XML 29 R17.htm IDEA: XBRL DOCUMENT

Income Taxes

12 Months Ended

Oct. 31, 2021

9. Income Taxes

On March 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act is a relief package intended to assist many aspects of the Country’s economy of which certain components of the Act impacted the Company's 2020 income tax provision. We recorded approximately $1.3 million of tax benefit as a result of the provision allowing taxpayers to carry back net operating losses to offset taxable income on previously filed tax returns.

The Company determined that certain foreign earnings to be indefinitely reinvested outside the United States. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to foreign tax authorities.

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


	2021		2020		2019

Current:
Federal	$	(3,449)	$	(5,684)	$	9,146
State		323		(214)		2,516
Foreign		16,703		645		290
Total current		13,577		(5,253)		11,952

Deferred:
Federal		790		576		516
State		(343)		(505)		209
Foreign		(3,934)		260		205
Total deferred		(3,487)		331		930
Change in valuation allowance		657		630		—
Total income tax provision (benefit)	$	10,747	$	(4,292)	$	12,882

At October 31, 2021 and 2020, gross deferred tax assets totaled approximately $29.3 million and $31.5 million, while gross deferred tax liabilities totaled approximately $22.7 million and $28.4 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):


	2021		2020

Property, plant, and equipment		(4,764)		(11,552)
Intangible assets		5,051		6,861
Unrealized gain, Limoneira investment		(1,138)		(116)
Investment in FreshRealm		—		1,096
Stock-based compensation		511		812
State taxes		(498)		(592)
Credits and incentives		1,808		1,345
Allowance for accounts receivable		1,259		1,165
Inventories		507		864
Accrued liabilities		2,067		2,119
Operating lease - Right of use assets		(15,839)		(15,732)
Operating lease liabilities		17,040		16,895
Net operating loss		1,093		369
Valuation allowance		(1,291)		(631)
Other		(490)		(417)
Long-term deferred income taxes	$	5,316	$	2,486

As of October 31, 2021 and 2020, the Company has gross state net operating loss carryforwards of approximately $19.0 million and $7.2 million with carryforward periods primarily ranging from 20 years to indefinite. As of October 31, 2021, the Company has an estimated gross federal net operating loss of $6.7 million that is expected to be carried back to one of the five preceding tax years. Any unused losses may be carried forward indefinitely and do not expire. The Company incurred a net operating loss of $11.8 million for the fiscal year 2020 which was carried back to its fiscal 2015 tax period and fully utilized.

The Company records a valuation allowance against deferred tax assets when determined that all or a portion of the deferred tax assets are not more likely than not to be realized based on all available evidence. As of October 31, 2021, the Company recorded an approximate $1.2 million valuation allowance against the deferred tax assets for state tax credit carryforwards that are more likely than not to expire unutilized between 2022 and 2028.

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


	2021		2020		2019

Federal statutory tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal effects	11.6		4.4		3.7
Rate differential on NOL carryback	125.8		6.2		—
Foreign income tax rate differential	16.1		(2.3)		0.4
Mexican tax assessments	(1,059.9)		—		—
Stock based compensation	(16.7)		—		—
Provision to return	39.2		(2.5)		0.7
State rate change	9.2		(0.1)		(0.2)
Valuation allowance	(44.1)		(2.7)		—
Other	(15.5)		(0.3)		0.4
	(913.3)	%	23.7	%	26.0	%

For fiscal years 2021, 2020 and 2019, income (loss) before income taxes (benefit) related to domestic operations was approximately $(5.0) million, $(18.9) million, and $47.9 million. For fiscal years 2021, 2020 and 2019, income before income taxes (benefit) related to foreign operations was approximately $3.8 million, $0.8 million and $1.6 million. The Company’s distortive effective tax rate for fiscal year 2021 differs from that of prior fiscal periods

primarily due to impacts of one-time tax events including the 2011 and 2013 Mexico Assessments, tax rate arbitrage on carryback claims under the CARES Act, and near break-even pre-tax operations relative to prior fiscal periods.

As of October 31, 2021, and 2020, we had a liability of $11.3 million and $0.1 million for unrecognized tax expenses related primarily to the probable outcomes of the 2013 Mexico Assessment. See Note 7 for further information.

A reconciliation of the beginning and ending amount of gross unrecognized taxes (exclusive of interest and penalties) was as follows (in thousands):


	Year Ended October 31,
	2021		2020
Beginning balance	$	72	$	72
Gross increase - Tax positions in prior periods		131		—
Gross increase - Tax positions in current period		11,100		—
Ending balance	$	11,303	$	72

Although it is reasonably possible that certain unrecognized taxes may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized taxes over the next 12 months. See Note 7 for additional details.

We are subject to U.S. federal income tax as well as income of multiple state tax and foreign tax jurisdictions. We are no longer subject to U.S. income tax examinations for the fiscal years prior to October 31, 2018, and are no longer subject to state income tax examinations for fiscal years prior to October 31, 2017.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details