US produce group Calavo Growers has predicted it will post record revenues and earnings per share in its 2014/15 financial year.
The company said the growth would come on the back of a 20% increase in sales and gross profit from its fresh and prepared foods arm Renaissance Food Group, as well as double-digit increases from its Calavo Foods business. It also estimated avocado consumption in the US would rise by a fifth.
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The forecasts were made alongside Calavo’s results for the year to 31 October in which sales and profits rose.
However, Calavo also disclosed it would record a non-cash charge of US$88.9m before tax related to a “misstatement in its treatment of contingent consideration” in its acquisition of RFG in 2011.
The company said: “This non-cash misstatement in its historical financial statements relates to equity payments made to the sellers when RFG’s operating results exceeded defined thresholds.
“Initially, Calavo recorded the contingent consideration, which was settleable in common stock, as an equity instrument and, therefore, did not record expense based on the changes in fair value of the contingent consideration. The company now believes, however, that the contingent consideration should have been accounted for as a liability, requiring re-measurement to fair value and expense recognition, which Calavo is treating as amortizsation expense, at each reporting period subsequent to the acquisition.”
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By GlobalDataLee Cole, Calavo’s chairman, president and CEO, insisted the cost has “no impact on Calavo’s cash position whatsoever”.
He said: “Let me underscore that the contingent consideration liability is a non-cash charge. It has no impact on Calavo’s cash position whatsoever. Further, the change does not alter either the company’s historical or current EBITDA and has no impact on the company going forward. Furthermore, there will be no additional non-cash charges, as this transaction is now completed, and all details of the earn-out have been correctly outlined in all SEC filings over the last three-and-a-half years. It is important to reiterate that the success of the RFG transaction itself triggered this charge, and is a reflection of acquiring that business on risk-averse terms.”
Cole added: “In sum, it was an outstanding final quarter and year for Calavo as measured by our formidable results from operations.”
Calavo posted net sales of US$782.5m, 13.2% higher than a year earlier. It posted net income of $112m, versus a net loss of $1.97m a year before.
In addition to the RFG charge, the full-year results included a $12.6m gain related to Calavo’s previously-disclosed deconsolidation of its FreshRealm subsidiary last May. Adjusted annual net income equalled $25m, an increase of 44% compared to the previous year.
