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Stock-Based Compensation

12 Months Ended

Oct. 31, 2022

Stock-Based Compensation

Stock-Based Compensation

12. Stock-Based Compensation

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.

On November 2, 2020, 11 of our non-employee directors were each granted 1,500 restricted shares, as part of their annual compensation (total of 16,500 shares). In January of fiscal 2020 all 12 of our non-employee directors were granted 1,500 restricted shares each (total of 18,000 shares). These shares have full voting rights and participate in dividends as if unrestricted. The closing price of our stock was $67.97 and $87.21 for each respective year. After one year from the grant date, as long as the directors are still serving on the Board of Directors, these shares lose their restriction and become non-forfeitable and transferable. These shares were granted pursuant to our 2011 Plan. The total recognized stock-based compensation expense for these grants was $0.2 million and $1.1 million for the year ended October 31, 2022 and 2021.

On November 2, 2020, our executive officers were granted a total of 9,334 restricted shares. On December 18, 2019, our executive officers were granted a total of 31,158 restricted shares. These shares have full voting rights and participate in dividends as if unrestricted. The closing price of our stock on such dates was $67.97 and $87.63, respectively. The shares granted in fiscal year 2021, vest over two years, on an annual basis, beginning November 2, 2021. The shares granted in fiscal year 2020, vest in one-third increments, on an annual basis, beginning December 18, 2020. All shares were granted pursuant to our 2011 Plan. The total recognized stock-based compensation expense for these grants were $0.2 million and $1.0 million for the year ended October 31, 2022 and 2021.

In April 2021, the Board of Directors approved the vesting of all of the remaining restricted shares outstanding to our former Chief Executive Officer and Board member. With this vesting, we recognized stock-based compensation of $0.7 million for the year ended October 31, 2021. We recorded amortization of $0.3 million for the year ended October 31, 2021, of previous stock grants before his retirement.

In June 2021, our former Chief Financial Officer, resigned from Calavo and 5,598 restricted shares were forfeited. We recorded amortization of $0.1 million for the year ended October 31, 2021, of previous stock grants before his resignation.

In September 2021, the Board of Directors approved the vesting of all of the remaining restricted shares outstanding to our former Chief Executive Officer. With this vesting, we recognized stock-based compensation of $0.7 million for the year ended October 31, 2021.

The 2020 Equity Incentive Plan

In April 2021, our shareholders approved the Calavo Growers, Inc. 2020 Equity Incentive Plan (the 2020 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 2020 Plan. This is a five-year plan, with up to 1,500,000 shares issuable through December 9, 2025.

Restricted Stock Awards

On December 13, 2021, certain of our officers were granted a total of 5,355 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 $40.53. These shares vest over two years, on an annual basis, beginning December 13, 2022. These shares were granted pursuant to our 2020 Plan. The total recognized stock-based compensation expense for these grants was less than $0.1 million for the year ended October 31, 2022.

On January 3, 2022, all 10 of our current directors were granted 2,814 restricted shares each (for a total of 28,140 shares). These shares have full voting rights and participate in dividends as if unrestricted. The closing share price of our stock on such grant date was $42.64. As of January 3, 2023, these shares will vest and become unrestricted subject to the continued service of the director. The total recognized stock-based compensation expense for these grants was $1.0 million for the year ended October 31, 2022.

On January 20, 2022, one of our current directors was granted 1,500 unrestricted shares as a component of her compensation for services rendered during the 2021 fiscal year. The closing share price of our stock on such grant date

was $41.73. The stock-based compensation expense for this grant was recognized in total upon grant and aggregated $0.1 million for the year ended October 31, 2022.

On February 1, 2022, Brian Kocher, our new Chief Executive Officer, was granted 28,993 restricted shares as part of his employment agreement. The closing share price of our stock on such grant date was $41.39. These shares will vest over three years on an annual basis, beginning February 1, 2023. The total recognized stock-based compensation expense for this grant was $0.3 million for the year ended October 31, 2022.

A summary of restricted stock activity, related to our 2011 Plan and 2020 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, 2021		43		$	64.89
Vested		(31)		$	45.44
Forfeited		(9)		$	37.67
Granted		64		$	41.88
Outstanding at October 31, 2022		67		$	45.01		$	2,318

The total recognized stock-based compensation expense for restricted stock awards was $2.3 million and $4.0 million for the years ended October 31, 2022 and 2021.

Restricted Stock Units (RSUs) and Performance Restricted Stock Units (PRSUs)

On April 1, 2022, we issued RSUs for officers and other members of management as part of our long-term incentive plan. The RSUs are time-based and vest annually in equal amounts over a three-year period. The PRSUs are based on three-year cumulative performance targets of net sales, adjusted EBITDA and return on invested capital and vest entirely at the third anniversary. We granted 34,269 RSUs and 34,269 PRSUs at a grant stock price of $37.49. With the departure of our former Chief Financial Officer, 4,014 shares each of RSUs and PRSUs were forfeited. Based on our current projections, we recognized approximately $0.6 million of stock-based compensation for the year ended October 31, 2022. As of October 31, 2022, there was $2.2 million of unrecognized stock-based compensation costs related to non-vested RSUs and PRSUs, which the Company expects to recognize over a weighted-average period of 2.0 years. The total fair value of the restricted stock units at October 31, 2022, is approximately $2.2 million.

In the third quarter of fiscal 2022, Shawn Munsell, our new Chief Financial Officer, and Danny Demas, our new SVP of Grown products were granted 9,002 RSUs and 3,533 RSUs, respectively, as part of their employment agreements. The closing share price of our stock on such grant dates were $38.88 and $42.46, respectively. These shares will vest over three years on an annual basis, with the first third vesting on June 20, 2023, and July 11, 2023, respectively. The total recognized stock-based compensation expense for this grant was $0.1 million for the year ended October 31, 2022.

In the fourth quarter of fiscal 2022, Helen Kurtz, our new SVP of Prepared products, and our new VP of global supply chain was granted 6,778 RSUs and 2,341 RSU’s as part of their employment agreements. The closing share price of our stock on such grant date was $44.26 and $42.71, respectively. These shares will vest over three years on an annual basis, with the first third vesting on August 16, 2023 and August 29, 2023. The total recognized stock-based compensation expense for this grant was insignificant for the year ended October 31, 2022.

In December 2022, we issued RSUs for officers and other members of management as part of our long-term incentive plan. The RSUs are time-based and vest annually in equal amounts over a three-year period. The PRSUs are based on three-year cumulative performance targets of net sales, adjusted EBITDA and return on invested capital and vest entirely at the third anniversary. We granted 101,800 RSUs and 66,228 PRSUs at a grant stock price of $34.51.

A combined summary of RSU and PRSU activity, related to our 2020 Plan, is as follows (in thousands, except for per share amounts):


		Number of Shares		Weighted-Average			Aggregate
		Represented		Grant Price			Intrinsic Value
Outstanding at April 30, 2022		69		$	37.49
Forfeited		(8)		$	37.49
Granted		22		$	41.56
Outstanding at October 31, 2022		83		$	38.57		$	3,253

The total recognized stock-based compensation expense for restricted stock units was $0.8 million for the year ended October 31, 2022.

Stock Options

In September 2021, our Board of Directors approved the issuance of options to acquire a total of 5,000 shares of our common stock to Steven Hollister, who for a period of time assumed the role of Interim Chief Executive Officer. Such grant vests in equal increments over a two-year period and has an exercise price of $39.20 per share. Vested options have an exercise period of five years from the vesting date. The market price of our common stock at the grant date was $39.20. The estimated fair market value of such option grant was approximately $0.2 million. The total recognized stock-based compensation expense for this grant was insignificant for the year ended October 31, 2022.

The value of each option award is estimated using a lattice-based option valuation model. We primarily consider the following assumptions when using these models: (1) expected volatility, (2) expected dividends, (3) expected life and (4) risk-free interest rate. Such models also consider the intrinsic value in the estimation of fair value of the option award.

A summary of stock option activity, related to our 2011 and 2020 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, 2021		19		$	42.89
Exercised		(2)		$	23.48
Outstanding at October 31, 2022		17		$	47.62		$	—
Exercisable at October 31, 2022		12		$	51.12		$	—

The weighted average remaining life of such outstanding options is 1.5 years. The weighted average remaining life of such exercisable options is 2.4 years. The fair value of vested shares was insignificant for fiscal 2022 and $0.1 million for fiscal 2021.