Calavo reports strong Q2 earnings despite Mexican tax expense
Avocado marketer Calavo Growers reported that second-quarter earnings nearly doubled since the same period last year, before taking into account an unanticipated multimillion-dollar tax expense.
For the three months ended April 30, net income before the tax item rose 84 percent to $4.4 million, equal to 30 cents per share, the Santa Paula-based company said in a June 4 earnings release. That’s up from $2.4 million, or 16 cents per share, in the second quarter of fiscal year 2011.
The avocado company learned after the close of the second quarter that it was liable for a $1.9 million income tax bill related to an unfavorable ruling in a dispute with the Mexican tax authority’s examination of its 2004 fiscal tax year. Including the effect of that ruling, which the release says was unexpected by management and legal advisers, net income was $2.5 million, or 17 cents per diluted share.
“We were deeply disappointed by the ruling of the Mexican appellate court, which we and our legal counsel believe was unsupported by the facts. Despite this unwarranted non-recurring expense, by virtually all financial yardsticks Calavo registered an outstanding performance in the fiscal 2012 second quarter,” Lee Cole, the company’s president and CEO, said in the earnings release.
Calavo’s share prices missed analyst estimates. The average analyst estimate compiled by Reuters for the second quarter was 45 cents per share, 15 cents higher than the 30 cents per share the company said it would have been valued without the tax issue and 28 cents higher than its actual second quarter value of 17 cents per share.
Revenues for the second quarter were $139 million, up from $119 million one year ago. Part of the increase in earnings was due to an avocado harvest that was 23 percent larger than last year. “Most importantly, consumer demand for avocados continues to expand,” Cole said in the earnings release.
In the Calavo Foods business segment, which includes prepared avocados, salsa and tortilla chips, revenues totaled $11.2 million, largely unchanged from $11.1 million in the second quarter of fiscal year 2011.
Operating results for the most recent quarter include those of Renaissance Food Group, a prepared foods company that Calavo acquired in June 2011. Sales in that segment totaled $36.1 million.
