Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number: 000-33385
CALAVO GROWERS, INC.
(Exact name of registrant as specified in its charter)
California
33-0945304
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
1141-A Cummings Road, Santa Paula, California
93060
(Address of principal executive offices)
(Zip Code)
(805) 525-1245
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
CVGW
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Registrant's number of shares of common stock outstanding as of August 31, 2025 was 17,853,323.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains statements relating to future events and results of Calavo Growers, Inc. and its consolidated subsidiaries (“Calavo,” the “Company,” “we,” “us” or “our”) that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks, uncertainties, and assumptions, are based on current expectations, and are not guarantees of future performance. If any of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may differ materially from those expressed or implied in the forward-looking statements.
All statements other than historical facts are forward-looking statements, including but not limited to:
The words “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” and similar expressions often indicate forward-looking statements.
Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to:
Additional information about these and other risks is included in our most recent Annual Report on Form 10-K for the fiscal year ended October 31, 2024, and in our subsequent Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission.
Forward-looking statements are made as of the date of this report. We undertake no obligation to update or revise them, except as required by applicable securities laws.
2
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements:
Condensed Consolidated Balance Sheets –July 31, 2025 and October 31, 2024 (Unaudited)
4
Condensed Consolidated Statements of Operations – Three and Nine Months Ended July 31, 2025 and 2024 (Unaudited)
5
Condensed Consolidated Statements of Cash Flows – Nine Months Ended July 31, 2025 and 2024 (Unaudited)
6
Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended July 31, 2025 and 2024 (Unaudited)
7
Notes to Condensed Consolidated Financial Statements (Unaudited)
8
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
19
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
27
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
28
Item 5.
Other Information
29
Item 6.
Exhibits
Signatures
30
3
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
July 31,
October 31,
2025
2024
Assets
Current assets:
Cash and cash equivalents
$
63,754
57,031
Accounts receivable, net of allowances of $3,430 (2025) and $3,624 (2024)
41,467
41,909
Inventories
30,328
34,157
Prepaid expenses and other current assets
8,411
9,976
Advances to suppliers
14,216
14,570
Income taxes receivable
936
Total current assets
159,112
158,579
Property, plant, and equipment, net
50,603
54,200
Operating lease right-of-use assets
16,813
18,316
Investments in unconsolidated entities
2,602
2,424
Deferred income tax assets
7,473
Goodwill
10,211
Other assets
54,435
49,916
Total assets
301,249
301,119
Liabilities and shareholders' equity
Current liabilities:
Payable to growers
31,849
18,377
Trade accounts payable
9,772
8,742
Accrued expenses
10,459
28,149
Income tax payable
1,721
2,767
Other current liabilities
11,000
Current portion of operating leases
3,479
3,296
Current portion of finance leases
921
874
Total current liabilities
69,201
73,205
Long-term liabilities:
Long-term portion of operating leases
15,594
17,476
Long-term portion of finance leases
4,211
4,274
Other long-term liabilities
4,243
4,388
Total long-term liabilities
24,048
26,138
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,853 (2025) and 17,802 (2024) shares issued and outstanding)
18
Additional paid-in capital
178,803
177,973
Retained earnings
27,603
22,341
Total Calavo Growers, Inc shareholders' equity
206,424
200,332
Noncontrolling interest
1,576
1,444
Total shareholders' equity
208,000
201,776
Total liabilities and shareholders' equity
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
Three months ended
Nine months ended
Net sales
178,822
179,596
523,753
491,585
Cost of sales
160,624
159,503
471,738
440,071
Gross profit
18,198
20,093
52,015
51,514
Selling, general and administrative
9,232
10,510
29,822
36,993
Expenses related to Mexican tax matters
307
225
858
810
Operating income
8,659
9,358
21,335
13,711
Foreign currency loss
(2,483)
(4,203)
(2,488)
(2,799)
Interest income
879
100
2,486
340
Interest expense
(199)
(833)
(616)
(2,619)
Other income, net
89
81
814
561
Income before income taxes and net income from unconsolidated entities
6,945
4,503
21,531
9,194
Income tax benefit (expense)
(1,807)
1,441
(5,598)
478
Net income (loss) from unconsolidated entities
(402)
(579)
178
(374)
Net income from continuing operations
4,736
5,365
16,111
9,298
Net loss from discontinued operations (Note 10)
—
(6,127)
(10,218)
Net income (loss)
(762)
(920)
Less: Net loss (income) attributable to noncontrolling interest
(22)
(132)
(17)
Net income (loss) attributable to Calavo Growers, Inc.
4,714
(732)
15,979
(937)
Calavo Growers, Inc.’s net income (loss) per share:
Basic
Continuing Operations
0.26
0.30
0.90
0.52
Discontinued Operations
(0.34)
(0.57)
Net income (loss) attributable to Calavo Growers, Inc
(0.04)
(0.05)
Diluted
0.89
Number of shares used in per share computation:
17,853
17,801
17,842
17,800
17,899
17,893
17,848
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended July 31,
Cash Flows from Operating Activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
5,656
8,675
Non-cash operating lease expense
(196)
(1,739)
Net (income) loss from unconsolidated entities
(178)
374
Impairment of goodwill
9,280
Provision for uncollectible Mexican IVA taxes receivable
165
Stock-based compensation expense
878
1,834
Amortization of debt issuance costs
137
Gain on sale of Temecula packinghouse
(166)
(162)
(Gain) loss on disposal of property, plant, and equipment
(10)
56
Effect on cash of changes in operating assets and liabilities:
Accounts receivable, net
442
(17,243)
3,829
259
2,165
3,492
(246)
2,456
Income taxes receivable/payable
(1,046)
(2,517)
(4,656)
(748)
13,472
11,588
Trade accounts payable, accrued expenses and other liabilities
(16,958)
(1,267)
Net cash provided by operating activities
19,234
13,583
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment
(1,066)
(2,519)
Net cash used in investing activities
Cash Flows from Financing Activities:
Payment of dividend to shareholders
(10,717)
(5,341)
Proceeds from revolving credit facility
95,733
Payments on revolving credit facility
(100,838)
Payments of minimum withholding taxes on net share settlement of equity awards
(48)
(625)
Payments on term loan
(445)
Payments on long-term obligations and finance leases
(680)
(1,274)
Net cash (used in) financing activities
(11,445)
(12,790)
Net increase (decrease) in cash, cash equivalents
6,723
(1,726)
Cash, cash equivalents, beginning of period
2,852
Cash, cash equivalents, end of period
1,126
Noncash Investing and Financing Activities:
Right of use assets obtained in exchange for new financing lease obligations
664
640
Settlement of Agricola Belher infrastructure advance offset against payable to growers
600
Property, plant, and equipment included in trade accounts payable and accrued expenses
319
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
Additional
Common Stock
Paid-in
Retained
Noncontrolling
Shares
Amount
Capital
Earnings
Interest
Total
Balance, April 30, 2025
17,876
178,522
26,465
1,554
206,559
Issuance of common stock in connection with stock-based compensation, net of tax withholdings
(23)
281
Dividend declared to shareholders (0.20 per share)
(3,576)
Payment of min. withholding of taxes on net share settlement of equity awards
Avocados de Jalisco noncontrolling interest
22
Net income attributable to Calavo Growers, Inc.
Balance, July 31, 2025
Balance, April 30, 2024
177,302
28,572
1,439
207,331
Stock compensation expense
388
Dividend declared to shareholders (0.10 per share)
(1,780)
(30)
Net loss attributable to Calavo Growers, Inc.
Balance, July 31, 2024
17,802
177,690
26,060
1,409
205,177
Balance, October 31, 2024
51
132
Balance, October 31, 2023
17,761
176,481
32,338
1,392
210,229
41
17
See accompanying notes to unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of the business
Business
Calavo Growers, Inc. (“Calavo,” the “Company,” “we,” “us,” or “our”) is a global leader in sourcing, packing and distribution of fresh avocados, tomatoes, papayas and processing of guacamole and other avocado products. Drawing on decades of expertise with fresh and prepared produce, we deliver a broad portfolio of products to retail grocers, club and mass-merchandise stores, foodservice operators, and wholesalers worldwide. We procure avocados from California, Mexico, and other key growing regions. Across our operating facilities, we (i) sort, pack, ripen, and ship avocados, tomatoes, and Hawaiian-grown papayas and (ii) process and package fresh and frozen guacamole. Our products are distributed both domestically and internationally.
In the first quarter of fiscal 2025, we renamed our “Grown” reportable segment to “Fresh” to better reflect its activities; the change did not affect the segment’s composition, financial results, or internal performance metrics. We report results under two segments: Fresh and Prepared.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements (the “interim financial statements”) have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying interim financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows. The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2024.
Recently Issued Accounting Standards
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Disaggregation of Income Statement Expenses,” which expands interim and annual requirements to include disclosure about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The guidance will be effective for annual periods beginning after December 15, 2026, with either retrospective or prospective application. The ASU allows for early adoption of these requirements. The Company is currently evaluating the potential effect that this ASU will have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures”. This ASU amends Accounting Standards Codification (“ASC”) 740 to enhance the nature of disclosures for income taxes. Specifically, the ASU requires public business entities to disclose additional information in categories defined within the ASU within the reconciliation of the effective tax rate to the statutory rate for federal, state and foreign income taxes. Additionally, the ASU requires disclosure of taxes paid, net of refunds received, disaggregated by federal, state and foreign taxes. ASU 2023-09 is effective for years beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the potential effect that this ASU will have on its financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the potential effect that this ASU will have on its financial statement disclosures.
2. Information regarding our operations in different segments
During the first quarter of fiscal 2025, we changed the name of our ‘Grown’ reportable segment to ‘Fresh’ to more accurately represent the segment’s business activities. This change in title does not affect the segment’s composition, financial results, or how we assess performance internally. We report our operations in two different business segments: Fresh and Prepared. The Fresh segment consists of fresh avocados, tomatoes and papayas. The Prepared segment comprises all our guacamole products sold at retail and food service as well as avocado pulp sold to foodservice. These two business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources. Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate. We do not allocate assets, or specifically identify them, to our operating segments. The sales data in the following tables is presented in thousands:
Three months ended July 31, 2025
Three months ended July 31, 2024
Fresh
Prepared
Avocados
147,344
151,814
Tomatoes
5,846
9,874
Papayas
3,085
2,268
Other fresh income
24
Guacamole
24,254
18,388
Total gross sales
156,299
180,553
163,980
182,368
Less: sales allowances
(448)
(1,283)
(1,731)
(2,010)
(2,772)
155,851
22,971
163,218
16,378
Nine months ended July 31, 2025
Nine months ended July 31, 2024
431,864
387,500
30,844
49,226
9,209
8,200
64
72
57,395
54,107
471,981
529,376
444,998
499,105
Less sales allowances
(1,674)
(3,949)
(5,623)
(1,999)
(5,521)
(7,520)
470,307
53,446
442,999
48,586
9
(All amounts are presented in thousands)
143,424
17,200
12,427
5,771
145,043
14,460
18,175
1,918
431,690
40,048
38,617
13,398
402,041
38,030
40,958
10,556
For the three months ended July 31, 2025, intercompany sales and cost of sales of $0.1 million between Fresh products and Prepared products were eliminated. For the nine months ended July 31, 2025 and 2024, intercompany sales and cost of sales of $0.8 million and $0.6 million between Fresh products and Prepared products were eliminated.
Sales to customers outside the U.S. were approximately $17.2 million and $11.9 million for the three months ended July 31, 2025, and 2024. Sales to customers outside the U.S. were approximately $42 million and $35.7 million for the nine months ended July 31, 2025 and 2024.
The net carrying value of long-lived assets attributed to geographic areas as of July 31, 2025, and October 31, 2024, are as follows (in thousands):
United States
Mexico
Consolidated
July 31, 2025
22,684
27,919
October 31, 2024
24,531
29,669
3.
Inventories consist of the following (in thousands):
Fresh fruit
16,233
20,002
Packing supplies and ingredients
6,932
6,936
Finished prepared foods
7,163
7,219
Inventories are stated at the lower of cost or net realizable value. We periodically review the value of items in inventory and record any necessary write downs of inventory based on our assessment of market conditions. Inventory includes reserves of $2.6 million in slow moving inventories and amounts estimated not to be sold as of July 31, 2025 and $0.4 million as of October 31, 2024. The increase in reserves at July 31, 2025 reflects higher slow-moving
10
inventories and market-related factors in the third quarter, including the temporary detention hold on certain avocados from Mexico by the U.S. Food and Drug Administration (the “FDA”), which led to inventory write-downs on fruit diverted or sold at distressed prices. See Note 6 for additional information regarding this temporary FDA detention hold and the impacts thereof.
4.
Related party transactions
Board of Directors & Chief Executive Officer
Certain members of our Board of Directors market California avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers. For the three and nine months ended July 31, 2025, the amount of avocados procured from entities owned or controlled by members of our Board of Directors was $2.7 million and $4.3 million. For the three and nine months ended July 31, 2024, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $1.9 million and $2.2 million. As of July 31, 2025, we had less than $0.1 million in outstanding payables to these Board members. We did not have any amounts payable to the entities owned or controlled by these Board members as of October 31, 2024.
For the three and nine months ended July 31, 2025, we procured $2.5 million and $6 million of avocados from entities affiliated with our Chief Executive Officer. For the three and nine months ended July 31, 2024, we procured $3.3 million and $4.7 million of avocados from entities affiliated with our Chief Executive Officer. As of July 31, 2025, we had $0.7 million in outstanding payables to entities affiliated with our Chief Executive Officer. There were no outstanding payables to entities affiliated with our Chief Executive Officer as of October 31, 2024.
Agricola Don Memo, S.A. de C.V. (“Don Memo”)
Calavo and Agricola Belher (“Belher”) each have an equal one-half ownership interest in Don Memo. Pursuant to a management service agreement, Belher, through its officers and employees, has day-to-day power and authority to manage the operations of Don Memo.
As of July 31, 2025, and October 31, 2024, we had investments of $2.6 million and $2.4 million, respectively, representing Calavo’s 50% ownership in Don Memo, which was included as an investment in unconsolidated entities on our balance sheet. We make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Don Memo, net of our commission and aforementioned advances. For the three months ended July 31, 2025 and 2024, we advanced $1.6 million and $0 of preseason advances to Don Memo. For the nine months ended July 31, 2025 and 2024, we advanced $4.5 million and $4.5 million of preseason advances to Don Memo. As of July 31, 2025 and October 31, 2024, we had outstanding advances of $8.2 million and $7.7 million to Don Memo. In October 2020, we entered into an infrastructure loan agreement with Don Memo for up to $2.4 million secured by certain property and equipment of Don Memo. This infrastructure loan accrues interest at 7.25%. The total outstanding infrastructure loan balance both at July 31, 2025 and at October 31, 2024, was $1.6 million which is included in prepaids and other current assets. During the three months ended July 31, 2025 and 2024, we incurred $2.2 million and $3.3 million of cost of sales to Don Memo. During the nine months ended July 31, 2025 and 2024, we incurred $10.6 million and $10.6 million of cost of sales to Don Memo pursuant to our purchase consignment agreement.
Belher
We make advances to Belher for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Belher, net of our commission and aforementioned advances. For the three months ended July 31, 2025, we advanced $3.8 million of preseason advances to Behler. For the nine months ended July 31, 2025, we advanced $3.9 million of preseason advances to Belher. For the three and nine months ended July 31, 2024, we advanced $2.5 million and $3.5 million of preseason advances to Belher. We had grower advances due from Belher totaling $4.3 million as of July 31, 2025 and $5.1 million as of October 31, 2024, which are recorded as advances to suppliers. In July 2021, we made a bridge loan of $3.5 million to Belher. This
11
loan is secured by certain farmland in Mexico and accrues interest at 10%. As part of this loan agreement, we can withhold payments on both the infrastructure advances and the bridge loan by netting these amounts against the grower payable due to Belher. As of July 31, 2025, the bridge loan balance of $0.5 million was recorded in prepaid expenses and other current assets. At October 31, 2024, the bridge loan balance was $1.1 million, consisting of $0.6 million in prepaid expenses and other current assets and $0.5 million in other assets. During the three months ended July 31, 2025 and 2024, we incurred $2.9 million and $4.1 million of cost of sales to Belher pursuant to our purchase consignment agreement. During the nine months ended July 31, 2025 and 2024, we incurred $16 million and $29.1 million of cost of sales to Belher pursuant to our purchase consignment agreement.
Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”)
In August 2015, we entered into a Shareholder’s Agreement with various Mexican partners and created Avocados de Jalisco. Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados. As of July 31, 2025, this entity was approximately 83% owned by Calavo and was consolidated in our interim financial statements. Avocados de Jalisco built a packinghouse located in Jalisco, Mexico, which began operations in June of 2017. During the three months ended July 31, 2025 and 2024, we purchased approximately $1.2 million and $3.5 million of avocados from the partners of Avocado de Jalisco. During the nine months ended July 31, 2025 and 2024 we purchased approximately $3 million and $7.1 million of avocados from the partners of Avocados de Jalisco.
5.
Other assets consist of the following (in thousands):
Mexican IVA (i.e., value-added) taxes receivable, net (see Note 9)
53,854
48,739
Infrastructure advances
467
Other
581
710
6.
Other events
Dividends
On January 31, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million, to shareholders of record on January 10, 2025. On April 29, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million to shareholders of record on April 1, 2025. On July 28, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million, to shareholders of record on June 30, 2025. The Board of Directors declared a quarterly cash dividend of $0.20 per share to be paid on October 31, 2025, to shareholders of record on September 30, 2025.
Regulatory matters
In July 2025, the FDA placed Calavo de México (“CDM”), our wholly owned subsidiary, on a Red List Detention Hold after trace levels of Imazalil (not approved for avocados) were detected in a single line item. All subsequent third-party tests were clean. During the third quarter of fiscal 2025, the hold resulted in third-party inspection and testing costs, incremental logistics/handling costs, and inventory write-downs on fruit diverted or sold at distressed prices, with an estimated incremental cost of approximately $4.2 million recorded in cost of sales. This FDA matter was fully resolved in September 2025.
During our fourth quarter of 2025, we submitted an insurance claim seeking recovery of costs associated with the FDA detention hold described above. The claim remains under review, and while we are pursuing recovery and believe it is achievable, as of the date of this report we have not yet obtained sufficient information to conclude that recovery of recognized losses is probable under applicable accounting guidance. Accordingly, no insurance receivable has been
12
recorded. We will recognize any recovery up to the amount of recognized losses when realization becomes probable, and will recognize any amounts in excess of recognized losses, if any, when realized.
Litigation
From time to time, we are involved in litigation arising in the ordinary course of our business that we do not believe will have a material impact on our financial position, results of operations, or cash flows.
Compliance matters
On September 2, 2025, the U.S. Department of Justice officially notified us that it has closed its Foreign Corrupt Practices Act (“FCPA”) inquiry related to our operations in Mexico.
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the U.S. The OBBBA includes numerous provisions that affect corporate taxation, including changes to bonus depreciation, the expensing of domestic research costs, and modifications to certain U.S. international tax rules. The company has analyzed the impacts of the OBBBA and reflected them in the current period. These impacts do not have a material effect on the tax rate for the three and nine months ended July 31, 2025. The majority of the tax law changes will take effect in future years.
Mexico tax audits
We conduct business both domestically and internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by tax authorities, primarily in Mexico and the United States.
2013 Assessment
In January 2017, CDM received preliminary observations from the Servicio de Administración Tributaria in Mexico (the “SAT”) related to an audit for fiscal year 2013 outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Taxes (“VAT”). We provided a written rebuttal to these preliminary observations during our third fiscal quarter of 2017.
In January 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment (the “2013 Assessment”) totaling approximately 2.6 billion Mexican pesos (which includes annual adjustments for inflation, and equals approximately $138.7 million USD at July 31, 2025) related to income tax, flat rate business tax, value added tax and fines, related to this fiscal 2013 tax audit. This amount has been adjusted for inflation as of July 31, 2025 to the amount of 3 billion Mexican pesos (approximately $160 million USD). Additionally, the tax authorities have determined that we owe our employees profit-sharing liability, totaling approximately 118 million Mexican pesos (approximately $6.3 million USD at July 31, 2025). In August 2018, we filed an Administrative Appeal on the 2013 Assessment, appealing our case to the SAT’s central legal department in Michoacan.
On June 25, 2021, we became aware that the Administrative Appeal had been resolved by the SAT against CDM on March 12, 2021, and that we had allegedly failed to timely respond to and challenge the SAT’s notification of such resolution, therefore rendering the 2013 Assessment as definitive. Consequently, the SAT placed liens on the fixed assets of CDM, with a net book value of approximately $26 million USD, and on bank accounts of CDM totaling approximately $1 million USD in order to guarantee the 2013 Assessment. Based on legal counsel from our tax advisory firm, we and our tax advisory firm have concluded that the March notification was not legally communicated.
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On August 18, 2021, we filed an Administrative Reconsideration (the “Reconsideration”) before the Central Legal Department of the SAT located in Mexico City, asserting that the resolution in March of the Administrative Appeal was wrongly concluded, in particular with respect to the following matters:
On August 20, 2021 CDM filed a Nullity Trial (the “Nullity Trial”) with the Federal Tax Court in Mexico, which among other things, strongly contends that the notifications made by the SAT to CDM and its designated advisors of the resolution of the Administrative Appeal in March 2021 were not legally communicated. In addition, the Nullity Trial asserts the same matters central to the Reconsideration, as described above, as wrongly concluded in the resolution of the Administrative Appeal.
On October 13, 2023, the Company filed an extension of the Nullity Trial filed on August 20, 2021, as a result of the response to the lawsuit filed by the tax authority, pointing out that the tax authority’s resolution is unlawful due to improper substantiation and motivation, because of the following:
On November 14, 2023, the Federal Tax Court acknowledged the admission of the extension to the lawsuit. Additionally, in November 2024, the Administrative Reconsideration and related Injunction action were finalized. The tax authority determined that the filing of the Administrative Reconsideration was not legally viable, citing the existence of a concurrent legal remedy—the Nullity Trial. Furthermore, the SAT noted a presumption that the Nullity Trial was filed within the required timeframe, as evidenced by its admission by the Federal Tax Court.
These resolutions can be used as supervening evidence to support the arguments that the Nullity Petition should be admitted. The resolutions will contribute to demonstrate that the SAT considers that the Nullity Petition was filed on time. This is a statement made within a formal procedure that contradicts what the SAT had been arguing (within the reconsideration procedure).
While we continue to believe that the tax assessment for fiscal year 2013 is completely without merit, and that we will prevail on the Nullity Trial in the Tax Court, we also believe that it is in the best interest of CDM and the Company to settle the 2013 Assessment as quickly as possible. In accordance with our cumulative probability analysis on uncertain tax positions, settlements made by the SAT in other cases, the 2011 tax assessment reached by CDM with the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico, and the value of CDM assets, we recorded a provision of $11 million, in the third quarter of fiscal year 2021, as a discrete item in Income Tax Provision. The provision includes estimated fines, interest and inflationary adjustments.
We believe that this provision remains appropriate as of July 31, 2025 based on our cumulative probability analysis. We incurred $0.3 million and $0.9 million of related professional fees for the three and nine months ended July 31, 2025 which have been recorded in Expenses related to Mexican Tax matters on the consolidated statements of operations.
Lease contingency
In conjunction with the sale of the Fresh Cut business on August 15, 2024, the Company assigned certain leases to the buyer. As a result of these lease assignments, the buyer is the primary obligor under the leases, with the Company secondarily liable as a guarantor. If the buyer fails to perform under a lease, the Company could be responsible for fulfilling any remaining lease obligation. The leases had a remaining average term of 5.3 years as of October 31, 2024,
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with a maximum exposure of $32.0 million in undiscounted future minimum lease payments, plus $13.3 million in potential additional payments related to common area maintenance, taxes, insurance, and other obligations.
As of July 31, 2025, we had not experienced any changes related to this contingency, and there were no new developments affecting its likelihood or potential financial impact. We continue to assess this obligation, but do not believe it is probable that we will be required to fulfill any obligations under these leases.
7.
The following table reconciles shareholders’ equity attributable to noncontrolling interest related to Avocados de Jalisco (in thousands):
Three months ended July 31,
Noncontrolling interest, beginning
Net income (loss) attributable to noncontrolling interest of Avocados de Jalisco
Noncontrolling interest, ending
Net income attributable to noncontrolling interest of Avocados de Jalisco
8.
Earnings per share
Basic and diluted net income (loss) per share is calculated as follows (data in thousands, except per share data):
Numerator:
Less: Net (income) loss attributable to noncontrolling interest
Net income from continuing operations attributable to Calavo Growers, Inc.
5,395
Denominator:
Weighted average shares - Basic
Effect on dilutive securities – Restricted stock/units/options
46
Weighted average shares - Diluted
Net income (loss) per share attributable to Calavo Growers, Inc:
15
Less: Net income attributable to noncontrolling interest
9,281
48
9.
Mexican IVA taxes receivable
Included in other assets are tax receivables due from the Mexican government for value-added taxes (“IVA”) paid in advance. CDM is charged IVA by vendors on certain expenditures in Mexico, which, insofar as they relate to the exportation of goods, translate into VAT amounts recoverable from the Mexican government.
As of July 31, 2025 and October 31, 2024, CDM VAT receivables, net of our estimated provision for uncollectable amounts, totaled $53.9 million (1.0 billion Mexican pesos) and $48.7 million (976.0 million Mexican pesos). Historically, CDM received VAT refund payments from the Mexican tax authorities on a timely basis. Beginning in fiscal 2014 and continuing into fiscal 2025, the tax authorities began objecting to refund requests and supporting documentation that had previously been deemed acceptable to process a refund. Additionally, they are also contesting the refunds requested attributable to VAT paid to certain suppliers that allegedly did not fulfill their own tax obligations. We believe these factors and others have contributed to delays in the processing of VAT claims by the Mexican tax authorities. Currently, we are in the process of collecting such balances primarily through regular administrative processes, but these amounts may ultimately need to be recovered through Administrative Appeals and/or other legal means.
During the first quarter of fiscal 2017, the tax authorities informed us that their internal opinion, based on the information provided by the local SAT office, considers that CDM was not properly documented relative to its declared tax structure and therefore CDM could not claim the refundable VAT balance. CDM has strong arguments and supporting documentation to sustain its declared tax structure for VAT and income tax purposes. CDM started an Administrative Appeal for the VAT related to the refund requests for the months of July, August and September of 2015 (the “2015 Appeal”) in order to assert its argument that CDM is properly documented and to therefore change the SAT’s
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internal assessment. In August 2018, we received a favorable ruling from the SAT’s Legal Administration in Michoacan on the 2015 Appeal indicating that they believe CDM’s legal interpretation of its declared tax structure is indeed accurate. While favorable on this central matter of CDM’s declared tax structure, the ruling, however, still does not recognize the taxpayer’s right to a full refund for the VAT related to the months of July, August and September 2015. Therefore, in October 2018, CDM filed a substance-over-form Annulment Suit in the Federal Tax Court to recover its full refund for VAT over the subject period.
In April 2022, the Chamber specializing in exclusive resolution of the substantial matters belonging to the Federal Tax Court issued the ruling for the months of July, August and September 2015 through which it was declared that the following resolutions were resolved:
We believe that our operations in Mexico are properly documented, and our internationally recognized tax advisors believe that there are legal grounds to prevail in collecting the corresponding VAT amounts. With assistance from our internationally recognized tax advisory firm, as of July 31, 2025, CDM filed Administrative Appeals for months for which VAT refunds have been denied by the SAT, and will continue filing such appeals for any months for which refunds are denied in the future. Therefore, we believe it is probable that the Mexican tax authorities will ultimately authorize the refund of the remaining VAT amounts.
During the second quarter of fiscal 2025, the SAT refunded 36.7 million Mexican pesos in VAT (approximately $1.9 million USD), including inflationary adjustments, relating to claims for March, April, and November 2019. These refunds were secured directly from the tax authority rather than through the court system.
Recent legal development
In August 2025, the Fifth Collegiate Circuit Court issued a ruling recognizing CDM as a maquila and directing the SAT to refund IVA balances for January through June 2013. We believe this decision provides important judicial confirmation of CDM’s maquila status, which strengthens our position to recover outstanding IVA receivables and also reinforces our defense in the 2013 Assessment described in Note 6. In August 2025, the SAT appealed this decision to the Mexican Supreme Court. We will continue to pursue collection of IVA refunds through administrative processes and, where necessary, legal remedies.
10.Assets Held for Sale and Discontinued Operations
In August 2024, we completed the sale of our Fresh Cut business and related real estate for $83 million. The Fresh Cut business represented substantially all the Prepared segment, excluding the retained guacamole business.
As previously disclosed, the Fresh Cut business was classified as held for sale and discontinued operations in the first quarter of fiscal 2024. In connection with the sale, we recorded a $9.3 million goodwill impairment charge in the quarter ended July 31, 2024, based on the transaction’s sale price.
The following table summarizes the results of operations of the Fresh Cut business that are being reported as discontinued operations (in thousands):
88,586
258,958
81,224
246,955
7,362
12,003
4,193
12,896
Operating loss
(6,111)
(10,173)
(77)
32
Loss from discontinued operations before income taxes and gain on sale
Income tax benefit
Net loss from discontinued operations
Select cash flow information related to the Fresh Cut business follows (in thousands):
Net cash used in operating activities
(7,071)
(355)
11.Sale of Fresh Cut Business
Fresh Cut Business -- Asset Purchase Agreement and Purchase and Sale Agreement
On August 15, 2024, we completed the sale of our Fresh Cut business and related real estate for a total transaction value of $83 million. The sale included certain assets, leasehold interests, and specified liabilities related to the Fresh Cut business, while the guacamole business was retained.
The purchase price for the business assets was $52.0 million, subject to customary adjustments, and the real estate was sold separately for $31.0 million. See Note 6.
Amendment to Credit Agreement
On August 15, 2024, we entered into a First Amendment to Credit Agreement and Consent (as amended, the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent and lender (“Agent”), whereby (i) the Credit Agreement was amended to reduce the revolving commitments thereunder from $90,000,000 to $75,000,000, among other minor adjustments to align the borrowing base with our current asset base excluding the Fresh Cut business (which was sold on August 15, 2024), and (ii) we obtained consent from Agent for entry into the Asset Purchase Agreement and Purchase and Sale Agreement with respect to the sale of the Fresh Cut business.
12. Subsequent Events
We have evaluated subsequent events through September 9, 2025, the date these interim financial statements were issued.
In August 2025, the Fifth Collegiate Circuit Court issued a ruling recognizing CDM as a maquila and directing the SAT to refund IVA balances for January through June 2013, as further described in Note 9.
The Board of Directors declared a quarterly cash dividend of $0.20 per share to be paid on October 31, 2025, to shareholders of record on September 30, 2025.
We have determined that, other than the ruling of the Fifth Collegiate Circuit Court and the dividend declaration noted above, no other material subsequent events have occurred that would require disclosure or adjustment to these interim financial statements.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto (the “interim financial statements”) included in this Quarterly Report, and the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K for the fiscal year ended October 31, 2024 of Calavo Growers, Inc. (“we”, “Calavo”, or the “Company”).
Recent Developments
On July 28, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million to shareholders of record as of June 30, 2025. The Board of Directors declared a quarterly cash dividend of $0.20 per share to be paid on October 31, 2025, to shareholders of record on September 30, 2025.
Compliance Matters
Mexican Tax Issues
During the second quarter of fiscal 2025, the SAT refunded 36.7 million Mexican pesos in VAT (approximately $1.9 million USD), including inflationary adjustments, relating to refund claims for March, April, and November 2019. These refunds were secured directly from the tax authority rather than through the court system and provide positive momentum as we continue working to recover additional outstanding balances. Management views these outcomes as a sign of progress in our broader tax strategy and of improved engagement with the SAT.
In August 2025, the Fifth Collegiate Circuit Court issued a ruling recognizing Calavo de México (“CDM”) as a maquila and directing the SAT to refund IVA balances for January through June 2013. Management believes this decision provides important judicial confirmation of CDM’s maquila status, strengthens our position to recover outstanding IVA receivables, and bolsters our defense in the 2013 Assessment described in Note 6 to the consolidated financial statements. In August 2025, the SAT appealed this decision to the Mexican Supreme Court. We will continue to pursue collection of IVA refunds through administrative processes and, where necessary, legal remedies.
Market Trends and Uncertainties
We continue to be impacted by macroeconomic challenges, including inflationary pressures and shifts in trade policies, which have affected our operations in the past and may continue to do so in the future. These challenges drive cost fluctuations in key areas such as fruit procurement, labor, corrugated and plastic packaging, and overall operating expenses. To manage these pressures, we implement various strategies, including adjusting selling prices and optimizing
global sourcing strategies. We anticipate that inflationary and other cost pressures will persist in the remainder of fiscal 2025 and there is no assurance that we will be able to fully offset these cost increases.
In July 2025, the U.S. Food and Drug Administration (the “FDA”) placed our CDM facility on a detention hold after trace levels of Imazalil were detected in a single shipment of conventional avocados. All subsequent third-party tests were clean, and the hold was lifted in September 2025. While this was the first such event in our Mexican operations since they began in 1998, the detention hold caused incremental third-party inspection and testing costs, incremental logistics/handling costs, and inventory write-downs on fruit diverted or sold at distressed prices. Regulatory actions of this type, if repeated, could continue to disrupt our supply chain, increase costs, and adversely impact our operating results.
During our fourth quarter of 2025, we submitted an insurance claim seeking recovery of costs associated with the FDA detention hold described above. The claim remains under review, and while we are pursuing recovery and believe it is achievable, as of the date of this report we have not yet obtained sufficient information to conclude that recovery of recognized losses is probable under applicable accounting guidance. Accordingly, no insurance receivable has been recorded. We will recognize any recovery up to the amount of recognized losses when realization becomes probable, and will recognize any amounts in excess of recognized losses, if any, when realized.
In addition, ongoing uncertainty surrounding U.S. trade policy—particularly as it relates to Mexico—could adversely affect our business. On February 2, 2025, the United States announced tariffs of up to 25 percent on imports from several countries (including Mexico and Canada) and higher duties on selected Chinese goods; all of these measures were subsequently put on hold. A separate 25 percent tariff on Mexican imports was briefly in effect from March 4 to March 6, 2025, before being suspended. As of May 30, 2025, no further reciprocal tariffs are scheduled, but the situation remains fluid and additional trade actions could be announced without advance notice.
At present, it remains uncertain whether, and to what extent, any of the proposed tariffs or duties will apply to the fresh fruit and prepared products we import from Mexico. Given that a substantial portion of our produce originates there, new or increased trade barriers could raise our input costs. If we cannot pass along these extra costs to customers, renegotiate grower pricing, alter sourcing patterns, or implement other mitigation strategies, then our margins, operating results, and cash flows could be materially adversely affected.
Although tariffs on imports from Mexico introduce additional costs, we do not currently expect them to have a material impact on our long-term profitability. Given the evolving nature of trade policies and recent short-term financial impacts, we will continue to assess the situation, adjust our sourcing and pricing strategies as needed, and take proactive measures to mitigate potential challenges.
The U.S. Department of Commerce also terminated the U.S.–Mexico Tomato Suspension Agreement (“TSA”) on July 14, 2025. Such termination automatically imposes a 17 percent anti-dumping duty on Mexican tomatoes. Industry groups such as the Texas International Produce Association warned that ending the TSA could sharply raise tomato prices, disrupt national supply chains, and threaten roughly 46,900 U.S. jobs tied to $3.1 billion in annual Mexican tomato imports. Because we source and distribute significant volumes of tomatoes, any resulting supply shortages or cost increases could materially adversely affect our sales volumes and customer relationships.
For additional information, see the risk factor entitled “Tariffs on Imported Goods Could Materially Impact Our Business, Financial Condition, and Results of Operations” in Part II, Item 1A. Risk Factors, in our Quarterly Report on Form 10-Q filed on March 12, 2025.
Supply Chain Disruptions
During our first fiscal quarter of 2025, one of our Mexican packinghouses temporarily paused its operations due to the detection of a small number of avocado weevils in a pre-production area. After completing remedial measures, including those described below, the affected packinghouse was re-certified by the relevant authorities and resumed
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normal operations. During our second fiscal quarter of 2025, we implemented enhanced monitoring protocols in our pre-production areas, which have effectively prevented any further avocado weevil outbreaks. A severe outbreak of the avocado weevil in the future, however, could result in reduced avocado supply and higher procurement costs, impacting our ability to meet consumer demand and maintain product quality standards. Any sustained disruption caused by this pest could materially and adversely affect our business, financial condition, and results of operations.
Regulatory responses, such as quarantine measures or restrictions on avocado imports from affected regions, could further disrupt our supply chain, limit our sourcing options, and reduce the volume of avocados available for sale. The implementation of such measures, whether in response to pests or other phytosanitary or chemical compliance issues, may also continue to increase logistical complexities, delay shipments, and introduce additional compliance costs.
For additional information, see the risk factor entitled “The Spread of the Avocado Seed Weevil Could Disrupt Our Supply Chain and Adversely Impact Our Business” in Part II, Item 1A. Risk Factors, in our Quarterly Report on Form 10-Q filed on March 12, 2025.
Critical Accounting Estimates
In preparing our financial statements in accordance with GAAP, we are required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, and costs and expenses that are reported in the financial statements and accompanying disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates and assumptions. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
There have been no material changes in our critical accounting estimates during the three and nine months ended July 31, 2025, as compared to those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for our fiscal year ended October 31, 2024.
Results of Operations
Net Sales
The following table summarizes our net sales by business segment for each of the three and nine months ended July 31, 2025 and 2024 (dollar amounts in thousands):
Change
Net sales:
(5)
%
40
Total net sales
(0)
As a percentage of sales:
87
91
90
100.0
Summary
Net sales for the three months ended July 31, 2025, decreased by $0.8 million, or less than 1%, compared to the same period in fiscal 2024, reaching $178.8 million. This stability was driven primarily by a 2% increase in price per avocado
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carton, partially offset by a 5% decrease in avocado carton volume, while Prepared segment sales increased by 40% year-over-year due primarily to increased sales volumes. Net sales for the nine months ended July 31, 2025, compared to the corresponding period in fiscal 2024, increased by $32.2 million, or approximately 7%. This growth was driven by a 6% increase in Fresh segment sales, primarily due to higher avocado pricing, partially offset by a decline in carton volume, while Prepared segment sales increased by 10% year-over-year due primarily to increases in sales volumes, while average selling prices remained steady.
We remain focused on expanding grower partnerships and strengthening relationships with retail and foodservice customers to support long-term net sales growth across both segments. Our Fresh and Prepared businesses are subject to seasonal trends, which may impact the volume and quality of raw materials sourced in any given quarter.
Fresh products
Third Quarter 2025 vs. Third Quarter 2024
Net sales for the Fresh segment decreased by approximately $7.4 million, or 5%, for the third quarter of fiscal 2025 compared to the same period in fiscal 2024. The decrease was primarily driven by lower avocado sales.
Nine Months Ended July 31, 2025 vs. Nine Months Ended July 31, 2024
Net sales for the Fresh segment increased by approximately $27.3 million, or 6%, for the nine months ended July 31, 2025, compared to the corresponding period in fiscal 2024. The increase was primarily due to higher average avocado selling prices, partially offset by a decline in avocado and tomato sales.
Prepared products
Net sales for the Prepared segment increased by $6.6 million, or 40%, for the three months ended July 31, 2025, compared to the same period in fiscal 2024. The increase was primarily driven by a 35% increase in pounds sold and a 3% increase in average selling price per pound. Growth reflected expanded sales to existing customers and meaningful new customer wins across retail and foodservice in both domestic and international markets. Net sales also benefited from an updated estimate of sales allowances, which increased revenue by approximately $0.5 million based on recent
claims experience and customer mix. Our avocado squeeze pouch product contributed modestly to the quarter, supported by its extended shelf life and portion control format.
Net sales for the Prepared segment increased by $4.9 million, or 10%, for the nine months ended July 31, 2025, compared to the same period in fiscal 2024. The increase was primarily due to an 11% increase in pounds sold, partially offset by a 1% decrease in average selling price per pound. In the third quarter, strong volume growth and customer program expansion more than offset earlier softness, with momentum driven by expanded sales to existing customers, new wins across retail and foodservice in both domestic and international markets, modestly higher pricing on certain products, lower fruit input costs, and improved operating efficiencies. Our avocado squeeze pouch product also contributed modestly to year-to-date growth. Based on recent trends, including the third-quarter ramp, we currently estimate Prepared segment sales of approximately $115 million in fiscal 2026, subject to demand, pricing, and execution.
Gross Profit
The following table summarizes our gross profit and gross profit percentages by business segment for the three and nine months ended July 31, 2025, and 2024 (dollar amounts in thousands):
Gross profit:
(32)
(6)
201
Total gross profit
(9)
1
Gross profit percentages:
25
Our cost of goods sold consists primarily of ingredient costs (including fruit and other food products), packing materials, freight and handling, labor, and overhead (including depreciation) associated with packing, distributing, and/or preparing food products, as well as other direct expenses related to products sold.
Gross profit decreased by approximately $1.9 million, or 9%, for the third quarter of fiscal 2025, compared to the corresponding period in fiscal 2024. The decline was primarily driven by approximately $4.2 million of discrete costs associated with the FDA detention hold on certain avocado imports from Mexico, where the fungicide was present on fruit purchased from a grower and is never applied in Calavo facilities, as well as lower volumes and pricing pressure in tomatoes due to abundant U.S. supply that reduced import demand.
Gross profit increased by $0.5 million, or 1%, for the nine months ended July 31, 2025, compared to the same period in fiscal 2024. Prepared segment gross profit rose by $2.8 million, or 27%, driven by an 11% increase in pounds sold, continued operating leverage, and lower fruit input costs. This improvement offset a $2.3 million, or 6%, decline in Fresh segment gross profit, which reflected lower avocado and tomato volumes and included approximately $4.2 million of discrete costs associated with the FDA detention hold on certain avocado imports from Mexico in the third quarter.
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The decrease in Fresh products gross profit for the third quarter of fiscal 2025 was primarily driven by lower volumes for both avocados and tomatoes.
The decrease in Fresh products gross profit for the nine months ended July 31, 2025, was primarily driven by lower avocado and tomato volumes along with regulatory costs such as third-party inspection and testing costs, incremental logistics/handling costs, and inventory write-downs on fruit diverted or sold at distressed prices related, to the FDA detention hold in the third quarter and a temporary tariff event in the second quarter.
Gross profit per pound for guacamole products increased during the third quarter of fiscal 2025 compared to the same period last year, reflecting improved operational efficiency and stronger cost management. For the nine months ended July 31, 2025, Prepared segment gross profit increased 14.6% to $13.4 million, reflecting higher sales volumes, lower fruit input costs compared to the prior year, and improved operating efficiencies.
Selling, General and Administrative
(Dollars in thousands)
(12)
(19)
Percentage of net sales
Selling, general, and administrative (SG&A) expenses totaled $9.2 million for the three months ended July 31, 2025. These expenses include marketing and advertising costs, sales expenses (including broker commissions), and other general and administrative costs.
SG&A expenses for the three months ended July 31, 2025 decreased by $1.3 million, or 12%, compared to the three months ended July 31, 2024. The decrease was driven by a $2.0 million reduction in professional and consulting fees, including lower FCPA-related legal expenses, partially offset by a $0.3 million increase in bonus expense.
SG&A expenses for the nine months ended July 31, 2025 decreased by $7.2 million, or 19%, compared to the prior year period. The decrease was driven by a $5.1 million reduction in professional and consulting fees, primarily related to lower legal costs (including reduced FCPA investigation-related legal expenses), a $1.7 million reduction in compensation expenses reflecting lower headcount and severance costs, and a $0.8 million decrease in stock-based compensation, mainly related to the Chief Executive Officer’s compensation structure.
(41)
(11)
Our foreign operations in Mexico are subject to exchange rate fluctuations and foreign currency transaction costs. The functional currency of our foreign subsidiaries in Mexico is the United States dollar (U.S. dollar). As a result, monetary assets and liabilities are remeasured into U.S. dollars at exchange rates as of the balance sheet date and non-monetary assets, liabilities and equity are remeasured at historical rates. Sales and expenses are remeasured using a weighted-average exchange rate for the period.
Due to the change in the Mexican peso to the U.S. dollar exchange rates, foreign currency remeasurement losses, net of gains, for the three and nine months ended July 31, 2025, were $2.5 million. Net foreign currency remeasurement (losses), for the three and nine months ended July 31, 2024, were $(4.2) million and $(2.8) million.
Income (loss) from unconsolidated entities
(31)
(148)
Income (loss) from unconsolidated entities includes our participation in earnings or losses from our investments in Agricola Don Memo. For the three months ended July 31, 2025 and 2024 we realized losses of $0.4 million and $0.6 million from Agricola Don Memo. For the nine months ended July 31, 2025 and 2024 we realized income (loss) of $0.2 million and $(0.4) million from Agricola Don Memo.
(225)
(1,271)
Effective tax rate
26
(37)
The effective tax rates for the three months ended July 31, 2025 and July 31, 2024 were 26% and (37)%. The effective tax rates for the nine months ended July 31, 2025 and July 31, 2024 were 26% and (5)%. The Company’s effective tax rate for the three and nine months ended July 31, 2025 differs from the U.S. federal statutory rate of 21% due to the U.S. state tax and foreign tax rate differential in Mexico. The Company’s effective tax rate for the three and nine months ended July 31, 2024 differs from the U.S. federal statutory rate of 21% due to valuation allowances on domestic deferred tax assets that were not more likely than not to be realized, and foreign exchange losses in Mexico.
Liquidity and Capital Resources
Cash provided in operating activities was $19.2 million for the nine months ended July 31, 2025, compared to cash provided by operating activities of $13.6 million for the corresponding period in fiscal 2024. Cash provided in operating activities for the nine months ended July 31, 2025 reflects primarily our net income of $16.1 million, combined with non-cash activities (depreciation and amortization, non-cash operating lease expense, stock-based compensation expense, income from unconsolidated entities, and loss on disposal of property, plant and equipment) of $6.1 million which was partially offset by a net effect of changes in operating assets and liabilities of $3.0 million.
Changes in operating assets and liabilities included a decrease in inventories of $3.8 million, a decrease in prepaid expenses and other current assets of $2.2 million, a net decrease in accounts payable, accrued expenses and other liabilities of $17.0 million, an increase in payable to growers of $13.5 million, and a decrease in income tax payable of $1.0 million, partially offset by a decrease in other assets of $4.7 million.
The decrease in our inventory as of July 31, 2025, compared to October 31, 2024, was primarily due to revaluations of the inventory on hand. The decrease in our prepaid and other current assets is primarily due to an increase in amortization of prepaid expenses, and the timing of rebate receipts. The increase in payable to growers is mostly due to an increase in farming activity of tomatoes as farming production for the spring/summer cycle (May-October) is scaling up.
Cash used in investing activities was $1.1 million for the nine months ended July 31, 2025, compared to cash used by investing activities of $2.5 million for the corresponding period in fiscal 2024. Cash used in investing activities relates principally to purchases of property, plant, and equipment.
Cash used in financing activities was $11.4 million for the nine months ended July 31, 2025, compared to cash used by financing activities of $12.8 million for the corresponding period in fiscal 2024. Cash used in financing activities relates principally to payments of $10.7 million in dividends, payments on long-term obligations of $0.7 million and the payment of minimum withholding of taxes on the net settling of shares of less than $0.1 million.
Our principal sources of liquidity are our existing cash reserves, cash generated from operations, and amounts available for borrowing under our credit facility. Cash and cash equivalents as of July 31, 2025 and October 31, 2024, totaled $63.8 million and $57.0 million. Our working capital at July 31, 2025 was $89.9 million, compared to $85.4 million at October 31, 2024.
We believe that our cash balance, cash flows from operations, availability under our credit facility, and other sources will be sufficient to satisfy our future capital expenditures and commitments, grower recruitment efforts, working capital and other financing requirements for the foreseeable future.
On June 26, 2023, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent and lender (“Agent” or “Wells Fargo”). The Credit Agreement provided for a revolving credit facility (the “Revolving Loans”) of up to $90.0 million, along with a capex credit facility of up to $10.0 million (the “Term Loan”).
On August 15, 2024, we entered into a First Amendment to Credit Agreement and Consent with Wells Fargo whereby (i) the Credit Agreement was amended to reduce the revolving commitments thereunder from $90.0 million to $75.0 million, among other minor adjustments to align the borrowing base with our asset base excluding the Fresh Cut business (which was sold on August 15, 2024); and (ii) we obtained consent from Agent for entry into the Asset Purchase Agreement and Purchase and Sale Agreement with respect to the sale of the Fresh Cut business.
Borrowings of the Revolving Loans under the Credit Agreement are asset based and are subject to a borrowing base calculation that includes a certain percentage of eligible accounts receivable, inventory and equipment, less any reserves implemented by Agent in its permitted discretion, provided that the equipment-based portion of such borrowing base calculation reduces monthly according to scheduled amortization.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at our option, either a base rate or a secured overnight financing rate (“SOFR”) term rate (which includes a spread adjustment of 0.10% and is subject to a floor of 0.00%). The applicable margin is (i) for Revolving Loans, 0.50% for base rate borrowings and 1.50% for SOFR term rate borrowings, and (ii) for Term Loan, 1.00% for base rate borrowings and 2.00% for SOFR term rate borrowings. The credit facility matures on June 26, 2028.
As of July 31, 2025, we were in compliance with the financial covenants in the Credit Agreement, as amended. As of July 31, 2025, approximately $50.5 million was available for borrowing, based on our borrowing base calculation discussed above.
The weighted-average interest rate under the credit facility was 8.0% at July 31, 2025. Under the credit facility, there was less than $0.1 million outstanding related to the Revolving Loans and Term Loan as of July 31, 2025.
In March 2025, our Board of Directors authorized a stock repurchase program of up to $25 million. While no shares have been repurchased to date under this program, the timing and volume of repurchases will depend on market conditions, our capital allocation priorities, and other strategic considerations.
Contractual Commitments
There have been no other material changes to our contractual commitments from those previously disclosed in our Annual Report on Form 10-K for our fiscal year ended October 31, 2024.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K for the year ended October 31, 2024.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2025. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms.
There were no changes in our internal control over financial reporting during the quarter ended July 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
Please refer to Note 6 to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information.
ITEM 1A. RISK FACTORS
For a discussion of our risk factors, see Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended October 31, 2024, as supplemented by our Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2025. There have been no material changes from the risk factors set forth in such Annual Report on Form 10-K and Quarterly Report on Form 10-Q. However, the risks and uncertainties that we face are not limited to those set forth in such Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.
ITEM 5. OTHER INFORMATION
(c) Trading Plans
During the quarter ended July 31, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Supplemental Cybersecurity Governance and Program Update
The Company’s Board of Directors (the “Board”) currently provides direct oversight of cybersecurity risk. The Board is supported by directors with relevant experience in technology governance, cybersecurity oversight, and risk management, including director-level cybersecurity education and certifications.
Our ongoing evaluation against the NIST Cybersecurity Framework 2.0, expected to be completed in our fourth quarter 2025, indicates that our residual risk profile remains within acceptable parameters.
We have launched a systematic program enhancement initiative focused on elevating cybersecurity program maturity through structured documentation, policy refinement, and capability advancement. This twelve-month strategic effort will adapt dynamically to emerging threat landscapes and resource allocation priorities.
ITEM 6. EXHIBITS
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS#
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH#
Inline XBRL Schema Document
101.CAL#
Inline XBRL Calculation Linkbase Document
101.DEF#
Inline XBRL Definition Linkbase Document
101.LAB#
Inline XBRL Labels Linkbase Document
101.PRE#
Inline XBRL Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
This certification is not deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
#
The following financial information from the Quarterly Report on Form 10-Q of Calavo Growers, Inc. for the quarter ended July 31, 2025, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (1) Consolidated Balance Sheets as of July 31, 2025 and October 31, 2024; (2) Consolidated Statements of Operations for the three and nine months ended July 31, 2025 and 2024; (3) Consolidated Statements of Cash Flows for the three and nine months ended July 31, 2025 and 2024; (4) Consolidated Statements of Shareholders’ Equity for the three and nine months ended July 31, 2025 and 2024; (5) Notes to Consolidated Financial Statements; and (6) the information included in Part II, Item 5(c).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Calavo Growers, Inc.
(Registrant)
Date: September 9, 2025
By
/s/ Lecil E. Cole
Lecil E. Cole
Chief Executive Officer
(Principal Executive Officer)
/s/ James Snyder
James Snyder
Chief Financial Officer
(Principal Financial Officer)