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What changed in CALAVO GROWERS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CALAVO GROWERS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+297 added−361 removedSource: 10-K (2025-01-14) vs 10-K (2024-01-31)

Top changes in CALAVO GROWERS INC's 2024 10-K

297 paragraphs added · 361 removed · 191 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

29 edited+43 added−26 removed5 unchanged
Biggest changeWe are subject to USDA, Mexican Secretary of Agriculture, Livestock, Rural Development, Fisheries and Food/Plant Protection (“SAGARPA”) and other regulatory inspections to ensure the safety and the quality of the fruit being delivered. We have also developed a series of value-added programs that are designed to offer products and services to our customers that meet their various needs.
Biggest changeOur ongoing success in marketing avocados depends largely on maintaining a reliable, high-quality supply at reasonable prices while keeping handling costs low as fruit moves through our facilities and to our customers. ​ To help ensure the safety and quality of our avocados, we are subject to inspections by the USDA, the Mexican Secretary of Agriculture, Secretariat of Agriculture and Rural Development (SADER), and other regulatory authorities. ​ We have developed a range of value-added programs designed to provide products and services that address our customers' diverse needs.
Food and Drug Administration (the “FDA”), the USDA and the Federal Trade Commission (the “FTC”), as well as state and local agencies, with respect to production processes, product attributes, packaging, labeling, storage and distribution. Under various statutes and regulations, these agencies prescribe requirements and establish standards for the distribution, safety, purity and labeling of food products.
Food and Drug Administration (the “FDA”), the USDA and the Federal Trade Commission, as well as state and local agencies, with respect to production processes, product attributes, packaging, labeling, storage and distribution. Under various statutes and regulations, these agencies prescribe requirements and establish standards for the distribution, safety, purity and labeling of food products.
Total research and development costs for fiscal years 2023, 2022 and 2021 were approximately $0.1 million, $0.1 million and $0.3 million. ​ Compliance with Government Regulations ​ As a purchaser, manufacturer, distributor, marketer, and advertiser of food products, our operations are subject to extensive regulation by various federal government agencies, including the U.S.
Total research and development costs for fiscal years 2024, 2023 and 2022 were approximately $0.1 million, $0.1 million and $0.1 million. ​ Compliance with Government Regulations ​ As a purchaser, manufacturer, distributor, marketer, and advertiser of food products, our operations are subject to extensive regulation by various federal government agencies, including the U.S.
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.
Our expertise in marketing and distributing avocados, prepared avocado products, 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 worldwide. 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. ​ We distribute our products both domestically and internationally and we report our operations in two different business segments: Grown and Prepared.
Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, and (ii) process and package guacamole. We distribute our products both domestically and internationally. ​ We report our operations in two different business segments: Grown and Prepared. The Grown segment consists of fresh avocados, tomatoes and papayas.
In addition, we believe our diversified product assortment, consistent product quality and value-added programs provide us with a competitive advantage in servicing retail and foodservice customers. ​ Our Grown business segment also markets and distributes other perishable food products, such as tomatoes and papayas (“Other Fresh Products”).
Additionally, we believe our diversified fresh product offerings, consistent product quality, and value-added programs give us a distinct advantage in serving retail and foodservice customers. ​ Our Grown business segment also markets and distributes other perishable food products, including tomatoes and papayas (“Other Fresh Products”).
Tomatoes are primarily handled on a consigned basis, while papayas are handled on a pooling basis, generally at a fixed fee per papaya delivered. ​ For sales on a consigned basis, our gross profit is based on a commission agreed to with each party, which usually is a percent of the overall selling price.
Tomatoes are primarily handled on a consignment basis, while papayas are managed through a pooling system, typically at a fixed fee per papaya delivered. ​ For consignment sales, our gross profit is typically based on a commission agreed upon with each party, usually calculated as a percentage of the total selling price.
The gross profit percentage for consignment sales are dependent on the volume of fruit we handle, the average selling prices, and the competitiveness of the returns that we provide to third-party growers/packers. ​ Sales of our Other Fresh Products generally experience fluctuations related to seasonality.
The gross profit percentage for these sales depends on the volume of fruit handled, average selling prices, and the competitiveness of returns offered to third-party growers and packers. ​ Sales of our Other Fresh Products are generally subject to seasonal fluctuations.
Our packinghouse facilities and products are subject to periodic inspection by federal, state and local authorities, including the FDA and the California Department of Food and Agriculture (the “CFDA”), which oversees weights & measures compliance at our California facilities. All of 7 our US facilities are also in compliance with the FDA’s Food Safety Modernization Act (“FSMA”).
In addition, our operations are subject to certain employment health and safety regulations, including those issued under the Occupational Safety and Health Act. Our packinghouse facilities and products are subject to periodic inspection by federal, state and local authorities, including the FDA and the California Department of Food and Agriculture, which oversees weights & measures compliance at our California facilities.
Many of our customers desire consistent year-round supply across multiple sourcing locations, the ability to receive just-in-time deliveries at their desired level of ripeness and a variety of packaging and display options.
Products are sold under the Calavo family of brand labels, as well as private labels. Many of our customers seek a consistent, year-round supply from multiple sourcing locations, along with just-in-time deliveries tailored to their desired ripeness and a variety of packaging and display options.
Based on the information we have from various industry sources, we believe that we are consistently among the largest avocado marketers in the United States (“U.S.”) from a volume and sales perspective. We attribute our position as one of the top avocado distributors to our sourcing competitiveness and to the communication and service we maintain with our growers.
Based on data from various industry sources, we believe we are consistently among the largest avocado marketers in the United States in terms of both volume and sales. ​ We attribute our leadership position to our competitive sourcing strategies and the strong communication and service we maintain with our growers, driven by upper and middle management teams with decades of avocado experience.
In addition, our operations in Mexico are subject to Mexican regulations through the SAGARPA. ​ As a large importer of perishable products in the U.S., Calavo was an early adopter of the U.S.
In addition, our operations in Mexico are subject to US and Mexican regulations through the USDA-APHIS and the Mexican Secretary of Agriculture, Secretariat of Agriculture and Rural 7 Development (SADER) primarily pertaining to phytosanitary regulations, certification regulation for the importation of Hass avocados to the United States. ​ As a large importer of perishable products in the U.S., Calavo was an early adopter of the U.S.
We also believe that the value proposition of avocados in a bag provides for a higher level of sales to grocery stores. ​ The avocado market is highly competitive with many avocado marketers and/or importers seeking to source avocados from independent, USDA certified growers worldwide.
We also believe bagged avocados deliver a strong value proposition, supporting higher sales for grocery stores ​ The avocado market is highly competitive, with numerous marketers and importers sourcing avocados from independent, USDA-certified growers in Mexico, Peru, Colombia, Chile, and the Dominican Republic, among others.
Some of these key programs are as follows: ​ ● Value-Added Ripening: Retailers require that their avocados meet strict quality and ripeness specifications, and we believe that our nationwide ripening infrastructure, using the latest technology and experienced avocado handling workforce, best position us to service those customers.
Key programs include: ​ ● Value-Added Ripening: Retailers require avocados that meet strict quality and ripeness standards. Our nationwide ripening infrastructure—featuring advanced technology and an experienced handling workforce—positions us to effectively meet those demands.
We consider the relationship with our employees to be good and we have never experienced a significant work stoppage. ​ The following is a summary of the number of “salaried” and “hourly” employees as of October 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ Location Salaried Hourly Total United States 331 1,059 1,390 Mexico 207 1,467 1,674 TOTAL 538 2,526 3,064 ​ ​
We consider the relationship with our employees to be good and we have never experienced a significant work stoppage. ​ The following is a summary of the number of “salaried” and “hourly” employees as of October 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ Location Salaried Hourly Total United States 134 183 317 Mexico 388 1,401 1,789 TOTAL 522 1,584 2,106 ​ ​ We compensate all workers with wages, overtime premiums, and benefits that meet or exceed local legal standards, local industry standards, or collective agreements, whichever are highest.
We sell avocados sourced from a variety of locations (including but not limited to California, Mexico, Peru, and Colombia) to a diverse group of retail grocers, foodservice operators, club stores, mass merchandisers, food distributors and wholesalers, under the Calavo family of brand labels, as well as private labels.
See Note 16 of the consolidated financial statements for further information. ​ Grown ​ Founded in 1924 to market California avocados, Calavo now sources avocados from various locations—including California, Mexico, Peru, and Colombia—and distributes them to a diverse group of retail grocers, foodservice operators, club stores, mass merchandisers, food distributors, and wholesalers.
We do not have a significant number of US employees covered by a collective bargaining agreement. Approximately 1,500 of Calavo’s Mexican employees are represented by a union.
As of October 31, 2024, we had 2,106 employees, of which 317 were in the US and 1,789 were in Mexico. While we have certain operations in Hawaii that are represented by a union, we do not have a significant number of US employees covered by a collective bargaining agreement.
We also utilize the following trademarks in conducting our business: Avo Fresco, Bueno, Calavo Gold, Celebrate the Taste, El Dorado, Taste of Paradise, The First Name in Avocados, The Family of Fresh, ProRipeVIP™, RIPE NOW!, Renaissance Food Group, Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials. ​ Working Capital Requirements ​ We generally bridge the timing between vendor payments and customer receipts (our working capital needs) by using operating cash flows and commercial bank borrowings.
We also utilize the following trademarks in conducting our business: Avo Fresco, Bueno, Calavo Gold, Celebrate the Taste, El Dorado, Taste of Paradise, The First Name in Avocados, The Family of Fresh, ProRipeVIP™, and RIPE NOW!. ​ Research and Development ​ Our research and development for new and improved products generally originates from customer requests, customer and market research and innovative ideas generated by our own team of experts with food processing and culinary backgrounds.
In our judgment, these factors benefit large handlers like us, who have the ability to develop a variety of diverse sourcing relationships and the value-added/bagging capabilities, ripening assets and distribution infrastructure to meet the needs of large nationwide accounts.
We believe these needs favor large handlers like us, who can leverage diverse sourcing relationships, value-added packaging and bagging capabilities, ripening assets, and a robust distribution infrastructure to serve large, nationwide accounts. Over time, we have built strong, long-term customer relationships that form a solid foundation for our business. ​ The Hass avocado is the predominant variety marketed globally.
In California, the growing area stretches from San Diego County to Monterey County, with the majority of the growing areas located approximately 100 miles north and south of Los Angeles County. Generally, California grown Hass avocados are available year-round, with peak production periods occurring from April through August.
In California, growing regions extend from San Diego County to Monterey County, with most production concentrated within 100 miles north and south of Los Angeles County.
As a result of our investment in packinghouse equipment, distribution centers with value-added ripening and packing capabilities, and personnel, we believe that our cost structure is geared to optimally handle larger avocado crops.
Consequently, fluctuations in delivery volumes can have a notable impact on our per-pound packing costs. Typically, larger crop volumes result in lower per-pound handling costs. ​ We believe our investments in packing house equipment, distribution centers with value-added ripening and packing capabilities, and skilled personnel position us to efficiently manage larger avocado crops.
The storage life of fresh avocados (once picked from the tree) is limited, typically ranging from one to four weeks depending upon the maturity of the fruit, the growing methods used, and the handling conditions in the distribution chain, including the utilization of controlled atmosphere during transport. ​ Avocados delivered to our packinghouses are graded, sized, packed and cooled.
We also source avocados from other key growing regions, including Peru and Colombia. ​ Fresh avocados have a limited storage life once picked from the tree, typically three to six weeks depending on factors such as fruit maturity, cultivation methods, and handling conditions throughout the distribution chain.
We believe our facilities and practices are sufficient to maintain compliance with applicable governmental laws, regulations, permits and licenses. ​ Employees ​ As of October 31, 2023, we had 3,064 employees, of which 1,390 were located in the US and 1,674 were located in Mexico.
We believe our facilities and practices are sufficient to maintain compliance with applicable governmental laws, regulations, permits and licenses. ​ Human Capital Resources ​ We believe in nurturing people, from consumers eating our products to our employees, suppliers, customers and the communities in which we live and work. ​ Employees : Our employees are our greatest asset and are directly responsible for our success in delivering fresh, quality products to consumers.
While the majority of our prepared avocado products are produced in our Uruapan, Mexico production facility, we sometimes utilize high-quality co-packers (using similar ultra-high pressure technology), to produce some of our retail and foodservice products. ​ As a leader in refrigerated fresh packaged foods, we utilize a network of company-operated and independently-operated USDA and organic certified fresh food facilities strategically located across the U.S.
After processing, our guacamole can be frozen for extended shelf life or shipped fresh to customers in the U.S. and internationally. ​ While most of our prepared avocado products are produced at our Uruapan, Mexico facility, we occasionally partner with high-quality co-packers—utilizing similar ultra-high-pressure technology—to meet demand for retail and foodservice products. ​ Our prepared products include guacamole sold through retail and foodservice channels, as well as avocado pulp sold to foodservice customers.
We believe that ripened avocados help our customers fulfill consumer needs and accelerate the sale of avocados through their stores. ​ ● Value-Added Packaging: We have developed various display techniques and packages that appeal to consumers and, in particular, impulse buyers.
We believe ripened avocados help retailers satisfy consumer preferences and drive faster sales through their stores. 5 ​ ● Value-Added Packaging: We have introduced innovative packaging and display techniques to attract consumers, especially impulse buyers. These include bagging avocados and strategically displaying them within produce sections.
See Note 10 in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information about our business segments. Our principal executive offices are located at 1141-A Cummings Road, Santa Paula, California 93060; and our telephone number is (805) 525-1245. ​ Available information ​ We maintain an Internet website at http://www.calavo.com.
Our principal executive offices are located at 1141-A Cummings Road, Santa Paula, California 93060; and our telephone number is (805) 525-1245. ​ Discontinued Operations ​ We completed the sale of our Fresh Cut business (formerly “RFG”) and related real estate on August 15, 2024 for $83.0 million.
Peruvian and Colombian avocados are primarily handled on a consignment basis, in which the price we pay for the fruit is usually calculated as a percentage of the net selling price less certain charges for distribution and value-added services. ​ Apart from the cost of fruit and freight costs, which are generally passed on to our customer, significant portions of our avocado handling costs are fixed.
Avocados from Colombia are primarily handled on an FOB Colombia basis, with price guidelines, strict quality specification and inspections upon arrival to the United States. ​ Aside from fruit costs, packing materials, and freight costs, which are generally passed on to our customers, a significant portion of our avocado handling costs are fixed.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and other information related to us, are available, free of charge, on our website as soon as reasonably practicable after we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission (the “SEC”).
Our annual reports on Form 10-K and proxy statements are made available free of charge through the Investors section 9 of the Company’s website (http:// ir.calavo.com/financial-information/annual-reports-and-proxy-statements) as soon as practicable after such material is electronically filed with, or furnished to, the SEC. Material contained on our website is not incorporated by reference in this report.
The purchase price we pay for fruit acquired from Mexican growers is generally negotiated daily for substantially all the fruit harvested daily in a particular grove. The Mexican avocado crop will typically have three to four blooms in a single year.
Payments to California growers are settled monthly. ​ In Mexico, the crop typically produces three to four blooms per year. Prices are typically negotiated daily for most fruit harvested that day. Once a daily price is agreed upon, the fruit is harvested and delivered to one of our Mexican packinghouses.
Removed
The Grown segment consists of fresh avocados, tomatoes and papayas. The Prepared segment comprises all other products including fresh-cut fruits and vegetables, ready-to-eat sandwiches, wraps, salads and snacks, guacamole, and salsa sold at retail and food service as well as avocado pulp sold to foodservice.
Added
The Prepared segment consists of guacamole sold at retail and foodservice as well as avocado pulp sold to foodservice. See Note 10 in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information about our business segments.
Removed
Our Internet website and the information contained therein, or connected thereto, is not and is not intended to be incorporated into this Annual Report on Form 10-K (this “Annual Report”). ​ We have a code of business conduct and ethics that applies to all employees, including our executive officers, as well as our Board of Directors.
Added
Proceeds from the sale totaled $81.1 million, net of $1.9 million of transaction costs.
Removed
Our code of business conduct and ethics is available for review on our corporate website.
Added
The Fresh Cut business represents substantially all of the business of the Prepared segment other than the guacamole business, which was retained. ​ The financial results of the Fresh Cut business have been classified as discontinued operations in the statements of operations and its assets and liabilities have been classified as held for sale in the balance sheets included herein.
Removed
We intend to disclose any changes in, or waivers from, this code by posting such information on the same website or by filing a Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or Nasdaq. ​ Grown ​ Calavo was founded in 1924 to market California avocados.
Added
Unless otherwise noted, amounts and disclosures in this section relate to our continuing operations (except for the Liquidity and Capital Resources section). ​ Prior to the decision to divest our Fresh Cut business, our Prepared reporting segment included the Fresh Cut business unit and our guacamole business.
Removed
We believe we have developed strong, long-term relationships with our customers that provide a solid base for our business. ​ 4 The Hass variety is the predominant avocado variety marketed on a worldwide basis.
Added
As a result of the divestiture, the Fresh Cut business unit is no longer included in our Prepared business segment. All segment information included herein reflect these changes.
Removed
In Mexico, we procure fruit from the growing regions of Michoacán and Jalisco. The Mexican avocado harvest is year-round (though generally most significant from September to June in Michoacán and from June to January for Jalisco). Other significant growing areas from which we have sourced avocados include Peru and Colombia.
Added
California-grown Hass avocados are generally available from April through September, with peak production occurring from May through August. 4 ​ In fiscal 2022, the United States Department of Agriculture (USDA) approved the export of Jalisco avocados to the United States. As such, we source fruit from both the Michoacán and Jalisco regions in Mexico.
Removed
In fiscal 2022, the United States Department of Agriculture (the “USDA”) approved the export of Jalisco avocados into the United States.
Added
Mexico’s avocado harvest tends to be year-round, with Michoacán’s peak season running from September to June, while Jalisco’s peak season runs from June to January.
Removed
The actual size and timing of the delivery of the annual avocado crop has a substantial impact on both our costs and the sales price we receive for the fruit. To that end, our field personnel maintain direct contact with growers and farm managers and coordinate harvest plans.
Added
This includes the use of controlled-atmosphere technologies during transport to preserve quality. ​ Avocados delivered to our packinghouses are graded, sized, packed, and cooled. The size and timing of the annual avocado crop significantly impact both our costs and the prices we receive for the fruit.
Removed
The feedback from our field managers is used by our sales department to prepare sales plans used by our direct sales force. The process by which avocados are purchased from growers differs slightly across our different sourcing regions. In California, avocado growers are provided daily field quotes, on a per pound basis, for most fruit.
Added
To help manage this, our field personnel work closely with growers and farm managers to coordinate harvest plans. Feedback from our field managers is shared with our sales department to help develop sales strategies for our direct sales force. Industry associations in Mexico employ crop estimators to provide an annual crop estimate.
Removed
These quotes are based on the variety, size, and grade of California avocados and are calculated based on our expectations of how much we believe we will sell the fruit for, less our anticipated costs and desired margin. Ultimately, we pay/settle with our California growers once a month.
Added
No less than three updates are executed throughout the crop year. ​ The process for purchasing avocados varies across sourcing regions. In California, growers receive daily field quotes, priced per pound, based on variety, size, and grade. These quotes are calculated by estimating expected sales prices, less anticipated costs and desired margins.
Removed
Once a purchase price is agreed to on a daily basis, the fruit is then harvested and delivered to our packinghouses located in Mexico. Based on the size and quality of the fruit harvested, the final settlement with the grower on the respective day’s harvest takes place approximately 14 to 21 days later.
Added
Final settlements, based on fruit size and quality, are completed approximately 14 to 21 days after harvest. We also source fruit directly from third-party Mexican packers (copackers) to balance inventory or fulfill priority sizes and grades.
Removed
We also purchase fruit directly from third-party Mexican packers as a supplemental source to balance inventory or fulfill priority sales orders. In such cases, the already packed fruit may not be packed in a Calavo label but will be packed to our standards for shipment to either our customers’ or our operating facilities.
Added
While this fruit usually is packed in Calavo branded cartons, all the fruit we source from third parties is packed at certified packinghouses to meet Calavo quality and food safety standards before being shipped to our facilities and customers. ​ Avocados sourced from Peru are primarily handled on a consignment basis.
Removed
As a result, significant fluctuations in the volume of avocados delivered have a considerable impact on the per pound packing costs of avocados we handle. Generally, larger crops will result in a lower per pound handling cost.
Added
Payments are generally calculated as a percentage of the net selling price, less charges for distribution and value-added service or alternatively at a flat, per carton rate.
Removed
We believe that our continued success in marketing avocados is largely dependent upon securing a reliable, high-quality supply of avocados at reasonable prices, and keeping the handling costs low as we ship avocados to our packinghouses and distribution centers and, ultimately, to our customers.
Added
Research shows that consumers typically buy larger quantities when avocados are offered in bags rather than traditional bulk displays.
Removed
Some of our techniques include the bagging of avocados and the strategic display of the bags within the produce section of retail stores. Our research has demonstrated that consumers generally purchase a larger quantity of avocados when presented in a bag as opposed to the conventional bulk 5 displays.
Added
We believe offering a variety of fruits complements our core avocado business and enhances our overall product portfolio. ​ Prepared ​ Our Prepared segment focuses on our prepared avocado products (“guacamole”) division. We use ultra-high-pressure technology, a cold pasteurization process, on all guacamole products to safeguard food without requiring preservatives.
Removed
We believe that distributing other types of fruit complement our offerings of avocados. ​ Prepared ​ Prepared products include prepared avocado products (including both frozen and fresh guacamole), fresh-cut fruit and vegetables, fresh prepared entrée salads, wraps, sandwiches, parfaits and fresh snacking products, as well as ready-to-heat entrees and other hot bar and various deli items, meals kit components and salad kits.
Added
This process effectively eliminates bacteria that could cause spoilage, food safety concerns, or oxidation issues, while preserving the product’s taste profile.
Removed
Our Prepared segment has also expanded its capacity to provide more products in the deli and produce section of the retail category. ​ Our Prepared segment consists of our prepared avocado products (“guacamole”) division and our fresh-cut division.
Added
These products are marketed under Calavo-owned brands and through store-brand private label programs. ​ Both our Grown and Prepared segments foster strong customer relationships by delivering high-quality products, driving innovation, offering year-round availability, and maintaining national distribution. ​ Sales and Other Financial Information by Business Segment and Product Category ​ Sales and other financial information by business segment are provided in Note 10 to our consolidated financial statements that are included in this Annual Report. ​ 6 Competition ​ The perishable food industry, including the avocado, tomato, papaya, and prepared foods markets in which we operate, is highly competitive.
Removed
We utilize ultra-high pressure technology, a cold pasteurization process, on all of our guacamole products, that is designed to protect and safeguard foods, without the need of preservatives. This procedure substantially destroys the cells of any bacteria that could lead to spoilage, food safety, or oxidation issues, without affecting the taste profile of the finished product.
Added
Competition is intensified by the perishable nature of our products and the need to meet evolving consumer preferences.
Removed
Once the procedure is complete, our packaged guacamole can be frozen to ensure a longer shelf-life or shipped fresh to customers in the U.S. and abroad.
Added
We compete on several factors, including price, product quality, brand recognition, customer loyalty, consistency, supply reliability, marketing effectiveness, and our ability to provide value-added services such as ripening, packaging, regional distribution and logistics. ​ Our avocado business faces competition from both large multinational producers and distributors as well as regional and local growers and importers.
Removed
These facilities allow us to offer national retailers high quality, refrigerated fresh foods that can generally be delivered within hours from time of production. Consumer demand is high for quality refrigerated fresh packaged foods and our speed to market, product innovation and broad product portfolio position the Company well to serve retailers addressing this consumer trend.
Added
Supply fluctuations, driven by seasonality, weather conditions and pests, among other geopolitical factors, can impact pricing and availability, particularly given the year-round demand for avocados.
Removed
Our prepared products include fresh-cut fruits and vegetables, sandwiches, wraps, salads, parfaits, snacks, and guacamole sold at retail and food service as well as avocado pulp sold to foodservice ..
Added
We believe our diverse sourcing regions, including California, Mexico, Peru, and Colombia, as well as our long-standing grower relationships and state-of-the-art ripening and packing facilities, provide a competitive advantage. ​ In the prepared avocado products segment, we face competition from local and international food processors offering both branded and private-label guacamole and avocado products.
Removed
Our products are marketed under the Calavo, Avofresco, Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials brands, as well as store-brand, private label programs. ​ 6 We believe our current capacity will be sufficient for expected growth in fiscal 2024.
Added
Consumer preferences, particularly for natural, preservative-free products, drive differentiation in this market. Our use of ultra-high pressure processing technology to deliver high-quality, preservative-free guacamole with extended shelf life helps position us as a leader in this category.
Removed
We believe that our marketing strength is distinguished by providing quality products, innovation, year-round product availability, national distribution, and strong customer relationships. ​ As discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report, we and certain of our subsidiaries have entered into non-binding, exclusive negotiations regarding the potential sale of all of the assets used in our Fresh Cut business and certain related real property.
Added
Additionally, our ability to ship fresh or frozen products enhances our flexibility and reach across retail and foodservice markets in the U.S. and abroad. ​ While barriers to entry in the avocado, tomato, and produce markets are relatively low, we believe our scale, infrastructure, and reputation for quality and service differentiate us from smaller competitors.
Removed
The Fresh cut business represents substantially all of the business of the Prepared segment other than the guacamole business, which would be retained following the Proposed Transaction. ​ Sales and Other Financial Information by Business Segment and Product Category ​ Sales and other financial information by business segment are provided in Note 10 to our consolidated financial statements that are included in this Annual Report. ​ Patents and Trademarks ​ Our trademarks include the Calavo brand name and related logos.
Added
Our customer-focused approach, combined with our global sourcing capabilities and value-added services, position us to maintain and grow our market share in this competitive industry. ​ Patents and Trademarks ​ Our trademarks include the Calavo brand name and related logos.
Removed
In addition, from time to time we provide crop loans and other advances to some of our growers, which are also funded through operating cash flows and borrowings. ​ Backlog ​ Our Grown and Prepared customers do not place product orders significantly in advance of the requested product delivery dates. ​ Research and Development ​ Our research and development for new and improved products generally originates from customer requests, customer and market research and innovative ideas generated by our own team of experts with food processing and culinary backgrounds.
Added
All of our US facilities are also in compliance with the FDA’s Food Safety Modernization Act.
Removed
In addition, our operations are subject to certain employment health and safety regulations, including those issued under the Occupational Safety and Health Act (“OSHA”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

69 edited+13 added−46 removed70 unchanged
Biggest changeThe following risk factors should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. ​ Business and Operational Risks ​ Manufacturing and Supply Chain Disruption ​ Outbreaks of contagious diseases, including COVID-19, and other adverse public health developments in countries and states where we operate, have had and may continue to have an adverse effect on our business and financial condition, as well as cause operational challenges in the manufacturing of our products and the operation of the related supply chains supporting our ability to deliver our products to the consumer.
Biggest changeThe following risk factors should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K. ​ Business and Operational Risks ​ We may face challenges related to the transition and carve-out of operations following the divestiture of our Fresh Cut business, which could adversely impact our business, financial performance, and/or shareholder value .
This rapidly changing environment may result in increased general and administrative expenses. ​ We may also communicate certain initiatives and goals regarding environmental matters, diversity and other ESG-related matters. These initiatives and goals could be difficult and expensive to implement, and we could be criticized for the accuracy, adequacy or completeness of the disclosure.
This rapidly changing environment may result in increased general and administrative expenses. ​ We may also communicate certain initiatives and goals regarding environmental, diversity and other ESG-related matters. These initiatives and goals could be difficult and expensive to implement, and we could be criticized for the accuracy, adequacy or completeness of the disclosure.
Our common stock price, like that of other companies, can be volatile and can be affected by many factors, including: ​ ● Our operating and financial performance and prospects; 22 ● Announcements and public SEC filings we make about our business, financial performance and prospects; ● Announcements our customers or competitors make regarding their business, financial performance and prospects; ● Short-interest in our common stock, which may be significant from time-to-time; ● The depth and liquidity of the market for our common stock; ● Investor perception of us and the industry and markets in which we operate; ● Our inclusion in, or removal from, any equity market indices; ● Changes in earnings estimates or buy/sell recommendations by analysts; ● Whether or not we meet earnings estimates of analysts who follow our Company; ● Competitors in common markets; and ● General financial, domestic, international, economic, industry and other market trends or conditions. ​ Our performance may be impacted by general economic conditions or an economic downturn. ​ An overall decline in economic activity could adversely impact our business and financial results.
Our common stock price, like that of other companies, can be volatile and can be affected by many factors, including: ​ ● Our operating and financial performance and prospects; ● Announcements and public SEC filings we make about our business, financial performance and prospects; ● Announcements our customers or competitors make regarding their business, financial performance and prospects; ● Short-interest in our common stock, which may be significant from time-to-time; ● The depth and liquidity of the market for our common stock; ● Investor perception of us and the industry and markets in which we operate; ● Our inclusion in, or removal from, any equity market indices; ● Changes in earnings estimates or buy/sell recommendations by analysts; ● Whether or not we meet earnings estimates of analysts who follow our Company; ● Competitors in common markets; and ● General financial, domestic, international, economic, industry and other market trends or conditions. ​ Our performance may be impacted by general economic conditions or an economic downturn. ​ An overall decline in economic activity could adversely impact our business and financial results.
Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image. ​ Climate change may negatively affect our business and operations. ​ There is concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. ​ 15 In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products.
Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image. ​ Climate change may negatively affect our business and operations. ​ There is concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. ​ In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products.
An adverse result of this appeal could have an adverse effect on our operations in Mexico, which rely to some extent on external picking and hauling services. ​ For additional information about our Mexican sourced fruit, see the “Business” section included in this Annual Report. ​ Our current international operations are subject to a number of inherent risks, including: ​ ● Local economic and political conditions, including disruptions in supply, labor, transportation (the transport of consumer goods), trading and capital markets; ● Restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, including import/export duties and quotas and customs duties and tariffs; and ● Changes in legal or regulatory requirements affecting foreign investment, loans, taxes (including value-added taxes), imports, and exports. ​ 20 The Hamas-Israel and Russia-Ukraine conflicts, other areas of geopolitical tension around the world, or the worsening of those conflicts or tensions, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate may materially adversely affect our customers, vendors, and partners, and the duration and extent to which these factors may impact our future business and operations, results of operations, financial condition and cash flows remain uncertain. ​ The Hamas-Israel and Russia-Ukraine conflicts, or other areas of geopolitical tension around the world, or any worsening or spread of those conflicts or geopolitical tensions, and any related challenging macroeconomic conditions globally, could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy protection or go out of business, impact expected spending and pricing levels from existing and potential new customers, and negatively impact collections of accounts receivable, all of which could adversely affect our business, results of operations and financial condition. ​ Any of the negative impacts of the Hamas-Israel and Russia-Ukraine conflicts, other areas of geopolitical tension around the world, or any worsening of those conflicts or geopolitical tensions, and any related challenging macroeconomic conditions, may have a material adverse effect on our business and operations, results of operations, financial condition and cash flows.
An adverse result of this appeal could have an adverse effect on our operations in Mexico, which rely to some extent on external picking and hauling services. ​ For additional information about our Mexican sourced fruit, see the “Business” section included in this Annual Report. ​ Our current international operations are subject to various inherent risks, including: ​ ● Local economic and political conditions, including disruptions in supply, labor, transportation (the transport of consumer goods), trading and capital markets; ● Restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, including import/export duties and quotas and customs duties and tariffs; and ● Changes in legal or regulatory requirements affecting foreign investment, loans, taxes (including value-added taxes), imports, and exports. ​ The Hamas-Israel and Russia-Ukraine conflicts, other areas of geopolitical tension around the world, or the worsening of those conflicts or tensions, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate may materially adversely affect our customers, vendors, and partners, and the duration and extent to which these factors may impact our future business and operations, results of operations, financial condition and cash flows remain uncertain. ​ The Hamas-Israel and Russia-Ukraine conflicts, or other areas of geopolitical tension around the world, or any worsening or spread of those conflicts or geopolitical tensions, and any related challenging macroeconomic conditions globally, could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy protection or go out of business, impact expected spending and pricing levels from existing and potential new customers, and negatively impact collections of accounts receivable, all of which could adversely affect our business, results of operations and financial condition. ​ Any of the negative impacts of the Hamas-Israel and Russia-Ukraine conflicts, other areas of geopolitical tension around the world, or any worsening of those conflicts or geopolitical tensions, and any related challenging macroeconomic conditions, may have a material adverse effect on our business and operations, results of operations, financial condition and cash flows.
Moreover, our ongoing internal investigation, and cooperating with and responding to the SEC and the DOJ in connection with potential investigations they may undertake, as well as responding to any future U.S. or foreign governmental investigations or whistleblower lawsuits, have resulted in, and may continue to result in, substantial expenses, and have diverted and may continue to divert management’s attention from other business concerns, and could have a material adverse effect on our business and financial condition and growth prospects. ​ International Risks ​ We work with international third-party suppliers and partners, and our financial results could suffer due to unfavorable international events or regulations. ​ We conduct a substantial amount of business with growers and customers who are located outside the United States.
Moreover, our ongoing internal investigation, and cooperating with and responding to the SEC and the DOJ in connection with potential investigations they may undertake, as well as responding to any future U.S. or foreign governmental investigations or whistleblower lawsuits, have resulted in, and may continue to result in, substantial expenses, and have diverted and may continue to divert management’s attention from other business concerns, and could have a material adverse effect on our business and financial condition and growth prospects. 19 ​ International Risks ​ We work with international third-party suppliers and partners, and our financial results could suffer due to unfavorable international events or regulations. ​ We conduct a substantial amount of business with growers and customers who are located outside the United States.
As a result, prospective purchasers may decide to purchase other securities rather than shares of our common stock, which would reduce the demand for, and potentially result in a decline in the market price of, shares of our common stock. ​ Due to the seasonality of the business, our revenue and operating results may vary from quarter to quarter. ​ Our earnings may be affected by seasonal factors, including: ​ ● the availability, quality and price of raw materials (including, but not limited to, fruit and vegetable inputs); ● the timing and effects of ripening and perishability; ● the ability to process perishable raw materials in a timely manner; ● the leveraging of certain fixed overhead costs during off-season months; and ● variations in consumer demand and holiday timing. ​ Our earnings are sensitive to fluctuations in market prices and demand for our products. ​ We buy and sell fresh produce that can be subject to price volatility caused by weather conditions such as rainfall, hailstorms, windstorms, floods, droughts, wildfires and freezes, as well as by impacts from diseases and pests. ​ Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest.
As a result, prospective purchasers may decide to purchase other securities rather than shares of our common stock, which would reduce the demand for, and potentially result in a decline in the market price of, shares of our common stock. ​ Due to the seasonality of the business, our revenue and operating results may vary from quarter to quarter. ​ Our earnings may be affected by seasonal factors, including: ​ ● the availability, quality and price of raw materials (including, but not limited to, fruit and vegetable inputs); ● the timing and effects of ripening and perishability; ● our ability to process perishable raw materials in a timely manner; ● fixed overhead costs during off-season months; and ● variations in consumer demand and holiday timing. ​ Our earnings are sensitive to fluctuations in market prices and demand for our products. ​ We buy and sell fresh produce that can be subject to price volatility caused by weather conditions such as rainfall, hailstorms, windstorms, floods, droughts, wildfires and freezes, as well as by impacts from diseases and pests. ​ Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest.
For example, fuel, transportation, and packaging costs are significant components of our operating costs, and we may not be able to pass on to our customers any increases in costs of fuel, transportation, or packaging. ​ We depend on our infrastructure to have sufficient capacity to handle our annual production needs. ​ If we lose machinery or facilities due to natural disasters or mechanical failure, we may not be able to operate at a sufficient capacity to meet our production needs and we may incur significant costs or delays in any effort to restore lost capacity.
For example, fuel, transportation, and packaging costs are significant components of our operating costs, and we may not be able to pass on to our customers any increases in costs of fuel, transportation, or packaging. ​ 11 We depend on our infrastructure to have sufficient capacity to handle our annual production needs. ​ If we lose machinery or facilities due to natural disasters or mechanical failure, we may not be able to operate at a sufficient capacity to meet our production needs and we may incur significant costs or delays in any effort to restore lost capacity.
As a result of climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations. ​ Demand for our products is subject to changing consumer preferences. ​ Consumer preferences for particular food products are subject to fluctuations over time.
As a result of climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations. ​ Demand for our products is subject to changing consumer preferences. ​ Consumer preferences for food products are subject to fluctuations over time.
A prolonged labor dispute, which could include a work stoppage, could have a material adverse effect on the portion of our business affected by the dispute, which could impact our business, results of operations and financial condition. ​ 14 We rely on co-packers for a portion of our production needs. ​ We utilize high-quality co-packers to produce a portion of our retail and foodservice products.
A prolonged labor dispute, which could include a work stoppage, could have a material adverse effect on the portion of our business affected by the dispute, which could impact our business, results of operations and financial condition. ​ We rely on co-packers for a portion of our production needs. ​ We utilize high-quality co-packers to produce a portion of our retail and foodservice products.
These restrictions prohibit or limit our ability to: incur indebtedness; grant liens on its assets; enter into certain investments; consummate fundamental change transactions; engage in mergers or acquisitions or dispose of assets; enter into certain transactions with affiliates; make changes to its fiscal year; enter into certain restrictive agreements; and make certain restricted payments (including for dividends).
These restrictions prohibit or limit our ability to: incur indebtedness; grant liens on assets; enter into certain investments; consummate fundamental change transactions; engage in mergers or acquisitions or dispose of assets; enter into certain transactions with affiliates; make changes to our fiscal year; enter into certain restrictive agreements; and make certain restricted payments (including for dividends).
To the extent that consumers stop purchasing products that we produce due to health, food safety or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer preferences, there will be a decreased demand for our products. ​ Increases in commodity or raw product input costs, such as fuel, packaging, and paper, could adversely affect our operating results. ​ Many factors may affect the cost and supply of fresh produce, including external conditions, commodity market fluctuations, currency fluctuations, changes in governmental laws and regulations, the war in Ukraine or conflict 9 elsewhere, agricultural programs, severe and prolonged weather conditions and natural disasters.
To the extent that consumers stop purchasing products that we produce due to health, food safety or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer preferences, there could be a decreased demand for our products. ​ Increases in commodity or raw product input costs, such as fuel, packaging, and paper, could adversely affect our operating results. ​ Many factors may affect the cost and supply of fresh produce, including external conditions, commodity market fluctuations, currency fluctuations, changes in governmental laws and regulations, the war in Ukraine or conflict elsewhere, agricultural programs, severe and prolonged weather conditions and natural disasters.
Like many companies, we publish an annual sustainability report covering topics including energy and emissions, fair labor, and sustainable 16 agriculture. While we believe the disclosures in our sustainability reports and elsewhere concerning ESG are accurate, we could still be subject to litigation involving ESG claims.
Like many companies, we publish an annual sustainability report covering topics including energy and emissions, fair labor, and sustainable agriculture. While we believe the disclosures in our sustainability reports and elsewhere concerning ESG are accurate, we could still be subject to litigation involving ESG claims.
Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. ​ We are also subject to the examination of our tax returns and other tax matters by the U.S.
Our effective tax rates could be affected by changes in the mix of 17 earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. ​ We are also subject to the examination of our tax returns and other tax matters by the U.S.
We may be unable to successfully 10 integrate businesses or the personnel of any business that might be acquired in the future, and our failure to do so could have a material adverse effect on our business and on the market price of our common stock.
We may be unable to successfully integrate businesses or the personnel of any business that might be acquired in the future, and our failure to do so could have a material adverse effect on our business and on the market price of our common stock.
For example, our production capacity for guacamole products is consolidated into a single manufacturing plant in the state of Michoacán, Mexico. Any significant production disruptions at this manufacturing site could result in a limitation of the availability of some or all our guacamole products.
For example, our production capacity for guacamole products is consolidated in a single manufacturing plant in the state of Michoacán, Mexico. Any significant production disruptions at this manufacturing site could result in a limitation of the availability of some or all our guacamole products.
Our production capacity for guacamole products is consolidated into a single manufacturing plant in the state of Michoacán, Mexico. Any significant production disruptions at this manufacturing site could result in a limitation of the availability of some or all our guacamole products.
Our production capacity for guacamole products is consolidated in a single manufacturing plant in the state of Michoacán, Mexico. Any significant production disruptions at this manufacturing site could result in a limitation of the availability of some or all our guacamole products.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, results of operations and financial condition could be adversely impacted. ​ 13 Human Capital Risks ​ We have recently transitioned new personnel into executive leadership positions and our future success will depend in part on our ability to manage this transition successfully.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, results of operations and financial condition could be adversely impacted. ​ 14 Human Capital Risks ​ We have recently transitioned new personnel into executive leadership positions and our future success will depend in part on our ability to manage this transition successfully.
Consumer demand for our products also may be impacted by any public commentary that consumers or certain regulatory bodies (including federal or state agencies involved in monitoring food safety) may make regarding our products or similar products.
Consumer demand for our products also may be impacted by any public commentary that consumers or certain regulatory bodies (including federal or state agencies involved in 16 monitoring food safety) may make regarding our products or similar products.
Any of these negative impacts, alone or in combination with others, also could exacerbate many of the other risk factors discussed in this report, including volatility in the trading prices of our common stock.
Any of these negative impacts, alone or in combination with others, also could exacerbate many of the other risk factors discussed in this report, including volatility in the trading prices of our common 20 stock.
Disruption to the timely supply of these services or dramatic increases in the cost of these services for any reason including availability of fuel for such services, labor disputes, governmental regulation, or governmental restrictions limiting specific forms of transportation could have an adverse effect on our business, financial condition and results of operations. ​ The acquisition of other businesses could pose risks to our operating income. ​ We intend to review acquisition prospects that would complement our business.
Disruption to the timely supply of these services or dramatic increases in the cost of these services for any reason including availability of fuel for such services, labor disputes, governmental regulation, or governmental restrictions limiting specific forms of transportation could have an adverse effect on our business, financial condition and results of operations. ​ The acquisition of other businesses could pose risks to our business, financial condition and results of operations. ​ We intend to review acquisition prospects that would complement our business.
Our results of operations may be adversely affected if we are unable to comply with existing and modified regulations and are unable to secure avocado import permits in the future. ​ The FDA establishes, and continues to modify, regulations governing the production of processed avocado products, such as the new Food Safety Modernization Act, which implements mandatory preventive controls for food facilities and compliance with mandatory produce safety standards.
Our results of operations may be adversely affected if we are unable to comply with existing and modified regulations and are unable to secure avocado import permits in the future. ​ The FDA establishes, and continues to modify, regulations governing the production of prepared avocado products, such as the new Food Safety Modernization Act, which implements mandatory preventive controls for food facilities and compliance with mandatory produce safety standards.
Importing avocados from Mexico to the U.S. depends on ours border remaining open, which has closed for trading in the past. ​ In November 2022, the Mexican Secretary of Labor and Social Welfare issued the criteria for subcontracting inspections noting that companies engaged in farming, packing, distribution, and export of fruit would have to internalize picking and hauling services.
Importing avocados from Mexico to the U.S. depends on our border remaining open, which has closed for trading in the past. ​ In November 2022, the Mexican Secretary of Labor and Social Welfare issued criteria for subcontracting inspections noting that companies engaged in farming, packing, distribution, and export of fruit would have to internalize picking and hauling services.
If one or more of our key business partners fail to perform as expected or contracted for any reason, our business could be negatively impacted. ​ Our insurance policies may not adequately protect us from liability or may negatively impact our financial condition and results of operations due to increasing costs. ​ While we believe that the extent of our insurance coverage is consistent with industry practice, such coverage does not cover all losses we may incur, even in areas for which we have coverage.
If one or more of our key business partners fail to perform as expected or contracted for any reason, our business could be negatively impacted. ​ Our insurance policies may not adequately protect us from liability and they may negatively impact our financial condition and results of operations due to the increasing premiums. ​ While we believe that the extent of our insurance coverage is consistent with industry practice, such coverage does not cover all losses we may incur, even in areas for which we have coverage.
Instability in financial markets may impact our ability, or increase the cost, to enter into new credit agreements in the future.
Instability in financial markets may impact our ability, or increase the cost, to enter into new credit agreements in the 22 future.
We may face difficulty in attracting, retaining and compensating key talent for a number of reasons, including competitive market conditions, the effect of recent company performance on the achievement of performance compensation conditions, and the need to align the vision of a new executive team with our Board’s vision for our Company.
We may face difficulty in attracting, retaining and compensating key talent for various reasons, including competitive market conditions, the effect of recent company performance on the achievement of performance compensation conditions, and the need to align the vision of a new executive team with our Board’s vision for our Company.
The degree to which we are leveraged on a consolidated basis could have important consequences to the holders of our securities, including: ● our ability in the future to obtain additional financing for working capital, capital expenditures or acquisitions may be limited; ● we may not be able to refinance our indebtedness on terms acceptable to us or at all; ● a significant portion of our cash flow may be dedicated to the payment of interest on our indebtedness, thereby reducing funds available for operations, capital expenditures, acquisitions and/or dividends on our common stock; and ● we may be more vulnerable to economic downturns and be limited in our ability to withstand competitive pressures. ​ Changing rules, public disclosure regulations and stakeholder expectations on ESG-related matters create a variety of risks for our business. ​ Increasingly, regulators, consumers, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
The degree to which we are leveraged on a consolidated basis could have important consequences to the holders of our securities, including: ● our ability in the future to obtain additional financing for working capital, capital expenditures or acquisitions may be limited; ● we may not be able to refinance our indebtedness on terms acceptable to us or at all; ● a significant portion of our cash flow may be dedicated to the payment of interest on our indebtedness, thereby reducing funds available for operations, capital expenditures, acquisitions and/or dividends on our common stock; and ● we may be more vulnerable to economic downturns and be limited in our ability to withstand competitive pressures. ​ Changing rules, public disclosure regulations and stakeholder expectations on environmental, social and corporate governance (“ESG”) related matters create a variety of risks for our business. ​ Increasingly, regulators, consumers, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
Consumer demand for our products also may be impacted by changes in the level of advertising or promotional support that are employed by (i) us, (ii) our retail/foodservice customers, or (iii) relevant industry groups or third parties that provide competing products.
Consumer demand for our products also may be impacted by changes in the level of advertising or promotional support employed by (i) us, (ii) our retail/foodservice customers, (iii) relevant industry groups, or (iv) third parties that provide competing products.
We purchase avocados from foreign growers and packers, sell fresh avocados and processed avocado products to foreign customers, and operate packinghouses and a processing plant in Mexico. Mexico is the largest source of our supply of avocados, and our operations are affected by events in that country.
We purchase avocados from foreign growers and packers, sell fresh avocados and prepared avocado products to foreign customers, and operate packinghouses and a processing plant in Mexico. Mexico is the largest source of our supply of avocados, and our operations are affected by events in that country.
Increases in interest rates may also affect consumer purchasing behavior, including for our fresh and processed food products. Additionally, the trading price of our common stock may be affected by the dividend yield on our common stock relative to market interest rates.
Increases in interest rates may also affect consumer purchasing behavior, including for our fresh and prepared food products. Additionally, the trading price of our common stock may be affected by the dividend yield on our common stock relative to market interest rates.
We have in the past, and we may in the future pay significant severance to departed executives.
We have paid in the past, and we may in the future pay, significant severance to departed executives.
The selling price received for each type of produce depends on factors such as the availability and quality of the produce item in the market and the availability and quality of competing types of produce. ​ In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products could reduce demand and prices for some of our products.
The selling price received for each type of produce depends on factors such as the availability and quality of the product in the market and the availability and quality of competing types of produce. ​ In addition, public perceptions regarding the quality, safety or health risks associated with particular food products could reduce demand and prices for some of our products.
These foreign currency fluctuations also affect the ultimate realization of foreign currency denominated assets and liabilities in US dollar terms. While hedging instruments may help reduce the volatility associated with currency rate changes, hedging instruments may not be readily available, may be too expensive or may be ineffective for the respective reduction in volatility desired.
These foreign currency fluctuations also affect the ultimate realization of foreign currency denominated assets and liabilities in U.S. dollar terms. While hedging instruments may help reduce the volatility associated with currency rate changes, hedging instruments may not be readily available, may be too expensive or may be ineffective for the respective reduction in volatility desired.
We do not control the operations of these investments, and our allocation of potential income or loss can increase or decrease our overall profitability significantly. ​ Any loans/notes or advances that we make to unconsolidated entities (such as the existing advances to Don Memo) may at some point in the future be deemed uncollectible and as such may materially and negatively impact our financial results in the period such determination is made.
We do not control the operations of this investment, and our allocation of potential income or loss can increase or decrease our overall profitability significantly. ​ Any loans/notes or advances that we make to unconsolidated entities (such as the existing advances to Don Memo) may at some point in the future be deemed uncollectible and as such may materially and negatively impact our financial results in the period such determination is made.
Similarly, we can lose our “kosher” certification if a manufacturing plant and raw materials do not meet the requirements of the appropriate kosher supervision organization.
Similarly, we can lose our “kosher” certification if a manufacturing plant and raw materials do not meet the requirements of the appropriate kosher supervisory organization.
We bear the risk that the rates we are charged by our lenders and lessors will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, or cause us to breach covenants contained in our credit agreement or leases, which could materially adversely affect our business, financial condition and results of operations.
We bear 10 the risk that the rates we are charged under the Credit Agreement and by lessors will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our obligations, or cause us to breach covenants contained in the Credit Agreement or leases, which could materially adversely affect our business, financial condition and results of operations.
Climate change regulation continues to evolve, and it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation. ​ Increased legislative, regulatory and public scrutiny on environmental, social, and corporate governance (“ESG”) issues including potential litigation involving our ESG practices or disclosures may adversely affect our business, and results of operations.
Climate change regulation continues to evolve, and it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation. ​ Increased legislative, regulatory and public scrutiny on ESG issues including potential litigation involving our ESG practices or disclosures may adversely affect our business, and results of operations.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain ​ Disruption of the supply or reliability of transportation services and/or significant increases in the cost of these services could impact our operating income. ​ We use multiple forms of transportation to bring our products to market, including truck, ocean, and air-cargo.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, and may require additional resources to restore our supply chain ​ Disruption of the supply or reliability of transportation services and/or significant increases in the cost of these services could have an adverse effect on our business, financial condition and results of operations. ​ We use multiple forms of transportation to bring our products to market, including truck, ocean, and air-cargo.
Increased supply could put downward pressure on the market price for avocados and also lead to a broader number of marketing and distribution competitors if we are unable to process sufficient supply to maintain our market share. ● We are subject to competition from other avocado packers.
Increased supply could put downward pressure on the market price for avocados and also lead to more marketing and distribution competitors if we are unable to process sufficient supply to maintain our market share. ● We are subject to competition from other avocado packers.
Additionally, any perceived failures to operate in accordance with domestic and international laws and regulations could cause consumers to no longer associate our company and our brands with high quality and safety products, may adversely affect the value of our brands and the demand for our products. ​ Unanticipated changes in US or international tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial performance. ​ We are subject to taxes in the US and Mexico.
Additionally, any perceived failures to operate in accordance with domestic and international laws and regulations could cause consumers to no longer associate our company and our brands with high quality and safety products, may adversely affect the value of our brands and the demand for our products. ​ Unanticipated changes in U.S. or international tax provisions, the adoption of new tax legislation, or exposure to additional tax liabilities could affect our business, results of operations and financial position. ​ We are subject to taxes in the U.S. and Mexico.
Our ability to market and sell our products successfully depends in part on our ability to identify changing consumer preferences and respond to those changes by offering products that appeal broadly to consumers in light of current demands.
Our ability to market and sell our products successfully depends in part on our ability to identify changing consumer preferences and respond to those changes by offering products that appeal broadly to consumers.
Any bankruptcy or other business disruption involving one of our significant customers also could adversely affect our results of operations. ​ Changes in our business relationships with California and Mexican growers could significantly impact our avocado supply in the U.S. ​ We are dependent on our long-term relationships with independent growers in California and Mexico to obtain and maintain our supply of avocados in the U.S.
Any bankruptcy or other business disruption involving one of our significant customers also could similarly adversely affect our business, financial condition, and results of operations. ​ Changes in our business relationships with California and Mexican growers could significantly impact our avocado supply. ​ We are dependent on our long-term relationships with independent growers in California and Mexico to obtain and maintain our supply of avocados in the United States.
A Special Committee of the Board of Directors (the “Special Committee”) was established to commence an investigation, with the assistance of external legal counsel and external forensic accountants. The Special Committee determined that certain of those matters related to the Company’s operations in Mexico raised potential issues under the 19 Foreign Corrupt Practices Act (“FCPA”).
A Special Committee of the Board of Directors (the “Special Committee”) was established to commence an investigation, with the assistance of external legal counsel and external forensic accountants. The Special Committee determined that certain of those matters related to the Company’s operations in Mexico raised potential issues under the FCPA.
However, there is no assurance that we will collect the full amount reflected in our financial statements. ​ We are subject to possible changing USDA and FDA regulations which govern the importation of foreign avocados into the United States and the processing of processed avocado products. ​ The USDA has established, and continues to modify, regulations governing the importation of avocados into the United States.
However, there is no assurance that we will be able to collect the full amounts recorded in our financial statements. ​ We are subject to possible changing USDA and FDA regulations which govern the importation of foreign avocados into the United States and the processing of prepared avocado products. ​ The USDA has established, and continues to modify, regulations governing the importation of avocados into the United States.
Shifts in consumer preferences that can impact demand for our products at any given time can result from a number of factors, including dietary trends, attention to particular nutritional aspects of our products, concerns regarding the health effects of particular ingredients, attention given to ingredient sourcing practices and general public perception of food safety risks.
Shifts in consumer preferences that can impact demand for our products can arise from various factors, including dietary trends, attention to particular nutritional aspects of our products, concerns regarding the health effects of particular ingredients, attention given to ingredient sourcing practices, and general public perception of food safety risks.
We, however, remain subject to risks related to the production of fresh and processed foods. ​ Industry Risks ​ We are subject to increasing competition that may adversely affect our operating results. ​ The fresh produce and prepared food markets in which we operate are highly competitive.
We, however, remain subject to risks related to the production of fresh and prepared foods. ​ 15 Industry Risks ​ We are subject to increasing competition that may adversely affect our business, financial condition and results of operations. ​ The fresh produce and prepared food markets in which we operate are highly competitive.
Our inability to maintain sufficient internal production capacity or our inability to enter into co-packing agreements on terms that are beneficial to us could have an adverse effect on our business.
Our inability to maintain sufficient internal production capacity or our inability to enter into co-packing agreements on reasonable terms could have an adverse effect on our business.
Management and key personnel changes may disrupt our operations, and we may have difficulty attracting and retaining qualified replacements. ​ We have experienced changes in management and other key personnel in critical functions across our organization, including our chief executive officer.
Management and key personnel changes may disrupt our operations, and we may have difficulty attracting and retaining qualified replacements. ​ We have experienced changes in management and other key personnel in critical functions across our organization, including our chief financial officer and other members of our accounting department.
Restrictions on or disruptions of transportation, border controls and closures, and other impacts on domestic and global supply chains and distribution channels could increase our costs for raw materials and commodity costs, increase demand for raw materials and 8 commodities, limit our ability to meet customer demand or otherwise have a material adverse effect on our business, financial condition, results of operation or cash flows. ​ Increases in interest rates could increase the cost of servicing our indebtedness and have an adverse effect on our results of operations, cash flows and stock price.
Restrictions on or disruptions to transportation, border controls, and closures—as well as other impacts on supply chains and distribution channels—could increase costs for raw materials and commodities, limit our ability to meet customer demand, or otherwise materially and adversely affect our business, financial condition, operating results, or cash flows. ​ Increases in interest rates could increase the cost of servicing our indebtedness and have an adverse effect on our results of operations, cash flows and stock price.
Management’s attention, or other resources, may be diverted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives. ​ System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or services provided to customers, and any such disruption could reduce our expected revenue, increase our expenses, damage our reputation and adversely affect our stock price. ​ Our information technology networks could be compromised by cyber attacks resulting in misappropriation of our confidential information or that of third parties, system disruptions or system shutdowns.
Management’s attention, or other resources, may be diverted if we fail to successfully complete or integrate business combinations or investment transactions. ​ 12 System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations and services provided to customers, and any such disruption could damage our reputation and adversely affect our business, financial condition and results of operations. ​ Our information technology networks could be compromised by cyber-attacks resulting in misappropriation of our confidential information or that of third parties, system disruptions or system shutdowns.
Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. ​ The loss of one or more of our largest customers, or a reduction in the level of purchases made by these customers, could negatively impact our sales and profits. ​ Sales to Kroger and Trader Joes, our largest customers, amounted to approximately 17% and 13% of our total net sales in 2023.
Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. ​ The loss of one or more of our largest customers, or a reduction in the level of purchases made by these customers, could negatively impact our sales and profits. ​ Sales to Walmart, our largest customer, amounted to approximately 12% of our total net sales in 2024.
These effects include a potential negative impact on the availability of our key personnel; disruptions of our facilities or facilities of our members, business partners, customers, suppliers, third-party service providers or other vendors; and interruption of domestic and global supply chains, distribution channels, liquidity and capital or financial markets.
The potential effects include negative impacts on the availability of key personnel; disruptions to our facilities or the facilities of our business partners, customers, suppliers, third-party service providers, or other vendors; and interruptions to domestic and global supply chains, distribution channels, and financial markets.
The Credit Agreement also contains a springing fixed charge coverage ratio financial covenant that is tested if the amount of the Revolving Loans available for Calavo to borrow under the New Credit Facility is less than 10% of the total revolving credit facility. ​ The Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to thresholds and grace periods, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default.
The Credit Agreement also contains a springing fixed charge coverage ratio financial covenant that is tested if the amount of the Revolving Loans available to borrow under the Credit Facility is less than 10% of the total revolving credit facility. ​ The Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to thresholds and grace periods, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default. 21 Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions.
Certain events of default under our credit agreement would prohibit us from paying dividends on our common stock. In addition, upon the occurrence of an event of default under our credit agreement, the lenders could elect to declare all amounts outstanding under the credit agreement, together with accrued interest, to be immediately due and payable.
In addition, upon the occurrence of an event of default under the Credit Agreement, the lenders could elect to declare all amounts outstanding under the Credit Agreement, together with accrued interest, to be immediately due and payable.
In July 2018, a local office of the SAT issued a final tax assessment (the “2013 Assessment”) totaling approximately $2.6 billion Mexican pesos (which includes annual adjustments for inflation, and equals approx. $143.8 million USD at October 31, 2023) related to a fiscal 2013 tax audit.
Our dispute with Mexican tax authorities related to the 2013 Tax Assessment may have a material adverse effect on our results of operations and financial position. ​ In July 2018, a local office of the SAT issued a final tax assessment (the “2013 Assessment”) totaling approximately $2.6 billion Mexican pesos (which includes annual adjustments for inflation, and equals approx. $128.9 million USD at October 31, 2024) related to a fiscal 2013 tax audit.
A portion of our workforce is unionized and labor disruptions could decrease our profitability. ​ While we believe that our relations with our employees and labor unions are good, we cannot ensure that we will be able to negotiate collective bargaining agreements on favorable terms, or at all, and without production interruptions, including labor stoppages.
If we fail to manage transitions successfully, we could experience significant delays or difficulty in the achievement of our development and strategic objectives and our business, financial condition and results of operations could be materially and adversely affected. ​ A portion of our workforce is unionized and labor disruptions could decrease our profitability. ​ While we believe that our relations with our employees and labor unions are good, we cannot ensure that we will be able to negotiate collective bargaining agreements on favorable terms, or at all, and without production interruptions, including labor stoppages.
For further details on this matter, see Note 14 in the consolidated financial statements. ​ We believe that our operations in Mexico are properly documented and our internationally recognized tax advisors believe that there are legal grounds to prevail in collecting the corresponding IVA amounts.
For additional details, see Note 14 in the consolidated financial statements. ​ 18 We believe our operations in Mexico are properly documented, and our internationally recognized tax advisors support our position that there are legal grounds to prevail in recovering the IVA amounts. Accordingly, we have recorded no provision related to these refunds.
If we are unable to consistently pay growers a competitive price for their avocados, these growers may choose to have their avocados marketed by alternate packers. ● The fresh-cut produce market is highly fragmented and we compete with a variety of national, regional and local manufacturers and distributors of fresh-cut produce in the geographies that we serve.
If we are unable to consistently pay growers a competitive price for their avocados, these growers may choose to have their avocados marketed by alternate packers. ● In the guacamole market we compete with a variety of global manufacturers and distributors. These competitors include both branded and non-branded producers.
Our credit facility currently bears interest at a variable rate, which will generally change as interest rates change. We also have various leases, and may enter into future equipment leases, with costs that increase as interest rates increase.
We also have various leases, and may enter into future equipment leases, with costs that increase as interest rates increase.
We may not be able to obtain additional financing, if required, in amounts or on terms acceptable to us, or at all. ​ 21 We are subject to restrictive debt covenants and other requirements related to our debt that limit our business flexibility by imposing operating and financial restrictions on our operations. ​ On June 26, 2023, Calavo and certain subsidiaries entered into a credit agreement (the “Credit Agreement”) by and among Calavo, certain subsidiaries of Calavo as guarantors, and Wells Fargo Bank, National Association, as agent and lender.
We may not be able to obtain additional financing, if required, in amounts or on terms acceptable to us, or at all. ​ We are subject to restrictive debt covenants and other requirements related to our debt that limit our flexibility by imposing operating and financial restrictions on our operations. ​ The Credit Agreement originally provided for a revolving credit facility of up to $90.0 million, along with a capex credit facility of up to $10.0 million.
Our Board of Directors may, in its sole discretion, decrease the level of dividends provided for in our dividend policy or entirely discontinue the payment of dividends.
Our Board of Directors may, in its sole discretion, decrease the level of dividends relative to those paid in the past, including entirely discontinuing the payment of dividends.
Future dividends with respect to shares of our capital stock, if any, depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions (including restrictions in our credit agreement), business opportunities, 12 provisions of applicable law (including certain provisions of the California Corporations Code) and other factors that our board of directors may deem relevant. ​ If our cash flows from operating activities were to fall below our minimum expectations (or if our assumptions as to capital expenditures or interest expense were too low or our assumptions as to the sufficiency of our credit facility were to prove incorrect), we may need to either reduce or eliminate dividends.
Future dividends 13 with respect to shares of our capital stock, if any, depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions (including restrictions in our Credit Agreement), business opportunities, provisions of applicable law (including certain provisions of the California Corporations Code) and other factors that our Board of Directors may deem relevant. ​ We have in the past had and may in the future incur substantial indebtedness which could restrict our ability to pay dividends and would impact our financing options and liquidity position. ​ Our ability to pay dividends is subject to restrictions contained in our Credit Agreement.
Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of these covenants, or failure to meet or maintain ratios or tests could result in a default under our credit agreement.
A breach of any of these covenants, or failure to meet or maintain ratios or tests could result in a default under the Credit Agreement. Certain events of default under the Credit Agreement would prohibit us from paying dividends on our common stock.
In addition, we will have expended significant management resources in an effort to complete the Proposed Transaction and will have incurred transaction costs ​ Holders of our common stock may not receive the level of dividends provided for in our dividend policy or any dividends at all. ​ Dividend payments are not mandatory or guaranteed and holders of our common stock do not have any legal right to receive, or require us to pay, dividends.
Deterioration of our relationships with our key growers could adversely affect our Grown business in the U.S., which could have an adverse effect on our business, financial condition and results of operations. ​ Holders of our common stock may not receive the level of dividends that we have paid in the past or any dividends at all. ​ Dividend payments are not mandatory or guaranteed and holders of our common stock do not have any legal right to receive, or require us to pay, dividends.
Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis. Beginning in fiscal 2014 and continuing into fiscal 2023, the tax authorities began objecting to refund requests and supporting documentation that had previously been deemed acceptable to process a refund.
Historically, CDM received IVA refunds from the Mexican tax authorities in a timely manner. However, since fiscal 2014 and continuing into fiscal 2024, the tax authorities have challenged refund requests and supporting documentation that were previously deemed acceptable. They have also questioned refunds related to IVA paid to certain suppliers alleged to have failed to meet their own tax obligations.
This amount has been adjusted for inflation as of October 31, 2023 to the amount of $3 billion Mexican pesos (approx. $166.0 million USD). Additionally, the tax authorities have determined that we owe our employees profit-sharing liability, totaling approximately $118 million Mexican pesos (approx. $6.5 million USD at October 31, 2023).
This amount has been adjusted for inflation as of October 31, 2024 to the amount of $3 billion Mexican pesos (approx. $148.8 million USD).
Further, we cannot assure you that the provision for this matter in our financial statements will be adequate to fund any settlement we may ultimately enter into or any amount of taxes. ​ 18 Our dispute with the Mexican tax authorities related to taxes receivable may have a material adverse effect on our results of operations and financial position. ​ As of October 31, 2023, and October 31, 2022, CDM IVA receivables totaled $49.9 million (913.6 million Mexican pesos) and $43.6 million (865.4 million Mexican pesos).
An adverse result could materially impact our financial condition and potentially trigger defaults under our credit facility. ​ Our dispute with the Mexican tax authorities related to taxes receivable may have a material adverse effect on our results of operations and financial position. ​ As of October 31, 2024, and October 31, 2023, CDM's IVA receivables, net of our estimated provision for uncollectable amounts, totaled $48.7 million (976.0 million Mexican pesos) and $49.9 million (913.6 million Mexican pesos).
Currently, we are in the process of collecting such balances primarily through regular administrative processes, but these amounts may ultimately need to be recovered through Administrative Appeals and/or other legal means.
These factors, among others, have contributed to delays in processing IVA claims. ​ We are actively pursuing the collection of these balances through regular administrative processes, but recovery may ultimately require Administrative Appeals or other legal actions.
The overall availability and quality of produce items that we purchase for processing can have a meaningful impact on sales and profitability of our Prepared reporting unit.
To compete globally, we must be able to source, sell, and distribute globally. The overall availability and quality of our avocado source from which we produce our guacamole products can have a meaningful impact on sales and profitability. ​ A recall of our products could have a material adverse effect on our business.
Removed
Deterioration of our relationships with our key growers could adversely affect our Grown business in the U.S., which could have an adverse effect on our business, financial condition and results of operations. ​ 11 We may not be successful in achieving targeted savings and efficiencies from cost reduction initiatives and related strategic initiatives, including Project Uno. ​ During the third quarter of 2021, we launched Project Uno, a strategic set of initiatives that seeks to identify areas of operating efficiencies and cost savings to expand profit margins, cash flow and return on invested capital.
Added
The successful transition and carve-out of operations after the Fresh Cut business divestiture involves operational, strategic, and financial risks.
Removed
We have undertaken multiple productivity and transformation initiatives, including (1) closure and transfer of certain facilities, (2) implementing broader supply chain operational improvements, (3) integrating our commercial, logistics, IT, procurement and accounting functions across the three divisions, (4) product rationalization initiatives which are aimed at eliminating unprofitable or slow moving SKUs and (5) outsourcing certain functions in our North American business to third-party service providers and the associated implementation of new procurement technology solutions. ​ We may not be successful in fully implementing our productivity plans or realizing our anticipated savings and efficiencies, including potentially as a result of factors outside our control.
Added
These include the reallocation of resources and focus on our remaining business segments, which could divert management’s attention and impact efficiency and profitability. ​ Additionally, the reduced scale of our operations may lead to revenue fluctuations and challenges in managing fixed costs, potentially affecting our financial performance. ​ We also face risks associated with the allocation and use of proceeds from the divestiture.
Removed
If we are unable to fully realize the anticipated savings and efficiencies of our cost reduction initiatives and related strategic initiatives, including Project Uno, our profitability may be materially and adversely impacted. ​ The potential sale of our Fresh Cut business is subject to various risks and uncertainties and may not be completed on the currently contemplated timeline or terms, or at all. ​ We and certain of our subsidiaries have entered into non-binding, exclusive negotiations regarding the potential sale of all of the assets used in our Fresh Cut business and certain related real property (the “Proposed Transaction”).
Added
Investment decisions related to these proceeds may not yield the anticipated returns and could negatively impact shareholder value if not effectively deployed. ​ Any failure to address these risks could materially and adversely affect our business, financial condition, and results of operations. ​ Manufacturing and Supply Chain Disruption ​ Outbreaks of contagious diseases, sporadic pest challenges, and other adverse public health and environmental developments in the countries and states where we operate have had, and may continue to have, a material adverse effect on our business, financial condition, and operations.
Removed
The closing of the Proposed Transaction is subject to the negotiation and execution of a binding agreement.
Added
These challenges can create operational disruptions in the manufacturing of our products and in the supply chains that support our ability to deliver products to consumers.
Removed
There can be no assurance that a binding agreement will result from the current negotiations, and if a binding agreement does result, the price, structure, form of consideration (for example, cash, promissory, equity) and other material terms may be materially different than currently expected.
Added
In June 2023, Calavo and certain subsidiaries entered into a credit agreement (the “Credit Agreement”) by and among Calavo, certain subsidiaries of Calavo as guarantors, and Wells Fargo Bank, National Association, as agent and lender. This credit facility currently bears interest at a variable rate, which will generally change as interest rates change.
Removed
Whether a binding agreement results, and the terms thereof, may depend on the continuing financial and operating performance of the Fresh Cut business during the negotiation process and the proposed purchaser’s willingness and ability to provide the capital and/or financing necessary to complete the transaction.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties ​ We lease our corporate headquarters building from Limoneira, which building is located in Santa Paula, California. In addition, we lease a corporate office in Rancho Cordova, California. We have numerous facilities throughout the United States and three facilities in Mexico.
Biggest changeItem 2. Properties ​ Our corporate headquarters is located in Santa Paula, California, in a leased building. Our RFG Business leased a corporate office in Rancho Cordova, California, which the lease expired in November 2024. We also operate numerous facilities across the United States and maintain three facilities in Mexico.
See the following table for a summary of our locations: 23 ​ United States Locations: ​ Packinghouses: ​ ​ ​ ​ ​ Leased or Owned: City State Description ​ Owned ​ Santa Paula ​ California ​ Primarily handles fresh avocados. The facility was purchased in 1955 and has been improved in capacity and efficiency since then.
See the following table for a summary of our locations: 24 ​ United States Locations: ​ Packinghouses: ​ ​ ​ ​ ​ Leased or Owned: City State Description ​ Owned ​ Santa Paula ​ California ​ Primarily handles fresh avocados. The facility was purchased in 1955 and has been improved in capacity and efficiency since then.
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ Mexico Locations: ​ Packinghouses and Processing Facility: ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or Owned: ​ City ​ State ​ Description ​ Owned ​ Uruapan ​ Michoacan ​ Our guacamole processing facility produces our guacamole products.
We believe that the annual capacity will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25 Mexico Locations: ​ Packinghouses and Processing Facility: ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or Owned: ​ City ​ State ​ Description ​ Owned ​ Uruapan ​ Michoacan ​ Our guacamole processing facility produces our guacamole products.
We believe that the annual capacity of this facility will be sufficient to process its forecasted annual production needs. See Note 7 to our consolidated financial statements ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned ​ Ciudad Guzman ​ Jalisco ​ Opened in the third quarter of 2017, this facility primarily handles fresh avocados.
We believe that the annual capacity of this facility will be sufficient to process its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned ​ Ciudad Guzman ​ Jalisco ​ Opened in the third quarter of 2017, this facility primarily handles fresh avocados.
Removed
We believe that the annual capacity will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Houston ​ Texas ​ Prepared products facility that primarily processes fresh-cut fruits and vegetables, and prepared foods.
Removed
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned ​ Riverside ​ California ​ Prepared products facility that primarily processes fresh-cut fruits and vegetables, and prepared foods.
Removed
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Sacramento ​ California ​ Prepared products facility that primarily processes fresh-cut fruits and vegetables, and prepared foods.
Removed
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ 24 eased ​ ​ ​ ​ ​ ​ Leased or Owned: ​ City ​ State ​ Description Leased ​ Clackamas ​ Oregon ​ Opened in the fourth quarter of fiscal 2019, this Prepared products facility primarily processes fresh-cut fruits and vegetables, and prepared foods.
Removed
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ Leased ​ Conley ​ Georgia ​ Opened in the third quarter of fiscal 2019, this Prepared products facility primarily processes fresh-cut fruits and vegetables, and prepared foods.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Our common stock trades on The Nasdaq Global Select Market under the symbol "CVGW". ​ The following tables set forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on the Nasdaq Global Select Market. ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2023 High Low First Quarter ​ $ 37.41 ​ $ 29.00 ​ Second Quarter ​ $ 45.24 ​ $ 22.80 ​ Third Quarter ​ $ 38.26 ​ $ 28.84 ​ Fourth Quarter ​ $ 38.24 ​ $ 24.40 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 High Low First Quarter ​ $ 44.56 ​ $ 37.00 ​ Second Quarter ​ $ 45.26 ​ $ 32.75 ​ Third Quarter ​ $ 44.57 ​ $ 28.76 ​ Fourth Quarter ​ $ 45.50 ​ $ 29.51 ​ ​ Shareholders ​ As of November 30, 2023, there were 770 stockholders of record of our common stock. ​ Dividend Policy ​ Our dividend policy has historically provided for an annual dividend payment, as determined by the Board of Directors.
Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Our common stock trades on The Nasdaq Global Select Market under the symbol "CVGW". ​ Shareholders ​ As of December 31, 2024, there were 735 stockholders of record of our common stock. ​ Dividend Policy ​ Our dividend policy has historically provided for an annual dividend payment, as determined by the Board of Directors.
In making this comparison, we have assumed an investment of $100 in Calavo Growers, Inc. common stock, the Nasdaq Market Index, the Peer Group Index as of October 31, 2018. We have also assumed the reinvestment of all dividends.
In making this comparison, we have assumed an investment of $100 in Calavo Growers, Inc. common stock, the Nasdaq Market Index, the Peer Group Index as of October 31, 2019. We have also assumed the reinvestment of all dividends.
In November 2022, we announced that we would begin declaring and paying dividends quarterly rather than annually, as had been our practice. ​ On December 14, 2022, we paid a dividend of $0.2875 per share, or an aggregate of $5.2 million, to shareholders of record on November 16, 2022.
In November 2022, we announced that we would begin declaring and paying dividends quarterly rather than annually, as had been our practice. ​ On January 31, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on January 26, 2024.
On October 11, 2023, we paid a $0.10 per share dividend in the aggregate amount of $1.8 million to shareholders of record on September 27, 2023. ​ 26 Shareholder Return Performance Graph ​ The following graph compares the performance of our common stock with the performance of the Nasdaq Market Index and a Peer Group of major diversified companies in our same industry for approximately the 60-month period beginning October 31, 2018 and ending October 31, 2023.
On October 30, 2024, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million, to shareholders of record on October 2, 2024. ​ 26 Shareholder Return Performance Graph ​ The following graph compares the performance of our common stock with the performance of the Nasdaq Market Index and a Peer Group of major diversified companies in our industry for approximately the 60-month period beginning October 31, 2019 and ending October 31, 2024.
Our Peer Group Index includes the companies of: Andersons, Inc., B&G Foods, Inc., Boston Beer Company, Inc., Fresh Del Monte Produce, Inc., Hain Celestial Group, Inc., Hostess Brands, Inc., J&J Snack Foods, Corp., John B Sanfilippo & Son, Inc., and Landec, Corp. ​ ​ 10/18 10/19 10/20 10/21 10/22 10/23 Calavo Growers, Inc. 100.00 90.34 70.84 43.11 38.14 28.47 NASDAQ Composite 100.00 114.77 152.47 218.01 155.75 183.76 Peer Group 100.00 104.33 158.68 134.68 99.79 94.01 ​ ​ ​
Our Peer Group Index includes the companies of: Andersons, Inc., B&G Foods, Inc., Boston Beer Company, Inc., Fresh Del Monte Produce, Inc., Hain Celestial Group, Inc., J&J Snack Foods, Corp., John B Sanfilippo & Son, Inc., and Landec, Corp. ​ ​ 10/19 10/20 10/21 10/22 10/23 10/24 Calavo Growers, Inc. 100.00 78.41 47.72 42.22 31.52 33.69 NASDAQ Composite 100.00 132.84 189.96 135.70 160.11 227.14 Peer Group 100.00 152.09 129.09 95.65 90.11 87.27 ​ ​ ​
On April 6, 2023, we paid a $0.10 per share dividend in the aggregate amount of $1.7 million to shareholders of record on March 24, 2023. On July 11, 2023, we paid a $0.10 per share dividend in the aggregate amount of $1.8 million to shareholders of record on June 27, 2023.
On April 29, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on April 1, 2024. On July 30, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on July 2, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe continue to seek to expand our relationships with major foodservice companies and food retailers and develop alliances that will allow our products to reach more consumers. ​ 28 The operating results of all of our businesses have been, and will continue to be, affected by quarterly and annual fluctuations and market downturns due to a number of factors, including but not limited to pests and disease, weather patterns, changes in demand by consumers, food safety advisories, the timing of the receipt, reduction, or cancellation of significant customer orders; the gain or loss of significant customers; market acceptance of our products; our ability to develop, introduce, and market new products on a timely basis; the availability, quality and price of raw materials; new product introductions by our competitors; the utilization of production capacity at our various plant locations; change in the mix of products that our Grown and Prepared segments sell; and general economic conditions.
Biggest changeThese include, but are not limited to, pests and diseases, weather patterns, shifts in consumer demand, food safety advisories, timing, reduction, or cancellation of significant customer orders, gains or losses of key customers, market acceptance of our products, and our ability to develop, introduce, and market new products in a timely manner. 28 ​ Additional factors include the availability, quality, and cost of raw materials, new product launches by competitors, utilization rates at our production facilities, changes in product mix across our Grown and Prepared segments, and general economic conditions. ​ Despite these challenges, we believe our diversified sourcing capabilities, value-added production infrastructure, and strong customer relationships position us well to manage risks and achieve favorable operating results for the foreseeable future . ​ Recent Developments ​ Dividend payment ​ On January 31, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on January 26, 2024.
On an ongoing basis, we re-evaluate all of our estimates, including those related to the areas of customer and grower receivables, IVA tax receivables, inventories, useful lives of property, plant and equipment, promotional allowances, equity income/losses and impairment analysis from unconsolidated entities, loans to unconsolidated entities, income taxes, retirement benefits, and commitments and contingencies.
On an ongoing basis, we re-evaluate our estimates, including those related to the areas of customer and grower receivables, IVA tax receivables, inventories, useful lives of property, plant and equipment, promotional allowances, equity income/losses and impairment analysis from unconsolidated entities, loans to unconsolidated entities, income taxes, retirement benefits, and commitments and contingencies.
Selling, general and administrative expenses increased by $0.9 million, or 1%, for the year ended October 31, 2023 compared to the prior year period. This increase was primarily due to $2.9 million paid in severance and other costs and $1.6 million in stock-based compensation related to executive departures.
Selling, general and administrative expenses increased by $0.7 million, or 2%, for the year ended October 31, 2023 compared to the prior year period. This increase was primarily due to $2.9 million paid in severance and other costs and $1.6 million in stock-based compensation related to executive departures.
Any determination that the Company’s operations or activities were not in compliance with laws, including the FCPA, could result in the imposition of material fines and penalties and the imposition of 29 equitable remedies. See “Risk Factors” included in this Annual Report.
Any determination that the Company’s operations or activities were not in compliance with laws, including the FCPA, could result in the imposition of material fines and penalties and the imposition of equitable remedies. See “Risk Factors” included in this Annual Report.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ​ You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and notes thereto that appear elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ​ You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and notes thereto that appear elsewhere in this Annual Report. This discussion and analysis contain forward-looking statements that involve risks, uncertainties, and assumptions.
First, U.S. avocado demand continues to grow, with per capita consumption in 2022/2023 per USDA reaching 9.2 pounds per person, and approximately 64% higher than the estimate from a decade ago.
First, U.S. avocado demand continues to grow, with per capita consumption in 2023/2024 per USDA reaching 9.2 pounds per person, and approximately 64% higher than the estimate from a decade ago.
The applicable margin is (i) for Revolving Loans, 0.50% for base rate borrowings and 1.50% for SOFR term rate borrowings, and (ii) for Term Loan, 1.00% for base rate borrowings and 2.00% for SOFR term rate borrowings. The New Credit Facility matures on June 26, 2028. As of October 31, 2023, we were in compliance with the financial covenants.
The applicable margin is (i) for Revolving Loans, 0.50% for base rate borrowings and 1.50% for SOFR term rate borrowings, and (ii) for Term Loan, 1.00% for base rate borrowings and 2.00% for SOFR term rate borrowings. The Credit Facility matures on June 26, 2028. As of October 31, 2024, we were in compliance with the financial covenants.
The tomato is the fourth most popular fresh-market vegetable (though a fruit scientifically speaking, tomatoes are more commonly considered a vegetable) behind potatoes, lettuce, and onions in the U.S. Over the past few decades, per capita consumption of tomatoes has been on the rise due primarily to the enduring popularity of salads, salad bars, and submarine sandwiches.
The tomato is the fourth most popular fresh-market vegetable (though a fruit scientifically speaking, tomatoes are often considered a vegetable) behind potatoes, lettuce, and onions in the U.S. Over the past few decades, per capita consumption of 34 tomatoes has been on the rise due primarily to the enduring popularity of salads, salad bars, and submarine sandwiches.
See Note 10 in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information about our business segments. ​ Our Grown products business grades, sizes, packs, cools, and ripens (if desired) avocados for delivery to our customers.
See Note 10 in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information about our business segments. ​ Our Grown products business grades, sizes, packs, cools, and, when requested, ripens avocados for delivery to our customers.
As discussed above, even though a majority of our tomato sales are made on a consignment basis, we had lower gross profit from third-party growers/packers compared to prior year. ​ Prepared products ​ Fiscal 2023 vs.
As discussed above, even though a majority of our tomato sales are made on a consignment basis, we had lower gross profit from third-party growers/packers compared to the prior year. ​ 38 Prepared products ​ Fiscal 2024 vs.
The Company has voluntarily disclosed this ongoing internal investigation to the SEC and the Department of Justice ("DOJ"), and the Company intends to fully cooperate with the SEC and the DOJ in connection with these matters.
The Company has voluntarily disclosed this ongoing internal investigation to the SEC and the DOJ, and the Company intends to fully cooperate with the SEC and the DOJ in connection with these matters.
During fiscal 2023, 2022 and 2021, we remitted approximately $5.5 million, $4.2 million and $5.7 million to APEAM primarily related to these marketing activities for Mexican avocados. ​ We also believe that our other Grown products, primarily tomatoes, are positioned for future growth.
During fiscal 2024, 2023, and 2022, we remitted approximately $4.3 million, $5.5 million, and $4.2 million, to APEAM primarily for marketing activities related to Mexican avocados. ​ We also believe that our other Grown products, primarily tomatoes, are positioned for future growth.
We will continue to pursue grower recruitment opportunities and expand relationships with retail and/or foodservice customers to fuel growth in each of our business segments. ​ On June 26, 2023, Calavo and certain subsidiaries entered into a Credit Agreement by and among, Calavo, certain subsidiaries of Calavo as guarantors, and Wells Fargo Bank, National Association, as agent and lender.
We will continue to pursue grower recruitment opportunities and expand relationships with retail and/or foodservice customers to fuel growth in each of our business segments. ​ On June 26, 2023, Calavo and certain subsidiaries entered into the “Credit Agreement” by and among Calavo, certain subsidiaries of Calavo as guarantors, and Wells Fargo Bank, National Association, as agent and lender (“Agent”).
The fair value of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded.
The quantitative assessment of the Company’s Prepared reporting unit was determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded.
Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those presented under "Risks Related to Our Business" included in Item 1A and elsewhere in this Annual Report. ​ Overview ​ We are a leading marketer, processor, and distributor of avocados and other value-added fresh foods to customers throughout the world.
Actual results may differ materially from those anticipated in these forward-looking statements because of various factors, including, but not limited to, those presented under "Business and Operational Risks", included in Item 1A and elsewhere in this Annual Report. ​ Overview ​ We are a leading marketer, processor, and distributor of avocados and other value-added fresh foods, serving customers worldwide.
Actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods. ​ Management has discussed the development and selection of critical accounting estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting estimates in this Annual Report. ​ We believe the following are the more significant judgments and estimates used in the preparation of our consolidated financial statements. ​ 2013 Mexican Tax Audit Assessment.
Actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods. ​ Management has discussed the development and selection of critical accounting estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting estimates in this Annual Report. ​ We believe the following are the critical judgments and estimates used in the preparation of our consolidated financial statements. ​ 30 As discussed in Notes 7 and 14 in the consolidated financial statements, our accounting for Mexican tax matters, including the 2013 tax assessment and IVA receivables, involves significant judgment and estimation uncertainty.
Additionally, we also believe that avocados and avocado based products will further penetrate other markets that we currently operate in as interest in avocados continues to expand. ​ In October 2002, the USDA announced the creation of a Hass Avocado Board to promote the sale of Hass variety avocados in the US.
Additionally, we also believe that avocados and avocado based products will further penetrate other markets that we currently operate in as interest in avocados continues to expand. ​ In October 2002, the USDA established the Hass Avocado Board to promote the sale of Hass avocados in the U.S. market.
We believe that the incremental funding of promotional and advertising programs in the U.S. will, in the long term, positively impact average selling prices and will favorably impact our avocado businesses. During fiscal 2023, 2022 and 2021, on behalf of avocado growers, we remitted approximately $0.5 million, $1.5 million and $1.0 million to the California Avocado Commission.
We believe that the incremental funding for promotional and advertising programs in the U.S. will have a positive long-term impact on average selling prices and will benefit our avocado business. During fiscal 2024, 2023, and 2022, we remitted approximately $2.0 million, $0.5 million, and $1.5 million, to the California Avocado Commission on behalf of avocado growers.
Fiscal year 2023 operating cash flows reflect our net loss of $8.0 million, net increase of noncash charges (depreciation and amortization, stock-based compensation expense, provision for losses on accounts receivable, losses from unconsolidated entities, deferred taxes, loss on disposal of property, plant and equipment, reserve for Mexican IVA receivables, the divestiture of our salsa business and gain on the sale of the Temecula packinghouse) of $28.2 million and a net decrease from changes in the non-cash components of our working capital accounts of approximately $34.7 million. ​ Decreases in operating cash flows caused by working capital changes include a net decrease in accounts payable, accrued expenses of $15.1 million, an increase in other assets of $7.6 million, a decrease in payable to growers of $5.4 million, an increase in prepaid expenses and other current assets of $5.4 million, an increase in accounts receivable of $2.4 million, an increase in advances to suppliers of $1.3 million, and an increase in inventory of $1.0 million, partially offset by a decrease in income taxes receivable of $3.6 million. ​ The decrease in accounts payable, accrued expenses and other liabilities is primarily related to the timing of payments in October 2023.
Fiscal year 2024 operating cash flows reflect our net loss of $1.0 million, net increase of noncash charges (depreciation and amortization, stock-based compensation expense, goodwill impairment, losses from unconsolidated entities, deferred taxes, loss on disposal of property, plant and equipment, reserve for Mexican IVA receivables, gain on the sale of the Temecula packinghouse, gain on sale of the Fresh Cut business, operating lease expense and amortization of debt issuance costs) of $15.7 million and a net increase from changes in the non-cash components of our working capital accounts of approximately $10.2 million. ​ The increase in operating cash flows was caused by working capital changes including an increase in payable to growers of $3.6 million, a decrease in other assets of $2.8 million, an increase in income tax payables of $2.9 million, a decrease in prepaid expenses and other current assets of $1.6 million, a decrease in advances to suppliers of $0.7 million, a decrease in income tax receivable of $0.2 million, and a net increase in accounts payable and accrued expenses of $7.0 million partially offset by an increase in accounts receivables of $6.5 million and an increase in inventories of $1.9 million. ​ The increase in accounts payable, accrued expenses and other liabilities is primarily related to the timing of payments.
These discrete items were primarily related the lack of deductibility of certain Mexican tax expenses. In addition, we recognized $5.7 million of additional income tax provision expenses during fiscal 2023 related to the recording of additional valuation allowance and other permanent differences. ​ For fiscal 2022, we incurred return to provision discrete taxable items in the amount of $2.0 million.
These discrete items were primarily related the lack of deductibility of certain Mexican tax expenses. In addition, we recognized $0.7 million of income tax provision benefit during fiscal 2024 related to the other permanent differences and release of valuation allowances. ​ For fiscal 2023 continuing operation, we incurred $0.2 million return to provision discrete taxable items.
For fiscal 2022, as compared to fiscal 2021, the increase in interest expense was due to higher interest rates, as well as a higher average debt balance. ​ Other Income, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ (Dollars in thousands) Other income, net $ 316 (69) % $ 1,017 0 % $ 1,016 Percentage of net sales ​ 0.0 % ​ ​ 0.1 % ​ ​ — % ​ Other income, net includes dividend income, as well as certain other transactions that are outside of the normal course of operations.
For fiscal 2023, as compared to fiscal 2022, the increase in interest expense was due to higher interest rates, as well as a higher average debt balance. ​ Other Income, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ Change ​ 2023 ​ Change ​ 2022 ​ ​ (Dollars in thousands) Other income, net $ 641 147 % $ 260 (68) % $ 803 Percentage of net sales ​ 0.1 % ​ ​ 0.0 % ​ ​ 0.1 % ​ Other income, net includes transactions that are outside of the normal course of operations.
Goodwill, defined as unidentified asset(s) acquired in conjunction with a business acquisition, is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We continue to monitor developments, and any material changes will be reflected in future periods as they occur. ​ Goodwill ​ Goodwill, defined as unidentified asset(s) acquired in conjunction with a business acquisition, is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
A Special Committee of the Board of Directors (the “Special Committee”) was established to commence an investigation, with the assistance of external legal counsel and external forensic accountants. The Special Committee determined that certain of those matters related to the Company’s operations in Mexico raised potential issues under the Foreign Corrupt Practices Act (“FCPA”).
The Special Committee was established to commence an investigation, with the assistance of external legal counsel and external forensic accountants. The Special Committee determined that certain of those matters related to the Company’s operations in Mexico raised potential issues under the FCPA.
Fiscal 2022: ​ Net sales for the Prepared products business decreased by approximately $48.3 million, or 10%, for the year ended October 31, 2023 compared to the corresponding period in fiscal 2022.
Fiscal 2023: ​ Net sales for the Prepared products business decreased by approximately $2.7 million, or 4%, for the year ended October 31, 2024, compared to the corresponding period in fiscal 2023.
During fiscal 2023, 2022 and 2021, we remitted approximately $8.0 million, $8.1 million and $8.3 million to the Hass Avocado Board related to avocados. Similarly, Avocados from Mexico (AFM) was formed in 2013 as the marketing arm of the Mexican Hass Avocados Importers Association (MHAIA) and the Association of Growers and Packers of Avocados From Mexico (APEAM).
Additionally, we remitted approximately $5.6 million, $8.0 million, and $8.1 million to the Hass Avocado Board in support of these activities. Similarly, in 2013, Avocados From Mexico (AFM) was formed as the marketing arm of the Mexican Hass Avocados Importers Association (MHAIA) and the Association of Growers and Packers of Avocados From Mexico (APEAM).
The increase in tomato sales was primarily due to an 8% increase in the sales price per carton, and an 8% increase in volume sold. ​ Fiscal 2022 vs. Fiscal 2021: ​ Net sales for the Grown products business increased by approximately $111.7 million, or 19%, for the year ended October 31, 2022 compared to the prior year period.
The decrease in tomato sales was primarily due to a 17% decrease in volume sold offset by a 19% increase in the sales price per carton. ​ Fiscal 2023 vs. Fiscal 2022: ​ Net sales for the Grown products business decreased by approximately $170.8 million, or 24%, for the year ended October 31, 2023 compared to the prior year period.
In addition, we recognized additional income tax provision expenses during fiscal 2022 related to the recording of additional valuation allowance and other permanent differences. ​ Net loss (income) attributable to noncontrolling interest ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 Change 2022 Change 2021 ​ ​ (Dollars in thousands) Net loss (income) attributable to noncontrolling interest ​ $ (377) ​ (207) % $ 353 ​ 239 % $ 104 Percentage of net sales ​ ​ 0.0 % ​ ​ ​ 0.0 % ​ ​ ​ 0.0 % ​ For fiscal years 2023, 2022 and 2021, the net loss (income) attributable to noncontrolling interest is due to income/losses from Avocados de Jalisco. ​ ​ 45 ​ Liquidity and Capital Resources ​ Cash used in operating activities for fiscal 2023 was $14.5 million.
In addition, we recognized $3.1 million of additional income tax provision expenses during fiscal 2023 related to the other permanent differences. ​ Net loss (income) attributable to noncontrolling interest ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 Change 2023 Change 2022 ​ ​ (Dollars in thousands) Net loss (income) attributable to noncontrolling interest ​ $ (52) ​ (86) % $ (377) ​ (207) % $ 353 Percentage of net sales ​ ​ (0.0) % ​ ​ ​ (0.0) % ​ ​ ​ 0.0 % ​ For fiscal years 2024, 2023 and 2022, the net loss (income) attributable to noncontrolling interest is due to income/losses from Avocados de Jalisco. ​ Liquidity and Capital Resources ​ Cash provided by operating activities was $24.4 million and $50.2 million for fiscal year 2024 and 2022.
Restricted cash, cash and cash equivalents as of October 31, 2023 and 2022 totaled $2.9 million and $3.1 million, respectively.
Restricted cash, cash and cash equivalents as of October 31, 2024 and 2023 totaled $57.0 million and $2.9 million, respectively.
For the years ended October 31, 2023, 2022 and 2021, we recognized losses of $0.9 million, $0.6 million and of $1.7 million, respectively, related to Don Memo. ​ Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ (Dollars in thousands) Interest income $ 605 21 % $ 500 49 % $ 335 Percentage of net sales ​ 0.0 % ​ ​ 0.0 % ​ ​ 0.0 % ​ The increase in interest income in fiscal 2023 as compared to 2022 is primarily due to the increase in the amount owed from our tomato growers from loans and infrastructure advances.
For the years ended October 31, 2024, 2023 and 2022, we recognized losses of $0.5 million, $0.9 million and of $0.6 million, respectively, related to Don Memo. ​ Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ Change ​ 2023 ​ Change ​ 2022 ​ ​ (Dollars in thousands) Interest income $ 1,020 69 % $ 605 21 % $ 500 Percentage of net sales ​ 0.2 % ​ ​ 0.1 % ​ ​ 0.1 % ​ The increase in interest income in fiscal 2024 as compared to 2023 is primarily due to interest earned on the net proceeds from the sale of the Fresh Cut business.
As of October 31, 2023, approximately $40.0 million was available for borrowing, based on our borrowing base calculation discussed above. ​ The weighted-average interest rate under the New Credit Facility was 7.1% at October 31, 2023.
As of October 31, 2024, approximately $51.8 million was available for borrowing, based on the borrowing base calculation discussed above. ​ The weighted-average interest rate under the Credit Facility was 7.2% for the fiscal year ended October 31, 2024.
The Company concluded based on quantitative assessment tests that no goodwill impairment existed in the fiscal years ended October 31, 2023 and 2022.
Other than the goodwill impairment charge of $9.3 million, as discussed above, the Company concluded based on quantitative assessment tests that no goodwill impairment existed in the fiscal years ended October 31, 2024, and 2023.
The majority of our tomato sales are made on a consignment basis, in which the gross profit we earn is generally based on a commission agreed to with each party, which usually is a percent of the overall selling price; however, we also purchase some tomatoes on the spot market to meet specific customer requests and have certain fixed overhead costs associated with our tomato operations which impact the overall gross profit realized from tomato sales.
We, however, also purchase some tomatoes on the spot market to meet specific customer requests and have certain fixed overhead costs associated with our tomato operations which impact the overall gross profit realized from tomato sales.
(the “Existing Credit Facility”) of $34.9 million) , and the receipt of $4.1 million from our Term Loan with Wells Fargo, partially offset by $10.4 million of dividend payments, proceeds from payments on long-term obligations of $1.9 million, debt issuance costs of $0.7 million, and the payment of minimum withholding taxes on net share settlement of equity awards of $0.1 million. ​ Our principal sources of liquidity are cash generated from operations and amounts available for borrowing under our Credit Facility.
Cash used during fiscal year 2024 primarily relates to the net payments to our credit facility totaling $35.0 million, dividend payments of $9.0 million, payment of the Term Loan of $4.1 million, long-term obligation payments of $1.5 million, the payment of minimum withholding taxes on net share settlement of equity awards of $0.7 million and the payment of debt issuance costs of $0.2 million. ​ Our principal sources of liquidity are cash generated from operations and amounts available for borrowing under our Credit Facility.
Our expertise in marketing and distributing avocados and developing and manufacturing prepared avocado products and other value-added fresh foods allows us to deliver a wide array of food products to retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers throughout the world but primarily in the United States.
Our expertise in marketing and distributing avocados, as well as developing and manufacturing prepared avocado products and other value-added fresh foods, enables us to deliver a diverse range of products to retail grocery stores, foodservice providers, club stores, mass merchandisers, food distributors, and wholesalers—primarily in the United States. ​ We source avocados from multiple regions, including California, Mexico, Peru, and Colombia.
The increase in our prepaid and other current assets is primarily due to a temporary deposit for collateral in connection with our workers compensation policies while we were in the process of obtaining a letter of credit. The increase in our accounts receivable is due to an increase in sales for the month of October 2023 compared to October 2022.
The decrease in our prepaid and other current assets is primarily due to the release of the temporary deposit for collateral in connection with our workers compensation policies in place at October 31, 2023, which has been replaced by a letter of credit. The increase in our accounts receivable is due to an increase in sales prices for avocados.
(Bank of America) and our new credit facility with Wells Fargo. For fiscal 2023, as compared to fiscal 2022, the increase in interest expense was due to higher interest rates, as well as a higher average debt balance.
For fiscal 2024, as compared to fiscal 2023, the increase in interest expense was due to higher interest rates, as well as a higher average debt balance and amortization of debt issuance cost.
This increase in Grown product sales during the year ended October 31, 2022 was due primarily to increased sales prices of avocados associated with lower overall supply of avocados in the 39 marketplace.
The decrease in Grown product sales during the year ended October 36 31, 2023 was primarily related to lower sales prices of avocados due to increased industry supply of avocados.
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 other prepared foods including sandwiches, salads, parfaits and snack items among other products, and (iii) process and package guacamole. ​ We distribute our products both domestically and internationally and we report our operations in two different business segments: Grown and Prepared.
Across our various operating facilities, we (i) sort, pack, and ripen avocados, tomatoes, and Hawaiian-grown papayas, and (ii) process and package guacamole. We distribute our products both domestically and internationally. ​ We report our operations in two different business segments: Grown and Prepared. The Grown segment consists of fresh avocados, tomatoes and papayas.
This decrease in Prepared product sales during the year ended October 31, 2023 was primarily related to lower sales volume of fresh-cut fruit and vegetables, prepared foods and guacamole products. ​ Net sales for fresh-cut products decreased $43.2 million, or 10%, for the year ended October 31, 2023 compared to the corresponding period in fiscal 2022.
This decrease in Prepared product sales during the year ended October 31, 2024 was primarily related to a change in sales mix. ​ Net sales for guacamole products decreased $2.0 million, or 3%, for the year ended October 31, 2024 compared to the corresponding period in fiscal 2024.
The majority of our tomato sales are made on a consignment basis, in which the gross profit we earn is generally based on a commission agreed to with each party, which usually is a percent of the overall selling price; however, we also purchase some tomatoes on the spot market to meet specific customer requests and have certain fixed overhead costs associated with our tomato operations which impact the overall gross profit realized from tomato sales.
The majority of our tomato sales are made on a consignment basis, in which the gross profit we earn is generally based on a commission agreed to with each party, which usually is a percent of the overall selling price.
At the end of fiscal 2022, we sold our investment in Limoneira and therefore received no dividends from Limoneira in fiscal 2023. ​ Income Taxes Provision ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ ​ (Dollars in thousands) Income tax provision ​ $ (5,942) 83 % $ (3,251) (70) % $ (10,747) ​ Effective tax rate ​ ​ 293.4 % ​ ​ 97.0 % ​ ​ 913.3 % ​ 44 For fiscal 2023, we incurred return to provision discrete taxable items in the amount of $0.2 million.
At the end of fiscal 2022, we sold our investment in Limoneira and therefore received no dividends from Limoneira in fiscal 2024 and fiscal 2023. ​ Income Taxes Provision ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ Change ​ 2023 ​ Change ​ 2022 ​ ​ ​ (Dollars in thousands) Income tax expense ​ $ 2,325 (62) % $ 6,148 94 % $ 3,165 ​ Effective tax rate ​ ​ 25.3 % ​ ​ 55.0 % ​ ​ (85.9) % ​ 40 For fiscal 2024 continuing operation, we incurred $0.5 million return to provision discrete taxable items.
Fiscal 2022: ​ The decrease in our Prepared products gross profit for the year ended October 31, 2023 was the result of decreased gross profit for fresh-cut fruit and vegetables products, partially offset by an increase in guacamole products. ​ Fresh-cut fruit and vegetables and prepared foods products gross profit percentage for the year ended October 31, 2023 was 1.5%, compared to 4.8% for the same prior year period.
Fiscal 2022: ​ The increase in our Prepared products gross profit for the year ended October 31, 2022, was the result of increased profit in guacamole products. Guacamole products gross profit percentage for the year ended October 31, 2023 was 18.1%, compared to a gross profit of 5.7% for the prior year period.
The increase in other assets as of October 31, 2023, when compared to the prior year period, is primarily due to an increase in Mexican IVA taxes receivable. The decrease in payable to growers is mostly due to lower sales volumes of avocados in the month of October 2023 compared to October 2022.
The decrease in other assets as of October 31, 2024, when compared to the prior year period, is primarily due to repayments of infrastructure loans. The increase in payable to growers is mostly due to higher sales prices for avocados.
These discrete items were primarily related to rate differentials related to our carryback losses from prior years and the lack of deductibility of certain Mexican tax expenses.
These discrete items were primarily related the lack of deductibility of certain Mexican tax expenses.
This increase primarily reflects price increases of 14% as well as a favorable product mix, partially offset by a 7% decrease in sales volumes. ​ Net sales for guacamole products for the year ended October 31, 2022 compared to the prior year period decreased $3.2 million, or 4%, primarily due to a decrease in the total volume sold. ​ 40 ​ Gross Profit ​ The following table summarizes our gross profit and gross profit percentages by business segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ Gross profit (loss): ​ ​ ​ ​ ​ Grown ​ ​ $ 52,163 ​ 4 % $ 50,165 ​ 5 % $ 47,787 ​ Prepared ​ ​ 17,793 ​ (25) % 23,680 ​ 146 % 9,638 ​ Total gross profit ​ ​ $ 69,956 ​ (5) % $ 73,845 ​ 29 % $ 57,425 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit percentages: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ ​ 9.9 % ​ ​ 7.2 % ​ ​ 8.1 % Prepared ​ ​ 4.0 % ​ ​ 4.8 % ​ ​ 2.1 % Consolidated ​ ​ 7.2 % ​ ​ 6.2 % ​ ​ 5.4 % ​ 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.
This decrease in Prepared product sales during the year ended October 31, 2023 was primarily related to lower sales volume of guacamole products. ​ Net sales for guacamole products decreased $6.9 million, or 10%, for the year ended October 31, 2023 compared to the corresponding period in fiscal 2022, primarily due to a decrease in total volume sold. ​ With the divestiture of our salsa business in April 2023, we had a decrease in sales of salsa products of $1.1 million, or 59%. ​ 37 Gross Profit ​ The following table summarizes our gross profit and gross profit percentages by business segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ Change ​ 2023 ​ Change ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ Gross profit: ​ ​ ​ ​ ​ Grown ​ ​ $ 55,268 ​ 9 % $ 50,534 ​ 1 % $ 50,165 ​ Prepared ​ ​ 12,536 ​ 4 % 12,078 ​ 164 % ​ 4,577 ​ Total gross profit ​ ​ $ 67,804 ​ 8 % $ 62,612 ​ 14 % $ 54,742 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit percentages: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ ​ 9.2 % ​ ​ 9.6 % ​ ​ 7.2 % Prepared ​ ​ 19.6 % ​ ​ 18.1 % ​ ​ 6.4 % Consolidated ​ ​ 10.2 % ​ ​ 10.5 % ​ ​ 7.1 % ​ 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.
The increase in gross profit percentage for the year ended October 31, 2023 in guacamole products was primarily due to lower raw product fruit costs and manufacturing improvements.
Fiscal 2023: ​ The gross profit percentage for guacamole products for the year ended October 31, 2024, was 19.6%, compared to 18.1% in the prior year. This increase in gross profit percentage for fiscal 2024 was primarily driven by lower raw fruit costs and lower production expenses. ​ Fiscal 2023 vs.
Partially offsetting these increases, is a reduction in our short-term incentive accrual of $2.3 million. ​ Selling, general and administrative expenses of $65.5 million for the year ended October 31, 2022 include costs of marketing and advertising, sales expenses (including broker commissions) and other general and administrative costs.
Partially offsetting these increases is a reduction in severance cost of $1.6 million and $3.0 million in stock-based compensation, from the prior year, related to the departure of our former Chief Executive Officer and other executives. ​ Selling, general and administrative expenses of $47.2 million for the year ended October 31, 2023 include costs of marketing and advertising, sales expenses (including broker commissions) and other general and administrative costs.
This decrease was across both segments. ​ For the year ended October 31, 2023, the decrease in Grown product sales was primarily due to a decrease in price per unit of avocados offset by increased sales volume due to increased volumes of available fruit.
This increase was driven by an increase in the Grown segment, partly offset by a decline in the Prepared segment. ​ For the year ended October 31, 2024, the increase in Grown product sales was primarily due to an increase in price per unit of avocados partially offset by decreased sales volume in avocados and tomatoes.
If completed, we expect to use the net proceeds from the Proposed Transaction primarily for the reduction of debt and return of cash to shareholders. ​ 46 We believe that cash flows from operations, the available Credit Facility, and other sources will be sufficient to satisfy our future capital expenditures, working capital and other financing requirements for at least the next twelve months.
Our working capital at October 31, 2024 was $85.4 million, compared to $51.6 million at October 31, 2023. ​ We believe that cash flows from operations, borrowings available under our Credit Facility, and other sources will be sufficient to satisfy our future capital expenditures, working capital and other financing requirements for at least the next twelve months.
On April 6, 2023, we paid a $0.10 per share dividend in the aggregate amount of $1.7 million to shareholders of record on March 24, 2023. On July 11, 2023, we paid a $0.10 per share dividend in the aggregate amount of $1.8 million to shareholders of record on June 27, 2023.
On April 29, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on April 1, 2024. On July 30, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on July 2, 2024.
Fiscal 2022: ​ Net sales for the Grown products business decreased by approximately $171.2 million, or 24%, for the year ended October 31, 2023 compared to the prior year period. The decrease in Grown product sales during the year ended October 31, 2023 was primarily related to lower sales prices of avocados due to increased industry supply of avocados.
Fiscal 2023: ​ Net sales for the Grown products business increased by approximately $70.2 million, or 13%, for the year ended October 31, 2024 compared to the prior year period.
The increase in interest income in fiscal 2022 as compared to 2021 is primarily due to a bridge loan to one of our tomato growers. ​ Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ (Dollars in thousands) Interest expense $ 2,495 48 % $ 1,686 111 % $ 798 Percentage of net sales ​ 0.3 % ​ ​ 0.1 % ​ ​ 0.1 % ​ Interest expense is primarily generated from our line of credit borrowings with Farm Credit West, PCA (FCW) and Bank of America, N.A.
The increase in interest income in fiscal 2023 as compared to 2022 is primarily due to the increase in the amount owed from our tomato growers from loans and infrastructure advances. ​ Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ Change ​ 2023 ​ Change ​ 2022 ​ ​ (Dollars in thousands) Interest expense $ 2,893 22 % $ 2,371 45 % $ 1,631 Percentage of net sales ​ 0.4 % ​ ​ 0.4 % ​ ​ 0.2 % ​ Interest expense is primarily generated from our line of credit borrowings with Wells Fargo.
Fiscal 2022: ​ During our year ended October 31, 2023, as compared to the prior year period, our Grown products segment gross profit increased $2.0 million or 4%. For the years ended October 31, 2023 and 2022, the gross profit percentages for avocados were 10.1% and 7.1%, respectively.
We expect to source less volume from the spot market in fiscal 2025 relative to consignment sales. ​ Fiscal 2023 vs. Fiscal 2022: ​ During our year ended October 31, 2023, as compared to the prior year period, our Grown products segment gross profit increased $0.4 million or 1%.
Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. We perform a goodwill impairment test on an annual basis, and between annual tests whenever events or changes in circumstances indicate that the carrying 31 amount may not be recoverable.
Relative fair value is estimated using a combination of a discounted cash flow analysis and market valuation approach. We perform a goodwill impairment test on an annual basis, and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The decrease in guacamole products gross profit was due primarily to higher raw product fruit costs associated with the same supply constraints that drove whole avocado prices to historically high levels, which increased manufacturing costs. ​ Selling, General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ (Dollars in thousands) Selling, general and administrative ​ $ 66,400 1 % $ 65,482 16 % $ 56,463 ​ Percentage of net sales ​ 6.8 % ​ ​ 5.5 % ​ ​ 5.3 % ​ Selling, general and administrative expenses of $66.4 million for the year ended October 31, 2023 include costs of marketing and advertising, sales expenses (including broker commissions) and other general and administrative costs.
The increase in gross profit percentage for the year ended October 31, 2023 in guacamole products was primarily due to lower raw product fruit costs and manufacturing improvements. ​ Selling, General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ Change ​ 2023 ​ Change ​ 2022 ​ ​ (Dollars in thousands) Selling, general and administrative ​ $ 50,038 6 % $ 47,276 2 % $ 46,538 ​ Percentage of net sales ​ 7.6 % ​ ​ 8.0 % ​ ​ 6.0 % ​ Selling, general and administrative expenses of $50.0 million for the year ended October 31, 2024 include costs of marketing and advertising, sales expenses (including broker commissions) and other general and administrative costs.
Dollar and the Mexican Peso may have a material impact on future gross profit for our Grown products segment. ​ For the year ended October 31, 2023, we generated gross profit of $4.5 million from tomato sales, up from $3.5 million in the prior year period.
For the years ended October 31, 2023 and 2022, the gross profit percentages for avocados were 10.1% and 7.1%, respectively. ​ For the year ended October 31, 2023, we generated gross profit of $4.5 million from tomato sales, up from $3.5 million in the prior year period.
Gross profit decreased by approximately $3.9 million, or 5%, for the year ended October 31, 2023, compared to the corresponding period in fiscal 2022. The decrease was primarily attributable to a gross profit decrease in the Prepared segment, partially offset by a gross profit increase in the Grown segment. ​ Grown products ​ Fiscal 2023 vs.
Gross profit increased by approximately $5.2 million, or 8%, for the year ended October 31, 2024, compared to the same period in fiscal 2023. This growth was primarily driven by higher gross profits in both the Grown and Prepared segments. ​ Grown products ​ Fiscal 2024 vs.
For a period of one year following the Closing Date, Calavo may utilize the proceeds of the Term Loan to pay a certain percentage of the costs of certain equipment purchased by Calavo. ​ Borrowings of the Revolving Loans under the Credit Agreement are asset based and will be subject to a borrowing base calculation that includes a certain percentage of eligible accounts receivable, inventory and equipment of Calavo, less any reserves implemented by Agent in its permitted discretion; provided that the equipment based portion of such borrowing base calculation will reduce monthly following the Closing Date. ​ Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at Calavo’s option, either a base rate or a secured overnight financing rate (“SOFR”) term rate (which includes a spread adjustment of 0.10% and is subject to a floor of 0.00%).
The Credit Agreement provides for a revolving credit facility of up to $90.0 million (the “Revolving Loans”), along with a capex credit facility of up to $10.0 million (the “Term Loan”, and together with the Revolving Loans, the “Credit Facility”). ​ On August 15, 2024, in conjunction with its sale of the Fresh Cut business, Calavo and certain of its subsidiaries (collectively, the “Borrower”) entered into a First Amendment to Credit Agreement and Consent (as amended, the “Credit Agreement”) with Agent, whereby (i) the Credit Agreement was amended to (A) reduce the revolving commitments thereunder from $90.0 million to $75.0 million and (B) reduce the machinery and equipment subline of the loans from $6.8 million to $1.7 million, and to reduce the related monthly amortization on such subline from $80,952.38 to $24,335.37, and (ii) the Borrower obtained consent from Agent for entry into the Asset Purchase Agreement and Purchase and Sale Agreement. ​ Borrowings of the Revolving Loans under the Credit Agreement are asset based and subject to a borrowing base calculation that includes a certain percentage of eligible accounts receivable, inventory and equipment of Calavo, less any reserves implemented by Agent in its permitted discretion; provided that the equipment-based portion of such borrowing base calculation reduces monthly following the Closing Date. ​ Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at Calavo’s option, either a base rate or a secured overnight financing rate (“SOFR”) term rate (which includes a spread adjustment of 0.10% and is subject to a floor of 0.00%).
Litigation ​ From time to time, we are 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. ​ Critical Accounting Estimates ​ Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Mexican Tax Issues ​ See footnotes 7 and 14 of the consolidated financial statements for information on Mexican tax matters and the Mexican IVA taxes receivable. ​ Critical Accounting Estimates ​ Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Fiscal year 2023 cash flows used by investing activities includes the purchases of property, plant and equipment of $10.7 million. ​ Cash provided by financing activities was $24.9 million for fiscal year 2023. Cash used in financing activities was $57.8 million and $5.2 million for fiscal years 2022 and 2021.
Fiscal year 2024 cash flows provided by investing activities include the proceeds from the sale of the Fresh Cut business of $83.0 million partially offset by the purchases of property, plant and equipment of $2.9 million. ​ 41 Cash used in financing activities was $50.4 million and $58.6 million for fiscal years 2024 and 2022.
This board provides a basis for a unified funding of promotional activities based on an assessment 36 on all avocados sold in the U.S. marketplace. The California Avocado Commission, which receives its funding from California avocado growers, has historically shouldered the promotional and advertising costs supporting avocado sales.
This board created a framework for unified funding of promotional activities through assessments on all avocados sold in the United States. Historically, the California Avocado Commission—funded by California avocado growers—has borne the costs of promotional and advertising efforts to support avocado sales.
We believe that our continued success in marketing avocados is largely dependent upon securing a reliable, high-quality supply of avocados at reasonable prices, and keeping the handling costs low as we ship avocados to our packinghouses and distribution centers.
In fiscal 2024, we operated three packinghouses, and five regional distribution facilities all of which perform value-added operations that handle avocados for distribution to our customers. ​ We believe our continued success in marketing avocados depends on maintaining a reliable, high-quality supply at reasonable prices, while controlling handling costs as we ship fruit through our packinghouses and distribution centers.
In addition, tomato sales increased due to an increase in overall sales volume, partially offset by a decrease in sales prices. ​ Sales of avocados increased $108.1 million, or 20%, for the year ended October 31, 2022, compared to the prior year period. The average avocado sales price per carton increased 37% compared to the prior year period.
The increase in Grown product sales during the year ended October 31, 2024 was primarily related to higher sales prices for avocados, partially offset by a decrease in sales of tomatoes. ​ Sales of avocados increased $68.0 million, or 15%, for the year ended October 31, 2024, compared to the prior year period.
This increase in tomato sales was due primarily to a 9% increase in the cartons sold of tomatoes, partially offset by a 1% decrease in average sales prices per carton. ​ Prepared products ​ Fiscal 2023 vs.
The increase in tomato sales was primarily due to an 8% increase in the sales price per carton, and an 8% increase in volume sold. ​ Prepared products ​ Fiscal 2024 vs.
See “Liquidity and Capital Resources” below for more information. ​ Compliance matters ​ On January 16, 2024, the Company announced that its internal audit process had identified to the Audit Committee of the Board of Directors certain matters that the Board of Directors determined after fiscal year end merited enhanced evaluation.
The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses. ​ Compliance matters ​ On January 16, 2024, the Company announced that its internal audit process had identified to the Audit Committee of the Board of Directors certain matters that the Board of Directors determined merited enhanced evaluation.
Fiscal 2021: ​ During our year ended October 31, 2022, as compared to the prior year period, our Grown products segment gross profit increased $2.3 million or 5%. While our overall gross profit increased, our gross profit percentage decreased. For the year ended October 31, 2022 and 2021, the gross profit percentages for avocados were 7.1% and 8.0%, respectively.
Fiscal 2023: ​ For the year ended October 31, 2024, compared to the prior year, our Grown products segment gross profit increased by $4.7 million, or 9%. Gross profit percentages for avocados remained strong at approximately 10% for both fiscal 2024 and 2023. However, tomato gross profits declined to $3.6 million from $4.5 million.
The Grown segment consists of fresh avocados, tomatoes and papayas. The Prepared segment comprises all other products including fresh-cut fruits and vegetables, sandwiches, wraps, salads, parfaits, snacks, and guacamole sold at retail and food service as well as avocado pulp sold to foodservice.
The Prepared segment consists of guacamole sold at retail and foodservice companies as well as avocado pulp sold to foodservice companies.
The volume of avocados sold for the year ended October 31, 2022, decreased 12% compared to the prior year period. ​ Sales of tomatoes increased $3.6 million, or 8%, for the year ended October 31, 2022, when compared to the prior year period.
The volume of avocados sold for the year ended October 31, 2024 decreased by 8% compared to the prior year period. ​ We expect our avocado sales volume to increase in fiscal 2025, driven by our focus on new customer recruitment, expanding existing customers’ sales, and intensifying global sourcing. ​ Sales of tomatoes decreased by $0.1 million, or 0.3%, for the year ended October 31, 2024, when compared to the prior year period.
Selling, general and administrative expenses increased by $9.0 million, or 16%, for the year ended October 31, 2022, when compared to the prior year period.
Selling, general and administrative expenses increased by $2.8 million, or 6%, for the year ended October 31, 2024 compared to the prior year period. This increase was primarily due to $7.4 million in professional fees related to our internal investigation and a $1.0 million employee incentive accrual.
Under the Credit Facility, we had $35.0 million and $4.1 million outstanding related to the Revolving Loans and Term Loan, respectively, as of October 31, 2023. ​ ​ 47
Under the Credit Facility, as of October 31, 2024, we had no amounts outstanding related to the Revolving Loans or Term Loan. During August 2024 we fully repaid the Term Loan with the proceeds from the sale of the Fresh Cut business.
Prepared products include fresh-cut fruits and vegetables, sandwiches, wraps, salads, parfaits, snacks, and guacamole sold at retail and food service as well as avocado pulp sold to foodservice . Prepared products are marketed under the Calavo, Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials brands, as well as store-brand and private label programs.
We also periodically evaluate opportunities to distribute other crops that align with our business model and deliver reasonable returns. ​ Prepared products include guacamole sold at retail and foodservice as well as avocado pulp sold to foodservice . Prepared products are marketed under Calavo-owned brands, as well as store-brand and private label programs.
Papayas have high nutritional benefits. They are rich in antioxidants, B vitamins, folate and pantothenic acid, potassium and magnesium, and fiber. ​ Additionally, through our Prepared segment we have expanded and accelerated the Company’s presence in the fast-growing refrigerated fresh packaged foods category through an array of retail product lines for produce, deli, and foodservice departments.
Papayas have high nutritional benefits. They are rich in antioxidants, B vitamins, folate and pantothenic acid, potassium and magnesium, and fiber. ​ Our Prepared segment sources avocados, processes them into a wide variety of guacamole products, and distributes the finished products to foodservice, retail, and industrial accounts.
We believe that we are well positioned to address the diverse taste and needs of today’s foodservice and retail customers. Our Prepared business maintains relationships with foodservice companies and food retailers.
Our Prepared business maintains relationships with foodservice companies and food retailers.
This increase in the sales price per carton was mainly due to a decrease of supply of avocados in the marketplace.
The average avocado sales price per carton increased 24% compared to the prior year period. The increase in the sales price per carton was mainly due higher market values for avocados.
This decrease was primarily driven by lower sales volume of 14%, partially offset by a increase in sales price of 4%. ​ Net sales for guacamole products decreased $6.9 million, or 10%, for the year ended October 31, 2023 compared to the corresponding period in fiscal 2022, primarily due to a decrease in total volume sold. ​ With the divestiture of our salsa business in June 2023, we had a decrease in sales of salsa products of $1.1 million, or 59%. ​ Fiscal 2022 vs.
We cannot assure you, however, that such increases in sales will occur. ​ Fiscal 2023 vs. Fiscal 2022: ​ Net sales for the Prepared products business decreased by approximately $4.8 million, or 7%, for the year ended October 31, 2023 compared to the corresponding period in fiscal 2022.
The decrease in income taxes receivable is due to a combination of discrete tax items and income tax refunds in fiscal 2023. ​ Cash used by investing activities was $10.7 million for fiscal year 2023. Cash provided by investing activities was $8.0 million for fiscal year 2022. Cash used in investing activities was $9.6 million for fiscal year 2021.
The increase in our inventory as of October 31, 2024, when compared to the prior year period, is primarily due to higher inventory of Mexican avocados offset by a decrease in inventory of guacamole products The decrease in income taxes receivable and increase in income taxes payable are due to the gain on disposal of discontinued operations offset by cash payments made during the year. ​ Cash provided by investing activities was $80.1 million and $8.7 million for fiscal year 2024 and 2022.
To the extent the carrying amount of the reporting unit’s allocated goodwill exceeds the unit’s fair value, we recognize an impairment of goodwill for the excess up to the amount of goodwill of that reporting unit. ​ In fiscal 2023 and 2022, the Company’s estimated fair value exceeded its carrying value in our quantitative assessment of the Company’s impairment test.
To the extent the carrying amount of the reporting unit’s allocated goodwill exceeds the unit’s fair value, we recognize an impairment of goodwill for the excess up to the amount of goodwill of that reporting unit. ​ As a result of the Fresh Cut business being classified as held for sale and discontinued operations, goodwill related to our Prepared segment was allocated between our Fresh Cut and Guacamole businesses based on the relative fair value of the disposal group and the portion of the reporting unit to be retained as of the date of the assets held for sale determination.
For the year ended October 31, 2023, the decrease in Prepared product sales was due primarily to decreased sales volume from fresh-cut fruit products and guacamole products. ​ We will continue to pursue grower recruitment opportunities and expand relationships with retail and/or foodservice customers with the goal to fuel net sales growth in each of our business segments.
For the year ended October 31, 2024, the decrease in Prepared product sales was due primarily to a change in product mix, described further below. ​ We remain focused on expanding grower partnerships and strengthening relationships with retail and foodservice customers to drive net sales growth across all business segments. ​ Both our Grown and Prepared segments are influenced by seasonal trends, which may affect the availability, volume, and quality of raw materials sourced during any given quarter. ​ Grown Products ​ Fiscal 2024 vs.
For the year ended October 31, 2022, we had a remeasurement loss of $1.0 million. ​ Significant fluctuations in the exchange rate between the U.S.
Sales and expenses are remeasured using a weighted-average exchange rate for the period. ​ Due to the change in the Mexican peso to the U.S. dollar exchange rates, foreign currency remeasurement losses, net of gains, for the year ended October 31, 2024 and 2022 were $5.8 million and $1.0 million respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe 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 current translation gains for fiscal years 2023 and 2021, net of losses, were $1.2 million and $0.9 million, respectively.
Biggest changeCurrently, we do not utilize derivative instruments to hedge fluctuations in the Mexican peso (MXN) to U.S. dollar (USD) exchange rates. However, management periodically evaluates the feasibility of employing such instruments. Total foreign currency remeasurement losses for fiscal 2024 and 2022, net of gains, were $5.8 million and $1.0 million, respectively.
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Item 7A. 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.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ Commodity Risk The commodities we rely on—such as fruits, ingredients, packaging materials, transportation, as well as electricity and natural gas—can experience price volatility due to various external factors, including market fluctuations, availability, weather, currency fluctuations, and changes in governmental regulations and agricultural programs.
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All of our financial instruments are entered into during the normal course of operations and have not been acquired for trading purposes.
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Such events may lead to reduced supplies of these materials, increased supply costs, or disruptions to our production schedules. The principal effect of inflation in both commodity and consumer prices on our operating results is to increase costs, both for products sold and selling, general and administrative expenses.
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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 October 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (All amounts in thousands) ​ Expected maturity date October 31, ​ ​ 2024 2025 2026 2027 2028 Thereafter Total Fair Value ​ Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted cash, cash and cash equivalents (1) ​ $ 2,852 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 2,852 ​ $ 2,852 ​ Accounts receivable (1) ​ 61,376 ​ — ​ — ​ — ​ — ​ — ​ 61,376 ​ 61,376 ​ Advances to suppliers (1) ​ 14,684 ​ — ​ — ​ — ​ — ​ — ​ 14,684 ​ 14,684 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payable to growers (1) ​ $ 14,788 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 14,788 ​ $ 14,788 ​ Accounts payable (1) ​ 15,537 ​ — ​ — ​ — ​ — ​ — ​ 15,537 ​ 15,537 ​ Borrowings pursuant to credit facilities (1) ​ — ​ — ​ — ​ — ​ 35,024 ​ — ​ 35,024 ​ 35,024 ​ Term loan (1) ​ 647 ​ 692 ​ 692 ​ 692 ​ 1,340 ​ — ​ 4,063 ​ 4,063 ​ ​ (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. ​ We were not a party to any derivative instruments during the fiscal year.
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Although we may attempt to offset these cost increases by increasing selling prices for our products, consumers may not have the buying power to cover these increased costs and may reduce their volume of purchases of those products. In that event, selling price increases may not be sufficient to completely offset our cost increases.
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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 foreign cash needs.
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Exchange Rate Risk ​ A substantial portion of our business operations are based in Mexico. Consequently, a considerable share of our costs and expenses are denominated in Mexican pesos. To meet foreign cash requirements, funds are transferred weekly from our corporate office to Mexico.
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Total foreign currency translation losses for fiscal year 2022, net of gains, were $1.0 million. ​ ​ 48
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Total foreign currency remeasurements gains for fiscal 2023, net of losses, were $1.4 million. ​ Fluctuations in exchange rates between MXN and the USD can have complex and, at times, conflicting impacts on our financial results.
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A strengthening USD or a weaker MXN generally benefits cash flow by reducing the amount of USD we need to transfer to Mexico to fund daily operations. However, a strengthening USD or weaker MXN results in higher noncash foreign currency translation remeasurement expense.
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For further information, please see Note 2, Foreign Currency Translation and Remeasurement, in our consolidated financial statements, and the discussion under the heading “Foreign currency gain (loss)” contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this Annual Report on Form 10-K.
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These impacts do not necessarily offset one another and introduce significant complexity to our financial results and their interpretation. ​ ​ 43

Other CVGW 10-K year-over-year comparisons