Calavo Growers, Inc. (Nasdaq-GS: CVGW), a global avocado-industry leader and an expanding provider of value-added fresh food, today reported that fiscal 2012 second quarter net income nearly doubled on a 17 percent increase in revenues from the corresponding period last year, before the effect of an unanticipated $1.9 million income tax expense related to an unfavorable ruling in a disputed matter with Mexico’s tax authority’s examination of the 2004 tax year.
Operating results for the most-recent quarter include those of Renaissance Food Group, LLC (RFG), which the company acquired on June 1, 2011. RFG’s results are now included as a separate business segment distinct from the company’s legacy Calavo Foods business segment.
For the three months ended April 30, 2012, net income before the Mexican tax item rose 84 percent to $4.4 million, equal to $0.30 cents per diluted share, from $2.4 million, or $0.16 per diluted share, in the fiscal 2011 second quarter. Including the effect of the Mexican tax ruling, which the company learned of after the close of the second fiscal quarter, net income was $2.5 million, or $0.17 per diluted share.
Revenues increased to $139.0 million from $118.7 million in the like quarter one year earlier.
Second-quarter gross margin climbed 57 percent to $14.7 million, or 10.6 percent of total revenues, from $9.3 million, equal to 7.9 percent of total revenues in the fiscal 2011 comparable quarter. Operating income rose 87 percent to $7.1 million from $3.8 million in the last fiscal year’s second period.
As previously disclosed, the company had been awaiting the resolution of two outstanding assessments by Mexico’s tax authority related to the examination of the 2004 tax year. Contrary to the expectations of management and the company’s outside legal advisors in Mexico, the Mexican appellate court upheld an earlier ruling against Calavo. The company does not believe that further appeal of the ruling will be beneficial. The assessment of approximately $1.9 million was recorded as an income tax expense for the second fiscal quarter. The company stated that this unexpected item relates solely to resolution of issues pertaining to the tax-year-ended December 31, 2004.