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Stock-Based Compensation

9 Months Ended

Jul. 31, 2022

6.	Stock-Based Compensation

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. Shares were issuable under the 2011 Plan through December 2020. On April 21, 2021, the shareholders of Calavo approved the Calavo Growers, Inc. 2020 Equity Incentive Plan (the “2020 Plan”). This is a five-year plan with up to 1,500,000 shares that are issuable pursuant to awards that may be made 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 three and nine months ended July 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 $0.3 million and $0.7 million for the three and nine months ended July 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 nine months ended July 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 $0.1 million for the three months ended July 31, 2022. The total recognized stock-based compensation expense for this grant was $0.2 million for the nine months ended July 31, 2022.

A combined summary of restricted stock award activity, related to our 2011 and 2020 Plans, 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 July 31, 2022	67	$	45.01	$	2,672

The total recognized stock-based compensation expense for restricted stock was $0.4 million and $0.6 million for the three months ended July 31, 2022 and 2021. The total recognized stock-based compensation expense for restricted stock was $1.8 million and $2.8 million for the nine months ended July 31, 2022 and 2021. Total unrecognized stock-based compensation expense totaled $1.7 million as of July 31, 2022 and will be amortized through fiscal year 2024.

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 $0.3 million of stock-based compensation for the three and nine months ended July 31, 2022. As of July 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 2.3 years. The total fair value of the restricted stock units at July 31, 2022, is approximately $2.5 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 insignificant for the three and nine months ended July 31, 2022.

On August 16, 2022, Helen Kurtz, our new SVP of Prepared products, was granted 6,778 RSUs as part of her employment agreement. The closing share price of our stock on such grant date was $44.26. These shares will vest over three years on an annual basis, with the first third vesting on August 16, 2023.

A combined summary of RSU 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	34	$	37.49
Forfeited	(4)	$	37.49
Granted	13	$	39.89
Outstanding at July 31, 2022	43	$	38.18	$	1,724

Stock Options

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

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. We measure the fair value of our stock-based compensation awards on the date of grant.

A summary of stock option activity, related to our 2011 and 2020 Plans, is as follows (in thousands, except for weighted-average exercise price):


		Weighted-Average		Aggregate
		Exercise		Intrinsic
	Number of Shares	Price		Value
Outstanding at October 31, 2021	19	$	42.89
Exercised	(2)	$	23.48
Outstanding at July 31, 2022	17	$	47.62	$	—
Exercisable at July 31, 2022	12	$	51.12	$	—

At July 31, 2022, outstanding and exercisable stock options had a weighted-average remaining contractual term of 2.7 years. The total recognized and unrecognized stock-based compensation expense was insignificant for the three and nine months ended July 31, 2022 and 2021.