10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2016

OR

[   ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-33385

CALAVO GROWERS, INC.

(Exact name of registrant as specified in its charter)

California	33-0945304
(State of incorporation)	(I.R.S. Employer Identification No.)
1141-A Cummings Road, Santa Paula, CA	93060
(Address of principal executive offices)	(Zip code)

Registrant's telephone number, including area code:  (805) 525-1245

Securities registered pursuant to Section 12(b) of the Act:

	Name Of Each Exchange
Title of Each Class	On Which Registered
Common Stock, $0.001 Par Value per Share	Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

Yes [X]  No []

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [ ]  No [X]

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [  ]

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes [X]  No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer [X]     Accelerated filer  [ ]     Non-accelerated filer [ ]     Smaller reporting company [ ]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ] No [X]

Based on the closing price as reported on the Nasdaq Global Select Market, the aggregate market value of the Registrant's Common Stock held by non-affiliates on April 30, 2016 (the last business day of the Registrant's most recently completed second fiscal quarter) was approximately $866.3 million.  Shares of Common Stock held by each executive officer and director and by each shareholder affiliated with a director or an executive officer have been excluded from this calculation because such persons may be deemed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.  The number of outstanding shares of the Registrant's Common Stock as of November 30, 2016 was 17,440,408.

Documents Incorporated by Reference

Portions of the Registrant's Proxy Statement for the 2017 Annual Meeting of Shareholders, which we intend to hold on April 26, 2017 are incorporated by reference into Part III of this Form 10-K.  The definitive Proxy Statement will be filed within 120 days after October 31, 2016.

CAUTIONARY STATEMENT

This Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7, contains forward-looking statements that involve risks, uncertainties and assumptions.  If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo Growers, Inc. and its consolidated subsidiaries (CG) may differ materially from those expressed or implied by such forward-looking statements and assumptions.  All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, any projections of revenue, margins, expenses, earnings, earnings per share, tax provisions, cash flows, currency exchange rates, the impact of acquisitions or other financial items; any statements of the plans, strategies and objectives of management for future operations, including execution of restructuring and integration plans; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on CG and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic trends and events; the competitive pressures faced by CG's businesses; the development and transition of new products and services (and the enhancement of existing products and services) to meet customer needs; integration and other risks associated with business combinations; the hiring and retention of key employees; the resolution of pending investigations, claims and disputes; and other risks that are described herein, including, but not limited to, the items discussed in "Risk Factors" in Item 1A of this report, and that are otherwise described or updated from time to time in CG's Securities and Exchange Commission reports. CG assumes no obligation and does not intend to update these forward-looking statements.

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PART I

Item 1. Business

General development of the business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, convenience stores, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa.  We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and RFG.  See Note 11 in our consolidated financial statements for further information about our business segments.  Our principal executive offices are located at 1141-A Cummings Road, Santa Paula, California 93060; telephone (805) 525-1245. 

On October 9, 2001, we completed a series of transactions whereby common and preferred shareholders of Calavo Growers of California (the Cooperative), an agricultural marketing cooperative association, exchanged all of their outstanding shares for shares of our common stock.  Concurrent with this transaction, the Cooperative was merged into us with Calavo Growers, Inc. (Calavo) emerging as the surviving entity.  These transactions had the effect of converting the legal structure of the business from a non-profit cooperative to a for-profit corporation.   

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Growers de Mexico).  In July 2015, Calavo Growers de Mexico entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and Agricola Don Memo, S.A. de C.V. (Don Memo). Don Memo, a Mexican corporation formed in July 2013, is engaged in the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  Belo and Calavo Growers de Mexico have an equal one-half ownership interest in Don Memo.  Pursuant to a management service agreement, Belo, through its officers and employees, shall have day-to-day power and authority to manage the operations. In fiscal 2016 and 2015, we contributed $2.3 million and $1.0 million as investments in Don Memo. These investment contributions represent Calavo Growers de Mexico’s 50% ownership in Don Memo, which is included in investment in unconsolidated entities on our balance sheet. In fiscal 2015 and 2014, we advanced $0.8 million and $3.2 million. These monies totaling $4.0 million, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. In January 2016, Calavo entered into an agreement with Bank of America, N.A. (BoA), essentially guaranteeing a loan made from BoA to Don Memo.  See footnote 12 to our consolidated financial statements.

In August 2015, we entered into a Shareholder’s Agreement with various partners which created Avocados de Jalisco, S.A.P.I. de C.V. (Avocados de Jalisco).  Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados in Jalisco, Mexico.  This entity is approximately 80% owned by Calavo Growers de Mexico, a wholly owned subsidiary of Calavo, and is consolidated into our financial statements.  In the 3rd fiscal quarter of 2016, Avocados de Jalisco completed the construction of a packinghouse located in Jalisco, Mexico which is expected to be operational in the first quarter of 2017.  We invested approximately $10.8 million to construct and equip this new packinghouse. 

In fiscal 2016, we expanded and refurbished our plant facilities in Houston, TX and Jacksonville, FL to add additional capacity and in-plant capabilities. We invested approximately $7.3 million into the Houston facility and $13.3 million into the Jacksonville facility. 

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Available information

We maintain an Internet website at http://www.calavo.com.  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and other information related to us, are available, free of charge, on our website as soon as reasonably practicable after we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission (SEC).  Our Internet website and the information contained therein, or connected thereto, is not and is not intended to be incorporated into this Annual Report on Form 10-K.

    We have a code of ethics that applies to all employees, including our executive officers, as well as to the Board of Directors. Our code of ethics is available for review on our corporate website. We intend to disclose any changes in, or waivers from, this code by posting such information on the same website or by filing a Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or NASDAQ.

Fresh products

Calavo was founded in 1924 to market California avocados.  In California, the growing area stretches from San Diego County to Monterey County, with the majority of the growing areas located approximately 100 miles north and south of Los Angeles County.  The storage life of fresh avocados is limited.  It generally ranges from one to four weeks, depending upon the maturity of the fruit, the growing methods used, and the handling conditions in the distribution chain.

We sell avocados to a diverse group of supermarket chains, wholesalers, food service and other distributors, under the Calavo family of brand labels, as well as private labels.  From time to time, some of our larger customers seek short-term sales contracts that formalize their pricing and volume requirements.  Generally, these contracts contain provisions that establish a price floor and/or ceiling during the contract duration.  In our judgment, the shift by our customers to drafting sales contracts benefits large handlers like us, which have the ability to fulfill the terms of these contracts.  During fiscal year 2016, our 5 and 25 largest fresh customers represented approximately 15% and 36% of our total consolidated revenues.  During fiscal year 2015, our 5 and 25 largest fresh customers represented approximately 18% and 39% of our total consolidated revenues.  During fiscal year 2016, 2015 and 2014 none of our fresh customers represented more than 10% of total consolidated revenues.

The Hass variety is the predominant avocado variety marketed on a worldwide basis.  Generally, California grown Hass avocados are available year-round, with peak production periods occurring from April through August.  Other varieties have a more limited picking season and generally command a lower price.  Approximately 1,900 California growers deliver avocados to us, generally pursuant to a standard marketing agreement.  Our share of the California avocado crop approximated 28% of the 2016 shipped California avocado crop, based on data published by the California Avocado Commission.  We attribute our solid foothold in the California industry principally to the competitiveness of the per pound returns we pay and the communication and service we maintain with our growers.

California avocados delivered to our packinghouses are grouped as a homogenous pool on a weekly basis based on the variety, size, and grade.  They are then graded, sized, packed, cooled and, frequently, ripened for delivery to customers. Our ability to estimate the size, as well as the timing of the delivery of the annual avocado crop, has a substantial impact on both our costs and the sales price we receive for the fruit. To that end, our field personnel maintain direct contact with growers and farm managers and coordinate harvest plans. The feedback from our field-managers is used by our sales department to prepare sales plans used by our direct sales force.

A significant portion of our California avocado handling costs is fixed. As a result, significant fluctuations in the volume of avocados delivered have a considerable impact on the per pound packing costs of avocados we handle. Generally, larger crops will result in a lower per pound handling cost. We believe that our cost structure is geared to optimally handle larger avocado crops. Our strategy calls for continued efforts in aggressively recruiting new large growers, retaining existing growers, and procuring a larger percentage of the California avocado crop.

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The proceeds we receive from the sale of each separate avocado pool, net of a packing and marketing fee to cover our costs and a profit, generate the initial amounts considered to be paid back to the growers once a month. The packing and marketing fee we withhold is determined by our Chief Executive Officer and is revised from time to time based on our estimated per pound packing and operating costs, as well as our operating profit. This fee is a fixed rate per pound packed.  These amounts are then compared to field quotes provided for each avocado pool, with the resulting final payment determined based on the field quotes to the growers.

The California avocado market is highly competitive with nine major avocado handlers.  A marketing order enacted by the state legislature is in effect for California grown avocados and provides the financial resource to fund generic advertising and promotional programs.  Avocados handled by us are identifiable through packaging and the Calavo brand name sticker. 

We also import avocados from Mexico.  We typically purchase Mexican avocados from growers and packers located in Mexico. The purchase price we pay for fruit acquired from Mexican growers is generally negotiated for substantially all the fruit in a particular grove, by bloom.  The Mexican avocado crop will typically have three to four blooms in a single year. Once a purchase price is tentatively agreed to, the fruit is then harvested and delivered to our packinghouse located in Uruapan, Michoacán, Mexico. Purchased fruit is harvested and hauled by a number of subcontracted picking companies that we hire.Once delivered, such fruit is weighed, graded, sized, packed, and cooled for shipment, primarily to the United States. Payment for such fruit can be changed from what was initially agreed to if the actual packout does not reach levels forecasted by the grower. Fruit purchased directly from unaffiliated third-party Mexican packers is used as a supplemental source and is packed to our standards for shipment to either our customers’ or our operating facilities. In either case, the purchase price of Mexican avocados is generally based on our estimated selling prices of such fruit, less anticipated packing and/or selling costs and our desired margin. We believe these two current sources, in conjunction with the expected opening of our packinghouse in Jalisco, Mexico, allow us to maximize both the timely acquisition, as well as purchase price, of Mexican fruit.

Similar to California avocados, a significant portion of our handling costs for Mexican avocados are fixed.  As a result, significant fluctuations in the volume of Mexican avocados delivered to our packinghouse can have a considerable impact on the per pound packing costs of avocados we handle.  Generally, larger crops will result in a lower per pound handling cost.  In fiscal year 2012, we completed an expansion of our Uruapan packinghouse.  This expansion more than doubled our capacity to handle Mexican avocados. We believe that our cost structure for Mexican avocados is geared to optimally handle larger avocado crops. 

We believe that our continued success in marketing Mexican avocados is largely dependent upon securing a reliable, high-quality supply of avocados at reasonable prices, and keeping the handling costs low as we ship the Mexican avocados to our packinghouses and distribution centers.  We are subject to USDA and other regulatory inspections to ensure the safety and the quality of the fruit being delivered from Mexico.  The Mexican avocado harvest is year round (though generally most significant from September to June).  As a result, it is common for Mexican growers to monitor year round the supply of avocados for export to the United States in order to obtain higher field prices.  During 2016, we packed and distributed approximately 16% of the avocados exported from Mexico into the United States and approximately 7% of the avocados exported from Mexico to countries outside of North America, based on our estimates.

We have developed a series of marketing and sales initiatives primarily aimed at our largest customers that are designed to differentiate our products and services from those offered by our competitors.  Some of these key initiatives are as follows:

· We continue to have success with our ProRipeVIP™ avocado ripening program.  This proprietary program allows us to deliver avocados ~evenly ripened to our customers’ specifications.  We have invested in TasteTech Near Infrared (NIR) technology and equipment.  The most significant reason we invested in the TasteTech systems is because the NIR technology measures internal qualities of the entire piece of fruit, as opposed to competitive mechanical tests that use pressure and calculated averages to measure firmness.  We believe that ripened avocados help our customers address the consumers' immediate needs and accelerate the sale of avocados through their stores.  We currently have three TasteTech systems in use in the United States, which, we believe, can effectively meet our customers’ demand for conditioned fruit.

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· We have developed various display techniques and packages that appeal to consumers and, in particular, impulse buyers. Some of our techniques include the bagging of avocados and the strategic display of the bags within the produce section of retail stores.  Our research has demonstrated that consumers generally purchase a larger quantity of avocados when presented in a bag as opposed to the conventional bulk displays.  We also believe that the value proposition of avocados in a bag provides for a higher level of sales to grocery stores.

Other perishable food products include various other fruit, such as tomatoes, papayas, and pineapples.  The majority of our other perishable food sales are generated from tomatoes and papayas.  Tomatoes are primarily handled on a consigned basis, while papayas are handled on a pooling basis, generally at a fixed fee per papaya delivered.  Sales of our diversified Fresh products generally experience fluctuations related to seasonality.  We believe our efforts in distributing our other various types of fruit complement our offerings of avocados.

Calavo Foods

The Calavo Foods segment was originally conceived as a mechanism to stabilize the price of California avocados by reducing the volume of avocados available to the marketplace.  In the 1960's and early 1970's, we pioneered the process of freezing avocado pulp and developed a wide variety of guacamole recipes to address the diverse tastes of consumers and buyers in both the retail and food service industries.  One of the key benefits of frozen products is their long shelf-life.  With the introduction of low cost processed products delivered from Mexican based processors, however, we realigned the segment's strategy by shifting the fruit procurement and pulp processing functions to Mexico. 

We utilize ultra-high pressure technology equipment, which is designed to protect and safeguard our avocado and guacamole products without the need of preservatives.  Using high pressure only, this procedure substantially destroys the cells of any bacteria that could lead to spoilage, food safety, or oxidation issues.  Once the procedure is complete, our packaged guacamole is cased and shipped to various retail, club, and food service customers throughout the markets we service in the U.S and abroad.  By fiscal year 2010, we had two ultra-high pressure machines into service.  These machines, which are located in Uruapan, pressurize all guacamole product lines, including all frozen products, which begun in fiscal 2010.  A 3rd ultra-high pressure machine, with a larger capacity, was put into service during our first fiscal quarter of 2012. We estimate that our actual capacity utilization for all three ultra-high pressure machines for fiscal 2016 to be approximately 90%.  In fiscal 2017, we expect to use a qualified co-packer to produce several of our retail and foodservice products. This co-packer will also use ultra-high pressure technology, similar to our existing production, and will be overseen by certain Calavo personnel.  We expect our selling capacity to increase materially through the use of this co-packer.  Net sales of our ultra-high pressure (fresh refrigerated) products, typically sold to retail customers, represented approximately 50% and 48% of total guacamole products within the Calavo Foods segment sales for the years ended October 31, 2016 and 2015. 

Sales in the U.S. and Canada are made principally through a commissioned nationwide broker network, which is supported by our regional sales managers.  We believe that our marketing strength is distinguished by providing quality products, innovation, year-round product availability, strategically located warehouses, and market relationships.  During fiscal year 2016, our 5 and 25 largest processed product customers represented approximately 3% and 6% of our total consolidated revenues.  During fiscal year 2015, our 5 and 25 largest processed product customers represented approximately 3% and 5% of our total consolidated revenues.  During fiscal years 2016, 2015 and 2014 none of our processed product customers represented more than 10% of total consolidated revenues.

RFG

Acquired in June of 2011, Renaissance Food Group, LLC (RFG) is a leader in the fast-growing refrigerated fresh packaged foods category.  RFG produces, markets, and distributes nationally a portfolio of healthy, high quality fresh packaged food products for consumers via the retail channel, including national and regional supermarkets, club stores, mass merchandisers, convenience stores, and specialty/natural retailers.  As a leader in refrigerated fresh packaged foods, RFG utilizes a network of company-operated and independently-operated USDA and organic certified fresh food facilities strategically located across the U.S.  These facilities allow RFG to offer national retailers high quality, refrigerated fresh foods that can be delivered within hours from time of production.  Consumer demand is high for

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quality refrigerated fresh packaged foods and RFG’s speed to market, product innovation and broad product range positions the Company well to serve retailers addressing this consumer trend.  RFG products include fresh prepared fruit and vegetables, fresh prepared entrée salads, wraps, sandwiches and fresh snacking products as well as ready-to-heat entrees and other hot bar and behind-the-deli glass meal and salad kits.  RFG products are marketed under the Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials as well as store-brand, private label programs. Backed by Calavo’s resources, the business unit continues to expand its footprint in the retail grocery channel During fiscal year 2016, our 5 and 25 largest RFG product customers represented approximately 25% and 36% of our total consolidated revenues.  During fiscal year 2015, our 5 and 25 largest RFG product customers represented approximately 23% and 33% of our total consolidated revenues.  During fiscal year 2016, RFG had one customer that represented more than 10% of total consolidated revenues.  During fiscal years 2015 and 2014, none of our RFG product customers represented more than 10% of total consolidated revenues. 

Sales and Other Financial Information by Business Segment and Product Category

Sales and other financial information by business segment are provided in Note 11 to our consolidated financial statements that are included in this Annual Report.

Patents and Trademarks

Our trademarks include the Calavo and RFG brand name and related logos.  We also utilize the following trademarks in conducting our business: Avo Fresco, Bueno, Calavo Gold, Calavo Salsa Lisa, Salsa Lisa, Celebrate the Taste, El Dorado, Fresh Ripe, Select, Taste of Paradise, The First Name in Avocados, Tico, Mfresh, Maui Fresh International, Triggered Avocados, ProRipeVIP™, Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials. 

Working Capital Requirements

Generally, we make payments to our avocado growers and other suppliers in advance of collecting all of the related accounts receivable.  We generally bridge the timing between vendor payments and customer receipts by using operating cash flows and commercial bank borrowings.  In addition, we provide crop loans and other advances to some of our growers, which are also funded through operating cash flows and borrowings. 

Non-California sourced avocados and other perishable food products often require working capital to finance the payment of advances to suppliers and collection of accounts receivable.  These working capital needs are also financed through the use of operating cash flows and bank borrowings.

With respect to our Calavo Foods business, we require working capital to finance the production of our processed avocado products, building and maintaining an adequate supply of finished product, and collecting our accounts receivable balances.  These working capital needs are financed through the use of operating cash flows and bank borrowings.

Backlog

Our customers do not place product orders significantly in advance of the requested product delivery dates.  Customers typically order perishable products two to ten days in advance of shipment, and typically order Calavo Foods within thirty days in advance of shipment.

Research and Development

Prior to the acquisition of RFG, we did not undertake significant research and development efforts. Research and development programs, if any, were limited to the continuous process of refining and developing new techniques to enhance the effectiveness and efficiency of our Calavo Foods operations and the handling, ripening, storage, and packing of fresh avocados.  With the acquisition of RFG, however, we have increased research and development for new and improved products which is driven by customer requests, changes in product specifications, customer and market

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research and/or innovative ideas generated by our own team of experts with food processing and culinary backgrounds.  We solicit customer and supplier input, review process and product trends and conduct sensory and shelf life testing, all to expand the category and drive new sales for our customers. In fiscal year 2014, with the consolidation of FreshRealm, we had an increased emphasis on research and development.  Much of the research and development for FreshRealm was on a re-usable shipping container, which includes designing and the testing of prototypes, testing packing efficiency, gathering consumer feedback, thermal research, and testing the longevity and reusability of the containers.  We deconsolidated FreshRealm in the third quarter of fiscal 2014.  Research and development costs are charged to expense when incurred.  Total research and development costs for fiscal years 2016 and 2015 were insignificant. Total research and development costs for fiscal years 2014 were approximately $0.8 million. 

Compliance with Government Regulations

The California State Department of Food and Agriculture oversees the packing and processing of California avocados and conducts tests for fruit quality and packaging standards.  All of our packages are stamped with the state seal as meeting standards.  Various states have instituted regulations providing differing levels of oversight with respect to weights and measures, as well as quality standards.

As a manufacturer and marketer of processed avocado products, our operations are subject to extensive regulation by various federal government agencies, including the Food and Drug Administration (FDA), the USDA and the Federal Trade Commission (FTC), as well as state and local agencies, with respect to production processes, product attributes, packaging, labeling, storage and distribution. Under various statutes and regulations, these agencies prescribe requirements and establish standards for safety, purity and labeling.  In addition, advertising of our products is subject to regulation by the FTC, and our operations are subject to certain health and safety regulations, including those issued under the Occupational Safety and Health Act.  Our manufacturing facilities and products are subject to periodic inspection by federal, state and local authorities.

As a result of our agricultural and food processing activities, we are subject to numerous environmental laws and regulations. These laws and regulations govern the treatment, handling, storage and disposal of materials and waste and the remediation of contaminated properties.

We seek to comply at all times with all such laws and regulations and to obtain any necessary permits and licenses, and we are not aware of any instances of material non-compliance.  We believe our facilities and practices are sufficient to maintain compliance with applicable governmental laws, regulations, permits and licenses. 

Employees

As of October 31, 2016, we had 2,096 employees, of which 681 were located in the United States and 1,415 were located in Mexico.  We do not have a significant number of United States employees covered by a collective bargaining agreement.  Approximately 1,250 of Calavo's Mexican employees are represented by a union. We consider the relationship with our employees to be good and we have never experienced a significant work stoppage.

The following is a summary of the number of "salaried" and "hourly" employees as of October 31, 2016.

Location	Salaried	Hourly	Total
United States	198	483	681
Mexico	167	1,248	1,415
TOTAL	365	1,731	2,096

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Item 1A. Risk Factors

Risks Related to Our Business

We are subject to increasing competition that may adversely affect ouroperating results.

The market for avocados and processed avocado products is highly competitive and affects each of our businesses.  Each of our businesses is subject to competitive pressures, including the following:

· California avocados are impacted by an increasing volume of foreign grown avocados being imported into the United States.  Recently, there have been significant plantings of avocados in Mexico, Chile, the Dominican Republic, Peru and other parts of the world, which have had, and will continue to have, the effect of increasing the volume of foreign grown avocados entering the United States market. 

· California avocados are subject to competition from other California avocado handlers.  If we are unable to consistently pay California growers a competitive price for their avocados, these growers may choose to have their avocados marketed by alternate handlers.

· Non-California sourced avocados and perishable food products are impacted by competitors operating in Mexico.  Generally, handlers of Mexican grown avocados operate facilities that are substantially smaller than our facility in Uruapan, Mexico.  If we are unable to pack and market a sufficient volume of Mexican grown avocados, smaller handlers will have a lower per unit cost and be able to offer Mexican avocados at a more competitive price to our customers.

· Non-California sourced avocados and perishable food products are also subject to competition from other California avocado handlers that market Chilean and Peruvian grown avocados. 

We are subject to the risks of doing business internationally.

We conduct a substantial amount of business with growers and customers who are located outside the United States.  We purchase avocados from foreign growers and packers, sell fresh avocados and processed avocado products to foreign customers, and operate a packinghouse and a processing plant in Mexico.  In the most recent years, there has been an increase in organized crime in Mexico.  This has not had a significant impact on our operations, but this does increase the risk of doing business in Mexico.   We are also subject to regulations imposed by the Mexican government, and also to examinations by the Mexican tax authorities.  Significant changes to these government regulations and to assessments by the Mexican tax authorities can have a negative impact on our operations and operating results in Mexico.  For additional information about our Mexican sourced fruit, see the "Business" section included in this Annual Report.

Our current international operations are subject to a number of inherent risks, including:

· Local economic and political conditions, including disruptions in supply, trading and capital markets;

· Restrictive foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, including export duties and quotas and customs duties and tariffs; and

· Changes in legal or regulatory requirements affecting foreign investment, loans, taxes (including value-added taxes), imports, and exports.

Currency exchange fluctuations may impact the results of our operations.

Currency exchange rate fluctuations, depending upon the nature of the changes, may make our domestic-sourced products more expensive compared to foreign grown products or may increase our cost of obtaining foreign-sourced products.  Because we do not hedge against our foreign currency exposure, our business has increased susceptibility to foreign currency fluctuations.

We and our growers are subject to the risks that are inherent in farming.

Our results of operations may be adversely affected by numerous factors over which we have little or no control and that are inherent in farming, including reductions in the market prices for our products, adverse weather and growing

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conditions, pest and disease problems, and new government regulations regarding farming and the marketing of agricultural products.

Our earnings are sensitive to fluctuations in market prices and demand for our products.

Excess supplies often cause severe price competition in our industry. Growing conditions in various parts of the world, particularly weather conditions such as windstorms, floods, droughts and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply and quality of product.

Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest.  The selling price received for each type of produce depends on all of these factors, including the availability and quality of the produce item in the market, and the availability and quality of competing types of produce.

In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products could reduce demand and prices for some of our products. To the extent that consumer preferences evolve away from products that we produce for health or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer preferences, there will be a decreased demand for our products.

Increases in commodity or raw product costs, such as fuel, packaging, and paper, could adversely affect our operating results.

Many factors may affect the cost and supply of fresh produce, including external conditions, commodity market fluctuations, currency fluctuations, changes in governmental laws and regulations, agricultural programs, severe and prolonged weather conditions and natural disasters. Increased costs for purchased fruit have in the past negatively impacted our operating results, and there can be no assurance that they will not adversely affect our operating results in the future.

The price of various commodities can significantly affect our costs. Fuel and transportation cost is a significant component of the price of much of the produce that we purchase from growers, and there can be no assurance that we will be able to pass on to our customers the increased costs we incur in these respects.

The cost of paper is also significant to us because most of our products are packed in cardboard boxes. If the price of paper increases and we are not able to effectively pass these price increases along to our customers, then our operating income will decrease.

We are subject to the risk of product liability claims.

The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling or transportation phases. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with all applicable laws and regulations, we cannot be sure that consumption of our products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image.

We are subject to possible changing USDA and FDA regulations which govern theimportation of foreign avocados into the United States and the processing ofprocessed avocado products.

The USDA has established, and continues to modify, regulations governing the importation of avocados into the United States. Our permits that allow us to import foreign-sourced avocados into the United States generally are contingent on our compliance with these regulations.  Our results of operations may be adversely affected if we are unable to comply with existing and modified regulations and are unable to secure avocado import permits in the future.

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The FDA establishes, and continues to modify, regulations governing the production of processed avocado products, such as the new Food Safety Modernization Act, which implements mandatory preventive controls for food facilities and compliance with mandatory produce safety standards.  Our results of operations may be adversely affected if we are unable to comply with these existing and modified regulations. 

If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred basis.

From time to time we may dispose of properties in transactions that are intended to qualify as tax deferred exchanges under Section 1031 (Section 1031 Exchanges). It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable.  In addition, if a Section 1031 Exchange were later to be determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any information reports we sent our stockholders. Moreover, it is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.

The acquisition of other businesses could pose risks to our operating income.

We intend to review acquisition prospects that would complement our business.  While we are not currently a party to any agreement with respect to any acquisitions, we may acquire other businesses in the future.  Future acquisitions by us could result in accounting charges, potentially dilutive issuances of equity securities, and increased debt and contingent liabilities, any of which could have a material adverse effect on our business and the market price of our common stock.  Acquisitions entail numerous risks, including the integration of the acquired operations, diversion of management's attention to other business concerns, risks of entering markets in which we have limited prior experience, and the potential loss of key employees of acquired organizations.  We may be unable to successfully integrate businesses or the personnel of any business that might be acquired in the future, and our failure to do so could have a material adverse effect on our business and on the market price of our common stock.

Our ability to competitively serve our customers is a function of reliable andlow cost transportation. Disruption of the supply of these services and/orsignificant increases in the cost of these services could impact our operating income.

We use multiple forms of transportation to bring our products to market.  They include ocean, truck, and air-cargo.  Disruption to the timely supply of these services or dramatic increases in the cost of these services for any reason including availability of fuel for such services, labor disputes, or governmental restrictions limiting specific forms of transportation could have an adverse effect on our ability to serve our customers and consumers and could have an adverse effect on our financial performance.

We depend on our infrastructure to have sufficient capacity to handle our annual production needs.

We have an infrastructure that has sufficient capacity for our production needs, but if we lose machinery or facilities due to natural disasters or mechanical failure, we may not be able to operate at a sufficient capacity to meet our production needs.  This could have a material adverse effect on our business, which could impact our results of operations and our financial condition.

We depend on our key personnel and if we lose the services of any of these individuals, or fail to attract and retain additional key personnel, we may not be able to implement our business strategy or operate our business effectively.

Our future success largely depends on the contributions of our management team. We believe that these individuals’ expertise and knowledge about our industry and their respective fields and their relationships with other individuals in our industry are critical factors to our continued growth and success. We do not carry key person insurance. The loss of the services of any member of our senior management team could have a material adverse effect on our business and

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prospects. Our success also depends upon our ability to attract and retain additional qualified sales, marketing and other personnel.

A portion of our workforce is unionized and labor disruptions could decrease our profitability.

While we believe that our relations with our employees are good, we cannot assure you that we will be able to negotiate collective bargaining agreements on favorable terms, or at all, and without production interruptions, including labor stoppages. A prolonged labor dispute, which could include a work stoppage, could have a material adverse effect on the portion of our business affected by the dispute, which could impact our business, results of operations and financial condition.

System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations or services provided to customers, and any such disruption could reduce our expected revenue, increase our expenses, damage our reputation and adversely affect our stock price.

Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including "bugs" and other problems that could unexpectedly interfere with the operation of the system. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions.

Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive. Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales, lower margins or lost customers resulting from these disruptions have adversely affected in the past, and in the future could adversely affect, our financial results, stock price and reputation.

Risks Related to Our Common Stock

The value of our common stock may be adversely affected by market volatility.

The trading price of our common stock fluctuates and may be influenced by many factors, including:

· Our operating and financial performance and prospects;

· The depth and liquidity of the market for our common stock;  

· Investor perception of us and the industry and markets in which we operate;

· Our inclusion in, or removal from, any equity market indices;

· Changes in earnings estimates or buy/sell recommendations by analysts; and

· General financial, domestic, international, economic and other market conditions;

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from executing our growth strategy.

The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on many factors, including:

· Market acceptance of our products; and

· The existence of opportunities for expansion.

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If our capital resources are not sufficient to satisfy our liquidity needs, we may seek to sell additional equity or obtain additional debt financing.  The sale of additional equity would result in dilution to our shareholders.  Additional debt would result in increased expenses and could result in covenants that would restrict our operations.  With the exception of our existing credit facility, we have not made arrangements to obtain additional financing.  We may not be able to obtain additional financing, if required, in amounts or on terms acceptable to us, or at all.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties 

We lease our corporate headquarters building from Limoneira Company (Limoneira) located in Santa Paula, California.  In addition, RFG leases their corporate office in Ranch Cordova, California.  We have numerous facilities throughout the United States, and three facilities in Mexico.  See the following table for a summary of our locations: 

United States Locations:

Packinghouses:

Leased or Owned:	City	State	Description
Owned	Santa Paula	California	Primarily handles California and Mexican avocados.  The facility was purchased in 1955 and has been improved in capacity and efficiency since then.  This facility operates substantially similar to our Temecula facility. We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Owned	Temecula	California	Primarily handles California and Mexican avocados.  The facility was built in 1985 and has been improved in capacity and efficiency since then.  This facility operates substantially similar to our Santa Paula facility.  We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.

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Operating and Distributing Facilities:

Leased or Owned:	City	State	Description
Owned	Santa Paula	California	Primarily ripens, sorts, packs and ships fresh avocados. We sort and pack certain diversified commodities as well. We believe that the annual capacity of this facility will be sufficient to pack and ripen, if necessary, its expected annual volume of avocados and specialty commodities delivered to us.
Leased	Swedesboro	New Jersey	Primarily ripens, sorts, packs, and ships avocados.  Additionally, it also serves to store and ship certain tropical commodities, as well as ready-to-eat/heat deli and prepared guacamole products. In 2016, we increased this facility’s ripe room capacity by 50%, and doubled its bagging capacity. We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Leased	Garland	Texas	Primarily ripens, sorts, packs and ships fresh avocados. Additionally, it also serves to store and ship prepared guacamole products as well.  We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Leased	Jacksonville	Florida	Opened in the first fiscal quarter of 2016, this facility ripens, sorts, packs and ships fresh avocados and stores and ships prepared guacamole. This facility also processes cut fruits and vegetables, salads, sandwiches, and wraps.  We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Leased	Nogales	Arizona	Primarily ripens, sorts, packs and ships, tomatoes, and other diversified commodities.  We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Leased	Hilo	Hawaii	Primarily sorts, packs, and ships papayas. We believe that the annual capacity will be sufficient to handle its forecasted annual production needs.
Owned	Hilo	Hawaii	Primarily provides irradiation services for produce grown in Hawaii. We believe that the annual capacity will be sufficient to handle its forecasted annual production needs.
Leased	St. Paul	Minnesota	CSL facility that produces salsa.  We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Leased	Houston	Texas	RFG facility that primarily processes cut fruits and vegetables, salads, sandwiches, and wraps. We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.
Leased	Sacramento	California	RFG facility that primarily processes cut fruits and vegetables, salads, sandwiches, and wraps. We believe that the annual capacity of this facility will be sufficient to handle its forecasted annual production needs.

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Mexico Locations:

Packinghouse and Processing Facility:

Leased or Owned:	City	State	Description
Owned	Uruapan	Michoacan	Our Calavo Foods processing facility produces our guacamole products.  While we believe this capacity is reasonable give our current sales, we are considering various plans to meet our future expected growth.
Owned	Uruapan	Michoacan	Handles avocados delivered to us by Mexican growers.  The facility was built in 1985 and has been significantly improved in capacity and efficiency since then. We believe that the annual capacity of this facility will be sufficient to process its forecasted annual production needs.
Owned	Ciudad Guzman	Jalisco	Construction of this packinghouse was completed in the third fiscal quarter of 2016, and is expected to be operational in calendar 2017.  We believe that the annual capacity of this facility will be sufficient to process its forecasted annual production needs.

Item 3. Legal Proceedings

See Note 8 of our consolidated financial statements for further information.

Item 4. Mine Safety Disclosures

Not applicable

Executive Officers of the Registrant

The following table sets forth the name, age and position of individuals who hold positions as executive officers of our company. There are no family relationships between any director or executive officer and any other director or executive officer of our company. Executive officers are elected by the Board of Directors and serve at the discretion of the Board.

Name	Age	Position
Lecil E. Cole	77	Chairman of the Board and Chief Executive Officer
Kenneth J. Catchot	53	Chief Operating Officer and President
B. John Lindeman	46	Chief Financial Officer and Corporate Secretary
Robert J. Wedin	67	Vice President, Sales and Fresh Marketing
Alan C. Ahmer	68	Vice President, Processed Product Sales and Production
Michael A. Browne	58	Vice President, Fresh Operations

Lecil E. Cole has been a member of our board of directors since February 1982 and has served as Chairman of the Board since 1988.  Mr. Cole has also served as our Chief Executive Officer and President since February 1999.  He served as an executive of Safeway Stores from 1964 to 1976 and as Chairman of Central Coast Federal Land Bank from 1986 to 1996.  Mr. Cole has served as Chairman and President of Hawaiian Sweet, Inc. and Tropical Hawaiian Products, Inc. since 1996.  Mr. Cole farms approximately 4,400 acres in California on which avocados and cattle are produced and raised.

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Kenneth J. Catchot has served as our President and Chief Operating Officer since June 2015.  Mr. Catchot co-founded RFG in 2003 and has served as an officer of RFG since 2003. In January 2017, Mr. Catchot will resign as President and Chief Operating Officer.  Following Mr. Catchot’s resignation, Mr. Cole will serve as our President in addition to continuing to serve as our Chief Executive Officer and Chairman of the Board of Directors.

B. John Lindeman has served as our Chief Financial Officer and Corporate Secretary since August 2015. Prior to joining Calavo, Mr. Lindeman served as Managing Director at Sageworth Trust Company.  Prior to joining Sageworth, Mr. Lindeman served as Managing Director at Janney Montgomery Scott from August 2009 to March 2015.   Prior to joining Janney, Mr. Lindeman served as Managing Director at Stifel Nicolaus from December 2005 to August 2009 and as Principal at Legg Mason from October 1999 to December 2005.  Prior to joining Legg Mason, Mr. Lindeman was Manager at PricewaterhouseCoopers LLP.

Robert J. Wedin has served as our Vice President since 1993.  Mr. Wedin joined us in 1973 at our then Santa Barbara packinghouse.  Beginning in 1990, Mr. Wedin served as a director of the California Avocado Commission for a period of ten years.  Mr. Wedin currently is a board member of Producesupply.org and serves as a member of that organization's executive committee.

Alan C. Ahmer has served as our Vice President since 1989.  Mr. Ahmer joined us in 1979 as a regional sales manager in our Calavo Foods business.  In September 2003, Mr. Ahmer’s new title became Vice-President, Calavo Foods Sales and Production.

Michael A. Browne has served as our Vice President since 2005.  From 1997 until joining us, Mr. Browne served as the founder and co-owner of Fresh Directions International, a closely held multinational fresh produce company, which marketed fresh avocados from Mexico, Chile, and the Dominican Republic.  Mr. Browne joined us in May 2005.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

In March 2002, our common stock began trading on the OTC Bulletin Board under the symbol "CVGW."  In July 2002, our common stock began trading on the Nasdaq National Market under the symbol "CVGW" and currently trades on the Nasdaq Global Select Market.

The following tables set forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on the Nasdaq Global Select Market.

Fiscal 2016	High		Low
First Quarter	$	56.58	$	48.12
Second Quarter	$	57.54	$	47.64
Third Quarter	$	67.43	$	55.10
Fourth Quarter	$	69.78	$	58.78

Fiscal 2015	High		Low
First Quarter	$	48.73	$	38.83
Second Quarter	$	52.85	$	39.46
Third Quarter	$	56.67	$	49.95
Fourth Quarter	$	60.50	$	44.09

     As of November 30, 2016, there were approximately 854 stockholders of record of our common stock, which includes shareholders whose shares were held in brokerage firms, depositories and other institutional firms in “street name”.

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Dividend Policy

Our dividend policy is to provide for an annual dividend payment, as determined by the Board of Directors.  We anticipate paying dividends in the first quarter of our fiscal year. 

On December 8, 2016, we paid a $0.90 per share dividend in the aggregate amount of $15.7 million to shareholders of record on November 17, 2016.

On December 8, 2015, we paid a $0.80 per share dividend in the aggregate amount of $13.9 million to shareholders of record on November 17, 2015.

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Item 6. Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA

The following summary consolidated financial data (other than pounds information) for each of the years in the five-year period ended October 31, 2016, are derived from the audited consolidated financial statements of Calavo Growers, Inc. 

Historical results are not necessarily indicative of results that may be expected in any future period.  The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto that are included elsewhere in this Annual Report.

	Fiscal Year Ended October 31,
	2016		2015		2014		2013		2012
	(In thousands, except per share data)
Income Statement Data: (1)(2)(5)(6)
Net sales	$	935,679	$	856,824	$	782,510	$	691,451	$	551,119
Gross margin		107,534		85,227		71,228		59,448		60,665
Selling, general and administrative		46,440		41,558		36,605		33,485		32,714
Net income attributable to Calavo Growers, Inc.		38,022		27,199		97		(1,795)		15,802
Basic net income per share	$	2.19	$	1.57	$	0.01	$	(0.12)	$	1.07
Diluted net income per share	$	2.18	$	1.57	$	0.01	$	(0.12)	$	1.05
Balance Sheet Data as of End of Period:
Working capital	$	25,612	$	18,964	$	22,047	$	(3,252)	$	1,287
Total assets		327,933		284,945		283,464		239,810		207,787
Accrued expenses		31,095		21,311		25,303		36,541		30,554
Current portion of long-term obligations		138		2,206		5,099		5,258		5,416
Long-term obligations, less current portion		445		586		2,791		7,792		13,039
Shareholders' equity		215,069		185,982		179,406		119,093		102,719
Cash Flows Provided by (Used in):
Operations	$	61,968	$	37,283	$	24,547	$	13,712	$	22,011
Investing(2)(4)		(21,731)		(21,054)		(21,753)		(7,746)		(7,449)
Financing(4)		(33,566)		(15,802)		(4,069)		(5,050)		(10,233)
Other Data:
Cash dividends declared per share	$	0.90	$	0.80	$	0.75	$	0.70	$	0.65
Net book value per share	$	12.33	$	10.70	$	10.37	$	7.58	$	6.90
Pounds of California avocados sold		109,545		75,538		74,438		141,400		127,145
Pounds of non-California avocados sold		278,200		312,710		258,940		218,244		174,995
Pounds of processed avocados products sold		26,773		27,182		26,451		21,636		17,341

(1) In July 2013, we entered into an Amended and Restated Limited Liability Company Agreement of FreshRealm. When we deconsolidated FreshRealm (see below), principal operations had not yet commenced.  As a result, FreshRealm had no sales or cost of sales.  FreshRealm had incurred $1.0 million and $1.9 million of expenses related to its development as of October 31, 2014 and 2013, which are included in selling, general and administrative expenses. 

(2) In May 2014, we deconsolidated FreshRealm (see above). We recorded a gain on the deconsolidation of FreshRealm of $12.6 million, which has been recorded on the face of the income statement as other income.  In September 2016, we contributed an additional $1.6 million as an investment in FreshRealm.  Our total investment of $19.4 million in FreshRealm has been recorded as investment in unconsolidated subsidiaries on our balance sheet.

(3) In July 2015, Calavo Growers de Mexico entered into a Shareholder Agreement with Belo a Mexican Company owned by Agricola Belher, and Don Memo. Don Memo, a Mexican corporation created in July 2013, is engaged in

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the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  In fiscal 2013, 2015 and 2016, we contributed $1.0 million, $1.0 million and $2.3 million as investments in Don Memo.  In fiscal 2014 and 2015, we advanced $3.2 million and $0.8 million. These monies totaling $4.0 million, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. We had recorded such loans in prepaids and other current assets.

(4) Cost of Sales for fiscal 2014, 2013, and 2012 include non-cash compensation expense related to the acquisition of RFG totaling $1.8 million, $0.7 million, and an insignificant amount.  These non-cash expenses will not continue into fiscal 2015 nor beyond.  

(5) Selling, General, and Administrative expenses for fiscal 2014, 2013 and 2012 include non-cash compensation expense related to the acquisition of RFG totaling $0.7 million, $0.3 million, and an insignificant amount.  These non-cash expenses will not continue into the future. 

(6) Included in accrued liabilities as of October 31, 2013 and 2012 is a non-cash, contingent consideration liability totaling $15.6 million and $11.2 million related to the acquisition of RFG.  This liability resolved during fiscal 2014 and will not continue in the future. 

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financialcondition and results of operations together with "Selected ConsolidatedFinancial Data" and our consolidated financial statements and notes theretothat appear elsewhere in this Annual Report.  This discussion and analysiscontains forward-looking statements that involve risks, uncertainties, andassumptions.  Actual results may differ materially from those anticipated inthese forward-looking statements as a result of various factors, including, butnot limited to, those presented under "Risks related to our business" included in Item 1A and elsewhere in this Annual Report.

Overview

We are a leader in the distribution of avocados, prepared avocado products, and other perishable food products throughout the United States.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa.  We report our operations in three different business segments:  (1) Fresh products, (2) Calavo Foods and (3) RFG.  See Note 11 to our consolidated financial statements for further discussion.

Our Fresh products business grades, sizes, packs, cools, and ripens (if desired) avocados for delivery to our customers.  During fiscal 2016, we operated two packinghouses and four operating and distributing facilities that handle avocados across the United States. These packinghouses handled approximately 28% of the California avocado crop during the 2016 fiscal year, based on data obtained from the California Avocado Commission.  Our operating results are highly dependent on the volume of avocados delivered to our packinghouses, as a significant portion of our costs are fixed.  Our strategy calls for continued efforts to retain and recruit growers that meet our business model.  Additionally, our Fresh products business also procures avocados grown in Mexico, as well as other various perishable foods, including tomatoes and papayas.  Based on our estimates, we handled approximately 16% of the Mexican avocado crop bound for the United States market and approximately 7% of the avocados exported from Mexico to countries outside of North America during the 2015-2016 Mexican season through the operation of our packinghouse in Mexico and fruit purchased from co-packers. Our strategy is to increase our market share of currently sourced avocados to help meet anticipated demand. We believe our diversified avocado sources provide a level of supply stability that may, over time, help solidify the demand for avocados among consumers in the United States and elsewhere in the world.  We believe our efforts in distributing our other various perishable foods, such as those mentioned above, complement our offerings of avocados.  From time to time, we continue to explore distribution of other crops that provide reasonable returns to the business.

Our Calavo Foods business procures avocados, processes avocados into a wide variety of guacamole products, and distributes the processed product to our customers.  All of our prepared avocado products shipped to North America are “cold pasteurized” and include both frozen and fresh guacamole.  Due to the long shelf-life of our frozen guacamole and the purity of our fresh guacamole, we believe that we are well positioned to address the diverse taste and needs of today’s customers.  Additionally, we also prepare various fresh salsa products.  Our Calavo Foods segment maintains relationships with foodservice companies and food retailers.  We continue to seek to expand our relationships with major foodservice companies and food retailers and develop alliances that will allow our products to reach a larger percentage of the marketplace.

Net sales of frozen products represented approximately 50% and 52% of total processed segment sales for the years ended October 31, 2016 and 2015.  Net sales of our refrigerated products represented approximately 50% and 48% of total processed segment sales for the years ended October 31, 2016 and 2015. 

Our RFG business produces, markets and distributes nationally a portfolio of healthy, high quality fresh packaged food products for consumers via the retail channel.  RFG products include fresh prepared fruit and vegetables, fresh prepared entrée salads, wraps, sandwiches and fresh snacking products as well as ready-to-heat entrees and other hot bar

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and behind-the-deli glass meal and salad kits.  RFG products are marketed under the Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials as well as store-brand, private label programs.

The operating results of all of our businesses have been, and will continue to be, affected by quarterly and annual fluctuations and market downturns due to a number of factors, such as pests and disease, weather patterns, changes in demand by consumers, the timing of the receipt, reduction, or cancellation of significant customer orders, the gain or loss of significant customers, market acceptance of our products, our ability to develop, introduce, and market new products on a timely basis, availability and cost of avocados and supplies from growers and vendors, new product introductions by our competitors, change in the mix of avocados and Calavo Foods and RFG products we sell, and general economic conditions.  We believe, however, that we are currently positioned to address these risks and deliver favorable operating results for the foreseeable future.

Recent Developments

Dividend Payment

On September 27, 2016, the Company declared a $0.90 per share cash dividend to shareholders of record on November 17, 2016.  On December 8, 2016, the Company paid this cash dividend which totaled $15.7 million.

Houston and Jacksonville Facilities

    In fiscal 2016, we expanded and refurbished our plant facilities in Houston, TX and Jacksonville, FL to add additional production capacity and in-plant capabilities. We invested approximately $7.3 million into the Houston facility and $13.3 million into the Jacksonville facility.

Mexico tax audits

We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions.  Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States.  During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (“CDM”), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (“MFM”) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary.  MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (“VAT”).  During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations   and requested the adoption of a conclusive agreement before the PRODECON (Local Tax Ombudsman) so that a full discussion of the case between us, the MFM and the PRODECON can occur and so that, as appropriate, the MFM can reconsider their findings.  Note that until such discussion occurs, the normal period during which the MFM would issue its final assessment (previously expected no later February 2017) has been suspended.  Though a formal meeting date has not yet been determined, the discussion between us, the MFM and the PRODECON is expected to start in calendar 2017.

    Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico, is currently under examination related to fiscal year 2013.  Under Mexican law, the SAT has until approximately March 2017 to complete their review.   In conjunction with their examination, the SAT has requested information though no formal findings have yet been received.

    We believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position.

From time to time, we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

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Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we re-evaluate all of our estimates, including those related to the areas of customer and grower receivables, inventories, useful lives of property, plant and equipment, promotional allowances, income taxes, retirement benefits, and commitments and contingencies.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Additionally, we frequently engage third party valuation experts to assist us with estimates described below.  Actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods.

Management has discussed the development and selection of critical accounting estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed our disclosure relating to critical accounting estimates in this Annual Report.

We believe the following are the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Promotional allowances.  We provide for promotional allowances at the time of sale, based on our historical experience.  Our estimates are generally based on evaluating the relationship between promotional allowances and gross sales.  The derived percentage is then applied to the current period’s sales revenues in order to arrive at the appropriate debit to sales allowances for the period.  The offsetting credit is made to accrued liabilities.  When certain amounts of specific customer accounts are subsequently identified as promotional, they are written off against this allowance.  Actual amounts may differ from these estimates and such differences are recognized as an adjustment to net sales in the period they are identified.  A 1% change in the derived percentage for the entire year would impact results of operations by approximately $0.7 million.

Income taxes.    We account for deferred tax liabilities and assets for the future consequences of events that have been recognized in our consolidated financial statements or tax returns.  Measurement of the deferred items is based on enacted tax laws.  In the event the future consequences of differences between financial reporting bases and tax bases of our assets and liabilities result in a deferred tax asset, we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset.  A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.  If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies.  Conversely, we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.  Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.  Therefore, the actual liability for U.S. or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Goodwill and acquired intangible assets.  Goodwill, defined as unidentified asset(s) acquired in conjunction with a business acquisition, is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment.  Goodwill impairment testing is a

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two-step process.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test would be unnecessary.  If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.  If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess.  Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units.  The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses.  We performed our annual assessment of goodwill and determined that no impairment existed as of October 31, 2016.

Allowance for accounts receivable.  We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Results of Operations

The following table sets forth certain items from our consolidated statements of income, expressed as percentages of our total net sales, for the periods indicated:

	Year ended October 31,
	2016		2015		2014
Net sales	100	%	100	%	100	%
Gross margins	11.5	%	9.9	%	9.1	%
Selling, general and administrative	5.0	%	4.9	%	4.7	%
Contingent consideration related to RFG acquisition	0.0	%	0.0	%	6.5	%
Operating income	6.5	%	5.1	%	(2.1)	%
Interest income	0.0	%	0.0	%	0.0	%
Interest expense	(0.1)	%	(0.1)	%	(0.1)	%
Other income, net	0.0	%	0.0	%	0.1	%
Net income	4.1	%	3.2	%	0.0	%

Net Sales

We believe that the fundamentals for our products continue to be favorable.  Firstly, United States (U.S.) avocado demand continues to grow, with per capita use in 2015/16 reaching 6.9 pounds per person, up 7 percent from the previous year, and approximately double the estimate of a decade ago. We believe that the healthy eating trend that has been developing in the United States contributes to such growth, as avocados, which are cholesterol and sodium free, are dense in fiber, vitamin B6, antioxidants, potassium, folate, and contain unsaturated fat, which help lower cholesterol.  Also, a growing number of research studies seem to suggest that phytonutrients, which avocados are rich in, help fight chronic illnesses, such as heart disease and cancer.

Additionally, we believe that the demographic changes in the U.S. will impact the consumption of avocados and avocado-based products.  The Hispanic community currently accounts for approximately 18% of the U.S. population, and the total number of Hispanics is estimated to double by the year 2050.  Avocados are considered a staple item purchased by Hispanic consumers, as the per-capita avocado consumption in Mexico is significantly higher than that of the U.S. 

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We anticipate avocado products will further penetrate the United States marketplace driven by year-round availability of fresh avocados due to imports, a rapidly growing Hispanic population, and the promotion of the health benefits of avocados.  As one of the largest marketers of avocado products in the United States, we believe that we are well positioned to leverage this trend and to grow our Fresh products and Calavo Foods segments of our business.  Additionally, we also believe that avocados and avocado based products will further penetrate other marketplaces that we currently operate in, as interest in avocados continues to expand.

In October 2002, the USDA announced the creation of a Hass Avocado Board to promote the sale of Hass variety avocados in the U.S. marketplace.  This board provides a basis for a unified funding of promotional activities based on an assessment on all avocados sold in the U.S. marketplace.  The California Avocado Commission, which receives its funding from California avocado growers, has historically shouldered the promotional and advertising costs supporting avocado sales.  We believe that the incremental funding of promotional and advertising programs in the U.S. will, in the long term, positively impact average selling prices and will favorably impact our avocado businesses.  During fiscal 2016, 2015 and 2014, on behalf of avocado growers, we remitted approximately $2.4 million, $1.7 million and $1.7 million to the California Avocado Commission.  During fiscal 2016, 2015 and 2014, we remitted approximately $8.2 million, $8.3 million and $7.1 million to the Hass Avocado Board related to avocados.

We also believe that our diversified fresh products, primarily tomatoes and papayas, are positioned for future growth. 

The tomato is the fourth most popular fresh-market vegetable (though a fruit scientifically speaking, tomatoes are more commonly considered a vegetable)  behind potatoes, lettuce, and onions in the United States. Although stabilizing in the first decade of the 2000s, annual average fresh-market tomato consumption remains well above that of the previous decade. Over the past few decades, per capita use of tomatoes has been on the rise due to the enduring popularity of salads, salad bars, and submarine sandwiches. Perhaps of greater importance has been the introduction of improved and new tomato varieties, heightened consumer interest in a wider range of tomatoes, a surge of new immigrants who eat vegetable-intensive diets, and expanding national emphasis on health and nutrition.

Papayas have become more popular as the consumption in the United States has more than doubled in the past decade.  Papayas have high nutritional benefits. They are rich in anti-oxidants, the B vitamins, folate and pantothenic acid; and the minerals, potassium and magnesium; and fiber. Together, these nutrients promote the health of the cardiovascular system and also provide protection against colon cancer.

Additionally, through the acquisition of RFG, we substantially expanded and accelerated the Company’s presence in the fast-growing refrigerated fresh packaged foods category through an array of retail product lines for produce, deli, and foodservice departments.  RFG products include fresh prepared fruit and vegetables, fresh prepared entrée salads, wraps, sandwiches and fresh snacking products as well as ready-to-heat entrees and other hot bar and behind-the-deli glass meal and salad kits.  RFG products are marketed under the Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials as well as store-brand, private label programs.

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The following tables set forth sales by product category and sales incentives, by segment (dollars in thousands):

	Year ended October 31, 2016								Year ended October 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	493,440	$	—	$	—	$	493,440	$	471,178	$	—	$	—	$	471,178
Tomatoes		35,981		—		—		35,981		18,681		—		—		18,681
Papayas		9,514		—		—		9,514		9,485		—		—		9,485
Pineapples		1,060		—		—		1,060		2,397		—		—		2,397
Other fresh products		536		—		—		536		442		—		—		442
Food service		—		50,716		—		50,716		—		49,212		—		49,212
Retail and club		—		23,216		336,989		360,205		—		22,736		296,697		319,433
Total gross sales		540,531		73,932		336,989		951,452		502,183		71,948		296,697		870,828
Less sales incentives		(1,844)		(10,438)		(3,491)		(15,773)		(1,472)		(9,792)		(2,740)		(14,004)
Net sales	$	538,687	$	63,494	$	333,498	$	935,679	$	500,711	$	62,156	$	293,957	$	856,824

	Year ended October 31, 2015								Year ended October 31, 2014
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	471,178	$	—	$	—	$	471,178	$	433,581	$	—	$	—	$	433,581
Tomatoes		18,681		—		—		18,681		19,705		—		—		19,705
Papayas		9,485		—		—		9,485		12,619		—		—		12,619
Pineapples		2,397		—		—		2,397		5,086		—		—		5,086
Other fresh products		442		—		—		442		1,037		—		—		1,037
Food service		—		49,212		—		49,212		—		48,085		—		48,085
Retail and club		—		22,736		296,697		319,433		—		22,334		255,074		277,408
Total gross sales		502,183		71,948		296,697		870,828		472,028		70,419		255,074		797,521
Less sales incentives		(1,472)		(9,792)		(2,740)		(14,004)		(1,079)		(11,140)		(2,792)		(15,011)
Net sales	$	500,711	$	62,156	$	293,957	$	856,824	$	470,949	$	59,279	$	252,282	$	782,510

Net sales to third parties by segment exclude inter-segment sales and cost of sales.  For fiscal year 2016, 2015 and 2014, inter-segment sales and cost of sales of $4.3 million, $1.5 million and $2.2 million between Fresh products and RFG were eliminated. For fiscal year 2016, 2015 and 2014, inter-segment sales and cost of sales of $2.7 million, $1.9 million and $1.7 million between Calavo Foods and RFG were eliminated.

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The following table summarizes our net sales by business segment:

	2016			Change		2015			Change		2014
(in thousands)
	(Dollars in thousands)
Net sales:
Fresh products	$	538,687		7.6	%	$	500,711		6.3	%	$	470,949
Calavo Foods		63,494		2.2	%		62,156		4.9	%		59,279
RFG		333,498		13.5	%		293,957		16.5	%		252,282
Total net sales	$	935,679		9.2	%	$	856,824		9.5	%	$	782,510
As a percentage of net sales:
Fresh products		57.6	%				58.4	%				60.2	%
Calavo Foods		6.8	%				7.3	%				7.6	%
RFG		35.6	%				34.3	%				32.2	%
		100	%				100	%				100	%

Summary

Net sales for the year ended October 31, 2016, compared to 2015, increased by $78.9 million, or 9.2%.  The increase in sales, when compared to the same corresponding prior year periods, is related to growth from all segments.

For fiscal year 2016, our largest percentage increase in sales was RFG, followed by our Fresh products segment and our Calavo Foods segment, as shown above.  Our increase in RFG sales was due primarily to increased sales from fresh prepared food and fresh-cut fruit and vegetable products.  Our increase in Fresh product sales was due primarily to increased sales of California avocados and tomatoes, partially offset by decreased sales of Mexican avocados. We experienced an increase in our Calavo Foods segment during fiscal year 2016, which was due primarily to an increase in the sales of our salsa products.  See discussion below for further details.

All three segments of our business are subject to seasonal trends which can impact the volume and/or quality of fruit sourced in any particular quarter.

Net sales to third parties by segment exclude value-added services billed by our Uruapan packinghouse and our Uruapan processing plant to the parent company.  All intercompany sales are eliminated in our consolidated results of operations.

Fresh products

Fiscal 2016 vs. Fiscal 2015:

Net sales delivered by the Fresh products business increased by approximately $38.0 million, or 7.6%, for the year ended October 31, 2016, when compared to fiscal 2015.  As discussed above, this increase in Fresh product sales during fiscal 2016 was primarily related to increased sales of California avocados and tomatoes, partially offset by decreased sales of Mexican avocados. See details below.

Sales of California sourced avocados increased $50.0 million, or 50.6%, for the year ended October 31, 2016, when compared to the same prior year period.  The increase in California sourced avocados was primarily due to an increase of 34.0 million pounds of avocados sold, or 45.0%. We attribute most of this increase in volume to the larger California avocado crop in fiscal 2016, compared to the same prior year period. In addition to this increase in pounds sold, is an increase in the sales price per carton.  The sales price per carton for California sourced avocados increased by approximately 3.9%.  We attribute much of this change in price to a lower overall supply of avocados in the market during the fourth quarter of fiscal 2016.

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Sales of tomatoes increased to $36.0 million for the year ended October 31, 2016, compared to $18.7 million for the same period for fiscal 2015.  The increase in sales of tomatoes is due to an increase in cartons sold of approximately 1.1 million cartons or 62.9%.  In addition, tomatoes experienced an increase in the sales price per carton of approximately 18.2%, most notable during our fiscal first quarter, primarily resulting from a change in weather patterns.

Partially offsetting these increases was a decrease in sales of Mexican sourced avocados, which decreased $22.6 million, or 6.2%, for the year ended October 31, 2016, when compared to the same prior year period.  The decrease in Mexican sourced avocados was primarily due to a decrease in pounds sold of Mexican sourced avocados, which decreased approximately 26.7 million pounds or 8.8%. This decrease is primarily due to supply disruptions in July and October which stalled the harvesting of avocados for the entire industry. 

Sales of Peruvian sourced avocados decreased $5.4 million for the year ended October 31, 2016, compared to the same period for fiscal 2015.  We chose not to sell Peruvian sourced avocados in fiscal 2016.

We anticipate that sales volume of California grown avocados will decrease in fiscal 2017, due to a smaller expected California avocado crop.  We anticipate that sales of Mexican grown avocados will increase in fiscal 2017, when compared to the same prior year period.  

Fiscal 2015 vs. Fiscal 2014:

Net sales delivered by the Fresh products business increased by approximately $29.8 million, or 6.3%, for the year ended October 31, 2015, when compared to fiscal 2014.  As discussed above, this increase in Fresh product sales during fiscal 2015 was primarily related to increased sales of Mexican and Peruvian sourced avocados, partially offset by decreases in sales of California and Chilean sourced avocados, papayas, pineapples, and tomatoes. See details below.

Sales of Mexican sourced avocados increased $39.3 million, or 12.0%, for the year ended October 31, 2015, when compared to the same prior year period. The increase in Mexican sourced avocados was primarily due to an increase in the pounds sold, which increased by approximately 51.3 million pounds of avocados sold, or 20.1%, when compared to the same prior year period. Partially offsetting this increase in pounds sold, however, is a decrease in the sales price per carton.  The sales price per carton for Mexican sourced avocados decreased by approximately 6.7%.  We attribute much of this change to a higher supply of avocados in the market.

Sales of Peruvian sourced avocados increased to $5.4 million for the year ended October 31, 2015, compared to $0.8 million for the same period for fiscal 2014.  The increase in Peruvian sourced avocados was primarily due to an increase in the pounds sold, which increased by approximately 5.2 million pounds.

Partially offsetting such increases was a decrease in sales of California sourced avocados, which decreased $3.7 million, or 3.6% for the year ended October 31, 2015, when compared to the same prior year period.  The decrease in California sourced avocados was primarily due to a decrease in the sales price per carton, which decreased approximately 5.0%.  Partially offsetting this decrease, however, was an increase pounds sold.  California sourced avocados sales reflect an increase in 1.1 million pounds of avocados sold, or 1.5%, when compared to the same prior year period.

Sales of Chilean sourced avocados decreased $3.0 million, or 97.4%, for the year ended October 31, 2015, when compared to the same prior year period.  The decrease in Chilean sourced avocados was primarily due to the Company’s decision to focus more heavily on sourcing avocados from other growing regions outside the US, namely Mexico and Peru.  As a result, Chilean sourced avocados sales reflect a decrease in 2.7 million pounds of avocados sold, when compared to the same prior year period.  In addition, we have liquidated our unconsolidated subsidiary Calavo Chile, which further caused the above decrease.

Partially offsetting these increases were decreases in sales of pineapples, papayas and tomatoes. Sales of papayas decreased $2.7 million, or 23.9%, sales of pineapples decreased $2.7 million, or 52.9% and sales of tomatoes decreased $1.0 million, or 5.2%, for the year ended October 31, 2015, when compared to the same period for fiscal 2014. The decrease in sales for pineapples, papayas, and tomatoes are primarily due to decreases in the number of cartons sold.  We

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attribute all of these decreases in cartons sold due primarily to weather related issues effecting the quality and quantity of the fruit.

Calavo Foods

Fiscal 2016 vs. Fiscal 2015:

Sales for Calavo Foods for the year ended October 31, 2016, when compared to the same period for fiscal 2015, increased $1.3 million, or 2.2%.  This increase is primarily due to an increase in sales of salsa products of approximately $1.4 million, or 66.8%, for the year ended October 31, 2016, when compared to the same prior year period. The increase in sales of salsa was primarily related to an increase in overall pounds sold. 

Fiscal 2015 vs. Fiscal 2014:

Sales for Calavo Foods for the year ended October 31, 2015, when compared to the same period for fiscal 2014, increased $2.9 million, or 4.9%.  This increase is due to an increase in sales of prepared guacamole products which increased approximately $2.3 million, or 3.9%, for the year ended October 31, 2015, when compared to the same prior year period.  The increase in sales of prepared guacamole was primarily related to an increase in overall pounds sold, which increased 0.7 million pounds, or 2.8%.  In addition, sales of salsa products increased approximately $0.6 million, or 41.3%, for the year ended October 31, 2015, when compared to the same prior year period.  The increase in sales of salsa was primarily related to an increase in overall pounds sold, which increased 0.4 million pounds, or 47.8%.

RFG

Fiscal 2016 vs. Fiscal 2015:

Sales for RFG for the year ended October 31, 2016, when compared to the same period for fiscal 2015, increased $39.5 million, or 13.5%.  This increase is due primarily to increased sales from fresh prepared food and fresh-cut fruit and vegetable products. The overall increase in sales is primarily due to an increase in sales volume, which we believe results from an increase in demand for the variety of innovative and convenient products that we offer, as well as our ability to expand retail relationships by providing high-quality, fresh foods solutions from our growing national production footprint. 

Fiscal 2015 vs. Fiscal 2014:

Sales for RFG for the year ended October 31, 2015, when compared to the same period for fiscal 2014, increased $41.7 million, or 16.5%.  This increase is due primarily to increased sales from cut fruit and deli products, as well as an increase in sales of cut vegetables.  The overall increase in sales is primarily due to an increase in sales volume, partially offset by a decrease in the sales price per unit. Collectively, cut fruit, cut vegetable, and deli product sales increased 8.8 million units, or 31.2%.  We believe the overall increase in sales volume is primarily due to an increase in demand for the variety of innovative products that we offer. 

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Gross Margins

The following table summarizes our gross margins and gross margin percentages by business segment:

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Gross Margins:
Fresh products	$	57,997		56.5	%	$	37,064		2.6	%	$	36,129
Calavo Foods		22,448		9.4	%		20,511		57.7	%		13,010
RFG		27,089		(2.0)	%		27,652		25.2	%		22,089
Total gross margins	$	107,534		26.2	%	$	85,227		19.7	%	$	71,228
Gross margin percentages:
Fresh products		10.8	%				7.4	%				7.7	%
Calavo Foods		35.4	%				33.0	%				21.9	%
RFG		8.1	%				9.4	%				8.8	%
Consolidated		11.5	%				9.9	%				9.1	%

Summary

Our cost of goods sold consists predominantly of fruit costs, packing materials, freight and handling, labor and overhead (including depreciation) associated with preparing food products and other direct expenses pertaining to products sold.  Gross margins increased by approximately $22.3 million, or 26.2%, for the year ended October 31, 2016, when compared to the same period for fiscal 2015.  These increases were attributable to gross margin increases across the Fresh products and Calavo Foods segments, partially offset by a decrease in our RFG segment.

Note that RFG’s Cost of Sales for fiscal 2014, includes a non-cash compensation expense related to the sale/acquisition of RFG totaling $1.8 million. 

Fresh products

Fiscal 2016 vs. Fiscal 2015:

During fiscal 2016, as compared to the same prior year period, the increase in our Fresh products segment gross margin percentage was the result of increased margins for Californian and Mexican sourced avocados. For the year ended October 31, 2016, compared to the same prior year period, the gross margin percentage for California sourced avocados increased from a loss of -1.6% in 2015 to a margin of 9.0% in 2016.  For fiscal 2016, we were able to effectively manage our fruit costs during select periods within the year and better leverage our fixed handling costs. For the year ended October 31, 2016, compared to the same prior year period, the gross margin percentage for Mexican sourced avocados increased from 9.6% in 2015 to 11.7% in 2016.  For fiscal 2016, we were able to manage fruit cost for Mexican sourced avocados effectively. In addition, the U.S. Dollar to Mexican Peso exchange rate continued to strengthen in fiscal 2016. Note that any significant fluctuations in the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Fresh products segment.

The gross margin and/or gross profit percentage for consignment sales are dependent on the volume of fruit we handle, the average selling prices, and the competitiveness of the returns that we provide to third-party growers/packers.  The gross margin we earn is generally based on a commission agreed to with each party, which usually is a percent of the overall selling price.  Although we generally do not take legal title to such products prior to sale, we do assume responsibilities (principally assuming credit risk, inventory loss and delivery risk, and pricing risk) that are consistent with acting as a principal in the transaction.  Accordingly, our results of operations include sales and cost of sales from the sale of products procured under consignment arrangements. For the year ended October 31, 2016 we generated gross margins of $4.2 million from consigned tomato sales, up 107% from $2.0 million in the corresponding prior year period. This improvement in tomato gross margins, is due to an overall increase in tomato sales, which increased $17.3 million

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for the year ended October 31, 2016, compared to the same period for fiscal 2015.  The increase in sales of tomatoes is due to an increase in cartons sold of approximately 1.1 million cartons or 62.9%. In addition, tomatoes experienced an increase in the sales price per carton of approximately 18.2%, most notable during our fiscal first quarter, primarily resulting from a change in weather patterns.  Gross margins of Peruvian sourced avocados decreased $0.5 million for the year ended October 31, 2016, compared to the same period for fiscal 2015.  We chose not sell Peruvian sourced avocados in fiscal 2016.

Fiscal 2015 vs. Fiscal 2014:

During fiscal 2015, as compared to the same prior year period, the increase in our Fresh products segment gross margin percentage was primarily the result of increased margins for Mexican sourced avocados that increased from 8.1% in fiscal 2014 to 9.6% in fiscal 2015.  In the current year, we were able to manage the spread between the sales price and the fruit cost of Mexican sourced avocados more effectively, as average fruit costs decreased 8.3%, we were able to have the decrease in sales prices to be only approximately 6.7%.  In addition, the U.S. Dollar to Mexican Peso exchange rate strengthened in fiscal year 2015, more significantly compared to fiscal year 2014.  Note that any significant fluctuations in the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Fresh products and Calavo Foods segments.

Partially offsetting this increase in gross margin percentage was a decrease in the gross margin percentage for California sourced avocados for fiscal 2015, as compared to the same prior year periods.  This decrease was primarily related to increased fruit cost, in the form of higher grower returns vs. the related selling prices.  We believe this is primarily due to California avocado sales prices decreasing for prolonged periods of time during fiscal 2015.  This declining market negatively impacted gross margins.

The gross margin and/or gross profit percentage for consignment sales, including certain Peruvian avocados, Chilean avocados, tomatoes and pineapples, are dependent on the volume of fruit we handle, the average selling prices, and the competitiveness of the returns that we provide to third-party growers/packers.  The gross margin we earn is generally based on a commission agreed to with each party, which usually is a percent of the overall selling price.  Although we generally do not take legal title to such avocados and perishable products, we do assume responsibilities (principally assuming credit risk, inventory loss and delivery risk, and pricing risk) that are consistent with acting as a principal in the transaction.  Accordingly, our results of operations include sales and cost of sales from the sale of avocados and perishable products procured under consignment arrangements.  For fiscal year 2015 we generated gross margins of $3.0 million from consigned sales. This is consistent for consigned sales compared to previous year.  Sales of Peruvian sourced avocados increased to $5.4 million for the year ended October 31, 2015, compared to $0.8 million for the same period for fiscal 2014.  The increase in Peruvian sourced avocados was primarily due to an increase in the pounds sold, which increased by approximately 5.2 million pounds. Sales of Chilean sourced avocados decreased $3.0 million, or 97.4%, for the year ended October 31, 2015 when compared to the same prior year period.  The decrease in Chilean sourced avocados was due to a decrease in pounds sold.  Chilean sourced avocados sales reflect a decrease in 2.7 million pounds of avocados sold when compared to the same prior year period.  This decrease in sales is due to the high availability of other avocado sources, and an increased focus on Mexican and California sourced avocados for the year ended October 31, 2015.  In addition, we have liquidated our unconsolidated subsidiary Calavo Chile, which further caused the above decrease. Sales of tomatoes decreased to $18.7 million for the year ended October 31, 2015, compared to $19.7 million for the same period for fiscal 2014.  The decrease in sales for tomatoes is due to a decrease in the sales price per carton, which decreased 7.2%.  We believe this decline in the sales price per carton is due to the higher supply of tomatoes in the marketplace.

Calavo Foods

Fiscal 2016 vs. Fiscal 2015:

The Calavo Foods segment gross margin percentage during our year ended October 31, 2016 increased to 35.4%, compared to the same prior year period gross margin percentage of 33.0%.  This increase was primarily due to (i) lower guacamole production costs resulting from the U.S. Dollar to Mexican Peso exchange rate strengthening by approximately 18% for the year ended October 31, 2016, as compared to the same period year period and (ii) lower salsa

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production costs.  Note that any significant fluctuation in the cost of fruit used in the production process or the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Calavo Foods segments.

Fiscal 2015 vs. Fiscal 2014:

The Calavo Foods segment gross margin percentage during our year ended October 31, 2015, when compared to the same prior year period, increased primarily due to a decrease in fruit costs. Fruit costs decreased during our year ended October 31, 2015, by approximately 36.1%. In addition, the U.S. Dollar to Mexican Peso exchange rate strengthened for the year ended October 31, 2015, as compared to the same period year period.   Note that any significant fluctuation in the cost of fruit used in the production process or the exchange rate between the U.S. Dollar and the Mexican Peso may have a material impact on future gross margins for our Calavo Foods segments

RFG

Fiscal 2016 vs. Fiscal 2015:

RFG’s decreased gross margin percentage for the year ended October 31, 2016, is due in part to the lingering effects of adverse weather conditions (related to El Nino) that impacted certain fruit and vegetable growing regions and caused reduced raw material availability, increased raw material prices, and reduced processing yields in our first fiscal quarter of 2016 and to a lesser extent in our second fiscal quarter of 2016. Similar to the Calavo Foods segment, RFG often has agreed upon pricing with many of their customers. Note that any significant fluctuation in raw material availability, price and/or quality may have a material impact on future gross margins for our RFG segment. 

RFG invested throughout fiscal year 2016 by expanding its production facilities and adding capabilities to meet growing customer demand. Certain expenses associated with the start-up and initial optimization of those facilities temporarily reduced gross margin percentage in the year ended October 31, 2016.

Fiscal 2015 vs. Fiscal 2014:

RFG’s improved gross-margin is reflective of certain economies of scale resulting from significant sales growth (see discussion above), improved labor utilization and improved raw-material quality and yield. Benefits from superior fruit quality/yield extend beyond just lower fruit costs, but also reduce other costs, including the labor needed to process such fruit.  Sales for RFG for the year ended October 31, 2015, when compared to the same period for fiscal 2014, increased $41.7 million, or 16.5%. 

Selling, General and Administrative

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Selling, general and administrative	$	46,440		11.7	%	$	41,558		13.5	%	$	36,605
Percentage of net sales		5.0	%				4.9	%				4.7	%

Selling, general and administrative expenses include costs of marketing and advertising, sales expenses and other general and administrative costs.  Selling, general and administrative expenses increased $4.9 million, or 11.7%, for the year ended October 31, 2016, when compared to the same prior year period.  This increase was primarily related to higher corporate costs, including, but not limited to, general and administrative costs related to salaries (approximately $2.5 million), accrued management bonuses (approximately $1.3 million), insurance (approximately $0.6 million), depreciation (approximately $0.3 million), and employee benefits (approximately $0.2 million), partially offset by a decreases in administration fees (approximately $0.4 million) and legal fees (approximately $0.2 million).

Selling, general and administrative expenses increased $5.0 million, or 13.5%, for the year ended October 31, 2015, when compared to the same prior year period.  This increase was primarily related to higher corporate costs, including,

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but not limited to, general and administrative costs related to salaries (approximately $1.7 million), stock-based compensation expense (approximately $1.4 million), a write-down of contingent consideration related to Salsa Lisa (approximately $0.5 million), legal/consulting fees (approximately $0.4 million), promotion and advertising (approximately $0.3 million), data processing (approximately $0.3 million), consulting fees (approximately $0.3 million), workers compensation (approximately $0.3 million), employee benefits (approximately $0.2 million), and other admin fees (approximately $0.2 million), partially offset by a decrease in the start-up operations of FreshRealm (approximately $1.0 million) and accrued management bonuses (approximately $0.6 million).

Contingent Consideration Related to RFG Acquisition

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Contingent Consideration Related to RFG Acquisition	$	—		NM	%	$	—		NM	%	$	51,082
Percentage of net sales		—	%				—	%				6.5	%

RFG’s former owners received the maximum earn-out payment permitted pursuant to the acquisition agreement in fiscal 2014. This caused the significant increase in contingent consideration for fiscal 2014.  There was no contingent consideration expense for fiscal year 2016 and 2015. There will be no future expenses related to this acquisition. See the 2014 fiscal year Consolidated Financial Statement for more information.

Interest Income

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Interest income	$	132		71.4	%	$	77		(66.2)	%	$	228
Percentage of net sales		—	%				—	%				—	%

Interest income was primarily generated from our loans to growers.  The increase in interest income in fiscal 2016 as compared to 2015 is due to the borrowings by California avocado growers increasing in the current year compared to the prior year.

The decrease in interest income in fiscal 2015 as compared to 2014 is due to the borrowings by California avocado growers decreasing in the current year compared to the prior year.

Interest Expense

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Interest expense	$	756		(8.9)	%	$	830		(15.6)	%	$	983
Percentage of net sales		0.1	%				0.1	%				0.1	%

Interest expense is primarily generated from our line of credit borrowings, as well as our term loan agreements with Farm Credit West, PCA (FCW) and Bank of America, N.A. (BoA). For fiscal 2016, as compared to fiscal 2015, the decrease in interest expense was primarily related to the payoff of our term loans with FCW and BoA, and the lower average outstanding balance on our non-collateralized, revolving credit facility.

For fiscal 2015, as compared to fiscal 2014, the decrease in interest expense was primarily related to a lower average outstanding balance on our non-collateralized, revolving credit facilities.

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Other Income, Net

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Other income, net	$	428		2.6	%	$	417		(11.8)	%	$	473
Percentage of net sales		0.0	%				0.0	%				0.1	%

Other income, net includes dividend income, as well as certain other transactions that are outside of the normal course of operations.  Other Income stayed relatively consistent in fiscal 2016 compared to fiscal 2015 and 2014.  During fiscal 2016, 2015 and 2014, we received $0.3 million as dividend income from Limoneira. 

Provision (benefit) for Income Taxes

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Provision (benefit) for income taxes	$	21,869		35.9	%	$	16,093		NM	%	$	(3,916)
Effective tax rate		36.3	%				37.2	%				(94.8)	%

For fiscal year 2016, our provision for income taxes was $21.9 million, as compared to $16.1 million recorded for the comparable prior year period. 

For fiscal year 2015, our provision for income taxes was $16.1 million, as compared to a benefit of $3.9 million recorded for the comparable prior year period.  The prior year benefits for income taxes are primarily attributable to the revaluation adjustment related to contingent consideration. 

The benefit for income taxes of $3.9 million in fiscal year 2014 is attributable to the revaluation adjustment of $88.1 million related to contingent consideration which was spread between fiscal year 2014 through fiscal year 2011. The prior year revaluation expense drove pre-tax book income into a loss position, thus causing a benefit for income taxes as this revaluation adjustment is capitalized and amortized as goodwill over the remaining useful life for income tax purposes resulting in a taxable income position for the prior year. 

Net (income) loss attributable to noncontrolling interest

	2016			Change		2015			Change		2014
	(Dollars in thousands)
Net (income) loss attributable to noncontrolling interest	$	(437)		NM	%	$	-		(100.0)	%	$	312
Percentage of net sales		0.0	%				0.0	%				0.0	%

      The noncontrolling interest for Salsa Lisa is recorded at the greater of the noncontrolling interest balance adjusted for the attribution of loss or the amount redeemable pursuant to the buyout process contained in the amended and restated limited liability company agreement of Calavo Salsa Lisa LLC. For fiscal 2016, we recorded an adjustment of $486,000 to increase the noncontrolling interest balance to the currently expected redeemable amount of $771,000. This adjustment has been included in net loss attributed to noncontrolling interest. See Note 2 in our consolidated financial statements for further information. 

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Quarterly Results of Operations

The following table presents our operating results for each of the eight fiscal quarters in the period ended October 31, 2016.  The information for each of these quarters is derived from our unaudited interim financial statements and should be read in conjunction with our audited consolidated financial statements included in this Annual Report.  In our opinion, all necessary adjustments, which consist only of normal and recurring accruals, have been included to fairly present our unaudited quarterly results.  Historically, we receive and sell a substantially smaller volume of California avocados in our first fiscal quarter. 

	Three months ended
	Oct. 31, 2016	July 31, 2016	Apr. 30, 2016	Jan. 31, 2016	Oct. 31, 2015	July 31, 2015	Apr. 30, 2015	Jan. 31, 2015
	(in thousands, except per share amounts)
Statement of Operations Data
Net sales	$ 247,655	$ 263,146	$ 220,303	$ 204,575	$ 207,994	$ 232,450	$ 221,589	$ 194,791
Cost of sales	220,570	230,502	193,496	183,577	187,825	208,172	198,614	176,986
Gross margin	27,085	32,644	26,807	20,998	20,169	24,278	22,975	17,805
Selling, general and administrative	11,574	12,287	11,658	10,921	11,442	10,620	9,986	9,510
Operating income	15,511	20,357	15,149	10,077	8,727	13,658	12,989	8,295
Other income (expense), net	(553)	(325)	88	24	(237)	(107)	73	(106)
Income before provision for income taxes	14,958	20,032	15,237	10,101	8,490	13,551	13,062	8,189
Provision for income taxes	5,260	7,323	5,561	3,725	3,703	4,910	4,590	2,890
Net income	9,698	12,709	9,676	6,376	4,787	8,641	8,472	5,299
Add: Net (income) loss-noncontrolling interest	(459)	36	13	(27)	-	-	-	-
Net income-Calavo Growers, Inc	$ 9,239	$ 12,745	$ 9,689	$ 6,349	$ 4,787	$ 8,641	$ 8,472	$ 5,299
Basic	$ 0.53	$ 0.73	$ 0.56	$ 0.37	$ 0.28	$ 0.50	$ 0.49	$ 0.31
Diluted	$ 0.53	$ 0.73	$ 0.56	$ 0.37	$ 0.28	$ 0.50	$ 0.49	$ 0.31
Number of shares used in per share computation:
Basic	17,355	17,351	17,348	17,322	17,307	17,301	17,300	17,295
Diluted	17,447	17,447	17,445	17,386	17,392	17,386	17,382	17,311

Liquidity and Capital Resources

Operating activities for fiscal 2016, 2015 and 2014 provided cash flows of $62.0 million, $37.3 million, and $24.5 million.  Fiscal year 2016 operating cash flows reflect our net income of $38.5 million, net increase of noncash charges (depreciation and amortization, income from unconsolidated entities, provision for losses on accounts receivable, interest on deferred compensation, excess  tax benefit from stock based compensation, deferred income taxes, and stock compensation expense) of $13.0 million and a net increase from changes in the non-cash components of our working capital accounts of approximately $10.5 million.

Fiscal year 2016 increases in operating cash flows, caused by working capital changes, includes an increase in payable to growers of $18.1 million, an increase in trade accounts payable and accrued expenses of $7.6 million, a decrease in income tax receivable of $6.2 million, an increase in deferred rent of $1.7 million, and a decrease in other assets of $0.6 million, partially offset by an increase in accounts receivable of $11.5 million, an increase in inventory of $5.5 million, an increase in prepaid expenses and other current assets of $5.1 million and an increase in advances to suppliers of $1.6 million.

The increase in payable to our growers primarily reflects an increase in fruit prices for Mexican fruit delivered in the month of October 2016, as compared to the month of October 2015. The increase in accounts payable and accrued expenses is primarily related to increase in fruit or other related cost, and an increase in our accrual for management incentives. The decrease in income tax receivable and the increase in income taxes payable primarily reflects the tax impact of the current year’s net income. The increase in deferred rent is due to the new lease in Jacksonville Florida. The decrease in other assets is primarily due to the collection of infrastructure through the settlement process of advances to our tomato growers Agricola Belher. The increase in our accounts receivable, as of October 31, 2016 when compared to October 31, 2015, primarily reflects higher sales recorded in the month of October 2016, as compared to October 2015. The increase in our inventory balance is primarily related to an increase in Mexico avocado inventory on hand at October 31, 2016 and higher fruit prices, as compared to the same prior year period. The net increase in our prepaid assets and other assets is due

34

primarily to an increase in our Mexican IVA tax receivable in fiscal 2016. The increase in our advances to suppliers is primarily related to an increase in preseason advances to our grower Agricola Belher.

Cash used in investing activities was $21.7 million, $21.1 million, and $21.8 million for fiscal years 2016, 2015, and 2014.  Fiscal year 2016 cash flows used in investing activities include capital expenditures of $21.8 million of property, plant and equipment items for expansion projects in the RFG and Fresh products segments and an additional investment in Agricola Don Memo of $2.3 million, an additional investment in FreshRealm of $1.6 million, partially offset by proceeds received from the repayment of the loan to Agricola Don Memo of $4.0 million.

Cash used in financing activities was $33.6 million, $15.8 million and $4.1 million for fiscal years 2016, 2015 and 2014.  Cash used during fiscal year 2016 primarily related to the payment of a dividend of $13.9 million, payments on our credit facilities totaling $17.9 million, payments on long-term obligations of $2.2 million and deferred financing costs of $0.1 million, partially offset by the excess of the tax benefit of stock based compensation of $0.4 million and proceeds from the exercise of stock options of $0.1 million.

Our principal sources of liquidity are our existing cash reserves, cash generated from operations and amounts available for borrowing under our existing credit facilities.  Cash and cash equivalents as of October 31, 2016 and 2015 totaled $13.8 million and $7.2 million.  Our working capital at October 31, 2016 was $25.6 million, compared to $19.0 million at October 31, 2015. 

We believe that cash flows from operations and the available Credit Facility will be sufficient to satisfy our future capital expenditures, grower recruitment efforts, working capital and other financing requirements for the next twelve months.  We will continue to evaluate grower recruitment opportunities, expanded relationships with retail and club customers, and exclusivity arrangements with food service companies to fuel growth in each of our business segments.  In June 2016, we entered into a new unsecured, revolving credit facility with Bank of America as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West, as joint lead arranger. Under the terms of this agreement, we are advanced funds for both working capital and long-term productive asset purchases.  Total credit available under this new agreement is $80 million, and will expire in June 2021. Upon notice to Bank of America, we may from time to time, request an increase in the Credit Facility by an amount not exceeding $50 million. For our current and past line of credit agreements the weighted-average interest rate was 1.9% and 1.7% at October 31, 2016 and 2015.  Under these credit facilities, we had $19.0 million and $36.9 million outstanding as October 31, 2016 and 2015. 

This new Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. We were in compliance with all such covenants at October 31, 2016. 

The following table summarizes contractual obligations pursuant to which we are required to make cash payments.  The information is presented as of our fiscal year ended October 31, 2016:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt obligations (including interest)	$	662	$	162	$	222	$	202	$	76
Revolving credit facilities		19,000		19,000		—		—		—
Defined benefit plan		195		33		66		66		30
Operating lease commitments		58,206		5,268		10,445		8,922		33,571
Total	$	78,063	$	24,463	$	10,733	$	9,190	$	33,677

The California avocado industry is subject to a state marketing order whereby handlers are required to collect assessments from the growers and remit such assessments to the California Avocado Commission (CAC).  The assessments are primarily for advertising and promotions.  The amount of the assessment is based on the dollars paid to

35

the growers for their fruit, and, as a result, is not determinable until the value of the payments to the growers has been calculated. 

With similar precision, amounts remitted to the Hass Avocado Board (HAB) in connection with their assessment program are likewise not determinable until the fruit is actually delivered to us.  HAB assessments are primarily used to fund marketing and promotion efforts.

Recently Adopted Accounting Pronouncements

In November 2015, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

Recently Issued Accounting Standards

In March 2016, the FASB issued an ASU, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are evaluating the impact of the adoption of this amended accounting

36

standard on our financial condition, result of operations and cash flows, but we do not expect the adoption of this accounting standard to have a significant effect.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments include cash and cash equivalents, accounts receivable, payable to growers, accounts payable, current and long-term borrowings pursuant to our credit facilities with financial institutions, and long-term, fixed-rate obligations.  All of our financial instruments are entered into during the normal course of operations and have not been acquired for trading purposes.  The table below summarizes interest rate sensitive financial instruments and presents principal cash flows in U.S. dollars, which is our reporting currency, and weighted-average interest rates by expected maturity dates, as of October 31, 2016.

(All amounts in thousands)	Expected maturity date October 31,
	2017		2018		2019		2020		2021		Thereafter		Total		Fair Value
Assets
Cash and cash equivalents (1)	$	13,842	$	—	$	—	$	—	$	—	$	—	$	13,842	$	13,842
Accounts receivable (1)		70,101		—		—		—		—		—		70,101		70,101
Liabilities
Payable to growers (1)	$	20,965	$	—	$	—	$	—	$	—	$	—	$	20,965	$	20,965
Accounts payable (1)		22,447		—		—		—		—		—		22,447		22,447
Current borrowings pursuant to credit facilities (1)		19,000		—		—		—		—		—		19,000		19,000
Fixed-rate long-term obligations (2)		138		99		89		92		92		73		583		551

(1) We believe the carrying amounts of cash and cash equivalents, accounts receivable, advances to suppliers, payable to growers, accounts payable, and current borrowings pursuant to credit facilities approximate their fair value due to the short maturity of these financial instruments.

(2) Fixed-rate long-term obligations bear interest rates ranging from 3.5% to 4.3% with a weighted-average interest rate of 2.3%.  We believe that loans with a similar risk profile would currently yield a return of 2.8%.  We project the impact of an increase or decrease in interest rates of 100 basis points would result in a change of fair value of approximately $18,000.

We were not a party to any derivative instruments during the fiscal year.  It is currently our intent not to use derivative instruments for speculative or trading purposes. Additionally, we do not use any hedging or forward contracts to offset market volatility. 

Our Mexican-based operations transact a significant portion of business in Mexican pesos.  Funds are transferred by our corporate office to Mexico on a weekly basis to satisfy domestic cash needs. We do not currently use derivative instruments to hedge fluctuations in the Mexican peso to U.S. dollar exchange rates.  Management does, however, evaluate this opportunity from time to time.  Total foreign currency translation losses for fiscal years 2016, 2015, and 2014, net of gains, were $1.1 million, $1.8 million and $0.1 million.

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Item 8. Financial Statements and Supplementary Data

CALAVO GROWERS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	October 31,
	2016		2015
Assets
Current assets:
Cash and cash equivalents	$	13,842	$	7,171
Accounts receivable, net of allowances of $2,063 (2016) $2,312 (2015)		70,101		58,606
Inventories, net		31,849		26,351
Prepaid expenses and other current assets		14,402		15,763
Advances to suppliers		4,425		2,820
Income taxes receivable		334		6,111
Total current assets		134,953		116,822
Property, plant, and equipment, net		87,837		69,448
Investment in Limoneira Company		34,036		27,415
Investment in unconsolidated entities		24,652		19,720
Deferred income taxes		14,944		19,277
Goodwill		18,262		18,262
Other assets		13,249		14,001
	$	327,933	$	284,945
Liabilities and shareholders' equity
Current liabilities:
Payable to growers	$	20,965	$	3,924
Trade accounts payable		22,447		19,600
Accrued expenses		31,095		21,311
Short-term borrowings		19,000		36,910
Dividend payable		15,696		13,907
Current portion of long-term obligations		138		2,206
Total current liabilities		109,341		97,858
Long-term liabilities:
Long-term obligations, less current portion		445		586
Deferred rent		2,307		—
Deferred income taxes		—		234
Total long-term liabilities		2,752		820
Commitments and contingencies
Noncontrolling interest, Calavo Salsa Lisa		771		285
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,440 (2016) and 17,384 (2015) shares issued and outstanding)		17		17
Additional paid-in capital		149,748		147,063
Accumulated other comprehensive income		6,544		2,419
Noncontrolling interest		962		1,011
Retained earnings		57,798		35,472
Total shareholders' equity		215,069		185,982
	$	327,933	$	284,945

See accompanying notes to consolidated financialstatements.

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CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Year Ended October 31,
	2016		2015		2014
Net sales	$	935,679	$	856,824	$	782,510
Cost of sales		828,145		771,597		711,282
Gross margin		107,534		85,227		71,228
Selling, general and administrative		46,440		41,558		36,605
Contingent consideration related to RFG acquisition		—		—		51,082
Operating income (loss)		61,094		43,669		(16,459)
Losses from unconsolidated entities		(570)		(41)		(12)
Interest income		132		77		228
Interest expense		(756)		(830)		(983)
Gain on deconsolidation of FreshRealm		—		—		12,622
Other income, net		428		417		473
Income (loss) before provision for income taxes		60,328		43,292		(4,131)
Provision (benefit) for income taxes		21,869		16,093		(3,916)
Net income (loss)		38,459		27,199		(215)
Less: Net (income) loss attributable to noncontrolling interest		(437)		—		312
Net income attributable to Calavo Growers, Inc.	$	38,022	$	27,199	$	97
Calavo Growers, Inc.’s net income per share:
Basic	$	2.19	$	1.57	$	0.01
Diluted	$	2.18	$	1.57	$	0.01
Number of shares used in per share computation:
Basic		17,347		17,295		15,765
Diluted		17,431		17,363		17,220

See accompanying notes to consolidated financialstatements.

39

CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(in thousands)

	Year ended
	October 31,
	2016		2015		2014
Net income (loss)	$	38,459	$	27,199	$	(215)
Other comprehensive income (loss), before tax:
Unrealized investment gains (losses) arising during period		6,621		(16,940)		(1,175)
Income tax benefit (expense) related to items of other comprehensive loss		(2,496)		6,646		474
Other comprehensive income (loss), net of tax		4,125		(10,294)		(701)
Comprehensive income (loss)		42,584		16,905		(916)
Less: Net (income) loss attributable to noncontrolling interest		(437)		—		312
Comprehensive income (loss) – Calavo Growers, Inc.	$	42,147	$	16,905	$	(604)

See accompanying notes to consolidated financialstatements.

40

CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

						Accumulated
				Additional		Other
	Common Stock			Paid-in		Comprehensive		Retained		Noncontrolling
	Shares	Amount		Capital		Income		earnings		Interest		Total
Balance, October 31, 2013	15,720		15		70,790		13,414		35,054		(180)		119,093
Exercise of stock options and income tax benefit of $191	8		—		318		—		—		—		318
Stock compensation expense	—		—		727		—		—		—		727
Restricted stock issued	35		—		—		—		—		—		—
Issuance of stock related to RFG Contingent consideration and non-cash compensation	1,532		2		67,288		—		—		—		67,290
Unrealized loss on Limoneira investment, net	—		—		—		(701)		—		—		(701)
Dividend declared to shareholders	—		—		—		—		(12,971)		—		(12,971)
FreshRealm noncontrolling interest contribution	—		—		5,373		—		—		4,627		10,000
Deconsolidation of FreshRealm	—		—		—		—		—		(4,030)		(4,030)
Net loss attributable to FreshRealm	—		—		—		—		—		(417)		(417)
Net income attributable to Calavo Growers, Inc	—		—		—		—		97		—		97
Balance, October 31, 2014	17,295		17		144,496		12,713		22,180		—		179,406
Exercise of stock options and income tax benefit of $111	13		—		360		—		—		—		360
Stock compensation expense	—		—		2,108		—		—		—		2,108
Restricted stock issued	76		—		99		—		—		—		99
Unrealized loss on Limoneira investment, net	—		—		—		(10,294)		—		—		(10,294)
Dividend declared to shareholders	—		—		—		—		(13,907)		—		(13,907)
Avocados de Jalisco noncontrolling interest contribution	—		—		—		—		—		1,011		1,011
Net income attributable to Calavo Growers, Inc.	—		—		—		—		27,199		—		27,199
Balance, October 31, 2015	17,384		17		147,063		2,419		35,472		1,011		185,982
Exercise of stock options and income tax benefit of $447	5		—		551		—		—		—		551
Stock compensation expense	—		—		2,134		—		—		—		2,134
Restricted stock issued	51		—		—		—		—		—		—
Unrealized gain on Limoneira investment, net	—		—		—		4,125		—		—		4,125
Dividend declared to shareholders	—		—		—		—		(15,696)		—		(15,696)
Avocados de Jalisco noncontrolling interest contribution	—		—		—		—		—		(49)		(49)
Net income attributable to Calavo Growers, Inc.	—		—		—		—		38,022		—		38,022
Balance, October 31, 2016	17,440	$	17	$	149,748	$	6,544	$	57,798	$	962	$	215,069

See accompanying notes to consolidated financialstatements.

41

CALAVO GROWERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended October 31,
	2016		2015		2014
Cash Flows from Operating Activities:
Net income (loss)	$	38,459	$	27,199	$	(215)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		8,812		8,038		6,926
Provision for losses on accounts receivable		47		75		154
Loss from unconsolidated entities		570		109		15
Interest on contingent consideration		—		—		37
Contingent consideration and non-cash compensation expense related to the acquisition of RFG		—		—		53,611
Contingent consideration related to acquisition of Salsa Lisa		—		15		(491)
Stock compensation expense		2,134		2,108		727
Gain on deconsolidation of FreshRealm		—		—		(12,622)
Loss on disposal of property, plant, and equipment		248		147		115
Excess tax benefit from stock-based compensation		(447)		—		—
Deferred income taxes		1,603		3,183		(15,076)
Effect on cash of changes in operating assets and liabilities:
Accounts receivable		(11,542)		(2,063)		(1,712)
Inventories, net		(5,498)		4,713		(2,302)
Prepaid expenses and other current assets		(5,097)		(1,780)		(5,614)
Advances to suppliers		(1,605)		438		(45)
Income taxes receivable/payable		6,224		(3,465)		(648)
Other assets		683		441		48
Payable to growers		18,084		(1,889)		(6,985)
Deferred rent		1,697		—		—
Trade accounts payable and accrued expenses		7,596		14		8,624
Net cash provided by operating activities		61,968		37,283		24,547
Cash Flows from Investing Activities:
Acquisitions of property, plant, and equipment		(21,859)		(18,099)		(11,613)
Investment in unconsolidated entities		(3,900)		(1,800)		(125)
Proceeds received for repayment of San Rafael note		28		386		—
Proceeds from liquidation of Calavo Chile		—		262		—
Decrease in cash due to deconsolidation of FreshRealm		—		—		(6,813)
Infrastructure advance to Agricola Belher		—		(1,000)		—
Loan to Agricola Don Memo		—		(803)		(3,202)
Proceeds received for repayment of loan to Agricola Don Memo		4,000		—		—
Net cash used in investing activities		(21,731)		(21,054)		(21,753)
Cash Flows from Financing Activities:
Payment of dividend to shareholders		(13,907)		(12,971)		(11,005)
Proceeds from revolving credit facility		217,230		255,350		242,340
Payments on revolving credit facility		(235,140)		(254,340)		(240,430)
Deferred financing costs		(91)		—		—
Payments on long-term obligations		(2,209)		(5,098)		(5,160)
Proceeds from stock option exercises		104		249		127
Proceeds from issuance of FreshRealm stock		—		—		10,000
Proceeds from issuance of noncontrolling interest stock		—		817		—
Excess tax benefit from stock-based compensation		447		191		59
Net cash used in financing activities		(33,566)		(15,802)		(4,069)
Net increase (decrease) in cash and cash equivalents		6,671		427		(1,275)
Cash and cash equivalents, beginning of period		7,171		6,744		8,019
Cash and cash equivalents, end of period	$	13,842	$	7,171	$	6,744
Supplemental Information:
Cash paid during the year for:
Interest	$	741	$	843	$	986
Income taxes	$	14,425	$	15,495	$	11,355
Noncash Investing and Financing Activities:
Issuance of stock related to RFG contingent consideration	$	—	$	—	$	66,988
Declared dividends payable	$	15,696	$	13,907	$	12,971
Investment in FreshRealm included in accrued expenses	$	1,600	$	—	$	—
Construction in progress included in trade accounts payable and accrued expenses	$	4,574	$	529	$	—
Noncash assets received for issuance of noncontrolling interest	$	—	$	194	$	—
Collection for Agricola Belher Infrastructure Advance	$	1,045	$	845	$	845
Unrealized holding gains (losses)	$	6,621	$	(16,940)	$	(1,175)

See accompanying notes to consolidated financialstatements.

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of the business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and Renaissance Food Group, LLC (RFG). 

2. Basis of Presentation and Significant Accounting Policies

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States.

Our consolidated financial statements include the accounts of Calavo Growers, Inc. and our wholly owned subsidiaries, Calavo de Mexico S.A. de C.V., Calavo Foods de Mexico S.A. de C.V., Calavo Growers de Mexico, S. de R.L. de C.V. ( Calavo Growers de Mexico), Maui Fresh International, Inc. (Maui), Hawaiian Sweet, Inc. (HS), Hawaiian Pride, LLC (HP), Avocados de Jalisco, S.A.P.I. de C.V. (Avocados de Jalisco), in which we have a 80 percent ownership interest, and RFG.  We consolidate our entity Calavo Salsa Lisa, LLC (CSL), in which we currently have a 65 percent ownership interest.  All intercompany accounts and transactions have been eliminated in consolidation. 

Cash and Cash Equivalents

We consider all highly liquid financial instruments purchased with an original maturity date of three months or less to be cash equivalents.  The carrying amounts of cash and cash equivalents approximate their fair values.

Prepaid Expenses and Other Current Assets

     Prepaid expenses and other current assets consist primarily of non-trade receivables, infrastructure advances and prepaid expenses. Non-trade receivables were $11.6 million and $12.3 million at October 31, 2016 and 2015.  Included in non-trade receivables are $8.4 million and $5.7 million related to the current portion of Mexican IVA (i.e. value-added) taxes at October 31, 2016 and 2015.  In addition, included in non-trade receivables at October 31, 2015 is $4.0 million related to the bridge loan to the then newly created joint venture Agricola Don Memo. Infrastructure advances are discussed below.  Prepaid expenses totaling $2.8 million and $2.3 million at October 31, 2016 and 2015, are primarily for insurance, rent and other items.

Inventories

Inventories are stated at the lower of cost or market.  Cost is computed on a monthly weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.  Costs included in inventory primarily include the following: fruit, picking and hauling, overhead, labor, materials and freight. 

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are stated at cost and amortized over the lesser of their estimated useful lives or

43

the term of the lease, using the straight-line method.  Useful lives are as follows:  buildings and improvements - 7 to 50 years; leasehold improvements - the lesser of the term of the lease or 7 years; equipment - 7 to 25 years; information systems hardware and software – 3 to 10 years.  Significant repairs and maintenance that increase the value or extend the useful life of our fixed asset are capitalized.  Replaced fixed assets are written off.  Ordinary maintenance and repairs are charged to expense. 

We capitalize software development costs for internal use beginning in the application development stage and ending when the asset is placed into service.  Costs capitalized include coding and testing activities and various implementation costs.  These costs are limited to (1) external direct costs of materials and services consumed in developing or obtaining internal-use computer software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software project to the extent of the time spent directly on the project; and (3) interest cost incurred while developing internal-use computer software.  See Note 4 for further information.

Goodwill and Acquired Intangible Assets

Goodwill is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment.  Goodwill impairment testing is a two-step process.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test would be unnecessary.  If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.  If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess.  Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units.  The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses.  For fiscal years 2016 and 2015, we performed our annual assessment of goodwill and noted no impairments existed as of October 31, 2016 and 2015.

Long-lived Assets

Long-lived assets, including fixed assets and intangible assets (other than goodwill), are continually monitored and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable.  The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset and its eventual disposition.  The estimate of undiscounted cash flows is based upon, among other things, certain assumptions about future operating performance, growth rates and other factors.  Estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to the business model or changes in operating performance.  If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, an impairment loss will be recognized, measured as the amount by which the carrying value exceeds the fair value of the asset.  For fiscal year 2016 and 2015, we performed our annual assessment of long-lived assets and determined that no impairment existed as of October 31, 2016 and 2015.

Investments

We account for non-marketable investments using the equity method of accounting if the investment gives us the ability to exercise significant influence over, but not control, an investee.  Significant influence generally exists when we have an ownership interest representing between 20% and 50% of the voting stock of the investee.  Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions. 

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In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and Agricola Don Memo, S.A. de C.V. (Don Memo). Don Memo, a Mexican corporation formed in July 2013, is engaged in the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  Belo and Calavo Sub have an equal one-half ownership interest in Don Memo.  Pursuant to a management service agreement, Belo, through its officers and employees, shall have day-to-day power and authority to manage the operations. In fiscal 2016 and 2015, we contributed $2.3 million and $1.0 million as investments in Don Memo. These investment contributions represent Calavo Sub’s 50% ownership in Don Memo, which is included in investment in unconsolidated entities on our balance sheet. In fiscal 2015 and 2014, we advanced Don Memo $0.8 million and $3.2 million. These monies, totaling $4.0 million, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. We had recorded such loans in prepaids and other current assets. We use the equity method to account for this investment. 

Effective May 2014, we closed our Second Amended and Restated Limited Liability Company Agreement by and among FreshRealm and the ownership members of FreshRealm.  Pursuant to this agreement, Impermanence, LLC (Impermanence) was admitted as an ownership member of FreshRealm.  Impermanence contributed $10.0 million to FreshRealm for 28.6% ownership.  As a result of the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8%.  The minority/non-Calavo unit-holders held substantive participating rights.  These rights existed primarily in two forms:  (1) two out of a total of four board of director seats and (2) a provision in the Agreement that states that for situations for which the approval of the Members, as defined, is required by the Agreement, the Members shall act by Super-Majority Vote.  As such, Calavo could not control FreshRealm through its two board of director seats, nor its 50.8% ownership.  Based on the foregoing, we deconsolidated FreshRealm in May 2014. In the third and fourth quarter of fiscal 2015, FreshRealm issued additional units to various parties, which reduced our ownership percentage to approximately 49% at October 31, 2015. In the fourth quarter of fiscal 2016, FreshRealm completed another round of financing in which Calavo invested $3.2 million.  During that round of financing, FreshRealm issued additional units to various parties, which reduced our ownership percentage further to approximately 46% at October 31, 2016. 

We estimated the fair value of our noncontrolling interest in FreshRealm by performing a fair value measurement.  This analysis was conducted with the consultation from a third party consulting firm.  Our investment of $19.4 million in FreshRealm million has been recorded as investment in unconsolidated subsidiaries on our balance sheet. 

Marketable Securities

Our marketable securities consist of our investment in Limoneira Company (Limoneira) stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are considered available for sale securities based on management’s intent with respect to such securities and are carried at fair value as determined from quoted market prices.  The estimated fair value, cost, and gross unrealized gain related to such investment was $34.0 million, $23.5 million and $10.5 million as of October 31, 2016.  The estimated fair value, cost, and gross unrealized gain related to such investment was $27.4 million, $23.5 million and $4.0 million as of October 31, 2015. 

Advances to Suppliers

We advance funds to third-party growers primarily in Mexico for various farming needs.  Typically, we obtain collateral (i.e. fruit, fixed assets, etc.) that approximates the value at risk, prior to making such advances.  We continuously evaluate the ability of these growers to repay advances in order to evaluate the possible need to record an allowance.  No such allowance was required at October 31, 2016, nor October 31, 2015.

Pursuant to our distribution agreement, which was amended in fiscal 2011, with Agricola Belher (Belher) of Mexico, a producer of fresh vegetables, primarily tomatoes, for export to the U.S. market, Belher agreed, at their sole cost and expense, to harvest, pack, export, ship, and deliver tomatoes exclusively to our company, primarily our Arizona facility.  In exchange, we agreed to sell and distribute such tomatoes, make advances to Belher for operating purposes, provide additional advances as shipments are made during the season (subject to limitations, as defined), and return the proceeds from such tomato sales to Belher, net of our commission and aforementioned advances.  Pursuant to such amended

45

agreement with Belher, we advanced Belher a total of $3.0 million, up from $2.0 million in the original agreement, during fiscal 2011.  Additionally, the amended agreement calls for us to continue to advance $3.0 million per annum for operating purposes through 2019.  These advances will be collected through settlements by the end of each year.  For fiscal 2016, we agreed to advance an additional $1.4 million for preseason advances. As of October 31, 2016 and 2015, we have total advances of $4.4 million and $3.0 million to Belher pursuant to this agreement, which is recorded in advances to suppliers.

Similar to Belher, we make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from such tomato sales to Don Memo, net of our commission and aforementioned advances. As of October 31, 2016 and 2015, we have total advances of $0.9 million and $1.8 million to Don Memo, which is recorded in advances to suppliers.

Infrastructure Advances

Pursuant to our infrastructure agreement, we make advances to be used solely for the acquisition, construction, and installation of improvements to and on certain land owned/controlled by Belher, as well as packing line equipment.  Advances incur interest at 4.7% at October 31, 2016 and 2015.  As of October 31, 2016, we have advanced a total of $0.8 million ($0.2 million included in prepaid expenses and other current assets and $0.6 million included in other long-term assets).  As of October 31, 2015, we have advanced a total of $1.8 million ($1.0 million included in prepaid expenses and other current assets and $0.8 million included in other long-term assets).  Belher is to annually repay these advances in no less than 20% increments through June 2020.  Interest is to be paid monthly or annually, as defined.  Belher may prepay, without penalty, all or any portion of the advances at any time.  In order to secure their obligations pursuant to both agreements discussed above, Belher granted us a first-priority security interest in certain assets, including cash, inventory and fixed assets, as defined.

Accrued Expenses

Included in accrued expenses at October 31, 2016 and 2015 are liabilities related to the receipt of goods and/or services for which an invoice has not yet been received. These totaled approximately $12.4 million and $6.2 million for the year ended October 31, 2016 and 2015. 

Revenue Recognition

Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.  These terms are typically met upon delivery of product to the customer.  Service revenue, including freight, ripening, storage, bagging and palletization charges, is recorded when services are performed and sales of the related products are delivered.

Shipping and Handling

We include shipping and handling fees billed to customers in net revenues.  Amounts incurred by us for freight are included in cost of goods sold.

Promotional Allowances

We provide for promotional allowances at the time of sale, based on our historical experience.  Our estimates are generally based on evaluating the historical relationship between promotional allowances and gross sales.  The derived percentage is then applied to the current period’s sales revenues in order to arrive at the appropriate debit to sales allowances for the period.  The offsetting credit is made to accrued expenses.  When certain amounts of specific customer accounts are subsequently identified as promotional, they are written off against this allowance.  Actual amounts may differ from these estimates and such differences are recognized as an adjustment to net sales in the period they are identified.

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Allowance for Accounts Receivable

We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.

Consignment Arrangements

We frequently enter into consignment arrangements with pineapple and tomato growers and packers located outside of the United States and growers of certain perishable products in the United States. Although we generally do not take legal title to these avocados and perishable products, we do assume responsibilities (principally assuming credit risk, inventory loss and delivery risk, and pricing risk) that are consistent with acting as a principal in the transaction.  Accordingly, the accompanying financial statements include sales and cost of sales from the sale of avocados and perishable products procured under consignment arrangements.  Amounts recorded for each of the fiscal years ended October 31, 2016, 2015 and 2014 in the financial statements pursuant to consignment arrangements are as follows (in thousands):

	2016		2015		2014
Sales	$	34,919	$	28,139	$	30,721
Cost of Sales		30,729		25,177		27,759
Gross Margin	$	4,190	$	2,962	$	2,962

Advertising Expense

Advertising costs are expensed when incurred and are generally included as a component of selling, general and administrative expense. Such costs were approximately $0.2 million for fiscal years 2016, 2015, and 2014.  

Research and Development

Research and development costs are expensed as incurred and are generally included as a component of selling, general and administrative expense. FreshRealm, a development stage company, comprised the majority of our research and development costs in 2014. Total research and development costs for fiscal years 2016 and 2015 were less than $0.1 million.  Total research and development costs for fiscal years 2014, were approximately $0.8 million. 

Other Income, Net

Included in other income, net is dividend income totaling $0.6 million for fiscal year 2016.  Dividend income totaled $0.5 million for fiscal years 2015 and 2014.  See Note 9 for related party disclosure related to other income.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.  Among the significant estimates affecting the financial statements are those related to valuation allowances for accounts receivable, goodwill, grower advances, inventories, long-lived assets, valuation of and estimated useful lives of identifiable intangible assets, stock-based compensation, promotional allowances and income taxes.  On an ongoing basis, management reviews its estimates based upon currently available information.  Actual results could differ materially from those estimates.

Income Taxes

We account for deferred tax liabilities and assets for the future consequences of events that have been recognized in our consolidated financial statements or tax returns.  Measurement of the deferred items is based on enacted tax laws.  In the event the future consequences of differences between financial reporting bases and tax bases of our assets and

47

liabilities result in a deferred tax asset, we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset.  A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.  If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies.  Conversely, we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.  Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.  Therefore, the actual liability for U.S. or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Basic and Diluted Net Income per Share

Basic earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock options and contingent consideration.  Diluted earnings per common share is calculated using the weighted-average number of common shares outstanding during the period after consideration of the dilutive effect of stock options and the effect of contingent consideration shares.

Basic and diluted net income per share is calculated as follows (U.S. dollars in thousands, except share and per share data):

	Year ended  October 31,
	2016		2015		2014
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	38,022	$	27,199	$	97
Denominator:
Weighted average shares - Basic		17,347,121		17,295,305		15,765,102
Effect on dilutive securities – Restricted stock/options		83,560		67,731		1,455,000
Weighted average shares - Diluted		17,430,681		17,363,036		17,220,102
Net income per share attributable to Calavo Growers, Inc:
Basic	$	2.19	$	1.57	$	0.01
Diluted	$	2.18	$	1.57	$	0.01

Stock-Based Compensation

We account for awards of equity instruments issued to employees under the fair value method of accounting and recognize such amounts in our statements of operations.  We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. 

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For the years ended October 31, 2016, 2015 and 2014, we recognized compensation expense of $2,134,000, $2,108,000, and $727,000 related to non-acquisition stock-based compensation.  The value of the stock-based compensation was determined from quoted market prices at the date of the grant.

Foreign Currency Translation and Remeasurement

Our foreign operations are subject to exchange rate fluctuations and foreign currency transaction costs.  The functional currency of our foreign subsidiaries is the United States dollar.  As a result, monetary assets and liabilities are translated into U.S. dollars at exchange rates as of the balance sheet date and non-monetary assets, liabilities and equity are translated at historical rates.  Sales and expenses are translated using a weighted-average exchange rate for the period.  Gains and losses resulting from those remeasurements are included in income.  Gains and losses resulting from foreign currency transactions are also recognized currently in income. Total foreign currency losses for fiscal 2016, 2015 and 2014, net of gains, were $1.1 million, $1.8 million, and $0.1 million.

Fair Value of Financial Instruments

We believe that the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings approximates fair value based on either their short-term nature or on terms currently available to the Company in financial markets.  Due to current market rates, we believe that our fixed-rate long-term obligations have the same fair value and carrying value  of approximately $0.6 million as of October 31, 2016.

Deferred Rent

As part of certain lease agreements, we receive construction allowances from our landlords.  The construction allowances are deferred and amortized on a straight-line basis over the life of the lease as a reduction to rent expense. 

Derivative Financial Instruments

We were not a party to any material derivative instruments during the fiscal year.  It is currently our intent not to use derivative instruments for speculative or trading purposes. Additionally, we do not use any hedging or forward contracts to offset market volatility. 

Recently Adopted Accounting Pronouncements

In November 2015, the FASB issued an ASU, which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to

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supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

    In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are evaluating the impact of the adoption of this amended accounting standard on our financial condition, result of operations and cash flows, but we do not expect the adoption of this accounting standard to have a significant effect.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as all changes in a company's net assets, except changes resulting from transactions with shareholders.  For the fiscal year ended October 31, 2016, other comprehensive income includes the unrealized gain on our Limoneira investment totaling $4.1 million, net of income taxes.  Limoneira’s stock price at October 31, 2016 equaled $19.69 per share.  For the fiscal year ended October 31, 2015, other comprehensive income includes the unrealized loss on our Limoneira investment totaling $10.3 million, net of income taxes.  Limoneira’s stock price at October 31, 2015 equaled $15.86 per share.  For the fiscal year ended October 31, 2014, other comprehensive loss includes the unrealized loss on our Limoneira investment totaling $0.7 million, net of income taxes.  Limoneira’s stock price at October 31, 2014 equaled $25.66 per share. 

Noncontrolling Interest

The following tables reconcile shareholders’ equity attributable to noncontrolling interest related to the Salsa Lisa acquisition, and Avocados de Jalisco (in thousands). 

	Year ended		Year ended
Salsa Lisa noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Accretion attributable to noncontrolling interest of Salsa Lisa		486		15
Noncontrolling interest, ending	$	771	$	285

The noncontrolling interest for Salsa Lisa is recorded at the greater of the noncontrolling interest balance adjusted for the attribution of loss or the amount redeemable pursuant to the acquisition agreement. For fiscal 2016, we recorded an

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adjustment of $486,000 to increase the noncontrolling interest balance to the expected redeemable amount of $771,000. This adjustment has been included in net (income) loss attributed to noncontrolling interest.

	Year ended		Year ended
Avocados de Jalisco noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Noncontrolling interest contribution		—		1,011
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(49)		—
Noncontrolling interest, ending	$	962	$	1,011

3.    Inventories

Inventories consist of the following (in thousands):

	October 31,
	2016		2015
Fresh fruit	$	17,126	$	11,939
Packing supplies and ingredients		7,605		6,347
Finished prepared foods		7,118		8,065
	$	31,849	$	26,351

We assess the recoverability of inventories through an ongoing review of inventory levels in relation to sales and forecasts and product marketing plans.  When the inventory on hand, at the time of the review, exceeds the foreseeable demand, the value of inventory that is not expected to be sold is written down.  The amount of the write-down is the excess of historical cost over estimated realizable value (generally zero).  Once established, these write-downs are considered permanent adjustments to the cost basis of the excess inventory.

The assessment of the recoverability of inventories and the amounts of any write-downs are based on currently available information and assumptions about future demand and market conditions.  Demand for processed avocado products may fluctuate significantly over time, and actual demand and market conditions may be more or less favorable than our projections.  In the event that actual demand is lower than originally projected, additional inventory write-downs may be required.

We recorded an adjustment of $1.1 million to adjust our fresh fruit inventory to the lower of cost or market as of October 31, 2016. We did not record any lower of cost or market adjustments during fiscal year 2015.

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4.     Property, Plant, and Equipment

Property, plant, and equipment consist of the following (in thousands):

	October 31,
	2016		2015
Land	$	7,023	$	7,023
Buildings and improvements		22,480		22,497
Leasehold improvements		8,918		4,810
Equipment		66,109		59,391
Information systems - hardware and software		8,089		7,839
Construction in progress		25,456		12,305
		138,075		113,865
Less accumulated depreciation and amortization		(50,238)		(44,417)
	$	87,837	$	69,448

Depreciation expense was $7.3 million, $6.4 million and $5.3 million for fiscal years 2016, 2015, and 2014, of which $0.5 million was related to depreciation on capital leases for fiscal year 2016, 2015, and 2014. 

Property, plant, and equipment include various capital leases which total $3.2 million and $3.3 million, less accumulated depreciation of $2.5 million and $2.1 million as of October 31, 2016 and 2015.

The increase in construction in progress from $12.3 million as of October 31, 2015, to $25.5 million as of October 31, 2016, is due to leasehold improvements to the facility in Jacksonville, Florida, and leasehold improvements to the facility in Houston, Texas.

5.     Other Assets

Other assets consist of the following (in thousands):

	October 31,		October 31,
	2016		2015
Intangibles, net	$	3,365	$	4,613
Mexican IVA (i.e. value-added) taxes receivable		6,962		5,853
Grower advances		49		346
Infrastructure advance to Agricola Belher		600		800
Loan to FreshRealm members		318		307
Notes receivable from San Rafael		928		1,286
Other		1,027		796
	$	13,249	$	14,001

The intangible assets consist of the following (in thousands):

		October 31, 2016						October 31, 2015
	Weighted-	Gross				Net		Gross				Net
	Average	Carrying		Accum.		Book		Carrying		Accum.		Book
	Useful Life	Value		Amortization		Value		Value		Amortization		Value
Customer list/relationships	8.0 years	$	7,640	$	(5,241)	$	2,399	$	7,640	$	(4,282)	$	3,358
Trade names	8.2 years		2,760		(2,380)		380		2,760		(2,164)		596
Trade secrets/recipes	9.3 years		630		(319)		311		630		(270)		360
Brand name intangibles	indefinite		275		—		275		275		—		275
Non-competition agreements	5.0 years		267		(267)		—		267		(243)		24

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Intangibles, net $ 11,572 $ (8,207) $ 3,365 $ 11,572 $ (6,959) $ 4,613

We recorded amortization expense of approximately $1.5 million, $1.6 million, and $1.3 million for fiscal years 2016, 2015, and 2014.  We anticipate recording amortization expense of approximately $1.1 million, $1.1 million, $0.7 million, $0.1 million, and $0.1 million for fiscal years 2017 through 2021.  The remainder of approximately $0.1 million will be amortized over fiscal years 2021 through 2023. 

6.     Revolving Credit Facilities

    In June 2016, we entered into a new Credit Agreement with Bank of America, N.A. (“Bank of America”) as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West (“FCW”), as joint lead arranger. The Credit Agreement provides for a five-year, $80 million syndicated senior unsecured revolving credit facility maturing on June 14, 2021(the”Credit Facility”), which replaces the Company’s prior revolving credit facilities, which were scheduled to expire on July 1, 2016.

    Provided there exists no default, upon notice to Bank of America, the Company may from time to time, request an increase in the Credit Facility by an amount not exceeding $50 million (the “Accordion”). Any future exercises of the Accordion would require additional commitments from existing or new lenders.

    Borrowings under the Credit Facility will be at the Company’s discretion either at a Eurodollar Rate (“LIBOR”) loan plus applicable margin or a base rate loan plus applicable margin. The applicable margin will be based on the Company’s Consolidated Leverage Ratio and can range from 1.00% to 1.50% for LIBOR loans and 0.00% to 0.50% for Base Rate Loans. The Credit Facility also includes a commitment fee on the unused commitment amount at a rate per annum of 0.15%.

   The Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. We were in compliance with all such covenants at October 31, 2016. 

      The Credit Facility also contains customary events of default. If any event of default occurs and is continuing, Bank of America may take the following actions: (a) declare the commitment of each lender to make loans and any obligation of the Issuer to make credit extensions to be terminated; (b) declare the unpaid principal amount of all outstanding loans, all interest, and all other amounts to be immediately due and payable; (c) require that Calavo cash collateralize the obligations; and (d) exercise on behalf of itself, the lenders and the Issuer all rights and remedies available to it.

7.     Employee Benefit Plans

We sponsor five defined contribution retirement plans for salaried and hourly employees.  Expenses for these plans approximated $984,000, $922,000, and $943,000 for fiscal years 2016, 2015 and 2014, which are included in selling, general and administrative expenses in the accompanying financial statements.

We also sponsor a non-qualified defined benefit plan for two retired executives.  Pension expenses, including actuarial losses, approximated $8,000, $10,000 and $9,000 for the year ended October 31, 2016, 2015, and 2014.  These amounts are included in selling, general and administrative expenses in the accompanying financial statements.

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Components of the change in projected benefit obligation for fiscal year ends consist of the following (in thousands):

	2016		2015
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	215	$	196
Interest cost		8		7
Actuarial loss		9		48
Benefits paid		(37)		(36)
Projected benefit obligation at end of year (unfunded)	$	195	$	215

The following is a reconciliation of the unfunded status of the plans at fiscal year ends included in accrued expenses (in thousands):

	2016		2015
Projected benefit obligation	$	195	$	215
Unrecognized net (gain) loss		-		-
Recorded pension liabilities	$	195	$	215

Significant assumptions used in the determination of pension expense consist of the following:

	2016		2015
Discount rate on projected benefit obligation	3.7	%	4.3	%

8.     Commitments and Contingencies

Commitments and guarantees

We lease facilities and certain equipment under non-cancelable operating leases expiring at various dates through 2031. We are committed to make minimum cash payments under these agreements as of October 31, 2016, as follows (in thousands):

2017	$	5,268
2018		5,305
2019		5,140
2020		4,644
2021		4,278
Thereafter		33,571
	$	58,206

Total rent expense amounted to approximately $5.8 million, $4.4 million and $3.8 million for the years ended October 31, 2016, 2015, and 2014.  Rent to Limoneira, for our corporate office, amounted to approximately $0.3 million for fiscal years 2016, 2015, and 2014.  In fiscal 2014, we renewed our lease with Limoneira for our corporate facility through fiscal 2020 at an annual rental of $0.3 million per annum (subject to annual CPI increases, as defined). 

In fiscal 2016, we renewed the lease of our facility in Houston Texas through fiscal 2021 at an annual rental of $0.7 million per annum (subject to annual CPI increases, as defined).

In July 2015, we entered into a Lease Agreement with Green Cove, LLC to lease an operating facility in Jacksonville Florida. The facility is approximately 200,000 square feet and is expected to be a value-added distribution center for all operating segments.  We took possession of the property in August 2015 and are in the process of making improvements to this facility.  The lease began in November 2015 and is scheduled to terminate in October 2031.

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In fiscal 2014, we renewed the lease of our distribution facility in Garland Texas through fiscal 2029 at an annual rental of $0.8 million per annum (subject to annual CPI increases, as defined).

In fiscal 2014, we had two lease renewals for our RFG facilities in California, one being the corporate office of RFG in Rancho Cordova, and the other being a fresh processing facility in Sacramento.  The RFG corporate office in Rancho Cordova has an operating lease through June 2018.  Total rent for fiscal 2016, 2015, and 2014 was approximately $0.4 million.  The processing facility in Sacramento has an operating lease through May 2021(subject to annual CPI increases, as defined).  Total rent for fiscal 2016, 2015, and 2014 was approximately $0.5 million.

Effective January 28, 2016, Calavo Growers, Inc. and Bank of America, N.A. (“BoA”), entered into a Continuing and Unconditional Guaranty agreement (the “Guaranty”). Under the terms of the Guaranty, the Company unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Agricola Don Memo, S.A. de C.V. (“Don Memo”) to BoA. Grupo Belo del Pacifico, S.A. de C.V. has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed on January 28, 2016. On January 29, 2016, Don Memo, used the proceeds from the new BoA loan to repay $4.0 million due the Company.

We indemnify our directors and have the power to indemnify each of our officers, employees and other agents, to the maximum extent permitted by applicable law.  The maximum amount of potential future payments under such indemnifications is not determinable.  No amounts have been accrued in the accompanying financial statements related to these indemnifications.

Litigation

From time to time, we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

Mexico tax audits

    We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions.  Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States.  During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (“CDM”), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (“MFM”) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary.  MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (“VAT”).  During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations   and requested the adoption of a conclusive agreement before the PRODECON (Local Tax Ombudsman) so that a full discussion of the case between us, the MFM and the PRODECON can occur and so that, as appropriate, the MFM can reconsider their findings.  Note that until such discussion occurs, the normal period during which the MFM would issue its final assessment (previously expected no later February 2017) has been suspended.  Though a formal meeting date has not yet been determined, the discussion between us, the MFM and the PRODECON is expected to start in calendar 2017.

    Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico, is currently under examination related to fiscal year 2013.  Under Mexican law, the SAT has until approximately March 2017 to complete their review.   In conjunction with their examination, the SAT has requested information though no formal findings have yet been received.

    We believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position.

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9.     Related-Party Transactions

Certain members of our Board of Directors market avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers.  During the years ended October 31, 2016, 2015, and 2014, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $25.5 million, $16.4 million and $10.5 million.  We did not have any amounts due to Board members as of October 31, 2016 and 2015.

During fiscal years 2016, 2015, and 2014, we received $0.3 million as dividend income from Limoneira.  In addition, we lease office space from Limoneira for our corporate office.  Rent to Limoneira amounted to approximately $0.3 million for fiscal years 2016, 2015, and 2014.  Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. We have a 12% ownership interest in Limoneira.  Additionally, our Chief Executive Officer is a member of the Limoneira Board of Directors.

We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During the years ended October 31, 2016, 2015, and 2014, Calavo Growers, Inc. paid fees totaling approximately $0.2 million, $0.2 million and $0.1 million to TroyGould PC. 

During the 3rd and 4th quarters of fiscal 2015, in conjunction with another round of financing for FreshRealm, LLC (FreshRealm), we invested $0.8 million. Additionally, two officers of Calavo contributed $1.8 million, in exchange for a 2.8% ownership interest, and three board of director members contributed $0.3 million in exchange for a 0.44% ownership interest. RFG is a supplier for FreshRealm.  Based on the total number of shares issued, our ownership interest in FreshRealm decreased from approximately 50% to approximately 49%.  During the 4th quarter of fiscal 2016, FreshRealm had another round of financing, which we invested $3.2 million.  Based on the total number of LLC units issued, our ownership interest in FreshRealm decreased from approximately 49% to approximately 46%.  In fiscal 2016, 2015 and 2014, we had sales of $1.1 million, $0.5 million and $0.2 million to FreshRealm.

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and Agricola Don Memo, S.A. de C.V. (Don Memo). Don Memo, a Mexican corporation formed in July 2013, is engaged in the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  Belo and Calavo Sub have an equal one-half ownership interest in Don Memo.  Pursuant to a management service agreement, Belo, through its officers and employees, shall have day-to-day power and authority to manage the operations. Belo is entitled to a management fee equal to 20% of the earnings before interest and taxes (EBIT), as defined, which is payable annually in July of each year. Additionally, Calavo Sub is entitled to a 12% commission, calculated in U.S. dollars, for the sale of produce in the Mexican National Market, United States, Canada, and any other overseas market. In fiscal 2016 and 2015, we contributed $2.3 million and $1.0 million as investments in Don Memo, respectively. These investment contributions represent Calavo Sub’s 50% ownership in Don Memo, which is included in investment in unconsolidated entities on our balance sheet. In fiscal 2015 and 2014, we advanced $0.8 million and $3.2 million. These monies totaling $4.0, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. We had recorded such loans in prepaids and other current assets. We use the equity method to account for this investment.  As of October 31, 2016 and 2015, we have total advances of $0.9 million and $1.8 million to Don Memo, which is recorded in advances to suppliers. During the year ended October 31, 2016 and 2015, we incurred $4.8 million and $2.3 million of expenses to Don Memo pursuant to our consignment agreement.

Effective January 28, 2016, Calavo Growers, Inc. and BoA, entered into a Continuing and Unconditional Guaranty agreement (the “Guaranty”). Under the terms of the Guaranty, the Company unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Agricola Don Memo, S.A. de C.V. (“Don Memo”) to BoA. Grupo Belo del Pacifico, S.A. de C.V. has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed on January 28, 2016. On January 29, 2016, Don Memo, used the proceeds from the new BoA loan to repay $4.0 million due the Company.

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We had grower advances due from Belher of $4.4 million and $3.0 million as of October 31, 2016 and 2015.  In addition, we had infrastructure advances due from Belher of $0.8 million and $1.8 million as of October 31, 2016 and 2015.  Of these infrastructure advances $0.2 million was recorded as receivable in prepaid and other current assets and $0.6 million is included in other assets. During the year ended October 31, 2016, 2015 and 2014, we purchased $26.0 million, $14.2 million, and $17.4 million of tomatoes from Belher pursuant to our consignment agreement.

In August 2015, we entered into Shareholder’s Agreement with various partners which created Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”).  Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados in Jalisco Mexico.  This entity is approximately 80% owned by Calavo and was consolidated as of October 31, 2015.  In the third fiscal quarter of 2016, Avocados de Jalisco completed the construction of a packinghouse located in Jalisco, Mexico; such packinghouse is expected to be operational in the first quarter of 2017. As of October 31, 2016 and 2015, we have made preseason advances of approximately $0.3 million to various partners of Avocados de Jalisco.

The three previous owners and current executives of RFG have a majority ownership of certain entities that provide various services to RFG.  RFG’s California operating facility leases a building from LIG partners, LLC (LIG) pursuant to an operating lease.  RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease.  Additionally, RFG sells cut produce and purchases raw materials, obtains transportation services, and shares costs for certain utilities with Third Coast Fresh Distribution (Third Coast).  LIG, THNC and Third Coast are majority owned by entities owned by three employees of Calavo (former/current executives of RFG). See the following tables for the related party activity and balances for fiscal year 2016 and 2015:

	Year ended October 31,
(in thousands)	2016		2015
Rent paid to LIG	$	529	$	522
Rent paid to THNC, LLC	$	342	$	304
Sales to Third Coast	$	-	$	270
Purchases from Third Coast	$	-	$	195

10.     Income Taxes

The income tax provision (benefit) consists of the following for the years ended October 31, (in thousands):

	2016		2015		2014
Current:
Federal	$	17,244	$	10,150	$	7,379
State		2,040		1,650		939
Foreign		982		1,110		842
Total current		20,266		12,910		9,160
Deferred:
Federal		1,863		3,314		(10,392)
State		533		98		(2,870)
Foreign		(793)		(229)		186
Total deferred		1,603		3,183		(13,076)
Total income tax provision (benefit)	$	21,869	$	16,093	$	(3,916)

At October 31, 2016 and 2015, gross deferred tax assets totaled approximately $33.9 million and $36.1 million, while gross deferred tax liabilities totaled approximately $18.9 million and $17.0 million.  Deferred income taxes reflect the net of temporary differences between the carrying amount of assets and liabilities for financial reporting and income tax purposes.

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Significant components of our deferred taxes assets (liabilities) as of October 31, are as follows (in thousands):

	2016		2015
Property, plant, and equipment		(6,901)		(6,877)
Intangible assets		27,686		31,432
Unrealized gain, Limoneira investment		(4,048)		(1,553)
Investment in FreshRealm		(6,902)		(7,024)
Stock-based compensation		952		556
State taxes		(931)		(1,358)
Credits and incentives		2,070		2,044
Allowance for accounts receivable		875		662
Inventories		395		495
Accrued liabilities		1,912		885
Other		(164)		(219)
Long-term deferred income taxes	$	14,944	$	19,043

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income for the years ended October 31, is as follows:

	2016		2015		2014
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal effects	2.9		3.0		22.3
Foreign income taxes greater than U.S.	0.7		0.7		5.8
Section 199 deduction	(1.7)		(0.8)		15.8
Tax Credits	—		—		15.2
Other	(0.6)		(0.7)		0.7
	36.3	%	37.2	%	94.8	%

We intend to reinvest our accumulated foreign earnings, which approximated $15.5 million at October 31, 2016, indefinitely.  As a result, we have not provided any deferred income taxes on such unremitted earnings. 

For fiscal years 2016, 2015 and 2014, income (loss) before income taxes related to domestic operations was approximately $61.0 million, $41.5 million, and $(0.6) million.  For fiscal years 2016, 2015 and 2014, income (loss) before income taxes related to foreign operations was approximately $(0.6) million, $1.8 million and $3.6 million. 

As of October 31, 2016, we had liability of $0.4 million for unrecognized tax benefits related to various foreign income tax matters. As of October 31, 2015, we did not have a liability for unrecognized tax benefits related to various federal and state income tax matters.

In fiscal 2014, the benefit for income taxes of $3.9 million is attributable to the revaluation adjustment of $88.1 million related to contingent consideration which was spread between fiscal year 2014 through fiscal year 2011. The revalued contingent consideration and non-cash compensation expense resulted in $53.6 million additional GAAP expense recorded in fiscal years 2014.  In fiscal 2014, the revaluation expense drove pre-tax book income into a loss position, thus causing a benefit for income taxes as this revaluation adjustment is capitalized and amortized as goodwill over the remaining useful life for income tax purposes resulting in a taxable income position for the current year. 

We are subject to U.S. federal income tax as well as income of multiple state tax jurisdictions.  We are no longer subject to U.S. income tax examinations for the fiscal years prior to October 31, 2013, and are no longer subject to state income tax examinations for fiscal years prior to October 31, 2012.

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11.     Segment Information

As discussed in Note 1, we report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG.  These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources.  The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole, and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and deli products.  Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate.  We do not allocate assets, or specifically identify them to, our operating segments.

The following table sets forth sales by product category, by segment (in thousands):

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Year ended October 31, 2016
Net sales	$	538,687	$	63,494	$	333,498	$	935,679
Cost of sales		480,690		41,046		306,409		828,145
Gross margin	$	57,997	$	22,448	$	27,089	$	107,534
Year ended October 31, 2015
Net sales	$	500,711	$	62,156	$	293,957	$	856,824
Cost of sales		463,647		41,645		266,305		771,597
Gross margin	$	37,064	$	20,511	$	27,652	$	85,227
Year ended October 31, 2014
Net sales	$	470,949	$	59,279	$	252,282	$	782,510
Cost of sales		434,820		46,269		230,193		711,282
Gross margin	$	36,129	$	13,010	$	22,089	$	71,228

     For fiscal year 2016, 2015 and 2014, inter-segment sales and cost of sales of $4.3 million, $1.5 million and $2.2 million between Fresh products and RFG were eliminated. For fiscal year 2016, 2015 and 2014, inter-segment sales and cost of sales of $2.7 million, $1.9 million and $1.7 million between Calavo Foods and RFG were eliminated.

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The following table sets forth sales by product category, by segment (in thousands):

	Year Ended October 31, 2016								Year Ended October 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	493,440	$	—	$	—	$	493,440	$	471,178	$	—	$	—	$	471,178
Tomatoes		35,981		—		—		35,981		18,681		—		—		18,681
Papayas		9,514		—		—		9,514		9,485		—		—		9,485
Pineapples		1,060		—		—		1,060		2,397		—		—		2,397
Other fresh products		536		—		—		536		442		—		—		442
Food service		—		50,716		—		50,716		—		49,212		—		49,212
Retail and club		—		23,216		336,989		360,205		—		22,736		296,697		319,433
Total gross sales		540,531		73,932		336,989		951,452		502,183		71,948		296,697		870,828
Less sales incentives		(1,844)		(10,438)		(3,491)		(15,773)		(1,472)		(9,792)		(2,740)		(14,004)
Net sales	$	538,687	$	63,494	$	333,498	$	935,679	$	500,711	$	62,156	$	293,957	$	856,824

	Year Ended October 31, 2015								Year Ended October 31, 2014
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	471,178	$	—	$	—	$	471,178	$	433,581	$	—	$	—	$	433,581
Tomatoes		18,681		—		—		18,681		19,705		—		—		19,705
Papayas		9,485		—		—		9,485		12,619		—		—		12,619
Pineapples		2,397		—		—		2,397		5,086		—		—		5,086
Other fresh products		442		—		—		442		1,037		—		—		1,037
Food service		—		49,212		—		49,212		—		48,085		—		48,085
Retail and club		—		22,736		296,697		319,433		—		22,334		255,074		277,408
Total gross sales		502,183		71,948		296,697		870,828		472,028		70,419		255,074		797,521
Less sales incentives		(1,472)		(9,792)		(2,740)		(14,004)		(1,079)		(11,140)		(2,792)		(15,011)
Net sales	$	500,711	$	62,156	$	293,957	$	856,824	$	470,949	$	59,279	$	252,282	$	782,510

Sales to customers outside the United States were approximately $25.4 million, $26.7 million and $32.8 million for fiscal years 2016, 2015, and 2014.

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Long-lived assets attributed to geographic areas as of October 31, are as follows (in thousands):

	United States		Mexico		Consolidated
2016	$	55,715	$	32,122	$	87,837
2015	$	37,573	$	31,875	$	69,448

12.     Long-Term Obligations

Long-term obligations at fiscal year ends consist of the following (in thousands):

	2016		2015
Farm Credit West, PCA, (FCW) term loan	$	—	$	1,002
Bank of America, N.A. (BoA) term loan		—		1,019
Capital leases		583		771
		583		2,792
Less current portion		(138)		(2,206)
	$	445	$	586

The Company and FCW entered into a Term Loan Agreement (Term Agreement) in connection with the RFG acquisition, effective May 31, 2011. Under the terms of the Term Agreement, we were advanced $15 million for the purchase of RFG.  Pursuant to this agreement, we were required to make 60 monthly principal and interest payments, from July 1, 2011 to June 1, 2016. In fiscal 2016, this term loan was repaid in full.

Effective September 30, 2011, the Company and BoA, entered into an agreement, Amendment No. 4 to Loan Agreement (the Agreement), which amended our existing credit facility with BoA.  This agreement included a variable rate term loan in the amount of approximately $7.1 million. These proceeds were used to retire approximately 50% of the outstanding balance (as of September 30, 2011) of the term loan owed to FCW related to the purchase of RFG (see above). In fiscal 2016, this term loan was repaid in full.

Effective January 28, 2016, Calavo Growers, Inc. and BoA, entered into a Continuing and Unconditional Guaranty agreement (the “Guaranty”). Under the terms of the Guaranty, the Company unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Agricola Don Memo, S.A. de C.V. (“Don Memo”) to BoA. Grupo Belo del Pacifico, S.A. de C.V. has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed on January 28, 2016. On January 29, 2016, Don Memo, used the proceeds from the new BoA loan to repay $4.0 million due the Company.

At October 31, 2016, capital lease payments are scheduled as follows (in thousands):

	Total
Year ending October 31:
2017	$	162
2018		118
2019		104
2020		103
2021		99
Thereafter		76
Minimum lease payments		662
Less interest		(79)
Present value of future minimum lease payments	$	583

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13.     Stock-Based Compensation

The 2005 Stock Incentive Plan

The 2005 Stock Incentive Plan, was a stock-based compensation plan, under which employees and directors may be granted options to purchase shares of our common stock.  In June 2012, this plan has been terminated without affecting the outstanding stock options related to this plan.

Stock options were granted with exercise prices of not less than the fair market value at grant date, generally vested over one to five years and generally expired two to five years after the grant date.  We settle stock option exercises with newly issued shares of common stock.

We measured compensation cost for all stock-based awards pursuant to this plan at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest.  We measured the fair value of our stock based compensation awards on the date of grant.

A summary of stock option activity is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Exercise Price		Intrinsic Value
Outstanding at October 31, 2015	10	$	18.28
Exercised	(2)	$	19.20
Outstanding at October 31, 2016	8	$	18.05	$	474
Exercisable at October 31, 2016	8	$	18.05	$	474

The weighted average remaining life of such outstanding options is 2.5 years and the total intrinsic value of options exercised during fiscal 2016 was $0.1 million.  The weighted average remaining life of such exercisable options is 2.5 years.  The fair value of shares vested during the year ended October 31, 2016, 2015, and 2014 was approximately $0.5 million, $0.5 million, and $0.8 million.

The 2011 Management Incentive Plan

In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the 2011 Plan).  All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan.  Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan.

In January 2014, all 12 of our non-employee directors were each granted 1,750 restricted shares (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $32.49.  This grant of restricted stock incurred $0.2 million and $0.5 million in stock compensation expenses in fiscal 2015 and 2014, respectively.  As of January 1, 2015, all shares have vested.

In January 2014, our executive officers were granted a total of 10,774 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $30.50.  These shares vest in one-third increments, on an annual basis, beginning January 1, 2015. This grant of restricted stock incurred $0.1 million in stock compensation expenses in fiscal 2016, 2015 and 2014. 

In January 2015, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $40.39.  On January 1, 2016, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable.  The total recognized stock-based compensation expense for these grants was $0.7 million for fiscal 2015. 

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On February 6, 2015, our executive officers were granted a total of 55,394 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $40.17.  These shares vest in one-third increments, on an annual basis, beginning January 8, 2016. These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.5 million for fiscal 2015.  On June 15, 2015, our Chief Operating Officer/Chief Financial Officer retired from Calavo.  His unvested portion of restricted stock of 12,322 shares issued in February of 2015 and January of 2014 was forfeited. As part of his retirement on June 1st 2015, he was granted 12,322 shares of unrestricted stock.  The closing price of our stock on such date was $49.95. We recorded for this grant $0.6 million of stock-based compensation expense for fiscal years 2016 and 2015.

On January 4, 2016, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.46.  On January 3, 2017, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable.  These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.8 million for the year ended October 31, 2016. 

On January 8, 2016, our executive officers were granted a total of 24,582 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.68.  These shares vest in one-third increments, on an annual basis, beginning January 8, 2017. These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.3 million for the year ended October 31, 2016. 

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A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Grant Price		Intrinsic Value
Outstanding at October 31, 2015	72	$	39.01
Vested	(39)	$	39.5
Granted	51	$	48.58
Outstanding at October 31, 2016	84	$	44.76	$	4,981

The total recognized stock-based compensation expense for restricted stock was $2.1 million for the year ended October 31, 2016. 

A  summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2015	14	$	23.00
Exercised	(3)	$	21.80
Outstanding at October 31, 2016	11	$	23.33	$	395
Exercisable at October 31, 2016	7	$	20.13	$	274

The weighted average remaining life of such outstanding options is 4.3 years.  The weighted average remaining life of such exercisable options is 2.8 years.  The fair value of shares vested during the year ended October 31, 2016, was $0.3 million.

14.     Dividends

On September 27, 2016, the Company declared a $0.90 per share cash dividend to shareholders of record on November 17, 2016.  On December 8, 2016, the Company paid this cash dividend which totaled $15.7 million. On December 8, 2015, the Company paid a $0.80 per share dividend in the aggregate amount of $13.9 million to shareholders of record on November 17, 2015. 

15.    Fair Value Measurements

A fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability.  A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table sets forth our financial assets and liabilities as of October 31, 2016 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	34,036		-		-	$	34,036
Total assets at fair value	$	34,036	$	-	$	-	$	34,036

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(1)The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are measured at fair value by quoted market prices.  Limoneira’s stock price at October 31, 2016 and October 31, 2015 equaled $19.69 per share and $15.86 per share.  Unrealized gains and losses are recognized through other comprehensive income.  Unrealized investment holding gains arising during the year ended October 31, 2016 was $6.6 million.  Unrealized investment holding losses arising during the year ended October 31, 2015 and 2014 was $16.9 million and $1.2 million. 

16.     Mexican IVA taxes receivable

Included in prepaids & other current assets and other assets are tax receivables due from the Mexican government for value-added taxes (IVA) paid in advance.  CDM is charged IVA by vendors on certain expenditures in Mexico, which, insofar as they relate to the exportation of goods, translate into IVA amounts receivable from the Mexican government.

As of October 31, 2016 and 2015, IVA receivables totaled $15.4 million and $11.6 million.  Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.  Beginning in fiscal 2014 and continuing into fiscal 2016, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation.  Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations.  We believe these factors and others have contributed to delays in the processing of IVA claims by the Mexican tax authorities.  Currently, we are in the process of collecting such balances through regular administrative processes, but certain amounts may ultimately need to be recovered via legal means.  We believe that our operations in Mexico are properly documented and that the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts.  We will continue to monitor the collection of these receivables with our outside consultants.

As of October 31, 2016, $8.4 million and $7.0 million of IVA were recorded in prepaids & other current assets and other assets.  As of October 31, 2015, $5.7 million and $5.9 million of IVA receivables were recorded in prepaids & other current assets and other assets.

17.     Subsequent Events

Riverside Facility -On November 1, 2016, we acquired certain real property, consisting of land, a refrigerated building and select production and office equipment located at 1730 Eastridge Avenue, Riverside, California (collectively, the “Property”) from Fresh Foods, LLC (the “Seller”) for total consideration of approximately $19.4 million.

RFG intends to operate the refrigerated facility as part of its network of USDA and organic certified fresh food facilities. On November 3, 2016 the Company issued a press release discussing the completed purchase of the Property.

The acquisition of the Property was effected in connection with a potential reverse exchange pursuant to Section 1031 of the Internal Revenue Code.

Temecula Facility - On December 21, 2016, we entered into an agreement (the “Agreement”) with Pac West Group Inc., a Delaware limited liability company (the “Buyer”), pursuant to which the Company will sell to the Buyer certain real property located at 28410 Vincent Moraga Drive, Temecula, California (collectively, the “Temecula Property”).

   The Agreement contains customary representations and warranties, covenants, closing conditions and termination provisions and contemplates a buyer due diligence period that would lead to a closing date on or before March 8, 2017.  Subject to satisfactory completion of the Buyer’s due diligence, the purchase price for the Temecula Property will be approximately $6.6 million.

   The proceeds from this transaction are currently expected to be used in conjunction with the recently completed acquisition of 1730 Eastridge Avenue, Riverside, California, to complete a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code.

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    Maui Note - On November 30, 2016, we entered into an Amendment to the Goodwill Promissory Note (the “Amended Note”) with San Rafael Distributing, Inc., an Arizona corporation (“San Rafael”), pursuant to which the Company has agreed to amend the Goodwill Promissory Note (the “Note”) dated as of October 31, 2012.

    This Amended Note changes the payment terms from the entire $1.3 million being due on November 1, 2017 to equal monthly installments over a 36 month payment cycle. Interest at the rate of 4.5% per annum shall begin to accrue and be payable on December 1, 2017 and each month thereafter until paid in full. 

    The payment of the Amended Note is secured by a pledge of all of the membership interest of Maui Fresh International, LLC, a California limited liability company (“Maui”) owned by Borrower pursuant to that certain Pledge and Security Agreement (the “Security Agreement”) dated as of October 31, 2012 by Borrower in favor of Holder, and the payment of the Note as amended hereby remains secured by the Security Agreement. 

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Calavo Growers, Inc.

We have audited the accompanying consolidated statements of income, comprehensive income, shareholders' equity, and cash flows of Calavo Growers, Inc. for the year ended October 31, 2014.  Our audit also included the financial statement schedule for the year ended October 31, 2014 listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of its operations and its cash flows of Calavo Growers Inc. for the year ended October 31, 2014, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedule for the year ended October 31, 2014, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

	/s/ Ernst & Young LLP
Los Angeles, California
January 30, 2015

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Calavo Growers, Inc.

Santa Paula, California

We have audited the accompanying consolidated balance sheets of Calavo Growers, Inc. and subsidiaries (the Company) as of October 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive operations, shareholders' equity, and cash flows for the years ended October 31, 2016 and 2015.  Our audits also included the financial statement schedule listed in the index at Item 15 (a). These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Calavo Growers, Inc. and subsidiaries at October 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for the years ended October 31, 2016 and 2015, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Calavo Growers Inc.’s internal control over financial reporting as of October 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 23, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.

	/s/ Deloitte & Touche LLP
Costa Mesa, California
December 23, 2016

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of October 31, 2016. 

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended October 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). 

Based on our evaluation under the framework set forth in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of October 31, 2016.  Our internal control over financial reporting as of October 31, 2016 has been audited by Deloitte LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Calavo Growers, Inc.

Santa Paula, California

We have audited internal control over financial reporting of Calavo Growers, Inc. and subsidiaries (the Company) as of October 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2016, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended October 31, 2016 of the Company and our report dated December 23, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule. 

	/s/ Deloitte & Touche LLP
Costa Mesa, California
December 23, 2016

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Item 9B. Other Information

None.

PART III

Certain information required by Part III is omitted from this Annual Report because we will file a definitive Proxy Statement for the Annual Meeting of Shareholders pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the Proxy Statement), not later than 120 days after the end of the fiscal year covered by this Annual Report, and the applicable information included in the Proxy Statement is incorporated herein by reference.

Item 10. Directors, Executive Officers, and Corporate Governance

The names of our executive officers and their ages, titles and biographies are incorporated by reference from Part I, above.

The following information is included in our Notice of Annual Meeting of Shareholders and Proxy Statement to be filed within 120 days after our fiscal year end of October 31, 2016 (the Proxy Statement) and is incorporated herein by reference:

Ø Information regarding our directors who are standing for reelection and any persons nominated to become our directors is set forth under "Election of Directors."

Ø Information regarding our Audit Committee and designated "audit committee financial expert" is set forth under "Corporate Governance Principles and Board Matters—Board Structure and Committee Composition—Audit Committee."

Ø Information on our code of ethics for directors, officers and employees and our Corporate Governance Guidelines is set forth under "Corporate Governance Principles and Board Matters."

Ø Information regarding Section 16(a) beneficial ownership reporting compliance is set forth under "Section 16(a) Beneficial Ownership Reporting Compliance."

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference to the sections entitled “Executive Compensation” and “Directors’ Compensation” in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated herein by reference to the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference to the section entitled “Certain Relationships and Related Transactions” in the Proxy Statement. 

Item 14. Principal Accountant’s Fees and Services

Information required by this Item is incorporated herein by reference to the section of the Proxy Statement entitled “Principal Accountant Fees and Services.”

71

Part IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1)Financial Statements

The following consolidated financial statements as of October 31, 2016 and 2015 and for each of the three years in the period ended October 31, 2016 are included herewith:

Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Statements of Shareholders' Equity, Notes to Consolidated Financial Statements, and Report of Deloitte and Touche LLP, Independent Registered Public Accounting Firm.

(2)Supplemental Schedules

Schedule II -- Valuation and Qualifying Accounts

All other schedules have been omitted since the required information is not present in amounts sufficient to require submission of the schedule, or because the required information is included in the consolidated financial statements or notes thereto.

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(3)Exhibits

Exhibit Number	Description
2.1	Agreement and Plan of Merger and Reorganization dated as of
	February 20, 2001 between Calavo Growers, Inc. and Calavo
	Growers of California.1
2.2	Agreement and Plan of Merger dated as of November 7, 2003
	Among Calavo Growers, Inc., Calavo Acquisition, Inc., Maui Fresh
	International, Inc. and Arthur J. Bruno, Robert J. Bruno and Javier J. Badillo2
2.3	Stock Purchase Agreement dated as of June 1, 2005, between
	Limoneira Company and Calavo Growers, Inc.3
2.4	Acquisition Agreement between Calavo Growers, Inc., a California corporation and Lecil E. Cole, Eric Weinert, Suzanne Cole-Savard, Guy Cole, and Lecil E. Cole and Mary Jeanette Cole, acting jointly and severally as trustees of the Lecil E. and Mary Jeanette Cole Revocable Trust dated October 19, 1993, also known as the Lecil E. and Mary Jeanette Cole Revocable 1993 Trust dated May 19, 2008 4
2.5	Acquisition Agreement between Calavo Growers, Inc., Calavo Salsa Lisa, LLC, Lisa’s Salsa Company and Elizabeth Nicholson and Eric Nicholson dated February 8, 2010 5
2.6	Amended and Restated Limited Liability Company Agreement for Calavo Salsa Lisa, LLC dated February 8, 2010 among Calavo Growers, Inc., Calavo Salsa Lisa LLC, Lisa’s Salsa Company, Elizabeth Nicholson and Eric Nicholson. (Portions of this agreement have been deleted and filed separately with the Securities and Exchange Commission Pursuant to a request for confidential treatment.) 15
2.7	Agreement and Plan of Merger dated May 25, 2011 among Calavo Growers, Inc., CG Mergersub LLC, Renaissance Food Group, LLC and Liberty Fresh Foods, LLC, Kenneth Catchot, Cut Fruit, LLC, James Catchot, James Gibson, Jose O. Castillo, Donald L. Johnson and RFG Nominee Trust1 (Certain portions of the exhibit have been omitted based upon a request for confidential treatment filed by the Registrant with the Securities and Exchange Commission. The omitted portions of the exhibit have been separately filed by the Registrant with the Securities and Exchange Commission.) 19
2.9	Amendment No. 1 to Agreement and Plan of Merger, dated July 31, 2013, among Calavo Growers, Inc., Renaissance Food Group, LLC and Liberty Fresh Foods, LLC, Kenneth Catchot, Cut Fruit, LLC, James Catchot, James Gibson, Jose O. Castillo, Donald L. Johnson and RFG Nominee Trust. 25
2.10	Amended and Restated Limited Liability Company Agreement, dated August 16, 2013, by and among FreshRealm, LLC, a Delaware limited liability company, and the Members. 26
2.11	Amendment No. 2 to Agreement and Plan of Merger, dated as of October 1, 2013, among Calavo Growers, Inc., Renaissance Food Group, LLC and Liberty Fresh Foods, LLC, Kenneth J. Catchot, Cut Fruit, LLC, James S. Catchot, James Gibson, Jose O. Castillo, Donald L. Johnson and the RFG Nominee Trust. 27
3.1	Articles of Incorporation of Calavo Growers, Inc.  1
3.2	Amended and Restated Bylaws of Calavo Growers, Inc.6
3.3	Amendments to Articles of Incorporation or Bylaws of Calavo Growers, Inc. 18
3.4	Amended and Restated Bylaws of Calavo Growers, Inc., effective as of September 25, 2014. 28
10.1	Form of Marketing Agreement for Calavo Growers, Inc.7
10.2	Marketing Agreement dated as of April 1, 1996 between
	Tropical Hawaiian Products, Inc., a Hawaiian corporation,
	and Calavo Growers of California.  1
10.3	Lease Agreement dated as of November 21, 1997, between Tede
	S.A. de C.V., a Mexican corporation, and Calavo de Mexico,
	S.A. de C.V., a Mexican corporation, including attached Guaranty
	of Calavo Growers of California dated December 16, 1996.1
10.4	Lease agreement dated as of February 15, 2005, between Limoneira
	Company and Calavo Growers, Inc.3
10.5	Standstill agreement dated June 1, 2005, between Limoneira
	Company and Calavo Growers, Inc.3

73

10.6	Standstill agreement dated June 1, 2005 between Calavo Growers, Inc.
	And Limoneira Company3
10.7	Term Loan Agreement dated April 9, 2008 (effective date May 1, 2008)
	between Farm Credit West, PCA, and Calavo Growers, Inc.  7
10.8	2005 Stock Incentive Plan Of Calavo Growers, Inc.9
10.9	Calavo Supplemental Executive Retirement Agreement dated
	March 11, 1989 between Egidio Carbone, Jr. and Calavo
	Growers of California.  1
10.10	Amendment to the Calavo Growers of California Supplemental
	Executive Retirement Agreement dated November 9, 1993
	Between Egidio Carbone, Jr. and Calavo Growers of California.  1
10.11	Line of Credit and Security Agreement, dated July 15, 2013 by and between Calavo Growers, Inc. a California Corporation, and FreshRealm, LLC, a Delaware limited liability company. 26
10.12	Business Loan Agreement between Bank of America, N.A. and Calavo
	Growers, Inc., dated October 15, 200710
10.13	First Amendment Agreement between Bank of America, N.A. and Calavo
	Growers, Inc., dated August 28, 200811
10.14	Form of Stock Option Agreement12
10.15	Amendment No. 2 to Loan Agreement dated as of July 31, 2009 between Calavo Growers, Inc. and Bank of America, N.A.13
10.16	Amendment to Term Loan Agreement between Farm Credit West, PCA, and Calavo Growers, Inc 14`
10.17	Amendment No. 3 to Loan Agreement dated February 9, 2010 between Bank of America, N.A. and Calavo Growers, Inc. 15
10.18	2011 Management Incentive Plan of Calavo Growers, Inc. 16
10.19	Retention Bonus Agreement between Lecil E. Cole and Calavo Growers, Inc. 17
10.20	Term Revolving Credit Agreement between Farm Credit West, PCA and Calavo Growers, Inc. as of May 31, 2011. 20
10.21	Term Loan Agreement between Farm Credit West, PCA and Calavo Growers, Inc. as of May 31, 2011. 20
10.22	Amendment to Term Revolving Credit Agreement between FCW and Calavo Growers, Inc. dated May 31, 2011. 21
10.23	Amendment No. 4 to Loan Agreement dated as of September 30, 2011 between Calavo Growers, Inc. and Bank of America, N.A. 22
10.24	Amendment No. 2 to Term Revolving Credit Agreement dated October 31, 2012 between Farm Credit West, PCA and Calavo Growers, Inc. 23
10.25	Amendment No. 2 to Term Loan Agreement dated October 31, 2012 between Farm Credit West, PCA and Calavo Growers, Inc. 23
10.26	Amendment No. 2 to Promissory Note dated October 31, 2012 between Farm Credit West, PCA and Calavo Growers, Inc. 23
10.27	Equity Secured Promissory Note dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc. 24
10.28	Goodwill Secured Promissory Note dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc. 24
10.29	Pledge and Security Agreement dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc. 24
10.30	Personal Guaranty dated October 31, 2013 between Calavo Growers, Inc. and Francisco Clouthier. 24
10.31	Restricted Stock Award Agreement, dated January 9, 2014. 29
10.32	Restricted Stock Award Agreement, dated January 9, 2014. 29
10.33	Restricted Stock Award Agreement, dated January 20, 2015. 30
10.34	Restricted Stock Award Agreement, dated February 6, 2015. 31
10.35	Amendment to Goodwill Promissory Note  *
10.36	Amendment No. 7 to Business Loan Agreement, dated as of January 19, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 32
10.37	Letter Amendment to Revolving Credit Facility, dated January 19, 2016 between Farm Credit West, PCA and Calavo Growers, Inc. 32

74

10.38	Letter Amendment to Revolving Credit Facility, dated January 26, 2016 between Farm Credit West, PCA and Calavo Growers, Inc. 33
10.39	Amendment No. 8 to Business Loan Agreement, dated as of January 28, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 33
10.40	Continuing and Unconditional Guaranty, dated as of January 28, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 33
10.41	Amendment No. 9 to Business Loan Agreement, dated as of May 26, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 34
10.42	Letter Amendment to Revolving Credit Facility, dated May 26, 2016 between Farm Credit West, PCA and Calavo Growers, Inc. 34
10.43	Credit Agreement, dated as of June 14, 2016, by and among Calavo Growers, Inc., and the subsidiary guarantor identified therein and the lenders and agents names therein. 35
10.44	Revolving Credit Note, dated as of June 14, 2016, by and among Calavo Growers, Inc., and FCW.35
10.45	First Amendment to Credit Agreement dated August 29, 2016. 36
10.46	Agreement to Sell and Purchase and Escrow Instructions with Fresh Foods, LLC, a Delaware limited liability company dated August 3, 2016. 37
10.47	First Amendment Agreement to Sell and Purchase and Escrow Instructions, by and among Calavo Growers, Inc., and Fresh Foods, LLC. 38
10.48	Agreement to Sell and Purchase and Escrow instructions with Fresh Foods, LLC dated August 3, 2016. 38
10.49	Agreement to Sell and Purchase and Escrow instructions with Pac West Group Inc. dated December 21, 2016.  *
21.1	Subsidiaries of Calavo Growers, Inc.  1
23.1	Consent of Deloitte & Touche LLP.  *
23.2	Consent of Ernst & Young LLP.  *
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-15(e)
	or Rule 15d-15(e)  *
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-15(e)
	or Rule 15d-15(e)  *

32

Certification of Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350 *

101

The following financial information from the Annual Report on Form 10-K of Calavo Growers, Inc. for the year ended October 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Balance Sheets as of October 31, 2016 and 2015; (2) Consolidated Statements of Income for the years ended October 31, 2016, 2015 and 2014; (3) Consolidated Statements of Comprehensive Income for the years ended October 31, 2016, 2015, and 2014; (4) Consolidated Statements of Shareholders’ Equity for the years ended October 31, 2016, 2015, and 2014; (5) Consolidated Statements of Cash Flows for the years ended October 31, 2016, 2015 and 2014; and (6) Notes to Financial Statements.*

*Filed with this Annual Report on Form 10-K.

1 Previously filed on April 24, 2001 as an exhibit to the Registrant’s Registration Statement on Form S-4, File No. 333-59418, and incorporated herein by reference.

2 Previously filed on January 23, 2004 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

3 Previously filed on June 9, 2005 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

4Previously filed on May 29, 2008 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

5Previously filed on February 8, 2010 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

75

6Previously filed on December 19, 2002 as an exhibit to the Registrant’s Report on Form 8-K, and incorporated herein by reference. 

7Previously filed on January 28, 2003 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

8Previously filed on May 8, 2008 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

9Previously filed on March 21, 2005 as an exhibit to the Registrant’s Definitive Proxy Statement on Form DEF14A and incorporated herein by reference.

10Previously filed on October 19, 2007 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

11Previously filed on January 27, 2009 as an exhibit to the Registrant’s Report on Form 10-K/A and incorporated herein by reference.

12Previously filed on September 11, 2006 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

13Previously filed on August 6, 2009 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

14Previously filed on January 11, 2010 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

15Previously filed on March 11, 2010 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

16Previously filed on January 14, 2011 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

17Previously filed on March 2, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

18Previously filed on March 30, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

19Previously filed on January 10, 2012 as an exhibit to the Registrant’s Report on Form 8-K/A and incorporated herein by reference.

20Previously filed on June 15, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

21Previously filed on September 9, 2011 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

22Previously filed on October 6, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

23Previously filed on November 14, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

24Previously filed on November 6, 2012 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

25Previously filed on September 4, 2013 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

26Previously filed on September 9, 2013 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

27Previously filed on November 26, 2013 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

28Previously filed on September 30, 2014 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

76

29Previously filed on March 11, 2014 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

30Previously filed on March 12, 2015 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

31Previously filed on June 9, 2015 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

32Previously filed on January 19, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

33Previously filed on January 26, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

34Previously filed on May 26, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

35Previously filed on June 14, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

36Previously filed on August 29, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

37Previously filed on September 8, 2016 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

38Previously filed on November 1, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

(b)Exhibits

See subsection (a) (3) above.

(c)Financial Statement Schedules

See subsection (a) (1) and (2) above.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 23, 2016.

CALAVO GROWERS, INC
By:	/s/ Lecil E. Cole
	Lecil E. Cole
	Chairman of the Board of Directors, and
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on December 23, 2016 by the following persons on behalf of the registrant and in the capacities indicated:

Signature	Title
/s/ Lecil E. Cole	Chairman of the Board of Directors, and
Lecil E. Cole	Chief Executive Officer
	(Principal Executive Officer)
/s/ B. John Lindeman	Chief Financial Officer and Corporate Secretary
B. John Lindeman	(Principal Financial Officer)
/s/ James E. Snyder	Corporate Controller
James E. Snyder	(Principal Accounting Officer)
/s/ Donald M. Sanders	Director
Donald M. Sanders
/s/ Marc L. Brown	Director
Marc L. Brown
/s/ John M. Hunt	Director
John M. Hunt
/s/ Michael A. DiGregorio	Director
Michael A. DiGregorio
/s/ J. Link Leavens	Director
J. Link Leavens
/s/ James Helin	Director
James Helin
/s/ Dorcas H. Thille	Director
Dorcas H. Thille
/s/ Egidio Carbone, Jr	Director
Egidio Carbone, Jr
/s/ Steven W. Hollister	Director
Steven W. Hollister
/s/ Harold Edwards	Director
Harold Edwards
/s/ Scott Van Der Kar	Director
Scott Van Der Kar

78

SCHEDULE II

CALAVO GROWERS, INC.

VALUATION AND QUALIFYING ACCOUNTS (in thousands)

	Fiscal year	Balance at			Balance at
	ended	beginning			end
	October 31:	of year	Additions(1)	Deductions(2)	of year
Allowance for customer deductions	2014	1,482	11,833	10,290	3,025
	2015	3,025	10,400	11,284	2,141
	2016	2,141	9,325	9,621	1,845
Allowance for doubtful accounts	2014	215	143	135	223
	2015	223	74	126	171
	2016	171	47	—	218

(1)  Charged to net sales (customer deductions) or costs and expenses (doubtful accounts).

(2)  Customer deductions taken or write off of accounts receivables.

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EXHIBIT INDEX

Exhibit Number	Description
2.1	Agreement and Plan of Merger and Reorganization dated as of
	February 20, 2001 between Calavo Growers, Inc. and Calavo
	Growers of California.1
2.2	Agreement and Plan of Merger dated as of November 7, 2003
	Among Calavo Growers, Inc., Calavo Acquisition, Inc., Maui Fresh
	International, Inc. and Arthur J. Bruno, Robert J. Bruno and Javier J. Badillo2
2.3	Stock Purchase Agreement dated as of June 1, 2005, between
	Limoneira Company and Calavo Growers, Inc.3
2.4	Acquisition Agreement between Calavo Growers, Inc., a California corporation and Lecil E. Cole, Eric Weinert, Suzanne Cole-Savard, Guy Cole, and Lecil E. Cole and Mary Jeanette Cole, acting jointly and severally as trustees of the Lecil E. and Mary Jeanette Cole Revocable Trust dated October 19, 1993, also known as the Lecil E. and Mary Jeanette Cole Revocable 1993 Trust dated May 19, 2008 4
2.5	Acquisition Agreement between Calavo Growers, Inc., Calavo Salsa Lisa, LLC, Lisa’s Salsa Company and Elizabeth Nicholson and Eric Nicholson dated February 8, 2010 5
2.6	Amended and Restated Limited Liability Company Agreement for Calavo Salsa Lisa, LLC dated February 8, 2010 among Calavo Growers, Inc., Calavo Salsa Lisa LLC, Lisa’s Salsa Company, Elizabeth Nicholson and Eric Nicholson. (Portions of this agreement have been deleted and filed separately with the Securities and Exchange Commission Pursuant to a request for confidential treatment.) 15
2.7	Agreement and Plan of Merger dated May 25, 2011 among Calavo Growers, Inc., CG Mergersub LLC, Renaissance Food Group, LLC and Liberty Fresh Foods, LLC, Kenneth Catchot, Cut Fruit, LLC, James Catchot, James Gibson, Jose O. Castillo, Donald L. Johnson and RFG Nominee Trust1 (Certain portions of the exhibit have been omitted based upon a request for confidential treatment filed by the Registrant with the Securities and Exchange Commission. The omitted portions of the exhibit have been separately filed by the Registrant with the Securities and Exchange Commission.) 19
2.8	Sale of LLC Interest Agreement dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc.24
2.9	Amendment No. 1 to Agreement and Plan of Merger, dated July 31, 2013, among Calavo Growers, Inc., Renaissance Food Group, LLC and Liberty Fresh Foods, LLC, Kenneth Catchot, Cut Fruit, LLC, James Catchot, James Gibson, Jose O. Castillo, Donald L. Johnson and RFG Nominee Trust. 25
2.10	Amended and Restated Limited Liability Company Agreement, dated August 16, 2013, by and among FreshRealm, LLC, a Delaware limited liability company, and the Members. 26
2.11	Amendment No. 2 to Agreement and Plan of Merger, dated as of October 1, 2013, among Calavo Growers, Inc., Renaissance Food Group, LLC and Liberty Fresh Foods, LLC, Kenneth J. Catchot, Cut Fruit, LLC, James S. Catchot, James Gibson, Jose O. Castillo, Donald L. Johnson and the RFG Nominee Trust. 27
3.1	Articles of Incorporation of Calavo Growers, Inc.  1
3.2	Amended and Restated Bylaws of Calavo Growers, Inc.6
3.3	Amendments to Articles of Incorporation or Bylaws of Calavo Growers, Inc. 18
3.4	Amended and Restated Bylaws of Calavo Growers, Inc., effective as of September 25, 2014. 28
10.1	Form of Marketing Agreement for Calavo Growers, Inc.7
10.2	Marketing Agreement dated as of April 1, 1996 between Tropical Hawaiian Products, Inc., a Hawaiian corporation, and Calavo Growers of California.  1
10.3	Lease Agreement dated as of November 21, 1997, between Tede S.A. de C.V., a Mexican corporation, and Calavo de Mexico, S.A. de C.V., a Mexican corporation, including attached Guaranty of Calavo Growers of California dated December 16, 1996.1
10.4	Lease agreement dated as of February 15, 2005, between Limoneira Company and Calavo Growers, Inc.3
10.5	Standstill agreement dated June 1, 2005, between Limoneira Company and Calavo Growers, Inc.3
10.6	Standstill agreement dated June 1, 2005 between Calavo Growers, Inc. And Limoneira Company3

80

Exhibit Number	Description
10.7	Term Loan Agreement dated April 9, 2008 (effective date May 1, 2008) between Farm Credit West, PCA, and Calavo Growers, Inc.  7
10.8	2005 Stock Incentive Plan Of Calavo Growers, Inc.9
10.9	Calavo Supplemental Executive Retirement Agreement dated March 11, 1989 between Egidio Carbone, Jr. and Calavo Growers of California.  1
10.10	Amendment to the Calavo Growers of California Supplemental Executive Retirement Agreement dated November 9, 1993 Between Egidio Carbone, Jr. and Calavo Growers of California.  1
10.11	Line of Credit and Security Agreement, dated July 15, 2013 by and between Calavo Growers, Inc. a California Corporation, and FreshRealm, LLC, a Delaware limited liability company.  26
10.12	Business Loan Agreement between Bank of America, N.A. and Calavo Growers, Inc., dated October 15, 200710
10.13	First Amendment Agreement between Bank of America, N.A. and Calavo Growers, Inc., dated August 28, 200811
10.14	Form of Stock Option Agreement12
10.15	Amendment No. 2 to Loan Agreement dated as of July 31, 2009 between Calavo Growers, Inc. and Bank of America, N.A.13
10.16	Amendment to Term Loan Agreement between Farm Credit West, PCA, and Calavo Growers, Inc 14
10.17	Amendment No. 3 to Loan Agreement dated February 9, 2010 between Bank of America, N.A. and Calavo Growers, Inc. 15
10.18	2011 Management Incentive Plan of Calavo Growers, Inc. 16
10.19	Retention Bonus Agreement between Lecil E. Cole and Calavo Growers, Inc. 17
10.20	Term Revolving Credit Agreement between Farm Credit West, PCA and Calavo Growers, Inc. as of May 31, 2011. 20
10.21	Term Loan Agreement between Farm Credit West, PCA and Calavo Growers, Inc. as of May 31, 2011. 20
10.22	Amendment to Term Revolving Credit Agreement between FCW and Calavo Growers, Inc. dated May 31, 2011. 21
10.23	Amendment No. 4 to Loan Agreement dated as of September 30, 2011 between Calavo Growers, Inc. and Bank of America, N.A. 22
10.24	Amendment No. 2 to Term Revolving Credit Agreement dated October 31, 2012 between Farm Credit West, PCA and Calavo Growers, Inc. 23
10.25	Amendment No. 2 to Term Loan Agreement dated October 31, 2012 between Farm Credit West, PCA and Calavo Growers, Inc. 23
10.26	Amendment No. 2 to Promissory Note dated October 31, 2012 between Farm Credit West, PCA and Calavo Growers, Inc. 23
10.27	Equity Secured Promissory Note dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc. 24
10.28	Goodwill Secured Promissory Note dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc. 24
10.29	Pledge and Security Agreement dated October 31, 2013 between Calavo Growers, Inc. and San Rafael Distributing, Inc. 24
10.30	Personal Guaranty dated October 31, 2013 between Calavo Growers, Inc. and Francisco Clouthier.  2
10.31	Restricted Stock Award Agreement, dated January 9, 2014. 29
10.32	Restricted Stock Award Agreement, dated January 9, 2014. 29
10.33	Restricted Stock Award Agreement, dated January 20, 2015. 30
10.34	Restricted Stock Award Agreement, dated February 6, 2015. 31
10.35	Amendment to Goodwill Promissory Note  *
10.36	Amendment No. 7 to Business Loan Agreement, dated as of January 19, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 32
10.37	Letter Amendment to Revolving Credit Facility, dated January 19, 2016 between Farm Credit West, PCA and Calavo Growers, Inc. 32
10.38	Letter Amendment to Revolving Credit Facility, dated January 26, 2016 between Farm Credit West, PCA and Calavo Growers, Inc. 33

81

Exhibit Number	Description
10.39	Amendment No. 8 to Business Loan Agreement, dated as of January 28, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 33
10.40	Continuing and Unconditional Guaranty, dated as of January 28, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 33
10.41	Amendment No. 9 to Business Loan Agreement, dated as of May 26, 2016 between Bank of America, N.A. and Calavo Growers, Inc. 34
10.42	Letter Amendment to Revolving Credit Facility, dated May 26, 2016 between Farm Credit West, PCA and Calavo Growers, Inc. 34
10.43	Credit Agreement, dated as of June 14, 2016, by and among Calavo Growers, Inc., and the subsidiary guarantor identified therein and the lenders and agents names therein. 35
10.44	Revolving Credit Note, dated as of June 14, 2016, by and among Calavo Growers, Inc., and FCW.35
10.45	First Amendment to Credit Agreement dated August 29, 2016. 36
10.46	Agreement to Sell and Purchase and Escrow Instructions with Fresh Foods, LLC, a Delaware limited liability company dated August 3, 2016. 37
10.47	First Amendment Agreement to Sell and Purchase and Escrow Instructions, by and among Calavo Growers, Inc., and Fresh Foods, LLC. 38
10.48	Agreement to Sell and Purchase & Escrow instructions with Fresh Foods, LLC dated August 3, 2016 38
10.49	Agreement to Sell and Purchase and Escrow instructions with Pac West Group Inc. dated December 21, 2016.  *
21.1	Subsidiaries of Calavo Growers, Inc.  1
23.1	Consent of Deloitte & Touche LLP.  *
23.2	Consent of Ernst & Young LLP.  *
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-15(e)
	or Rule 15d-15(e)  *
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-15(e)
	or Rule 15d-15(e)  *
32	Certification of Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350 *
101	The following financial information from the Annual Report on Form 10-K of Calavo Growers, Inc. for the year ended October 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Balance Sheets as of October 31, 2016 and 2015; (2) Consolidated Statements of Income for the years ended October 31, 2016, 2015 and 2014; (3) Consolidated Statements of Comprehensive Income for the years ended October 31, 2016, 2015, and 2014; (4) Consolidated Statements of Shareholders’ Equity for the years ended October 31, 2016, 2015, and 2014; (5) Consolidated Statements of Cash Flows for the years ended October 31, 2016, 2015 and 2014; and (6) Notes to Financial Statements.*

*Filed with this Annual Report on Form 10-K.

1 Previously filed on April 24, 2001 as an exhibit to the Registrant’s Registration Statement on Form S-4, File No. 333-59418, and incorporated herein by reference.

2 Previously filed on January 23, 2004 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

3 Previously filed on June 9, 2005 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

4 Previously filed on May 29, 2008 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

5 Previously filed on February 8, 2010 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

6 Previously filed on December 19, 2002 as an exhibit to the Registrant’s Report on Form 8-K, and incorporated herein by reference. 

82

7 Previously filed on January 28, 2003 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

8 Previously filed on May 8, 2008 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

9 Previously filed on March 21, 2005 as an exhibit to the Registrant’s Definitive Proxy Statement on Form DEF14A and incorporated herein by reference.

10 Previously filed on October 19, 2007 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

11 Previously filed on January 27, 2009 as an exhibit to the Registrant’s Report on Form 10-K/A and incorporated herein by reference.

12 Previously filed on September 11, 2006 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

13 Previously filed on August 6, 2009 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

14 Previously filed on January 11, 2010 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

15 Previously filed on March 11, 2010 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

16 Previously filed on January 14, 2011 as an exhibit to the Registrant’s Report on Form 10-K and incorporated herein by reference.

17 Previously filed on March 2, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

18 Previously filed on March 30, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

19 Previously filed on January 10, 2012 as an exhibit to the Registrant’s Report on Form 8-K/A and incorporated herein by reference.

20 Previously filed on June 15, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

21 Previously filed on September 9, 2011 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

22 Previously filed on October 6, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

23 Previously filed on November 14, 2011 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

24 Previously filed on November 6, 2012 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

25 Previously filed on September 4, 2013 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

26 Previously filed on September 9, 2013 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

27 Previously filed on November 26, 2013 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

28 Previously filed on September 30, 2014 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

29 Previously filed on March 11, 2014 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

83

30Previously filed on March 12, 2015 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

31Previously filed on June 9, 2015 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

32Previously filed on January 19, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

33Previously filed on January 26, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

34Previously filed on May 26, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

35Previously filed on June 14, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

36Previously filed on August 29, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

37Previously filed on September 8, 2016 as an exhibit to the Registrant’s Report on Form 10-Q and incorporated herein by reference.

38Previously filed on November 1, 2016 as an exhibit to the Registrant’s Report on Form 8-K and incorporated herein by reference.

84

EX-10.35

Exhibit 10.35

AMENDMENT TO GOODWILL PROMISSORY NOTE

This Amendment to Goodwill Promissory Note (this “Amended Note”), dated as of November 29, 2016, amends that certain Goodwill Promissory Note (the “Note”) dated as of October 31, 2012 by San Rafael Distributing, Inc., an Arizona corporation ("Borrower") in favor of Calavo Growers, Inc., a California corporation (“Holder”).  Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Note.

Borrower and Holder hereby agree to amend the Note as follows:

1. The second sentence of the Note which states:  "The entire principal amount shall be due and payable on November 1, 2017" is deleted in its entirety and replaced with the following language:  "The entire principal amount shall be payable over a 36 month payment cycle, with the first payment, in the amount of $37,158.17, being due and payable on December 1, 2016, and each subsequent payment being due and payable on the first day of every month thereafter.  Interest at the rate of 4.5% per annum shall begin to accrue and be payable on December 1, 2017 and each month thereafter until paid in full.  The amortization table showing the date and amount of each payment is attached hereto as Exhibit "A" and its terms are incorporated herein.  The maturity date of the Note shall be November 1, 2019, and all principal and all accrued and unpaid interest shall be due and payable in full on such date."

2. The payment of the Note is secured by a pledge of all of the membership interest of the Company owned by Borrower pursuant to that certain Pledge and Security Agreement (the “Security Agreement”) dated as of October 31, 2012 by Borrower in favor of Holder, and the payment of the Note as amended hereby remains secured by the Security Agreement. 

3. Payment and performance of the Note is absolutely and unconditionally guaranteed by Francisco Clouthier (“Guarantor”) pursuant to that certain Personal Guaranty (the “Guaranty”) dated as of October 31, 2012 by Guarantor in favor of Holder, and the payment and performance of the Note as amended hereby remains guaranteed by the Guarantor on the terms of the Guaranty.

4. Except as expressly amended herein, all other terms and conditions of the Note remain in full force and effect and are binding obligations of Borrower in connection with the Note, as amended hereby.

-  1  -

IN WITNESS WHEREOF, Borrower and Holder have executed and delivered this Amended Note as of the date first written above.

BORROWER
San Rafael Distributing, Inc.
By:	/s/: Francisco Clouthier
	Francisco Clouthier
Its:	President and Secretary
HOLDER
Calavo Growers, Inc.
By:	/s/: James Snyder
	James Snyder
Its:	Corporate Controller, CAO

-  2  -

EX-10.49

Exhibit 10.49

STANDARD OFFER, AGREEMENT AND ESCROW

INSTRUCTIONS FOR PURCHASE OF REAL ESTATE

(Non-Residential)

AIR Commercial Real Estate Association

December 14, 2016

(Date for Reference Purposes)

1.  Buyer.

1.1   Pac West Group Inc. and/or Assignee, (“Buyer”) hereby offers to purchase the real property, hereinafter described, from the owner thereof (“Seller”) (collectively, the “Parties” or individually, a “Party”), through an escrow ("Escrow") to on or before March 8, 2017, (“Expected Closing Date”) to be held by First American Title-Phyllis Chambers  (“Escrow Holder”) whose address is 777 So. Figueroa Street, 4thFloor, Los Angeles, CA 90017, Phone No. (213) 271 - 1720, Facsimile No. (714) 361 - 3595 upon the terms and conditions set forth in this agreement ("Agreement”).  Buyer shall have the right to assign Buyer’s rights hereunder, but any such assignment shall not relieve Buyer of Buyer's obligations herein unless Seller expressly releases Buyer.

1.2   The term “Date of Agreement” as used herein shall be the date when by execution and delivery (as defined in paragraph 20.2) of this document or a subsequent counteroffer thereto, Buyer and Seller have reached agreement in writing whereby Seller agrees to sell, and Buyer agrees to purchase, the Property upon terms accepted by both Parties.

2.  Property.

2.1   The real property (“Property”) that is the subject of this offer consists of (insert a brief physical description) An approximately 64, 678 SF industrial facility on approximately 7.24 acres. is located in the City of Temecula, County of Riverside, State of California, is commonly known by the street address of 28410 Vincent Morage Drive,  Temecula, CA and is legally described as: to be supplied by First American Title Co. in Escrow

(APN: 921 – 281 – 018 – 8 ).

2.2   If the legal description of the Property is not complete or is inaccurate, this Agreement shall not be invalid and the legal description shall be completed or corrected to meet the requirements of First  American Title Company (“Title Company”), which shall issue the title policy hereinafter described.

2.3  The Property includes, at no additional cost to Buyer, the permanent improvements thereon, including those items which pursuant to applicable law are a part of the property, as well as the following items, if any, owned by Seller and at present located on the Property: electrical distribution systems (power panel, bus ducting, conduits, disconnects, lighting fixtures); telephone distribution systems (lines, jacks and connections only); space healers; heating, ventilating, air conditioning equipment (“HVAC”); air lines; fire sprinkler systems; security and fire detection systems; carpets;

(collectively, the “Improvements”).

2.4  The fire sprinkler monitor: ☐ is owned by Seller and included in the Purchase Price, ☐ is leased by Seller, and Buyer will need to negotiate a new lease with the fire monitoring company, ☑ ownership will be determined during Escrow, or ☐ there is no fire sprinkler monitor.

2.5  Except as provided in Paragraph 2.3 the Purchase Price does not include Seller’s personal property, furniture and furnishings, and F.F.&E. listed on Exhibit “A” attached hereto all of which shall be removed by Seller as provided in paragraph 30.

3.  Purchase Price.

3.1  The purchase price (“Purchase Price”) to be paid by Buyer to Seller for the Property shall be $6,600,000.00, payable all in cash at closing:

Total Purchase Price: $6,600,000.00

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Page 1 of 22

3.2  If Buyer is taking title to the Property subject to, or assuming, an Existing Deed of Trust and such deed of trust permits the beneficiary to demand payment of fees including, but not limited to, points, processing fees, and appraisal fees as a condition to the transfer of the Property. Buyer agrees to pay such fees up to a maximum of 1.5% of the unpaid principal balance of the applicable Existing Note.

4.  Deposits.

4.1 ☑ Buyer has delivered to Broker a check in the sum of $100,000.00, payable to Escrow Holder, to be delivered by Broker to Escrow Holder within 2 or business days after both Parties have executed this Agreement and the executed Agreement has been delivered to Escrow Holder, or ☐ within 2 or business days after both Parties have executed this Agreement and the executed Agreement has been delivered to Escrow Holder Buyer shall deliver to Escrow Holder a check in the sum of $ . If said check is not received by Escrow Holder within said time period then Seller may elect to unilaterally terminate this transaction by giving written notice of such election to Escrow Holder whereupon neither Party shall have any further liability to the other under this Agreement.  Should Buyer and Seller not enter into an agreement for purchase and sale, Buyer’s check or funds shall, upon request by Buyer, be promptly returned to Buyer.

4.3  Escrow Holder shall deposit the funds deposited with it by Buyer pursuant to paragraphs 4.1 and 4.2 (collectively the “Deposit”), in a State or Federally chartered bank in an interest bearing account whose term is appropriate and consistent with the timing requirements of this transaction. The interest therefrom shall accrue to the benefit of Buyer, who hereby acknowledges that there may be penalties or interest forfeitures if the applicable instrument is redeemed prior to its specified maturity.  Buyer’s Federal Tax Identification Number is to be supplied in Escrow.

NOTE: Such interest bearing account cannot be opened until Buyer’s Federal Tax Identification Number is provided.

4.4  Notwithstanding the foregoing, within 5 days after Escrow Holder receives the monies described in paragraph 4.1 above, Escrow Holder shall release $100 of said monies to Seller as and for independent consideration for Seller’s execution of this Agreement and the granting of the contingency period to Buyer as herein provided.  Such independent consideration is non-refundable to Buyer but shall be credited to the Purchase Price in the event that the purchase of the Property is completed.

4.5  Upon waiver of all of Buyer's contingencies the Deposit shall become non-refundable but applicable to the Purchase Price except in the event of a Seller breach.

7.  Real Estate Brokers.

7.1  The following real estate broker(s) (“Brokers”) and brokerage relationships exist in this transaction and are consented to by the Parties (check the applicable boxes):

☑	Kevin Kelly – CBRE	represents Seller exclusively (“Seller’s Broker”);
☑	ROB Gunness – CBRE	represents Buyer exclusively (“Buyer’s Broker”); or
☐		represents both Seller and Buyer (“Dual Agency”).

The Parties acknowledge that other than the Brokers listed above, there are no other brokers representing the Parties or due any fees and/or commissions under this Agreement See paragraph 24 regarding the nature of a real estate agency relationship. Buyer shall use the service of Buyer’s Broker exclusively in connection with any and all negotiations and offers with respect to the Property for a period of 1 year from the date inserted for reference purposes at the top of page 1.

7.2  Buyer and Seller each represent and warrant to the other that he/she/it has had no dealings with any person, firm, broker or finder in connection with the negotiation of this Agreement and/or the consummation of the purchase and sale contemplated herein, other than the Brokers named in paragraph 7.1, and no broker or other person, firm or entity, other than said Brokers is/are entitled to any commission or finder’s fee in connection with this transaction as the result of any dealings or acts of such Party. Buyer and Seller do each hereby agree to indemnify, defend, protect and hold the other harmless from and against any costs, expenses or liability for compensation, commission or charges which may be claimed by any broker, finder or other similar party, other than said named Brokers by reason of any dealings of act or the indemnifying Party.

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Page 2 of 22

8.  Escrow and Closing.

8.1   Upon acceptance hereof by Seller, this Agreement, including any counteroffers incorporated herein by the Parties, shall constitute not only the agreement of purchase and sale between Buyer and Seller, but also instructions to Escrow Holder for the consummation of the Agreement through the Escrow. Escrow Holder shall not prepare any further escrow instructions restating or amending the Agreement unless specifically so instructed by the Parties or a Broker herein. Subject to the reasonable approval of the Parties, Escrow Holder may, however, include its standard general escrow provisions. In the event that there is any conflict between the provisions of the Agreement and the provisions of any additional escrow instructions the provisions of the Agreement shall prevail as to the Parties and the Escrow Holder.

8.2   As soon as practical after the receipt of this Agreement and any relevant counteroffers, Escrow Holder shall ascertain the Date of Agreement as defined in paragraphs 1.2 and 20.2 and advise the Parties and Brokers, in writing, of the date ascertained.

8.3   Escrow Holder is hereby authorized and instructed to conduct the Escrow in accordance with this Agreement, applicable law and custom and practice of the community in which Escrow Holder is located, including any reporting requirements of the Internal Revenue Code. In the event of a conflict between the Jaw of the state where the Property is located and the law of the state where the Escrow Holder Is located, the law of the state where the Property is located shall prevail.

8.4   Subject to satisfaction of the contingencies herein described, Escrow Holder shall close this escrow (the “Closing”) by recording a general warranty deed (a grant deed in California) and the other documents required to be recorded, and by disbursing the funds and documents in accordance with this Agreement.

8.5   Buyer and Seller shall each pay one-half of the Escrow Holder’s charges and Seller shall pay the usual recording fees and any required documentary transfer taxes. Seller shall pay the premium for a standard coverage owner's or joint protection policy of title insurance.  (See also paragraph 11)

8.6   Escrow Holder shall verify that all of Buyer's contingencies have been satisfied or waived prior to Closing. The matters contained in paragraphs 9.1 subparagraphs (b), (c), (d), (e), (g), (i), (n), and (c), 9.4, 12, 13, 14, 16, 18, 20, 21, 22, and 24 are, however, matters of agreement between the Parties only and are not Instructions to Escrow Holder.

8.7   If this transaction is terminated for non-satisfaction and non-waiver of a Buyer's Contingency, as defined in paragraph 9.2, then neither of the Parties shall thereafter have any liability to the other under this Agreement, except to the extent of a breach of any affirmative covenant or warranty in this Agreement. In the event of such termination, Buyer shall, subject to the provisions of paragraph 8.10, be promptly refunded all funds deposited by Buyer with Escrow Holder, less only the $100 provided for in paragraph 4.4 and the Title Company and Escrow Holder cancellation fees and costs, all of which shall be Buyer's obligation. If this transaction is terminated as a result of Seller's breach of this Agreement then Seller shall pay the Title Company end Escrow Holder cancellation fees and costs.

8.8   The Closing shall occur on the Expected Closing Date, as soon as the Escrow is in condition for Closing the Closing does not occur by the Expected Closing Date and said Date is not extended by mutual instructions of the Parties, a Party not then in default under this Agreement may notify the other Party, Escrow Holder, and Brokers, the Escrow shall be deemed terminated without further notice or instructions.

8.9   Except as otherwise provided herein, the termination of Escrow shall not relieve or release either Party from any obligation to pay Escrow Holder's fees and costs or constitute a waiver, release or discharge of any breach or default that has occurred in the performance of the obligations, agreements, covenants or warranties contained therein.

8.10  If this sale of the Property is not consummated for any reason other than Seller’s breach or default, then at Seller's request, and as a condition to any obligation to return Buyer's deposit (see paragraph 21), Buyer shall within 5 days after written request deliver to Seller, at no charge, copies of all surveys, engineering studies, soil reports, maps, master plans, feasibility studies and other similar items prepared by or for Buyer that pertain to the Property. Provided, however, that Buyer shall not be required to deliver any such report if the written contract which Buyer entered into with the consultant who prepared such report specifically forbids the dissemination of the report to others.

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9.  Contingencies to Closing.

9.1   The Closing of this transaction is contingent upon the satisfaction or waiver of the following contingencies. IF BUYER FAILS TO NOTIFY ESCROW HOLDER, IN WRITING, OF THE DISAPPROVAL OF ANY OF SAID CONTINGENCIES WITHIN THE TIME SPECIFIED THEREIN, IT SHALL BE CONCLUSIVELY PRESUMED THAT BUYER HAS APPROVED SUCH ITEM, MATIER OR DOCUMENT. Buyer’s conditional approval shall constitute disapproval, unless provision is made by the Seller within the time specified therefore by the Buyer in such conditional approval or by this Agreement, whichever is later, for the satisfaction or the condition imposed by the Buyer. Escrow Holder shall promptly provide all Parties with copies of any written disapproval or conditional approval which it receives. With regard to subparagraphs (a) through (m) the pre-printed time periods shall control unless a different number of days is inserted in the spaces provided.

(a)  Disclosure. Seller shall make to Buyer through Escrow, all of the applicable disclosures required by law (See AIR Commercial Real Estate Association (“AIR") standard form entitled "Seller's Mandatory Disclosure Statement”) and provide Buyer with a completed Property Information Sheet (“Property Information Sheet”) concerning the Property, duly executed by or on behalf of Seller in the current form or equivalent to that published by the AIR within   5   days from Opening of Escrow. Buyer has 10 days from the receipt of said disclosures to approve or disapprove the matters disclosed.

(b)  Physical Inspection. Buyer has until 5:00 p.m. February 6, 2017 to satisfy itself with regard to the physical aspects and size of the Property.

(c)  Hazardous Substance Conditions Report. Buyer has until 5:00 p.m. February 6, 2017 to satisfy itself with regard to the environmental aspects of the Property. Seller recommends that Buyer obtain a Hazardous Substance Conditions Report concerning the Property and relevant adjoining properties. Any such report shall be paid for by Buyer. A “Hazardous Substance” for purposes of this Agreement is defined as any substance whose nature and/or quantity of existence) use, manufacture, disposal or effect, render it subject to Federal, state or local regulation, investigation, remediation or removal as potentially injurious to public health or welfare.  A “Hazardous Substance Condition" for purposes of this Agreement is defined as the existence on. under or relevantly adjacent to the Property of a Hazardous Substance that would require remediation and/or removal under applicable Federal, state or local law.

(d)  SoilInspection. Buyer has until 5:00 p.m. February 6, 2017 to satisfy itself with regard to the condition of the soils on the Property. Seller recommends that Buyer obtain a soil test report. Any such report shall be paid for by Buyer. Seller shall provide Buyer copies of any soils report that Seller may have within 10 days of the Date of Agreement.

(e)  Governmental Approvals. Buyer has until 5:00 p.m. February 6, 2017 to satisfy itself with regard to approvals and permits from governmental agencies or departments which have or  may have jurisdiction over the Property and which Buyer deems necessary or desirable in connection with its intended use of the Property, including, but not limited to, permits and approvals required with respect to zoning, planning, building and safety, fire, police, handicapped and Americans with Disabilities Act requirements, transportation and environmental matters.

(f)  Conditionsof Title. Escrow Holder shall cause a current commitment for title insurance (“Title Commitment”) concerning the Property issued by the Title Company, as well as legible copies of all documents referred to in the Title Commitment (“Underlying Documents”), and a scaled and dimensioned plot showing the location of any easements to be delivered to Buyer within 10 days following Opening of Escrow. Buyer has 10 days from the receipt of the Title Commitment, the Underlying Documents and the plot plan to satisfy itself with regard to the condition of title. The disapproval by Buyer of any monetary encumbrance, which by the terms of this Agreement is not to remain against the Property after the Closing, shall not be considered a failure of this contingency, as Seller shall have the obligation, at Seller’s expense, to satisfy and remove such disapproved monetary encumbrance at or before the Closing.

(g)  Survey. Buyer has until 5:00 p.m. February 6, 2017 to satisfy itself with regard to any ALTA title supplement based upon a survey prepared to American Land Title Association (“ALTA”) standards for an owner’s policy by a licensed surveyor, showing the legal description and boundary lines of the Property, any easements of record and any improvements, poles, structures and things located within 10 feet of either side of the Property boundary lines. Any such survey shall be prepared at Buyer's direction and expense. If Buyer has obtained a survey and approved the ALTA title supplement, Buyer may elect within the period allowed for Buyer’s approval of a survey to have an ALTA extended coverage owner’s form of title policy, in which event Buyer shall pay any additional premium attributable thereto.

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(h)  ExistingLeases and Tenancy Statements. Seller shall within   5   days following the Opening of Escrow provide both Buyer and Escrow Holder with legible copies of all leases, subleases or rental arrangements (collectively, “Existing Leases”) affecting the Property, and with a tenancy statement (“Estoppel Certificate”) in the latest form or equivalent to that published by the AIR, executed by Seller and/or each tenant and subtenant of the Property. Seller shall use its best efforts to have each tenant complete and execute an Estoppel Certificate. If any tenant falls or refuses to provide an Estoppel Certificate then Seller shall complete and execute an Estoppel Certificate for that tenancy. Buyer has 10 days from the receipt of said Existing Leases and Estoppel Certificates to satisfy itself with regard to the Existing Leases and any other tenancy issues.

(i)  Owner's Association. Seller shall   5   days following the Opening of Escrow provide Buyer with a statement and transfer package from any owner's association servicing the Property. Such transfer package shall at a minimum include: copies of the association's bylaws, articles of Incorporation, current budget and financial statement. Buyer has 10 days from the receipt of such documents to satisfy itself with regard to the association.

(j)  Other Agreements. Seller shall within   5   days following the Opening of Escrow provide Buyer with legible copies of all other agreements (“Other Agreements”) known to Seller that will affect the Property after Closing. Buyer has 10 days from the receipt of said Other Agreements to satisfy itself with regard to such Agreements.

(k)  The Buyer shall have the ability to conduct any non-Invasive Investigations and due diligence regarding the Property for Buyers Intended use and development that Buyer deems Important in its discretion, and Buyer shall have the right prior to 5.00 p.m. on February 6, 2017, to satisfy itself with regards to such Investigations.

(m) Personal Property. In the event that any personal property is included in the Purchase Price, Buyer has until 5:00 p.m. February 6, 2016 to satisfy itself with regard to the title condition of such personal property. Seller recommends that Buyer obtain a UCC-1 report. Any such report shall be paid for by Buyer. Seller shall provide Buyer copies of any liens or encumbrances affecting such personal property that it is aware of within   5   days following the Opening of Escrow.

(n)  Destruction, Damage or Loss. Subsequent to the Date of Agreement and prior to Closing there shall not have occurred a destruction, or damage or loss to, the Property or any portion thereof, from any cause whatsoever, which would cost more than $10,000.00 to repair or cure. If the cost of repair or cure is $10,000.00 or less, Seller shall repair or cure the loss prior to the Closing. Buyer shall have the option, within 10 days after receipt of written notice of a loss costing more than $10,000.00 to repair or cure, to either terminate this Agreement or to purchase the Property notwithstanding such loss, but without deduction or offset against the Purchase Price. If the cost to repair or cure is more than $10,000.00, and Buyer does not elect to terminate this Agreement, Buyer shall be entitled to any insurance proceeds applicable to such loss. Unless otherwise notified in writing, Escrow Holder shall assume no such destruction, damage or loss has occurred prior to Closing.

(o)  Material Change. Buyer shall have 10 days following receipt of written notice of a Material Change within which to satisfy itself with regard to such change. "Material Change" shall mean a substantial adverse change in the use, occupancy, tenants, title, or condition of the Property that occurs after the date of this offer and prior to the Closing. Unless otherwise notified in writing, Escrow Holder shall assume that no Material Change has occurred prior to the Closing.

(p)  Seller Performance. The delivery of all documents and the due performance by Seller of each and every undertaking and agreement to be performed by Seller under this Agreement.

9.2   All of the contingencies specified in subparagraphs (a) through (m) of paragraph 9.1 are for the benefit or, and may be waived by, Buyer, and may be elsewhere herein referred to as “Buyer's Contingencies."

9.3   If any of Buyer's Contingencies or any other matter subject to Buyer's approval is disapproved as provided for herein in a timely manner ("Disapproved Item"), Seller shall have the right within 10 days following the receipt of notice of Buyer’s disapproval to elect to cure such Disapproved item prior to the Expected Closing Date (“Seller's Election”). Seller's failure to give to Buyer within such period, written notice of Seller's commitment to cure such Disapproved Item on or before the Expected Closing Date shall be conclusively presumed to be Seller's Election not to cure such Disapproved Item. If Seller elects, either by written notice or failure to give written notice, not to cure a Disapproved Item, Buyer shall have the right, within 10 days after Seller's Election to either accept title to the Property subject to such Disapproved Item, or to terminate this Agreement. Buyer’s failure to notify Seller in writing of Buyer's election to accept title to the Property subject to the Disapproved Item without deduction or offset shall constitute Buyer's election to terminate this Agreement. The above time periods only apply once for each Disapproved Item. Unless expressly provided otherwise herein, Seller’s right to cure shall not apply to the remediation of Hazardous Substance Conditions. Unless the Parties mutually instruct otherwise, if the time periods for the satisfaction of contingencies or for Seller’s and Buyer’s elections would expire on a date after the Expected Closing Date, the Expected Closing Dale shall be deemed extended for 3 business days following the expiration of: (a) the applicable contingency period(s), (b) the period within which the Seller may elect to cure the Disapproved Item, or (c) If Seller elects not to cure, the period within which Buyer may elect to proceed with this transaction, whichever is later.

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9.4  The Parties acknowledge that extensive local, state and Federal legislation establish broad liability upon owners and/or users of real property tor the investigation and remediation of Hazardous Substances. The determination of the existence of a Hazardous Substance Condition and the evaluation of the impact of such a condition are highly technical and beyond the expertise of Brokers. The Parties acknowledge that they have been advised by Brokers to consul! their own technical and legal experts with respect to the possible presence of Hazardous Substances on the Property or adjoining properties, and Buyer and Seller are not relying upon any investigation by or statement of Brokers with respect thereto. The Parties hereby assume all responsibility for the impact of such Hazardous Substances upon their respective Interests herein.

10.  Documents Required at or Before Closing:

10.1  Five days prior to the Closing date Escrow Holder shall obtain an updated Title Commitment concerning the Property from the Title Company and provide copies thereof to each of the Parties.

10.2  Seller shall deliver to Escrow Holder in time for delivery to Buyer at the Closing:

(a)  Grant or general warranty deed. duly executed and In recordable form, conveying fee title to the Property to Buyer.

(c)  If applicable, the Existing Leases and Other Agreements together with duly executed assignments thereof by Seller and Buyer. The assignment of Existing Leases shall be on the most recent Assignment and Assumption or Lessor's Interest in Lease from published by the AIR or its equivalent.

(e)  An affidavit executed by Seller to the effect that Seller is not a “foreign person” within the meaning of Internal Revenue Code Section 1445 or successor statutes. If Seller does not provide such affidavit in form reasonably satisfactory to Buyer at least 3 business days prior to the Closing. Escrow Holder shall at the Closing deduct from Seller’s proceeds and remit to the Internal Revenue Service such sum as is required by applicable Federal law with respect to purchases from foreign sellers.

(f)  If the Property is located in California, an affidavit executed by Seller to the effect that Seller is not a “nonresident” within the meaning of California Revenue and Tax Code Section 18662 or successor statutes. If Seller does not provide such affidavit in form reasonably satisfactory to Buyer at least 3 business days prior to the Closing, Escrow Holder shall at the Closing deduct from Seller’s proceeds and remit to !he Franchise Tax Board such sum as is required by such statute.

(g) If applicable, a bill of sale, duly executed, conveying title to any included personal property to Buyer.

(h) If the Seller is a corporation, a duly executed corporate resolution authorizing the execution of this Agreement and 1he sale of the Property.

10.3 Buyer shall deliver to Seller through Escrow:

(a)  The cash portion or the Purchase Price and such additional sums as are required of Buyer under this Agreement shall be deposited by Buyer with Escrow Holder, by federal funds wire transfer, or any other method acceptable to Escrow Holder in Immediately collectable funds, no later than 2:00 P.M. on the business day prior to the Expected Closing Date provided, however, that Buyer shall not be required to deposit such monies Into Escrow if at the time at set for the deposit of such monies Seller is in default or has indicated that it will not perform any of its obligations hereunder Instead, in such circumstances in order to reserve its rights to proceed Buyer need only provide Escrow with evidence establishing that the required monies were available.

(d)  Assumptions duly executed by Buyer of the obligations of Seller that accrue after Closing under any Other Agreements.

(l)   If the Buyer is a corporation, a duly executed corporate resolution authorizing the execution of this Agreement and the purchase of the Property.

10.4    At Closing, Escrow Holder shall cause to be issued to Buyer a standard coverage (or ALTA extended, if elected pursuant to 9.1(g)) owner’s form policy of title insurance effective as of the Closing, issued by the Title Company in the full amount of the Purchase Price, insuring title to the Property vested in Buyer, subject only to the exceptions approved by Buyer. In the event there is a Purchase Money Deed of Trust in this transaction, the policy of title insurance shall be a joint protection policy insuring both Buyer and Seller.

IMPORTANT: IN A PURCHASE OR EXCHANGE OF REAL PROPERTY, IT MAY BE ADVISABLE TO OBTAIN TITLE INSURANCE IN CONNECTION WITH THE CLOSE OF ESCROW SINCE THERE MAY BE PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE PROPERTY BEING ACQUIRED. A NEW POLICY OF TITLE INSURANCE SHOULD BE OBTAINED IN ORDER TO ENSURE YOUR INTEREST IN THE PROPERTY THAT YOU ARE ACQUIRING.

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11.  Prorations and Adjustments.

11.1  Taxes. Applicable real property taxes and special assessment bonds shall be prorated through Escrow as of the date of the Closing, based upon the latest tax bill available. The Parties agree to prorate as of the Closing any taxes assessed against the Property by supplemental bill levied by reason of events occurring prior to the Closing. Payment of the prorated amount shall be made promptly in cash upon receipt of a copy of any supplemental bill.

11.2  Insurance.  WARNING: Any insurance which Seller may have maintained will terminate on the Closing. Buyer is advised to obtain appropriate insurance to cover the Property.

11.3  Rentals,InterestandExpenses. Scheduled rentals, interest on Existing Notes, utilities, and operating expenses shall be prorated as of the date of Closing. The Parties agree to promptly adjust between themselves outside of Escrow any rents received after the Closing.

11.4  Security Deposit. Security Deposits held by Seller shall be given to Buyer as a credit to the cash required of Buyer at the Closing.

11.5  Post Closing Matters. Any item to be prorated that is not determined or determinable at the Closing shall be promptly adjusted by the Parties by appropriate cash payment outside of the Escrow when the amount due is determined.

11.6  Variations in Existing Note Balances. In the event that Buyer is purchasing the Property subject to an Existing Deed of Trust(s), and in the event that a Beneficiary Statement as to the applicable Existing Note(s) discloses that the unpaid principal balance of such Existing Note(s) at the closing will be more or less than the amount set forth In paragraph 3.1(c) hereof (“Existing Note Variation”), then the Purchase Money Note(s) shall be reduced or increased by an amount equal to such Existing Note Variation. If there is to be no Purchase Money Note, the cash required at the Closing per paragraph 3.1(a) shall be reduced or increased by the amount of such Existing Note Variation.

11.7  Variations in New Loan Balance. In the event Buyer is obtaining a New Loan and the amount ultimately obtained exceeds the amount set forth in paragraph 5.1, then the amount of the Purchase Money Note, if any, shall be reduced by the amount of such excess.

11.8  Owner’s Association Fees. Escrow Holder shall: (i) bring Seller’s account with the association current and pay any delinquencies or transfer fees from Seller’s proceeds, and (ii) pay any up front fees required by the association from Buyer’s funds.

12.  Representations and Warranties of Seller and Disclaimers.  Paragraph 28.

12.1  Seller’s warranties and representations shall survive the Closing and delivery of the deed for a period of 31 years, and any lawsuit or action based upon them must be commenced within such time period. Seller’s warranties and representations are true, material and relied upon by Buyer and Brokers in all respects. Seller hereby makes the following warranties and representations to Buyer and Brokers:

(a)  Authority of Seller. Seller is the owner or the Property and/or has the full right, power and authority to sell, convey and transfer the Property to Buyer as provided herein, and to perform Seller’s obligations hereunder.

(b)  Maintenance During Escrow and Equipment Condition At Closing. Except as otherwise provided in paragraph 9.1(n) hereof, Seller shall maintain the Property until the Closing in its present condition, ordinary wear and tear excepted.

(c)  Hazardous Substances/Storage Tanks. Seller has no knowledge, except as otherwise disclosed to Buyer in writing, of the existence or prior existence on the Property of any Hazardous Substance, nor of the existence or prior existence of any above below ground storage tank.

(d)  Compliance. Seller has no written notice from any governmental agency of any aspect or condition of the Property which violates applicable laws, rules, regulations, codes or covenants, conditions or restrictions, or of Improvements or alterations made to the Property which violates applicable laws, rules, regulations, codes or covenants, conditions or restriction or of improvements or alterations made to the Property without a permit where one was required, or of any unfulfilled order or directive of any applicable governmental agency requiring any remediation, repair, maintenance or improvement be performed on the Property.

(e)  Changes in Agreements. Prior to the Closing, Seller will not violate or modify any Existing Lease or Other Agreement, or create any new leases or other agreements affecting the Property, without Buyer’s written approval, which approval will not be unreasonably withheld.

(f)  Possessory Rights. Seller has no knowledge that anyone will, at the Closing, have any right to possession of the Property. except as disclosed by this Agreement or otherwise in writing to Buyer.

(g) Mechanics’ Liens. There are no unsatisfied mechanics’ or materialmens’ lien rights concerning the Property.

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(h) Actions, Suits or Proceedings. Seller has no knowledge or any actions, suits or proceedings pending or threatened before any commission, board, bureau, agency, arbitrator, court or tribunal that would affect the Property or the right to occupy or utilize same.

(i)  Notice of Changes. Seller will promptly notify Buyer and Brokers in writing of any Material Change (see paragraph 9.1(o)) affecting the Property that becomes known to Seller prior to the Closing.

(j)  No Tenant Bankruptcy Proceedings. Seller has no notice or knowledge that any tenant of the Property is the subject or a bankruptcy or insolvency proceeding.

(k) No Seller Bankruptcy Proceedings. Seller is not the subject of a bankruptcy, insolvency or probate proceeding.

(l)  Personal Property. Seller has no knowledge that anyone will, at the Closing, have any right to possession of any personal property included in the Purchase Price nor knowledge or any liens or encumbrances affecting such personal property, except as disclosed by this Agreement or otherwise in writing to Buyer.

12.2  Buyer hereby acknowledges that, except as otherwise stated in this Agreement , Buyer is purchasing the Property in its existing condition and will, by the time called for herein, make or have waived all inspections of the Property Buyer believes are necessary to protect its own interest in, and its contemplated use of, the Property. The Parties acknowledge that, except as otherwise stated in this Agreement, no representations, inducements, promises, agreements, assurances, oral or written, concerning the Property, or any aspect of the occupational safety and health laws, Hazardous Substance laws, or any other act, ordinance or law, have been made by either Party or Brokers, or relied upon by either Party hereto.

12.3  In the event that Buyer learns that a Seller representation or warranty might be untrue prior to the Closing, and Buyer elects to purchase the Property anyway then, and in that evont, Buyer waives any right that it may have to bring an action or proceeding against Seller or Brokers regarding said representation or warranty.

12.4  Any environmental reports, soils reports, surveys, and other similar documents which were prepared by third party consultants and provided to Buyer by Seller or Seller’s representatives, have been delivered as an accommodation to Buyer and without any representation or warranty as to the sufficiency, accuracy, completeness, and/or validity of said documents, all of which Buyer relies on at Its own risk. Seller believes said documents to be accurate, but Buyer is advised to retain appropriate consultants to review said documents and investigate the Property.

13.  Possession.

Possession of the Property shall be given to Buyer at the Closing subject to Seller rights. See paragraph 30.

14.  Buyer’s Entry.

At any time during the Escrow period, Buyer, and its agents and representatives, shall have the right at reasonable times and subject to rights of tenants, to enter upon the Property for the purpose of making inspections and tests specified in this Agreement. No destructive testing shall be conducted, however, without Seller’s prior approval which shall not be unreasonably withheld. Following any such entry or work, unless otherwise directed in writing by Seller, Buyer shall return the Property to the condition it was in prior to such entry or work, including the recompaction or removal of any disrupted soil or material as Seller may reasonably direct. All such inspections and tests and any other work conducted or materials furnished with respect to the Property by or for Buyer shall be paid for by Buyer as and when due and Buyer shall indemnify, defend, protect and hold harmless Seller and the Property of and from any and all claims, liabilities, losses, expenses (including reasonable attorneys’ fees), damages, including those for injury to person or property, arising out of or relating to any such work or materials or the acts or omissions of Buyer, its agents or employees in connection therewith. See Paragraph 27.

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15.  Further Documents and Assurances.

The Parties shall each, diligently and in good faith, undertake all actions and procedures reasonably required to place the Escrow in condition for Closing as and when required by this Agreement. The Parties agree to provide all further information, and to execute and deliver all further documents, reasonably required by Escrow Holder or the Title Company.

16.  Attorneys' Fees.

If any Party or Broker brings an action or proceeding (including arbitration) involving the Property whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably incurred.

17.  Prior Agreements/Amendments.

17.1  This Agreement supersedes any and all prior agreements between Seller and Buyer regarding the Property.

17.2  Amendments to this Agreement are effective only if made in writing and executed by Buyer and Seller.

19.  Notices.

19.1  Whenever any Party, Escrow Holder or Brokers herein shall desire to give or serve any notice, demand, request, approval, disapproval or other communication, each such communication shall be in writing and shall be delivered personally, by messenger, or by mail, postage prepaid, to the address set forth in this agreement or by facsimile transmission, electronic signature, digital signature, or email.

19.2  Service of any such communication shall be deemed made on the date of actual receipt if personally delivered, or transmitted by facsimile transmission, electronic signature, digital signature, or email. Any such communication sent by regular mall shell be deemed given 48 hours after the same is mailed. Communications sent by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed delivered 24 hours after delivery or the same to the Postal Service or courier. If such communication is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

19.3  Any Party or Broker hereto may from time to time, by notice in writing, designate a different address to which, or a different person or additional persons to whom, all communications are thereafter to be made.

20.  Duration of Offer.

20.1  If this offer is not accepted by Seller on or before 5:00 P.M. according to the time standard applicable to the city of Carlsbad on the date of December 15, 2016, it shall be deemed automatically revoked.

20.2 The acceptance of this offer. or of any subsequent counteroffer hereto, that creates an agreement between the Parties as described in paragraph 1.2 , shall be deemed made upon delivery to the other Party or either Broker herein of a duly executed writing unconditionally accepting the last outstanding offer or counteroffer.

21.  LIQUIDATED DAMAGES. (This Liquidated Damages paragraph is applicable only if initialed by both Parties).

THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH WOULD BE SUFFERED BY SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT. THEREFORE, IF, AFTER THE SATISFACTION OR WAIVER OF ALL CONTINGENCIES PROVIDED FOR THE BUYER'S BENEFIT, BUYER BREACHES THIS AGREEMENT, SELLER SHALL BE ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF   $100,000.00   UPON PAYMENT OF SAID SUM TO SELLER, BUYER SHALL BE RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY ESCROW CANCELLATION FEES AND TITLE COMPANY CHARGES SHALL BE PAID BY SELLER.

Seller Initials Buyer Initials

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22.  ARBITRATION OF DISPUTES. (See Paragraph 36).

23.  Miscellaneous.

23.1  Binding Effect.   This Agreement shall be binding on the Parties without regard to whether or not paragraphs 21 and 22 are initialed by both of the Parties, Paragraphs 21 and 22 are each incorporated into this Agreement only if initialed by both Parties at the time that the Agreement is executed.

23.2  Applicable Law.   This Agreement shall be governed by, and paragraph 22.3 is amended to refer to, the laws of the state in which the Property is located. Any litigation or arbitration between the Parties hereto concerning this Agreement shall be initiated in the county in which the Property is located.

23.3  Time of Essence.   Time is of the essence of this Agreement.

23.4  Counterparts.   This Agreement may be executed by Buyer and Seller In counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Escrow Holder, after verifying that the counterparts are identical except for the signatures, is authorized end instructed to combine the signed signature pages on one of the counterparts, which shall then constitute the Agreement.

23.5  Waiver of Jury Trial.   THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT.

23.6  Conflict.   Any conflict between the printed provisions of this Agreement and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. Seller and Buyer must initial any and all handwritten provisions.

23.7  1031 Exchange.   Both Seller and Buyer agree to cooperate with each other in the event that either or both wish to participate in a 1031 exchange.  Any party initiating an exchange shall bear all costs of such exchange.  The cooperating Party shall not have any liability (special or otherwise) for damages to the exchanging Party in the event that the sale is delayed and/or that the sale otherwise fails to qualify as a 1031 exchange.

23.8  Days.   Unless otherwise specifically indicated to the contrary, the word “days” as used in this Agreement shall mean and refer to calendar days.

24.  Disclosures Regarding The Nature of a Real Estate Agency Relationship.

24.1  The Parties and Brokers agree that their relationship(s) shall be governed by the principles set forth in the applicable sections of the California Civil Code, as summarized in paragraph 24.2.

24.2  When entering into a discussion with a real estate agent regarding a real estate transaction, a Buyer or Seller should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Buyer and Seller acknowledge being advised by the Brokers in this transaction, as follows:

(a) Seller’s Agent. A Seller’s agent under a listing agreement with the Seller acts as the agent for the Seller only. A Seller’s agent or subagent has the following affirmative obligations: (1) To the Seller: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Seller. (2) To the Buyer and the Seller: a. Diligent exercise of reasonable skills and care in performance of the agent’s duties. b. A duty of honest and fair dealing and good faith. c. A duly to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

(b) Buyer’s Agent. A selling agent can, with a Buyer’s consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has the following affirmative obligations. (1) To the Buyer: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Buyer. (2) To the Buyer and the Seller. a. Diligent exercise of reasonable skills and care in performance of the agent’s duties. b. A duty or honest and fair dealing and good faith. c. A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

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(c) Agent Representing Both Seller and Buyer. A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer. (1) In a dual agency situation, the agent has the following affirmative obligations to both the Seller and the Buyer: a. A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Seller or the Buyer. b. Other duties to the Seller and the Buyer as stated above in their respective sections (a) or (b) of this paragraph 24.2. (2) In representing both Seller and Buyer, the agent may not without the express permission of the respective Party, disclose to the other Party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered. (3) The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect their own interests. Buyer and Seller should carefully read all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.

(d) Further Disclosures. Throughout this transaction Buyer and Seller may receive more than one disclosure, depending upon the number of agents assisting in the transaction. Buyer and Seller should each read its contents each time it is presented, considering the relationship between them and the real estate agent in this transaction and that disclosure. Buyer and Seller each acknowledge receipt of a disclosure of the possibility of multiple representation by the Broker representing that principal. This disclosure may be part of a listing agreement, buyer representation agreement or separate document. Buyer understands that Broker representing Buyer may also represent other potential buyers, who may consider, make offers on or ultimately acquire the Property. Seller understands that Broker representing Seller may also represent other sellers with competing properties that may be of interest to this Buyer. Brokers have no responsibility with respect to any default or breach hereof by either Party. The Parties agree that no lawsuit or other legal proceeding involving any breach of duty, error or omission relating to this transaction may be brought against Broker more than one year after the Date of Agreement and that the liability (including court costs and attorneys’ fees), of any Broker with respect to any breach of duty, error or omission relating to this Agreement shall not exceed the fee received by such Broker pursuant to this Agreement; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

24.3  Confidential Information: Buyer and Seller agree to identify to Brokers as “Confidential” any communication or information given Brokers that is considered by such Party to be confidential.

25.  Construction of Agreement. In construing this Agreement, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Agreement. Whenever required by the context, the singular shall include the plural and vice versa. This Agreement shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.

26  Additional Provisions: Additional provisions of this offer, if any, are as follows or are attached hereto by an addendum or addenda consisting of paragraphs   27   through   39   . (If there are no additional provisions write “NONE”.)

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ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS AGREEMENT OR THE TRANSACTION TO WHICH IT RELATES.THE PARTIES ARE URGED TO:

1.        SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS AGREEMENT.

2.        RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PROPERTY. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE INTEGRITY AND CONDITION OF ANY STRUCTURES AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PROPERTY FOR BUYER’S INTENDED USE.

WARNING: IF THE PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THIS AGREEMENT MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.

NOTE:

1.        THIS FORM IS NOT FOR USE IN CONNECTION WITH THE SALE OF RESIDENTIAL PROPERTY.

2.        IF EITHER PARTY IS A CORPORATION, IT IS RECOMMENDED THAT THIS AGREEMENT BE SIGNED BY TWO CORPORATE OFFICERS.

The undersigned Buyer offers and agrees to buy the Property on the terms and conditions stated and acknowledges receipt of a copy hereof.

BROKER:					BUYER:
CBRE, Inc.					Pac West Group Inc. and/or Assignee
Attn:	Robert Gunness, Lic. 00943209				By:
Title:	First Vice President				Date:	12-21-16
Address:				5780 Fleet Street, Suite 100	Name Printed:				James Lytle
Carlsbd, CA 92008					Title:	PRESIDENT
Telephone:				(760) 438-8524	Telephone:			(     )
Facsimile:			(760) 438-8592		Facsimile:		(     )
Email:		rob.gunness@cbre.com			Email:	JLytle@Rancongroup.com
Federal ID No.
					By:
Broker/Agent BRE License #:					Date:
					Name Printed:
					Title:
					Address:
					Telephone:			(     )
					Facsimile:		(     )
					Email:
					Federal ID No.

27.  Acceptance.

27.1  Seller accepts the foregoing offer to purchase the Property and hereby agrees to sell the Property to Buyer on the terms and conditions therein specified.

27.2  Seller acknowledges that Brokers have been retained to locate a Buyer and are the procuring cause of the purchase and sale of the Property set forth in this Agreement. In consideration or real estate brokerage service rendered by Brokers, Seller agrees to pay Brokers a real estate Brokerage Fee in a sum equal to   5%   of the Purchase Price to be divided between the Brokers as follows: Seller’s Broker 2.5% and Buyer’s Broker   2.5%  .

27.3  Seller acknowledges receipt of a copy hereof and authorizes Brokers to deliver a signed copy to Buyer.

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NOTE: A PROPERTY INFORMATION SHEET IS REQUIRED TO BE DELIVERED TO BUYER BY SELLER UNDER THIS AGREEMENT.

BROKER:					SELLER:
CBRE, Inc.					Calavo Growers, Inc.
Attn:	Kevin Kelly				By:
Title:	Senior Vice President				Date:	12-20-2016
Address:			2100 Mc Kinney, Suite 700, Dallas, TX		Name Printed:				Lecoil E Cole
75201					Title:	CEO
Telephone:				(214) 979-6359	Telephone:			(     )
Facsimile:				(818) 212-2710	Facsimile:		(     )
Email:		kevin.kelly@cbre.com			Email:
Federal ID No.:
					By:
					Date:
Broker/Agent BRE License #:					Name Printed:
					Title:
					Address:
					Telephone:			(     )
					Facsimile:		(     )
					Email:
					Federal ID No.:

NOTICE:  These forms are often modified to meet changing requirements of law and industry needs.

Always write or call to make sure you are utilizing the most current form:

AIR Commercial Real Estate Association, 500 N Brand Blvd, Suite 900, Glendale, CA 91203.

Telephone No. (213) 687-8777. Fax No.: (213) 687-8616.

© Copyright 2003 By AIR Commercial Real Estate Association.

All rights reserved.

No part of these works may be reproduced in any form without permission in writing.

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ADDENDUM

to

Standard Offer, Agreement and Escrow Instructions

For Purchase of Real Estate Dated December 14, 2016

Regarding

28410 Vincent Moraga Drive

Temecula, California

27.  Buyer's Entry:

Buyer’s right of entry as provided in paragraph 14 of the Agreement is modified as follows: Buyer shall provide Seller with evidence of insurance coverage reasonably satisfactory to Seller and provide an endorsement demonstrating that seller has been added as an additional insured to such coverage. Notwithstanding any other provision of this Agreement, Buyer may not perform any sampling or invasive testing of environmental media without Seller’s prior written consent. If the inspection, including a Phase I Environmental Inspection, recommends a further inspection requiring borings or other invasive testing, Buyer shall prepare and deliver to Seller during the Contingency Period a written proposal for such testing setting forth the proposed scope of the invasive testing (the “Invasive Testing Proposal”), which Seller may approve or disapprove in its sole and absolute discretion. The scope of any environmental inspection to be conducted by Buyer’s environmental consultant in excess of a Phase I environmental assessment shall be in accordance with the terms of the agreed upon Invasive Testing Proposal. Nothing herein shall authorize any subsurface testing or drilling on the Property by Buyer or its environmental consultant unless specifically provided for in the agreed upon Invasive Testing Proposal. If Seller disapproves Buyer’s request for invasive testing (Phase II Investigation), and Buyer elects to terminate this Agreement during the Contingency Period, Buyer shall be entitled, as its sole remedy, to terminate this Agreement and receive from Escrow the return of its Deposit less the independent consideration of $100, and shall return all tests, surveys, studies, maps, plans, and permits related to the Property which Buyer has previously received from Seller as well as all studies, reports and feasibility data collected by Buyer with regard to the Property.

28.  Seller's Representations, Limitation:

For the purpose of this Agreement, all representations made by Seller are based on the actual, personal awareness of Mike Browne who is the person currently with Seller who is the most knowledgeable about the Property without any duty of inquiry or investigation by him. However, Mike Browne shall have no personal liability to Buyer in connection with such representations or any alleged failure to disclose.

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29.  Assignment:

This Agreement shall be personal to Buyer. However, Buyer may, at any time prior to five (5) days before the Expected Closing Date, assign its rights and obligations under this Agreement to any person or entity that controls, is controlled by, under common control of Buyer (“Affiliated Assignee”) by giving Seller (i) notice of that assignment and (ii) a written assignment agreement and a copy of supporting documents regarding the ownership or management of the Affiliated Assignee. Seller acknowledges and agrees that Buyer intends to create a newly formed California limited liability company that will take title to the Property, in which the Buyer will (i) have a controlling ownership interest, or (ii) be the general partner or managing member, and it will be deemed an approved Affiliated Assignee. Upon such assignment, the Affiliated Assignee shall be credited with Buyer’s Deposit. Buyer shall not otherwise assign, agree to assign, offer to assign or solicit offers to purchase Buyer’s interest in or right to purchase the Property without first obtaining the written approval of Seller, which approval shall be in Seller’s sole and absolute discretion.

Any assignment, agreement, offer or solicitation by Buyer (except as to potential investors in the Affiliated Assignee) to any other person or entity, without Seller’s written approval, shall constitute a default under this Agreement and shall terminate and void this Agreement and any escrow pursuant thereto. No written consent by Seller under this provision shall be deemed a waiver by Seller of any of the provisions of this paragraph, except to the extent expressly provided in the consent. Any assignment shall not relieve Buyer of Buyer’s obligation herein unless Seller expressly releases Buyer in writing therefrom.

30.  Continued Right of Possession:

(a)From the Close of Escrow through August 31, 2017, Buyer grants to Seller full and unfettered occupancy rights to occupy and use the southwest pre-cooler area (about 4,500 sf), the shipping office, and associated loading and truck court for rent of $100 per month or any portion thereof. Seller shall be responsible for all utility expenses during this period and shall continue to maintain GCL and Property Damage Liability insurance coverage, naming Buyer as an additional named insured. Seller shall also have unfettered access privileges for up to 90 days after the Close of Escrow, to remove its personal property, equipment, trade fixtures and the items listed on Exhibit “A” hereto from the Property.

(b)For the period of ninety (90) days following the Close of Escrow, Seller shall be allowed to store its equipment and other personal property in the warehouse for rent in the amount of $1.00 per month. Following such removal and the end of its occupancy rights, the Property shall be delivered to Buyer free of personal property, including but not limited to, equipment and racking and in broom clean condition. In addition, any racking bolts shall be removed or cut flush with the floor.

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31.  Deed Restriction:

Buyer acknowledges that the grant deed transferring title to the Property to Buyer shall contain a deed restriction forbidding its use or ownership by another avocado packer, distributor or producer for a period of 10 years following the Close of Escrow and that a violation of such restriction can remedied by an injunction and/or monetary damages as well as the recovery of Seller’s costs for enforcement including reasonable attorneys’ fees.

32.  Real Property 1031 Reverse Exchange:

Buyer acknowledges that the Seller will use the proceeds from this transaction to complete an existing 1031 Real Property Reverse Exchange and that time is of the essence in completing this transaction. Both Buyer and Seller will cooperate with each other at no material expense to Buyer.

33.Severability:

In case one or more of the provisions of this Agreement shall be determined to be invalid, illegal or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions shall not be affected and shall be enforceable to the extent consistent with the intent of the Parties.

34.  Waiver:

No waiver of any of the provisions of this Agreement shall be deemed to constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall any waiver be a continuing waiver. No waiver of any of the provisions of this Agreement shall be binding unless executed in writing by the party making the waiver.

35.  Entire Agreement:

This Agreement supersedes any prior or contemporaneous letters of intent, agreements, negotiations, and communications, oral or written, and contains the entire agreement between Buyer and Sellers as to the subject matter hereof. No subsequent agreement, representation, or promise made by either party hereto, or by or to an employee, officer, agent, or representative of either party hereto shall be of any effect unless it is in writing and executed by the party to be bound thereby.

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36.  Arbitration of Disputes:

(a)IF ANY CLAIM OR DISPUTE ARISES UNDER THIS AGREEMENT, THEN SUCH DISPUTE SHALL BE RESOLVED BY ARBITRATION TO BE CONDUCTED IN THE COUNTY OF RIVERSIDE ADMINISTERED BY JAMS BEFORE A SINGLE ARBITRATOR PURSUANT TO ITS COMPREHENSIVE ARBITRATION RULES AND PROCEDURES OR ITS STREAMLINED ARBITRATION RULES AND PROCEDURES, AS APPLICABLE, EXCEPT THAT SUCH RULES ARE MODIFIED AS SET FORTH HEREIN. THE ARBITRATION SHALL BE CONDUCTED AND THE ISSUES DETERMINED IN COMPLIANCE WITH ALL JUDICIAL RULES AND ALL STATUTORY AND DECISIONAL LAW OF THE STATE OF CALIFORNIA. THE PREVAILING PARTY IN THE ARBITRATION SHALL BE ENTITLED TO RECEIVE AS PART OF THE JUDGMENT IN ITS FAVOR AN AWARD OF ALL ACTUAL ATTORNEYS FEES AND COSTS INCURRED WITH RESPECT TO THE ARBITRATION, PLUS INTEREST AT THE HIGHEST RATE PERMITTED BY LAW AS NOT BEING USURIOUS FROM AND AS OF THE DATE OF THE ALLEGED BREACH. THE JUDGMENT ENTERED UPON THE DECISION OF THE ARBITRATOR SHALL BE SUBJECT TO ALL POST-TRIAL PROCEDURES AND TO APPEAL IN THE SAME MANNER AS AN APPEAL FROM ANY ORDER OF JUDGMENT IN A CIVIL ACTION.

(b)PRIOR TO THE APPOINTMENT OF THE ARBITRATOR, AND WITHIN 10 DAYS FROM THE DATE OF COMMENCEMENT OF THE ARBITRATION, THE PARTIES SHALL SUBMIT THE DISPUTE TO JAMS FOR MEDIATION. THE PARTIES WILL COOPERATE WITH JAMS AND WITH ONE ANOTHER IN SELECTING A MEDIATOR FROM JAMS PANEL OF NEUTRALS, AND IN PROMPTLY SCHEDULING THE MEDIATION PROCEEDINGS. THE PARTIES COVENANT THAT THEY WILL PARTICIPATE IN THE MEDIATION IN GOOD FAITH, AND THAT THEY WILL SHARE EQUALLY IN ITS COSTS. ALL OFFERS, PROMISES, CONDUCT AND STATEMENTS, WHETHER ORAL OR WRITTEN, MADE IN THE COURSE OF THE MEDIATION BY ANY OF THE PARTIES, THEIR AGENTS, EMPLOYEES, EXPERTS AND ATTORNEYS, AND BY THE MEDIATOR OR ANY JAMS EMPLOYEES, ARE CONFIDENTIAL, PRIVILEGED AND INADMISSIBLE FOR ANY PURPOSE, INCLUDING IMPEACHMENT, IN ANY ARBITRATION OR OTHER PROCEEDING INVOLVING THE PARTIES, PROVIDED THAT EVIDENCE THAT IS OTHERWISE ADMISSIBLE OR DISCOVERABLE SHALL NOT BE RENDERED INADMISSIBLE OR NON-DISCOVERABLE AS A RESULT OF ITS USE IN THE MEDIATION, IF THE DISPUTE IS NOT RESOLVED WITHIN 30 DAYS FROM THE DATE OF THE SUBMISSION OF THE DISPUTE TO MEDIATION (OR SUCH LATER DATE AS THE PARTIES MAY MUTUALLY AGREE IN WRITING), THE ADMINISTRATION OF THE ARBITRATION SHALL PROCEED FORTHWITH. THE MEDIATION MAY CONTINUE, IF THE PARTIES SO AGREE, AFTER THE APPOINTMENT OF THE ARBITRATOR. THE MEDIATOR SHALL BE DISQUALIFIED FROM SERVING AS ARBITRATOR IN THE CASE. THE PENDENCY OF A MEDIATION SHALL NOT PRECLUDE A PARTY FROM

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SEEKING PROVISIONAL REMEDIES IN AID OF THE ARBITRATION FROM A COURT OF APPROPRIATE JURISDICTION, AND THE PARTIES AGREE NOT TO DEFEND AGAINST ANY APPLICATION FOR PROVISIONAL RELIEF ON THE GROUND THAT A MEDIATION IS PENDING.

(c)THIS ARBITRATION AGREEMENT MAY BE SPECIFICALLY ENFORCED BY THE FILING OF A COMPLAINT OR PETITION OR MOTION SEEKING SPECIFIC ENFORCEMENT OR BY MOTION DIRECTED TO THE ORANGE COUNTY SUPERIOR COURT.

(d)NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION, ABOVE. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION, ABOVE, TO NEUTRAL ARBITRATION.

BUYER:SELLER:

37.  Jurisdiction and Venue:

Subject to paragraph 36, the parties hereby agree that any action, dispute, proceeding arbitration or claim arising out of or under this Agreement shall be brought in Riverside, and hereby submit to and consent to the jurisdiction of the federal and state courts located within that County. The parties shall not raise in connection therewith, and hereby waive any defenses based upon the venue, the inconvenience of the forum, the lack of personal jurisdiction or the like in any such action or suit brought in Riverside. Nothing herein shall restrict the parties from resorting to the courts of any jurisdiction in order to collect, enforce or execute any judgment obtained in the federal or state courts in Riverside.

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38.  Backup Offers:

Notwithstanding anything to the contrary contained elsewhere herein to the contrary, Buyer acknowledges that because Seller is attempting to accomplish a time sensitive reverse 1031 real property exchange, time is of the essence with respect to this proposed transaction, and Seller needs to reserve the right to obtain “back up” offers on the Property during the Contingency Period and before Buyer waives all contingencies and its Deposit becomes non-refundable. Seller agrees to notify all other potential buyers of Buyer’s rights in and to the Property and to condition any such buyer proposals or offers on the fact that they are subordinate to Buyer’s rights in and to the Property. Seller agrees that once Buyer has waived all Buyer’s Contingencies in this Agreement, it will cease marketing the Property and will not accept or discuss any other proposal with any third party.

39.  Confidentiality:

Notwithstanding anything to the contrary contained elsewhere herein, Buyer hereby acknowledges that all information furnished by Seller to Buyer or obtained by Buyer in the course of Buyer’s investigation of the Property, or in any way arising from or relating to any and all studies or entries upon the Property by Buyer, its agents or representatives, shall be treated as confidential information, and further, that if any such confidential information is disclosed to third parties (except Buyer’s potential investors in the Affiliated Assignee who agree to be bound by this confidentiality provision), Seller may suffer damages and irreparable harm. The Buyer further agrees to furnish Seller with copies of all Due Diligence Reports or other studies (except Buyer’s internal confidential analysis) made in connection with Purchaser’s inspection, study or investigation of the Property within a reasonable time (not to exceed ten (10) days) of receipt of same by Buyer and, in the event this Agreement is terminated, to return to Seller all information, studies, and Due Diligence Reports Buyer or Buyer’s agents have obtained or commissioned with respect to the Property or the condition of the Property together with a!! documents Seller provided to Buyer. In connection therewith, Buyer hereby agrees that Buyer will not make any press release (except in the form mutually agreed upon by Seller and Buyer) or other public disclosure concerning this transaction. This provision shall survive the early termination of this Agreement; provided, however, that if Buyer purchases the Property, the terms of this paragraph will cease to apply except for Buyer’s agreement to not make a press release or other public disclosure concerning the confidential aspects of this transaction.

Buyer acknowledges, however, that Seller, as a public reporting company, may be required by legal, regulatory or internal reporting requirements and Seller must reserve the right herein to make public disclosure (such as press releases and SEC filings) regarding the transaction contemplated by this Agreement

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including the name of the Buyer and the purchase price paid for the Property without the prior consent of Buyer.

SELLER  BUYER

Calavo Growers, Inc.,		Pac West Group, Inc.
By:		By:
	Name:		Name:
	Title:		Title:

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EXHIBIT “A”

To

STANDARD OFFER, AGREEMENT

AND ESCROW INSTRUCTIONS FOR

PURCHASE OF REAL ESTATE

LIST OF PROPERTY THAT SELLER WILL KEEP AND REMOVE FROM THE PROPERTY:

To be completed by Seller and Buyer and deposited with Escrow Holder by January 6, 2017.

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EXHIBIT “B”

To

STANDARD OFFER, AGREEMENT

AND ESCROW INSTRUCTIONS FOR

PURCHASE OF REAL ESTATE

LIST OF DOCUMENTS THAT SELLER WILL ORGANIZE AND MAKE AVAILABLE TO BUYER AT THE PROPERTY:

1. Current preliminary title report and copies of all documents reflected thereon and any ALTA Survey of the Property

2. Any existing leases and current rent roll

3. Current property tax bill.

4. All plans, maps and surveys

5. All soils, seismic, Phase I Environmental, engineering and other reports relating to the Property

6. Intentionally deleted

7. Any agreements with adjoining landowners

8. Any Building Plans

9. Existing Insurance Policies

10. Refrigeration System, Chiller, Boiler condition and maintenance reports for the last two years.

11. All service contracts relating to the Property

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements Form S-3 No. 333-180597, Form S-8 No. 333-132175, Form S-8 No. 333-179101, Form S-3 No. 333-191702, and Form S-3 No. 333-199754 of our reports dated December 23, 2016, relating to the consolidated financial statements and financial statement schedule of Calavo Growers, Inc. and subsidiaries (the Company), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Calavo Growers, Inc. for the year ended October 31, 2016.

/s/ Deloitte & Touche LLP

Costa Mesa, California

December 23, 2016

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 No. 333-180597) of Calavo Growers, Inc.,

(2) Registration Statement (Form S-8 No. 333-132175) pertaining to the 2005 Stock Incentive Plan of Calavo Growers, Inc.,

(3) Registration Statement (Form S-8 No. 333-179101) pertaining to the 2011 Management Incentive Plan of Calavo Growers, Inc.,

(4) Registration Statement (Form S-3 No. 333-191702) of Calavo Growers, Inc., and

(5) Registration Statement (Form S-3 No. 333-199754) of Calavo Growers, Inc.;

of our report dated January 30, 2015, with respect to the consolidated financial statements and schedule of Calavo Growers, Inc., included in this Annual Report (Form 10-K) of Calavo Growers, Inc. for the year ended October 31, 2016.

/s/ Ernst & Young LLP

Los Angeles, California

December 23, 2016

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Lecil E. Cole, certify that:

1. I have reviewed this annual report on Form 10-K of Calavo Growers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  December 23, 2016	/s/  Lecil E. Cole
	Lecil E. Cole
	Chairman of the Board of Directors,
	and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, B. John Lindeman, certify that:

1. I have reviewed this annual report on Form 10-K of Calavo Growers, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

. JK
Date:  December 23, 2016	/s/  B. John Lindeman
	B. John Lindeman
	Chief Financial Officer and Corporate Secretary
	(Principal Financial Officer)

EX-32

Exhibit 32

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

Each of the undersigned, the Chairman of the Board and Chief Executive Officer and Chief Operating Officer, Chief Financial Officer, and Corporate Secretary of Calavo Growers, Inc. (the Company), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Company’s Annual Report on Form 10-K for the year ended October 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the Report), fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  December 23, 2016

/s/  Lecil E. Cole

Lecil E. Cole

Chairman of the Board and

Chief Executive Officer

. John

/s/  B. John Lindeman

B. John Lindeman

Chief Financial Officer and

Corporate Secretary

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Oct. 31, 2016	Nov. 30, 2016	Apr. 30, 2016
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Oct. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Entity Registrant Name	CALAVO GROWERS INC
Entity Central Index Key	0001133470
Current Fiscal Year End Date	--10-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		17,440,408
Entity Public Float			$ 866.3

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Current assets:
Cash and cash equivalents	$ 13,842	$ 7,171
Accounts receivable, net of allowances of $2,063 (2016) $2,312 (2015)	70,101	58,606
Inventories, net	31,849	26,351
Prepaid expenses and other current assets	14,402	15,763
Advances to suppliers	4,425	2,820
Income taxes receivable	334	6,111
Total current assets	134,953	116,822
Property, plant, and equipment, net	87,837	69,448
Investment in Limoneira Company	34,036	27,415
Investment in unconsolidated entities	24,652	19,720
Deferred income taxes	14,944	19,277
Goodwill	18,262	18,262
Other assets	13,249	14,001
Total assets	327,933	284,945
Current liabilities:
Payable to growers	20,965	3,924
Trade accounts payable	22,447	19,600
Accrued expenses	31,095	21,311
Short-term borrowings	19,000	36,910
Dividend payable	15,696	13,907
Current portion of long-term obligations	138	2,206
Total current liabilities	109,341	97,858
Long-term liabilities:
Long-term obligations, less current portion	445	586
Deferred rent	2,307
Deferred income taxes		234
Total long-term liabilities	2,752	820
Commitments and contingencies
Noncontrolling interest, Calavo Salsa Lisa	771	285
Shareholders' equity:
Common stock ($0.001 par value, 100,000 shares authorized; 17,440 (2016) and 17,384 (2015) shares issued and outstanding)	17	17
Additional paid-in capital	149,748	147,063
Accumulated other comprehensive income	6,544	2,419
Noncontrolling interest	962	1,011
Retained earnings	57,798	35,472
Total shareholders' equity	215,069	185,982
Total liabilities and shareholders' equity	$ 327,933	$ 284,945

XML

CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) shares in Thousands, $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Statement of Financial Position [Abstract]
Allowances of accounts receivable	$ 2,063	$ 2,312
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	17,440	17,384
Common stock, shares outstanding	17,440	17,384

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Income Statement [Abstract]
Net sales	$ 935,679	$ 856,824	$ 782,510
Cost of sales	828,145	771,597	711,282
Gross margin	107,534	85,227	71,228
Selling, general and administrative	46,440	41,558	36,605
Contingent consideration related to RFG acquisition			51,082
Operating income (loss)	61,094	43,669	(16,459)
Losses from unconsolidated entities	(570)	(41)	(12)
Interest income	132	77	228
Interest expense	(756)	(830)	(983)
Gain on deconsolidation of FreshRealm			12,622
Other income, net	428	417	473
Income (loss) before provision for income taxes	60,328	43,292	(4,131)
Provision (benefit) for income taxes	21,869	16,093	(3,916)
Net income (loss)	38,459	27,199	(215)
Less: Net (income) loss attributable to noncontrolling interest	(437)		312
Net income attributable to Calavo Growers, Inc.	$ 38,022	$ 27,199	$ 97
Calavo Growers, Inc.'s net income per share:
Basic	$ 2.19	$ 1.57	$ 0.01
Diluted	$ 2.18	$ 1.57	$ 0.01
Number of shares used in per share computation:
Basic	17,347	17,295	15,765
Diluted	17,431	17,363	17,220

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 38,459	$ 27,199	$ (215)
Other comprehensive income (loss), before tax:
Unrealized investment gains (losses) arising during period	6,621	(16,940)	(1,175)
Income tax benefit (expense) related to items of other comprehensive loss	(2,496)	6,646	474
Other comprehensive income (loss), net of tax	4,125	(10,294)	(701)
Comprehensive income (loss)	42,584	16,905	(916)
Less: Net (income) loss attributable to noncontrolling interest	(437)		312
Comprehensive income (loss) – Calavo Growers, Inc.	$ 42,147	$ 16,905	$ (604)

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member] FreshRealm	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income [Member]	Retained Earnings [Member] Calavo Salsa Lisa	Retained Earnings [Member] FreshRealm	Retained Earnings [Member]	Noncontrolling Interest [Member] FreshRealm	Noncontrolling Interest [Member] Avocados de Jalisco noncontrolling interest	Noncontrolling Interest [Member]	Calavo Salsa Lisa	FreshRealm	Avocados de Jalisco noncontrolling interest	Total
Beginning balance at Oct. 31, 2013	$ 15		$ 70,790	$ 13,414			$ 35,054			$ (180)				$ 119,093
Beginning balance, Shares at Oct. 31, 2013	15,720
Exercise of stock options and income tax benefit, Value			318											318
Exercise of stock options and income tax benefit, Shares	8
Stock compensation expense			727											727
Restricted stock issued, Shares	35
Issuance of stock related to RFG Contingent consideration and non-cash compensation, net of tax, Value	$ 2		67,288											67,290
Issuance of stock related to RFG Contingent consideration and non-cash compensation, net of tax, Shares	1,532
Unrealized gain (loss) on Limoneira investment, net				(701)										(701)
Dividend declared to shareholders							(12,971)							(12,971)
Noncontrolling interest contribution		$ 5,373						$ 4,627				$ 10,000
Deconsolidation of FreshRealm								(4,030)				(4,030)
Net income					$ 97			$ (417)			$ 97	(417)		97
Ending balance at Oct. 31, 2014	$ 17		144,496	12,713			22,180							179,406
Ending balance, Shares at Oct. 31, 2014	17,295
Exercise of stock options and income tax benefit, Value			360											360
Exercise of stock options and income tax benefit, Shares	13
Stock compensation expense			2,108											2,108
Restricted stock issued, Shares	76
Unrealized gain (loss) on Limoneira investment, net				(10,294)										(10,294)
Dividend declared to shareholders							(13,907)							(13,907)
Noncontrolling interest contribution									$ 1,011				$ 1,011
Net income						$ 27,199						$ 27,199		27,199
Ending balance at Oct. 31, 2015	$ 17		147,063	2,419			35,472			1,011				185,982
Ending balance, Shares at Oct. 31, 2015	17,384
Restricted stock issued			99											99
Exercise of stock options and income tax benefit, Value			551											551
Exercise of stock options and income tax benefit, Shares	5
Stock compensation expense			2,134											2,134
Restricted stock issued, Shares	51
Unrealized gain (loss) on Limoneira investment, net				4,125										4,125
Dividend declared to shareholders							(15,696)							(15,696)
Noncontrolling interest contribution									$ (49)				$ (49)
Net income							38,022							38,022
Ending balance at Oct. 31, 2016	$ 17		$ 149,748	$ 6,544			$ 57,798			$ 962				$ 215,069
Ending balance, Shares at Oct. 31, 2016	17,440

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (PARENTHETICAL) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Statement of Stockholders' Equity [Abstract]
Tax benefit related to stock based compensation	$ 447	$ 111	$ 191

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Cash Flows from Operating Activities:
Net income (loss)	$ 38,459	$ 27,199	$ (215)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	8,812	8,038	6,926
Provision for losses on accounts receivable	47	75	154
Loss from unconsolidated entities	570	109	15
Interest on contingent consideration			37
Contingent consideration and non-cash compensation expense related to the acquisition of RFG			53,611
Contingent consideration related to acquisition of Salsa Lisa		15	(491)
Stock compensation expense	2,134	2,108	727
Gain on deconsolidation of FreshRealm			(12,622)
Loss on disposal of property, plant, and equipment	248	147	115
Excess tax benefit from stock-based compensation	(447)
Deferred income taxes	1,603	3,183	(15,076)
Effect on cash of changes in operating assets and liabilities:
Accounts receivable	(11,542)	(2,063)	(1,712)
Inventories, net	(5,498)	4,713	(2,302)
Prepaid expenses and other current assets	(5,097)	(1,780)	(5,614)
Advances to suppliers	(1,605)	438	(45)
Income taxes receivable/payable	6,224	(3,465)	(648)
Other assets	683	441	48
Payable to growers	18,084	(1,889)	(6,985)
Deferred rent	1,697
Trade accounts payable and accrued expenses	7,596	14	8,624
Net cash provided by operating activities	61,968	37,283	24,547
Cash Flows from Investing Activities:
Acquisitions of property, plant, and equipment	(21,859)	(18,099)	(11,613)
Investment in unconsolidated entities	(3,900)	(1,800)	(125)
Proceeds received for repayment of San Rafael note	28	386
Proceeds from liquidation of Calavo Chile		262
Decrease in cash due to deconsolidation of FreshRealm			(6,813)
Infrastructure advance to Agricola Belher		(1,000)
Loan to Agricola Don Memo		(803)	(3,202)
Proceeds received for repayment of loan to Agricola Don Memo	4,000
Net cash used in investing activities	(21,731)	(21,054)	(21,753)
Cash Flows from Financing Activities:
Payment of dividend to shareholders	(13,907)	(12,971)	(11,005)
Proceeds from revolving credit facility	217,230	255,350	242,340
Payments on revolving credit facility	(235,140)	(254,340)	(240,430)
Deferred financing costs	(91)
Payments on long-term obligations	(2,209)	(5,098)	(5,160)
Proceeds from stock option exercises	104	249	127
Excess tax benefit from stock-based compensation	447	191	59
Net cash used in financing activities	(33,566)	(15,802)	(4,069)
Net increase (decrease) in cash and cash equivalents	6,671	427	(1,275)
Cash and cash equivalents, beginning of period	7,171	6,744	8,019
Cash and cash equivalents, end of period	13,842	7,171	6,744
Cash paid during the year for:
Interest	741	843	986
Income taxes	14,425	15,495	11,355
Noncash Investing and Financing Activities:
Issuance of stock related to RFG contingent consideration			66,988
Declared dividends payable	15,696	13,907	12,971
Investment in FreshRealm included in accrued expenses	1,600
Construction in progress included in trade accounts payable and accrued expenses	4,574	529
Noncash assets received for issuance of noncontrolling interest		194
Collection for Agricola Belher Infrastructure Advance	1,045	845	845
Unrealized holding gains (losses)	$ 6,621	(16,940)	(1,175)
FreshRealm
Cash Flows from Financing Activities:
Proceeds from issuance of stock			$ 10,000
Avocados de Jalisco noncontrolling interest
Cash Flows from Financing Activities:
Proceeds from issuance of stock		$ 817

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Description of the business

12 Months Ended

Oct. 31, 2016

Accounting Policies [Abstract]

Description of the business

1. Description of the business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and Renaissance Food Group, LLC (RFG).    

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Basis of Presentation and Significant Accounting Policies

12 Months Ended

Oct. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States.

Our consolidated financial statements include the accounts of Calavo Growers, Inc. and our wholly owned subsidiaries, Calavo de Mexico S.A. de C.V., Calavo Foods de Mexico S.A. de C.V., Calavo Growers de Mexico, S. de R.L. de C.V. ( Calavo Growers de Mexico), Maui Fresh International, Inc. (Maui), Hawaiian Sweet, Inc. (HS), Hawaiian Pride, LLC (HP), Avocados de Jalisco, S.A.P.I. de C.V. (Avocados de Jalisco), in which we have a 80 percent ownership interest, and RFG.  We consolidate our entity Calavo Salsa Lisa, LLC (CSL), in which we currently have a 65 percent ownership interest.  All intercompany accounts and transactions have been eliminated in consolidation. 

Cash and Cash Equivalents

We consider all highly liquid financial instruments purchased with an original maturity date of three months or less to be cash equivalents.  The carrying amounts of cash and cash equivalents approximate their fair values.

Prepaid Expenses and Other Current Assets

     Prepaid expenses and other current assets consist primarily of non-trade receivables, infrastructure advances and prepaid expenses. Non-trade receivables were $11.6 million and $12.3 million at October 31, 2016 and 2015.  Included in non-trade receivables are $8.4 million and $5.7 million related to the current portion of Mexican IVA (i.e. value-added) taxes at October 31, 2016 and 2015.  In addition, included in non-trade receivables at October 31, 2015 is $4.0 million related to the bridge loan to the then newly created joint venture Agricola Don Memo. Infrastructure advances are discussed below.  Prepaid expenses totaling $2.8 million and $2.3 million at October 31, 2016 and 2015, are primarily for insurance, rent and other items.

Inventories

Inventories are stated at the lower of cost or market.  Cost is computed on a monthly weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.  Costs included in inventory primarily include the following: fruit, picking and hauling, overhead, labor, materials and freight. 

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are stated at cost and amortized over the lesser of their estimated useful lives or the term of the lease, using the straight-line method.  Useful lives are as follows:  buildings and improvements - 7 to 50 years; leasehold improvements - the lesser of the term of the lease or 7 years; equipment - 7 to 25 years; information systems hardware and software – 3 to 10 years.  Significant repairs and maintenance that increase the value or extend the useful life of our fixed asset are capitalized.  Replaced fixed assets are written off.  Ordinary maintenance and repairs are charged to expense. 

We capitalize software development costs for internal use beginning in the application development stage and ending when the asset is placed into service.  Costs capitalized include coding and testing activities and various implementation costs.  These costs are limited to (1) external direct costs of materials and services consumed in developing or obtaining internal-use computer software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software project to the extent of the time spent directly on the project; and (3) interest cost incurred while developing internal-use computer software.  See Note 4 for further information.

Goodwill and Acquired Intangible Assets

Goodwill is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment.  Goodwill impairment testing is a two-step process.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test would be unnecessary.  If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.  If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess.  Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units.  The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses.  For fiscal years 2016 and 2015, we performed our annual assessment of goodwill and noted no impairments existed as of October 31, 2016 and 2015.

Long-lived Assets

Long-lived assets, including fixed assets and intangible assets (other than goodwill), are continually monitored and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable.  The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset and its eventual disposition.  The estimate of undiscounted cash flows is based upon, among other things, certain assumptions about future operating performance, growth rates and other factors.  Estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to the business model or changes in operating performance.  If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, an impairment loss will be recognized, measured as the amount by which the carrying value exceeds the fair value of the asset.  For fiscal year 2016 and 2015, we performed our annual assessment of long-lived assets and determined that no impairment existed as of October 31, 2016 and 2015.

Investments

We account for non-marketable investments using the equity method of accounting if the investment gives us the ability to exercise significant influence over, but not control, an investee.  Significant influence generally exists when we have an ownership interest representing between 20% and 50% of the voting stock of the investee.  Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions. 

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and Agricola Don Memo, S.A. de C.V. (Don Memo). Don Memo, a Mexican corporation formed in July 2013, is engaged in the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  Belo and Calavo Sub have an equal one-half ownership interest in Don Memo.  Pursuant to a management service agreement, Belo, through its officers and employees, shall have day-to-day power and authority to manage the operations. In fiscal 2016 and 2015, we contributed $2.3 million and $1.0 million as investments in Don Memo. These investment contributions represent Calavo Sub’s 50% ownership in Don Memo, which is included in investment in unconsolidated entities on our balance sheet. In fiscal 2015 and 2014, we advanced Don Memo $0.8 million and $3.2 million. These monies, totaling $4.0 million, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. We had recorded such loans in prepaids and other current assets. We use the equity method to account for this investment. 

Effective May 2014, we closed our Second Amended and Restated Limited Liability Company Agreement by and among FreshRealm and the ownership members of FreshRealm.  Pursuant to this agreement, Impermanence, LLC (Impermanence) was admitted as an ownership member of FreshRealm.  Impermanence contributed $10.0 million to FreshRealm for 28.6% ownership.  As a result of the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8%.  The minority/non-Calavo unit-holders held substantive participating rights.  These rights existed primarily in two forms:  (1) two out of a total of four board of director seats and (2) a provision in the Agreement that states that for situations for which the approval of the Members, as defined, is required by the Agreement, the Members shall act by Super-Majority Vote.  As such, Calavo could not control FreshRealm through its two board of director seats, nor its 50.8% ownership.  Based on the foregoing, we deconsolidated FreshRealm in May 2014. In the third and fourth quarter of fiscal 2015, FreshRealm issued additional units to various parties, which reduced our ownership percentage to approximately 49% at October 31, 2015. In the fourth quarter of fiscal 2016, FreshRealm completed another round of financing in which Calavo invested $3.2 million.  During that round of financing, FreshRealm issued additional units to various parties, which reduced our ownership percentage further to approximately 46% at October 31, 2016. 

We estimated the fair value of our noncontrolling interest in FreshRealm by performing a fair value measurement.  This analysis was conducted with the consultation from a third party consulting firm.  Our investment of $19.4 million in FreshRealm million has been recorded as investment in unconsolidated subsidiaries on our balance sheet. 

Marketable Securities

Our marketable securities consist of our investment in Limoneira Company (Limoneira) stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are considered available for sale securities based on management’s intent with respect to such securities and are carried at fair value as determined from quoted market prices.  The estimated fair value, cost, and gross unrealized gain related to such investment was $34.0 million, $23.5 million and $10.5 million as of October 31, 2016.  The estimated fair value, cost, and gross unrealized gain related to such investment was $27.4 million, $23.5 million and $4.0 million as of October 31, 2015. 

Advances to Suppliers

We advance funds to third-party growers primarily in Mexico for various farming needs.  Typically, we obtain collateral (i.e. fruit, fixed assets, etc.) that approximates the value at risk, prior to making such advances.  We continuously evaluate the ability of these growers to repay advances in order to evaluate the possible need to record an allowance.  No such allowance was required at October 31, 2016, nor October 31, 2015.

Pursuant to our distribution agreement, which was amended in fiscal 2011, with Agricola Belher (Belher) of Mexico, a producer of fresh vegetables, primarily tomatoes, for export to the U.S. market, Belher agreed, at their sole cost and expense, to harvest, pack, export, ship, and deliver tomatoes exclusively to our company, primarily our Arizona facility.  In exchange, we agreed to sell and distribute such tomatoes, make advances to Belher for operating purposes, provide additional advances as shipments are made during the season (subject to limitations, as defined), and return the proceeds from such tomato sales to Belher, net of our commission and aforementioned advances.  Pursuant to such amended agreement with Belher, we advanced Belher a total of $3.0 million, up from $2.0 million in the original agreement, during fiscal 2011.  Additionally, the amended agreement calls for us to continue to advance $3.0 million per annum for operating purposes through 2019.  These advances will be collected through settlements by the end of each year.  For fiscal 2016, we agreed to advance an additional $1.4 million for preseason advances. As of October 31, 2016 and 2015, we have total advances of $4.4 million and $3.0 million to Belher pursuant to this agreement, which is recorded in advances to suppliers.

Similar to Belher, we make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from such tomato sales to Don Memo, net of our commission and aforementioned advances. As of October 31, 2016 and 2015, we have total advances of $0.9 million and $1.8 million to Don Memo, which is recorded in advances to suppliers.

Infrastructure Advances

Pursuant to our infrastructure agreement, we make advances to be used solely for the acquisition, construction, and installation of improvements to and on certain land owned/controlled by Belher, as well as packing line equipment.  Advances incur interest at 4.7% at October 31, 2016 and 2015.  As of October 31, 2016, we have advanced a total of $0.8 million ($0.2 million included in prepaid expenses and other current assets and $0.6 million included in other long-term assets).  As of October 31, 2015, we have advanced a total of $1.8 million ($1.0 million included in prepaid expenses and other current assets and $0.8 million included in other long-term assets).  Belher is to annually repay these advances in no less than 20% increments through June 2020.  Interest is to be paid monthly or annually, as defined.  Belher may prepay, without penalty, all or any portion of the advances at any time.  In order to secure their obligations pursuant to both agreements discussed above, Belher granted us a first-priority security interest in certain assets, including cash, inventory and fixed assets, as defined.

Accrued Expenses

Included in accrued expenses at October 31, 2016 and 2015 are liabilities related to the receipt of goods and/or services for which an invoice has not yet been received. These totaled approximately $12.4 million and $6.2 million for the year ended October 31, 2016 and 2015. 

Revenue Recognition

Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.  These terms are typically met upon delivery of product to the customer.  Service revenue, including freight, ripening, storage, bagging and palletization charges, is recorded when services are performed and sales of the related products are delivered.

Shipping and Handling

We include shipping and handling fees billed to customers in net revenues.  Amounts incurred by us for freight are included in cost of goods sold.

Promotional Allowances

We provide for promotional allowances at the time of sale, based on our historical experience.  Our estimates are generally based on evaluating the historical relationship between promotional allowances and gross sales.  The derived percentage is then applied to the current period’s sales revenues in order to arrive at the appropriate debit to sales allowances for the period.  The offsetting credit is made to accrued expenses.  When certain amounts of specific customer accounts are subsequently identified as promotional, they are written off against this allowance.  Actual amounts may differ from these estimates and such differences are recognized as an adjustment to net sales in the period they are identified.

Allowance for Accounts Receivable

We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.

Consignment Arrangements

We frequently enter into consignment arrangements with pineapple and tomato growers and packers located outside of the United States and growers of certain perishable products in the United States. Although we generally do not take legal title to these avocados and perishable products, we do assume responsibilities (principally assuming credit risk, inventory loss and delivery risk, and pricing risk) that are consistent with acting as a principal in the transaction.  Accordingly, the accompanying financial statements include sales and cost of sales from the sale of avocados and perishable products procured under consignment arrangements.  Amounts recorded for each of the fiscal years ended October 31, 2016, 2015 and 2014 in the financial statements pursuant to consignment arrangements are as follows (in thousands):

	2016		2015		2014
Sales	$	34,919	$	28,139	$	30,721
Cost of Sales		30,729		25,177		27,759
Gross Margin	$	4,190	$	2,962	$	2,962

Advertising Expense

Advertising costs are expensed when incurred and are generally included as a component of selling, general and administrative expense. Such costs were approximately $0.2 million for fiscal years 2016, 2015, and 2014.  

Research and Development

Research and development costs are expensed as incurred and are generally included as a component of selling, general and administrative expense. FreshRealm, a development stage company, comprised the majority of our research and development costs in 2014. Total research and development costs for fiscal years 2016 and 2015 were less than $0.1 million.  Total research and development costs for fiscal years 2014, were approximately $0.8 million. 

Other Income, Net

Included in other income, net is dividend income totaling $0.6 million for fiscal year 2016.  Dividend income totaled $0.5 million for fiscal years 2015 and 2014.  See Note 9 for related party disclosure related to other income.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.  Among the significant estimates affecting the financial statements are those related to valuation allowances for accounts receivable, goodwill, grower advances, inventories, long-lived assets, valuation of and estimated useful lives of identifiable intangible assets, stock-based compensation, promotional allowances and income taxes.  On an ongoing basis, management reviews its estimates based upon currently available information.  Actual results could differ materially from those estimates.

Income Taxes

We account for deferred tax liabilities and assets for the future consequences of events that have been recognized in our consolidated financial statements or tax returns.  Measurement of the deferred items is based on enacted tax laws.  In the event the future consequences of differences between financial reporting bases and tax bases of our assets and liabilities result in a deferred tax asset, we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset.  A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.  If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies.  Conversely, we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.  Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.  Therefore, the actual liability for U.S. or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Basic and Diluted Net Income per Share

Basic earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock options and contingent consideration.  Diluted earnings per common share is calculated using the weighted-average number of common shares outstanding during the period after consideration of the dilutive effect of stock options and the effect of contingent consideration shares.

Basic and diluted net income per share is calculated as follows (U.S. dollars in thousands, except share and per share data):

	Year ended  October 31,
	2016		2015		2014
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	38,022	$	27,199	$	97
Denominator:
Weighted average shares - Basic		17,347,121		17,295,305		15,765,102
Effect on dilutive securities – Restricted stock/options		83,560		67,731		1,455,000
Weighted average shares - Diluted		17,430,681		17,363,036		17,220,102
Net income per share attributable to Calavo Growers, Inc:
Basic	$	2.19	$	1.57	$	0.01
Diluted	$	2.18	$	1.57	$	0.01

Stock-Based Compensation

We account for awards of equity instruments issued to employees under the fair value method of accounting and recognize such amounts in our statements of operations.  We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. 

For the years ended October 31, 2016, 2015 and 2014, we recognized compensation expense of $2,134,000,  $2,108,000, and $727,000 related to non-acquisition stock-based compensation.  The value of the stock-based compensation was determined from quoted market prices at the date of the grant.

Foreign Currency Translation and Remeasurement

Our foreign operations are subject to exchange rate fluctuations and foreign currency transaction costs.  The functional currency of our foreign subsidiaries is the United States dollar.  As a result, monetary assets and liabilities are translated into U.S. dollars at exchange rates as of the balance sheet date and non-monetary assets, liabilities and equity are translated at historical rates.  Sales and expenses are translated using a weighted-average exchange rate for the period.  Gains and losses resulting from those remeasurements are included in income.  Gains and losses resulting from foreign currency transactions are also recognized currently in income. Total foreign currency losses for fiscal 2016, 2015 and 2014, net of gains, were $1.1 million, $1.8 million, and $0.1 million.

Fair Value of Financial Instruments

We believe that the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings approximates fair value based on either their short-term nature or on terms currently available to the Company in financial markets.  Due to current market rates, we believe that our fixed-rate long-term obligations have the same fair value and carrying value  of approximately $0.6 million as of October 31, 2016.

Deferred Rent

As part of certain lease agreements, we receive construction allowances from our landlords.  The construction allowances are deferred and amortized on a straight-line basis over the life of the lease as a reduction to rent expense.  

Derivative Financial Instruments

We were not a party to any material derivative instruments during the fiscal year.  It is currently our intent not to use derivative instruments for speculative or trading purposes. Additionally, we do not use any hedging or forward contracts to offset market volatility.  

Recently Adopted Accounting Pronouncements

In November 2015, the FASB issued an ASU, which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

    In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are evaluating the impact of the adoption of this amended accounting standard on our financial condition, result of operations and cash flows, but we do not expect the adoption of this accounting standard to have a significant effect.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as all changes in a company's net assets, except changes resulting from transactions with shareholders.  For the fiscal year ended October 31, 2016, other comprehensive income includes the unrealized gain on our Limoneira investment totaling $4.1 million, net of income taxes.  Limoneira’s stock price at October 31, 2016 equaled $19.69 per share.  For the fiscal year ended October 31, 2015, other comprehensive income includes the unrealized loss on our Limoneira investment totaling $10.3 million, net of income taxes.  Limoneira’s stock price at October 31, 2015 equaled $15.86 per share.  For the fiscal year ended October 31, 2014, other comprehensive loss includes the unrealized loss on our Limoneira investment totaling $0.7 million, net of income taxes.  Limoneira’s stock price at October 31, 2014 equaled $25.66 per share. 

Noncontrolling Interest

The following tables reconcile shareholders’ equity attributable to noncontrolling interest related to the Salsa Lisa acquisition, and Avocados de Jalisco (in thousands). 

	Year ended		Year ended
Salsa Lisa noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Accretion attributable to noncontrolling interest of Salsa Lisa		486		15
Noncontrolling interest, ending	$	771	$	285

The noncontrolling interest for Salsa Lisa is recorded at the greater of the noncontrolling interest balance adjusted for the attribution of loss or the amount redeemable pursuant to the acquisition agreement. For fiscal 2016, we recorded an adjustment of $486,000 to increase the noncontrolling interest balance to the expected redeemable amount of $771,000. This adjustment has been included in net (income) loss attributed to noncontrolling interest.

	Year ended		Year ended
Avocados de Jalisco noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Noncontrolling interest contribution		—		1,011
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(49)		—
Noncontrolling interest, ending	$	962	$	1,011

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Inventories

12 Months Ended

Oct. 31, 2016

Inventory Disclosure [Abstract]

Inventories

3.    Inventories

Inventories consist of the following (in thousands):

	October 31,
	2016		2015
Fresh fruit	$	17,126	$	11,939
Packing supplies and ingredients		7,605		6,347
Finished prepared foods		7,118		8,065
	$	31,849	$	26,351

We assess the recoverability of inventories through an ongoing review of inventory levels in relation to sales and forecasts and product marketing plans.  When the inventory on hand, at the time of the review, exceeds the foreseeable demand, the value of inventory that is not expected to be sold is written down.  The amount of the write-down is the excess of historical cost over estimated realizable value (generally zero).  Once established, these write-downs are considered permanent adjustments to the cost basis of the excess inventory.

The assessment of the recoverability of inventories and the amounts of any write-downs are based on currently available information and assumptions about future demand and market conditions.  Demand for processed avocado products may fluctuate significantly over time, and actual demand and market conditions may be more or less favorable than our projections.  In the event that actual demand is lower than originally projected, additional inventory write-downs may be required.

We recorded an adjustment of $1.1 million to adjust our fresh fruit inventory to the lower of cost or market as of October 31, 2016. We did not record any lower of cost or market adjustments during fiscal year 2015.

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Property, Plant, and Equipment

12 Months Ended

Oct. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant, and Equipment

4.     Property, Plant, and Equipment

Property, plant, and equipment consist of the following (in thousands):

	October 31,
	2016		2015
Land	$	7,023	$	7,023
Buildings and improvements		22,480		22,497
Leasehold improvements		8,918		4,810
Equipment		66,109		59,391
Information systems - hardware and software		8,089		7,839
Construction in progress		25,456		12,305
		138,075		113,865
Less accumulated depreciation and amortization		(50,238)		(44,417)
	$	87,837	$	69,448

Depreciation expense was $7.3 million, $6.4 million and $5.3 million for fiscal years 2016, 2015, and 2014, of which $0.5 million was related to depreciation on capital leases for fiscal year 2016, 2015, and 2014. 

Property, plant, and equipment include various capital leases which total $3.2 million and $3.3 million, less accumulated depreciation of $2.5 million and $2.1 million as of October 31, 2016 and 2015.

The increase in construction in progress from $12.3 million as of October 31, 2015, to $25.5 million as of October 31, 2016, is due to leasehold improvements to the facility in Jacksonville, Florida, and leasehold improvements to the facility in Houston, Texas.

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Other Assets

12 Months Ended

Oct. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

5.     Other Assets

Other assets consist of the following (in thousands):

	October 31,		October 31,
	2016		2015
Intangibles, net	$	3,365	$	4,613
Mexican IVA (i.e. value-added) taxes receivable		6,962		5,853
Grower advances		49		346
Infrastructure advance to Agricola Belher		600		800
Loan to FreshRealm members		318		307
Notes receivable from San Rafael		928		1,286
Other		1,027		796
	$	13,249	$	14,001

The intangible assets consist of the following (in thousands):

		October 31, 2016						October 31, 2015
	Weighted-	Gross				Net		Gross				Net
	Average	Carrying		Accum.		Book		Carrying		Accum.		Book
	Useful Life	Value		Amortization		Value		Value		Amortization		Value
Customer list/relationships	8.0 years	$	7,640	$	(5,241)	$	2,399	$	7,640	$	(4,282)	$	3,358
Trade names	8.2 years		2,760		(2,380)		380		2,760		(2,164)		596
Trade secrets/recipes	9.3 years		630		(319)		311		630		(270)		360
Brand name intangibles	indefinite		275		—		275		275		—		275
Non-competition agreements	5.0 years		267		(267)		—		267		(243)		24
Intangibles, net		$	11,572	$	(8,207)	$	3,365	$	11,572	$	(6,959)	$	4,613

We recorded amortization expense of approximately $1.5 million, $1.6 million, and $1.3 million for fiscal years 2016, 2015, and 2014.  We anticipate recording amortization expense of approximately $1.1 million, $1.1 million, $0.7 million, $0.1 million, and $0.1 million for fiscal years 2017 through 2021.  The remainder of approximately $0.1 million will be amortized over fiscal years 2021 through 2023. 

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Revolving Credit Facilities

12 Months Ended

Oct. 31, 2016

Debt Disclosure [Abstract]

Revolving Credit Facilities

6.     Revolving Credit Facilities

    In June 2016, we entered into a new Credit Agreement with Bank of America, N.A. (“Bank of America”) as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West (“FCW”), as joint lead arranger. The Credit Agreement provides for a five-year, $80 million syndicated senior unsecured revolving credit facility maturing on June 14, 2021(the”Credit Facility”), which replaces the Company’s prior revolving credit facilities, which were scheduled to expire on July 1, 2016.

    Provided there exists no default, upon notice to Bank of America, the Company may from time to time, request an increase in the Credit Facility by an amount not exceeding $50 million (the “Accordion”). Any future exercises of the Accordion would require additional commitments from existing or new lenders.

    Borrowings under the Credit Facility will be at the Company’s discretion either at a Eurodollar Rate (“LIBOR”) loan plus applicable margin or a base rate loan plus applicable margin. The applicable margin will be based on the Company’s Consolidated Leverage Ratio and can range from 1.00% to 1.50% for LIBOR loans and 0.00% to 0.50% for Base Rate Loans. The Credit Facility also includes a commitment fee on the unused commitment amount at a rate per annum of 0.15%.

   The Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. We were in compliance with all such covenants at October 31, 2016. 

    The Credit Facility also contains customary events of default. If any event of default occurs and is continuing, Bank of America may take the following actions: (a) declare the commitment of each lender to make loans and any obligation of the Issuer to make credit extensions to be terminated; (b) declare the unpaid principal amount of all outstanding loans, all interest, and all other amounts to be immediately due and payable; (c) require that Calavo cash collateralize the obligations; and (d) exercise on behalf of itself, the lenders and the Issuer all rights and remedies available to it.

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Employee Benefit Plans

12 Months Ended

Oct. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

7.     Employee Benefit Plans

We sponsor five defined contribution retirement plans for salaried and hourly employees.  Expenses for these plans approximated $984,000,  $922,000, and $943,000 for fiscal years 2016, 2015 and 2014, which are included in selling, general and administrative expenses in the accompanying financial statements.

We also sponsor a non-qualified defined benefit plan for two retired executives.  Pension expenses, including actuarial losses, approximated $8,000,  $10,000 and $9,000 for the year ended October 31, 2016, 2015, and 2014.  These amounts are included in selling, general and administrative expenses in the accompanying financial statements.

Components of the change in projected benefit obligation for fiscal year ends consist of the following (in thousands):

	2016		2015
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	215	$	196
Interest cost		8		7
Actuarial loss		9		48
Benefits paid		(37)		(36)
Projected benefit obligation at end of year (unfunded)	$	195	$	215

The following is a reconciliation of the unfunded status of the plans at fiscal year ends included in accrued expenses (in thousands):

	2016		2015
Projected benefit obligation	$	195	$	215
Unrecognized net (gain) loss		-		-
Recorded pension liabilities	$	195	$	215

Significant assumptions used in the determination of pension expense consist of the following:

	2016		2015
Discount rate on projected benefit obligation	3.7	%	4.3	%

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Commitments and Contingencies

12 Months Ended

Oct. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8.     Commitments and Contingencies

Commitments and guarantees

We lease facilities and certain equipment under non-cancelable operating leases expiring at various dates through 2031. We are committed to make minimum cash payments under these agreements as of October 31, 2016, as follows (in thousands):

2017	$	5,268
2018		5,305
2019		5,140
2020		4,644
2021		4,278
Thereafter		33,571
	$	58,206

Total rent expense amounted to approximately $5.8 million, $4.4 million and $3.8 million for the years ended October 31, 2016, 2015, and 2014.  Rent to Limoneira, for our corporate office, amounted to approximately $0.3 million for fiscal years 2016, 2015, and 2014.  In fiscal 2014, we renewed our lease with Limoneira for our corporate facility through fiscal 2020 at an annual rental of $0.3 million per annum (subject to annual CPI increases, as defined). 

In fiscal 2016, we renewed the lease of our facility in Houston Texas through fiscal 2021 at an annual rental of $0.7 million per annum (subject to annual CPI increases, as defined).

In July 2015, we entered into a Lease Agreement with Green Cove, LLC to lease an operating facility in Jacksonville Florida. The facility is approximately 200,000 square feet and is expected to be a value-added distribution center for all operating segments.  We took possession of the property in August 2015 and are in the process of making improvements to this facility.  The lease began in November 2015 and is scheduled to terminate in October 2031.

In fiscal 2014, we renewed the lease of our distribution facility in Garland Texas through fiscal 2029 at an annual rental of $0.8 million per annum (subject to annual CPI increases, as defined).

In fiscal 2014, we had two lease renewals for our RFG facilities in California, one being the corporate office of RFG in Rancho Cordova, and the other being a fresh processing facility in Sacramento.  The RFG corporate office in Rancho Cordova has an operating lease through June 2018.  Total rent for fiscal 2016, 2015, and 2014 was approximately $0.4 million.  The processing facility in Sacramento has an operating lease through May 2021(subject to annual CPI increases, as defined).  Total rent for fiscal 2016, 2015, and 2014 was approximately $0.5 million.

Effective January 28, 2016, Calavo Growers, Inc. and Bank of America, N.A. (“BoA”), entered into a Continuing and Unconditional Guaranty agreement (the “Guaranty”). Under the terms of the Guaranty, the Company unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Agricola Don Memo, S.A. de C.V. (“Don Memo”) to BoA. Grupo Belo del Pacifico, S.A. de C.V. has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed on January 28, 2016. On January 29, 2016, Don Memo, used the proceeds from the new BoA loan to repay $4.0 million due the Company.

We indemnify our directors and have the power to indemnify each of our officers, employees and other agents, to the maximum extent permitted by applicable law.  The maximum amount of potential future payments under such indemnifications is not determinable.  No amounts have been accrued in the accompanying financial statements related to these indemnifications.

Litigation

From time to time, we are also involved in litigation arising in the ordinary course of our business that we do not believe will have a material adverse impact on our financial statements.

Mexico tax audits

    We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions.  Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States.  During our third quarter of fiscal 2016, our wholly-owned subsidiary, Calavo de Mexico (“CDM”), received a written communication from the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico (“MFM”) containing preliminary observations related to a fiscal 2011 tax audit of such subsidiary.  MFM’s preliminary observations outline certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and Value Added Tax (“VAT”).  During our fourth fiscal quarter of 2016, we provided a written rebuttal to MFM’s preliminary observations   and requested the adoption of a conclusive agreement before the PRODECON (Local Tax Ombudsman) so that a full discussion of the case between us, the MFM and the PRODECON can occur and so that, as appropriate, the MFM can reconsider their findings.  Note that until such discussion occurs, the normal period during which the MFM would issue its final assessment (previously expected no later February 2017) has been suspended.  Though a formal meeting date has not yet been determined, the discussion between us, the MFM and the PRODECON is expected to start in calendar 2017.

    Additionally, we also received notice from Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria (SAT), that our wholly-owned Mexican subsidiary, Calavo de Mexico, is currently under examination related to fiscal year 2013.  Under Mexican law, the SAT has until approximately March 2017 to complete their review.   In conjunction with their examination, the SAT has requested information though no formal findings have yet been received.

    We believe that the ultimate resolution of these matters is unlikely to have a material effect on our consolidated financial position.

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Related-Party Transactions

12 Months Ended

Oct. 31, 2016

Related-Party Transactions [Abstract]

Related-Party Transactions

9.     Related-Party Transactions

Certain members of our Board of Directors market avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers.  During the years ended October 31, 2016, 2015, and 2014, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $25.5 million, $16.4 million and $10.5 million.  We did not have any amounts due to Board members as of October 31, 2016 and 2015.

During fiscal years 2016, 2015, and 2014, we received $0.3 million as dividend income from Limoneira.  In addition, we lease office space from Limoneira for our corporate office.  Rent to Limoneira amounted to approximately $0.3 million for fiscal years 2016, 2015, and 2014.  Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. We have a 12% ownership interest in Limoneira.  Additionally, our Chief Executive Officer is a member of the Limoneira Board of Directors.

We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During the years ended October 31, 2016, 2015, and 2014, Calavo Growers, Inc. paid fees totaling approximately $0.2 million, $0.2 million and $0.1 million to TroyGould PC. 

During the 3rd and 4th quarters of fiscal 2015, in conjunction with another round of financing for FreshRealm, LLC (FreshRealm), we invested $0.8 million. Additionally, two officers of Calavo contributed $1.8 million, in exchange for a 2.8% ownership interest, and three board of director members contributed $0.3 million in exchange for a 0.44% ownership interest. RFG is a supplier for FreshRealm.  Based on the total number of shares issued, our ownership interest in FreshRealm decreased from approximately 50% to approximately 49%.  During the 4th quarter of fiscal 2016, FreshRealm had another round of financing, which we invested $3.2 million.  Based on the total number of LLC units issued, our ownership interest in FreshRealm decreased from approximately 49% to approximately 46%.  In fiscal 2016, 2015 and 2014, we had sales of $1.1 million, $0.5 million and $0.2 million to FreshRealm.

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and Agricola Don Memo, S.A. de C.V. (Don Memo). Don Memo, a Mexican corporation formed in July 2013, is engaged in the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  Belo and Calavo Sub have an equal one-half ownership interest in Don Memo.  Pursuant to a management service agreement, Belo, through its officers and employees, shall have day-to-day power and authority to manage the operations. Belo is entitled to a management fee equal to 20% of the earnings before interest and taxes (EBIT), as defined, which is payable annually in July of each year. Additionally, Calavo Sub is entitled to a 12% commission, calculated in U.S. dollars, for the sale of produce in the Mexican National Market, United States, Canada, and any other overseas market. In fiscal 2016 and 2015, we contributed $2.3 million and $1.0 million as investments in Don Memo, respectively. These investment contributions represent Calavo Sub’s 50% ownership in Don Memo, which is included in investment in unconsolidated entities on our balance sheet. In fiscal 2015 and 2014, we advanced $0.8 million and $3.2 million. These monies totaling $4.0, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. We had recorded such loans in prepaids and other current assets. We use the equity method to account for this investment.  As of October 31, 2016 and 2015, we have total advances of $0.9 million and $1.8 million to Don Memo, which is recorded in advances to suppliers. During the year ended October 31, 2016 and 2015, we incurred $4.8 million and $2.3 million of expenses to Don Memo pursuant to our consignment agreement.

Effective January 28, 2016, Calavo Growers, Inc. and BoA, entered into a Continuing and Unconditional Guaranty agreement (the “Guaranty”). Under the terms of the Guaranty, the Company unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Agricola Don Memo, S.A. de C.V. (“Don Memo”) to BoA. Grupo Belo del Pacifico, S.A. de C.V. has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed on January 28, 2016. On January 29, 2016, Don Memo, used the proceeds from the new BoA loan to repay $4.0 million due the Company.

We had grower advances due from Belher of $4.4 million and $3.0 million as of October 31, 2016 and 2015.  In addition, we had infrastructure advances due from Belher of $0.8 million and $1.8 million as of October 31, 2016 and 2015.  Of these infrastructure advances $0.2 million was recorded as receivable in prepaid and other current assets and $0.6 million is included in other assets. During the year ended October 31, 2016, 2015 and 2014, we purchased $26.0 million, $14.2 million, and $17.4 million of tomatoes from Belher pursuant to our consignment agreement.

In August 2015, we entered into Shareholder’s Agreement with various partners which created Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”).  Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados in Jalisco Mexico.  This entity is approximately 80% owned by Calavo and was consolidated as of October 31, 2015.  In the third fiscal quarter of 2016, Avocados de Jalisco completed the construction of a packinghouse located in Jalisco, Mexico; such packinghouse is expected to be operational in the first quarter of 2017. As of October 31, 2016 and 2015, we have made preseason advances of approximately $0.3 million to various partners of Avocados de Jalisco.

The three previous owners and current executives of RFG have a majority ownership of certain entities that provide various services to RFG.  RFG’s California operating facility leases a building from LIG partners, LLC (LIG) pursuant to an operating lease.  RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease.  Additionally, RFG sells cut produce and purchases raw materials, obtains transportation services, and shares costs for certain utilities with Third Coast Fresh Distribution (Third Coast).  LIG, THNC and Third Coast are majority owned by entities owned by three employees of Calavo (former/current executives of RFG). See the following tables for the related party activity and balances for fiscal year 2016 and 2015:

	Year ended October 31,
(in thousands)	2016		2015
Rent paid to LIG	$	529	$	522
Rent paid to THNC, LLC	$	342	$	304
Sales to Third Coast	$	-	$	270
Purchases from Third Coast	$	-	$	195

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Income Taxes

12 Months Ended

Oct. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

10.     Income Taxes

The income tax provision (benefit) consists of the following for the years ended October 31, (in thousands):

	2016		2015		2014
Current:
Federal	$	17,244	$	10,150	$	7,379
State		2,040		1,650		939
Foreign		982		1,110		842
Total current		20,266		12,910		9,160
Deferred:
Federal		1,863		3,314		(10,392)
State		533		98		(2,870)
Foreign		(793)		(229)		186
Total deferred		1,603		3,183		(13,076)
Total income tax provision (benefit)	$	21,869	$	16,093	$	(3,916)

At October 31, 2016 and 2015, gross deferred tax assets totaled approximately $33.9 million and $36.1 million, while gross deferred tax liabilities totaled approximately $18.9 million and $17.0 million.  Deferred income taxes reflect the net of temporary differences between the carrying amount of assets and liabilities for financial reporting and income tax purposes.

Significant components of our deferred taxes assets (liabilities) as of October 31, are as follows (in thousands):

	2016		2015
Property, plant, and equipment		(6,901)		(6,877)
Intangible assets		27,686		31,432
Unrealized gain, Limoneira investment		(4,048)		(1,553)
Investment in FreshRealm		(6,902)		(7,024)
Stock-based compensation		952		556
State taxes		(931)		(1,358)
Credits and incentives		2,070		2,044
Allowance for accounts receivable		875		662
Inventories		395		495
Accrued liabilities		1,912		885
Other		(164)		(219)
Long-term deferred income taxes	$	14,944	$	19,043

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income for the years ended October 31, is as follows:

	2016		2015		2014
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal effects	2.9		3.0		22.3
Foreign income taxes greater than U.S.	0.7		0.7		5.8
Section 199 deduction	(1.7)		(0.8)		15.8
Tax Credits	—		—		15.2
Other	(0.6)		(0.7)		0.7
	36.3	%	37.2	%	94.8	%

We intend to reinvest our accumulated foreign earnings, which approximated $15.5 million at October 31, 2016, indefinitely.  As a result, we have not provided any deferred income taxes on such unremitted earnings. 

For fiscal years 2016, 2015 and 2014, income (loss) before income taxes related to domestic operations was approximately $61.0 million, $41.5 million, and $(0.6) million.  For fiscal years 2016, 2015 and 2014, income (loss) before income taxes related to foreign operations was approximately $(0.6) million, $1.8 million and $3.6 million. 

As of October 31, 2016, we had liability of $0.4 million for unrecognized tax benefits related to various foreign income tax matters. As of October 31, 2015, we did not have a liability for unrecognized tax benefits related to various federal and state income tax matters.

In fiscal 2014, the benefit for income taxes of $3.9 million is attributable to the revaluation adjustment of $88.1 million related to contingent consideration which was spread between fiscal year 2014 through fiscal year 2011. The revalued contingent consideration and non-cash compensation expense resulted in $53.6 million additional GAAP expense recorded in fiscal years 2014.  In fiscal 2014, the revaluation expense drove pre-tax book income into a loss position, thus causing a benefit for income taxes as this revaluation adjustment is capitalized and amortized as goodwill over the remaining useful life for income tax purposes resulting in a taxable income position for the current year. 

We are subject to U.S. federal income tax as well as income of multiple state tax jurisdictions.  We are no longer subject to U.S. income tax examinations for the fiscal years prior to October 31, 2013, and are no longer subject to state income tax examinations for fiscal years prior to October 31, 2012.

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Segment Information

12 Months Ended

Oct. 31, 2016

Segment Reporting [Abstract]

Segment Information

11.     Segment Information

As discussed in Note 1, we report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG.  These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources.  The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole, and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and deli products.  Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate.  We do not allocate assets, or specifically identify them to, our operating segments.

The following table sets forth sales by product category, by segment (in thousands):

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Year ended October 31, 2016
Net sales	$	538,687	$	63,494	$	333,498	$	935,679
Cost of sales		480,690		41,046		306,409		828,145
Gross margin	$	57,997	$	22,448	$	27,089	$	107,534
Year ended October 31, 2015
Net sales	$	500,711	$	62,156	$	293,957	$	856,824
Cost of sales		463,647		41,645		266,305		771,597
Gross margin	$	37,064	$	20,511	$	27,652	$	85,227
Year ended October 31, 2014
Net sales	$	470,949	$	59,279	$	252,282	$	782,510
Cost of sales		434,820		46,269		230,193		711,282
Gross margin	$	36,129	$	13,010	$	22,089	$	71,228

     For fiscal year 2016, 2015 and 2014, inter-segment sales and cost of sales of $4.3 million, $1.5 million and $2.2 million between Fresh products and RFG were eliminated. For fiscal year 2016, 2015 and 2014, inter-segment sales and cost of sales of $2.7 million, $1.9 million and $1.7 million between Calavo Foods and RFG were eliminated.

The following table sets forth sales by product category, by segment (in thousands):

	Year Ended October 31, 2016								Year Ended October 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	493,440	$	—	$	—	$	493,440	$	471,178	$	—	$	—	$	471,178
Tomatoes		35,981		—		—		35,981		18,681		—		—		18,681
Papayas		9,514		—		—		9,514		9,485		—		—		9,485
Pineapples		1,060		—		—		1,060		2,397		—		—		2,397
Other fresh products		536		—		—		536		442		—		—		442
Food service		—		50,716		—		50,716		—		49,212		—		49,212
Retail and club		—		23,216		336,989		360,205		—		22,736		296,697		319,433
Total gross sales		540,531		73,932		336,989		951,452		502,183		71,948		296,697		870,828
Less sales incentives		(1,844)		(10,438)		(3,491)		(15,773)		(1,472)		(9,792)		(2,740)		(14,004)
Net sales	$	538,687	$	63,494	$	333,498	$	935,679	$	500,711	$	62,156	$	293,957	$	856,824

	Year Ended October 31, 2015								Year Ended October 31, 2014
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	471,178	$	—	$	—	$	471,178	$	433,581	$	—	$	—	$	433,581
Tomatoes		18,681		—		—		18,681		19,705		—		—		19,705
Papayas		9,485		—		—		9,485		12,619		—		—		12,619
Pineapples		2,397		—		—		2,397		5,086		—		—		5,086
Other fresh products		442		—		—		442		1,037		—		—		1,037
Food service		—		49,212		—		49,212		—		48,085		—		48,085
Retail and club		—		22,736		296,697		319,433		—		22,334		255,074		277,408
Total gross sales		502,183		71,948		296,697		870,828		472,028		70,419		255,074		797,521
Less sales incentives		(1,472)		(9,792)		(2,740)		(14,004)		(1,079)		(11,140)		(2,792)		(15,011)
Net sales	$	500,711	$	62,156	$	293,957	$	856,824	$	470,949	$	59,279	$	252,282	$	782,510

Sales to customers outside the United States were approximately $25.4 million, $26.7 million and $32.8 million for fiscal years 2016, 2015, and 2014.

Long-lived assets attributed to geographic areas as of October 31, are as follows (in thousands):

	United States		Mexico		Consolidated
2016	$	55,715	$	32,122	$	87,837
2015	$	37,573	$	31,875	$	69,448

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Long-Term Obligations

12 Months Ended

Oct. 31, 2016

Debt Disclosure [Abstract]

Long-Term Obligations

12.     Long-Term Obligations

Long-term obligations at fiscal year ends consist of the following (in thousands):

	2016		2015
Farm Credit West, PCA, (FCW) term loan	$	—	$	1,002
Bank of America, N.A. (BoA) term loan		—		1,019
Capital leases		583		771
		583		2,792
Less current portion		(138)		(2,206)
	$	445	$	586

The Company and FCW entered into a Term Loan Agreement (Term Agreement) in connection with the RFG acquisition, effective May 31, 2011. Under the terms of the Term Agreement, we were advanced $15 million for the purchase of RFG.  Pursuant to this agreement, we were required to make 60 monthly principal and interest payments, from July 1, 2011 to June 1, 2016. In fiscal 2016, this term loan was repaid in full.

Effective September 30, 2011, the Company and BoA, entered into an agreement, Amendment No. 4 to Loan Agreement (the Agreement), which amended our existing credit facility with BoA.  This agreement included a variable rate term loan in the amount of approximately $7.1 million. These proceeds were used to retire approximately 50% of the outstanding balance (as of September 30, 2011) of the term loan owed to FCW related to the purchase of RFG (see above). In fiscal 2016, this term loan was repaid in full.

Effective January 28, 2016, Calavo Growers, Inc. and BoA, entered into a Continuing and Unconditional Guaranty agreement (the “Guaranty”). Under the terms of the Guaranty, the Company unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Agricola Don Memo, S.A. de C.V. (“Don Memo”) to BoA. Grupo Belo del Pacifico, S.A. de C.V. has also entered into a similar guarantee with BoA. These guarantees relate to a new loan in the amount of $4.5 million loan from BoA to Don Memo that closed on January 28, 2016. On January 29, 2016, Don Memo, used the proceeds from the new BoA loan to repay $4.0 million due the Company.

At October 31, 2016, capital lease payments are scheduled as follows (in thousands):

	Total
Year ending October 31:
2017	$	162
2018		118
2019		104
2020		103
2021		99
Thereafter		76
Minimum lease payments		662
Less interest		(79)
Present value of future minimum lease payments	$	583

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Stock-Based Compensation

12 Months Ended

Oct. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

13.     Stock-Based Compensation

The 2005 Stock Incentive Plan

The 2005 Stock Incentive Plan, was a stock-based compensation plan, under which employees and directors may be granted options to purchase shares of our common stock.  In June 2012, this plan has been terminated without affecting the outstanding stock options related to this plan.

Stock options were granted with exercise prices of not less than the fair market value at grant date, generally vested over one to five years and generally expired two to five years after the grant date.  We settle stock option exercises with newly issued shares of common stock.

We measured compensation cost for all stock-based awards pursuant to this plan at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest.  We measured the fair value of our stock based compensation awards on the date of grant.

A summary of stock option activity is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Exercise Price		Intrinsic Value
Outstanding at October 31, 2015	10	$	18.28
Exercised	(2)	$	19.20
Outstanding at October 31, 2016	8	$	18.05	$	474
Exercisable at October 31, 2016	8	$	18.05	$	474

The weighted average remaining life of such outstanding options is 2.5 years and the total intrinsic value of options exercised during fiscal 2016 was $0.1 million.  The weighted average remaining life of such exercisable options is 2.5 years.  The fair value of shares vested during the year ended October 31, 2016, 2015, and 2014 was approximately $0.5 million, $0.5 million, and $0.8 million.

The 2011 Management Incentive Plan

In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the 2011 Plan).  All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan.  Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan.

In January 2014, all 12 of our non-employee directors were each granted 1,750 restricted shares (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $32.49.  This grant of restricted stock incurred $0.2 million and $0.5 million in stock compensation expenses in fiscal 2015 and 2014, respectively.  As of January 1, 2015, all shares have vested.

In January 2014, our executive officers were granted a total of 10,774 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $30.50.  These shares vest in one-third increments, on an annual basis, beginning January 1, 2015. This grant of restricted stock incurred $0.1 million in stock compensation expenses in fiscal 2016, 2015 and 2014. 

In January 2015, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $40.39.  On January 1, 2016, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable.  The total recognized stock-based compensation expense for these grants was $0.7 million for fiscal 2015. 

On February 6, 2015, our executive officers were granted a total of 55,394 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $40.17.  These shares vest in one-third increments, on an annual basis, beginning January 8, 2016. These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.5 million for fiscal 2015.  On June 15, 2015, our Chief Operating Officer/Chief Financial Officer retired from Calavo.  His unvested portion of restricted stock of 12,322 shares issued in February of 2015 and January of 2014 was forfeited. As part of his retirement on June 1st 2015, he was granted 12,322 shares of unrestricted stock.  The closing price of our stock on such date was $49.95. We recorded for this grant $0.6 million of stock-based compensation expense for fiscal years 2016 and 2015.

On January 4, 2016, all 12 of our non-employee directors were granted 1,750 restricted shares each (total of 21,000 shares).  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.46.  On January 3, 2017, as long as the directors are still serving on the board, these shares lose their restriction and become non-forfeitable and transferable.  These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.8 million for the year ended October 31, 2016. 

On January 8, 2016, our executive officers were granted a total of 24,582 restricted shares.  These shares have full voting rights and participate in dividends as if unrestricted.  The closing price of our stock on such date was $48.68.  These shares vest in one-third increments, on an annual basis, beginning January 8, 2017. These shares were granted pursuant to our 2011 Management Incentive Plan. The total recognized stock-based compensation expense for these grants was $0.3 million for the year ended October 31, 2016. 

A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Grant Price		Intrinsic Value
Outstanding at October 31, 2015	72	$	39.01
Vested	(39)	$	39.5
Granted	51	$	48.58
Outstanding at October 31, 2016	84	$	44.76	$	4,981

The total recognized stock-based compensation expense for restricted stock was $2.1 million for the year ended October 31, 2016. 

A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2015	14	$	23.00
Exercised	(3)	$	21.80
Outstanding at October 31, 2016	11	$	23.33	$	395
Exercisable at October 31, 2016	7	$	20.13	$	274

The weighted average remaining life of such outstanding options is 4.3 years.  The weighted average remaining life of such exercisable options is 2.8 years.  The fair value of shares vested during the year ended October 31, 2016, was $0.3 million.

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Dividends

12 Months Ended

Oct. 31, 2016

Equity [Abstract]

Dividends

14.     Dividends

On September 27, 2016, the Company declared a $0.90 per share cash dividend to shareholders of record on November 17, 2016.  On December 8, 2016, the Company paid this cash dividend which totaled $15.7 million. On December 8, 2015, the Company paid a $0.80 per share dividend in the aggregate amount of $13.9 million to shareholders of record on November 17, 2015. 

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Fair Value Measurements

12 Months Ended

Oct. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

15.    Fair Value Measurements

A fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability.  A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table sets forth our financial assets and liabilities as of October 31, 2016 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	34,036		-		-	$	34,036
Total assets at fair value	$	34,036	$	-	$	-	$	34,036

(1)The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are measured at fair value by quoted market prices.  Limoneira’s stock price at October 31, 2016 and October 31, 2015 equaled $19.69 per share and $15.86 per share.  Unrealized gains and losses are recognized through other comprehensive income.  Unrealized investment holding gains arising during the year ended October 31, 2016 was $6.6 million.  Unrealized investment holding losses arising during the year ended October 31, 2015 and 2014 was $16.9 million and $1.2 million. 

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Mexican IVA taxes receivable

12 Months Ended

Oct. 31, 2016

Value Added Tax Receivable [Abstract]

Mexican IVA taxes receivable

16.     Mexican IVA taxes receivable

Included in prepaids & other current assets and other assets are tax receivables due from the Mexican government for value-added taxes (IVA) paid in advance.  CDM is charged IVA by vendors on certain expenditures in Mexico, which, insofar as they relate to the exportation of goods, translate into IVA amounts receivable from the Mexican government.

As of October 31, 2016 and 2015, IVA receivables totaled $15.4 million and $11.6 million.  Historically, CDM received IVA refund payments from the Mexican tax authorities on a timely basis.  Beginning in fiscal 2014 and continuing into fiscal 2016, however, the tax authorities began carrying out more detailed reviews of our refund requests and our supporting documentation.  Additionally, they are also questioning the refunds requested attributable to IVA paid to certain suppliers that allegedly did not fulfill their own tax obligations.  We believe these factors and others have contributed to delays in the processing of IVA claims by the Mexican tax authorities.  Currently, we are in the process of collecting such balances through regular administrative processes, but certain amounts may ultimately need to be recovered via legal means.  We believe that our operations in Mexico are properly documented and that the Mexican tax authorities will ultimately authorize the refund of the corresponding IVA amounts.  We will continue to monitor the collection of these receivables with our outside consultants.

As of October 31, 2016, $8.4 million and $7.0 million of IVA were recorded in prepaids & other current assets and other assets.  As of October 31, 2015, $5.7 million and $5.9 million of IVA receivables were recorded in prepaids & other current assets and other assets.

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Subsequent Events

12 Months Ended

Oct. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

17.     Subsequent Events

Riverside Facility -On November 1, 2016, we acquired certain real property, consisting of land, a refrigerated building and select production and office equipment located at 1730 Eastridge Avenue, Riverside, California (collectively, the “Property”) from Fresh Foods, LLC (the “Seller”) for total consideration of approximately $19.4 million.

RFG intends to operate the refrigerated facility as part of its network of USDA and organic certified fresh food facilities. On November 3, 2016 the Company issued a press release discussing the completed purchase of the Property.

The acquisition of the Property was effected in connection with a potential reverse exchange pursuant to Section 1031 of the Internal Revenue Code.

Temecula Facility - On December 21, 2016, we entered into an agreement (the “Agreement”) with Pac West Group Inc., a Delaware limited liability company (the “Buyer”), pursuant to which the Company will sell to the Buyer certain real property located at 28410 Vincent Moraga Drive, Temecula, California (collectively, the “Temecula Property”).

   The Agreement contains customary representations and warranties, covenants, closing conditions and termination provisions and contemplates a buyer due diligence period that would lead to a closing date on or before March 8, 2017.  Subject to satisfactory completion of the Buyer’s due diligence, the purchase price for the Temecula Property will be approximately $6.6 million.

   The proceeds from this transaction are currently expected to be used in conjunction with the recently completed acquisition of 1730 Eastridge Avenue, Riverside, California, to complete a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code.

    Maui Note - On November 30, 2016, we entered into an Amendment to the Goodwill Promissory Note (the “Amended Note”) with San Rafael Distributing, Inc., an Arizona corporation (“San Rafael”), pursuant to which the Company has agreed to amend the Goodwill Promissory Note (the “Note”) dated as of October 31, 2012.

    This Amended Note changes the payment terms from the entire $1.3 million being due on November 1, 2017 to equal monthly installments over a 36 month payment cycle. Interest at the rate of 4.5% per annum shall begin to accrue and be payable on December 1, 2017 and each month thereafter until paid in full. 

    The payment of the Amended Note is secured by a pledge of all of the membership interest of Maui Fresh International, LLC, a California limited liability company (“Maui”) owned by Borrower pursuant to that certain Pledge and Security Agreement (the “Security Agreement”) dated as of October 31, 2012 by Borrower in favor of Holder, and the payment of the Note as amended hereby remains secured by the Security Agreement. 

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Schedule II Valuation and Qualifying Accounts

12 Months Ended

Oct. 31, 2016

Valuation and Qualifying Accounts [Abstract]

Schedule II Valuation and Qualifying Accounts

SCHEDULE II

CALAVO GROWERS, INC.

VALUATION AND QUALIFYING ACCOUNTS (in thousands)

	Fiscal year	Balance at			Balance at
	ended	beginning			end
	October 31:	of year	Additions(1)	Deductions(2)	of year
Allowance for customer deductions	2014	1,482	11,833	10,290	3,025
	2015	3,025	10,400	11,284	2,141
	2016	2,141	9,325	9,621	1,845
Allowance for doubtful accounts	2014	215	143	135	223
	2015	223	74	126	171
	2016	171	47	—	218

(1)  Charged to net sales (customer deductions) or costs and expenses (doubtful accounts).

(2)  Customer deductions taken or write off of accounts receivables.

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Basis of Presentation and Significant Accounting Policies (Policies)

12 Months Ended

Oct. 31, 2016

Accounting Policies [Abstract]

Business

Business

Calavo Growers, Inc. (Calavo, the Company, we, us or our), is a global leader in the avocado industry and an expanding provider of value-added fresh food.  Our expertise in marketing and distributing avocados, prepared avocados, and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, and restaurants on a worldwide basis.  We procure avocados principally from California and Mexico.  Through our various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes and/or Hawaiian grown papayas, (ii) process and package fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a variety of behind-the-glass deli items and (iii) produce and package guacamole and salsa. We distribute our products both domestically and internationally and report our operations in three different business segments:  Fresh products, Calavo Foods and Renaissance Food Group, LLC (RFG).    

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid financial instruments purchased with an original maturity date of three months or less to be cash equivalents.  The carrying amounts of cash and cash equivalents approximate their fair values.

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

     Prepaid expenses and other current assets consist primarily of non-trade receivables, infrastructure advances and prepaid expenses. Non-trade receivables were $11.6 million and $12.3 million at October 31, 2016 and 2015.  Included in non-trade receivables are $8.4 million and $5.7 million related to the current portion of Mexican IVA (i.e. value-added) taxes at October 31, 2016 and 2015.  In addition, included in non-trade receivables at October 31, 2015 is $4.0 million related to the bridge loan to the then newly created joint venture Agricola Don Memo. Infrastructure advances are discussed below.  Prepaid expenses totaling $2.8 million and $2.3 million at October 31, 2016 and 2015, are primarily for insurance, rent and other items.

Inventories

Inventories

Inventories are stated at the lower of cost or market.  Cost is computed on a monthly weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs.  Costs included in inventory primarily include the following: fruit, picking and hauling, overhead, labor, materials and freight. 

Property, Plant, and Equipment

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are stated at cost and amortized over the lesser of their estimated useful lives or the term of the lease, using the straight-line method.  Useful lives are as follows:  buildings and improvements - 7 to 50 years; leasehold improvements - the lesser of the term of the lease or 7 years; equipment - 7 to 25 years; information systems hardware and software – 3 to 10 years.  Significant repairs and maintenance that increase the value or extend the useful life of our fixed asset are capitalized.  Replaced fixed assets are written off.  Ordinary maintenance and repairs are charged to expense. 

We capitalize software development costs for internal use beginning in the application development stage and ending when the asset is placed into service.  Costs capitalized include coding and testing activities and various implementation costs.  These costs are limited to (1) external direct costs of materials and services consumed in developing or obtaining internal-use computer software; (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software project to the extent of the time spent directly on the project; and (3) interest cost incurred while developing internal-use computer software.  See Note 4 for further information.

Goodwill and Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

Goodwill is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment.  Goodwill impairment testing is a two-step process.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test would be unnecessary.  If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.  If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess.  Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units.  The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses.  For fiscal years 2016 and 2015, we performed our annual assessment of goodwill and noted no impairments existed as of October 31, 2016 and 2015.

Long-lived Assets

Long-lived Assets

Long-lived assets, including fixed assets and intangible assets (other than goodwill), are continually monitored and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable.  The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset and its eventual disposition.  The estimate of undiscounted cash flows is based upon, among other things, certain assumptions about future operating performance, growth rates and other factors.  Estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to the business model or changes in operating performance.  If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, an impairment loss will be recognized, measured as the amount by which the carrying value exceeds the fair value of the asset.  For fiscal year 2016 and 2015, we performed our annual assessment of long-lived assets and determined that no impairment existed as of October 31, 2016 and 2015.

Investments

Investments

We account for non-marketable investments using the equity method of accounting if the investment gives us the ability to exercise significant influence over, but not control, an investee.  Significant influence generally exists when we have an ownership interest representing between 20% and 50% of the voting stock of the investee.  Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions. 

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub).  In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and Agricola Don Memo, S.A. de C.V. (Don Memo). Don Memo, a Mexican corporation formed in July 2013, is engaged in the business of owning and improving land in Jalisco, Mexico for the growing of tomatoes and other produce and the sale and distribution of tomatoes and other produce.  Belo and Calavo Sub have an equal one-half ownership interest in Don Memo.  Pursuant to a management service agreement, Belo, through its officers and employees, shall have day-to-day power and authority to manage the operations. In fiscal 2016 and 2015, we contributed $2.3 million and $1.0 million as investments in Don Memo. These investment contributions represent Calavo Sub’s 50% ownership in Don Memo, which is included in investment in unconsolidated entities on our balance sheet. In fiscal 2015 and 2014, we advanced Don Memo $0.8 million and $3.2 million. These monies, totaling $4.0 million, effectively a bridge loan, were repaid in the first quarter of fiscal 2016. We had recorded such loans in prepaids and other current assets. We use the equity method to account for this investment. 

Effective May 2014, we closed our Second Amended and Restated Limited Liability Company Agreement by and among FreshRealm and the ownership members of FreshRealm.  Pursuant to this agreement, Impermanence, LLC (Impermanence) was admitted as an ownership member of FreshRealm.  Impermanence contributed $10.0 million to FreshRealm for 28.6% ownership.  As a result of the admission of Impermanence, Calavo’s ownership was reduced from 71.1% to 50.8%.  The minority/non-Calavo unit-holders held substantive participating rights.  These rights existed primarily in two forms:  (1) two out of a total of four board of director seats and (2) a provision in the Agreement that states that for situations for which the approval of the Members, as defined, is required by the Agreement, the Members shall act by Super-Majority Vote.  As such, Calavo could not control FreshRealm through its two board of director seats, nor its 50.8% ownership.  Based on the foregoing, we deconsolidated FreshRealm in May 2014. In the third and fourth quarter of fiscal 2015, FreshRealm issued additional units to various parties, which reduced our ownership percentage to approximately 49% at October 31, 2015. In the fourth quarter of fiscal 2016, FreshRealm completed another round of financing in which Calavo invested $3.2 million.  During that round of financing, FreshRealm issued additional units to various parties, which reduced our ownership percentage further to approximately 46% at October 31, 2016. 

We estimated the fair value of our noncontrolling interest in FreshRealm by performing a fair value measurement.  This analysis was conducted with the consultation from a third party consulting firm.  Our investment of $19.4 million in FreshRealm million has been recorded as investment in unconsolidated subsidiaries on our balance sheet. 

Marketable Securities

Marketable Securities

Our marketable securities consist of our investment in Limoneira Company (Limoneira) stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are considered available for sale securities based on management’s intent with respect to such securities and are carried at fair value as determined from quoted market prices.  The estimated fair value, cost, and gross unrealized gain related to such investment was $34.0 million, $23.5 million and $10.5 million as of October 31, 2016.    

Advances to Suppliers

Advances to Suppliers

We advance funds to third-party growers primarily in Mexico for various farming needs.  Typically, we obtain collateral (i.e. fruit, fixed assets, etc.) that approximates the value at risk, prior to making such advances.  We continuously evaluate the ability of these growers to repay advances in order to evaluate the possible need to record an allowance.  No such allowance was required at October 31, 2016, nor October 31, 2015.

Pursuant to our distribution agreement, which was amended in fiscal 2011, with Agricola Belher (Belher) of Mexico, a producer of fresh vegetables, primarily tomatoes, for export to the U.S. market, Belher agreed, at their sole cost and expense, to harvest, pack, export, ship, and deliver tomatoes exclusively to our company, primarily our Arizona facility.  In exchange, we agreed to sell and distribute such tomatoes, make advances to Belher for operating purposes, provide additional advances as shipments are made during the season (subject to limitations, as defined), and return the proceeds from such tomato sales to Belher, net of our commission and aforementioned advances.  Pursuant to such amended agreement with Belher, we advanced Belher a total of $3.0 million, up from $2.0 million in the original agreement, during fiscal 2011.  Additionally, the amended agreement calls for us to continue to advance $3.0 million per annum for operating purposes through 2019.  These advances will be collected through settlements by the end of each year.  For fiscal 2016, we agreed to advance an additional $1.4 million for preseason advances. As of October 31, 2016 and 2015, we have total advances of $4.4 million and $3.0 million to Belher pursuant to this agreement, which is recorded in advances to suppliers.

Similar to Belher, we make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from such tomato sales to Don Memo, net of our commission and aforementioned advances. As of October 31, 2016 and 2015, we have total advances of $0.9 million and $1.8 million to Don Memo, which is recorded in advances to suppliers.

Infrastructure Advances

Infrastructure Advances

Pursuant to our infrastructure agreement, we make advances to be used solely for the acquisition, construction, and installation of improvements to and on certain land owned/controlled by Belher, as well as packing line equipment.  Advances incur interest at 4.7% at October 31, 2016 and 2015.  As of October 31, 2016, we have advanced a total of $0.8 million ($0.2 million included in prepaid expenses and other current assets and $0.6 million included in other long-term assets).  As of October 31, 2015, we have advanced a total of $1.8 million ($1.0 million included in prepaid expenses and other current assets and $0.8 million included in other long-term assets).  Belher is to annually repay these advances in no less than 20% increments through June 2020.  Interest is to be paid monthly or annually, as defined.  Belher may prepay, without penalty, all or any portion of the advances at any time.  In order to secure their obligations pursuant to both agreements discussed above, Belher granted us a first-priority security interest in certain assets, including cash, inventory and fixed assets, as defined.

Accrued Expenses

Accrued Expenses

Included in accrued expenses at October 31, 2016 and 2015 are liabilities related to the receipt of goods and/or services for which an invoice has not yet been received. These totaled approximately $12.4 million and $6.2 million for the year ended October 31, 2016 and 2015. 

Revenue Recognition

Revenue Recognition

Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.  These terms are typically met upon delivery of product to the customer.  Service revenue, including freight, ripening, storage, bagging and palletization charges, is recorded when services are performed and sales of the related products are delivered.

Shipping and Handling

Shipping and Handling

We include shipping and handling fees billed to customers in net revenues.  Amounts incurred by us for freight are included in cost of goods sold.

Promotional Allowances

Promotional Allowances

We provide for promotional allowances at the time of sale, based on our historical experience.  Our estimates are generally based on evaluating the historical relationship between promotional allowances and gross sales.  The derived percentage is then applied to the current period’s sales revenues in order to arrive at the appropriate debit to sales allowances for the period.  The offsetting credit is made to accrued expenses.  When certain amounts of specific customer accounts are subsequently identified as promotional, they are written off against this allowance.  Actual amounts may differ from these estimates and such differences are recognized as an adjustment to net sales in the period they are identified.

Allowance for Accounts Receivable

Allowance for Accounts Receivable

We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable.

Consignment Arrangements

Consignment Arrangements

We frequently enter into consignment arrangements with pineapple and tomato growers and packers located outside of the United States and growers of certain perishable products in the United States. Although we generally do not take legal title to these avocados and perishable products, we do assume responsibilities (principally assuming credit risk, inventory loss and delivery risk, and pricing risk) that are consistent with acting as a principal in the transaction.  Accordingly, the accompanying financial statements include sales and cost of sales from the sale of avocados and perishable products procured under consignment arrangements.  Amounts recorded for each of the fiscal years ended October 31, 2016, 2015 and 2014 in the financial statements pursuant to consignment arrangements are as follows (in thousands):

	2016		2015		2014
Sales	$	34,919	$	28,139	$	30,721
Cost of Sales		30,729		25,177		27,759
Gross Margin	$	4,190	$	2,962	$	2,962

Advertising Expense

Advertising Expense

Advertising costs are expensed when incurred and are generally included as a component of selling, general and administrative expense. Such costs were approximately $0.2 million for fiscal years 2016, 2015, and 2014.  

Research and Development

Research and Development

Research and development costs are expensed as incurred and are generally included as a component of selling, general and administrative expense. FreshRealm, a development stage company, comprised the majority of our research and development costs in 2014. Total research and development costs for fiscal years 2016 and 2015 were less than $0.1 million.  Total research and development costs for fiscal years 2014, were approximately $0.8 million. 

Other Income, Net

Other Income, Net

Included in other income, net is dividend income totaling $0.6 million for fiscal year 2016.  Dividend income totaled $0.5 million for fiscal years 2015 and 2014.  See Note 9 for related party disclosure related to other income.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.  Among the significant estimates affecting the financial statements are those related to valuation allowances for accounts receivable, goodwill, grower advances, inventories, long-lived assets, valuation of and estimated useful lives of identifiable intangible assets, stock-based compensation, promotional allowances and income taxes.  On an ongoing basis, management reviews its estimates based upon currently available information.  Actual results could differ materially from those estimates.

Income Taxes

Income Taxes

We account for deferred tax liabilities and assets for the future consequences of events that have been recognized in our consolidated financial statements or tax returns.  Measurement of the deferred items is based on enacted tax laws.  In the event the future consequences of differences between financial reporting bases and tax bases of our assets and liabilities result in a deferred tax asset, we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset.  A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.  If we ultimately determine that the payment of these liabilities will be unnecessary, the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies.  Conversely, we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.  Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.  Therefore, the actual liability for U.S. or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Basic and Diluted Net Income per Share

Basic and Diluted Net Income per Share

Basic earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock options and contingent consideration.  Diluted earnings per common share is calculated using the weighted-average number of common shares outstanding during the period after consideration of the dilutive effect of stock options and the effect of contingent consideration shares.

Basic and diluted net income per share is calculated as follows (U.S. dollars in thousands, except share and per share data):

	Year ended  October 31,
	2016		2015		2014
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	38,022	$	27,199	$	97
Denominator:
Weighted average shares - Basic		17,347,121		17,295,305		15,765,102
Effect on dilutive securities – Restricted stock/options		83,560		67,731		1,455,000
Weighted average shares - Diluted		17,430,681		17,363,036		17,220,102
Net income per share attributable to Calavo Growers, Inc:
Basic	$	2.19	$	1.57	$	0.01
Diluted	$	2.18	$	1.57	$	0.01

Foreign Currency Translation and Remeasurement

Foreign Currency Translation and Remeasurement

Our foreign operations are subject to exchange rate fluctuations and foreign currency transaction costs.  The functional currency of our foreign subsidiaries is the United States dollar.  As a result, monetary assets and liabilities are translated into U.S. dollars at exchange rates as of the balance sheet date and non-monetary assets, liabilities and equity are translated at historical rates.  Sales and expenses are translated using a weighted-average exchange rate for the period.  Gains and losses resulting from those remeasurements are included in income.  Gains and losses resulting from foreign currency transactions are also recognized currently in income. Total foreign currency losses for fiscal 2016, 2015 and 2014, net of gains, were $1.1 million, $1.8 million, and $0.1 million.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

We believe that the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings approximates fair value based on either their short-term nature or on terms currently available to the Company in financial markets.  Due to current market rates, we believe that our fixed-rate long-term obligations have the same fair value and carrying value  of approximately $0.6 million as of October 31, 2016.

Deferred Rent

Deferred Rent

As part of certain lease agreements, we receive construction allowances from our landlords.  The construction allowances are deferred and amortized on a straight-line basis over the life of the lease as a reduction to rent expense.

Derivative Financial Instruments

Derivative Financial Instruments

We were not a party to any material derivative instruments during the fiscal year.  It is currently our intent not to use derivative instruments for speculative or trading purposes. Additionally, we do not use any hedging or forward contracts to offset market volatility.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In November 2015, the FASB issued an ASU, which amends the existing accounting standards for income taxes. The amendment required companies to report their deferred tax liabilities and deferred tax assets each as a single non-current item on their classified balance sheets. The Company elected to adopt the amendments in the first quarter of fiscal year 2016 and applied them prospectively to the current period presented, as permitted by the standard. The adoption of the amendments had no impact on the Company's net earnings or cash flow from operations for any period presented.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU"), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will be effective for us beginning the first day of our 2017 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In February 2016, the FASB issued an ASU, which requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including significant judgments and changes in judgments. This ASU will be effective for us beginning the first day of our 2019 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

In January 2016, the FASB issued an ASU, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows.

In July 2015, the FASB issued an ASU for measuring inventory.  The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us on a prospective basis beginning on the first day of our fiscal 2017 year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, result of operations and cash flows, but do not expect the adoption of this ASU to have a significant effect.

    In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is not permitted. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are evaluating the impact of the adoption of this amended accounting standard on our financial condition, result of operations and cash flows, but we do not expect the adoption of this accounting standard to have a significant effect.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as all changes in a company's net assets, except changes resulting from transactions with shareholders.  For the fiscal year ended October 31, 2016, other comprehensive income includes the unrealized gain on our Limoneira investment totaling $4.1 million, net of income taxes.  Limoneira’s stock price at October 31, 2016 equaled $19.69 per share.  For the fiscal year ended October 31, 2015, other comprehensive income includes the unrealized loss on our Limoneira investment totaling $10.3 million, net of income taxes.  Limoneira’s stock price at October 31, 2015 equaled $15.86 per share.  For the fiscal year ended October 31, 2014, other comprehensive loss includes the unrealized loss on our Limoneira investment totaling $0.7 million, net of income taxes.  Limoneira’s stock price at October 31, 2014 equaled $25.66 per share. 

Noncontrolling Interest

Noncontrolling Interest

The following tables reconcile shareholders’ equity attributable to noncontrolling interest related to the Salsa Lisa acquisition, and Avocados de Jalisco (in thousands). 

	Year ended		Year ended
Salsa Lisa noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Accretion attributable to noncontrolling interest of Salsa Lisa		486		15
Noncontrolling interest, ending	$	771	$	285

The noncontrolling interest for Salsa Lisa is recorded at the greater of the noncontrolling interest balance adjusted for the attribution of loss or the amount redeemable pursuant to the acquisition agreement. For fiscal 2016, we recorded an adjustment of $486,000 to increase the noncontrolling interest balance to the expected redeemable amount of $771,000. This adjustment has been included in net (income) loss attributed to noncontrolling interest.

	Year ended		Year ended
Avocados de Jalisco noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Noncontrolling interest contribution		—		1,011
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(49)		—
Noncontrolling interest, ending	$	962	$	1,011

Business Segment Reporting

we report our operations in three different business segments: (1) Fresh products, (2) Calavo Foods, and (3) RFG.  These three business segments are presented based on how information is used by our Chief Executive Officer to measure performance and allocate resources.  The Fresh products segment includes all operations that involve the distribution of avocados and other fresh produce products.  The Calavo Foods segment represents all operations related to the purchase, manufacturing, and distribution of prepared products, including guacamole, and salsa. The RFG segment represents all operations related to the manufacturing and distribution of fresh-cut fruit, ready-to-eat vegetables, recipe-ready vegetables and deli products.  Selling, general and administrative expenses, as well as other non-operating income/expense items, are evaluated by our Chief Executive Officer in the aggregate.  We do not allocate assets, or specifically identify them to, our operating segments.

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Basis of Presentation and Significant Accounting Policies (Tables)

12 Months Ended

Oct. 31, 2016

Accounting Policies [Abstract]

Financial Statements of Consignment Arrangements

Amounts recorded for each of the fiscal years ended October 31, 2016, 2015 and 2014 in the financial statements pursuant to consignment arrangements are as follows (in thousands):

	2016		2015		2014
Sales	$	34,919	$	28,139	$	30,721
Cost of Sales		30,729		25,177		27,759
Gross Margin	$	4,190	$	2,962	$	2,962

Schedule of basic and diluted net income per share

Basic and diluted net income per share is calculated as follows (U.S. dollars in thousands, except share and per share data):

	Year ended  October 31,
	2016		2015		2014
Numerator:
Net Income attributable to Calavo Growers, Inc.	$	38,022	$	27,199	$	97
Denominator:
Weighted average shares - Basic		17,347,121		17,295,305		15,765,102
Effect on dilutive securities – Restricted stock/options		83,560		67,731		1,455,000
Weighted average shares - Diluted		17,430,681		17,363,036		17,220,102
Net income per share attributable to Calavo Growers, Inc:
Basic	$	2.19	$	1.57	$	0.01
Diluted	$	2.18	$	1.57	$	0.01

Reconciles Shareholders' Equity Attributable to Noncontrolling Interest

The following tables reconcile shareholders’ equity attributable to noncontrolling interest related to the Salsa Lisa acquisition, and Avocados de Jalisco (in thousands). 

	Year ended		Year ended
Salsa Lisa noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	285	$	270
Accretion attributable to noncontrolling interest of Salsa Lisa		486		15
Noncontrolling interest, ending	$	771	$	285

The noncontrolling interest for Salsa Lisa is recorded at the greater of the noncontrolling interest balance adjusted for the attribution of loss or the amount redeemable pursuant to the acquisition agreement. For fiscal 2016, we recorded an adjustment of $486,000 to increase the noncontrolling interest balance to the expected redeemable amount of $771,000. This adjustment has been included in net (income) loss attributed to noncontrolling interest.

	Year ended		Year ended
Avocados de Jalisco noncontrolling interest	October 31, 2016		October 31, 2015
Noncontrolling interest, beginning	$	1,011	$	—
Noncontrolling interest contribution		—		1,011
Net loss attributable to noncontrolling interest of Avocados de Jalisco		(49)		—
Noncontrolling interest, ending	$	962	$	1,011

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Inventories (Tables)

12 Months Ended

Oct. 31, 2016

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following (in thousands):

	October 31,
	2016		2015
Fresh fruit	$	17,126	$	11,939
Packing supplies and ingredients		7,605		6,347
Finished prepared foods		7,118		8,065
	$	31,849	$	26,351

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Property, Plant, and Equipment (Tables)

12 Months Ended

Oct. 31, 2016

Property, Plant and Equipment [Abstract]

Summary of Property, Plant, and Equipment

Property, plant, and equipment consist of the following (in thousands):

	October 31,
	2016		2015
Land	$	7,023	$	7,023
Buildings and improvements		22,480		22,497
Leasehold improvements		8,918		4,810
Equipment		66,109		59,391
Information systems - hardware and software		8,089		7,839
Construction in progress		25,456		12,305
		138,075		113,865
Less accumulated depreciation and amortization		(50,238)		(44,417)
	$	87,837	$	69,448

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Other Assets (Tables)

12 Months Ended

Oct. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Assets

Other assets consist of the following (in thousands):

	October 31,		October 31,
	2016		2015
Intangibles, net	$	3,365	$	4,613
Mexican IVA (i.e. value-added) taxes receivable		6,962		5,853
Grower advances		49		346
Infrastructure advance to Agricola Belher		600		800
Loan to FreshRealm members		318		307
Notes receivable from San Rafael		928		1,286
Other		1,027		796
	$	13,249	$	14,001

Schedule of Intangible Assets

The intangible assets consist of the following (in thousands):

		October 31, 2016						October 31, 2015
	Weighted-	Gross				Net		Gross				Net
	Average	Carrying		Accum.		Book		Carrying		Accum.		Book
	Useful Life	Value		Amortization		Value		Value		Amortization		Value
Customer list/relationships	8.0 years	$	7,640	$	(5,241)	$	2,399	$	7,640	$	(4,282)	$	3,358
Trade names	8.2 years		2,760		(2,380)		380		2,760		(2,164)		596
Trade secrets/recipes	9.3 years		630		(319)		311		630		(270)		360
Brand name intangibles	indefinite		275		—		275		275		—		275
Non-competition agreements	5.0 years		267		(267)		—		267		(243)		24
Intangibles, net		$	11,572	$	(8,207)	$	3,365	$	11,572	$	(6,959)	$	4,613

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Employee Benefit Plans (Tables)

12 Months Ended

Oct. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Components of Change in Projected Benefit Obligation

Components of the change in projected benefit obligation for fiscal year ends consist of the following (in thousands):

	2016		2015
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	215	$	196
Interest cost		8		7
Actuarial loss		9		48
Benefits paid		(37)		(36)
Projected benefit obligation at end of year (unfunded)	$	195	$	215

Reconciliation of Unfunded Status of Plans Included in Accrued Expenses

The following is a reconciliation of the unfunded status of the plans at fiscal year ends included in accrued expenses (in thousands):

	2016		2015
Projected benefit obligation	$	195	$	215
Unrecognized net (gain) loss		-		-
Recorded pension liabilities	$	195	$	215

Significant Assumptions Used in Determination of Pension Expense

	2016		2015
Discount rate on projected benefit obligation	3.7	%	4.3	%

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Commitments and Contingencies (Tables)

12 Months Ended

Oct. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Minimum Cash Payments Under Non-Cancelable Operating Leases

We are committed to make minimum cash payments under these agreements as of October 31, 2016, as follows (in thousands):

2017	$	5,268
2018		5,305
2019		5,140
2020		4,644
2021		4,278
Thereafter		33,571
	$	58,206

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Related-Party Transactions (Tables)

12 Months Ended

Oct. 31, 2016

Related-Party Transactions [Abstract]

Schedule of related party transactions

	Year ended October 31,
(in thousands)	2016		2015
Rent paid to LIG	$	529	$	522
Rent paid to THNC, LLC	$	342	$	304
Sales to Third Coast	$	-	$	270
Purchases from Third Coast	$	-	$	195

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Income Taxes (Tables)

12 Months Ended

Oct. 31, 2016

Income Tax Disclosure [Abstract]

Summary of Income Tax Provision (Benefit)

The income tax provision (benefit) consists of the following for the years ended October 31, (in thousands):

	2016		2015		2014
Current:
Federal	$	17,244	$	10,150	$	7,379
State		2,040		1,650		939
Foreign		982		1,110		842
Total current		20,266		12,910		9,160
Deferred:
Federal		1,863		3,314		(10,392)
State		533		98		(2,870)
Foreign		(793)		(229)		186
Total deferred		1,603		3,183		(13,076)
Total income tax provision (benefit)	$	21,869	$	16,093	$	(3,916)

Significant Components of Deferred Taxes Assets (Liabilities)

Significant components of our deferred taxes assets (liabilities) as of October 31, are as follows (in thousands):

	2016		2015
Property, plant, and equipment		(6,901)		(6,877)
Intangible assets		27,686		31,432
Unrealized gain, Limoneira investment		(4,048)		(1,553)
Investment in FreshRealm		(6,902)		(7,024)
Stock-based compensation		952		556
State taxes		(931)		(1,358)
Credits and incentives		2,070		2,044
Allowance for accounts receivable		875		662
Inventories		395		495
Accrued liabilities		1,912		885
Other		(164)		(219)
Long-term deferred income taxes	$	14,944	$	19,043

Reconciliation of Significant Differences Between Federal Statutory Income Tax Rate and Effective Income Tax Rate

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income for the years ended October 31, is as follows:

	2016		2015		2014
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal effects	2.9		3.0		22.3
Foreign income taxes greater than U.S.	0.7		0.7		5.8
Section 199 deduction	(1.7)		(0.8)		15.8
Tax Credits	—		—		15.2
Other	(0.6)		(0.7)		0.7
	36.3	%	37.2	%	94.8	%

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Segment Information (Tables)

12 Months Ended

Oct. 31, 2016

Segment Reporting [Abstract]

Gross Margin

The following table sets forth sales by product category, by segment (in thousands):

	Fresh		Calavo
	products		Foods		RFG		Total
	(All amounts are presented in thousands)
Year ended October 31, 2016
Net sales	$	538,687	$	63,494	$	333,498	$	935,679
Cost of sales		480,690		41,046		306,409		828,145
Gross margin	$	57,997	$	22,448	$	27,089	$	107,534
Year ended October 31, 2015
Net sales	$	500,711	$	62,156	$	293,957	$	856,824
Cost of sales		463,647		41,645		266,305		771,597
Gross margin	$	37,064	$	20,511	$	27,652	$	85,227
Year ended October 31, 2014
Net sales	$	470,949	$	59,279	$	252,282	$	782,510
Cost of sales		434,820		46,269		230,193		711,282
Gross margin	$	36,129	$	13,010	$	22,089	$	71,228

Sales by Product Category, by Segment

The following table sets forth sales by product category, by segment (in thousands):

	Year Ended October 31, 2016								Year Ended October 31, 2015
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	493,440	$	—	$	—	$	493,440	$	471,178	$	—	$	—	$	471,178
Tomatoes		35,981		—		—		35,981		18,681		—		—		18,681
Papayas		9,514		—		—		9,514		9,485		—		—		9,485
Pineapples		1,060		—		—		1,060		2,397		—		—		2,397
Other fresh products		536		—		—		536		442		—		—		442
Food service		—		50,716		—		50,716		—		49,212		—		49,212
Retail and club		—		23,216		336,989		360,205		—		22,736		296,697		319,433
Total gross sales		540,531		73,932		336,989		951,452		502,183		71,948		296,697		870,828
Less sales incentives		(1,844)		(10,438)		(3,491)		(15,773)		(1,472)		(9,792)		(2,740)		(14,004)
Net sales	$	538,687	$	63,494	$	333,498	$	935,679	$	500,711	$	62,156	$	293,957	$	856,824

	Year Ended October 31, 2015								Year Ended October 31, 2014
	Fresh		Calavo						Fresh		Calavo
	products		Foods		RFG		Total		products		Foods		RFG		Total
Third-party sales:
Avocados	$	471,178	$	—	$	—	$	471,178	$	433,581	$	—	$	—	$	433,581
Tomatoes		18,681		—		—		18,681		19,705		—		—		19,705
Papayas		9,485		—		—		9,485		12,619		—		—		12,619
Pineapples		2,397		—		—		2,397		5,086		—		—		5,086
Other fresh products		442		—		—		442		1,037		—		—		1,037
Food service		—		49,212		—		49,212		—		48,085		—		48,085
Retail and club		—		22,736		296,697		319,433		—		22,334		255,074		277,408
Total gross sales		502,183		71,948		296,697		870,828		472,028		70,419		255,074		797,521
Less sales incentives		(1,472)		(9,792)		(2,740)		(14,004)		(1,079)		(11,140)		(2,792)		(15,011)
Net sales	$	500,711	$	62,156	$	293,957	$	856,824	$	470,949	$	59,279	$	252,282	$	782,510

Long-Lived Assets Attributed to Geographic Areas

Long-lived assets attributed to geographic areas as of October 31, are as follows (in thousands):

	United States		Mexico		Consolidated
2016	$	55,715	$	32,122	$	87,837
2015	$	37,573	$	31,875	$	69,448

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Long-Term Obligations (Tables)

12 Months Ended

Oct. 31, 2016

Debt Disclosure [Abstract]

Summary of Long-Term Obligations

Long-term obligations at fiscal year ends consist of the following (in thousands):

	2016		2015
Farm Credit West, PCA, (FCW) term loan	$	—	$	1,002
Bank of America, N.A. (BoA) term loan		—		1,019
Capital leases		583		771
		583		2,792
Less current portion		(138)		(2,206)
	$	445	$	586

Schedule of Capital Lease Payments

At October 31, 2016, capital lease payments are scheduled as follows (in thousands):

	Total
Year ending October 31:
2017	$	162
2018		118
2019		104
2020		103
2021		99
Thereafter		76
Minimum lease payments		662
Less interest		(79)
Present value of future minimum lease payments	$	583

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Stock-Based Compensation (Tables)

12 Months Ended

Oct. 31, 2016

2005 Stock Incentive Plan [Member]

Stock Option Activity, Related to Incentive Plan

A summary of stock option activity is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Exercise Price		Intrinsic Value
Outstanding at October 31, 2015	10	$	18.28
Exercised	(2)	$	19.20
Outstanding at October 31, 2016	8	$	18.05	$	474
Exercisable at October 31, 2016	8	$	18.05	$	474

2011 Management Incentive Plan [Member]

Stock Option Activity, Related to Incentive Plan

A summary of stock option activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2015	14	$	23.00
Exercised	(3)	$	21.80
Outstanding at October 31, 2016	11	$	23.33	$	395
Exercisable at October 31, 2016	7	$	20.13	$	274

Restricted Stock Activity

A summary of restricted stock activity, related to our 2011 Management Incentive Plan, is as follows (in thousands, except for per share amounts):

		Weighted-Average		Aggregate
	Number of Shares	Grant Price		Intrinsic Value
Outstanding at October 31, 2015	72	$	39.01
Vested	(39)	$	39.5
Granted	51	$	48.58
Outstanding at October 31, 2016	84	$	44.76	$	4,981

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Fair Value Measurements (Tables)

12 Months Ended

Oct. 31, 2016

Fair Value Disclosures [Abstract]

Financial Assets and Liabilities Measured on Recurring and Non-Recurring Basis

The following table sets forth our financial assets and liabilities as of October 31, 2016 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Assets at Fair Value:
Investment in Limoneira Company(1)	$	34,036		-		-	$	34,036
Total assets at fair value	$	34,036	$	-	$	-	$	34,036

(1)The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock.  We currently own approximately 12% of Limoneira’s outstanding common stock.  These securities are measured at fair value by quoted market prices.  Limoneira’s stock price at October 31, 2016 and October 31, 2015 equaled $19.69 per share and $15.86 per share.  Unrealized gains and losses are recognized through other comprehensive income.  Unrealized investment holding gains arising during the year ended October 31, 2016 was $6.6 million.  Unrealized investment holding losses arising during the year ended October 31, 2015 and 2014 was $16.9 million and $1.2 million.    

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Description of Business (Details)	12 Months Ended
	Oct. 31, 2016 segment
Accounting Policies [Abstract]
Number of Reportable Segments	3

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Basis of Presentation and Significant Accounting Policies - Additional Information (Details) - USD ($)	1 Months Ended		3 Months Ended		12 Months Ended
	May 31, 2015	May 31, 2014	Oct. 31, 2016	Jul. 31, 2014	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014	Jan. 31, 2016	Jul. 31, 2015	Oct. 31, 2012	Oct. 31, 2011
Significant Accounting Policies [Line Items]
Non-trade receivables			$ 11,600,000		$ 11,600,000	$ 12,300,000
Mexican IVA (i.e. value-added) tax receivable recorded in prepaids & other current assets			8,400,000		8,400,000	5,700,000
Prepaid expenses			2,800,000		2,800,000	2,300,000
Goodwill impairment loss					0	0
Impairment of long-lived assets					0	0
Investment in FreshRealm included in accrued expenses					1,600,000
Noncontrolling interest			962,000		962,000	1,011,000
Estimated fair value of investment			34,000,000		34,000,000	27,400,000
Estimated cost of investment			23,500,000		23,500,000	23,500,000
Estimated gross unrealized gain related to such investment					10,500,000	4,000,000
Advances to supplier						800,000	$ 3,200,000
Advances to suppliers					1,605,000	(438,000)	45,000
Total advance to supplier			4,425,000		4,425,000	2,820,000
Accrued liabilities related to goods and services			12,400,000		12,400,000	6,200,000
Advertising costs					200,000	200,000	200,000
Research and development costs							800,000
Dividend income included in other income					$ 600,000	$ 500,000	$ 500,000
Weighted average shares - Basic					17,347,000	17,295,000	15,765,000
Effect on dilutive securities - Restricted stock/options					83,560	67,731	1,455,000
Recognized stock-based compensation expense					$ 2,134,000	$ 2,108,000	$ 727,000
Foreign currency gains/losses net of losses/gains					1,100,000	1,800,000	100,000
Fixed rate long term obligation fair value			600,000		600,000
Unrealized gain (loss) on investment					$ (6,621,000)	16,940,000	1,175,000
As reported
Significant Accounting Policies [Line Items]
Ownership percentage by parent		71.10%
Impermanence
Significant Accounting Policies [Line Items]
Ownership interest		28.60%
Noncontrolling interest		$ 10,000,000
FreshRealm
Significant Accounting Policies [Line Items]
Ownership percentage by parent	50.80%			49.00%	46.00%
Investment made			3,200,000
Fair value of noncontrolling investment			$ 19,400,000		$ 19,400,000
Agricola Don Memo
Significant Accounting Policies [Line Items]
Investment in unconsolidated entities						800,000	3,200,000
Bridge loan amount								$ 4,000,000
Avocados de Jalisco noncontrolling interest
Significant Accounting Policies [Line Items]
Ownership interest			80.00%		80.00%
Supply Agreement With Belher [Member]
Significant Accounting Policies [Line Items]
Allowance from advance to supplier			$ 0		$ 0	0
Advances to supplier										$ 3,000,000	$ 2,000,000
Advances for operating purpose			3,000,000		3,000,000
Advances to suppliers					1,400,000
Total advance to supplier			4,400,000		4,400,000	3,000,000
Supply Agreement With Don Memo [Member]
Significant Accounting Policies [Line Items]
Advances to supplier			900,000		900,000	1,800,000
Infrastructure Advance Agreement With Belher [Member]
Significant Accounting Policies [Line Items]
Advances to supplier			$ 4,400,000		$ 4,400,000	$ 3,000,000
Advances incur interest			4.70%		4.70%	4.70%
Aggregate advance			$ 800,000		$ 800,000	$ 1,800,000
Repay these advances in no less than			20.00%		20.00%
Repay these advances in no less than period					2020-06
Limoneira
Significant Accounting Policies [Line Items]
Ownership interest			12.00%		12.00%
Percentage of outstanding shares of Limoneira's shares					12.00%
Dividend income included in other income					$ 300,000	300,000	300,000
Unrealized gain (loss) on investment					$ 4,100,000	$ 10,300,000	$ 700,000
Limoneira's stock price			$ 19.69		$ 19.69	$ 15.86	$ 25.66
Mexican IVA
Significant Accounting Policies [Line Items]
Mexican IVA (i.e. value-added) tax receivable recorded in prepaids & other current assets			$ 8,400,000		$ 8,400,000	$ 5,700,000
Prepaid Expenses and Other Current Assets [Member] | Agricola Don Memo
Significant Accounting Policies [Line Items]
Receivable in prepaid and other current assets						4,000,000
Prepaid Expenses and Other Current Assets [Member] | Infrastructure Advance Agreement With Belher [Member]
Significant Accounting Policies [Line Items]
Aggregate advance			200,000		200,000	1,000,000
Other Long Term Assets [Member] | Infrastructure Advance Agreement With Belher [Member]
Significant Accounting Policies [Line Items]
Aggregate advance			$ 600,000		$ 600,000	800,000
Minimum
Significant Accounting Policies [Line Items]
Ownership interest of voting stock of investee					20.00%
Minimum | Building and Improvements
Significant Accounting Policies [Line Items]
Useful lives					7 years
Minimum | Leasehold Improvements
Significant Accounting Policies [Line Items]
Useful lives					7 years
Minimum | Equipment
Significant Accounting Policies [Line Items]
Useful lives					7 years
Minimum | Information Systems Hardware And Software [Member]
Significant Accounting Policies [Line Items]
Useful lives					3 years
Maximum
Significant Accounting Policies [Line Items]
Ownership interest of voting stock of investee					50.00%
Research and development costs					$ 100,000	$ 100,000
Maximum | Building and Improvements
Significant Accounting Policies [Line Items]
Useful lives					50 years
Maximum | Equipment
Significant Accounting Policies [Line Items]
Useful lives					25 years
Maximum | Information Systems Hardware And Software [Member]
Significant Accounting Policies [Line Items]
Useful lives					10 years
Calavo Salsa Lisa
Significant Accounting Policies [Line Items]
Ownership percentage by parent					65.00%
Don Memo
Significant Accounting Policies [Line Items]
Investment in unconsolidated entities					$ 2,300,000		$ 1,000,000
Belo
Significant Accounting Policies [Line Items]
Ownership interest			50.00%		50.00%				50.00%

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Basis of Presentation and Significant Accounting Policies - Investments (Details) - USD ($) $ in Millions	12 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2016	Jul. 31, 2015
Belo
Schedule of Equity Method Investments [Line Items]
Ownership interest			50.00%	50.00%
Agricola Don Memo
Schedule of Equity Method Investments [Line Items]
Investment in unconsolidated entities	$ 0.8	$ 3.2

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Basis of Presentation and Significant Accounting Policies - Financial Statements of Consignments Arrangements (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Schedule Of Condensed Statements Of Operations [Line Items]
Net sales	$ 935,679	$ 856,824	$ 782,510
Cost of sales	828,145	771,597	711,282
Gross margin	107,534	85,227	71,228
Consignment Arrangement [Member]
Schedule Of Condensed Statements Of Operations [Line Items]
Net sales	34,919	28,139	30,721
Cost of sales	30,729	25,177	27,759
Gross margin	$ 4,190	$ 2,962	$ 2,962

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Basis of Presentation and Significant Accounting Policies - Basic and Diluted Net Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Earnings Per Share [Abstract]
Net income attributable to Calavo Growers, Inc.	$ 38,022	$ 27,199	$ 97
Weighted average shares - Basic	17,347,000	17,295,000	15,765,000
Effect on dilutive securities - Restricted stock/options	83,560	67,731	1,455,000
Weighted average shares - Diluted	17,431,000	17,363,000	17,220,000
Basic	$ 2.19	$ 1.57	$ 0.01
Diluted	$ 2.18	$ 1.57	$ 0.01

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Basis of Presentation and Significant Accounting Policies - Reconciliation of Shareholders' Equity Attributable to Noncontrolling Interest (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning	$ 1,011
Less: Net (income) loss attributable to noncontrolling interest	(437)		$ 312
Noncontrolling interest, ending	962	$ 1,011
Salsa Lisa noncontrolling interest [Member]
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning	285	270
Less: Net (income) loss attributable to noncontrolling interest	486	15
Noncontrolling interest, ending	771	285	$ 270
Noncontrolling Interest [Member]
Noncontrolling Interest [Line Items]
Noncontrolling interest, beginning	1,011
Noncontrolling interest contribution		1,011
Less: Net (income) loss attributable to noncontrolling interest	(49)
Noncontrolling interest, ending	$ 962	$ 1,011

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Inventories (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Inventory Disclosure [Abstract]
Fresh fruit	$ 17,126	$ 11,939
Packing supplies and ingredients	7,605	6,347
Finished prepared foods	7,118	8,065
Total, Inventories	31,849	$ 26,351
Adjustment for inventory to the lower of cost or market value	$ 1,100

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Property, Plant, and Equipment - Summary of Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	$ 138,075	$ 113,865
Less accumulated depreciation and amortization	(50,238)	(44,417)
Property, Plant and Equipment, Net, Total	87,837	69,448
Land
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	7,023	7,023
Building and Improvements
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	22,480	22,497
Leasehold Improvements
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	8,918	4,810
Equipment
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	66,109	59,391
Information systems - hardware and software
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	8,089	7,839
Construction in Progress
Property, Plant and Equipment [Line Items]
Property plant and equipment, Gross	$ 25,456	$ 12,305

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Property, Plant, and Equipment - Narrative (Details) - USD ($) $ in Millions	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 7.3	$ 6.4	$ 5.3
Property, plant, and equipment with capital leases	3.2	3.3
Accumulated depreciation with capital leases	2.5	2.1
Capital Leases
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 0.5	$ 0.5	$ 0.5

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Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Schedule Of Other Assets [Line Items]
Intangibles, net	$ 3,365	$ 4,613
Mexican IVA (i.e. value-added) taxes receivable	6,962	5,853
Grower advances	49	346
Infrastructure advance to Agricola Belher	600	800
Loan to FreshRealm members	318	307
Notes receivable from San Rafael	928	1,286
Other	1,027	796
Other assets	$ 13,249	$ 14,001

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Other Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	$ 11,572	$ 11,572
Accum. Amortization	(8,207)	(6,959)
Net Book Value	3,365	4,613
Intangibles, net	3,365	4,613
Brand name intangibles [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	275	275
Net Book Value	$ 275	275
Customer list/relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	8 years
Gross Carrying Value	$ 7,640	7,640
Accum. Amortization	(5,241)	(4,282)
Net Book Value	$ 2,399	3,358
Trade names [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	8 years 2 months 12 days
Gross Carrying Value	$ 2,760	2,760
Accum. Amortization	(2,380)	(2,164)
Net Book Value	$ 380	596
Trade secrets/recipes [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	9 years 3 months 18 days
Gross Carrying Value	$ 630	630
Accum. Amortization	(319)	(270)
Net Book Value	$ 311	360
Non-competition agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Useful Life	5 years
Gross Carrying Value	$ 267	267
Accum. Amortization	$ (267)	(243)
Net Book Value		$ 24

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Other Assets - Narrative (Details) - USD ($) $ in Millions	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 1.5	$ 1.6	$ 1.3
Amortization expense for remainder of fiscal 2016	1.1
Amortization expense for the year 2017	1.1
Amortization expense for the year 2018	0.7
Amortization expense for the year 2019	0.1
Amortization expense for the year 2020	0.1
Amortization expense for the years 2020-2023	$ 0.1

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Revolving Credit Facilities (Details) - Revolving Credit Facility - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Jun. 30, 2016	Oct. 31, 2016
Debt Instrument [Line Items]
Credit agreement term	5 years
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage		0.15%
Credit available under borrowing agreement	$ 80
Additional borrowing capacity	$ 50
Maximum
Debt Instrument [Line Items]
Quarterly consolidated leverage ratio		2.50%
Minimum
Debt Instrument [Line Items]
Quarterly consolidated leverage ratio		1.15%
LIBOR | Maximum
Debt Instrument [Line Items]
Applicable margin (as a percent)		1.50%
LIBOR | Minimum
Debt Instrument [Line Items]
Applicable margin (as a percent)		1.00%
Base Rate | Maximum
Debt Instrument [Line Items]
Applicable margin (as a percent)		0.50%
Base Rate | Minimum
Debt Instrument [Line Items]
Applicable margin (as a percent)		0.00%

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Employee Benefit Plans - Narrative (Details)	12 Months Ended
	Oct. 31, 2016 USD ($) item	Oct. 31, 2015 USD ($)	Oct. 31, 2014 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Number of defined contribution retirement plans | item	5
Expenses incurred on defined contribution retirement plans | $	$ 984,000	$ 922,000	$ 943,000
Expenses incurred on defined benefit retirement plans | $	$ 8,000	$ 10,000	$ 9,000
Non Qualified Defined Benefit Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Number of retired executives sponsored under the plan | item	2

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Employee Benefit Plans - Components of Change in Projected Benefit Obligation (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$ 215	$ 196
Interest cost	8	7
Actuarial loss	9	48
Benefits paid	(37)	(36)
Projected benefit obligation at end of year (unfunded)	$ 195	$ 215

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Employee Benefit Plans - Reconciliation of Unfunded Status of Plans Included in Accrued Expenses (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Compensation and Retirement Disclosure [Abstract]
Projected benefit obligation	$ 195	$ 215	$ 196
Unrecognized net (gain) loss	0	0
Recorded pension liabilities	$ 195	$ 215

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Employee Benefit Plans - Significant Assumptions Used in Determination of Pension Expense (Details)	Oct. 31, 2016	Oct. 31, 2015
Compensation and Retirement Disclosure [Abstract]
Discount rate on projected benefit obligation	3.70%	4.30%

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Commitments and Contingencies - Minimum Cash Payments Under Non-Cancelable Operating Leases (Details) $ in Thousands	Oct. 31, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2017	$ 5,268
2018	5,305
2019	5,140
2020	4,644
2021	4,278
Thereafter	33,571
Total	$ 58,206

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Commitments and Contingencies - Narrative (Details) $ in Millions	12 Months Ended
	Oct. 31, 2016 USD ($) facility	Oct. 31, 2015 USD ($)	Oct. 31, 2014 USD ($)	Jan. 29, 2016 USD ($)	Jan. 28, 2016 USD ($)	Jul. 31, 2015 ft²
Commitments And Contingencies [Line Items]
Total rent expense under operating lease	$ 5.8	$ 4.4	$ 3.8
Indemnification Agreement
Commitments And Contingencies [Line Items]
Accrued liabilities	0.0
Texas
Commitments And Contingencies [Line Items]
Corporate facility annual future lease rent renewed	0.8
Renaissance Food Group, LLC (RFG) | Corporate Office
Commitments And Contingencies [Line Items]
Total rent expense under operating lease	0.4	0.4	0.4
Renaissance Food Group, LLC (RFG) | Fresh Processing Facility
Commitments And Contingencies [Line Items]
Total rent expense under operating lease	$ 0.5	0.5	0.5
Renaissance Food Group, LLC (RFG) | California
Commitments And Contingencies [Line Items]
Number of lease renewals | facility	2
Limoneira
Commitments And Contingencies [Line Items]
Total rent expense under operating lease	$ 0.3	$ 0.3	$ 0.3
Corporate facility annual future lease rent renewed	$ 0.3
Green Cove LLC
Commitments And Contingencies [Line Items]
Area of facility (in sq. ft) | ft²						200,000
Bank Of America
Commitments And Contingencies [Line Items]
Due from Joint Ventures, Noncurrent					$ 4.5
Amount Repaid From Loan Proceeds				$ 4.0

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Related-Party Transactions (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Oct. 31, 2016 USD ($) item director	Oct. 31, 2016 USD ($)	Oct. 31, 2015 USD ($)	Oct. 31, 2014 USD ($)	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2016 USD ($)	Jan. 29, 2016 USD ($)	Jan. 28, 2016 USD ($)	Jul. 31, 2015
Related Party Transaction [Line Items]
Dividend income from Limoneira		$ 600	$ 500	$ 500
Investment in FreshRealm included in accrued expenses		1,600
Revenue, Net		935,679	856,824	782,510
Advances to supplier			800	3,200
Bank Of America
Related Party Transaction [Line Items]
Amount loaned to Don Memo since its formation									$ 4,500
Amount Repaid From Loan Proceeds								$ 4,000
Infrastructure Advance Agreement With Belher [Member]
Related Party Transaction [Line Items]
Advances to supplier	$ 4,400	4,400	3,000
Infrastructure advances due	800	800	1,800
Prepaid Expenses and Other Current Assets [Member] | Infrastructure Advance Agreement With Belher [Member]
Related Party Transaction [Line Items]
Infrastructure advances due	200	200	1,000
Other Long Term Assets [Member] | Infrastructure Advance Agreement With Belher [Member]
Related Party Transaction [Line Items]
Infrastructure advances due	$ 600	$ 600	800
Avocados de Jalisco noncontrolling interest
Related Party Transaction [Line Items]
Ownership interest	80.00%	80.00%
Preseason advances	$ 300	$ 300	300
FreshRealm
Related Party Transaction [Line Items]
Ownership interest	46.00%	46.00%			49.00%	50.00%
Investment in unconsolidated entities	$ 3,200	$ 3,200	800
Number of officers | item	2
Number of board of directors | director	3
Revenue, Net		$ 1,100	$ 500	200
Belo
Related Party Transaction [Line Items]
Ownership interest	50.00%	50.00%								50.00%
Percentage of management fee equal to EBIT			20.00%
Officer | FreshRealm
Related Party Transaction [Line Items]
Ownership interest	2.80%	2.80%
Investment in unconsolidated entities	$ 1,800	$ 1,800
Director | FreshRealm
Related Party Transaction [Line Items]
Ownership interest	0.44%	0.44%
Investment in unconsolidated entities	$ 300	$ 300
Limoneira
Related Party Transaction [Line Items]
Dividend income from Limoneira		300	$ 300	300
Rent paid		$ 300	300	300
Ownership interest	12.00%	12.00%
TroyGould PC
Related Party Transaction [Line Items]
Legal fees		$ 200	200	100
LIG
Related Party Transaction [Line Items]
Rent paid		529	522
THNC
Related Party Transaction [Line Items]
Rent paid		$ 342	304
Third Coast
Related Party Transaction [Line Items]
Purchases from related parties			195
Sales made to related parties			$ 270
Calavo Sub
Related Party Transaction [Line Items]
Ownership interest	50.00%	50.00%
Percentage of commission entitled			12.00%
Agricola Don Memo
Related Party Transaction [Line Items]
Bridge Loan	$ 2,300	$ 2,300	$ 1,000				$ 4,000
Advances to supplier	$ 900	900	1,800
Avocados [Member] | Director
Related Party Transaction [Line Items]
Purchases from related parties		25,500	16,400	10,500
Tomatoes [Member] | Agricola Belher
Related Party Transaction [Line Items]
Purchases from related parties		26,000	14,200	$ 17,400
Tomatoes [Member] | Agricola Don Memo
Related Party Transaction [Line Items]
Purchases from related parties		$ 4,800	$ 2,300

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Income Taxes - Summary of Income Tax Provision (Benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Current:
Federal	$ 17,244	$ 10,150	$ 7,379
State	2,040	1,650	939
Foreign	982	1,110	842
Total current	20,266	12,910	9,160
Deferred:
Federal	1,863	3,314	(10,392)
State	533	98	(2,870)
Foreign	(793)	(229)	186
Total deferred	1,603	3,183	(13,076)
Total income tax provision	$ 21,869	$ 16,093	$ (3,916)

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Income Taxes - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended			48 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2014
Income Taxes [Line Items]
Gross deferred tax assets	$ 33,900	$ 36,100
Gross deferred tax liabilities	18,900	17,000
Accumulated foreign earnings	15,500
Income (loss) before income taxes related to domestic operations	61,000	41,500	$ (600)
Income before income taxes related to foreign operations	(600)	1,800	3,600
Unrecognized tax benefits	400
Total income tax provision	$ 21,869	$ 16,093	(3,916)
Renaissance Food Group, LLC (RFG)
Income Taxes [Line Items]
Revaluation of earn-out liability			53,600	$ 88,100
Total income tax provision			$ 3,900

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Income Taxes - Significant Components of Deferred Taxes Assets (Liabilities) (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Income Tax Disclosure [Abstract]
Property, plant, and equipment	$ (6,901)	$ (6,877)
Intangible assets	27,686	31,432
Unrealized gain, Limoneira investment	(4,048)	(1,553)
Investment in FreshRealm	(6,902)	(7,024)
Stock-based compensation	952	556
State taxes	(931)	(1,358)
Credits and incentives	2,070	2,044
Allowance for accounts receivable	875	662
Inventories	395	495
Accrued liabilities	1,912	885
Other	(164)	(219)
Long-term deferred income taxes	$ 14,944	$ 19,043

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Income Taxes - Reconciliation of Significant Differences Between Federal Statutory Income Tax Rate and Effective Income Tax Rate (Details)	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Income Tax Disclosure [Abstract]
Federal statutory tax rate	35.00%	35.00%	35.00%
State taxes, net of federal effects	2.90%	3.00%	22.30%
Foreign income taxes greater (less) than U.S.	0.70%	0.70%	5.80%
Section 199 deduction	(1.70%)	(0.80%)	15.80%
Tax Credits			15.20%
Other	(0.60%)	(0.70%)	0.70%
Effective Income Tax Rate, Total	36.30%	37.20%	94.80%

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Segment Information - Narrative (Details) $ in Thousands	12 Months Ended
	Oct. 31, 2016 USD ($) segment	Oct. 31, 2015 USD ($)	Oct. 31, 2014 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment	3
Revenue, Net	$ 935,679	$ 856,824	$ 782,510
Fresh products and RFG [Member] | Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Revenue, Net	(4,300)	(1,500)	(2,200)
Calavo Foods and RFG [Member] | Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Revenue, Net	(2,700)	(1,900)	(1,700)
Outside United States [Member]
Segment Reporting Information [Line Items]
Sales to customer outside United States	$ 25,400	$ 26,700	$ 32,800

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Segment Information - Sales by Product Category, Gross Margin (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Segment Reporting Information [Line Items]
Net sales	$ 935,679	$ 856,824	$ 782,510
Cost of sales	828,145	771,597	711,282
Gross margin	107,534	85,227	71,228
Fresh products [Member]
Segment Reporting Information [Line Items]
Net sales	538,687	500,711	470,949
Cost of sales	480,690	463,647	434,820
Gross margin	57,997	37,064	36,129
Calavo Foods [Member]
Segment Reporting Information [Line Items]
Net sales	63,494	62,156	59,279
Cost of sales	41,046	41,645	46,269
Gross margin	22,448	20,511	13,010
RFG
Segment Reporting Information [Line Items]
Net sales	333,498	293,957	252,282
Cost of sales	306,409	266,305	230,193
Gross margin	$ 27,089	$ 27,652	$ 22,089

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Segment Information - Sales by Product Category, Net Sales (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Segment Reporting Information [Line Items]
Total gross sales	$ 951,452	$ 870,828	$ 797,521
Less sales incentives	(15,773)	(14,004)	(15,011)
Net sales	935,679	856,824	782,510
Avocados [Member]
Segment Reporting Information [Line Items]
Total gross sales	493,440	471,178	433,581
Tomatoes [Member]
Segment Reporting Information [Line Items]
Total gross sales	35,981	18,681	19,705
Papayas [Member]
Segment Reporting Information [Line Items]
Total gross sales	9,514	9,485	12,619
Pineapples [Member]
Segment Reporting Information [Line Items]
Total gross sales	1,060	2,397	5,086
Other fresh products [Member]
Segment Reporting Information [Line Items]
Total gross sales	536	442	1,037
Food service [Member]
Segment Reporting Information [Line Items]
Total gross sales	50,716	49,212	48,085
Retail and club [Member]
Segment Reporting Information [Line Items]
Total gross sales	360,205	319,433	277,408
Fresh products [Member]
Segment Reporting Information [Line Items]
Total gross sales	540,531	502,183	472,028
Less sales incentives	(1,844)	(1,472)	(1,079)
Net sales	538,687	500,711	470,949
Fresh products [Member] | Avocados [Member]
Segment Reporting Information [Line Items]
Total gross sales	493,440	471,178	433,581
Fresh products [Member] | Tomatoes [Member]
Segment Reporting Information [Line Items]
Total gross sales	35,981	18,681	19,705
Fresh products [Member] | Papayas [Member]
Segment Reporting Information [Line Items]
Total gross sales	9,514	9,485	12,619
Fresh products [Member] | Pineapples [Member]
Segment Reporting Information [Line Items]
Total gross sales	1,060	2,397	5,086
Fresh products [Member] | Other fresh products [Member]
Segment Reporting Information [Line Items]
Total gross sales	536	442	1,037
Calavo Foods [Member]
Segment Reporting Information [Line Items]
Total gross sales	73,932	71,948	70,419
Less sales incentives	(10,438)	(9,792)	(11,140)
Net sales	63,494	62,156	59,279
Calavo Foods [Member] | Food service [Member]
Segment Reporting Information [Line Items]
Total gross sales	50,716	49,212	48,085
Calavo Foods [Member] | Retail and club [Member]
Segment Reporting Information [Line Items]
Total gross sales	23,216	22,736	22,334
RFG
Segment Reporting Information [Line Items]
Total gross sales	336,989	296,697	255,074
Less sales incentives	(3,491)	(2,740)	(2,792)
Net sales	333,498	293,957	252,282
RFG | Retail and club [Member]
Segment Reporting Information [Line Items]
Total gross sales	$ 336,989	$ 296,697	$ 255,074

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Segment Information - Long-Lived Assets Attributed to Geographic Areas (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Segment Reporting Information [Line Items]
Long-lived assets	$ 87,837	$ 69,448
United States
Segment Reporting Information [Line Items]
Long-lived assets	55,715	37,573
Mexico
Segment Reporting Information [Line Items]
Long-lived assets	$ 32,122	$ 31,875

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Long-Term Obligations - Summary of Long-Term Obligations (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Debt Instrument [Line Items]
Debt and capital lease obligations	$ 583	$ 2,792
Less current portion	(138)	(2,206)
Long-term obligations, less current portion	445	586
Capital Leases
Debt Instrument [Line Items]
Debt and capital lease obligations	$ 583	771
Farm Credit West, PCA, (FCW) term loan, bearing interest at 1.7%
Debt Instrument [Line Items]
Debt and capital lease obligations		1,002
Bank of America, N.A. (BoA) term loan, bearing interest at 1.7 %
Debt Instrument [Line Items]
Debt and capital lease obligations		$ 1,019

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Long-Term Obligations - Narrative (Details) $ in Millions	12 Months Ended
	Oct. 31, 2016 USD ($) installment	Sep. 30, 2011 USD ($)
Debt Instrument [Line Items]
Portion of outstanding balance of term loan owed to FCW		50.00%
FCW, term loan, bearing interest at 5.7 %
Debt Instrument [Line Items]
Advance from FCW term loan for business acquisition received	$ 15.0
Number of monthly principal and interest payments | installment	60
Bank of America, N.A. (BoA) term loan, bearing interest at 1.7 %
Debt Instrument [Line Items]
Variable interest term loan		$ 7.1

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Long-Term Obligations - Schedule of Capital Lease Payments (Details) $ in Thousands	Oct. 31, 2016 USD ($)
Leases [Abstract]
2017	$ 162
2018	118
2019	104
2020	103
2021	99
Thereafter	76
Minimum lease payments	662
Less interest	(79)
Present value of future minimum lease payments	$ 583

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Stock-Based Compensation - Additional Information (Details)					1 Months Ended			12 Months Ended			24 Months Ended
	Jan. 08, 2016 $ / shares shares	Jan. 04, 2016 USD ($) director $ / shares shares	Jun. 01, 2015 $ / shares shares	Feb. 06, 2015 $ / shares shares	Feb. 28, 2015 shares	Jan. 31, 2015 director $ / shares shares	Jan. 31, 2014 director $ / shares shares	Oct. 31, 2016 USD ($) $ / shares shares	Oct. 31, 2015 USD ($)	Oct. 31, 2014 USD ($)	Oct. 31, 2016 USD ($)	Apr. 30, 2011 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized stock-based compensation expense								$ 2,134,000	$ 2,108,000	$ 727,000
Stock compensation expense								2,134,000	2,108,000	727,000
Executive Officers [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total restricted shares issued to non-employee directors | shares				55,394
Restricted stock closing price awarded | $ / shares				$ 40.17
Stock compensation expense									500,000
Chief Financial officer and Chief Operating officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted | shares			12,322
Market price of common stock at grant date | $ / shares			$ 49.95
Stock compensation expense											$ 600,000
Unvested portion of restricted stock forfeited | shares					12,322
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense								100,000	100,000	100,000
Restricted Stock [Member] | Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense		$ 800,000							200,000	500,000
Restricted Stock [Member] | Executive Officers [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense								300,000
2005 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of options exercised								100,000
Estimated fair market value of options								$ 500,000	500,000	$ 800,000
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Board of Director Members for April Two Thousand Eleven Option Grants | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of vested stock options								2 years
Vesting period								1 year
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Board of Director Members for October Two Thousand Eleven Option Grants [Member] | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of vested stock options								5 years
Vesting period								5 years
2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares authorized under ESPP | shares												1,500,000
Number of non-employee directors | director		12				12	12
Restricted stock closing price awarded | $ / shares	$ 48.68						$ 30.50
Estimated fair market value of options								$ 300,000
2011 Management Incentive Plan [Member] | Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock closing price awarded | $ / shares		$ 48.46					$ 32.49
2011 Management Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares granted per non-employee | shares		1,750
Restricted shares issued per non-employee director | shares						1,750
Total restricted shares issued to non-employee directors | shares		21,000				21,000	21,000
Restricted stock closing price awarded | $ / shares						$ 40.39		$ 48.58
Restricted shares granted | shares								51,000
Stock compensation expense								$ 2,100,000
2011 Management Incentive Plan [Member] | Restricted Stock [Member] | Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense									$ 700,000
2011 Management Incentive Plan [Member] | Restricted Stock [Member] | Executive Officers [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures | shares							10,774
Unvested portion of restricted stock forfeited | shares	24,582
2011 Management Incentive Plan [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares issued per non-employee director | shares							1,750

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Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015
2005 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	10
Exercised, Number of Shares	(2)
Outstanding, Number of Shares, Ending Balance	8	10
Exercisable, Number of Shares	8
Outstanding, Weighted-Average Exercise Price	$ 18.05	$ 18.28
Exercised, Weighted-Average Exercise Price	19.20
Exercisable, Weighted-Average Exercise Price	$ 18.05
Outstanding, Aggregate Intrinsic Value	$ 474
Exercisable, Aggregate Intrinsic Value	$ 474
Outstanding stock options, weighted-average remaining contractual term	2 years 6 months
Exercisable stock options, weighted-average remaining contractual term	2 years 6 months
2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding stock options, weighted-average remaining contractual term	4 years 3 months 18 days
Weighted-average remaining life of exercisable options	2 years 9 months 18 days
Stock Options [Member] | 2011 Management Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance	14
Exercised, Number of Shares	(3)
Outstanding, Number of Shares, Ending Balance	11	14
Exercisable, Number of Shares	7
Outstanding, Weighted-Average Exercise Price	$ 23.33	$ 23.00
Exercised, Weighted-Average Exercise Price	21.80
Exercisable, Weighted-Average Exercise Price	$ 20.13
Outstanding, Aggregate Intrinsic Value	$ 395
Exercisable, Aggregate Intrinsic Value	$ 274

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Stock-Based Compensation - Summary of Restricted Stock Activity (Details) - 2011 Management Incentive Plan [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		1 Months Ended		12 Months Ended
	Jan. 08, 2016	Jan. 31, 2015	Jan. 31, 2014	Oct. 31, 2016	Oct. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Weighted-Average Grant Price	$ 48.68		$ 30.50
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding, Number of Shares, Beginning Balance				72
Vested, Number of Shares				(39)
Granted, Number of Shares				51
Outstanding, Number of Shares, Ending Balance				84
Outstanding, Weighted-Average Grant Price				$ 44.76	$ 39.01
Vested, Weighted-Average Grant Price				39.50
Granted, Weighted-Average Grant Price		$ 40.39		$ 48.58
Aggregate Intrinsic Value				$ 4,981

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Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands			12 Months Ended
	Dec. 08, 2016	Dec. 08, 2015	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Dividend payment		$ 0.80
Dividend aggregate amount to shareholders		$ 13,900	$ 13,907	$ 12,971	$ 11,005
Subsequent Event
Dividend payment	$ 0.90
Dividend aggregate amount to shareholders	$ 15,700

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Fair Value Measurements - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Assets at Fair Value:
Unrealized Gain (Loss) on Investments	$ (6,621)	$ 16,940	$ 1,175
Limoneira
Assets at Fair Value:
Limoneira's stock price	$ 19.69	$ 15.86	$ 25.66
Unrealized Gain (Loss) on Investments	$ 4,100	$ 10,300	$ 700
Fair Value, Measurements, Recurring [Member]
Assets at Fair Value:
Total assets at fair value	34,036
Fair Value, Measurements, Recurring [Member] | Limoneira
Assets at Fair Value:
Total assets at fair value	$ 34,036
Percentage of outstanding shares of Limoneira's shares owned	12.00%
Limoneira's stock price	$ 19.69	$ 15.86
Unrealized Gain (Loss) on Investments	$ (6,600)	$ (16,900)	$ (1,200)
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets at Fair Value:
Total assets at fair value	34,036
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Limoneira
Assets at Fair Value:
Total assets at fair value	$ 34,036

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Mexican IVA taxes receivable (Details) - USD ($) $ in Thousands	Oct. 31, 2016	Oct. 31, 2015
Value Added Tax Receivable [Abstract]
IVA receivables balance	$ 15,400	$ 11,600
Mexican IVA (i.e. value-added) tax receivable recorded in prepaids & other current assets	8,400	5,700
Mexican IVA (i.e. value-added) tax receivable recorded in other assets	$ 6,962	$ 5,853

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Subsequent Events - Riverside facility (Details) - USD ($) $ in Thousands		12 Months Ended
	Nov. 01, 2016	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Total consideration		$ 21,859	$ 18,099	$ 11,613
Fresh Foods LLC | Subsequent Event
Total consideration	$ 19,400

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Subsequent Events - Temecula facility (Details) $ in Millions	Mar. 08, 2017 USD ($)
Temecula Facility [Member] | Subsequent Event
Purchase price	$ 6.6

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Subsequent Events - Maui note (Details) $ in Thousands	Nov. 30, 2016 USD ($) installment	Oct. 31, 2016 USD ($)	Oct. 31, 2015 USD ($)
Maui note
Notes receivable from San Rafael		$ 928	$ 1,286
San Rafael [Member] | Goodwill Promissory Note | Subsequent Event
Maui note
Notes receivable from San Rafael	$ 1,300
Number of monthly installment | installment	36
Interest rate (as a percent)	4.50%

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Schedule II Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2016	Oct. 31, 2015	Oct. 31, 2014
Reserve for Customer Deductions [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of year	$ 2,141	$ 3,025	$ 1,482
Additions	9,325	10,400	11,833
Deductions	9,621	11,284	10,290
Balance at end of year	1,845	2,141	3,025
Allowance for Doubtful Accounts [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance at beginning of year	171	223	215
Additions	47	74	143
Deductions		126	135
Balance at end of year	$ 218	$ 171	$ 223