|
Lee Cole – BIOGRAPHY
Chairman of the Board, President and CEO
|
Message To Our Shareholders - Fiscal 2010:
Record Revenues, Gross Margin & Net Income
It is with immense pride that I report Calavo Growers, Inc. completed a very successful fiscal 2010-our company's fourth consecutive year of record operating results. This historic performance speaks to the single-minded focus and determination with which we have implemented our business agenda, last year generating double-digit sales growth in fresh avocados, diversified produce and prepared foods to power our results.
We benefited as a company from the burgeoning fresh avocado supply, increasing unit volumes in diversified produce and an expanding portfolio of prepared food products. Neither those achievements nor the record results they propelled, however, occurred by happenstance. Instead, they were all in keeping with a disciplined strategic blueprint that has broadened our fresh produce sources, further diversified our product offerings and enabled us to continue leveraging the formidable Calavo sales, marketing and distribution infrastructure.
Among the company's notable fiscal 2010 accomplishments were:
Registering new all-time highs in revenues, gross margin, and net income, as well as virtually all other key performance metrics;
Entering the number-one-ranked condiment category through the creation of a new majority-owned subsidiary, Calavo Salsa Lisa, and that entity's acquisition of a popular Upper Midwest manufacturer of a fresh, all-natural line of salsa products;
Re-branding the CalavoFoods business unit to best reflect our prepared product portfolio of fresh refrigerated guacamole, expansion into salsa and introductions of guacamole hummus and premium tortilla chips; and,
Packing and distributing sharply higher year-over-year total unit volume of fresh avocados and other diversified produce-a central component of our business model.
Record Financial Results
Net income for the fiscal year ended October 31, 2010 climbed 31 percent to $17.8 million, equal to $1.22 per diluted share, from $13.6 million, or $0.94 per diluted share, in the preceding year, which was the previous all-time high. On the strength of the aforementioned double-digit sales growth in each of our business segments, revenues rose to $398.4 million, an increase of approximately 16 percent from $344.8 million in fiscal 2009.
Full-year gross margin advanced 16 percent to $51.5 million, eclipsing the prior historic high of $44.5 million set one year earlier. Gross margin as a percentage of revenues was 12.9 percent. Operating income in the most recent year totaled $28.4 million, an increase of $6.7 million, or 30 percent, from $21.7 million in the corresponding 12 months of fiscal 2009.
Our accomplishments expanding revenues, gross margin and profit while incurring only a nominal increase in selling, general and administrative (SG&A) expense are indicative of Calavo's success in leveraging its vast packing, marketing and distribution infrastructure. To that end, SG&A expense for fiscal 2010 rose just slightly-less than $400,000 or 1.7 percent-to $23.2 million from $22.8 million in the prior year, while supporting an additional $53.6 million in revenues. As a result, SG&A as a percentage of revenues declined 80 basis points to 5.8 percent in the most recent year from 6.6 percent in fiscal 2009. SG&A as a percentage of gross profit in the most recent year-a key Calavo performance metric-fell 620 basis points to 45.0 percent from 51.2 percent for the corresponding 12 months earlier.
Calavo's financial condition is strong, flexible and possesses considerable capacity for leverage as we pursue complementary acquisitions aligning with our business plan, a topic which I address in more detail below. We pared long-term obligations from our balance sheet last year by more than half to $6.1 million at fiscal-year end from $13.9 million 12 months earlier. While sharply reducing our debt, the robust operating performance in fiscal 2010 also enabled us to distribute over $8 million to shareholders in the form of our annual cash dividend. We re-affirmed our abiding commitment to stockholder returns by boosting our payout 10 percent to $0.55 per common share.
A Year of Achievement in Brief
Last year, we put in motion key initiatives intended to expand our platform in the prepared foods segment, where the company's ultra-high-pressure guacamole is already a category leader. Most notably, the February 2010 acquisition of Lisa's Salsa Co. by a newly formed majority-owned subsidiary was a pivotal step in re-casting and expanding the CalavoFoods business unit. Through Lisa's Salsa, we gained entrée to the number-one-selling condiment category in the United States via an award-winning maker of all-natural, fresh refrigerated salsas. The re-branded Calavo Salsa Lisa, with a line-up of six delicious varieties sold in supermarket produce sections, melds an outstanding product, which formerly had a popular-albeit-limited reach in the Upper Midwest, to our company's distribution muscle, as well as deep financial resources. Moreover, from a sales and merchandising standpoint, salsa ideally complements Calavo's guacamole: both are fresh, all-natural and have extended shelf lives for side-by-side grocery sales.
To that end, in the second half of fiscal 2010, Calavo Salsa Lisa distribution exploded by ten-fold from 200 to 2,000 locations. We anticipate that number to expand to 3,500 through the imminent addition of another national supermarket chain, with still more to come. Market potential for salsa continues to explode with demographic shifts-the same factors driving avocado and guacamole growth. United States salsa sales (in dollars) already outstrip ketchup, the next largest-selling condiment, by a factor of almost two to one, according to market-research firm A.C. Nielsen.
New product introduction and innovation did not end with salsa last year. Calavo Premium Tortilla Chips complement our dip offerings. Another wholesome, all-natural product, these chips must be tasted to be believed-they're simply terrific, enhancing the CalavoFoods lineup and further extending the brand. The chips are joined by another exciting new product, the first-ever guacamole hummus. The Mediterranean-inspired chickpea dip was launched under an exclusive one-year agreement with a national grocery chain in fiscal 2010. With the expiration of that pact this spring, Calavo will roll out widely this flavorful and nutritious product and we're excited about its prospects. There's a common thread that ties guacamole, salsa and hummus: all are products that originated in ethnic niches but now ride crests of popular appeal. We have the experience, distribution and merchandising clout to capitalize on this distinction. Consider, as well, that while already a $350 million sales category, hummus is yet untried by approximately 80 percent of the U.S. population, putting the vast market potential in context. It is, indeed, a very busy and promising time in the CalavoFoods segment.
Turning to the Fresh products business unit, I previously wrote in detail about the burgeoning available avocado supply and its profound implications for the growth of our company. Much as predicted, the total all-source fresh avocado volume last year rose to about 1.3 billion pounds, of which Calavo packed approximately 23 percent, or nearly one of every four pieces of fruit sold domestically-a formidable statistic. We expect to continue as a principal beneficiary of both rising demand and the trends fueling this occurrence. I also cannot overstate the instrumental role that avocado-industry marketing campaigns are playing in generating awareness and driving interest. The California Avocado Commission and its contemporaries in Mexico and Chile collectively spend about $60 million annually in advertising and promotion to which Calavo contributes significantly on the basis of its volume. Suffice to say, it is paying off and then some.
Building Blocks for Calavo's Future
When I contemplate our company's course ahead, legendary baseball player Satchel Paige's immortal words come to mind: "Don't look back. Something might be gaining on you." As a company, we are never content to rest upon past achievements. Instead, we keep the collective Calavo eye trained squarely toward the future and building an ever-larger, more broadly based agribusiness and prepared-food enterprise. We adhere to our business plan, a proven formula as the company's operating performance evidences. Calavo anticipates growth will be driven by a four-pronged strategy which encompasses: fresh avocados; diversified produce; CalavoFoods; and opportunistic acquisitions.
My ambition of growing our company to $1 billion in annual revenues is no secret, and I believe the four drivers above will get us there. Through organic growth-specifically, folding additional avocado volume as well as current and new diversified produce categories into our existing packing, sales, marketing and distribution infrastructure-our Fresh products segment can expand to $600-$650 million in sales. With virtually no capital expansion costs, we could potentially double current avocado and fresh produce sales and unit volume that way. This growth will come as avocado demand continues to rise. We will also nurture existing diversified produce categories-tomatoes and papayas as items-in-point-while expanding our portfolio further. Subsequent to the close of the fiscal year, Calavo shipped its first melons and other new products are in the offing in fiscal 2011, as well.
As I see it, the balance of a prospective $1 billion company-approximately $350 million-will come from the CalavoFoods segment. To grow this business unit to such a level will require not only internal growth but an aggressive acquisition program, for which we have both operating and financial resources, as well as ambition and determination. I want to state clearly that we are evaluating prospective transactions of various sizes which would complement our current CalavoFoods product portfolio. Our criteria are rigorous-being immediately accretive to revenue and net income is a given. We recognize that gaining scale in the prepared foods segment likely requires us buying into a category and we possess the necessary skill sets to integrate a significant transaction.
Executing the aforementioned would enable Calavo to best utilize a best-in-class customer list comprised of leading grocery retailers, institutional foodservice suppliers and restaurant chains. Our client roster is the envy of our industry and we have a unique opportunity to leverage it by offering customers more products from our sterling brand franchise.
My excitement and confidence about Calavo's outlook ahead is palpable. I am fortunate to be surrounded by
a dedicated senior-management team that shares this same vision and works tirelessly in its pursuit. Our rank-and-file are a source of considerable pride to me; Calavo could not ask for finer employees. Our board of directors offers sound counsel and possess good judgment and wisdom for which I am eternally grateful. In that vein, let me also pay tribute to longtime director Fred J. Ferrazzano, who retired from the company's board last year, by thanking him for his service. To our stockholders, my profound thanks for your support and loyalty. I look forward to reporting Calavo's future achievements-they shall be many and meaningful.
Sincerely,
Lecil E. Cole
Chairman, President and Chief Executive Officer
March 4, 2011
|
Chairman of the Board, President and CEO
Calavo Growers, Inc.
Lee Cole has been called a maverick, a risk-taker, a visionary and a savvy entrepreneur, and indeed, he is all these things. But first and foremost, he is a grower—whether he is tending his 400-acre avocado farm in Santa Paula, California or transforming a local, grower-owned cooperative into a publicly traded, diversified, world-class agribusiness.
Deep Roots in “Calavo Country”
Born to Oklahoma cattle ranchers, Lecil Edward Cole decided early in life that he would follow his father’s footsteps into ranching. At age 13, he moved with his parents to Santa Paula, and set his sights on owning his own ranch. After a stint in the U.S. Army, he went home to Santa Paula to put his plan into action.
Cole took a job with Safeway Stores to support himself, and quickly rose through the ranks. At age 21, he became the youngest store manager in Company history. Soon he was promoted to District Manager, overseeing all aspects of operations in 18 stores. All the while, Cole was purchasing land and water rights in Santa Paula. At age 33, with 80 acres of producing avocado trees and 100 head of cattle, Cole left his Safeway career to become a full-time rancher, avocado grower and entrepreneur. Before long, the avocado trees had taken over his ranch, eventually displacing the cattle.
Then, as now, Santa Paula was “Calavo Country,” and Cole was quickly recruited to join the growers’ cooperative. Seeing a need for improved customer service, he campaigned for the director’s seat and won. Next, he leveraged his 15 years of retailing experience to win election to the directorship in 1982. He has remained on Calavo's board ever since, becoming Chairman and CEO in 1998, and assuming the added role of president in 1999.
A Grower’s Perspective
Implementing an aggressive strategic agenda while also maintaining strong profitability is key to Cole’s leadership style. From the beginning, he applied his grower’s perspective to retool the Company to compete as an efficient, global enterprise in the 21st century. As a grower as well as a shareholder, he strives to maximize both corporate profit and returns to the farm. As a result, Calavo’s grower returns rank among the industry’s best.
Unlocking Value
To unlock the Company’s value and pave the way for future growth, Cole spearheaded the co-op’s conversion to a for-profit corporation in 2001 and its listing on the NASDAQ in 2002. This forward-thinking transaction created a currency to use for all-stock acquisitions without needing to leverage Calavo’s strong balance sheet.
In 2003, Cole led Calavo in its first strategic acquisition, Maui Fresh International, Inc., a multi-product distributor of specialty produce. The transaction extended Calavo’s brand equity and market stature into new perishable product categories and broadened Calavo’s product offerings to 20-plus items, ranging from tropical fruits to chilies.
Nurturing Grower Relationships
Understanding that packinghouses thrive on volume, Cole made grower recruitment and retention Calavo’s number one priority. Accordingly, he instituted a strategic grower recruitment plan that resulted in a record 38 to 40 percent of the domestic market share. In 2005, he piloted the Company through an equity cross-investment with Limoneira Company. Calavo now packs and distributes the crops of the number one and number two domestic producers of avocados—Irvine Company and Limoneira, respectively—and has forged alliances with growers in Mexico, Chile, New Zealand and the Dominican Republic.
To bring new operating efficiencies to its processed-products unit, Cole instituted a comprehensive restructuring of Calavo’s processed products unit, with a 90,000-square- foot production facility in Uruapan, Michaocan, Mexico, ending an inefficient two-step process of pulping and converting to finished product in separate plants.
A Family Business
More than 80 years after its founding as a grower-owned cooperative—and seven years after Cole assumed leadership of the Company—Calavo is growing and profitable. As he continues to move the Company ahead, Cole’s family business continues to blossom as well.
In addition to his Santa Paula avocado ranch, where he resides with his wife, Jeannette, Cole owns a papaya farm and papaya processing plant on Hawaii’s Big Island. Cole’s papayas are sold domestically under the label, "Calavo Gold", his own "Cole" label, and internationally under the "Jeanette" label. Cole’s son, Guy, manages the avocado farm and his daughter, Suzanne, manages the papaya processing plant, which sells papaya purée worldwide.
As he looks back over 80-plus years of history, Cole is characteristically humble about his stewardship. “I never forget that I am charged with the oversight of a formidable legacy, and I am proud, humbled and even awed to be at its reins,” he says. “I do not feel that I inherited this company from those who preceded me; instead, I am borrowing it from those who will follow me.”
Thanks to Cole’s leadership, those who follow will enjoy the fruits of a bigger, more broadly based Calavo, solidly positioned to lead the industry for the next 80 years and beyond.
|
Company |
Investor Relations |
Fresh Division |
Calavo Foods |
Growers |
Consumers |
Sales Materials |
Recipes
Contact Us |
Site Map |
Terms of Use |
Privacy Policy |
Employment
|
 |
Calavo owns valuable exclusive trademarks internationally that represent Calavo Growers, Inc. and its products and services. Do not manufacture, distribute, or sell merchandise bearing the Calavo trademark, including the Calavo logo without prior written authorization from Calavo Growers, Inc.
Site powered by 
|
