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, Mexico, and Chile. Through our various operating facilities, we sort, pack, and/or ripen avocados, tomatoes, pineapples and/or Hawaiian grown papayas. Additionally, we also produce salsa and prepare ready-to-eat produce and deli products.

The accompanying unaudited consolidated condensed financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of adjustments of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations and cash flows. The results of operations for interim periods are not necessarily indicative of the results that may be expected for a full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2013.

Correction of Immaterial Errors Within Previously Issued Consolidated Condensed Financial Statements

In connection with the preparation of our accompanying Consolidated Condensed Financial Statements, we identified an immaterial error in our Consolidated Condensed Balance Sheet as of April 30, 2014, included within our Form 10-Q for the quarter ended April 30, 2014, as a result of the incorrect recognition of cash as of April 30, 2014 for a wire transfer initiated on April 30, 2014, but not received until May 1, 2014. Accordingly, there was a $10.0 million overstatement within “Cash and cash equivalents,” a $5.4 million overstatement of “Additional paid-in capital” and a $4.6 million overstatement of “Noncontrolling interest, FreshRealm.” Additionally, our Consolidated Condensed Statement of Cash Flows presented an overstatement of $10.0 million within “Cash Flows from Financing Activities,” under the line item “Proceeds from issuance of FreshRealm stock.” Our management evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin No. 99, Materiality, and determined that these errors were not material to our previously reported quarterly financial statements as of and for the three and six months ended April 30, 2014. The aforementioned errors have no impact on this Quarterly Report on Form 10-Q, nor any future periodic filings, except that the Consolidated Condensed Statement of Cash Flows for the six months ended April 30, 2014 will be corrected to properly reflect this immaterial error in our Form 10-Q for the quarter ended April 30, 2015.

The effect of recording this immaterial error correction in our consolidated condensed balance sheet as of April 30, 2014 and the related consolidated condensed statement of cash flows for the six months ended April 30, 2014 is as follows:


Balance Sheet (in thousands)	April 30, 2014 As previously reported			April 30, 2014 As corrected
Cash and cash equivalents	$	19,914		$	9,914
Total assets	$	259,107		$	249,107
Additional paid-in capital	$	65,358		$	59,968
Noncontrolling interest,FreshRealm	$	4,301		$	(309	)
Shareholders’ equity	$	145,602		$	135,602

Statement of cash flows (in thousands)	April 30, 2014 As previously reported			April 30, 2014 As corrected
Cash flows from operating activities	$	13,263		$	13,263
Cash flows used in investing activities	$	(5,589	)	$	(5,589	)
Proceeds from issuance of FreshRealm stock	$	10,000		$	—
Proceeds from financing activities	$	4,221		$	(5,779	)
Cash and cash equivalents, end of period	$	19,914		$	9,914

The correction of this immaterial error on the consolidated condensed statements of income for the three and six months ended April 30, 2014 was inconsequential and corrected in the three months ended July 31, 2014.

Recently Adopted Accounting Pronouncements

In February 2013, the FASB issued a standard that revised the disclosure requirements for items reclassified out of accumulated other comprehensive income and requires entities to present information about significant items reclassified out of accumulated other comprehensive income by component either (1) on the face of the statement where net income is presented or (2) as a separate disclosure in the notes to the financial statements. This guidance is effective for annual reporting periods beginning after December 15, 2012. The adoption of this standard had no impact on our financial statements.

In July 2013, the FASB issued a standard permitting the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to the United States Treasury rate and London Interbank Offered Rate (“LIBOR”). In addition, the restriction on using different benchmark rates for similar hedges is removed. The Company is required to adopt these provisions prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013. The adoption of this standard had no impact on our financial statements.

Recently Issued Accounting Standards

In March 2013, the FASB issued a standard which requires the release of a Company’s cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance is effective for annual reporting periods beginning after December 15, 2013. The adoption of this amendment will not have a material effect on our financial statements.

In July 2013, the FASB issued a standard to clarify the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists as of the reporting date. This guidance is effective for annual reporting periods beginning after December 15, 2013. The adoption of this amendment will not have a material effect on our financial statements.