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Note 9 - Commitments and Contingencies | 12 Months Ended
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May 28, 2017
Notes to Financial Statements |
Commitments and Contingencies Disclosure [Text Block] |
9 . | Commitments and Contingencies
Operating Leases Landec leases land, facilities, and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2030. Certain of these leases have renewal options. The approximate future minimum lease payments under these operating leases at May 28, 2017 are as follows (in thousands):
|  | Amount |
Fiscal year 2018 |  | $ | 3,349 |
Fiscal year 2019 |  |  | 2,301 |
Fiscal year 2020 |  |  | 1,286 |
Fiscal year 2021 |  |  | 1,138 |
Fiscal year 2022 |  |  | 906 |
Thereafter |  |  | 6,771 |
Total |  | $ | 15,751 |
Rent expense for operating leases, including month to month arrangements was $5.6 million, $4.5 million and $5.0 million for the fiscal years 2017, 2016 and 2015, respectively. Capital Leases On September 3, 2015, Lifecore leased a 65,000 square foot building in Chaska, MN, two miles from its current facility. The initial term of the lease is seven years with two five -year renewal options. The lease contains a buyout option at any time after year seven with the purchase price equal to then mortgage balance on the lessor’s loan secured by the building. Included in property, plant and equipment as of May 28, 2017 is $3.7 million associated with this capital lease. The monthly lease payment was initially $34,000 and increases by 2.4% per year. Lifecore and the lessor made capital improvements prior to occupancy and thus the lease did not become effective until January 1, 2016. Lifecore is currently using the building for warehousing and final packaging. Apio has a capital lease for office equipment for which the value of $104,000 is included in property, plant and equipment as of May 28, 2017 . Future minimum lease payments under capital leases for each year presented as are follows (in thousands):
Fiscal year 2018 |  | $ | 462 |
Fiscal year 2019 |  |  | 472 |
Fiscal year 2020 |  |  | 483 |
Fiscal year 2021 |  |  | 486 |
Fiscal year 2022 |  |  | 460 |
Thereafter |  |  | 3,491 |
Total minimum lease payment |  |  | 5,854 |
Less: amounts representing interest and taxes |  |  | (2,053 | )
Total |  |  | 3,801 |
Less : current portion included in other accrued liabilities |  |  | (70 | )
Long-term capital lease obligation |  | $ | 3,731 |
Purchase Commitments At May 28, 2017, the Company was committed to purchase $19.1 million of produce and other materials during fiscal year 2018 in accordance with contractual terms at market rates. Payments of $32.2 million, $30.5 million and $16.8 million were made in fiscal years 2017, 2016 and 2015, respectively, under similar arrangements. Legal Contingencies In the ordinary course of business, the Company is involved in various legal proceedings and claims. The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each fiscal quarter and adju sted to reflect the impacts of negotiations, estimate settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal fees are expensed in the period in which they are incurred. Apio has been the target of a union organizing campaign which has included two unsuccessful attempts to unionize Apio's Guadalupe, California processing plant. The campaign has involved a union and over 100 former and current employees of Pacific Harvest, Inc. and Rancho Harvest, Inc. (collectively "Pacific Harvest"), Apio's labor contractors at its Guadalupe, California processing facility, bringing legal actions before various state and federal agencies, the California Superior Court, and initiating over 100 individual arbitrations against Apio and Pacific Harvest. The legal actions consist of three main types of claims: ( 1 ) Unfair Labor Practice claims ("ULPs") before the National Labor Relations Board (“NLRB”), ( 2 ) discrimination/wrongful termination claims before state and federal agencies and in individual arbitrations, and ( 3 ) wage and hour claims as part of two Private Attorney General Act (“PAGA”) cases in state court and in over 100 individual arbitrations. A settlement of the ULPs among the union, Apio, and Pacific Harvest that were pending before the NLRB was approved on December 27, 2016 for $310,000. Apio was responsible for half of this settlement, or $155,000. On May 5, 2017, the parties to the remaining actions executed a Settlement Agreement concerning the discrimination/wrongful termination claims and the wage and hour claims which covers all non-exempt employees of Pacific Harvest working at Apio's Guadalupe, California processing facility from September 2011 through the settlement date. Under the settlement agreement, the plaintiffs are to be paid $6.0 million in three installments, $2.4 million of which was paid on July 3, 2017, with $1.8 million due in November 2017 and $1.8 million due in July 2018. The Company and Pacific Harvest have each agreed to pay one half of the settlement payments. The Company paid the entire first installment of $2.4 million on July 3, 2017 and will be reimbursed by Pacific Harvest for its $1.2 million portion through weekly payments until full paid. Based on our current agreement with Pacific Harvest, the Company will also pay the entire second installment of $1.8 million in November 2017, and will be reimbursed by Pacific Harvest as indicated above. The Company and Pacific Harvest will both make one half of the third installment in July 2018. The Company ’s recourse against non-payment by Pacific Harvest is its security interest in assets owned by Pacific Harvest. During the twelve months ended May 28, 2017, the Company recorded a legal settlement charge of $2.6 million related to these actions. During the twelve months ended May 28, 2017 and May 29, 2016, the Company incurred legal expenses of $2.1 million and $542 ,000, respectively, related to these actions. As of May 28, 2017, the Company had accrued $3.2 million related to these actions, which is included in Other accrued liabilities in the accompanying Consolidated Balance Sheet.

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