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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 31, 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.

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 July 31, 2020 was 17,656,816

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains statements relating to future events and results of Calavo Growers, Inc. and its consolidated subsidiaries (Calavo, the Company, we, us or our), including certain projections and business trends, that are "forward-looking statements," as defined in the Private Securities Litigation and Reform Act of 1995, that involve risks, uncertainties and assumptions. These statements are based on our current expectations and are not promises or guarantees. If any of the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo 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 and currency exchange rates; the impact of COVID-19 on our business, results of operations and financial condition; 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 COVID-19 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 and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements include, but are not limited to, the following: the impact of COVID-19 on our business, results of operations and financial condition, including, but not limited to, disruptions in the manufacturing of our products and the operations of the related supply chains supporting our ability to deliver our products to consumers, impacts on our employees and uncertainty regarding our ability to implement health and safety measures for our employees, uncertainties regarding consumer demand for our products in light of COVID-19, increased costs that we must incur as a result of COVID-19, the impact of governmental trade restrictions imposed as a result of COVID-19 and the possible adverse impact of COVID-19 on our goodwill and other intangible assets; the impact of macroeconomic trends and events; the competitive pressures faced by Calavo's business; 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 acquisitions of other businesses; our ability to hire and retain key employees; the resolution of pending investigations, legal claims and tax disputes; the risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and COVID-19 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; and potential cyber-attacks on our information technology systems or on the information technology systems of our suppliers or customers.

For a further discussion of these risks and uncertainties and other risks and uncertainties that we face, please see the risk factors described in our most recent Annual Report on Form 10-K for the fiscal year ended October 31, 2019 filed with the Securities and Exchange Commission and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q (including this Quarterly Report on Form 10-Q) and other filings with the Securities and Exchange Commission. Forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date of this report, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

2

CALAVO GROWERS, INC.

INDEX

PAGE

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited):

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

4

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

5

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

6

Consolidated Statements of Shareholders’ Equity

7

Notes to Consolidated Condensed Financial Statements

9

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

38

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 6.

Exhibits

40

Signatures

41

3

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share amounts)

July 31, 

October 31, 

2020

2019

Assets

    

    

    

    

Current assets:

Cash and cash equivalents

$

3,573

$

7,973

Accounts receivable, net of allowances of $3,706 (2020) $3,366 (2019)

 

69,724

 

63,423

Inventories, net

 

43,944

 

36,889

Prepaid expenses and other current assets

 

10,365

 

9,027

Advances to suppliers

 

3,265

 

7,338

Income taxes receivable

 

7,543

 

2,865

Total current assets

 

138,414

 

127,515

Property, plant, and equipment, net

 

130,923

 

132,098

Operating lease right-of-use assets

 

61,875

 

Investment in Limoneira Company

 

22,610

 

31,734

Investments in unconsolidated entities

 

5,800

 

10,722

Deferred income taxes

 

8,081

 

3,447

Goodwill

 

28,469

 

18,262

Notes receivable from FreshRealm

 

 

35,241

Other assets

 

41,093

 

31,341

$

437,265

$

390,360

Liabilities and shareholders' equity

Current liabilities:

Payable to growers

$

18,490

$

13,463

Trade accounts payable

 

10,640

 

17,421

Accrued expenses

 

37,010

 

39,629

Short-term borrowings

 

24,600

 

Dividend payable

 

 

19,354

Current portion of operating leases

 

6,399

 

Current portion of long-term obligations and finance leases

 

1,275

 

762

Total current liabilities

 

98,414

 

90,629

Long-term liabilities:

Long-term operating leases, less current portion

 

59,899

 

Long-term obligations and finance leases, less current portion

 

5,903

 

5,412

Deferred rent

3,681

Other long-term liabilities

 

3,519

 

4,769

Total long-term liabilities

 

69,321

 

13,862

Commitments and contingencies

Shareholders' equity:

Common stock ($0.001 par value, 100,000 shares authorized; 17,657 (2020) and 17,595 (2019) shares issued and outstanding)

 

18

 

18

Additional paid-in capital

 

164,082

 

161,606

Noncontrolling interest

 

1,560

 

1,688

Retained earnings

 

103,870

 

122,557

Total shareholders' equity

 

269,530

 

285,869

$

437,265

$

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

Nine months ended

July 31, 

July 31, 

2020

2019

2020

2019

Net sales

    

$

270,425

    

$

359,332

    

$

824,941

    

$

903,601

Cost of sales

 

239,590

 

323,557

 

756,223

 

800,152

Gross profit

 

30,835

 

35,775

 

68,718

 

103,449

Selling, general and administrative

 

13,424

 

14,295

 

44,226

 

44,228

Gain on sale of Temecula packinghouse

 

54

 

75

 

162

 

2,002

Operating income

 

17,465

21,555

 

24,654

 

61,223

Interest expense

 

(203)

 

(228)

 

(732)

 

(847)

Other income, net

 

628

 

936

 

2,250

 

2,332

Loss on reserve for FreshRealm note receivable and impairment of investment

(37,192)

(37,192)

Unrealized and realized net gain (loss) on Limoneira shares

 

218

 

(5,116)

 

(9,125)

 

(8,262)

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

 

(19,084)

 

17,147

 

(20,145)

 

54,446

Income tax benefit (provision)

 

4,682

 

(3,987)

 

6,540

 

(11,093)

Net loss from unconsolidated entities

 

(1,170)

 

(2,510)

 

(6,375)

 

(11,944)

Net income (loss)  

 

(15,572)

 

10,650

 

(19,980)

 

31,409

Less: Net loss (income) attributable to noncontrolling interest

 

(64)

 

(47)

 

128

 

26

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

$

(15,636)

$

10,603

$

(19,852)

$

31,435

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

Basic

$

(0.89)

$

0.61

$

(1.13)

$

1.79

Diluted

$

(0.89)

$

0.60

$

(1.13)

$

1.79

Number of shares used in per share computation:

Basic

 

17,586

 

17,525

 

17,558

 

17,517

Diluted

 

17,586

 

17,605

 

17,558

 

17,589

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)

Nine months ended July 31, 

2020

2019

Cash Flows from Operating Activities:

    

    

    

    

Net income (loss)

$

(19,980)

$

31,409

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

Depreciation and amortization

 

11,850

 

10,173

Non-cash operating lease expense

145

Provision for losses on accounts receivable

 

 

83

Net loss from unconsolidated entities

 

6,375

 

11,945

Unrealized and realized net loss on Limoneira shares

 

9,125

 

8,262

Loss on reserve for FreshRealm note receivable and impairment of investment

 

37,192

 

Interest income on notes to FreshRealm

 

(1,732)

 

(1,643)

Stock-based compensation expense

 

3,569

 

2,710

Gain on sale of Temecula packinghouse

 

(162)

 

(2,002)

Loss on disposal of property, plant, and equipment

 

230

 

Deferred income taxes on FreshRealm reserve

 

(7,525)

 

Effect on cash of changes in operating assets and liabilities:

Accounts receivable, net

 

(4,045)

 

(21,917)

Inventories, net

 

(6,363)

 

(11,296)

Prepaid expenses and other current assets

 

(814)

 

(652)

Advances to suppliers

 

4,873

 

1,215

Income taxes receivable/payable

 

(4,678)

 

3,160

Other assets

 

(9)

 

(3,754)

Payable to growers

 

5,027

 

20,596

Deferred rent

954

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

 

(12,722)

 

11,239

Net cash provided by operating activities

 

20,356

 

60,482

Cash Flows from Investing Activities:

Acquisitions of and deposits on property, plant, and equipment

 

(8,349)

 

(11,701)

Acquisition of SFFI, net of cash acquired of $623

 

(18,396)

 

Proceeds received for repayment of San Rafael note

 

 

339

Proceeds received from Limoneira stock sales

 

 

1,154

Proceeds from sale of Temecula packinghouse

 

 

7,100

Investment in FreshRealm

 

(1,477)

 

Notes receivables advanced to FreshRealm

(20,100)

Net cash used in investing activities

 

(28,222)

 

(23,208)

Cash Flows from Financing Activities:

Payment of dividend to shareholders

 

(19,354)

 

(17,568)

Proceeds from revolving credit facility

 

172,450

 

195,500

Payments on revolving credit facility

 

(147,850)

 

(210,500)

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

(1,179)

(1,008)

Payments on long-term obligations and finance leases

 

(687)

 

(135)

Proceeds from stock option exercises

 

86

 

85

Net cash provided by (used in) financing activities

 

3,466

 

(33,626)

Net increase (decrease) in cash and cash equivalents

 

(4,400)

 

3,648

Cash and cash equivalents, beginning of period

 

7,973

 

1,520

Cash and cash equivalents, end of period

$

3,573

$

5,168

Noncash Investing and Financing Activities:

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

$

593

$

Notes receivable from FreshRealm converted to investment in FreshRealm

$

2,761

$

Acquisitions of property, plant, and equipment with capital lease

$

$

2,827

Capital lease related to Temecula packinghouse

$

$

3,306

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

$

568

$

2,484

Collection for Agricola Belher Infrastructure Advance

$

800

$

800

 

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

6

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(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

24

 

 

 

 

 

 

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

17,593

 

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

17,595

 

18

 

159,838

 

 

126,097

 

1,675

 

287,628

Stock compensation expense

 

 

884

 

 

 

 

884

Avocados de Jalisco noncontrolling interest contribution

 

 

 

 

 

47

 

47

Net income attributable to Calavo Growers, Inc.

 

 

 

 

10,603

 

 

10,603

Balance, July 31, 2019

17,595

$

18

$

160,722

$

$

136,700

$

1,722

$

299,162

7

    

    

    

    

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

Exercise of stock options and income tax benefit

2

39

39

Stock compensation expense

667

667

Restricted stock issued

23

1,119

1,119

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

(1,179)

(1,179)

Avocados de Jalisco noncontrolling interest contribution

(129)

(129)

Net loss attributable to Calavo Growers, Inc.

(3,278)

(3,278)

Balance, April 30, 2020

17,639

 

18

 

163,230

 

 

119,506

 

1,496

 

284,250

Exercise of stock options and income tax benefit

 

 

 

 

 

 

Stock compensation expense

 

 

852

 

 

 

 

852

Restricted stock issued

18

Avocados de Jalisco noncontrolling interest contribution

 

 

 

 

 

64

 

64

Net loss attributable to Calavo Growers, Inc.

 

 

 

 

(15,636)

 

 

(15,636)

Balance, July 31, 2020

17,657

$

18

$

164,082

$

$

103,870

$

1,560

 

$

269,530

See accompanying notes to consolidated financial statements.

8

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.

9

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 segment represents operations related to the manufacturing and distribution of fresh-cut fruit, fresh-cut vegetables, and

10

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 July 31, 2020

Three months ended July 31, 2019

    

Fresh

    

Calavo

    

    

    

Fresh

    

Calavo

    

    

products

Foods

RFG

Total

products

Foods

RFG

Total

Avocados

$

145,670

$

$

$

145,670

$

196,047

$

$

$

196,047

Tomatoes

 

13,827

 

 

 

13,827

 

8,708

 

 

 

8,708

Papayas

 

2,695

 

 

 

2,695

 

3,105

 

 

 

3,105

Other fresh products

 

88

 

 

 

88

 

424

 

 

 

424

Prepared avocado products

 

 

19,764

 

 

19,764

 

 

27,427

 

 

27,427

Salsa

 

 

816