Calavo Growers, Inc. reported its financial results for the third quarter ended July 31, 2020. The company also announced separately the following changes to its Board of Directors, effective January 3, 2021:
Farha Aslam will be appointed as independent Director and Member of the Audit Committee.
“We continued to execute with resilience and resolve in the face of a prolonged pandemic while prioritizing the health and safety of our team and customers. As a result, we maintained supply chain continuity across our 18 facilities in the U.S. and Mexico and provided uninterrupted service to our customers during these challenging times,” said James E. Gibson, CEO of Calavo Growers. “Our third quarter results were impacted by a combination of lower avocado prices, reflecting increased supply from Mexico and Peru, and lower demand in our RFG and Foods segments resulting from the second wave of COVID-19. While sales declined year-over-year, avocado volume increased 18%, signaling growth in consumer demand for avocados. Gross profit per carton for the third quarter was in-line with our historical averages.
“We continue to benefit from owning and operating our RFG manufacturing facilities. Gross margin improved on both a year-over-year and sequential basis, reflecting increased operating leverage from greater utilization of our facilities, especially in Georgia and the Pacific Northwest. Our Foods segment also delivered margin improvement versus the comparable period due to lower avocado costs, which helped offset weaker demand from foodservice and grocery retail outlets.
“Given the evolving and dynamic environment that we are operating in today, we remain focused on aspects of the business that we can control. To that end, I’d like to outline several near term priorities that we are actively working on to position the company to emerge from this period of uncertainty even stronger and more resilient,” said Gibson.
Third Quarter 2020 consolidated financial review
Total revenue for the third quarter of 2020 was $270.4 million compared to $359.3 million for the third quarter of 2019, representing a 24.7% decrease. While avocado volumes were strong, increasing 18.2% over the prior year period, total revenue was impacted by lower average selling price of avocados in the Company’s Fresh segment, reflecting increased supply from Peru and Mexico and lower sales volumes in the RFG and Foods segments as a result of the previously announced closure of RFG’s Midwest co-packing partner in March 2020 and the prolonged COVID-19 pandemic.
Gross profit for the third quarter was $30.8 million, or 11.4% of revenue, compared to $35.8 million, or 10.0% of revenue, for the same period last year. The increase in gross profit margin was attributable to improvements in the RFG and Foods business segments.
Selling, general and administrative (SG&A) expense for the third quarter totaled $13.4 million, or 5.0% of revenue, compared to $14.3 million, or 4.0% of revenue, for the same period last year. The decrease in SG&A expense was primarily due to a decrease in the accrual for performance-based compensation and a reduction in headcount implemented at the end of the second quarter of 2020.
Net loss for the third quarter of 2020 was $15.6 million, or $(0.89) per diluted share, primarily reflecting a $37.2 million non-cash loss on reserve for the FreshRealm note receivable and impairment of investment. This compares with net income of $10.6 million, or $0.60 per diluted share, for the same period last year.
Adjusted net income, which excludes certain non-comparable items such as non-cash gains or losses from unconsolidated subsidiaries and non-GAAP tax adjustments, was $12.9 million, or $0.73 per diluted share, for the third quarter of 2020, compared to adjusted net income of $16.2 million, or $0.92 per diluted share, for the same period last year, and adjusted net income of $7.0 million, or $0.40 per diluted share, for the second quarter of 2020.
Adjusted EBITDA, which is a non-GAAP financial measure as described below and in an accompanying financial table in this release, was $23.1 million for the third quarter of 2020, compared to $26.6 million for the same period last year and $14.4 million for the second quarter of 2020.
For the full financial report by Calavo Growers, please click here.