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What changed in CALAVO GROWERS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CALAVO GROWERS INC's 2022 and 2023 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 2023 report.

+317 added−311 removedSource: 10-K (2024-01-31) vs 10-K (2022-12-20)

Top changes in CALAVO GROWERS INC's 2023 10-K

317 paragraphs added · 311 removed · 219 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

40 edited+4 added−3 removed16 unchanged
Biggest changeOur Prepared segment has also expanded its capacity to provide products for a larger portion of the fresh deli department. ​ Our Prepared segment consists of our prepared avocado products division and our fresh-cut division. We utilize ultra-high pressure technology equipment on all of our guacamole products, which is designed to protect and safeguard foods, without the need of preservatives.
Biggest changeOur 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.
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, customers.
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.
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 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 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.
In California, the growing area stretches from San Diego County to Monterey County, with the majority of the growing areas located approximately 100 3 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, 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.
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 displays.
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.
These laws and regulations govern the treatment, handling, storage and disposal of materials and waste and the remediation of contaminated properties. ​ 6 We seek to comply at all times with all such laws and regulations and to obtain any necessary permits and licenses, and we are not aware of any instances of material non-compliance.
These laws and regulations govern the treatment, handling, storage and disposal of materials and waste and the remediation of contaminated properties. ​ We seek to comply at all times with all such laws and regulations and to obtain any necessary permits and licenses, and we are not aware of any instances of material non-compliance.
We believe we have developed strong, long-term relationships with our customers that provide a solid base for our business. ​ The Hass variety is the predominant avocado variety marketed on a worldwide basis.
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.
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 (SEC).
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”).
In addition, our operations in Mexico are subject to Mexican regulations through the SAGARPA. ​ As a large importer of perishable products in the US, Calavo was an early adopter of the U.S.
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.
We 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.
We 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.
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.
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.
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).
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”).
While the majority of our prepared avocado products are produced in our Uruapan, Mexico production facility, we also often 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.
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.
We believe that ripened avocados help our customers fulfill customer 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 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.
Certain agricultural commodities sold by Calavo are subject to additional specific government acts or regulations, including the Hass Avocado Promotion, Research and Information Act of 2000 for our avocados and the federal suspension agreement guidelines which govern tomato imports to the US. ​ As a result of our agricultural and food processing activities, we are subject to numerous environmental laws and regulations.
Certain agricultural commodities sold by Calavo are subject to additional specific government acts or regulations, including the Hass Avocado Promotion, Research and Information Act of 2000 for our avocados and the federal suspension agreement guidelines which govern tomato imports to the U.S. ​ As a result of our agricultural and food processing activities, we are subject to numerous environmental laws and regulations.
The purchase price we pay for fruit acquired from Mexican growers is generally negotiated for substantially all the fruit in a particular grove. The Mexican avocado crop will typically have three to four blooms in a single year.
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.
Total research and development costs for fiscal years 2022, 2021 and 2020 were approximately $0.1 million, $0.3 million and $0.7 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 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.
We believe our efforts in distributing other types of fruit complement our offerings of avocados. ​ Prepared ​ Prepared products include prepared avocado products (including both frozen and fresh guacamole), salsa, 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.
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.
We solicit customer and supplier input, review process and product trends and conduct sensory and shelf life testing, all to expand the category and drive new sales for our customers. Research and development costs are charged to expense when incurred.
We solicit customer and supplier input, review process and product trends and conduct sensory and shelf life testing, in order to expand the category and drive new sales for our customers. Research and development costs are charged to expense when incurred.
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, which is generally driven by customer requests, changes in product specifications, customer and market research and/or innovative ideas generated by our own team of experts with food processing and culinary backgrounds.
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.
In addition, our operations are subject to certain employment health and safety regulations, including those issued under the Occupational Safety and Health Act (OSHA).
In addition, our operations are subject to certain employment health and safety regulations, including those issued under the Occupational Safety and Health Act (“OSHA”).
Customs & Border Protection’s C-TPAT certification programs for monitoring and expediting all imports to the US. ​ As a purchaser and manufacturer of perishable agricultural commodities, we are subject to, and compliant with, USDA’s Perishable Agricultural Commodities Act.
Customs & Border Protection’s C-TPAT certification programs for monitoring and expediting all imports to the U.S. ​ As a purchaser and manufacturer of perishable agricultural commodities, we are subject to, and compliant with, the USDA’s Perishable Agricultural Commodities Act.
We also believe that the value proposition of avocados in a bag provides for a higher level of sales to grocery stores. 4 ​ The avocado market is highly competitive with many avocado marketers and/or importers, such as Calavo, seeking to source avocados from independent, USDA certified growers worldwide.
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.
Food and Drug Administration (FDA), the USDA and the Federal Trade Commission (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 (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.
In our judgment, these factors benefit large handlers like us, which have the ability to cultivate a variety of diverse sourcing relationships and the value-added/bagging capabilities, ripening assets and distribution infrastructure to meet the needs of these large nationwide accounts.
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.
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 (CFDA), which oversees weights & measures compliance at our California facilities. All of our US facilities are also in compliance with the FDA’s Food Safety Modernization Act (FSMA).
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 fiscal 2022, the United States Department of Agriculture (USDA) approved the export of Jalisco avocados into the United States.
In fiscal 2022, the United States Department of Agriculture (the “USDA”) approved the export of Jalisco avocados into the United States.
We also utilize the following trademarks in conducting our business: Avo Fresco, Bueno, Calavo Gold, Calavo Salsa Lisa, Salsa Lisa, Celebrate the Taste, El Dorado, Fresh Ripe, Select, Taste of Paradise, The First Name in Avocados, Tico, Mfresh, Maui Fresh International, Triggered Avocados, 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™, 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.
Based on the information we have from various industry sources, we believe that Calavo is consistently among the largest avocado marketers in the United States (US) from a volume, sales and profitability 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 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.
We do not have a significant number of United States employees covered by a collective bargaining agreement. Approximately 1,600 of Calavo's Mexican employees are represented by a union.
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.
Our products are marketed under the Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials brands, as well as store-brand, private label programs. ​ For fiscal 2023, with plans to invest in added capacity, we believe our capacity will be sufficient for our expected growth.
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.
We believe our facilities and practices are sufficient to maintain compliance with applicable governmental laws, regulations, permits and licenses. ​ Employees ​ As of October 31, 2022, we had 3,266 employees, of which 1,464 were located in the United States and 1,802 were located in Mexico.
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 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, 2022. ​ ​ ​ ​ ​ ​ ​ ​ Location Salaried Hourly Total United States 331 1,133 1,464 Mexico 217 1,585 1,802 TOTAL 548 2,718 3,266 ​ ​
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 ​ ​
Item 1. Business ​ General development of the business ​ Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and a provider of value-added fresh food.
Item 1. Business ​ General development of the business ​ Calavo Growers, Inc. (referred to in this report as “Calavo”, the “Company”, “we’, “us” or “our”), is a global leader in the avocado industry and a provider of value-added fresh food.
Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) process and package guacamole and salsa and (iii) create, process and package a portfolio of healthy fresh foods including fresh-cut fruit and vegetables, and prepared foods including sandwiches, salads, parfaits and ready-to-eat snack items among other products.
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.
Our principal executive offices are located at 1141-A Cummings Road, Santa Paula, California 93060; telephone (805) 525-1245. ​ Available information ​ We maintain an Internet website at http://www.calavo.com.
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.
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. 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.
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.
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. 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.
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.
We believe that our marketing strength is distinguished by providing quality products, innovation, year-round product availability, strategically located warehouses, and market relationships. ​ 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. ​ 5 Patents and Trademarks ​ Our trademarks include the Calavo brand name and related logos.
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.
Tomatoes are primarily handled on a consigned basis, while papayas are handled on a pooling basis, generally at a fixed fee per papaya delivered. Sales of our Other Fresh Products generally experience fluctuations related to seasonality.
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.
Removed
We distribute our products both domestically and internationally. ​ On April 13, 2022, the Company announced its plans to reorganize its business into two reporting segments, Grown and Prepared. The management transition to operate as Grown and Prepared began at the start of the third quarter of 2022. The Grown segment consists of fresh avocados, tomatoes and papayas.
Added
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.
Removed
Convenient, ready-to-eat fruits and vegetables have continued to grow faster than their broader produce categories as consumers increasingly place value on the convenient nature of these products.
Added
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.
Removed
Our prepared products include 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 kits and related components and salad kits.
Added
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 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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor 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. ​ Currency exchange fluctuations may impact the results of our operations. ​ Currency exchange rate fluctuations, depending upon the nature of the changes, may make our domestic-sourced products more expensive compared to foreign grown products or may increase our cost of obtaining foreign-sourced products.
Biggest changeAn 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.
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 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 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 date, the Company has not hedged against foreign currency exposure and we may not hedge against foreign currency exposure in the future, which could increase our susceptibility to foreign currency fluctuations. ​ Financial Risks ​ Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from executing our growth strategy. ​ The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on many factors, including: ​ ● Market acceptance of our products; and ● The existence of opportunities for expansion. ​ If our capital resources are not sufficient to satisfy our liquidity needs, we may seek to sell additional equity or obtain additional debt financing.
To date, the Company has not hedged against foreign currency exposure and we may not hedge against foreign currency exposure in the future, which could increase our susceptibility to foreign currency fluctuations. ​ Financial Risks ​ Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from executing our growth strategy. ​ The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on many factors, including: ​ ● Market acceptance of our products; and ● Opportunities for expansion. ​ If our capital resources are not sufficient to satisfy our liquidity needs, we may seek to sell additional equity or obtain additional debt financing.
We cannot assure you that we will be able to hire or retain the personnel necessary to achieve our strategic vision, that personnel we do recruit will be successful or that the loss of any such personnel will not have a material impact on our financial condition and results of operations. ​ 12 Replacing departing executives can involve organizational disruption and uncertainty.
We cannot assure you that we will be able to hire or retain the personnel necessary to achieve our strategic vision, that personnel we do recruit will be successful or that the loss of any such personnel will not have a material impact on our financial condition and results of operations. ​ Replacing departing executives can involve organizational disruption and uncertainty.
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; 18 ● 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; 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.
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.
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.
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.
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.
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.
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.
Recently, there have been significant plantings of avocados in Mexico, Chile, the Dominican Republic, Peru, Colombia and other parts of the world, which have had, and will continue to have, the effect of increasing the volume of foreign grown avocados entering the United States market.
There have been significant plantings of avocados in Mexico, Chile, the Dominican Republic, Peru, Colombia and other parts of the world, which have had, and will continue to have, the effect of increasing the volume of foreign grown avocados entering the United States market.
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 and our chief financial 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 executive officer.
Our inability to maintain sufficient internal production capacity or our inability to enter into co-packing agreements on terms that are 9 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 terms that are beneficial to us could have an adverse effect on our business.
Similar, if an existing co-packer is no longer able or willing to produce products for us, there are no assurances that we will be able to immediately replace them with our own production capacity or that of another co-packer operating in the same region and at the same level of quality.
Similarly, if an existing co-packer is no longer able or willing to produce products for us, there are no assurances that we will be able to immediately replace them with our own production capacity or that of another co-packer operating in the same region and at the same level of quality.
Our results of operations may be adversely affected if we are 16 unable to comply with these existing and modified regulations.
Our results of operations may be adversely affected if we are unable to comply with these existing and modified regulations.
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 ability to serve our customers and 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 operating income. ​ We intend to review acquisition prospects that would complement our business.
For further details on this matter, see Note 15 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 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.
Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis. Beginning in fiscal 2014 and continuing into fiscal 2022, 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 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.
In the current operating environment, we are experiencing a shortage of qualified labor in certain geographies, particularly with plant production workers, resulting in increased costs from certain temporary wage actions, such as hiring and referral and retention bonus program.
In the current operating environment, we are experiencing a shortage of qualified labor in certain geographies, particularly with plant production workers, resulting in increased costs from certain temporary wage actions, such as hiring and referral and retention bonus programs.
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. 13 ● We are subject to competition from other avocado handlers.
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.
We carry insurance, including cyber insurance, commensurate with our size and the nature of our operations, although there is no certainty that such insurance will in all cases be sufficient to fully reimburse us for all losses incurred in connection with the occurrence of any of these system security risks, data protection breaches, cyber-attacks or other events. ​ 10 Portions of our IT infrastructure may also experience interruptions, delays or cessations of service, or produce errors in connection with systems integration or migration work that takes place from time to time.
We carry insurance, including cyber insurance, commensurate with our size and the nature of our operations, although there is no certainty that such insurance will in all cases be sufficient to fully reimburse us for all losses incurred in connection with the occurrence of any of these system security risks, data protection breaches, cyber-attacks or other events. ​ Our information technology systems may also experience interruptions, delays or cessations of service, or produce errors in connection with systems integration or migration work that takes place from time to time.
This could have a material adverse effect on our business, results of operations, and financial condition. ​ Failure to optimize our supply chain or disruption of our supply chain could have an adverse effect on our business, financial condition and results of operations. ​ In coordination with our suppliers, our ability to make, move and sell products is critical to our success.
Any disruptions in our infrastructure could have a material adverse effect on our business, results of operations, and financial condition. ​ Failure to optimize our supply chain or disruption of our supply chain could have an adverse effect on our business, financial condition and results of operations. ​ In coordination with our suppliers, our ability to make, move and sell products is critical to our success.
This amount has been adjusted for inflation as of October 31, 2022 to the amount of $3 billion Mexican pesos (approx. $151.5 million USD). Additionally, the tax authorities have 15 determined that we owe our employees profit-sharing liability, totaling approximately $118 million Mexican pesos (approx. $6.0 million USD at October 31, 2022).
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).
Customers also may respond to any price increase that we may implement by reducing their purchases from us, resulting in reduced sales of our products. If sales of our products to one or more of our largest customers are reduced, this reduction may have a material adverse effect on our business, financial condition, and results of operations.
Customers also may respond to any price increase that we may implement by reducing their purchases from us, resulting in reduced sales of our products. If sales of our products to one or more of our largest customers decrease, the impact may have a material adverse effect on our business, financial condition, and results of operations.
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. $131.3 million USD at October 31, 2022) related to a fiscal 2013 tax audit.
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.
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. ​ 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, 2022, and October 31, 2021, CDM IVA receivables totaled $43.6 million (865.4 million Mexican pesos) and $37.5 million (762.1 million Mexican pesos).
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).
The 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 ​ The COVID-19 pandemic and resulting worldwide economic conditions adversely affected, and may continue to adversely affect, our business operations, financial condition, results of operations, and cash flows. ​ Manufacturing and Supply Chain Disruption ​ Outbreaks of contagious diseases, including the ongoing COVID-19 outbreak and pandemic, 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.
The 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.
Currently we are in compliance with such financial covenants and expect to remain in compliance. ​ Our ownership in unconsolidated subsidiaries, our loans/notes or advances to unconsolidated subsidiaries and other future debt or equity investments that we may make in unconsolidated subsidiaries, present risks and challenges that could have a material adverse effect on our business, financial position and results of operations. ​ Income/(loss) from unconsolidated entities includes our allocation of earnings or losses from our investments in Don Memo.
Our ownership in unconsolidated subsidiaries, our loans/notes or advances to unconsolidated subsidiaries and other future debt or equity investments that we may make in unconsolidated subsidiaries, present risks and challenges that could have a material adverse effect on our business, financial position and results of operations. ​ Income/(loss) from unconsolidated entities includes our allocation of earnings or losses from our investments in Don Memo.
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. When market interest rates rise, prospective purchasers of our common stock may expect a higher dividend yield.
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.
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, Trader Joes, and Wal-mart, our largest customers, amounted to approximately 15% , 11% and 10% of our total net sales in 2022.
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.
For example, in 2019, certain of our computer systems became encrypted by ransomware, which prevented them from operating for a time. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our systems or otherwise exploit any security vulnerabilities of our systems.
For example, in 2019, certain of our computer systems were encrypted by ransomware, which prevented them from operating for a period of time. Attackers may be able to develop and deploy viruses, worms, and other malicious software programs that infiltrate our systems or otherwise exploit any security vulnerabilities.
We have taken measures to vigorously defend our position that the 2013 Assessment is without merit and we have court rulings in favor of CDM, including a Court resolution from the Tax Court ordering the SAT to accept an Administrative Guaranty and remove all liens.
CDM accordingly received access to its bank accounts in November 2022. 17 We have taken measures to vigorously defend our position that the 2013 Assessment is without merit and we have court rulings in favor of CDM, including a Court resolution from the Tax Court ordering the SAT to accept an Administrative Guaranty and remove all liens.
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. ​ Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns.
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.
A continuation of such shortages for a prolonged period of time could have a material adverse effect on our results of operations. ​ 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.
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.
Internal Revenue Service, the Servicio de Administracion Tributaria in Mexico (the “SAT”) and other tax authorities. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes.
Internal Revenue Service, the SAT and other tax authorities. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes.
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, 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. ​ 11 We have in the past had and may in the future incur substantial indebtedness which could restrict our ability to pay dividends and impact our financing options and liquidity position. ​ Our ability to pay dividends is subject to restrictions contained in the instruments governing our indebtedness.
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.
The future success of our operations, including the achievement of our strategic objectives, depends on our ability, and the ability of third parties on which we rely to supply and to deliver our products, to identify, recruit, develop and retain qualified and talented individuals. As a result, any shortage of qualified labor could significantly adversely affect our business.
The future success of our operations, including the achievement of our strategic objectives, depends on our ability, and the ability of third parties on which we rely to supply and to deliver our products, to identify, recruit, develop and retain qualified and talented individuals.
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.
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.
We have filed an Annulment Suit (the “Suit”) with the Federal Tax Court, which among other things, contends that the notifications made by the SAT to CDM and its designated advisors of the resolution of the Administrative Appeal in March 2021 was not legally communicated and asserts the same matters central to the Reconsideration as wrongly concluded in the resolution of the Administrative Appeal.
On August 20, 2021, we filed an Annulment Suit (the “Suit”) with the Federal Tax Court, which among other things, contends that the notifications made by the SAT to CDM and its designated advisors of the resolution of the Administrative Appeal in March 2021 was not legally communicated and asserts the same matters central to the Reconsideration as wrongly concluded in the resolution of the Administrative Appeal. ​ On September 22, 2021, we had an initial in-person meeting with the SAT in Mexico City to formally present and discuss the Administrative Reconsideration (the “Reconsideration”) that we filed on August 18, 2021.
Increased costs for purchased fruit have in the past negatively impacted our operating results, and there can be no assurance that they will not adversely affect our operating results in the future. ​ The price of various commodities can affect our costs.
Increased costs for purchased fruit have in the past negatively impacted our operating results, and may adversely affect our operating results in the future. ​ The price of various commodities can affect our costs.
As of October 31, 2022 all liens have been removed from the assets of CDM as a result of a Court ruling in favor of CDM. CDM accordingly received access to its bank accounts in November 2022.
As of October 31, 2022 all liens have been removed from the assets of CDM as a result of a Court ruling in favor of CDM.
If the price of paper increases and we are not able to effectively pass these price increases along to our customers, then our operating income will decrease. ​ We depend on our infrastructure to have sufficient capacity to handle our annual production needs. ​ Our infrastructure has sufficient capacity for our production needs, including investments we expect to make to facilitate growth, but 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. ​ 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.
Any bankruptcy or other business disruption involving one of our significant customers also could adversely affect our results of operations. ​ 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.
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.
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); 8 ● 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 ● the impacts on consumer demand based on seasonal and holiday timing. ​ Our earnings are sensitive to fluctuations in market prices and demand for our products. ​ Excess supplies often cause severe price competition in our industry.
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.
If consumer preferences trend negatively with respect to any one or more of our products, our sales volumes may decline as a result. ​ 14 Regulatory and Related Risks ​ Environmental and other regulation of our business, including potential climate change regulation, could adversely impact us by increasing our production cost or restricting our ability to import certain products into the United States. ​ Climate change could increase both the frequency and severity of natural disasters that may affect our business operations.
The loss of any independent certifications could adversely affect our market position as an organic and natural products company, which could harm our business. ​ Regulatory and Related Risks ​ Environmental and other regulation of our business, including potential climate change regulation, could adversely impact us by increasing our production cost or restricting our ability to import certain products into the United States. ​ Climate change could increase both the frequency and severity of natural disasters that may affect our business operations.
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. ​ ​ 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.
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.
Qualified individuals are in high demand, and we may incur significant costs to attract them, particularly at the executive level. We may face difficulty in attracting, retaining and compensating key talent for a number of reasons, including competitive market 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 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 not be able to obtain additional financing, if required, in amounts or on terms acceptable to us, or at all. ​ 17 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. ​ The agreements governing our indebtedness impose significant operating and financial restrictions on us.
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.
In addition, the actions of growers and other industry partners on ESG matters could negatively impact our reputation or involve us in legal or regulatory proceedings concerning their conduct. ​ Unanticipated changes in U.S. 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 U.S. and Mexico.
In addition, the actions of growers and other industry partners on ESG matters could negatively impact our reputation or involve us in legal or regulatory proceedings concerning their conduct.
Our credit agreement requires us to maintain specified financial ratios and satisfy financial condition tests, including, without limitation, a consolidated leverage ratio and a consolidated fixed charge coverage ratio. Our ability to comply with the ratios or tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions.
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.
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 commodities from competing purchasers, 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. ​ Costs to Confront the COVID-19 Pandemic ​ We have incurred and may in the future incur increased costs related to overtime and sick pay, government mandated employee leave related to pandemic conditions, incremental pay for working under challenging conditions, temporary employees, temporary facility closures, sanitizing the work environment, and overall increased safety measures.
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.
If we are unable to pack and market a sufficient volume of Mexican grown avocados, smaller handlers will have a lower per unit cost and be able to offer Mexican avocados at a more competitive price to our customers. ● 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. ● 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 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. ​ 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.
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.
We cannot assure you that any of these measures will be successful or that we will be able to settle the 2013 Assessment on terms acceptable to us or at all.
We incurred $2.4 million of related professional fees for the year ended October 31, 2023, respectively, which we have recoded in Expenses related to Mexican Tax matters on the consolidated statements of operations. ​ We cannot assure you that any of these measures will be successful or that we will be able to settle the 2013 Assessment on terms acceptable to us or at all.
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. In recent years, there has been an increase in organized crime in Mexico.
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.
This has not had a significant impact on our operations, but this does increase the risk of doing business in Mexico. We are also subject to regulations imposed by the Mexican government, and also to examinations by the Mexican tax authorities.
In recent years, there has been an increase in organized crime in Mexico, which could in the future affect avocado farming, packing and shipment activities and increase the costs and risks of doing business in Mexico. We are also subject to regulations imposed by the Mexican government and to examinations by the Mexican tax authorities.
Such failures could also cause reputational damage to our business. ​ 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. ​ 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.
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. ​ We and our growers are subject to the risks that are inherent in farming. ​ Our results of operations may be adversely affected by numerous factors over which we have little or no control and that are inherent in farming, including reductions in the market prices for our products, adverse weather (including but not limited to drought, high winds, earthquakes and/or wildfire) and growing conditions, pest and disease problems, and new government regulations regarding farming and the marketing of agricultural products. ​ Demand for our products is subject to changing consumer preferences. ​ Consumer preferences for particular food products are subject to fluctuations over time.
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.
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We have implemented health and safety measures to protect our employees and will continue to take precautionary measures to help minimize the risk of COVID-19 to our employees. Some of these precautionary measures, and similar precautionary measures that we may take in the future, may result in additional costs.
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When market interest rates rise, the yield on our common stock may become less attractive relative to other available securities.
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Our operating results may be adversely affected if we fail to adequately manage these costs or if we experience significant unexpected costs in the future. 7 ​ The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.
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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.
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If we are unable to successfully manage our business through the challenges and uncertainty created by the COVID-19 pandemic, our business and operating results could be materially adversely affected. ​ If the COVID-19 pandemic or other factors result in prolonged adverse impacts on our operating results, our goodwill and other intangible assets may be at risk of impairment. ​ We have significant goodwill and intangibles balances recorded with respect to our Prepared reporting unit, which we periodically review for impairment.
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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.
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These assets are sensitive to any significant changes in related results of operations of the underlying businesses. The COVID-19 pandemic has had adverse effects on the Prepared reporting unit, although no impairment of the related goodwill and intangibles balances has occurred during the year ended October 31, 2022.
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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.
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We cannot, however, predict the effects that any continued adverse conditions from the pandemic or other factors may have on the future impairment of these assets. ​ The recovery from the COVID-19 pandemic and the current economic climate are increasing labor costs, commodity costs and logistical costs, each of which has adversely affected our business operations and results of operations and may continue to do so in the future.
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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”).
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Our efforts to raise prices may not be sufficient to offset these cost increases and may have other adverse effects. ​ We have experienced operational challenges in our production facilities and logistics networks, shortage of labor and impacts from increases in prices of petroleum-based products, packaging materials and commodities, all of which are increasing costs companywide. ​ In response to the inflationary costs described above, we have implemented price increases and may implement additional price increases in the future.
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The closing of the Proposed Transaction is subject to the negotiation and execution of a binding agreement.
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Customers may not accept price increases or we may face competitive pressure that leads to price reductions for certain products. ​ 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.
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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.
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We may not be able to, or we may not choose to, provide a higher dividend yield in such instances.
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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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Growing conditions in various parts of the world, particularly weather conditions such as rainfall, hailstorms, windstorms, floods, droughts, wildfires and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply and quality of product. ​ Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest.
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If we are able to finalize a bidning agreement, it may be subject to the satisfaction or waiver of certain conditions, including, among others, availability of third-party consents that may be required, the accuracy of each party’s representations and warranties contained in any binding agreement, compliance by each party with its respective covenants contained in any binding agreement, and the potential requirement of a transaction services agreement for continuing services by the Company to the purchaser for a period of time following any closing.
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Fuel and transportation cost is a significant component of the price of much of the produce that we purchase from growers, and there can be no assurance that we will be able to pass on to our customers any increased costs we incur in these respects. ​ The cost of paper is also significant to us as most of our products are packed in cardboard boxes.
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We or the proposed purchaser may be unable to satisfy such conditions to the closing of the Proposed Transaction in a timely manner or at all and, if such conditions are not satisfied or waived, the Proposed Transaction may be delayed or completed on terms that are less favorable, perhaps materially, to us than the terms currently being negotiated, or the Proposed Transaction may not be completed at all.
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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 handlers. ● Mexican sourced avocados and perishable food products are impacted by competitors operating in Mexico. Generally, handlers of Mexican grown avocados operate facilities that are substantially smaller than our facility in Uruapan, Mexico.
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Whether or not a binding agreement is executed and the closing occurs, the announcement and pendency of the Proposed Transaction may adversely affect our relationships with customers, suppliers and vendors, and the operating performance and financial results of the Prepared segment may also be materially adversely affected.
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These restrictions prohibit or limit, among other things: ● the incurrence of additional indebtedness; ● a number of restricted payments, including investments; ● specified sales of assets; ● specified transactions with affiliates; ● the creation of certain types of liens; ● consolidations, mergers and transfers of all or substantially all of our assets.
Added
We or the proposed purchaser may choose not to proceed with the Proposed Transaction, and if the Proposed Transaction is delayed or not completed for any reason, investor confidence may decline and we may face negative publicity and possible litigation. ​ Further, failure to complete the Proposed Transaction would adversely affect our current plans to use proceeds from the Proposed Transaction to reduce our debt and return cash to shareholders.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe facility was built in 1985 and has been significantly and continually improved in capacity and efficiency since then. We believe that the annual capacity of this facility will be sufficient to process its forecasted annual production needs.
Biggest changeWe believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned ​ Uruapan ​ Michoacan ​ Primarily handles fresh avocados. The facility was built in 1985 and has been significantly and continually improved in capacity and efficiency since then.
We believe that the annual capacity of this facility will be sufficient to pack and ripen, if necessary, its expected annual volume of avocados and other fresh products delivered to us. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Swedesboro ​ New Jersey ​ Primarily ripens, sorts, packs, and ships avocados.
We believe that the annual capacity of this facility will be sufficient to pack and ripen, if necessary, its expected annual volume of avocados and other fresh products delivered to us. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Swedesboro ​ New Jersey ​ Primarily ripens, sorts, packs, and ships fresh avocados.
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. ​ ​ ​
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 sold this facility in 2019 and leased back a portion of it. ​ 20 Operating and Distributing Facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or Owned: ​ City ​ State ​ Description ​ Owned ​ Santa Paula ​ California ​ Primarily ripens, sorts, packs and ships fresh avocados.
We sold this facility in 2019 and leased back a portion of it. ​ Operating and Distributing Facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or Owned: ​ City ​ State ​ Description ​ Owned ​ Santa Paula ​ California ​ Primarily ripens, sorts, packs and ships fresh avocados.
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ 21 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.
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.
See the following table for a summary of our locations: 19 ​ 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: 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.
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Garland ​ Texas ​ Primarily ripens, sorts, packs and ships fresh avocados. Additionally, it also serves to store and ship prepared guacamole products as well.
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Garland ​ Texas ​ Primarily ripens, sorts, packs and ships fresh avocados. Additionally, it also serves to store and ship prepared guacamole products .
We believe that the annual capacity of this facility 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.
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.
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. In November 2021, we have ceased operations in the Prepared products portion of this facility.
We believe that the annual capacity of this facility will be sufficient to process its forecasted annual production needs. ​ ​ ​
We believe that the annual capacity will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned ​ Hilo ​ Hawaii ​ Primarily provides irradiation services for produce grown in Hawaii.
We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Hilo ​ Hawaii ​ Primarily sorts, packs, and ships papayas.
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See Note 18 in consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ Hilo ​ Hawaii ​ Primarily sorts, packs, and ships papayas.
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We believe that the annual capacity will be sufficient to handle its forecasted annual production needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased ​ St. Paul ​ Minnesota ​ Calavo Salsa Lisa (CSL) facility that produces salsa.
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We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs. See Note 7 to our consolidated financial statements ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned ​ Uruapan ​ Michoacan ​ Primarily handles fresh avocados.

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 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2021 High Low First Quarter ​ $ 77.95 ​ $ 62.02 ​ Second Quarter ​ $ 85.40 ​ $ 71.58 ​ Third Quarter ​ $ 80.06 ​ $ 55.65 ​ Fourth Quarter ​ $ 57.76 ​ $ 33.25 ​ ​ ​ Shareholders ​ As of November 30, 2022, there were 746 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 November 2022, we announced that we will begin declaring and paying dividends quarterly rather than annually as had been our practice.
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.
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, 2017. 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, 2018. We have also assumed the reinvestment of all dividends.
On December 3, 2021, we paid the aggregate amount of $20.3 million to shareholders of record on November 12, 2021. 23 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, 2017 and ending October 31, 2022.
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 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. ​ On October 29, 2021, we declared a cash dividend of $1.15 per share.
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.
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. ​ ​ ​ ​
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 ​ ​ ​
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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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur Prepared segment has also expanded the capacity to provide products for a larger portion of the Fresh Deli department. ​ 35 ​ The following tables set forth sales by product category and sales allowances, by segment (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, 2022 ​ Year ended October 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ Prepared ​ Total ​ Grown ​ Prepared ​ Total Third-party sales: ​ ​ ​ ​ ​ ​ ​ Avocados ​ $ 645,944 ​ $ — ​ $ 645,944 ​ $ 536,969 ​ $ — ​ $ 536,969 ​ Tomatoes ​ 47,288 ​ — ​ 47,288 ​ 43,658 ​ — ​ 43,658 ​ Papayas ​ 11,422 ​ — ​ 11,422 ​ 10,884 ​ — ​ 10,884 ​ Other fresh income ​ 123 ​ — ​ 123 ​ 693 ​ — ​ 693 ​ Fresh-cut fruit ​ ​ — ​ ​ 204,433 ​ ​ 204,433 ​ ​ — ​ ​ 205,087 ​ ​ 205,087 ​ Fresh-cut vegetables ​ ​ — ​ ​ 107,332 ​ ​ 107,332 ​ ​ — ​ ​ 102,291 ​ ​ 102,291 ​ Prepared products ​ — ​ 114,396 ​ 114,396 ​ — ​ 95,639 ​ 95,639 ​ Guacamole ​ ​ — ​ 74,970 ​ 74,970 ​ — ​ 75,681 ​ 75,681 ​ Salsa ​ — ​ 1,860 ​ 1,860 ​ — ​ 2,784 ​ 2,784 ​ Total gross sales ​ 704,777 ​ 502,991 ​ 1,207,768 ​ 592,204 ​ 481,482 ​ 1,073,686 ​ Less sales allowances ​ (4,507) ​ (10,123) ​ (14,630) ​ (3,677) ​ (11,682) ​ (15,359) ​ Less inter-company eliminations ​ ​ (2,065) ​ ​ — ​ ​ (2,065) ​ ​ (2,497) ​ ​ — ​ ​ (2,497) ​ Net sales ​ $ 698,205 ​ $ 492,868 ​ $ 1,191,073 ​ $ 586,030 ​ $ 469,800 ​ $ 1,055,830 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, 2021 ​ Year ended October 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ Prepared ​ Total ​ Grown ​ Prepared ​ Total Third-party sales: ​ ​ ​ ​ ​ ​ ​ Avocados ​ $ 536,969 ​ $ — ​ $ 536,969 ​ $ 521,542 ​ $ — ​ $ 521,542 ​ Tomatoes ​ 43,658 ​ — ​ 43,658 ​ 53,922 ​ — ​ 53,922 ​ Papayas ​ 10,884 ​ — ​ 10,884 ​ 10,529 ​ — ​ 10,529 ​ Other fresh income ​ 693 ​ — ​ 693 ​ 327 ​ — ​ 327 ​ Fresh-cut fruit ​ ​ — ​ ​ 205,087 ​ ​ 205,087 ​ ​ — ​ ​ 204,766 ​ ​ 204,766 ​ Fresh-cut vegetables ​ — ​ 102,291 ​ 102,291 ​ — ​ 113,460 ​ 113,460 ​ Prepared products ​ ​ — ​ ​ 95,639 ​ ​ 95,639 ​ ​ — ​ ​ 88,346 ​ ​ 88,346 ​ Guacamole ​ ​ — ​ ​ 75,681 ​ ​ 75,681 ​ ​ — ​ ​ 75,409 ​ ​ 75,409 ​ Salsa ​ — ​ 2,784 ​ 2,784 ​ — ​ 2,783 ​ 2,783 ​ Total gross sales ​ 592,204 ​ 481,482 ​ 1,073,686 ​ 586,320 ​ 484,764 ​ 1,071,084 ​ Less sales allowances ​ (3,677) ​ (11,682) ​ (15,359) ​ (1,268) ​ (8,794) ​ (10,062) ​ Less inter-company eliminations ​ ​ (2,497) ​ ​ — ​ ​ (2,497) ​ ​ (1,651) ​ ​ — ​ ​ (1,651) ​ Net sales ​ $ 586,030 ​ $ 469,800 ​ $ 1,055,830 ​ $ 583,401 ​ $ 475,970 ​ $ 1,059,371 ​ ​ Net sales to third parties by segment exclude inter-segment sales and cost of sales.
Biggest changeOur Prepared segment has also expanded the capacity to provide products for a larger portion of the Fresh Deli department. ​ 37 ​ The following tables set forth sales by product category and sales allowances, by segment (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, 2023 ​ Year ended October 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ Prepared ​ Total ​ Grown ​ Prepared ​ Total ​ ​ ​ ​ ​ ​ ​ ​ Avocados ​ $ 466,385 ​ $ — ​ $ 466,385 ​ $ 645,944 ​ $ — ​ $ 645,944 ​ Tomatoes ​ 56,298 ​ — ​ 56,298 ​ 47,288 ​ — ​ 47,288 ​ Papayas ​ 10,432 ​ — ​ 10,432 ​ 11,422 ​ — ​ 11,422 ​ Other fresh income ​ 100 ​ — ​ 100 ​ 123 ​ — ​ 123 ​ Fresh-cut products ​ ​ — ​ ​ 383,028 ​ ​ 383,028 ​ ​ — ​ ​ 426,161 ​ ​ 426,161 ​ Guacamole ​ ​ — ​ 70,611 ​ 70,611 ​ — ​ 74,970 ​ 74,970 ​ Salsa ​ — ​ 796 ​ 796 ​ — ​ 1,860 ​ 1,860 ​ Total gross sales ​ 533,215 ​ 454,435 ​ 987,650 ​ 704,777 ​ 502,991 ​ 1,207,768 ​ Less sales allowances ​ (4,190) ​ (9,883) ​ (14,073) ​ (4,507) ​ (10,123) ​ (14,630) ​ Less intersegment eliminations ​ ​ (1,629) ​ ​ — ​ ​ (1,629) ​ ​ (2,065) ​ ​ — ​ ​ (2,065) ​ Net sales ​ $ 527,396 ​ $ 444,552 ​ $ 971,948 ​ $ 698,205 ​ $ 492,868 ​ $ 1,191,073 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, 2022 ​ Year ended October 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ Prepared ​ Total ​ Grown ​ Prepared ​ Total ​ ​ ​ ​ ​ ​ ​ ​ Avocados ​ $ 645,944 ​ $ — ​ $ 645,944 ​ $ 536,969 ​ $ — ​ $ 536,969 ​ Tomatoes ​ 47,288 ​ — ​ 47,288 ​ 43,658 ​ — ​ 43,658 ​ Papayas ​ 11,422 ​ — ​ 11,422 ​ 10,884 ​ — ​ 10,884 ​ Other fresh income ​ 123 ​ — ​ 123 ​ 693 ​ — ​ 693 ​ Fresh-cut products ​ ​ — ​ ​ 426,161 ​ ​ 426,161 ​ ​ — ​ ​ 403,017 ​ ​ 403,017 ​ Guacamole ​ ​ — ​ ​ 74,970 ​ ​ 74,970 ​ ​ — ​ ​ 75,681 ​ ​ 75,681 ​ Salsa ​ — ​ 1,860 ​ 1,860 ​ — ​ 2,784 ​ 2,784 ​ Total gross sales ​ 704,777 ​ 502,991 ​ 1,207,768 ​ 592,204 ​ 481,482 ​ 1,073,686 ​ Less sales allowances ​ (4,507) ​ (10,123) ​ (14,630) ​ (3,677) ​ (11,682) ​ (15,359) ​ Less intersegment eliminations ​ ​ (2,065) ​ ​ — ​ ​ (2,065) ​ ​ (2,497) ​ ​ — ​ ​ (2,497) ​ Net sales ​ $ 698,205 ​ $ 492,868 ​ $ 1,191,073 ​ $ 586,030 ​ $ 469,800 ​ $ 1,055,830 ​ ​ Net sales to third parties by segment exclude intersegment sales and cost of sales.
In January 2017, we received preliminary observations from SAT related to an audit for fiscal year 2013 outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and IVA.
In January 2017, we received preliminary observations from SAT related to an audit for fiscal year 2013 outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors and suppliers and IVA.
We believe adjusted net income affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the GAAP measure of net income (loss) attributable to Calavo Growers, Inc. ​ Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the financial tables below. ​ Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules.
We believe adjusted net income (loss) affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the GAAP measure of net income (loss) attributable to Calavo Growers, Inc. ​ Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the financial tables below. ​ Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules.
The way the Company measures EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in Company agreements. ​ Adjusted Net Income (Non-GAAP, Unaudited) ​ The following table presents adjusted net income and adjusted diluted EPS, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., and Diluted EPS, which are the most directly comparable GAAP measures.
The way the Company measures EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in Company agreements. ​ Adjusted Net Income (Non-GAAP, Unaudited) ​ The following table presents adjusted net income (loss) and adjusted diluted EPS, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., and Diluted EPS, which are the most directly comparable GAAP measures.
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; 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 adjustments to calculate EBITDA and adjusted 31 EBITDA are items recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. ​ Adjusted net income is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items.
The adjustments to calculate EBITDA and adjusted EBITDA are items recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. ​ Adjusted net income (loss) is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items.
The increase in gross profit for these products for the year ended October 31, 2022 was mainly due to increased sales prices and a reduction in distribution expenses, an improvement in product yield and labor productivity, and a reduction in costs related to the consolidation of operations in our Green Cove Springs, Florida facility into our Georgia facility . ​ Guacamole products gross profit percentage for the year ended October 31, 2022 was 5.7% compared to a gross profit of 17.6% for the prior year period.
The increase in gross profit for these products 42 for the year ended October 31, 2022 was mainly due to increased sales prices and a reduction in distribution expenses, an improvement in product yield and labor productivity, and a reduction in costs related to the consolidation of operations in our Green Cove Springs, Florida facility into our Georgia facility . ​ Guacamole products gross profit percentage for the year ended October 31, 2022 was 5.7% compared to a gross profit of 17.6% for the prior year period.
In accordance with our cumulative probability analysis, based on factors such as recent settlements made by the SAT in other cases, the 2011 Assessment settlement reached by CDM with the MFM, and the value of CDM assets, we recorded a provision of $11 million in the third quarter of fiscal 2021, as a discrete item in Income Tax Provision.
In accordance with our cumulative 30 probability analysis, based on factors such as recent settlements made by the SAT in other cases, the 2011 Assessment settlement reached by CDM with the MFM, and the value of CDM assets, we recorded a provision of $11 million in the third quarter of fiscal 2021, as a discrete item in Income Tax Provision.
One-time items are identified in the notes to the reconciliations in the financial tables below. ​ Non-GAAP information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. None of these metrics are presented as measures of liquidity.
One-time items are identified in the notes to the reconciliations in the financial tables below. 33 ​ Non-GAAP information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. None of these metrics are presented as measures of liquidity.
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 amount may not be recoverable.
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.
This board provides a basis for a unified funding of promotional activities based on an assessment 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 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.
From time to time, we continue to explore the distribution of other crops that provide reasonable returns to our business. ​ Our Prepared business produces, markets and distributes nationally a portfolio of healthy, high quality fresh packaged food products for consumers sold through the retail and other channels.
From time to time, we continue to explore the distribution of other crops that provide reasonable returns to our business. ​ Our Prepared business produces, markets and distributes, primarily nationally, a portfolio of healthy, high quality fresh packaged food products for consumers sold through retail and other channels.
With assistance from our internationally recognized tax advisory firm, CDM has filed an Administrative Appeals for the IVA related to the preceding months. A response to these Administrative Appeals is currently pending resolution. ​ In light of the foregoing, the Company is currently considering its options for resolution of the VAT receivables.
With assistance from our internationally recognized tax advisory firm, CDM has filed an Administrative Appeals for the IVA related to the preceding months. A response to these Administrative Appeals is currently pending resolution. ​ In light of the foregoing, the Company is currently considering its options for resolution of the IVA receivables.
Adjusted net income and the related measure of adjusted diluted EPS exclude certain items that are recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.
Adjusted net income (loss) and the related measure of adjusted diluted EPS exclude certain items that are recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.
For fiscal 2022 and 2021, we recorded $2.8 million and $0.9 million of consulting expenses related to an enterprise-wide strategic business review conducted for the purpose of restructuring to improve the profitability of the organization and efficiency of our operations.
For fiscal 34 2022 and 2021, we recorded $2.8 million and $0.9 million of consulting expenses related to an enterprise-wide strategic business review conducted for the purpose of restructuring to improve the profitability of the organization and efficiency of our operations.
In the unlikely event of an unfavorable resolution of the Administrative Appeals, we plan to file Annulment Suits with the Mexican Federal Tax Court. If these suits result in an unfavorable ruling, there is an option to appeal to the Collegiate Circuit Court.
In the event of an unfavorable resolution of the Administrative Appeals, we plan to file Annulment Suits with the Mexican Federal Tax Court. If these suits result in an unfavorable ruling, there is an option to appeal to the Collegiate Circuit Court.
Any significant fluctuation in the cost of fruit used in the production process or the exchange rate between the U.S. dollar and the Mexican peso may have a material impact on future gross profit for our Prepared segment. ​ Management has considered the impact of current operating results as well as expected future results and has concluded that there were no impairment indicators regarding intangible assets carried on the balance sheet as of October 31, 2022.
Any significant fluctuation in the cost of fruit used in the production process or the exchange rate between the U.S. dollar and the Mexican peso may have a material impact on future gross profit for our Prepared segment. ​ Management has considered the impact of current operating results as well as expected future results and has concluded that there were no impairment indicators regarding intangible assets carried on the balance sheet as of October 31, 2023.
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 marketplace.
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.
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. ​ ​ 28 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 of America.
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.
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. ​ Results of Operations ​ The following table sets forth certain items from our consolidated statements of operations, expressed as percentages of our total net sales, for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, ​ ​ 2022 ​ 2021 ​ 2020 Net sales 100.0 % 100.0 % 100.0 % Gross profit 6.2 % 5.4 % 8.5 % Selling, general and administrative 5.5 % 5.4 % 5.5 % Expenses related to Mexican tax matters ​ — % 0.0 % — % Impairment and charges related to RFG Florida facility closure ​ 0.1 % 0.9 % — % Gain on sales of Temecula packinghouse ​ (0.0) % (0.0) % (0.0) % Operating income 0.5 % (0.9) % 3.0 % Interest income 0.0 % 0.0 % 0.2 % Interest expense (0.1) % (0.1) % (0.1) % Other income, net 0.1 % 0.1 % 0.1 % Recovery (loss) on reserve for FreshRealm note receivable and impairment of investment ​ — % 0.6 % (3.5) % Unrealized and realized net loss (gain) on Limoneira shares ​ (0.7) % 0.4 % (0.8) % Net loss (0.5) % (1.1) % (1.3) % ​ Non-GAAP Financial Measures ​ The below tables include non-GAAP measures EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share (“EPS”), which are not prepared in accordance with U.S. generally accepted accounting principles, or “GAAP.” ​ EBITDA is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) interest income and expense, (2) income taxes (benefit) provision, (3) depreciation and amortization and (4) stock-based compensation expense.
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. ​ 32 ​ Results of Operations ​ The following table sets forth certain items from our consolidated statements of operations, expressed as percentages of our total net sales, for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, ​ ​ 2023 ​ 2022 ​ 2021 Net sales 100.0 % 100.0 % 100.0 % Gross profit 7.2 % 6.2 % 5.4 % Selling, general and administrative 6.8 % 5.5 % 5.4 % Expenses related to Mexican tax matters ​ 0.0 % — % 0.0 % Impairment and charges related to RFG Florida facility closure ​ — % 0.1 % 0.9 % Gain on sales of Temecula packinghouse ​ — % (0.0) % (0.0) % Operating income 0.0 % 0.5 % (0.9) % Interest income 0.0 % 0.0 % 0.0 % Interest expense (0.1) % (0.1) % (0.1) % Other income, net 0.0 % 0.1 % 0.1 % Recovery (loss) on reserve for FreshRealm note receivable and impairment of investment ​ — % — % 0.6 % Unrealized and realized net loss (gain) on Limoneira shares ​ — % (0.7) % 0.4 % Net loss (0.9) % (0.5) % (1.1) % ​ Non-GAAP Financial Measures ​ The below tables include measures which are not prepared in accordance with U.S. generally accepted accounting principles, or “GAAP,” (“non-GAAP measures”) including EBITDA, adjusted EBITDA, adjusted net income (loss) and adjusted diluted earnings per share (“EPS”). ​ EBITDA is defined as net income (loss) attributable to Calavo Growers, Inc., excluding (1) interest income and expense, (2) income taxes (benefit) provision, (3) depreciation and amortization, and (4) stock-based compensation expense.
Beginning in fiscal 2014 and continuing into fiscal 2022, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation. Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations.
Beginning in fiscal 2014 and continuing into fiscal 2023, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation. Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations.
We wrote down $8.7 million of leasehold improvements, $0.1 million of equipment, and $0.6 million of inventory (recognized through cost of goods sold). We also paid $0.4 million in employee severance. We incurred $0.9 million of expenses for the year ended October 31, 2022, related to the closure of this facility.
In fiscal 2021, we wrote down $8.7 million of leasehold improvements, $0.1 million of equipment, and $0.6 million of inventory (recognized through cost of goods sold). We also paid $0.4 million in employee severance. We incurred $0.9 million of expenses for the year ended October 31, 2022, related to the closure of this facility.
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 4%. 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 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.
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, 2022 we generated gross profit of $3.5 million from tomato sales, down from $3.7 million in the prior year period.
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, 2022 we generated gross profit of $3.5 million from tomato sales, a decrease from $3.7 million in the prior year period.
(h) On October 18, 2021, we announced the closure of Prepared’s food processing operations at our Green Cove Springs (near Jacksonville), Florida facility, as part of our Project Uno profit improvement program. As of November 15, 2021, the Green Cove facility for our Prepared segment has ceased operations.
On October 18, 2021, we announced the closure of Prepared’s food processing operations at our Green Cove Springs (near Jacksonville), Florida facility, as part of our Project Uno profit improvement program. As of November 15, 2021, the Green Cove facility for our Prepared segment ceased operations.
During fiscal 2022, 2021 and 2020, we remitted approximately $4.2 million, $5.7 million and $5.2 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 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.
Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units which includes forecasted cash flow.
Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units which include forecasted cash flow.
Papayas have high nutritional benefits. They are rich in anti-oxidants, 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. ​ 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.
Additionally, the tax authorities have determined that we owe our employee’s profit-sharing liability, totaling approximately $118 million Mexican pesos (approximately $6.0 million USD at October 31, 2022). ​ While we continue to believe that the 2013 Assessment is completely without merit, and that we will prevail on the Annulment Suit in the Tax Court, and that we have court rulings in favor of CDM, we also believe it is in the best interest of CDM and the Company to settle the 2013 Assessment as quickly as possible.
Additionally, the tax authorities have determined that we owe our employee’s profit-sharing liability, totaling approximately $118 million Mexican pesos (approximately $6.5 million USD at October 31, 2023). ​ While we continue to believe that the 2013 Assessment is completely without merit, and that we will prevail on the Annulment Suit in the Tax Court, and that we have court rulings in favor of CDM, we also believe it is in the best interest of CDM and the Company to settle the 2013 Assessment as quickly as possible.
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 2022, 2021 and 2020, on behalf of avocado growers, we remitted approximately $1.5 million, $1.0 million and $1.3 million to the California Avocado Commission.
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.
Avocados are considered a staple item purchased by Hispanic consumers, as the per-capita avocado consumption in Mexico is significantly higher than that of the U.S. ​ We anticipate avocado products will further penetrate the United States marketplace, driven by year-round availability of imported fresh avocados, a rapidly growing Hispanic population, and the promotion of the health benefits of avocados.
Avocados are considered a staple item purchased by Hispanic consumers, as the per-capita avocado consumption in Mexico is significantly higher than that of the US. ​ We anticipate avocado products will further penetrate the United States marketplace, driven by year-round availability of imported fresh avocados, a growing Hispanic population, and the promotion of the health benefits of avocados.
(f) For fiscal 2022, 2021 and 2020, results include higher stock-based compensation expense of $0.1 million, $1.3 million and $1.1 million related to senior management transitions, which does not impact the underlying cost structure of the Company.
(f) For fiscal 2023, 2022 and 2021, results include higher stock-based compensation expense of $1.6 million, $0.1 million and $1.3 million related to senior management transitions, which does not impact the underlying cost structure of the Company.
The Company concluded based on quantitative assessment tests that no goodwill impairment existed in the fiscal years ended October 31, 2022 and 2021.
The Company concluded based on quantitative assessment tests that no goodwill impairment existed in the fiscal years ended October 31, 2023 and 2022.
We provided a written rebuttal to these preliminary observations during our second fiscal quarter of 2017. ​ As a result, in July 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment totaling approximately $2.6 billion Mexican pesos (which includes annual adjustments for inflation, and equals approximately $131.3 million USD at October 31, 2022) related to Income Tax, Flat Rate Business Tax, and value added tax, related to this fiscal 2013 tax audit.
We provided a written rebuttal to these preliminary observations during our second fiscal quarter of 2017. ​ As a result, in July 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment totaling approximately $2.6 billion Mexican pesos (which includes annual adjustments for inflation, and equals approximately $143.8 million USD at October 31, 2023) related to Income Tax, Flat Rate Business Tax, and value added tax, related to this fiscal 2013 tax audit.
During fiscal 2022, 2021 and 2020, we remitted approximately $8.1 million, $8.3 million and $8.4 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).
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).
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. ​ Promotional allowances.
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.
Management will continue to evaluate the impact of operating results on these considerations in future quarters. ​ Fiscal 2021 vs.
Management will continue to evaluate the impact of operating results on these considerations in future quarters. ​ Fiscal 2022 vs.
The provision includes estimated penalties, interest and inflationary adjustments. We believe that this provision remains appropriate as of October 31, 2022 based on our cumulative probability analysis. We incurred $1.4 million of related professional fees for the year ended October 29 31, 2022, which have been recorded in Expenses related to Mexican Tax matters.
The provision includes estimated penalties, interest and inflationary adjustments. We believe that this provision remains appropriate as of October 31, 2023 based on our cumulative probability analysis. We incurred $2.4 million of related professional fees for the year ended October 31, 2023, which have been recorded in Expenses related to Mexican Tax matters.
We continue to seek to expand our relationships with major foodservice companies and food retailers and develop alliances that will allow our products to reach a larger percentage of the marketplace. ​ 25 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 impacting the fresh perishable food categories in which we currently operate, 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.
We 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.
For the year ended October 31, 2022, we recognized a return to provision discrete tax expense of $0.6 million due to the finalization of the tax treatment of the loss related to the previously recorded impairment of the investment in FreshRealm.
For the year ended October 31, 2021, we incurred $0.1 million of professional fees related to FreshRealm. For the year ended October 31, 2022, we recognized a return to provision discrete tax expense of $0.6 million due to the finalization of the tax treatment of the loss related to the previously recorded impairment of the investment in FreshRealm.
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. ​ 37 Fiscal 2021 vs.
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.
Additionally, we also believe that avocados and avocado based products will further penetrate other marketplaces that we currently operate in as interest in avocados continues to expand. ​ 34 In October 2002, the USDA announced the creation of a Hass Avocado Board to promote the sale of Hass variety avocados in the U.S. marketplace.
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.
Restricted cash, cash and cash equivalents as of October 31, 2022 and 2021 totaled $3.1 million and $2.9 million.
Restricted cash, cash and cash equivalents as of October 31, 2023 and 2022 totaled $2.9 million and $3.1 million, respectively.
See Note 7 to our consolidated financial statements for further information. ​ Mexican IVA taxes receivable . As of October 31, 2022, and October 31, 2021, CDM IVA receivables totaled $43.6 million (865.4 million Mexican pesos) and $37.5 million (762.1 million Mexican pesos). Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.
See Note 7 to our consolidated financial statements for further information. ​ Mexican IVA taxes receivable . 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). Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.
For the year ended October 31, 2022, we recognized a return to provision discrete tax expense of $0.9 million due to the finalization of the tax treatment for the final settlement of the 2011 Assessment (see below). In June 2021, we paid $2.4 million in full settlement of the 2011 Assessment.
For the year ended October 31, 2022, we recognized a return to provision discrete tax expense of $0.9 million due to the finalization of the tax treatment for the final settlement of the 2011 Assessment (see below).
(i) Tax impact of non-GAAP adjustments are based on the prevailing year-to-date tax rates in each period and adjusted to the one-time tax charges mentioned in note (b) above. ​ 33 ​ Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP, Unaudited) ​ The following table presents EBITDA and adjusted EBITDA, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., which is the most directly comparable GAAP measure.
In addition, we incurred $0.1 million in associated legal fees. ​ (j) Tax impact of non-GAAP adjustments are based on the prevailing year-to-date tax rates in each period and adjusted to the one-time tax charges mentioned in note (b) above. ​ ​ 35 ​ Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP, Unaudited) ​ The following table presents EBITDA and adjusted EBITDA, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., which is the most directly comparable GAAP measure.
We believe that the healthy eating trend that has been developing in the U.S. contributes to such growth, as avocados are cholesterol and sodium free, dense in fiber, vitamin B6, antioxidants, potassium, folate, and contain unsaturated fat, which helps lower cholesterol.
We believe that the healthy eating trend that has been developing in the U.S. contributes to such growth, as avocados are cholesterol and sodium free, dense in fiber, vitamin B6, antioxidants, potassium, folate, and contain unsaturated fat, which helps lower cholesterol. ​ Additionally, we believe that demographic changes in the U.S. will impact the consumption of avocados and avocado-based products.
See “Non-GAAP Financial Measures” above (in thousands, except per share amounts). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, ​ 2022 2021 2020 Net loss attributable to Calavo Growers, Inc. ​ $ (6,249) ​ $ (11,818) ​ $ (13,625) Interest Income ​ ​ (500) ​ ​ (335) ​ ​ (1,998) Interest Expense ​ ​ 1,686 ​ 798 ​ 877 Provision for Income Taxes ​ ​ 3,251 ​ 10,747 ​ (4,292) Depreciation & Amortization ​ ​ 16,589 ​ 17,571 ​ 16,093 Stock-Based Compensation ​ ​ 3,139 ​ 3,950 ​ 4,487 EBITDA ​ ​ $ 17,916 ​ $ 20,913 ​ $ 1,542 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjustments: ​ ​ ​ ​ Non-cash losses recognized from unconsolidated entities (a) ​ ​ 564 ​ 1,719 ​ 6,110 Net (gain) loss on Limoneira shares (d) ​ ​ 8,928 ​ (3,858) ​ 8,537 Loss (recovery) from FreshRealm and other related expenses (b) ​ ​ — ​ (5,989) ​ 37,577 Rent expense add back (e) ​ ​ 432 ​ 396 ​ 108 Acquisition costs (c) ​ ​ — ​ 262 ​ 510 Restructure costs - consulting and management recruiting and severance (f) ​ ​ ​ 4,775 ​ ​ 1,833 ​ ​ — Expenses related to Mexican tax matters (g) ​ ​ ​ 1,417 ​ ​ 1,797 ​ ​ — Impairment, losses and charges related to property, plant and equipment (h) ​ ​ ​ 1,115 ​ ​ 9,748 ​ ​ ​ Adjusted EBITDA ​ ​ $ 35,147 ​ $ 26,821 ​ $ 54,384 Adjusted EBITDA per dilutive share ​ ​ $ 1.98 ​ $ 1.52 ​ $ 3.10 ​ See prior page for footnote references ​ Net Sales ​ We believe that the fundamental consumption trends for our products continue to be favorable.
See “Non-GAAP Financial Measures” above (in thousands, except per share amounts). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31 , ​ 2023 2022 2021 Net loss attributable to Calavo Growers, Inc. ​ $ (8,344) ​ $ (6,249) ​ $ (11,818) Interest Income ​ ​ (605) ​ ​ (500) ​ ​ (335) Interest Expense ​ 2,495 ​ 1,686 ​ 798 Provision for Income Taxes ​ 5,942 ​ 3,251 ​ 10,747 Depreciation and Amortization ​ 17,282 ​ 16,589 ​ 17,571 Stock-Based Compensation ​ 5,210 ​ 3,139 ​ 3,950 EBITDA ​ $ 21,980 ​ $ 17,916 ​ $ 20,913 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjustments: ​ ​ ​ Non-cash losses recognized from unconsolidated entities (a) ​ 879 ​ 564 ​ 1,719 Net loss (income) on Limoneira shares (d) ​ — ​ 8,928 ​ (3,858) Recovery from FreshRealm and other related expenses (b) ​ — ​ — ​ (5,989) Rent expense add back (e) ​ 432 ​ 432 ​ 396 Acquisition costs (c) ​ ​ ​ ​ ​ ​ ​ 262 Restructure costs - consulting and management recruiting and severance (f) ​ ​ 3,930 ​ ​ 4,775 ​ ​ 1,833 Expenses related to Mexican tax matters (g) ​ ​ 3,128 ​ ​ 1,417 ​ ​ 1,797 Impairment, losses and charges related to property, plant and equipment (h) ​ ​ 235 ​ ​ 1,115 ​ ​ 9,748 Legal settlement and related expenses (i) ​ 700 ​ — ​ ​ — Adjusted EBITDA ​ $ 31,284 ​ $ 35,147 ​ $ 26,821 ​ See prior page for footnote references ​ Net Sales ​ We believe that the fundamental consumption trends for our products continue to be favorable.
First, U.S. avocado demand continues to grow, with per capita consumption in 2021/2022 per USDA reaching 8.4 pounds per person, and approximately 65% higher than the estimate from a decade ago.
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.
This amount has been adjusted for inflation as of October 31, 2022 to the amount of $3 billion Mexican pesos (approximately $151.5 million USD).
This amount has been adjusted for inflation as of October 31, 2023 to the amount of $3 billion Mexican pesos (approximately $166.0 million USD).
See Note 10 to our consolidated financial statements 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 ripens (if desired) avocados for delivery to our customers.
See “Non-GAAP Financial Measures” above (in thousands, except per share amounts). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, ​ 2022 2021 2020 Net loss attributable to Calavo Growers, Inc. ​ ​ $ (6,249) ​ $ (11,818) ​ $ (13,625) Non-GAAP adjustments: ​ ​ ​ ​ Non-cash losses recognized from unconsolidated entities (a) ​ ​ 564 ​ 1,719 ​ 6,110 Loss (recovery) from FreshRealm and other related expenses (b) ​ ​ 580 ​ (5,989) ​ 37,577 Acquisition costs (c) ​ ​ — ​ 262 ​ 510 Net (gain) loss on Limoneira shares (d) ​ ​ 8,928 ​ (3,858) ​ 8,537 Rent expense add back (e) ​ ​ 432 ​ 396 ​ 108 Restructure costs - consulting, management recruiting and severance (f) ​ ​ ​ 4,914 ​ ​ 3,180 ​ ​ 1,119 Mexican tax matters (g) ​ ​ ​ 2,343 ​ ​ 14,270 ​ ​ — Impairment, losses and charges related to property, plant and equipment (h) ​ ​ ​ 1,145 ​ ​ 9,748 ​ ​ — Tax impact of adjustments (i) ​ ​ (3,788) ​ (1,690) ​ (12,773) Adjusted net income attributed to Calavo Growers, Inc. ​ ​ $ 8,869 ​ $ 6,220 ​ $ 27,563 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Calavo Growers, Inc.’s net income (loss) per share: ​ ​ ​ ​ Diluted EPS (GAAP) ​ ​ $ (0.35) ​ $ (0.67) ​ $ (0.78) Adjusted Diluted EPS ​ ​ $ 0.50 ​ $ 0.35 ​ $ 1.57 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of shares used in per share computation: ​ ​ ​ ​ Diluted ​ ​ 17,663 ​ 17,621 ​ 17,564 32 (a) For the year ended October 31, 2020, FreshRealm incurred losses totaling $24.1 million, of which we recorded $7.2 million of non-cash losses during fiscal 2020.
See “Non-GAAP Financial Measures” above (in thousands, except per share amounts). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended October 31, ​ 2023 2022 2021 Net loss attributable to Calavo Growers, Inc. ​ $ (8,344) ​ $ (6,249) ​ $ (11,818) Non-GAAP adjustments: ​ ​ ​ Non-cash losses recognized from unconsolidated entities (a) ​ 879 ​ 564 ​ 1,719 Loss (recovery) from FreshRealm and other related expenses (b) ​ — ​ ​ 580 ​ (5,989) Acquisition costs (c) ​ — ​ ​ — ​ 262 Net loss (income) on Limoneira shares (d) ​ — ​ 8,928 ​ (3,858) Rent expense add back (e) ​ 432 ​ 432 ​ 396 Restructure costs - consulting, management recruiting and severance (f) ​ ​ 5,490 ​ ​ 4,914 ​ ​ 3,180 Expenses related to Mexican tax matters (g) ​ ​ 3,128 ​ ​ 2,343 ​ ​ 14,270 Impairment, losses and charges related to property, plant and equipment (h) ​ ​ 235 ​ ​ 1,145 ​ ​ 9,748 Legal settlement and related expenses (i) ​ ​ 700 ​ ​ — ​ ​ — Tax impact of adjustments (j) ​ (2,716) ​ (3,788) ​ (1,690) Adjusted net income (loss) attributed to Calavo Growers, Inc. ​ $ (196) ​ $ 8,869 ​ $ 6,220 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Calavo Growers, Inc.’s net income (loss) per share: ​ ​ ​ Diluted EPS (GAAP) ​ $ (0.47) ​ $ (0.35) ​ $ (0.67) Adjusted net income (loss) per diluted share ​ $ (0.01) ​ $ 0.50 ​ $ 0.35 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of shares used in per share computation: ​ ​ ​ Diluted ​ 17,750 ​ 17,663 ​ 17,621 (a) For the years ended October 31, 2023, 2022 and 2021, we incurred losses from Agricola Don Memo totaling $0.9 million, $0.6 million, and $1.7 million.
Gross profit benefited for fiscal 2021 by the strengthening of the U.S. dollar in relation to the Mexican peso during the year ended October 31, 2021, which resulted in a $0.9 million net gain related to the remeasurement of peso-dominated net assets at our Mexican subsidiaries.
Contributing to the increase in gross profit for fiscal 2023 was the strengthening of the Mexican Peso in relation to the U.S. Dollar during the year ended October 31, 2023, which resulted in a $1.2 million net gain related to the remeasurement of peso-dominated net assets at our Mexican subsidiaries.
For fiscal 2021, as compared to fiscal 2020, the decrease in interest expense was primarily related to lower interest rates, offset by a higher average debt balance. ​ Other Income, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Change ​ 2021 ​ Change ​ 2020 ​ ​ (Dollars in thousands) Other income, net $ 1,017 0 % $ 1,016 84 % $ 553 Percentage of net sales ​ 0.1 % ​ ​ 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 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.
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.
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.
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 including sandwiches, salads, parfaits and ready-to-eat snack items among other products and (iii) process and package guacamole and salsa.
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.
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 leader in the distribution of avocados, guacamole products, and other perishable food products throughout the United States.
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.
We incurred $0.3 million of broker fees as part of the sale of Limoneira stock. (e) For the year ended October 31, 2022, 2021 and 2020, we incurred $0.4 million, $0.4 million and $0.1 million related to rent paid for Prepared’s former corporate office space that we have vacated and plan to sublease.
(e) For the year ended October 31, 2023, 2022 and 2021, we incurred $0.4 million related to rent paid for Prepared’s former corporate office space that we have vacated and plan to sublease.
Fiscal year 2022 cash flows provided by investing activities includes the proceeds received on the sale of Limoneira stock of $18.5 million, partially offset by purchases of property, plant and equipment of $10.5 million. ​ Cash used in financing activities was $57.8 million, $5.2 million and $0.9 million for fiscal years 2022, 2021 and 2020.
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 2022 operating cash flows reflect our net loss of $6.6 million, net increase of noncash charges (depreciation and amortization, stock-based compensation expense, provision for losses on accounts receivable, losses from unconsolidated entities, net losses on Limoneira shares, deferred taxes, loss on disposal of property, plant and equipment, loss on the reserve for FreshRealm, impairment related to Prepared’s Florida facility closure and gain on the sale of the Temecula packinghouse) of $29.1 million and a net increase from changes in the non-cash components of our working capital accounts of approximately $27.6 million. ​ Increases in operating cash flows caused by working capital changes include a decrease in accounts receivable of $19.9 million, a net increase in accounts payable, accrued expenses and other liabilities of $10.4 million, an increase in income taxes payable of $8.1 million, and a decrease in inventory of $1.8 million, partially offset by an increase in other assets of $5.0 million, an increase in advances to suppliers of $4.7 million, and a decrease in payable to growers of $2.8 million and an increase in prepaid expenses and other current assets of $0.1 million. ​ The decrease in our accounts receivable is due to improvements in our working capital practices and lower sales in October 2022 compared to the same prior year period.
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.
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. ​ 39 Fiscal 2021 vs. Fiscal 2020: ​ During our year ended October 31, 2021, as compared to the prior year period, our Grown products segment gross profit percentage was consistent.
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.
For fiscal years 2022, 2021 and 2020, inter-segment sales and cost of sales of $2.1 million, $2.5 million and $1.7 million between the Grown segment and the Prepared segment were eliminated. ​ 36 The following table summarizes our net sales by business segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Change ​ 2021 ​ Change ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross sales: ​ ​ ​ ​ ​ Grown ​ ​ $ 700,270 ​ 19 % $ 588,527 ​ 1 % $ 585,052 ​ Prepared ​ ​ 492,868 ​ 5 % 469,800 ​ (1) % 475,970 ​ Less intercompany eliminations ​ ​ ​ (2,065) ​ (17) % ​ (2,497) ​ 51 % ​ (1,651) ​ Total net sales ​ ​ $ 1,191,073 ​ 13 % $ 1,055,830 ​ (0) % $ 1,059,371 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As a percentage of sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ ​ 58.7 % ​ ​ 55.6 % ​ ​ 55.1 % Prepared ​ ​ 41.3 % ​ ​ 44.4 % ​ ​ 44.9 % ​ ​ ​ 100 % ​ ​ 100 % ​ ​ 100 % ​ Summary ​ Net sales for the year ended October 31, 2022, as compared to 2021, increased by approximately $135.2 million or 13%.
For fiscal years 2023, 2022 and 2021, intersegment sales and cost of sales of $1.6 million, $2.1 million and $2.5 million between the Grown segment and the Prepared segment were eliminated. ​ 38 The following table summarizes our net sales by business segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ Change ​ 2022 ​ Change ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross sales: ​ ​ ​ ​ ​ Grown ​ ​ $ 529,025 ​ (24) % $ 700,270 ​ 19 % $ 588,527 ​ Prepared ​ ​ 444,552 ​ (10) % 492,868 ​ 5 % 469,800 ​ Less intersegment eliminations ​ ​ ​ (1,629) ​ (21) % ​ (2,065) ​ (17) % ​ (2,497) ​ Total net sales ​ ​ $ 971,948 ​ (18) % $ 1,191,073 ​ 13 % $ 1,055,830 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As a percentage of sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ ​ 54.3 % ​ ​ 58.7 % ​ ​ 55.6 % Prepared ​ ​ 45.7 % ​ ​ 41.3 % ​ ​ 44.4 % ​ ​ ​ 100 % ​ ​ 100 % ​ ​ 100 % ​ Summary ​ Net sales for the year ended October 31, 2023, compared to the corresponding period in fiscal 2022, decreased by $219.1 million, or approximately 18%.
Fiscal 2020: ​ The decrease in our Prepared products gross profit for the year ended October 31, 2021 was the result of decreased gross profit for fresh-cut fruit and vegetables, prepared foods, and guacamole products. ​ Fresh-cut fruit and vegetables and prepared foods’ gross profit (loss) percentage for the year ended October 31, 2021 was (0.9)%, compared to 5.3% in the same prior year period.
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.
The decrease in interest income in fiscal 2021 as compared to fiscal 2020 is primarily due to the discontinuation of accruing interest for FreshRealm, which was effective August 1, 2020. ​ Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Change ​ 2021 ​ Change ​ 2020 ​ ​ (Dollars in thousands) Interest expense $ 1,686 111 % $ 798 (9) % $ 877 Percentage of net sales ​ 0.1 % ​ ​ 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 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.
In fiscal 2022 and 2021, we incurred $2.0 million and $0.9 million related to management recruiting and severance costs in connection with the restructuring initiative. (g) For the year ended October 31, 2022, we incurred $1.4 million of professional fees related to the Mexican tax matters.
In fiscal 2023, 2022 and 2021, we incurred $2.9 million, $2.0 million and $0.9 million related to management recruiting and severance costs in connection with the restructuring initiative. For the year ended October 31, 2023, we recorded $0.8 million in severance costs as part of U.S. restructuring efforts.
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 prior year period.
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.
During fiscal 2022, 2021 and 2020, we received $0.6 million, $0.5 million and $0.5 million, million as dividend income from Limoneira. ​ Income Taxes Benefit (Provision) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Change ​ 2021 ​ Change ​ 2020 ​ ​ ​ (Dollars in thousands) Income tax benefit (provision) ​ $ (3,251) (70) % $ (10,747) (350) % $ 4,292 ​ Effective tax rate ​ ​ 97.0 % ​ ​ 913.3 % ​ ​ 23.7 % ​ ​ 42 For fiscal 2022, we incurred return to provision discrete taxable items in the amount of $2.0 million.
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.
(Bank of America). 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 over the first half of the year.
(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.
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 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.
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.
The gross profit percentage for consignment sales is 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. ​ Prepared products ​ Fiscal 2022 vs.
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. The decrease in tomato gross profit was due primarily to an increase in sales of tomatoes from third-party growers/packers.
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 on a worldwide basis. We procure avocados from California, Mexico and other growing regions around the world.
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.
For the year ended October 31, 2020, we recognized $7.2 million of losses related to FreshRealm. ​ Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Change ​ 2021 ​ Change ​ 2020 ​ ​ (Dollars in thousands) Interest income $ 500 49 % $ 335 (83) % $ 1,998 Percentage of net sales ​ 0.0 % ​ ​ 0.0 % ​ ​ 0.0 % ​ 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.
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.
During fiscal 2022, we operated four packinghouses and four operating and distributing facilities (aka value-added depots or VADs) that handle avocados that are sold across the United States and to select international markets.
During fiscal 2023, we operated three packinghouses and five operating and distributing facilities (also known as “value-added depots” or “VAD”s) that handle avocados that are sold across the United States and select international markets.
Of this amount, $1.5 million has been recorded as a discrete item in Income Tax Provision and $0.9 million is related to value added tax expense and recorded as Expenses related to the Mexican tax matters. An additional $0.3 million of related professional fees have also been recorded as expenses related to the Mexican tax matters.
In June 2021, we paid $2.4 million in full settlement of the 2011 Assessment. Of this amount, $1.5 million was recorded as a discrete item in Income Tax Provision and $0.9 million is related to value added tax expense and recorded as Expenses related to the Mexican tax matters.
The decline in pounds sold of guacamole products was due to a decline in demand from foodservice customers related to COVID-19 during the year. ​ 38 ​ Gross Profit ​ The following table summarizes our gross profit and gross profit percentages by business segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ Change ​ 2021 ​ Change ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ Gross profit (loss): ​ ​ ​ ​ ​ Grown ​ ​ $ 50,165 ​ 5 % $ 47,787 ​ 0 % $ 47,563 ​ Prepared ​ ​ 23,680 ​ 146 % 9,638 ​ (77) % 42,335 ​ Total gross profit ​ ​ $ 73,845 ​ 29 % $ 57,425 ​ (36) % $ 89,898 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit (loss) percentages: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grown ​ ​ 7.2 % ​ ​ 8.1 % ​ ​ 8.1 % Prepared ​ ​ 4.8 % ​ ​ 2.1 % ​ ​ 8.9 % Consolidated ​ ​ 6.2 % ​ ​ 5.4 % ​ ​ 8.5 % ​ 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 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.
See Note 7 to the consolidated financial statements for further information. In July 2021, based on our evaluation of the most probable outcomes of the 2013 Assessment, we recorded an accrual of $11 million as a discrete item in Income Tax Provision.
An additional $0.3 million of related professional fees have also been recorded as expenses related to the Mexican tax matters. In July 2021, based on our evaluation of the most probable outcomes of the 2013 Assessment, we recorded an accrual of $11 million as a discrete item in Income Tax Provision.
The decrease in our inventory as of October 31, 2022, when compared to the prior year period, is primarily due to a combination of lower inventory of Mexican avocados and prepared avocado products. The increase in other assets is primarily related to the increase in IVA receivable in fiscal 2022.
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.
Our working capital at October 31, 2022 was $23.7 million, compared to $38.0 million at October 31, 2021. ​ 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.
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.
Cash used during fiscal year 2022 primarily relates to the net payment on our credit facilities totaling $36.5 million, payment of a $20.3 million dividend, payments on long-term obligations of $1.1 million and the payment of minimum withholding taxes on net share settlement of equity awards of $0.1 million, partially offset by proceeds received from a failed leaseback of $0.2 million. ​ Our principal sources of liquidity are cash generated from operations and amounts available for borrowing under our Credit Facility.
(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.
The average avocado sales price per carton increased 3% compared to the prior year period. ​ Sales of tomatoes decreased $10.3 million, or 19%, for the year ended October 31, 2021, when compared to the prior year period.
The volume of avocados sold for the year ended October 31, 2023 increased 3% compared to the prior year period. ​ Sales of tomatoes increased $7.7 million, or 16%, for the year ended October 31, 2023, when compared to the prior year period.

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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 changeThe 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, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (All amounts in thousands) ​ Expected maturity date October 31, ​ ​ 2023 2024 2025 2026 2027 Thereafter Total Fair Value ​ Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted cash, cash and cash equivalents (1) ​ $ 3,134 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 3,134 ​ $ 3,134 ​ Accounts receivable (1) ​ 59,016 ​ — ​ — ​ — ​ — ​ — ​ 59,016 ​ 59,016 ​ Advances to suppliers (1) ​ 12,430 ​ — ​ — ​ — ​ — ​ — ​ 12,430 ​ 12,430 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payable to growers (1) ​ $ 20,223 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 20,223 ​ $ 20,223 ​ Accounts payable (1) ​ 10,436 ​ — ​ — ​ — ​ — ​ — ​ 10,436 ​ 10,436 ​ Borrowings pursuant to credit facilities (1) ​ — ​ — ​ — ​ 1,200 ​ — ​ — ​ 1,200 ​ 1,200 ​ ​ (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.
Biggest changeThe 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.
We do not currently use derivative instruments to hedge fluctuations in the Mexican peso to U.S. dollar exchange rates. Management does, however, evaluate this opportunity from time to time. Total foreign currency translation losses for fiscal years 2022, and 2020, net of gains, were $1.0 million and $1.0 million.
We do not currently use derivative instruments to hedge fluctuations in the Mexican peso to U.S. dollar exchange rates. Management does, however, evaluate this opportunity from time to time. Total foreign current translation gains for fiscal years 2023 and 2021, net of losses, were $1.2 million and $0.9 million, respectively.
Total foreign current translation gains for fiscal year 2021, net of losses, was $0.9 million. ​ ​ 46
Total foreign currency translation losses for fiscal year 2022, net of gains, were $1.0 million. ​ ​ 48

Other CVGW 10-K year-over-year comparisons