CALAVO GROWERS INC Fair Value Disclosure
14. 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 Company had no financial assets or liabilities measured at fair value on a recurring basis as of October 31, 2022. The following table sets forth our financial assets and liabilities as of October 31, 2021 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||||
(All amounts are presented in thousands) | |||||||||||||
Assets at Fair Value at October 31, 2021: | |||||||||||||
Investment in Limoneira Company(1) | $ | 27,055 |
| — |
| — | $ | 27,055 | |||||
Total assets at fair value | $ | 27,055 | — | — | $ | 27,055 | |||||||
| (1) | The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock. These securities were measured at fair value by quoted market prices. Limoneira’s stock price at October 31, 2021 equaled $16.13 per share (level 1). Our remaining shares of Limoneira stock, totaling 1,677,299, were revalued to $16.13 per share and $13.83 per share at October 31, 2021 and 2020 and, as a result, we recorded a gain of $3.9 million for the year ended October 31, 2021 in our consolidated statements of operations. |
On October 27, 2022, the Company sold 1,677,299 shares of Limoneira common stock for gross proceeds of approximately $18.5 million. The net proceeds thereof after payment of commissions and expenses was used by the Company to pay down borrowings on its credit facility with Bank of America, as administrative agent, and the other lenders thereto. Contemporaneously with such sale, Bank of America, as administrative agent, released its lien on such shares in accordance with terms of the Credit Facility and the related loan documents.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2022 | Dec 20, 2022 | Showing above |
| 2021 | Dec 21, 2021 | |
| 2020 | Dec 21, 2020 | |
| 2019 | Dec 19, 2019 | |
| 2018 | Dec 20, 2018 | |
| 2017 | Dec 22, 2017 | |
| 2016 | Dec 23, 2016 | |
| 2015 | Dec 30, 2015 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.