Calavo Growers Inc. (CVGW) 2004年年度報告「NASDAQ」.pdf

《Calavo Growers Inc. (CVGW) 2004年年度報告「NASDAQ」.pdf》由會員分享，可在線閱讀，更多相關《Calavo Growers Inc. (CVGW) 2004年年度報告「NASDAQ」.pdf（47頁珍藏版）》請在三個皮匠報告上搜索。

1、2004 CALAVO GROWERS INCORPORATEDSANTA PAULACALIFORNIA 93060CALAVO GROWERS INCORPORATEDSANTA PAULA,CALIFORNIAfy2004annual reportOur Annual Report on Form 10-Kcontains statements relating to future results of Calavo Growers,Inc.(including certain projectionsand business trends)that are“forward-looking

2、 statements”within the meaning of Section 27Aof the Securities Act of 1933,as amended,and Section 21Eof the Securities Exchange Act of 1934,as amended,and are subject to the“safe harbor”created by those sections.Forward-looking statements frequently are identifiable by the use of words such as“belie

3、ve,”“anticipate,”“expect,”“intend,”“will,”and other similar expressions.Our actual results may differ materially from those projected as a result of certain risks and uncertainties.These risks and uncertainties include,but are not limited to:increased competition,general economic and business condit

4、ions,energy costs and availability,conducting substantial amounts of business internationally,pricing pressures on agriculturalproducts,adverse weather and growing conditions confronting avocado growers,new governmental regulations,as well as other risksand uncertainties,including those set forth be

5、low under the caption“Risks Related to Our Business”and elsewhere in this AnnualReport on Form 10-Kand those detailed from time to time in our other filings with the Securities and Exchange Commission.These forward-looking statements are made only as of the date hereof,and we undertake no obligation

6、 to update or revise theforward-looking statements,whether as a result of new information,future events or otherwise.1.C CA AL LA AV VO O O OP PE ER RA AT TE ED D A AS S A A G GR RO OW WE ER R-M ME EM MB BE ER R O OW WN NE ED D C CO OO OP PE ER RA AT TIIV VE E F FO OR R T TH HE E F FIIR RS ST T 7 77

7、 7 Y YE EA AR RS S O OF F IIT TS S E EX XIIS ST TE EN NC CE E.We are growing.We are profitable.We are theglobal leader in an industry we founded 80years ago and continue at the forefront of today.We spent our first 77years as a grower-ownedagricultural cooperative only to emerge as a nimble,for-prof

8、it corporation that operates worldwide.We are evolvingat an ever-faster pacemakingstrategic acquisitions and restructuring segmentsof our business to bring greater efficiencies to ouroperations.As we do so,we are committed todelivering grower returns that are among thehighest in our industry.We rema

9、in focused onbuilding shareholder value.Fiscal 2004,duringwhich we celebrated our milestone 80thanniversary,was a transformative year for us.And yet,it isin a manner of speakingonly stillthe beginning.We are Calavo Growers,Inc.,and this is our story”“2.C CA AL LA AV VO O P PA AC CK KS S T TH HE E C

10、CR RO OP PS S O OF F M MO OR RE E T TH HA AN N 2 2,2 20 00 0 C CA AL LIIF FO OR RN NIIA A A AV VO OC CA AD DO O G GR RO OW WE ER RS S,IIN NC CL LU UD DIIN NG G T TH HE E IIN ND DU US ST TR RY YS S T TW WO O L LA AR RG GE ES ST T F FR RU UIIT T P PR RO OD DU UC CE ER RS S IIR RV VIIN NE E C CO OM MP

11、PA AN NY Y A AN ND D L LIIM MO ON NE EIIR RA A C CO OM MP PA AN NY Y.3.The sun rises,chasing away the cooling coastal breezes and warming the fertile earth of theavocado groves which stretch from Temecula and Fallbrook northward to Santa Paula and onto San Luis Obispo.Much like the red-orange orb th

12、at bursts open over the Topa TopaMountains,so,too,does a new day dawn for Calavo Growers,Inc.In a most fitting beginningto its next 80years,the company is relocating its corporate headquarters to Santa Paula,Californiathe very heart of its largest growing regionin March 2005.Is the move anaffirmatio

13、n of the companys formidable agricultural roots?Without a doubt it is,as the newlocale puts the companys“ear”closer to it growers,making us even more responsive tochanging industry conditions while placing us proximate to one of our two Californiapackinghouses.Now,customers,shareholders and supplier

14、s can trace first-hand the avocadojourney from panicle blossom to the packinghouse,discovering first-hand what makes Calavodistinctive and our products so synonymous with quality.Where once Calavo employees andmanagers looked out their headquarter windows to see concrete,steel and glass,now theircol

15、lective gaze will be trained at acre-upon-acre of verdant avocado and citrus fields.Thecompany surges ahead to meet its promising future,every bit as sturdy and enduring as thestone and rough-hewn timber of its new headquarters,its new home.Calavo Growers,Inc.,too,has found its own place in the sun.

16、4.IIN N O OC CT TO OB BE ER R 2 20 00 011,C CA AL LA AV VO O G GR RO OW WE ER R-M ME EM MB BE ER RS S V VO OT TE ED D O OV VE ER RW WH HE EL LM MIIN NG GL LY Y F FO OR R C CO ON NV VE ER RS SIIO ON N T TO O F FO OR R-P PR RO OF FIIT T S ST TA AT TU US S,P PA AV VIIN NG G T TH HE E W WA AY Y F FO OR

17、R T TH HE E C CO OM MP PA AN NY Y T TO O B BE EC CO OM ME E P PU UB BL LIIC CL LY Y T TR RA AD DE ED D.C CA AL LA AV VO O P PA AC CK KE ED D 115 52 2 M MIIL LL LIIO ON N P PO OU UN ND DS S O OF F C CA AL LIIF FO OR RN NIIA A A AV VO OC CA AD DO OS S IIN N F FIIS SC CA AL L 2 20 00 04 4.5.To Our Shar

18、eholdersIN THE COMPANION VOLUME,WE COMMEMORATE OUR MILESTONE ANNIVERSARY WITH A HISTORICAL FABLE THAT ENCOMPASSESHIGHLIGHTS FROM THE COMPANYS FIRST 80 YEARS,AS SEEN THROUGH THE EYES OF OUR NEWEST COLLEAGUE,CALTHE AVOCADO.DURING FISCAL 2004,THOUGH,OUR MANAGEMENT TEAM WAS BUSY LOOKING FORWARDNOT BACKT

19、O LAYA SOLID FOUNDATION FOR CALAVO GROWERS,INC.S NEXT 80 YEARS.WE PRESSED AHEAD WITH AN AMBITIOUS AGENDAOF INITIATIVES AND COUNT AMONG OUR ACCOMPLISHMENTS:Posting record revenues for the third consecutive year with sales surging through thequarter-billion dollar mark;Completing successfully the rest

20、ructuring of processed-product operations anchoredby commencement of operations at our impressive new facility in Mexico;Concluding and integrating the acquisition of Maui Fresh Internationalour firstacquisition since becoming publicly traded in 2002which substantially diversifiesCalavos range of pr

21、oduct offerings;Reinvigorating our core California avocado business to drive Calavos profitability as itrecovered from cyclical downturn the prior year;andIntroducing our family of outstanding ultra-high pressure guacamole products in theretail marketplace and enjoying excellent initial acceptance f

22、rom consumers.Whew!Quite an aggressive 12-month to-do list,wouldnt you say?RECORD SALES,SOLID PROFITABILITYParticularly gratifying to me,however,is that even as your company aggressivelymoved forward with a strategic agenda intended to drive our industry leadership stillfurther,we did so while maint

23、aining strong profitability.In fiscal 2004,Calavoregistered net income of$6.2million,or$0.46per diluted share,which compares with$7.2million,equal to$0.55per diluted share,a year ago.Results in the most recent yearwere restrained,in part,by approximately$1million in costs related to theaforementione

24、d restructuring of our processed-products segment specifically foremployee separation,freight and facility costs and accounted for on our incomestatement as special charges,selling,general and administrative(SG&A),and cost ofsales,respectively.Per share results reflect five percent greater number of

25、 sharesoutstanding following the all-stock acquisition of Maui Fresh in November 2003.CALAVOS BOOK VALUE PER COMMON SHARE OF STOCK TOTALED MORE THAN$3.20 AT OCTOBER 31,2004.6.Revenues leaped 11percent last year to a new historic high of$274.2million,eclipsing theprevious record of$246.8million poste

26、d in fiscal 2003.The top line was propelled principallyby a resurgent California avocado business segment,where year-over-year sales rose by morethan$12million;increased sales of Mexican and Dominican Republic-grown avocados;andinitial-year revenue contributions from Maui Fresh.Even with our resourc

27、e-intensive slate of initiatives,we remained firmly committed toinvoking a rigorous cost discipline last year.In that vein,SG&Aas a percentage of total revenuesdeclined slightly in fiscal 2004,even after providing for the substantial,aforementioned costsrelated to our processed-unit restructuring.Wi

28、th respect to our financial condition,the Calavobalance sheet is flexible,liquid and long-term debt free.Shareholders equity last year grew by$6.8million,equal to 18percent,to nearly$44million.To put the companys financial health in perspectiveand of considerable pride to metheentire$10million-plus

29、cost associated with our processed-product unit restructuring,includingconstruction of the new state-of-the-art manufacturing facility,was financed entirely fromCalavos treasury and robust cash flowand without leveraging the balance sheet.Inrecognition of our solid performance,the board of directors

30、 increased the annual cash dividendon our common stock by 20percent to$0.30per share,which was paid to shareholders onJanuary 5,2005.The companys cash dividend has risen 50percent since 2002,indicative of theboards commitment to shareholder returns.CALIFORNIA AVOCADO VOLUME RISES SHARPLYAs anticipat

31、ed,our California avocado business segment rebounded soundly from thecyclically smaller harvest that characterized fiscal 2003.Nearly 25percent more fruit pouredinto our Santa Paula and Temecula packinghouses last year,with our total volume topping 152million pounds.Industry estimates place our shar

32、e of the California market for fiscal 2004atapproximately 35percent,in line with prior-year figures.Packinghouses,as a rule,thrive onvolumeit breeds productivity and operating efficiencies that reduce costs by spreading themacross a greater number of pounds.Consequently,we place considerable precede

33、nce on growerrelationsspecifically retention and recruitmentas a pivotal component of our growth strategy tobuild market share by adding incremental volume that can drive operating results higher.Calavos current number of growers totals about 2,200,and a key part of my job descriptionremains regular

34、 communication with them.We are proud that our stellar grower returnsroutinely among the industrys bestalong with our vast array of resources and the cache ofbeing aligned with the global brand leader continue to attract growers of all sizes.This wasreaffirmed subsequent to fiscal-year endwith very

35、positive implications for my volumepostulate abovewhen Limoneira Company,an integrated agribusiness operation and theC CO ON NS ST TR RU UC CT TIIO ON N O OF F C CA AL LA AV VO OS S N NE EW W S ST TA AT TE E-O OF F-T TH HE E-A AR RT T P PR RO OC CE ES SS SIIN NG G P PL LA AN NT T A AT T A A C CO OS

36、ST T O OF F M MO OR RE E T TH HA AN N$110 0 M MIIL LL LIIO ON N W WA AS S F FIIN NA AN NC CE ED D E EN NT TIIR RE EL LY Y F FR RO OM M T TH HE E C CO OM MP PA AN NY YS S R RO OB BU US ST T C CA AS SH H F FL LO OW WS S.7.second-largest avocado grower in the world,signed an agreement for Calavo to pac

37、k and marketits fruit.Limoneiras own storied California history stretches back more than a century and is acomplementary fit with our company.Calavo now proudly packs and distributes the crops ofthe number one and two producers of avocados:Irvine Company and Limoneira,respectively.MEXICAN AVOCADO SA

38、LES RISE;DOMINICAN MARKET OPENSInternational avocado sales remained particularly strong last year,driven principally bygreater volume of Mexican fruit packed both for export into the United States and othermarkets,as well as for distribution within the country.We remain squarely the market leaderfor

39、 Mexican fruit,packing nearly one-third of all avocados shipped to the U.S.last year.Fiscal2004also marked Calavos first year of sourcing avocados from the Dominican Republic andsales of fruit from the island nation reached$7.0million suffice to say,a very promising start.Our company is widely ackno

40、wledged and admired for its ability to forge alliances with globalgrowers;the opening of the Dominican market is evidence of this core Calavo strength.MAUI MAKES SOLID FIRST-YEAR CONTRIBUTIONThe acquisition of Maui Fresh,completed at the beginning of fiscal 2004,was smoothlyintegrated into the compa

41、ny and diversified Calavo well beyond avocados and papayas.Although accounting for a comparatively small portion of our overall business,Maui Freshmade solid revenue and profit contribution to Calavo last fiscal year.In addition to substantiallybroadening our product offerings20-plus items from trop

42、ical fruits to chiliesMaui providesus a stronger toehold in the all-important and fast-growing Hispanic market in the U.S.,whereper-capita avocado consumption is far higher and considered a staple in most households.AMBITIOUS PROCESSED-UNIT RESTRUCTURING COMPLETEDIn a span of slightly more than 18mo

43、nths,Calavo completed a comprehensive restructuringof its processed-products unit late last year that streamlines and brings new-found operatingefficiencies to the division.Last February,we opened the doors of and began ramping up ournew 90,000-plus square foot production facility in Uruapan,Michoac

44、an,Mexico.InAugust,the company wound up processed operations in Mexicali,Baja California Norte,Mexico,the second of two plants(the other being Santa Paula,California)shuttered as part ofthe transition.The new facility is located in the heart of the Mexican growing region andproximate to Calavos Urua

45、pan packinghouse,the principal source for fruit,and ended theinefficient two-step process of pulping and converting to finished product in separate plants.The transition was not without its share of challengesoptimizing production,subcontractingduring the transition to meet demand and rebuilding inv

46、entories,among thembut we emergefrom the other end of the restructuring as a stronger company.Calavo expects to recognizeconsiderable cost reductions from transportation,elimination of duplicative overhead and labor8.and services.A second machine for processing ultra-high pressure guacamole is prese

47、ntly beingrelocated from Mexicali,and will join equipment already in service at Uruapan to substantiallyboost production output for this high-demand product in fiscal 2005.ULTRA-HIGH PRESSURE GUACAMOLE GAINS SALES STRENGTHNew capacity comes as we are beginning to gain significant traction in the ret

48、ail segment,towhich sales commenced last year,for our ultra-high pressure guacamole.Most notably,thehighly selective Trader Joes chain has enjoyed success marketing the product under its ownHot and Spicy label.Since I believe good news shouldnt wait,subsequent to fiscal-year end wesecured distributi

49、on of ultra-high pressure processed guacamole in Stater Bros.markets,whichwill be sold under the Calavo name.The expansion into the retail channel complements thestrong market acceptance that the product has enjoyed since its introduction in the institutionaland food-service sector.As I write this l

50、etter,it is Super Bowl weekend and tens of thousandsif not millionsof football fans will consume our ultra-high pressure processed guacamole inrestaurants and at parties and mistake it for fresh-made.It simply tastes that greatIm an evenbigger fan of our guacamole product than I am of football.WELL-

51、POSITIONED TO MEET USDA RULE CHANGEThe issue that overshadowed all else in our industry last year was the United StatesDepartment of Agricultures pronouncement allowing for the year-round importation ofMexican Hass avocados to all 50 states,and which took effect on February 5,2005.Exemptfrom the rul

52、e for a period of two years are growing states:California,Florida and Hawaii.Theprevious USDArule,established in 1996,permitted the six-month import of Mexican-grownHass to 31states.The USDAdecision to fully open the U.S.market was something ofinevitability and should come as no surprise to those wh

53、o closely follow the avocado industry.Recognizing this trend,Calavo has been on the ground in Mexico since the 1990s when weopened our Uruapan packinghouse,which was joined by the companys new processed facilitylast year.We consider ourselves to have a deep understanding of the market there and,as i

54、nCalifornia,enjoy strong local relations with growers.In short,we are extremely well positionedas a companyon both sides of the borderto respond and meet the challenges of an evolvingmarketplace.That said,it is entirely too early to prognosticateand I simply will not dosoon the effects,if any,result

55、ing from year-round importation of Mexican fruit.I watch theissue as a large California grower myself but say this as the companys chief executive:Calavowill always act in a manner consistent with the best interests of all stakeholdersshareowners,growers,customers and employees.9.A STRONG,VIBRANT IN

56、DUSTRY,AN EVEN STRONGER CALAVOI also do not overreact to the USDAaction because I remain truly encouraged by thefundamental strength of the California avocado industry.As a whole,there is a strong base ofgrowers in an industry enjoying healthy returns.New plantings of avocado acreage are on therise,

57、according to industry statistics.Couple these points with a growing Hispanic populationwithin the United States,increased acceptance and usage of avocados in mainstream dishes andan upswing in consumption overallwith about half of all households buying regularlyandyou can understand why I am ebullie

58、nt.Here within the company,I have considerable confidence that the best is yet to come,as well.Let me share a few of the reasons why.With our processed restructuring complete,weturn our attention again to spurring growthinternally and through opportunisticacquisitions that may emerge.We are continui

59、ng to explore ways in which Maui Fresh can tapinto Calavos resourcesnamely our customer base and distributionto invigorate its sales.Global opportunitiesboth sourcing and sellingare within our reach as the market leader andbecause of our infrastructure and resources.The Dominican Republic business i

60、s a strongcase-in-point.In heading this great company,I am charged with oversight of a formidable legacyand Inever forget that.I am proud,humbled and at times even awed to be at its reins.Consequentlyand to paraphrase a historic passage,I do not feel that I inherited this company from itsfounders or

61、 those who preceded me;instead,I am borrowing it from those who will follow me.As such,I remain committed to shaping and leaving behind a bigger,more broadly basedCalavo that will lead the avocado industry for the next 80years.As we cross this milestone,it is appropriate to reflect and reminisce abo

62、ut those who camebefore us and made it possible to reach these heights.I extend immense thanks,as well,toa dedicated management team,loyal employees and committed board of directors.I conveyappreciation to our growers,customers and shareholders alike for their steadfast support.Wewill work diligentl

63、y to justify your faith.Sincerely,Lee E.ColeChairman,President andChief Executive OfficerFebruary 14,2005C CA AL LA AV VO O B BO OA AS ST TS S A A S ST TR RO ON NG G F FIIN NA AN NC CIIA AL L C CO ON ND DIIT TIIO ON N W WIIT TH H A A L LO ON NG G-T TE ER RM M D DE EB BT T F FR RE EE E B BA AL LA AN

64、NC CE E S SH HE EE ET T.10.FROM LEFT TO RIGHT:Scott N.Van Der Kar General Manager,Van Der Kar Family Farms(Pinehill Ranch)Carpinteria,CaliforniaGeorge H.“Bud”Barnes Avocado Grower,Valley Center,CaliforniaJ.LinkLeavens General Manager,Leavens Ranches Ventura,CaliforniaLecil E.Cole Chairman of the Boa

65、rd,President,Chief Executive Officer,Calavo Growers,Inc.Santa Paula,CaliforniaDonald M.SandersPresident,S&SGrove Management Escondido,CaliforniaT TH HE E C CO OM MP PA AN NY Y H HA AS S B BU UIIL LT T S SIIX X A AV VO OC CA AD DO O R RIIP PE EN NIIN NG G R RO OO OM MS S IIN N S ST TR RA AT TE EG GII

66、C C L LO OC CA AT TIIO ON NS S T TH HR RO OU UG GH HO OU UT T T TH HE E U U.S S.,E EN NA AB BL LIIN NG G T TH HE E S SH HIIP PM ME EN NT T O OF F F FR RU UIIT T T TO O C CU US ST TO OM ME ER RS S S SP PE EC CIIF FIIC C R RE EQ QU UIIR RE EM ME EN NT TS S A AN ND D S SP PU UR RR RIIN NG G C CO ON NS

67、SU UM MP PT TIIO ON N.11.FROM LEFT TO RIGHT:Alva V.Snider Avocado Grower,Fallbrook,CaliforniaMike Hause President/ChiefExecutive Officer,Santa Clara Valley Bank Santa Paula,CaliforniaDorcas H.Mc Farlane Owner&Operator,J.K.Thille Ranches Santa Paula,CaliforniaJohn M.Hunt Manager,Embarcadero RanchGole

68、ta,CaliforniaFred J.Ferrazzano President&Chief Executive Officer,Ferrazzano FarmsEscondido,CaliforniaIN MEMORIAM:We remember our friend andfellow Director Roy V.Keenan AvocadoGrower,Temecula,California(1935-2004).He was an active board member from(1994-2004).He shall be missed.12.2000200120022003200

69、4200020012002200320042000200120022003200420002001200220032004REVENUES(dollars in millions)SHAREHOLDERS EQUITY(dollars in millions)EARNINGS PER SHARE(in dollars)NET INCOME(dollars in millions)$221$4.5$0.43$0.37$0.60$0.55$21$20$31$37$44$0.46$3.8$6.9$7.2$6.2$218$243$247$274Financial ResultsC CA AL LA A

70、V VO OS S F FO OR RM MA AT TIIO ON N IIN N 119 92 24 4 P PR RE EC CE ED DE ES S B BY Y T TW WO O Y YE EA AR RS S T TH HE E P PL LA AN NT TIIN NG G O OF F T TH HE E F FIIR RS ST T H HA AS SS S A AV VO OC CA AD DO O T TR RE EE E B BY Y A A P PO OS ST TM MA AN N IIN N L LA A H HA AB BR RA A,C CA AL LII

71、F FO OR RN NIIA A.C CA AL LA AV VO O F FIIR RS ST T A AD DD DE ED D F FR RE ES SH H P PA AP PA AY YA A T TO O IIT TS S D DIIV VE ER RS SIIF FIIE ED D L LIIN NE E O OF F O OT TH HE ER R P PE ER RIIS SH HA AB BL LE E F FO OO OD D P PR RO OD DU UC CT TS S IIN N 119 94 49 9 A AN ND D H HA AS S P PA AC C

72、K KE ED D A AN ND D D DIIS ST TR RIIB BU UT TE ED D T TH HE E T TR RO OP PIIC CA AL L F FR RU UIIT T F FO OR R 5 55 5 C CO ON NS SE EC CU UT TIIV VE E Y YE EA AR RS S.13.Financial Table of Contents14.Selected Consolidated Financial Data15.Managements Discussion&Analysis25.Consolidated Balance Sheets

73、26.Consolidated Statements of Income27.Consolidated Statements of Shareholders Equity28.Consolidated Statements of Cash Flows29.Notes to Consolidated Financial Statements40.Report of Independent Registered Public Accounting FirmSelected Consolidated Financial DataFiscal Year Ended October 31,(In tho

74、usands,except per share data)20042003200220012000INCOME STATEMENT DATA:(1)Net sales$274,218$246,761$242,671$217,704$220,712Gross margin25,40425,46525,82318,80819,554Net income6,2107,1606,9153,8384,476Basic and diluted net income per share(2)$0.46$0.55$0.60$0.37$0.43BALANCE SHEET DATA AS OF END OF PE

75、RIOD:Working capital20,35320,73518,8339,79912,559Total assets67,39853,68955,13252,36846,537Short-term debt22243,22216,2419,486Long-term debt,less current portion(3)34613,1803,4293,820Shareholders equity43,93737,14730,55620,02921,066CASH FLOWS PROVIDED BY(USED IN):Operations4,46015,2228,1351,1612,958

76、Investing(4)(8,474)(4,475)(2,078)(2,029)(1,685)Financing(725)(6,293)(7,193)1,433(1,239)OTHER DATA:Dividends per share(2)$0.30$0.25$0.20$0.50$Net book value per share$3.25$2.87$2.38$2.01$2.13Pounds of California avocados sold152,725122,950158,187163,891123,399Pounds of international avocados sold69,4

77、1070,34869,51244,93542,300Pounds of processed avocados products sold13,31714,70714,24814,78814,962(1)Operating results for fiscal year 2004 include the acquisition of Maui.For fiscal year 2004,Mauis net sales,gross margins,and net income were as follows:$19.8 million,$1.4 million,and$0.5 million.(2)

78、Dividends per share for fiscal 2001 represent the payment of our dividend to shareholders for the results of our fiscal 2000 operations.We did not declare a cash dividend in connection with our fiscal 200operating results.In December 2001,we declared a 5%stock dividend payable February 15,2002 for a

79、ll shareholders of record as of February 1,2002.Basic and diluted earnings per share for all periodspresented have been restated to reflect the 5%stock dividend.Dividends per share and net book value per share are computed based on the actual shares outstanding.(3)In July 2003,our Board of Directors

80、 approved the retirement of our Industrial Development Revenue Bond.The bonds were initially floated to provide the financing to construct our Temecula,Californiapackinghouse.We repaid the final$2.8 million in principal under the indenture in September 2003.(4)Cash flows used in investing activities

81、 for fiscal 2004 and 2003 include the effect of constructing a processing facility in Uruapan,Michoacan,Mexico.The Uruapan facility commenced operationsin February 2004.14.The following summary consolidated financial data(other thanpounds information)for each of the years in the five-year periodende

82、d October 31,2004 are derived from the audited consolidatedfinancial statements of Calavo Growers,Inc.and our predecessor,Calavo Growers of California.Historical results are not necessarily indicative of results that maybe expected in any future period.The following data should beread in conjunction

83、 with“Managements Discussion and Analysisof Financial Condition and Results of Operations”and ourconsolidated financial statements and notes thereto that areincluded elsewhere in this Annual Report.Managements Discussion and Analysis of Financial Condition and Results of OperationsYou should read th

84、e following discussion and analysis of ourfinancial condition and results of operations together with“Selected Consolidated Financial Data”and our consolidatedfinancial statements and notes thereto that appear elsewhere in this Annual Report.OVERVIEWWe are a leader in the distribution of avocados,pr

85、ocessed avocado products,and other perishable food products throughoutthe United States and elsewhere in the world.Our history andexpertise in handling California grown avocados has allowed us todevelop a reputation of delivering quality products,at competitiveprices,while providing a competitive re

86、turn to our growers.Thisreputation has enabled us to expand our product offering to includeavocados sourced on an international basis,processed avocadoproducts,and other perishable foods.We report these operationsin three business segments:California avocados,internationalavocados and other perishab

87、le food products and processedproducts.We report our financial results on a November 1 toOctober 31 fiscal year basis to coincide with the Californiaavocado harvest season.In order to diversify our product lines and increase synergieswithin the marketplace,we acquired all the outstanding commonshare

88、s of Maui Fresh International,Inc.(Maui)for 576,924 sharesof our common stock valued at$4.05 million in November 2003,plus acquisition costs of$65,000.Maui is a specialty producecompany servicing a wide array of retail,food service,and terminalmarket wholesale customers with over 20 different specia

89、ltycommodities.The value of our common stock issued inconjunction with the acquisition was based on the average quotedmarket price of our common stock for three days before and afterthe announcement date.As security for certain potential contingencies,such as unrecordedliabilities,we held approximat

90、ely 58,000 shares issued inconjunction with such acquisition for one full year from theacquisition date.As no contingencies developed,which was inaccordance with our expectations,we are in the process ofreleasing these shares to the original Maui shareholders.The following table summarizes the estim

91、ated fair values of theassets acquired and liabilities assumed at the date of acquisition.The differences from the previously reported amounts of goodwilland intangible assets of$867,000 resulted from the finalization ofour valuation information in the second quarter of fiscal 2004.15.(in thousands)

92、2004Fixed assets$114Goodwill3,591Intangible assets 867Total assets acquired4,572Current liabilities110Deferred tax liabilities347Net assets acquired$4,115Our California avocado business grades,sizes,packs and coolsavocados grown in California for delivery to our customers.Wepresently operate two pac

93、kinghouses in Southern California.Thesepackinghouses handled approximately 35%of the Californiaavocado crop during the 2004 fiscal year,based on data obtainedfrom the California Avocado Commission.Our operating resultsand the returns we pay our growers are highly dependent on thevolume of avocados d

94、elivered to our packinghouses,as a significantportion of our costs are fixed.Our strategy calls for continuedefforts in retaining existing growers,aggressively recruiting newgrowers,and procuring a larger percentage of the Californiaavocado crop to improve our results from operations.Our internation

95、al and perishable food products business procuresavocados grown in Mexico,Chile,and the Dominican Republic,aswell as other various commodities,including papayas,tomatoes,chili peppers,pineapples,and ginger.We operate a packinghouse inMexico that handled approximately 31%of the Mexican avocadocrop bo

96、und for the United States market during the 2003-2004Mexican harvest season,based on our estimates.Additionally,during the 2003-2004 Chilean avocado harvest season,we handledapproximately 10%of the Chilean avocado crop,based on ourestimates.Our strategy is to procure and sell the internationallygrow

97、n avocados to complement our distribution efforts ofCalifornia grown avocados.We believe that the introduction ofthese avocados,although competitive at times with Californiagrown avocados,provides a level of supply stability that may,over time,help solidify the demand for avocados among consumers in

98、the United States and elsewhere in the world.We believe ourefforts in distributing our other various commodities,such as thoseshown above,complement our offerings of avocados.From time totime,we continue to explore distribution of other crops thatprovide reasonable returns to the business.Our proces

99、sed products business procures avocados,processesavocados into a wide variety of guacamole products,anddistributes the processed product to our customers.In February2003,our Board of Directors approved a plan whereby theoperations of our processed products business would be relocated.The plan called

100、 for the closing of our Santa Paula,California andMexicali,Baja California Norte processing facilities and therelocation of these operations to a new facility in Uruapan,Michoacan,Mexico.We believe that this restructuring will providecost savings in the elimination of certain transportation costs,du

101、plicative overhead structures,and savings in the overall cost oflabor and services.The Uruapan facility commenced operations inFebruary 2004 and the Santa Paula and Mexicali facilities wereclosed in February 2003 and August 2004,respectively.For fiscal year 2004,we have incurred costs related to thi

102、srestructuring approximating$1,013,000.Our income statement forthe year ended October 31,2004 includes$741,000 as cost of sales,$185,000 as special charges,and$87,000 as selling,general andadministrative expenses.16.Special charges recorded during the year ended October 31,2004consist entirely of em

103、ployee separation costs.All employeeseparation costs were paid in cash and represent final payments to93 production and 8 managerial/administrative employees formerlyworking at our Mexicali processing facility.We have not recordeda significant charge relating to the write-down of production assetsbe

104、ing held at our Mexicali production facility,as substantially allsuch assets were re-commissioned at our new facility in Uruapanor their carrying value was less than their fair value.Processed products customers include both food service industryand retail businesses.Our strategy calls for the devel

105、opment ofnew guacamole recipes and other processed avocado products thataddress the diverse taste of todays consumers.We also seek toexpand our relationships with major food service companies anddevelop alliances that will allow our products to reach a largerpercentage of the marketplace.Our Califor

106、nia avocado and international and perishable foodproduct businesses are highly seasonal and are characterized byrapid crop volume and price changes.Furthermore,the operatingresults of all of our businesses,including our processed productsbusiness,have been,and will continue to be,affected by substan

107、tialquarterly and annual fluctuations and market downturns due to anumber of factors,such as pests and disease,weather patterns,changes in demand by consumers,the timing of the receipt,reduction,or cancellation of significant customer orders,the gainor loss of significant customers,market acceptance

108、 of ourproducts,our ability to develop,introduce,and market newproducts on a timely basis,availability and cost of avocados andsupplies from growers and vendors,new product introductions byour competitors,change in the mix of avocados and processedproducts we sell,and general economic conditions.We

109、believe,however,that we are currently positioned to address these risksand deliver favorable operating results for the foreseeable future.On October 9,2001,we completed a series of transactionswhereby common and preferred shareholders of Calavo Growersof California,an agricultural marketing cooperat

110、ive association,exchanged all of their outstanding shares for shares of our commonstock.Concurrently with this transaction,the Cooperative wasmerged into us with Calavo emerging as the surviving entity.Thesetransactions had the effect of converting the legal structure of thebusiness from a non-profi

111、t cooperative to a for-profit corporation.The merger and the conversion were approved on anoverwhelming basis by both the Cooperatives shareholders andour board of directors.Prior to the merger,the Cooperativereported results of operations as constituting either member(thepacking and distribution of

112、 avocados procured from eithermembers or associate members)or non-member business(non-member business included both the processed product businessand the sourcing and distribution of all crops that were notprocured from the Cooperatives members).We have realigned ourbusinesses to combine within our

113、California avocado segment theresults of operations of both the California avocados grownpreviously by members and those that were procured from non-members.We believe that this presentation provides an enhancedview of the results of our California operations and a betterframework to evaluate the re

114、sults of our various operations.Recent DevelopmentsDividend PaymentIn January 2005,we paid a$0.30 per share dividend in theaggregate amount of$4,052,000 to shareholders of record onNovember 15,2004.Corporate Headquarters BuildingIn August 2004,we entered into an agreement to sell our corporateheadqu

115、arters building located in Santa Ana,California for$3.4million.Such transaction,however,fell out of escrow in November2004.Then,in December 2004,we re-entered escrow with adifferent buyer,to sell our corporate headquarters building for thesame sales price.Escrow related to such transaction is expect

116、ed toclose in the second quarter of fiscal 2005,which is when we expectto complete the move of our corporate headquarters.We estimatethat this transaction will result in a pre-tax gain on sale ofapproximately$3.0 million,if such transaction is consummatedaccording to terms.We currently plan to reloc

117、ate our corporateoffices to Santa Paula,California.CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financialstatements,which have been prepared in accordance withaccounting principles generally accepted in

118、 the United States ofAmerica.The preparation of these financial statements requires usto make estimates and judgments that affect the reported amountsof assets,liabilities,revenues and expenses.On an ongoing basis,we re-evaluate all of our estimates,including those related to theareas of customer an

119、d grower receivables,inventories,useful lives of property,plant and equipment,promotional allowances,income taxes,retirement benefits,and commitments andcontingencies.We base our estimates on historical experience andon various other assumptions that are believed to be reasonableunder the circumstan

120、ces,the results of which form the basis formaking judgments about the carrying values of assets and liabilitiesthat are not readily apparent from other sources.Actual resultsmay materially differ from these estimates under differentassumptions or conditions as additional information becomesavailable

121、 in future periods.Management has discussed the development and selection ofcritical accounting estimates with the Audit Committee of theBoard of Directors and the Audit Committee has reviewed ourdisclosure relating to critical accounting estimates in this Annual Report.ReservesRestructuringAmountsN

122、on-cashremaining(in thousands)chargespaidchargesto be utilizedSpecial charges-employee separation costs$185$(185)$Selling,general and administrative freight87(87)Cost of sales-facility operating costs741(672)(69)$1,013$(944)$(69)$These costs are comprised of the following components as of and for th

123、e year ended October 31,2004:17.We believe the following are the more significant judgments and estimates used in the preparation of our consolidated financial statements.Promotional allowances.We provide for promotional allowances atthe time of sale,based on our historical experience.Our estimatesa

124、re generally based on evaluating the average length of timebetween the product shipment date and the date on which we paythe customer the promotional allowance.The product of this lagfactor and our historical promotional allowance payment rate isthe basis for the promotional allowance included in ac

125、cruedexpenses on our balance sheet.Actual amounts may differ fromthese estimates and such differences are recognized as anadjustment to net sales in the period they are identified.Goodwill and acquired intangible assets.The purchase method ofaccounting for business combinations requires us to make u

126、se ofestimates and judgments to allocate the purchase price paid foracquisitions to the fair value of the net tangible and identifiableintangible assets.Goodwill is tested for impairment annually,orwhen a possible impairment is indicated,using the fair value basedtest prescribed by Statement of Fina

127、ncial Accounting Standards(SFAS)No.142,Goodwill and Other Intangible Assets.Theimpairment test requires us to compare the fair value of businessreporting units to carrying value,including goodwill.We primarilyuse an“income approach”(which considers the present value offuture cash flows)in combinatio

128、n with a“market approach”(which considers what other purchasers in the marketplace have paid for similar businesses)to determine fair value.Future cashflows typically include operating cash flows for the business forfive years and an estimated terminal value.Management judgmentis required in the est

129、imation of future operating results and todetermine the appropriate terminal values.Future operating resultsand terminal values could differ from the estimates and couldrequire a provision for impairment in a future period.Allowance for accounts receivable.We provide an allowance forestimated uncoll

130、ectible accounts receivable balances based onhistorical experience and the aging of the related accountsreceivable.If the financial condition of our customers were todeteriorate,resulting in an impairment of their ability to makepayments,additional allowances may be required.Revenue recognition.Sale

131、s of products and related costs of productssold are recognized when persuasive evidence of an arrangementexists,shipment has been made,title passes,the price is fixed ordeterminable and collectibility is reasonably assured.Servicerevenue,including freight,ripening,storage,bagging andpalletization ch

132、arges,is recorded when services are performed and sales of the related products are delivered.RESULTS OF OPERATIONSThe following table sets forth certain items from our consolidatedstatements of income,expressed as percentages of our total netsales,for the periods indicated:Year ended October 31,200

133、420032002Net sales100.0%100.0%100.0%Gross margins9.3%10.3%10.6%Selling,general and administrative5.8%6.0%5.7%Operating income3.4%4.3%4.9%Other income,net0.2%0.4%0.3%Net income2.3%2.9%2.8%Net SalesWe believe that the fundamentals for our products continue to befavorable.Government census studies cont

134、inue to indicate a shiftin the demographics of the U.S.population in which largerportions of the population descend from a Hispanic origin.Avocados are considered a staple item purchased by Hispanicconsumers and their acceptance as part of American cuisinecontinues to spur demand for our products.We

135、 anticipate avocado products will further penetrate the United Statesmarketplace driven by growth in the Hispanic community andgeneral acceptance in American cuisine.As the largest marketer of avocado products in the United States,we believe that weare well positioned to leverage this trend and to g

136、row all segments of our business.Sales of products and related costs of products sold are recognizedwhen persuasive evidence of an arrangement exists,shipment hasbeen made,title passes,the price is fixed or determinable,andcollectibility is reasonably assured.Service revenue,includingfreight,ripenin

137、g,storage,bagging and palletization charges,isrecorded when services are performed and sales of the relatedproducts are delivered.We provide for sales returns andpromotional allowances at the time of shipment,based on ourexperience.The following table summarizes our net sales bybusiness segment:Net

138、sales for the year ended October 31,2004,when compared to2003,grew by approximately$27.5 million,or 11.1%,principallyas a result of growth experienced by our California avocados andInternational avocados and perishable food products segments.Inparticular,growth in our net sales reflects an increasin

139、g percentageof our business being generated by our International avocados andperishable food product segments,which was driven primarily byadditional sales related to the acquisition of Maui FreshInternational,Inc.(“Maui”).Net sales generated by our International avocados and perishablefood products

140、 business depends principally on the availability ofChilean and Mexican grown avocados in the U.S.markets.Currently,Mexican grown avocados are significant during our firsttwo fiscal quarters.Chilean grown avocados are significant duringour 1st and 4th fiscal quarters.In 1996,the United StatesDepartm

141、ent of Agriculture(“USDA”)established a protocolwhereby Mexican grown Hass avocados were permitted to beimported,on a restricted basis,into the United States.Restrictionsimposed on the marketing of the fruit,due to phytosanitaryconcerns,limited the marketing of Mexican Hass avocados to 31states,from

142、 the middle of October to the middle of April.InNovember 2004,however,the USDA published a rule allowingHass avocado imports from Mexico into all 50 states,with theexception of California,Florida,and Hawaii.The exceptionextends for two years.For the remaining 47 states,however,avocados exports are s

143、et to start February 1,2005.While webelieve that we are well positioned to respond to such legislation,we are unable to project the impact,if any,the adoption of this new rule would have on our financial condition and results of operations.The following tables set forth sales by product category,fre

144、ight and other charges and sales incentives,by segment(dollars in thousands):18.(Dollars in thousands)2004Change2003Change2002Net sales:California avocados$163,4869.3%$149,635(9.4)%$165,077International avocados andperishable food products94,42325.3%75,34727.5%59,083Processed products32,7491.2%32,36

145、08.0%29,960Eliminations(16,440)(10,581)(11,449)Total net sales$274,21811.1%$246,7611.7%$242,671As a percentage of net sales:California avocados59.0%60.6%68.0%International avocados andperishable food products31.6%28.0%22.2%Processed products9.4%11.4%9.8%100.0%100.0%100.0%Year ended October 31,2004Ye

146、ar ended October 31,2003InternationalInternationalavocados andavocados andperishableperishableCaliforniafoodProcessedCaliforniafoodProcessed avocadosproductsproductsTotal avocados products products TotalThird-party sales:California avocados$150,159$150,159$140,795$140,795Imported avocados54,58954,58

147、956,30656,306Papayas6,8466,8462,9202,920Specialities and tropicals14,23314,2333030Processed-food service27,35227,35228,54528,545Processed-retail and club4,2854,2855,1655,165Total fruit and product sales to third-parties150,15975,66831,637257,464140,79559,25633,710233,761Freight and other charges11,9

148、4610,96853423,4488,99710,07929019,366Total gross sales to third-parties162,10586,63632,171280,912149,79269,33534,000253,127Less sales incentives(131)(48)(6,515)(6,694)(157)(251)(5,958)(6,366)Total net sales to third-parties161,97486,58825,656274,218149,63569,08428,042246,761Intercompany sales1,5127,

149、8357,09316,4406,2634,31810,581Net sales$163,486$94,423$32,749290,658$149,635$75,347$32,360257,342Intercompany sales eliminations(16,440)(10,581)Consolidated net sales$274,218$246,76119.Net sales to third parties by segment exclude value-added services billed by our Uruapan packinghouse,Uruapan proce

150、ssingplant and Mexicali processing plant to the parent company.All intercompany sales are eliminated in our consolidated results of operations.California AvocadosNet sales delivered by the business increased by approximately$12.3 million,or 8.2%,from fiscal 2003 to 2004.This increase insales reflect

151、s a 24.2%increase in pounds of avocados sold,partiallyoffset by a decrease in our average selling prices when compared tothe same prior year period.This increase in pounds sold wasconsistent with the increase in the overall harvest of the Californiaavocado crop for the 2003/2004 season.Our market sh

152、are ofCalifornia avocados remained consistent at 34.7%for fiscal year2004,compared to 34.2%for the same period in the prior year.For fiscal year 2004,average selling prices,on a per carton basis,for California avocados were 18.0%lower when compared to thesame prior year period.This pricing structure

153、 primarily reflects theimpact of a larger California avocado harvest.For fiscal year 2005,we believe that the year-round introduction of imported avocadosin the U.S.marketplace will put increasing pressure on sales prices,principally as a result of an increase in volume.Net sales delivered by the bu

154、siness decreased by approximately$15.4 million,or 9.4%,from fiscal 2002 to 2003.This decrease insales primarily reflects a 22.3%decrease in avocados sold,partiallyoffset by a significant improvement in the average selling prices ofavocados when compared to fiscal 2002.The decrease in poundssold is c

155、onsistent with the decrease in the overall harvest of theCalifornia avocado crop for the 2002/2003 season,as well as a shiftin growing areas where we do not command as significant a marketshare.Despite this decrease in volume,we continued to maintainour leadership role in packing and marketing Calif

156、ornia grownavocados.Our market share of first grade Hass variety avocadoswas approximately 34%and 37%during fiscal 2003 and 2002.Forthe 2002/2003 season,we attribute such decrease in market shareprimarily to the aforementioned shift into growing areas where wedo not command as significant a market s

157、hare among growers.For fiscal year 2003,average selling prices,on a per carton basis,for California avocados were 19.0%higher when compared tofiscal year 2002.We attribute some of the increase in these averageselling prices to increasing demand for California grown avocadosin the U.S.marketplace and

158、 a reduced volume of avocados.Webelieve that our investments in focused marketing activities,combined with promotional programs established by theCalifornia Avocado Commission,have generally had a positiveeffect on average sales prices.Our strategy is to continue todevelop marketing opportunities th

159、at favorably position avocadospacked by Calavo with our customers by emphasizing existingvalue-added services,such as fruit bagging and ripening.Webelieve that these and other value-added strategies are criticalelements in sustaining competitive average selling prices.In October 2002,the USDA announ

160、ced the creation of a HassAvocado Board to promote the sale of Hass variety avocados in the U.S.marketplace.The California Avocado Commission,which receives its funding from California avocado growers,has historically shouldered the promotional and advertising costs supporting avocado sales.The new

161、Hass Avocado Board now provides a basis for a unified funding of promotional activities based on an assessment on all avocados sold in the U.S.marketplace including imported and California grown fruit.We believe that the incremental funding of promotional and advertising programs in the U.S.will,in

162、the long term,positively impact average selling prices and will favorably impactour California avocado and international avocado businesses.During fiscal 2004 and 2003,we remitted approximately$3.3million and$2.4 million to the Hass Avocado Board representingour share of such marketing expenses.Inte

163、rnational and Perishable Food ProductsFor fiscal year 2004,when compared to the same period in the prior year,sales to third-party customers increased byapproximately$17.5 million,or 25.3%,from$69.1 million to$86.6million.The increased sales to third-parties by our internationaland perishable food p

164、roducts business were primarily driven bythe additional sales related to the acquisition of Maui in NovemberYear ended October 31,2003Year ended October 31,2002InternationalInternationalavocados andavocados andperishableperishableCaliforniafoodProcessedCaliforniafoodProcessed avocadosproductsproduct

165、sTotal avocados products products TotalThird-party sales:California avocados$140,795$140,795$153,878$153,878Imported avocados56,30656,30643,71543,715Papayas2,9202,9202,6582,658Specialities and tropicals30304242Processed-food service28,54528,54524,96424,964Processed-retail and club5,1655,1655,1415,14

166、1Total fruit and product salesto third-parties140,79559,25633,710233,761153,87846,41530,105230,398Freight and other charges8,99710,07929019,36611,3817,54021719,138Total gross sales to third-parties149,79269,33534,000253,127165,25953,95530,322249,536Less sales incentives(157)(251)(5,958)(6,366)(182)(

167、150)(6,533)(6,865)Total net sales to third-parties149,63569,08428,042246,761165,07753,80523,789242,671Intercompany sales6,2634,31810,5815,2786,17111,449Net sales$149,635$75,347$32,360257,342$165,077$59,083$29,960254,120Intercompany sales eliminations(10,581)(11,449)Consolidated net sales$246,761$242

168、,6712003,as well as increased sales of Mexican and DominicanRepublic grown avocados in the U.S.,Japanese,and/or Europeanmarketplace.These increases,however,were partially offset bydecreased sales of Chilean grown avocados.We believe that sales ofMexican grown avocados will continue to show a growing

169、 trend.We intend to leverage our position as the largest packer of Mexicangrown avocados for export markets to improve the overallperformance of this business.For fiscal year 2004,the additional sales related to the acquisitionof Maui totaled approximately$19.8 million(approximately$1.5million of su

170、ch sales were related to California avocados).Also,sales of Mexican and Dominican Republic sourced fruit increased$4.1 million and$6.9 million for fiscal year 2004,when comparedto the same prior year period,primarily as a result of a 9.8%and100%increase in pounds of Mexican and Dominican Republicfru

171、it handled.Such increases,however,were partially offset bydecreases in Chilean fruit sales.For fiscal year 2004,sales ofChilean sourced fruit decreased$12.3 million when compared tothe same prior period.This was primarily the result of a 42.1%decrease in the volume of Chilean fruit handled,when comp

172、aredto the same prior year period.Pricing during fiscal year 2004 wasfairly stable as well,when compared to fiscal 2003.For fiscal year 2003,when compared to fiscal year 2002,sales tothird-party customers increased by approximately$15.3 million,or28.4%,from$53.8 million to$69.1 million.The increased

173、 sales tothird parties by our International and perishable foods productsbusiness were primarily driven by a greater volume of Chilean andMexican grown avocados penetrating into the U.S.,Japan andEurope marketplaces.The volume of fruit handled increased by 4.1million pounds of Chilean grown avocados

174、,or 16.3%,and 9.3million pounds of Mexican grown avocados,or 30.3%,for fiscal2003 when compared to fiscal 2002.Pricing during fiscal 2003 wasfairly stable as well,when compared to fiscal 2002.During fiscal year 2003,we sourced a significantly greater volume ofMexican grown avocados from our Uruapan,

175、Mexico packinghouse.During fiscal 2003,the volume of fruit related to shipments to theU.S.marketplace increased by approximately 2.5 million pounds,or13.8%,as compared to fiscal 2002.In addition,net sales resultingfrom the sale of Mexican grown avocados were also favorablyimpacted by increased deman

176、d from Japanese and Europeancustomers.During fiscal 2003,the volume of fruit related toshipments to Japan and Europe increased by approximately 6.7million pounds,or 76.8%,as compared to fiscal 2002.Processed ProductsNet sales to third-party customers decreased by approximately$2.3 million,or 8.5%,fr

177、om$28.0 million for fiscal year 2003 to$25.7 million for fiscal year 2004.The decrease in net sales tothird-party customers is primarily attributable to a decrease in 1.4 million pounds of product sold,or 9.5%,and an increase insales incentives and promotional activities paid of$0.6 million,or8.5%,p

178、artially offset by an increase in the sales price per productpound sold of$0.09,or 3.9%.During fiscal year 2004,the decreasein pounds sold primarily relates to a lack of inventory to meetcustomer demand.Such lack of inventory was primarily related toreduced production capabilities during constructio

179、n of our newprocessed facility.As a result,and,in order to maintain goodcustomer relationships,we increased our sales incentives andpromotional activities paid.Net sales to third-party customers increased by approximately$4.2 million,or 17.9%,from$23.8 million for fiscal 2002 to$28.0million for fisc

180、al 2003.The increase in fiscal 2003 net sales to third-party customers is primarily attributable to an increase in 0.5million pounds of product sold,or 3.2%,an increase in the salesprice per product pound sold of$0.18,and a decrease in salesincentives and paid promotional activities of$0.6 million o

181、r 8.8%.During fiscal 2003,we experienced an increase in demand for ourfrozen processed products as one of our competitors exited fromthe business.As a result of the increase in demand for our product,we decreased our sales incentives and promotional activities paid.During fiscal year 2002,we purchas

182、ed and commissioned newultra high pressure treatment equipment designed to manufactureprocessed avocado products that are not frozen.During fiscal year 2004,we operated two separate high pressure lines,consistingof one ultra high pressure machine manufacturing guacamole inMexicali and another in Uru

183、apan.The machine in Mexicali wascommissioned for operations in October 2002 and ran nearcapacity during fiscal 2003 through the closure date of Mexicali,which was August 2004.The machine in Uruapan,which has a much larger capacity than the Mexicali machine,wascommissioned for operations in July 2004

184、 and ran at about 40%capacity through October 2004.We anticipate that we will operatesuch high pressure machine at or near full capacity during fiscalyear 2005.We plan to re-commission the high pressure machinethat was located in Mexicali to Uruapan during fiscal 2005 as well.Utilizing avocado pulp

185、and chunks,these high pressure machinesallow us to deliver fresh guacamole to retail and food servicecustomers.Sales of our high pressure product totaled approximately$5.5 million for fiscal year 2004.We believe that the introductionof these fresh guacamole products will,in the long-term,successfull

186、y address a growing market segment.Gross MarginsThe following table summarizes our gross margins and gross profitpercentages by business segment:20.(Dollars in thousands)2004Change2003Change2002Gross Margins:California avocados$17,10215.0%$14,873(13.9)%$17,281International avocados and perishable fo

187、od products4,958(9.1)%5,45750.2%3,711Processed products3,344(33.3)%5,0173.9%4,831Total gross margins$25,4040.2%$25,347(1.4)%$25,823Gross profit percentages:California avocados10.6%9.9%10.5%International avocados and perishable food products5.7%7.9%6.9%Processed products13.0%17.9%20.3%Consolidated9.3

188、%10.3%10.6%21.Our cost of goods sold consists predominantly of fruit costs,packing materials,freight and handling,labor and overhead(including depreciation)associated with preparing food products,and other direct expenses pertaining to products sold.Consolidated gross margin,as a percent of sales,de

189、creased 1.0%for fiscal year 2004 when compared to fiscal year 2003.Thisdecrease was principally attributable to decreased profitability inour international avocados and perishable food products operatingsegment and our processed product segment,partially offset byincreased profitability in our Calif

190、ornia avocado segment.Consolidated gross margin,as a percent of sales,decreased 0.3%for fiscal year 2003 when compared to fiscal year 2002.Thisdecrease was principally a result of decreases in the gross profitpercentages realized by our California avocado and processedproducts segments,which were pa

191、rtially offset by increased grossprofit percentages achieved by our international avocado andperishable food products segment.Gross margins and gross profit percentages for our Californiaavocado business are largely dependent on production yieldsachieved at our packinghouses,current market prices of

192、 avocados,and the volume of avocados packed.The increase in our grossmargin percentage during fiscal year 2004 was primarily related toa significant increase in pounds of fruit handled.During fiscal year2004,when compared to fiscal year 2003,fruit handled by ourCalifornia packinghouses increased app

193、roximately 31.4%.This hadthe effect of reducing our per pound costs,which,as a result,positively impacted gross margins.The decrease in our grossmargin percentage during fiscal year 2003 was primarily related toa higher average return per pound paid to our growers.Ourgrowers received an average retu

194、rn of$1.03 per pound,ascompared to$0.86 per pound in fiscal 2002.The volume ofavocados delivered by our growers decreased,however,byapproximately 34.4 million pounds.During fiscal 2004,freight andhandling costs increased by approximately$1.5 million,from$3.5million in fiscal 2003 to$5.0 million duri

195、ng fiscal 2004.Duringfiscal 2003,freight and handling costs decreased by approximately$0.7 million,from$4.2 million in fiscal 2002 to$3.5 million.Wecontinue to review our packinghouse processes for potentialimprovements in packing efficiencies and more favorableproduction yields.The gross margin and

196、 gross profit percentage for our internationalavocado and perishable food products business are dependent onthe volume of fruit we handle and the competitiveness of thereturns that we provide to third-party domestic packers.Forexample,the gross margins we earn on avocados procured fromChile and the

197、Dominican Republic,as well as papayas grown inHawaii,are generally based on a commission agreed to with eachpacker that is subject to incentive provisions.These provisionsprovide for us to deliver returns to these packers that arecompetitive with those delivered by other handlers.Accordingly,the gro

198、ss margin results for this business are a function of thevolume handled and the competitiveness of the sales prices that werealize as compared to others.Although we generally do not takelegal title to such avocados and perishable products,we do assumeresponsibilities(principally assuming credit risk

199、,inventory lossand delivery risk,and limited pricing risk)that are consistent withacting as a principal in the transaction.Accordingly,our results ofoperations include sales and cost of sales from the sale of avocadosand perishable products procured under consignmentarrangements.For fiscal year 2004

200、,we generated gross margins of$1.5 million from the sale of fresh produce products that werepacked by third parties,whereas gross margins for fiscal year 2003were$2.3 million.For fiscal year 2003,we generated gross marginsof$2.3 million from the sale of fresh produce products that werepacked by thir

201、d parties,whereas gross margins for fiscal year 2002were only$1.4 million.Our business with Mexican growers differs in that we operate apackinghouse in Mexico and purchase avocados directly from thefield.Consequently,the gross margin and gross profit percentagesgenerated by our Mexican operations ar

202、e significantly impacted bythe volume of avocados handled by our packinghouse and the costof the fruit.During fiscal year 2004,our gross margins generatedfrom the sale of Mexican avocados deteriorated fromapproximately$2.2 million in fiscal year 2003 to$1.5 million infiscal year 2004,principally as

203、a result of an increase in fruit costs.This increase in fruit costs had the effect of increasing our perpound costs,which,as a result,adversely affected gross margins.Further,we experienced an increase in sales of non-exported fruit,which typically generate lower margins then exported fruit.Thesedec

204、reases,however,were partially offset by increases in fruitvolume during fiscal year 2004,which had the effect of reducingour per pound costs.During fiscal year 2003,our gross marginsgenerated from the sale of Mexican avocados improved fromapproximately$1.8 million in fiscal year 2002 to$2.2 million

205、infiscal year 2003,principally as a result of increases in the poundspacked at our facility.For fiscal year 2004,the additional grossmargin related to the acquisition of Maui totaled approximately$1.4 million(approximately$0.2 million of such gross margin wasrelated to California avocados).Gross mar

206、gins and gross profit percentages for our processedproducts business are largely dependent on the pricing of our finalproduct and the cost of avocados used in preparing guacamole.During fiscal year 2004,the processed products gross profitpercentages decreased primarily as a result of inefficienciese

207、xperienced in the start-up process of our newly constructedfacility in Uruapan,Mexico and the winding down of theoperations at our Mexicali,Mexico facility.Such inefficienciesprimarily relate to subcontracting costs and duplicative overheadcosts.Additionally,our processed product segment experienced

208、higher fruit costs,as well as an increase in the sale of products thatgenerate a lower gross margin then those sold in the prior year.During fiscal year 2003,the decrease in the gross marginpercentage is primarily related to higher fruit costs,as well asinefficiencies related to the relocation of pr

209、oduction from SantaPaula,California and Mexicali,Mexico to our newly constructedfacility in Uruapan,Mexico.Additionally,as a result of the closureof our Santa Paula processed facility and greater then expectedincrease in demand for our products,we depleted our inventory at a rate greater than initia

210、lly planned.Therefore,we entered intoagreements and/or discussions with two processed avocadoproduct suppliers to supplement our existing inventory levels.This had the effect of decreasing our gross margin percentage dueto higher costs and inefficiencies related to sourcing this productfrom outside

211、suppliers.We anticipate that the gross profitpercentage for our processed product segment will continue toexperience fluctuations primarily due to the uncertainty of fruitcosts that will be used in the production process.Selling,general and administrative expenses include costs ofmarketing and adver

212、tising,sales expenses,and other general andadministrative costs.For fiscal year 2004,selling,general andadministrative expenses increased by$1.3 million,or 8.7%,compared to fiscal year 2003.The increased general andadministrative costs related principally to selling,general andadministrative expense

213、s incurred by Maui.Mauis selling,generaland administrative expenses totaled approximately$0.7 million forfiscal year 2004.Additionally,we also experienced higher costs ofcorporate functions,such as accounting,information systems,andhuman resources(totaling approximately$0.8 million).These increased

214、costs were partially offset by reduced employeecompensation expenses of approximately$0.5 million,which wasprimarily related to a reduction in bonuses during fiscal year 2004as compared to fiscal year 2003.Selling,general and administrative expenses increased byapproximately$0.9 million from fiscal

215、2002 to 2003.The increaseis attributable principally to$0.4 million of additional marketingexpenses,$0.3 million of transportation costs associated with therelocation of the processed product operations,and$0.2 million inincentives paid to employees.22.Selling,General and Administrative(Dollars in t

216、housands)2004Change2003Change2002Selling,general and administrative$15,9208.7%$14,6516.4%$13,881Percentage of net sales5.8%5.9%5.7%Other income,net includes interest income and expense generatedprimarily in connection with our financing activities,as well ascertain other transactions that are outsid

217、e of the course of normaloperations.During fiscal year 2004,other income,net includes interest accrued on notes receivable from directors and officers ofapproximately$0.2 million.During fiscal year 2003,other income,net includes interest accrued on notes receivable from directors andofficers of appr

218、oximately$0.3 million.The effective income tax rate for fiscal year 2004 and 2003 is higherthan the federal statutory rate principally due to state taxes.Oureffective income tax rate decreased from 37.6%in fiscal year 2003to 36.5%in fiscal year 2004 primarily as a result of a favorablereduction in o

219、ur foreign tax rates during fiscal year 2004 whencompared to fiscal year 2003.Our effective income tax ratedecreased from 45.3%in fiscal year 2002 to 37.6%in fiscal year2003 primarily as a result of a reduction in non-deductibletransaction costs and a favorable reduction in our state and foreigntax

220、rates during fiscal year 2003 when compared to fiscal year2002.The effective income tax rate for fiscal year 2002 is higherthan the federal statutory rate principally due to state and foreigntaxes and certain non-recurring transaction costs related to ourconversion from a cooperative to a for-profit

221、 corporation that were non-deductible for tax purposes.QUARTERLY RESULTS OF OPERATIONSThe following table presents our operating results for each of the eight fiscal quarters in the period ended October 31,2004.The information for each of these quarters is derived from ourunaudited interim financial

222、 statements and should be read inconjunction with our audited consolidated financial statementsincluded in this Annual Report.In our opinion,all necessaryadjustments,which consist only of normal and recurring accruals,have been included to fairly present our unaudited quarterlyresults.Our effective

223、income tax rate decreased in our 4th fiscalquarter of 2003 primarily as a result of a favorable reduction in ourforeign tax rate.Other Income,Net(Dollars in thousands)2004Change2003Change2002Other income,net$478(46.2)%$88927.0%$700Percentage of net sales0.2%0.4%0.3%Provision for Income Taxes(Dollars

224、 in thousands)2004Change2003Change2002Provision for income taxes$3,567(17.4)%$4,319(24.6)%$5,727Percentage of income beforeprovision for income taxes36.5%37.6%45.3%23.LIQUIDITY AND CAPITAL RESOURCESOperating activities for fiscal 2004,2003 and 2002 provided cashflows of$4.5 million,$15.2 million,and

225、$8.1 million.Fiscal year2004 operating cash flows reflect our net income of$6.2 million,net noncash charges(depreciation and amortization,losses,andstock compensation expense)of$2.7 million and a net decrease inthe non-cash components of our working capital of approximately$4.4 million.Fiscal year 2

226、004 decreases in operating cash flows,caused byworking capital changes,include an increase in accounts receivableof$4.6 million,an increase in inventory of$3.4 million,an increasein advance to suppliers of$1.8 million,a net increase in income taxreceivable of$0.9 million,and an increase in deferred

227、income taxesof$0.3 million,partially offset by a decrease in prepaid expensesand other assets of$2.8 million,an increase in payable to growersof$2.4 million,an increase in trade accounts payable and accruedexpenses of$1.3 million,and a decrease in loans to growers of$0.1 million.Increases in our acc

228、ounts receivable balance as of October 31,2004,when compared to October 31,2003,primarily reflect theadditional receivables related to the acquisition of Maui,as well asa significantly higher volume of California avocado sales recordedin the month of October 2004,as compared to October 2003.Similarl

229、y,the amounts payable to our growers also reflects theincrease in the volume of California avocados marketed in themonth of October 2004,as compared to October 2003.Thesevolume levels are consistent with the harvests experienced inprevious years.Additionally,increases in our inventory balance as of

230、October 31,2004,when compared to October 31,2003,primarily reflect a significantly higher amount of finishedprocessed product,as we began building our inventories duringfiscal year 2004 in conjunction with the completion of ourprocessed product Uruapan facility.Increase in advances to suppliers as o

231、f October 31,2004,whencompared to October 31,2003,primarily relates to delays in thestart of the Chilean avocado harvest,which resulted in slowercollections on our advances.Increases in our trade accountspayable and accrued expenses as of October 31,2004,whencompared to October 31,2003,primarily ref

232、lect the additionaltrade accounts payable and accrued expenses from the acquisitionof Maui.The decrease in prepaid expenses and other assets as ofOctober 31,2004,when compared to October 31,2003,wasprimarily a result of the capitalization of a deposit and progresspayments related to our large high p

233、ressure machine in Uruapan,as such machine was placed into service during fiscal year 2004.Cash used in investing activities was$8.5 million,$4.5 million,and$2.1 million for fiscal years 2004,2003,and 2002.Fiscal year 2004cash flows used in investing activities include capital expendituresof$8.4 mil

234、lion,principally related to the construction of our newprocessed operations facility in Uruapan,Michoacan,Mexico.Cash used in financing activities was$0.7 million,$6.3 million,and$7.2 million for fiscal years 2004,2003,and 2002.Cash used duringfiscal year 2004 primarily included the payment of a div

235、idend totaling$3.4 million,partially offset by additional short-term borrowings of$2.0 and collections on notes receivable of$0.7 million.Our principal sources of liquidity are our existing cash reserves,cash generated from operations and amounts available forborrowing under our existing credit faci

236、lities.Cash and cashequivalents as of October 31,2004 and 2003 totaled$0.6 millionand$5.4 million.Our working capital at October 31,2004 was$20.4 million compared to$20.7 million at October 31,2003.Theoverall working capital decrease primarily reflects additional short-term borrowings and the decrea

237、se in our cash balance.We believe that cash flows from operations and available creditfacilities will be sufficient to satisfy our future capital expenditures,grower recruitment efforts,working capital and other financingrequirements.We will continue to evaluate grower recruitmentThree months endedO

238、ct.31,July 31,Apr.30,Jan.31,Oct.31,July 31,Apr.30,Jan.31,(in thousands,except per share amounts)20042004200420042003200320032003STATEMENT OF OPERATIONS DATANet sales$65,436$83,318$76,421$49,043$63,780$81,359$57,393$44,229Cost of sales59,42574,83368,62545,93158,48372,20350,42240,306Gross margin6,0118

239、,4857,7963,1125,2979,1566,9713,923Selling,general and administrative4,4163,7774,0123,7153,4113,9194,1303,191Restructuring charge1853598Operating income(loss)1,4104,7083,784(603)1,8835,2322,743732Other income,net16791106114274294206115Income before provision(benefit)for income taxes1,5774,7993,890(48

240、9)2,1575,5262,949847Provision(benefit)for income taxes4671,7391,556(195)4712,2871,214347Net income(loss)$1,110$3,060$2,334$(294)$1,686$3,239$1,735$500Net income(loss)per share:Basic$0.08$0.23$0.17$(0.02)$0.13$0.25$0.13$0.04Diluted$0.08$0.23$0.17$(0.02)$0.13$0.25$0.13$0.04Number of shares used in per

241、 share computation:Basic13,50713,50713,50713,46912,93012,93012,93012,856Diluted13,59113,59413,58913,46912,97012,96012,96012,887opportunities and exclusivity arrangements with food servicecompanies to fuel growth in each of our business segments.InJanuary 2004,we renewed our two short-term,non-collat

242、eralized,revolving credit facilities.These credit facilities expire in January2006 and April 2006 and are with separate banks.Under the termsof these agreements,we are advanced funds for working capitalpurposes.Total credit available under the combined short-termborrowing agreements was$24 million,w

243、ith a weighted-averageinterest rate of 2.9%and 2.0%at October 31,2004 and 2003.Under these credit facilities,we had$2 million and$0 outstandingas of October 31,2004 and 2003.The credit facilities containvarious financial covenants with which we were in compliance atOctober 31,2004.The following tabl

244、e summarizes contractual obligations pursuantto which we are required to make cash payments.The informationis presented as of our fiscal year ended October 31,2004:24.Payments due by periodLess thanContractual Obligations Total1 year1-3 years4-5 yearsLong-term debt obligations(including interest)$65

245、$24$32$9Short-term borrowings2,0002,000Defined benefit plan33055165110Operating lease commitments2,5888621,452274Total$4,983$2,941$1,649$393The California avocado industry is subject to a state marketingorder whereby handlers are required to collect assessments fromthe growers and remit such assessm

246、ents to the California AvocadoCommission(CAC).The assessments are primarily for advertisingand promotions.The amount of the assessment is based on thedollars paid to the growers for their fruit,and,as a result,is notdeterminable until the value of the payments to the growers hasbeen calculated.We di

247、d not have any significant commitments for capitalexpenditures as of October 31,2004.IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSSee Note 2 of Notes to Consolidated Financial Statements.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our financial instruments include cash and cash

248、equivalents,accounts receivable,short and long-term loans to growers,notesreceivable from shareholders,accounts payable,and long-term,fixed-rate obligations.All of our financial instruments are enteredinto during the normal course of operations and have not beenacquired for trading purposes.The tabl

249、e below summarizesinterest rate sensitive financial instruments and presents principalcash flows in U.S.dollars,which is our reporting currency,andweighted-average interest rates by expected maturity dates,as ofOctober 31,2004.(All amounts in thousands)Expected maturity date October 31,2004200520062

250、0072008TotalFair ValueAssets:Cash and cash equivalents(1)$636$636$636Accounts receivable,net(1)21,13121,13121,131Loans to growers(1)209209209Advances to suppliers(1)2,4132,4132,413Notes receivable from shareholders(2)2102112,4622,8832,883Liabilities:Payable to growers(1)$5,789$5,789$5,789Accounts pa

251、yable(1)2,4902,4902,490Fixed-rate long-term obligations(3)23138845658(1)We believe the carrying amounts of cash and cash equivalents,accounts receivable,loans to growers,advances to suppliers,payable to growers and accounts payable approximate their fair value due to the short maturity of these fina

252、ncial instruments.(2)Notes receivable from shareholders bear interest at 7.0%.We believe that a portfolio of loans with a similar risk profile would currently yield a return of 7.0%.We project the impact of an increase ordecrease in interest rates of 100 basis points would result in a change of fair

253、 value of approximately$79,000.(3)Fixed rate long-term obligations bear interest rates ranging from 3.3%to 8.2%,with a weighted-average interest rate of 4.9%.We believe that loans with a similar risk profile would currently yield areturn of 4.2%.We project the impact of an increase or decrease in in

254、terest rates of 100 basis points would result in a change of fair value of approximately$2,000.We were not a party to any derivative instruments during the fiscalyear.It is currently our intent not to use derivative instruments forspeculative or trading purposes.Consequently,we do not use anyhedging

255、 or forward contracts to offset market volatility.Our Mexican-based operations transact business in Mexican pesos.Funds are transferred by our corporate office to Mexico,on aweekly basis,to satisfy domestic cash needs.Consequently,the spotrate for the Mexican peso has a moderate impact on our operat

256、ingresults.We do not believe,however,that this impact is sufficient towarrant the use of derivative instruments to hedge the fluctuation inthe Mexican peso.Total foreign currency gains and losses for each ofthe three years ended October 31,2004 do not exceed$0.1 million.25.Consolidated Balance Sheet

257、sOctober 31,(in thousands,except per share amounts)20042003ASSETSCurrent assets:Cash and cash equivalents$636$5,375Accounts receivable,net of allowancesof$1,087(2004)and$700(2003)21,13116,560Inventories,net11,3758,021Prepaid expenses and other current assets4,5984,487Loans to growers209353Advances t

258、o suppliers2,413624Income taxes receivable803Deferred income taxes1,7751,379Total current assets42,94036,799Property,plant,and equipment,net17,42713,121Building held for sale1,658Goodwill3,591Other assets1,7823,769$67,398$53,689LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Payable to grower

259、s$5,789$3,446Trade accounts payable2,4901,534Accrued expenses8,2347,777Income tax payable51Short-term borrowings2,000Dividend payable4,0523,232Current portion of long-term obligations2224Total current liabilities22,58716,064Long-term liabilities:Long-term obligations,less current portion3461Deferred

260、 income taxes840417Total long-term liabilities874478Commitments and contingencies(Note 8)Shareholdersequity:Common stock($0.001 par value,100,000 sharesauthorized;13,507 and 12,930 shares outstandingat October 31,2004 and 2003)1413Additional paid-in capital28,82224,727Notes receivable from sharehold

261、ers(2,883)(3,563)Retained earnings17,98415,970Total shareholdersequity43,93737,147$67,398$53,689See accompanying notes to consolidated financial statements.Consolidated Statements of IncomeYear Ended October 31,(in thousands,except per share amounts)200420032002Net sales$274,218$246,761$242,671Cost

262、of sales248,814221,414216,848Gross margin25,40425,34725,823Selling,general and administrative15,92014,65113,881Restructuring charge185106Operating income9,29910,59011,942Other income,net478889700Income before provision for income taxes9,77711,47912,642Provision for income taxes3,5674,3195,727Net inc

263、ome$6,210$7,160$6,915Net income per share:Basic$0.46$0.55$0.60Diluted$0.46$0.55$0.60Number of shares used in per share computation:Basic13,49712,91111,562Diluted13,58212,94411,604See accompanying notes to consolidated financial statements.26.27.Consolidated Statements of Shareholders EquityNotesAddi

264、tionalReceivableCommon StockPaid-inFromRetained(in thousands)SharesAmountCapitalShareholdersEarningsTotalBALANCE,OCTOBER 31,20019,9671010,1589,86120,029Exercise of stock options,andincome tax benefit of$361,04015,236(4,789)448Stock Dividend54912,166(2,167)Issuance of common stock in connectionwith E

265、mployee Stock Purchase Plan2791,952(1,952)Issuance of common stock in connectionwith Rights Offering,net ofoffering costs of$2901,00014,7094,710Collections on shareholder notes receivable1,0211,021Dividend declared to shareholders(2,567)(2,567)Net income6,9156,915BALANCE,OCTOBER 31,200212,8351324,22

266、1(5,720)12,04230,556Exercise of stock options,andincome tax benefit of$7295547547Collections on shareholder notes receivable2,1572,157Additional costs related to Rights Offering(41)(41)Dividend declared to shareholders(3,232)(3,232)Net income7,1607,160BALANCE,OCTOBER 31,200312,9301324,727(3,563)15,9

267、7037,147Purchase acquisition57714,0494,050Stock compensation expense4646Collections on shareholder notes receivable680680Dividend declared to shareholders(4,196)(4,196)Net income6,2106,210BALANCE,OCTOBER 31,200413,507$14$28,822$(2,883)$17,984$43,937See accompanying notes to consolidated financial st

268、atements.28.Consolidated Statements of Cash FlowsYear Ended October 31,(in thousands)200420032002Cash Flows from Operating Activities:Net income$6,210$7,160$6,915Adjustments to reconcile net income to net cash provided byoperating activities:Depreciation and amortization2,6482,0241,957Provision for

269、losses on accounts receivable251935Stock compensation expense46Loss on disposal of property,plant,and equipment3229Gain on sale of investments held to maturity(163)Effect on cash of changes in operating assets and liabilities:Accounts receivable(4,596)1,3281,855Inventories,net(3,354)4,440(3,386)Prep

270、aid expenses and other assets2,654506(1,937)Loans to growers144114652Advances to suppliers(1,789)1,911(163)Income taxes receivable(803)360(60)Deferred income taxes(320)(226)(566)Payable to growers2,343(2,922)(555)Trade accounts payable and accrued expenses1,3035883,359Income tax payable(51)51Net cas

271、h provided by operating activities4,46015,2228,135Cash Flows from Investing Activities:Proceeds from sale of investments held to maturity2,060Direct costs of acquisition of Maui Fresh International,Inc.(65)Acquisitions of property,plant,and equipment(8,409)(6,535)(1,973)Proceeds from sale of short-t

272、erm investments2,223Purchases of short-term investments(2,223)(105)Net cash used in investing activities(8,474)(4,475)(2,078)Cash Flows from Financing Activities:Dividend paid to shareholders(3,376)(2,567)Proceeds from(repayments of)short-term borrowings,net2,000(3,000)(12,800)Proceeds from issuance

273、 of common stock4,710Payments on long-term obligations(29)(3,317)(536)Proceeds from stock option exercises475412Proceeds from collection of shareholder notes receivable6802,1571,021Additional rights offering costs(41)Net cash used in financing activities(725)(6,293)(7,193)Net increase(decrease)in ca

274、sh and cash equivalents(4,739)4,454(1,136)Cash and cash equivalents,beginning of year5,3759212,057Cash and cash equivalents,end of year$636$5,375$921Supplemental Information-Cash paid during the year for:Interest$66$179$443Income taxes$4,899$4,170$6,362Noncash Investing and Financing Activities:Exer

275、cise of stock options using shareholder notes receivable$4,7895%Stock dividend$2,167Tax receivable increase related to stock option exercise$72$36Stock purchases using shareholder notes receivable$1,952Declared dividends payable$4,052$3,232$2,567Acquisition of property under capital lease$68In Novem

276、ber 2003,the Company acquired all of the outstanding common shares of Maui Fresh International,Inc.for 576,924 shares ofthe Companys common stock,valued at$4.05 million,plus acquisition costs of$65,000.See Note 1 for further explanation.Thefollowing table summarizes the estimated fair values of the

277、non-cash assets acquired and liabilities assumed at the date of acquisition.See accompanying notes to consolidated financial statements.(in thousands)2004Fixed assets$114Goodwill3,526Intangible assets867Total non-cash assets acquired4,507Current liabilities110Deferred tax liabilities assumed347Net n

278、on-cash assets acquired$4,05029.Notes to Consolidated Financial Statements1.DESCRIPTION OF THE BUSINESSBusinessCalavo Growers,Inc.(Calavo,the Company,we,us or our)procures and markets avocados and other perishable commoditiesand prepares and distributes processed avocado products.Ourexpertise in mar

279、keting and distributing avocados,processedavocados,and other perishable foods allows us to deliver a widearray of fresh and processed food products to food distributors,produce wholesalers,supermarkets,and restaurants on aworldwide basis.Through our two operating facilities in southernCalifornia and

280、 two facilities in Mexico,we sort and pack avocadosprocured in California and Mexico and prepare processed avocadoproducts.Additionally,we procure avocados internationally,principally from Mexico,Chile,and the Dominican Republic,anddistribute other perishable foods,such as Hawaiian grownpapayas.We r

281、eport these operations in three different businesssegments:(1)California avocados,(2)international avocados andperishable food products and(3)processed products.In order to diversify our product lines and increase synergieswithin the marketplace,we acquired all the outstanding common shares of Maui

282、Fresh International,Inc.(Maui)for 576,924 sharesof our common stock valued at$4.05 million in November 2003,plus acquisition costs of$65,000.Maui is a specialty producecompany servicing a wide array of retail,food service,and terminalmarket wholesale customers with over 20 different specialtycommodi

283、ties.The value of our common stock issued inconjunction with the acquisition was based on the average quotedmarket price of our common stock for three days before and afterthe announcement date.As security for certain potential contingencies,such asunrecorded liabilities,we held approximately 58,000

284、 shares issuedin conjunction with such acquisition for one full year fromthe acquisition date.As no contingencies developed,which wasin accordance with our expectations,we are in the process ofreleasing these shares to the original Maui shareholders.The following table summarizes the estimated fair

285、values of theassets acquired and liabilities assumed at the date of acquisition.The differences from the previously reported amounts of goodwilland intangible assets of$867,000 resulted from the finalization ofour valuation information in the second quarter of fiscal 2004.(in thousands)2004Fixed ass

286、ets$114Goodwill3,591Intangible assets 867Total assets acquired4,572Current liabilities110Deferred tax liabilities347Net assets acquired$4,115Pro forma statement of operations information is not presented,asthe acquisition was not deemed to be a material business combination.Conversion to a For-Profi

287、t CorporationOn October 9,2001,we completed a series of transactionswhereby common and preferred shareholders of Calavo Growersof California,an agricultural marketing cooperative association,exchanged all of their outstanding shares for shares of our commonstock.Concurrent with this transaction,the

288、Cooperative wasmerged into Calavo,with Calavo emerging as the surviving entity.These transactions had the effect of converting the legal structureof the business from a not-for-profit cooperative to a for-profitcorporation.Accordingly,the accompanying consolidated financialstatements give retroactiv

289、e effect,for all periods presented,to themerger,as a combination of entities with common shareholders,accounted for in a manner similar to a pooling of interests.2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANTACCOUNTING POLICIESThe accompanying consolidated financial statements were preparedin ac

290、cordance with accounting principles generally accepted in theUnited States of America.Our consolidated financial statements include the accounts ofCalavo Growers,Inc.and our wholly owned subsidiaries,CalavoFoods,Inc.;Calavo de Mexico S.A.de C.V.;and Calavo Foods deMexico S.A.de C.V.All intercompany

291、accounts and transactionshave been eliminated.Cash and Cash EquivalentsWe consider all highly liquid financial instruments purchased withan original maturity date of three months or less to be cashequivalents.The carrying amounts of cash and cash equivalentsapproximate their fair values.InventoriesI

292、nventories are stated at the lower of cost on a weighted-averagebasis,which approximates the first-in,first-out method,or market.Costs included in inventory primarily include the following:fruit,picking and hauling,overhead,labor,materials and freight.Loans to GrowersWe sponsor a grower loan program

293、.Pursuant to this program,weprovide loans to growers,bearing interest at prevailing marketrates and repayable generally within a 12-month period.Theseloans are secured by the growers avocado crops.We periodicallyevaluate the ability of these growers to repay advances in order toevaluate the possible

294、 need to record an allowance.No significantallowance was required at October 31,2004.Property,Plant,and EquipmentProperty,plant,and equipment are stated at cost and depreciatedover their estimated useful lives using the straight-line method.Leasehold improvements are stated at cost and amortized ove

295、r thelesser of their estimated useful lives or the term of the lease,usingthe straight-line method.The principal estimated useful lives are:30.buildings and improvements-7 to 30 years;leaseholdimprovements-the lesser of the term of the lease or 7 years;equipment-7 years;information systems hardware

296、and software-36 to 60 months.Significant renewals and betterments arecapitalized and replaced units are written off.Maintenance andrepairs are charged to expense.We capitalize software development costs for internal use inaccordance with Statement of Position 98-1,Accounting for Costsof Computer Sof

297、tware Developed or Obtained for Internal Use(SOP 98-1).Capitalization of software development costs begins inthe application development stage and ends when the asset isplaced into service.We amortize such costs using the straight-linebasis over estimated useful lives.Pursuant to SOP 98-1,wecapitali

298、zed$254,000 and$88,000 of software development andacquisition costs in 2004 and 2003 relating to systems supportingour business infrastructure.Goodwill and Acquired Intangible AssetsThe purchase method of accounting for business combinationsrequires us to make use of estimates and judgments to alloc

299、ate thepurchase price paid for acquisitions to the fair value of the nettangible and identifiable intangible assets.Goodwill is tested forimpairment annually,or when a possible impairment is indicated,using the fair value based test prescribed by Statement of FinancialAccounting Standards(SFAS)No.14

300、2,Goodwill and OtherIntangible Assets.The impairment test requires us to compare thefair value of business reporting units to carrying value,includinggoodwill.We primarily use an“income approach”(whichconsiders the present value of future cash flows)in combinationwith a“market approach”(which consid

301、ers what other purchasersin the marketplace have paid for similar businesses)to determinefair value.Future cash flows typically include operating cash flowsfor the business for five years and an estimated terminal value.Management judgment is required in the estimation of futureoperating results and

302、 to determine the appropriate terminal values.Future operating results and terminal values could differ from theestimates and could require a provision for impairment in a futureperiod.We performed our annual assessment of goodwill anddetermined that no impairment existed as of October 31,2004.Inclu

303、ded in other assets in the accompanying consolidated financialstatements are the following intangible assets:customer-relatedintangibles of$590,000(accumulated amortization of$88,000 atOctober 31,2004),brand name intangibles of$275,000 and otheridentified intangibles totaling$2,000(accumulated amort

304、ization of$1,000 at October 31,2004).The customer-related intangibles andother identified intangibles are being amortized over five and twoyears.The intangible asset related to the brand name currently hasan indefinite remaining useful life and,as a result,is not currentlysubject to amortization.We

305、anticipate recording amortizationexpense of approximately$119,000 per annum from fiscal 2005through fiscal 2008,with the remaining amortization expense ofapproximately$27,000 recorded in fiscal 2009.Long-lived Assets Long-lived assets,including fixed assets and intangible assets(other than goodwill)

306、,are continually monitored and are reviewedfor impairment whenever events or changes in circumstancesindicate that the carrying amount of any such asset may not berecoverable.The determination of recoverability is based on anestimate of undiscounted cash flows expected to result from theuse of an as

307、set and its eventual disposition.The estimate ofundiscounted cash flows is based upon,among other things,certain assumptions about future operating performance,growthrates and other factors.Estimates of undiscounted cash flows maydiffer from actual cash flows due to,among other things,technological

308、changes,economic conditions,changes to thebusiness model or changes in operating performance.If the sum ofthe undiscounted cash flows(excluding interest)is less then thecarrying value,an impairment loss will be recognized,measured asthe amount by which the carrying value exceeds the fair value ofthe

309、 asset.We have evaluated our long-lived assets and have notidentified any significant impairment as of October 31,2004.Long-lived assets held for sale are reported at the lower of carryingamount or fair value less cost to sell.Advances to SuppliersWe advance funds to third-party growers primarily in

310、 Californiaand Mexico for various farming needs.These advances aregenerally secured with a crop lien or other collateral owned by thegrower.We continuously evaluate the ability of these growers torepay advances and the fair value of the collateral in order toevaluate the possible need to record an a

311、llowance.No suchallowance was required at October 31,2004.Accrued ExpensesIncluded in accrued expenses at October 31,2004 and 2003 areaccrued management bonuses of approximately$0.7 million and$1.0 million.Revenue RecognitionSales of products and related costs of products sold are recognizedwhen per

312、suasive evidence of an arrangement exists,shipment hasbeen made,title passes,the price is fixed or determinable andcollectibility is reasonably assured.Service revenue,includingfreight,ripening,storage,bagging and palletization charges,isrecorded when services are performed and sales of the relatedp

313、roducts are delivered.Promotional AllowancesWe provide for promotional allowances at the time of sale,basedon our historical experience.Our estimates are generally based on evaluating the average length of time between the productshipment date and the date on which we pay the customer thepromotional

314、 allowance.The product of this lag factor and ourhistorical promotional allowance payment rate is the basis for the promotional allowance included in accrued expenses on ourbalance sheet.Actual amounts may differ from these estimates andsuch differences are recognized as an adjustment to net sales i

315、n theperiod they are identified.31.Allowance for Accounts ReceivableWe provide an allowance for estimated uncollectible accountsreceivable balances based on historical experience and the aging of the related accounts receivable.Consignment ArrangementsWe enter into consignment arrangements with avoc

316、ado growersand packers located outside of the United States and growers ofcertain perishable products in the United States.Although wegenerally do not take legal title to avocados and perishableproducts,we do assume responsibilities(principally assumingcredit risk,inventory loss and delivery risk,an

317、d limited pricingrisk)that are consistent with acting as a principal in thetransaction.Accordingly,the accompanying financial statementsinclude sales and cost of sales from the sale of avocados andperishable products procured under consignment arrangements.Amounts recorded for each of the fiscal yea

318、rs ended October 31,2004,2003 and 2002 in the financial statements pursuant toconsignment arrangements are as follows(in thousands):200420032002Sales$26,878$33,675$27,960Cost of Sales25,98531,90026,608Gross Margin$893$1,775$1,352Advertising ExpenseAdvertising costs are expensed when incurred.Such co

319、sts in fiscal 2004,2003,and 2002 were approximately$213,000,$223,000,and$245,000.Use of EstimatesThe preparation of financial statements in conformity withaccounting principles generally accepted in the United States ofAmerica requires management to make estimates and assumptionsthat affect the amou

320、nts reported in the consolidated financialstatements and accompanying notes.Among the significantestimates affecting the financial statements are those related tovaluation allowances for accounts receivable,goodwill,groweradvances,inventories,long-lived assets,valuation of and estimateduseful lives

321、of identifiable intangible assets,promotionalallowances and income taxes.On an ongoing basis,managementreviews its estimates based upon currently available information.Actual results could differ materially from those estimates.Income TaxesWe account for income taxes under the provisions of SFAS No.

322、109,Accounting for Income Taxes.This statement requires therecognition of deferred tax liabilities and assets for the futureconsequences of events that have been recognized in ourconsolidated financial statements or tax returns.Measurement ofthe deferred items is based on enacted tax laws.In the eve

323、nt the future consequences of differences between financial reportingbases and tax bases of our assets and liabilities result in a deferredtax asset,SFAS No.109 requires an evaluation of the probability ofbeing able to realize the future benefits indicated by such asset.Avaluation allowance related

324、to a deferred tax asset is recorded whenit is more likely than not that some portion or all of the deferredtax asset will not be realized.Basic and Diluted Net Income per ShareBasic earnings per share is calculated using the weighted-averagenumber of common shares outstanding during the period witho

325、utconsideration of the dilutive effect of stock options.The basicweighted-average number of common shares outstanding was13,497,000,12,911,000,and 11,562,000 for fiscal years 2004,2003,and 2002.Diluted earnings per common share is calculated usingthe weighted-average number of common shares outstand

326、ingduring the period after consideration of the dilutive effect of stockoptions,which were 85,000,33,000 and 42,000 for fiscal years2004,2003 and 2002.There were no anti-dilutive options for fiscalyears 2004,2003 and 2002.Stock-Based CompensationAs permitted by SFAS No.123,Accounting for Stock-Based

327、Compensation,which was amended by SFAS No.148,Accountingfor Stock-Based Compensation Transition and Disclosure,theCompany accounts for stock-based compensation underAccounting Principles Board Opinion No.25,Accounting forStock Issued to Employees(“APB 25”)and related interpretations.Year ended Octob

328、er 31,200420032002Net Income:As reported$6,210$7,160$6,915Add:Total stock-based compensation expense determined under APB 25 and related interpretations,net of tax effects28Deduct:Total stock-based compensation expense determined under fair value basedmethod for all awards,net of tax effects(28)(703

329、)Pro forma$6,210$7,160$6,212Net income per share,as reported:Basic$0.46$0.55$0.60Diluted$0.46$0.55$0.60Net income per share,pro forma:Basic$0.46$0.55$0.54Diluted$0.46$0.55$0.5432.For purposes of pro forma disclosures under SFAS No.123,theestimated fair value of the options is assumed to be amortized

330、 tocompensation expense over the options vesting period.The fairvalue of the options granted in fiscal year 2004 and 2002 has beenestimated at the date of grant using the Black-Scholes optionpricing model with the following assumptions:20042002Risk-free interest rate3.3%2.0%Expected volatility26.9%1

331、30%Dividend yield20%Expected life(years)51.1Weighted-average fair value of options granted$3.01$1.04The Black-Scholes option valuation model was developed for usein estimating the fair value of traded options that have no vestingrestrictions and are fully transferable.In addition,option valuationmod

332、els require the input of highly subjective assumptions,including the expected stock price volatility.Because options heldby our directors have characteristics significantly different fromthose of traded options,and because changes in the subjectiveinput assumptions can materially affect the fair val

333、ue estimate,in our opinion,the existing models do not necessarily provide a reliable single measure of the fair value of these options.Foreign Currency Translation and RemeasurementOur foreign operations are subject to exchange rate fluctuationsand foreign currency transaction costs.The functional currency of our foreign subsidiaries is the United States dollar.As a result,monetary assets and liab