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Stock-Based Compensation

3 Months Ended

Jan. 31, 2023

Stock-Based Compensation

Stock-Based Compensation

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 November 3, 2022, our Chief Executive Officer (CEO) entered into an amendment to his employment agreement, which changed $100,000 of his guaranteed STIP cash bonus for fiscal 2022 to $100,000 worth of unrestricted Calavo common stock. On December 22, 2022, our CEO was granted 3,321 shares of unrestricted common stock. The closing share price of our common stock at the grant date was $30.12.

On December 1, 2022, our ten directors were granted 3,478 restricted shares each (for a total of 34,780 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 $34.51. As of November 1, 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 $0.2 million for the three months ended January 31, 2023.

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, 2022		62		$	42.88
Vested		(34)		$	42.37
Granted		38		$	34.13
Outstanding at January 31, 2023		66		$	38.11		$	2,125

The total recognized stock-based compensation expense for restricted stock was $0.7 million and $0.6 million for the three months ended January 31, 2023 and 2022. Total unrecognized stock-based compensation expense totaled $1.9 million as of January 31, 2023 and will be amortized through fiscal year 2024.

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

On December 1, 2022, we issued RSUs and PRSUs 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 66,325 RSUs and 66,325 PRSUs at a grant stock price of $34.51.

Based on our current projections, we recognized approximately $0.5 million of stock-based compensation for the three months ended January 31, 2023 for all RSUs and PRSUs. As of January 31, 2023, there was $6.0 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 2.1 years. The total fair value of the restricted stock units at January 31, 2023, is approximately $6.4 million.

The 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 October 31, 2022		52		$	39.17
Vested		(11)			37.49
Forfeited		(2)		$	37.49
Granted		66		$	34.51
Outstanding at January 31, 2023		105		$	36.46		$	3,350

The summary of 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 October 31, 2022		31		$	37.49
Forfeited		(4)		$	37.49
Granted		66		$	34.51
Outstanding at January 31, 2023		93		$	35.41		$	2,992

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, 2022		27		$	44.67
Exercised		(2)		$	23.48
Outstanding at January 31, 2023		25		$	46.36		$	—
Exercisable at January 31, 2023		15		$	45.83		$	—

At January 31, 2023, outstanding and exercisable stock options had a weighted-average remaining contractual term of 2.6 years. The total recognized and unrecognized stock-based compensation expense was insignificant for the three ended January 31, 2023 and 2022.