CALAVO GROWERS INC - Quarter Report: 2013 January (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended January 31, 2013

OR

Commission file number: 000-33385

CALAVO GROWERS, INC.

(Exact name of registrant as specified in its charter)

1141-A Cummings Road

Santa Paula, California 93060

(Address of principal executive offices) (Zip code)

(805) 525-1245

(Registrant’s telephone number, including area code)

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 (§232.405 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 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):

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

Registrant’s number of shares of common stock outstanding as of January 31, 2013 was 14,847,033.

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CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, 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 (Calavo, the Company, we, us or our) 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 Calavo 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 Calavo’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 Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2012, and those detailed from time to time in our other filings with the Securities and Exchange Commission. Calavo assumes no obligation and does not intend to update these forward-looking statements.

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CALAVO GROWERS, INC.

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(in thousands)

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CALAVO GROWERS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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 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, 2012.

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued guidance regarding the presentation of comprehensive income. The new standard requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. The adoption of this standard had no impact on our financial statements.

In May 2011, the FASB issued additional guidance on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this standard had no impact on our financial statements.

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (CONTINUED)

(UNAUDITED)

Recently Issued Accounting Standards

In July 2012, the FASB issued additional guidance to simplify the assessment of testing the impairment of indefinite-lived intangible assets other than goodwill and will become effective for fiscal years beginning after September 15, 2012. The amended guidance allows us to do an initial qualitative assessment to determine whether it is more likely than not that the fair value of its indefinite-lived intangible assets are less than their carrying amounts prior to performing the quantitative indefinite-lived intangible asset impairment test. The adoption of this amendment will not have a material effect on our financial statements.

Reclassifications

Certain items in the prior period consolidated condensed financial statements have been reclassified to conform to the current period presentation.

2. Information regarding our operations in different segments

We now 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, tortilla chips 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 meat 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):

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (CONTINUED)

(UNAUDITED)

For the three months ended January 31, 2013 and 2012, inter-segment sales and cost of sales for Fresh products totaling $9.8 million and $5.0 million were eliminated in consolidation. For three months ended January 31, 2013 and 2012, inter-segment sales and cost of sales for Calavo Foods totaling $3.1 million and $2.9 million were eliminated in consolidation.

3. Inventories

Inventories consist of the following (in thousands):

During the three months ended January 31, 2013 and 2012, we were not required to, and did not, record any provisions to reduce our inventories to the lower of cost or market.

4. 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 three months ended January 31, 2013 and 2012, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $0.3 million. Accounts payable to these Board members were $0.1 million and $0.3 million at January 31, 2013 and October 31, 2012.

During the first quarter of fiscal 2013 and 2012, we received $0.1 million as dividend income from Limoneira.

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. LIG is majority owned by an entity owned by such three executives of RFG. For the three months ended January 31, 2013 and 2012, total rent paid to LIG was $0.1 million. RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease. THNC is majority owned by an entity owned by such three executives of RFG. For the three months ended January 31, 2013, total rent paid to THNC was $0.1 million. Additionally, RFG sells cut produce and purchases raw materials, obtains

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (CONTINUED)

(UNAUDITED)

transportation services, and shares costs for certain utilities with Third Coast Fresh Distribution (Third Coast). Third Coast is majority owned by an entity owned by such three executives of RFG. For the three months ended January 2013 and 2012, total sales made to Third Coast were $1.1 million and $0.8 million. For the year ended January 31, 2013 and 2012, total purchases made from Third Coast were $0.5 million and $0.4 million. Amounts due from Third Coast were $1.0 million and $0.8 million as of January 31, 2013 and October 31, 2012. Amounts due to Third Coast were $0.1 million as of January 31, 2013 and October 31, 2012.

5. Other assets

Other assets consist of the following (in thousands):

Intangible assets consist of the following (in thousands):

We anticipate recording amortization expense of approximately $1.1 million for the remainder of fiscal 2013, with $1.4 million of amortization expense for each of the fiscal years 2014 through 2015. We anticipate recording amortization expense of approximately $1.3 million for fiscal year 2016. We anticipate recording amortization expense of approximately $1.2 million for fiscal year 2017. The remainder of approximately $2.3 million will be amortized over fiscal years 2018 through 2023.

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. Up to 1,500,000 shares of common stock may be issued by Calavo under the 2011 Plan. As a result of such new plan, no new awards will be made under our 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.

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (CONTINUED)

(UNAUDITED)

On January 28, 2013, all 12 of our non-employee directors were granted 1,000 restricted shares each (total of 12,000 shares). These shares have full voting rights and participate in dividends as if unrestricted. The closing price of our stock on such date was $24.71. On January 1, 2014, 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.

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 grant 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 2005 Stock Incentive Plan, is as follows (in thousands, except for per share amounts):

At January 31, 2013, outstanding stock options had a weighted-average remaining contractual term of 5.1 years. At January 31, 2013, exercisable stock options had a weighted-average remaining contractual term of 3.9 years. The total recognized stock-based compensation expense was insignificant for the three months ended January 31, 2013.

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

At January 31, 2013, outstanding stock options had a weighted-average remaining contractual term of 3.0 years. At January 31, 2013, exercisable stock options had a weighted-average remaining contractual term of 0.4 years. The total recognized stock-based compensation expense was $0.1 million for the three months ended January 31, 2013.

7. Other events

Dividend payment

On December 12, 2012, we paid a $0.65 per share dividend in the aggregate amount of $9.6 million to shareholders of record on November 28, 2012.

Contingencies

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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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (CONTINUED)

(UNAUDITED)

8. 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 January 31, 2013 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:

The following is a reconciliation of the beginning and ending amounts of the contingent consideration for Salsa Lisa and RFG:

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CALAVO GROWERS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (CONTINUED)

(UNAUDITED)

9. Noncontrolling interest

The following table reconciles shareholders’ equity attributable to noncontrolling interest related to the Salsa Lisa acquisition disclosed on our Form10-K for our fiscal year ended October 31, 2012 (in thousands):

10. Subsequent events

We have evaluated subsequent events to assess the need for potential recognition or disclosure in this Quarterly Report on Form 10-Q. Such events were evaluated through the date these financial statements were issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition in the financial statements.

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This information should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto included in this Quarterly Report, and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K for the year ended October 31, 2012 of Calavo Growers, Inc. (we, Calavo, or the Company).

Recent Developments

Dividend payment

On December 12, 2012, we paid a $0.65 per share dividend in the aggregate amount of $9.6 million to shareholders of record on November 28, 2012.

Net Sales

The following table summarizes our net sales by business segment for each of the three-month periods ended January 31, 2013 and 2012:

Net sales for the first quarter of fiscal 2013, compared to fiscal 2012, increased by $22.1 million, or 18.8%. The increase in sales, when compared to the same corresponding prior year period, is primarily related to an increase in sales from our RFG and Fresh product segments. We experienced an increase in RFG sales during the first quarter of fiscal 2013, which was due primarily to increased sales from cut fruit and vegetables platters, as well as an increase in sales of Deli products. We experienced an increase in Fresh product sales during the first quarter of fiscal 2013, which was due primarily to increased sales of Mexican and California sourced avocados, as well as tomatoes. Partially offsetting this increase in Fresh product sales, however, was a decrease in sales of Chilean sourced avocados. While the procurement of fresh avocados related to our Fresh products segment is very seasonal, our Calavo Foods business is generally not subject to a seasonal effect.

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.

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Fresh products

Net sales delivered by the Fresh products business increased by approximately $13.9 million, or 19.6%, for the first quarter of fiscal 2013, when compared to the same period for fiscal 2012. As discussed above, this increase in Fresh product sales during the first quarter of fiscal 2013 was primarily related to increased sales of Mexican and California sourced avocados and tomatoes. These increases were partially offset, however, by decreased sales from Chilean sourced avocados. See details below.

Sales of Mexican sourced avocados increased $11.1 million, or 18.6% for the first quarter of 2013, when compared to the same prior year period. The increase in Mexican sourced avocados was primarily due to an increase in pounds sold. Mexican sourced avocados sales reflect an increase in 23.2 million pounds of avocados sold, or 41.6%, when compared to the same prior year period. We attribute much of this increase in volume to the large Mexican avocado crop in the current year. Partially offsetting this increase, however, was the decrease in the sales price per carton, which decreased by approximately 16.3%. We attribute this decrease primarily to a higher overall volume of avocados in the marketplace.

Sales of California sourced avocados increased $2.5 million, or 387.7%, for the first quarter of 2013, when compared to the same prior year period. The increase in California sourced avocados was due to an increase in pounds sold. California sourced avocados sales reflect an increase in 2.7 million pounds of avocados sold, or 415.6%, when compared to the same prior year period. We attribute most of this increase in volume to the large California avocado crop in 2012, which contributed to significant deliveries in November 2012. Partially offsetting this increase, however, was the decrease in the sales price per carton, which decreased by approximately 5.4%. We attribute this decrease primarily to a higher overall volume of avocados in the marketplace.

Sales of tomatoes increased $4.8 million, or 216.6%, for the first quarter of fiscal 2013, when compared to the same period for fiscal 2012. The increase in sales for tomatoes is primarily due to a combination of an increase in the number of cartons sold and an increase in the sales price per carton. Warmer than expected weather was experienced in both Florida’s and Mexico’s growing areas during the first fiscal quarter of 2012. This situation delayed the start of harvests and reduced the number of units available in prior year’s first quarter. We attribute some of the increase in the per carton selling price to the lower volume of quality tomatoes in the U.S. marketplace, due primarily to cold weather which reduced supplies and delayed harvests in current year.

Partially offsetting such increases was a decrease in sales of Chilean sourced avocados, which decreased $2.6 million for the first quarter of 2013, 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 in the first quarter of 2013. As a result, there was an insignificant amount of sales related to Chilean sourced avocados in the first quarter of 2013.

We anticipate that California avocado sales will experience an increase during our second fiscal quarter of 2013, as compared to the first quarter of 2013. Additionally, we believe that the sales volume of California grown avocados will increase in second quarter of fiscal 2013, when compared to the same prior year period. This increase is due to a larger expected avocado crop.

We anticipate that net sales related to tomatoes will increase during our second fiscal quarter of 2013, as compared to the first fiscal quarter of 2013. We anticipate that sales of Mexican grown avocados will increase in the second quarter of fiscal 2013, when compared to the same prior year period, due to higher volume of avocados in the marketplace. We anticipate that sales of tomatoes will increase in the second quarter of fiscal 2013, when compared to the same prior year period. This increase is due to a larger expected tomato crop.

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Calavo Foods

Sales for Calavo Foods for the quarter ended January 31, 2013, when compared to the same period for fiscal 2012, increased $0.7 million, or 5.8%. This increase is due to an increase in sales of prepared guacamole products which increased approximately $0.9 million, or 9.0%, in the first quarter of fiscal year 2013, when compared to the same prior year period. Partially offsetting these increases, is a decrease of sales of Calavo Salsa Lisa products of $0.2 million or 31.7%. The increase in sales of prepared guacamole was primarily related to an increase in overall pounds sold, which increased 0.7 million pounds, or 17.9%, partially offset by a decrease in the average net selling price per pound for both our frozen guacamole products and our refrigerated guacamole products of approximately 5.6%.

RFG

Sales for RFG for the quarter ended January 31, 2013, when compared to the same period for fiscal 2012, increased $7.5 million, or 21.5%. This increase is due primarily to increased sales from cut fruit and vegetable platters, as well as an increase in sales of deli products. The overall increase in sales is primarily due to an increase in sales volume. Collectively, cut fruit, cut vegetable, and deli product sales increased 2.5 million units, or 19.3%. 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.

Gross Margins

The following table summarizes our gross margins and gross profit percentages by business segment for each of the three-month periods ended January 31, 2013 and 2012:

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 $1.2 million, or 10.3%, for the first quarter of fiscal 2013 when compared to the same period for fiscal 2012. This increase was primarily attributable to increases in our Fresh products and RFG segments.

During our first fiscal quarter of 2013, as compared to the same prior year period, our Fresh products segment gross margin percentage stayed relatively consistent to prior year, with a slight decrease from 8.4% to 8.0% percent. This decrease is due mostly to a decrease in per carton sales prices for Mexican avocados of 16.3%, partially offset by decreases of fruit costs of Mexican sourced avocados. During our first fiscal quarter of 2013, when compared to the prior year period, we experienced an increase in the volume of Mexican sourced avocados sold by 23.2 million pounds, or 41.6%. This increase is primarily related to the larger Mexican avocado crop. Although we experienced overall lower fruit costs and less per pound costs with the significantly higher volume, the decrease of the selling prices of Mexican sourced avocados decreased at a higher rate than which fruit costs decreased. The net effect of these negatively impacted gross margins.

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The Calavo Foods segment gross margin percentage during our first fiscal quarter of 2013, when compared to the same prior year period, decreased primarily as a result of higher operating costs due to a decrease in pounds of prepared guacamole products produced. Although fruit costs for the first fiscal quarter of 2013 decreased 19.2%, when compared to the same prior year period, pounds produced of prepared guacamole products decreased 2.2 million pounds, or 31.1%. In addition, the weakening of the U.S. Dollar compared to the Mexican Peso, increased our per pound costs. All of these combined had the effect of increasing our per pound costs, which, as a result, negatively impacted gross margins. We anticipate that the gross margin percentage for our Calavo Foods segment will continue to experience significant fluctuations during this fiscal year primarily due to the uncertainty of the cost of fruit that will be used in the production process. In addition, any significant fluctuation 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.

The RFG segment gross margin percentage during our first fiscal quarter of 2013, when compared to the same prior year period, increased primarily as a result of lower operating costs due to an overall increase in units of products produced. Sales for RFG for the quarter ended January 31, 2013, when compared to the same period for fiscal 2012, increased $7.5 million, or 21.5%. The increase in production to support such increase in sales had the effect of decreasing our per pound operating costs, which, as a result, positively impacted gross margins.

Selling, General and Administrative

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 $1.3 million, or 17.7%, for the three months ended January 31, 2013, when compared to the same period for fiscal 2012. This increase was primarily to higher corporate costs, including, but not limited to, revalue adjustment on contingent consideration related to the acquisition of RFG (totaling approximately $1.2 million, see Note 8 of the unaudited consolidated condensed financial statements), salaries (totaling approximately $0.3 million), accounting fees (totaling approximately $0.1 million), and employee benefits (totaling approximately $0.1 million), partially offset by decreases in management bonuses (totaling approximately $0.2 million), other administration fees (totaling approximately $0.1 million), and grower relations (totaling approximately $0.1 million).

Provision for Income Taxes

For the first three months of fiscal 2013, our provision for income taxes was $1.5 million, as compared to $1.7 million for the comparable prior year period. We expect our effective tax rate to be approximately 36% during fiscal 2013. The expected lower tax rate, compared to prior year, is due to tax benefits related to the shift of income between tax jurisdictions and tax credits received through California’s Enterprise Zone Hiring Credit Program. See Note 10 of the most recently filed 10-K for more information.

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Liquidity and Capital Resources

Cash provided by operating activities was $1.4 million for the three months ended January 31, 2013, compared to $0.4 million used in operations for the similar period in fiscal 2012. Operating cash flows for the three months ended January 31, 2013 reflect our net income of $2.7 million, net non-cash charges (depreciation and amortization, stock compensation expense, interest on deferred consideration, revalue adjustments on contingent consideration and income from unconsolidated entities) of $3.0 million and net of cash used in the components of our operating capital of approximately $4.3 million.

Cash used in operations caused by working capital changes, when compared to October 31, 2012, includes a net increase in accounts receivable of $9.5 million, and a net decrease in payable to growers of $2.5 million, partially offset by, an increase in trade accounts payable and accrued expenses of $5.9 million, a decrease in advances to suppliers of $1.1 million, a decrease in inventory of $0.6 million, and a decrease in income tax receivable of $0.1 million.

The increase in our accounts receivable, as of January 31, 2013, when compared to October 31, 2012, primarily reflects higher sales recorded in the month of January 2013, as compared to October 2012. The decrease in our payable to growers primarily reflects a decrease in California fruit delivered in the month of January 2013, as compared to October 31, 2012. The increase in accounts payable and accrued expenses and the decrease in advances to suppliers are primarily related to an increase in our payables related to tomatoes and Mexican avocados. The decrease in inventory is primarily related to a decrease in fruit prices at January 31, 2013. The decrease in income tax receivable primarily relates to income from operations for the three months ended January 31, 2013.

Cash used in investing activities was $1.5 million for the three months ended January 31, 2013 and related principally to the purchase of property, plant and equipment items.

Cash provided by financing activities was $2.1 million for the three months ended January 31, 2013, which related principally to borrowings on our credit facilities totaling $12.6 million, and exercises of stock options of $0.2 million, partially offset by the payment of our $9.6 million dividend and payments on long-term obligations if $1.1 million.

Our principal sources of liquidity are our existing cash balances, cash generated from operations and amounts available for borrowing under our existing credit facilities. Cash and cash equivalents as of January 31, 2013 and October 31, 2012 totaled $9.1 million and $7.1 million. Our working capital at January 31, 2013 was $12.7 million, compared to $9.7 million at October 31, 2012.