EXHIBIT 99.1
CALAVO GROWERS, INC. REPORTS
RECORD SECOND QUARTER OPERATING RESULTS
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NET INCOME SURGES MORE THAN 35 PERCENT ON STRONG SALES GAINS,
DISCIPLINED FOCUS FOR CONTAINING COSTS
Second Quarter Highlights Include:
- Total Net Revenues Rise 33 Percent
- All Business Units Register Sales Gains
- Robust Growth in California Avocado Segment
- 60 Percent Net Sales Increase in International Avocados and
Perishable Food Products Segment (International)
- New Uruapan, Mexico Processing Facility Commences Production
- Company Expresses Confidence Regarding Fiscal 2004 Outlook
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SANTA ANA, Calif. (June 3, 2004) - Calavo Growers, Inc. (Nasdaq-NM: CVGW), the
global leader in packing and distributing fresh avocados, processed avocados and
other perishable food products, today reported record operating results for the
second quarter of fiscal 2004, with revenues and net income climbing to historic
highs.
For the three months ended April 30, 2004, net income advanced 35
percent to $2.3 million, equal to $0.17 per fully diluted share, from $1.7
million, or $0.13 per fully diluted share, in last year's second quarter.
Propelled by strong year-over-year sales growth in both its California
Avocado and International segments, net revenues jumped 33 percent in the
recently concluded period to $76.4 million from $57.4 million posted in the like
quarter of fiscal 2003.
"Calavo delivered an outstanding and extremely gratifying second quarter
operating performance," said Lee E. Cole, the company's chairman, president and
chief executive officer. "We witnessed sales growth in all three of our business
segments, with most notably, California and International segment net revenues
rising 27 and 60 percent, respectively."
He continued, "By all indications in the second quarter - and as
anticipated - the California avocado harvest is snapping back from last year's
cyclically smaller total industry crop and appears poised to gain velocity
throughout the second half of fiscal 2004. This favorable California
performance, in tandem with outstanding sales generated by International,
catapulted revenues in the period."
According to Cole, Calavo's sharp net-profit growth benefited from a
"disciplined approach to cost containment," as selling, general and
administrative (SG&A) expenses dipped slightly from the second period last year.
"We are committed to maintaining a firm rein on operating costs,
particularly as Calavo accelerates revenue growth across its various segments,"
Cole continued. "This rigorous emphasis - the ability to boost sales while
holding our ground on operating expense - favorably impacted the bottom line as
evidenced by the most recent quarter."
For the first half of fiscal 2004, net income totaled $2.0 million,
equal to $0.15 per fully diluted share, on revenues of $125.5 million. This
compares with net income of $2.2 million, approximating $0.17 per diluted share,
on $101.6 million net revenues posted in the initial six months last year.
Mexican Processed Facility Commences Operation
Referencing one of Calavo's most significant initiatives - its new
processed products manufacturing facility in Uruapan, Mexico - the company
stated that, as previously disclosed, the 90,000-plus-square-foot plant
commenced operations during the fiscal second period. Cole indicated production
at the new facility made significant strides toward meeting the company's
objectives for the Processed Products segment.
The Calavo CEO continued: "We are concentrating on increasing production
in the new facility, including installation of our second ultra-high-pressure
machine for guacamole and shifting operations from the company's Mexicali,
Mexico facility. As anticipated, the transition has resulted in increased
expenses related to, among other factors, duplicative overhead and co-packing by
outside contractors. We expect, however, to soon realize increased efficiencies
gained from this world-class, new facility, as well as to achieve anticipated
reductions in these above-mentioned transition costs."
California Avocados
Net sales totaled $44.4 million, an increase of 27 percent or $9.4
million from $35.0 million in last year's second quarter. The higher sales
reflect Calavo's market share of a cyclically larger 2004 California avocado
harvest, according to industry forecasts. Calavo estimates that its
second-quarter share of the California fresh avocado market approximated 34.6
percent, in line with the comparable prior-year period.
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International Avocados and Perishable Food Products
Net sales in the International segment soared 60 percent to $25.3
million from $15.8 million in the corresponding quarter of fiscal 2003.
Approximately half of segment net revenue growth is attributable to strong
year-over-year gains of Mexican-grown avocados to global markets, including
robust demand from Japan. However, the impact of increased fruit costs partially
offset the benefit of these higher sales and resulted in pressure on
second-period segment gross margin. This year's second-quarter results also
include the company's Maui Fresh International subsidiary, which was acquired on
Nov. 7, 2003.
Cole stated, "International accounted for nearly one-third of Calavo's
total revenues in the second quarter and approximately half of our year-to-year
rise in period sales. The unit's sales performance is clearly indicative of the
success of Calavo's diversification strategy - both beyond California and beyond
avocados."
Processed Products
Processed Products second quarter net sales advanced two percent to $6.7
million from $6.6 million in the like quarter last year. Revenue gains reflect
increased demand for the company's ultra-high-pressure guacamole product by the
foodservice channel. Gross margin as a percent of sales was in line with last
year's second period. However, the company continued to experience higher costs
associated with opening its new Uruapan facility - including duplicative
overhead, transportation and subcontracting fees for co-packing - that adversely
impacted margins and profitability.
"Sales continue to trend very favorably in the processed segment," said
Cole. "Demand for ultra-high-pressure outstrips current capacity, which will
increase significantly once the operations in Uruapan normalize. As production
hits its stride and we're able to reduce extraneous expense, we foresee margin
and profit improvement in the segment."
Looking Ahead: Summary and Outlook
Commenting on the operating picture for the balance of fiscal 2004, Cole
stated, "As we begin the second half of the year, we are well positioned to
continue implementing our ambitious strategic agenda focused squarely on driving
revenue and profit growth."
"Specifically, as the industry's leader, with the California avocado
market showing seasonal strength, we will benefit through increased packinghouse
volumes as we proceed into the principal harvest months."
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As processed production increases efficiencies at the Uruapan facility,
the company also anticipates stepping up introduction of its ultra-high-pressure
guacamole to the consumer channel. To date available primarily to the
food-service category, where it has enjoyed outstanding acceptance and brisk
demand since its introduction approximately 18 months ago, Cole said that
several "significant retail customers" are awaiting delivery of the
great-tasting guacamole product when Calavo commences wide-scale consumer
production in the near future.
Cole stated, "With our considerable resources and strong financial
condition - including a flexible, unleveraged balance sheet, ample working
capital and untapped borrowing lines - Calavo is positioned favorably to
capitalize on opportunities that emerge in the produce industry."
"We look to the third and fourth quarters with considerable confidence
and are enthusiastic about our prospects for the balance of fiscal 2004," he
concluded.
About Calavo
Calavo Growers, Inc. is a worldwide leader in the procurement and
marketing of fresh and processed avocados, as well as other perishable food
products. Founded in 1924 and headquartered in Santa Ana, Calif., Calavo is the
first name in avocados(TM) and markets its products to food distributors,
produce wholesalers, supermarkets, and restaurants on a global basis.
On Nov. 7, 2003, the company completed its acquisition of privately held
Maui Fresh International, a multi-line marketer of specialty produce, including
tropical fruits and vegetables. With a reputation for quality, Maui Fresh
operates as a wholly owned subsidiary of Calavo and markets products under its
respected brand name.
Safe Harbor Statement
This news release contains statements relating to future events and results of
Calavo (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results and events may differ from those projected as
a result of certain risks and uncertainties. These risks and uncertainties
include but are not limited to: increased competition, conducting substantial
amounts of business internationally, pricing pressures on agricultural products,
adverse weather and growing conditions confronting avocado growers, new
governmental regulations, as well as other risks and uncertainties detailed from
time to time in the company's Securities and Exchange Commission filings,
including, without limitation, the company's Report on Form 10-K for the year
ended October 31, 2003. These
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forward-looking statements are made only as of the date hereof, and the company
undertakes no obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
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CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
APRIL 30, OCTOBER 31,
2004 2003
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ASSETS
Current assets:
Cash and cash equivalents ....................... $ 682 $ 5,375
Accounts receivable, net of allowances of
$1,626 (2004) and $1,219 (2003) ................. 27,563 16,560
Inventories, net ................................ 12,612 8,021
Prepaid expenses and other current assets ....... 3,924 4,487
Loans to growers ................................ 291 353
Advances to suppliers ........................... 430 624
Deferred income taxes ........................... 1,379 1,379
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Total current assets ......................... 46,881 36,799
Property, plant, and equipment, net ................ 16,781 13,121
Goodwill ........................................... 3,591 --
Other assets ....................................... 4,053 3,769
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$71,306 $53,689
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to growers .............................. $15,783 $ 3,446
Trade accounts payable .......................... 1,579 1,534
Accrued expenses ................................ 8,402 7,777
Income taxes payable ............................ 214 51
Short-term borrowings ........................... 1,000 --
Dividend payable ................................ -- 3,232
Current portion of long-term obligations ........ 24 24
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Total current liabilities .................... 27,002 16,064
Long-term liabilities:
Long-term obligations, less current portion ..... 42 61
Deferred income taxes ........................... 764 417
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Total long-term liabilities .................. 806 478
Total shareholders' equity ......................... 43,498 37,147
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$71,306 $53,689
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CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
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2004 2003 2004 2003
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Net sales ................................... $ 76,421 $ 57,393 $ 125,464 $ 101,622
Cost of sales ............................... 68,625 50,422 114,556 90,728
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Gross margin ................................ 7,796 6,971 10,908 10,894
Special charges ............................. -- 98 -- 98
Selling, general and administrative ......... 4,012 4,130 7,727 7,321
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Operating income ............................ 3,784 2,743 3,181 3,475
Other income, net ........................... (106) (206) (220) (321)
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Income before provision for income taxes .... 3,890 2,949 3,401 3,796
Provision for income taxes .................. 1,556 1,214 1,361 1,561
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Net income .................................. $ 2,334 $ 1,735 $ 2,040 $ 2,235
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Net income per share:
Basic ...................................... $ 0.17 $ 0.13 $ 0.15 $ 0.17
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Diluted .................................... $ 0.17 $ 0.13 $ 0.15 $ 0.17
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Number of shares used in per share
computation:
Basic ...................................... 13,507 12,930 13,488 12,892
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Diluted .................................... 13,589 12,960 13,571 12,922
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