Calavo Growers, a global avocado-industry leader and expanding provider of value-added fresh foods, reported that fiscal 2014 second quarter net income reached a new all-time high for any single period in company history.
Operating results were paced by double-digit top-line growth and higher gross margins which climbed nearly 65 percent from last year's second quarter.
Net income for the three months ended April 30, 2014, increased 205 percent to $6.7 million, equal to $0.43 per diluted share, from $2.2 million, or $0.15 per diluted share, in the second quarter last year.
Revenues rose 17.2 percent to $194.9 million, a new second-quarter record, from $166.3 million in the corresponding quarter of 2013.
Calavo Growers Posts Record Fiscal 2014 Second Quarter Results
Second-quarter gross margin advanced to $19.0 million, a new single-period historic high and equal to 9.7 percent of revenues, from $11.5 million, or 6.9 percent of revenues, in the year-earlier like quarter. Operating income jumped 195 percent to $9.9 million in the most recent quarter from $3.3 million in the second period of fiscal 2013.
Chairman, President and Chief Executive Officer Lee E. Cole said that "Calavo registered an outstanding performance in the fiscal 2014 second quarter as evidenced by record-breaking metrics. These results are, in large part, attributable to sharp upward gross margin trends in our Fresh products and Renaissance Food Group, LLC (RFG) business segments." Cole stated: "Indicative of the company's core strength, we did an outstanding job managing Mexican fresh-avocado sourcing and sales operations which contributed to the substantial improvement in Fresh segment gross margin versus last year's second quarter and paced total gross margin gain of about 280 basis points in the most recent period.
Furthermore, RFG's improved gross-margin is reflective of certain economies of scale resulting from strong, consistent sales growth, better labor utilization, and improved raw-material quality and yield. "
"With respect to that aforementioned revenue growth, as a point of note and great pride, Calavo once again enjoyed double-digit top-line growth in all three of its principal business units in the most recent quarter -- Fresh, Calavo Foods and RFG -- reflective of the complementary engines driving profitability and which serve as cornerstones of the company's focused strategic agenda," Cole said. For the six months ended April 30, 2014, net income more than doubled to $10.7 million, or $0.68 per diluted share, a 118 percent increase from $4.9 million, or $0.33 per diluted share, in the first half of fiscal 2013.
Revenues climbed 18 percent in the most recent six months to $363.1 million from $305.8 million in the comparable period last year. Gross margin climbed 32 percent to $32.7 million from $24.7 million in the fiscal 2013 initial two quarters.
Gross margin as a percentage of total sales registered 9.0 percent for the initial six months of fiscal 2014 versus 8.1 percent in the first half last year. Operating income rose more than two-fold to $15.3 million from $7.6 million in the fiscal 2013 first half.
Fresh business segment revenues rose 10 percent in the second quarter to $124.0 million from $112.5 million in the corresponding quarter of fiscal 2013. Fresh gross margin advanced 137 percent to $9.7 million, equal to 7.8 percent of segment sales, from $4.1 million, or 3.6 percent of segment sales, in the second quarter last year.
The yearover- year growth in Fresh business segment gross margin primarily reflects significant improvement in sourcing and selling of Mexico-grown avocados. Total Fresh units in the most recent quarter totaled 5.0 million versus 5.9 million last year.
The year-overyear unit decline is principally attributable to the cyclically smaller California avocado supply. Revenues in the RFG business segment grew 34 percent to reach $55.8 million in the most recent quarter from $41.6 million in the corresponding period one year ago. Gross margin in the RFG segment increased 73 percent to $5.5 million, or 9.8 percent of segment sales, from $3.2 million, equal to 7.6 percent of segment sales, in the fiscal 2013 second quarter.
The 220 basis point improvement in RFG segment gross margin is indicative of the aforementioned benefits afforded by higher sales, better labor utilization, and improved raw-material quality and yield, "allowing Calavo to increasingly realize the profit potential from the outstanding portfolio of value-added, refrigerated fresh products," according to the company. Second-quarter revenues in the Calavo Foods business segment increased 24 percent to $15.1 million from $12.2 million in the like period one year ago, and were up 17 percent from $12.9 million in the fiscal 2014 first quarter. Gross margin improved to $3.8 million, or 25.3 percent of Calavo Foods segment revenues, from $2.6 million, or 20.2 percent of segment sales in the fiscal 2014 first quarter.
This compares with gross margin in last year's second quarter of $4.3 million, or 35.3 percent of segment sales. Segment revenue growth was propelled by increasingly strong demand for prepared avocados and significantly more pounds delivered to both retail grocery and foodservice customers.
Higher costs for avocados utilized in prepared products impacted segment gross margin in the most recent quarter as compared to last year. Selling, general and administrative (SG&A) expense in the fiscal 2014 second quarter totaled $9.1 million, equal to 4.7 percent of revenues, which compares with $8.2 million, or 4.9 percent of revenues, in the corresponding period last year. SG&A as a percentage of gross margin totaled 48.0 percent in the most recent quarter, an improvement of approximately 2,300 basis points from 71.0 percent in the fiscal 2013 second quarter.
