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Income Taxes
 12 Months Ended
Oct. 31, 2012
Income Taxes [Abstract]  
Income Taxes

10. Income Taxes

The income tax provision consists of the following for the years ended October 31 (in thousands):

 

                         
    2012     2011     2010  

Current:

                        

Federal

   $ 8,212     $ 4,405     $ 7,988  

State

     1,233       1,107       1,868  

Foreign

     2,428       (170 )      153  
   

 

 

    

 

 

    

 

 

  

Total current

     11,873       5,342       10,009  
       

Deferred:

                        

Federal

     (214 )      1,277       1,157  

State

     (559 )      208       277  

Foreign

     (45 )      422       (104 ) 
   

 

 

    

 

 

    

 

 

  

Total deferred

     (818 )      1,907       1,332  
   

 

 

    

 

 

    

 

 

  

Total income tax provision

   $ 11,055     $ 7,249     $ 11,341  
   

 

 

    

 

 

    

 

 

  

At October 31, 2012 and 2011, gross deferred tax assets totaled approximately $3.6 million and $2.7 million, while gross deferred tax liabilities totaled approximately $12.1 million and $8.8 million. Deferred income taxes reflect the net of temporary differences between the carrying amount of assets and liabilities for financial reporting and income tax purposes.

Significant components of our deferred taxes assets (liabilities) as of October 31, are as follows (in thousands):

 

                 
    2012     2011  

Allowances for accounts receivable

   $ 714     $ 564  

Inventories

     483       435  

State taxes

     350       276  

Accrued liabilities

     675       861  
   

 

 

    

 

 

  

Current deferred income taxes

   $ 2,222     $ 2,136  
   

 

 

    

 

 

  
     

Property, plant, and equipment

     (5,604 )      (5,258 ) 

Intangible assets

     105       (312 ) 

Unrealized gain, Limoneira investment

     (6,008 )      (2,614 ) 

Stock-based compensation

     286       183  

State taxes

     546       —    

Other

     10       (1 ) 
   

 

 

    

 

 

  

Long-term deferred income taxes

   $ (10,665 )    $ (8,002 ) 
   

 

 

    

 

 

  

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income for the years ended October 31, is as follows:

 

                         
    2012     2011     2010  

Federal statutory tax rate

     35.0 %      35.0 %      35.0 % 

State taxes, net of federal effects

     1.7       4.8       4.8  

Foreign income taxes greater (less) than U.S.

     (2.7 )      (0.9 )      (0.9 ) 

Hacienda assessment

     6.3       —         —    

Other

     (0.8 )      0.9       0.2  
   

 

 

    

 

 

    

 

 

  
      39.5 %      39.8 %      39.1 % 
   

 

 

    

 

 

    

 

 

  

We intend to reinvest our accumulated foreign earnings, which approximated $8.9 million at October 31, 2012, indefinitely. As a result, we have not provided any deferred income taxes on such unremitted earnings. For fiscal years 2012, 2011 and 2010, income before income taxes related to domestic operations was approximately $24.2 million, $17.1 million, and $28.3 million. For fiscal years 2012, 2011 and 2010, income before income taxes related to foreign operations was approximately $3.8 million, $1.1 million and $0.7 million.

As of October 31, 2012, we did not have a liability for unrecognized tax benefits related to various federal and state income tax matters. As of October 31, 2011, we provided a liability less than $0.1 million for unrecognized tax benefits related to various federal and state income tax matters. The tax effected amount would reduce our effective income tax rate if recognized.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

         

Balance at November 1, 2010

   $ 103  

Reductions of tax positions from prior years

     (62 ) 
   

 

 

  

Balance at October 31, 2011

     41  

Reductions of tax positions from prior years

     (41 ) 
   

 

 

  

Balance at October 31, 2012

   $ —    
   

 

 

  

As previously disclosed, during the third quarter of fiscal year 2012, we received an update from our outside legal counsel regarding the Hacienda’s examination of the tax year ended December 31, 2004. The appellate court, via a second resolution, upheld the lower court’s decision on two outstanding tax assessments from the Hacienda for which we had previously received unfavorable rulings. Management, as well as our outside legal counsel, still believes the company’s position was correct.

Based on discussions with our outside legal counsel in Mexico, however, we did not believe we would be able to appeal this decision any further (i.e. to the Mexican Supreme Court) and, as a result, were forced to pay an assessment. The income tax assessment related to these allegations amounted to $1.8 million. The payment related to this tax assessment was paid during our third fiscal quarter. This has the effect of increasing our effective income tax rate for fiscal 2012.

Substantially offsetting the impact of this assessment on our tax provision are tax benefits recognized due to a shift of income between taxing jurisdictions, tax credits received through California’s Enterprise Zone Hiring Credit Program (EZC) and an increase in the Section 199 deduction. We expect to continue to receive tax benefits related to the shift of income between taxing jurisdictions, as well as the EZC credits, during fiscal 2013.

The effective income tax rate for fiscal years 2011, and 2010 is higher than the federal statutory rate principally due to state and foreign taxes.