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Other events | 9 Months Ended
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Jul. 31, 2024
Other events |
Other events |
7. | Other events
​ Dividend payments ​ On January 31, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on January 26, 2024. On April 29, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on April 1, 2024. On July 30, 2024, we paid a dividend of $0.10 per share, or an aggregate of $1.8 million, to shareholders of record on July 2, 2024. ​ Restricted cash ​ In the prior year, in connection with the refinancing of our credit facility, we temporarily posted $0.8 million of cash collateral to satisfy certain collateral requirements as we transitioned banks providing letters of credit related to our workers compensation insurance policies. In the first quarter of 2024, this restriction was released. Litigation ​ From time to time, we are 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. ​ Compliance matters ​ On January 16, 2024, the Company announced that its internal audit process had identified to the Audit Committee of the Board of Directors certain matters that the Board of Directors determined after fiscal year end merited enhanced evaluation. A Special Committee of the Board of Directors (the “Special Committee”) was established to commence an investigation, with the assistance of external legal counsel and external forensic accountants. The Special Committee determined that certain of those matters related to the Company’s operations in Mexico raised potential issues under the Foreign Corrupt Practices Act (“FCPA”). The Company has voluntarily disclosed this ongoing internal investigation to the SEC and the Department of Justice ("DOJ"), and the Company intends to fully cooperate with the SEC and the DOJ in connection with these matters. Any determination that the Company’s operations or activities were not in compliance with laws, including the FCPA, could result in the imposition of material fines and penalties and the imposition of equitable remedies. The Company cannot currently predict the timing of completion or the outcome of its internal investigation or of any actions that may be taken by the SEC, the DOJ or Mexican authorities in connection with the matters under investigation, and the Company cannot currently estimate the amount or range of loss or potential impact on its consolidated financial statements associated with these matters. Mexico tax audits ​ We conduct business both domestically and internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by taxing authorities, primarily in Mexico and the United States. ​ 2013 Assessment ​ In January 2017, Calavo de Mexico (“CDM”) received preliminary observations from the Servicio de Administracion Tributaria in Mexico (the “SAT”) related to an audit for fiscal year 2013 outlining certain proposed adjustments primarily related to intercompany funding, deductions for services from certain vendors/suppliers and IVA. We provided a written rebuttal to these preliminary observations during our third fiscal quarter of 2017. ​ In July 2018, the SAT’s local office in Uruapan issued to CDM a final tax assessment (the “2013 Assessment”) totaling approximately $2.6 billion Mexican pesos (which includes annual adjustments for inflation, and equals approximately $138.4 million USD at July 31, 2024) related to income tax, flat rate business tax, and value added tax, related to this fiscal 2013 tax audit. This amount has been adjusted for inflation as of July 31, 2024 to the amount of $3.08 billion Mexican pesos (approx. $163.9 million USD). Additionally, the tax authorities have determined that we owe our employees profit-sharing liability, totaling approximately $118 million Mexican pesos (approx. $6.3 million USD at July 31, 2024). In August 2018, we filed an Administrative Appeal on the 2013 Assessment, appealing our case to the SAT’s central legal department in Michoacan. ​ On June 25, 2021, we became aware that the Administrative Appeal had been resolved by the SAT against CDM on March 12, 2021, and that we had allegedly failed to timely respond to and challenge the SAT’s notification of such resolution, therefore rendering the 2013 Assessment as definitive. Based on legal counsel from our tax advisory firm, we and our tax advisory firm have concluded that the March notification was not legally communicated. ​ On August 18, 2021, we filed an Administrative Reconsideration (the “Reconsideration”) before the Central Legal Department of the SAT located in Mexico City, asserting that the resolution in March of the Administrative Appeal was wrongly concluded, in particular with respect to the following matters: ​
| o | Failure to recognize CDM as a “maquiladora”
| o | Considering the Company to have a permanent establishment in Mexico,
| o | Including fruit purchase deposits transferred by the Company to CDM as taxable,
| o | Application of 16% IVA tax to fruit purchase deposits; and
| o | Imposing double-taxation on the fruit purchase transactions
​ SAT formally rejected our request for Reconsideration on January 3, 2022. CDM has filed an Amparo on April 22, 2024 and an Appeal on July 31, 2024 before the Circuit Court challenging the last resolution from March 25, 2024 where the tax authority considered that the filing of the administrative reconsideration was not legally viable because there was a legal remedy already filed that coexists with the administrative reconsideration, that is, the Annulment Suit. ​ On August 20, 2021 CDM filed an Annulment Suit (the “Annulment Suit”) with the Federal Tax Court, which among other things, strongly contends that the notifications made by the SAT to CDM and its designated advisors of the resolution of the Administrative Appeal in March 2021 were not legally communicated. In addition, the Annulment Suit asserts the same matters central to the Reconsideration, as described above, as wrongly concluded in the resolution of the Administrative Appeal. ​ On October 13, 2023, the Company filed an extension of the Annulment Suit filed on August 20, 2021, as a result of the response to the lawsuit filed by the Tax Authority, pointing out that the Tax Authority’s resolution is unlawful due to improper substantiation and motivation, because of the following: ​
| ● | The QR Code does not allow the company to verify the veracity of the document,
| ● | The notification of the tax assessment was not sent to the phone number indicated by the company, when the Tax Authority was obliged to do so, among others.
​ On November 14, 2023, the Tax Court notified the admission of the extension of the lawsuit was filed. ​ While we continue to believe that the 2013 Assessment is completely without merit, and that we will prevail on the Annulment Suit in the Tax Court, we also believe that it is in the best interest of CDM and the Company to settle the 2013 Assessment as quickly as possible. In accordance with our cumulative probability analysis on uncertain tax positions, settlements made by the SAT in other cases, the 2011 Assessment settlement reached by CDM with the Ministry of Finance and Administration of the government of the State of Michoacan, Mexico, and the value of CDM assets, we recorded a provision of $11 million, in the third quarter of fiscal 2021, as a discrete item in Income Tax Provision. The provision includes estimated penalties, interest and inflationary adjustments. We believe that this provision remains appropriate as of July 31, 2024 based on our cumulative probability analysis. We incurred $0.2 million and $0.8 million of related professional fees for the three and nine months ended July 31, 2024, respectively, which have been recorded in Expenses related to Mexican Tax matters on the consolidated statements of operations.

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