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Other events

3 Months Ended

Jan. 31, 2025

6.	Other events

Dividends

On January 31, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million, to shareholders of record on January 10, 2025. On March 7, 2025, the Board of Directors declared a quarterly cash dividend of $0.20 per share to be paid on April 29, 2025, to shareholders of record on April 1, 2025.

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 impact on our financial position, results of operations, or cash flows.

Compliance matters

We continue to cooperate fully with the SEC and the Department of Justice (DOJ) investigations relating to the Foreign Corrupt Practices Act (FCPA). On February 5, 2025, Attorney General Bondi issued a memorandum stating, in regard to the FCPA, that the DOJ “shall prioritize investigations related to foreign bribery that facilitates the criminal operations of Cartels and Transnational Criminal Organizations, and shift focus away from investigations and cases that do not involve such a connection. Examples of such cases include bribery of foreign officials to facilitate human smuggling and the trafficking of narcotics and firearms.” While the DOJ’s policy may evolve, we are currently unaware of any facts suggesting conduct of any of our employee that would fall within the examples provided in the DOJ’s February 5, 2025, memoranda.

Additionally, on February 10, 2025, President Trump issued an Executive Order “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security,” which stated that for a period of 180 days following the date of the order, “the Attorney General shall review guidelines and policies governing investigations and enforcement actions under the FCPA. During the review period, the Attorney General shall: . . . (ii) review in detail all existing FCPA investigations or enforcement actions and take appropriate action with respect to such matters to restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives; and (iii) issue updated guidelines or policies, as appropriate…”

On February 18, 2025, President Trump issued Executive Order “Ensuring Accountability for All Agencies” that stated, “it shall be the policy of the executive branch to ensure Presidential supervision and control of the entire executive branch” and that “independent regulatory agency chairmen shall regularly consult with and coordinate policies and priorities with the directors of OMB, the White House Domestic Policy Council, and the White House National Economic Council.”  On February 18, 2025, the SEC notified us that activity in the investigation has been postponed, after President Trump issued Executive Orders on February 10 and February 18, 2025. Given the Attorney General’s February 5, 2025 Memo and the President’s Executive Orders, along with a potential shift in DOJ and SEC priorities, we do not currently anticipate any near-term action from the government’s FCPA inquiry that would likely have a material impact on our short-term financial outlook.

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 January 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 $125.6 million USD at January 31, 2025) 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 January 31, 2025 to the amount of 3 billion Mexican pesos (approx. $144.9 million USD). Additionally, the tax authorities have determined that we owe our employees profit-sharing liability, totaling approximately 118 million Mexican pesos (approx. $5.7 million USD at January 31, 2025). 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. Consequently, the SAT placed liens on the fixed assets

of CDM, with a net book value of approximately $26 million USD, and on bank accounts of CDM totaling approximately $1 million USD in order to guarantee the 2013 Assessment. 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.

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:

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The QR Code does not allow the company to verify the veracity of the document,

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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 acknowledged the admission of the extension to the lawsuit. Additionally, in November 2024, the Administrative Reconsideration and related Injunction action were finalized. The tax authority determined that the filing of the Administrative Reconsideration was not legally viable, citing the existence of a concurrent legal remedy—the Nullity Petition. Furthermore, the SAT noted a presumption that the Nullity Petition was filed within the required timeframe, as evidenced by its admission by the Tax Court.

These resolutions can be used as supervening evidence to support the arguments that the Nullity Petition should be admitted. The resolutions will contribute to demonstrate that SAT considers that the Nullity Petition was filed on time. This is a statement made within a formal procedure that contradicts what SAT had been arguing (within the reconsideration procedure).

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.

Additionally, while the 2013 Assessment and our ongoing VAT (IVA) refund efforts are separate matters, we believe the recent VAT refund secured directly from the SAT—rather than through the court system—provides positive momentum for our broader tax strategy and it is opening communication channels with the tax authorities to resolve the 2013 Assessment.

We believe that this provision remains appropriate as of January 31, 2025 based on our cumulative probability analysis. We incurred $0.4 million of related professional fees for the three months ended January 31, 2025 which have been recorded in Expenses related to Mexican Tax matters on the consolidated statements of operations.

Lease contingency

In conjunction with the sale of the Fresh Cut business on August 15, 2024, the Company assigned certain leases to the buyer. As a result of these lease assignments, the buyer is the primary obligor under the leases, with the Company secondarily liable as a guarantor. If the buyer fails to perform under a lease, the Company could be responsible for fulfilling any remaining lease obligation. The leases had a remaining average term of 5.3 years as of October 31, 2024, with a maximum exposure of $32.0 million in undiscounted future minimum lease payments, plus $13.3 million in potential additional payments related to common area maintenance, taxes, insurance, and other obligations.

As of January 31, 2025, we have not experienced any changes related to this contingency, and there are no new developments affecting its likelihood or potential financial impact. We continue to assess this obligation, but do not believe it is probable that it will be required to fulfill any obligations under these leases