Agriculture Property Acquisitions

12 Months Ended

Oct. 31, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

3. Agriculture Property Acquisitions

In September 2015, the Company completed the acquisition of 157 acres of lemon, orange and specialty citrus orchards in California’s San Joaquin Valley for $3,389,000. The orchards were acquired pursuant to purchase options contained in certain operating leases the Company had been a party to since 2012 covering approximately 1,000 acres of lemon, orange and specialty citrus and other crops, which the Company refers to as the Sheldon Ranch leases. This acquisition was accounted for as an asset purchase and included in property, plant and equipment in the Company’s consolidated balance sheet at October 31, 2015.

In September 2015, the Company entered into a purchase agreement to acquire 757 acres of lemon, orange and specialty citrus orchards in California’s San Joaquin Valley, for $15,148,000. The orchards were acquired pursuant to purchase options contained in the Sheldon Ranches operating leases. The Company paid a deposit of $50,000 in September 2015 and escrow closed in December 2015, at which time the remaining $15,098,000 was paid.

Business Combinations

Yuma Packinghouse

On June 30, 2014, the Company acquired the packing house property, equipment and certain intangible assets of Marlin Packing Company from its sole shareholder, Marlin Ranching Company. Both companies are privately owned Arizona corporations located in Yuma, Arizona. No liabilities were assumed in the acquisition. The purchase price was $1,700,000, comprised of 23,455 unregistered shares of the Company’s common stock valued at $518,600, $700,000 in cash, contingent consideration consisting of an earn-out with a fair value of $300,000 and a deferred cash payment of $181,400 which was paid in fiscal year 2015 upon the completion of certain land remediation activities required by the seller. The earn-out has a maximum value of $400,000 in cash based on the operating profits of the acquired business, as defined in the purchase agreement, over a five-year period ending October 31, 2019. The liability for the fair value of the earn-out is included in other long term liabilities and the deferred cash payment is included in accrued liabilities in the accompanying October 31, 2015 balance sheet. Transaction costs associated with the acquisition were not significant and were expensed in the year ended October 31, 2014. The results of operations of the Yuma packinghouse have been included in the consolidated results of operations from the acquisition date.

The following is a summary of the fair value of the assets acquired on the date of acquisition based on a third-party valuation, which is considered a Level 3 fair value measurement under FASB ASC 820, Fair Value Measurements and Disclosures:

Building	$	395,000
Land and improvements		260,000
Equipment		885,000
Customer relationships		160,000
Fair value of assets acquired	$	1,700,000

Customer relationships are subject to amortization over an estimated life of five years.

Revenue and net loss of $136,000 and $522,000, respectively, of the Yuma packinghouse are included in the Company’s consolidated statement of operations for fiscal year 2014. The results of operations of the Yuma packinghouse were not material to the Company’s pro forma consolidated statements of operations for the year ended October 31, 2013 had the Yuma packinghouse been included in the consolidated results from the beginning of the year.

Lemons 400

On October 11, 2013, the Company completed the acquisition of approximately 760 acres of agricultural property in the town of Porterville in Tulare County, California (“Lemons 400”) for $8,750,000 cash. This property consists of approximately 400 acres of productive lemon orchards and 360 acres primarily utilized for cattle grazing. The acquisition also included water assets and agricultural equipment and supplies.

The following is a summary of the fair value of the assets acquired on the date of acquisition based on a third-party valuation, which is considered a Level 3 fair value measurement under FASB ASC 820, Fair Value Measurements and Disclosures:

Cultural costs	$	1,130,000
Land		5,180,000
Land improvements		309,000
Buildings and building improvements		60,000
Equipment		150,000
Orchards		601,000
Investment in mutual water company		1,320,000
Fair value of assets acquired	$	8,750,000

Results of operations are included in the Company’s fiscal year 2013 consolidated statement of operations from the date of acquisition but are not significant due to the short time period from the acquisition date to the Company’s fiscal year end of October 31, 2013.

The unaudited, pro forma consolidated statement of operations as if the acquisition had been included in the consolidated results of the Company for the entire year ended October 31, 2013, results in revenue of $88,900,000 and net income of $5,879,000.

Associated Citrus Packers

On September 6, 2013 the Company acquired of all of the outstanding stock of Associated, a privately owned Arizona corporation, for $18,580,000. The purchase price consisted of the issuance of 705,000 unregistered shares of the Company’s common stock with an aggregate value of $15,959,000 based on the Company’s stock price on the acquisition date, $1,041,000 in cash and the repayment of $1,580,000 in Associated’s long term debt. The acquisition was structured as a tax-free reorganization under section 368 of the Internal Revenue Code. Upon completion of the acquisition, Associated became a wholly-owned subsidiary of the Company. Associated owns approximately 1,300 acres of property in Yuma County, Arizona, comprised of 950 acres of productive lemon orchards, 350 acres of other crops and agriculture equipment and facilities. Transaction costs incurred in connection with the acquisition were approximately $270,000, which are included in selling, general and administrative expense. The results of operations of Associated have been included in the consolidated results of operations from the acquisition date.

The following is a summary of the fair value of the assets acquired on the date of acquisition based on a third-party valuation, which is considered a Level 3 fair value measurement under FASB ASC 820, Fair Value Measurements and Disclosures:

Cultural costs	$	1,456,000
Other current assets		814,000
Land		15,035,000
Land improvements		1,103,000
Buildings and building improvements		355,000
Equipment		1,751,000
Orchards		4,382,000
Other assets		491,000
Goodwill		680,000
Total assets acquired		26,067,000
Current liabilities		(216,000)
Long-term debt		(24,000)
Deferred income taxes		(7,247,000)
Total liabilities assumed		(7,487,000)
Fair value of net assets acquired	$	18,580,000

Of the $491,000 of acquired other assets, $486,000 was assigned to trade names and trademarks that are subject to amortization over an estimated life of 8 years.

Revenue of $2,809,000 and net income of $291,000 of Associated are included in the Company’s consolidated statement of operations from the acquisition date to the period ended October 31, 2013.

The unaudited, pro forma consolidated statement of operations as if Associated had been included in the consolidated results of the Company for the entire year ended October 31, 2013 results in revenue of $86,667,000 and net income of $4,973,000.