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Other events

9 Months Ended

Jul. 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 April 29, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million to shareholders of record on April 1, 2025. On July 28, 2025, we paid a dividend of $0.20 per share, or an aggregate of $3.6 million, to shareholders of record on June 30, 2025. The Board of Directors declared a quarterly cash dividend of $0.20 per share to be paid on October 31, 2025, to shareholders of record on September 30, 2025.

Regulatory matters

In July 2025, the FDA placed Calavo de México (“CDM”), our wholly owned subsidiary, on a Red List Detention Hold after trace levels of Imazalil (not approved for avocados) were detected in a single line item. All subsequent third-party tests were clean. During the third quarter of fiscal 2025, the hold resulted in third-party inspection and testing costs, incremental logistics/handling costs, and inventory write-downs on fruit diverted or sold at distressed prices, with an estimated incremental cost of approximately $4.2 million recorded in cost of sales. This FDA matter was fully resolved in September 2025.

During our fourth quarter of 2025, we submitted an insurance claim seeking recovery of costs associated with the FDA detention hold described above. The claim remains under review, and while we are pursuing recovery and believe it is achievable, as of the date of this report we have not yet obtained sufficient information to conclude that recovery of recognized losses is probable under applicable accounting guidance. Accordingly, no insurance receivable has been

recorded. We will recognize any recovery up to the amount of recognized losses when realization becomes probable, and will recognize any amounts in excess of recognized losses, if any, when realized.

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

On September 2, 2025, the U.S. Department of Justice officially notified us that it has closed its Foreign Corrupt Practices Act (“FCPA”) inquiry related to our operations in Mexico.

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the U.S. The OBBBA includes numerous provisions that affect corporate taxation, including changes to bonus depreciation, the expensing of domestic research costs, and modifications to certain U.S. international tax rules. The company has analyzed the impacts of the OBBBA and reflected them in the current period. These impacts do not have a material effect on the tax rate for the three and nine months ended July 31, 2025. The majority of the tax law changes will take effect in future years.

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 tax authorities, primarily in Mexico and the United States.

2013 Assessment

In January 2017, CDM received preliminary observations from the Servicio de Administración 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 Value Added Taxes (“VAT”). 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 $138.7 million USD at July 31, 2025) related to income tax, flat rate business tax, value added tax and fines, related to this fiscal 2013 tax audit. This amount has been adjusted for inflation as of July 31, 2025 to the amount of 3 billion Mexican pesos (approximately $160 million USD). Additionally, the tax authorities have determined that we owe our employees profit-sharing liability, totaling approximately 118 million Mexican pesos (approximately $6.3 million USD at July 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% VAT tax to fruit purchase deposits; and

o

Imposing double-taxation on the fruit purchase transactions.

On August 20, 2021 CDM filed a Nullity Trial (the “Nullity Trial”) with the Federal Tax Court in Mexico, 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 Nullity Trial 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 Nullity Trial 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, and

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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 Federal 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 Trial. Furthermore, the SAT noted a presumption that the Nullity Trial was filed within the required timeframe, as evidenced by its admission by the Federal 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 the SAT considers that the Nullity Petition was filed on time. This is a statement made within a formal procedure that contradicts what the SAT had been arguing (within the reconsideration procedure).

While we continue to believe that the tax assessment for fiscal year 2013 is completely without merit, and that we will prevail on the Nullity Trial 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 tax assessment 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 year 2021, as a discrete item in Income Tax Provision. The provision includes estimated fines, interest and inflationary adjustments.

We believe that this provision remains appropriate as of July 31, 2025 based on our cumulative probability analysis. We incurred $0.3 million and $0.9 million of related professional fees for the three and nine months ended July 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 July 31, 2025, we had not experienced any changes related to this contingency, and there were no new developments affecting its likelihood or potential financial impact. We continue to assess this obligation, but do not believe it is probable that we will be required to fulfill any obligations under these leases.