Commitments and Contingencies
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Oct. 31, 2012
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Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
20. Commitments and Contingencies
Operating Leases
The Company has operating leases for agricultural land, pollinating equipment, packinghouse equipment, and photovoltaic generators. Total lease expense for fiscal years 2012, 2011 and 2010 was $1,972,000, $1,480,000 and $1,513,000, respectively. In addition, the Company made prepayments on the lease of the pollination equipment totaling $159,000. These prepayments are included in prepaid expenses and other current assets and other assets in the Company's consolidated balance sheets at October 31, 2012 and 2011, respectively, and will be expensed over the last year of the lease based on the terms of the arrangement with the lessor.
During fiscal year 2008, the Company entered into a contract with Perpetual Power, LLC ("Perpetual") to install a 1,000 KW photovoltaic generator in order to provide electrical power for the Company's lemon packinghouse operations. The facility became operational in October 2008. Farm Credit West provided financing for the generator and upon completion of the construction Perpetual sold the generator to Farm Credit West. The Company then signed a 10-year operating lease agreement with Farm Credit West. At the end of the 10-year lease term, the Company will have an option to purchase the generator from Farm Credit West for $1,125,000.
Additionally in fiscal year 2008, the Company entered into a contract with Perpetual to install a second 1,000 KW photovoltaic generator in order to provide electrical power for the Company's farming operations in Ducor, California. Farm Credit West provided the financing for the generator and when construction was completed, Perpetual sold the generator to Farm Credit West. The Company then signed a 10-year operating lease agreement with Farm Credit West for this facility. At the end of the 10-year lease term, the Company will have an option to purchase the generator from Farm Credit West for $1,275,000. The generator in Ducor, California became operational in December 2008. Included in other assets in the Company's consolidated balance sheets is $872,000 and $639,000 at October 31, 2012 and 2011, respectively of deferred rent assets related to the Company's Ducor solar lease as the minimum lease payments exceed the straight-line rent expense during the earlier terms of the lease.
In January 2012, the Company entered into six operating leases for approximately 1,000 acres of lemon, orange, specialty citrus and other crop orchards in Lindsay, California. Each of the leases is for a ten-year term and provides for four five-year renewal options with an aggregate base rent of approximately $500,000 per year. The leases also contain profit share arrangements with the lessors as additional rent on each of the properties and a provision for the potential purchase of the properties by the Company in the future. In accordance with the terms of the lease agreements, the Company did not share in the citrus crop revenue in its fiscal year ending October 31, 2012. The Company incurred $456,000 of net lease expense in fiscal year 2012.
Minimum future lease payments are as follows:
The Company had an operating lease of 450 acres, the Ranch Refugio/Caldwell Ranch, which provided for an adjustment to rent for inflation and included a purchase option. On February 3, 2011, the Company completed the exercise of the purchase option contained in its lease of the Rancho Refugio/Caldwell Ranch, which allowed the Company to acquire the property for a purchase price of $6,510,000. Concurrently with the close of its purchase option, the Company sold the property for $10,000,000 to Rancho Guacamole, LLC, a California limited liability company. The gain on the sale was $1,351,000, net of the $6,510,000 purchase price, $1,436,000 remaining capitalized in leasehold improvements and $703,000 of selling and transaction costs. The net cash realized from the transaction was $2,787,000. In connection with this lease, the Company incurred lease expense of zero, $28,000 and $66,000 in fiscal years 2012, 2011 and 2010, respectively.
Letters of Credit
The Company utilizes standby letters of credit to satisfy workers' compensation insurance security deposit requirements. At October 31, 2012, these outstanding letters of credit totaled $495,000.
Litigation
The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business. At this time, the Company is not aware of any pending or threatened litigation against it that it expects will have a material adverse effect on its business, financial condition, liquidity, or operating results. Legal claims are inherently uncertain, however, and it is possible that the Company's business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings.
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