales	135,086	127,743	239,080	236,672
Operating segments | Fresh products [Member] | Tomatoes [Member]
Segment reporting information
Net sales	14,515	7,963	25,907	20,047
Operating segments | Fresh products [Member] | Papayas [Member]
Segment reporting information
Net sales	1,809	2,852	4,748	5,657
Operating segments | Fresh products [Member] | Other fresh products [Member]
Segment reporting information
Net sales	108	69	189	104
Operating segments | Calavo Foods [Member]
Segment reporting information
Less sales incentives	(2,259)	(3,271)	(4,293)	(6,049)
Net sales	24,300	25,975	49,405	48,643
Operating segments | Calavo Foods [Member] | Prepared avocado products [Member]
Segment reporting information
Net sales	23,631	25,235	47,883	47,038
Operating segments | Calavo Foods [Member] | Salsa [Member]
Segment reporting information
Net sales	669	740	1,522	1,605
Operating segments | RFG [Member]
Segment reporting information
Less sales incentives	(649)	(425)	(1,126)	(1,095)
Net sales	114,641	104,982	234,182	211,758
Operating segments | RFG [Member] | Fresh-cut fruit & veg. and prepared foods [Member]
Segment reporting information
Net sales	114,641	104,982	234,182	211,758
Intercompany eliminations
Segment reporting information
Net sales	(1,203)	(1,045)	(2,755)	(2,312)
Intercompany eliminations | Fresh products [Member]
Segment reporting information
Net sales	(471)	(254)	(1,066)	(668)
Intercompany eliminations | Calavo Foods [Member]
Segment reporting information
Net sales	$ (732)	$ (791)	$ (1,689)	$ (1,644)

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Information regarding our operations in different segments - Gross Profit (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Segment reporting information
Net sales	$ 286,236	$ 264,405	$ 544,268	$ 512,333
Cost of sales	249,399	232,436	476,594	454,054
Gross profit	36,837	31,969	67,674	58,279
Fresh products [Member]
Segment reporting information
Net sales	150,935	137,935	267,789	260,720
Cost of sales	123,169	122,815	219,233	231,343
Gross profit	27,766	15,120	48,556	29,377
Calavo Foods [Member]
Segment reporting information
Net sales	21,309	21,913	43,423	40,950
Cost of sales	14,989	14,361	30,671	27,423
Gross profit	6,320	7,552	12,752	13,527
RFG [Member]
Segment reporting information
Net sales	113,992	104,557	233,056	210,663
Cost of sales	111,241	95,260	226,690	195,288
Gross profit	2,751	9,297	6,366	15,375
Elimination between Fresh products and RFG [member]
Segment reporting information
Sales and Cost of Sales Eliminated	400	200	900	600
Elimination between Calavo Foods and RFG [member]
Segment reporting information
Sales and Cost of Sales Eliminated	700	800	1,700	1,600
Elimination between Fresh products and Calavo Foods [member]
Segment reporting information
Sales and Cost of Sales Eliminated	100	100	200	100
Operating segments
Segment reporting information
Revenue less sales incentives	287,439	265,450	547,023	514,645
Net sales	290,459	269,584	553,511	522,881
Cost of sales	250,602	233,481	479,349	456,366
Operating segments | Fresh products [Member]
Segment reporting information
Revenue less sales incentives	151,406	138,189	268,855	261,388
Net sales	151,518	138,627	269,924	262,480
Cost of sales	123,583	123,052	220,174	231,955
Operating segments | Calavo Foods [Member]
Segment reporting information
Revenue less sales incentives	22,041	22,704	45,112	42,594
Net sales	24,300	25,975	49,405	48,643
Cost of sales	15,496	14,840	31,823	28,461
Operating segments | RFG [Member]
Segment reporting information
Revenue less sales incentives	113,992	104,557	233,056	210,663
Net sales	114,641	104,982	234,182	211,758
Cost of sales	111,523	95,589	227,352	195,950
Intercompany eliminations
Segment reporting information
Net sales	(1,203)	(1,045)	(2,755)	(2,312)
Cost of sales	(1,203)	(1,045)	(2,755)	(2,312)
Intercompany eliminations | Fresh products [Member]
Segment reporting information
Net sales	(471)	(254)	(1,066)	(668)
Cost of sales	(414)	(237)	(941)	(612)
Intercompany eliminations | Calavo Foods [Member]
Segment reporting information
Net sales	(732)	(791)	(1,689)	(1,644)
Cost of sales	(507)	(479)	(1,152)	(1,038)
Intercompany eliminations | RFG [Member]
Segment reporting information
Cost of sales	$ (282)	$ (329)	$ (662)	$ (662)

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Information regarding our operations in different segments - Long-Lived Assets Attributed to Geographic Areas (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018	Oct. 31, 2018
Segment reporting information
Net sales	$ 286,236	$ 264,405	$ 544,268	$ 512,333
Long-lived assets	125,696		125,696		$ 122,143
United States [Member]
Segment reporting information
Long-lived assets	93,340		93,340		88,600
Mexico [Member]
Segment reporting information
Long-lived assets	32,356		32,356		$ 33,543
Outside United States [Member]
Segment reporting information
Net sales	$ 10,100	$ 10,700	$ 19,200	$ 18,200

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Inventories (Details) - USD ($) $ in Thousands	Apr. 30, 2019	Oct. 31, 2018
Inventory Disclosure [Abstract]
Fresh fruit	$ 25,017	$ 12,902
Packing supplies and ingredients	11,630	10,889
Finished prepared foods	12,969	11,253
Total, Inventories	49,616	35,044
Adjustment for inventory net realizable value	$ 0	$ 0

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Related-Party Transactions (Details) $ in Thousands		1 Months Ended		2 Months Ended	3 Months Ended				6 Months Ended		12 Months Ended	18 Months Ended
	Jul. 31, 2018 USD ($)	Dec. 15, 2018	Jan. 31, 2018 USD ($) director	Jan. 31, 2019	Apr. 30, 2019 USD ($)	Jan. 31, 2019 USD ($)	Oct. 31, 2018 USD ($)	Apr. 30, 2018 USD ($) director	Apr. 30, 2019 USD ($) item director	Apr. 30, 2018 USD ($)	Oct. 31, 2018 USD ($)	Apr. 30, 2019 USD ($)	Dec. 31, 2017 USD ($)	Oct. 31, 2017 USD ($)
Related Party Transaction [Line Items]
Investment in unconsolidated entities					$ 15,370		$ 24,805		$ 15,370		$ 24,805	$ 15,370
Related party advance, noncurrent					2,600		2,600		2,600		2,600	2,600
Additional loan									14,700
Loans to FreshRealm					24,680				24,680			24,680
Prepaid expenses and other current assets					7,878		16,727		7,878		16,727	7,878
Noncash transfer of noncontrolling interest										$ 1,001
FreshRealm [Member]
Related Party Transaction [Line Items]
Investment in unconsolidated entities					10,300		19,900		10,300		19,900	10,300
Loans to FreshRealm					$ 24,700		9,000		$ 24,700		9,000	$ 24,700
Prepaid expenses and other current assets							9,000				9,000
Loan receivable interest rate (as a percent)					10.00%				10.00%			10.00%
Interest receivable					$ 1,000				$ 1,000			$ 1,000
Investment in unconsolidated entities	$ 3,500
Subscription agreements issued to third-party investors	3,500
Number of officers | item									3
Number of board of directors | director									5
Loans to FreshRealm members					200		300		$ 200		$ 300	200
Revenue from related parties					$ 100			$ 100	$ 200	200
FreshRealm [Member] | FreshRealm [Member]
Related Party Transaction [Line Items]
VIE ownership (as a percent)		100.00%		37.00%	37.00%				37.00%		37.00%
FreshRealm [Member] | Chairman and Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Investment in unconsolidated entities													$ 1,500	$ 7,000
FreshRealm [Member] | Non Executive Directors [Member]
Related Party Transaction [Line Items]
Investment in unconsolidated entities			$ 1,800
Investment in unconsolidated entities								$ 1,200
Number of board of directors | director			1					2
FreshRealm [Member] | RFG [Member]
Related Party Transaction [Line Items]
Revenue from related parties					$ 300			$ 2,400	$ 1,900	3,900
FreshRealm [Member] | NMUPA
Related Party Transaction [Line Items]
Additional loan						$ 3,000	9,000
Loan receivable commitment	$ 12,000
FreshRealm [Member] | $7.5 million Note
Related Party Transaction [Line Items]
Additional loan						$ 7,500
FreshRealm [Member] | Unsecured Notes Receivable
Related Party Transaction [Line Items]
Additional loan					4,200
Directors
Related Party Transaction [Line Items]
Purchases from related parties					2,100			1,900	2,100	2,000
Accounts payable to related parties					2,000				2,000			2,000
Limoneira [Member]
Related Party Transaction [Line Items]
Dividend income from Limoneira									100	100		$ 200
Rent paid					$ 100			100	$ 100	100
Limoneira [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Non-equity method investment ownership (as a percent)					10.00%				10.00%			10.00%
TroyGould PC | Maximum [Member]
Related Party Transaction [Line Items]
Legal fees					$ 100			100	$ 200	100
Don Memo
Related Party Transaction [Line Items]
Purchases from related parties					200				5,900	3,800	$ 100
Investment in unconsolidated entities					$ 5,000		5,200		$ 5,000		5,200	$ 5,000
Ownership interest					50.00%				50.00%			50.00%
Advances to supplier					$ 2,800		2,500		$ 2,800		2,500	$ 2,800
Agricola Belher [Member]
Related Party Transaction [Line Items]
Purchases from related parties					12,400			6,700	17,600	12,600
Advances to supplier					4,000		4,000		4,000		4,000	4,000
Related party advance					3,400		3,400		3,400		3,400	3,400
Related party advance, current					800		800		800		800	800
Related party advance, noncurrent					2,600		2,600		2,600		2,600	2,600
Avocados de Jalisco
Related Party Transaction [Line Items]
Purchases from related parties					1,000				2,000	200
Advances to supplier					$ 100		$ 100		$ 100		$ 100	$ 100
Noncash transfer of noncontrolling interest			$ 1,000							1,001
Avocados de Jalisco | Avocados de Jalisco
Related Party Transaction [Line Items]
Subsidiary ownership (as a percent)					83.00%				83.00%			83.00%
LIG [Member]
Related Party Transaction [Line Items]
Rent paid					$ 122			139	$ 261	278
THNC [Member]
Related Party Transaction [Line Items]
Rent paid					$ 198			$ 199	$ 397	$ 398

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Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Thousands	Apr. 30, 2019	Oct. 31, 2018
Statement of Financial Position [Abstract]
Mexican IVA (i.e. value-added) taxes receivable	$ 25,404	$ 21,859
Infrastructure advance to Agricola Belher	2,600	2,600
Intangibles, net	556	1,109
Other	1,566	1,462
Other assets	$ 30,126	$ 27,030

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Other Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2019	Oct. 31, 2018
Finite-Lived Intangible Assets
Accum. Amortization	$ (10,749)	$ (10,196)
Finite and indefinite lived intangible assets gross	11,305	11,305
Intangibles, net	556	1,109
Brand name intangibles [Member]
Finite-Lived Intangible Assets
Gross carrying value and net book value	$ 275	275
Customer list/relationships [Member]
Finite-Lived Intangible Assets
Weighted-Average Useful Life	8 years
Gross Carrying Value	$ 7,640	7,640
Accum. Amortization	(7,568)	(7,106)
Net Book Value	$ 72	534
Trade names [Member]
Finite-Lived Intangible Assets
Weighted-Average Useful Life	9 years 2 months 12 days
Gross Carrying Value	$ 2,760	2,760
Accum. Amortization	(2,738)	(2,672)
Net Book Value	$ 22	88
Trade secrets/recipes [Member]
Finite-Lived Intangible Assets
Weighted-Average Useful Life	9 years 3 months 18 days
Gross Carrying Value	$ 630	630
Accum. Amortization	(443)	(418)
Net Book Value	$ 187	$ 212

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Other Assets - Amortization (Details) $ in Millions	Apr. 30, 2019 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense for remainder of fiscal 2019	$ 0.1
Amortization expense for 2020	0.1
Amortization expense for 2021	0.1
Amortization expense for 2022	0.1
Amortization expense for the year 2023	$ 0.1

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Stock-Based Compensation - Narrative (Details) $ / shares in Units, $ in Millions			3 Months Ended		6 Months Ended
	Jan. 02, 2019 director $ / shares shares	Dec. 14, 2018 $ / shares shares	Apr. 30, 2019 USD ($)	Apr. 30, 2018 USD ($)	Apr. 30, 2019 USD ($) shares	Apr. 30, 2018 USD ($)	Apr. 30, 2011 shares
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted					35,000
Recognized stock-based compensation expense | $			$ 0.9	$ 0.9	$ 1.8	$ 1.8
Unrecognized stock based compensation expenses | $			3.8		3.8
Restricted Stock [Member] | Non-employee directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of non-employee directors | director	12
Restricted shares granted per non-employee	1,750
Restricted shares granted	21,000
Share price | $ / shares	$ 71.56
Recognized stock-based compensation expense | $			0.5		0.6
Restricted Stock [Member] | Executive officers [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted		14,522
Share price | $ / shares		$ 85.67
Recognized stock-based compensation expense | $			$ 0.2		$ 0.2
Annual incremental vesting percentage		33.00%
Stock Options [Member] | Minimum [Member]
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 [Member]
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 plan							1,500,000

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Stock-Based Compensation - Restricted Stock Activity (Details) - Restricted Stock [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Apr. 30, 2019	Oct. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	85
Vested, Number of Shares	(51)
Granted, Number of Shares	35
Outstanding, Number of Shares, Ending Balance	69
Outstanding, Weighted-Average Grant Price	$ 71.74	$ 68.82
Vested, Weighted-Average Grant Price	70.48
Granted, Weighted-Average Grant Price	$ 77.33
Aggregate Intrinsic Value	$ 6,624

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Stock-Based Compensation - Stock Option Activity (Details) - Stock Options [Member] $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Apr. 30, 2019 USD ($) $ / shares shares	Oct. 31, 2018 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	20
Exercised, Number of Shares	(2)
Outstanding, Weighted-Average Exercise Price | $ / shares		$ 40.07
Exercised, Weighted-Average Exercise Price | $ / shares	$ 23.48
2005 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	4
Exercised, Number of Shares	(2)
Outstanding, Number of Shares, Ending Balance	2
Exercisable, Number of Shares	2
Outstanding, Weighted-Average Exercise Price | $ / shares	$ 19.20	$ 19.20
Exercised, Weighted-Average Exercise Price | $ / shares	19.20
Exercisable, Weighted-Average Exercise Price | $ / shares	$ 19.20
Outstanding, Aggregate Intrinsic Value | $	$ 192
Exercisable, Aggregate Intrinsic Value | $	$ 192
Outstanding stock options, weighted-average remaining contractual term	1 year 3 months 18 days
Exercisable stock options, weighted-average remaining contractual term	1 year 3 months 18 days
2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Ending Balance	18
Exercisable, Number of Shares	12
Outstanding, Weighted-Average Exercise Price | $ / shares	$ 41.91
Exercisable, Weighted-Average Exercise Price | $ / shares	$ 25.10
Outstanding, Aggregate Intrinsic Value | $	$ 971
Exercisable, Aggregate Intrinsic Value | $	$ 849
Outstanding stock options, weighted-average remaining contractual term	4 years 2 months 12 days
Exercisable stock options, weighted-average remaining contractual term	4 years 2 months 12 days

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Other Events (Details) $ / shares in Units, $ in Thousands, $ in Millions				6 Months Ended
	Apr. 29, 2019 MXN ($)	Dec. 07, 2018 USD ($) $ / shares	Jul. 12, 2018 MXN ($)	Apr. 30, 2019 USD ($)	Apr. 30, 2018 USD ($)
Dividend declared per share | $ / shares		$ 1.00
Dividend amount paid to shareholders		$ 17,600		$ 17,568	$ 16,657
Mexican Tax Authority [Member]
Employee profit sharing liability			$ 118
Tax Year 2011 [Member] | Mexican Tax Authority [Member]
Final tax assessment related to Income Tax, Flat Rate Business Tax, and Value Added Tax	$ 2,190
Tax Year 2013 [Member] | Mexican Tax Authority [Member]
Final tax assessment related to Income Tax, Flat Rate Business Tax, and Value Added Tax			$ 2,620

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Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Limoneira [Member]
Assets at Fair Value:
Realized gain (loss)	$ 1,400		$ (3,100)
Unrealized gains (losses) recorded		$ 3,000		$ (100)
Limoneira [Member] | Maximum [Member]
Assets at Fair Value:
Non-equity method investment ownership (as a percent)	10.00%		10.00%
Fair Value, Measurements, Recurring [Member]
Assets at Fair Value:
Total assets at fair value	$ 38,310		$ 38,310
Fair Value, Measurements, Recurring [Member] | Limoneira [Member]
Assets at Fair Value:
Investment in Limoneira Company	38,310		38,310
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets at Fair Value:
Total assets at fair value	38,310		38,310
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Limoneira [Member]
Assets at Fair Value:
Investment in Limoneira Company	$ 38,310		$ 38,310

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Noncontrolling Interest (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2018	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning				$ 1,748
Noncash transfer of noncontrolling interest					$ 1,001
Net loss attributable to noncontrolling interest of Avocados de Jalisco		$ (67)	$ (106)	(73)	(256)
Noncontrolling interest, ending		1,675		1,675
Avocados de Jalisco
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning		1,742	1,867	1,748	1,016
Noncash transfer of noncontrolling interest	$ 1,000				1,001
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(67)	(106)	(73)	(256)
Noncontrolling interest, ending	$ 1,867	$ 1,675	$ 1,761	$ 1,675	$ 1,761

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Apr. 30, 2019	Jan. 31, 2019	Apr. 30, 2018	Jan. 31, 2018	Apr. 30, 2019	Apr. 30, 2018
Earnings Per Share [Abstract]
Net income attributable to Calavo Growers, Inc.	$ 16,345	$ 4,487	$ 14,122	$ 7,139	$ 20,832	$ 21,261
Weighted average shares - Basic	17,530		17,481		17,514	17,472
Effect on dilutive securities - Restricted stock/options	79		99		68	89
Weighted average shares - Diluted	17,609		17,580		17,582	17,561
Basic	$ 0.93		$ 0.81		$ 1.19	$ 1.22
Diluted	$ 0.93		$ 0.80		$ 1.18	$ 1.21

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Mexican IVA taxes receivable (Details) - USD ($) $ in Millions	Apr. 30, 2019	Oct. 31, 2018
Value Added Tax Receivable [Abstract]
IVA receivables balance	$ 25.4	$ 21.9

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Income Taxes - Narrative (Details) $ in Millions	3 Months Ended
	Jan. 31, 2018 USD ($)
Income Tax Disclosure [Abstract]
Non-cash charges related to the revaluation of our net deferred tax assets and the transition tax on the deemed repatriation of foreign earnings	$ 1.7
Revaluation of net deferred tax assets	1.4
Transition tax on deemed repatriation of foreign earnings	$ 0.3

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FreshRealm (Details) - USD ($) $ in Thousands	1 Months Ended	2 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	Dec. 15, 2018	Jan. 31, 2019	Apr. 30, 2019	Jan. 31, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018	Oct. 31, 2018
Variable Interest Entity [Line Items]
Investment in unconsolidated entities			$ 15,370			$ 15,370		$ 24,805
Income (loss) from unconsolidated entities						(9,435)	$ 278
Loans to FreshRealm			24,680			24,680
FreshRealm [Member]
Variable Interest Entity [Line Items]
Investment in unconsolidated entities			10,300			10,300		19,900
Net loss			(7,371)		$ (7,412)	(18,749)	$ (13,800)
Income (loss) from unconsolidated entities	$ (4,200)	$ (2,700)	(2,700)	$ (6,900)
Loans to FreshRealm			$ 24,700			$ 24,700		$ 9,000
FreshRealm [Member] | FreshRealm [Member]
Variable Interest Entity [Line Items]
VIE ownership (as a percent)	100.00%	37.00%	37.00%			37.00%		37.00%

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FreshRealm - Summarized financial information (Details) - FreshRealm [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Income Statement:
Net sales	$ 3,701	$ 7,490	$ 12,589	$ 12,524
Gross loss	(1,480)	(2,646)	(4,371)	(4,803)
Selling, general and administrative	(4,525)	(4,228)	(10,528)	(8,180)
Other	(1,366)	(538)	(3,850)	(817)
Net loss	$ (7,371)	$ (7,412)	$ (18,749)	$ (13,800)

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Revenue recognition (Details)	6 Months Ended
	Apr. 30, 2019
Revenue recognition
Revenue, Practical Expedient, Initial Application and Transition, Completed Contract, Use of Transaction Price at Contract Completion Date [true false]	true
Revenue, Practical Expedient, Incremental Cost of Obtaining Contract [true false]	true

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Sale of Temecula, California Packinghouse (Details) $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Apr. 30, 2019 USD ($)	Apr. 30, 2019 USD ($)	Apr. 30, 2019 USD ($)
Disposal
Recorded gain on sale of business		$ 1,927	$ 1,927
Disposal, by Sale | Temecula, California Packinghouse
Disposal
Consideration for sale	$ 7,100	7,100	7,100
Net consideration for sale	6,700	6,700	6,700
Sales commission	$ 400	$ 400	$ 400
Portion retained by the entity (as a percent)	33.00%	33.00%	33.00%
Gain on sale of business	$ 6,400
Recorded gain on sale of business	1,900
Deferred gain on sale of business	$ 4,500	$ 4,500	$ 4,500
Sale leaseback lease term	15
Capital lease asset, gross	$ 3,300	3,300	3,300
Capital lease obligation	$ 3,300	$ 3,300	$ 3,300

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Subsequent Event (Details) - Subsequent Event $ in Millions	1 Months Ended
	Jun. 06, 2019 USD ($)
Building and Equipment Lease [Member]
Term of lease	10 years
Fresh Processing Facility [Member]
Annual rent	$ 0.9
Equipment [Member]
Annual rent	$ 0.6