1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24,JULY 5, 2001.
REGISTRATION NO. 333-333-59418
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CALAVO GROWERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 06005159 33-0945304
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
2530 RED HILL AVENUE EGIDIO CARBONE, JR.
SANTA ANA, CALIFORNIA 92705-5542 VICE PRESIDENT, FINANCE AND CORPORATE SECRETARY
(949) 223-1111 CALAVO GROWERS, INC.
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE 2530 RED HILL AVENUE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S SANTA ANA, CALIFORNIA 92705-5542
PRINCIPAL EXECUTIVE OFFICES) (949) 223-1111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT
FOR SERVICE)
COPY TO:
MARC L. BROWN
TROY & GOULD PROFESSIONAL CORPORATION
1801 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CALIFORNIA 90067-2367
(310) 789-1269
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.001 per share.....................share....... 10,000,000(1) $1.72(2) $17,200,000(2) $4,300.00(3)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Based upon an estimate of the maximum number of shares of the capital stock
of Calavo Growers of California that will be exchanged for shares of the
common stock of Calavo Growers, Inc. in the merger described herein.in this
Registration Statement.
(2) Calculated in accordance with Rule 457(f)(2) under the Securities Act based
upon the book value as of February 28, 2001 of the shares of the capital
stock of Calavo Growers of California to be exchanged in the merger
described herein.in this Registration Statement.
(3) Calculated by multiplying the proposed maximum aggregate offering price by
.00025.Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
CALAVO GROWERS OF CALIFORNIA
CALAVO GROWERS, INC.
2530 RED HILL AVENUE
SANTA ANA, CALIFORNIA 92705
(949) 223-1111
-------------------------
INFORMATION------------------------
PROXY STATEMENT/PROSPECTUS
To the shareholders of Calavo Growers of California:
The Board of Directors unanimously recommends the conversion of Calavo
Growers of California ("CALAVO") from a California nonprofit cooperative
association into a California for-profit corporation called Calavo Growers, Inc.
("NEW CALAVO"). After the conversion, New Calavo will conduct Calavo's business
and will own all of Calavo's assets. However, the business will be conducted on
a for-profit basis rather than on a nonprofit cooperative basis.
To accomplish the conversion, Calavo will merge into New Calavo, which is a
newly organized California corporation. Each share of Calavo's preferred or
common stock that is outstanding on the effective date of the merger will be
exchanged for one share of the common stock of New Calavo. The common stock of
New Calavo will not be listed on a securities exchange or the Nasdaq stock
market. A copy of the merger agreement is attached as Appendix A to this InformationProxy
Statement/Prospectus and is incorporated into this document.
The conversion and the merger agreement require the approval of Calavo's
shareholders and lenders.shareholders. You may vote if you owned shares of Calavo stock as of the close
of business on , 2001, which has been fixed by the Board of
Directors as the record date for determining the shareholders who are entitled
to vote on the merger.
Please vote by completing and mailing the enclosed ballot in the envelope
provided. Please deliver your ballot to Calavo by , 2001. If you
fail to return a completed ballot, the effect will be the same as a vote against
the conversion. You may vote only by using the enclosed ballot.
WE STRONGLY URGE YOU TO REVIEW THIS ENTIRE INFORMATIONPROXY STATEMENT/PROSPECTUS,
INCLUDING THE "RISK FACTORS" SECTION BEGINNING ON PAGE 6. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM THE INFORMATION
CONTAINED IN THIS INFORMATIONPROXY STATEMENT/PROSPECTUS.
CALAVO'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
IN FAVOR OF THE CONVERSION OF CALAVO INTO A FOR-PROFIT CORPORATION BY VOTING IN
FAVOR OF THE CONVERSION AND THE MERGER AGREEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN THE
MERGER OR DETERMINED IF THIS INFORMATIONPROXY STATEMENT/ PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This InformationProxy Statement/Prospectus is dated , 2001 and is being
mailed to shareholders on or about that date.
Sincerely,
Lee Cole
Chairman, Chief Executive Officer and
President
3
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information......................... ii
Forward-Looking Statements.................................. ii
Questions and Answers About the Conversion..................Summary..................................................... 1
Summary..................................................... 3
Risk Factors................................................ 6
The Conversion.............................................. 910
Transfers of Shares of New Calavo Common Stock After the
Conversion................................................ 1314
New Calavo's Business, Management and Common Stock.......... 1516
Comparison of the Rights of Calavo's and New Calavo's
Shareholders.............................................. 1719
Selected Condensed Consolidated Financial Data.............. 2122
Unaudited Pro Forma Condensed Combined Financial
Statements................................................ 2223
Business of Calavo.......................................... 2730
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 3741
Management of Calavo........................................ 4349
Security Ownership of Certain Beneficial OwnersPrincipal Shareholders and
Management................................................ 4755
Legal Matters............................................... 4856
Experts..................................................... 4856
Index to Financial Statements............................... F-1
Appendix A: Agreement and Plan of Merger and Reorganization
Appendix B: Articles of Incorporation of Calavo Growers,
Inc.
Appendix C: Amended and Restated Bylaws of Calavo Growers,
Inc.
Appendix D: Marketing Agreement for Calavo Growers, Inc.
Appendix E: January 2001 Amendment to the Bylaws of Calavo
Growers of California
i
4
WHERE YOU CAN FIND MORE INFORMATION
Following the conversion, New Calavo will file annual, quarterly and
special reports and proxy statements with the Securities and Exchange Commission
(the "SEC"). You may read and copy any reports, proxy statements and other
documents that the companyNew Calavo files with the SEC at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at regional public
reference rooms in New York, New York and Chicago, Illinois.20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms.room. The reports, proxy statements and any other documents that New Calavo
files with the SEC will also be available from commercial document retrieval
services and at the SEC's web site (http://www.sec.gov). In addition, New Calavo
intends to furnish its shareholders with annual reports containing financial
statements audited by an independent certified accounting firm.
New Calavo has filed with the SEC a Registration Statement on Form S-4 that
registers the offer and sale of the common stock that will be issued in
connection with the merger between Calavo and New Calavo. This InformationProxy
Statement/Prospectus is a part of that Registration Statement. As allowed by the
SEC's rules, this InformationProxy Statement/Prospectus does not contain all of the
information that you can find in the Registration Statement or all of the
exhibits to the Registration Statement.
YOU SHOULD RELY ONLY ON THE INFORMATION THAT IS CONTAINED IN THIS INFORMATIONPROXY
STATEMENT/PROSPECTUS. WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU
WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. FURTHERMORE, INFORMATION
THAT IS CONTAINED ON CALAVO'S WEB SITE DOES NOT CONSTITUTE A PART OF THIS
DOCUMENT. WE ARE NOT MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION CONTAINED IN THIS INFORMATIONPROXY STATEMENT/PROSPECTUS IS ACCURATE ONLY AS
OF THE DATE ON THE FRONT COVER OF THIS DOCUMENT. OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this InformationProxy Statement/Prospectus that
represent our expectations or beliefs about future events and financial
performance. Forward-looking statements are identifiable by words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may" and other
similar expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. Forward-looking statements are subject to known and
unknown risks and uncertainties, including those described under "Risk Factors"
and elsewhere in this document. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this document might not
occur. In addition, actual results could differ materially from those suggested
by the forward-looking statements, and therefore you should not place undue
reliance on the forward-looking statements.
We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
ii
5
QUESTIONSSUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND ANSWERS ABOUTDOES
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. IN ORDER TO
UNDERSTAND THE TRANSACTION FULLY, YOU SHOULD READ THIS ENTIRE PROXY
STATEMENT/PROSPECTUS, INCLUDING THE ATTACHED APPENDICES.
PROPOSED CONVERSION Q. Why hasOF CALAVO TO FOR-PROFIT STATUS
Calavo's Board of Directors proposedunanimously recommends converting the cooperative from
a nonprofit corporationCalavo into a
California for-profit corporation?
A.corporation. To accomplish the conversion, Calavo will
merge into New Calavo, and New Calavo will thereafter conduct Calavo's business
operations. New Calavo is currently a wholly owned subsidiary of Calavo that has
not commenced business operations.
REASONS FOR THE CONVERSION
In order to maintain its status as an agricultural cooperative, Calavo must
conduct a majority of its business with members. Because the percentage of its
business conducted with nonmembers has increased in recent years and is expected
to increase in subsequent years, Calavo will not satisfy this requirement in
2001 and probably will not satisfy this requirement in subsequent years. To
satisfy the requirement, Calavo would need to restructure its corporate
organization into two separate businesses. In the Board's view, this would
weaken the cooperative. Conversion to a for-profit corporation may also enable
Calavo to raise equity capital by issuing stock.
Q. HowISSUANCE OF NEW CALAVO COMMON STOCK IN THE CONVERSION
Each share of Calavo preferred stock and common stock will the conversion occur?
A. Calavo will merge intobe exchanged for
one share of New Calavo which will assume ownership of all of
Calavo's business and assets on the effective date of the merger. The mergercommon stock. You will not change Calavo's day-to-day operations.
Q. What vote is required to approve the conversion?
A. The conversion must be approved by a majority of all common shareholders,
voting separately as a class, and by a majority of the outstanding shares of
preferred stock, voting separately as a class. However, the Board of
Directors will not elect to proceed with the conversion unless a substantial
majority of Calavo's shareholders approve the conversion. In addition,
completion of the conversion is contingent upon receiving approvals from
Calavo's lenders and upon satisfying several other conditions specified in
the merger agreement.
Q. Will I receive a new stock
certificate in the new company?
A. No.because New Calavo uses a "certificateless" system that does not
involve the issuance of traditional stock certificates. However, you will
receive an announcement of the completion of the conversion and a written
statement setting forth the number of shares of stock held by you in New Calavo.
You do not need to return any stock certificates or other evidence of ownership
in order to establish your stock ownership rights in New Calavo.
Q. Will I incur taxesSHAREHOLDER APPROVAL REQUIRED
The conversion cannot occur without the approval of (1) a majority of
Calavo's common shareholders voting separately as a resultclass and (2) a majority of
the conversion?
A. Subject to the limitations and assumptions described in this Information
Statement/Prospectus,outstanding shares of Calavo and its shareholders are not expected to incur
federal income taxespreferred stock voting separately as a resultclass.
Each common shareholder is entitled to only one vote on the conversion
regardless of the mergernumber of Calavo into New Calavo.
Your tax basis in the New Calavo stockshares that you receive in the merger will be
the same as the tax basis in your Calavo stock.
Q. If I vote against the merger, can I require Calavo to repurchase my shares
for cash?
A. No. Dissenters' rights and appraisal rights are not available. If the
conversion occurs, each Calavo shareholder will receive shares in New Calavo
even if he or she voted againstowns.
Even if the transaction.
Q. How do I know if thisrequired majority vote is a fair transaction? Didobtained, the Board of Directors receive an appraisalwill
not elect to proceed with the conversion unless the transaction is approved by
members who delivered at least sixty percent of the companytotal volume of avocados
delivered by all members during the preceding fiscal year.
CALAVO'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
IN FAVOR OF THE MERGER AND THE MERGER AGREEMENT.
SHAREHOLDERS ENTITLED TO VOTE
You can vote if you owned shares of Calavo stock as of , 2001,
which is the record date established by the Board of Directors for determining
shareholders entitled to vote. You should vote by completing and mailing the
enclosed ballot and delivering it to Calavo in the enclosed envelope no later
than , 2001 (or such later date as the Board of Directors may
establish and announce in its sole discretion). A shareholder may vote only by
completing and mailing the enclosed ballot. A shareholders' meeting to consider
and vote on the conversion will not be held.
1
6
SHARES OWNED BY DIRECTORS AND OFFICERS
As of April 30, 2001, Calavo's directors collectively owned approximately
16.8% of the outstanding shares of Calavo common stock and none of its preferred
stock. Each of Calavo's ten directors owns shares of common stock, and the
directors collectively are therefore entitled to cast a total of ten votes on
the conversion since each holder of common stock is entitled to only one vote.
None of Calavo's executive officers (excluding the Chief Executive Officer, who
is also a director) owns shares of common stock or preferred stock. As of the
record date, there are holders of common stock who are entitled to
vote on the merger, and there are holders of preferred stock who are
entitled to vote on the merger.
REGULATORY APPROVAL
The conversion will become effective on the date that a "fairness opinion"?
A. Themerger agreement is
filed with the California Secretary of State after shareholder approval has been
obtained. No other federal, state or third party approvals or consents must be
obtained prior to the completion of the conversion.
FAIRNESS OF THE CONVERSION
Calavo's Board of Directors did not see any need to obtain an appraisal or
a fairness opinion.opinion in connection with the conversion. No shareholders are being
cashed out, and each shareholder will receive the same number of shares in New
Calavo that he or she owns in Calavo. The interests of Calavo's shareholders in
New Calavo are not being diluted through the merger, and the net book value of
New Calavo will be the same as the net book value of Calavo on the effective
date of the conversion.
Q. Who will own Calavo after the conversion?
A. Immediately after the conversion, each current shareholder will have an
ownership interest in New Calavo that equals the shareholder's ownership
interest in Calavo. The ownership interests of the
1
6 shareholders are subject to
change after the conversion based upon trades in New Calavo's common stock by
shareholders and additional stock issuances that may be made by New Calavo.
Q. Can I continueNO DISSENTERS' RIGHTS
Under California law, you have no right to selldemand an appraisal of your
Calavo shares of stock after the conversion? And to whom?
A. The existing mechanism for transferring shares will be retained. New Calavo's
stock will not be listed on a securities exchange or the Nasdaq stock market.
However, shareholders will be able to engage in privately negotiated purchase
and sale transactions. New Calavo will distribute lists of shareholders who
have indicated an interest in purchasing or selling shares.
Afterconnection with the conversion of Calavoand to for-profit status,receive a grower who markets
avocados through New Calavo will no longer be required to own shares in the
corporation. Also, sales of shares to non-growers will be permitted. However,
New Calavo will have a right of first refusal to purchase all shares that a
shareholder proposes to sell. The right of first refusal will be exercisablecash payment
for the same purchase price that is offered by the prospective buyer.
Q. Who will control New Calavo?
A. Under the current cooperative structure, each member has only one vote. Each
shareholder of New Calavo will have a number of votes equal to the number of
shares owned by the shareholder.
Q. How will the directors of New Calavo be elected?
A. The ten current directors of Calavo will serve as the initial directors of
New Calavo. Each year, directors of New Calavo will be elected by the
shareholders to serve a one-year term. The incumbent Board will have
discretion to nominate a director from each district based upon the current
ten-district format. A shareholder will not be limited to voting for a
director from his or her district as in the current system. Each shareholder
will be entitled to vote on a cumulative basis for all of the director
positions that are to be filled each year. Under cumulative voting, each
share of common stock is entitled to a number of votes equal to the number of
directors to be elected, and a shareholder may cast all of his or her votes
for a single candidate or may allocate the votes among two or more of the
directors to be elected on a basis determined by the shareholder.
Q. What will happen to thefair value of my shares?
A. That is impossible to predict with any certainty. Based uponyour shares. Even if you vote against the financial
performance of the company and its dividend payments (if any), the value of
yourmerger, you will
receive shares in New Calavo may increase or decrease. Thereif the conversion is currently no
assurance that the value of your shares in Calavo will increase.
Q. How will dividends be paid?
A. New Calavo's net income will be available for distribution to the
shareholders each year on a per share basis. There will be no patronage
dividends based upon the volume of avocados delivered by each shareholder.
The Board of Directors will continue to have discretion to determine the size
of any dividends based upon its assessment of the financial needs of the
company.
Q. What will happen to my marketing agreement with Calavo?
A. The existing marketing agreement with Calavo will terminate on the effective
date of the conversion. Please sign and return the marketing agreement with
New Calavo that is enclosed with this Information Statement/Prospectus. New
Calavo will continue to accept all of your avocados, subject to limitations
imposed by the character, quantity or marketability of the fruit and the
other conditions of the current marketing agreement. The marketing agreement
with New Calavo will be renewable on an annual basis. You should review the
new marketing agreement for additional details.
Q. How will I be paid for my avocados?
A. The Board of Directors will set a packing and marketing fee on a periodic
basis. The packing and marketing fee will cover New Calavo's costs and will
include a profit to New Calavo. The fruit will continue to be "pooled," and
the net proceeds will be paid to growers.
2
7
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. IN ORDER TO
UNDERSTAND THE TRANSACTION FULLY, YOU SHOULD READ THIS ENTIRE INFORMATION
STATEMENT/PROSPECTUS, INCLUDING THE ATTACHED APPENDICES.
CALAVOcompleted.
CALAVO'S BUSINESS OPERATIONS
Calavo is a nonprofit cooperative association that is organized under the
California Food and Agricultural Code. Its primary purpose is to pack, process
and market avocados delivered by its members on a nonprofit cooperative basis.
Calavo has approximately 1,560 members, each of whom is required to own shares of Calavo's
common stock.
Calavo has operated as a cooperative in accordance with the applicable
provisions of the Internal Revenue Code of 1986, as amended, governing
cooperatives. Among other things, Calavo has delivered to each member an annual
"patronage dividend" that is based primarily upon the quantity of avocados
delivered by the member during the year and that represents a return to the
member of his or her pro rata share of Calavo's net proceeds of marketing
avocados on behalf of members. Calavo also does business with nonmembers of the
cooperative on a for-profit basis. Any dividends that the Board of Directors
elects to distribute from profits on nonmember business are distributed to each
shareholder based upon the number of shares that he or she owns rather than upon
the volume of the member's business with Calavo.
NEW CALAVOCALAVO'S BUSINESS OPERATIONS
New Calavo was incorporated on January 5, 2001 under the California General
Corporation Law. It is currently a wholly owned subsidiary of Calavo and was
formed for the purpose of merging with Calavo. Its business operations will
commence on the effective date of the merger, and it will be taxed under
2
7
Subchapter C of the Internal Revenue Code. Unlike Calavo, New Calavo is a
"for-profit" corporation that is not intended to be operated on a nonprofit
cooperative basis. Among other things, New Calavo will be entitled to receive
and retain a profit from the marketing agreements that it enters into with
shareholders.
BUSINESS ADDRESS OF CALAVO AND NEW CALAVO
The address of the principal executive office of Calavo and New Calavo is
2530 Red Hill Avenue, Santa Ana, California, 92705, and the telephone number of
each corporation is (949) 223-1111.
CONVERSION OF CALAVO TO FOR-PROFIT STATUS BY A MERGER
CALAVO'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS CONVERTING CALAVO INTO A
CALIFORNIA FOR-PROFIT CORPORATION. TO ACCOMPLISH THE CONVERSION, CALAVO WILL
MERGE INTO NEW CALAVO, AND NEW CALAVO WILL THEREAFTER CONDUCT CALAVO'S BUSINESS
OPERATIONS. CALAVO'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE IN FAVOR OF THE MERGER AND THE MERGER AGREEMENT.
ISSUANCE OF NEW CALAVO COMMON STOCK
The conversion will become effective on the date that a merger agreement is
filed with the California Secretary of State. Each share of Calavo preferred
stock and common stock that is outstanding on the effective date of the
conversion will be exchanged for one share of New Calavo common stock.
SHAREHOLDER APPROVAL REQUIRED
The conversion cannot occur without the approval of a majority of Calavo's
common shareholders, voting separately as a class, and by a majority of the
outstanding shares of preferred stock.
3
8
SHAREHOLDERS ENTITLED TO VOTE
You can vote if you owned shares of Calavo stock as of , 2001,
which is the record date established by the Board of Directors for determining
shareholders entitled to vote. You should vote by completing and mailing the
enclosed ballot and delivering it to Calavo in the enclosed envelope no later
than , 2001 (or such later date as the Board of Directors may
establish and announce in its sole discretion). As of the record date, there are
holders of common stock who are entitled to vote on the merger,
and there are holders of preferred stock who are entitled to vote
on the merger.
A shareholder may vote only by completing and mailing the enclosed ballot.
A shareholders' meeting to consider and vote on the conversion will not be held.
CONVERSION CONDITIONS
The completion of the conversion is subject to the satisfaction of several
closing conditions, including obtaining shareholder approval and the consents of
Calavo's lenders. Even if shareholder approval is obtained, Calavo's Board of
Directors will elect not to proceed with the conversion unless a substantial
majority of Calavo's shareholders approve the conversion.
NO DISSENTERS' RIGHTS
Under California law, you have no right to demand an appraisal of your
Calavo shares in connection with the conversion and to receive a cash payment
for the fair value of your shares. Even if you vote against the merger, you will
receive shares in New Calavo if the conversion is completed.
POST-CONVERSION TRANSFERS OF SHARES
As is the case with Calavo's stock, a public trading market will not exist
for New Calavo's common stock since the stock will not be listed on a securities
exchange or the Nasdaq stock market.stock. However, you will be able to buy and sell shares
of New Calavo common stock in transactions that you negotiate with other
shareholders and with non-shareholders who are interested in becoming
shareholders. Each purchase and sale of stock must satisfy any applicable
federal and state securities registration exemptions, andexemptions.
New Calavo will have a right of first refusal to purchase all shares that a
shareholder proposes to sell, exercisable at the price offered by the proposed
purchaser. New Calavo currently anticipates that it will exercise the right of
first refusal on a limited, infrequent basis. The right of first refusal is most
likely to be exercised only if a shareholder with whom New Calavo has a
marketing agreement proposes to transfer a substantial amount of stock to a
person who has not entered into a marketing agreement and does not intend to do
so.
Calavo distributes to its shareholders lists of other shareholders who have
indicated an interest in purchasing or selling shares of stock. New Calavo will
continue this practice after the conversion. New Calavo will not otherwise
assist its shareholders in negotiating or completing stock transactions.
New Calavo's stock will not be listed on a securities exchange or the
Nasdaq stock market. We believe that, for the foreseeable future, the interests
of New Calavo and its shareholders will be best served if most of our shares
continue to be owned by growers with whom we have a marketing relationship and
if growers continue to control the operations of New Calavo.
ANTICIPATED VALUE OF NEW CALAVO'S SHARES
Based upon the financial performance of New Calavo and its dividend
payments (if any), the value of your shares in New Calavo may increase or
decrease. There is currently no assurance that the value of your shares in
Calavo will increase.
DIVIDEND PAYMENTS BY NEW CALAVO
New Calavo's net income will be available for distribution to the
shareholders each year on a per share basis. There will be no patronage
dividends based upon the volume of avocados delivered by each shareholder. The
Board of Directors will continue to have discretion to determine the size of any
dividends based upon its assessment of the financial needs of New Calavo.
POST-CONVERSION MANAGEMENT AND BUSINESS OPERATIONS
The ten current directors of Calavo will serve as the initial directors of
New Calavo. Beginning at the first annual shareholders' meeting, directors of
New Calavo will be elected for one-year terms. The incumbent Board will have
discretion to nominate a director from each district based upon the current
ten-district format.
It is anticipated that the officers, employees, day-to-day business
operations, properties and production facilities of New Calavo will be similar
to those of Calavo.
MARKETING AGREEMENT
Your existing marketing agreement with Calavo will be terminated on the
effective date of the conversion. You will need to sign a new marketing
agreement. Please complete, sign and return to New Calavo the new marketing
agreement that is enclosed with this Information Statement/Prospectus.
43
98
DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
In many respects, your rights as a shareholder of New Calavo will be
similar to your rights as a shareholder of Calavo. However, there will be
important differences, including the following:
- Each Calavo common shareholder is currently entitled to only one vote,
regardless of the number of shares that he or she owns. Preferred
shareholders are currently not entitled to vote on any matters except on
specific matters expressly required by law such as the proposed
conversion. As a New Calavo shareholder, you will have a number of votes
equal to the number of shares that you own.
- Each Calavo common shareholder is currently limited to voting for a
director from his or her district, and preferred shareholders are not
entitled to vote in the election of directors. As a New Calavo
shareholder, you will be entitled to cast votes on a cumulative basis for
all of the director positions that are to be filled each year. Under
cumulative voting, each share of common stock is entitled to a number of
votes equal to the number of directors to be elected, and a shareholder
may cast all of his or her votes for a single candidate or may allocate
the votes among two or more of the directors to be elected on a basis
determined by the shareholder.
- Currently, if you terminate your membership in Calavo, you are required
to sell your common stock to other members or to convert the common stock
into preferred stock that is redeemable by Calavo at $1.00 per share.
This requirement will not apply after the conversion. If you terminate
your marketing agreement with New Calavo, you will be entitled to retain
your shares of common stock.
NEW MARKETING AGREEMENT
Your existing marketing agreement with Calavo will be terminated on the
effective date of the conversion. You will need to sign a new marketing
agreement. Please complete, sign and return to New Calavo the new marketing
agreement that is enclosed with this Proxy Statement/Prospectus.
If you sign a new marketing agreement, New Calavo will continue to accept
all of your avocados, subject to limitations imposed by the character, quantity
or marketability of the fruit and the other conditions of the current marketing
agreement. The marketing agreement with New Calavo will be renewable on an
annual basis. The Board of Directors will set a packing and marketing fee on a
periodic basis. The packing and marketing fee will cover New Calavo's costs and
will include a profit to New Calavo. The fruit will continue to be "pooled," and
the net proceeds will be paid to growers. You should review the new marketing
agreement for additional details.
If you do not sign a new marketing agreement, New Calavo may in its
discretion offer to market your avocados on a pooled/consignment basis or to
purchase your avocados on a cash/spot basis. However, you will need to sign a
written agreement in order to market your avocados in the manner described in
the preceding sentence and, based upon current market conditions, there is no
assurance that New Calavo will elect to market your avocados on any basis than
through the marketing agreement.
FEDERAL INCOME TAX CONSEQUENCES
Subject to the limitations and assumptions described in this InformationProxy
Statement/Prospectus under "The Conversion -- Material Federal Income Tax
Consequences," it is anticipated that neither Calavo nor its shareholders will
incur federal income taxes as a result of the merger of Calavo into New Calavo.
IN VIEW OF THE INDIVIDUAL NATURE OF FEDERAL AND STATE TAX LAW, YOU ARE ADVISED
TO CONSULT WITH YOUR INCOME TAX ADVISER REGARDING THE SPECIFIC TAX CONSEQUENCES
TO YOU FROM THE MERGER.
FINANCIAL INFORMATION
New Calavo will not commence business operations until the effective date
of its merger with Calavo. Financial information regarding Calavo is contained
in the sections of this InformationProxy Statement/Prospectus entitled "Selected Condensed
Consolidated Financial Data," "Unaudited Pro Forma Condensed Combined
4
9
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in the consolidated financial
statements and related notes thereto that are included elsewhere in this InformationProxy
Statement/Prospectus.
COPIES OF THE MERGER AGREEMENT AND NEW CALAVO'S ORGANIZATIONAL DOCUMENTS
WE HAVE ATTACHED TO THIS INFORMATIONPROXY STATEMENT/PROSPECTUS COPIES OF (1) THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION BETWEEN CALAVO AND NEW CALAVO,
(2) NEW CALAVO'S ARTICLES OF INCORPORATION, (3) NEW CALAVO'S BYLAWS, (4) THE
FORM OF MARKETING AGREEMENT THAT WILL BE USED BY NEW CALAVO, AND (5) A RECENT
AMENDMENT TO CALAVO'S BYLAWS. THESE DOCUMENTS ARE INCORPORATED BY REFERENCE INTO
THIS INFORMATIONPROXY STATEMENT/PROSPECTUS, AND WE RECOMMEND THAT YOU REVIEW EACH OF THE
DOCUMENTS.
5
10
RISK FACTORS
YOU SHOULD CONSIDER THE RISKS DESCRIBED BELOW IN EVALUATING WHETHER OR NOT
TO APPROVE THE MERGER OF CALAVO INTO NEW CALAVO. YOU SHOULD ALSO REVIEW THE
ENTIRE INFORMATIONPROXY STATEMENT/PROSPECTUS.
RISKS RELATED TO THE CONVERSION
TAX-FREE TREATMENT FORDIVIDENDS TO SHAREHOLDERS ARE NOT GUARANTEED AFTER THE CONVERSION.
During the preceding three years, Calavo has distributed to its
shareholders substantially all of its net income from business conducted on a
for-profit basis with nonmembers. After the conversion, New Calavo may determine
that it is advisable to retain all or a substantial portion of its income in
order to satisfy capital needs, to support its growth and to satisfy more
restrictive dividend limitations that may be imposed by lenders. New Calavo may
elect not to pay any dividends after the conversion, and any dividends that it
does pay may be substantially less than the previous years' dividends paid by
Calavo.
THE CONVERSION ISMAY ADVERSELY AFFECT NEW CALAVO'S ABILITY TO OBTAIN A SUFFICIENT
SUPPLY OF AVOCADOS.
As a cooperative, Calavo is entitled to require each of its
shareholder-members to enter into a marketing agreement that obligates the
shareholder-member to deliver all of his or her avocados to Calavo. Mandatory
marketing agreements help to ensure the cooperative with an adequate supply of
avocados. If a member terminates his or her marketing agreement with Calavo and
thereby relinquishes membership in Calavo, any of the former member's common
stock that is not sold to other members is converted into preferred stock that
is redeemable by Calavo at $1.00 per share. The desire of members to avoid the
conversion of their common stock into redeemable preferred stock may contribute
to their willingness to maintain marketing agreements with Calavo.
After the conversion, New Calavo will be unable to require its shareholders
to enter into marketing agreements. This may adversely impact New Calavo's
ability to obtain an adequate supply of avocados. A shareholder will be entitled
to retain his or her common stock in New Calavo even if the shareholder does not
elect to enter into a marketing agreement with New Calavo or even if the
shareholder subsequently elects to terminate the marketing agreement. The
ability of New Calavo to secure marketing agreements with growers, including
growers who are shareholders, will depend upon the competitiveness of the terms
that it offers and the quality of its services.
THE LIMITED ANTITRUST EXEMPTION PROVIDED TO COOPERATIVES WILL NOT ASSURED.
The mergerBE AVAILABLE
TO NEW CALAVO.
Federal and California laws provide limited relief to agricultural
cooperatives from several aspects of the antitrust and unfair competition laws.
For example, the members of a cooperative are allowed to agree on a collective
sales price for their products; a cooperative's marketing agreements with
members are not considered an illegal restraint of trade; and a cooperative may
under specified circumstances achieve monopoly power in a given market.
As a non-cooperative, New Calavo will not be entitled to the benefit of
these laws. Calavo's Board of Directors believes that, in light of the increased
competition faced by Calavo from other growers, these exemptions from the
antitrust and unfair competition laws probably would not be of great benefit to
Calavo even if it retained its cooperative status. If, however, New Calavo
obtains an increased market share after the conversion or other presently
unanticipated events occur, the loss of the limited antitrust exemption may
adversely affect New Calavo's operations.
NEW CALAVO'S SHARES WILL HAVE NO PUBLIC TRADING MARKET.
As is the case with Calavo's stock, a public trading market will not exist
for the common stock of New Calavo since the stock will not be listed on a
securities exchange or the Nasdaq stock market although the existing mechanism
for buying and selling shares of stock will be maintained. As a result, you
6
11
should not assume that your shares of New Calavo stock will be more marketable
than your shares of Calavo intostock or that the New Calavo stock is intendedmore likely to
qualify asappreciate in value.
IF PERSONS WHO DO NOT MARKET AVOCADOS THROUGH NEW CALAVO GAIN CONTROL OF NEW
CALAVO AFTER THE CONVERSION BY PURCHASING LARGE NUMBERS OF SHARES, THEY COULD
CAUSE NEW CALAVO TO OPERATE IN A MANNER THAT DOES NOT BENEFIT AVOCADO GROWERS
WHO MARKET THEIR PRODUCT THROUGH NEW CALAVO.
Holders of Calavo common stock must be members of Calavo who have entered
into marketing agreements with the cooperative, and each member is entitled to
only one vote. As a nontaxable
transaction for bothresult, control of the cooperative by its members is
assured.
Ownership of New Calavo common stock is not limited to growers who have
entered into marketing agreements with New Calavo, and itseach shareholder is
entitled to a number of votes equal to the number of shares that are owned by
the shareholder. New Calavo will be entitled to issue shares of common stock to
non-growers, and any such stock issuances will dilute the proportionate equity
ownership interests of shareholders who have marketing agreements with New
Calavo. Shareholders will be entitled to retain their common stock after they
have ceased to sell avocados to New Calavo, and shareholders will be entitled to
sell their stock to purchasers who do not market avocados through New Calavo.
The bylaws of New Calavo provide it with a right of first refusal to
purchase the stock that a shareholder proposes to transfer to another person.
However, New Calavo may elect not to exercise the right of first refusal if a
shareholder proposes to sell stock to a non-grower or it may not have the funds
with which to pay for the shares. The bylaws also state that no person or entity
may own more than twenty percent of New Calavo's stock and that transfers of
stock to competitors of New Calavo are prohibited, but nontaxable treatment
cannotthese provisions may be
assured. Althoughunenforceable in some circumstances.
If persons who do not market avocados through New Calavo has receivedobtain a legal opinionlarge
degree of control over New Calavo, they might attempt to cause the corporation
to operate in a manner that does not benefit avocado growers who market their
product through New Calavo. For example, the merger
is a nontaxable transaction,non-grower shareholders might cause
New Calavo to increase the opinion is not binding uponpacking and marketing fee under the Internal
Revenue Service.
COOPERATIVEmarketing
agreements in order to maximize corporate profits. Similarly, they might cause
New Calavo to engage in new lines of business that are unrelated to the
marketing of avocados and that divert capital from avocado marketing.
THERE IS NO HISTORICAL BASIS FOR PREDICTING THE IMPACT ON CALAVO'S PROFITABILITY
OF CONVERTING TO A FOR-PROFIT CORPORATION, PARTICULARLY IN LIGHT OF THE
DIFFERENT TAX TREATMENT THAT WILL BE UNAVAILABLE AFTER THE CONVERSION.ACCORDED TO A FOR-PROFIT CORPORATION.
Subchapter T of the Internal Revenue Code provides that, as a cooperative,
Calavo does not pay taxes on member-based income as long as it distributes or
allocates the income to the members in proportion to their use or patronage of
the cooperative within eight and one-half months after the end of the
cooperative's tax year. Members agree to take this income into their taxable
income even if the income is not distributed to them. Calavo pays normal
corporate taxes on all nonmember-based income.
New Calavo will be taxed at corporate rates on its entire net income,
including net income that is derived from business done by New Calavo with its
growers. Distributions by New Calavo to its shareholders will generally be taxed
to the shareholders as corporate dividends. However, shareholders will not be
taxed on income that is not distributed to them by New Calavo. The amount paid
by New Calavo to a grower for fruit delivered by the grower will be taxed to the
grower, which is not a change to current practice.
As a cooperative, Calavo is entitled to satisfy all or a portion of its
equity capital requirements by retaining for several years a portion of the
proceeds that are otherwise distributable to its members. Calavo does not pay
taxes on these retained amounts. After the conversion, New Calavo will be
required to pay taxes on any income that it withholds as retained earnings in
order to satisfy its equity needs.
There is no historical basis for predicting the impact on Calavo's
profitability of converting to a for-profit corporation, particularly in light
of the different tax treatment that will be accorded to a for-profit
corporation.
DIVIDENDS7
12
RISKS RELATED TO SHAREHOLDERS ARE NOT GUARANTEED AFTER THE CONVERSION.
During the preceding three years, Calavo has distributed to its
shareholders substantially all of its net income from business conducted on a
for-profit basis with nonmembers. After the conversion, New Calavo may determine
that it is advisable to retain all or a substantial portion of its income in
order to satisfy capital needs, to support the company's growth and to satisfy
more restrictive dividend limitations that may be imposed by lenders. There is
no assurance that New Calavo will pay dividends after the conversion or that any
dividends that are paid will equal or exceed the previous years' dividends.CALAVO'S AND NEW CALAVO'S ABILITY TO OBTAIN A SUFFICIENT SUPPLY OF AVOCADOS MAY BE AFFECTED
BY THE CONVERSION.
As a cooperative, Calavo is entitled to require each of its
shareholder-members to enter into a marketing agreement that obligates the
shareholder-member to deliver all of his or her avocados to Calavo. Mandatory
marketing agreements help to ensure the cooperative with an adequate supply of
avocados. If a member terminates his or her marketing agreement with Calavo and
thereby relinquishes membership in Calavo, any of the former member's common
stock that is not sold to other members is converted into preferred stock that
is redeemable by Calavo at $1.00 per share. The desire of members to
6
11
avoid the conversion of their common stock into redeemable preferred stock may
contribute to their willingness to maintain marketing agreements with Calavo.
After the conversion, New Calavo will be unable to require its shareholders
to enter into marketing agreements. This may impact New Calavo's ability to
obtain an adequate supply of avocados. A shareholder will be entitled to retain
his or her common stock in New Calavo even if the shareholder does not elect to
enter into a marketing agreement with New Calavo or even if the shareholder
subsequently elects to terminate the marketing agreement. The ability of New
Calavo to secure marketing agreements with growers, including growers who are
shareholders, will depend upon the competitiveness of the terms that it offers
and the quality of its services.
THE LIMITED ANTITRUST EXEMPTION PROVIDED TO COOPERATIVES WILL NOT BE AVAILABLE
TO NEW CALAVO.
Federal and California laws provide limited relief to agricultural
cooperatives from certain aspects of the antitrust and unfair competition laws.
For example, the members of a cooperative are allowed to agree on a collective
sales price for their products; a cooperative's marketing agreements with
members are not considered an illegal restraint of trade; and a cooperative may
under certain circumstances achieve monopoly power in a given market.
As a non-cooperative, New Calavo will not be entitled to the benefit of
these laws. Calavo's Board of Directors has determined that, in light of the
increased competition faced by Calavo from other growers, these exemptions from
the antitrust and unfair competition laws probably would not be of great benefit
to Calavo even if it retained its cooperative status. However, there is no
assurance that Calavo is not relinquishing a valuable protection under these
laws by converting to a for-profit corporation.
NEW CALAVO'S SHARES WILL HAVE NO PUBLIC TRADING MARKET.
As is the case with Calavo's stock, a public trading market will not exist
for the common stock of New Calavo since the stock will not be listed on a
securities exchange or the Nasdaq stock market. The Board of Directors may
determine at a subsequent date to list New Calavo's stock on a stock exchange or
the Nasdaq stock market, but there is no assurance that such listing will ever
occur. As a result, you should not assume that your shares of New Calavo stock
will be more marketable than your shares of Calavo stock or that the New Calavo
stock is more likely to appreciate in value. However, the existing mechanism for
buying and selling shares of stock will be maintained after the conversion.
NON-GROWERS COULD GAIN CONTROL OF NEW CALAVO IF THEY PURCHASE LARGE NUMBERS OF
SHARES.
Holders of Calavo common stock must be members of Calavo who have entered
into marketing agreements with the cooperative, and each member is entitled to
only one vote. As a result, control of the cooperative by its members is
assured.
Ownership of New Calavo common stock is not limited to growers who have
entered into marketing agreements with New Calavo, and each shareholder is
entitled to a number of votes equal to the number of shares that are owned by
the shareholder. New Calavo will be entitled to issue shares of common stock to
non-growers, and any such stock issuances will dilute the proportionate equity
ownership interests of shareholders who have marketing agreements with New
Calavo. Shareholders will be entitled to retain their common stock after they
have ceased to sell avocados to New Calavo, and shareholders will be entitled to
sell their stock to purchasers who do not market avocados through New Calavo.
The Bylaws of New Calavo provide the corporation with a right of first
refusal to purchase the stock that a shareholder proposes to transfer to another
person, although there is no assurance that the corporation will elect to
exercise that right or have the funds with which to pay for the shares. The
Bylaws state that no person or entity may own more than twenty percent of New
Calavo's stock and that transfers of stock to competitors of New Calavo are
prohibited, but there is no assurance that these provisions can prevent persons
who do not market avocados through New Calavo from obtaining an undesirable
degree of control over the corporation.
7
12BUSINESS
DIRECTORS AND EXECUTIVE OFFICERS WHO OWN NEW CALAVO STOCK AND ALSO MARKET
AVOCADOS THROUGH NEW CALAVO MAY HAVE A CONFLICT OF INTEREST IN ESTABLISHING AN
APPROPRIATE PACKING AND MARKETING FEE UNDER THE MARKETING AGREEMENTS.
Directors and executive officers who own New Calavo stock will have a
personal financial interest in maximizing the profitability of New Calavo for
its shareholders by, among other things, setting a high packing and marketing
fee under the marketing agreements with growers. However, directors and
executive officers who also market avocados through New Calavo will have a
personal financial interest in maximizing growers' profits by setting a low
packing and marketing fee under the marketing agreements. Whether a director's
or an executive officer's personal financial interest will be best served by a
high or low packing and marketing fee may depend upon the relative percentage of
New Calavo stock versus avocado acreage that is owned by the director or
executive officer. This potential conflict of interest exists under Calavo's
current operations as a nonprofit cooperative association.
RISKS RELATED TO CALAVO'S BUSINESS
INCREASING COMPETITION MAY ADVERSELY AFFECT NEW CALAVO.
The market for avocados is highly competitive. Recently, there have been
significant plantings of avocados in Mexico, Chile, New Zealand and others parts
of the world. In particular, avocados grown by Mexican growers who are not
members of Calavo are lower-priced than avocados grown by Calavo's members.
Competition from foreign-based growers is likely to increase in future years,
and there is no assurance that New Calavo willmay be ableunable to enter into marketing agreements with those
growers. Although there are currently restrictions on the times and states where
Mexican avocados may be imported into the United States, there are ongoing
requests from Mexican governmental authorities to relax thesethose time and location
restrictions.
AS A RESULT OF CALIFORNIA'S CURRENT ENERGY CRISIS, CALAVO AND NEW CALAVO MAY
EXPERIENCE POWER BLACKOUTS, DISRUPTED OPERATIONS AND INCREASED EXPENSES.
California is in the midst of an energy crisis that could disrupt the
operations of Calavo and New Calavo and increase their expenses. In addition, Newthe event of
an acute power shortage, California has on some occasions implemented rolling
blackouts throughout the state. The blackouts may continue to be implemented in
the future. Calavo owns two packinghouses and one processing facility that are
located in California, and its corporate headquarters are also located in
California.
Due to cost considerations and the long waiting period for obtaining
equipment, Calavo does not currently have backup generators or alternate sources
of power in the event of a blackout, and current insurance does not provide
coverage for any damages that Calavo or its customers may suffer as a result of
any power supply interruption. Although Calavo's resultsproduct refrigeration systems
can maintain their temperatures over short periods, blackouts may result in
increased energy expenses and a decreased volume of operationsavocados being handled at
the California facilities. As a result, revenues may be adversely affectedimpacted.
Blackouts may also increase growers' energy expenses, restrict the use by
numerous other factors over which New Calavo will
have little or no control, including prevailing market prices for its products,
the weather, growing conditions, government regulationsgrowers of irrigation systems and capital expenses.decrease their avocado production.
NEW CALAVO ISWILL BE SUBJECT TO THE RISKS OF DOING BUSINESS INTERNATIONALLY.
Calavo conducts a substantial amount of business with growers and customers
who are located outside the United States. It purchases avocados from foreign
growers, sells fresh avocados and processed avocado products to foreign
customers and operates a packinghouse and a processing plant in Mexico. For
additional information about Calavo's international business operations, see
"Business of Calavo."
8
13
Calavo's current international operations (and New Calavo's business
operations after the conversion) are subject to a number of inherent risks,
including:
- Local economic and political conditions, including disruptions in trading
and capital markets;
- Restrictive foreign governmental actions, such as restrictions on
transfers of funds and trade protection measures, including export duties
and quotas and customs duties and tariffs;
- Changes in legal or regulatory requirements affecting foreign investment,
loans, taxes, imports and exports; and
- Currency exchange rate fluctuations which, depending upon the nature of
the changes, may make Calavo's products more expensive compared to
foreign-grown products or may increase Calavo's cost of obtaining
foreign-sourced products.
8NEW CALAVO AND ITS GROWERS WILL BE SUBJECT TO THE RISKS THAT ARE INHERENT IN
FARMING.
New Calavo's results of operations may be adversely affected by numerous
factors over which it has little or no control and that are inherent in farming,
including reductions in the market prices for its products, adverse weather and
growing conditions and new government regulations regarding farming and the
marketing of agricultural products.
9
1314
THE CONVERSION
PROPOSED CONVERSION OF CALAVO TO FOR-PROFIT STATUS
Calavo's Board of Directors unanimously recommends the conversion of Calavo
from a nonprofit cooperative association that is organized under the California
Food and Agricultural Code into a for-profit corporation that is organized under
the California General Corporation Law.
MERGER OF CALAVO INTO NEW CALAVO
To accomplish the conversion, Calavo will merge into New Calavo, which is a
newly formed corporation organized under the California General Corporation Law.
It is currently a wholly owned subsidiary of Calavo and was formed for the
purpose of merging with Calavo. On the effective date of the merger, New Calavo
will assume ownership of all of Calavo's business and assets, and all of
Calavo's shareholders will receive shares of New Calavo common stock. New Calavo
will be taxed under Subchapter C of the Internal Revenue Code and, unlike
Calavo, New Calavo will operate as a "for-profit" corporation rather than as a
nonprofit cooperative association.
RECORD DATE FOR VOTING
Only holders of record of Calavo'sCalavo preferred stock or common stock as of the
close of business on , 2001, which has been established by the Board
of Directors as the record date, are entitled to vote on the conversion. As of
the record date, there are holders of common stock who are entitled
to vote, and there are holders of preferred stock who are entitled
to vote.
As of the record date, all ten of Calavo's directors
own shares of common stock and are therefore entitled to cast a total of ten
votes, and none of Calavo's executive officers (excluding the Chief Executive
Officer, who is also a director) owns shares of common stock or preferred stock.
Calavo's directors collectively own approximately 16.8% of the outstanding
shares of Calavo common stock.
METHOD OF VOTING
To vote on the proposed conversion, you must use the mail ballot
accompanying this InformationProxy Statement/Prospectus. It is the only ballot that you
will receive, and a shareholders' meeting to consider and vote on the conversion
will not be held. If you wish to vote, you should complete, sign and deliver the
ballot to Calavo in the enclosed envelope no later than , 2001 (or
such later date as the Board of Directors may establish and announce in its sole
discretion) in order for the ballot to be counted.
VOTE REQUIRED; EFFECT OF A FAILURE TO VOTE
The conversion cannot occur without the approval of (1) a majority of
Calavo's common shareholders voting separately as a class and by(2) a majority of
the outstanding shares of Calavo preferred stock voting separately as a class. A
shareholder's failure to vote has the same effect as a vote against the
conversion.
REVOCABILITY OF BALLOTS
Any shareholder who delivers a completed and signed ballot to Calavo has
the power to revoke it by filing with the Calavo Corporate Secretary a written
instrument that revokes the ballot. However, a ballot cannot be revoked after
the date that Calavo has received from its shareholders a sufficient number of
ballots to approve the conversion.
BOARD OF DIRECTORS' RECOMMENDATION
CALAVO'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE CONVERSION
IS IN THE BEST INTERESTS OF CALAVO AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE CONVERSION OF
CALAVO INTO A FOR-PROFIT CORPORATION.
9
14
SOLICITATION EXPENSES
Calavo will bear the entire cost of the solicitation of ballots in favor of
the conversion. In addition to solicitation by mail, Calavo's directors,
officers and other employees may, without additional compensation, solicit
ballots personally, by telephone, by facsimile or by other means.
10
15
REASONS FOR THE CONVERSION
In order to maintain its status as an agricultural cooperative under
applicable laws, Calavo must conduct a majority of its business with members.
The current year's sales estimate is that sales of members' avocados will
represent less than fifty percent of Calavo's total sales. Management estimates
that Calavo will not satisfy this requirement in 2001 and probably will not satisfy
this requirementconduct a minority of its business with members in subsequent
years.years as a result of increasing amounts of business conducted with foreign
growers.
To satisfy the requirement that it conduct a majority of its business with
members, Calavo would need to restructure its corporate organization into two
separate businesses. In the Board's view, this would weaken the cooperative.
Primarily as a result of the Board of Directors' determination that Calavo will
soon lose its status as a nonprofit agricultural cooperative, the Board of
Directors has determined that Calavo should now formally convert to a for-profit
corporation organized under the California General Corporation Law.
Under Calavo's Bylawsbylaws and applicable law, holders of the cooperative's
common stock must be members of Calavo who have entered into marketing
agreements with Calavo. The Board of Directors believes that this requirement
may limit Calavo's ability to attract equity capital from third parties who do
not market avocados, and that the requirement may limit the ability of Calavo's
members to obtain the full value of their equity investment in Calavo since they
are not permitted to sell their stock to nonmembers of Calavo. Conversion to a
for-profit corporation may enable Calavo to raise equity capital by issuing
stock to third parties who are not marketers of agricultural products. For
example, it is possible that common stock could be issued to joint venture
partners and in connection with the acquisition of businesses that will enhance
the value of Calavo.
As a for-profit corporation, Calavo will be able to grant to its officers
and selected employees stock options and other rights to acquire shares of its
common stock. The Board of Directors believes that this will allow management to
participate in the growth of the corporationNew Calavo and will provide management with added
incentives to operate the corporationNew Calavo in a manner that increases the value of the
shareholders' equity interests. The Board of Directors believes that equity
incentives are a component of management compensation at many corporations, and
that allowing management to have an equity interest in New Calavo will enable the
corporationit
to attract and retain qualified officers and employees.
The Board of Directors did not see any need to obtain an appraisal or a
fairness opinion. No shareholders are being cashed out, and each shareholder
will receive the same number of shares in New Calavo that he or she owns in
Calavo. The economic interests of Calavo's shareholders in New Calavo are not
being diluted through the merger, and the net book value of New Calavo will be
the same as the net book value of Calavo on the effective date of the
conversion.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
The terms and conditions of the conversion are set forth in an Agreement
and Plan of Merger and Reorganization (the "MERGER AGREEMENT") between Calavo
and New Calavo, a copy of which is attached as Appendix A and incorporated herein.into
this Proxy Statement/Prospectus. You are advised to read the Merger Agreement in
order to understand the conversion fully. The following summary of the Merger
Agreement discusses only selected provisions of the Merger Agreement.
EFFECTIVE DATE OF THE MERGER. The conversion will become effective on the
date that a short-form version of the Merger Agreement is filed with the
California Secretary of State. Calavo will file this document as soon as
practicable after shareholder approval is obtained. However, even if shareholder
approvalthe
required majority vote is obtained, Calavo'sthe Board of Directors intends to exercise
its right under the Merger Agreement and applicable law not to proceed with the
conversion unless the transaction is approved by members who delivered at least
sixty percent of the total volume of avocados delivered by all members during
the preceding fiscal year. The Board believes that New Calavo is unlikely to be
profitable or competitive unless the conversion is supported by growers who are
responsible for delivering a substantial majorityvolume of Calavo's shareholders approve the conversion.
10avocados to Calavo.
11
1516
ISSUANCE OF SHARES OF THE COMMON STOCK OF NEW CALAVO. On the effective date
of the conversion, each outstanding share of the preferred stock and common
stock of Calavo automatically will be converted into one share of New Calavo
common stock, and the 100 shares of the common stock of New Calavo that are
currently owned by Calavo will be cancelled. As a result, Calavo's shareholders
will own all of the common stock of New Calavo in the same proportion that they
own Calavo's outstanding stock on the effective date of the merger. New Calavo
will advise its shareholders that the conversion has occurred and will deliver
to them statements regarding the number of shares of common stock that they own
in New Calavo.
EFFECT OF THE MERGER. On the effective date of the merger, Calavo will be
merged into New Calavo, and Calavo will cease to exist. New Calavo will be the
surviving corporation, and it will succeed to all of the business, assets and
liabilities of Calavo. The directors, officers and employees of Calavo will
remain in the same positions with New Calavo as of the effective date of the
merger.
CONDITIONS TO CONSUMMATION OF THE CONVERSION. The obligations of Calavo and
New Calavo to consummate the conversion are subject to the satisfaction or
waiver, where permissible, of the following conditions:
- Calavo's shareholders shall have approved the conversion and the Merger
Agreement.
- The Registration Statement on Form S-4 that has been filed with the SEC
regarding the conversion shall have become effective under the Securities
Act of 1933 and shall not be subject to any stop order
suspending its effectiveness or to any proceeding seeking a stop order.
- All permits, consents and approvals that are required fromThe permit issued by the California Department of Corporations and other applicable state securities
regulatory authorities regarding
the offer and sale of shares of New Calavo common stock in the conversion
shall not have been obtained.
- Calavo shall have obtained all necessary consents to the conversion from
its lenders and any other parties whose consents are required under
contracts to which Calavo is a party.revoked.
- There shall not be in effect any judgment, regulation, order or
injunction of any court or governmental authority that prohibits the
conversion.
AMENDMENT AND TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may
be amended by a writing executed by Calavo and New Calavo. However, after
approval of Calavo's shareholders has been obtained, shareholder approval of the
amendment is required if the amendment changes any of the principal terms of the
Merger Agreement.
Calavo's Board of Directors is authorized to terminate the Merger Agreement
(and thereby terminate the conversion) at any time prior to the effective date
of the conversion, whether before or after shareholder approval.
NO DISSENTERS' RIGHTS
Under California law, Calavo's shareholders have no right to demand an
appraisal of their Calavo shares in connection with the conversion and to
receive a cash payment for the fair value of their shares. Even if a shareholder
votes against the merger, he or she will receive shares in New Calavo if the
conversion is completed.
MARKETING AGREEMENTS
In January 2001, the Board of Directors amended Section 7.08 of Calavo's
Bylawsbylaws to provide that Calavo's marketing agreement with each member will
terminate automatically on the effective date of Calavo's merger into New
Calavo. A copy of the amendment is attached to this InformationProxy Statement/ Prospectus
as Appendix E. If you desire to market avocados through New Calavo after the
conversion, you must complete, sign and return to New Calavo the new marketing
agreement that is enclosed with this InformationProxy Statement/Prospectus.
1112
1617
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the merger of Calavo into New Calavo that are generally
applicable to holders of Calavo stock. This discussion does not deal with all
aspects of federal income taxation that may be relevant to particular
shareholders, such as persons who acquired shares of such stock in compensatory
transactions (that is, upon the exercise of employee stock options or pursuant
to employee stock purchase plans or arrangements), dealers in securities, foreign persons, tax-exempt
organizations, cooperative associations, shareholders who do not hold such stock
as a "capital asset" as defined in the Internal Revenue Code of 1986, as amended
(the "INTERNAL REVENUE CODE"), and persons subject to the alternative minimum
tax. In addition, this discussion does not address the tax consequences of
transactions effectuated prior to or after the merger. Moreover, this discussion
does not address any state, local or foreign tax or other considerations.
IN VIEW OF THE SUMMARY NATURE OF THIS DISCUSSION AND THE INDIVIDUAL NATURE
OF FEDERAL INCOME AND OTHER TAX CONSEQUENCES OF THE MERGER, YOU ARE STRONGLY
ADVISED TO CONSULT WITH YOUR OWN TAX ADVISER AS TO THE SPECIFIC TAX CONSEQUENCES
TO YOU FROM THE MERGER (INCLUDING, WITHOUT LIMITATION, THE APPLICABILITY AND
EFFECT OF FOREIGN, STATE AND LOCAL TAX LAWS AND OF CONSTRUCTIVE OWNERSHIP
RULES).
The following discussion is based upon provisions of the Internal Revenue
Code, regulations, administrative rulings and judicial decisions presently in
effect, all of which are subject to change (possibly with retroactive effect) or
to different interpretations. Neither party to the merger has sought a ruling
from the Internal Revenue Service (the "IRS") with respect to any tax
consequences of the merger. Consequently, the IRS is not precluded from adopting
positions contrary to those discussed hereinin this Proxy Statement/Prospectus or
otherwise advanced by the parties to the merger, including holders of Calavo
stock. In addition, there is no assurance that future legislative, judicial or
administrative changes or interpretations will not adversely affect the accuracy
of the following discussion. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the merger to
holders of Calavo stock.
Troy & Gould Professional Corporation, counsel to Calavo, has rendered an
opinion to the effect that, on the basis of certain facts existing and representations
made as of the effective date of the merger, the merger and the exchange of
shares incident to the merger will qualify for non-recognition treatment for
federal income tax purposes. This opinion will not, however, be binding on the
IRS.
Subject to the limitations and assumptions that are referred to therein, thein its
opinion,
of Troy & Gould Professional CorporationCorporation's opinion that the merger will
qualify for non-recognition treatment under the Internal Revenue Code means the
following:
(a) Neither Calavo nor New Calavo will recognize gain or loss in the
merger;
(b) No gain or loss will be recognized by holders of Calavo stock upon
their receipt of New Calavo common stock in the merger;
(c) The aggregate tax basis of the New Calavo common stock received in
the merger by the holders of Calavo stock will be the same as the aggregate
tax basis of the exchanged Calavo stock exchanged therefor;stock; and
(d) The holding period of the New Calavo common stock received in the
merger will include the period for which the Calavo stock surrendered in
exchange therefor was held, provided that the Calavo stock was held as a capital
asset at the time of the merger.
ACCOUNTING TREATMENT
The merger will be treated in a manner similar to a "pooling of interests"
under accounting principles generally accepted in the United States in which no
gain, loss or goodwill is recognized as a result of the transaction.
1213
1718
TRANSFERS OF SHARES OF NEW CALAVO
COMMON STOCK AFTER THE CONVERSION
TRANSFERS OF CALAVO STOCK PRIOR TO THE CONVERSION
A public trading market does not exist for the common or preferred stock of
Calavo. The stock is not listed on a securities exchange or the Nasdaq stock
market. Outstanding shares of the common or preferred stock may be transferred
only if federal and state securities registration exemptions are satisfied.
Calavo distributes to its shareholders lists of shareholders who have indicated
an interest in purchasing or selling shares of stock, and the purchasing and
selling shareholders then privately negotiate the terms of the transaction.
For each fiscal quarter during the three fiscal years ended October 31,
2000 and for the fiscal quarterquarters ended January 31, 2001 and April 30, 2001,
respectively, the following table sets forth information about purchases and
sales of Calavo common stock that occurred among Calavo's shareholders. The
table does not contain any express or implied representation about the value of
the Calavo common stock or about the prices at which New Calavo common stock may
be purchased and sold after the conversion.
NUMBER OF NUMBER OF RANGE
PERIOD COVERED TRANSACTIONS SHARES HIGH AVERAGE LOW
-------------- ------------ --------- ----- ------- -----
1997 - 1998
11/1 - 1/31................................ 17 87,518 $2.75 $1.27 $1.00
2/1 - 4/30................................. 17 45,971 2.00 1.29 1.00
5/1 - 7/31................................. 5 13,156 1.35 1.04 1.00
8/1 - 10/31................................ 20 95,654 1.50 1.23 0.75
--- --------- -----
Summary.................................... 59 242,299 $1.24
=== ========= =====
1998 - 1999
11/1 - 1/31................................ 35 213,162 1.50 $1.09 1.00
2/1 - 4/30................................. 44 244,638 1.50 1.30 0.95
5/1 - 7/31................................. 26 235,258 1.50 1.26 1.00
8/1 - 10/31................................ 19 399,446 1.50 1.38 1.00
--- --------- -----
Summary.................................... 124 1,092,504 $1.28
=== ========= =====
1999 - 2000
11/1 - 1/31................................ 19 92,645 1.50 $1.24 1.00
2/1 - 4/30................................. 42 327,385 1.98 1.46 1.00
5/1 - 7/31................................. 22 59,004 1.70 1.23 1.00
8/1 - 10/31................................ 17 102,396 1.50 1.50 1.00
--- --------- -----
Summary.................................... 100 581,430 $1.41
=== ========= =====
2000 - 2001
11/1 - 1/31................................ 8 93,828 3.00 $1.37 1.00
2/1 - 4/30................................. 14 30,993 6.00 2.24 1.00
--- --------- -----
Summary.................................... 22 124,821 $1.60
=== ========= =====
NO PUBLIC TRADING MARKET FOR NEW CALAVO STOCK
A public trading market will not exist for the shares of New Calavo common
stock that are issued in the merger to Calavo's shareholders. New Calavo does
not have any present intention of listing the shares on a securities exchange or
the Nasdaq stock market. We believe that, for the foreseeable future, the
interests of New Calavo and its shareholders will be best served if most of New
Calavo's shares continue to be owned by growers with whom it has a marketing
relationship and if growers continue to control the operations of New Calavo. If
New Calavo's shares were actively traded on a securities exchange or the
14
19
Nasdaq stock market, it would be unable to exercise a right of first refusal to
purchase the shares in appropriate circumstances and persons who do not market
avocados through New Calavo could gain control over the corporation by
purchasing large numbers of shares.
LISTS OF POTENTIAL PURCHASERS AND SELLERS OF NEW CALAVO STOCK
After the conversion, New Calavo will maintain a list of shareholders who
have notified it that they are interested in selling some or all of their shares
of common stock and a list of shareholders who have notified New Calavo that
they are interested in purchasing additional shares of common stock from
shareholders. 13
18
In its discretion, and if permitted by applicable law, New Calavo
may include on the list of potential purchasers non-shareholders who have
advised the companyit that they are interested in purchasing shares. The lists will contain
(a) the interested potential buyers' and sellers' names, (b) information
regarding how the buyers and sellers may be contacted, and (c) if supplied by
the buyer or seller, the number of shares that he or she is interested in buying
or selling.
On a periodicquarterly basis, (a) New Calavo will distribute the lists of potential
sellers to persons who have indicated an interest in purchasing stock, and (b)
New Calavo will distribute the list of potential buyers to shareholders who have
indicated an interest in selling stock. The lists will contain information about
the prices at which shares of common stock have been traded or issued during
prior quarters, but the lists will not contain any recommendation by New Calavo
about the current value of its stock. The lists will also contain summary
financial information that is derived from the financial statements filed by New
Calavo with the SEC.
The lists will be accompanied by the following statements: (a) New Calavo
is not a registered national securities exchange, securities information
processor, broker, dealer, investment adviser or clearing agency; (b) the lists
merely set forth the names of persons who are interested in buying or selling
specified numbers of shares of common stock, and there is no assurance that any
transaction will occur as to any particular number of shares or at any
particular price; (c) the historical price information contained in the lists
may not reflect the current value of the common stock; (d) each transaction must
be executed by the buyer and seller without New Calavo's assistance or
involvement; and (e) each transaction must be conducted by the buyer and seller
in accordance with applicable federal securities laws, including antifraud
provisions and registration or exemption requirements.
Buyers and sellers will be entitled to use the lists for the purpose of
entering into privately negotiated transactions with each other. Neither New
Calavo nor its officers or employees will (a) participate in the sale
negotiations, (b) match or otherwise solicit buyers and sellers, (c) receive any
commissions or fees with respect to these transactions, (d) act as an
intermediary in the transfer of funds from the buyer to the seller in connection
with any transaction, (e) arrange financing for the buyer, or (f) make any
recommendation regarding the advisability of the transaction or the value of the
common stock.
If permitted by applicable law, New Calavo may elect to post these lists on
its web site. However, New Calavo has not yet made any decision about using its
web site to facilitate the distribution of lists of potential buyers and sellers
of its stock.
RIGHT OF FIRST REFUSAL IN FAVOR OF NEW CALAVO; OTHER TRANSFER RESTRICTIONS
ARTICLE VI OF NEW CALAVO'S BYLAWS CONTAINS CERTAIN RESTRICTIONS ON THE
TRANSFERABILITY OF ALL SHARES OF NEW CALAVO COMMON STOCK. THE FOLLOWING IS A
SUMMARY OF CERTAINTHE MOST SIGNIFICANT PROVISIONS OF ARTICLE VI. YOU SHOULD REVIEW
ARTICLE VI IN ITS ENTIRETY IN ORDER TO UNDERSTAND THE RESTRICTIONS TO WHICH YOUR
SHARES WILL BE SUBJECT.
Before any shares of New Calavo common stock that are owned by any
shareholder may be sold, assigned or otherwise transferred, the shares must
first be offered to New Calavo. The transferring shareholder must give New
Calavo at least thirty days' prior written notice of the proposed transfer, and
the notice must describe the terms of the proposed transfer. The transferee does
not need to be an existing
15
20
shareholder of New Calavo or a grower who markets avocados through New Calavo. A
transfer of stock to a shareholder's family members or to a family trust is not
subject to the right of first refusal.
New Calavo will have the right to elect to purchase all of the shares that
are the subject of the proposed transfer. The right of first refusal must be
exercised by New Calavo, if at all, within thirty days after its receipt of the
transfer notice from the shareholder. Subject to certainseveral specified exceptions,
New Calavo will purchase the shares for the same purchase price and other
payment terms that are described in the transfer notice if it elects to exercise
its right of first refusal.
New Calavo currently anticipates that it will exercise the right of first
refusal on a limited, infrequent basis. The right of first refusal is most
likely to be exercised only if a shareholder with whom New Calavo has a
marketing agreement proposes to transfer a substantial amount of stock to a
person who has not entered into a marketing agreement and does not intend to do
so.
If New Calavo does not elect to purchase the shares that are the subject of
the proposed transfer, the shares may be transferred to the proposed transferee.
However, New Calavo has the right to require representation certificates and
other appropriate evidence from the transferring shareholder and the transferee
regarding compliance with applicable federal and state securities registration
exemptions. Also, (a) no person, entity or group is permitted by the Bylawsbylaws to
own more than twenty percent of the total outstanding shares of New Calavo
stock, and (b) the Bylawsbylaws prohibit the transfer of shares to competitors of New
Calavo. Shares that are transferred by a shareholder will remain subject to the
right of first refusal 14
19
and other transfer restrictions of the Bylaws,bylaws, and
certificates and written statements that evidence the common stock will bear
appropriate restrictive legends that refer to these transfer restrictions.
NEW CALAVO'S BUSINESS, MANAGEMENT AND COMMON STOCK
BUSINESS OF NEW CALAVO
New Calavo was incorporated on January 5, 2001 for the purpose of merging
with Calavo. New Calavo is a for-profit corporation that is organized under the
California General Corporation Law.
New Calavo currently has no business operations. On the effective date of
its merger with Calavo, New Calavo will acquire all of Calavo's assets and
business and will assume all of its liabilities. Thereafter, New Calavo will
carry on Calavo's business operations, although New Calavo will have the right
and authority to engage in other business operations if it so determines. For a
description of Calavo's business, see "Business of Calavo." For information
about Calavo's results of operations, see "Selected Condensed Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements (including
the notes thereto) of Calavo that are included in this InformationProxy
Statement/Prospectus.
Unlike Calavo, New Calavo will not operate on a nonprofit cooperative
basis. Calavo's primary purpose is to pack, process and market avocados produced
by its members at the highest possible sales price and to perform those services
for the mutual benefit of its members on a nonprofit cooperative basis at cost
(after allowing for the expenses of operation and maintenance of necessary
reserves). New Calavo's primary purpose will be to maximize profits for its
shareholders and to enhance the value of its shareholders' investment in the
corporation.New
Calavo. Although most of New Calavo's shareholders probably will continue to
market avocados through the corporation, the marketing of avocados through the corporationNew
Calavo will no longer be a requirement for ownership of common stock, and some
shareholders will not be marketers of avocados.
Except for earnings that are attributable to business that is conducted
with nonmembers on a for-profit basis, Calavo distributes earnings to members
according to their utilization of the cooperative's services, which is
determined primarily by the volume of the avocados that they deliver to Calavo.
By contrast, all earnings that New Calavo may elect to distribute to
shareholders in the form of dividends will be distributed based upon the number
of shares that are owned by each shareholder rather than upon the amount of
business that he or she does with the corporation.New Calavo. For additional information
regarding the
16
21
differences in the rights of Calavo's and New Calavo's shareholders as a result
of the conversion, see "Comparison of the Rights of Calavo's and New Calavo's
Shareholders."
DESCRIPTION OF NEW CALAVO STOCK
COMMON STOCK
The authorized capital stock of New Calavo consists of 100,000,000 shares
of common stock with a par value of $0.001 per share. As of the date of this
InformationProxy Statement/Prospectus, Calavo owns all 100 of the outstanding shares of New
Calavo common stock. As of , 2001, shares of Calavo preferred
stock were issued and outstanding, and shares of Calavo common stock
were issued and outstanding. Assuming that Calavo does not repurchase any shares
or issue any additional shares prior to the effective date of its merger into
New Calavo, there will be issued and outstanding shares of
New Calavo common stock as of the effective date of the conversion, all of which
will be fully paid and non-assessable. All 100 shares of New Calavo common stock
that are owned by Calavo will be cancelled in the merger.
Holders of New Calavo common stock are entitled to one vote per share on
all matters to be voted upon by shareholders, provided that shareholders have
cumulative voting rights in the election of directors. Holders of shares of
common stock are entitled to receive on a pro rata basis such dividends, if any,
as 15
20
may be declared from time to time by New Calavo's Board of Directors in its
discretion from funds legally available for that use.
Holders of shares of New Calavo common stock are also entitled to share on
a pro rata basis in any distribution to shareholders upon the liquidation,
dissolution or winding up of New Calavo. Shareholders do not have preemptive
rights to subscribe to any additional stock issuances by New Calavo, and
shareholders do not have the right to require the redemption of their shares or
the conversion of their shares into any other class of New Calavo's stock.
Shares of common stock are subject to certain rights of first refusal and transfer
restrictions that are imposed by New Calavo's Bylaws.bylaws. See "Transfers of Shares
of New Calavo Common Stock After the Conversion."
PREFERRED STOCK
New Calavo's Articlesarticles of Incorporationincorporation do not authorize the issuance of
shares of preferred stock. Any amendment of the Articlesarticles of Incorporationincorporation to
provide for the issuance of preferred stock would require shareholder approval.
TRANSFER AGENT AND REGISTRAR
Unless it elects in the future to list its common stock on a securities
exchange or the Nasdaq stock market, New Calavo anticipates that it will serve
as the transfer agent and registrar for its common stock.
DIRECTORS OF NEW CALAVO
The ten persons who currently serve as the directors of Calavo are also
serving as the initial directors of New Calavo and will continue to do so after
the conversion. For information regarding the current directors of Calavo and
their compensation, see "Management of Calavo." New Calavo anticipates that it
will continue Calavo's policy of compensating directors for attending board and
committee meetings and of reimbursing their expenses of attending the meetings.
Beginning with the first annual meeting of New Calavo's shareholders and
continuing at every annual shareholders' meeting thereafter, all of New Calavo's
directors will be elected by the shareholders to serve one-year terms.
17
22
EXECUTIVE OFFICERS OF NEW CALAVO
New Calavo's Board of Directors has appointed Calavo's existing executive
officers to serve as New Calavo's executive officers in the same positions that
they currently hold. For additional information regarding the executive
officers, see "Management of Calavo -- Executive Officers." Each of New Calavo's
executive officers will serve at the discretion of the Board of Directors,
subject to the terms of any employment agreement that he or she may subsequently
enter into with the corporation. New Calavo doesCalavo. We do not presently anticipate that itNew Calavo
will enter into employment agreements with any of its officers or other employees. On
the effective date of the conversion, all employees of Calavo will automatically
become employees of New Calavo.
SECURITY OWNERSHIP OF NEW CALAVO'S DIRECTORS AND EXECUTIVE OFFICERS
On the effective date of the conversion, each of Calavo's directors and
executive officers who owns shares of Calavo common stock will receive an equal
number of shares of New Calavo common stock in exchange for the shares of Calavo
stock. For information regarding the stock ownership of the directors and
executive officers, see "Security Ownership of Certain Beneficial OwnersPrincipal Shareholders and
Management."
16
21
EXECUTIVE COMPENSATION
New Calavo has not paid any compensation to its executive officers. For
information regarding the compensation of Calavo's executive officers (each of
whom is also an executive officer of New Calavo), see "Management of Calavo --
Executive Compensation." During the period after the conversion, New Calavo's
Board of Directors will review the compensation of the corporation'sits executive officers and
will determine whether any adjustments to the basis for determining the
compensation or the amount of the compensation are appropriate in light of theits
financial performance of the corporation and other relevant factors.
POST-CONVERSION STOCK ISSUANCES
After the conversion, New Calavo will have the right, without obtaining
shareholder approval but subject to compliance with applicable federal and state
securities laws, to issue shares of common stock to existing shareholders, to
persons who elect to enter into marketing agreements with the corporation,it, to officers and
employees of the corporation and to third parties, including persons who do not market avocados
through New Calavo. The Articlesarticles of Incorporationincorporation of New Calavo state that the
issuance by New Calavo of any shares of stock or options or other rights to
acquire stock requires the approval of at least seventy-five percent of New
Calavo's directors. Any issuances of stock after the conversion may dilute the
proportionate equity interests of existing shareholders. New Calavo has not yet
determined the number of shares, if any, that will be issued to growers who are
not currently members of Calavo and elect to enter into marketing agreements for
the first time after the conversion.
Shortly after the conversion, and subject to compliance with applicable
federal and state securities laws, New Calavo intends tomay offer certain of itsselected employees an
opportunity to purchase an as-yet undetermined number of shares of common stock
at a purchase price that will not be less than the fair market value of the
stock as of the date that the purchase rights are granted. The fair market value
of the stock will be based upon the average price at which the stock has been
traded over a recent period to be determined by the Board of Directors in
compliance with applicable accounting requirements. The proposed offer of stock
to employees is subject to the Board of Directors'Board's right to amend any of its proposed terms
or to determine not to proceed with the transaction.
18
23
COMPARISON OF THE RIGHTS OF CALAVO'S AND
NEW CALAVO'S SHAREHOLDERS
Upon completion of the conversion, the shareholders of Calavo will cease
being members and shareholders of a California nonprofit cooperative
association. On the effective date of the conversion, they will become
shareholders of New Calavo, which is a California for-profit corporation.
The following is a summary of the material differences between the rights
of Calavo's shareholders and the rights of New Calavo's shareholders effective
upon the conversion. The summary does not purport to be a comprehensive
discussion of these material differences, and the summary does not discuss the
rights of Calavo's shareholders that will remain the same or substantially the
same after the conversion. Furthermore, the identification of the differences
summarized below is not intended to suggest that other important differences do
not exist.
YOU ARE ADVISED TO REVIEW NEW CALAVO'S ARTICLES OF INCORPORATION AND
BYLAWS, WHICH ARE ATTACHED TO THIS INFORMATIONPROXY STATEMENT/PROSPECTUS AS APPENDICES B
AND C, RESPECTIVELY. YOU ARE ALSO ADVISED TO REVIEW THE COPY OF CALAVO'S
ARTICLES OF INCORPORATION AND BYLAWS THAT HAS PREVIOUSLY BEEN PROVIDED TO YOU.
YOU MAY WITHOUT CHARGE OBTAIN ANOTHER COPY OF CALAVO'S ARTICLES OF INCORPORATION
AND BYLAWS BY WRITING THE CORPORATE SECRETARY, GENEEGIDIO CARBONE, AT 2530 RED HILL
AVENUE, SANTA ANA, CALIFORNIA 92705 OR BY CALLING HIM AT (949) 223-1111.
GOVERNING CALIFORNIA LAW
The California Food and Agricultural Code governs the organization and
operation of a nonprofit agricultural cooperative such as Calavo. The California
General Corporation Law also governs the operation of Calavo except where its
provisions are in conflict or inconsistent with the express provisions of the
California Food and Agricultural Code.
17
22
New Calavo's organization and operation are governed by the California
General Corporation Law, and the California Food and Agricultural Code is not
applicable to New Calavo.
CORPORATE PURPOSE
Calavo's Articlesarticles of Incorporationincorporation and Bylawsbylaws state the cooperative's
primary purpose is to pack, process and market agricultural products produced by
its members and to return to the members the proceeds of sale, less expenses, on
the basis of the quantity or value or both of the products marketed for its
members. The Articlesarticles of Incorporationincorporation and Bylawsbylaws also state that Calavo is a
nonprofit cooperative association, and the Bylawsbylaws state that the value of its
business with nonmembers may not exceed the value of its business with members.
New Calavo's Articlesarticles of Incorporationincorporation state that the corporation'sits purpose is to engage
in any lawful act or activity for which a corporation may be organized under the
California General Corporation Law other than the banking or trust company
business or the practice of certainvarious types of professions. This provision gives
New Calavo more flexibility in its business operations, although New Calavo
anticipates that its primary purpose probably will remain the marketing of
agricultural products. New Calavo's Articlesarticles of Incorporationincorporation do not state that
it will operate on a nonprofit basis for the benefit of its members. Instead, it
will operate as a for-profit corporation for the benefit of its shareholders,
whether or not they market products through the corporation.New Calavo. Also, New Calavo is not
limited to conducting a majority of its business with members.
MEMBERS
Calavo's Bylawsbylaws provide for the admission of "members" to the cooperative.
A member must produce and deliver avocados to Calavo and must own shares of
Calavo's common stock. Every member must enter into a marketing agreement with
Calavo, the primary terms of which are contained in the Bylaws.bylaws. Pursuant to the
marketing agreement, the member agrees to deliver all of his or her avocados to
Calavo, and Calavo agrees to market the avocados on behalf of the member. The
Bylawsbylaws also address the circumstances under which membership may be terminated.
19
24
New Calavo's Bylawsbylaws do not contain any concept of membership in the
corporation that is based
upon an agreement to deliver avocados to the
corporation.avocados. The Bylawsbylaws do not contain a marketing
agreement, and they do not discuss the terms and conditions upon which New
Calavo will market avocados. Instead, any shareholder who desires to market
avocados through New Calavo must sign a marketing agreement, a form of which is
attached to this InformationProxy Statement/Prospectus as Appendix D. A grower who markets
avocados through New Calavo is not required to own shares of New Calavo common
stock.
AUTHORIZED CAPITAL
Calavo is authorized by its Articlesarticles of Incorporationincorporation to issue up to
10,000,000 shares of preferred stock and up to 10,000,000 shares of common
stock. New Calavo is authorized by its Articlesarticles of Incorporationincorporation to issue up to
100,000,000 shares of common stock but is not authorized to issue preferred
stock.
STOCK OWNERSHIP
Calavo's Articlesarticles of Incorporationincorporation and Bylawsbylaws state that only a member who
markets avocados through Calavo is entitled to own Calavo common stock. Upon
termination of membership, the former member's common stock that is not sold to
other members is converted into preferred stock that is redeemable by Calavo at
$1.00 per share. No shares of common or preferred stock may be transferred by a
shareholder without the consent of Calavo's Board of Directors.
Ownership of New Calavo common stock is not limited to growers who have
entered into marketing agreements, with the corporation, and a grower is not required to sell or
convert his or her common stock upon termination of a marketing agreement with
New Calavo. Non-growers are entitled to own common 18
23
stock, and the Board of
Directors does not have the right to approve transfers of shares other than to
competitors of the corporation.competitors. However, New Calavo does have a right of first refusal to purchase
all shares that a shareholder proposes to sell; the right is exercisable for the
purchase price offered by the buyer. See "Transfers of Shares of New Calavo
Common Stock After the Conversion."
VOTING RIGHTS
Calavo's Articlesarticles of Incorporationincorporation and Bylawsbylaws state that each holder of
common stock is entitled to only one vote regardless of the number of shares
that he or she owns. Except as required by applicable law, holders of preferred
stock do not have any voting rights.
New Calavo's Bylawsbylaws state that each holder of common stock is entitled to a
number of votes equal to the number of shares that he or she owns. Furthermore,
shareholders have cumulative voting rights in the election of directors. In an
election of directors pursuant to cumulative voting, each share of common stock
is entitled to a number of votes equal to the number of directors to be elected.
A shareholder may cast all of his or her votes for a single candidate or may
allocate the votes among two or more of the directors to be elected on a basis
determined by the shareholder. For example, if 10 directors are to be elected
and a shareholder owns 100 shares of stock, the shareholder could give one
candidate all 1,000 of the shareholder's votes or the shareholder could
apportion the 1,000 votes among two or more of the director nominees.
ELECTION OF DIRECTORS
Calavo's Bylawsbylaws provide that the cooperative's territory will be divided
into between seven and twelve districts, and that one director will be elected
from each district. Under certainspecified circumstances, an additional director may be
elected from the two largest districts. Each member of Calavo is assigned to a
district, and the member votes for a director from his or her district but not
from other districts. Each director serves a two-year term and must be a member
of the district from which he or she is elected. Because directors serve
staggered terms, only one-half of the total authorized directors are elected
each year. Currently, there are ten directors, each of whom is from a different
district. The Bylawsbylaws also authorize the election by the directors of up to three
directors-at-large, but there are currently no directors-at-large.
20
25
New Calavo's Bylawsbylaws provide that the authorized number of directors will be
not less than eight nor more than fifteen, and that that Board of Directors will
determine the number of directors within that range. Currently, the authorized
number of directors is ten. Although the incumbent Board is authorized to create
districts for administrative purposes and to nominate a slate of directors
consisting of a nominee from each district, directors will not be elected on a
district basis. Instead, each shareholder is entitled to cast votes on a
cumulative basis for all of the director positions that are to be filled each
year, and a shareholder will not be limited to voting for a director from his or
her district. All directors serve one-year terms and will be elected at each
annual shareholders' meeting. Only persons who market California-grown avocados
through New Calavo are authorized to serve as directors.
SPECIAL MEETINGS OF SHAREHOLDERS
Calavo is required by its Bylawsbylaws to hold a special meeting of shareholders
upon the request of at least twenty percent of the holders of common stock. New
Calavo's Bylawsbylaws require a special meeting to be held upon the request of
shareholders whose combined holdings comprise at least ten percent of the
outstanding common stock.
DIVIDENDS
Distributions that are made on an annual basis by Calavo to its members
from the net proceeds on sales of members' avocados are referred to as patronage
dividends and are distributed to members based primarily upon the quantity of
avocados delivered by each member during the fiscal year without regard to the
number of shares of common stock that are owned by the member. Under Subchapter
T of the
19
24 Internal Revenue Code, which applies to agricultural cooperatives,
Calavo does not pay taxes on the patronage dividends that are distributed to
members. Calavo's members are taxed on the distributions.
By contrast, dividends that Calavo elects to distribute to shareholders
based upon its earnings from business that is conducted with nonmembers on a
for-profit basis are distributed to each shareholder based upon the number of
shares of common or preferred stock that he or she owns rather than upon the
amount of business conducted by the shareholder with the cooperative. Calavo
pays normal corporate taxes on these earnings, and its shareholders pay taxes
upon their receipt of the dividends.
As a for-profit corporation, New Calavo will be taxed under Subchapter C of
the Internal Revenue Code. New Calavo will not have the ability to deliver
patronage dividends to growers who havewith whom it has entered into marketing
agreements with
the corporation.agreements. All earnings that New Calavo elects in its discretion to deliver to
shareholders in the form of dividends will be distributed based upon the number
of shares that are owned by each shareholder rather than upon the amount of
business that the shareholder does with the corporation.it. New Calavo will be taxed on these
earnings, and shareholders will then be taxed upon their receipt of the
dividends.
REVOLVING FUNDS
As a cooperative, Calavo is entitled under its Articlesarticles of Incorporationincorporation
and Bylawsbylaws to satisfy all or a portion of its capital needs by withholding for
several years a portion of the proceeds from marketing avocados that are
otherwise distributable to its members. Assuming satisfaction of certainapplicable
requirements, Calavo does not pay taxes on these retained amounts, which are
referred to as retains or revolving funds. Instead, the cooperative's members
agree to take this income into their taxable income. Pursuant to a recapitalization that was completed in January 1997, Calavo's
members exchanged their revolving fund credits for Calavo common stock. The
revolving fund credits that were held by former members and by members who did
not consent to the recapitalization were also converted into common stock after
the credits were purchased by consenting Calavo members. Subsequent to the
recapitalization,In recent years, the use of
revolving funds has not been an important source of financing byfor Calavo.
New Calavo's Articlesarticles of Incorporationincorporation and Bylawsbylaws do not provide for the
corporation's
creation of a revolving fund from proceeds that are otherwise payable to growers
who are parties to marketing agreements with the corporation.it. New Calavo will be required to
pay taxes on any income that it withholds as retained earnings.
2021
2526
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The following selected condensed consolidated financial data for each of
the years in the five-year period ended October 31, 2000 are derived from
Calavo's audited consolidated financial statements. The following selected
condensed consolidated financial data for the three-monthsix-month periods ended January
31,April 30,
2000 and January 31,April 30, 2001, respectively, are derived from Calavo's unaudited
consolidated financial statements. The unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements included hereinin this Proxy Statement/Prospectus and, in the
opinion of management, include all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the operating results
for the periods. The results of operations for the threesix months ended January 31,April 30,
2001 are not necessarily indicative of results to be achieved for the full
fiscal year. You should read the financial information presented below along
with the consolidated financial statements and related notes thereto that are
included elsewhere in this InformationProxy Statement/Prospectus. For a narrative
explanation of certainprincipal aspects of the following financial information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
THREESIX MONTHS
FISCAL YEAR ENDED OCTOBER 31, ENDED JANUARY 31,
----------------------------------------------------------APRIL 30,
------------------------------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net sales................ $147,866 $151,189 $152,194 $181,480 $225,869 $40,000 $40,449sales................................. $144,463 $147,376 $148,641 $177,303 $219,983 $93,292 $91,714
Operating proceeds.......proceeds........................ 85,647 85,284 82,441 96,563 112,273 15,670 12,86350,919 39,737
Tax provision (benefit)................................. 1,209 (319) 730 (408) 2,162 594 4561,100 320
Net income from nonmember products...............products........ 1,444 266 1,648 884 4,764 1,319 9092,348 734
BALANCE SHEET DATA AS OF END OF PERIOD:
Working capital..........capital........................... 12,217 10,503 11,626 10,254 13,929 9,721 7,40611,092 8,788
Total assets.............assets.............................. 36,114 34,115 33,887 46,442 46,485 45,254 46,55249,399 57,110
Short-term debt..........debt........................... 1,178 2,525 475 9,148 9,486 8,169 12,9017,787 14,110
Long-term debt...........debt............................ 4,249 3,468 4,794 4,331 3,820 4,419 3,5443,989 3,583
Shareholders' equity/members' interest......interest.... 16,382 16,147 17,518 17,577 22,435 17,839 17,13419,755 18,587
CASH FLOWS FROM:
Operations...............Operations................................ 3,865 (844) 1,464 (6,338)(1) 2,978 1,454 1,102
Investing................2,363 3,309
Investing................................. (1,482) (786) (3,284)(2) (1,523) (1,685) (289) (802)
Financing................(853) (1,441)
Financing................................. (1,414) (445) 167 6,917(2) (1,259) (2,078) (1,770)
Weighted-Average
Shares Outstanding.........(2,890) (562)
Weighted average shares outstanding....... 9,623(3) 9,594(3) 9,605 9,572 9,849 9,839 9,9369,840 9,958
Basic and Diluted Net
Income Per Sharediluted net income per share
from Nonmember Products.......nonmember products................. $ 0.15(3) $ 0.03(3) $ 0.17 $ 0.09 $ 0.48 $ 0.130.24 $ 0.090.07
Dividends Per Share........per share....................... $ 0.10(3) $ 0.05(3) $ 0.17 $ 0.12 $ 0.50 $ -- $ --
Net Book Value Per Share...book value per share.................. $ 1.66(3) $ 1.64(3) $ 1.77 $ 1.78 $ 2.28 $ 2.01 $ 1.87
- -------------------------
(1)Reflects increased accounts receivable, which is a result of increased sales
in fiscal 1999 of member and imported avocado products.
(2)Reflects the purchase of Calavo's California headquarters building in fiscal
1998 and the opening of a packinghouse in Mexico with financing completed in
fiscal 1999.
(3)In January 1997, Calavo converted its capital structure by exchanging member
revolving fund credits for shares of common stock. The share information as
of and for the fiscal years ended October 31, 1997 and 1996 is presented on a
pro forma basis. This pro forma share information was prepared assuming that
the number of shares outstanding prior to the conversion was equal to the
initial number of shares issued in the January 1997 recapitalization.
2122
2627
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
for New Calavo give effect to the merger with Calavo. The historical financial
information set forth below has been derived from, and is qualified by reference
to, the consolidated financial statements of Calavo and the financial statements
of New Calavo and should be read in conjunction with those financial statements
and notes thereto included elsewhere herein.in this Proxy Statement/Prospectus. The
Unaudited Pro Forma Condensed Combined StatementBalance Sheet as of April 30, 2001 gives
effect to the merger with Calavo as if it had occurred on April 30, 2001. The
Unaudited Pro Forma Condensed Combined Statements of Operations for the fiscal
yearyears ended October 31, 2000, gives1999 and 1998 and the six months ended April 30,
2001 give effect to the merger with Calavo as if it had occurred on November 1,
1999, and the Unaudited Pro Forma Condensed Combined Statement of Operations for
the three months ended January 31, 2001 gives effect to the merger as if it had
occurred on November 1, 2000. The Unaudited Pro Forma Condensed Combined Balance
Sheet as of January 31, 2001 gives effect to the merger with Calavo as if it had
occurred on January 31, 2001.1997.
Under the terms of the merger, each share of Calavo common stock and
preferred stock will be exchanged for one share of New Calavo common stock. The
merger with Calavo will be accounted for in a manner similar to a pooling of
interests. Accordingly, the assets and liabilities subsequent to the merger will
be presented at Calavo's historical cost and no goodwill will be recorded.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with (i) Management's Discussion and Analysis of Financial
Condition and Results of Operations and the historical financial statements and
notes to financial statements of Calavo and New Calavo which are included
elsewhere in this InformationProxy Statement/Prospectus, and (ii) the selected historical
financial data appearing elsewhere in this InformationProxy Statement/Prospectus. The
Unaudited Pro Forma Condensed Combined Financial Statements are provided for
informational purposes only and do not purport to present the combined financial
position or results of operations of Calavo and New Calavo had the merger
assumed therein occurred on the dates specified, nor are they necessarily indicative of the
results of operations that may be expected in the future.
2223
2728
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JANUARY 31,APRIL 30, 2001
(IN THOUSANDS)
HISTORICAL HISTORICAL PRO FORMA PRO
NEW CALAVO(1) CALAVO(1) ADJUSTMENTS FORMA
------------- ---------- ----------- ----------------
ASSETS
Cash and cash equivalents....................equivalents................... $-- $ 2,798 $ -- $ 22 $ -- $ 222,798
Accounts receivable, net.....................net.................... -- 17,79322,305 -- 17,79322,305
Inventories, net.............................net............................ -- 10,87414,348 -- 10,874(2) 14,348
Prepaid expenses and other current assets....assets... -- 1,6321,416 -- 1,6321,416
Loan to growers..............................growers............................. -- 1,6031,071 -- 1,6031,071
Income taxes receivable......................receivable..................... -- 459588 -- 459588
Deferred income taxes........................taxes....................... -- 537 -- 537
--------- ------- --------------- -------
Total current assets.......................assets...................... -- 32,92043,063 -- 32,92043,063
Property, plant and equipment, net...........net.......... -- 9,3039,670 -- 9,3039,670
Investments held to maturity.................maturity................ -- 1,5901,817 -- 1,5901,817
Other assets.................................assets.............................. -- 2,7392,560 -- 2,739
------2,560
--- ------- -------- -------
-------$-- $57,110 $ -- $46,552 $ -- $46,552
======$57,110
=== ======= =============== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Payable to members........................... $ -- $ 8,122 $(8,122)(2)members.......................... $-- $14,963 $(14,963)(3) $ --
Trade accounts payable and accrued
expenses...................................expenses.................................. -- 4,491 8,122(2) 12,6135,202 14,963(3) 20,165
Short-term borrowings........................borrowings....................... -- 12,40013,600 -- 12,40013,600
Current portion of long-term obligations.....obligations.... -- 501510 -- 501
------510
--- ------- --------------- -------
Total current liabilities..................liabilities................. -- 25,51434,275 -- 25,51434,275
Long-term obligations, less current
portion....................................portion................................... -- 3,5443,583 -- 3,5443,583
Other liabilities........................... -- 305 -- 305
Deferred income taxes........................taxes....................... -- 360 -- 360
--------- ------- --------------- -------
Total long-term liabilities................liabilities............... -- 3,9044,248 -- 3,9044,248
Shareholders' equity:
Redeemable preferred stock...................stock.................. -- 47 (47)(3)(4) --
Common stock.................................stock................................ 1 9,9099,913 (1)(5)
(9,913)(4)
(9,909)(3)
10(3)10(4) 10
Additional paid-in capital...................capital.................. -- 178 9,946(3) 10,124187 9,950(4) 10,137
Retained earnings............................earnings........................... -- 7,0008,440 -- 7,0008,440
Receivable from shareholder.................. (1)shareholder................. (5) -- 1(4)1(5) --
--------- ------- --------------- -------
Total shareholders' equity.................equity................ -- 17,13418,587 -- 17,134
------18,587
--- ------- -------- -------
-------$-- $57,110 $ -- $46,552 $ -- $46,552
======$57,110
=== ======= =============== =======
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
2324
2829
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL HISTORICAL PRO FORMA
NEW CALAVO(1) CALAVO(1) ADJUSTMENTS PRO FORMA
------------- ---------- ----------- ---------
Net sales................................ $ -- $ 225,869219,983 $ -- $225,869$219,983
Cost of sales............................ -- -- 105,347(5)
292(5)
92,230(6)105,347(6)
292(6)
92,230(7) 197,869
-------- --------
Gross margin............................. -- -- -- 28,00022,114
Operating expense........................ -- 112,934107,225 (92,230)(6) 20,704
------(7) 14,995
---- --------- -------- --------
Operating income/operating proceeds and
nonmember gross profit................. -- 112,935112,758 105,639 7,2967,119
Other expense............................ -- 370193 -- 370193
Decrease in members' fresh fruit
inventories............................ -- (292) 292(5)292(6) --
---------- --------- -------- --------
Income before provision for income
taxes.................................. -- 112,273 105,347 6,926
Income tax provision..................... -- 2,162 --(8) 2,162
Net proceeds distributed to members...... -- (105,347) 105,347(5)105,347(6) --
--------- -------- --------
Net income............................... $ -- $ 4,764 $ -- $ 4,764
========== ========= ======== ========
Basic and diluted net income per share... $ -- $ 0.48 $ 0.48
==== ========= ========
Basic and diluted weighted average
shares................................. 9,849 9,849
==== ========= ========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
25
30
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL HISTORICAL PRO FORMA
NEW CALAVO(1) CALAVO(1) ADJUSTMENTS PRO FORMA
------------- ---------- ----------- ---------
Net sales................................. $ -- $177,303 $ -- $177,303
Cost of sales............................. -- -- 96,087(6)
(696)(6)
67,046(7) 162,437
-------- --------
Gross margin.............................. -- -- -- 14,866
Operating expense......................... -- 81,246 (67,046)(7) 14,200
---- -------- -------- --------
Operating income/operating proceeds and
nonmember gross profit.................. -- 96,057 95,391 666
Other expense............................. -- 190 -- 190
Increase in members' fresh fruit
inventories............................. -- 696 (696)(6) --
---- -------- -------- --------
Income before provision for income
taxes................................... -- 96,563 96,087 476
Income tax provision...................... -- (408) --(8) (408)
Net proceeds distributed to members....... -- (96,087) 96,087(6) --
-------- -------- --------
Net income................................ $ -- $ 0.48
====== =========884 $ -- $ 884
==== ======== ======== ========
Basic and diluted net income per share.... $ -- $ 0.09 $ -- $ 0.09
==== ======== ======== ========
Basic and diluted weighted average
shares.................................shares.................................. 9,572 -- 9,849 -- 9,849
====== =========9,572
==== ======== ======== ========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
2426
2931
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREEYEAR ENDED OCTOBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL HISTORICAL PRO FORMA
NEW CALAVO(1) CALAVO(1) ADJUSTMENTS PRO FORMA
------------- ---------- ----------- ---------
Net sales................................. $ -- $148,641 $ -- $148,641
Cost of sales............................. -- -- 78,688(6)
106(6)
53,390(7) 132,184
-------- --------
Gross margin.............................. -- -- -- 16,457
Operating expense......................... -- 67,844 (53,390)(7) 14,454
---- -------- -------- --------
Operating income/operating proceeds and
nonmember gross profit.................. -- 80,797 78,794 2,003
Gain on sale of facility.................. 1,575 1,575
Other expense............................. -- (175) -- (175)
Decrease in members' fresh fruit
inventories............................. -- (106) 106(6) --
---- -------- -------- --------
Income before provision for income
taxes................................... -- 82,441 78,688 3,753
Income tax provision...................... -- 730 --(8) 730
Net proceeds distributed to members....... -- (78,688) 78,688(6) --
Appropriation for capital expenditures.... (1,375) -- (1,375)
---- -------- -------- --------
Net income................................ $ -- $ 1,648 $ -- $ 1,648
==== ======== ======== ========
Basic and diluted net income per share.... $ -- $ 0.17 $ 0.17
==== ======== ========
Basic and diluted weighted average
shares.................................. -- 9,605 9,605
==== ======== ========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
27
32
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31,APRIL 30, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL HISTORICAL PRO FORMA
NEW CALAVO(1) CALAVO(1) ADJUSTMENTS PRO FORMA
------------- ---------- ----------- ---------
Net sales................................. $ -- $ 40,44991,714 $ -- $ 40,449$91,714
Cost of sales............................. -- -- 11,498(5)
(1,471)(5)
24,687(6) 34,714
------ ---------38,683(6)
(3,298)(6)
48,582(7) 83,967
---- -------- -------- -------
Gross margin.............................. -- -- -- 5,7357,747
Operating expense......................... -- 28,933 (24,687)(6) 4,246
------55,197 (48,582)(7) 6,615
---- -------- --------- -------- -------
Operating income/operating proceeds and
nonmember gross profit.................. -- 11,516 10,027 1,48936,517 35,585 1,132
Other expense............................. -- 12478 -- 12478
Increase in members' fresh fruit
inventories............................. -- 1,471 (1,471)(5)3,298 (3,298)(6) --
---------- -------- --------- -------- -------
Income before provision for income
taxes................................... -- 12,863 11,498 1,36539,737 38,683 1,054
Income tax provision...................... -- 456320 -- 456(8) 320
Net proceeds distributed to members....... -- (11,498) 11,498
------(38,683) 38,683
---- -------- --------- -------- -------
Net income................................ $ -- $ 909734 $ -- $ 909
======734
==== ======== ========= ======== =======
Basic and diluted net income per share.... $ -- $ 0.090.07 $ 0.09
======0.07
==== ======== ===============
Basic and diluted weighted average
shares.................................. -- 9,936 9,936
======9,958 9,958
==== ======== ===============
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
information.
2528
3033
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Pro forma adjustments for the unaudited pro forma condensed combined
balance sheet as of January 31,April 30, 2001 and for the unaudited statements of
operations for the yearfiscal years ended October 31, 2000, 1999 and 1998 and the
threesix months ended January 31,April 30, 2001 are as follows:
(1) Calavo reports its financial information on the basis of an October 31
fiscal year. New Calavo was incorporated on January 5, 2001. The Unaudited
Pro Forma Condensed Combined Financial Statements for the fiscal yearyears ended
October 31, 2000, 1999 and 1998 and for the threesix months ended January
31,April 30, 2001
include Calavo's historical results of operations for the fiscal yearyears ended
October 31, 2000, 1999 and 1998 and the threesix months ended January
31,April 30, 2001,
respectively, and do not include any operations of New Calavo as its
operations will not commence until after the proposed merger is consummated.
The Unaudited Pro Forma Condensed Combined Balance Sheet includes the
historical balance sheetssheet of Calavo as of April 30, 2001 and the historical
balance sheet of New Calavo as of January 31,April 30, 2001.
(2)No adjustment has been provided to adjust the inventory balance from net
realizable value to the lower of cost or market. Management believes that
such an adjustment would not be significant.
(3) Represents the reclassification of a payable to a growers balance maintained
by Calavo as an agricultural cooperative to a trade accounts payable as a
commercial corporation.
(3)(4) Represents the exchange of 9,867,0009,913,000 and 47,000 shares of Calavo common and
preferred stock (par value $1.00) for 9,904,0009,960,000 shares of New Calavo common
stock (par value $0.001) and the corresponding increase in additional
paid-in capital.
(4)(5) Represents the forgiveness of a note receivable from New Calavo's parent and
the cancellation of all shares of New Calavo common stock.
(5)(6) Represents the reclassification of proceeds distributed to growers and other
related accounts maintained by Calavo as an agricultural cooperative to cost
of goods sold consistent with operations as a commercial corporation.
(6)(7) Represents certainvarious costs and expenses presented by Calavo in accordance with
industry standards for agricultural cooperatives and reclassifies such
amounts as cost of goods sold. 26Costs reclassified include the cost of the
fruit and associated production, freight and handling and packaging costs to
ready the fruit for sale.
(8)No adjustment has been provided for incremental income taxes that maybe
incurred as a result of operating Calavo's member business on a for-profit
basis. Management believes that such an adjustment would not be significant.
29
3134
BUSINESS OF CALAVO
OVERVIEW
Calavo is a nonprofit cooperative association that is organized under the
California Food and Agricultural Code. It was founded in 1924 to market avocados
grown in California by its members. The growing area stretches from San Diego to
the north of Santa Barbara, with the majority of the growing areas located
approximately 100 miles north and south of Los Angeles.
The Hass variety of avocados represents about 85% of current plantings. The
Hass variety is available from December through November, with peak production
in the May to September months.
The avocados are harvested and then delivered to a packinghouse where they
are cooled, graded, sized and packed. The avocados are then stored in a
temperature-controlled warehouse until they are shipped to customers. Customers
consist of the major supermarket chains in the United States and Canada and
certainseveral other foreign countries and of food service distributors who supply the
away-from-home market such as restaurants, fast food chains, hospitals and other
institutions. Calavo markets its products through its own sales force for the
fresh avocado market and uses a broker network for its processed products.
Calavo sources avocados from Chile and New Zealand under consignment
marketing agreements. It earns a marketing commission for sales made to its
customers. Papayas from Hawaii are also sold on a commission basis.
Calavo purchases avocados in Mexico for its fresh and processed businesses.
Calavo has one packinghouse in Mexico for packing and shipping avocados to the
United States, Canada, Asia and Europe. Avocados are also processed in Mexico by
first removing the skin and seed, and then are made into a pulp. The pulp is
shipped to a processing plant in California where it is further processed and
packaged. The product is then frozen for storage with shipment to warehouses and
ultimately to its customers.
The product has an extended storage life compared
to the short storage life of fresh avocados is limited. It can range from one to
four weeks depending upon the maturity of the fruit, the growing methods used
and the handling conditions in the distribution chain. Processed avocados that
are stored in metal containers have a storage life of several years. Processed
avocados that are stored in plastic or film/pouch packages have a shorter life,
but their storage life is considerably longer than the storage life of fresh
product.avocados.
The market for avocados is worldwide. The United States market receives
most of Calavo's U.S. production. In recent years, U.S. production has been
reduced due to weather and disease or pest conditions. When U.S. production is
reduced, imports come into the market and fill the void. In recent years, the
U.S. market has also been restricted due to high domestic prices.
Calavo's cost structure is geared to handle larger crops than it has
processed in the last several years. Calavo has aggressively recruited and
procured an additional percentage of the California avocados crop in recent
years, especially from nonmembers.
The California avocado market is highly competitive. There are over forty
handlers of fresh avocados, all of whom place purchase quotations into a daily
price quoting marketplace. The competition is both for the growers and for the
food buyers at the retail and food service companies.
Avocados are not differentiated at the consumer level since there is
limited branding of the product. The industry operates under a California
marketing order whereby all growers fund a generic advertising and promotion
program. There is no brand crediting. The only label on the avocados is
"California Grown," with an industry-wide PLU label used for scanning purposes
on the fruit and with Calavo marking the PLU label with its name. The packaging
container does show the packer's name on the container, but the container
normally does not appear in the store display area.
Calavo's sales effort for fresh avocados is handled out of its Santa Ana,
California office with four regional sales offices in key United States markets.
The processed avocado sales effort is handled by a
30
35
nationwide broker network controlled by six salaried regional managers.
California growers are serviced out of two packinghouses with regional field
managers handling the daily harvest planning, delivery and grower relations.
Calavo's logistics, accounting and information services are also headquartered
in its Santa Ana, California office.
27
32
Members' fruit is pooled on a weekly basis, which means that all fruit
received during a week is aggregated into one homogeneous commodity. The fruit
is tracked through the packaging cycle, and the sales proceeds for each week are
allocated to the applicable week's delivery of avocados. The proceeds are paid
to the growers once each month with all of the fruit received in a given week
receiving the same return by variety, grade and size.
Most of the fruit is sold on a weekly basis. At the time of payout, the
avocados that are not yet invoiced are estimated for payout purposes. Over a
number of years, this payout system has closely tracked actual proceeds. Any
errors in calculation are absorbed by Calavo.
A packing retain is withheld when the avocados are delivered by charging a
packing fee against the estimated sales proceeds. If this packing retain is more
than the actual cost of operations, the excess is refunded to the members on the
basis of the pounds of fruit delivered by each member. If there is a deficit, it
is recovered in the following year. Generally, a refund has been made to the
members since Calavo is conservative in setting its retain rate. Competitive
pressures act as a control on setting the lowest possible retain since growers
might deliver avocados to a competitive marketer if the retain is too high. Upon
the conversion of Calavo to a for-profit corporation, a refundable retain will
not be charged againstwithheld from the sales proceeds since Calavo will cease operating as a
cooperative.
Members of Calavo sign a marketing agreement to deliver all of their fruit
to the cooperative for one year. This term is renewed on an annual basis unless
either party gives written notice to terminate during a prescribed period each
year.
The processed avocado segment has experienced major competition from
Mexican-based producers in recent years. Mexican producers have a slight
advantage over United States producers in fruit procurement costs. However,
since the avocados must be processed and then delivered to the United States,
Calavo does not believe that this has given Mexican producers a major cost
advantage.
Calavo's marketing strength has been its quality, innovation, year-round
product availability, strategically located warehouses and market relationships.
Calavo does heavy brand support of its processed products with consumer
advertising and trade promotions.
1997 RECAPITALIZATION
Pursuant to a recapitalization that was completed in January 1997, Calavo's
members exchanged their revolving fund credits for shares of Calavo common
stock. The revolving fund credits that were held by former members and by
members who did not consent to the recapitalization were also converted into
common stock after the revolving fund credits were purchased by consenting
Calavo members. Each consenting Calavo member received one share of common stock
in exchange for each dollar of revolving fund credits held by the member.
Approximately $9,623,000 of revolving fund credits were exchanged for shares of
common stock in the recapitalization.
The primary purpose of the recapitalization was to substitute permanent
equity for revolving equity. Prior to the recapitalization, Calavo satisfied a
portion of its capital needs by annually withholding revolving funds from
proceeds that were otherwise payable to members and by then repaying the
revolving funds over a cycle of six or seven years out of funds withheld from
members in future years. Calavo's Board of Directors determined that the
practice of withholding funds from the current year's proceeds in order to repay
prior years' revolving fund credits was not an efficient use of capital and
imposed burdens both on the cooperative and on its members. The Board also
determined that membership in the cooperative would be made more attractive by
providing members with shares that might appreciate in value based upon the
success of the cooperative.
31
36
Subsequent to the recapitalization, Calavo has issued shares to new members
pursuant to federal securities registration exemptions. Each new member
typically has been issued 100 shares, although several new members have each
purchased 10,000 to 25,000 shares based upon the average price at which Calavo's
common stock was traded near the time of the purchase.
BUSINESS SEGMENTS
IDENTIFICATION OF SEGMENTS
Calavo's business has three segments:
- Member avocados, which includes all operations that involve the
distribution of avocados delivered primarily by members and associate members under
marketing agreements;
- Nonmember perishable products, which includes the distribution of
nonmembers' fresh avocados grown in California or imported primarily from
Chile, Mexico and New Zealand and the distribution of Hawaiian-grown
papayas and which is done on a consignment and purchased basis; and
- Processed avocados, which includes frozen avocado pulp products mainly
produced at Calavo's plants.
MEMBER AVOCADOS
There are approximately 1,560 growers who deliver their avocados to Calavo
on a member basis. This fruit is paid on a consignment basis with an estimated
packing and marketing charge deducted from the sales proceeds. There are
approximately 180 growers who deliver avocados to Calavo on a nonmemberan associate member
basis. They are paid the same rate as Calavo's members. However, the nonmembersassociate
members do not vote on corporate matters and are not shareholders of Calavo.
Members must own shares of Calavo common stock.
Calavo also purchases avocados at an agreed price. Calavo takes the full
market risk on these transactions. The commodityfresh product is delivered to a Calavo packinghouse where it is graded,
sized and packed into shipping containers for delivery to Calavo's customers. It
is important for Calavo to be able to
28
33 estimate the total size of the crop and to
have that commodity move through the distribution system in an orderly manner.
This is done through a field team that maintains direct contact with growers and
farm managers to coordinate harvest plans and that gives feedback to the
marketing group. The sales effort is coordinated through the Santa Ana,
California office where list prices are published for a direct sales force to
solicit orders. Calavo maintains additional offices in the States of Washington,
Illinois and New Jersey.
Sales are made to a diverse group of supermarket chains, wholesalers, food
service suppliers and other direct users. The recent consolidation in the
supermarket and food service segments has led to fewer but bigger buyers.
Limited sales are made through the "dot com" distribution method, which will
probably increase over the near term.
Calavo's largest 5 customers represent 12.5% of all fresh product sales and
the largest 25 customers represent 43.9% of all sales. The sales force sells the
member avocados and nonmember perishable products to the same customer base.
Calavo has a market share of 37.0% of California avocados. This percentage
has increased in recent years from 30.0% as a result of areas recovering from
weather and pest problems and new membership additions.
The cost structure of Calavo is heavily weighted to fixed expenses. When
the volume increases, this overhead is spread over more pounds, which yields a
lower operating cost.
NONMEMBER PERISHABLE PRODUCTS
The nonmember perishable products segment includes avocados purchased by
Calavo at an agreed price and on a consignment basis. Calavo takes the full
market risk on transactions involving the purchase
32
37
of avocados at an agreed price because upon resale it may obtain less than the
price that it paid for the avocados if the market price declines after the date
that it purchased the avocados. The growers who sold the avocados to Calavo do
not obtain any additional payments if the market resale price increases after
the date that they sold their avocados to Calavo.
This area has experienced significant growth over the last several years.
The Chilean volume has increased due to larger plantings and lower crop sizes in
California. This has created market opportunities for the Chilean crop, which is
harvested towards the end of the California crop season. Calavo has a 23.5%
share of Chilean imports into the United States.
Mexican avocados have been allowed to enter the United States market since
1998. They are marketed in the 19 northeastern states from November 1 to the end
of February. Calavo has a history of dealing in Mexican produce. With the border
being opened, a major investment was made in Mexico to build a packinghouse in
the growing area. The success of this portion is dependent upon securing a
reliable, high quality supply of avocados at a reasonable cost. Recently, the
Mexican growers and government have restricted the supply of avocados for export
to the United States in order to obtain higher field prices. Calavo is dependent
upon securing a sufficient volume of fruit to support its investment in the
packing operation. Calavo also exports Mexican avocados to Japan, Canada and
Europe. Calavo has a 20.0% share of the avocados exported from Mexico.
Advances have been made to several Mexican growers to secure their fruit
for the season. If they do not deliver this fruit, it may be difficult for
Calavo to obtain repayment of the advances. Total advances to Mexican growers as
of October 31, 2000April 30, 2001 were $1,088,000.$564,000.
New Zealand has recently started to export avocados into the United States.
New Zealand avocados compete with the Chilean and Mexican fruit for shelf space.
Calavo's share of the avocados imported from New Zealand into the United States
is approximately 40.0%.
Papayas, packed by a company that is owned by Calavo's Chairman of the
Board and Chief Executive Officer, are shipped to the United States for sale to
Calavo's customers. The crop has been restricted due to disease problems in
Hawaii. There is also significant competition from Mexico in this product line.
Calavo marketed mangos until 1999, when Calavo discontinued that product
due to profitability issues.
PROCESSED AVOCADOS
Calavo pioneered the freezing of the avocado in the 1960's and early
1970's. The process involves a ripening, seed removal and pulp extraction
operation. The pulp is packaged in plastic or metal containers
29
34 for sale to the
food service industry and retail supermarket trade. Sales declined over the last
several years due mainly to Mexican-based processors entering the market. In
prior years, Calavo used California fruit to create the pulp. With restricted
supplies, Calavo had to process Mexican fruit in order to remain competitive in
the market place. Because Mexican processors had access to lower-priced fruit,
Calavo made a decision in 1995 to build a Mexican processing plant, which put it
on a more competitive fruit-sourcing basis.
Sales of processed avocados are made to the food service sector and the
retail supermarket sector. The sales are made by a commissioned broker network
that is managed by Calavo's regional sales managers. The largest 5five customers
represent 24.3% of all sales, and the largest 25 customers represent 49.3% of
sales.
33
38
SALES INFORMATION BY BUSINESS SEGMENT
For each of Calavo's three business segments, Note 13 to the Consolidated
Financial Statements that are included in this InformationProxy Statement/Prospectus sets
forth detailed information regarding sales, costs and income for each of the
years in the three-year period ended October 31, 2000.
The following table sets forth sales, costs and income information for each
of Calavo's three business segments for each fiscal quarter during the two
fiscal years ended October 31, 2000 and for the fiscal quarterquarters ended January
31, 2001.2001 and April 30, 2001, respectively.
MEMBER AVOCADOS
(IN THOUSANDS)
FISCAL YEAR ENDED OCTOBER 31, 1999
--------------------------------------------------------------------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- --------
Sales...........................Sales.............................. $ 8,408 $30,384 $43,729 $29,038 $111,5598,422 $30,313 $43,645 $29,005 $111,385
Costs(1)........................ 3,223 4,227 4,727 4,012 16,189........................... 3,237 4,156 4,643 3,979 16,015
Tax (benefit)(2)................................... -- -- -- (21) (21)
Change in inventory.............inventory................ 1,569 1,786 (136) (2,523) 696
Distributed.....................Distributed........................ 7,997 26,206 38,672 23,215 96,090
------- ------- ------- ------- --------
Excess distribution (deficit)(distribution) deficit to
growers.......................growers.......................... $(1,243) $ 1,737 $ 194 $ (691) $ (3)
QUARTER ENDED
JANUARY 31,
FISCAL YEAR ENDED OCTOBER 31, 2000
2001
-------------------------------------------------------------- -------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL 11/1 - 1/31
----------- ---------- ---------- ----------- -------- -------------
Sales........................... $14,327 $38,052 $44,565 $26,723 $123,667 $14,255
Costs(1)........................ 2,915 4,775 5,329 4,989 18,008 4,228
Tax(2).......................... 1 -- -- 19 20 1
Change in inventory............. 2,346 437 (1,191) (1,884) (292) 1,471
Distributed..................... 14,808 32,826 36,785 20,948 105,367 12,799
------- ------- ------- ------- -------- -------
Excess distribution (deficit) to
growers....................... $(1,051) $ 888 $ 1,260 $(1,117) $ (20) $(1,301)
30
35
NONMEMBER PERISHABLE PRODUCTS
(IN THOUSANDS)
FISCAL YEAR ENDED OCTOBER 31, 1999
--------------------------------------------------------------------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- --------
Sales........................... $15,801 $ 4,591 $ 2,274 $17,619 $ 40,285Sales.............................. $14,320 $37,990 $44,491 $26,658 $123,459
Costs(1)........................ 13,959 4,318 2,973 16,256 37,506
Gross margins................... 1,842 273 (699) 1,363 2,779
Other costs(1).................. 1,068 920 654 1,334 3,976........................... 2,908 4,713 5,255 4,924 17,800
Tax (benefit)(2)................ 173 (298) (498) (77) (700)................... 1 -- -- 19 20
Change in inventory................ 2,346 437 (1,191) (1,884) (292)
Distributed........................ 14,808 32,826 36,785 20,948 105,367
------- ------- ------- ------- --------
Net income (loss)...............Excess (distribution) deficit to
growers.......................... $(1,051) $ 601888 $ (349)1,260 $(1,117) $ (855) $ 106 $ (497)(20)
QUARTERSIX MONTHS ENDED JANUARY 31,
FISCAL YEAR ENDED OCTOBER 31, 2000APRIL 30, 2001
-------------------------------------------------------------- ------------------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
11/1 - 1/31
----------- ---------- ---------- ----------- -------- --------------------
Sales............................... $14,217 $30,406 -- -- $44,623
Costs(1)............................ 4,190 5,048 -- -- 9,238
Tax (benefit)(2).................... -- -- -- -- --
Change in inventory................. 1,471 1,827 -- -- 3,298
Distributed......................... 12,799 25,570 -- -- 38,369
------- ------- ---- ---- -------
Excess (distribution) deficit to
growers........................... $(1,301) $ 1,615 -- -- $ 314
NONMEMBER PERISHABLE PRODUCTS
(IN THOUSANDS)
FISCAL YEAR ENDED OCTOBER 31, 1999
-----------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- -------
Sales........................... $17,765
Sales............................... $15,751 $4,579 $2,265 $17,580 $40,175
Costs(1)............................ 13,959 4,318 2,973 16,256 37,506
Gross margins....................... 1,792 261 (708) 1,324 2,669
Other costs(1)...................... 1,018 908 645 1,295 3,866
Tax (benefit)(2).................... 173 (298) (498) (77) (700)
------- ------ ------ ------- -------
Net income (loss)................... $ 9,934 $12,982 $28,777601 $ 69,458 $18,617(349) $ (855) $ 106 $ (497)
34
39
FISCAL YEAR ENDED OCTOBER 31, 2000
-----------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- -------
Sales............................... $17,743 $9,887 $12,929 $28,727 $69,286
Costs(1).................................................... 15,935 7,955 11,071 26,251 61,212
16,862
Gross margins................... 1,830 1,979 1,911 2,526 8,246 1,755margins....................... 1,808 1,932 1,858 2,476 8,074
Other costs(1).................. 1,118 1,618 1,274 1,456 5,466 1,399
Tax(2)................................................ 1,096 1,571 1,221 1,406 5,294
Tax (benefit)(2).................... 221 87 154 209 671
119------- ------ ------- ------- -------
Net income (loss)................... $ 491 $ 274 $ 483 $ 861 $ 2,109
SIX MONTHS ENDED APRIL 30, 2001
-----------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- -------
--------
Sales............................... $18,587 $16,347 -- $34,934
Costs(1)............................ 16,862 15,237 -- -- 32,099
Gross margins....................... 1,725 1,110 -- -- 2,835
Other costs(1)...................... 1,369 1,511 -- -- 2,880
Tax (benefit)(2).................... 119 (224) -- -- (105)
------- ------- ---- ---- -------
Net income (loss).................................. $ 491237 $ 274(177) -- -- $ 483 $ 861 $ 2,109 $ 23760
PROCESSED AVOCADOS
(IN THOUSANDS)
FISCAL YEAR ENDED OCTOBER 31, 1999
-------------------------------------------------------------------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- -------
Sales............................... $5,766 $5,701 $7,189 $7,087 $25,743
Costs(1)............................ 3,084 3,162 4,594 5,344 16,184
Gross margins....................... 2,682 2,539 2,595 1,743 9,559
Other costs(1)...................... 1,851 2,128 1,977 1,909 7,865
Tax (benefit)(2).................... 186 90 136 (99) 313
------ ------ ------ ------ -------
Net income (loss)................... $ 645 $ 321 $ 482 $ (67) $ 1,381
FISCAL YEAR ENDED OCTOBER 31, 2000
-----------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- -------
Sales............................... $6,992 $6,360 $7,296 $6,590 $27,238
Costs(1)............................ 4,092 3,116 3,121 4,466 14,795
Gross margins....................... 2,900 3,244 4,175 2,124 12,443
Other costs(1)...................... 1,700 2,070 2,257 2,290 8,317
Tax (benefit)(2).................... 372 419 684 (4) 1,471
------ ------ ------ ------ -------
Net income (loss)................... $ 828 $ 755 $1,234 $ (162) $ 2,655
SIX MONTHS ENDED APRIL 30, 2001
-----------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- -------
Sales............................... $6,226 $5,931 -- -- $12,157
Costs(1)............................ 3,520 3,811 -- -- 7,331
Gross margins....................... 2,706 2,120 -- -- 4,826
Other costs(1)...................... 1,697 2,030 -- -- 3,727
Tax (benefit)(2).................... 337 88 -- -- 425
------ ------ ---- ---- -------
Net income (loss)................... $ 672 $ 2 -- -- $ 674
35
40
COMBINED
(IN THOUSANDS)
FISCAL YEAR ENDED OCTOBER 31, 1999
------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- --------
Sales........................... $ 6,420 $ 6,616 $ 8,231 $ 8,369 $ 29,636Sales.............................. $29,939 $40,593 $53,099 $53,672 $177,303
Costs(1)........................ 3,084 3,162 4,594 5,344 16,184........................... 17,043 7,480 7,567 21,600 53,690
Gross margins................... 3,336 3,454 3,637 3,025 13,452margins...................... 12,896 33,113 45,532 32,072 123,613
Other costs(1).................. 2,505 3,043 3,019 3,191 11,758..................... 6,106 7,192 7,265 7,183 27,746
Tax (benefit)(2)................ 186 90 136 (99) 313................... 359 (208) (362) (197) (408)
Change in inventory................ 1,569 1,786 (136) (2,523) 696
Distributed........................ 7,997 26,206 38,672 23,215 96,090
Excess (distribution) deficit to
growers(3)....................... (1,243) 1,737 194 (691) (3)
------- ------- ------- ------- --------
Net income (loss)............... from nonmember
products......................... $ 6451,246 $ 321(28) $ 482(373) $ (67)39 $ 1,381884
QUARTER ENDED
JANUARY 31,
FISCAL YEAR ENDED OCTOBER 31, 2000 2001
-------------------------------------------------------------- -------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL 11/1 - 1/31
----------- ---------- ---------- ----------- -------- -------------
Sales........................... $ 7,908 $ 7,767 $ 8,676 $ 8,393 $ 32,744 $ 7,577
Costs(1)........................ 4,092 3,116 3,121 4,466 14,795 3,520
Gross margins................... 3,816 4,651 5,555 3,927 17,949 4,057
Other costs(1).................. 2,616 3,477 3,637 4,093 13,823 3,048
Tax (benefit)(2)................ 372 418 684 (3) 1,471 337
------- ------- ------- ------- -------- -------
Net income (loss)............... $ 828 $ 756 $ 1,234 $ (163) $ 2,655 $ 672
31
36
COMBINED
(IN THOUSANDS)
FISCAL YEAR ENDED OCTOBER 31, 1999
--------------------------------------------------------------2000
------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
----------- ---------- ---------- ----------- --------
Sales........................... $30,629 $41,591 $54,234 $55,026 $181,480Sales.............................. $39,055 $54,237 $64,716 $61,975 $219,983
Costs(1)........................ 17,043 7,480 7,567 21,600 53,690........................... 20,027 11,071 14,192 30,717 76,007
Gross margins................... 13,586 34,111 46,667 33,426 127,790margins...................... 19,028 43,166 50,524 31,258 143,976
Other costs(1).................. 6,796 8,190 8,400 8,537 31,923..................... 5,704 8,354 8,733 8,620 31,411
Tax (benefit)(2)................ 359 (208) (362) (197) (408).................. 594 506 838 224 2,162
Change in inventory............. 1,569 1,786 (136) (2,523) 696
Distributed..................... 7,997 26,206 38,672 23,215 96,090inventory................ 2,346 437 (1,191) (1,884) (292)
Distributed........................ 14,808 32,826 36,785 20,948 105,367
Excess distribution (deficit)(distribution) deficit to
growers(3).................... (1,243) 1,737 194 (691) 3....................... (1,051) 888 1,260 (1,117) (20)
------- ------- ------- ------- --------
Net income (loss) from nonmember
products......................products......................... $ 1,2461,319 $ (28)1,029 $ (373)1,717 $ 39699 $ 8844,764
QUARTERSIX MONTHS ENDED JANUARY 31,
FISCAL YEAR ENDED OCTOBER 31, 2000APRIL 30, 2001
-------------------------------------------------------------- ------------------------------------------------------------------------------
11/1 - 1/31 2/1 - 4/30 5/1 - 7/31 8/1 - 10/31 TOTAL
11/1 - 1/31
----------- ---------- ---------- ----------- -------- --------------------
Sales........................... $40,000 $55,753 $66,223 $63,893 $225,869 $40,449Sales............................... $39,030 $52,684 -- -- $91,714
Costs(1)........................ 20,027 11,071 14,192 30,717 76,007............................ 20,382 19,048 -- -- 39,430
Gross margins................... 19,973 44,682 52,031 33,176 149,862 20,067margins....................... 18,648 33,636 -- -- 52,284
Other costs(1).................. 6,649 9,870 10,240 10,538 37,297 8,675
Tax(2).......................... 594 506 837 225 2,162...................... 7,256 8,589 -- -- 15,845
Tax (benefit)(2).................... 456 (136) -- -- 320
Change in inventory............. 2,346 437 (1,191) (1,884) (292)inventory................. 1,471 Distributed..................... 14,808 32,826 36,785 20,948 105,3671,827 -- -- 3,298
Distributed......................... 12,799 25,570 -- -- 38,369
Excess distribution (deficit)(distribution) deficit to
growers(3).................... (1,051) 888 1,260 (1,117) (20)........................ (1,301) 1,615 -- -- 314
------- ------- ------- ------- ------------ ---- -------
Net income (loss) from nonmember
products......................products.......................... $ 1,319909 $ 1,029(175) -- -- $ 1,718 $ 698 $ 4,764 $ 909734
- -------------------------
(1) Costs and other costs include costs which can be identified by segment and
costs which are allocated using a five-year sales factor. The allocated
costs are general and administrative costs.
(2) Non-specific expenses are allocated using a one-year sales allocation factor
for purposes of computing taxable income, which yields a different
allocation of such costs than the five-year method used for financial
statement purposes. The effective tax rate is applied to each quarter.
(3) Transferred to retained earnings at the end of the fiscal year.
3236
3741
SALES BY PRODUCT CATEGORY
The following table sets forth sales by product category for each of the
years in the five-year period ended October 31, 2000.
FISCAL YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS)(1)
California avocados -- members......members.............. $ 96,915 $ 99,723 $ 91,461 $107,357 $117,878
California avocados -- nonmembers...nonmembers........... -- -- -- 3,405 23,057
Chilean avocados....................avocados............................ 7,137 8,881 13,531 18,355 20,538
Mexican avocados....................avocados............................ 2,444 3,276 6,828 11,240 13,802
New Zealand avocados................avocados........................ -- -- -- 1,273 3,672
Miscellaneous purchased avocados....avocados............ 68 435 1,290 1,154 1,094
Papayas.............................Papayas..................................... 3,271 2,129 2,624 1,981 2,061
Mangos..............................Mangos...................................... 11 535 1,150 4 --
Others..............................Others...................................... 199 36 71 -- --
Processed -- food service...........service................... 19,261 19,442 20,363 21,261 27,225
Processed -- retail & club..........club.................. 11,188 10,065 8,351 8,375 5,519
Processed -- miscellaneous..........miscellaneous.................. 2 56 10 -- --
-------- -------- -------- -------- --------
Total sales -- F.O.B. .................................... $140,496 $144,578 $145,679 $174,405 $214,846
Freight and other charges(2)........................ 7,370 6,611 6,515 7,075 11,023
-------- -------- -------- -------- --------
Total sales.......................sales before incentives............. $147,866 $151,189 $152,194 $181,480 $225,869
======== ======== ======== ======== ========
- -------------------------
(1) Fresh sales products are reported in F.O.B. dollars, which is the cost to
customers for the packed products before freight, storage and handling costs
and other add-on costs to customers. Processed products are reported in
delivered pricing as the products have freight costs built into the price
quoted to the customers.
(2) These charges change as the volume increases or decreases.
The following table sets forth the percentage of total sales contributed by
each product category for each of the years in the five-year period ended
October 31, 2000.
FISCAL YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
----- ----- ----- ----- -----
California avocados -- members.............members..................... 69.0% 69.0% 62.8% 61.6% 54.9%54.8%
California avocados -- nonmembers..........nonmembers.................. -- -- -- 2.0 10.7
Chilean avocados...........................avocados................................... 5.1 6.1 9.3 10.5 9.6
Mexican avocados...........................avocados................................... 1.7 2.3 4.7 6.4 6.4
New Zealand avocados.......................avocados............................... 0.0 -- -- 0.7 1.7
Miscellaneous purchased avocados...........avocados................... 0.1 0.3 0.9 0.7 0.5
Papayas....................................Papayas............................................ 2.3 1.5 1.8 -- --
Mangos.....................................1.1 1.0
Mangos............................................. -- 0.4 0.8 -- --
Others.....................................Others............................................. 0.1 -- -- -- --
Processed -- food service..................service.......................... 13.7 13.4 14.0 12.2 12.7
Processed -- retail & club.................club......................... 8.0 7.0 5.7 4.8 2.6
Processed -- miscellaneous.................miscellaneous......................... -- -- -- -- --
----- ----- ----- ----- -----
Total sales..............................sales -- F.O.B............................. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
3337
3842
AVOCADOS DELIVERED BY CALAVO'S CALIFORNIA MEMBERS
The following table sets forth the quantity of avocados delivered by
Calavo's California members for each of the years in the five-year period ended
October 31, 2000.
FISCAL YEAR ENDED OCTOBER 31,
-------------------------------------------------
1996 1997 1998 1999 2000
------- ------- ------ ------ -------
(IN THOUSANDS OF POUNDS)
Pounds.................................Pounds..................................... 117,038 104,159 91,698 82,235 119,248
FOREIGN AND DOMESTIC SALES INFORMATION
The following table sets forth information regarding Calavo's domestic and
foreign sales before sales incentives for each of the years in the three-year
period ended October 31, 2000.
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS)
United States...................................... $146,107 $170,899 $212,595
Canada............................................. 1,136 3,437 4,091
Asia............................................... 3,371 3,110 6,608
Europe............................................. 1,580 4,034 2,575
SEASONAL AVAILABILITY OF PRODUCTS
The availability of products during the course of each year is as follows:
PRODUCT AVAILABILITY
------- ------------
California avocados......................avocados.............. All year
Chilean avocados.........................avocados................. August to January
Mexican avocados.........................avocados................. July to June
New Zealand avocados.....................avocados............. August to December
Papayas..................................Papayas.......................... All year
Processed products.......................products............... All year, with production
scheduled to bridge the low
availability months of August and
September
PATENTS AND TRADEMARKS
There are no patents or trademarks on Calavo's products other than the
Calavo name and related brand names.
WORKING CAPITAL REQUIREMENTS
For most of Calavo's fresh and processed products, payments must be made to
growers and other suppliers in advance of Calavo's collection of receivables
from the sale of the products. This generally requires seasonal borrowings by
Calavo. Crop loans and other advances by Calavo to growers also require seasonal
borrowings by Calavo.
BACKLOG
Customers do not order products significantly in advance of the shipment of
the products. Customers typically order perishable products two to ten days in
advance of shipment, and they typically order processed products one to thirty
days in advance of shipment.
3438
3943
RESEARCH AND DEVELOPMENT
Calavo does not conduct a material amount of research and development, and
the cooperative has not incurred material expenses for research and development
during recent years. As a normal function, however, Calavo does continuously
attempt to refine the quality of its processed avocado products.
COMPLIANCE WITH GOVERNMENT REGULATIONS
In California, the State Department of Food and Agriculture oversees the
production of avocados and conducts tests for fruit quality and packaging
standards. All packages are stamped with the state seal as meeting standards.
The United States Department of Agriculture regulates imported products. All
imports are subject to USDA review. Various states have some oversight as to
weights and measures and quality issues. Furthermore, Calavo's operations at its
packinghouses and processing facilities are subject to various federal, state,
local and foreign laws and regulations relating to environmental matters. Calavo
believes that it is in material compliance with all laws and regulations that
govern its business operations.
EMPLOYEES
As of December 31, 2000,April 30, 2001, Calavo had 450422 employees, 222261 of whom were located in
the United States and 228161 of whom were located in Mexico. None of Calavo's
United States employees is covered by a collective bargaining agreement.
Approximately 195128 of Calavo's Mexican employees are represented by a union.
Calavo believes that its relations with employees are very good.
The following is a summary of the number of "salaried" and "hourly"
employees as of October 31, 2000.April 30, 2001.
LOCATION SALARIED HOURLY
-------- -------- ------
United States............................................... 100 121
Mexico......................................................States.............................................. 110 151
Mexico..................................................... 33 195128
--- ---
TOTAL....................................................... 133 316TOTAL.................................................... 143 279
=== ===
Agriculture is a seasonal industry. However, avocados have a wider window
of production than most perishable commodities and, as a result, hourly
personnel are more constant during the year compared to other products.
PRODUCTION AND OFFICE FACILITIES
Calavo owns its corporate headquarters building in Santa Ana, California.
The building was purchased in 1997. Calavo also owns two packinghouses and one
processing facility in California and leases one packinghouse and one processing
facility in Mexico.
Calavo's two California packinghouses handle the fresh avocados delivered
by growers. The Temecula, California facility was built in 1985 and has been
improved in capacity and efficiency since 1985. The Santa Paula, California
facility was purchased in 1955 and has had recent improvements to equal the
Temecula facility. The combined annual capacity of the two packinghouses is over
200 million pounds under normal workweek operations.
The Santa Paula, California processing facility was built in 1975 and had a
major expansion in 1988. The facility includes a storage freezer.
The Mexicali, Mexico processing plant was built to Calavo's specifications
by the owner and is leased by Calavo through 2005. The annual capacity is in
excess of 11 million pounds of product per year. The Uruapan, Mexico
packinghouse was built to Calavo's specifications by the same owner and is
leased by Calavo through 2008. The annual capacity is in excess of 50 million
pounds.
Calavo believes that its facilities are sufficient to meet projected needs
without major capital expenditures, assuming that state of the art methods do
not radically change. Since improvements in food
3539
4044
processing technology are made on an ongoing basis, however, capital
expenditures may be required in the future.
Calavo has made significant investments in its two Mexican facilities. As
of October 31, 2000,April 30, 2001, the net book value of the facilities' property, plant and
equipment was as follows:
MEXICALI URUAPAN COMBINED
-------- ------- --------
(IN THOUSANDS)
Cost basis............................................. $2,525 $1,737 $4,262$2,562 $1,755 $4,317
Accumulated depreciation............................... 2,066 471 2,5372,218 595 2,813
------ ------ ------
Net Book Value at October 31, 2000..................... 459 1,266 1,725April 30, 2001....................... 344 1,160 1,504
LEGAL PROCEEDINGS
From time to time, Calavo is subject to legal proceedings that are
incidental to its business. Calavo is not currently subject to any legal
proceedings that could have a material adverse effect upon its financial
position or results of operations.
3640
4145
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED
UNDER "RISK FACTORS," THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE ANTICIPATED. THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH
CALAVO'S CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO THAT ARE
INCLUDED ELSEWHERE IN THIS INFORMATIONPROXY STATEMENT/PROSPECTUS.
SIX MONTHS ENDED APRIL 30, 2001 COMPARED TO SIX MONTHS ENDED APRIL 30, 2000
NET SALES
Net sales decreased 1.7% from $93.3 million for the six months ended April
30, 2000 to $91.7 million for the six months ended April 30, 2001.
Member Avocados Segment. Member avocado sales dollars decreased 14.7% from
$52.3 million to $44.6 million. The current year's California avocado crop is
much larger than the previous year's crop with an increase of 18.8 million
pounds, or 38.0%. The current year is forecasted to be a large crop by recent
standards. In the second quarter of fiscal 2001, Calavo handled almost as many
pounds as it did in the first half of last year. It is normal for sales dollars
to decline in the face of an increase in supply. The key is to have a lesser
dollar decline than the pounds increase, which is what happened in the six
months ended April 30, 2001. This means that there is strong consumer demand for
the increased supply.
Nonmember Perishable Products Segment. The nonmember sales dollars
increased 26.4% from $27.6 million to $34.9 million. The strong domestic demand
created a good market for Chilean and Mexican avocados. Papaya sales were also
up with increased production from Hawaii. The only decrease was in New Zealand
avocados which was due to the timing of the deliveries. Most of the New Zealand
fruit was sold in September and October in the current year. The prior year had
fruit carried into November and December. Nonmember California avocados
increased due to the larger crop size.
Processed Avocados Segment. Sales decreased 8.9% from $13.4 million to
$12.2 million. Total pounds sold increased 1.0%. Lower per case selling prices
and heavy promotional allowances reduced sales dollars. Lower sales in the
retail market were the result of a reduction in selling prices due to
competitive pressure. The loss of a major customer in the club store market was
due to competitive pricing. The food service market was the only area with
increased sales. Calavo has traditionally been stronger in this area with good
national representation and distribution. At least 80% of all sales are in the
food service market.
PROCESSING AND PACKING COSTS
Processing and packing costs increased from $35.3 million for the six
months ended April 30, 2000 to $44.7 million for the six months ended April 30,
2001, or 26.7%. This cost includes the processing and packing costs and payments
to nonmember growers for their fresh fruit.
Member Avocados Segment. Costs increased in line with the production volume
increase for member avocados with an increase of 26.0% from $4.2 million to $5.3
million.
Nonmember Perishable Products Segment. Costs of nonmember products
increased 34.4%, from $23.9 million to $32.1 million, due to volume increases
and the increased value of consigned products. A major increase in costs was in
the field price paid for Mexican avocados. The Mexican crop volume was down from
the prior year, and the growers received much higher field prices for their
avocados. This impacted both the costs of fresh packing and the processed
products costs of production. Next year's crop should return to a more normal
size. This should allow for lower production costs in both of these areas.
Processed Avocados Segment. Production costs of processed products
increased 1.7% from $7.2 million to $7.3 million. The higher fruit costs were
offset by cost reduction in manufacturing costs and by utilizing less expensive
California fruit which is normally not available at competitive field prices.
The higher California crop size meant certain sizes and varieties were less
costly than Mexican fruit in the
41
46
same period. Both of Calavo's Mexican plants have closed for the June to August
period to avoid the forecasted very high Mexican fruit costs and to do normal
plant maintenance. They will reopen in August in time to start processing the
new Mexican crop which is forecasted to be a lower cost one than the recent
crop. The normal Mexican avocado season is about three months ahead of
California with a start date of August or September, 2001 for the new crop.
MARKETING AND DISTRIBUTION COSTS
Marketing and distribution costs decreased 12.8% from $3.7 million to $3.2
million. A reduction in the processed segment of 23.0% due to lower staffing
costs and distribution costs more than offset higher advertising and staffing
costs in the member segment. Promotional costs, which are adjustments to the
selling price, are netted against sales dollars.
FREIGHT AND HANDLING COSTS
Total freight and handling costs increased 28.8% from $3.3 million to $4.3
million. Processed products costs increased 29.0% as inventory levels were
increased to bridge a longer than normal production closedown in the face of
escalating fruit costs. Member avocado costs increased 78.0%. Most of the
increase was due to the increased volume of fruit shipped and higher freight
costs.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs increased 9.2% from $2.7 million to $3.0
million. The major cost increase was in the legal and accounting costs
attributable to the conversion of Calavo into a for-profit corporation. This is
a one-time cost and will continue into the third quarter of fiscal 2001. The
prior year had a major addition of $0.2 million to the bad debt reserve due to
the bankruptcy of Ameriserve, which was one of the largest food service
distributors in the United States. Thus far this year, there have been no major
collection problems with an addition to the reserve of $36,000. The management
incentive award program has been accrued in the current year as some of the
objectives were expected to be achieved in the prior year. At the same time
during the prior fiscal year, the program was not achieving its objectives. This
increased costs by $0.4 million compared to the six months ended April 30, 2000.
INTEREST
Net interest costs increased slightly by $0.026 million from $0.260 million
to $0.286 million. There is a higher level of borrowing in fiscal 2001 with more
inventory being carried. This is due to the higher fruit values in processed and
fresh inventories. The monthly pool payouts have been large, which requires
higher borrowings. The grower loan program had a higher level of participation
than during the six months ended April 30, 2000, which resulted in higher
interest income to Calavo. This offset the higher expense of borrowing. The
effective cost of borrowing is lower in fiscal 2001 than last year due to the
reductions in the rate charged by Calavo's banks as a result of the Federal
Reserve Board's lowering of interest rates.
OTHER INCOME
Other income increased 38.7% from $0.150 million to $0.208 million. During
the six months ended April 30, 2001, Calavo received a larger patronage dividend
from CoBank than during the six-month period of the preceding year due to the
higher level of borrowings in fiscal 2000 and higher refunds on an insurance
program.
PROVISION FOR INCOME TAXES
Calavo is subject to income taxes for all business activities other than
the marketing and distribution of member products. Calavo had pretax income of
$1.1 million in the six months ended April 30, 2001 compared to pretax income of
$3.4 million in the six months ended April 30, 2000. The tax provision was $0.3
million in the six months ended April 30, 2001 compared to $1.1 million for the
first six months of fiscal 2000.
42
47
Taxes decreased 70.9%, which is in line with the 68.7% decrease in
nonmember net income. The effective rate used is 38.0% for the current year,
which is approximately the same rate as the prior year. There are no major
changes in the tax structure for 2001. The effective tax rate differs from the
statutory rates due primarily to state and foreign taxes and the benefit of
lower federal brackets.
NET PROCEEDS DISTRIBUTED
Proceeds distributed by Calavo include payments to members for avocados
delivered (member returns) and a dividend declared by the Board of Directors
relating to the operations of the nonmember perishable products and processed
products segments. The nonmember perishable products and processed avocados
segment net income is retained during the year and is available for distribution
by Calavo upon the finalization of year-end results and a decision by the Board
of Directors to pay a dividend.
Total dollars distributed to members during the six months ended April 30,
2001 decreased 19.5%, from $47.6 million to $38.4 million, compared to the six
months ended April 30, 2000. This is normal with a larger crop yielding a lower
per pound sales value. The packing charge has been held constant for the last
two years. The member segment showed a slight surplus of $0.3 million as
compared to a small deficit of $0.2 million during the six months ended April
30, 2000. The larger crop generated a surplus that was larger than the prior
period's surplus. It is normal for Calavo to be negative in the first quarter
and to be positive by the second quarter.
FISCAL YEAR ENDED OCTOBER 31, 2000 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1999.1999
NET SALES
Net sales increased by 24.5%24.1% from $181.5$177.3 million for fiscal 2000 to $220.0
million for fiscal 2001.
Member Avocados Segment. Member sales increased 10.8% in dollars, from
$111.4 million to $225.9 million.
Member Avocados and Nonmember Perishable Products Segments.$123.5 million, although total pounds delivered increased
45.0%. This segment was impacted by a strong consumer demand for avocados.
Historically, increased supply translates into lower sales dollars, which did
not prove to be the case in fiscal 2000.
The higherNonmember Perishable Products Segment. Higher fresh avocado prices
stimulated additional imports of Chilean, Mexican and New Zealand avocados.
Calavo is a major distributor of these imports. The sales increaseincreases included the
results of an aggressive recruiting of avocados grown by nonmembers. Sales
increased 72.5% from $40.2 million to $69.3 million.
Processed ProductsAvocados Segment. Net sales of processed products increased by
10.5%5.8%
from $29.6$25.7 million to $32.7$27.2 million. This increase was driven by strong food service
sales which offset reduced sales of retail and club store products. COST OF PRODUCT
The cost of product includes the processingThere was a
major increase in promotional allowances and other price adjustments due to
competitive pricing. These allowances are netted against sales dollars.
PROCESSING AND PACKING COSTS
Processing and packing costs and payments
to nonmember growers for their fresh fruit. On a consolidated basis, the cost of
product increased by 38.0%37.9% by moving from $62.1$62.2 million
to $85.7 million.
Member Avocados and Nonmember Perishable Products Segments. The total
California avocado pounds increased by 45.0% year-to-year to 119.2 million
pounds.Segment. The increased volume of pounds handled resulted in
a proportionate increase in variable packing storage and freight costs. In addition, theTotal costs increased from
$8.5 million to $9.7 million, or 14.5%.
Nonmember Perishable Products Segment. The cost of avocados procured from
Mexico, Chile and New Zealand increased 63.2%, which is included inwas slightly less than the
cost of product, declined slightly as a percent of sales and was favorably
impacted by an72.0% increase in volume.sales. Total costs increased from $37.5 million to $61.2
million.
Processed ProductsAvocados Segment. Cost of productPacking and processing costs decreased by 8.6%
from $16.2 million to $14.8 million. A reduction in the acquisition cost of
Mexican-sourced fruit was the major reason for the cost reduction.
SELLING, GENERAL43
48
MARKETING AND ADMINISTRATIVE EXPENSESDISTRIBUTION COSTS
Marketing and distribution costs decreased 9.0% from $9.5 million to $8.7
million. Member costs decreased 27.5% from $3.2 million to $2.3 million due to
staff and program reductions. Nonmember costs increased by 6.2%120.0%, from $0.6
million to $1.3 million, with staff increases being the major increasereason for the
increase. Processed products costs decreased 12.0% from $5.8 million to $5.1
million. The three segments had an organizational change in nonmemberheadcount and processed costs duearea
assignments with some staff reductions and transfers to volume increases.other segments.
FREIGHT AND HANDLING COSTS
Freight and handling costs increased by 33.6% from $4.9 million to $6.5
million. Member costs increased 65.0%, which was also agreater than the crop volume
increase of 45%. With the larger crop, additional costs were incurred for
several value-added services such as ripening, bagging, palletizing, and
specialty packing which were not done to the same degree in the prior year.
These costs are normally recovered in higher sales prices. Nonmember costs
increased 18.9%, from $2.6 million to $3.1 million, which was due to the
increased sales volume. Processed costs increased 37.7% from $1.2 million to
$1.6 million. This was the result of volume increases.more inventory being moved through the
distribution system and year-end inventory levels being increased 76.0% compared
to the prior year.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs increased by 34.3%. This35.4% from $4.7 million to $6.3
million. These costs are allocated to each segment of the business. The major
cost increase was primarily attributable to an additional provisiona 100% write-off of $0.7 million for doubtful accounts recorded in connection
with the bankruptcy of Ameriserve, one of the largest food service
distributors in the United States.Ameriserve. In addition, during fiscal year 2000, Calavo
completed an upgrade in its financial reporting and operating systems which is
being amortized over its useful life. An ongoing upgradeThe annual amortization of its order processingthe software is
$50,000. The costs of recruiting and inventory management information systems continues intoretaining new growers was a significant
increase over the subsequentprior year.
INTEREST
Net interest costs increased by 28.5% from $0.319 million to $0.410 million in
fiscal 2000. The increase was primarily due to higher daily borrowings for
working capital and the financing of certain capital projects. The working
capital needs are driven by the timing differences between the payment of
advances and costs of avocados and the collection of sales proceeds on an
increasing volume of avocados. 37
42The total of capital expenditures of $1.3 million
was almost totally financed with the increased borrowing of $1.6 million. This
accounted for a major part of the increase in interest costs.
PROVISION FOR INCOME TAXES
Calavo is subject to income taxes for all business activities other than
the marketing and distribution of member products.
Calavo had pretax income of $5.7 million in fiscal 2000 compared to a
taxable loss of $1.3 million during fiscal 1999. The provision for taxes was
$2.2 million compared to a tax benefit of $0.4 million in the prior year. The
effective tax rate for fiscal 2000 of 37.0% differs from the statutory rates due
primarily to state and foreign taxes and the benefit of lower federal brackets.
If the conversion to a for-profit company occurs, any profit generated in the
member segment will be subject to taxes.
NET PROCEEDS DISTRIBUTED
Proceeds distributed by Calavo include payments to members for avocados
delivered (member returns) and a dividend declared by the Board of Directors
relating to the operations of the nonmember perishable products and processed
products segments.
Payments to members for avocados delivered increased by 9.7% year-to-year from
$96.1 million to $105.4 million. In addition, Calavo's dividend from its
nonmember segments increased 317.0% year-to-year from $1.2 million, or $0.12 per
share, to $5.0 million, or $0.50 per share. The $0.50 per share dividend was
distributed in January, 2001.
44
49
FISCAL YEAR ENDED OCTOBER 31, 1999 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1998
NET SALES
Net sales increased in each of Calavo's three operating segments by 19.2% from $152.2$148.6 million for fiscal 1998 to $177.3
million for fiscal 1999.
Member Avocados Segment. Member sales increased from $95.1 million to
$181.5 million.
Member Avocados and$111.4 million, or 17.2%. Total pounds delivered decreased 11.5%. The consumer
demand was strong for avocados, which resulted in a "more dollars for fewer
pounds" scenario.
Nonmember Perishable Products Segments. The increase inSegment. Nonmember sales was primarily attributableincreased from $28.0
million to a 43.6% year-to-year increase in nonmember
fruit sales. In particular,$40.1 million, or 43.4%. Calavo experienced a 67.0% increase in
imported avocados from Mexico and Chile and began procuring avocados from New
Zealand. The United States market has become increasingly attractive to
foreign-based avocado growers due to the reduced California crop size and
continued strong consumer demand.
Processed ProductsAvocados Segment. Net sales increased by 3.2%0.7% year-to-year from
$28.7$25.6 million to $29.6$25.7 million. The processed segment experienced strong sales
performance in its food service product lines offsetting weaker sales from its
retail and club store product lines. During fiscal 1999, the processed products
segment also experienced increased competition in its retail product line with
several Mexican-based producers entering the market with aggressively priced
products. Management believes that the entry of additional Mexican-based
producers is a trend that is expected to continue.
COST OF PRODUCT
The cost of product includes processingPROCESSING AND PACKING COSTS
Processing and packing costs and payments to
nonmember growers for their fruit. On a consolidated basis, Calavo's cost of
product increased year-to-year by 27.4% from $48.8 million to $62.2 million.million,
or 27.4%.
Member Avocados andSegment. Member costs decreased from $9.4 million to $8.4
million, or 10.0%, which is in line with the crop decrease percentage.
Nonmember Perishable Products Segments. Total pounds of
member avocados decreased by 10.4%Segment. Nonmember costs increased 51.4% from
91.7$24.8 million pounds to 82.2 million
pounds. The decreased volume resulted in a proportionate decrease in packing,
storage and freight costs.$37.5 million. The cost of procuring avocados from Mexican
growers increased by $6.4 million during fiscal 1999, which representedrepresents the first
year of year-round operations of Calavo's Uruapan,Uraupan, Mexico packing plant. The
first year's operation of the Mexican plant resulted in an increase of 800.0% in
avocados packed.
Processed ProductsAvocados Segment. Cost ofProcessed product for processingsegment cost increased by 10.9%
year-to-year from $14.6 million to $16.2 million. The increase relates to the
increased sales volume and a small rise in fruit costs from fiscal 1998.
SELLING,MARKETING AND DISTRIBUTION COSTS
Marketing and distribution costs decreased from $10.9 million to $9.5
million, or 12.5%. The processed avocados segment represented almost all of the
decrease as a result of lower selling and promotion support costs.
FREIGHT AND HANDLING COSTS
Freight and handling costs increased from $4.6 million to $4.9 million, or
5.9%. The nonmember segment increased by $0.5 million, or 24.0%, due to the
volume increase in product handled.
GENERAL AND ADMINISTRATIVE EXPENSESCOSTS
General and administrative expenses increased 36.0%30.8% year-to-year from $3.4$3.6
million to $4.6$4.7 million. The increase was primarily attributableattributed to the write-off
of $0.6 million of costs incurred in the
38
43 implementation of a management
information system when that project was abandoned. In addition, Calavo paid
increased bonuses of $0.7 million to its employees in connection with improved
operating results.
These increases45
50
GAIN ON SALE OF FACILITY
In fiscal 1998, Calavo sold its Escondido, California packinghouse. At the
same time, it exercised its option to purchase its corporate headquarters
building. The two transactions were done on a tax deferred exchange basis. The
net gain on the sale was recorded in general and administrative expenses were offset by a 5.0% year-to-year decline
in marketing and distribution costs from $14.4 million to $13.7 million as a
result of lower processed retail product sales volume.1998 along with the deferred taxes.
INTEREST
Net interest costs increased from $0.055 million to $0.319 million. The
increase in interest was primarily attributable to higher daily borrowingborrowings for working
capital and the financing of certain capital projects. The increased working
capital requirements related principally to higher short-term borrowings to
finance the increased sales volume of California and foreign-grown avocados.
Calavo's fiscal 1999 results also include interest charges relating to loans
secured to finance the equipping of the Uruapan,Uraupan, Mexico packinghouse and a full
year of interest on a loan secured to finance the purchase and to improve
Calavo's corporate headquarters facility.
INCOME TAX BENEFIT
Calavo is subject to income taxes for all business activities other than
the marketing and distribution of member products.
Calavo incurred a taxable loss of $1.3 million during fiscal 1999 as
compared to taxable income of $1.9 million during fiscal 1998. The income tax
benefit of $0.4 million for fiscal 1999 compares to a provision of $0.7 million
for fiscal 1998. The effective tax rate for fiscal 1999 of 48.0% differs from
statutory rates due primarily to state and foreign taxes and the benefit of
lower federal tax brackets.
NET PROCEEDS DISTRIBUTED
Proceeds distributed by Calavo include payments to members for avocados
delivered (member returns) and a dividend declared by the Board of Directors
relating to the operations of the nonmember perishable products and processed
products segments.
Payments to members for avocados delivered increased by 22.2% year-to-year
from $78.6 million to $96.1 million. In addition, Calavo's dividend from its
nonmember segments decreased 25%25.0% from $1.6 million to $1.2 million, or from
$0.17 per share to $0.12 per share in fiscal 1999.
THREE MONTHS ENDED JANUARY 31, 2001 COMPARED TO THREE MONTHS ENDED JANUARY 31,
2000
NET SALES
Net sales increased by 1.0% from $40.0 million to $40.4 million.
Member Avocados and Nonmember Perishable Products Segments. The California
crop is at a low level of harvest in the first quarter of each year. The 2000/01
crop size is forecasted by Calavo to be about 50.0% larger than the prior year's
size. Sales of California avocados were flat compared to the prior year's first
quarter, with more volume offset by lower average selling prices.
The Chilean, Mexican and other nonmember product sales increased by 4.8%.
The sales of New Zealand fruit decreased as this fruit moved into the market
earlier than last year.
Processed Products Segment. Sales decreased by 4.2% from the prior year's
first quarter. Sales to the food service market increased, but this was more
than offset by a decline in retail and club store market sales.
39
44
COST OF PRODUCT
Total cost of product increased $0.9 million from $21.7 million to $22.6
million, or 4.4%.
Member Avocados and Nonmember Perishable Products Segments. Costs of member
avocados increased in proportion to the crop delivery increase of 53.0%. Several
areas had period-to-period increases, with grower incentive programs up by
$0.250 million.
Costs of nonmember products increased by 5.8% in the cost of fruit and
packing costs. This was slightly ahead of sales growth of 4.8%. Freight and
handling costs increased by 32.9% with the increased volume being shipped.
Processed Products Segment. Processed product costs decreased by 14.0% with
lower costs of fruit being the major cost reduction, a trend that is not
anticipated to continue for the balance of the year. Promotional costs increased
significantly, with major increases in the highly competitive food service
product line. Freight and handling costs increased by 160%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative costs had an increase of 52%. The incentive
bonus payout in December was above the prior year. This was partially offset by
higher miscellaneous income being received in the first quarter of 2001.
INTEREST
Net interest costs declined by $0.018 million. This was the result of a
later than normal payout of the year-end dividend which normally is paid in
December. This year, the payment was made almost 30 days later.
The grower loan program had a higher level of participation than last year,
which resulted in higher interest income to Calavo. This offset higher interest
costs.
PROVISION FOR INCOME TAXES
Calavo had pretax income of $1.9 million in the first quarter from the
nonmember and processed segments. This was down from $1.3 million in the prior
year's first quarter. An effective tax rate of 34.0% is being used in fiscal
2001. The effective tax rate differs from the statutory rates due primarily to
state and foreign taxes and the benefit of lower federal brackets.
NET PROCEEDS DISTRIBUTED
Members received proceeds in excess of available dollars due to the use of
a level operating charge based on the full year's projected volume. It is normal
for Calavo to operate at a deficit in the first quarter of each fiscal year as
this is the low volume period for avocado harvesting in California. The
nonmember and processed net income is retained during the year and is available
for distribution by Calavo upon finalization of its year-end operating results.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $10.3 million as of October 31, 1999 to
$13.9 million as of October 31, 2000 before payment of the nonmember perishableperishables
products and processed products segmentavocados segments dividend. Working capital at April 30,
2001 was $8.8 million. The current ratio improved from 1.4:1.0 as of October 31,
1999 to 1.7:1.0 as of October 31, 2000. Working
capital decreased from $13.9 million asThe current ratio at April 30, 2001 was
1.26:1.0. The major changes in the first six months of October 31, 2000 to $6.8 million as
of January 31,fiscal 2001 primarily as a result ofwere the
payment of the dividend of $5.0 million, capital expenditures of $1.5 million
and the building of inventory values of $6.6 million. The expenditures were
financed by a net increase in January 2001, prepaid promotion expenses, capital projects and long-term debt
reductions.bank borrowings of $4.6 million.
Cash provided by operating activities in fiscal 2000 was $3.0 million
compared to cash used of $6.4 million in fiscal 1999, and was $3.3 million for fiscal 1999.the six months
ended April 30, 2001. Fiscal 2000 operating cash flow reflectsflows reflect the nonmember
income of $4.8 million
40
45 and non-cash charges for depreciation and amortization of
$1.7 million offset by athe net working capital decrease of $3.5 million. For the
first six months of fiscal 2001, nonmember income was $0.7 million and
depreciation was $0.9 million. Cash used in operating activities for fiscal 1999
resulted principally from an increase in accounts receivable which more than
offset nonmember net income and an increase in trade and member payables. Cash
provided in fiscal 1998 by operating activities approximated the nonmember-membernonmember net
income.
Investing activities used $1.7 million in fiscal 2000, compared to $1.5
million in fiscal 1999.1999 and $1.4 million in the six months ended April 30, 2001.
Capital expenditures for fiscal 2000 were $1.3 million, which was the same amount asfor
fiscal 1999, and were $1.5 million in fiscal 1999.the six months ended April 30, 2001.
Cash used in financing activities was $1.3 million during fiscal 2000
as
compared to $6.9 million provided by financing activities during fiscal 1999.1999 and $0.6 million in the six
months ended April 30, 2001. During fiscal 2000, proceeds from additional
borrowings of $1.6 million were offset by the payment of dividends of $1.2
million and payments of long-term obligations of $1.8 million. During fiscal
1999, proceeds from additional borrowings of $8.7 million and issuance of
capital stock of $0.4 million were offset by athe
46
51
payment of dividends of $1.6 million and payments of long-term obligations of
$0.5 million. In the six months ended April 30, 2001, additional borrowings of
$4.6 million, insurance proceeds of $0.3 million and new equity of $0.07 million
offset bank loan reductions of $0.3 million.
Management believes that cash flows from operations and additional
borrowings will be sufficient to satisfy Calavo's future capital expenditures,
nonmember recruitment, working capital and other financing requirements for at
least the next twelve months. Calavo will continue to evaluate nonmember grower
recruitmentrecruiting opportunities and additional capital expenditures to expand each of
the business segments. In order to finance such growth, New Calavo may seek to
obtain borrowings or issue additional shares of common stock. There can beis no
assurance that financing for such growth will be available on favorable terms,
or at all.
AsCalavo projected the impact of October 31, 2000,an increase or decrease in the prime lending
rate to be $100,000 for each 100 basis points movement in the rate, based on the
average daily borrowings for the first seven months of fiscal 2001. Calavo does
not use any hedging or forward contracts to offset market volatility.
Calavo had outstanding borrowings of $9.0 million as of October 31, 2000
and $13.6 million as of April 30, 2001 under working capital lines of credit
with two banks and had a totalagainst an availability of $17.5
million of available credit under$26.5 million. Calavo has obtained
from these lines of credit. The consent ofbanks the lendersconsents to the merger with New Calavo isthat are required
under the lines of credit. For additional information regarding the terms of
Calavo's credit facilities, see Notes 6 and 7 to the Consolidated Financial
Statements that are included in this InformationProxy Statement/Prospectus.
As of October 31, 2000, Calavo had approximately $0.350$0.035 million of material
commitments for capital expenditures, which related to the purchase of
additional field bins for grower deliveries and for an expansion to existing
avocado ripening facilities. As of January 31,April 30, 2001, there were $2.4$1.0 million of
projected capital projects which had not been funded by external sources.expended.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Calavo's financial instruments include cash and cash equivalents and United
States government bonds with a maturity date of August 15, 2005. The government
bonds are held in an irrevocable trust to be used solely for the satisfaction of
scheduled payments of interest and principal relating to Calavo's industrial
development revenue bonds. As these securities are intended to be held until
maturity, they are being carried on the balance sheet at October 31, 2000 at
$1.590 million, representingwhich represents their amortized cost. The market value of these
securities as of October 31, 2000 approximated $1.604 million. At April 30,
2001, the cost basis was $1.817 million with a market value of $1.875 million.
Additional bonds were purchased in the six months ended April 30, 2001.
Calavo was not a party to any derivative financial instruments during
fiscal 2000.2000 or the six months ended April 30, 2001. Calavo does not intend to
use derivative instruments for speculative or trading purposes.
Calavo's Mexican-based operations transact business in the local currency,
which is the peso. Calavo transfers funds on a weekly basis to cover the coming
week's expenditures. The daily peso-to-dollar conversion rate impacts Calavo's
operating results. The transactions are not large enough to be hedged, nor has
the conversion rate volatility been large enough to justify hedging.
The six months ended April 30, 2001 resulted in a 6.5% increase in the
value of the peso. This cost increase is built into the selling price to
Calavo's customers. The net effect is to reduce margins, increase sales, or
both. Average weekly transfer is $300,000 to $400,000 in peak months. The impact
of a 6.5% rate increase would be $100,000 per month if Calavo could not pass
this rate increase onto its customers. Over the last two years, the
peso-to-dollar rate has been favorable, and the recent unfavorable rate
increases therefore may not be sustainable.
47
52
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Calavo does not presently engage in hedging activities. In addition, Calavo
has reviewed its agreements with third parties and has determined that it has no
derivative instruments and that none of its agreements contained embedded
derivative instruments as of October 31, 2000.2000 or April 30, 2001. Accordingly,
the adoption of Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- DeferralActivities-Deferral of the Effective Date of FASB Statement No. 133," and
41
46 SFAS No.
138, "Accounting for Derivative Instruments and Hedging Activities," did not
have a material impact on Calavo's consolidated financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements." SAB No. 101 summarized the SEC
staff's views regarding the application of accounting principles generally
accepted in the United States to revenue recognition in financial statements.
The application of SAB No. 101 did not have a material impact on Calavo's
consolidated financial statements.
42ANTICIPATED EFFECT OF THE CONVERSION TO A FOR-PROFIT CORPORATION
Following the conversion from a cooperative to a for-profit corporation,
Calavo will be taxed at corporate rates on net income that is derived from the
member avocados segment. This segment is highly competitive since over forty
handlers bid for growers' avocados on a daily basis. This competition will act
as an incentive for New Calavo to keep its packing and distribution charge low.
At the same time, New Calavo's shareholders will expect a profit and will not
expect the member avocados segment to incur losses. This will create a tension
between returning competitive field prices to growers and making profits for
shareholders.
We do not expect the member avocados segment to become very profitable
unless New Calavo's cost of handling avocados is lowered. We anticipate that
more growers may elect to deliver their avocados to New Calavo after the
conversion. With an increased volume of avocados, fixed costs would be spread
over a larger base, which would result in a lowering of the packing charge.
However, if deliveries of avocados by growers decrease, there will be a
corresponding increase in per unit costs and reduced profits in the member
avocados segment.
48
4753
MANAGEMENT OF CALAVO
DIRECTORS
The following table identifies Calavo's current directors and sets forth
certain
information concerning them, including their districts and terms of office. Each
director is a member of Calavo and markets avocados through the cooperative.
Each of the following persons also serves as a director of New Calavo and will
continue to do so after the conversion. Beginning with the first annual meeting
of New Calavo's shareholders and continuing at every annual shareholders'
meeting thereafter, all of New Calavo's directors will be elected to serve
one-year terms. See "Comparison of the Rights of Calavo's and New Calavo's
Shareholders -- Election of Directors."
TERM
NAME AND ADDRESS AGE DISTRICT EXPIRES
---------------- --- -------- -------
Lecil E. Cole............................................... 61 1 2001
1750 Orcutt Road
Santa Paula, CA 93060
Edward P. Smith............................................. 70 2 2002
29363 Gordon Hill Road
Valley Center, CA 92082
George H Barnes.............................................H. Barnes............................................ 68 3 2001
31510 Laurel Ridge
Valley Center, CA 92082
Fred J. Ferrazzano.......................................... 67 4 2002
3101 Foxhall Glen
Escondido, CA 92029-6826
Roy V. Keenan............................................... 65 5 2001
P.O. Box 205
Temecula, CA 92593
Alva V. Snider.............................................. 85 6 2002
3410 Alta Vista
Fallbrook, CA 92028
Scott Van Der Kar........................................... 46 7 2001
7017 Shepard Mesa Drive
Carpinteria, CA 93013
J. Link Leavens............................................. 49 8 2002
P.O. Box 4278
Ventura, CA 93007
Dorcas H. Thille............................................ 69 9 2001
14053 Foothill Road
Santa Paula, CA 93060
John M. Hunt................................................ 43 10 2002
P. O. Box 1343
Goleta, CA 93116
Lecil E. Cole. Mr. Cole has been a member of the Board of Directors since
February 1982 and serves as Calavo's Chairman, Chief Executive Officer and
President. He is also a formerserved as an executive of Safeway Stores from 1964 to 1976 and as
the past Chairman of Central Coast Federal Land Bank andfrom 1986 to 1996. Mr. Cole has
served as the Chairman and President of Hawaiian Sweet Inc. and Tropical
Hawaiian Products, Inc. since 1996. Mr. Cole farms a total of 4,430 acres in
California and Hawaii on which avocados, papayas and cattle are produced and
raised.
Edward P. Smith. Mr. Smith has been a member of the Board of Directors
since February 1997. He is a retiredUntil his retirement in 1986, he was an engineering manager
with Interstate Electronics Corp.
4349
4854
George H. Barnes. Mr. Barnes has been a member of the Board of Directors
since January 2000. He has been a real estate broker with Matthews & O'Donnell
since 1995.
Fred J. Ferrazzano. Mr. Ferrazzano has been a member of the Board of
Directors since August 1985. He has been the President and Chief Executive
Officer of Ferrazzano Farms, Inc. since 1973 and the President and Chief
Executive Officer of Westbridge Estates, Inc., a residential homes developer,
since 1989. He is a retired Commander in the United States Navy and has a degree
in engineering science from the United States Naval Postgraduate School.
Roy V. Keenan. Mr. Keenan has been a member of the Board of Directors since
February 1994 and an avocado grower since 1981. He is a retired Vice President
of a building contractor firm and has a master's degree in aeronautics and
astronautics from the Massachusetts Institute of Technology.
Alva V. Snider. Mr. Snider has been a member of the Board of Directors
since February 1987. He has been the owner and manager of a ten-acre avocado and
specialty crop grove since 1968. He is a retired manager of Shell Chemical Corp
and has a master's degree in organic chemistry from Oregon State University.
Scott Van Der Kar. Mr. Van Der Kar has been a member of the Board of
Directors since February 1994. He ishas served as a manager of Van Der Kar Family
Farms.Farms since 1978. He is a member of the boards of the California Cherimoya
Association, the Santa Barbara County Farm Bureau and the Santa Barbara County
Workforce Investment Board. He has a bachelor's degree in farm management from
California Polytechnic State University, San Luis Obispo.
J. Link Leavens. Mr. Leavens has been a member of the Board of Directors
since February 1987. He ishas served as the President of the Ventura County
Resource Conservation District since 1986 and isas a member of the Ventura County
Agricultural Land Trust.Trust since 1992. Mr. Leavens is a former President of the
Ventura County Farm Bureau, and he has a bachelor's degree in plant and soil
science from California Polytechnic State University, Pomona, and a master's
degree in business administration from California Lutheran University.
Dorcas H. Thille. Mrs. Thille has been a member of the Board of Directors
since February 1986. She isSince 1972, she has been the owner and manager of a
291-acre farm on which avocados, lemons and vegetables are grown. She is a
member of the boards of the Saticoy Lemon Association, the Agricultural Issues
Center and the Agricultural Council of California.
John M. Hunt. Mr. Hunt has been a member of the Board of Directors since
February 1993. He ishas served as the General Manager of Embarcadero Ranch since
1982 and has a bachelor's degree in plant soil science from California
Polytechnic State University, San Luis Obispo.
COMMITTEES OF THE BOARD
Executive. The Executive Committee exercises the authority of the Board of
Directors when the Board is not in session, as permitted by law and by policy.
Its members are Messrs. Cole, Keenan, Leavens, Snider and Van Der Kar.
Finance. The Finance Committee reviews Calavo's financial structure,
policies and procedures and internal controls. Its members are Messrs. Keenan,
Barnes, Hunt, Leavens and Snider.
Grower Relations. The Grower Relations Committee reviews membership issues.
Its members are Mrs. Thille and Messrs. Barnes, Smith, Snider and Van Der Kar.
Process. The Process Committee reviews the results and planning for the
processed segment of Calavo's business. Its members are Messrs. Leavens,
Ferrrazzano, Hunt, Keenan, Smith and Van Der Kar.
50
55
COMPENSATION OF DIRECTORS
Each member of the Board of Directors receives a fee of $200 per Board
meeting and $100 per committee meeting plus a mileage reimbursement of $0.325
per mile for travel to and from meetings. The Chairman of the Board receives an
additional $100 per meeting.
44
49
EXECUTIVE OFFICERS
The following table identifies Calavo's executive officers and sets forth
certain
information concerning them. Each of the following persons also serves in the
same position as an executive officer of New Calavo and will continue to do so
after the conversion. Each executive officer of Calavo and New Calavo serves at
the discretion of the corporation's Board of Directors.
NAME AGE POSITION
---- --- --------
Lecil E. Cole........................ 61 Chairman of the Board, Chief Executive Officer and
President
Egidio Carbone, Jr. ................. 60Jr................... 61 Vice President, Finance and Corporate Secretary
Robert J. Wedin...................... 52 Vice President, Sales & Fresh Marketing
Alan C. Ahmer........................ 52 Vice President, Sales, Food Service/Retail
Avi Crane............................ 47 Vice President, International
Gerard J. Watts...................... 42 Vice President, General Manager, Calavo de Mexico
Lecil E. Cole. Mr. Cole has served as Chairman of the Board since 1988 and
as Chief Executive Officer and President since February 1999. He is also a
grower and member of Calavo. For additional information regarding Mr. Cole, see
"Management of Calavo -- Directors."
Egidio Carbone, Jr. Mr. Carbone has served as a Vice President and
Corporate Secretary of Calavo since 1980 and prior to that he was Treasurer and
Controller.
Robert J. Wedin. Mr. Wedin has served as a Vice President of Calavo since
1993. He joined Calavo in 1973 at its Santa Barbara packinghouse.
Alan C. Ahmer. Mr. Ahmer has served as a Vice President of Calavo since
1989. He joined Calavo in 1979 as a regional sales manager in the processed
products division.
Avi Crane. MrMr. Crane joined Calavo in 1999 as a Vice President. PriorFrom 1993
to that1999, he was employed as a General Manager by a competitor, Chiquita Brands,
Inc., and from 1985 to 1993, he was employed as a Vice President by the
California Avocado Commission.
Gerard J. Watts. Mr. Watts has been a Vice President of Operations of
Calavo since 1992. He joined Calavo in 1981 in its processed products division.
51
56
EXECUTIVE COMPENSATION
The following table shows the compensation of Calavo's Chief Executive
Officer and four other most highly compensated executive officers for the fiscal
year ended October 31, 2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
---------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
--------------------------- ---- -------- -------- ---------------
Lecil E. Cole.................................. 2000 $240,000 $100,000 $12,000
Chairman, Chief Executive Officer and
President
Egidio Carbone, Jr............................. 2000 164,496 36,037 17,257
Vice President
Gerard J. Watts................................ 2000 136,236 36,969 6,986
Vice President
Robert J. Wedin................................ 2000 136,956 20,000 8,139
Vice President
Alan C. Ahmer.................................. 2000 127,260 26,406 7,460
Vice President
- -------------------------
(1) In accordance with SEC regulations, this table does not include perquisites
and other personal benefits valued at the lesser of $50,000 or 10% of the
total salary and bonus reported for the named
45
50 executive officer. Amounts
reported under Annual Compensation include amounts deferred by the named
executive officers under Calavo's 401(k) plan.
(2) Amounts reported for Mr. Carbone under All Other Compensation include $7,873
that Calavo contributed on his behalf to its 401(k) plan and $9,384 that
Calavo accrued for his benefit under the supplemental executive retirement
agreement described below. Amounts reported under All Other Compensation for
every other named executive officer were contributed by Calavo to its 401(k)
plan for the named executive officer.
EMPLOYEE BENEFITS
Calavo provides a 401(k) plan for all employees. Salaried employees may
contribute an amount up to defined limits, and Calavo contributes 4% of base
salary plus a matching percentage up to a maximum of 6%. Amounts contributed by
Calavo vest at the rate of 25% per year.
Hourly employees may contribute amounts to the plan, but Calavo does not
make matching contributions. Calavo contributes a fixed amount per hour worked
to a multiple employer trust for each such employee.
Calavo maintains for all full-time employees health and medical insurance,
dental insurance, vision care, short-term and long-term disability and term life
insurance.
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Calavo has entered into a supplemental executive retirement agreement with
Mr. Carbone. Calavo has agreed to provide Mr. Carbone with a monthly payment
following his retirement after reaching age 65 equal to 20% of his final five-year5-year
average annual base salary divided by 12 and reduced by an amount equal to his
monthly social security benefits. CERTAIN RELATIONSHIPSIf Mr. Carbone retires after reaching age 62
but before reaching age 65, the amount of his monthly benefit will be the
actuarially determined equivalent of his benefit following retirement after age
65. The retirement benefit is payable for the remainder of Mr. Carbone's life.
The agreement provides for Mr. Carbone's designated beneficiary to receive a
reduced payment for a 10-year period if Mr. Carbone dies prior to reaching age
62.
52
57
The agreement requires Mr. Carbone to refrain from competing with Calavo
during the 3-year period after his retirement. The agreement does not provide
Mr. Carbone with a right to continue in the employment of Calavo for any
specified period, although the agreement does require Calavo to make a lump sum
payment to Mr. Carbone if it elects to terminate the agreement prior to the date
that Mr. Carbone reaches age 62.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The articles of incorporation of Calavo and New Calavo eliminate the
personal liability of directors for monetary damages for breach of their duties
as directors to the fullest extent permitted under California law. California
law provides that this provision does not eliminate the liability of a director
for specified acts such as:
- Acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law;
- Acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director;
- Acts or omissions that show a reckless disregard for the director's duty
to the corporation or its shareholders in circumstances in which the
director was aware, or should have been aware, in the ordinary course of
performing his or her duties, of a risk of serious injury to the
corporation or its shareholders;
- Acts or omissions that constitute an unexcused pattern of inattention
that amounts to an abdication of the director's duty to the corporation or
its shareholders;
- Unlawful payments of dividends or unlawful stock repurchases; or
- Any transaction from which the director derived an improper personal
benefit.
The bylaws of Calavo and New Calavo provide that each corporation will
indemnify each of its directors to the maximum extent permitted by applicable
law against expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred by the director in connection with a legal proceeding
that arises out of the director's service as a director of the corporation or an
affiliated entity. The bylaws of Calavo and New Calavo permit each corporation
to indemnify its officers, employees and other agents against such expenses,
judgments, fines, settlements and other amounts that they may incur in
connection with legal proceedings that arise out of their service as officers,
employees and agents. Each corporation is permitted by its bylaws to purchase
insurance on behalf of any director, officer, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit such indemnification.
Calavo and New Calavo have been advised that, insofar as indemnification
for liability arising under the Securities Act of 1933 may be permitted to
directors or officers pursuant to the foregoing provisions, the SEC's opinion is
that such indemnification is against public policy as expressed in the act and
is, therefore, unenforceable.
RELATED TRANSACTIONS; COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATIONPARTY TRANSACTIONS
Each of Calavo's directors is a member of the cooperative and markets
avocados through Calavo pursuant to a marketing agreement that is identical to
the marketing agreements that Calavo has entered into with its other members.
Mr. Cole, Calavo's Chairman of the Board, Chief Executive Officer and President,
is involved in setting member pool proceeds on a monthly basis. He receives
normal crop proceeds at the same rate as other members and in the same weekly
pool.
The Board of Directors, of which Mr. Cole is a member, determines the
compensation of Calavo's executive officers. However, Mr. Cole does not
participate in decisions of the Board regarding his compensation as an executive
officer.
Mr. Cole is the owner of Tropical Hawaiian Products, Inc. Pursuant to a
marketing agreement, Calavo markets Tropical Hawaiian's papayas on a
non-exclusive consignment basis and remits monthly proceeds to Tropical Hawaiian
from the sale of the papayas. Mr. Cole is not involved in the calculation of the
monthly payments, although he does assist Calavo in setting the sales prices
that are charged to
53
58
Calavo's customers for the papayas. Tropical Hawaiian also markets papayas under
its own brand name without the involvement of Calavo. Calavo believes that the
terms of its marketing agreement with Mr. Cole's company are as favorable to
Calavo as it could obtain in a contract with an unaffiliated third party. During
the fiscal year ended October 31, 2000, Tropical Hawaiian received $2,062,394 of
sales proceeds from Calavo.
46COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors, of which Mr. Cole is a member, determines the
compensation of Calavo's executive officers. However, Mr. Cole does not
participate in decisions of the Board regarding his compensation as an executive
officer.
54
5159
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSPRINCIPAL SHAREHOLDERS AND MANAGEMENT
With respect to each person known by Calavo to be the beneficial owner of
more than five percent of its common stock, each director of Calavo, each of the
executive officers named in the Summary Compensation Table presented above and
all of Calavo's directors and executive officers as a group, the following table
sets forth the number of shares of common stock beneficially owned as of January
31,April
30, 2001 by each such person or group and the percentage of the outstanding
shares of the common stock beneficially owned as of January 31,April 30, 2001 by each such
person or group. No such person or group owns any shares of Calavo preferred
stock. Unless otherwise indicated, each of the following shareholders has, to
Calavo's knowledge, sole voting and investment power with respect to the shares
beneficially owned, except to the extent that such authority is shared by
spouses under applicable law.
On the effective date of the merger of Calavo into New Calavo, each of the
following persons and groups (together with every other shareholder of Calavo)
will acquire shares of New Calavo common stock that are equal in number to the
shares of Calavo common stock that are owned by such person or group as of the
effective date of the merger. At all times prior to the effective date of the
merger, Calavo will be the sole shareholder of New Calavo.
SHARES OF COMMON PERCENT OF COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
OWNED AS OF OWNED AS OF
NAME OF BENEFICIAL OWNER JANUARY 31,APRIL 30, 2001 JANUARY 31,APRIL 30, 2001
------------------------ ------------------ ------------------
Lecil E. Cole(1)........................................... 787,654 7.9%
Edward P. Smith(2)......................................... 28,792 0.3
George H. Barnes........................................... 5,799 0.1
Fred J. Ferrazzano......................................... 105,102 1.1
Roy V. Keenan(3)........................................... 333,689 3.4
Alva V. Snider(4).......................................... 8,884 0.1
Scott Van Der Kar(5)....................................... 40,507 0.4
J. Link Leavens(6)......................................... 198,823 2.0
Dorcas H. Thille........................................... 19,044 0.2
John M. Hunt(7)............................................ 132,822 1.3
Egidio Carbone, Jr......................................... 0 0
Robert J. Wedin............................................ 0 0
Gerard J. Watts............................................ 0 0
Alan C. Ahmer.............................................. 0 0
All directors and executive officers as a group (15
persons)................................................. 1,661,116 16.8%
- -------------------------
(1) Mr. Cole's address is 1750 Orcutt Road, Santa Paula, California 93060.
(2) Information presented for Mr. Smith includes 28,792 shares held in a family
trust and with respect to which Mr. Smith has voting and investment power as
trustee.
(3) Information presented for Mr. Keenan includes 225,187 shares of common stock
that are held in two trusts and with respect to which Mr. Keenan has voting
and investment power as trustee.
(4) Information presented for Mr. Snider includes 8,884 shares held in a family
trust and with respect to which Mr. Snider has voting and investment power
as trustee.
(5) Information presented for Mr. Van Der Kar includes 40,507 shares held in a
family trust and with respect to which Mr. Van Der Kar shares voting and
investment power as a trustee.
(6) Information presented for Mr. Leavens includes 198,823 shares that are owned
of record by a partnership of which Mr. LeavenLeavens is a partner. Mr. Leavens
shares voting and investment power with respect to the shares.
4755
5260
(7) Information presented for Mr. Hunt includes 132,822 shares that are owned by
his employer, Embarcadero Ranch. Mr. Hunt shares voting and investment power
with respect to the shares.
To Calavo's knowledge, there are two non-directors who each control more
than 2.0% of the outstanding shares of common stock. Hidden Valley Ranch owned
approximately 2.4% of the outstanding Calavo common stock as of January 31,April 30, 2001,
and Chandler Ranch Company owned approximately 2.4% of the outstanding common
stock as of that date.
Mr. Cole is the only executive officer who owns any shares of Calavo common
stock. George Hatfield, who is a non-executive officer of Calavo and is also a
grower-member of the cooperative, owned approximately 0.5% of the outstanding
Calavo common stock as of January 31,April 30, 2001. Several non-officer employees who are
also grower-members own small amounts of Calavo common stock. Shares of Calavo
common stock are owned by a large number of individuals, partnerships, trusts
and corporations, with the average shareholder owning approximately 6,400 shares
or 0.06% of the total shares outstanding.
As of the record date of , 2001, shares of
preferred stock were outstanding. Holders of Calavo preferred stock do not have
voting rights on any matter except as expressly required by law. The shares of
preferred stock are held by former members. Calavo has the right to redeem the
shares at $1.00 per share. The shares of preferred stock will be converted into
shares of New Calavo common stock on the effective date of the merger of Calavo
into New Calavo.
LEGAL MATTERS
Troy & Gould Professional Corporation has issued an opinion concerning the
validity of the shares of the common stock of New Calavo that will be issued
pursuant to the merger with Calavo and has also issued an opinion concerning
certainmaterial federal income tax consequences of the merger.
EXPERTS
The financial statements of Calavo Growers of California and subsidiaries
as of October 31, 2000 and 1999, and for each of the three years in the period
ended October 31, 2000, included in this InformationProxy Statement/Prospectus, and the
related financial statement schedule for each of the three years in the period
ended October 31, 2000, included elsewhere in the Registration Statement on Form
S-4, have been audited by Deloitte & Touche, LLP, independent auditors, as
stated in their reports appearing hereinin this Proxy Statement/Prospectus and
elsewhere in the Registration Statement. The balance sheet of Calavo Growers,
Inc. as of January 31,April 30, 2001, included in this InformationProxy Statement/Prospectus, has also
been audited by Deloitte & Touche, LLP, independent auditors, as stated in their
report appearing herein and elsewhere in the Registration Statement.this Proxy Statement/Prospectus. Such financial statements
and financial statement schedule have been included hereinin this Proxy
Statement/Prospectus and elsewhere in the Registration Statement in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
4856
5361
CALAVO GROWERS, INC.
CALAVO GROWERS OF CALIFORNIA
INDEX TO FINANCIAL STATEMENTS
PAGE
----
FINANCIAL STATEMENT OF CALAVO GROWERS, INC.
Independent Auditors' Report.............................. F-2
Balance Sheet as of January 31, 2001......................April 30, 2001........................ F-3
Notes to Balance Sheet.................................... F-4
CONSOLIDATED FINANCIAL STATEMENTS OF CALAVO GROWERS OF
CALIFORNIA AND SUBSIDIARIES
Independent Auditors' Report.............................. F-5
Consolidated Balance Sheets as of October 31, 2000 and
1999, and January 31,April 30, 2001 (Unaudited).................................... F-6
Consolidated Statements of Operations and Member Proceeds
for the Years Ended October 31, 2000, 1999 and 1998,
and for the ThreeSix Months Ended January 31,April 30, 2001 and 2000
(Unaudited)................................................................................... F-7
Consolidated Statements of Shareholders' Equity for the
Years Ended October 31, 2000, 1999 and 1998, and for
the ThreeSix Months Ended January 31,April 30, 2001 and 2000
(Unaudited).................................................... F-8
Consolidated Statements of Cash Flows for the Years Ended
October 31, 2000, 1999 and 1998, and for the ThreeSix Months
Ended January 31,April 30, 2001 and 2000 (Unaudited)................... F-9
Notes to Consolidated Financial Statements................ F-10
F-1
5462
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Calavo Growers, Inc.:
We have audited the accompanying balance sheet of Calavo Growers, Inc. (the
Company) as of January 31,April 30, 2001. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statement presents fairly, in all material
respects, the financial position of the Company as of January 31,April 30, 2001 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
- ---------------------------------------------------------
Costa Mesa, California
April 20,July 3, 2001
F-2
5563
CALAVO GROWERS, INC.
BALANCE SHEET
JANUARY 31,APRIL 30, 2001
ASSETS...................................................... $ --
======
SHAREHOLDER'S EQUITY:
Common stock, par value $0.001 per share, 100,000,000 shares
authorized, 100 shares issued............................. $ 0.10
Receivable from parent company.............................. (0.10)
------
Total shareholder's equity................................ $ --
======
The accompanying notes are an integral part of these financial statements.
F-3
5664
CALAVO GROWERS, INC.
NOTES TO BALANCE SHEET
JANUARY 31,APRIL 30, 2001
1. BACKGROUND OF ORGANIZATION
Calavo Growers, Inc. (New Calavo) was incorporated on January 5, 2001 under
the California General Corporation Law, for the purpose of effectuating the
conversion of Calavo Growers of California and subsidiaries (Calavo) from a
nonprofit cooperative association that is organized under the California Food
and Agricultural Code to a corporation organized under the General Corporation
Law of California and subject to income taxes in accordance with Subchapter C of
the Internal Revenue Code. The conversion of Calavo will be achieved in
accordance with the terms of the Agreement and Plan of Merger and Reorganization
between Calavo Growers, Inc. and Calavo Growers of California, dated February
20, 2001 (the Agreement).
For purposes of convenience this financial statement has been dated January
31, 2001.
New Calavo has not conducted business or activity other than in connection
with the Agreement (related expenses are the responsibility of Calavo).
2. SHAREHOLDER'S EQUITY
The initial authorized capital stock of New Calavo consists of 100,000,000
shares of common stock, par value $0.001 per share. One hundred shares have been
issued and are outstanding. The shares were issued to Calavo and are unpaid.
Accordingly, through the conversion date New Calavo will remain a wholly owned
subsidiary of Calavo.
3. MERGER AND REORGANIZATION AGREEMENT
The Agreement, which has been approved by the Board of Directors of each
company, calls for the holders of shares of common and preferred Calavo stock to
receive an equivalent number of shares of New Calavo common stock. Concurrent
with this exchange of securities, the original 100 shares of common stock held
by Calavo will be canceled and the related receivable will be forgiven. Finally,
New Calavo and Calavo will merge with New Calavo emerging as the surviving
entity, assuming all rights and obligations of the business of Calavo.
The Agreement is subject to approval by the grower members of Calavo, its
lenders, and the expiration of Calavo's Board of Directors' right to elect not
to proceed with the conversion.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Calavo will generally adopt all accounting policies of Calavo, with the
exception of those items specific to agricultural marketing cooperatives. Such
changes in accounting policies include the tax exempt status, which will cease,
inventory, which will be recorded at the lower of cost or market, and certain
line items on the statement of operations, which will be reclassed.reclassified. As a
result of these reclassifications, New Calavo will include net proceeds
distributed for member fruit, change in members' fresh fruit inventories,
processing, packing, and cost of nonmember fruit and freight and handling in
cost of sales.
F-4
5765
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Calavo Growers of California
Santa Ana, California
We have audited the accompanying consolidated balance sheets of Calavo
Growers of California and subsidiaries (Calavo or the Cooperative) as of October
31, 2000 and 1999, and the related consolidated statements of operations and
member proceeds, shareholders' equity, and cash flows for each of the three
years in the period ended October 31, 2000. These financial statements are the
responsibility of the Cooperative's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Calavo Growers of California
and subsidiaries as of October 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 2000 in conformity with accounting principles generally accepted in
the United States of America.
/s/ DELOITTE & TOUCHE LLP
- ---------------------------------------------------------
Costa Mesa, California
December 14, 2000, except for the second paragraph of
Note 14 as to which the date is February 20, 2001
F-5
5866
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31,
------------------------- JANUARY 31,-------------------------- APRIL 30,
1999 2000 2001
----------- ----------- -----------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents.............................equivalents......................... $ 1,458,000 $ 1,492,000 $ 22,0002,798,000
Accounts receivable, net of allowance for doubtful
accounts of $69,000$85,000 (2001) (unaudited), $49,000
(2000), and $2,500 (1999)................................................ 22,321,000 21,632,000 17,793,00022,305,000
Inventories, net......................................net.................................. 5,996,000 7,726,000 10,874,00014,348,000
Prepaid expenses and other current assets.............assets......... 2,356,000 1,326,000 1,632,0001,416,000
Loans to growers......................................growers.................................. 27,000 1,086,000 1,603,0001,071,000
Income taxes receivable...............................receivable........................... 1,161,000 459,000588,000
Deferred income taxes.................................taxes............................. 868,000 537,000 537,000
----------- ----------- -----------
Total current assets...............................assets........................... 34,187,000 33,799,000 32,920,00043,063,000
Property, plant,Plant, and equipment, net.....................Equipment, net................. 9,508,000 9,044,000 9,303,0009,670,000
Investments heldHeld to maturity............................Maturity........................ 1,176,000 1,590,000 1,590,0001,817,000
Other assets............................................Assets........................................ 1,571,000 2,052,000 2,739,0002,560,000
----------- ----------- -----------
$46,442,000 $46,485,000 $46,552,000$57,110,000
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Payable to members....................................members................................ $ 6,762,000 $ 4,726,000 $ 8,122,000$14,963,000
Trade accounts payable................................payable............................ 2,438,000 2,867,000 1,283,0002,596,000
Accrued expenses......................................expenses.................................. 4,405,000 2,791,000 3,208,0002,606,000
Short-term borrowings.................................borrowings............................. 8,400,000 8,985,000 12,400,00013,600,000
Current portion of long-term obligations..............obligations.......... 748,000 501,000 501,000510,000
Dividend payable......................................payable.................................. 1,180,000
----------- ----------- -----------
Total current liabilities..........................liabilities...................... 23,933,000 19,870,000 25,514,00034,275,000
Long-Term Liabilities:
Long-term obligations, less current portion...........portion....... 4,331,000 3,820,000 3,544,0003,583,000
Deferred income taxes.................................taxes............................. 601,000 360,000 360,000
Other liabilities................................. 305,000
----------- ----------- -----------
Total long-term liabilities........................liabilities.................... 4,932,000 4,180,000 3,904,0004,248,000
Commitments and Contingencies
Shareholders' Equity:
Redeemable preferred stock, $1 par value;
10,000,000 shares authorized; 47,000 shares
issued and outstanding in 2001 (unaudited) and
2000.......................2000........................................... 47,000 47,000
Common stock, $1 par value; 10,000,000 shares
authorized; 9,909,0009,913,000 (2001) (unaudited),
9,867,000 (2000), and 9,847,000 (1999) shares
issued and outstanding........................................outstanding......................... 9,847,000 9,867,000 9,909,0009,913,000
Additional paid-in capital............................capital........................ 110,000 156,000 178,000187,000
Unallocated retained earnings.........................earnings..................... 7,621,000 12,365,000 7,000,0008,440,000
Treasury stock, 1,000 shares..........................shares...................... (1,000)
----------- ----------- -----------
Total shareholders' equity.........................equity..................... 17,577,000 22,435,000 17,134,00018,587,000
----------- ----------- -----------
$46,442,000 $46,485,000 $46,552,000$57,110,000
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
5967
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND MEMBER PROCEEDS
THREESIX MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,APRIL 30,
------------------------------------------ -------------------------
1998 1999 2000 2000 2001
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
Net sales..................................... $152,194,000 $181,480,000 $225,869,000 $40,000,000 $40,449,000sales.................... $148,641,000 $177,303,000 $219,983,000 $93,292,000 $91,714,000
Costs and expenses:
Processing, packing, and
packing......................cost of nonmember
fruit................... 48,769,000 62,154,000 85,696,000 21,683,000 22,628,00035,323,000 44,734,000
Marketing and
distribution.................. 14,432,000 13,701,000 14,549,000 2,728,000 2,711,000distribution............ 10,879,000 9,524,000 8,663,000 3,684,000 3,214,000
Freight and handling........................handling....... 4,621,000 4,892,000 6,534,000 1,114,000 2,059,0003,328,000 4,288,000
General and
administrative.................. 3,370,000 4,584,000 6,155,000 1,010,000 1,535,000administrative.......... 3,575,000 4,676,000 6,332,000 2,711,000 2,961,000
------------ ------------ ------------ ----------- -----------
Total costs and
expenses.................. 71,192,000 85,331,000 112,934,000 26,535,000 28,933,000expenses.............. 67,844,000 81,246,000 107,225,000 45,046,000 55,197,000
------------ ------------ ------------ ----------- -----------
Operating proceeds and
nonmember gross
profit...................................... 81,002,000 96,149,000 112,935,000 13,465,000 11,516,000operating
income..................... 80,797,000 96,057,000 112,758,000 48,246,000 36,517,000
Gain on sale of facility......................facility..... 1,575,000
Interest income...............................income.............. 163,000 71,000 304,000 39,000 74,00091,000 132,000
Interest expense..............................expense............. (218,000) (390,000) (714,000) (180,000) (198,000)(351,000) (418,000)
Other income.................................. 25,000 37,000 40,000income................. 230,000 129,000 217,000 150,000 208,000
(Decrease) increase in
members' fresh fruit
inventories.................................inventories................ (106,000) 696,000 (292,000) 2,346,000 1,471,0002,783,000 3,298,000
------------ ------------ ------------ ----------- -----------
Operating proceeds and
nonmember income before
income tax provision
(benefit)................................ 82,441,000 96,563,000 112,273,000 15,670,000 12,863,00050,919,000 39,737,000
Income tax provision
(benefit).................................. 730,000 (408,000) 2,162,000 594,000 456,0001,100,000 320,000
------------ ------------ ------------ ----------- -----------
Net proceeds available for
distribution and nonmember
net income........................income................. 81,711,000 96,971,000 110,111,000 15,076,000 12,407,00049,819,000 39,417,000
Net proceeds distributed for
member fruit.....fruit............... (78,597,000) (96,090,000) (105,367,000) (14,808,000) (12,799,000)(47,634,000) (38,369,000)
Receivable from members due
to distributions in excess
of available proceeds.............proceeds...... (91,000) (314,000)
Excess distribution to
members................members.................... 3,000 20,000 1,051,000 1,301,000163,000
Appropriation for capital
expenditures........expenditures............... (1,375,000)
------------ ------------ ------------ ----------- -----------
Net income from nonmember
products............products................... $ 1,648,000 $ 884,000 $ 4,764,000 $1,319,000 $ 909,0002,348,000 $ 734,000
============ ============ ============ =========== ===========
Basic and diluted net income
per share from nonmember
products..........................products................... $ 0.17 $ 0.09 $ 0.48 $ 0.130.24 $ 0.090.07
============ ============ ============ =========== ===========
Weighted-average common
shares outstanding, basic
and diluted...........................diluted................ 9,605,000 9,572,000 9,849,000 9,839,000 9,936,0009,840,000 9,958,000
============ ============ ============ =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
F-7
6068
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK ADDITIONAL UNALLOCATED
---------------- ---------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------ ------- --------- ---------- ---------- ----------- -------- -----------
Balance, NovemberBALANCE, NOVEMBER 1, 1997........1997......... -- $ -- 9,619,000 $9,619,000 $ -- $ 6,545,000$6,545,000 $(17,000) $16,147,000
Retirement of common stock and
member privileges............privileges............... (8,000) (8,000) (8,000)
Issuance of treasury stock.....stock........ 4,000 4,000
Appropriation for capital
expenditures.................expenditures.................... 1,375,000 1,375,000
Net income from nonmember
products.....................products........................ 1,648,000 1,648,000
Dividend declared to
shareholders.................shareholders.................... (1,648,000) (1,648,000)
------ ------- --------- ---------- -------- ----------- -------- -----------
Balance, OctoberBALANCE, OCTOBER 31, 1998........1998......... 9,611,000 9,611,000 7,920,000 (13,000) 17,518,000
Retirement of common stock and
member privileges............privileges............... (59,000) (59,000) (59,000)
Issuance of stock and
reinstatement of
members.....members......................... 295,000 295,000 110,000 405,000
Issuance of treasury stock.....stock........ 12,000 12,000
Excess distribution to members......................members.... (3,000) (3,000)
Net income from nonmember
products.....................products........................ 884,000 884,000
Dividend declared..............declared................. (1,180,000) (1,180,000)
------ ------- --------- ---------- -------- ----------- -------- -----------
Balance, OctoberBALANCE, OCTOBER 31, 1999........1999......... 9,847,000 9,847,000 110,000 7,621,000 (1,000) 17,577,000
Retirement of common stock and
member privileges............privileges............... (18,000) (18,000) (18,000)
Issuance of stock and
reinstatement of
members.....members......................... 85,000 85,000 46,000 131,000
Issuance of treasury stock.....stock........ 1,000 1,000
Excess distribution to members......................members.... (20,000) (20,000)
Conversion of common stock to
preferred
stock..............stock........................... 47,000 47,000 (47,000) (47,000)
Net income from nonmember
products.....................products........................ 4,764,000 4,764,000
------ ------- --------- ---------- -------- ----------- -------- -----------
Balance, OctoberBALANCE, OCTOBER 31, 2000........2000......... 47,000 47,000 9,867,000 9,867,000 156,000 12,365,000 22,435,000
Retirement of common stock and
member privileges
(unaudited)..................
Issuance of stock and
reinstatement of members
(unaudited).................. 42,000 42,000 22,000 64,000
Excess distribution..................... 46,000 46,000 31,000 77,000
Receivable from members due to
membersdistributions in excess of
available proceeds
(unaudited).................. (1,301,000) (1,301,000)..................... 314,000 314,000
Net income from nonmember products
(unaudited)......... 909,000 909,000..................... 734,000 734,000
Dividend declared to shareholders
(unaudited).......................... (4,973,000) (4,973,000)
------ ------- --------- ---------- -------- ----------- -------- -----------
Balance, January 31,BALANCE, APRIL 30, 2001
(unaudited)....................(UNAUDITED)..................... 47,000 $47,000 9,909,000 $9,909,000 $178,0009,913,000 $9,913,000 $187,000 $8,440,000 $ 7,000,000 $ $17,134,000-- $18,587,000
====== ======= ========= ========== ======== =========== ======== ===========
The accompanying notes are an integral part of these consolidated financial statements.
F-8
6169
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREESIX MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,APRIL 30,
--------------------------------------- -------------------------
1998 1999 2000 2000 2001
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from nonmember products....................products.......................... $ 1,648,000 $ 884,000 $ 4,764,000 $2,348,000 $ 1,319,000 $ 909,000734,000
Adjustments to reconcile net income from nonmember products
to net cash provided by (used in) operating activities:
Depreciation and amortization.......................amortization............................. 1,456,000 1,750,000 1,748,000 411,000 543,000
Excess823,000 946,000
Over (under) distribution of available proceeds to
members...................... (1,051,000) (1,301,000)members................................................. (163,000) 314,000
Gain on sale of facility............................facility.................................. (1,575,000)
Provision for losses on accounts receivable.........receivable............... 15,000 50,000 717,000 100,000 17,000200,000 41,000
(Gain) loss on disposal of property, plant, and
equipment.........................................equipment............................................... (8,000) 351,000 (13,000)
Effect on cash of changes in operating assets and
liabilities:
Accounts receivable...............................receivable..................................... (397,000) (9,635,000) (28,000) 3,664,000 3,822,000(459,000) (714,000)
Inventories, net..................................net........................................ 1,030,000 91,000 (1,730,000) (3,700,000) (3,148,000)(5,141,000) (6,622,000)
Income taxes receivable...........................receivable................................. 283,000 (920,000) 1,161,000 551,000 (459,000)1,119,000 (588,000)
Deferred income taxes.............................taxes................................... 733,000 (510,000) 90,000
Prepaid expenses and other assets.................assets....................... 1,102,000 (3,305,000) 549,000 68,000 (993,000)469,000 (598,000)
Loans to growers..................................growers........................................ (27,000) (1,059,000) (861,000) (517,000)(826,000) 15,000
Payable to members................................members...................................... (1,405,000) 2,462,000 (2,036,000) 3,842,000 3,396,0007,487,000 10,237,000
Trade accounts payable, accrued expenses, and accrued expenses.......income tax
payable............................................... (1,418,000) 2,520,000 (1,185,000) (2,889,000) (1,167,000)(3,494,000) (456,000)
Other long-term liabilities.......................liabilities............................. (49,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities....................................activities... 1,464,000 (6,338,000) 2,978,000 1,454,000 1,102,0002,363,000 3,309,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant, and equipment...........................................equipment........ 1,635,000 65,000 26,000
Acquisitions of property, plant, and equipment........equipment.............. (4,873,000) (1,324,000) (1,297,000) (289,000) (802,000)(487,000) (1,519,000)
Purchases of investments..............................investments.................................... (46,000) (264,000) (414,000) (366,000) (227,000)
Other liabilities........................................... 305,000
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities...........activities................. (3,284,000) (1,523,000) (1,685,000) (289,000) (802,000)(853,000) (1,441,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend to shareholders..............................shareholders.................................... (480,000) (1,648,000) (1,180,000) (1,180,000) (4,973,000)
Proceeds (payments) from borrowings and issuance of
debt................................................(payments on) short-term borrowings........... 1,435,000 8,673,000 1,585,000 (970,000) 3,415,000(1,115,000) 4,615,000
Proceeds from issuance of capital stock...............stock..................... 405,000 131,000 5,000 64,00010,000 77,000
Proceeds (payments) offrom (payments on) long-term obligations..........obligations........... (2,159,000) (463,000) (1,758,000) 79,000 (276,000)(588,000) (281,000)
Retirement of common stock and member privileges......privileges............ (8,000) (59,000) (18,000) (13,000)(18,000)
Proceeds from the issuance of treasury stock..........stock................ 4,000 12,000 1,000 1,000
Retention of funds for capital expenditures...........expenditures................. 1,375,000
Excess distribution to members........................members.............................. (3,000) (20,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities....................................activities... 167,000 6,917,000 (1,259,000) (2,078,000) (1,770,000)(2,890,000) (562,000)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.........................................Net Increase (Decrease) in Cash and Cash Equivalents........ (1,653,000) (944,000) 34,000 (913,000) (1,470,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..........(1,380,000) 1,306,000
Cash and Cash Equivalents, beginning of year................ 4,055,000 2,402,000 1,458,000 1,458,000 1,492,000
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR................Cash and Cash Equivalents, end of year...................... $ 2,402,000 $ 1,458,000 $ 1,492,000 $ 545,00078,000 $ 22,0002,798,000
=========== =========== =========== =========== ===========
SUPPLEMENTAL INFORMATION --
Cash paid during the year for:
Interest..........................................Interest................................................ $ 267,000 $ 268,000 $ 249,000 $ 166,000344,000 $ 183,000446,000
=========== =========== =========== =========== ===========
Income taxes......................................taxes............................................ $ 241,000 $ 955,000 $ 696,000 $ -- $ 1,000,0001,054,000
=========== =========== =========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Declared nonpatronage dividends.......................dividends............................. $ 1,648,000 $ 1,180,000 $ -- $ -- $ --
=========== =========== =========== =========== ===========
Conversion of common stock to preferred stock.........stock............... $ -- $ -- $ 47,000 $ -- $ --
=========== =========== =========== =========== ===========
Acquisition of capital lease................................ $ -- $ -- $ -- $ -- $ 53,000
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
F-9
6270
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General -- Calavo Growers of California and subsidiaries (Calavo or the
Cooperative) is an agricultural marketing cooperative association organized for
the purpose of processing and marketing avocados delivered by its members, and
processing and marketing nonmember products. The consolidated financial
statements include the accounts of Calavo Growers of California and its wholly
owned subsidiaries, Calavo Foods, Inc. (CFI); Calavo de Mexico S.A. de C.V.; and
Calavo Foods de Mexico S.A. de C.V. All intercompany accounts and transactions
have been eliminated.
The Cooperative's customer base, to which credit is granted, includes food
distributors, produce wholesalers, supermarkets, and restaurants.
The Cooperative conducts operations in Mexico at two different facilities
and is subject to certain concentration risks that are inherent in conducting
operations on an international basis.
Basis of Presentation -- The accompanying consolidated financial statements
were prepared in accordance with accounting principles generally accepted in the
United States of America.
Interim Financial Statements (Unaudited) -- The accompanying consolidated
balance sheet as of January 31,April 30, 2001, and the statements of operations and member
proceeds and cash flows for the threesix months ended January 31,April 30, 2000 and 2001, and
the statement of shareholders' equity for the threesix months ended January 31,April 30, 2001
and related notes thereto are unaudited, but in the opinion of management,
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of results for these interim periods. The results of
operations for the threesix months ended January 31,April 30, 2001 are not necessarily
indicative of the results to be expected for the entire fiscal year.
Cash and Cash Equivalents -- The Cooperative considers cash and cash
equivalents to be all highly liquid financial instruments purchased with an
original maturity date of three months or less.
Inventories -- Members' fresh fruit inventories are valued at marketnet
realizable value. Other inventories are stated at the lower of cost on a
weighted-average basis or market.
Loans to Growers -- The Cooperative sponsors a grower loan program. The
grower loan program generally provides for loans to be advanced to members
bearing interest at prime plus 2% and are repayable in a 12-month period. The
loans are secured by the members' avocado crop.crops.
Property, Plant, and Equipment -- Property, plant, and equipment are stated
at cost and depreciated over their estimated useful lives, ranging from three to
30 years, using the straight-line method. Leasehold improvements are stated at
cost and amortized over the lesser of their estimated useful lives or the term
of the lease, using the straight-line method.
Long-Lived Assets -- The Cooperative accounts for the impairment and
disposition of long-lived assets in accordance with Statement of Financial
Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of. In accordance with SFAS No. 121,
long-lived assets to be held are reviewed for events or changes in circumstances
which indicate that their carrying value may not be recoverable and at least
review such assets annually for any impairment. Management has evaluated its
long-lived assets, using estimates of undiscounted future cash flows, and has
not identified any impairment as of October 31, 2000.
Investments -- The Cooperative accounts for its investments in debt
securities in accordance with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities. The Cooperative has classified all of its
investment portfolio as "held-to-maturity." In accordance with SFAS No. 115,
investments classified as held-to-maturity are carried at amortized cost.
F-10
6371
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net Sales -- Sales from processed products are recorded when the product is
shipped and title passes. FreshMember and nonmember fresh fruit sales are recorded
when both the product is shipped and the market price is known.
Promotional Allowances -- Calavo provides for certain
promotional allowances,
principally rebates, cooperative advertising, and slotting fees, at the time of
shipment,sale.
Cash rebates are generally earned by customers upon achievement of volume
purchases or by corporate customers for purchases made by affiliated
subsidiaries.
Emerging Issues Task Force (EITF) Issue No. 00-14, Accounting for Certain
Sales Incentives, addresses the recognition, measurement, and income statement
classification for sales incentives offered voluntarily by a vendor, without
charge to the customer, in a single exchange transaction at the point of sale.
In addition to providing guidance on when to recognize and how to measure the
cost of sales incentive, it requires that incentives in the form of a reduction
in or refund of the selling price of a product or services delivered at the time
of sale should be classified as a reduction of revenue. Calavo has adopted EITF
Issue No. 00-14 for its second quarter ended April 30, 2001. The results for the
six months ended April 30, 2000 and annual amounts for each of the three fiscal
years in the period ended October 31, 2000, totaling approximately $2.5 million,
$5.9 million, $4.2 million, and $3.6 million, have been reclassified to conform
to the current presentation.
Cooperative advertising and slotting fees are presented as marketing and
distribution costs in the accompanying financial statements.
Management believes it can reasonably provide for promotional allowances
based on the Cooperative's historical experience.experience in providing these sales
incentives.
Consignment Arrangements -- The Cooperative enters into consignment
arrangements with avocado growers located outside of the United States. Although
the Cooperative does not take legal title to the avocados, Calavo does assume
responsibilities (principally assuming credit risk, inventory loss and delivery
risk, and limited pricing risk) that are consistent with acting as a principal
in the transaction. Accordingly, the accompanying financial statements include
sales and cost of sales from the sale of avocados procured under consignment
arrangements.
Costs and Expenses -- Costs of processing and packing include purchases of
nonmember products and products purchased and used in the processing and packing
operations. Costs of marketing and distribution include storage, brokerage,
promotion,promotional allowances, and related costs.
Advertising Expense -- Advertising costs are expensed when incurred. Such
costs in fiscal 1998, 1999, and 2000 were $259,000, $558,000, and $320,000.
Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Income Taxes -- The Cooperative accounts for income taxes under the
provisions of SFAS No. 109, Accounting for Income Taxes. This statement requires
the recognition of deferred tax liabilities and assets for the future
consequences of events that have been recognized in the Cooperative's
consolidated financial statements or tax returns. Measurement of the deferred
items is based on enacted tax laws. In the event the future consequences of
differences between financial reporting bases and tax bases of the Cooperative's
assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an
evaluation of the probability of being able to realize the future benefits
indicated by such asset. A valuation allowance related to a
F-11
72
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
deferred tax asset is recorded when it is more likely than not that some portion
or all of the deferred tax asset will not be realized.
Member Avocado Proceeds -- Proceeds from the sale of avocados delivered by
members are allocated to members on the basis of their individual shares of the
established value of each avocado pool. This "pool basis" of accounting is
utilized for the determination of proceeds distributable to members. The
difference between net operating proceeds financial basis, as reported in the
accompanying financial statement, and net proceeds pool basis (available for
distribution), as reported to members, is the increase or decrease in members'
fresh fruit inventories between years.
As approved by the Board of Directors, during the years ended October 31,
20001999 and 1999,2000, the Cooperative made distributions of $20,000$3,000 and $3,000$20,000 in
excess of proceeds available. The excess distribution was charged to retained
earnings.
As approved by the Board of Directors, during the year ended October 31,
1997, the Cooperative made distributions of $91,000 in excess of proceeds
available. This amount was included in payables to members as a contra-liability.contraliability.
During the year ended October 31, 1998, the Cooperative recaptured $91,000 from
available proceeds.
Basic and Dilutive Net Income Per Common Share from Nonmember
Products -- The Cooperative presents "basic" earnings per share (which excludes
dilution) and "diluted" earnings per share in accordance with SFAS No. 128,
Earnings Per Share. Basic net income per share is computed by dividing net
income by the weighted-average number of shares of common stock outstanding. As
the nonvoting preferred stock participates in dividends on a basis equivalent to
common stock (Note 9), the outstanding preferred shares are included in the
weighted-average common shares outstanding. There are no potentially dilutive
securities outstanding at October 31, 2000,1998, 1999, and 1998.2000.
Recent Accounting Pronouncements -- The Cooperative does not presently
engage in hedging activities. In addition, the Cooperative has reviewed its
agreements and has determined that it has no derivative instruments, nor do any
of its agreements contain embedded derivative instruments as of October 31,
2000. Accordingly, the adoption of SFAS No. 133, Accounting for Derivative
Instruments and F-11
64
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Hedging Activities, as amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities -- DeferralActivities-Deferral of the Effective Date of
FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, did not have a material impact on
the Cooperative's consolidated financial statements on November 1, 2000.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
SAB No. 101 summarizes the staff's view in applying accounting principles
generally accepted in the United States of America to revenue recognition in
financial statements. The application of SAB No. 101 did not have a material
impact on the Cooperative's consolidated financial statements.
Comprehensive Income -- Comprehensive income is defined as all changes in a
company's net assets, except changes resulting from transactions with
shareholders. There was no difference between comprehensive income and net
income from nonmember products for the fiscal years ended October 31, 2000,1998,
1999, and 1998.2000.
Reclassifications -- Certain items in the prior period financial statements
have been reclassified to conform to the current period presentation.
F-12
73
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVENTORIES
OCTOBER 31,
------------------------ APRIL 30,
1999 2000 2001
---------- ---------- -----------
(UNAUDITED)
Member:
Packaging supplies................................supplies.......................... $ 483,000 $ 732,000 $ 770,000
Fresh fruit.......................................fruit................................. 989,000 697,000 3,995,000
---------- ---------- -----------
1,472,000 1,429,000 4,765,000
Nonmember:
Fresh fruit, packaging supplies, and
ingredients....................................ingredients.............................. 1,220,000 1,431,000 1,575,000
Finished goods....................................goods.............................. 3,304,000 4,866,000 8,008,000
---------- ---------- -----------
4,524,000 6,297,000 9,583,000
---------- ---------- -----------
$5,996,000 $7,726,000 $14,348,000
========== ========== ===========
As of October 31, 1999 and 2000 and 1999,April 30, 2001 (unaudited), the reserve
for obsolescence is approximately $29,000.$29,000, $29,000, and $5,000.
3. PROPERTY, PLANT, AND EQUIPMENT
1999 2000
------------ ------------
Land............................................ $ 1,177,000 $ 1,177,000
Buildings and improvements...................... 9,257,000 9,516,000
Leasehold improvements.......................... 417,000 165,000
Equipment....................................... 22,089,000 21,887,000
Software........................................ 153,000 153,000
Construction in progress........................ -- 7,000
------------ ------------
33,093,000 32,905,000
Less accumulated depreciation................... (23,585,000) (23,861,000)
------------ ------------
$ 9,508,000 $ 9,044,000
============ ============
F-12
65
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS HELD-TO-MATURITY
Investments are made in U.S. government bonds bearing interest at 6.2% with
a maturity date of August 15, 2005. The interest income generated from the bonds
is reinvested in a money market fund. The investments are held in an irrevocable
trust to be used solely for the satisfaction of scheduled payments of interest
and principal relating to the Industrial Development Revenue Bonds (Note 7).
1999 2000
---------- ----------
Cost................................................ $1,176,000 $1,590,000
========== ==========
Fair value.......................................... $1,164,000 $1,604,000
========== ==========
5. OTHER ASSETS
During 1999, the Cooperative established a Grower Development Program
whereby the Cooperative may advance funds to new member producers in exchange
for the commitment by the new member producer to deliver to the Cooperative a
minimum volume of avocados. As of October 31, 2000, the Cooperative has a
secured advance of $2,000,000 on a cumulative basis to new members participating
in
F-13
74
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the Grower Development Program. Such advances are amortized over the multiyear
term of the agreement.
6. SHORT-TERM BORROWINGS
The Cooperative maintains short-term borrowing agreements with various
banks. Under the terms of the various agreements, the Cooperative is advanced
funds for working capital purposes. Total credit available under the combined
short-term borrowing agreements was $26,500,000$9,100,000 and $9,100,000$26,500,000 at October 31,
20001999 and 1999,2000, with interest at a weighted-average rate of 7.58%6.21% and 6.21%7.58% at
October 31, 20001999 and 1999.2000. The Cooperative had outstanding borrowings of
$8,985,000$8,400,000 and $8,400,000$8,985,000 as of October 31, 20001999 and 1999,2000, under these
agreements. The short-term borrowing agreements contain certain financial
covenants with which the Cooperative was in compliance at October 31, 20001999 and
1999.2000.
7. LONG-TERM OBLIGATIONS
1999 2000
---------- ----------
Riverside County Variable Rate Demand Industrial Development
Revenue Bonds, due in 2005, plus interest at variable
rates (3.95%(3.1% and 3.1%3.95% at October 31, 20001999 and 1999, respectively)..........2000)....... $2,800,000 $2,800,000
Revolving term loans, noncollateralized, payable in variable
annual installments through November 2003, plus interest
at variable rates (8.59%(6.84% and 6.84%8.59% at October 31, 20001999 and
1999,
respectively)..................................... $2,243,000 $1,459,000
Other...............................................2000)..................................................... 2,243,000 1,459,000
Other....................................................... 36,000 62,000
---------- ----------
5,079,000 4,321,000
Less current portion................................portion........................................ (748,000) (501,000)
---------- ----------
$4,331,000 $3,820,000
========== ==========
The revolving term loans contain certain financial covenants with which the
Cooperative was in compliance at October 31, 20001999 and 1999.
F-13
66
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)2000.
The Riverside County Variable Rate Demand Industrial Development Revenue
Bonds (the Bonds) are collateralized by property and equipment with a net book
value of $1,989,000 at October 31, 2000. The lending agreement contains certain
financial covenants with which the Cooperative was in compliance at October 31,
20001999 and 1999.2000. As required by the Bond's lending agreement, the Cooperative has
posted a $2,800,000 standby letter of credit from a bank, which matures on
September 16, 2001 (Note 4).
At October 31, 2000, annual debt payments are as follows:
REVENUE REVOLVING
BOND LOAN OTHER TOTAL
---------- ---------- ------- ----------
Year ending October 31:
2001..............................2001...................................... $ -- $ 484,000 $17,000 $ 501,000
2002..............................2002...................................... -- 484,000 18,000 502,000
2003..............................2003...................................... -- 376,000 17,000 393,000
2004..............................2004...................................... -- 50,000 5,000 55,000
2005..............................2005...................................... 2,800,000 65,000 5,000 2,870,000
---------- ---------- ------- ----------
$2,800,000 $1,459,000 $62,000 $4,321,000
========== ========== ======= ==========
F-14
75
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS
The Cooperative has a defined contribution retirement plan for salaried
employees and makes contributions to a pension plan for hourly employees.
Expenses of the plans were $362,000$327,000 and $327,000$362,000 for the years ended October 31,
20001999 and 1999,2000, which are included in general and administrative expenses in the
accompanying financial statements.
The Company sponsors a defined benefit plan for its top executives. Pension
expenses totaled $27,000,$64,000, $54,000, and $64,000$27,000 for the years ended October 31,
2000,1998, 1999, and 1998,2000, which are included in general and administrative expenses
in the accompanying financial statements.
Pension expense consists of the following components:
1998 1999 2000
------- ------- --------------- --------
Change in projected benefit obligation:
Projected benefit obligation at beginning of year.... $495,000 $439,000
Service cost.......................................... $21,000 $19,000 $cost......................................... 19,000 5,000
Interest cost......................................... 43,000cost........................................ 35,000 22,000
------- ------- -------
Total net periodic pension cost..................... $64,000 $54,000 $27,000
======= ======= =======Actuarial loss (gain)................................ (60,000) 19,000
Benefits paid........................................ (50,000) (50,000)
-------- --------
Projected benefit obligation at end of year.......... $439,000 $435,000
======== ========
The following is a reconciliation of the unfunded status of the plans
included in trade accounts payable and accrued expenses.
1998 1999 2000
-------- -------- --------
Projected benefit obligation....................... $495,000 $439,000 $435,000
Unrecognized net gain.............................. 65,000 107,000 88,000
-------- -------- --------
Recorded pension liabilities.....................liabilities....................... $560,000 $546,000 $523,000
======== ======== ========
Significant assumptions used in the determination of pension expense
consist of the following:
1998 1999 2000
---- ---- ----
Discount rate on projected benefit obligation............... 6.5% 8.0% 8.0%
Rate of future salary increases............................. 5.0% 5.0% 5.0%
F-14
67
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY
During 1996, the Cooperative's membership (the Members) voted to amend the
articles of incorporation and exchange their Revolving Fund Credits (RFCs) for
common stock in the Cooperative. Current Members were also given the option to
purchase former nonconsenting Member RFCs. These transactions were completed in
January 1997, resulting in the conversion of all RFCs to 9,623,000 shares of
common stock, net of certain adjustments.
All Members are required to hold common stock of the Cooperative, and such
common stock is considered permanent equity of the Cooperative. Members are
allowed to transfer shares between other Members; however, once they cease to be
Members, they must sell their shares to other Members or exchange their shares
for preferred nonvoting stock. In fiscal year 2000, 47,000 preferred shares were
exchanged for common shares. The Cooperative, at its discretion, may redeem any
outstanding preferred nonvoting stock at $1 per share. Such preferred nonvoting
stock participates in dividends on a basis equivalent to common stock. Members
that own preferred shares may convert their shares to common stock on a
one-to-one basis. Nonmembers who own preferred stock shall not be entitled to
exercise such conversion privilege.
F-15
76
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Board of Directors declared a dividend related to the year ended
October 31, 2000, subsequent to fiscal year end (Note 14).
The Board of Directors approved payments of dividends of $1,180,000$1,648,000 and
$1,648,000$1,180,000 for the years ended October 31, 19991998 and 1998,1999, from the operations of
nonmember products. For the years ended October 31, 19991998 and 1998,1999, Calavo
stockholders shared in nonmember product dividends in proportion to their
ownership in Calavo stock.
10. COMMITMENTS AND CONTINGENCIES
The Cooperative is committed to cash payments for some of its facilities
and certain equipment under noncancelable operating leases expiring at various
dates through 2007, as follows:
2001..................................................... $1,076,000
2002..................................................... 1,040,000
2003..................................................... 873,000
2004..................................................... 750,000
2005..................................................... 496,000
Thereafter............................................... 730,000
----------
$4,965,000
==========
Rental expenses amounted to $1,155,000,$1,022,000, $1,242,000, and $1,022,000$1,155,000 for the
years ended October 31, 2000,1998, 1999, and 1998.2000.
Litigation -- The Cooperative is involved in litigation in the ordinary
course of business, none of which management believes will have a material
adverse impact on the Cooperative.
11. RELATED-PARTY TRANSACTIONS
Sales of papaya, on behalf of an entity owned by the chairman of the Board
of Directors, amounted to $2,062,000,$2,624,000, $1,897,000, and $2,624,000$2,062,000 for the years
ended October 31, 2000,1998, 1999, and 1998,2000, and $819,000$1,915,000 for the quartersix months ended
January 31,April 30, 2001 (unaudited), resulting in gross profits of $236,000, $200,000,
$198,000, $200,000,
$236,000, and $60,000.$142,000. Included in trade accounts payable and accrued expenses
were $235,000,$245,000, $285,000, and $245,000$235,000 at October 31, 2000,1998, 1999, and 1998,2000, and
$230,000$304,000 at January 31,April 30, 2001 (unaudited), due to the above entity.
F-15
68
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES
The income tax provision (benefit) consists of the following for the year
ended October 31:
1998 1999 2000
-------- --------- ----------
Current:
Federal........................................ $(36,000) $ (27,000) $1,550,000
State.......................................... 33,000 (8,000) 522,000
Foreign........................................ 137,000
-------- --------- ----------
Total current............................... (3,000) 102,000 2,072,000
Deferred......................................... 733,000 (510,000) 90,000
-------- --------- ----------
Total income tax provision (benefit)........ $730,000 $(408,000) $2,162,000
======== ========= ==========
F-16
77
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At October 31, 20001999 and 1999,2000, the Cooperative's gross deferred tax assets
totaled $537,000$868,000 and $868,000,$537,000, while gross deferred tax liabilities totaled
$360,000$601,000 and $601,000.$360,000. Deferred income tax assets and liabilities consist of the
tax effects of temporary differences related to the following at October 31:
1999 2000
--------- ---------
Allowance for doubtful accounts.............................accounts...................... $ 1,000 $ 76,000
Inventories.................................................Inventories.......................................... 225,000 474,000
Deferred state taxes........................................taxes................................. 1,000 (13,000)
Net operating loss carryforwards............................carryforwards..................... 640,000
Other.......................................................Other................................................ 1,000
--------- ---------
Current deferred income taxes...............................taxes........................ $ 868,000 $ 537,000
========= =========
Property, plant, and equipment..............................equipment....................... $(641,000) $(589,000)
Retirement benefits.........................................benefits.................................. 40,000 229,000
--------- ---------
Long-term deferred income taxes.............................taxes...................... $(601,000) $(360,000)
========= =========
The Cooperative is subject to income taxes for all business activities
other than the marketing and distribution of Member products. During the years
ended October 31, 20001998 and 1998,2000, the Cooperative incurred pretax income of
$5,715,000$1,912,000 and $1,912,000.$5,715,000. During the year ended October 31, 1999, the
Cooperative incurred an operating loss of $1,257,000 for tax purposes.
The following is a reconciliation (in thousands) of the Cooperative's
pretax book income for the years ended October 31:
1998 1999 2000
-------- -------- ---------
Operating proceeds and nonmember income before
income tax provision (benefit).................. $ 82,441 $ 96,563 $ 112,273
Net proceeds distributed for member fruit......... (78,597) (96,090) (105,367)
Other nonspecific expense allocations............. (1,932) (1,730) (1,191)
-------- -------- ---------
Pretax income (loss).............................. $ 1,912 $ (1,257) $ 5,715
======== ======== =========
F-16
69
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the significant differences between the federal
statutory income tax rate and the effective income tax rate on pretax income
(loss) is as follows:
1998 1999 2000
---- ---- ----
Federal statutory tax at 35%................................ 35% 35% 35%
State taxes, net of federal effects......................... 6 4 5
Foreign income taxes in excess of (less than) U.S........... 11 (2)
Benefit of lower federal tax brackets....................... (1)
Nondeductible meals and entertainment....................... 1 (2)
Resolution of tax contingency............................... (14)
Other....................................................... 1
--- -- --
Provision (benefit) for income taxes........................ 29% 48% 37%
=== == ==
13. INFORMATION REGARDING THE COOPERATIVE'S OPERATIONS IN DIFFERENT SEGMENTS
The Cooperative offers for sale a wide range of Member- and
nonmember-sourced food products. These products have been separated into three
principal segments of business based on the Cooperative's management structure
and information used by the president to measure performance and allocate
resources. The Member avocado segment includes all operations that involve the
distribution of Member
F-17
78
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
avocados. The nonmember perishable product segment includes both operations
related to distribution of fresh avocados from nonmembers and distribution of
other nonavocado fruits. The processed products segment represents all
operations related to the purchase, manufacturing, and distribution of processed
avocado products. Those costs that can be specifically identified with a
particular product line are charged directly to that product line. For the years
ended October 31, 2000,1998, 1999, and 1998,2000, marketing and distribution costs and
general and administrative expenses were allocated based on five-year average
sales dollars. The Cooperative does not allocate specific assets to these
segments.
F-17
NONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
-------- ---------- --------- --------
(ALL AMOUNTS ARE PRESENTED IN THOUSANDS)
YEAR ENDED OCTOBER 31, 1998
Net sales....................................... $ 95,065 $28,019 $25,557 $148,641
Costs and expenses:
Processing, packing, and cost of nonmember
fruit...................................... 9,404 24,774 14,591 48,769
Marketing and distribution.................... 3,094 773 7,012 10,879
Freight and handling.......................... 1,281 2,120 1,220 4,621
General and administrative.................... 2,431 363 781 3,575
-------- ------- ------- --------
Total costs and expenses................... 16,210 28,030 23,604 67,844
-------- ------- ------- --------
Operating proceeds and nonmember operating
income (loss)................................. 78,855 (11) 1,953 80,797
Gain on sale of facility........................ 1,575 1,575
Interest (expense) income, net.................. (25) 9 (39) (55)
Other income.................................... 230 230
Decrease in members' fresh fruit inventories.... (106) (106)
-------- ------- ------- --------
Operating proceeds and nonmember income before
income tax provision (benefit)................ 80,529 (2) 1,914 82,441
Income tax provision (benefit).................. 466 (424) 688 730
-------- ------- ------- --------
Net proceeds available for distribution and
nonmember net income.......................... 80,063 422 1,226 81,711
Net proceeds distributed for member fruit....... (78,597) (78,597)
Receivable from Members due to distributions in
excess of available proceeds.................. (91) (91)
Appropriation for capital expenditures.......... (1,375) (1,375)
-------- ------- ------- --------
Net income from nonmember products.............. $ -- $ 422 $ 1,226 $ 1,648
======== ======= ======= ========
F-18
7079
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(All amounts are presented in thousands):
QUARTER ENDED JANUARY 31, 2001
-----------------------------------------------
NONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
-------- ---------- --------- --------
(UNAUDITED)(ALL AMOUNTS ARE PRESENTED IN THOUSANDS)
YEAR ENDED OCTOBER 31, 1999
Net sales............................... $ 14,255 $18,617 $7,577 $ 40,449sales........................................ $111,385 $40,175 $25,743 $177,303
Costs and expenses:
Processing, packing, and packing................ 2,246 16,862 3,520 22,628cost of nonmember
fruit....................................... 8,464 37,506 16,184 62,154
Marketing and distribution............ 548 369 1,794 2,711distribution..................... 3,168 590 5,766 9,524
Freight and handling.................. 322 767 970 2,059handling........................... 1,063 2,640 1,189 4,892
General and administrative............ 1,145 194 196 1,535administrative..................... 3,353 505 818 4,676
-------- ------- ------------- --------
Total costs and expenses........... 4,261 18,192 6,480 28,933expenses.................... 16,048 41,241 23,957 81,246
-------- ------- ------------- --------
Operating proceeds and nonmember gross
profit................................ 9,994 425 1,097 11,516operating income
(loss)......................................... 95,337 (1,066) 1,786 96,057
Interest income (expense)............... 33 (69) (88) (124)expense, net............................ (96) (131) (92) (319)
Other income..................................... 129 129
Increase in Members'members' fresh fruit inventories........................... 1,471 1,471inventories..... 696 696
-------- ------- ------------- --------
Operating proceeds and nonmember income before
income tax provision........... 11,498 356 1,009 12,863(benefit) provision................. 96,066 (1,197) 1,694 96,563
Income tax provision.................... 119 337 456(benefit) provision................... (21) (700) 313 (408)
-------- ------- ------------- --------
Net proceeds available for distribution and
nonmember net income.............. 11,498 237 672 12,407income........................... 96,087 (497) 1,381 96,971
Net proceeds distributed for Member
fruit................................. (12,799) (12,799)member fruit........ (96,090) (96,090)
Excess distribution to members.......... 1,301 1,301members................... 3 3
-------- ------- ------------- --------
Net income (loss) from nonmember products......products........ $ -- $ 237(497) $ 6721,381 $ 909884
======== ======= ============= ========
F-18F-19
7180
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(All amounts are presented in thousands):
YEARNONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
-------- ---------- --------- --------
(ALL AMOUNTS ARE PRESENTED IN THOUSANDS)
SIX MONTHS ENDED OCTOBER 31,APRIL 30, 2000
-------------------------------------------------(UNAUDITED)
Net sales........................................ $ 52,310 $27,630 $13,352 $ 93,292
Costs and expenses:
Processing, packing, and cost of nonmember
fruit....................................... 4,225 23,890 7,208 35,323
Marketing and distribution..................... 975 788 1,921 3,684
Freight and handling........................... 696 1,480 1,152 3,328
General and administrative..................... 1,823 342 546 2,711
-------- ------- ------- --------
Total costs and expenses.................... 7,719 26,500 10,827 45,046
-------- ------- ------- --------
Operating proceeds and nonmember operating
income......................................... 44,591 1,130 2,525 48,246
Interest income (expense), net................... 5 (94) (171) (260)
Other income..................................... 93 37 20 150
Increase in members' fresh fruit inventories..... 2,783 2,783
-------- ------- ------- --------
Operating proceeds and nonmember income before
income tax provision........................... 47,472 1,073 2,374 50,919
Income tax provision............................. 1 308 791 1,100
-------- ------- ------- --------
Net proceeds available for distribution and
nonmember net income........................... 47,471 765 1,583 49,819
Net proceeds distributed for member fruit........ (47,634) (47,634)
Excess distribution to members................... 163 163
-------- ------- ------- --------
Net income from nonmember products............... $ -- $ 765 $ 1,583 $ 2,348
======== ======= ======= ========
F-20
81
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
--------- ---------- --------- ---------
(ALL AMOUNTS ARE PRESENTED IN THOUSANDS)
YEAR ENDED OCTOBER 31, 2000
Net sales..............................sales..................................... $ 123,667 $69,458 $32,744123,459 $69,286 $27,238 $ 225,869219,983
Costs and expenses:
Processing, packing, and packing...............cost of nonmember
fruit.................................... 9,689 61,212 14,795 85,696
Marketing and distribution........... 2,504 1,467 10,578 14,549distribution.................. 2,296 1,295 5,072 8,663
Freight and handling.................handling........................ 1,759 3,138 1,637 6,534
General and administrative........... 4,110 706 1,339 6,155administrative.................. 4,219 746 1,367 6,332
--------- ------- ------- ---------
Total costs and expenses.......... 18,062 66,523 28,349 112,934expenses................. 17,963 66,391 22,871 107,225
--------- ------- ------- ---------
Operating proceeds and nonmember gross
profit............................... 105,605 2,935 4,395 112,935operating
income...................................... 105,496 2,895 4,367 112,758
Interest income (expense).............., net................ 54 (175) (289) (410)
Other income........................... 20 20 40income.................................. 109 60 48 217
Decrease in Members'members' fresh fruit
inventories..........................inventories................................. (292) (292)
--------- ------- ------- ---------
Operating proceeds and nonmember income before
income tax provision..........provision........................ 105,367 2,780 4,126 112,273
Income tax provision...................provision.......................... 20 671 1,471 2,162
--------- ------- ------- ---------
Net proceeds available for distribution and
nonmember net income.............income........................ 105,347 2,109 2,655 110,111
Net proceeds distributed for Member
fruit................................member fruit..... (105,367) (105,367)
Excess distribution to members.........members................ 20 20
--------- ------- ------- ---------
Net income from nonmember products.....products............ $ -- $ 2,109 $ 2,655 $ 4,764
========= ======= ======= =========
F-19F-21
7282
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(All amounts are presented in thousands):
QUARTER ENDED JANUARY 31, 2000
-----------------------------------------------
NONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
-------- ---------- --------- --------
(UNAUDITED)(ALL AMOUNTS ARE PRESENTED IN THOUSANDS)
SIX MONTHS ENDED APRIL 30, 2001
(UNAUDITED)
Net sales...............................sales....................................... $ 14,327 $17,765 $7,90844,623 $34,934 $12,157 $ 40,00091,714
Costs and expenses:
Processing, packing, and packing................ 1,656 15,935 4,092 21,683cost of nonmember
fruit...................................... 5,304 32,099 7,331 44,734
Marketing and distribution............ 464 339 1,925 2,728distribution.................... 1,024 631 1,559 3,214
Freight and handling.................. 164 577 373 1,114handling.......................... 1,242 1,558 1,488 4,288
General and administrative............ 612 143 255 1,010
-------- ------- ------ --------
Total costs and expenses........... 2,896 16,994 6,645 26,535
-------- ------- ------ --------
Operating proceeds and nonmember gross
profit................................ 11,431 771 1,263 13,465
Interest expense, net................... (19) (59) (63) (141)
Increase in Members' fresh fruit
inventories........................... 2,346 2,346
-------- ------- ------ --------
Operating proceeds and nonmember income
before income tax provision........... 13,758 712 1,200 15,670
Income tax provision.................... 1 221 372 594
-------- ------- ------ --------
Net proceeds available for distribution
and nonmember net income.............. 13,757 491 828 15,076
Net proceeds distributed for Member
fruit................................. (14,808) (14,808)
Excess distribution to members.......... 1,051 1,051
-------- ------- ------ --------
Net income from nonmember products...... $ -- $ 491 $ 828 $ 1,319
======== ======= ====== ========
F-20
73
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(All amounts are presented in thousands):
YEAR ENDED OCTOBER 31, 1999
-----------------------------------------------
NONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
-------- ---------- --------- --------
Net sales................................ $111,559 $40,285 $29,636 $181,480
Costs and expenses:
Processing and packing................. 8,464 37,506 16,184 62,154
Marketing and distribution............. 3,342 700 9,659 13,701
Freight and handling................... 1,063 2,640 1,189 4,892
General and administrative............. 3,261 505 818 4,584administrative.................... 1,837 640 484 2,961
-------- ------- ------- --------
Total costs and expenses............ 16,130 41,351 27,850 85,331expenses................... 9,407 34,928 10,862 55,197
-------- ------- ------- --------
Operating proceeds and nonmember gross
profit (loss).......................... 95,429 (1,066) 1,786 96,149operating
income........................................ 35,216 6 1,295 36,517
Interest expense, net.................... (96) (131) (92) (319)income (expense), net.................. 49 (111) (224) (286)
Other income............................. 37 37income.................................... 120 60 28 208
Increase in Members'members' fresh fruit inventories............................ 696 696inventories.... 3,298 3,298
-------- ------- ------- --------
Operating proceeds and nonmember income (loss)
before income tax provision (benefit)
provision.............................. 96,066 (1,197) 1,694 96,563......... 38,683 (45) 1,099 39,737
Income tax provision (benefit) provision........... (21) (700) 313 (408).................. (105) 425 320
-------- ------- ------- --------
Net proceeds available for distribution and
nonmember net income............... 96,087 (497) 1,381 96,971income.......................... 38,683 60 674 39,417
Net proceeds distributed for Member
fruit.................................. (96,090) (96,090)
Excess distribution to members........... 3 3
-------- ------- ------- --------
Net income (loss) from nonmember
products............................... $ -- $ (497) $ 1,381 $ 884
======== ======= ======= ========
F-21
74
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(All amounts are presented in thousands):
YEAR ENDED OCTOBER 31, 1998
----------------------------------------------
NONMEMBER
MEMBER PERISHABLE PROCESSED
AVOCADOS PRODUCTS PRODUCTS TOTAL
-------- ---------- --------- --------
Net sales................................. $ 95,418 $28,052 $28,724 $152,194
Costs and expenses:
Processing and packing.................. 9,404 24,774 14,591 48,769
Marketing and distribution.............. 3,447 806 10,179 14,432
Freight and handling.................... 1,281 2,120 1,220 4,621
General and administrative.............. 2,226 363 781 3,370
-------- ------- ------- --------
Total costs and expenses............. 16,358 28,063 26,771 71,192
-------- ------- ------- --------
Operating proceeds and nonmember gross
profit (loss)........................... 79,060 (11) 1,953 81,002
Gain on sale of facility.................. 1,575 1,575
Interest (expense) income................. (25) 9 (39) (55)
Other income.............................. 25 25
Decrease in Members' fresh fruit
inventories............................. (106) (106)
-------- ------- ------- --------
Operating proceeds and nonmember income
before income tax provision (benefit)... 80,529 (2) 1,914 82,441
Income tax provision (benefit)............ 466 (424) 688 730
-------- ------- ------- --------
Net proceeds available for distribution
and nonmember net income................ 80,063 422 1,226 81,711
Net proceeds distributed for Member
fruit................................... (78,597) (78,597)member fruit....... (38,369) (38,369)
Receivable from Members due to distributions in
excess of available proceeds (Note 1)....................... (91) (91)
Appropriation for capital expenditures.... (1,375) (1,375)proceeds.................. (314) (314)
-------- ------- ------- --------
Net income from nonmember products........products.............. $ -- $ 42260 $ 1,226674 $ 1,648734
======== ======= ======= ========
Long-lived assets attributed to geographic areas as of October 31 are as
follows:
UNITED STATES MEXICO CONSOLIDATED
------------- ---------- ------------
2000......................................... $10,358,000 $2,328,000 $12,686,000
1999......................................... $ 9,761,000 $2,494,000 $12,255,000
2000......................................... $10,358,000 $2,328,000 $12,686,000
F-22
7583
CALAVO GROWERS OF CALIFORNIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth sales by product category for each year
ended October 31.
1998 1999 2000
-------- -------- --------
(IN THOUSANDS)
California avocados -- members.....................members............................. $ 91,461 $107,357 $117,878
California avocados -- nonmembers..................nonmembers.......................... 3,405 23,057
Chilean avocados...................................avocados........................................... 13,531 18,355 20,538
Mexican avocados...................................avocados........................................... 6,828 11,240 13,802
New Zealand avocados...............................avocados....................................... 1,273 3,672
Miscellaneous purchased avocados...................avocados........................... 1,290 1,154 1,094
Papayas............................................Papayas.................................................... 2,624 1,981 2,061
Mangos.............................................Mangos..................................................... 1,150 4
Others.............................................Others..................................................... 71
Processed -- food service..........................service.................................. 20,363 21,261 27,225
Processed -- retail and club.......................club............................... 8,351 8,375 5,519
Processed -- miscellaneous.........................miscellaneous................................. 10
-------- -------- --------
Total sales -- F.O.B. .............................fruit and product sales.............................. 145,679 174,405 214,846
Freight and other charges..........................charges.................................. 6,515 7,075 11,023
-------- -------- --------
$152,194 $181,480 $225,869Total sales................................................ 152,194 181,480 225,869
Less sales incentives...................................... (3,553) (4,177) (5,886)
-------- -------- --------
Net sales.................................................. $148,641 $177,303 $219,983
======== ======== ========
14. SUBSEQUENT EVENTS
In December 2000, the Company declared a dividend in the amount of
approximately $4,973,000, which is expected to bewas paid in January 2001.
On February 20, 2001, the Board of Directors unanimously voted to recommend
to the Cooperative's shareholders to convert from a California nonprofit
cooperative association into a California for-profit corporation called Calavo
Growers, Inc. (the Company). To accomplish the conversion, if approved, the
Cooperative will merge into the Company and all outstanding common and preferred
shares of the Cooperative will be exchanged for common stock of the Company.
* * * * * *
F-23
7684
APPENDIX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (the "Agreement""AGREEMENT") is
entered into as of February 20, 2001 between Calavo Growers of California
("Calavo"CALAVO"), a nonprofit cooperative association that is organized under the
California Food and Agricultural Code, and Calavo Growers, Inc. ("New Calavo"NEW CALAVO"),
a corporation that is organized under the California General Corporation Law
(the "California Corporation Law""CALIFORNIA CORPORATION LAW").
RECITALS
A. Calavo's Board of Directors has determined that it is in the best
interests of Calavo and its shareholders to convert Calavo into a corporation
that is organized under and governed by the California Corporation Law. New
Calavo is a wholly owned subsidiary of Calavo, and Calavo has approved this
Agreement as the sole shareholder of New Calavo.
B. The Boards of Directors of Calavo and New Calavo have approved this
Agreement and intend that this Agreement shall constitute a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1968, as amended. Pursuant to this Agreement, Calavo shall be merged into New
Calavo, and New Calavo shall continue as the surviving corporation.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, Calavo and New Calavo hereby agree as follows:
1. The Merger.THE MERGER. At the Effective Time (as defined below), Calavo shall be
merged into New Calavo (the "Merger""MERGER") upon the terms and conditions described in
this Agreement and in accordance with the California Corporation Law. The Merger
shall become effective on such date and at such time (jointly referred to herein
as the "Effective Time""EFFECTIVE TIME") as a short-form agreement of merger substantially in
the form of Exhibit A attached hereto and incorporated herein, together with all
officers' certificates that are required under the California Corporation Law,
are filed by Calavo and New Calavo with the California Secretary of State
pursuant to the California Corporation Law as promptly as practicable after the
satisfaction or waiver (where permissible) of the closing conditions that are
described below in Section 6.
2. Effect of the Merger.EFFECT OF THE MERGER. At the Effective Time, the separate existence of
Calavo shall terminate, and New Calavo shall continue as the surviving
corporation. The Merger shall have the effect prescribed by the California
Corporation Law. Without limiting the generality of the preceding sentence, at
the Effective Time New Calavo automatically shall succeed to all of the rights
and properties of Calavo and shall be subject to all of the debts and
liabilities of Calavo in the same manner as if New Calavo had itself incurred
them.
3. Articles of Incorporation and Bylaws of New Calavo.ARTICLES OF INCORPORATION AND BYLAWS OF NEW CALAVO. The Articles of
Incorporation and Bylaws of New Calavo that are in effect immediately prior to
the Effective Time shall remain in effect after the Merger unless and until they
are subsequently amended as provided by applicable law.
4. Officers and Directors.OFFICERS AND DIRECTORS. Each officer and director of New Calavo shall
continue to hold office after the Merger until his or her successor is duly
elected or until his or her earlier death, resignation or removal.
5. Conversion of Shares.CONVERSION OF SHARES. At the Effective Time:
(a) Each share of the preferred stock and common stock of Calavo that
is outstanding immediately prior to the Effective Time automatically shall
be converted into one share of the common stock of New Calavo without the
necessity for further action on the part of the holder of such share; and
A-1
7785
(b) Each share of the common stock of New Calavo that is outstanding
immediately prior to the Effective Time shall be cancelled without payment
of any consideration therefor.
6. Closing Conditions.CLOSING CONDITIONS. The Merger shall occur as promptly as practicable
after the satisfaction of each of the following conditions, provided, however,
that any of the following conditions may be waived by a writing executed by
Calavo and New Calavo if and to the extent that such waiver is permitted by
applicable law:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by Calavo's shareholders;
(b) The Registration Statement on Form S-4 that has been filed with
the Securities and Exchange Commission regarding the shares of common stock
that New Calavo will issue in the Merger shall have become effective and
shall not be subject to any stop order suspending its effectiveness or to
any proceeding seeking a stop order;
(c) All permits, consents and approvals that are required from the
California Department of Corporations and other applicable state securities
regulatory authorities regarding the offer and sale of New Calavo common
stock in the Merger shall have been obtained;
(d) Calavo shall have obtained all necessary consents to the Merger
from its lenders and any other parties whose consents are required under
contracts to which Calavo is a party; and
(e) There shall not be in effect any judgment, regulation, order or
injunction of any court or governmental authority that prohibits the
Merger.
7. Further Assurances.FURTHER ASSURANCES. Calavo and New Calavo shall take such further
actions and execute such further documents as may be necessary or advisable in
order to carry out the terms of this Agreement.
8. Amendment and Termination.AMENDMENT AND TERMINATION. This Agreement (including Exhibit A hereto)
may be amended by a writing executed by Calavo and New Calavo at any time prior
to the Effective Time. However, after the approval of Calavo's shareholders has
been obtained, no amendment of this Agreement that changes its principal terms
may be made without the further approval of such shareholders. This Agreement
may be terminated by action of the Board of Directors of Calavo at any time
prior to the Effective Time, whether before or after shareholder approval has
been obtained.
9. Counterparts.COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed an original but both of which shall constitute one and
the same instrument.
10. Governing Law.GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California without giving
effect to the conflict of law principles of such state.
A-2
7886
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
CALAVO GROWERS OF CALIFORNIA
By: /s/ LECIL E. COLE
------------------------------------
Lecil E. Cole
Chairman, Chief Executive Officer
and President
By: /s/ EGIDIO CARBONE, JR.
------------------------------------
Egidio Carbone, Jr.
Vice President, Finance and
Corporate Secretary
CALAVO GROWERS, INC.
By: /s/ LECIL E. COLE
------------------------------------
Lecil E. Cole
Chairman, Chief Executive Officer
and President
By: /s/ EGIDIO CARBONE, JR.
------------------------------------
Egidio Carbone, Jr.
Vice President, Finance and
Corporate Secretary
A-3
7987
EXHIBIT A
AGREEMENT OF MERGER
This Agreement of Merger (the "Agreement""AGREEMENT") is entered into as of February
20, 2001 between Calavo Growers of California, a nonprofit cooperative
association that is organized under the California Food and Agricultural Code
(the "Merging Corporation""MERGING CORPORATION"), and Calavo Growers, Inc., a corporation that is
organized under the California General Corporation Law (the "Surviving
Corporation""SURVIVING
CORPORATION").
1. The Merging Corporation shall be merged into the Surviving Corporation.
The effect of the merger and the effective time of the merger are as prescribed
by applicable law.
2. At the effective time of the merger, (i) each outstanding share of the
preferred stock and common stock of the Merging Corporation shall be converted
into one share of the common stock of the Surviving Corporation, and (ii) each
outstanding share of the stock of the Surviving Corporation shall be cancelled
without payment of any consideration therefor.
3. The Articles of Incorporation and Bylaws of the Surviving Corporation
that are in effect immediately prior to the effective time of the merger shall
remain in effect after the merger unless and until they are subsequently amended
as provided by applicable law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
CALAVO GROWERS OF CALIFORNIA
By: /s/ LECIL E. COLE
------------------------------------
Lecil E. Cole
Chairman, Chief Executive Officer
and President
By: /s/ EGIDIO CARBONE, JR.
------------------------------------
Egidio Carbone, Jr.
Secretary
CALAVO GROWERS, INC.
By: /s/ LECIL E. COLE
------------------------------------
Lecil E. Cole
Chairman, Chief Executive Officer
and President
By: /s/ EGIDIO CARBONE, JR.
------------------------------------
Egidio Carbone, Jr.
Secretary
A-4
8088
APPENDIX B
ARTICLES OF INCORPORATION
OF
CALAVO GROWERS, INC.
ARTICLE I
The name of this corporation is Calavo Growers, Inc. (the "Corporation""CORPORATION").
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The name and address in the State of California of the Corporation's
initial agent for service of process is: Egidio Carbone; 2530 Red Hill Avenue;
Santa Ana, California 92705-5542.
ARTICLE IV
The Corporation is authorized to issue only one class of stock, which shall
be designated common stock with a par value of $0.001 per share. The total
number of shares that the Corporation is authorized to issue is One Hundred
Million (100,000,000).
ARTICLE V
(a) The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(b) The Corporation is authorized to provide indemnification of its agents
(as such term is defined in Section 317 of the California Corporations Code),
whether by bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, to the fullest extent permissible under California law.
(c) Any amendment of this Article V shall not adversely affect any right or
protection of an agent of the Corporation existing at the time of such
amendment.
ARTICLE VI
Each of the following actions shall require the approval of at least
seventy-five percent (75%) of the authorized number of directors that is set
forth or established in accordance with the Corporation's Bylaws:
(a) The issuance by the Corporation of any shares of stock or of any
options, warrants or other rights to acquire shares of stock;
(b) The amendment of these Articles of Incorporation, provided,
however, that any approval of the Corporation's shareholders that is
required by applicable law shall also be obtained in order for such
amendment to be effective; or
B-1
8189
(c) The adoption, amendment or repeal by the Corporation's Board of
Directors of any Bylaws, provided, however, that the Corporation's
shareholders shall also be entitled to adopt, amend or repeal Bylaws by the
affirmative vote or written consent of a majority of the outstanding shares
entitled to vote.
Dated: January 4, 2001 /s/ MARC L. BROWN
--------------------------------------
Marc L. Brown,
Incorporator
B-2
8290
APPENDIX C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------AMENDED AND RESTATED BYLAWS
OF
CALAVO GROWERS, INC.,
A CALIFORNIA CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8391
TABLE OF CONTENTS
PAGE
----
ARTICLE I -- OFFICES........................................ C-1
Section 1.01 Principal Office............................Office............................. C-1
Section 1.02 Other Offices...............................Offices................................ C-1
ARTICLE II -- MEETINGS OF SHAREHOLDERS...................... C-1
Section 2.01 Place of Meetings...........................Meetings............................ C-1
Section 2.02 Annual Meetings.............................Meetings.............................. C-1
Section 2.03 Special Meetings............................Meetings............................. C-1
Section 2.04 Adjourned Meetings and Notice Thereof.......Thereof........ C-2
Section 2.05 Entry of Notice of Delivery.................Delivery.................. C-2
Section 2.06 Voting by Shareholders; Director Nominations;
Cumulative Voting for Directors...........Directors.............. C-2
Section 2.07 Quorum......................................Quorum....................................... C-3
Section 2.08 Consent of Absentees........................Absentees......................... C-3
Section 2.09 Action Without Meeting......................Meeting....................... C-3
Section 2.10 Proxies.....................................Proxies...................................... C-4
Section 2.11 Districts...................................Districts.................................... C-4
ARTICLE III -- DIRECTORS.................................... C-4
Section 3.01 Powers; Committees of Directors, Including
Executive Committee and Nominating
Committee...........Committee.................................... C-4
Section 3.02 Number and Qualifications of Directors......Directors....... C-5
Section 3.03 Election and Term of Office.................Office; Removal of
Directors.............................................. C-6
Section 3.04 Vacancies...................................Vacancies.................................... C-6
Section 3.05 Place of Meeting............................ C-6Meeting............................. C-7
Section 3.06 Organizational Meeting...................... C-6Meeting....................... C-7
Section 3.07 Other Regular Meetings......................Meetings....................... C-7
Section 3.08 Special Meetings............................Meetings............................. C-7
Section 3.09 Notice of Adjournment.......................Adjournment........................ C-7
Section 3.10 Entry of Notice............................. C-7Notice.............................. C-8
Section 3.11 Waiver of Notice............................ C-7Notice............................. C-8
Section 3.12 Quorum...................................... C-7Quorum....................................... C-8
Section 3.13 Adjournment.................................Adjournment.................................. C-8
Section 3.14 Action Without Meeting......................Meeting....................... C-8
Section 3.15 Fees and Compensation.......................Compensation........................ C-8
ARTICLE IV -- OFFICERS...................................... C-8
Section 4.01 Officers....................................Officers..................................... C-8
Section 4.02 Elections................................... C-8Appointment.................................. C-9
Section 4.03 Subordinate Officers........................ C-8Officers......................... C-9
Section 4.04 Removal and Resignation..................... C-8Resignation...................... C-9
Section 4.05 Vacancies................................... C-8Vacancies.................................... C-9
Section 4.06 Chairman of the Board.......................Board........................ C-9
Section 4.07 Chief Executive Officer.....................Officer...................... C-9
Section 4.08 President...................................President.................................... C-9
Section 4.09 Vice President..............................President............................... C-9
Section 4.10 Secretary...................................Secretary.................................... C-9
Section 4.11 Chief Financial Officer..................... C-9Officer...................... C-10
i
92
PAGE
----
ARTICLE V -- MISCELLANEOUS.................................. C-10
Section 5.01 Record Date.................................Date.................................. C-10
Section 5.02 Inspection of Corporate Records.............Records.............. C-10
Section 5.03 Checks, Drafts and Notes.................... C-10Notes..................... C-11
Section 5.04 Seal........................................ C-10
i
84
PAGE
----
Seal......................................... C-11
Section 5.05 Financial Reports...........................Reports............................ C-11
Section 5.06 Execution of Documents......................Documents....................... C-11
Section 5.07 Certificates of Stock....................... C-11Stock........................ C-12
Section 5.08 Representation of Shares of Other
Corporations........................................... C-12
Section 5.09 Inspection of Bylaws........................Bylaws......................... C-12
ARTICLE VI -- RESTRICTIONS ON TRANSFER OF SHARES............ C-12
Section 6.01 Corporation's Right of First Refusal........Refusal......... C-12
Section 6.02 Notice to the Corporation of the Proposed
Transfer............................................... C-12C-13
Section 6.03 Purchase of Shares by the Corporation.......Corporation........ C-13
Section 6.04 Purchase Terms..............................Terms............................... C-13
Section 6.05 Closing of the Purchase..................... C-13Purchase...................... C-14
Section 6.06 Transfer of Shares to the Proposed
Transferee............................................. C-13C-14
Section 6.07 Transfers Not Subject to the Right of First
Refusal................................................ C-14
Section 6.08 Transfers of Shares in Violation of the
Bylaws................................................. C-14C-15
Section 6.09 Legends on Certificates..................... C-14Certificates...................... C-15
Section 6.10 Termination of the Right of First Refusal...Refusal.... C-15
ARTICLE VII -- INDEMNIFICATION.............................. C-15
Section 7.01 Indemnification of Directors................Directors................. C-15
Section 7.02 Indemnification of Officers, Employees and
Other Agents........................................... C-15
Section 7.03 Advance of Expenses......................... C-15Expenses.......................... C-16
Section 7.04 Indemnification Not Exclusive............... C-15Exclusive................ C-16
Section 7.05 Insurance................................... C-15Insurance.................................... C-16
Section 7.06 Conflicts...................................Conflicts.................................... C-16
Section 7.07 Indemnification Agreements..................Agreements................... C-16
Section 7.08 Amendment, Repeal or Modification...........Modification............ C-16
ARTICLE VIII -- AMENDMENTS.................................. C-16
Section 8.01 Power of Shareholders.......................Shareholders........................ C-16
Section 8.02 Power of Directors.......................... C-16Directors........................... C-17
ii
8593
AMENDED AND RESTATED BYLAWS
OF
CALAVO GROWERS, INC.
ARTICLE I -- OFFICES
SECTION 1.01 Principal Office.PRINCIPAL OFFICE. The principal executive office of Calavo
Growers, Inc. (the "CORPORATION") is hereby fixed and located at 2530 Red Hill
Avenue, Santa Ana, California. The Board of Directors is hereby granted full
power and authority to change said principal office from one location to another
at any place or places where the Corporation is qualified to do business.
SECTION 1.02 Other Offices.OTHER OFFICES. Branch or subordinate offices may at any time
be established by the Board of Directors at any place or places where the
Corporation is qualified to do business.
ARTICLE II -- MEETINGS OF SHAREHOLDERS
SECTION 2.01 Place of Meetings.PLACE OF MEETINGS. All meetings of shareholders shall be held
either at the principal executive office or at any other place within or without
the State of California which may be designated by the Board of Directors or by
the shareholders by obtaining written consent of all the persons entitled to
vote thereat.
SECTION 2.02 Annual Meetings.ANNUAL MEETINGS. An annual meeting of shareholders shall be
held each year on a date and at a time designated by the Board of Directors.
Notice of each annual meeting shall be given to each shareholder entitled
to vote thereat, either personally or by first-class mail or other means of
written communication, charges prepaid, addressed to such shareholder at the
address appearing on the books of the Corporation for such shareholder or given
by such shareholder to the Corporation for the purpose of notice. If no such
address appears or is given, notice shall be deemed to have been given such
shareholder if sent by mail or other means of written communication addressed to
the place where the principal executive office of the Corporation is situated,
or if published at least once in some newspaper of general circulation in the
county in which said office is located.
All such notices shall be delivered personally, or deposited in the mail or
sent by other means of written communication, to each shareholder entitled to
vote thereat, not less than ten (10) nor more than sixty (60) days before such
annual meeting, and shall specify the place, date and hour of such meeting and
those matters which the Board of Directors, at the time of the giving of such
notice, intends to present for action by the shareholders, including the names
of nominees intended at the time of such notice to be presented by the Board of
Directors for election to the Board of Directors. Such notice shall also state
the general nature of the business or proposal to be considered or acted upon at
such meeting before action may be taken at such meeting on:
(a) A proposal to approve a contract or other transaction between the
Corporation and one (1) or more directors or any corporation, firm or
association in which one (1) or more directors has a material financial
interest;
(b) A proposal to amend the Articles of Incorporation;
(c) A proposal to approve a reorganization of the Corporation;
(d) A proposal to wind up and dissolve the Corporation; or
(e) A proposal to approve a plan of distribution of the shares,
obligations or securities of any other corporation, or assets other than
money, which is not in accordance with the liquidation rights of any
preferred shares as specified in the Articles of Incorporation, in the
process of the winding up of the Corporation.
SECTION 2.03 Special Meetings.SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes whatsoever, may be called at any time by the Chairman of
the Board, the President, the Board of
C-1
8694
Directors or by one (1) or more shareholders entitled to cast not less than ten
percent (10%) of the votes at the meeting. Upon request in writing to the
Chairman of the Board, the President, any Vice President or the Secretary by any
person, other than the Board of Directors, entitled to call a special meeting of
shareholders, such officer shall cause notice to be given forthwith, but in no
event later than twenty (20) days after receipt of the request, that a meeting
will be held at the time requested by the person or persons calling the meeting,
which time shall be not less than thirty-five (35) and not more than sixty (60)
days after receipt of the request. Except in special cases where other express
provision is made by statute and as set forth herein, notice of such special
meetings shall be given in the same manner as for annual meetings of
shareholders. Notices of any special meeting shall specify, in addition to the
place, date and hour of such meeting, the general nature of the business to be
transacted.
SECTION 2.04 Adjourned Meetings and Notice Thereof.ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by a vote of a majority of the shares, the holders of which
are either present in person or by proxy thereat, but in the absence of a
quorum, no other business may be transacted at any such meeting except as
provided in Section 2.07 of this Article.
When any shareholders' meeting, either annual or special, is adjourned for
forty-five (45) days or less, the time and place of the adjourned meeting shall
be announced at the meeting at which the adjournment is taken. When any
shareholders' meeting, either annual or special, is adjourned for more than
forty-five (45) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting as in the case
of an original meeting. Except as aforesaid, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an adjourned
meeting, and at the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting.
SECTION 2.05 Entry of Notice of Delivery.ENTRY OF NOTICE OF DELIVERY. An affidavit executed by the
Secretary, any Assistant Secretary or any transfer agent to the effect that any
notice or report required to be given to a shareholder by law or these Bylaws
was duly given to such shareholder shall be sufficient evidence that such notice
or report was duly given to such shareholder. If any notice or report addressed
to a shareholder at the address of such shareholder appearing on the books of
the Corporation is returned to the Corporation by the United States Postal
Service marked to indicate that the United States Postal Service is unable to
deliver the notice or report to the shareholder at such address, all future
notices or reports shall be deemed to have been duly given without further
mailing if the same shall be available for the shareholder upon written demand
of the shareholder at the principal executive office of the Corporation for a
period of one (1) year from the date of the giving of the notice or report to
all other shareholders.
SECTION 2.06 Voting by Shareholders; Director Nominations; Cumulative
Voting for Directors.VOTING BY SHAREHOLDERS; DIRECTOR NOMINATIONS; CUMULATIVE
VOTING FOR DIRECTORS. Except as otherwise provided in the Articles of
Incorporation and in this Section, at all meetings of shareholders every
shareholder entitled to vote shall have the right to vote in person or by proxy
the number of shares standing in his or her name on the stock records of the
Corporation. Such vote may be given by viva voce or by ballot; provided,
however, that all elections for directors shall be by ballot upon demand made by
a shareholder at any election and before the voting begins.
Nominations of persons for election to the Board of Directors may be made
at, or in advance of, each meeting of shareholders at which directors are to be
elected (i) by or at the direction of the incumbent Board of Directors and (ii)
by any shareholder of the Corporation who is entitled to vote at the meeting in
the election of directors by submitting the name of such candidate or candidates
in writing to the Secretary of the Corporation. Each director nominee must
satisfy the qualification requirements that are described in Section 3.02 of
these Bylaws, and all solicitations of proxies to be used in connection with the
election of directors must satisfy applicable federal and state securities laws
and regulations and other applicable laws and regulations.
At each election of directors of the Corporation, if the candidate's name
or candidates' names have been placed in nomination prior to the voting, each
shareholder entitled to vote shall have the right to cast as many votes as shall
equal the number of votes to which his or her shares are normally entitled
C-2
8795
multiplied by the number of directors to be elected, and he or she may cast all
of such votes for a single candidate or may distribute them among some or all of
the candidates as he or she sees fit. The candidates receiving the highest
number of affirmative votes up to the number of directors to be elected shall be
elected; provided, however, that such candidates must satisfy the qualification
requirements for directors that are described in Section 3.02 of these Bylaws.
The affirmative vote of the majority of the shares represented and voting
at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number is required
by law or by the Articles of Incorporation or these Bylaws, and except as set
forth in Section 2.07 of this Article and at elections of directors as set forth
in this Section.
SECTION 2.07 Quorum.QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum.
SECTION 2.08 Consent of Absentees.CONSENT OF ABSENTEES. The proceedings and transactions of any
meeting of shareholders, either annual or special, however called and noticed
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy and
if, either before or after the meeting, each of the persons entitled to vote,
not present in person or by proxy, signs a written waiver of notice, a consent
to the holding of such meeting or an approval of the minutes thereof. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of shareholders need be specified in any written waiver of notice,
consent to the holding of the meeting or approval of the minutes thereof unless
otherwise provided in the Articles of Incorporation or these Bylaws, except for
the matters referred to in subparagraphs (a) through (e) of Section 2.02 of this
Article. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of notice of
and presence at such meeting, except when the person objects at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters required by law to
be included in the notice but not so included, if such objection is expressly
made at the meeting.
SECTION 2.09 Action Without Meeting.ACTION WITHOUT MEETING. Any action which may be taken at any
annual or special meeting of the shareholders may be taken without a meeting and
without prior notice, if authorized by a written consent setting forth the
action so taken, signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted, and filed with the Secretary of the Corporation; provided,
however, that directors may not be elected by written consent except by
unanimous written consent of all shares entitled to vote for the election of
directors, except that a vacancy on the Board of Directors (other than a vacancy
created by removal of a director) not filled by the Board of Directors may be
filled by the written consent of a majority of the outstanding shares entitled
to vote. Any shareholder giving a written consent, such shareholder's
proxyholders, a transferee of the shares or a personal representative of such
shareholder or their respective proxyholders, may revoke any such consent by a
writing received by the Corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the Corporation, but may not do so thereafter. Such
revocation shall be effective upon its receipt by the Secretary of the
Corporation.
Unless the consents of all shareholders entitled to vote have been
solicited in writing and have been received, prompt notice shall be given, in
the same manner as for annual meetings of shareholders except as set forth in
this Section, to those shareholders entitled to vote who have not consented in
writing, of the
C-3
8896
taking of any corporate action approved by shareholders without a meeting. Such
notice shall be given at least ten (10) days before the consummation of the
action authorized by such approval with respect to the following:
(a) Approval of any transaction referred to in subparagraph (a), (c)
or (e) of Section 2.02 of this Article; or
(b) Approval required by law of the indemnification of any person.
SECTION 2.10 Proxies.PROXIES. Every person entitled to vote or execute consents
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his or her duly
authorized agent; provided, however, that no such proxy shall be valid after the
expiration of eleven (11) months from the date of its execution unless otherwise
provided in the proxy.
SECTION 2.11 Districts.DISTRICTS. For purposes of administering the Corporation, the
Board of Directors may divide the territory in which the Corporation has
shareholders into two (2) or more districts. The number of such districts may
correspond to the authorized number of directors of the Corporation. The
boundaries and number of the districts shall be determined by the Board of
Directors, which shall have authority to revise and redefine the number and
boundaries of the districts from time to time. If the Board of Directors
establishes such districts, it shall assign each shareholder to a district based
upon the district in which the shareholder (if a grower) has the largest acreage
or production and on other factors deemed relevant by the Board of Directors.
The Board of Directors may establish policies and procedures for
informational meetings of the members of the various districts that shall be
held from time to time. However, any such meetings are not intended to function
as a substitute for the annual and special meetings of the Corporation's
shareholders that are discussed in these Bylaws. Furthermore, voting for
directors shall not be conducted on a district basis but shall instead be
conducted in the manner described in the preceding sections of this Article II.
In each such election, each shareholder shall be entitled to cast votes for the
number of directors that are to be elected and shall not be limited to voting
only for directors from his or her district.
The determinations of the Board of Directors on all matters relating to the
Corporation's districts shall be final, binding and conclusive on all persons.
ARTICLE III -- DIRECTORS
SECTION 3.01 Powers; Committees of Directors, Including Executive
Committee and Nominating Committee.POWERS; COMMITTEES OF DIRECTORS, INCLUDING EXECUTIVE COMMITTEE
AND NOMINATING COMMITTEE. Subject to limitations of the Articles of
Incorporation, of these Bylaws and of the California General Corporation Law as
to action to be authorized or approved by the shareholders or by the outstanding
shares, and subject to the duties of directors as prescribed by these Bylaws,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the directors shall have the following
powers:
(a) To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or these Bylaws,
fix their compensation and require from them security for faithful service;
(b) To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not
inconsistent with law, the Articles of Incorporation or these Bylaws, as
they may deem best;
(c) To change the principal office for the transaction of the business
of the Corporation from one location to another within or without the State
of California, as provided in Section 1.01 of Article I; to fix and locate
from time to time one or more branch or subsidiary offices of the
Corporation within or without the State of California, as provided in
Section 1.02 of Article I; to designate any place within or without the
State of California for the holding of any shareholders'
C-4
8997
meetings; and to adopt, make and use a corporate seal, to prescribe the
form of certificates of stock and to alter the form of such seal and of
such stock certificates from time to time as in their judgment they may
deem best, provided such seal and such certificates shall at all times
comply with the provisions of law;
(d) To authorize the issue of stock of the Corporation from time to
time, upon such terms as may be lawful, in consideration of money paid,
labor done, services actually rendered to the Corporation or for its
benefit or in its formation or reorganization, debts or securities
cancelled, tangible or intangible property actually received either by the
Corporation or by a wholly-owned subsidiary, or as a share dividend, or
upon a stock split, reverse stock split, reclassification or conversion of
outstanding shares into shares of another class, exchange of outstanding
shares for shares of another class, or other change affecting outstanding
shares;
(e) To borrow money and incur indebtedness for the purposes of the
Corporation and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and security
therefor; and
(f) To designate one or more committees and to appoint members and
alternate members therefor, by resolution adopted by a majority of the
authorized number of directors, each committee consisting of two (2) or
more directors and any alternate directors as may be designated to replace
any absent members at any meeting thereof, to serve at the pleasure of the
Board of Directors and to delegate to any such committee any of the powers
and authority of the Board of Directors in the management of the business
and affairs of the Corporation, except the following powers: to approve any
action which by law or by these Bylaws also requires shareholders' approval
or approval of the outstanding shares, to fill vacancies on the Board of
Directors or any committee thereof, to fix the compensation of directors
for serving on the Board of Directors or any committee thereof, to amend or
repeal bylaws or adopt new bylaws, to amend or repeal any resolution of the
Board of Directors which by its express terms is not so amendable or
repealable, to authorize a distribution to the shareholders of the
Corporation (other than a dividend in shares of the Corporation) except at
a rate or in a periodic amount or within a price range determined by the
Board of Directors or to appoint other committees of the Board of Directors
or the members thereof.
Without limiting the generality of the preceding paragraph:
There shall be an Executive Committee consisting of the Corporation's
Chairman of the Board and four (4) other directors who shall be appointed
by a majority of the authorized number of directors. The Executive
Committee shall have all of the functions and powers of the Board of
Directors that are delegated to it by the Board of Directors except as
otherwise provided by law and subject to the direction and control of the
Board of Directors.
The Board of Directors may also appoint a Nominating Committee, which
shall consist of two (2) or more directors, to assist it in the
identification and nomination of candidates for election as directors. The
Nominating Committee shall have the functions and powers that are delegated
to it from time to time by the Board of Directors, although it shall remain
subject to the direction and control of the Board of Directors. With the
assistance of any such Nominating Committee that is appointed, the Board of
Directors shall establish such rules and procedures for its selection of
director nominees as it deems appropriate. Among other things, the Board of
Directors shall have discretion to nominate a candidate from each district
that is described in Section 2.11 of these Bylaws, although it shall not be
obligated to follow such nomination procedure.
SECTION 3.02 Number and Qualifications of Directors.NUMBER AND QUALIFICATIONS OF DIRECTORS. The authorized number
of directors of the Corporation shall be not less than eight (8) nor more than
fifteen (15), and the exact number of directors within such limits shall be ten
(10) unless and until such exact number is changed from time to time, within
such specified limits, by a resolution which is duly adopted by the Board of
Directors or by the shareholders. The minimum and maximum number of directors
may be changed, or the Corporation may
C-5
9098
implement a board structure that specifies a fixed number of directors without
minimum and maximum numbers, by amendment of the Articles of Incorporation or by
a bylaw amending this Section of these Bylaws duly adopted by the affirmative
vote or written consentsconsent of a majority of the outstanding shares entitled to
vote; provided, however, that no such amendment reducing the number of directors
to a number less than five (5) shall be adopted if the votes cast against its
adoption at a meeting, or the shares not consenting thereto in the case of
action by written consent, are equal to more than sixteen and two-thirds percent
(16 2/3%) of the outstanding shares entitled to vote.
An individual shall be qualified to be elected as a director, and to
continue serving as a director, (i) only if he or she (or a corporation,
partnership, limited liability company or other entity which he or she controls)
is a party to a marketing agreement, consignment agreement or other similar
agreement with the Corporation pursuant to which he or she (or such corporation,
partnership, limited liability company or other entity) has agreed to deliver
California-grown avocados to the Corporation for processing and marketing, and
(ii) only if he or she (or such corporation, partnership, limited liability
company or other entity) is not in default under such agreement with the
Corporation. The preceding qualification for directors shall be inapplicable to
any directors who are elected by the holders of shares of the Corporation's
preferred stock (if a class or series of preferred stock is issued and
outstanding) voting separately as a class or series in the election of
directors.
SECTION 3.03 Election and Term of Office.ELECTION AND TERM OF OFFICE; REMOVAL OF DIRECTORS. The
directors shall be elected at each annual meeting of the shareholders, but if
any such annual meeting is not held or the directors are not elected thereat,
the directors may be elected at any special meeting of the shareholders held for
that purpose. Each director shall hold office until the expiration of the term
for which elected and until his or her successor is elected and qualified or
until hehis or she isher death, resignation or removal from office.
As provided in Section 302 of the California Corporations Code, the Board
of Directors may declare vacant the office of a director who has been declared
of unsound mind by an order of court or convicted of a felony. As provided in
Section 304 of the California Corporations Code, the superior court of the
proper county may, at the suit of shareholders holding at least ten percent
(10%) of the number of outstanding shares of any class, remove from office any
director in case of fraudulent or dishonest acts or gross abuse of authority or
discretion with reference to the Corporation and may bar from reelection any
director so removed for a period prescribed by the court.
Any or all of the directors may be removed from office. Nooffice without cause by the
affirmative vote or written consent of a majority of the outstanding shares
entitled to vote. However, no director may be removed priorfrom office (unless the
entire Board of Directors is removed) when the votes cast against such
director's removal, or not consenting in writing to the expirationremoval, would be
sufficient to elect that director if voted cumulatively at an election at which
the same total number of his or her termvotes were cast (or, if the action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
office, except as permitted by law.directors authorized at the time of such director's most recent election were
then being elected. The removal of a director without cause shall be subject to
any other applicable limitations that are set forth in Section 303 of the
California Corporations Code.
SECTION 3.04 Vacancies.VACANCIES. Vacancies in the Board of Directors, other than
those created by the removal of a director, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
and each director so elected shall hold office until his or her successor is
elected and qualified at an annual or special meeting of the shareholders.shareholders or
until his or her death, resignation or removal from office.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
when any authorized position of director is not filled by a duly elected and
acting director, whether caused by the death, resignation or removal of any
director, increase in the authorized number of directors, failure of the
shareholders, at any annual or special meeting of shareholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting or otherwise.
C-6
99
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies created by the removal of a director or not filled by the
directors. Any such election by written consent other than to fill a vacancy
created by removal (which shall require the unanimous written consent of all
shares entitled to vote for the election of directors) shall require the written
consent of a majority of the outstanding shares entitled to vote. If the
resignation of a director is given to take effect at a future time, the Board of
Directors or the shareholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his or her term of office.
SECTION 3.05 Place of Meeting.PLACE OF MEETING. Meetings of the Board of Directors or any
committee thereof shall be held at any place within or without the State of
California which has been designated in the notice of the meeting or, if not
stated in the notice or there is no notice, from time to time by resolution of
the Board of Directors or committee, as the case may be. In the absence of such
designation, meetings shall be held at the principal executive office of the
Corporation.
SECTION 3.06 Organizational Meeting.ORGANIZATIONAL MEETING. Immediately following each annual
meeting of shareholders, the Board of Directors shall hold a regular meeting for
the purpose of organization, election of officers and the transaction of other
business. Notice of such meetings is hereby dispensed with.
C-6
91
SECTION 3.07 Other Regular Meetings.OTHER REGULAR MEETINGS. Other regular meetings of the Board of
Directors and regular meetings of committees of the Board of Directors shall be
held without call on such dates as may be fixed by the Board of Directors or the
committee, as the case may be. Notice of all such regular meetings of the Board
of Directors and committees thereof is hereby dispensed with.
SECTION 3.08 Special Meetings.SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose or purposes may be called at any time by the Chairman of the
Board, by the President, by any Vice President, by the Secretary or by any two
(2) or more directors. Special meetings of any committee of the Board of
Directors for any purpose or purposes may be called at any time by the
President, by the Chairman or by any vice-chairman of the committee, by the
Secretary or by any two (2) or more members of the committee.
Notice of the time and place of special meetings shall be delivered
personally to all directors or committee members as the case may be, either in
writing or orally or by telephone, or shall be sent to each such director by
first-class mail, facsimile, telegram or other electronic or voice mail message,
charges prepaid, addressed to him or her at his or her address as it is shown
upon the records of the Corporation or, if it is not shown on such records or is
not readily ascertainable, at the place in which the meetings of the directors
are regularly held. In case such notice is mailed, it shall be deposited with
the United States Postal Service in the place where the principal office of the
Corporation is located at least four (4) days prior to the time of the holding
of the meeting. In case such notice is delivered by facsimile, telegram or other
electronic or voice mail message or personally as above provided, it shall be
delivered at least forty-eight (48) hours prior to the time of the holding of
the meeting.
Such notice need not specify the purpose of the special meeting. Such
mailing, telegraphing or personal delivery as above provided shall be due,
timely, legal and personal notice to such director.
SECTION 3.09 Notice of Adjournment.NOTICE OF ADJOURNMENT. Unless a directors' or committee
meeting has been adjourned for more than twenty-four (24) hours, notice of the
time and place of holding an adjourned meeting need not be given to absent
directors or committee members if the time and place be fixed at the meeting
adjourned. If the meeting has been adjourned for more than twenty-four (24)
hours, notice of such adjournment and the time and place of the adjourned
meeting shall be given prior to the time of the adjourned meeting to all
directors or committee members who were not present at the time of the
adjournment, in the same manner as provided in Section 3.08 of this Article for
special meetings of the Board of Directors or committee thereof.
C-7
100
SECTION 3.10 Entry of Notice.ENTRY OF NOTICE. Whenever any director has been absent from
any special meeting of the Board of Directors or committee thereof, an affidavit
executed by the Secretary or any Assistant Secretary to the effect that notice
has been duly given as required by law and these Bylaws shall be sufficient
evidence that due notice of such special meeting was given to such director.
SECTION 3.11 Waiver of Notice.WAIVER OF NOTICE. The transactions of any meeting of the Board
of Directors or committee thereof, however called and noticed and wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present and if, either before or after the meeting, each
of the directors or committee members not present, and each director or
committee member who is present but did not receive due notice thereof and
protests such lack of notice prior to such meeting or at its commencement, signs
a written waiver of notice, a consent to holding such meeting or an approval of
the minutes thereof. Such waiver of notice need not specify the purpose of the
meeting. All such waivers, consents or approvals shall be filed with the
Corporatecorporate records or made a part of the minutes of the meeting.
SECTION 3.12 Quorum.QUORUM. A majority of the authorized number of directors on
the Board of Directors or any committee thereof shall be necessary to constitute
a quorum for the transaction of business by such Board or committee, as the case
may be. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors or committee
members, if any action taken is approved by at least a majority of the required
quorum for such meeting. Subject to the foregoing sentence of this Section,
every act or decision done or made by a majority of the directors or committee
C-7
92
members present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors or committee thereof, as the case
may be, unless a greater number is required by law, the Articles of
Incorporation or these Bylaws. Directors shall be deemed present at any meeting
of the Board of Directors or any committee thereof and may participate therein
if present through use of conference telephone or similar communications
equipment, so long as all directors participating in such meeting can hear one
another.
SECTION 3.13 Adjournment.ADJOURNMENT. A majority of the directors or committee members
present, whether or not a quorum is present, may adjourn any directors' or
committee meeting to meet again at a stated time, place and hour.
SECTION 3.14 Action Without Meeting.ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Board of Directors or any committee thereof may be taken without a
meeting if all members of the Board of Directors or such committee shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board of Directors or such committee, as the case may be. Such action by written
consent shall have the same force and effect as a unanimous vote of such
directors or committee members.
SECTION 3.15 Fees and Compensation.FEES AND COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, a fixed fee, with or without expenses of attending, may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent, employee or otherwise and receiving compensation therefor.
ARTICLE IV -- OFFICERS
SECTION 4.01 Officers.OFFICERS. The officers of the Corporation shall be the
Chairman of the Board, the Chief Executive Officer, the President, the Secretary
and the Chief Financial Officer.
The Corporation may also have, at the discretion of the Board of Directors,
a Vice Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Chief Financial Officers and such other
officers as may be appointed in accordance with the provisions of Section 4.034.02
of this Article. Officers other than the Chairman of the Board need not be
directors. One person may hold two or more offices.
C-8
101
SECTION 4.02 Elections.APPOINTMENT. The officers of the Corporation shall be chosen
by the Board of Directors, and each shall hold his or her office until his or
her successor is appointed or until he or she resigns, dies or is removed from
office.
SECTION 4.03 Subordinate Officers.SUBORDINATE OFFICERS. The Board of Directors may appoint such
other officers as the business of the Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these Bylaws or as the Board of Directors may from time to
time determine.
SECTION 4.04 Removal and Resignation.REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by a majority of the directors at the time in office, at
a regular or special meeting of the Board of Directors or, except in case of an
officer chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors, the Chief Executive Officer, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 4.05 Vacancies.VACANCIES. A vacancy in any office because of death,
resignation, removal or any other cause shall be filled by the Board of
Directors at a regular or special meeting.
C-8
93
SECTION 4.06 Chairman of the Board.CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if
present, preside at all meetings of the Board of Directors, and exercise and
perform such other powers and duties as may from time to time be assigned to him
or her by the Board of Directors or as prescribed by these Bylaws. The Board of
Directors may also designate one of its members as Vice Chairman of the Board.
The Vice Chairman of the Board shall, during the absence or inability to act asof
the Chairman of the Board, have the powers and perform the duties of the
Chairman of the Board and shall have such other powers and perform such other
duties as may from time to time be assigned to him or her by the Board of
Directors or as prescribed by these Bylaws.
SECTION 4.07 Chief Executive Officer.CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the general manager and chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and affairs of the Corporation. He or she
shall preside at all meetings of the shareholders, and in the absence of the
Chairman or Vice Chairman of the Board, at all meetings of the Board of
Directors. He or she shall have the general powers and duties of management
usually vested in the office of chief executive officer of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors or these Bylaws. Unless and until otherwise determined by the Board of
Directors, the Chairman of the Board shall also serve as the Chief Executive
Officer.
SECTION 4.08 President.PRESIDENT. The President shall, after the Chief Executive
Officer, have general supervision, direction and control of the business and
affairs of the Corporation, subject to the control of the Board of Directors and
the Chief Executive Officer. The President shall have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
SECTION 4.09 Vice President.VICE PRESIDENT. In the absence or disability of the President,
the Vice Presidents, if there shall be any such officers, in order of their rank
as fixed by the Board of Directors or, if not ranked, the Vice President
designated by the Board of Directors, shall perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. The Vice Presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board of Directors or these Bylaws.
SECTION 4.10 Secretary.SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes in written form at the principal executive office of the
Corporation, of all meetings of directors, committees of the Board of Directors
and shareholders, with the time and place of holding, whether regular or
special, and if special how authorized, the notice thereof given, the names of
those directors and shareholders present, the
C-9
102
names of those present at directors' or committee meetings, the number of shares
present or represented at shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the Corporation's transfer agent or registrar of
shares, a share register, or a duplicate share register, in written form or in
any other form capable of being converted into written form, showing the names
of the shareholders and their addresses, and the number and classes of shares
held by each of them.
The Secretary shall give or cause to be given notice of all meetings of
shareholders and the Board of Directors, as required by these Bylaws or by law
to be given, and he or she shall keep the seal of the Corporation in safe
custody and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or these Bylaws.
SECTION 4.11 Chief Financial Officer.CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, in written form or in any
other form capable of being converted into written form, adequate and correct
books and records of account of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares.
The Chief Financial Officer shall deposit all monies and other valuables in
the name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of the
Corporation as may be ordered by the Board of Directors and shall render to the
C-9
94
President and directors, as required by Section 5.05 of Article V of these
Bylaws and at such other times as they may request, an account of all of his or
her transactions as Chief Financial Officer and of the financial condition of
the Corporation, and shall have such other powers and perform such other duties
as may be prescribed by the Board of Directors or these Bylaws.
ARTICLE V -- MISCELLANEOUS
SECTION 5.01 Record Date.RECORD DATE. The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of and to vote at any meeting of shareholders, or to receive any
dividend, distribution or allotment of rights, or to exercise rights in respect
of any other lawful action. The record date so fixed shall not be more than
sixty (60) nor less than ten (10) days prior to the date of the meeting, nor
more than sixty (60) days prior to any other action, for which it is fixed. When
a record date is so fixed, only shareholders of record at the close of business
on the record date shall be entitled to notice of and to vote at such meeting,
or to receive such dividend, distribution or allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any shares on
the books of the Corporation after the record date, except as otherwise provided
in the Articles of Incorporation or by agreement or by law. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting unless the Board of
Directors fixes a new record date for the adjourned meeting, but the Board of
Directors shall fix a new record date if the meeting is adjourned for more than
forty-five (45) days from the date set for the original meeting.
SECTION 5.02 Inspection of Corporate Records.INSPECTION OF CORPORATE RECORDS. The record of shareholders,
the accounting books and records, and minutes of proceedings of the
shareholders, the Board of Directors and committees of the Board of Directors,
shall be open to inspection in written form upon the written demand of any
shareholder or holder of a voting trust certificate, at any reasonable time during usual
business hours, for a purpose reasonably related to his or her interests as a
shareholder or holder of a voting trust certificate. Such inspection may be made
in person or by an agent or attorney and shall include the right to copy and
make extracts. Demand of inspection shall be made in writing upon the President,
Secretary or Assistant Secretary of the Corporation. The rights of inspection
described in this paragraph shall extend to the records of each subsidiary of
the Corporation.
A shareholder or shareholders holding at least five percent (5%) in the
aggregate of the outstanding voting shares of the Corporation or holding at
least one percent (1%) of those voting shares and having
C-10
103
filed a Schedule 14A with the United States Securities and Exchange Commission
shall have an absolute right to do either or both of the following: (i) inspect
and copy the record of shareholders' names and addresses and shareholdings
during usual business hours upon five (5) business days' prior written demand
upon the Corporation, or (ii) obtain from the transfer agent for the
Corporation, if any, upon written demand and upon the tender of its usual
charges for such a list (the amount of which charges shall be stated to the
shareholder by the transfer agent upon request), a list of the names and
addresses of the shareholders who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand, whichdemand. The list shall be made available on or before the later of
five (5) business days after the demand is received or the date specified
therein as the date as of which the list is to be compiled.
Every director shall have the absolute right at any reasonable time to
inspect in written form and copy all books, records and documents of every kind
and to inspect the physical properties of the Corporation and its subsidiary
corporations, domestic or foreign. Such inspection may be made in person or by
agent or attorney, and the right of inspection includes the right to copy and
make extracts.
SECTION 5.03 Checks, Drafts and Notes.CHECKS, DRAFTS AND NOTES. All checks, drafts or other orders
for payment of money, notes or other evidences of indebtedness issued in the
name of or payable to the Corporation shall be signed or endorsed by such person
or persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
SECTION 5.04 Seal.SEAL. The Corporation shall have a common seal, and shall have
inscribed thereon the name of the Corporation, the date of its incorporation and
the word California.
C-10
95
SECTION 5.05 Financial Reports.FINANCIAL REPORTS. The Chief Financial Officer shall prepare
and submit, or cause to be prepared and submitted, to the Board of Directors,
not later than one hundred twenty (120) days after the close of each fiscal year
of the Corporation, an annual report containing a balance sheet as of the end of
that fiscal year and an income statement and statement of changes in financial
position for that fiscal year, accompanied by the report thereon, if any, of any
independent accountants engaged by the Corporation or the certificate of an
authorized officer of the Corporation that the financial statements were
prepared without audit from the books and records of the Corporation. The
requirement of Section 1501 of the California Corporations Code that the Board
of Directors shall cause the annual report to be sent to the shareholders not
later than one hundred twenty (120) days after the close of the Corporation's
fiscal year and at least fifteen (15) days prior to the annual meeting of
shareholders is hereby expressly waived until such time as the Corporation has
one hundred (100) or more holders of record of its shares.
A shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of the Corporation may make a written request to
the Corporation for an income statement of the Corporation for the three-month,
six-month or nine-month period of the current fiscal year ended more than thirty
(30) days prior to the date of the request and a balance sheet of the
Corporation as of the end of such period and, in addition, if no annual report
for the last fiscal year has been sent to shareholders, such annual report,
accompanied by the report thereon, if any, of any independent accountants
engaged by the Corporation or the certificate of an authorized officer of the
Corporation that such financial statements were prepared without audit from the
books and records of the Corporation. The annual report or statements so
requested shall be delivered or mailed to the person making the request within
thirty (30) days thereafter.
A copy of each such annual, semi-annual, and quarterly financial statement
shall be kept on file for a period of twelve (12) months after delivery to the
Board of Directors, and shall be exhibited at all reasonable times to any
shareholder demanding an examination thereof or a copy shall be mailed to the
shareholder.
SECTION 5.06 Execution of Documents.EXECUTION OF DOCUMENTS. The Board of Directors, except as
these Bylaws or the Articles of Incorporation otherwise provide, may authorize
any officer or officers, or agent or agents, to enter into any contract or
execute any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances; and unless so
authorized by the Board of
C-11
104
Directors, no officer, agent, or employee shall have any power or authority to
bind the Corporation by any contract or agreement or to pledge its credit to
render it liable for any purpose or to any amount.
SECTION 5.07 Certificates of Stock.CERTIFICATES OF STOCK. A certificate or certificates for
shares of the capital stock of the Corporation shall be issued to each
shareholder when any such shares are fully paid. All such certificates shall be
signed by the Chairman of the Board or the President or a Vice President, and by
the Chief Financial Officer or an Assistant Chief Financial Officer, Secretary
or an Assistant Secretary, or shall be authenticated by facsimiles of such
signatures.
Certificates for shares may be issued prior to full payment thereof, under
such restrictions and for such purposes as the Board of Directors or these
Bylaws may provide; provided, however, that any such certificates so issued
prior to full payment shall state the total amount of the consideration to be
paid therefor and the amount paid thereon, and such statement shall be
conspicuous.
There shall also appear on each certificate, to the extent applicable,
statements: that the shares represented thereby are subject to restrictions upon
transfer, to an irrevocable proxy under Section 705(e) of the California
Corporations Code, or to restrictions upon voting rights contractually imposed
by the Corporation; that such shares are redeemable or assessable or subject to
conversion and the period for conversion, and any such statement that such
shares are subject to restrictions upon transfer or are assessable shall be
conspicuous. If the shares of the Corporation are classified or if any class of
shares has two or more series, there shall also appear on each certificate the
office or agency of the Corporation from which shareholders may obtain, upon
request and without charge, a statement of the rights, preferences, privileges
and restrictions granted to or imposed upon each class or series of shares
authorized to be issued and upon the holders thereof.
C-11
96
Notwithstanding the foregoing provisions of this Section 5.07, the Board of
Directors is entitled to elect to cause the Corporation to adopt a system of
issuance, recordation and transfer of its shares by electronic or other means
not involving any issuance of certificates, subject, however, to compliance with
Section 416 of the California Corporations Code and other applicable law
regarding such system.
SECTION 5.08 Representation of Shares of Other Corporations.REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Subject to the
instructions and control of the Board of Directors, the Chief Executive Officer,
the President or any Vice President and the Secretary or Assistant Secretary of
the Corporation, acting jointly, are authorized to vote, represent and exercise
on behalf of the Corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of the Corporation. The
authority herein granted to said officers to vote or represent on behalf of the
Corporation any and all shares held by the Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
person authorized so to do by proxy or power of attorney duly executed by said
officers.
SECTION 5.09 Inspection of Bylaws.INSPECTION OF BYLAWS. The Corporation shall keep in its
principal executive office in the State of California, or if there be no such
office at its principal business office in such State, the original or a copy of
these Bylaws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office is outside such State and the Corporation has no principal
business office in such State, the Corporation shall upon the written request of
any shareholder, made in writing upon the President, Secretary or Assistant
Secretary of the Corporation, furnish to such shareholder a copy of these Bylaws
as amended to date.
ARTICLE VI -- RESTRICTIONS ON TRANSFER OF SHARES
SECTION 6.01 Corporation's Right of First Refusal.CORPORATION'S RIGHT OF FIRST REFUSAL. Before any shares of the
Corporation's stock that are owned by any shareholder of the Corporation may be
sold, assigned, pledged or otherwise transferred (whether voluntarily,
involuntarily, by operation of law, pursuant to a marital dissolution decree or
by gift or for consideration and including a transfer of any interest in any
such shares), the shares shall first be offered to the Corporation, which shall
have the right to purchase all (but not fewer than all) of the shares that are
proposed to be transferred on the terms and conditions proposed by the potential
purchaser and in accordance with the terms and conditions of this Article VI
(the "RIGHT OF FIRST REFUSAL").
C-12
105
SECTION 6.02 Notice to the Corporation of the Proposed Transfer.NOTICE TO THE CORPORATION OF THE PROPOSED TRANSFER. Each time
that any shareholder of the Corporation (the "TRANSFERRING SHAREHOLDER")
proposes to sell, assign, pledge or otherwise transfer any shares of the
Corporation's stock in a transaction that is not a permitted transfer under
Section 6.07 of this Article, the Transferring Shareholder shall give the
Corporation at least thirty (30) days' prior written notice of the proposed
transfer (the "TRANSFER NOTICE"). Unless the Corporation agrees in writing to
another method of delivery, the Transfer Notice shall be delivered by registered
or certified mail, postage prepaid and return receipt requested, or delivered
personally to the Corporation's Secretary at the Corporation's principal
executive office specified in Section 1.01 of these Bylaws or to such other
principal executive office for the Corporation that the Board of Directors may
adopt and announce from time to time.
The Transfer Notice shall set forth in reasonable detail the terms and
conditions of the proposed transfer, including, without limitation, (i) the
identity of the proposed transferee (who must in any case be a bona fide
transferee with respect to whom the transfer is permissible under applicable
federal and state securities laws), (ii) the number of shares proposed to be
transferred, (iii) the purchase price per share, (iv) the terms of payment, (v)
the date of the proposed transfer, and (vi) a statement by the Transferring
Shareholder that he or she has entered into a legally binding agreement (subject
to compliance with these Bylaws) with the proposed transferee with respect to
the transfer of the shares on the terms described in the Transfer Notice. The
Transferring Shareholder shall be liable to the Corporation if the Transfer
Notice contains any intentional or grossly negligent misstatements or omissions.
C-12
97
For purposes of this Article VI, a "transfer" of shares shall be deemed to
include a proposed transfer or issuance of more than fifty percent (50%) of the
outstanding stock or other equity ownership interests of any shareholder of the
Corporation that is a corporation, a partnership, a limited liability company or
another form of entity, and the Right of First Refusal shall apply to any such
proposed transaction. In that event, the Transferring Shareholder shall be
deemed to have offered to sell a number of shares of the Corporation's stock
equal to the number of shares owned by the Transferring Shareholder multiplied
by the percentage of the Transferring Shareholder's stock or other equity
ownership interests that are the subject of the proposed transaction.
SECTION 6.03 Purchase of Shares by the Corporation.PURCHASE OF SHARES BY THE CORPORATION. The Corporation shall
have the right, but not the obligation, to elect to purchase from the
Transferring Shareholder all, but not less than all, of the shares of stock that
the Transferring Shareholder proposes to transfer and that are described in the
Transfer Notice. Within thirty (30) days after its receipt of the Transfer
Notice, the Corporation shall notify the Transferring Shareholder in writing as
to whether the Corporation has elected to purchase all of the shares that are
described in the Transfer Notice. Failure by the Corporation to give a timely
notice shall be deemed an election not to purchase all of such shares. Delivery
by the Corporation of a timely purchase election shall constitute a binding
purchase agreement between the Transferring Shareholder and the Corporation. The
Corporation shall not be entitled to elect to purchase fewer than all of the
shares that are the subject of the proposed transfer. Notices by the Corporation
to the Transferring Shareholder shall be delivered in the manner specified in
Section 2.02 of these Bylaws.
SECTION 6.04 Purchase Terms.PURCHASE TERMS. Except as provided in this Section 6.04 or in
Section 6.05 of this Article, the Transferring Shareholder's shares that are the
subject of the proposed transfer shall be purchased by the Corporation for the
same purchase price and other payment terms that are described in the Transfer
Notice. If the Transfer Notice provides for the use of promissory notes or other
non-cash consideration, the Corporation at its option may specify that the
purchase price will be paid by it in cash in an amount equal to the Board of
Directors' good faith estimate of the present fair market value of such non-cash
consideration. If the Transfer Notice does not describe any purchase price for
the shares that the Transferring Shareholder proposes to transfer because the
transfer is a gift, an involuntary transfer or any other form of transfer that
does not involve a purchase price for the shares that are the subject of the
proposed transfer, the Corporation shall pay a cash purchase price equal to the
Board of Directors' good faith estimate of the present fair market value or book
value of such shares, whichever is greater.
C-13
106
SECTION 6.05 Closing of the Purchase.CLOSING OF THE PURCHASE. The Corporation shall select the date
of the closing of the purchase and sale of the Transferring Shareholder's shares
of stock that are to be purchased as a result of the exercise of the Right of
First Refusal described in this Article by providing at least ten (10) days'
written notice thereof to the Transferring Shareholder, provided, however, that
the Corporation shall select a closing date that is no later than the fortieth
(40th) day after its receipt of the Transfer Notice from the Transferring
Shareholder unless the Corporation and the Transferring Shareholder agree to
extend the closing date.
The Corporation shall deliver to the Transferring Shareholder a check in
the amount of the purchase price of the shares purchased by the Corporation.
However, if the transferee identified in the Transfer Notice from the
Transferring Shareholder proposes to deliver promissory notes or another form of
non-cash consideration and if the Corporation does not elect pursuant to Section
6.04 of this Article above to pay cash equal to the present fair market value of
such non-cash consideration, then the Corporation shall deliver such non-cash
consideration to the Transferring Shareholder. The Transferring Shareholder
shall execute and deliver any stock assignments and other instruments that may
be reasonably requested by the Corporation in order to complete the purchase and
sale of the Transferring Shareholder's shares of stock.
SECTION 6.06 Transfer of Shares to the Proposed Transferee.TRANSFER OF SHARES TO THE PROPOSED TRANSFEREE. If the
Corporation does not make a timely election to purchase all of the shares that
are the subject of the proposed transfer, or if the Corporation defaults on its
election to purchase such shares, the Transferring Shareholder shall have the
right to transfer such shares to the proposed transferee who is identified in
the Transfer Notice, provided that such transaction must be completed within
sixty (60) days after the Transferring Shareholder's
C-13
98 delivery of the Transfer
Notice to the Corporation. The shares must be transferred on the terms described
in the Transfer Notice, and the transferee of such shares shall be bound by all
of these Bylaws (including, without limitation, this Article VI) with respect to
the transferred shares. However, the transfer shall not be made and shall be of
no force or effect unless and until (i) the Corporation has determined that the
transfer will be made in compliance with any and all applicable federal and
state securities laws and regulations and other applicable laws and regulations,
including, without limitation, the regulations of any national securities
exchanges, the National Association of Securities Dealers, Inc. and any other
regulatory bodies having jurisdiction over the shares and (ii) the Transferring
Shareholder and the proposed transferee, at their expense, have delivered to the
Corporation any and all investment representation certificates and other
certificates, legal opinions and instruments of conveyance, in form and
substance satisfactory to the Corporation, that may be requested by the
Corporation for the purpose of demonstrating that the transfer can be lawfully
made without registration or qualification under applicable federal and state
securities laws and regulations and in order to effect the transfer of the
shares to the transferee. Furthermore, notwithstanding anything to the contrary
in these Bylaws: (a) no individual, person, corporation, partnership, other
entity or group within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
may acquire or hold (directly or indirectly) record or beneficial ownership of
more than twenty percent (20%) of the total outstanding shares of the
Corporation's stock, as the term "beneficial ownership" is used in Rule 13d-3
under the Securities Exchange Act of 1934, as amended; (b) no shares may be
transferred to any individual, person, corporation, partnership or other entity
or group that is described in clause (a) of this sentence; and (c) without the
prior written consent of the Board of Directors, no shares may be transferred to
any individual, person, corporation, partnership, other entity or group that
engages in a business that is in competition with the Corporation's business.
SECTION 6.07 Transfers Not Subject to the Right of First Refusal.TRANSFERS NOT SUBJECT TO THE RIGHT OF FIRST REFUSAL. The Right
of First Refusal shall not apply to a transfer of shares of stock (i) to a
member or members of the Transferring Shareholder's immediate family or (ii) to
an inter vivos trust established for the sole and exclusive benefit of the
Transferring Shareholder and/or a member or members of the Transferring
Shareholder's immediate family. The transferee(s) of such shares shall be bound
by all of these Bylaws (including, without limitation, this Article VI) with
respect to the transferred shares. Furthermore, within ten (10) days after the
effective date of such transfer, the Transferring Shareholder (or his or her
legal representative) shall advise the Secretary of the Corporation in writing
of the details of such transfer and shall provide written
C-14
107
documentation to the Corporation demonstrating that such transfer satisfies the
terms and conditions of this Section 6.07. For purposes of this Section 6.07,
the term "immediate family" means a shareholder's spouse, children,
grandchildren, parents, brothers and sisters.
SECTION 6.08 Transfers of Shares in Violation of the Bylaws.TRANSFERS OF SHARES IN VIOLATION OF THE BYLAWS. Any sale or
other transfer of shares of the Corporation's stock (including any agreement to
sell or transfer shares) that is made in violation of the terms and conditions
of this Article VI shall be null and void for all purposes, and the Corporation
shall not be required to transfer on its books any shares that are the subject
of any such sale or transfer.
SECTION 6.09 Legends on Certificates.LEGENDS ON CERTIFICATES. All certificates that represent
shares of the Corporation's stock shall have endorsed thereon the following
legends:
(a) "THE SHARES THAT ARE REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST REFUSAL AS SET
FORTH IN THE BYLAWS OF THE CORPORATION. A COPY OF THE BYLAWS IS ON FILE AT
THE PRINCIPAL BUSINESS OFFICE OF THE CORPORATION."
(b) "THE SHARES THAT ARE REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, OFFERED FOR SALE, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS SUCH TRANSFER IS REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS COVERING SUCH SHARES
OR UNLESS THE CORPORATION RECEIVES AN C-14
99
OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED."
(c) Any other legends required to be placed thereon by federal or
state securities laws or authorities.
SECTION 6.10 Termination of the Right of First Refusal.TERMINATION OF THE RIGHT OF FIRST REFUSAL. The Right of First
Refusal described in this Article VI shall terminate if and when the Board of
Directors or the Corporation's shareholders adopt an amendment to the Bylaws
which deletes this Article VI from the Bylaws or which otherwise terminates the
Right of First Refusal.
ARTICLE VII -- INDEMNIFICATION
SECTION 7.01 Indemnification of Directors.INDEMNIFICATION OF DIRECTORS. The Corporation shall, to the
maximum extent permitted by applicable law but subject to the terms and
conditions of any indemnification agreement that may be entered into between the
director and the Corporation, indemnify each of its directors against expenses
(as defined in Section 317(a) of the California Corporations Code), judgments,
fines, settlements and other amounts actually and reasonably incurred by such
director in connection with any proceeding (as defined in Section 317(a) of the
California Corporations Code) arising by reason of the fact that such director
(i) is or was a director of the Corporation, (ii) was a director of the
Corporation's predecessor, Calavo Growers of California, a California nonprofit
cooperative association, or (iii) is or was serving at the request of the
Corporation as a director of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise. For purposes of this
Article VII, a "director" includes any person who is or was a director of the
Corporation.
SECTION 7.02 Indemnification of Officers, Employees and Other Agents.INDEMNIFICATION OF OFFICERS, EMPLOYEES AND OTHER AGENTS. In
addition to the indemnification that is required to be provided to directors of
the Corporation under Section 7.01 of this Article, the Corporation shall have
the power, to the extent and in the manner permitted by applicable law, to
indemnify each of its officers, employees and other agents against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding arising by reason of the fact that such person
is or was an officer, employee or other agent of the Corporation. For purposes
of this Article VII, an "employee," "officer" or "agent" of the Corporation
includes any person
C-15
108
(i) who is or was an officer, employee or other agent of the Corporation, (ii)
who is or was serving at the request of the Corporation as a director, officer,
employee or other agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an officer, employee
or other agent of Calavo Growers of California or of another enterprise at the
request of Calavo Growers of California.
SECTION 7.03 Advance of Expenses.ADVANCE OF EXPENSES. Attorneys' fees and other expenses
incurred in defending any proceeding may be advanced by the Corporation prior to
the final disposition of such proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amounts if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized or provided by this Article VII.
SECTION 7.04 Indemnification Not Exclusive.INDEMNIFICATION NOT EXCLUSIVE. The indemnification authorized
or provided by this Article VII shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under any Bylaw,
agreement, vote of shareholders or directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office. The rights to indemnification hereunder shall continue as to a person
who has ceased to be a director, officer, employee or other agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
SECTION 7.05 Insurance.INSURANCE. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or other agent of the Corporation against any liability
asserted against or incurred by such person in such capacity or arising out of
that C-15
100
person's status as such, whether or not the Corporation would have the
power to indemnify that person against such liability under the provisions of
this Article VII.
SECTION 7.06 Conflicts.CONFLICTS. No indemnification or advance shall be made under
this Article VII, except where such indemnification or advance is mandated by
law or the order, judgment or decree of any court of competent jurisdiction, in
any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Corporation's Articles of Incorporation, these Bylaws, a resolution of the
shareholders or an agreement in effect at the time of the accrual of the
alleged cause of action asserted in the proceeding in which the expenses
were incurred or other amounts were paid which prohibits or otherwise
limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
SECTION 7.07 Indemnification Agreements.INDEMNIFICATION AGREEMENTS. Notwithstanding anything to the
contrary in this Article VII, the Corporation is authorized to enter into a
contract with any director, officer, employee or other agent of the Corporation
(or with any person who is or was serving at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust or other enterprise, including employee benefit plans, or
any person who was a director, officer, employee or agent of a corporation which
was a predecessor corporation of the Corporation or of another enterprise at the
request of such predecessor corporation) which provides for indemnification
rights equivalent to or, if the Board of Directors so determines and to the
extent permitted by applicable law, greater than those provided for in this
Article VII.
SECTION 7.08 Amendment, Repeal or Modification.AMENDMENT, REPEAL OR MODIFICATION. No amendment, repeal or
modification of any provision of this Article VII shall adversely affect any
right or protection of any director, officer, employee or other agent of the
Corporation which exists at the time of such amendment, repeal or modification.
ARTICLE VIII -- AMENDMENTS
SECTION 8.01 Power of Shareholders.POWER OF SHAREHOLDERS. New Bylaws may be adopted or these
Bylaws may be amended or repealed by the affirmative vote or written consent of
a majority of the outstanding shares entitled to vote, except as may be
specifically set forth in the Articles of Incorporation or these Bylaws to the
contrary.
C-16
109
SECTION 8.02 Power of Directors.POWER OF DIRECTORS. Subject to the right of the shareholders
as provided in Section 8.01 of this Article to adopt, amend or repeal these
Bylaws, Bylaws other than a Bylaw or amendment thereof changing the authorized
number of directors may be adopted, amended or repealed by the affirmative vote
of at least seventy-five percent (75%) of the authorized number of directors.
The adoption of a resolution by the Board of Directors that fixes the exact
number of directors within the authorized range of directors specified in
Section 3.02 of these Bylaws shall not be considered an amendment of these
Bylaws.
C-16C-17
101110
APPENDIX D
CALAVO GROWERS, INC.
MARKETING AGREEMENT
GROWER'S NAME
GROWER'S ADDRESS
GROWER'S TAXPAYER I.D. NUMBER
GROWER'S ELECTION: ____ MONTHLY OR ____ WEEKLY POOL
EFFECTIVE DATE OF AGREEMENT
GROVE LOCATION
NUMBER OF TREES ____________
This Marketing Agreement (the "Agreement""AGREEMENT") is entered into by and between
the above-named grower (the "Grower""GROWER") and Calavo Growers, Inc. ("Calavo"CALAVO"), a
California corporation whose address is 2530 Red Hill Avenue, Santa Ana,
California 92705-5542. The effective date of this Agreement is specified above.
However, if this Agreement is being executed by the parties prior to the merger
of Calavo Growers of California, a California nonprofit cooperative association,
into Calavo, the effective date of this Agreement will be the date on which the
merger occurs. Calavo will advise the Grower of the date of the merger, and
neither party will have any obligations under this Agreement until the merger
occurs.
The Grower represents that it is the producer of California avocados.
Calavo desires to pack and market these avocados. The following terms are hereby
agreed upon by both parties:
1. DeliveryDELIVERY
The Grower will deliver to Calavo all of the avocados grown by the Grower
on the grove listed above and on all other land now or hereafter owned by the
Grower or in the Grower's possession as tenant, except avocados that are
retained for the Grower's personal use or consumption and except avocados of
such varieties that Calavo notifies the Grower are not economical to handle
because of the character, quantity or marketability of the fruit. Except as
described in the preceding sentence, Calavo will market, when and where
feasible, all of the avocados grown by the Grower.
Delivery of the avocados will be made at the Grower's expense and risk of
loss and at the time and place and in the manner reasonably specified by the
Grower, including, without limitation, through the Grower's right to require
Calavo to obtain possession of the avocados at the Grower's grove. Title to the
avocados will pass to Calavo only on the date that it obtains actual possession
of the avocados.
Calavo has the right to inspect the Grower's groves for crop estimating and
harvesting purposes during reasonable hours. The Grower will assist Calavo in
preparing an annual crop forecast. Calavo has full control of grading, sizing
and weight standards. The Grower will comply with all applicable laws and
regulations regarding the production, harvesting and delivery of the avocados.
2. TermTERM
The term of this Agreement will be for one year from the effective date and
will automatically renew on a year-to-year basis unless either party gives
written notice of termination of this Agreement at least thirty days prior to
the applicable anniversary of the effective date. Calavo may also terminate this
Agreement upon written notice to the Grower if the Grower is in breach of this
Agreement and fails to correct the breach within ten days after receipt of
written notice of the breach from Calavo. If the Grower engages in a bona fide
sale or lease to a third party of the grove(s) that is subject to this
Agreement, this Agreement will terminate as to such grove(s) on the effective
date of the sale or lease if (i) the Grower provides Calavo with satisfactory
written evidence of the bona fide nature of the sale or lease and (ii) all of
the Grower's obligations hereunder have been satisfied prior to the sale or
lease (including the obligation to deliver all avocados harvested prior to the
sale or lease). Subject to the preceding sentence,
D-1
102111
this Agreement is binding upon the successors and assigns of the Grower and
Calavo, although neither party has the right to assign its obligations to
another person or entity. No termination of this Agreement will release either
party from liability for breaches of this Agreement, and the provisions
described below in Sections 4 and 7 to 9 will survive the termination of this
Agreement.
3. MarketingMARKETING
Calavo will receive, pack, market and sell the avocados delivered by the
Grower, at such prices and terms, in such form, and at such times as in its
judgment and discretion it deems best, and will pay the Grower as payment in
full the net proceeds received from the marketing of the avocados less a packing
and marketing fee established by its Board of Directors. The packing and
marketing fee will include, but is not limited to, the costs of receiving,
processing, manufacturing, handling, transporting, advertising, promoting, and
other costs of marketing and administrative costs, and will also include a
profit to Calavo. The avocados may be pooled in one or more pools established by
the Board of Directors and will not be identified to the Grower once they are
graded. Packing and marketing of the avocados will be under the exclusive
control of Calavo.
4. LiensLIENS
Calavo is hereby given a first lien upon all sales proceeds as security for
any and all amounts of any nature owed by the Grower to Calavo, and Calavo may
offset amounts due Calavo against amounts owed to the Grower under this
Agreement. Such rights of Calavo will not be barred by the running of any
statute of limitations, and such rights may be subordinated by appropriate
written instructions when authorized by the Board of Directors in its sole
discretion. The Grower will execute and deliver any documents requested by
Calavo to implement or perfect its rights under this Agreement.
5. LaborLABOR
Calavo will have no control whatsoever over the labor relations policies or
conduct or direction of labor relations of the Grower, nor will the Grower have
any control over Calavo's labor policies.
6. ConsignmentCONSIGNMENT
The Grower acknowledges that Calavo may reconsign the avocados to another
party.
7. Notices; Entire Agreement; SeverabilityNOTICES; ENTIRE AGREEMENT; SEVERABILITY
All notices to either the Grower or Calavo will be delivered in writing,
either personally, by facsimile transmission or by registered, certified or
express mail, return receipt requested, postage prepaid, to the address for such
party specified above or to such other address as the party may from time to
time advise the other party, and will be deemed given and received as of actual
personal delivery, on the first business day after the date of delivery shown on
any such facsimile transmission or upon the third business day after deposit in
the U.S. Mail if registered, certified or express mail is used, as the case may
be.
This Agreement constitutes the entire agreement of the Grower and Calavo
regarding the subject matter hereof and supersedes all prior agreements and
understandings pertaining to such subject matter. This Agreement may be amended
only by a writing signed by the Grower and Calavo.
If any provision of this Agreement is determined by a duly appointed
arbitrator or a court of competent jurisdiction to be invalid or unenforceable,
the remaining provisions of this Agreement shall continue in full force and
effect.
8. Remedies for Grower's BreachREMEDIES FOR GROWER'S BREACH
The Grower's failure to deliver avocados as required by this Agreement will
result in injury to Calavo, and it would be extremely difficult and
impracticable to fix the amount of damages that Calavo will incur. Therefore,
the Grower agrees to pay to Calavo, upon Calavo's demand, the following amounts
as liquidated
D-2
103112
damages for all avocados that are withheld, delivered, sold, consigned or
otherwise marketed by or for the Grower other than in accordance with the terms
of this Agreement:
(a) $1,000; plus
(b) An amount equal to Calavo's packing and marketing fee per pound of
avocados that is in effect as of the date of the Grower's breach of this
Agreement, multiplied by the pounds of avocados that were withheld,
delivered, sold, consigned or otherwise marketed by or for the Grower other
than in accordance with the terms of this Agreement.
The foregoing right to recover liquidated damages is in addition to all
other remedies available to Calavo under applicable law including, without
limitation, the right to obtain injunctive relief, and all such remedies are
cumulative and not exclusive.
9. Governing Law; Enforcement of AgreementGOVERNING LAW; ENFORCEMENT OF AGREEMENT
This Agreement is governed by the internal laws of the State of California.
All disputes concerning this Agreement will be settled by arbitration, before
one arbitrator, in accordance with the commercial arbitration rules of the
American Arbitration Association then in effect. The arbitrator will be selected
in accordance with such commercial arbitration rules. A party is entitled to
initiate an arbitration proceeding if a dispute cannot be resolved amicably
within ten days after the other party has been notified of the existence of the
dispute. The arbitrator is authorized to grant injunctive relief and/or specific
performance in addition to monetary relief. The arbitrator hereby is instructed
to interpret and enforce this Agreement in accordance with its terms. All
arbitration proceedings will be held in Los Angeles, California. Notwithstanding
the foregoing, each party is entitled to bring an action for temporary or
preliminary injunctive relief at any time in any court of competent jurisdiction
in order to prevent immeasurable and irreparable injury that might result from a
breach of this Agreement that occurs prior to the conclusion of an arbitration
proceeding.
The award of the arbitrator in any arbitration proceeding will be final and
may be enforced in any court of competent jurisdiction, and an action to compel
arbitration may be brought in any court of competent jurisdiction. The
unsuccessful party to any arbitration proceeding or to any court action that is
permitted by this Agreement will pay to the successful party all costs and
expenses, including, without limitation, reasonable attorneys' fees and the fees
of the arbitrator, incurred therein by the successful party. EACH PARTY AGREES
THAT ALL RIGHTS TO A TRIAL BY A JURY OF ANY CLAIM CONCERNING THIS AGREEMENT ARE
ABSOLUTELY AND FOREVER WAIVED.
DATED: ________________________________ CALAVO GROWERS, INC.
By:
Title:
[Name of Grower]
By:
Title:
D-3
104113
APPENDIX E
CALAVO GROWERS OF CALIFORNIA
BYLAWS AMENDMENT
RESOLUTION OF THE BOARD OF DIRECTORS
RESOLVED, that the Bylaws of Calavo Growers of California hereby are
amended by adding the following paragraph to Section 7.08 of the Bylaws:
(c) Notwithstanding anything to the contrary in these Bylaws, (i) the
Association's Marketing Agreement with each member automatically shall
terminate on the effective date of the Association's merger with Calavo
Growers, Inc., a California corporation, and (ii) the membership of
each member in the Association automatically shall terminate on the
effective date of the merger. The effective date of the merger shall be
the date that an agreement of merger between the Association and Calavo
Growers, Inc. is filed with the Secretary of State of the State of
California.
E-1
105114
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 204 and 317 of the California General Corporation Law authorize
the registrant, Calavo Growers, Inc., to indemnify, subject to the terms and
conditions set forth therein, its directors, officers, employees and other
agents against expenses, judgments, fines, settlements and other amounts that
they may incur in connection with pending, threatened or completed legal actions
or proceedings that are based upon their service as directors, officers,
employees or other agents of the registrant or that are based upon their service
as directors, officers, employees or other agents of certain other specified
entities, including the registrant's predecessor corporation, Calavo Growers of
California. The California General Corporation Law also provides that the
registrant is entitled to purchase indemnification insurance on behalf of any
such director, officer, employee or agent.
Article VII of the registrant's Bylaws requires the indemnification by the
registrant of each of its directors to the maximum extent permitted by law.
Article VII of the registrant's Bylaws authorizes, but does not require, the
registrant to indemnify its officers, employees and other agents against the
expenses, judgments, fines, settlements and other amounts that are described in
the preceding paragraph.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
A list of exhibits that are included as part of this registration statement
is set forth in the Index to Exhibits that immediately precedes such exhibits.
(b) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is filed with Part II of this
registration statement:
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted from this registration statement
because they are not applicable or because the information required by any
applicable schedule is included in the consolidated financial statements or the
notes thereto.
(c) REPORT, OPINION OR APPRAISAL
Not applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
II-1
106115
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(c) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (b) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form S-4 within one business day of receipt of
such request and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
107116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statementAmendment No. 1 to Registration Statement No. 333-59418 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Santa Ana, State of California, on April 23,July 5, 2001.
CALAVO GROWERS, INC.
By: /s/ LECIL E. COLE
------------------------------------
Lecil E. Cole
Chairman of the Board of Directors,
Chief Executive Officer and
President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Lecil E. Cole and Egidio Carbone, Jr., and each of them, as his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statementAmendment
No. 1 to Registration Statement No. 333-59418 has been signed by the following
persons in the capacities indicated on April 23,July 5, 2001.
SIGNATURE TITLE
--------- -----
/s/ LECIL E. COLE Chairman of the Board of Directors, Chief
- ----------------------------------------------------------------------------------------- Executive Officer and President (Principal
Lecil E. Cole Executive Officer)
/s/ EGIDIO CARBONE, JR. Vice President, Finance and Corporate
- ----------------------------------------------------------------------------------------- Secretary (Principal Financial and Accounting
Egidio Carbone, Jr. Accounting Officer)
/s/ GEORGE H. BARNESBARNES* Director
- -----------------------------------------------------------------------------------------
George H. Barnes
/s/ FRED J. FERRAZZANOFERRAZZANO* Director
- -----------------------------------------------------------------------------------------
Fred J. Ferrazzano
/s/ JOHN M. HUNTHUNT* Director
- -----------------------------------------------------------------------------------------
John M. Hunt
/s/ ROY V. KEENANKEENAN* Director
- -----------------------------------------------------------------------------------------
Roy V. Keenan
/s/ J. LINK LEAVENSLEAVENS* Director
- -----------------------------------------------------------------------------------------
J. Link Leavens
II-3
108
SIGNATURE TITLE
--------- -----
/s/ EDWARD P. SMITHSMITH* Director
- -----------------------------------------------------------------------------------------
Edward P. Smith
/s/ ALVA V. SNIDERSNIDER* Director
- -----------------------------------------------------------------------------------------
Alva V. Snider
/s/ DORCAS H. THILLETHILLE* Director
- -----------------------------------------------------------------------------------------
Dorcas H. Thille
/s/ SCOTT VAN DER KARKAR* Director
- -----------------------------------------------------------------------------------------
Scott Van Der Kar
*By: /s/ LECIL E. COLE
- ---------------------------------------------
Lecil E. Cole
Attorney-in-Fact
II-4II-3
109117
SCHEDULE II
CALAVO GROWERS OF CALIFORNIA
VALUATION AND QUALIFYING ACCOUNTS
BALANCE BALANCE
FISCAL 11/1 10/31
FISCAL
YEAR BEGINNING ADDITIONS(1) DEDUCTIONS(2) END
------------------ --------- ------------ ------------- -------
Bad Debt Allowances..............Allowances..................... 1997/98 $26,000 $ 15,000 $ 38,000 $ 3,000
1998/99 3,000 50,000 51,000 2,000
1999/00 3,000 715,000 669,000 49,000
Reserve for Inventory Obsolescence...................Obsolescence...... 1997/98 $17,000 $ 29,000 $ 17,000 $29,000
1998/99 29,000 -- -- 29,000
1999/00 29,000 -- -- 29,000
- -------------------------
(1) Charged to costs and expenses
(2) Writeoff of assets
II-5II-4
110118
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors of
Calavo Growers of California
We have audited the accompanying consolidated balance sheets of Calavo
Growers of California and subsidiaries (Calavo or the Cooperative) as of October
31, 2000 and 1999, and the related consolidated statements of operations and
member proceeds, shareholders' equity, and cash flows, for each of the three
years in the period ended October 31, 2000 and have issued our report thereon
dated December 14, 2000, except for the second paragraph of Note 14 as to which
the date is February 20, 2001, included elsewhere in this Registration
Statement. Our audits also included the financial statement schedule listed in
Item 21 of this Registration Statement. This financial statement schedule is the
responsibility of the Cooperative's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
- --------------------------------------
Costa Mesa, California
December 14, 2000, except for the second Paragraph
of Note 14, as to which the date is February 20, 2001.
II-6II-5
111119
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Merger and Reorganization dated as of
February 20, 2001 between Calavo Growers, Inc. and Calavo
Growers of California.*
3.1 Articles of Incorporation of Calavo Growers, Inc.*
3.2 Amended and Restated Bylaws of Calavo Growers, Inc.
5.1 Form of opinionOpinion of Troy & Gould Professional Corporation with
respect to the securities being registered (executed
copy to be filed by amendment).registered.
8.1 Form of opinionOpinion of Troy & Gould Professional Corporation with
respect to certain tax matters (executed copy to be
filed by amendment).matters.
10.1 Form of Marketing Agreement for Calavo Growers, Inc.*
10.2 Marketing Agreement dated as of April 1, 1996 between
Tropical Hawaiian Products, Inc., a Hawaiian corporation,
and Calavo Growers of California.*
10.3 Lease Agreement (undated) between Tede S.A. de C.V., a
Mexican corporation, and Calavo Foods de Mexico, S.A. de
C.V., a Mexican corporation, including attached Guaranty of
Calavo Growers of California dated October 25, 1994.*
10.4 Lease Agreement dated as of November 21, 1997, between Tede
S.A. de C.V., a Mexican corporation, and Calavo de Mexico,
S.A. de C.V., a Mexican corporation, including attached
Guaranty of Calavo Growers of California dated December 16,
1996.*
10.5 Lease Intended as Security dated as of September 1, 2000
between Banc of America Leasing & Capital, LLC, a Delaware
limited liability company, and Calavo Growers of
California.*
10.6 Business Loan Agreement dated as of April 20, 1999 between
Bank of America National Trust and Savings Association and
Calavo Growers of California.*
10.7 Amendment No. 2 to Business Loan Agreement (undated) between
Bank of America N.A. (formerly Bank of America National
Trust and Savings Association) and Calavo Growers of
California.*
10.8 Loan Agreement dated as of September 1, 1985 between the
Riverside County Industrial Development Authority and Calavo
Growers of California relating to variable rate demand
industrial development revenue bonds.*
10.9 Reimbursement Agreement dated as of September 1, 1985
between Security Pacific National Bank and Calavo Growers of
California.*
10.10 Amendment No. Two to Reimbursement Agreement dated as of
August 22, 1995 between Bank of America National Trust and
Savings Association (as successor to Security Pacific
National Bank) and Calavo Growers of California.*
10.11 Amendment No. Three to Reimbursement Agreement dated as of
October 18, 2000 between Bank of America, N.A. (formerly
Bank of America National Trust and Savings Association) and
Calavo Growers of California.*
10.12 Master Loan Agreement dated as of June 15, 2000 between
CoBank, ACB and Calavo Growers of California, including
attached Revolving Credit Supplement dated June 15, 2000
between CoBank, ACB and Calavo Growers of California.*
10.13 Calavo Supplemental Executive Retirement Agreement dated
March 11, 1989 between Egidio Carbone, Jr. and Calavo
Growers of California.*
10.14 Amendment to the Calavo Growers of California Supplemental
Executive Retirement Agreement dated November 9, 1993
between Egidio Carbone, Jr. and Calavo Growers of
California.*
21.1 Subsidiaries of Calavo Growers of California.*
23.1 Consents of Troy & Gould Professional Corporation (included
in the opinions filed as Exhibits 5.1 and 8.1).
23.2 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney to execute amendments to thisthe Registration
Statement (included(previously filed on the signature pages of thisthe
Registrant's Registration Statement)Statement on Form S-4,
Registration No. 333-59418, and incorporated herein by
reference).
99.1 Form of Ballot of Calavo Growers of California.
112120
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
99.2 Restated Articles of Incorporation of Calavo Growers of
California.*
99.3 Bylaws (including Marketing Agreement) of Calavo Growers of
California, as amended to date.*
- -------------------------
*Previously filed as an exhibit to the Registrant's Registration Statement on
Form S-4, Registration Statement No. 333-59418, and incorporated herein by
reference.