Fair value measurements

3 Months Ended

Jan. 31, 2014

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, 2014 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:
Investment in Limoneira Company⁽¹⁾	$	35,902		—		—	$	35,902

Total assets at fair value	$	35,902	$	—	$	—	$	35,902

(1)

The investment in Limoneira Company consists of marketable securities in the Limoneira Company stock. At January 31, 2014 we own approximately 12% of Limoneira’s outstanding common stock. These securities are measured at fair value by quoted market prices. Limoneira’s stock price at January 31, 2014 and October 31, 2013 equaled $20.77 per share and $26.34 per share. Unrealized gains and losses are recognized through other comprehensive income. Unrealized investment holding losses arising during the quarters ended January 31, 2014 and 2013 were $9.6 million and $1.2 million.


	Level 1		Level 2		Level 3		Total
	(All amounts are presented in thousands)
Liabilities at fair value:
Salsa Lisa contingent consideration⁽²⁾		—		—	$	685	$	685

Total liabilities at fair value	$	—	$	—	$	685	$	685

(2)

On at least an annual basis, we revalue the contingent consideration obligations to their fair value and record increases or decreases in the fair value into selling, general and administrative expense. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in assumed discount periods and rates, changes in the assumed timing and amount of revenue and expense estimates. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period. The total revalue adjustment of the contingent consideration during the three months ended January 31, 2013 totaled $1.2 million. No revalue adjustments were necessary during the three months ended January 31, 2014.

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


	Balance at October 31, 2013		Interest		Revalue Adjustment		Balance January 31, 2014
	(All amounts are presented in thousands)
Salsa Lisa contingent consideration	$	676	$	9	$	—	$	685

Total	$	676	$	9	$	—	$	685


	Balance at October 31, 2012		Interest		Revalue Adjustment		Balance January 31, 2013
	(All amounts are presented in thousands)
Salsa Lisa contingent consideration	$	857	$	12	$	—	$	869
RFG contingent consideration⁽¹⁾		2,322		23		1,245		3,590

Total	$	3,179	$	35	$	1,245	$	4,459

(1)	We have amended our acquisition agreement with RFG in regards to the cash payment portion of the Stage II & III earnouts. See Note 16 of the most recently filed 10-K for more information.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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