0001558370-20-002302.txt : 20200310 0001558370-20-002302.hdr.sgml : 20200310 20200310130341 ACCESSION NUMBER: 0001558370-20-002302 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 71 CONFORMED PERIOD OF REPORT: 20200131 FILED AS OF DATE: 20200310 DATE AS OF CHANGE: 20200310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALAVO GROWERS INC CENTRAL INDEX KEY: 0001133470 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE SERVICES [0700] IRS NUMBER: 330945304 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-33385 FILM NUMBER: 20700771 BUSINESS ADDRESS: STREET 1: 1141A CUMMINGS ROAD CITY: SANTA PAULA STATE: CA ZIP: 93060 BUSINESS PHONE: 805-525-1245 MAIL ADDRESS: STREET 1: 1141A CUMMINGS ROAD CITY: SANTA PAULA STATE: CA ZIP: 93060 10-Q 1 cvgw-20200131x10q390949.htm 10-Q
17595000P2Y0.33P7M6D17614000P1Y0001133470--10-312020Q1falseus-gaap:OperatingLeaseRightOfUseAssetus-gaap:PropertyPlantAndEquipmentNetus-gaap:OperatingLeaseLiabilityCurrentus-gaap:LongTermDebtAndCapitalLeaseObligationsCurrentus-gaap:OperatingLeaseLiabilityNoncurrentus-gaap:LongTermDebtAndCapitalLeaseObligations1000000001133470cvgw:FreshRealmMember2018-11-012019-10-310001133470us-gaap:MexicanTaxAuthorityMemberus-gaap:TaxYear2013Member2019-11-012020-01-310001133470us-gaap:MexicanTaxAuthorityMemberus-gaap:TaxYear2011Member2019-11-012020-01-310001133470us-gaap:MexicanTaxAuthorityMemberus-gaap:TaxYear2011Member2019-04-012019-04-300001133470us-gaap:MexicanTaxAuthorityMemberus-gaap:TaxYear2013Member2018-07-012018-07-310001133470us-gaap:CommonStockMember2019-11-012020-01-310001133470us-gaap:CommonStockMember2018-11-012019-01-310001133470us-gaap:RetainedEarningsMember2020-01-310001133470us-gaap:NoncontrollingInterestMember2020-01-310001133470us-gaap:AdditionalPaidInCapitalMember2020-01-310001133470us-gaap:RetainedEarningsMember2019-10-310001133470us-gaap:NoncontrollingInterestMember2019-10-310001133470us-gaap:AdditionalPaidInCapitalMember2019-10-310001133470us-gaap:RetainedEarningsMember2019-01-310001133470us-gaap:NoncontrollingInterestMember2019-01-310001133470us-gaap:AdditionalPaidInCapitalMember2019-01-310001133470us-gaap:RetainedEarningsMember2018-10-310001133470us-gaap:NoncontrollingInterestMember2018-10-310001133470us-gaap:AdditionalPaidInCapitalMember2018-10-310001133470us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-10-310001133470us-gaap:CommonStockMember2020-01-310001133470us-gaap:CommonStockMember2019-10-310001133470us-gaap:CommonStockMember2019-01-310001133470us-gaap:CommonStockMember2018-10-310001133470us-gaap:EmployeeStockOptionMembercvgw:TwoThousandFiveStockIncentivePlanMember2019-10-310001133470us-gaap:EmployeeStockOptionMembercvgw:TwoThousandAndElevenManagementIncentivePlanMember2019-10-310001133470us-gaap:EmployeeStockOptionMembercvgw:TwoThousandFiveStockIncentivePlanMember2019-11-012020-01-310001133470us-gaap:EmployeeStockOptionMembercvgw:TwoThousandAndElevenManagementIncentivePlanMember2019-11-012020-01-310001133470us-gaap:EmployeeStockOptionMembercvgw:TwoThousandFiveStockIncentivePlanMember2020-01-310001133470us-gaap:EmployeeStockOptionMembercvgw:TwoThousandAndElevenManagementIncentivePlanMember2020-01-310001133470cvgw:TwoThousandAndElevenManagementIncentivePlanMember2011-04-300001133470us-gaap:RestrictedStockMember2019-10-310001133470srt:ExecutiveOfficerMemberus-gaap:RestrictedStockMember2019-12-182019-12-180001133470srt:MinimumMemberus-gaap:EmployeeStockOptionMember2019-11-012020-01-310001133470srt:MaximumMemberus-gaap:EmployeeStockOptionMember2019-11-012020-01-310001133470cvgw:TwoThousandFiveStockIncentivePlanMember2019-11-012020-01-310001133470cvgw:TwoThousandAndElevenManagementIncentivePlanMember2019-11-012020-01-310001133470cvgw:RfgMembercvgw:FreshRealmMember2019-11-012020-01-310001133470cvgw:RfgMembercvgw:FreshRealmMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:ValueAddedFruitsAndVegetablesAndPreparedFoodsMembercvgw:RfgMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:TomatoesMembercvgw:FreshProductsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:SalsaMembercvgw:CalavoFoodsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PreparedAvocadoProductMembercvgw:CalavoFoodsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PapayasMembercvgw:FreshProductsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:OtherFreshProductsMembercvgw:FreshProductsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:AvocadosMembercvgw:FreshProductsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:ValueAddedFruitsAndVegetablesAndPreparedFoodsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:TomatoesMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:SalsaMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PreparedAvocadoProductMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PapayasMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:OtherFreshProductsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:AvocadosMember2019-11-012020-01-310001133470us-gaap:IntersegmentEliminationMembercvgw:FreshProductsMember2019-11-012020-01-310001133470us-gaap:IntersegmentEliminationMembercvgw:CalavoFoodsMember2019-11-012020-01-310001133470us-gaap:NonUsMember2019-11-012020-01-310001133470cvgw:RfgMember2019-11-012020-01-310001133470cvgw:FreshProductsMember2019-11-012020-01-310001133470cvgw:CalavoFoodsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:ValueAddedFruitsAndVegetablesAndPreparedFoodsMembercvgw:RfgMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:TomatoesMembercvgw:FreshProductsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:SalsaMembercvgw:CalavoFoodsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PreparedAvocadoProductMembercvgw:CalavoFoodsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PapayasMembercvgw:FreshProductsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:OtherFreshProductsMembercvgw:FreshProductsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:AvocadosMembercvgw:FreshProductsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:ValueAddedFruitsAndVegetablesAndPreparedFoodsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:TomatoesMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:SalsaMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PreparedAvocadoProductMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:PapayasMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:OtherFreshProductsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:AvocadosMember2018-11-012019-01-310001133470us-gaap:IntersegmentEliminationMembercvgw:FreshProductsMember2018-11-012019-01-310001133470us-gaap:IntersegmentEliminationMembercvgw:CalavoFoodsMember2018-11-012019-01-310001133470us-gaap:NonUsMember2018-11-012019-01-310001133470cvgw:RfgMember2018-11-012019-01-310001133470cvgw:FreshProductsMember2018-11-012019-01-310001133470cvgw:CalavoFoodsMember2018-11-012019-01-310001133470srt:DirectorMember2019-11-012020-01-310001133470cvgw:DonMemoMember2019-11-012020-01-310001133470cvgw:BelherMember2019-11-012020-01-310001133470srt:DirectorMember2018-11-012019-01-310001133470cvgw:DonMemoMember2018-11-012019-01-310001133470cvgw:BelherMember2018-11-012019-01-310001133470country:US2020-01-310001133470country:MX2020-01-310001133470country:US2019-10-310001133470country:MX2019-10-310001133470cvgw:FreshRealmMember2020-02-012020-02-290001133470cvgw:FreshRealmMember2019-08-012019-10-310001133470cvgw:FreshRealmMember2019-05-012019-07-310001133470cvgw:FreshRealmMember2019-02-012019-04-300001133470cvgw:NoteReceivable7.5MillionMembercvgw:FreshRealmMember2018-11-012019-01-310001133470cvgw:NoteAndMembershipUnitPurchaseAgreementMembercvgw:FreshRealmMember2018-11-012019-01-310001133470cvgw:NoteAndMembershipUnitPurchaseAgreementMembercvgw:FreshRealmMember2018-08-012018-10-310001133470cvgw:ThncMember2019-11-012020-01-310001133470cvgw:LigMember2019-11-012020-01-310001133470cvgw:AvocadosDeJaliscoMember2019-11-012020-01-310001133470cvgw:AvocadosDeJaliscoMember2018-11-012019-01-310001133470cvgw:AvocadosDeJaliscoMembercvgw:AvocadosDeJaliscoMember2020-01-310001133470cvgw:AvocadosDeJaliscoMember2020-01-310001133470cvgw:AvocadosDeJaliscoMember2019-10-310001133470cvgw:AvocadosDeJaliscoMember2019-01-310001133470cvgw:AvocadosDeJaliscoMember2018-10-310001133470cvgw:NoteAndMembershipUnitPurchaseAgreementMembercvgw:FreshRealmMember2018-07-312018-07-310001133470cvgw:TroygouldPcMember2019-11-012020-01-3100011334702018-11-012019-10-310001133470cvgw:ThncMember2018-11-012019-01-310001133470cvgw:LigMember2018-11-012019-01-310001133470cvgw:LimoneiraMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-01-310001133470cvgw:LimoneiraMemberus-gaap:FairValueMeasurementsRecurringMember2020-01-310001133470us-gaap:TrademarksMember2020-01-310001133470us-gaap:TrademarksMember2019-10-310001133470us-gaap:MexicanTaxAuthorityMember2020-01-310001133470us-gaap:MexicanTaxAuthorityMember2018-07-3100011334702018-12-162019-01-310001133470us-gaap:TradeSecretsMember2019-11-012020-01-310001133470srt:MaximumMember2020-01-310001133470us-gaap:TradeSecretsMember2020-01-310001133470us-gaap:TradeNamesMember2020-01-310001133470us-gaap:CustomerRelationshipsMember2020-01-310001133470us-gaap:TradeSecretsMember2019-10-310001133470us-gaap:TradeNamesMember2019-10-310001133470us-gaap:CustomerRelationshipsMember2019-10-310001133470cvgw:LimoneiraMember2019-11-012020-01-310001133470cvgw:LimoneiraMember2018-11-012019-01-310001133470cvgw:FreshRealmMember2018-11-012018-12-150001133470cvgw:NonExecutiveDirectorsMembercvgw:FreshRealmMember2019-10-310001133470cvgw:ChairmanAndChiefExecutiveOfficerMembercvgw:FreshRealmMember2019-10-310001133470cvgw:NonExecutiveDirectorsMembercvgw:FreshRealmMember2018-01-310001133470cvgw:ChairmanAndChiefExecutiveOfficerMembercvgw:FreshRealmMember2017-12-310001133470cvgw:ChairmanAndChiefExecutiveOfficerMembercvgw:FreshRealmMember2017-10-310001133470cvgw:FreshRealmMember2020-02-030001133470us-gaap:RestrictedStockMember2020-01-310001133470srt:RestatementAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2019-11-010001133470cvgw:FreshRealmMember2020-02-032020-02-030001133470us-gaap:RetainedEarningsMember2019-11-012020-01-310001133470srt:RestatementAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2019-11-012019-11-0100011334702019-12-062019-12-0600011334702019-01-3100011334702018-10-310001133470us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-01-310001133470us-gaap:FairValueMeasurementsRecurringMember2020-01-310001133470srt:ExecutiveOfficerMemberus-gaap:RestrictedStockMember2019-11-012020-01-310001133470cvgw:NonEmployeeDirectorsMemberus-gaap:RestrictedStockMember2019-11-012020-01-310001133470us-gaap:RestrictedStockMember2019-11-012020-01-310001133470us-gaap:RestrictedStockMember2018-11-012019-01-310001133470cvgw:DonMemoMember2020-01-310001133470cvgw:DonMemoMember2019-10-310001133470us-gaap:AdditionalPaidInCapitalMember2019-11-012020-01-310001133470us-gaap:AdditionalPaidInCapitalMember2018-11-012019-01-310001133470cvgw:BelherMember2020-01-310001133470cvgw:BelherMember2019-10-310001133470srt:DirectorMember2020-01-310001133470us-gaap:RetainedEarningsMember2018-11-012019-01-310001133470us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMember2018-11-012019-01-310001133470cvgw:IntersegmentElimination3Member2019-11-012020-01-310001133470cvgw:IntersegmentElimination2Member2019-11-012020-01-310001133470cvgw:IntersegmentElimination1Member2019-11-012020-01-310001133470cvgw:IntersegmentElimination3Member2018-11-012019-01-310001133470cvgw:IntersegmentElimination2Member2018-11-012019-01-310001133470cvgw:IntersegmentElimination1Member2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:RfgMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:FreshProductsMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:CalavoFoodsMember2019-11-012020-01-310001133470us-gaap:IntersegmentEliminationMember2019-11-012020-01-310001133470us-gaap:OperatingSegmentsMembercvgw:RfgMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:FreshProductsMember2018-11-012019-01-310001133470us-gaap:OperatingSegmentsMembercvgw:CalavoFoodsMember2018-11-012019-01-310001133470us-gaap:IntersegmentEliminationMember2018-11-012019-01-310001133470cvgw:NonEmployeeDirectorsMemberus-gaap:RestrictedStockMember2020-01-022020-01-020001133470cvgw:NonExecutiveDirectorsMembercvgw:FreshRealmMember2019-10-012019-10-310001133470cvgw:NonExecutiveDirectorsMembercvgw:FreshRealmMember2018-02-012018-04-300001133470cvgw:NonExecutiveDirectorsMembercvgw:FreshRealmMember2018-01-012018-01-310001133470cvgw:FreshRealmMember2020-01-310001133470cvgw:FreshRealmMember2019-11-250001133470cvgw:FreshRealmMember2019-10-310001133470srt:MaximumMembercvgw:LimoneiraMember2020-01-310001133470us-gaap:NoncontrollingInterestMember2019-11-012020-01-3100011334702019-11-012020-01-310001133470us-gaap:NoncontrollingInterestMember2018-11-012019-01-3100011334702018-11-012019-01-3100011334702020-01-3100011334702019-10-310001133470cvgw:FreshRealmMember2019-11-012020-01-310001133470cvgw:FreshRealmMember2018-11-012019-01-31iso4217:USDxbrli:purecvgw:directorcvgw:itemxbrli:sharesiso4217:USDxbrli:sharesiso4217:MXNcvgw:segment

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 January 31, 2020

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 January 31, 2020 was 17,614,233

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 debt 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); any risks associated with receivables from and/or equity investments in unconsolidated entities; system security risk and cyber attacks 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); any risks associated with receivables from and/or equity investments in unconsolidated entities; system security risk and cyber attacks; 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, 2019, 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.

2

CALAVO GROWERS, INC.

INDEX

PAGE

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

Consolidated Condensed Balance Sheets – January 31, 2020 and October 31, 2019

4

Consolidated Condensed Statements of Operations – Three Months Ended January 31, 2020 and 2019

5

Consolidated Condensed Statements of Cash Flows – Three Months Ended January 31, 2020 and 2019

6

Consolidated Statements of Shareholders’ Equity

7

Notes to Consolidated Condensed Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 6.

Exhibits

32

Signatures

34

3

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share amounts)

January 31, 

October 31, 

2020

2019

Assets

    

    

    

    

Current assets:

Cash and cash equivalents

$

4,937

$

7,973

Accounts receivable, net of allowances of $3,920 (2020) $3,366 (2019)

 

78,654

 

63,423

Inventories, net

 

42,237

 

36,889

Prepaid expenses and other current assets

 

10,826

 

9,027

Advances to suppliers

 

3,872

 

7,338

Income taxes receivable

 

4,004

 

2,865

Total current assets

 

144,530

 

127,515

Property, plant, and equipment, net

 

131,209

 

132,098

Operating lease right-of-use assets

 

64,159

 

Investment in Limoneira Company

 

32,741

 

31,734

Investments in unconsolidated entities

 

7,694

 

10,722

Deferred income taxes

 

3,447

 

3,447

Goodwill

 

18,262

 

18,262

Notes receivable from FreshRealm

 

36,112

 

35,241

Other assets

 

33,244

 

31,341

$

471,398

$

390,360

Liabilities and shareholders' equity

Current liabilities:

Payable to growers

$

21,052

$

13,463

Trade accounts payable

 

21,880

 

17,421

Accrued expenses

 

36,074

 

39,629

Short-term borrowings

 

27,500

 

Dividend payable

 

 

19,354

Current portion of operating leases

 

5,881

 

Current portion of long-term obligations and finance leases

 

745

 

762

Total current liabilities

 

113,132

 

90,629

Long-term liabilities:

Long-term operating leases, less current portion

 

62,253

 

Long-term obligations and finance leases, less current portion

 

5,453

 

5,412

Deferred rent

3,681

Other long-term liabilities

 

3,549

 

4,769

Total long-term liabilities

 

71,255

 

13,862

Commitments and contingencies

Shareholders' equity:

Common stock ($0.001 par value, 100,000 shares authorized; 17,614 (2020) and 17,595 (2019) shares issued and outstanding)

 

18

 

18

Additional paid-in capital

 

162,584

 

161,606

Noncontrolling interest

 

1,625

 

1,688

Retained earnings

 

122,784

 

122,557

Total shareholders' equity

 

287,011

 

285,869

$

471,398

$

390,360

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

4

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

Three months ended

January 31, 

2020

2019

Net sales

    

$

273,348

    

$

258,032

Cost of sales

 

257,540

 

227,195

Gross profit

 

15,808

 

30,837

Selling, general and administrative

 

16,298

 

14,276

Gain on sale of Temecula packinghouse

 

54

 

Operating income (loss)

 

(436)

16,561

Interest expense

 

(187)

 

(254)

Other income, net

 

994

 

510

Unrealized and realized net gain (loss) on Limoneira shares

 

1,006

 

(4,505)

Income before provision (benefit) for income taxes and loss from unconsolidated entities

 

1,377

 

12,312

Provision (benefit) for income taxes

 

(650)

 

1,533

Net loss from unconsolidated entities

 

(3,028)

 

(6,298)

Net income (loss)  

 

(1,001)

 

4,481

Less: Net loss attributable to noncontrolling interest

 

63

 

6

Net income (loss) attributable to Calavo Growers, Inc.

$

(938)

$

4,487

Calavo Growers, Inc.’s net income (loss) per share:

Basic

$

(0.05)

$

0.26

Diluted

$

(0.05)

$

0.26

Number of shares used in per share computation:

Basic

 

17,536

 

17,500

Diluted

 

17,536

 

17,558

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

5

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three months ended January 31, 

2020

2019

Cash Flows from Operating Activities:

    

    

    

    

Net income (loss)

$

(1,001)

$

4,481

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

 

3,567

 

3,392

Non-cash operating lease expense

65

Net loss from unconsolidated entities

 

3,028

 

6,298

Unrealized and realized net gain (loss) on Limoneira shares

 

(1,006)

 

4,505

Interest income on notes to FreshRealm

 

(871)

 

Stock-based compensation expense

 

931

 

966

Gain on sale of Temecula packinghouse

 

(54)

 

Effect on cash of changes in operating assets and liabilities:

Accounts receivable, net

 

(15,231)

 

(7,181)

Inventories, net

 

(5,348)

 

(3,419)

Prepaid expenses and other current assets

 

(1,799)

 

(418)

Advances to suppliers

 

3,466

 

1,223

Income taxes receivable/payable

 

(1,139)

 

1,225

Other assets

 

(1,924)

 

(2,735)

Payable to growers

 

7,589

 

(3,753)

Deferred rent

217

Trade accounts payable, accrued expenses and other long-term liabilities

 

3,206

 

5,570

Net cash provided by (used in) operating activities

 

(6,521)

 

10,371

Cash Flows from Investing Activities:

Acquisitions of and deposits on property, plant, and equipment

 

(3,331)

 

(3,867)

Proceeds received for repayment of San Rafael note

 

 

112

Proceeds received from Limoneira stock sales

 

 

1,153

Notes receivables advanced to FreshRealm

(10,500)

Net cash used in investing activities

 

(3,331)

 

(13,102)

Cash Flows from Financing Activities:

Payment of dividend to shareholders

 

(19,354)

 

(17,568)

Proceeds from revolving credit facility

 

53,500

 

89,500

Payments on revolving credit facility

 

(26,000)

 

(65,500)

Payments of minimum withholding taxes on net share settlement of equity awards

(1,179)

(1,008)

Payments on long-term obligations and finance leases

 

(198)

 

(49)

Proceeds from stock option exercises

 

47

 

47

Net cash used in financing activities

 

6,816

 

5,422

Net increase (decrease) in cash and cash equivalents

 

(3,036)

 

2,691

Cash and cash equivalents, beginning of period

 

7,973

 

1,520

Cash and cash equivalents, end of period

$

4,937

$

4,211

Noncash Investing and Financing Activities:

Right of use assets obtained in exchange for new financing lease obligations

$

390

$

Property, plant, and equipment included in trade accounts payable and accrued expenses

$

935

$

573

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

6

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED 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, 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

    

    

    

    

Accumulated

    

    

    

 

Additional

Other

 

Common Stock

Paid-in

Comprehensive

Retained

Noncontrolling

 

Shares

Amount

Capital

Income

Earnings

Interest

Total

Balance, October 31, 2019

17,595

 

18

 

161,606

 

 

122,557

 

1,688

 

285,869

Cumulative effect adjustment on ASC 842 related to leases

 

 

 

 

1,165

 

 

1,165

Exercise of stock options and income tax benefit

2

 

 

47

 

 

 

 

47

Stock compensation expense

 

 

931

 

 

 

 

931

Restricted stock issued

17

 

 

 

 

 

 

Avocados de Jalisco noncontrolling interest contribution

 

 

 

 

 

(63)

 

(63)

Net loss attributable to Calavo Growers, Inc.

 

 

 

 

(938)

 

 

(938)

Balance, January 31, 2020

17,614

 

18

 

162,584

 

 

122,784

 

1,625

 

287,011

See accompanying notes to consolidated financial statements.

7

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, 2019.

Recently Adopted Accounting Pronouncements

In June 2018, the FASB issued an ASU, Improvements to Nonemployee Share-Based Payment Accounting. The FASB is issuing 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 was effective for us beginning the first day of our 2020 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated 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 was effective for us beginning the first day of our 2020 fiscal year. The adoption of the amendment did not have an impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, and has subsequently issued several supplemental and/or clarifying ASU's (collectively, "Topic 842"), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases 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 lease expense on a straight-line basis.  See Note 14.

8

Recently Issued Accounting Standards

In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The new guidance is effective for fiscal years beginning after December 15, 2019. 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 September 2018, the FASB issued an 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 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance, ASU 2018-19 in November 2018 and ASU 2019-05 in May 2019 including codification improvements to Topic 326 in ASU 2019-04. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. ASU 2019-05 provides entities that have certain instruments with an option to irrevocably elect the fair value option. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. This ASU will be effective for us beginning the first day of our 2021 fiscal year. Early adoption is permitted. 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.

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

9

segment represents operations related to the manufacturing and distribution of fresh-cut fruit, fresh-cut 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 January 31, 2020

Three months ended January 31, 2019

    

Fresh

    

Calavo

    

    

    

Fresh

    

Calavo

    

    

products

Foods

RFG

Total

products

Foods

RFG

Total

Avocados

$

117,884

$

$

$

117,884

$

103,995

$

$

$

103,995

Tomatoes

 

12,992

 

 

 

12,992

 

11,392

 

 

 

11,392

Papayas

 

2,643

 

 

 

2,643

 

2,939

 

 

 

2,939

Other fresh products

 

127

 

 

 

127

 

80

 

 

 

80

Prepared avocado products

 

 

21,800

 

 

21,800

 

 

24,252

 

 

24,252

Salsa

 

 

719

 

 

719

 

 

853

 

 

853

Fresh-cut fruit & veg. and prepared foods

121,470

121,470

119,541

119,541

Total gross sales

 

133,646

 

22,519

 

121,470

 

277,635

 

118,406

 

25,105

 

119,541

 

263,052

Less sales incentives

 

(457)

 

(2,036)

 

(535)

 

(3,028)

 

(957)

 

(2,034)

 

(477)

 

(3,468)

Less inter-company eliminations

(408)

(851)

(1,259)

(595)

(957)

(1,552)

Net sales

$

132,781

$

19,632

$

120,935

$

273,348

$

116,854

$

22,114

$

119,064

$

258,032

    

Fresh

    

Calavo

    

Interco.

    

products

Foods

RFG

    

Elimins.

Total

(All amounts are presented in thousands)

Three months ended January 31, 2020

Net sales

$

133,189

$

20,483

$

120,935

$

(1,259)

$

273,348

Cost of sales

126,607

14,133

118,059

(1,259)

257,540

Gross profit

$

6,582

$

6,350

$

2,876

$

$

15,808

Three months ended January 31, 2019

Net sales

$

117,449

$

23,071

$

119,064

$

(1,552)

$

258,032

Cost of sales

96,591

16,327

115,829

(1,552)

227,195

Gross profit

$

20,858

$

6,744

$

3,235

$

$

30,837

For the three months ended January 31, 2020 and 2019, intercompany sales and cost of sales of $0.3 million and $0.5 million between Fresh products and RFG were eliminated. For the three months ended January 31, 2020 and 2019, intercompany sales and cost of sales of $0.1 million and $0.1 million between Fresh products and Calavo Foods were eliminated. For the three months ended January 31, 2020 and 2019, intercompany sales and cost of sales of $0.9 million and $1.0 million between Calavo Foods and RFG were eliminated.

Sales to customers outside the U.S. were approximately $9.6 million, and $8.4 million for the three months ended January 31, 2020 and 2019.

Long-lived assets attributed to geographic areas as of January 31, 2020 and October 31, 2019, are as follows (in thousands):

10

    

United States

    

Mexico

    

Consolidated

January 31, 2020

$

96,565

$

34,644

$

131,209

October 31, 2019

$

98,224

$

33,874

$

132,098

3.

Inventories

Inventories consist of the following (in thousands):

January 31, 

October 31, 

2020

2019

Fresh fruit

    

$

18,214

    

$

15,874

Packing supplies and ingredients

 

11,514

 

11,370

Finished prepared foods

 

12,509

 

9,645

$

42,237

$

36,889

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 January 31, 2020 and October 31, 2019.

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 January 31, 2020 and 2019, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $0.2 million and $0.1 million. Amounts payable to these Board members were $0.2 million as of January 31, 2020. We did not have any amounts payable to these Board members as of October 31, 2019.

During the three months ended January 31, 2020 and 2019, we received $0.1 million as dividend income from Limoneira Company (Limoneira). In addition, we lease office space from Limoneira for our corporate office. We paid rent expense to Limoneira totaling $0.1 million for the three months ended January 31, 2020 and 2019. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. As of January 31, 2020, we own less than 10% of Limoneira’s outstanding shares.

We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During the three months ended January 31, 2020 and 2019, Calavo Growers, Inc. paid fees totaling $0.1 million to TroyGould PC.

As of January 31, 2020, and October 31, 2019, we had an investment of $5.4 million and $4.9 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 January 31, 2020 and October 31, 2019, we had outstanding advances of $3.3 million and $3.7 million to Don Memo. During the three months ended January 31, 2020 and 2019, we recorded $4.0 million and $5.7 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 $4.5 million as of January 31, 2020 and October 31, 2019, which are netted against the grower payable. In addition, we had infrastructure advances due from Belher of $2.6 million as of January 31, 2020 and October 31, 2019. $0.8 million of these infrastructure advances were recorded as a receivable in prepaid and other current assets. The remaining $1.8 million of these

11

infrastructure advances were recorded in other assets. During the three months ended January 31, 2020 and 2019, we recorded $7.2 million and $5.3 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 January 31, 2020, 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 January 31, 2020 and October 31, 2019, we have made an insignificant amount of preseason advances to various partners of Avocados de Jalisco. During the three months ended January 31, 2020 and 2019, we purchased approximately $0.4 million and $1.0 million of avocados from the partners of Avocados de Jalisco.

As of January 31, 2020, and October 31, 2019, we have an equity investment of $2.3 million and $5.8 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 12 for additional information. As of January 31, 2020, our ownership percentage in FreshRealm was approximately 38%.

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 to FreshRealm, subject to certain terms and conditions. Pursuant to the NMUPA, we entered into a $12 million Senior Promissory Note and corresponding Security Agreement 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 the second quarter of fiscal 2019, we amended the note related to this loan, 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 $7.5 million in unsecured notes receivable. During our second quarter of fiscal 2019, we loaned an additional $4.2 million on an unsecured basis to FreshRealm under similar terms. During our third quarter of fiscal 2019, we loaned an additional $5.4 million on an unsecured basis to FreshRealm under similar terms. During our fourth quarter of fiscal 2019, we loaned an additional $3.7 million to FreshRealm for a total outstanding principal amount of $32.8 million, not including accrued interest. At such time, we entered into an agreement with FreshRealm wherein all of the outstanding loan amount owed by Fresh Realm to us would be secured in the assets of FreshRealm.

As of January 31, 2020, and October 31, 2019, we have $36.1 million and $35.2 million in note receivables (including interest) from FreshRealm. The notes to FreshRealm, as of January 31, 2020 and October 31, 2019, bear interest at the rate of 10% annually, with monthly interest payments scheduled to begin on October 31, 2020. This first interest payment would represent interest due for the month of October 2020 only, with similar monthly payments scheduled to follow afterwards. The due date of the notes is November 1, 2021, with the Company having the option of up to two, one-year extensions (i.e. first to November 1, 2022, then to November 1, 2023). At January 31, 2020 and October 31, 2019 we have a receivable of $3.3 million and $2.4 million related to interest that we have recorded with note receivables from FreshRealm on the balance sheet.

As of November 25, 2019, we modified approximately $2.7 million of the outstanding secured loan to FreshRealm and applied it to unsecured debt as part of a convertible note round offered by FreshRealm to its existing equity holders. Such convertible note bears interest at the rate of 10% up to the time of conversion. Such $2.7 million unsecured note, along with the related accrued interest amount, was converted into additional equity of FreshRealm as of February 3, 2020. As a result of the convertible note round offered by FreshRealm our ownership percentage in FreshRealm (upon conversion on February 3, 2020) decreased to approximately 37%. In February 2020, we loaned FreshRealm an additional $1.0 million which is expected to be repaid in full before the end of Calavo’s second fiscal quarter.

Three officers and five members of our board of directors have investments in FreshRealm as of January 31, 2020. In addition, as of January 31, 2020 and October 31, 2019, we have a loan to FreshRealm members of approximately $0.2 million. In October and December 2017, our former Chairman and Chief Executive Officer invested $7.0 million and

12

$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 October 2019, our former Chairman and Chief Executive Officer invested $0.5 million in FreshRealm. In October 2019, one of our non-executive directors invested $0.2 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 $0.2 million and $0.1 million in storage services revenue from FreshRealm in the three months ended January 31, 2020 and 2019. For the three months ended January 31, 2020 and 2019, RFG has sold $0.2 million and $1.6 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 entities leases a building from LIG Partners, LLC (LIG) pursuant to an operating lease.  RFG’s Texas operating entity leases a building from THNC, LLC (THNC) pursuant to an operating lease.  In the first quarter of fiscal 2020, these facilities have been sold to a third party and our lease has transferred to the new owners. See the following tables for the related party activity for fiscal years 2020 and 2019:

Three months ended January 31,

 

(in thousands)

    

2020

    

2019

 

Rent paid to LIG

$

80

$

139

Rent paid to THNC, LLC

$

132

$

198

5.

Other assets

Other assets consist of the following (in thousands):

    

January 31, 

    

October 31, 

2020

2019

Mexican IVA (i.e. value-added) taxes receivable (see note 15)

$

29,515

$

27,592

Infrastructure advance to Agricola Belher

 

1,800

 

1,800

Intangibles, net

 

418

 

435

Other

 

1,511

 

1,514

$

33,244

$

31,341

Intangible assets consist of the following (in thousands):

January 31, 2020

October 31, 2019

    

Weighted-

    

Gross

    

    

Net

    

Gross

    

    

Net

Average

Carrying

Accum.

Book

Carrying

Accum.

Book

Useful Life

Value

Amortization

Value

Value

Amortization

Value

Customer list/relationships

 

$

7,640

$

(7,640)

$

$

7,640

$

(7,640)

$

Trade names

 

 

2,760

 

(2,760)

 

 

2,760

 

(2,760)

 

Trade secrets/recipes

 

9.3 years

 

630

 

(487)

 

143

 

630

 

(470)

 

160

Brand name intangibles

 

indefinite

 

275

 

 

275

 

275

 

 

275

Intangibles, net

$

11,305

$

(10,887)

$

418

$

11,305

$

(10,870)

$

435

13

We anticipate recording amortization expense of $0.1 million for the remainder of fiscal 2020, $0.1 million for fiscal year 2021, $0.1 million for fiscal year 2022, $0.1 million for fiscal year 2023, 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, 2020, all 12 of our non-employee directors were granted 1,500 restricted shares, as part of their annual compensation, each (total of 18,000 shares). These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $87.21. On January 2, 2021, 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 $0.1 million for the three months ended January 31, 2020.

On December 18, 2019, our executive officers were granted a total of 31,158 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 $87.63. These shares vest in one-third increments, on an annual basis, beginning December 18, 2020. 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 January 31, 2020.

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, 2019

 

69

$

71.74

Vested

 

(51)

$

70.48

Granted

 

49

$

87.48

Outstanding at January 31, 2020

 

67

$

85.71

$

5,152

The total recognized stock-based compensation expense for restricted stock was $0.9 million and $1.0 million for the three months ended January 31, 2020 and 2019. Total unrecognized stock-based compensation expense totaled $4.1 million as of January 31, 2020 and will be amortized through fiscal year 2023.

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):

14