®
2021
Annual Report
Senior Management
Mark Palamountain
(cid:38)(cid:75)(cid:76)e(cid:73) (cid:41)(cid:76)nan(cid:70)(cid:76)al (cid:50)(cid:73)(cid:192)(cid:70)er
Harold Edwards
President & CEO
Alex Teague
Senior Vice President & COO
Board of Directors
Elizabeth Mora
Betsy B. Chess
John W. H. Merriman
Left to Right
Donald R. Rudkin
Robert M. Sawyer
Vice-Chairperson
Jesus “Chuy” Loza
Harold S. Edwards
Scott S. Slater
Gordon E. Kimball
Chairperson of the Board
Amy Fukutomi
Edgar A. Terry
(not pictured)
Management
Susan Jones-Ng
Director of International
Business Development
Tomas Gonzalez
Director of Global Food
Safety & Compliance
Ryan Nasalroad
Manager,
Service Operations
Michael Gonzales
Marketing Manager
Left to Right
Greg Hamm
Vice President &
Corporate Controller
Dyson Schneider
Director of Northern
Farming Operations
Debra Walker
Director of
Human Resources
Anthony Ecuyer
Vice President of
Packing Operations
Eric Tovias
Director of
Information Systems
Amy Fukutomi
Director of Compliance
& Business Development
Edgar Gutierrez
Vice President of
Farming Operations
Kevin Poindexter
General Manager
Yuma Ranches
Vince Giacolone
Director, Southern
Farming Operations
Stewart Lockwood
Director of
Field Operations
John Carter
Vice President
of Sales
Rosie Castillo
Director of Housing &
Commercial Operations
Lee Nesbitt
General Manager,
Windfall Farms
(not pictured)
Limoneira Company
As this year unfolds and takes Limoneira
into a world still navigating through an ever-
changing pandemic and its consequences,
there is one thing for certain: Limoneira has
not only survived but claimed its place on a
global stage as a leader in agriculture. It has
become the company known for providing
its One World of Citrus® business model and
levels of
has
success as a leading citrus provider worldwide.
reached new, unparalleled
Very few companies can withstand global
depression, world wars, market crashes, cultural
upheaval, and global pandemics; but since 1893,
Limoneira has stood strong in the midst of all of
these seemingly insurmountable challenges and
still managed to operate at its highest standards.
Despite the most recent pandemic that every
nation in our world has faced, Limoneira has
continued to innovate and creatively (cid:192)nd new
ways to operate and consistently grow high
quality, nutritious citrus. While adapting to the
changing landscape of food service, retail
markets and logistics, Limoneira has found
new ways to increase its revenue streams and
customer base worldwide, as well as grow
and offer more citrus, and distribute higher
volumes of its citrus products than ever before.
its
throughout
importantly, Limoneira has taken
Most
its
sustainable, environmentally sound agricultural
practices to new heights, implementing new
practices
ranch, orchards,
buildings, and campuses that inspire and serve
both its employees and communities. It is this
commitment to environmental leadership that
would make Limoneira
forefathers proud,
and it is these consistent and paramount
practices that will keep Limoneira successful
– and fruitful – in the decades to come.
CHAIRPERSON’S LETTER TO THE SHAREHOLDERS
Over the last two years we have made signi(cid:192)cant ad(cid:77)ustments to our business model to adapt
to a world living with Covid-19. Fiscal 2021 was a much better year for the company than
2020. However, reduced worldwide lemon consumption, in(cid:193)ation, supply chain disruption
and shipping delays meant we still suffered a small (cid:192)nancial loss for the (cid:192)scal year.
In lemons, we bene(cid:192)tted from our hard work to gain new retail customers in 2020. With
the growth in our retail sales, we sold more of the lemons we grew than in the previous
year. Again in 2021 more lemons were packed in bags to meet the preferences of our retail
customers. Unfortunately, export markets remained closed or were placing only small orders.
Worldwide consumption of lemons remained down. But the trees ignored Covid-19 and
continued to produce the same quantity of fruit. Inevitably, with an oversupply of lemons,
prices were down. Despite all our successes, it was still a challenging and disappointing year
in the lemon business!
Consumption of oranges was down from 2020. Food service sales returned at reduced levels,
and we sold fewer cartons to the grocery stores. Prices and volume were both down, but we
still made a small operating pro(cid:192)t in oranges.
Avocado demand remained strong. US consumption even grew slightly above that of 2020.
High winds in (cid:45)anuary knocked a signi(cid:192)cant quantity of fruit off our trees, as a result our crop was
smaller. However, prices were strong, and we made a respectable operating pro(cid:192)t in avocados.
Harvest at Limoneira, our master-planned community, sold houses at a record pace in 2021.
Our guest builders continue to sell new houses as fast as they can be built. We have sold
all 586 lots in Phase 1 to our four home builders. Sales of lots in Phase 2 will begin shortly.
Fifteen years of investment, planning, and permitting are producing real results. Harvest at
Limoneira is a growing community with over 320 families living in their new homes. Seeing
the community come to life with houses becoming homes, children playing in the parks and
families out for walks is gratifying. Our vision for this valuable addition to Santa Paula is being
reali(cid:93)ed. We look forward to the coming years as we begin to receive a signi(cid:192)cant return on
our investment in the pro(cid:77)ect.
As we begin 2022, we continue to deal with Covid-19 impacts in our markets around the
world. Responding and adapting to a continually changing pandemic has changed how
we approach our business, and we are better as a result. We will continue to be innovative
farmers and marketers to make certain we are leading the way in an ever-evolving industry.
As always, we will support and promote our employees so we can achieve greater things
together. At Limoneira, we are a rich and diverse company with no asset more valuable
than our dedicated people. The passion, dedication, and hard work with which they grow
citrus and avocados is inspiring.
I look forward to “seeing” you at the virtual annual meeting in March.
Sincerely,
Gordon E. Kimball
Chairperson of the Board
CEO’S LETTER TO THE SHAREHOLDERS
Fiscal year 2021 was a year of signi(cid:192)cant operational improvement for Limoneira and a year
in which our real estate development activities advanced considerably. Unfortunately, the
persistent impact of the global pandemic (cid:11)COVID-19(cid:12) continued to negatively in(cid:193)uence the
(cid:192)nancial performance of our global agribusiness and our overall company.
Restaurants and bars slowly reopened across the
United States throughout the year and domestic
foodservice demand for Limoneira’s
lemons,
oranges, specialty citrus and avocados gradually
improved. Since 70% of lemons sold in the United
States are consumed in the foodservice channel
(restaurants and bars) this increase in demand was
important for Limoneira’s (cid:192)nancial improvement
in 2021 versus 2020 – especially since 90% of
Limoneira’s business is driven by lemon markets.
In some cases, this year’s increased foodservice
demand was even euphoric for a while, as people were allowed to leave their homes and
return to their favorite restaurants and bars once vaccinations were made widely available.
Export lemon markets throughout the world and particularly throughout Southeast Asia, on
the other hand, struggled to reopen and even today stand at less than 50% of pre-pandemic
demand.
Limoneira continued to make great strides in retail
food and club grocery growth with its lemons
by making strategic investments in bagging
equipment in 2021 which greatly increased both
the volume capacity and ef(cid:192)ciency of packed,
lemon con(cid:192)gurations, meeting the
bagged
demand of retailers this past year. The return of
domestic foodservice demand for Limoneira’s
lemons, in combination with the strides we made
in increasing our retail and grocery market
share across the United States, strengthened our
(cid:192)nancial performance in 2021 versus 2020.
Unfortunately, the negative impacts of global
supply chain challenges,
shipping delays,
in(cid:193)ation, and demand destruction caused by the
pandemic created headwinds for us throughout
the year in our agribusiness. While we believe
some of these headwinds are transitory, we
also believe that some of them will persist in the
coming days, months and even years and we
must prepare to operate in our radically changing
world by ad(cid:77)usting to the challenges facing us.
sales
Lemon tree crops in each of the growing
districts in California and Arizona were
smaller this year versus 2020. Our team’s
strategy
harvest, packing and
allowed us to achieve signi(cid:192)cantly higher
fresh sales utilization levels in 2021 versus
2020 bolstering our lemon revenues and
strengthening the (cid:192)nancial
returns we
provided to our third-party growers. Our
success with fresh lemon sales was offset by
disappointing average per carton lemon
sales prices across each of the grades and sizes we sold due to oversupplied lemon
markets caused by sluggish lemon demand due to the lingering impacts of COVID-19.
These impacts were felt across our industry and resulted in a disappointing lemon year
for all of us despite the signi(cid:192)cant operational improvement Limoneira en(cid:77)oyed in 2021
versus 2020.
Our One World of Citrus business model was on full display in 2021 as we (cid:192)nished
our domestic lemon harvests and sales in July and shifted our supplies to Southern
Hemisphere fruit from Chile and Argentina. Our shift to Southern Hemisphere supplies
was met with extreme supply chain challenges due to shipping and port delays
which compromised both our sales efforts as well as the quality of the fruit we were
supplying to our customers. These delays created negative (cid:192)nancial consequences
for us through lower average per carton sales prices due to compromised fruit quality
as well as higher costs from re-working of fruit in our packinghouses. It was another
frustrating experience caused by the pandemic and even though we recognize that
these supply chain delays and challenges are transitory, we are watching them very
closely as we enter 2022.
A bright spot for us in 2021 was the growth
of our agency sales of foreign supplier’s
fruit. We sold 1.4 million cartons of citrus
from suppliers in Argentina, Chile, and
Mexico for brokered fruit revenue of $29.3
Million, more than double compared
to the previous year. This was all made
possible due to our One World of Citrus
sales platform that we have created for
our own production in California, Arizona,
Chile, and Argentina as well as for our third-
party growers and co-packers in these places (as well as in Mexico.) We see great
promise for growth in this area as a complement to our citrus supplies from our own
farms, from our third-party grower network and from our co-packers. This should allow
us to successfully scale and grow into the future, as we connect our customers to the
highest quality, year-round, citrus supplies from around the world.
Our avocado crop in 2021 was negatively
impacted from unusually strong east winds
in the Fall that created wind drop and
reduced our overall crop. Today, Limoneira
farms 835 acres of avocados in Ventura
County from Fillmore to Ventura and we
produced 5.7 million pounds of avocados
in 2021 that returned $1.20/pound for
revenue of $6.8 million. We believe that
avocado consumption and demand in
the world will continue to increase, and we
continue to explore opportunities to expand our avocado production.
Part of the operational improvement we
experienced in 2021 is attributable to a Digital
Transformation effort being embraced by
the entire Limoneira Team. After taking
inventory of all the individual investments
in technology made by Limoneira across
the entire enterprise it became clear to
us that our investments and use of systems
and technology weren’t being managed
for optimal integration. By looking at the
use of advanced technologies in our
farming practices, packing operations, sales and logistics, supply chains, and back-
of(cid:192)ce administration and integrating them into a comprehensive ERP (Enterprise
Resource Planning) system, we realized we could greatly optimize operations and,
ultimately, our pro(cid:192)tability. We are working hard on this Digital Transformation during
the challenging times of COVID-19 so that we can emerge better, stronger, and faster
to embrace improved market conditions ahead of us. We are re-engineering our
business processes using Lean Manufacturing techniques that will not only make us
more competitive but also more ef(cid:192)cient with our use of technology. Look for more
on this as Limoneira evolves in the future.
Two additional bright spots for Limoneira in 2021 were its Harvest at Limoneira master-
planned community development pro(cid:77)ect - formerly East Area 1- and our Harvest
Medical Pavilion development pro(cid:77)ect -
East Area 2.
In sharp contrast to Limoneira’s lemon
business which was negatively impacted by
Covid-19, The Harvest at Limoneira pro(cid:77)ect
blossomed as result of the pandemic.
When federal, state, and local mandates
were issued for people to shelter-in-place
because of COVID-19 and people in the
United States were forced to work from home, demand skyrocketed for new housing
construction that offered the highest level of broadband internet connectivity in less
densely populated areas that offered quality of life amenities. Harvest at Limoneira
offers (cid:77)ust that and beginning in March of 2020 sales of newly constructed homes from
our guest builders Lennar, KB Home, K. Hovnanian, and Richmond American took off.
Absorption rates in the pro(cid:77)ect tripled and housing sales prices and commensurate
lot sales prices appreciated rapidly. Limoneira’s (cid:77)oint venture with The Lewis Group,
Limoneira Lewis Community Builders LLC, has developed the backbone infrastructure
of the Harvest at Limoneira master planned community and sells (cid:192)nished lots to home
builders in what will ultimately be a three phased development pro(cid:77)ect. Since inception
we have sold 586 lots to our guest builders who have now sold 494 newly constructed
homes. We are currently underway with the development of a 38-acre sports park
and are nearly 80% through all the infrastructure requirements for the pro(cid:77)ect. The
Limoneira Lewis Community Builders LLC is currently negotiating with home builders for
the next phase of 554 lot sales which we anticipate beginning to announce in 2022.
We have made great progress with our
East Area 2 Harvest Medical Pavilion
development pro(cid:77)ect. On July 1, 2021,
Limoneira entered a non-binding letter of
intent to sell 25.28 of its 32-acre real estate
asset referred to as East Area 2 to Paci(cid:192)c
Coast Investments, Inc. in (cid:192)ve staged
purchases.
Investments
Paci(cid:192)c Coast
will work with the Healthcare Agency
of Ventura County to provide a long-
term lease on build-to-suit medical assets
developed and built by Paci(cid:192)c Coast Investments for the Healthcare Agency of
Ventura County. Lot 1 will become a medical of(cid:192)ce and human services building
and Lot 2 will become a 49-bed acute care hospital. The Harvest Medical Pavilion
campus will provide a comprehensive approach to health care for the community.
The proposed development plan includes:
• Relocation of Santa Paula Hospital, Clinics, Behavioral Health and Human Services
to a comprehensive medical campus in the heart of Santa Paula
• New services for seniors and those with disabilities:
(cid:336) Skilled Nursing Facility
(cid:336) Assisted Living Facility: for individuals with disabilities and adults who cannot or
(cid:336)
who choose not to live independently
Independent Living: a residential housing community serving individuals 55+,
and those with a disability who wish to live in a community setting.
Pro(cid:192)ts and cash (cid:193)ows from these exciting pro(cid:77)ects should become signi(cid:192)cant in 2022,
providing a valuable diversi(cid:192)ed aspect to the (cid:192)nancial performance of Limoneira
for years to come while providing valuable assets and services to the Santa Paula
community.
The negative impacts of the global pandemic are still with us as of this writing. While
things feel like they are getting better, the next wave of a new COVID-19 variant is
rapidly spreading around the world challenging our work force’s health as well as the
health of our customers, suppliers, business partners, and service providers. Supply
chains are currently anything but normal and we are dealing with labor shortages and
in(cid:193)ationary pressures at unprecedented levels. Things are tough for everyone today
and we are all doing our best to protect each other’s health and safety while staying
true to our mission of serving our valuable customers and growers. The Limoneira
Board of Directors remain steadfast in their support of the entire Limoneira Team as
they expertly help us navigate through these challenging times. Just as our Chairman,
Gordon Kimball, is inspired by Limoneira’s Team, I am equally inspired by them and
their “can do” attitudes. It is truly an honor leading the Limoneira Team and I remain
extremely optimistic about our future.
Sincerely,
Harold S. Edwards
President and CEO
Agribusiness
Citrus products answer the call for delicious, nutritious foods that can be served in meals
or by themselves, and Limoneira is bene(cid:192)tting from a surge in global citrus popularity.
Citrus is in high demand as consumers increase their interest in health & wellness
foods, as restaurants continue to increase their clientele, as home cooking remains
popular, and as rising disposable income in global markets continues to grow.
Limoneira serves global grocery retailers and food service companies and
has become known for its One World of Citrus® business model, creating
year-round supply for the markets they serve. Due to the increase in
demand for citrus, Limoneira has come together with another respected
citrus business, Wileman Bros. & Elliott, Inc., based in California. This
alliance gives Limoneira access to more citrus volume, which has
will result in an increase in sales and more satis(cid:192)ed customers.
Furthermore, because it is so unique in all its operations, Limoneira has
differentiated itself from any competitors, making its success and
positioning noteworthy. Limoneira has been able to secure new levels
of growth and sees more opportunity with retailers ahead. Because
of Limoneira’s ongoing commitment to vertical integration, its
high environmental standards, and its proven history of being a
consistent and leading citrus provider, Limoneira is regarded in
high esteem by its retail partners. Furthermore, retailers are able
to put their full trust in Limoneira as their citrus partner, which
is especially important now given the challenges brought
about by the pandemic.
LEMONS
Lemons represent one of Limoneira’s
sweetest spots. With a US market
share of 9.5%, Limoneira is one of the
largest growers, packers, marketers
and distributors of
the
country. Limoneira has a far-reaching
network of more than 200 US and
international food service wholesale
and retail lemon customers, with more
anticipated. Limoneira expects to add
1200 producing acres of lemons by
2024 to generate between 900K to 1.2
million additional cartons.
lemons
in
AVOCADOS
This superfood has experienced super
fruit has
growth, as this powerful
experienced 103% consumption growth
over the past 10 years. Limoneira has
bene(cid:192)tted from this increased demand
as it is one of the largest growers of
avocados in the US.
ORANGES
Limoneira‘s oranges provide
rich,
healthy diversity for the One World
of Citrus® program. This crop has
continued to be a key aspect of
citrus offerings, so Limoneira now has
over 1,000 producing acres of navel
varieties.
SPECIALTY CROPS
Limoneira understands that keeping
citrus exciting and fresh is critical, so
new varieties of specialty fruit are
frequently offered in order to satisfy
consumer’s trending tastes, as well as
new interests for varied ingredients as
home cooking continues to evolve.
Limoneira’s offerings include grapefruit,
pummelos, wine grapes, blood
oranges, tangelos and pistachios, all
of which satisfy consumer’s health-
focused and creative recipe needs.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2021
OR
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-34755
LIMONEIRA COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
77-0260692
(I.R.S. Employer Identification No.)
1141 Cummings Road, Santa Paula, CA
(Address of principal executive offices)
93060
(Zip code)
Registrant’s telephone number, including area code: (805) 525-5541
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Trading Symbol
LMNR
Name of Each Exchange
On Which Registered
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Securities registered pursuant to Section 12(g) of the Act: None
Act. Yes (cid:1407) No (cid:3971)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1407)
No (cid:3971)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes (cid:3971) No (cid:1407)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes (cid:3971) No (cid:1407)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer (cid:1407)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
Non-accelerated filer (cid:1407)
Accelerated filer (cid:3971)
Smaller reporting
company (cid:1407)
Emerging growth
company (cid:1407)
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:1407)
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit report (cid:3971)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407) No (cid:3971)
Based on the closing price as reported on the NASDAQ Global Market, the aggregate market value of the Registrant’s Common
Stock held by non-affiliates on April 30, 2021 (the last business day of the Registrant’s most recently completed second fiscal quarter) was
approximately $268.1 million. Shares of Common Stock held by each executive officer and director and by each stockholder affiliated with a
director or an executive officer have been excluded from this calculation because such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of outstanding shares of the
Registrant’s Common Stock as of December 31, 2021 was 17,700,038.
Portions of the Registrant’s Proxy Statement for the 2022 Annual Meeting of Stockholders, which we intend to hold on March 22,
2022, are incorporated by reference into Part III of this Annual Report on Form 10-K. The definitive Proxy Statement will be filed within
120 days after October 31, 2021.
Documents Incorporated by Reference
2
TABLE OF CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
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CAUTIONARY STATEMENT
This Annual Report on Form 10-K (this “Annual Report”) contains statements which, to the extent that they do not recite
historical fact, constitute forward-looking statements. These statements can be identified by the fact that they do not relate
strictly to historical or current facts and may include the words "may," "will," “could," "should," "would," "believe," "expect,"
"anticipate," "estimate," "intend," "plan" or other words or expressions of similar meaning. We have based these forward-
looking statements on our current expectations about future events. The forward-looking statements include statements that
reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial
condition, results of operations, future performance and business, including statements relating to our business strategy and our
current and future development plans.
The potential risks and uncertainties that could cause our actual financial condition, results of operations and future
performance to differ materially from those expressed or implied in this Annual Report include:
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negative impacts related to the COVID-19 pandemic and the effectiveness of our Company's responses to the
pandemic;
changes in laws, regulations, rules, quotas, tariffs and import laws;
adverse weather conditions, natural disasters and other adverse natural conditions, including freezes, rains, fires and
droughts, that affect the production, transportation, storage, import and export of fresh produce;
market responses to industry volume pressures;
increased pressure from disease, insects and other pests;
disruption of water supplies or changes in water allocations;
product and raw materials supplies and pricing;
energy supply and pricing;
changes in interest rates;
availability of financing for development activities;
general economic conditions for residential and commercial real estate development;
political changes and economic crises;
international conflict;
acts of terrorism;
labor disruptions, strikes, shortages or work stoppages;
the impact of foreign exchange rate movements;
ability to maintain compliance with covenants under our loan agreements;
loss of important intellectual property rights; and
other factors disclosed in our public filings with the Securities and Exchange Commission (the "SEC").
In addition, this Annual Report contains industry data related to our business and the markets in which we operate. This data
includes projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results
could differ from the projections or estimates, especially relating to the COVID-19 pandemic. We urge you to carefully review
this Annual Report, particularly the section entitled “Risk Factors,” for a complete discussion of the risks of an investment in
our common stock.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements. Many factors discussed in this Annual Report, some of which are
beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially
from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not
regard the inclusion of a forward-looking statement in this Annual Report as a representation by us that our plans and objectives
will be achieved, and you should not place undue reliance on such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law.
All references to “we,” “us,” “our,” “our Company,” “the Company,” or “Limoneira” in this Annual Report mean
Limoneira Company, a Delaware corporation, and its consolidated subsidiaries.
4
PART I
Item 1. Business
Limoneira Company, a Delaware corporation, is the successor to several businesses with operations in California since 1893. Our
business and operations are described below. For detailed financial information with respect to our business and our operations, see
our consolidated financial statements and the related notes to consolidated financial statements, which are included in Item 8 in this
Annual Report. In addition, general information concerning our Company can be found on our website at www.limoneira.com. All
of our filings with the SEC, including but not limited to, annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and any amendments thereto, are available free of charge on our website as soon as reasonably practicable
after such material is electronically filed with or furnished to the SEC. The contents of our website referred to above are not
incorporated into this report. Further, any references to our website are intended to be interactive textual references only.
Overview
We are primarily an agribusiness company founded and based in Santa Paula, California, committed to responsibly using and
managing our approximately 15,400 acres of land, water resources and other assets to maximize long-term stockholder value. Our
current operations consist of fruit production, sales and marketing, rental operations, real estate and capital investment activities.
We are one of California’s oldest citrus growers. According to Sunkist Growers, Inc. (“Sunkist”), we are one of the largest growers
of lemons in the United States and, according to the California Avocado Commission, one of the largest growers of avocados in the
United States. In addition to growing lemons and avocados, we grow oranges and a variety of specialty citrus and other crops. We
have agricultural plantings throughout Ventura, Tulare, San Luis Obispo and San Bernardino Counties in California, Yuma County
in Arizona, La Serena, Chile and Jujuy, Argentina, which collectively consist of approximately 6,100 acres of lemons, 800 acres of
avocados, 1,000 acres of oranges and 900 acres of specialty citrus and other crops. We also operate our own packinghouses in Santa
Paula and Oxnard, California and Yuma, Arizona, where we process, pack and sell lemons that we grow, as well as lemons grown by
others. We have a 47% interest in Rosales S.A. (“Rosales”), a citrus packing, marketing and sales business, a 90% interest in
Fruticola Pan de Azucar S.A. (“PDA”), a lemon and orange orchard and 100% interest in Agricola San Pablo SpA. ("San Pablo"), a
lemon and orange orchard, all of which are located near La Serena, Chile. We have a 51% interest in a joint venture, Trapani Fresh
Consorcio de Cooperacion ("Trapani Fresh"), a lemon orchard in Argentina.
Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run
through, the land we own. Water for our farming operations is sourced from the existing water resources associated with our land,
which includes rights to water in the adjudicated Santa Paula Basin (aquifer) and the un-adjudicated Fillmore and Paso Robles
Basins (aquifers). We use ground water from the San Joaquin Valley Basin and water from local water and irrigation districts in
Tulare County, which is in California’s San Joaquin Valley. We also use ground water from the Cadiz Valley Basin in California’s
San Bernardino County and surface water in Arizona from the Colorado River through the Yuma Mesa Irrigation and Drainage
District (“YMIDD”). We use ground water provided by wells and surface water for our PDA and San Pablo farming operations in
Chile and our Trapani Fresh farming operations in Argentina.
For more than 100 years, we have been making strategic investments in California agriculture and real estate. We currently have an
interest in three real estate development projects in California. These projects include multi-family housing and single-family homes
of approximately 900 units in various stages of planning and development.
Fiscal Year 2021 Highlights and Recent Developments
We are equal partners in a joint venture with The Lewis Group of Companies (“Lewis”) for the residential development of our East
Area I real estate development project. To consummate the transaction, we formed Limoneira Lewis Community Builders, LLC
("LLCB") as the development entity. The first phase of the project broke ground to commence mass grading in November 2017.
LLCB has closed on lot sales representing 586 units from inception through October 31, 2021, including 232 units in fiscal year
2021. For further information see Note 7 – Real Estate Development of the notes to consolidated financial statements included in
this Annual Report.
In December 2020, we received $5.0 million of federal income tax refunds related to the Coronavirus Aid Relief and Economic
Security Act ("CARES Act") and received an additional $0.9 million of California state refunds in the third quarter of fiscal year
2021.
In June 2021, we entered into an agreement, effective March 1, 2021, to sell and license certain assets of Trapani Fresh to our 49%
partner in the joint venture, FGF Trapani ("FGF"). These assets consist of packing supplies and certain intangible assets related to
5
the packing, marketing, and selling business of Trapani Fresh. The total consideration to be received is approximately $3.9 million
over an 8-year term in 16 equal installments. There was no material gain or loss recognized on the transaction. In August 2021, we
entered into several additional agreements whereby the additional 25% interest in Finca Santa Clara ("Santa Clara") was transferred
into the trust resulting in the trust now holding a 100% interest in Santa Clara. Trapani Fresh owns and operates the 1,200-acre
Santa Clara ranch and now sells the lemons it grows to FGF, who packs, markets, and sells the fruit to its customers. As a result of
this transaction, Trapani Fresh now recognizes lemon revenues at the market price, less packinghouse charges to harvest, pack and
market the fruit.
In June 2021, we entered into a Master Loan Agreement (the “MLA”) with Farm Credit West, PCA (the “Lender”) dated June 1,
2021, together with a revolving credit facility supplement (the “Revolving Credit Supplement”), a non-revolving credit facility
supplement (the “Non-Revolving Credit Supplement,” and together with the Revolving Credit Supplement, the “Supplements”) and
an agreement to convert to fixed interest rate ("Fixed Interest Rate Agreement"). The MLA governs the terms of the Supplements.
The MLA amends and restates the previous Master Loan Agreement between our Company and the Lender, dated June 19, 2017 and
extends the principal repayment to July 1, 2026.
In July 2021, we entered into a non-binding letter of intent to sell approximately 25 acres of our East Area II property in five staged
purchases to an investment company for the purpose of constructing a medical campus consisting of medical office buildings and an
acute care hospital. Completion of the transaction is subject to the execution of a purchase and sale agreement and resolution of
certain contingencies.
In August 2021, we entered into an equipment finance agreement (the "FCW term loan") with the Lender in the amount of $2.5
million and used the proceeds to pay off the Wells Fargo term loan. The FCW term loan has a fixed interest rate of 3.19% and is
payable in monthly installments through September 2026. (cid:3)
In September 2021, the Board of Directors of our Company approved a share repurchase program authorizing us to repurchase up to
$10.0 million of our outstanding shares of common stock through September 2022. No shares have been repurchased under this
program.
On December 14, 2021, we declared a cash dividend of $0.075 per common share payable on January 14, 2022, in the aggregate
amount of $1.3 million to stockholders of record as of December 27, 2021.
COVID-19 Pandemic
The COVID-19 pandemic has had an adverse impact on the industries and markets in which we conduct business. In particular, the
United States lemon market has seen a significant decline in volume, with lemon demand falling since widespread shelter in place
orders were issued in mid-March 2020, resulting in a significant market oversupply. The export market for fresh product has also
significantly declined due to the COVID-19 pandemic impacts. As of October 31, 2021, the demand within both markets is
recovering but has not yet returned to pre-pandemic levels.
The decline in demand for our products beginning the second quarter of fiscal year 2020, which we believe was due to the COVID-
19 pandemic, negatively impacted our sales and profitability for the last three quarters of fiscal year 2020 and all of fiscal year 2021.
We also expect material adverse impacts on our sales and profitability in future periods. The duration of these trends and the
magnitude of such impacts cannot be estimated at this time, as they are influenced by a number of factors, many of which are
outside management’s control, including, but not limited, to those presented in Item 1A Risk Factors of this Annual Report.
Notwithstanding the adverse impacts and subject to unforeseen changes that may arise as the COVID-19 pandemic continues, we
currently expect improvement in fiscal year 2022 compared to fiscal year 2021.
Given the economic uncertainty as a result of the COVID-19 pandemic over the past two years, we have taken actions to improve
our current liquidity position, including temporarily postponing capital expenditures, selling equity securities to increase cash,
reducing operating costs, and substantially reducing discretionary spending.
Although we are considered an essential business, there is significant uncertainty around the breadth and duration of our business
disruptions related to the COVID-19 pandemic, as well as its impact on the U.S. economy, the ongoing business operations of our
customers and our results of operations and financial condition. Our management team is actively monitoring the impacts of the
COVID-19 pandemic and may take further actions altering our business operations that we determine are in the best interests of our
employees and customers or as required by federal, state, or local authorities, the full impact of the COVID-19 pandemic on our
results of operations, financial condition, or liquidity for fiscal year 2022 and beyond cannot be fully estimated at this point. The
following discussions are subject to the future effects of the COVID-19 pandemic on our ongoing business operations.
6
Business Division Summary
We have three business divisions: agribusiness, rental operations and real estate development. The agribusiness division is
comprised of four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness, which includes
oranges, specialty citrus and other crops. The agribusiness division includes our core operations of farming, harvesting, lemon
packing and lemon sales operations. The rental operations division includes our residential and commercial rentals, leased land
operations and organic recycling. The real estate development division includes our investments in real estate development projects.
Financial information and discussion of our four reportable segments are contained in the notes to the accompanying consolidated
financial statements of this Annual Report.
Agribusiness Summary
Farming
Lemons. We market and sell lemons directly to our food service, wholesale and retail customers throughout the United States,
Canada, Asia, Australia, Europe and certain other international markets. We are one of the largest lemon growers in the United
States with approximately 6,100 acres of lemons planted primarily in Ventura, Tulare and San Bernardino Counties in California and
in Yuma County, Arizona. In California, the lemon growing area stretches from the Coachella Valley to Fresno and Monterey
Counties, with the majority of the growing areas located in the coastal areas from Ventura County to Monterey County. Ventura
County is California’s top lemon producing county. Approximately 27% of our lemons are grown in Ventura County, 22% are grown
in Tulare County, 16% are grown in Yuma County, Arizona and 10% are grown in San Bernardino County, California. We also grow
approximately 8% of our lemons near La Serena, Chile and 17% of our lemons in Argentina.
There are many varieties of lemons, with the Lisbon, Eureka and Genoa being the predominant varieties marketed on a worldwide
basis. Approximately 88% of our lemon plantings are of the Lisbon, Eureka and Genoa varieties and approximately 12% are of
other varieties such as sweet Meyer lemons, Proprietary Seedless lemons and Pink Variegated lemons. California-grown lemons are
available throughout the year, with peak production periods occurring from January through August. The storage life of fresh
lemons generally ranges from one to 18 weeks, depending upon the maturity of the fruit, the growing methods used and the
handling conditions in the distribution chain.
Avocados. We are one of the largest avocado growers in the United States with approximately 800 acres of avocados planted
throughout Ventura County. In California, the avocado growing area stretches from San Diego County to Monterey County, with the
majority of the growing areas located approximately 100 miles north and south of Los Angeles County.
California-grown avocados have peak production periods occurring between February and July. Other avocado varieties have a
more limited picking season and typically command a lower price. Because of superior eating quality, the Hass avocado has
contributed greatly to the avocado’s growing popularity through its retail, restaurant and other food service uses. Approximately
95% of our avocado plantings are of the Hass variety. The storage life of fresh avocados generally ranges from one to four weeks,
depending upon the maturity of the fruit, the growing methods used and the handling conditions in the distribution chain.
We provide a majority of our avocado production to Calavo, a packing and marketing company listed on the NASDAQ Global
Select Market under the symbol CVGW. Calavo’s customers include many of the largest retail and food service companies in the
United States and Canada. Calavo receives fruit from our orchards at its packinghouse located in Santa Paula, California. Calavo’s
proximity to our agricultural operations enables us to keep transportation and handling costs to a minimum. Our avocados are
packed by Calavo and sold and distributed under its own brands to its customers primarily in the United States and Canada.
Primarily due to differing soil conditions, the care of avocado trees is intensive. The need for more production per acre to compete
with foreign sources of supply has required us to take an important lead in the practice of dense planting (typically four times the
number of avocado trees per acre versus traditional avocado plantings) and mulching composition to help trees acclimate under
conditions that more closely resemble those found in the tropics, a better climate for avocado growth.
Oranges, Specialty Citrus and Other Crops. We have approximately 1,000 acres of oranges planted primarily in Tulare County,
California. In California, the growing area for oranges stretches from Imperial County to Yolo County. California-grown Navel
oranges are available from October to June, with peak production periods occurring between January and April. Approximately 96%
of our orange plantings are of the Navel variety and approximately 4% are of the Valencia variety. We estimate approximately 70%
of our oranges are sold to retail customers and approximately 30% are sold to wholesale customers. We currently have
approximately 900 acres of specialty citrus and other crops planted such as Moro blood oranges, Cara Cara oranges, Minneola
tangelos, Star Ruby grapefruit, pummelos, pistachios and wine grapes.
7
We utilize third-party packinghouses to process and pack our oranges and specialty citrus. A portion of our oranges and specialty
citrus is marketed and sold under the Sunkist brand by Sunkist and orders are processed by Sunkist-member packinghouses. As an
agricultural cooperative, Sunkist coordinates the sales and marketing of the oranges and specialty citrus and orders are processed by
Sunkist-member packinghouses for direct shipment to customers.
We currently market our other crops, such as pistachios and wine grapes, utilizing processors that are not members of agricultural
cooperatives. Our pistachios are harvested and sold to a roaster, packager and marketer of nuts, and our wine grapes are sold to
various wine producers.
Plantings
We have agricultural plantings on properties located in the United States, Chile and Argentina. The following is a description of our
agriculture properties:
County / State or
Country
Ventura, CA
Ventura, CA
Ventura, CA
Ventura, CA
Ventura, CA
Ventura, CA
Tulare, CA
Tulare, CA
Tulare, CA
Tulare, CA
San Luis Obispo, CA
San Bernardino, CA
Yuma, AZ
Ranch Name
Limoneira/Olivelands
La Campana
Teague McKevett
Orchard Farm
Rancho La Cuesta
Limco Del Mar
Porterville Ranches
Ducor Ranches
Sheldon Ranches
Lemons 400
Windfall Farms
Cadiz
Associated Citrus Packers
Pan de Azucar & San Pablo La Serena, Chile
Jujuy, Argentina
Santa Clara
Other agribusiness land
Various Counties, CA
Total
Percentage of Total
Total
Acres
1,700
300
500
1,100
200
200
1,200
1,000
700
800
700
800
1,300
3,500
1,200
200
15,400
100 %
Lemons Avocados Oranges
—
—
—
—
—
—
300
300
300
—
—
—
—
100
—
—
1,000
6 %
600
100
—
700
100
100
300
400
200
400
—
600
900
500
1,000
200
6,100
40 %
500
200
—
—
—
100
—
—
—
—
—
—
—
—
—
—
800
5 %
Specialty
Crops
Other
—
—
—
—
—
—
200
300
100
—
300
—
—
—
—
—
900
6 %
600
—
500
400
100
—
400
—
100
400
400
200
400
2,900
200
—
6,600
43 %
The Limoneira/Olivelands Ranch is the original site of our Company. Our headquarters, lemon packing operations and storage
facilities are located on this property.
The Teague McKevett Ranch is the site of our real estate development project known as East Area I and described below under the
“Real Estate Development Summary” heading.
The other agribusiness land in the table above includes corporate and lemon packing facilities, land leased to other agricultural
businesses, rental units, roads, creeks, hillsides and other open land.
Our orchards can maintain production for many years. For financial reporting purposes, we depreciate our orchards from 20 to 40
years depending on the fruit variety with the majority of our orchards depreciated over 20 to 30 years. We regularly evaluate our
orchards’ production and growing costs and based on these and other factors, we may decide to redevelop certain orchards. In
addition, we may acquire agricultural property with existing productive orchards or without productive orchards, which would
require new orchard plantings. The fruit varieties that we grow are typically non-producing for approximately the first four years
after planting. Orchards may continue producing fruit longer than their depreciable lives. The following table presents the number of
acres planted by fruit variety and approximate age of our orchards:
8
Lemons
Avocados
Oranges
Specialty citrus and other
Total
Lemon Packing and Sales
Age of Orchards
0-4 Years
5-25 Years
4,800
300
500
800
6,400
1,000
—
—
—
1,000
Over 25
Years
Total
300
500
500
100
1,400
6,100
800
1,000
900
8,800
We are the oldest continuous lemon packing operation in North America. We pack and sell lemons grown by us as well as lemons
grown by others, the operations of which are included in our financial statements under the lemon packing segment. Lemons
delivered to our packinghouses in Santa Paula and Oxnard, California and Yuma, Arizona are sized, graded, cooled, ripened and
packed for delivery to customers. Our ability to accurately estimate the size, grade and timing of the delivery of the annual lemon
crop has a substantial impact on both our costs and the sales price we receive for the fruit.
A significant portion of the costs related to our lemon packing operation is fixed. Our strategy for growing the profitability of our
lemon packing operations calls for optimizing the percentage of a crop that goes to the fresh market, or fresh utilization, and
procuring a larger percentage of the California and Arizona lemon crop.
We invest considerable time and research into refining and improving our lemon packing through innovation and are continuously
searching for new techniques to refine how premium lemons are delivered to our consumers. In fiscal year 2016, our updated lemon
packing facility became operational, which doubled our lemon packing capacity and increased the efficiency and financial results of
these operations. Additionally, we purchased a packing house and related land ("Oxnard Lemon") in fiscal year 2018.
Rental Operations Summary
Our rental operations include our residential and commercial rentals, leased land operations and organic recycling.
We own and maintain 256 residential housing units located in Ventura and Tulare Counties in California that we lease to employees,
former employees and non-employees. We also own several commercial office buildings and as with our residential housing units,
these properties generate reliable cash flows that we use to partially fund the operating costs of our business. As of October 31,
2021, we lease approximately 500 acres of our land to third-party agricultural tenants who grow a variety of row crops. Our leased
land business provides us with a profitable method to diversify the use of our land. We also partner with one of our tenants and have
an organic recycling facility on our land in Ventura County.
Real Estate Development Summary
We invest in real estate development projects and recognize that long-term strategies are required for successful real estate
development activities. Our goal is to redeploy real estate earnings and cash flow into the expansion of our agribusiness and other
income producing real estate. For real estate development projects and joint ventures, it is not unusual for the timing and amounts of
revenues and costs, partner contributions and distributions, project loans, other financing assumptions and project cash flows to be
impacted by government approvals, project revenue and cost estimates and assumptions, economic conditions, financing sources
and product demand as well as other factors. Such factors could affect our results of operations, cash flows and liquidity.
For more than 100 years, we have been making strategic real estate investments in California agricultural and developable real
estate. Our current real estate developments include developable land parcels, multi-family housing and single-family homes with
approximately 900 units in various stages of planning and development. The following is a summary of each of the strategic
agricultural and development real estate investment properties in which we own an interest:
East Area I - Santa Paula, California. East Area I consists of 523 acres that we historically used as agricultural land and is located in
Santa Paula approximately ten miles from the City of Ventura and the Pacific Ocean. This property is also known as our Teague
McKevett Ranch. East Area I is the location for our master planned community of commercial and residential properties designed to
satisfy expected demand in a region that we believe will have few other developments in this coming decade. In 2008, after we
completed a process of community planning and environmental review, the citizens of Santa Paula voted to approve the annexation
9
of East Area I into Santa Paula. This vote was a requirement of the Save Open-Space and Agricultural Resources (“SOAR”)
ordinance that mandates a public vote of the City of Santa Paula for land use conversion.
In November 2015, we entered into a joint venture with Lewis for the residential development of our East Area I real estate
development project. To consummate the transaction, we formed LLCB as the development entity, contributed our East Area I
property to the joint venture and sold a 50% interest in the joint venture to Lewis for $20.0 million. We expect to receive
approximately $100.0 million from LLCB over the estimated 10 to 12-year life of the project, including $20.0 million received on
the consummation of LLCB. LLCB's partners will share in capital contributions to fund project costs until loan proceeds and/or
revenues are sufficient to fund the project. Since inception, each partner has made funding contributions of $21.4 million, including
$2.8 million in fiscal year 2020. The first phase of the project broke ground to commence mass grading in November 2017. Project
plans include approximately 1,500 residential units and site improvements substantially completed. Lot sales representing 232 and
144 residential units closed in fiscal years 2021 and 2020, respectively, and 586 residential units have closed from the project's
inception to October 31, 2021.
East Area II - Santa Paula, California. Our design associates and we are in the process of formulating plans for East Area II, a
parcel of approximately 30 acres adjacent to East Area I. East Area II is also a part of our Teague McKevett Ranch, which we
believe is suited to commercial and/or industrial development along the south side of California Highway 126, a heavily traveled
corridor that connects Highway 101 at Ventura on the west with Interstate 5 at Santa Clarita on the east. In July 2021, we entered
into a non-binding letter of intent to sell approximately 25 acres of our East Area II property in five staged purchases to an
investment company for the purpose of constructing a medical campus consisting of medical office buildings and an acute care
hospital. Completion of the transaction is subject to the execution of a purchase and sale agreement and resolution of certain
contingencies.
Santa Maria - Santa Barbara County, California. As of October 31, 2021, we were invested in one entitled development parcel,
Sevilla, located in Santa Maria in Santa Barbara County, California. In fiscal year 2020, we entered into an agreement to sell our
Sevilla property for $2.7 million, which is expected to close in the second quarter of fiscal year 2022.
Markets and Competitive Strengths
Agribusiness Operations
With agricultural operations dating back to 1893, we are one of California’s oldest citrus growers and one of the largest growers of
lemons and avocados in the United States. Consequently, we have developed significant experience with a variety of crops, mainly
lemons, avocados and oranges. The following is a brief list of what we believe are our significant competitive strengths with respect
to our agribusiness operations:
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
Our agricultural properties in Ventura County are located near the Pacific Ocean, which provides an ideal environment
for growing lemons, avocados and row crops. Our agricultural properties in Tulare County, which is in the San Joaquin
Valley in Central California, and in Yuma, Arizona, are also located in areas that are well-suited for growing citrus crops.
Historically, a higher percentage of our crops goes to the fresh market, which is commonly referred to as fresh
utilization, than that of other growers and packers with which we compete.
We have contiguous and nearby land resources that permit us to efficiently use our agricultural land and resources.
In all but one of our properties, we are not dependent on State or Federal water projects to support our agribusiness or
real estate development operations.
We own approximately 94% of our agricultural land and take a long view on our fruit production practices.
A significant amount of our agribusiness property was acquired many years ago, which results in a low-cost basis and
associated expenses.
In our fresh lemons and lemon packing segments, our integrated business model with respect to growing, packing,
marketing and selling lemons allows us to better serve our customers.
Our lemon packing operations provide marketing opportunities with other citrus companies and their respective
products.
We have made investments in ground-based solar projects that provide us with tangible and intangible non-revenue
generating benefits. The electricity generated by these investments provides us with a significant portion of the
electricity required to operate our packinghouse and cold storage facilities located in Santa Paula, California and
provides a significant portion of the electricity required to operate four deep-water well pumps at one of our ranches in
Tulare County, California. Additionally, these investments support our sustainable agricultural practices, reduce our
10
dependence on fossil-based electricity generation and lower our carbon footprint. Moreover, electricity that we generate
and do not use is conveyed seamlessly back to the investor-owned utilities operating in these two markets. Finally, over
time, we expect that our customers and the end consumers of our fruit will value the investments that we have made in
renewable energy as a part of our farming and packing operations, which we believe may help us differentiate our
products from similar commodities.
•(cid:3)
We have made various other investments in water rights and mutual water companies. We own shares in the following
mutual water companies: Farmers Irrigation Co., Canyon Irrigation Co., San Cayetano Mutual Water Co., Middle Road
Mutual Water Co. and Pioneer Water Company, Inc. Additionally, we acquired water rights in the adjudicated Santa
Paula Basin (aquifer), the YMIDD and in Chile.
Real Estate Development Operations
With respect to our real estate development operations, we believe our competitive advantages are as follows:
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
We have entitlements to build approximately 1,500 residential units in our East Area I development.
We have partnered with an experienced and financially strong land developer for our East Area I residential master plan
development.
Several of our agricultural and real estate investment properties are unique and carry longer-term development potential.
Our East Area II property has approximately 30 acres of land commercially zoned, which is adjacent to our East Area I
property.
Business Strategy
We are an agribusiness and real estate development company that generates annual cash flows to support investments in agricultural
and real estate development activities. As our agricultural and real estate development investments are monetized, we intend to seek
to expand our agribusiness into new regions and markets and invest in cash-producing residential, commercial and industrial rental
assets.
The following describes the key elements of our business strategy.
Agribusiness
With respect to our agribusiness operations, key elements of our strategy are:
•(cid:3) Acquire Additional Lemon Producing Properties. To the extent attractive opportunities arise and our capital availability
permits, we intend to consider the acquisition of additional lemon producing properties. In order to be considered, such
properties would need to have certain characteristics to provide acceptable returns, such as an adequate source of water, a
warm micro-climate and well-drained soils. We anticipate that the most attractive opportunities to acquire lemon producing
properties will be in the San Joaquin Valley near our existing operations in Tulare County, California.
•(cid:3) Expand our Sources of Lemon Supply. Peak lemon production occurs at different times of the year depending on
geographic region. In addition to our lemon production in California and Arizona and lemons we acquire from domestic
third-party growers and suppliers, we have expanded our lemon supply sources to international markets such as Mexico,
Chile and Argentina. Increases in lemons procured from third-party growers and suppliers and international sources
improve our ability to provide our customers with fresh lemons throughout the year.
•(cid:3)
Increase the Volume of our Lemon Packing Operations. We regularly monitor our costs for redundancies and opportunities
for cost reductions. In this regard, cost per carton is a function of throughput. We continually seek to acquire additional
lemons from third-party growers and suppliers to pack through our plants. Third-party growers and suppliers are only
added if we determine their fruit is of good quality and can be cost effective for both the grower and us. Of most
importance is the overall fresh utilization rate for our fruit, which is directly related to quality.
•(cid:3) Expand International Production and Marketing of Lemons. We estimate that we currently have approximately 10% of the
fresh lemon market in the United States and a larger share of the United States lemon export market. We intend to explore
opportunities to expand our international production and marketing of lemons. We have the ability to supply a wide range
of customers and markets and, because we produce high quality lemons, we can export our lemons to international
customers, which many of our competitors are unable to supply.
11
•(cid:3) Construction of an Updated Lemon Packinghouse. Over the years, new machinery and equipment along with upgrades
have been added to our original packinghouse and cold storage facilities. This, along with an aggressive and proactive
maintenance program, has allowed us to operate an efficient, competitive lemon packing facility. A project to double the
capacity and increase the efficiency of our lemon packing facilities became operational in fiscal year 2016. This project has
increased fresh lemon processing capacity.
•(cid:3) Opportunistically Expand our Plantings of Avocados, Oranges, Specialty Citrus and Other Crops. Our plantings of
avocados, oranges, specialty citrus and other crops have been profitable and have been pursued to diversify our product
line. Agricultural land that we believe is not suitable for lemons is typically planted with oranges, specialty citrus or other
crops. While we may expand our avocados, oranges, specialty citrus and other crops, we expect to do so on an
opportunistic basis in locations that we believe offer a record of historical profitability.
Other Operations
With respect to our rental operations and real estate development activities, key elements of our strategy include the following:
•(cid:3)
Secure Additional Rental and Housing Units. Our housing, commercial and land rental operations provide us with a
consistent, dependable source of cash flow that helps to fund our overall activities. Additionally, we believe our housing
rental operation allows us to offer a unique benefit to our employees.
•(cid:3) Opportunistically Lease Land to Third-Party Crop Farmers. We regularly monitor the profitability of our fruit-producing
acreage to ensure acceptable per acre returns. When we determine that leasing the land to third-party row crop farmers
would be more profitable than farming the land, we intend to seek third-party row crop tenants.
•(cid:3) Opportunistically Expand our Income-Producing Commercial and Industrial Rental Assets. We intend to redeploy our
future financial gains to acquire additional income-producing real estate investments and agricultural properties.
•(cid:3)
Selectively and Responsibly Develop our Agricultural Land. We recognize that long-term strategies are required for
successful real estate development activities. We thus intend to maintain our position as a responsible agricultural
landowner and major employer in Ventura County while focusing our real estate development activities on those
agricultural land parcels that we believe offer the best opportunities to demonstrate our long-term vision for our
community.
Customers
We market and sell our lemons directly to our food service, wholesale and retail customers in the United States, Canada, Asia,
Australia, Europe and certain other international markets. We sold lemons to approximately 200 U.S. and international customers
during fiscal year 2021. We sell a majority of our avocados to Calavo. Our oranges, specialty citrus and other crops are sold through
Sunkist and other third-party packinghouses and our wine grapes are sold to wine producers.
Information about Geographic Areas
During fiscal years 2021, 2020 and 2019, we had an aggregate of approximately $3.0 million, $3.5 million and $3.2 million,
respectively, of total sales in Chile by PDA and San Pablo. During fiscal years 2021, 2020 and 2019, we had an aggregate of
approximately $3.6 million, $14.2 million and $14.7 million, respectively, of total sales in Argentina by Trapani Fresh. The majority
of our avocados, oranges and specialty citrus and other crops are sold to packinghouses and processors located in the United States.
Competition
The agribusiness crop markets are intensely competitive, but no single producer has any significant market power over any market
segments, as is consistent with the production of most agricultural commodities. Generally, there are a large number of global
producers that sell through joint marketing organizations and cooperatives. Fruit is also sold to independent packers, both public and
private, who then sell to their own customer base. Customers are typically large retail chains, food service companies, industrial
manufacturers and distributors who sell and deliver to smaller customers in local markets throughout the world. In the purest sense,
our largest competitors in our agribusiness segments are other citrus and avocado producers in California, Mexico, Chile, Argentina
and Florida, a number of which are members of cooperatives such as Sunkist or have selling relationships with Calavo similar to
that of Limoneira. Our lemons and oranges also compete with other fruits and vegetables for the share of consumer expenditures
devoted to fresh fruit and vegetables: apples, pears, melons, pineapples and other tropical fruit. Avocado products compete in the
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supermarket with hummus products and other dips and salsas. For our specific crops, the size of the U.S. market is approximately
$660 million for lemons, both fresh and juice, approximately $430 million for avocados, and approximately $1.7 billion for oranges,
both fresh and juice. Competition in the various agribusiness markets is affected by reliability of supply, product quality, brand
recognition and perception, price and the ability to satisfy changing customer preferences through innovative product offerings.
The sale and leasing of residential, commercial and industrial real estate is very competitive, with competition coming from
numerous and varied sources throughout California. Our greatest direct competition for each of our current real estate development
properties in Ventura and Santa Barbara Counties comes from other residential and commercial developments in nearby areas.
Resources and Raw Materials
In our fresh lemons and lemon packing segments, paper is considered a material raw product for our business because most of our
products are packed in cardboard cartons for shipment. Paper is readily available and we have numerous suppliers for such material.
In our agribusiness division, petroleum-based products such as herbicides and pesticides are considered raw materials and we have
numerous suppliers for these products.
Intellectual Property
We have numerous trademarks and brands under which we market and sell our fruits, particularly lemons, domestically and
internationally, many of which have been owned for decades. The material brands of Limoneira lemons include, but are not limited
to, One World of Citrus®, Santa®, Paula®, Bridal Veil®, Fountain®, Golden Bowl® and Level®. These trademarks are owned by
us and registered with the United States Patent and Trademark Office. We also acquired certain lemon brands with acquisitions,
including Kiva®, Kachina®, Oxnard Lemon, Uno, Sunny, Trapani, Argentinian Beauty, Natural and Trapani Fresh.
Seasonal Nature of Business
(cid:3)
As with any agribusiness enterprise, our agribusiness operations are predominantly seasonal in nature. The harvest and sale of our
lemons, avocados, oranges and specialty citrus and other crops occurs in all quarters, but is generally more concentrated during our
third quarter. Our lemons are generally grown and marketed throughout the year, our avocados are primarily sold from January
through August, our oranges are primarily sold from January through June, our specialty citrus is primarily sold from November
through April and our specialty crops, such as pistachios and wine grapes, are primarily sold in September and October.
Environmental and Regulatory Matters
Our agribusiness and real estate development divisions are subject to a broad range of evolving federal, state and local
environmental laws and regulations. For example, the growing, packing, storing and distributing of our products is extensively
regulated by various federal and state agencies. The California State Department of Food and Agriculture oversees our packing and
processing of lemons and conducts tests for fruit quality and packaging standards. We are also subject to laws and regulations that
govern the use of pesticides and other potentially hazardous substances and the treatment, handling, storage and disposal of
materials and waste and the remediation of contaminated properties. Advertising of our products is subject to regulation by the
Federal Trade Commission and our operations are subject to certain health and safety regulations, including those issued under the
Occupational Safety and Health Act.
We seek to comply at all times with all such laws and regulations and to obtain any necessary permits and licenses, and we are not
aware of any instances of material non-compliance. We believe our facilities and practices are sufficient to maintain compliance
with applicable governmental laws, regulations, permits and licenses. Nevertheless, there is no guarantee that we will be able to
comply with any future laws and regulations for necessary permits and licenses. Our failure to comply with applicable laws and
regulations or obtain any necessary permits and licenses could subject us to civil remedies including fines, injunctions, recalls or
seizures, as well as potential criminal sanctions. These remedies can increase costs, decrease revenues and lead to additional charges
to earnings, which may have a material adverse effect on our business, results of operations and financial condition.
For a discussion of the various risks we face from regulation and compliance matters, see Item 1A Risk Factors of this Annual
Report.
Human Capital Resources
At October 31, 2021, we had 268 employees, of which 98 were salaried and 170 were hourly. None of our employees are subject to
a collective bargaining agreement. We believe that our relations with our employees are good.
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We believe that an environment of diversity, inclusion, and belonging fosters innovation, strengthens our global workforce, and
drives our ability to serve customers. Our global presence is strengthened by having a workforce that reflects the diversity of the
customers we serve and by maintaining an environment in which such diversity contributes to our mission.
Limoneira is committed to protecting the human rights, safety and dignity of the people who contribute to the success of our
business. We are committed to improving the lives of all our stakeholders by helping to provide access to our products and
increasing the diversity of our workforce. We also seek to support the welfare of the people who produce, process and harvest the
products we sell. We have established several new diversity, inclusion and belonging efforts and programs to better ensure that we
are supporting our employees.
Limoneira’s overall culture emphasizes the health and safety of our employees and the customers we serve. Limoneira has an Illness
and Injury Prevention Plan (IIPP), a Safety Guide and conforms to and follows regulations and guidelines set forth by OSHA in all
facilities and operations. Where a particular jurisdiction's guidelines, such as Cal OHSA, are different from the OSHA standard,
Limoneira adheres to the most extensive guideline. We have excellent results from our safety programs compared to similar
companies within our industry. In response to the COVID-19 pandemic, we implemented, and continue to improve, appropriate
safety measures in all our facilities and locations.
We strive to be a great place for our employees to work and live. We offer competitive pay and best-in-class benefits, including a
401k plan with matching contribution opportunities, comprehensive paid healthcare plans, wellness programs, and tuition
reimbursement.
We own and maintain 256 residential housing units located in Ventura and Tulare Counties in California. We lease these housing
units to employees, former employees and non-employees. Our residential units provide affordable housing to many of our
employees, including our agribusiness employees. Employees live close to their work, which reduces traffic and commuting times.
This unique employment benefit helps us maintain a dependable, long-term employee base.(cid:3)We partner with some local schools to
provide transportation for residents.
Item 1A. Risk Factors
Risks Related to Our Agribusiness Operations
Adverse weather conditions, natural disasters, including earthquakes and wildfires, and other natural conditions, including the
effects of climate change, could impose significant costs and losses on our business.
Fresh produce is vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which
are quite common and may occur with higher frequency or be less predictable in the future due to the effects of climate change.
Unfavorable growing conditions can reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some
geographic areas.
All of our crops are subject to damage from frosts and freezes, and this has happened periodically in the recent past. In some cases,
the fruit is damaged or ruined; in the case of extended periods of cold, the trees can also be damaged or killed.
Additionally, a significant portion of our agricultural plantings and our corporate headquarters are located in a region of California
that is prone to natural disasters such as earthquakes and wildfires. For example, in December 2017, high winds and the related
Southern California wildfires caused a brief power outage at our Santa Paula, California packinghouse and destroyed 14 of our 256
farm worker housing units. While our orchards did not suffer significant damage in the wildfire, the potential for significant damage
to a substantial amount of our plantings from a natural disaster in the future continues to exist. Furthermore, if a natural disaster or
other event occurs that prevents us from using all or a significant portion of our corporate headquarters, as a result of a power outage
or otherwise, or that damages critical infrastructure, it may be difficult or, in certain cases, impossible for us to continue our
business for a substantial amount of time.
For the foregoing reasons, adverse weather conditions, natural disasters, including earthquakes and wildfires, or other natural
conditions, including the effects of climate change, could severely disrupt our operations, and have a material adverse effect on our
business, results of operations, financial condition and prospects.
Our agricultural plantings are potentially subject to damage from disease and pests, which could impose losses on our business
and the prevention of which could impose significant additional costs on us.
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Fresh produce is also vulnerable to crop disease and to pests, e.g., Mediterranean Fruit Fly and the Asian Citrus Psyllid (“ACP”),
which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of
treatment applied and climatic conditions.
One such pest is ACP, an aphid–like insect that is a serious pest to all citrus plants because it can transmit the disease,
Huanglongbing (“HLB”), when it feeds on the plants’ leaves and trees. By itself, ACP causes only minor cosmetic damage to citrus
trees. HLB, however, is considered one of the most devastating diseases of citrus in the world. Trees infected with HLB decline in
health, produce inedible fruit and eventually die, usually in 3 to 5 years after becoming infected. Currently, there is no cure for the
disease and infected trees must be removed and destroyed to prevent further spreading.
ACP is a federal action quarantine pest subject to interstate and international quarantine restrictions by the United States Department
of Agriculture (“USDA”), including a prohibition on the movement of nursery stock out of quarantine areas and a requirement that
all citrus fruit be cleaned of leaves and stems prior to movement out of the quarantine area. ACP and HLB exist domestically in
California, Florida, Louisiana, Georgia, South Carolina and Texas and internationally in countries such as Mexico. Due to the
discovery of ACP in our orchards, we have experienced costs related to the quarantine and treatment of ACP and incurred
approximately $0.5 million of costs in fiscal year 2021 related to pest control efforts targeted against ACP. To date, HLB has been
detected in Los Angeles, Orange, Riverside, San Bernardino and San Diego Counties in California, however there has been no HLB
detected in our orchards. There can be no assurance that HLB will not be further detected in the future.
There are a number of registered insecticides known to be effective against ACP, however, certain markets and customer responses
to the discovery of ACP and the related quarantine could result in a significant decline in revenue due to restrictions on where our
lemons can be sold and lower demand for our lemons. Additional government regulations and other quarantine requirements or
customer handling and inspection requirements could increase agribusiness costs to us. Our citrus orchards could be at risk if ACP
starts to transmit the HLB disease to our trees. Agribusiness costs could also increase significantly as a result of HLB. For example,
a study in Florida indicated the presence of HLB has increased citrus production costs by as much as 40%.
The costs to control these diseases and other infestations vary depending on the severity of the damage and the extent of the
plantings affected. Moreover, there can be no assurance that available technologies to control such infestations will continue to be
effective. These infestations can increase costs, decrease revenues and lead to additional charges to earnings, which may have a
material adverse effect on our business, results of operations and financial condition.
Our strategy of marketing and selling our lemons directly to our food service, wholesale and retail customers may not continue
to be successful.
Directly obtaining and retaining customers, particularly chain stores and other large customers, is highly competitive, and the prices
or other terms of our sales arrangements may not be sufficient to retain existing business, maintain current levels of profitability or
obtain new business. Industry consolidation (horizontally and vertically) and other factors have increased the buying leverage of the
major grocery retailers in our markets, which may put further downward pressure on our pricing and volume and could adversely
affect our results of operations.
We depend on our relationship with Calavo and their ability to sell our avocados. Any disruption in this relationship could harm
our sales.
We sell a majority of the avocados we grow to Calavo and depend on their willingness and ability to market and sell our avocados to
consumers. Calavo sources its avocados from many growers and we cannot control who they will purchase from and how large their
orders may be. Should there be any change in our current relationship structure, whereby they buy a majority of our avocado crop,
we would need to find replacement buyers to purchase our remaining crop, which could take time and expense and may result in
less favorable terms of sale. Any loss of Calavo as a customer on a whole may cause a material loss in our profits, as it may take
time to fill any such void.
Our earnings are sensitive to fluctuations in market supply and prices and demand for our products.
Excess supplies often cause severe price competition in our industry. Growing conditions in various parts of the world, particularly
weather conditions such as windstorms, floods, droughts and freezes, as well as diseases and pests, are primary factors affecting
market prices because of their influence on the supply and quality of product. The ongoing COVID-19 pandemic has also reduced
the demand for our products resulting in excess supplies.
Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest. Some items, such as
avocados, oranges and specialty citrus, must be sold more quickly, while other items, such as lemons, can be held in cold storage for
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longer periods of time. The selling price received for each type of produce depends on all of these factors, including the availability
and quality of the produce item in the market and the availability and quality of competing types of produce.
In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products could
reduce demand and prices for some of our products. To the extent that consumer preferences evolve away from products that we
produce for health or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer
preferences, there will be a decreased demand for our products. However, even if market prices are unfavorable, produce items
which are ready to be, or have been, harvested must be brought to market promptly. A decrease in the selling price received for our
products due to the factors described above could have a material adverse effect on our business, results of operations and financial
condition.
Our earnings may be subject to seasonal variability.
Our earnings may be affected by seasonal factors, including:
•(cid:3)
•(cid:3)
•(cid:3)
the seasonality of our supplies and consumer demand;
the ability to process products during critical harvest periods; and
the timing and effects of ripening and perishability.
Our lemons are generally grown and marketed throughout the year. Our Navel oranges are primarily sold from January through
April and our Valencia oranges are primarily sold from June through September. Our avocados are primarily sold from January
through August. Our specialty citrus is primarily sold from November through June and our pistachios and wine grapes are
primarily sold in September and October.
Increases in commodity or raw product costs, such as fuel and paper, could adversely affect our operating results.
Many factors may affect the cost and supply of fresh produce, including external conditions, commodity market fluctuations,
currency fluctuations, changes in governmental laws and regulations, agricultural programs, severe and prolonged weather
conditions and natural disasters. Increased costs for purchased fruit have negatively impacted our operating results in the past, and
there can be no assurance that they will not adversely affect our operating results in the future.
The price of various commodities can significantly affect our costs. The cost of petroleum-based products is volatile and there can
be no assurance that there will not be further increases in such costs in the future. If the price of oil rises, the costs of our herbicides
and pesticides can be significantly impacted.
The cost of paper is also significant to us because some of our products are packed in cardboard boxes for shipment. If the price of
paper increases and we are not able to effectively pass these price increases along to our customers, then our operating income will
decrease. Increased costs for paper have negatively impacted our operating income in the past, and there can be no assurance that
these increased costs will not adversely affect our operating results in the future.
Increases in labor, personnel and benefits costs could adversely affect our operating results.
We primarily utilize labor contractors to grow, harvest and deliver our fruit to our lemon packinghouse or outside packing facilities.
We utilize a combination of employees and labor contractors to process our lemons in our lemon packing facility. Our employees
and contractors are in demand by other agribusinesses and other industries. Shortages of labor could delay our harvesting or lemon
processing activities or could result in increases in labor costs.
Our labor contractors and we are subject to government mandated wage and benefit laws and regulations. For example, the State of
California, where a substantial number of our labor contractors are located, passed regulations that increased minimum wage rates
from $13.00 per hour to $14.00 per hour, effective January 1, 2021, and will increase to $15.00 per hour in 2022. The State of
Arizona wage rates rise each year based on the annual cost of living and increased from $12.00 per hour to $12.15 per hour,
effective January 1, 2021, and will increase to $12.80 per hour in 2022. In addition, current or future federal or state healthcare
legislation and regulation, including the Affordable Care Act, may increase our medical costs or the medical costs of our labor
contractors that could be passed on to us.
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Changes in immigration laws could impact the ability of Limoneira to harvest its crops.
We engage third parties to provide personnel for our harvesting operations. The availability and number of such workers is subject
to decrease if there are changes in U.S. immigration laws. The states in which we operate are considering or have already adopted
new immigration laws or enforcement programs, and the U.S. Congress and the Department of Homeland Security from time to
time consider and may implement changes to federal immigration laws, regulations or enforcement programs. Immigration laws
have recently been an area of considerable focus by the Department of Homeland Security, with enforcement operations taking
place across the country, resulting in arrests and detentions of unauthorized workers. Termination of a significant number of
personnel who are found to be unauthorized workers or the scarcity of available personnel to harvest our agricultural products could
cause harvesting costs to increase or could lead to the loss of product that is not timely harvested, which could have a material
adverse effect to our citrus grove operations, financial position, results of operations and cash flows.
The lack of sufficient water would severely impact our ability to produce crops or develop real estate.
The average rainfall in Ventura, Tulare, San Luis Obispo and San Bernardino Counties in California is substantially below amounts
required to grow crops and therefore we are dependent on our rights to pump water from underground aquifers. Extended periods of
drought in California may put additional pressure on the use and availability of water for agricultural uses, and in some cases,
governmental authorities have diverted water to other uses. As California has grown in population, there are increasing and multiple
pressures on the use and distribution of water, which many view as a finite resource. Lack of available potable water can also limit
real estate development.
Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run
through, the land we own. Water for our farming operations is sourced from the existing water resources associated with our land,
which includes rights to water in the adjudicated Santa Paula Basin (aquifer) and the un-adjudicated Fillmore and Paso Robles
Basins (aquifers). We use ground water and water from local water districts in Tulare County and ground water in San Bernardino
County. Following our acquisition of Associated, we began using federal project water in Arizona from the Colorado River through
the YMIDD. We also have acquired water rights in Chile related to our acquisitions of PDA and San Pablo.
California has experienced below average precipitation in the 2019 - 2020 and 2020 - 2021 rainfall season and above average
precipitation in the first three months of the current rainfall season as of December 31, 2021. According to the U.S. Drought
Monitor, California is experiencing severe drought conditions as of December 31, 2021. In October 2021, the California Governor
declared a drought state of emergency statewide. Federal officials who oversee the Central Valley Project, California’s largest water
delivery system, allocated 5% of the contracted amount of water to San Joaquin Valley farmers in 2021 compared to 100% in 2017
through 2020. We are assessing the impact these reductions may have on our California orchards.(cid:3)
In August 2021, the U.S. Bureau of Reclamation declared a Level 1 Shortage Condition at Lake Mead in the Lower Colorado River
Basin for the first time ever, requiring shortage reductions and water savings contributions for states in the southwest. Beginning
January 1, 2022, Arizona will see water releases from Lake Mead reduced by approximately 18% of the state’s annual
apportionment. We are assessing the impact these reductions may have on our Arizona orchards.(cid:3)
For fiscal year 2021, irrigation costs for our agricultural operations were $0.7 million higher than fiscal year 2020. Costs may
increase as we pump more water than our historical averages and federal, state and local water delivery infrastructure costs may
increase to access these limited water supplies. We have an ongoing plan for irrigation improvements continuing in fiscal year 2022
that includes drilling new wells and upgrading existing wells and irrigation systems.
We believe we have access to adequate supplies of water for our agricultural operations as well as our real estate development and
rental operations and currently do not anticipate that future drought conditions will have a material impact on our operating results.
However, if future drought conditions are worse than prior drought conditions or if regulatory responses to such conditions limit our
access to water, our business could be negatively impacted by these conditions and responses in terms of access to water and/or cost
of water.
The use of herbicides, pesticides and other potentially hazardous substances in our operations may lead to environmental
damage and result in increased costs to us.
We use herbicides, pesticides and other potentially hazardous substances in the operation of our business. We may have to pay for
the costs or damages associated with the improper application, accidental release or use or misuse of such substances. Our insurance
may not be adequate to cover such costs or damages or may not continue to be available at a price or under terms that are
satisfactory to us. In such cases, payment of such costs or damages could have a material adverse effect on our business, results of
operations and financial condition.
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Environmental and other regulation of our business, including potential climate change regulation, could adversely impact us
by increasing our production cost or restricting our ability to import certain products into the United States.
Our business depends on the use of fertilizers, pesticides and other agricultural products. The use and disposal of these products in
some jurisdictions are subject to regulation by various agencies. A decision by a regulatory agency to significantly restrict the use of
such products that have traditionally been used in the cultivation of one of our principal products could have an adverse impact on
us. Under the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Food, Drug and Cosmetic Act and the Food Quality
Protection Act of 1996, the EPA is undertaking a series of regulatory actions relating to the evaluation and use of pesticides in the
food industry. Similarly, in the EU, regulation (EC) No. 1107/2009 fundamentally changed the pesticide approval process to hazard
criteria based on the intrinsic properties of the substance. These actions and future actions regarding the availability and use of
pesticides could have an adverse effect on us. In addition, if a regulatory agency were to determine that we are not in compliance
with a regulation in that agency’s jurisdiction, this could result in substantial penalties and a ban on the sale of part or all of our
products in that jurisdiction.
A global economic downturn may have an adverse impact on participants in our industry, which cannot be fully predicted.
The full impact of a global economic downturn on customers, vendors and other business partners, such as that seen with the
COVID-19 pandemic, cannot be anticipated. For example, major customers or vendors may have financial challenges unrelated to
us that could result in a decrease in their business with us or, in extreme cases, cause them to file for bankruptcy protection.
Similarly, parties to contracts may be forced to breach their obligations under those contracts. Although we exercise prudent
oversight of the credit ratings and financial strength of our major business partners and seek to diversify our risk to any single
business partner, there can be no assurance that there will not be a bank, insurance company, supplier, customer or other financial
partner that is unable to meet its contractual commitments to us. Similarly, stresses and pressures in the industry may result in
impacts on our business partners and competitors, which could have wide-ranging impacts on the future of the industry.
We are subject to the risk of product contamination and product liability claims.
The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering
by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals,
other agents, or residues introduced during the growing, storage, handling or transportation phases. While we are subject to
governmental inspection and regulations and believe our facilities comply in all material respects with all applicable laws and
regulations, we cannot be sure that consumption of our products will not cause a health-related illness in the future or that we will
not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued,
the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with
existing and potential customers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered
by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability
insurance however, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the
amount of our insurance coverage.
We are subject to transportation risks.
An extended interruption in our ability to ship our products could have a material adverse effect on our business, financial condition
and results of operations. Similarly, any extended disruption in the distribution of our products or supply chain issues could have a
material adverse effect on our business, financial condition and results of operations. While we believe we are adequately insured
and would attempt to transport our products by alternative means if we were to experience an interruption due to strike, natural
disasters or otherwise, we cannot be sure that we would be able to do so or be successful in doing so in a timely and cost-effective
manner.
Events or rumors relating to LIMONEIRA or our other trademarks and related brands could significantly impact our business.
Consumer and institutional recognition of the LIMONEIRA, One World of Citrus®, Santa®, Paula®, Bridal Veil®, Fountain®,
Golden Bowl®, Level®, Kiva®, Kachina®, Oxnard Lemon, Uno, Sunny, Trapani, Argentinian Beauty, Natural and Trapani Fresh
trademarks and related brands and the association of these brands with high quality and safe food products are an integral part of our
business. The occurrence of any events or rumors that cause consumers and/or institutions to no longer associate these brands with
high quality and safe food products may materially adversely affect the value of our brand names and demand for our products.
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Government regulation could increase our costs of production and increase legal and regulatory expenses.
Growing, packaging, storing and distributing food products are activities subject to extensive federal, state and local regulation, as
well as foreign regulation. The U.S. Food and Drug Administration (the “FDA”), the USDA and various state and local public health
and agricultural agencies regulate these aspects of our operations. Our business is subject to the FDA Food Safety Modernization
Act to ensure food safety. This Act provides direct recall authority to the FDA and includes a number of other provisions designed to
enhance food safety, including increased inspections by the FDA of food facilities. The Federal Perishable Agricultural
Commodities Act, which specifies standards for the sale, shipment, inspection and rejection of agricultural products, governs our
relationships with our fresh food suppliers with respect to the grading and commercial acceptance of product shipments. Import and
export controls and similar laws and regulations, in both the United States and elsewhere affect our business. Issues such as health
and safety, which may slow or otherwise restrict imports and exports, could adversely affect our business. In addition, the
modification of existing laws or regulations or the introduction of new laws or regulations could require us to make material
expenditures or otherwise adversely affect the way that we have historically operated our business.
Our strategy to expand international production and marketing may not be successful and may subject us to risks associated
with doing business in corrupt environments.
While we intend to expand our lemon supply sources to international markets and explore opportunities to expand our international
production and marketing of lemons, we may not be successful in implementing this strategy. Additionally, in many countries
outside of the United States, particularly in those with developing economies, it may be common for others to engage in business
practices prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act or similar local anti-bribery
laws. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to
government officials for the purpose of obtaining or retaining business. Failure to comply with these laws could subject us to civil
and criminal penalties that could materially and adversely affect our financial condition and results of operations.
We depend on our infrastructure to have sufficient capacity to handle our annual lemon production needs.
We have an infrastructure that has sufficient capacity for our lemon production needs, but if we lose machinery or facilities due to
natural disasters or mechanical failure, we may not be able to operate at a sufficient capacity to meet our lemon production needs.
This could have a material adverse effect on our business, which could impact our results of operations and our financial condition.
Risks Related to Our Indebtedness
We may be unable to generate sufficient cash flow to service our debt obligations.
To service our debt, we require a significant amount of cash. Our ability to generate cash, make scheduled payments or refinance
our obligations depends on our successful financial and operating performance. Our financial and operating performance, cash flow
and capital resources depend upon prevailing economic conditions and various financial, business and other factors, many of which
are beyond our control. These factors include among others:
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
economic and competitive conditions;
changes in laws and regulations;
operating difficulties, increased operating costs or pricing pressures we may experience; and
delays in implementing any strategic projects.
If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay
capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. If we are required to take
any actions referred to above, it could have a material adverse effect on our business, financial condition and results of operations.
In addition, we cannot assure you that we would be able to take any of these actions on terms acceptable to us, or at all, or that these
actions would enable us to continue to satisfy our capital requirements or that these actions would be permitted under the terms of
our various debt agreements.
Restrictive covenants in our debt instruments restrict or prohibit our ability to engage in or enter into a variety of transactions,
which could adversely restrict our financial and operating flexibility and subject us to other risks.
Our revolving and non-revolving credit and term loan facilities contain various restrictive covenants that limit our ability to take
certain actions. In particular, these agreements limit our ability to, among other things:
19
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
•(cid:3)
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incur additional indebtedness;
make certain investments or acquisitions;
create certain liens on our assets;
engage in certain types of transactions with affiliates;
merge, consolidate or transfer substantially all our assets; and
transfer and sell assets.
Our revolving and non-revolving credit facility with the Farm Credit West Credit Facility contain a financial covenant that requires
us to maintain compliance with a specified debt service coverage ratio on an annual basis. In December 2021, the Lender modified
the covenant to defer measurement at October 31, 2021 and revert to a debt service coverage ratio of 1.25:1.0 measured as of
October 31, 2022. Our failure to comply with this covenant in the future may result in the declaration of an event of default under
our Farm Credit West Credit Facility.
Any or all of these covenants could have a material adverse effect on our business by limiting our ability to take advantage of
financing, merger and acquisition or other corporate opportunities and to fund our operations. Any future debt could also contain
financial and other covenants more restrictive than those imposed under our line of credit and term loan facilities. A breach of a
covenant or other provision in any credit facility governing our current and future indebtedness could result in a default under that
facility and, due to cross-default and cross-acceleration provisions, could result in a default under our other credit facilities. Upon
the occurrence of an event of default under any of our credit facilities, the applicable lender(s) could elect to declare all amounts
outstanding to be immediately due and payable and, with respect to our revolving credit facility, terminate all commitments to
extend further credit. If we were unable to repay those amounts, our lenders could proceed against the collateral granted to them to
secure the indebtedness. If the lenders under our current or future indebtedness were to accelerate the payment of the indebtedness,
we cannot assure you that our assets or cash flow would be sufficient to repay in full our outstanding indebtedness.
Despite our relatively high current indebtedness levels and the restrictive covenants set forth in agreements governing our
indebtedness, we may still incur significant additional indebtedness, including secured and guaranteed indebtedness. Incurring
more indebtedness could increase the risks associated with our substantial indebtedness.
Subject to the restrictions in our credit facilities, we may incur significant additional indebtedness. If new debt is added to our
current debt levels, the related risks that we now face could increase.
In January 2018, LLCB entered into a $45.0 million unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”)
with Bank of America, N.A. to fund early development activities. The Loan, as modified and extended, matures February 22, 2023
and has a one-year extension option through February 22, 2024 subject to terms and conditions as defined in the agreement, with the
maximum borrowing amount reduced to $35.0 million during the extension period. The Loan contains certain customary default
provisions and LLCB may prepay any amounts outstanding under the Loan without penalty. The obligations under the Loan are
guaranteed by certain principals from Lewis and us. Defaults by LLCB could increase our indebtedness.
Some of our debt is based on variable rates of interest, which could result in higher interest expenses in the event of an increase
in the interest rates.
Our Farm Credit West Credit Facility currently bears interest at a variable rate, which will generally change as interest rates change.
We bear the risk that the rates we are charged by our lender will increase faster than the earnings and cash flow of our business,
which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our Farm
Credit West Credit Facility, which could materially adversely affect our business, financial condition and results of operations.
Several of our Company’s debt agreements use LIBOR as a reference rate. The expected discontinuation of LIBOR after 2021 could
have a significant impact on us if we cannot replace LIBOR with alternative reference rates at or below the current LIBOR rate.
Global capital and credit market issues affect our liquidity, increase our borrowing costs and may affect the operations of our
suppliers and customers.
The global capital and credit markets have experienced increased volatility and disruption over the past several years, making it
more difficult for companies to access those markets. We depend in part on stable, liquid and well-functioning capital and credit
markets to fund our operations. Although we believe that our operating cash flows and existing credit facilities will permit us to
meet our financing needs for the foreseeable future, there can be no assurance that continued or increased volatility and disruption in
the capital and credit markets will not impair our liquidity or increase our costs of borrowing. Our business could also be negatively
20
impacted if our suppliers or customers experience disruptions resulting from tighter capital and credit markets or a slowdown in the
general economy.
Risks Related to Our Real Estate Development Operations
We are involved in a cyclical industry and are affected by changes in general and local economic conditions.
The real estate development industry is cyclical and is significantly affected by changes in general and local economic conditions,
including:
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employment levels;
availability of financing;
interest rates;
consumer confidence;
demand for the developed product, whether residential or industrial;
supply of similar product, whether residential or industrial; and
local, state and federal government regulation, including eminent domain laws, which may result in taking for less
compensation than the owner believes the property is worth.
The process of project development and the commitment of financial and other resources occur long before a real estate project
comes to market. A real estate project could come to market at a time when the real estate market is depressed. It is also possible in a
rural area like ours that no market for the project will develop as projected.
A recession in the global economy, or a downturn in national or regional economic conditions, could adversely impact our real
estate development business.
Future economic instability or tightening in the credit markets could lead to another housing market collapse, which could adversely
affect our real estate development operations. Our future real estate sales, revenues, financial condition and results of operations
could suffer as a result. Our business is especially sensitive to economic conditions in California and Arizona, where our properties
are located.
Higher interest rates and lack of available financing can have significant impacts on the real estate industry.
Higher interest rates generally impact the real estate industry by making it harder for buyers to qualify for financing, which can lead
to a decrease in the demand for residential, commercial or industrial sites. Any decrease in demand will negatively impact our
proposed developments. Since the most recent recession, the Board of Governors of the Federal Reserve System has taken actions
that have resulted in low interest rates prevailing in the marketplace for a historically long period of time. Market interest rates may
increase in the future and the increase may materially and negatively affect us. Lack of available credit to finance real estate
purchases can also negatively impact demand. Any downturn in the economy or consumer confidence can also be expected to result
in reduced housing demand and slower industrial development, which would negatively impact the demand for land we are
developing.
We are subject to various land use regulations and require governmental approvals for our developments that could be denied.
In planning and developing our land, we are subject to various local, state, and federal statutes, ordinances, rules and regulations
concerning zoning, infrastructure design, subdivision of land, and construction. All of our new developments require amending
existing general plan and zoning designations, so it is possible that our entitlement applications could be denied. In addition, the
zoning that ultimately is approved could include density provisions that would limit the number of homes and other structures that
could be built within the boundaries of a particular area, which could adversely impact the financial returns from a given project. In
addition, in the past, many states, cities and counties (including Ventura County) have approved various “slow growth” or “urban
limit line” measures.
If unforeseen regulatory challenges with East Areas I and II occur, we may not be able to develop these projects as planned and the
approximately $83.0 million investment we have in the projects could be impaired in the future.
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Third-party litigation could increase the time and cost of our real estate development efforts.
The land use approval processes we must follow to ultimately develop our projects have become increasingly complex. Moreover,
the statutes, regulations and ordinances governing the approval processes provide third parties the opportunity to challenge the
proposed plans and approvals. As a result, the prospect of third-party challenges to planned real estate developments provides
additional uncertainties in real estate development planning and entitlements. Third-party challenges in the form of litigation would,
by their nature, adversely affect the length of time and the cost required to obtain the necessary approvals. In addition, adverse
decisions arising from any litigation would increase the costs and length of time to obtain ultimate approval of a project and could
adversely affect the design, scope, plans and profitability of a project.
We are subject to environmental regulations and opposition from environmental groups that could cause delays and increase the
costs of our real estate development efforts or preclude such development entirely.
Environmental laws that apply to a given site can vary greatly according to the site’s location and condition, the present and former
uses of the site, and the presence or absence of sensitive elements like wetlands and endangered species. Environmental laws and
conditions may (i) result in delays, (ii) cause us to incur additional costs for compliance, where a significant amount of our
developable land is located, mitigation and processing land use applications, or (iii) preclude development in specific areas. In
addition, in California, third parties have the ability to file litigation challenging the approval of a project, which they usually do by
alleging inadequate disclosure and mitigation of the environmental impacts of the project. While we have worked with
representatives of various environmental interests and wildlife agencies to minimize and mitigate the impacts of our planned
projects, certain groups opposed to development may oppose our projects vigorously, so litigation challenging their approval could
occur. Recent concerns over the impact of development on water availability and global warming increases the breadth of potential
obstacles that our developments face.
Our developable land is concentrated entirely in California and Arizona.
All of our developable land is located in California and Arizona, and our business is especially sensitive to the economic conditions
within California. Any adverse change in the economic climate of California, Arizona, or our regions of those states, and any
adverse change in the political or regulatory climate of California or Arizona, or the counties where our land is located in such
states, could adversely affect our real estate development activities. Ultimately, our ability to sell or lease lots may decline as a result
of weak economic conditions or restrictive regulations.
If the real estate industry weakens or instability of the mortgage industry and commercial real estate financing exists, it could
have an adverse effect on our real estate activities.
If the residential real estate market weakens or instability of the mortgage industry and commercial real estate financing exists, our
residential real estate business could be adversely affected. An excess supply of homes available due to foreclosures or the
expectation of deflation in house prices could also have a negative impact on our ability to sell our inventory when it becomes
available.
We rely on contractual arrangements with third party advisors to assist us in carrying out our real estate development projects
and are subject to risks associated with such arrangements.
We utilize third party contractor and consultant arrangements to assist us in operating our real estate development segment. These
contractual arrangements may not be as effective in providing direct control over this business segment. For example, our third-
party advisors could fail to take actions required for our real estate development businesses despite their contractual obligation to do
so. If the third-party advisors fail to perform under their agreements with us, we may have to rely on legal remedies under the law,
which may not be effective. In addition, we cannot assure you that our third-party advisors would always act in our best interests.
If we are unable to complete land development projects within forecasted time and budget expectations, if at all, our financial
results may be negatively affected.
We intend to develop land and real estate properties as suitable opportunities arise, taking into consideration the general economic
climate. New real estate development projects have a number of risks, including the following:
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Construction delays or cost overruns that may increase project costs;
Receipt of zoning, occupancy and other required governmental permits and authorizations;
Development costs incurred for projects that are not pursued to completion;
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•(cid:3)
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Earthquakes, hurricanes, floods, fires or other natural disasters that could adversely affect a project;
Defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to
be closed during the period required to rectify the situation;
Our ability to raise capital;
The impact of governmental assessments such as park fees or affordable housing requirements;
Governmental restrictions on the nature and size of a project or timing of completion; and
The potential lack of adequate building/construction capacity for large development projects.
If any development project is not completed on time or within budget, our financial results may be negatively affected.
If we are unable to obtain required land use entitlements at reasonable costs, or at all, our operating results would be adversely
affected.
The financial performance of our real estate development activities is closely related to our success in obtaining land use
entitlements for proposed development projects. Obtaining all of the necessary entitlements to develop a parcel of land is often
difficult, costly and may take several years, or more, to complete. In some situations, we may be unable to obtain the necessary
entitlements to proceed with a real estate development or may be required to alter our plans for the development. Delays or failures
to obtain these entitlements may have a material adverse effect on our financial results.
We could experience a reduction in revenues or reduced cash flows if we are unable to obtain reasonably priced financing to
support our real estate development projects and land development activities.
The real estate development industry is capital intensive, and development requires significant up-front expenditures to develop land
and begin real estate construction. Accordingly, we have and may continue to incur substantial indebtedness to finance our real
estate development and land development activities. Although we believe that internally generated funds and current and available
borrowing capacity will be sufficient to fund our capital and other expenditures, including additional land acquisition, development
and construction activities, and the amounts available from such sources may not be adequate to meet our needs. If such sources
were insufficient, we would seek additional capital in the form of debt from a variety of potential sources, including bank financing.
The availability of borrowed funds to be used for additional land acquisition, development and construction may be greatly reduced,
and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with
new loans. The failure to obtain sufficient capital to fund our planned expenditures could have a material adverse effect on our
business and operations and our results of operations in future periods.
We may encounter risks associated with the real estate joint venture we entered into in November 2015 with the Lewis Group of
Companies including:
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the joint venture may not perform financially or operationally as expected;
land values, project costs, sales absorption or other assumptions included in the development plans may cause the joint
venture’s operating results to be less than expected;
the joint venture may not be able to obtain project loans on acceptable terms;
the joint venture partners may not be able to provide capital to the joint venture in the event external financing or project
cash flows are not sufficient to finance the joint venture’s operations;
the joint venture partners may not manage the project properly; and
disagreements could occur between the joint venture partners that could affect the operating results of the joint venture or
could result in a sale of a partner’s interest or the joint venture at undesirable values.
We may encounter other risks that could impact our ability to develop our land.
We may also encounter other difficulties in developing our land, including:
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natural risks, such as geological and soil problems, earthquakes, fire, heavy rains and flooding and heavy winds;
shortages of qualified trades people;
reliance on local contractors, who may be inadequately capitalized;
shortages of materials;
increases in the cost of certain materials; and
23
•(cid:3)
environmental remediation costs.
General Risks and Risks Related to Our Common Stock
Our business is highly competitive and we cannot assure you that we will maintain our current market share.
Many companies compete in our different businesses. However, only a few well-established companies operate on an international,
national and regional basis with one or several product lines. We face strong competition from these and other companies in all our
product lines.
Important factors with respect to our competitors include the following:
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Some of our competitors may have greater operating flexibility and, in certain cases, this may permit them to respond
better or more quickly to changes in the industry or to introduce new products and packaging more quickly and with
greater marketing support.
We cannot predict the pricing or promotional actions of our competitors or whether those actions will have a negative
effect on us.
There can be no assurance that we will continue to compete effectively with our present and future competitors, and our ability to
compete could be materially adversely affected by our debt levels and debt service requirements.
Currency exchange fluctuation may impact the results of our operations.
We distribute our products both nationally and internationally. Our international sales are primarily transacted in U.S. dollars. Our
results of operations are affected by fluctuations in currency exchange rates in both sourcing and selling locations. In the past,
periods of a strong U.S. dollar relative to other currencies have led international customers, particularly in Asia, to find alternative
sources of fruit.
We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our
prospects.
(cid:3)
We currently depend heavily on the services of our key management personnel. The loss of any key personnel could materially and
adversely affect our results of operations, financial condition, or our ability to pursue land development. Our success will also
depend in part on our ability to attract and retain additional qualified management personnel.
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Inflation can have a significant adverse effect on our operations.
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Inflation can have a major impact on our farming operations. The farming operations are most affected by escalating costs and
unpredictable revenues (due to an oversupply of certain crops) and very high irrigation water costs. High fixed water costs related to
our farm lands will continue to adversely affect earnings. Prices received for many of our products are dependent upon prevailing
market conditions and commodity prices. Therefore, it is difficult for us to accurately predict revenue and we cannot pass on cost
increases caused by general inflation, except to the extent reflected in market conditions and commodity prices.
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System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal
operations or services provided to customers, and any such disruption could reduce our expected revenue, increase our expenses,
damage our reputation and adversely affect our stock price.
(cid:3)
Computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our
confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers
also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our products or otherwise
exploit any security vulnerabilities of our products. In addition, sophisticated hardware and operating system software and
applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other
problems that could unexpectedly interfere with the operation of the system. The costs to us to eliminate or alleviate cyber or other
security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our
efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of
existing or potential customers that may impede our sales, packing, distribution or other critical functions.
(cid:3)
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Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection
with systems integration or migration work that takes place from time to time. We may not be successful in implementing new
systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and
resource-intensive. Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales,
lower margins or lost customers resulting from these disruptions could adversely affect our financial results, stock price and
reputation.
The acquisition of other businesses could pose risks to our operating income.
We intend to continue to consider acquisition prospects that we think complement our business. While we are not currently a party
to any agreement with respect to any acquisitions, we may acquire other businesses in the future. Future acquisitions by us could
result in accounting charges, potentially dilutive issuances of equity securities, and increased debt and contingent liabilities, any of
which could have a material adverse effect on our business and the market price of our common stock. Acquisitions entail numerous
risks, including the integration of the acquired operations, diversion of management’s attention to other business concerns, risks of
entering markets in which we have limited prior experience, and potential loss of key employees of acquired organizations. We may
be unable to successfully integrate businesses or the personnel of any business that might be acquired in the future, and our failure
to do so could have a material adverse effect on our business and on the market price of our common stock.
The value of our common stock could be volatile.
Investing in our common stock involves a high degree of risk. There are numerous and varied risks, known and unknown, that may
prevent us from achieving our goals. The risks described here are not the only ones we will face. If any of these risks or other risks
actually occurs, our business, financial condition, results of operations or future prospects could be materially and adversely
affected. In such event, the trading price of our common stock could decline and investors in our common stock could lose all or
part of their investment.
The overall market and the price of our common stock may fluctuate greatly and we cannot assure you that you will be able to resell
shares at or above market price. The trading price of our common stock may be significantly affected by various factors, including:
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quarterly fluctuations in our operating results;
changes in investors’ and analysts’ perception of the business risks and conditions of our business;
our ability to meet the earnings estimates and other performance expectations of financial analysts or investors;
unfavorable commentary or downgrades of our stock by equity research analysts;
fluctuations in the stock prices of our peer companies or in stock markets in general; and
general economic or political conditions.
Concentrated ownership of our common stock creates a risk of sudden change in our share price.
As of October 31, 2021, directors and members of our executive management team beneficially owned or controlled approximately
6.6% of our common stock. Investors who purchase our common stock may be subject to certain risks due to the concentrated
ownership of our common stock. The sale by any of our large stockholders of a significant portion of that stockholder’s holdings
could have a material adverse effect on the market price of our common stock. In addition, the registration of any significant amount
of additional shares of our common stock will have the immediate effect of increasing the public float of our common stock and any
such increase may cause the market price of our common stock to decline or fluctuate significantly.
Our charter documents contain provisions that may delay, defer or prevent a change of control.
Provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire control of us, even
if the change in control would be beneficial to stockholders. These provisions include the following:
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division of our board of directors into three classes, with each class serving a staggered three-year term;
removal of directors by stockholders by a supermajority of two-thirds of the outstanding shares;
ability of the board of directors to authorize the issuance of preferred stock in series without stockholder approval; and
prohibitions on our stockholders that prevent them from acting by written consent and limitations on calling special
meetings.
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We incur increased costs as a result of being a publicly traded company.
As a Company with publicly traded securities, we have incurred, and will continue to incur, significant legal, accounting and other
expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as rules promulgated by the SEC and NASDAQ, require us to adopt
corporate governance practices applicable to U.S. public companies. These rules and regulations may increase our legal and
financial compliance costs, which could adversely affect the trading price of our common stock.
In our Annual Report for fiscal year ended October 31, 2020 we identified a material weakness in our internal control over
financial reporting. If we fail to properly remediate any weaknesses or fail to maintain effective internal controls, there could be
an adverse impact on our operations or the market price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our annual reports on Form 10-K our
assessment of the effectiveness of our internal control over financial reporting. As previously disclosed in our Annual Report for
fiscal year ended October 31, 2020, we identified a material weakness in our internal control over financial reporting related to an
acquired foreign subsidiary in the first year the subsidiary was included in management’s evaluation of the effectiveness of our
internal control over financial reporting. In fiscal year 2021, we remediated the material weakness and the remediation measures
have strengthened the design and operating effectiveness of our internal control over financial reporting.
We may in the future identify further material weaknesses in our internal control over financial reporting that we have not
discovered to date. If we cannot adequately maintain the effectiveness of our internal control over financial reporting, we might be
subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such action could adversely affect our financial
results, cause investors to lose confidence in the reliability of our financial statements and result in a decrease in the value of our
common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Real Estate
We own our corporate headquarters in Santa Paula, California. We own approximately 8,300 acres of farm land in California, with
approximately 4,000 acres located in Ventura County, approximately 3,600 acres located in Tulare County in the San Joaquin Valley
and approximately 700 acres in San Luis Obispo County. Additionally, we own approximately 1,200 acres located in Yuma,
Arizona, 3,500 acres in La Serena, Chile and 1,200 acres in Jujuy, Argentina. In California, we lease approximately 30 acres of land
located in Ventura County, approximately 80 acres in Tulare County and approximately 800 acres in San Bernardino County, and in
Arizona we lease approximately 65 acres of land located in Yuma County. We also have an interest in a partnership that owns
approximately 200 acres of land in Ventura County. The land used for agricultural plantings consists of approximately 6,100 acres of
lemons, approximately 800 acres of avocados, approximately 1,000 acres of oranges and approximately 900 acres of specialty citrus
and other crops. Our agribusiness land holdings are summarized below as of October 31, 2021 (in thousands, except per acre
amounts):
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Ranch Name
Acres
Book Value
Limoneira/Olivelands Ranch
La Campana Ranch
Orchard Farm Ranch
Rancho La Cuesta Ranch
Porterville Ranch
Ducor Ranch
Jencks Ranch
Windfall Farms
Stage Coach Ranch
Martinez Ranch
Associated Citrus Packers
Lemons 400
Sheldon Ranches
Pan de Azucar
San Pablo
Santa Clara
Other agribusiness land
1,700 $
300
1,100
200
700
900
100
700
100
200
1,300
800
600
200
3,300
1,200
400
13,800 $
Acquisition
Date
1907, 1913,
1920
1964
1990
1994
1997
1997
2007
2009
2012
2012
2013
2013
2016
2017
2018
2019
various
Book Value
per Acre
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
451
2,527
2,945
14,495
9,181
6,738
8,460
23,089
6,030
6,815
11,565
6,475
15,678
12,105
2,487
7,167
3,240
767
758
3,240
2,899
6,427
6,064
846
16,162
603
1,363
15,035
5,180
9,618
2,421
8,208
8,600
1,296
89,487
The book value of our agribusiness land holdings of approximately $89.5 million differs from the land balance of $95.9 million
included in property, plant and equipment in the notes to the consolidated financial statements in Item 8 of this Annual Report. The
table above presents our current land holdings in farming agribusiness operations and, therefore, excludes Oxnard Lemon land,
rental and real estate development land.
We own our packing facilities located in Santa Paula and Oxnard, California and Yuma, Arizona, where we process and pack our
lemons as well as lemons for other growers. We commissioned a new lemon packing facility in 2016 to increase capacity and
efficiency of our lemon packing operations. We have a 5.5 acre, one-megawatt ground-based photovoltaic solar generator, which
provides the majority of the power to operate our packing facility. We also have a one-megawatt solar array that provides us with a
majority of the electricity required to operate four deep water well pumps at one of our ranches in the San Joaquin Valley.
We own 256 residential units in Ventura and Tulare Counties that we lease to our employees, former employees and outside tenants
and we own several commercial office buildings and properties that are leased to various tenants.
We own real estate development property in the California counties of Santa Barbara and Ventura. These properties are in various
stages of development for up to approximately 900 residential units and approximately 811,000 square feet of commercial space.
Water and Mineral Rights
Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run
through, the land we own. We believe we have adequate supplies of water for our agribusiness segments as well as our rental and
real estate development activities. Water for our farming operations located in Ventura County, California is sourced from the
existing water resources associated with our land, which includes approximately 8,600 acre-feet of adjudicated water rights in the
Santa Paula Basin (aquifer) and the un-adjudicated Fillmore Basin. We use a combination of ground water provided by wells that
derive water from the San Joaquin Valley Basin and water from various water districts and irrigation districts in Tulare County,
California, which is in the agriculturally productive San Joaquin Valley. We use ground water provided by wells that derive water
from the Cadiz Valley Basin at the Cadiz Ranch in San Bernardino County, California. Our Windfall Farms property located in San
Luis Obispo County, California obtains water from wells that derive water from the Paso Robles Basin. Our Associated farming
operations in Yuma, Arizona source water from the Colorado River through the YMIDD, where we have access to approximately
11,700 acre feet of Class 3 Colorado River water rights. We use ground water provided by wells and surface water for our PDA and
San Pablo farming operations in La Serena, Chile and our Trapani Fresh farming operations in Argentina.
27
Our rights to extract groundwater from the Santa Paula Basin are governed by the Santa Paula Basin Judgment (the
“Judgment”). The Judgment was entered into in 1996 by stipulation among the United Water Conservation District, the City of
Ventura and various members of the Santa Paula Basin Pumpers Association (the “Association”). The Association is a not-for-profit,
mutual benefit corporation, which represents the interests of all overlying landowners with rights to extract groundwater from the
Santa Paula Basin and the City of Santa Paula. We are a member of the Association. Membership in the Association is governed by
the Association's Bylaws.
The Judgment adjudicated and allocated water rights in the Santa Paula Basin among the Association's members and the City of
Ventura. The water rights are established and governed by a seven-year moving average (i.e., production can rise or fall in any
particular year so long as the seven-year average is not exceeded). Under California law, the water rights are considered
"property". A perpetual right to water, evidenced by the Judgment, can be exchanged for interests in real property under IRS Code
Section 1031 and if condemned by a public agency, just compensation must be paid to the rightful owner. Our rights under the
Judgment are perpetual and considered very firm and reliable which reflects favorably upon their fair market value.
For ease of administration, the Association is appointed by the Judgment as the trustee of its members’ water rights and is
responsible for coordinating and promoting the interests of its members. The Judgment includes provisions for staged reductions in
production rights should shortage conditions develop. It also allows the adjudicated water rights to be leased or sold among the
parties. The Judgment established a Technical Advisory Committee composed of the United Water Conservation District, the City of
Ventura and the Association to assist the Superior Court of the State of California, Ventura County (the “Court”), with the technical
aspects of Santa Paula Basin management. Finally, the Judgment reserves continuing jurisdiction to the Court to hear motions for
enforcement or modification of the Judgment as necessary.
Our California water resources include approximately 17,000 acre-feet of water affiliated with our owned properties, of which
approximately 8,600 acre-feet are adjudicated. Our Yuma, Arizona water resources include approximately 11,700 acre-feet of water
sourced from the Colorado River. We own shares in five not-for-profit mutual benefit water companies. Our investments in these
water companies provide us with the right to receive a proportionate share of water from each of the water companies.
We believe water is a natural resource that is critical to economic growth in the western United States and firm, reliable water rights
are essential to our sustainable business practices. Consequently, we have long been a private steward and advocate of prudent and
efficient water management. We have made substantial investments in securing water and water rights in quantities that are
sufficient to support and, we believe will exceed, our long-term business objectives. We strive to follow best management practices
for the diversion, conveyance, distribution and use of water. In the future, we intend to continue to provide leadership in the area of,
and seek innovation opportunities that promote, increased water use efficiency and the development of new sources of supply for
our neighboring communities.
Item 3. Legal Proceedings
We are from time to time involved in legal proceedings arising in the normal course of business. Other than proceedings incidental
to our business, we are not a party to, nor is any of our property the subject of, any material pending legal proceedings, and no such
proceedings are, to our knowledge, contemplated by governmental authorities.
Item 4. Mine Safety Disclosures
Not applicable.
28
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “LMNR.” There is no assurance
that our common stock will continue to be traded on NASDAQ or that any liquidity will exist for our stockholders.
Holders
On December 31, 2021, there were approximately 228 registered holders of our common stock. The number of registered holders
includes banks and brokers who act as nominees, each of whom may represent more than one stockholder.
Dividends
The following table presents cash dividends per common share declared and paid in the periods shown.
2021
Fourth Quarter Ended October 31, 2021
Third Quarter Ended July 31, 2021
Second Quarter Ended April 30, 2021
First Quarter Ended January 31, 2021
2020
Fourth Quarter Ended October 31, 2020
Third Quarter Ended July 31, 2020
Second Quarter Ended April 30, 2020
First Quarter Ended January 31, 2020
Dividend
$
$
$
$
$
$
$
$
0.075
0.075
0.075
0.075
0.075
0.075
0.075
0.075
In December 2021, we declared our quarterly dividend of $0.075 per common share and we expect to continue to pay quarterly
dividends at a similar rate to the extent permitted by the financial results of our business and other factors beyond management’s
control.
29
Performance Graph
The line graph above compares the percentage change in cumulative total stockholder return of our common stock registered under
section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with (i) the cumulative total return of the
Russell 2000 Index, assuming reinvestment of dividends, and (ii) the cumulative total return of Dow Jones U.S. Food Producers
Index, assuming reinvestment of dividends.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by Issuer and Affiliated Purchasers
None.
Item 6. Reserved
30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to
promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be
read in conjunction with, our consolidated financial statements and the accompanying Notes to Consolidated Financial Statements
(Part II, Item 8 of this Form 10-K). This discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a
result of various factors, including, but not limited to, those presented under “Risk Factors” included in Item 1A and elsewhere in
this Annual Report on Form 10-K. This section generally discusses the results of operations for fiscal year 2021 compared to fiscal
year 2020. For discussion related to the results of operations and changes in financial condition for fiscal year 2020 compared to
fiscal year 2019 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in
our fiscal year 2020 Form 10-K, which was filed with the United States Securities and Exchange Commission (SEC) on January 14,
2021.
Overview
Limoneira Company, a Delaware corporation, is the successor to several businesses with operations in California since 1893. We are
primarily an agribusiness company founded and based in Santa Paula, California, committed to responsibly using and managing our
approximately 15,400 acres of land, water resources and other assets to maximize long-term stockholder value. Our current
operations consist of fruit production, sales and marketing, rental operations, real estate and capital investment activities.
We have three business divisions: agribusiness, rental operations and real estate development. The agribusiness division is
comprised of four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness, which includes
oranges, specialty citrus and other crops. The agribusiness division includes our core operations of farming, harvesting, lemon
packing and lemon sales operations. The rental operations division includes our residential and commercial rentals comprised of 256
completed rental units, leased land operations and organic recycling. The real estate development division includes our investments
in real estate development projects. Generally, we see our Company as a land and farming company that generates annual cash
flows to support our progress into diversified real estate development activities. As real estate developments are monetized, our
agriculture business will then be able to expand more rapidly into new regions and markets.
Recent Developments – Refer to Part I, Item 1 “Fiscal Year 2021 Highlights and Recent Developments”
31
Results of Operations
The following table shows the results of operations for ($ in thousands):
Years Ended October 31,
2021
2020
2019
Revenues:
Agribusiness
Other operations
Total net revenues
Costs and expenses:
Agribusiness
Other operations
Loss (gain) on disposal of assets
Selling, general and administrative
Total costs and expenses
Operating loss:
Agribusiness
Other operations
Loss (gain) on disposal of assets
Selling, general and administrative
Operating loss
Other income (expense):
Interest income
Interest expense, net of patronage dividends
Equity in earnings of investments, net
Loss on stock in Calavo Growers, Inc.
Other income, net
Total other income (expense)
Loss before income tax benefit
Income tax benefit
Net loss
Loss (income) attributable to noncontrolling interest
Net loss attributable to Limoneira Company
Non-GAAP Financial Measures
$ 161,381 97% $ 159,937 97% $ 166,549 97%
3%
4,622
171,398 100%
164,559 100%
166,027 100%
4,646
4,849
3%
3%
148,492 86%
157,281 86%
4,332
3%
109 —
19,427 11%
172,360 100%
4,504
2%
502 —
21,280 12%
183,567 100%
152,372 86%
3%
4,439
(1)%
(1,069)
21,170 12%
176,912 100%
12,889
314
(109)
(19,427)
(6,333)
379
(1,501)
3,203
—
89
2,170
(4,163)
266
(3,897)
456
(3,441)
$
2,656
118
(502)
(21,280)
(19,008)
362
(2,048)
339
(6,299)
219
(7,427)
(26,435)
8,494
(17,941)
1,506
$ (16,435)
14,177
410
1,069
(21,170)
(5,514)
207
(2,341)
3,073
(2,117)
129
(1,049)
(6,563)
1,097
(5,466)
(477)
(5,943)
$
Due to significant depreciable assets associated with the nature of our operations and interest costs associated with our capital
structure, management believes that earnings before interest, income taxes, depreciation and amortization (“EBITDA”) and adjusted
EBITDA, which excludes loss on stock in Calavo Growers, Inc. ("Calavo") and loss (gain) on disposal of assets, is an important
measure to evaluate our results of operations between periods on a more comparable basis. Adjusted EBITDA in previous periods
also excluded LLCB earnings in equity investment which is no longer excluded due to management’s anticipation of future cash
distributions related to the investment in LLCB. Adjusted EBITDA for prior periods has been restated to conform to the current
presentation. Such measurements are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and
should not be construed as an alternative to reported results determined in accordance with GAAP. The non-GAAP information
provided is unique to us and may not be consistent with methodologies used by other companies.
32
EBITDA and adjusted EBITDA are summarized and reconciled to net loss attributable to Limoneira Company which management
considers to be the most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in
thousands):
Net loss attributable to Limoneira Company
Interest income
Interest expense, net of patronage dividends
Income tax benefit
Depreciation and amortization
EBITDA
Loss on stock in Calavo Growers, Inc.
Loss (gain) on disposal of assets
Adjusted EBITDA
Fiscal Year 2021 Compared to Fiscal Year 2020
Revenues
$
$
Years Ended October 31,
2020
(16,435) $
(362)
2,048
(8,494)
10,097
(13,146)
6,299
502
(6,345) $
2021
(3,441) $
(379)
1,501
(266)
9,812
7,227
—
109
7,336 $
2019
(5,943)
(207)
2,341
(1,097)
8,633
3,727
2,054
(991)
4,790
Total revenues for fiscal year 2021 were $166.0 million compared to $164.6 million for fiscal year 2020. The 1% increase of $1.5
million was primarily the result of increased lemons and specialty citrus and other crops agribusiness revenues, partially offset by
decreased avocados and oranges agribusiness revenues, as detailed below ($ in thousands):
Lemons
Avocados
Oranges
Specialty citrus and other crops
Agribusiness revenues
Agribusiness Revenues for the Years Ended October 31,
2021
142,962 $
6,784
4,382
7,253
161,381 $
2020
137,563 $
8,806
7,722
5,846
159,937 $
$
$
Change
5,399
(2,022)
(3,340)
1,407
1,444
4%
(23)%
(43)%
24%
1%
•(cid:3) Lemons: The increase in fiscal year 2021 was primarily the result of increased brokered fruit and other lemon sales, partially
offset by decreased fresh lemon sales, compared to fiscal year 2020. Brokered fruit and other lemon sales for fiscal years 2021
and 2020 were $36.0 million and $18.9 million, respectively. The increase in brokered fruit in fiscal year 2021 was primarily
the result of higher volume and higher prices of brokered fruit sales, compared to fiscal year 2020. During fiscal years 2021 and
2020, brokered fruit sales were $29.3 million and $12.2 million on 1.4 million and 0.6 million cartons of brokered fruit sold at
average per carton prices of $21.63 and $19.82, respectively. The decrease in fresh lemon sales in fiscal year 2021 was
primarily the result of lower volume, partially offset by higher prices of fresh lemons sold, compared to fiscal year 2020.
During fiscal years 2021 and 2020, fresh lemon sales were $85.9 million and $101.1 million on 4.4 million and 5.5 million
cartons of fresh lemons packed and sold at average per carton prices of $19.60 and $18.32, respectively. Lemon revenues in
fiscal years 2021 and 2020 included shipping and handling of $17.5 million and $13.4 million and lemon by-products of $3.5
million and $4.1 million, respectively.
•(cid:3) Avocados: The decrease in fiscal year 2021 was primarily the result of lower volume, partially offset by higher prices of
avocados sold, compared to fiscal year 2020. The California avocado crop typically experiences alternating years of high and
low production due to plant physiology. During fiscal years 2021 and 2020, 5.7 million and 8.0 million pounds of avocados
were sold at average per pound prices of $1.20 and $1.10, respectively. Higher prices in fiscal year 2021 were primarily related
to lower supply of fruit in the marketplace.
•(cid:3) Oranges: The decrease in fiscal year 2021 was primarily due to lower prices and volume of oranges sold, compared to fiscal
year 2020. During fiscal years 2021 and 2020, sales consisted of 545,000 and 743,000 40-pound carton equivalents of oranges
sold at average per carton prices of $8.04 and $10.39, respectively.
33
•(cid:3)
Specialty citrus and other crops: The increase in fiscal year 2021 was primarily the result of higher volume of wine grapes sold,
compared to fiscal year 2020. In fiscal year 2021, we sold approximately 2,164 tons of wine grapes for $3.0 million compared
to approximately 1,610 tons of wine grapes for $1.5 million in fiscal year 2020.
Other operations revenue in fiscal year 2021 was similar to fiscal year 2020.
Costs and Expenses
Total costs and expenses for fiscal year 2021 were $172.4 million compared to $183.6 million for fiscal year 2020. This 6%
decrease of $11.2 million was primarily attributable to decreases in our agribusiness costs and selling, general and administrative
expenses. Costs associated with our agribusiness division include packing costs, harvest costs, growing costs, costs related to the
lemons we procure from third-party growers and suppliers and depreciation and amortization expense. These costs are discussed
further below ($ in thousands):
Packing costs
Harvest costs
Growing costs
Third-party grower and supplier costs
Depreciation and amortization
Agribusiness costs and expenses
Agribusiness Costs and Expenses for the Years Ended October 31,
2021
2020
Change
$
$
38,754 $
17,227
27,195
56,690
8,626
148,492 $
45,545 $
20,714
27,861
54,218
8,943
157,281 $
(6,791)
(3,487)
(666)
2,472
(317)
(8,789)
(15)%
(17)%
(2)%
5%
(4)%
(6)%
•(cid:3)
Packing costs: Packing costs consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit
treatments, packing and shipping supplies and facility operating costs. Lemon packing costs were $36.0 million and $42.6
million in fiscal years 2021 and 2020, respectively. The decrease in fiscal year 2021 was primarily attributable to lower volume
of fresh lemons packed and sold, partially offset by higher average per carton costs, compared to fiscal year 2020. In fiscal
years 2021 and 2020, we packed and sold 4.4 million and 5.5 million cartons of lemons at average per carton costs of $8.22 and
$7.71, respectively. The increase in average per carton costs in fiscal year 2021, compared to fiscal year 2020, was primarily
due to decreased volume of lemons packed and sold. Additionally, in fiscal years 2021 and 2020, packing costs included $2.7
million and $3.0 million of shipping costs, respectively.
•(cid:3) Harvest costs: The decrease in fiscal year 2021 was primarily attributable to decreased volume of lemons, avocados and
oranges harvested compared to fiscal year 2020.
•(cid:3) Growing costs: Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation,
fertilization and soil amendments, pest control, pruning and irrigation. The decrease in fiscal year 2021 compared to fiscal year
2020 reflects farm management decisions based on weather, harvest timing and crop conditions.
•(cid:3) Third-party grower and supplier costs: We sell fruit that we grow and fruit that we procure from other growers and suppliers.
The cost of procuring fruit from others is referred to as third-party grower and supplier costs. The increase in fiscal year 2021
was primarily due to increased volume of fruit procured from suppliers, partially offset by decreased volume of fruit procured
from third party growers, compared to fiscal year 2020. In fiscal years 2021 and 2020, costs for purchased, packed fruit for
resale increased by $9.8 million; we incurred costs of $25.2 million and $15.5 million, respectively. During fiscal years 2021
and 2020, of the 4.4 million and 5.5 million lemon cartons sold, 2.3 million (52%) and 3.3 million (60%) were procured from
third-party growers at average per carton prices of $13.83 and $11.71, respectively: a decrease of $7.3 million.
•(cid:3) Depreciation and amortization: Depreciation and amortization expense in fiscal year 2021 was $0.3 million lower than fiscal
year 2020.
Other operations expenses for fiscal years 2021 and 2020 were $4.3 million and $4.5 million, respectively.
Loss on disposal of assets for fiscal years 2021 and 2020 were $0.1 million and $0.5 million, respectively.
Selling, general and administrative expenses for fiscal year 2021 were $19.4 million compared to $21.3 million for fiscal year 2020.
The $1.9 million decrease was primarily the result of:
34
•(cid:3)
•(cid:3)
•(cid:3)
$0.7 million decrease in hardware, software and training costs associated with an ERP implementation
$0.6 million decrease in selling expenses; and
$0.5 million decrease in other selling, general and administrative expenses, including certain corporate overhead expenses.
Other Income (Expense)
Other income (expense), for fiscal year 2021 was $2.2 million compared to $(7.4) million for fiscal year 2020. The $9.6 million
increase in other income (expense) was primarily the result of:
•(cid:3)
•(cid:3)
•(cid:3)
$0.5 million decrease in interest expense as a result of increased amounts capitalized;
$2.9 million increase in equity in earnings of investments primarily from LLCB; and
$6.3 million decrease in the loss on stock in Calavo.
Income Taxes
We recorded for fiscal years 2021 and 2020 income tax benefit of $0.3 million and $8.5 million on pre-tax loss of $4.2 million and
$26.4 million, respectively. The tax provision recorded for fiscal year 2021 differs from the U.S. federal statutory tax rate of 21%
due primarily to foreign jurisdictions which are taxed at different rates, state taxes, nondeductible tax items and valuation
allowances on certain deferred tax assets of foreign subsidiaries. Our effective tax rate for fiscal years 2021 and 2020 was 6.4% and
32.2%, respectively.
Loss (Income) Attributable to Noncontrolling Interest
Loss (income) attributable to noncontrolling interest primarily represents 10% and 49% of the net losses of PDA and Trapani Fresh,
respectively.
Segment Results of Operations
We operate in four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness. Our reportable
operating segments are strategic business units with different products and services, distribution processes and customer bases. We
evaluate the performance of our operating segments separately to monitor the different factors affecting financial results. Each
segment is subject to review and evaluations related to current market conditions, market opportunities and available resources. See
Note 22 - Segment Information of the notes to consolidated financial statements included in this Annual Report for additional
information regarding our operating segments.
Segment information for fiscal year 2021 (in thousands):
Other
Agribusiness
Agribusiness Corporate
and Other
Revenues from external customers
Intersegment revenues
Total net revenues
Costs and expenses
Depreciation and amortization
Operating income (loss)
Fresh
Lemons
125,448
$
Lemon
Packing
17,514
$
—
125,448
116,117
—
$
9,331
$
25,637
43,151
36,018
—
7,133
$
Eliminations
$
— $
Avocados
(25,637)
(25,637)
(25,637)
—
— $
6,784 $
—
6,784
4,211
—
2,573 $
11,635 $
—
11,635
9,157
—
2,478 $
Segment information for fiscal year 2020 (in thousands):
Revenues from external customers
Intersegment revenues
Total net revenues
Costs and expenses
Depreciation and amortization
Operating (loss) income
Fresh
Lemons
124,150
$
Lemon
Packing
13,413
$
—
124,150
125,305
—
(1,155) $
$
36,820
50,233
42,563
—
7,670
$
Eliminations
$
— $
Avocados
(36,820)
(36,820)
(36,820)
—
— $
8,806 $
—
8,806
5,168
—
3,638 $
13,568 $
—
13,568
12,122
—
1,446 $
Total
161,381 $
—
161,381
139,866
8,626
12,889 $
Total
159,937 $
—
159,937
148,338
8,943
2,656 $
4,646 $
—
4,646
22,682
1,186
(19,222) $
4,622 $
—
4,622
25,132
1,154
(21,664) $
Total
166,027
—
166,027
162,548
9,812
(6,333)
Total
164,559
—
164,559
173,470
10,097
(19,008)
Other
Agribusiness
Agribusiness Corporate
and Other
35
Fiscal Year 2021 Compared to Fiscal Year 2020
The following analysis should be read in conjunction with the previous section “Results of Operations.”
Fresh Lemons
Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products and brokered fruit other lemon revenue.
For fiscal year 2021, our fresh lemons segment revenue was $125.4 million compared to $124.2 million for fiscal year 2020. The
1% increase of $1.3 million was primarily the result of higher prices partially offset by lower volume of fresh lemons sold, as
discussed earlier.
Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs, cost of fruit we procure from
third-party growers and suppliers, transportation costs and packing service charges incurred from the lemon packing segment to
pack lemons for sale. For fiscal year 2021, our fresh lemon costs and expenses were $116.1 million compared to $125.3 million for
fiscal year 2020. The 7% decrease of $9.2 million primarily consisted of the following:
•(cid:3) Harvest costs for fiscal year 2021 were $2.8 million lower than fiscal year 2020.
•(cid:3) Growing costs for fiscal year 2021 were $0.7 million higher than fiscal year 2020.
•(cid:3) Third-party grower and supplier costs for fiscal year 2021 were $4.4 million higher than fiscal year 2020.
•(cid:3) Transportation costs for fiscal year 2021 were $0.2 million lower than fiscal year 2020.
•(cid:3)
Intersegment costs and expenses for fiscal year 2021 were $11.2 million lower than fiscal year 2020.
Lemon Packing
Lemon packing segment revenue is comprised of intersegment packing revenue and shipping and handling revenue. For fiscal year
2021, our lemon packing segment revenue was $43.2 million compared to $50.2 million for fiscal year 2020. The 14% decrease of
$7.1 million was primarily due to decreased volume of lemons packed.
Costs and expenses associated with our lemon packing segment consist of the cost to pack lemons for sale such as labor and
benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. For fiscal year 2021, our
lemon packing costs and expenses were $36.0 million compared to $42.6 million for fiscal year 2020. The 15% decrease of $6.5
million was primarily due to decreased volume of lemons packed.
Lemon packing segment operating income per carton sold was $1.63 and $1.39 for fiscal years 2021 and 2020, respectively.
The lemon packing segment included $25.6 million and $36.8 million of intersegment revenues for fiscal years 2021 and 2020,
respectively, which were charged to the fresh lemons segment to pack lemons for sale. Such intersegment revenues and expenses are
eliminated in our consolidated financial statements.
Avocados
For fiscal year 2021, our avocados segment revenue was $6.8 million compared to $8.8 million for fiscal year 2020, a 23% decrease
of $2.0 million.
Cost and expenses associated with our avocados segment include harvest costs and growing costs. For fiscal year 2021, our avocado
costs and expenses were $4.2 million compared to $5.2 million for fiscal year 2020. The 19% decrease of $1.0 million primarily
consisted of the following:
•(cid:3) Harvest costs for fiscal year 2021 were $0.4 million lower than fiscal year 2020.
•(cid:3) Growing costs for fiscal year 2021 were $0.5 million lower than fiscal year 2020.
Other Agribusiness
For fiscal year 2021, our other agribusiness segment revenue was $11.6 million compared to $13.6 million for fiscal year 2020. The
14% decrease of $1.9 million primarily consisted of the following:
36
•(cid:3) Orange revenue for fiscal year 2021 was $3.3 million lower than fiscal year 2020.
•(cid:3)
Specialty citrus and other crop revenue for fiscal year 2021 was $1.4 million higher than fiscal year 2020.
Costs and expenses associated with our other agribusiness segment include harvest, growing and purchased fruit costs. Our other
agribusiness costs and expenses for fiscal year 2021 were $9.2 million compared to $12.1 million for fiscal year 2020. The 24%
decrease of $3.0 million primarily consisted of the following:
•(cid:3) Harvest costs for fiscal year 2021 were $0.3 million lower than fiscal year 2020.
•(cid:3) Growing costs for fiscal year 2021 were $0.8 million lower than fiscal year 2020.
•(cid:3)
Purchased fruit costs for fiscal year 2021 were $1.9 million lower than fiscal year 2020.
Total agribusiness depreciation and amortization for fiscal year 2021 was $8.6 million compared to $8.9 million in fiscal year 2020.
The 4% decrease of $0.3 million was primarily due to reduced amortization as a result of selling and licensing certain intangible
assets of Trapani Fresh to FGF in March 2021.
Corporate and Other
Our corporate and other operations had rental revenues of approximately $4.6 million in fiscal years 2021 and 2020.
Costs and expenses in our corporate and other operations were approximately $22.7 million and $25.1 million in fiscal years 2021
and 2020, respectively, and include rental operations costs and selling, general and administrative expenses not allocated to the
operating segments. Depreciation and amortization expenses were approximately $1.2 million in fiscal years 2021 and 2020.
Additionally, loss on disposal of assets for fiscal years 2021 and 2020 was $0.1 million and $0.5 million, respectively.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash and cash flows generated from our operations and use of our revolving credit facility. Our
liquidity and capital position fluctuates during the year depending on seasonal production cycles, weather events and demand for
our products. Typically, our first and last fiscal quarters coincide with the fall and winter months during which we are growing crops
that are harvested and sold in the spring and summer, which are our second and third quarters. To meet working capital demand and
investment requirements of our agribusiness and real estate development projects and to supplement operating cash flows, we utilize
our revolving credit facility to fund agricultural inputs and farm management practices until sufficient returns from crops allow us to
repay amounts borrowed. Raw materials needed to propagate the various crops grown by us consist primarily of fertilizer,
herbicides, insecticides, fuel and water, all of which are readily available from local sources.
(cid:3)
Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term fixed
rate and variable rate debt and related interest payments, operating and finance leases and our noncontributory, defined benefit
pension plan (“the Plan”). In fiscal year 2021, we decided to terminate the Plan effective December 31, 2021. The liabilities
disclosed as of October 31, 2021, reflect an estimate of the additional cost to pay lump sums to a portion of the active and vested
terminated participants and purchase annuities for all remaining participants from an insurance company. See Notes 12, 13 and 17 to
the consolidated financial statements included in this Annual Report for amounts outstanding on October 31, 2021, related to debt,
leases and the Plan. Purchase obligations consist of contracts primarily related to packing supplies and pollination services, the
majority of which are due in the next three years.
(cid:3)
We believe that the cash flows from operations and available borrowing capacity from our existing credit facilities will be sufficient
to satisfy our capital expenditures, debt service, working capital needs and other contractual obligations for the next twelve months.
In addition, we have the ability to control a portion of our investing cash flows to the extent necessary based on our liquidity
demands.
Cash Flows from Operating Activities
For the fiscal years ended October 31, 2021, 2020 and 2019, net cash provided by (used in) operating activities was $9.6 million,
$(11.3) million and $1.4 million, respectively. Our cash flow provided by operating activities is primarily from agricultural sales and
37
rental operations. Cash flow used in operations generally consists of agribusiness costs, rental operation costs, selling, general and
administrative expenses. The significant components of our cash flows provided by operating activities are as follows:
•(cid:3) Net loss was $(3.9) million and $(17.9) million for fiscal years 2021 and 2020, respectively. The components of net loss in
fiscal year 2021 compared to fiscal year 2020 consist of an decrease in operating loss of $12.7 million, an increase in total other
income (expense) of $9.6 million and a decrease in income tax benefit of $8.2 million.
•(cid:3) The adjustments to reconcile net loss to net cash provided by (used in) operating activities provided $10.2 million of cash in
fiscal year 2021 compared to providing $17.6 million of cash in fiscal year 2020, primarily due to significant changes in loss on
stock in Calavo, equity in earnings of investments, net and deferred income taxes.
•(cid:3) The changes in operating assets and liabilities, net of business combinations provided $3.3 million of operating cash in fiscal
year 2021 compared to using $11.0 million of operating cash in fiscal year 2020, primarily due to significant changes in
accounts receivable and receivables/other from related parties, cultural costs, income tax receivable, and accounts payable and
growers and suppliers payable.
Cash Flows from Investing Activities
For the years ended October 31, 2021, 2020 and 2019, net cash (used in) provided by investing activities was $(10.2) million, $3.8
million and $(23.7) million, respectively, and is primarily comprised of capital expenditures, business acquisitions, sales of assets
and investments.
•(cid:3) Capital expenditures for fiscal year 2021 were comprised of $9.8 million for property, plant and equipment primarily related to
orchard and real estate development projects. Additionally, in fiscal year 2021 we invested $0.7 million in mutual water
companies and water rights.
•(cid:3) Capital expenditures for fiscal year 2020 were comprised of $10.6 million for property, plant and equipment primarily related to
orchard and real estate development projects. Additionally, in fiscal year 2020, we received proceeds from sale of stock in
Calavo of $11.0 million, proceeds from sales of property assets of $6.3 million and contributed $2.8 million to LLCB for the
development of our East Area I real estate development project.
Cash Flows from Financing Activities
For the years ended October 31, 2021, 2020 and 2019 net cash provided by financing activities was $0.5 million, $7.4 million and
$22.4 million, respectively.
•(cid:3) The $0.5 million of cash provided by financing activities for fiscal year 2021 is primarily comprised of net borrowings of long-
term debt in the amount of $7.1 million. Additionally, we paid common and preferred dividends, in aggregate, of $5.8 million
and paid $0.7 million for the exchange of common stock related to our employees restricted stock awards.
•(cid:3) The $7.4 million of cash provided by financing activities for fiscal year 2020 is primarily comprised of net borrowings of long-
term debt in the amount of $17.0 million. Additionally, we paid common and preferred dividends, in aggregate, of $5.9 million
and purchases of shares of our common stock of $3.5 million under our share repurchase program in fiscal year 2020.
Transactions Affecting Liquidity and Capital Resources
Credit Facilities and Long-Term Debt
We finance our working capital and other liquidity requirements primarily through cash from operations and our Farm Credit West
Credit Facility, which includes the MLA, Supplements and Revolving Equity Line of Credit (the "RELOC"). In addition, we have
the Farm Credit West term loans, Banco de Chile term loans and COVID-19 loans, and a note payable to the sellers of a land parcel.
Additional information regarding these loans and the note payable can be found in Note 12 to the consolidated financial statements
included in this Annual Report.
In June 2021, we entered into the MLA with Lender dated June 1, 2021, together with the Supplements and a Fixed Interest Rate
Agreement. The MLA governs the terms of the Supplements. The MLA amends and restates the previous Master Loan Agreement
between our Company and the Lender, dated June 19, 2017, and extends the principal repayment to July 1, 2026.
38
The Supplements and RELOC provide aggregate borrowing capacity of $130.0 million comprised of $75.0 million under the
Revolving Credit Supplement, $40.0 million under the Non-Revolving Credit Supplement and $15.0 million under the RELOC. As
of October 31, 2021, our outstanding borrowings under the Farm Credit West Credit Facility were $111.3 million and we had $18.7
million of availability.
The MLA subjects us to affirmative and restrictive covenants including, among other customary covenants, financial reporting
requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of
proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of our business.
We are also subject to a financial covenant that requires us to maintain compliance with a specified debt service coverage ratio on an
annual basis. In December 2021, the Lender modified the covenant to defer measurement at October 31, 2021 and revert to a debt
service coverage ratio of 1.25:1.0 measured as of October 31, 2022.
In August 2021, we entered into the FCW term loan with the Lender and used the proceeds to pay off the Wells Fargo term loan.
The FCW term loan has a fixed interest rate of 3.19% and is payable in monthly installments through September 2026.
In fiscal years 2021 and 2020 we received annual patronage dividends of $1.2 million and $1.6 million, respectively, from Farm
Credit West.
Treasury Stock
In fiscal year 2021, our Company's Board of Directors approved a share repurchase program authorizing us to repurchase up to
$10.0 million of our outstanding shares of common stock through September 2022; no shares have been repurchased under this
program. In fiscal year 2020, we repurchased 250,977 shares for $3.5 million under a program which expired in March 2021.
Dividends
(cid:3)
The holders of the Series B Convertible Preferred Stock (the “Series B Stock”) and the Series B-2 Preferred Stock (the “Series B-2
Preferred Stock”) are entitled to receive cumulative cash dividends. Such preferred dividends paid totaled $0.5 million in each of the
fiscal years 2021 and 2020.
(cid:3)
Cash dividends declared in each of the fiscal years 2021 and 2020 totaled $0.30 per common share and such dividends paid totaled
$5.3 million and $5.4 million for fiscal years 2021 and 2020, respectively.
Real Estate Development Activities and Related Capital Resources
As noted under “Transactions Affecting Liquidity and Capital Resources,” we have the ability to control a portion of our investing
cash flows to the extent necessary based upon our liquidity demands. In order for our real estate development operations to reach
their maximum potential benefit to us, however, we will need to be successful over time in identifying other third-party sources of
capital to collaborate with us to move those development projects forward. While we are frequently in discussions with potential
external sources of capital in respect to all of our development projects, current market conditions for California real estate projects
make it difficult to predict the timing and amounts of future capital that will be required to complete the development of our
projects.
In November 2015, we entered into a joint venture with Lewis for the residential development of our East Area I real estate
development project. To consummate the transaction, we formed LLCB as the development entity, contributed our East Area I
property to the joint venture and sold a 50% interest in the joint venture to Lewis for $20.0 million. We expect to receive
approximately $100.0 million from LLCB over the estimated 10 to 12-year life of the project including $20.0 million received on
the consummation of LLCB. LLCB's partners will share in capital contributions to fund project costs until loan proceeds and/or
revenues are sufficient to fund the project. Since inception each partner has made funding contributions of $21.4 million, including
$2.8 million in fiscal year 2020. The first phase of the project broke ground to commence mass grading in November 2017. Project
plans currently include approximately 1,500 residential units and site improvements to be completed. Lot sales representing 232 and
144 residential units closed in fiscal years 2021 and 2020, respectively, and 586 residential units have closed from the project's
inception to October 31, 2021.
Trend Information
The commodity pricing for our fresh produce, and therefore our revenues and margins, is significantly impacted by consumer
demand. The worldwide fresh produce industry has historically enjoyed consistent underlying demand and favorable growth
39
dynamics. In recent years, the market for fresh produce has increased faster than the rate of population growth, supported by
ongoing trends including greater consumer demand for healthy, fresh and convenient foods, increased retailer square footage
devoted to fresh produce, and greater emphasis on fresh produce as a differentiating factor in attracting customers. Health-conscious
consumers are driving much of the growth in demand for fresh produce. Over the past several decades, the benefits of natural,
preservative-free and organic foods have become an increasingly significant element of the public dialogue on health and nutrition.
As a result, consumption of fresh fruit and vegetables has markedly increased. Conversely, a decrease in demand, as was seen
during the COVID-19 pandemic as a result of restaurant closures, has the impact of reducing our pricing and therefore our revenues
and margins.
Off-Balance Sheet Arrangements
As discussed in Note 7 – Real Estate Development and Note 8 – Equity in Investments of the notes to consolidated financial
statements included in this Annual Report, we have investments in joint ventures and partnerships that are accounted for using the
equity method of accounting.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires us to develop critical accounting
policies and make certain estimates, assumptions and judgments that may affect the reported amounts of assets, liabilities, revenues
and expenses. We base our estimates and judgments on historical experience, available relevant data and other information that we
believe to be reasonable under the circumstances, and we continue to review and evaluate these estimates. Actual results may
materially differ from these estimates under different assumptions or conditions as new or additional information become available
in future periods. For further information on significant accounting policies, see discussion in Note 2 to the consolidated financial
statements included in this Annual Report.
Impairment of Real Estate Development Projects – We evaluate our real estate development projects, held either by us or as
included specifically within our investment in LLCB, for impairment on an ongoing basis. Our evaluation for impairment involves
an initial assessment of each real estate development project to determine whether events or changes in circumstances exist that may
indicate that the carrying amounts of, or investment in, real estate development are no longer recoverable. Possible indications of
impairment may include events or changes in circumstances affecting the entitlement process, zoning, government regulation,
geographical demand for new housing or commercial property, and market conditions related to residential or commercial land lots.
When events or changes in circumstances exist, we further evaluate the real estate development for impairment by a) comparing
undiscounted future cash flows expected to be generated over the life of the real estate development to the respective carrying
amount for its own real estate development or b) determining if its equity in investment has incurred an other-than-temporary
decline.
We make significant judgments in evaluating each real estate development project, as held by us or within our investment in LLCB,
for possible indications of impairment. These judgments may relate to the identification of appropriate and comparable market
prices, the consideration of changes to legal factors or the business climate, the likelihood of successfully completing the entitlement
process, changes in zoning or government regulation, and demand for new housing. Changes in these judgments could have a
significant impact on real estate development or equity in investments. For fiscal years 2021, 2020 and 2019, no impairment loss
has been recognized on any real estate development and no other-than-temporary-impairment has been recognized on our equity in
LLCB.
The impairment calculation for real estate developments held by us compares the carrying value of the asset to the asset’s estimated
future cash flows (undiscounted). If the estimated future cash flows are less than the carrying value of the asset, we calculate an
impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which
may be based on estimated future cash flows (discounted). We recognize an impairment loss equal to the amount by which the
asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of
the asset will be its new cost basis. Restoration of a previously recognized impairment loss is prohibited. If actual results are not
consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to
impairment losses that could be material to our results of operations.
Whenever events or changes in circumstances indicate that the carrying amount of our equity investment in LLCB might not be
recoverable, then we determine whether an impairment is other-than-temporary. If we conclude the impairment is other-than-
temporary, we determine the estimated fair value of the investment by performing a discounted cash flow or market approach
analysis and recognize an other-than-temporary impairment to reduce the investment to its estimated fair value.
40
We believe that the accounting estimate related to impairment of real estate development projects held by us, or other-than-
temporary impairment of our equity investment in LLCB, is a critical accounting estimate because it is very susceptible to change
from period to period; it requires management to make assumptions about future prices, production, and costs, and the potential
impact of a loss from impairment could be material to our earnings. Management’s assumptions regarding future cash flows from
real estate development projects or return on equity of our investment in LLCB have fluctuated in the past due to changes in prices,
production and costs and are expected to continue to do so in the future as market conditions change.
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in this Annual
Report for information concerning recent accounting pronouncements.
41
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Borrowings under the Farm Credit West Credit Facility and Farm Credit West Term Loans are or will be subject to variable interest
rates. These variable interest rates subject us to the risk of increased interest costs associated with any upward movements in interest
rates. For the Farm Credit West Credit Facility and Farm Credit West Term Loans, our borrowing interest rate is an internally
calculated rate based on Farm Credit West’s internal monthly operations and their cost of funds and generally follows the changes in
the 90-day treasury rates in increments divisible by 0.25%. At October 31, 2021, our total debt outstanding under the Farm Credit
West Credit Facility and the Farm Credit West Term Loans was $111.3 million and $18.2 million, respectively.
From time to time we enter into interest rate swap agreements to manage risks and costs associated with our financing activities.
Based on our level of borrowings at October 31, 2021, a 100 basis points increase in interest rates would increase our interest
expense $0.7 million for fiscal year 2022 and an annual average of $0.8 million for the three subsequent fiscal years. Additionally, a
100 basis points increase in the interest rate would decrease our net income by $0.5 million for fiscal year 2022 and an annual
average of $0.6 million for the three subsequent fiscal years. Refer to the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Liquidity and Capital Resources” for additional information.
42
Item 8. Financial Statements and Supplementary Data
Limoneira Company
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements of Limoneira Company
Consolidated Balance Sheets at October 31, 2021 and 2020
Consolidated Statements of Operations for the years ended October 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Loss for the years ended October 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity and Temporary Equity for the years ended October 31, 2021, 2020 and
2019
Consolidated Statements of Cash Flows for the years ended October 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
44
46
47
48
49
50
52
All schedules are omitted for the reason that they are not applicable or the required information is included in the Consolidated
Financial Statements or the notes thereto.
43
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Limoneira Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Limoneira Company and subsidiaries (the "Company") as of
October 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders'
equity and temporary equity, and cash flows, for each of the three years in the period ended October 31, 2021, and the related
notes (collectively referred to as the "financial statements"). In our opinion, based on our audits and the report of the other
auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31,
2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended October 31,
2021, in conformity with accounting principles generally accepted in the United States of America.
We did not audit the financial statements of Limoneira Lewis Community Builders, LLC (“LLCB”), the Company's investment
in which is accounted for by use of the equity method. The accompanying consolidated financial statements of the Company
include, before the basis difference and related amortization discussed in Note 8, its equity investment in LLCB of $51,416,000
and $46,908,000 as of October 31, 2021 and 2020, respectively, and its equity earnings in LLCB of $4,508,000, $1,386,000 and
$4,368,000 for the years ended October 31, 2021, 2020 and 2019, respectively. The financial statements of LLCB were audited
by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the
Company’s equity investment and equity earnings in LLCB, is based on the report of the other auditors.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of October 31, 2021, based on the criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated January 10, 2022, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits and the report of the other auditors provide a reasonable
basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Real Estate Development – Impairment Indicators – Refer to Notes 2, 5, 7 and 8 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of real estate development, as held by the Company or as included specifically within its investment
in Limoneira Lewis Community Builders, LLC (“LLCB”), for impairment involves an initial assessment of each real estate
44
development to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of, or
investment in, real estate development are no longer recoverable. Possible indications of impairment may include events or
changes in circumstances affecting the entitlement process, zoning, government regulation, geographical demand for new
housing or commercial property, and market conditions related to pricing of residential or commercial land lots. When events or
changes in circumstances exist, the Company further evaluates the real estate development for impairment by a) comparing
undiscounted future cash flows expected to be generated over the life of the real estate development to the respective carrying
amount for its own real estate development or b) determining if its equity in investment has incurred an other-than-temporary
decline.
The Company makes significant judgments in evaluating real estate development for possible indications of impairment. These
judgments may relate to the identification of appropriate and comparable market prices, the consideration of changes to legal
factors or the business climate, the likelihood of successfully completing the entitlement process, changes in zoning or
government regulation, and demand for new housing. Changes in these judgments could have a significant impact on real estate
development. Real estate development assets were $22,828,000, and equity in investment in LLCB was $60,216,000 as of
October 31, 2021. For the year ended October 31, 2021, no impairment loss has been recognized on any real estate
development and no other-than-temporary-impairment has been recognized on the Company’s equity in LLCB.
We identified the management judgments used in the determination of impairment indicators for real estate development as a
critical audit matter due to their significance and because of the subjectivity used by management when determining whether
events or changes in circumstances have occurred indicating that the carrying amounts of, or investment in, real estate
development may not be recoverable. This required a high degree of auditor judgment when performing audit procedures to
evaluate whether management appropriately identified impairment indicators.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of real estate development for possible indications of impairment included the
following, among others:
•(cid:3) We tested the effectiveness of the controls over management’s identification of possible circumstances that may
indicate that real estate development is no longer recoverable, including controls over management’s evaluation of the
entitlement process, litigation, changes in zoning, government regulation, geographical demand for new housing or
commercial property and market conditions related to pricing of residential or commercial land lots.
(cid:402)(cid:3) We evaluated management’s impairment analysis by:
(cid:405)(cid:3)
Searching for adverse asset-specific and/or market conditions by reviewing publicly available information on
home values and land values in the surrounding regions of the development, periodicals and news
information relating to the Southern California housing market, other independent market data, including
considerations of the demand for housing in the market and changes to comparable home prices
(cid:405)(cid:3) Obtaining information from legal counsel and performing inquiries with management in order to evaluate any
changes in the status of litigation matters affecting the development properties and the potential impact on the
ability to recover the accumulated costs, including any relevant government regulations and/or other matters
impacting the entitlement process
(cid:405)(cid:3) With the assistance of our fair value specialists, we evaluated comparable land sales for both commercial and
residential lots in the area as well as cost to develop residential lot information and compared it to information
used by management
(cid:405)(cid:3) Developing an independent expectation of impairment indicators and comparing such expectation to
management’s analysis
Los Angeles, California
January 10, 2022
We have served as the Company’s auditor since 2019.
/s/ Deloitte & Touche LLP
45
LIMONEIRA COMPANY
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share amounts)
Assets
Current assets:
Cash
Accounts receivable, net
Cultural costs
Prepaid expenses and other current assets
Receivables/other from related parties
Income taxes receivable
Total current assets
Property, plant and equipment, net
Real estate development
Equity in investments
Goodwill
Intangible assets, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Growers and suppliers payable
Accrued liabilities
Payables to related parties
Current portion of long-term debt
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion
Deferred income taxes
Other long-term liabilities
Total liabilities
Commitments and contingencies
Series B Convertible Preferred Stock – $100.00 par value (50,000 shares authorized: 14,790 shares issued
and outstanding at October 31, 2021 and 2020) (8.75% coupon rate)
Series B-2 Convertible Preferred Stock – $100.00 par value (10,000 shares authorized: 9,300 shares issued
and outstanding at October 31, 2021 and 2020) (4% dividend rate on liquidation value of $1,000 per share)
Stockholders' equity:
Series A Junior Participating Preferred Stock – $0.01 par value (20,000 shares authorized: zero issued or
outstanding at October 31, 2021 and 2020)
Common Stock – $0.01 par value (39,000,000 shares authorized: 17,936,377 and 17,857,707 shares
issued and 17,685,400 and 17,606,730 shares outstanding at October 31, 2021 and 2020, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost, 250,977 shares at October 31, 2021 and 2020
Noncontrolling interest
Total stockholders' equity
Total liabilities and stockholders' Equity
See Notes to Consolidated Financial Statements.
46
October 31,
2021
2020
439 $
17,483
7,500
10,709
5,958
—
42,089
242,420
22,828
64,072
1,527
8,329
11,011
392,276 $
8,963 $
10,371
6,542
6,976
2,472
35,324
130,353
22,853
4,501
193,031
—
1,479
9,331
501
16,261
6,865
10,688
2,294
5,911
42,520
242,649
21,636
61,214
1,535
11,309
8,737
389,600
5,838
8,126
7,947
6,273
3,277
31,461
122,571
22,430
6,568
183,030
—
1,479
9,331
—
—
179
163,965
21,552
(5,733)
(3,493)
11,965
188,435
392,276 $
179
162,084
30,797
(7,548)
(3,493)
13,741
195,760
389,600
$
$
$
$
LIMONEIRA COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except share amounts)
Net revenues:
Agribusiness
Other operations
Total net revenues
Costs and expenses:
Agribusiness
Other operations
Loss (gain) on disposal of assets
Selling, general and administrative
Total costs and expenses
Operating loss
Other income (expense):
Interest income
Interest expense, net of patronage dividends
Equity in earnings of investments, net
Loss on stock in Calavo Growers, Inc.
Other income, net
Total other income (expense)
Loss before income tax benefit
Income tax benefit
Net loss
Loss (income) attributable to noncontrolling interest
Net loss attributable to Limoneira Company
Preferred dividends
Net loss applicable to common stock
Basic net loss per common share
Diluted net loss per common share
Years Ended October 31,
2020
2019
2021
$
161,381 $
4,646
166,027
159,937 $
4,622
164,559
148,492
4,332
109
19,427
172,360
(6,333)
379
(1,501)
3,203
—
89
2,170
157,281
4,504
502
21,280
183,567
(19,008)
362
(2,048)
339
(6,299)
219
(7,427)
166,549
4,849
171,398
152,372
4,439
(1,069)
21,170
176,912
(5,514)
207
(2,341)
3,073
(2,117)
129
(1,049)
(4,163)
(26,435)
(6,563)
266
(3,897)
456
(3,441)
(501)
(3,942) $
8,494
(17,941)
1,506
(16,435)
(501)
(16,936) $
1,097
(5,466)
(477)
(5,943)
(501)
(6,444)
(0.23) $
(0.96) $
(0.37)
(0.23) $
(0.96) $
(0.37)
$
$
$
Weighted-average common shares outstanding-basic
Weighted-average common shares outstanding-diluted
17,555,000
17,555,000
17,666,000
17,666,000
17,580,000
17,580,000
See Notes to Consolidated Financial Statements.
47
LIMONEIRA COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Years Ended October 31,
2020
(17,941) $
2021
(3,897) $
2019
(685)
2,500
—
1,815
(2,082)
445
(1,637) $
(707)
274
140
(293)
(18,234)
1,536
(16,698) $
(5,466)
(1,103)
(607)
—
(1,710)
(7,176)
438
(6,738)
Net loss
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Minimum pension liability adjustments, net of tax of $940, $(69) and $(252)
Residual state tax effects on sale of equity securities
Total other comprehensive income (loss), net of tax
Comprehensive loss
Comprehensive loss attributable to noncontrolling interest
Comprehensive loss attributable to Limoneira Company
$
$
See Notes to Consolidated Financial Statements.
48
LIMONEIRA COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY
($ in thousands)
Stockholders’ Equity
Common Stock
Additional
Paid-In Retained
Amount Capital Earnings
Accumulated
Other
Comprehensive Treasury
Stock
Income (Loss)
Non-
controlling
Interest
Series B
Preferred
Stock
Total
176
$ 159,071 $ 50,354
$
8,965 $ — $
574 $ 219,140 $ 1,479 $
Shares
17,647,135 $
Temporary Equity
Series B-2
Preferred
Stock
9,331
—
—
—
145,737
(36,692)
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
—
1,789
(606)
—
—
—
(5,331)
(129)
(372)
—
—
—
(5,943)
—
—
15,921
—
(1,411)
17,756,180
178
160,254
53,089
—
—
—
112,841
(11,314)
—
(250,977)
—
—
—
—
—
1
—
—
—
—
—
—
—
—
2,043
(213)
—
—
—
—
(5,356)
(129)
(372)
—
—
—
—
(16,435)
—
—
—
—
—
—
—
(1,710)
(15,921)
1,411
(7,255)
—
—
—
—
—
—
—
—
(293)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,493)
—
—
—
—
—
—
—
14,410
477
(5,331)
(129)
(372)
1,791
(606)
14,410
(5,466)
(39)
(1,749)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15,422
221,688
1,479
9,331
—
—
—
—
—
(145)
—
(1,506)
(30)
(5,356)
(129)
(372)
2,044
(213)
(145)
(3,493)
(17,941)
(323)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17,606,730
179
162,084
30,797
(7,548)
(3,493)
13,741
195,760
1,479
9,331
—
—
—
125,663
(46,993)
—
—
—
—
—
—
1
(1)
—
—
—
—
—
—
2,581
(700)
—
—
—
(5,303)
(129)
(372)
—
—
—
(3,441)
—
—
—
—
—
—
—
—
1,815
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,331)
(456)
11
(5,303)
(129)
(372)
2,582
(701)
(1,331)
(3,897)
1,826
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17,685,400 $
179
$ 163,965 $ 21,552
$
(5,733) $ (3,493) $
11,965 $ 188,435 $ 1,479 $
9,331
Balance at October 31,
2018
Dividends - common
($0.30 per share)
Dividends - Series B
($8.75 per share)
Dividends - Series B-2
($40 per share)
Stock compensation
Exchange of common
stock
Acquired noncontrolling
interest
Net (loss) income
Other comprehensive
loss, net of tax
Reclassification of
unrealized gain on
marketable securities
upon adoption of ASU
2016-01
Reclassification upon
adoption of ASU 2018-
02
Balance at October 31,
2019
Dividends - common
($0.30 per share)
Dividends - Series B
($8.75 per share)
Dividends - Series B-2
($40 per share)
Stock compensation
Exchange of common
stock
Noncontrolling interest
adjustment
Treasury shares
Net loss
Other comprehensive
loss, net of tax
Balance at October 31,
2020
Dividends - common
($0.30 per share)
Dividends - Series B
($8.75 per share)
Dividends - Series B-2
($40 per share)
Stock compensation
Exchange of common
stock
Noncontrolling interest
adjustment
Net loss
Other comprehensive
(loss) income, net of tax
Balance at October 31,
2021
See Notes to Consolidated Financial Statements
49
LIMONEIRA COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended October 31,
2020
2019
2021
$
(3,897) $
(17,941) $
(5,466)
Operating activities
Net loss
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization
Loss (gain) on disposal of assets
Stock compensation expense
Non-cash lease expense
Equity in earnings of investments, net
Cash distributions from equity investments
Deferred income taxes
Loss on stock in Calavo Growers, Inc.
Other, net
Changes in operating assets and liabilities, net of business
combinations:
Account receivable and receivables/other from related parties
Cultural costs
Prepaid expenses and other current assets
Income taxes receivable
Other assets
Accounts payable and growers and suppliers payable
Accrued liabilities and payables to related parties
Other long-term liabilities
Net cash provided by (used in) operating activities
Investing activities
Capital expenditures
Net proceeds from sales of assets
Net proceeds from sales of real estate development assets
Agriculture property acquisition
Business combination
Net proceeds from sale of stock in Calavo Growers, Inc.
Loan to Limoneira Lewis Community Builders, LLC
Collection on loan and note receivable
Equity investment contributions
Cash distribution from equity investment
Investments in mutual water companies and water rights
Net cash (used in) provided by investing activities
$
50
9,812
109
2,582
520
(3,203)
219
(189)
—
335
(5,076)
(639)
(1,021)
5,911
(5)
5,389
(730)
(512)
9,605
10,097
502
2,044
470
(339)
—
(2,133)
6,299
671
(309)
359
(44)
(4,932)
411
(5,545)
(685)
(242)
(11,317)
(9,834)
119
—
—
—
—
—
25
—
106
(653)
(10,237) $
(10,599)
6,261
—
—
—
11,048
(1,800)
1,800
(2,800)
—
(64)
3,846 $
8,633
(1,069)
1,791
—
(3,073)
351
(773)
2,117
(393)
(4,012)
1,447
(2,548)
(601)
(7)
3,392
1,459
117
1,365
(15,867)
3,978
2,886
(397)
(15,000)
4,785
—
150
(4,000)
283
(472)
(23,654)
LIMONEIRA COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Financing activities
Borrowings of long-term debt
Repayments of long-term debt
Principal paid on finance lease
Dividends paid - common
Dividends paid - preferred
Exchange of common stock
Purchase of treasury stock
Payments of deferred financing costs
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash
Cash at beginning of year
Cash at end of year
Supplemental disclosures of cash flow information
Cash paid during the year for interest, net of amounts capitalized
Cash (received) paid during the year for income taxes, net
Non-cash investing and financing activities:
Decrease in real estate development and sale-leaseback deferral
Non-cash reduction of note receivable
Capital expenditures accrued but not paid at year-end
Years Ended October 31,
2020
2021
2019
102,196 $
(95,140)
(18)
(5,303)
(501)
(700)
—
—
534
36
(62)
501
439 $
121,056 $
(104,066)
—
(5,356)
(501)
(213)
(3,493)
(66)
7,361
(5)
(115)
616
501 $
122,899
(93,994)
—
(5,331)
(501)
(605)
—
(35)
22,433
(137)
7
609
616
1,503 $
(5,911) $
1,865 $
(1,235) $
2,532
130
— $
— $
657 $
— $
— $
4,269 $
(58,330)
89
1,333
$
$
$
$
$
$
$
In December 2018, the Company terminated its lease agreement with LLCB (as defined herein) that is developing the East Area
I real estate development project. As a result, the Company reduced its sale lease-back deferral and corresponding real estate
development by $58,330,000 and reclassified $33,353,000 of the Company’s basis in the joint venture from real estate
development to equity in investments as further described in Note 7 - Real Estate Development and Note 8 - Equity in
Investments of the notes to consolidated financial statements included in this Annual Report.
See Notes to Consolidated Financial Statements.
51
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Limoneira Company (together with its consolidated subsidiaries, the “Company”) engages primarily in growing citrus and
avocados, picking and hauling citrus, and packing, marketing and selling lemons. The Company is also engaged in residential
rentals and other rental operations and real estate development activities.
The Company markets and sells lemons directly to food service, wholesale and retail customers throughout the United States,
Canada, Asia, Europe and other international markets. The Company is a member of Sunkist Growers, Inc. (“Sunkist”), an
agricultural marketing cooperative, and sells its oranges, specialty citrus and other crops to Sunkist-licensed and other third-
party packinghouses.
The Company sells the majority of its avocado production to Calavo Growers, Inc. (“Calavo”), a packing and marketing
company listed on the NASDAQ Global Select Market under the symbol CVGW. Calavo’s customers include many of the
largest retail and food service companies in the United States and Canada. Calavo packs the Company's avocados, which are
then sold and distributed under Calavo brands to its customers.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and
investments in which the Company holds a controlling interest. The consolidated financial statements represent the
consolidated balance sheets, statements of operations, statements of comprehensive loss, statements of stockholders’ equity and
temporary equity and statements of cash flows of Limoneira Company and consolidated subsidiaries. Intercompany balances
and transactions have been eliminated in consolidation. The Company considers the criteria established under the Financial
Accounting Standards Board (“FASB”) – Accounting Standards Code (“ASC”) 810, Consolidations, and the effect of variable
interest entities, in its consolidation process.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Accounts Receivable
The Company grants credit in the course of its operations to cooperatives, companies and lessees of the Company’s facilities.
The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require
collateral. The Company provides allowances on its receivables as required based on accounts receivable aging and other
factors. At October 31, 2021 and 2020 the allowances totaled $444,000 and $812,000, respectively. For fiscal years 2021, 2020
and 2019, credit losses were insignificant.
Concentrations and Geographic Information
The Company sells the majority of its avocado production to Calavo. Sales of avocados to Calavo were $6,594,000, $8,806,000
and $3,080,000 in fiscal years 2021, 2020 and 2019, respectively. The Company sells the majority of its oranges and specialty
citrus to a third-party packinghouse.
Concentrations of credit risk with respect to revenues and trade receivable are limited due to a large, diverse customer base.
Two customers each represented 10% of revenue for the year ended October 31, 2021 and one customer represented 10% of
revenue for the year ended October 31, 2020. No individual customer represented more than 10% of accounts receivable, net as
of October 31, 2021 and one customer represented more than 10% of accounts receivable, net as of October 31, 2020.
Lemons procured from third-party growers were approximately 52%, 60% and 60% of the Company's lemon supply in fiscal
years 2021, 2020 and 2019, respectively. One third-party grower was 46% and 39% of grower payable at October 31, 2021 and
2020, respectively.
The Company maintains its cash in federally insured financial institutions. The account balances at these institutions
periodically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a
concentration of risk related to amounts on deposit in excess of FDIC insurance coverage.
52
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)
Concentrations and Geographic Information (continued)
During fiscal years 2021, 2020 and 2019, the Company had approximately $2,976,000, $3,521,000 and $3,204,000,
respectively, of total sales in Chile by Fruticola Pan de Azucar S.A. (“PDA”) and Agricola San Pablo SpA. ("San Pablo").
During fiscal years 2021, 2020 and 2019, the Company had approximately $3,633,000, $14,150,000 and $14,651,000,
respectively, of total sales in Argentina by Trapani Fresh.
The majority of the Company's avocados, oranges and specialty citrus and other crops are sold to packinghouses and processors
located in the United States. Most of its long-lived assets are located within the United States. Long-lived assets, net of
accumulated depreciation, located in Chile were $14,322,000 and $15,261,000 as of October 31, 2021 and 2020, respectively,
and located in Argentina were $19,700,000 and $18,576,000 as of October 31, 2021 and 2020, respectively.
Cultural Costs
Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil
amendments, pest control, pruning and irrigation. Harvest costs are comprised of labor and equipment expenses incurred to
harvest and deliver crops to the packinghouses.
Certain of the Company's crops have distinct growing periods and distinct harvest and selling periods, each of which lasts
approximately four to eight months. During the growing period, cultural costs are capitalized as they are associated with
benefiting and preparing the crops for the harvest and selling period. During the harvest and selling period, harvest costs and
cultural costs are expensed when incurred and capitalized cultural costs are amortized as components of agribusiness costs and
expenses.
Due to climate, growing conditions and the types of crops grown, certain of the Company's other crops may be harvested and
sold on a year-round basis. Accordingly, the Company does not capitalize cultural costs associated with these crops and
therefore such costs, as well as harvest costs associated with these crops, are expensed to operations when incurred as
components of agribusiness costs and expenses.
Most cultural costs, including amortization of capitalized cultural costs, and harvest costs are associated with and charged to
specific crops. Certain other costs, such as property taxes, indirect labor, including farm supervision and management, and
irrigation that benefit multiple crops are allocated to crops on a per acre basis.
Income Taxes
Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax
bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and
liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to
affect taxable income. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount
expected to be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be
sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized
in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement.
Property, Plant and Equipment
Property, plant and equipment is stated at original cost, net of accumulated depreciation. Depreciation is computed using the
straight-line method at rates based upon the estimated useful lives of the related assets as follows (in years):
Land improvements
Buildings and building improvements
Equipment
Orchards and vineyards
10 – 30
10 – 50
5 – 20
20 – 40
53
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment (continued)
Costs of planting and developing orchards are capitalized until the orchards become commercially productive. Planting costs
consist primarily of the costs to purchase and plant nursery stock. Orchard development costs consist primarily of maintenance
costs of orchards such as cultivation, pruning, irrigation, labor, pest control and fertilization, and interest costs during the
development period. The Company ceases the capitalization of costs and commences depreciation when the orchards become
commercially productive and orchard maintenance costs are accounted for as cultural costs as described above.
Capitalized Interest
Interest is capitalized on real estate development projects and significant construction in progress using the weighted average
interest rate during the fiscal year. Capitalized interest is included in property, plant, and equipment and real estate development
assets in the Company’s consolidated balance sheets.
Real Estate Development Costs
The Company capitalizes the planning, entitlement, construction, development costs and interest associated with its various real
estate projects. Costs that are not capitalized, which include property maintenance and repairs, general and administrative and
marketing expenses, are expensed as incurred. A real estate development project is considered substantially complete upon the
cessation of construction and development activities. Once a project is substantially completed, future costs are expensed as
incurred. The Company capitalized costs related to its real estate projects of $1,192,000 and $4,034,000 in fiscal years 2021 and
2020, respectively.
Equity in Investments
Investments in unconsolidated joint ventures in which the Company has significant influence but less than a controlling interest,
or is not the primary beneficiary if the joint venture is determined to be a Variable Interest Entity (“VIE”), are accounted for
under the equity method of accounting and, accordingly, are adjusted for capital contributions, distributions and the Company’s
equity in net earnings or loss of the respective joint venture.
Equity Securities
The Company’s equity securities, are stated at fair value with unrealized gains (losses) reported in net income. The Company
had no equity securities as of October 31, 2021 and 2020.
Long-Lived and Intangible Assets
Intangible assets consist primarily of customer relationships, trade names and trademarks and a non-competition agreement.
The Company’s definite-life intangible assets are being amortized on a straight-line basis over their estimated lives ranging
from eight to ten years. Acquired water and mineral rights are indefinite-life assets not subject to amortization. Assets held for
sale are carried at the lower of cost or fair value less estimated cost to sell.
The Company evaluates long-lived assets, including its property and equipment, real estate development projects and definite-
life intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable. If the estimated fair value or undiscounted future cash flows from the use of an asset are less than the
carrying value of that asset, a write-down is recorded to reduce the carrying value of the asset to its estimated fair value. The
Company evaluates its indefinite-life intangible assets annually or whenever events or changes in circumstances indicate an
impairment of the assets’ value may exist.
COVID-19 Pandemic
There is uncertainty around the breadth and duration of the Company's business disruptions related to the COVID-19 pandemic.
The decline in demand for the Company's products beginning the second quarter of fiscal year 2020, which it believes was due
to the COVID-19 pandemic, negatively impacted its sales and profitability for the last three quarters of fiscal year 2020 and all
of fiscal year 2021. The Company also expects COVID-19 to have some impact to its sales and profitability in future periods.
The duration of these trends and the magnitude of such impacts are uncertain and therefore cannot be estimated at this time, as
they are influenced by a number of factors, many of which are outside management’s control. The full impact of the COVID-19
pandemic on the Company's results of operations, financial condition, or liquidity, including its ability to comply with debt
covenants, for fiscal year 2022 and beyond, is driven by estimates that contain uncertainties.
54
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)
Goodwill
Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying
value may not be recoverable. Goodwill impairment is tested at the reporting unit level, which is defined as an operating
segment or one level below the operating segment. The annual, or interim, goodwill impairment test is performed by comparing
the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the
carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of
goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit
to determine if the quantitative impairment test is necessary. Goodwill impairment testing involves significant judgment and
estimates.
Fair Values of Financial Instruments
Accounts receivable, note receivable, accounts payable, growers and suppliers payable and accrued liabilities reported on the
Company’s consolidated balance sheets approximate their fair values due to the short-term nature of the instruments.
Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the fair value
of long-term debt is approximately equal to its carrying amount as of October 31, 2021 and 2020.
Business Combination and Asset Acquisition
Business combinations are accounted for under the acquisition method in accordance with ASC 805, Business Combinations.
The acquisition method requires identifiable assets acquired and liabilities assumed and any noncontrolling interest in the
business acquired be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains
control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds
the net fair value of assets acquired and liabilities assumed is recorded as goodwill. Acquisitions that do not meet the definition
of a business are accounted for as asset acquisitions. An asset acquisition is accounted for by allocating the cost of the
acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis. Goodwill is not recognized in
an asset acquisition with any consideration in excess of net assets acquired allocated to acquired assets on a relative fair value
basis. Transaction costs are expensed in a business combination and are considered a component of the cost of the acquisition in
an asset acquisition.
Comprehensive Loss
Comprehensive loss represents all changes in a company’s net assets, except changes resulting from transactions with
stockholders. Other comprehensive income or loss primarily includes foreign currency translation items, defined benefit
pension items and unrealized gains or losses on available-for-sale securities. Accumulated other comprehensive income (loss) is
reported as a component of the Company's stockholders' equity.
The following table summarizes the changes in other comprehensive income (loss) by component (in thousands):
2021
Tax
(Expense)
Benefit
Pre-tax
Amount
Net
Amount
Pre-tax
Amount
2020
Tax
(Expense)
Benefit
Net
Amount
Pre-tax
Amount
2019
Tax
(Expense)
Benefit
Net
Amount
Foreign currency translation
adjustments
$
(685) $
—
$
(685) $
(707) $
—
$
(707) $ (1,103) $
—
$ (1,103)
Minimum pension liability adjustments:
Other comprehensive gain (loss)
before reclassifications
Available-for-sale securities:
Amounts reclassified to earnings
included in "Selling, general and
administrative"
Other comprehensive income (loss)
—
$ 2,755
$
3,440
(940)
2,500
205
69
274
(859)
252
(607)
—
—
(940) $ 1,815
$
—
(502) $
140
209
$
140
(293) $ (1,962) $
—
—
252
—
$ (1,710)
55
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)
The following table summarizes the changes in accumulated other comprehensive income (loss) by component (in thousands):
Balance as of October 31, 2018
Adoption of ASU 2016-01
Adoption of ASU 2018-02
Balance as of November 1, 2018
Other comprehensive loss
Balance as of October 31, 2019
Other comprehensive (loss) income
Balance as of October 31, 2020
Other comprehensive (loss) income
Balance as of October 31, 2021
Foreign Currency
Foreign
Currency
Translation Loss
$
Defined
Benefit
Pension Plan
Available-for-
Sale
Securities
Other
Accumulated Other
Comprehensive
Income (Loss)
(1,257) $
—
(2)
(1,259)
(1,103)
(2,362)
(707)
(3,069)
(685)
(3,754) $
(3,238) $
—
(908)
(4,146)
(607)
(4,753)
274
(4,479)
2,500
(1,979) $
13,435 $
(15,921)
2,346
(140)
—
(140)
140
—
—
— $
25 $
—
(25)
—
—
—
—
—
—
— $
8,965
(15,921)
1,411
(5,545)
(1,710)
(7,255)
(293)
(7,548)
1,815
(5,733)
$
San Pablo and PDA’s functional currency is the Chilean Peso. Their balance sheets are translated to U.S. dollars at exchange
rates in effect at the balance sheet date and their income statements are translated at average exchange rates during the reporting
period. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other
comprehensive income (loss).
Aggregate foreign exchange transaction losses realized for the Company's foreign subsidiaries was approximately $646,000 for
fiscal year 2021 and are included in selling, general and administrative expenses in the consolidated statements of operations.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from contracts with customers, and recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the Company expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company
applies the following steps:
Identify the contract(s) with a customer;
Identify the performance obligations in the contract;
•(cid:3)
•(cid:3)
•(cid:3) Determine the transaction price;
•(cid:3) Allocate the transaction price to the performance obligations in the contract;
•(cid:3) Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company determines the appropriate method by which it recognizes revenue by analyzing the nature of the products or
services being provided as well as the terms and conditions of contracts or arrangements entered into with its customers. The
Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are
identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
A contract's transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract
and each performance obligation is valued based on its estimated relative standalone selling price.
The Company recognizes the majority of its revenue at a point in time when it satisfies a performance obligation and transfers
control of the product to the respective customer. The amount of revenue that is recognized is based on the transaction price,
which represents the invoiced amount and includes estimates of variable consideration such as allowances for estimated
customer discounts or concessions, where applicable. The amount of variable consideration included in the transaction price
may be constrained and is included only to the extent that it is probable that a significant reversal in the amount of the
cumulative revenue recognized under the contract will not occur in a future period.
Agribusiness revenue - Revenue from lemon sales is generally recognized at a point in time when the customer takes control of
the fruit from the Company’s packinghouse, which aligns with the transfer of title to the customer. The Company has elected to
treat any shipping and handling costs incurred after control of the goods has been transferred to the customer as agribusiness
costs.
56
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)
The Company’s avocados, oranges, specialty citrus and other specialty crops are packed and sold by Calavo and other third-
party packinghouses. The Company’s arrangements with its third-party packinghouses are such that the Company is the
producer and supplier of the product and the third-party packinghouses are the Company’s customers. The Company controls
the product until it is delivered to the third-party packinghouses at which time control of the product is transferred to the third-
party packinghouses and revenue is recognized.
Revenue from crop insurance proceeds is recorded when the amount can be reasonably determined and upon establishment of
the present right to payment. The Company recorded agribusiness revenues from crop insurance proceeds of $2,311,000 in
fiscal year 2019. No proceeds were received in fiscal years 2021 and 2020.
Advertising Expense
Advertising costs are expensed as incurred. Advertising costs were $178,000 and $239,000 in fiscal years 2021 and 2020,
respectively, and were not material in fiscal year 2019.
Leases
Accounting for Leases as a Lessee - In its ordinary course of business, the Company enters into leases as a lessee generally for
agricultural land and packinghouse equipment. The Company determines if an arrangement is a lease or contains a lease at
inception. Operating and finance leases are included in other assets, accrued liabilities and other long-term liabilities on its
consolidated balance sheets. Lease right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term
and lease liabilities represent the obligation to make lease payments arising from the lease, measured on a discounted basis.
Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the
lease term at commencement date. The Company uses either its incremental borrowing rate based on the information available
at commencement date, or the rate implicit in the lease, if known, in determining the present value of future payments.
Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an
initial term of 12 months or less are not recorded on the balance sheet as the Company has elected to recognize lease expense
for these leases on a straight-line basis over the lease term. The Company has material leases with related parties which are
further described in Note 15 - Related-Party Transactions.
Certain of the Company’s agricultural land agreements contain variable costs based on a percentage of the operating results of
the leased property. Such variable lease costs are expensed as incurred. These land agreements also contain costs for non-lease
components, such as water usage, which the Company accounts for separately from the lease components. For all other
agreements, the Company generally combines lease and non-lease components in calculating the ROU assets and lease
liabilities. See Note 13 - Leases for additional information.
Accounting for Leases as a Lessor - Leases in which the Company acts as the lessor include land, residential and commercial
units and are all classified as operating leases. Certain of the Company’s contracts contain variable income based on a
percentage of the operating results of the leased asset. Certain of the Company’s contracts contain non-lease components such
as water, utilities and common area services. The Company has elected to not separate lease and non-lease components for its
lessor arrangements and the combined component is accounted for entirely under ASC 842, Leases. The underlying asset in an
operating lease arrangement is carried at depreciated cost within property, plant, and equipment, net on the consolidated balance
sheets. Depreciation is calculated using the straight-line method over the useful life of the underlying asset. The Company
recognizes operating lease revenue on a straight-line basis over the lease term.
Basic and Diluted Net Loss per Share
Basic net loss per common share is calculated using the weighted-average number of common shares outstanding during the
period without consideration of the dilutive effect of preferred stock. Diluted net loss per common share is calculated using the
weighted-average number of common shares outstanding during the period plus the dilutive effect of conversion of unvested,
restricted stock and preferred stock. The Series B and Series B-2 convertible preferred shares were anti-dilutive for fiscal years
ended October 31, 2021, 2020 and 2019.
Diluted net loss per common share is calculated using the more dilutive method of either the two-class method or the treasury
stock method. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating
shares are included in computing earnings per share using the treasury stock method. The Company’s unvested, restricted stock
awards qualify as participating shares.
57
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Significant Accounting Policies (continued)(cid:3)
Defined Benefit Retirement Plan
The Company sponsors a defined benefit retirement plan that was frozen in June 2004, and no future benefits have been
accrued to participants subsequent to that time. Ongoing accounting for this plan under FASB ASC 715, Compensation –
Retirement Benefits, provides guidance as to, among other things, future estimated pension expense, pension liability and
minimum funding requirements. This information is provided to the Company by third-party actuarial consultants. In
developing this data, certain estimates and assumptions are used, including among other things, discount rate, long-term rate of
return and mortality tables.
In fiscal year 2021, the Company decided to terminate the Plan effective December 31, 2021. The liabilities disclosed as of
October 31, 2021, reflect an estimate of the additional cost to pay lump sums to a portion of the active and vested terminated
participants and purchase annuities for all remaining participants from an insurance company.
During 2021, the Society of Actuaries (SOA) released a new mortality improvement scale table, referred to as MP-2021, which
is believed to better reflect mortality improvements and is to be used in calculating defined benefit pension obligations. In
addition, during fiscal year 2021, the assumed discount rate to measure the pension obligation decreased to 2.6%. The
Company used the latest mortality tables released by the SOA through October 2021 to measure its pension obligation as of
October 31, 2021 and combined with the assumed discount rate and other demographic assumptions, its pension liability
decreased by approximately $2,699,000 as of October 31, 2021. Further changes in any of these estimates could materially
affect the amounts recorded that are related to the Company's defined benefit retirement plan.
Recent Accounting Pronouncements
FASB ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
and related ASUs
This amendment requires the measurement of all expected credit losses for financial assets held at the reporting date based on
historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other
organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation
techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of
expected credit losses.
ASU 2016-13 is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. The Company adopted this ASU effective November 1, 2020 and the adoption did not have a material
impact on its consolidated financial statements.
FASB ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity
This amendment simplifies accounting for convertible instruments by removing major separation models currently required
under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more
convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The
ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception,
which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS)
calculation in certain areas.
ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after
December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning
after December 15, 2020. The Company is evaluating the effect this ASU may have on its consolidated financial statements.
3. Acquisitions
Agriculture Property Acquisition
In January 2019, the Company purchased land for use as a citrus orchard for a cash purchase price of $397,000. The acquisition
was for 26 acres of agricultural property adjacent to the Company’s orchards in Lindsay, California. This agriculture property
acquisition is included in property, plant and equipment on the Company’s consolidated balance sheet.
58
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Acquisitions (continued)
Trapani Fresh Business Combination
On May 30, 2019, the Company acquired a 51% interest in a joint venture, Trapani Fresh, formed with FGF Trapani ("FGF"), a
multi-generational, family owned citrus operation in Argentina. To consummate the transaction, the Company formed a
subsidiary under the name Limoneira Argentina S.A.U. (“Limoneira Argentina”) as the managing partner and acquired a 51%
interest in an Argentine Trust that held a 75% interest in Finca Santa Clara (“Santa Clara”), a ranch with approximately 1,200
acres of planted lemons. Trapani Fresh controls the trust and grows fresh citrus.
Total consideration paid for the Company’s interest in Trapani Fresh was $15,000,000 and transaction costs of approximately
$654,000 were included in selling, general and administrative expense during fiscal year 2019. The Company consolidated
Trapani Fresh and accounted for the acquisition of Trapani Fresh as a business combination, resulting in FGF’s 49% interest in
Trapani Fresh being accounted for as a noncontrolling interest.
In February 2020, FGF agreed to a decrease in the purchase consideration of $152,000 to reflect profits that Limoneira
Argentina would have received had the transaction been consummated at the beginning of the 2019 lemon export season. The
Company recorded a receivable from FGF, a decrease in noncontrolling interest and a decrease in goodwill.
Below is a summary of the fair value of the net assets acquired on the acquisition date based on a third-party valuation which
was updated during the second quarter of fiscal year 2020 (in thousands):
Cultural costs
Land and land improvements
Buildings and building improvements
Orchards
Customer relationships, trademarks and non-competition agreement (10 year useful life)
Goodwill
Total assets acquired
Noncontrolling interest
Net cash paid
$
$
3,270
9,520
870
8,410
6,920
123
29,113
(14,265)
14,848
Goodwill of $123,000 relates to synergies of the operations, was allocated to the fresh lemons segment and was not deductible
for tax purposes. Revenue of $14,651,000 and net income of $999,000 of Trapani Fresh were included in the Company’s
consolidated statement of operations from the acquisition date to the period ended October 31, 2019. The unaudited, pro forma
consolidated statement of operations as if Trapani Fresh had been included in the consolidated results of the Company for the
year ended October 31, 2019 would have resulted in revenues of $177,625,000 and net loss of $6,092,000.
In June 2021, the Company entered into an agreement, effective March 1, 2021, to sell and license certain assets of Trapani
Fresh to FGF. These assets consist of packing supplies and certain intangible assets related to the packing, marketing, and
selling business of Trapani Fresh. The total consideration to be received is approximately $3,900,000 over an 8-year term in 16
equal installments. Payments to be received are secured by FGF’s interest in land parcels at the Santa Clara ranch and consist of
a $1,200,000 note receivable and $2,700,000 of royalty payments. There was no material gain or loss recognized on the
transaction. In August 2021, the Company entered into several additional agreements whereby the additional 25% interest in
Santa Clara was transferred into the trust resulting in the trust now holding a 100% interest in Santa Clara. Trapani Fresh owns
and operates the 1,200-acre Santa Clara ranch and now sells the lemons it grows to FGF, who packs, markets, and sells the fruit
to its export customers. As a result of this transaction, Trapani Fresh now recognizes lemon revenues at the market price less
packinghouse charges to harvest, pack and market the fruit.
4. Fair Value Measurements
Under the FASB ASC 820, Fair Value Measurements and Disclosures, a fair value measurement is determined based on the
assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy draws distinctions
between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii)
inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable
inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).
59
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Fair Value Measurements (continued)
At October 31, 2019, the Company owned equity securities consisting of marketable securities in Calavo common stock of
200,000 shares representing approximately 1.1% of Calavo’s outstanding common stock at a stock price of $86.73 per share.
These securities were measured at fair value by quoted market prices and changes in fair value were included in the statement
of operations. In fiscal year 2020, the Company sold all 200,000 shares of Calavo common stock for a total of $11,048,000,
recognizing a loss of $6,299,000. In fiscal year 2019, the Company sold 50,000 shares of Calavo common stock for a total of
$4,785,000, recognizing a loss of $2,117,000.
5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following at October 31 (in thousands):
Prepaid supplies and insurance
Note receivable and related interest
Real estate development held for sale
Sales tax receivable
Lemon supplier advances and other
6. Property, Plant and Equipment
Property, plant and equipment consists of the following at October 31 (in thousands):
Land
Land improvements
Buildings and building improvements
Equipment
Orchards
Construction in progress
Less accumulated depreciation
2021
2020
2,521 $
2,438
2,543
909
2,298
10,709 $
2,080
2,490
2,543
1,867
1,708
10,688
2021
2020
95,868 $
35,440
48,565
62,598
63,454
22,477
328,402
(85,982)
242,420 $
96,334
33,733
48,441
60,124
61,098
20,469
320,199
(77,550)
242,649
$
$
$
$
Depreciation expense was $8,883,000, $9,098,000 and $7,944,000 for fiscal years 2021, 2020 and 2019, respectively.
In August 2020, the Company sold property located in Lindsay, California. The Company received net proceeds of $6,011,000
after transaction and other costs, and recorded a loss of approximately $424,000, which is included in loss (gain) on disposal of
assets in the consolidated statements of operations.
In September 2019, the Company sold its multi-use Mercantile property consisting of a retail convenience store, gas station, car
wash and quick serve restaurant located in Santa Paula, California. The Company received net proceeds of $4,000,000 and
recognized a gain of approximately $586,000, which is included in loss (gain) on disposal of assets in the consolidated
statement of operations.
7. Real Estate Development
Real estate development assets are comprised primarily of land and land development costs and consist of the following at
October 31 (in thousands):
East Area I - Retained property
East Area II
2021
2020
$
$
13,335 $
9,493
22,828 $
13,169
8,467
21,636
60
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Real Estate Development (continued)
East Area I, Retained Property and East Area II
In fiscal year 2005, the Company began capitalizing the costs of two real estate development projects east of Santa Paula,
California, for the development of 550 acres of land into residential units, commercial buildings and civic facilities. In
November 2015 (the "Transaction Date"), the Company entered into a joint venture with The Lewis Group of Companies
(“Lewis”) for the residential development of its East Area I real estate development project. To consummate the transaction, the
Company formed Limoneira Lewis Community Builders, LLC (“LLCB”) as the development entity, contributed its East Area I
property to LLCB and sold a 50% interest in LLCB to Lewis for $20,000,000.
The Company and the joint venture also entered into a Retained Property Development Agreement on the Transaction Date (the
"Retained Property Agreement"). Under the terms of the Retained Property Agreement, the joint venture will transfer certain
contributed East Area I property, which is entitled for commercial development, back to the Company (the "Retained Property")
and arranged for the design and construction of certain improvements to the Retained Property, subject to certain
reimbursements by the Company. The balance in Retained Property and East Area II includes estimated costs incurred by and
reimbursable to LLCB of $5,771,000 and $5,300,000 at October 31, 2021 and 2020, respectively, which is included in payables
to related parties.
In January 2018, LLCB entered into a $45,000,000 unsecured Line of Credit Loan Agreement and Promissory Note (the
“Loan”) with Bank of America, N.A. to fund early development activities. The Loan, as modified and extended, matures
February 22, 2023. The interest rate on the Loan is LIBOR plus 2.85%, and is payable monthly. The Loan contains certain
customary default provisions and LLCB may prepay any amounts outstanding under the Loan without penalty. The joint
venture had an outstanding balance of zero as of October 31, 2021. The Loan has a one year extension option through February
22, 2024 subject to terms and conditions as defined in the agreement, with the maximum borrowing amount reduced to
$35,000,000 during the extension period.
In February 2018, certain principals from Lewis and by the Company guaranteed the obligations under the Loan. The guarantee
shall continue in effect until all of the Loan obligations are fully paid and the guarantors are jointly and severally liable for all
Loan obligations in the event of default by LLCB. The $1,080,000 estimated value of the guarantee was recorded in the
Company’s consolidated balance sheets and is included in other long-term liabilities with a corresponding value in equity in
investments. The extension had no impact on the Company's guarantee value. Additionally, a Reimbursement Agreement was
executed between the Lewis guarantors and the Company, which provides for unpaid liabilities of LLCB to be shared pro-rata
by the Lewis guarantors and the Company in proportion to their percentage interest in the joint venture.
In February 2020, the Company and Lewis each loaned $1,800,000 to LLCB at an interest rate of 4.6%, which was repaid in
June 2020.
Through October 31, 2021, the joint venture has closed sales of the initial residential lots representing 586 residential units.
Other Real Estate Development Projects
The remaining real estate development parcel within the Templeton Santa Barbara, LLC project is described as Sevilla. In fiscal
year 2020, the Company entered into an agreement to sell its Sevilla property for $2,700,000, which is expected to close in the
second quarter of fiscal year 2022. After transaction and other costs, the Company expects to receive cash proceeds of
approximately $2,550,000 and recognize an immaterial gain upon closing. At October 31, 2021 and 2020, the $2,543,000
carrying value of the property was classified as held for sale and included in prepaid expenses and other current assets.
During December 2017, the Company sold its Centennial property with a net book value of $2,983,000 for $3,250,000. The
Company received cash and a $3,000,000 promissory note secured by the property for the balance of the purchase. The
promissory note was originally scheduled to mature in December 2019 but has been periodically extended with principal
payments totaling $400,000 received through October 31, 2021. In November 2021, the promissory note was further extended
to June 30, 2022 upon making a principal paydown of $250,000, which was paid in November 2021, and revising the interest
rate to 4.00% per annum, with an option to further extend the maturity date of the promissory note to September 30, 2022 upon
making an additional principal paydown of $250,000. At October 31, 2021, the net carrying value of the note was $2,600,000
and classified in prepaid expenses and other current assets.
61
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Equity in Investments
Limco Del Mar, Ltd.
The Company has a 1.3% interest in Limco Del Mar, Ltd. (“Del Mar”) as a general partner and a 26.8% interest as a limited
partner. Based on the terms of the partnership agreement, the Company may be removed as general partner without cause from
the partnership upon the vote of the limited partners owning an aggregate of 50% or more interest in the partnership. Since the
Company has significant influence, but less than a controlling interest, the Company’s investment in Del Mar is accounted for
using the equity method of accounting.
The Company provides Del Mar with farm management, orchard land development and accounting services and received
expense reimbursements of $200,000, $210,000 and $159,000 in fiscal years 2021, 2020 and 2019, respectively. Del Mar
markets lemons through the Company pursuant to its customary marketing agreements and the amount of lemons procured
from Del Mar was $1,681,000, $1,037,000 and $1,674,000 in fiscal years 2021, 2020 and 2019, respectively. Fruit proceeds due
to Del Mar were $694,000 and $334,000 at October 31, 2021 and 2020, respectively, and are included in grower’s payable in
the accompanying consolidated balance sheets.
Romney Property Partnership
In May 2007, the Company and an individual formed the Romney Property Partnership (“Romney”) for the purpose of owning
and leasing an office building and adjacent lot in Santa Paula, California. The Company paid $489,000 in 2007 for 75% interest
in Romney. The terms of the partnership agreement affirm the status of the Company as a noncontrolling investor in the
partnership since the Company cannot exercise unilateral control over the partnership. Since the Company has significant
influence, but less than a controlling interest, the Company’s investment in Romney is accounted for using the equity method of
accounting. Net profits, losses and cash flows of Romney are shared by the Company, which receives 75% and the individual,
who receives 25%.
Rosales S.A.
The Company currently has a 47% equity interest in Rosales S.A, (“Rosales”) of which 35% was acquired in fiscal 2014 and an
additional 12% interest was acquired with the purchase of PDA in fiscal 2017. Rosales is a citrus packing, marketing and sales
business located in La Serena, Chile. In addition, the Company has the right to acquire the interest of the majority shareholder
of Rosales upon death or disability of Rosales’ general manager for the fair value of the interest on the date of the event as
defined in the shareholders’ agreement. Since the Company has significant influence, but less than a controlling interest, the
Company’s investment in Rosales is accounted for using the equity method of accounting.
Rosales’ functional currency is the Chilean Peso. The following financial information has been translated to U.S. dollars. In
addition, as a result of the Company’s acquisition of its equity interest, basis differences were identified between the historical
cost of the net assets of Rosales and the proportionate fair value of the net assets acquired. Such basis differences aggregated to
$1,683,000 on the acquisition date and are primarily comprised of intangible assets, including $343,000 of equity method
goodwill. An additional $925,000 of basis differences were identified with the February 2017 PDA acquisition, including
$143,000 of equity method goodwill. The $2,122,000 in basis differences exclusive of goodwill is being amortized over the
estimated life of the underlying intangible assets as a reduction in the equity investment and an expense included in equity in
earnings (losses) of investments. Amortization amounted to $180,000, $180,000 and $298,000 for fiscal years 2021, 2020 and
2019, respectively, and is estimated to be approximately $118,000 $87,000 and $76,000 per year for years ending October 31,
2022 through October 31, 2024, respectively, and immaterial thereafter.
The Company recognized $3,405,000, $3,975,000 and $3,741,000 of lemon sales to Rosales in fiscal years 2021, 2020 and
2019, respectively. In fiscal years 2021, 2020 and 2019, the aggregate amount of lemons and oranges procured from Rosales
was $5,304,000, $3,190,000 and $4,315,000, respectively. Amounts due from (to) Rosales were $1,570,000 and $(954,000) at
October 31, 2021 and 2020, respectively, and are included in receivables/other from related parties and payables to related
parties, respectively.
62
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Equity in Investments (continued)
Limoneira Lewis Community Builders, LLC (“LLCB”)
As described in Note 7 – Real Estate Development, the Company has a joint venture with Lewis for the residential development
of its East Area I real estate development project. In addition to the assessment performed by the Company of its investment in
LLCB under the requirements of Regulation S-X Rule 4-08(g), the Company also assessed its investment in LLCB under the
requirements of Regulation S-X Rule 3-09(b). LLCB was deemed significant for the years ended October 31, 2021 and 2019
but was not deemed significant for the year ended October 31, 2020. Therefore, the audited financial statements of LLCB for
the years ended October 31, 2021, 2020 and 2019 are provided as exhibits to this document to comply with this
rule. Additionally, there is a basis difference between the Company’s historical investment in the project and the amount
recorded in members’ capital by LLCB of $51,416,000 as of October 31, 2021. The basis difference of $8,801,000 at October
31, 2021 is primarily comprised of capitalized interest, amounts related to the loan guarantee and certain other costs incurred by
Limoneira Company during the development period. This basis difference is being amortized as lots are sold utilizing the
relative sales value method and the amount amortized in fiscal years 2021, 2020 and 2019 totaled $1,434,000, $1,060,000 and
$1,498,000, respectively. The Company's share of LLCB's net income for fiscal years 2021, 2020 and 2019 prior to basis
amortization was $4,508,000, $1,386,000 and $4,368,000, respectively.
The following is financial information of the equity method investees for fiscal years 2021, 2020 and 2019 (in thousands):
2021
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenues
Operating income (loss)
Net income (loss)
2020
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenues
Operating (loss) income
Net (loss) income
2019
Revenues
Operating income (loss)
Net income (loss)
Del Mar
Romney
Rosales
LLCB
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
492 $
865 $
— $
— $
2,059 $
1,052 $
1,052 $
270 $
817 $
— $
— $
930 $
(109) $
(109) $
2,290 $
1,299 $
1,299 $
— $
617 $
— $
— $
17 $
(4) $
(4) $
— $
670 $
— $
— $
20 $
(2) $
(2) $
15 $
(5) $
(5) $
3,544 $ 108,964
—
2,406 $
4,708
2,362 $
—
2,083 $
42,853
9,862 $
9,087
438 $
9,087
35 $
4,564 $ 130,171
—
2,218 $
35,002
3,540 $
—
1,449 $
25,906
10,097 $
2,615
1,216 $
2,615
476 $
8,898 $
403 $
288 $
37,788
10,001
10,001
63
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Equity in Investments (continued)
The Company’s investment and equity in earnings (losses) of the equity method investees are as follows (in thousands):
Investment balance October 31, 2018
Equity earnings (losses)
Cash distributions
Investment contributions
Capitalized interest adjustment
Reclassification of sale and leaseback deferral
Investment balance October 31, 2019
Equity earnings (losses)
Investment contributions
Foreign currency adjustments
Investment balance October 31, 2020
Equity earnings (losses)
Cash distributions
Foreign currency adjustments
Investment balance October 31, 2021
9. Goodwill and Intangible Assets, Net
Del Mar
Romney
Rosales
LLCB
$
$
1,935 $
366
(351)
—
—
—
1,950
(30)
—
—
1,920
296
(219)
—
1,997 $
512 $
—
—
—
—
—
512
(1)
—
—
511
(3)
—
—
508 $
2,191 $
(163)
(283)
—
—
—
1,745
44
—
(148)
1,641
(164)
(106)
(20)
1,351 $
14,060 $
2,870
—
4,000
(267)
33,353
54,016
326
2,800
—
57,142
3,074
—
—
60,216 $
Total
18,698
3,073
(634)
4,000
(267)
33,353
58,223
339
2,800
(148)
61,214
3,203
(325)
(20)
64,072
A summary of the change in the carrying amount of goodwill is as follows (in thousands):
Balance at October 31, 2019
Trapani Fresh purchase price adjustment
Foreign currency translation adjustment
Balance at October 31, 2020
Foreign currency translation adjustment
Balance at October 31, 2021
Goodwill
Carrying
Amount
1,839
(297)
(7)
1,535
(8)
1,527
$
$
See Note 3 - Acquisitions for additional information regarding the Trapani Fresh purchase price adjustment.
Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying
value may not be recoverable. The Company concluded that no potential impairment indicators existed during any interim
period and performed its annual assessment of goodwill impairment as of July 31, 2021 with no impairment noted. The
Company did not incur any goodwill impairment losses in fiscal years 2021, 2020 or 2019, as the estimated fair values of its
reporting units were in excess of their carrying values.
As of October 31, 2021, the Company has allocated goodwill to its reportable segments as follows: Fresh Lemons $957,000 and
Lemon Packing $570,000.
During the fiscal year ended October 31, 2021, the Company acquired additional water rights in Chile for $186,000.
64
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Goodwill and Intangible Assets, Net (continued)
Intangible assets consisted of the following as of October 31, 2021 and 2020 (in thousands):
October 31, 2021
October 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Useful
Life in
Years
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Useful
Life in
Years
Intangible assets:
Trade names and trademarks
Customer relationships
Non-competition agreement
Acquired water and mineral rights
Intangible assets
$ 2,108 $
4,037
437
3,641
$ 10,223 $
(663) $ 1,445
(1,209) 2,828
415
8
9
8
(22)
— 3,641 Indefinite $ 3,571 $
$ 13,392 $
$ 3,771 $
5,010
1,040
(1,894) $ 8,329
(947) $ 2,824
4,021
(989)
893
(147)
— $ 3,571 Indefinite
10
9
10
(2,083) $ 11,309
Amortization expense totaled $929,000, $999,000, and $689,000 for the years ended October 31, 2021, 2020 and 2019,
respectively.
Estimated future amortization expense of intangible assets for each of the next five fiscal years and thereafter are as follows (in
thousands):
2022
2023
2024
2025
2026
Thereafter
$
$
724
724
716
711
711
1,102
4,688
10. Other Assets
Investments in Mutual Water Companies
The Company’s investments in various not-for-profit mutual water companies provide the Company with the right to receive a
proportionate share of water from each of the not-for-profit mutual water companies that have been invested in and do not
constitute voting shares and/or rights. Amounts included in other assets in the consolidated balance sheets as of October 31,
2021 and 2020 were $5,994,000 and $5,563,000, respectively.
11. Accrued Liabilities
Accrued liabilities consist of the following at October 31 (in thousands):
Compensation
Property taxes
Lemon and orange supplier payables
Operating expenses
Leases
Other
2021
2020
$
$
2,112 $
676
—
1,203
604
1,947
6,542 $
2,275
683
1,346
938
959
1,746
7,947
65
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Long-Term Debt
Long-term debt is comprised of the following at October 31 (in thousands):
2021
2020
Farm Credit West revolving and non-revolving lines of credit: The interest rate of the revolving
line of credit is variable based on the one-month London Interbank Offered Rate (“LIBOR”),
which was 0.09% at October 31, 2021, plus 1.85%. The interest rate for the $40.0 million
outstanding balance of the non-revolving line of credit was fixed at 4.77% through July 1, 2022,
3.57% through July 1, 2025 and variable interest thereafter. Interest is payable monthly and the
principal is due in full on July 1, 2026.
Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 2.48%. The loan
is payable in quarterly installments through November 2022.
Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 3.24%. The loan
is payable in monthly installments through October 2035.
$
111,293 $ 102,251
809
1,438
974
1,029
Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 3.24%. The loan
is payable in monthly installments through March 2036.
8,004
8,433
Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 2.77% until July
1, 2025, becoming variable for the remainder of the loan. The loan is payable in monthly
installments though March 2036.
5,892
6,220
Wells Fargo term loan: The loan was repaid in August 2021 with proceeds from the Farm Credit
West term loan.
—
3,491
Farm Credit West term loan: Effective August 2, 2021, the interest rate was fixed at 3.19%. The
loan is payable in monthly installments through September 2026.
Banco de Chile term loan: The interest rate is fixed at 6.48%. The loan is payable in annual
installments through January 2025.
2,475
—
1,011
1,205
Note Payable: The interest rate ranges from 5.00% to 7.00% and was 6.50% at October 31, 2021.
The loan includes interest-only monthly payments and principal is due in February 2023.
1,435
1,435
Banco de Chile COVID-19 loans: The interest rates are fixed at 3.48%. The loans are payable in
monthly installments beginning February 2021 through September 2024.
411
522
Banco de Chile COVID-19 loans: The interest rates are fixed at 3.48% and 4.26%. The loans are
payable in monthly installments beginning September 2021 through September 2026.
Subtotal
Less deferred financing costs, net of accumulated amortization
Total long-term debt, net
Less current portion
Long-term debt, less current portion
652
132,956
131
132,825
2,472
—
126,024
176
125,848
3,277
$ 130,353 $ 122,571
In August 2021, the Company entered into an equipment finance agreement (the "FCW term loan") with Farm Credit West,
PCA (the “Lender”) and used the proceeds to pay off the Wells Fargo term loan. The FCW term loan has a fixed interest rate of
3.19% and is payable in monthly installments through September 2026. There were no unamortized debt financing costs related
to the Wells Fargo term loan and no capitalized financing costs related to the FCW term loan.
In June 2021, the Company entered into a Master Loan Agreement (the “MLA”) with Lender dated June 1, 2021, together with
a revolving credit facility supplement (the “Revolving Credit Supplement”), a non-revolving credit facility supplement (the
“Non-Revolving Credit Supplement,” and together with the Revolving Credit Supplement, the “Supplements”) and an
agreement to convert to fixed interest rate for a period of time as described in the table above ("Fixed Interest Rate
Agreement"). The MLA governs the terms of the Supplements. The MLA amends and restates the previous Master Loan
Agreement between the Company and the Lender, dated June 19, 2017 and extends the principal repayment to July 1, 2026.
Debt financing costs related to the MLA agreement were immaterial.
66
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Long-Term Debt (continued)
In June 2020, the Company and Farm Credit West entered into a Conversion Agreement to convert the term loans noted above
to fixed interest rate loans effective July 1, 2020. No changes were made to the outstanding principal balances on the term loans
and the Company made no cash repayments of principal. The rates were subject to a prepayment restriction period for a portion
of the fixed rate term that expired on January 1, 2021. The Company may prepay any amounts without penalty.
In March 2020, the Company entered into a revolving equity line of credit promissory note and loan agreement with Farm
Credit West for a $15,000,000 Revolving Equity Line of Credit (the "RELOC") secured by a first lien on the Windfall Investors,
LLC property. The RELOC matures in 2043 and features a 3-year draw period followed by 20 years of fully amortized loan
payments. The interest rate is variable with monthly interest-only payments during the 3-year draw period and monthly
principal and interest payments thereafter.
The Supplements and RELOC provide aggregate borrowing capacity of $130,000,000 comprised of $75,000,000 under the
Revolving Credit Supplement, $40,000,000 under the Non-Revolving Credit Supplement and $15,000,000 under the RELOC.
As of October 31, 2021, the Company's outstanding borrowings under the revolving and non-revolving lines of credit were
$111,293,000 and it had $18,707,000 of availability. For amounts outstanding under both Supplements, interest will begin to be
charged on the date the Lender disburses principal and will continue until the outstanding indebtedness under the Supplements
is paid in full with interest.
The initial interest rate in effect under the Revolving Credit Supplement was 1.69% per annum, and was automatically adjusted
commencing July 1, 2021 and on the first day of each month thereafter. The interest rate for any amount outstanding under the
Revolving Credit Supplement will be based on the one-month LIBOR rate plus or minus an applicable margin. The applicable
margin will range from 1.75% to 2.35% depending on the ratio of current assets, plus the remaining available commitment
divided by current liabilities. On July 1, 2022, and on each one-year anniversary thereafter, the Company has the option to
convert the interest rate in use under the Revolving Credit Supplement from the preceding LIBOR-based calculation to a
variable interest rate. Any amounts outstanding under the Revolving Credit Supplement will be due and payable in full on July
1, 2026. The Company may prepay any amounts outstanding under the Revolving Credit Supplement without penalty.
The initial interest rate in effect under the Non-Revolving Credit Supplement is a fixed interest rate of 4.77% through July 1,
2022 and then will convert to a fixed interest rate of 3.57% per year until July 1, 2025 (the “Fixed Rate Term”). Thereafter, the
interest rate will convert to a variable interest rate established by the Lender corresponding to the corresponding interest rate
group. Any amount outstanding under the Non-Revolving Credit Supplement is due and payable in full on July 1, 2026. The
Company may not prepay any amounts under the outstanding Non-Revolving Credit Supplement during the Fixed Rate Term.
Thereafter, the Company may prepay any amounts outstanding under the Non-Revolving Credit Supplement, provided that a
fee equal to 0.50% of the amount prepaid and any other cost or loss suffered by the Lender must be paid with any prepayment.
All indebtedness under the MLA and RELOC, including any indebtedness under the Supplements, is secured by a first lien on
Company-owned stock or participation certificates, Company funds maintained with Lender, Lender’s unallocated surplus, and
certain of the Company’s agricultural properties in Tulare and Ventura counties in California and certain of the Company’s
building fixtures and improvements and investments in mutual water companies associated with the pledged agricultural
properties. The MLA includes customary default provisions that provide should an event of default occur, the Lender, at its
option, may declare all or any portion of the indebtedness under the MLA to be immediately due and payable without demand,
notice of nonpayment, protest or prior recourse to collateral, and terminate or suspend the Company’s right to draw or request
funds on any loan or line of credit.
The MLA subjects the Company to affirmative and restrictive covenants including, among other customary covenants, financial
reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the
use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of the
Company’s business. The Company is also subject to a financial covenant that requires it to maintain compliance with a
specified debt service coverage ratio on an annual basis. In December 2021, the Lender modified the covenant to defer
measurement at October 31, 2021 and revert to a debt service coverage ratio of 1.25:1.0 measured as of October 31, 2022.
The Company received annual cash patronage dividends from Farm Credit West of $1,170,000, $1,566,000 and $853,000 in
fiscal years 2021, 2020 and 2019, respectively.
In August 2021, PDA and San Pablo entered into term loan agreements for an aggregate amount of approximately $652,000.
These small business loans are guaranteed by the Chilean government in response to economic instability caused by the
COVID-19 pandemic. The unsecured loans mature in August 2025 and September 2026, bear interest at fixed rates of 3.48%
and 4.26%, respectively, and are payable in monthly installments beginning September 2021.
67
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Long-Term Debt (continued)
In July and September 2020, PDA and San Pablo entered into term loan agreements for an aggregate amount of approximately
$522,000. These small business loans are guaranteed by the Chilean government in response to economic instability caused by
the COVID-19 pandemic. The unsecured loans mature in July 2024 and September 2024, bear interest at fixed rates of 3.48%
and are payable in monthly installments beginning February 2021 and April 2021, respectively.
Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress. The
Company capitalized interest of $1,110,000, $921,000 and $1,369,000 during the fiscal years ended 2021, 2020 and 2019,
respectively. Capitalized interest is included in property, plant and equipment and real estate development assets in the
Company’s consolidated balance sheets.
The Company incurs certain loan fees and costs associated with its new or amended credit arrangements. Such costs are
capitalized as deferred financing costs and amortized as interest expense using the straight-line method over the terms of the
credit agreements. The balance of deferred financing costs was $131,000 and $176,000, net of amortization at October 31, 2021
and 2020, respectively, and was included in long-term debt on the Company’s consolidated balance sheet.
Principal payments on the Company’s long-term debt are due as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
13. Leases
Lessor Arrangements
$
$
2,472
3,385
1,815
2,092
112,749
10,443
132,956
The Company enters into leasing transactions in which it rents certain of its assets and the Company is the lessor. These lease
contracts are typically classified as operating leases with remaining terms ranging from one month to 21 years, with various
renewal terms available. All of the residential rentals have month-to-month lease terms.
The following table presents the components of the Company’s operating lease portfolio included in property, plant and
equipment, net as of October 31 (in thousands):
Land
Buildings, equipment and building improvements
Less: accumulated depreciation
Property, plant and equipment, net under operating leases
2021
2020
$
$
3,516 $
18,712
(6,331)
15,897 $
3,522
18,516
(5,691)
16,347
Depreciation expense for assets under operating leases was approximately $669,000 and $664,000 for the fiscal years 2021 and
2020, respectively.
The Company’s rental operations revenue consists of the following (in thousands):
Operating lease revenue
Variable lease revenue
Total lease revenue
Year ended October 31,
2021
2020
$
$
4,329 $
317
4,646 $
4,287
335
4,622
68
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Leases (continued)
Lessor Arrangements (continued)
The future minimum lease payments to be received by the Company related to these operating lease agreements as of October
31, 2021 are as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$
$
1,274
1,100
822
823
167
675
4,861
The Company’s rental operations revenue included contingent rental revenue of $355,000 for fiscal year 2019.
Lessee Arrangements
The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are classified as either
operating or finance leases. The Company’s lease contracts are generally for agricultural land and packinghouse equipment with
remaining lease terms ranging from one to 16 years, with various term extensions available. The Company’s lease agreements
do not contain any residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less
are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over
the lease term.
Operating lease costs were $606,000 and $559,000 and variable lease costs were $288,000 and immaterial, for the fiscal years
2021 and 2020, respectively, which are primarily included in agribusiness costs and expenses in the Company’s consolidated
statements of operations. Finance lease costs and short term lease costs were immaterial for both years.
Supplemental balance sheet information related to leases consists of the following as of October 31 (in thousands):
Assets
Operating lease ROU assets
Finance lease assets
Classification
Other assets
Other assets
2021
2020
$
$
2,041 $
1,142
3,183 $
2,053
—
2,053
Liabilities
Current operating lease liabilities
Current finance lease liabilities
Non-current operating lease liabilities
Non-current finance lease liabilities
Total operating lease liabilities
Accrued liabilities and payables to related parties $
Accrued liabilities
Other long-term liabilities
Other long-term liabilities
488 $
249
1,648
884
$
3,269 $
Weighted-average remaining lease term (in years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
10.9
4.9
3.7 %
3.3 %
521
—
1,610
—
2,131
11.0
—
3.8 %
—
69
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Leases (continued)
Lessee Arrangements (continued)
Supplemental cash flow information related to leases consists of the following (in thousands):
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases
Operating cash outflows from finance leases
Financing cash outflows from finance leases
ROU assets obtained in exchange for new operating lease liabilities
Leased assets obtained in exchange for new finance lease liabilities
Year ended October 31,
2021
2020
$
$
$
$
$
603 $
3 $
18 $
271 $
1,151 $
559
—
—
108
—
Future minimum lease payments under non-cancellable leases for each of the subsequent five fiscal years and thereafter are as
follows (in thousands), which excludes $448,000 of operating lease payments for leases that have been signed but not
commenced:
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Operating
Finance
Total
$
$
488 $
312
281
210
134
1,192
2,617
(481)
2,136 $
249 $
249
249
249
229
—
1,225
(92)
1,133 $
737
561
530
459
363
1,192
3,842
(573)
3,269
In addition to operating and finance lease commitments, the Company also has a contract for pollination services which does
not meet the definition of a lease, with minimum future payments of $307,000 and $51,000 in fiscal years 2022 and 2023,
respectively.
Total lease expense for fiscal year 2019 was $733,000, which was included in agribusiness costs and expenses in the
Company’s consolidated statements of operations.
14. Earnings Per Share
Basic net loss per common share is calculated using the weighted-average number of common shares outstanding during the
period without consideration of the dilutive effect of conversion of preferred stock. Diluted net loss per common share is
calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of
conversion of unvested, restricted stock and preferred stock. The Series B and Series B-2 convertible preferred shares were anti-
dilutive for fiscal years ended October 31, 2021, 2020 and 2019. The computations for basic and diluted net loss per common
share are as follows (in thousands, except per share amounts):
70
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. Earnings Per Share (continued)
Basic net loss per common share:
Net loss applicable to common stock
Effect of unvested, restricted stock
Numerator: Net loss for basic EPS
Denominator: Weighted average common shares-basic
Basic net loss per common share
Diluted net loss per common share:
Numerator: Net loss for diluted EPS
Weighted average common shares-basic
Effect of dilutive unvested, restricted stock and preferred stock
Denominator: Weighted average common shares-diluted
Diluted net loss per common share
Year ended October 31,
2020
2019
2021
$
$
$
$
(3,942) $
(35)
(3,977)
17,555
(0.23) $
(16,936) $
(44)
(16,980)
17,666
(0.96) $
(3,977) $
17,555
—
17,555
(0.23) $
(16,980) $
17,666
—
17,666
(0.96) $
(6,444)
(51)
(6,495)
17,580
(0.37)
(6,495)
17,580
—
17,580
(0.37)
Diluted net loss per common share is calculated using the more dilutive method of either the two-class method or the treasury
stock method. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating
shares are included in computing earnings per share. The Company’s unvested, restricted stock awards qualify as participating
shares. The Company excluded 117,000, 164,000 and 119,000, unvested, restricted shares, as calculated under the treasury
stock method, from its computation of diluted losses per share for the fiscal years ended October 31, 2021, 2020 and 2019,
respectively.
15. Related-Party Transactions
The Company has transactions with equity method investments and various related-parties summarized in Note 8 - Equity in
Investments and in the tables below (in thousands):
October 31, 2021
Balance Sheet
October 31, 2020
Balance Sheet
Receivables/Other
from Related
Parties
Other
Assets
Payables to
Related
Parties
Other
Long-Term
Liabilities
Receivables/Other
from Related
Parties
Other
Assets
Payables to
Related
Parties
Other
Long-Term
Liabilities
—
64 $
— $
64 $
—
123 $
— $
— $
182 $ 1,353
— $ 1,443 $
—
— $
81 $
— $
—
2,213 $
604 $
— $
—
— $ 5,300 $
— $
—
— $
— $
— $
Ref
Related Party
Mutual water companies
Cooperative association
Cadiz / Fenner / WAM
Colorado River Growers
FGF
LLCB
Third party growers
2
3
5
6
8
9
11
$
$
$
$
$
$
$
432 $
— $
— $
— $
— $ 1,386 $
— $
— $
4,598 $
— $
— $
40 $
— $
— $
19 $
273 $ 1,297 $
— $
— $
— $
832 $
980 $
— $
— $ 5,771 $
— $
41 $
— $
71
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Related-Party Transactions (continued)
Year Ended October 31, 2021
Consolidated Statement of Operations
Net
Revenue
Rental
Operations
Agribusiness
Expense and
Other
—
Net Revenue
Agribusiness
Ref
Related-Party
Employees
$
Mutual water companies $
Cooperative association $
Calavo
$
Cadiz / Fenner / WAM
$
Colorado River Growers $
YMIDD
$
FGF
$
Freska
$
Third party growers
$
1
2
3
4
5
6
7
8
10
11
— $
— $
— $
6,594 $
— $
157 $
— $
4,129 $
128 $
— $
Net Revenue
Agribusiness
—
—
—
Dividends
Paid
$ — $
$ — $
$ — $
503 $
$
$ — $
$ — $
$ — $
—
$ — $ 10,338
$ — $
—
$ — $
8,806
603
—
—
$
$
$
$
$
$
$
$
$
$
1,160
1,750
721
338
2,772
123
2,884
150
147
814 $
— $
— $
320 $
— $
— $
— $
— $
— $
— $
Year Ended October 31, 2020
Consolidated Statement of Operations
Net
Revenue
Rental
Operations
Agribusiness
Expense and
Other
—
894
1,223
1,849
785 $
— $
— $
330 $
— $
— $
— $
139
— $ 13,478
— $
—
— $
6,613
240
—
Other
Income,
Net
Dividends
Paid
$ — $ —
$ — $ —
$ — $ —
$ 220 $
503
$ — $ —
$ — $ —
$ — $ —
$ — $ —
$ — $ —
$ — $ —
Year Ended October 31, 2019
Consolidated Statement of Operations
Related Party
Agribusiness
Expense and
Other
Net Revenue
Rental
Operations
Dividends
Paid
Ref
$ —
1 Employees
$ —
2 Mutual water companies
$ —
3 Cooperative association
506
4 Calavo
$
$ —
5 Cadiz / Fenner / WAM
$ —
6 Colorado River Growers
$ —
7 YMIDD
$ —
8 FGF
$ —
11 Third party growers
(1) Employees - The Company rents certain of its residential housing assets to employees on a month-to-month basis and
recorded rental income from employees. There were no rental payments due from employees at October 31, 2021 and 2020.
Other
Income,
Net
— $ —
744 $
838 $ —
— $
1,687 $ —
— $
1,096 $
400 $
250
186 $ —
— $
5,476 $ —
— $
150 $ —
— $
— $ 10,300 $ —
10 $ —
— $
Net Revenue
Agribusiness
$
$
$
$
$
$
$
—
$ 14,471
$
—
$
$
$
$
$
$
$
$
$
3,080
306
—
—
—
—
(2) Mutual water companies - The Company has representation on the boards of directors of the mutual water companies in
which the Company has investments, refer to Note 10 - Other Assets. The Company recorded capital contributions, purchased
water and water delivery services and had water payments due to the mutual water companies.
(3) Cooperative association - The Company has representation on the board of directors of a non-profit cooperative association
that provides pest control services for the agricultural industry. The Company purchased services and supplies from and had
payments due to the cooperative association.
(4) Calavo - The Company had an investment in Calavo through March 2020 and has representation on the board of directors
and Calavo has an investment in the Company. The Company recorded dividend income on its investment in Calavo, paid
dividends to Calavo and had avocado sales to Calavo. Additionally, the Company leases office space to Calavo and purchases
storage services from Calavo.
(5) Cadiz / Fenner / WAM - A member of the Company’s board of directors serves as the CEO, President and a member of the
board of directors of Cadiz, Inc. In 2013, the Company entered a long-term lease agreement (the “Lease”) with Cadiz Real
Estate, LLC (“Cadiz”), a wholly owned subsidiary of Cadiz, Inc., and currently leases 670 acres located in eastern San
Bernardino County, California. The annual base rental is equal to the sum of $200 per planted acre and 20% of gross revenues
from the sale of harvested lemons (less operating expenses), not to exceed $1,200 per acre per year. In 2016, Cadiz assigned
this lease to Fenner Valley Farms, LLC (“Fenner”), a subsidiary of Water Asset Management, LLC (“WAM”). An entity
affiliated with WAM is the holder of 9,300 shares of Limoneira Company Series B-2 convertible preferred stock. Upon the
adoption of ASC 842, the Company recorded a ROU asset and corresponding lease liability.
72
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Related-Party Transactions (continued)
(6) Colorado River Growers, Inc. (“CRG”) - The Company had representation on the board of directors of CRG, a non-profit
cooperative association of fruit growers engaged in the agricultural harvesting business in Yuma County, Arizona. CRG was
dissolved in August 2021. The Company paid harvest expense to CRG and provided harvest management and administrative
services to CRG.
(7) Yuma Mesa Irrigation and Drainage District (“YMIDD”) - The Company has representation on the board of directors of
YMIDD. The Company purchased water from YMIDD and had amounts payable to them for such purchases.
(8) FGF - The Company advances funds to FGF for fruit purchases, which are recorded as an asset until the sales occur and the
remaining proceeds become due to FGF. Additionally, FGF provided farming, packing, by-product processing and
administrative services to Trapani Fresh. The Company had a receivable from FGF for lemon sales and the sale of packing
supplies and a payable due to FGF for fruit purchases and services. Effective March 1, 2021, Trapani Fresh sells the lemons it
grows to FGF, who packs, markets, and sells the fruit to its customers. The Company also records revenue related to the
licensing of intangible assets to FGF.
(9) LLCB - Refer to Note 7 - Real Estate Development.
(10) Freska - A member of the Company's board of directors is a majority shareholder of Freska Produce International, LLC
("Freska"). The Company had avocado sales to Freska.
(11) Third party growers - A member of the Company’s board of directors markets lemons through the Company and the
Company had payments due to the member of such lemon procurement.
16. Income Taxes
A reconciliation of income before income taxes for domestic and foreign locations for the years ended October 31, 2021, 2020
and 2019 are as follows (in thousands):
United States
Foreign
Income before income taxes
2021
$
$
(1,459) $
(2,704)
(4,163) $
2020
(23,195) $
(3,240)
(26,435) $
2019
(6,285)
(278)
(6,563)
The components of the provisions for income taxes for fiscal years 2021, 2020 and 2019 are as follows (in thousands):
Current:
Federal
State
Foreign
Total current benefit (provision)
Deferred:
Federal
State
Foreign
Total deferred benefit
Total income tax benefit
2021
2020
2019
$
$
37 $
40
—
77
5,835 $
332
194
6,361
(17)
127
79
189
266 $
640
1,177
316
2,133
8,494 $
(7)
563
(232)
324
998
(302)
77
773
1,097
Deferred income taxes reflect the net of temporary differences between the carrying amount of the assets and liabilities for
financial reporting and income tax purposes. The components of deferred income tax assets at October 31, 2021 and 2020 are as
follows (in thousands):
73
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. Income Taxes (continued)
Deferred income tax assets:
Reserve and other accruals
Net operating losses
Right-of-use asset
Minimum pension liability adjustment
Amortization
Other assets
Interest expense limitation
Stock based compensation
Total deferred income tax assets
Valuation allowance
Total net deferred income tax assets
Deferred income tax liabilities:
Property taxes
Depreciation
Amortization
Land and other indefinite life assets
Investment in joint ventures and other basis adjustments
Right-of-use asset
Prepaids and receivables
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
Deferred income taxes — noncurrent assets
Deferred income taxes — noncurrent liabilities
2021
2020
$
646 $
6,312
531
231
—
240
2
493
8,455
(1,324)
7,131
643
4,983
578
962
325
—
306
549
8,346
(540)
7,806
(161)
(18,665)
(242)
(6,581)
(3,510)
(510)
(260)
(55)
(29,984)
(22,853) $
— $
(22,853) $
(173)
(16,930)
—
(6,905)
(4,097)
(557)
—
(1,241)
(29,903)
(22,097)
333
(22,430)
$
$
$
The Company periodically evaluates the recoverability of the deferred tax assets. The Company recognized deferred tax assets
to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the
Company considers all available positive and negative evidence, including future reversals of existing taxable temporary
differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company has
recorded a valuation allowance of $1,324,000 on the net deferred tax assets of its subsidiaries in Argentina and Chile as of
October 31, 2021 as the Company does not believe it is more likely than not that these deferred tax assets will be realized due to
the recent history of cumulative pre-tax book losses and lack of objectively verifiable future source of taxable income.
At October 31, 2021, the Company has recorded a deferred tax asset of $6,312,000 related to its federal, state, and foreign net
operating loss carryforwards. The entire federal net operating loss is subject to the 80% taxable income limitation. The net
operating losses begin to expire as follows (in thousands):
Jurisdiction
Federal
State
Chile
Holland
Argentina
Gross Amount
Begin to Expire
17,443
21,277
2,248
66
2,390
Indefinite
10/31/2039
Indefinite
10/31/2025
10/31/2025
74
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. Income Taxes (continued)
At October 31, 2021, the Company had disallowed federal and state interest expense carryforwards of approximately zero and
$2,065,000, respectively, that do not expire. Because of the change of ownership provisions of the Tax Reform Act of 1986, use
of a portion of the domestic net operating loss and disallowed interest expense carryforwards may be limited in future periods.
Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.
Provision at statutory rates
State income tax, net of federal benefit
Dividend exclusion
Meals and entertainment
Transaction costs
Shared-based compensation
Executive compensation
Tax law change
State rate adjustment
Valuation allowance
Foreign rate differential
Noncontrolling interest
Other permanent items
Total income tax benefit
2021
2020
2019
Amount
874
$
224
—
—
—
(217)
(45)
57
(78)
(831)
130
(83)
235
266
$
Amount
%
(21.0)% $ 5,551
1,431
(5.4)%
27
—
(18)
—
—
—
—
5.2 %
—
1.1 %
1,948
(1.4)%
(82)
1.9 %
(168)
20.0 %
—
(3.1)%
(305)
2.0 %
110
(5.7)%
(6.4)% $ 8,494
Amount
%
(21.0) % $ 1,351
316
(5.4) %
28
(0.1) %
(90)
0.1 %
(137)
—
—
—
—
— %
—
(7.4) %
(109)
0.3 %
(393)
0.6 %
—
—
116
1.1 %
(0.4) %
15
(32.2) % $ 1,097
%
(21.0) %
(4.9) %
(0.4) %
1.4 %
2.1 %
—
— %
—
1.7 %
6.1 %
—
(1.8) %
(0.3) %
(17.1) %
At October 31, 2021 and 2020, the Company had no unrecognized tax benefits. The Company files income tax returns in the
U.S., California, Arizona, Chile, Argentina and Holland. The Company is no longer subject to significant U.S., state and
Chilean income tax examinations for years prior to the statutory periods of three years for federal, four years for state and three
years for Chilean tax jurisdictions. The Company recognizes interest expense and penalties related to income tax matters as a
component of income tax expense. There was no accrued interest or penalties associated with uncertain tax positions as of
October 31, 2021.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES
Act includes numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future
utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary
suspension of certain payment requirements for the employer portion of Social Security taxes, the creation of certain refundable
employee retention credits, and technical corrections from prior tax legislation for tax depreciation of certain qualified
improvement property. The Company evaluated the impact of the CARES Act and recorded a tax benefit of $1,948,000 and an
income tax refund of $5,801,000 due to its ability to carryback and obtain federal tax refund by utilizing net operating losses
under the provisions of the CARES Act at October 31, 2021, of which $841,000 and $4,960,000 were received in October 2020
and December 2020, respectively. An additional $948,000 of California state refunds were received in the third quarter of fiscal
year 2021.
17. Retirement Plans
The Limoneira Company Retirement Plan (the “Plan”) is a noncontributory, defined benefit, single employer pension plan,
which provides retirement benefits for all eligible employees. Benefits paid by the Plan are calculated based on years of service,
highest five-year average earnings, primary Social Security benefit and retirement age. Effective June 2004, the Company froze
the Plan and no additional benefits accrued to participants subsequent to that date. The Plan is administered by Wells Fargo
Bank and Mercer Human Resource Consulting. In fiscal year 2021, the Company decided to terminate the Plan effective
December 31, 2021. The liabilities disclosed as of October 31, 2021, reflect an estimate of the additional cost to pay lump sums
to a portion of the active and vested terminated participants and purchase annuities for all remaining participants from an
insurance company.
The Plan is funded consistent with the funding requirements of federal law and regulations. There were no funding
contributions during fiscal years 2021 or 2020. Plan assets are invested in a group trust consisting primarily of pooled funds,
mutual funds, short-term investment funds and cash.
75
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Retirement Plans (continued)
The investment policy and strategy has been established to provide a total investment return that will, over time, maintain
purchasing power parity for the Plan’s variable benefits and keep the Plan funding at a reasonable level. The long-term target
asset allocations are Cash 1% and Fixed Income 99%.
The following tables set forth the Plan’s net periodic cost, changes in benefit obligation and Plan assets, funded status, amounts
recognized in the Company’s consolidated balance sheets, additional year-end information and assumptions used in determining
the benefit obligations and net periodic benefit cost.
The components of net periodic benefit cost for the Plan for fiscal years 2021 and 2020 were as follows (in thousands):
Administrative expenses
Interest cost
Expected return on plan assets
Prior service cost
Amortization of net loss
Net periodic benefit cost
Following is a summary of the Plan’s funded status as of October 31 (in thousands):
Change in benefit obligation:
Benefit obligation at beginning of year
Administrative expenses
Interest cost
Benefits paid
Actuarial (gain) loss
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Fair value of plan assets at end of year
Reconciliation of funded status:
Fair value of plan assets
Benefit obligations
Net plan obligations
Amounts recognized in statements of financial position:
Noncurrent liabilities
Net obligation recognized in statements of financial position
Reconciliation of amounts recognized in statements of financial position:
Prior service cost
Net loss
Accumulated other comprehensive loss
Accumulated contributions in excess of net periodic benefit cost
Net deficit recognized in statements of financial position
76
2021
2020
277 $
550
(867)
45
737
742 $
278
641
(990)
45
739
713
2021
2020
22,898 $
277
550
(1,450)
(858)
21,417 $
19,352 $
2,668
(1,450)
20,570 $
22,267
278
641
(1,524)
1,236
22,898
19,229
1,647
(1,524)
19,352
20,570 $
21,417
19,352
22,898
(847) $
(3,546)
(847) $
(3,546)
(847) $
(3,546)
(99) $
(2,766)
(2,865)
2,018
(847) $
(144)
(6,162)
(6,306)
2,760
(3,546)
$
$
$
$
$
$
$
$
$
$
$
$
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Retirement Plans (continued)
Presented below are changes in accumulated other comprehensive income, before tax, in the Plan as of October 31, (in
thousands):
Changes recognized in other comprehensive income:
Net (gain) loss arising during the year
Amortization of prior service cost
Amortization of net loss
Total recognized in other comprehensive income
Total recognized in net periodic benefit and other comprehensive income
2021
2020
$
$
$
(2,658) $
(45)
(737)
(3,440) $
579
(45)
(739)
(205)
(2,699) $
508
The following assumptions, as of October 31, were used in determining benefit obligations and net periodic benefit cost ($ in
thousands):
Weighted-average assumptions used to determine benefit obligations:
Discount rate
Assumptions used to determine net periodic benefit cost:
Discount rate
Expected return on plan assets
Additional year-end information:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Benefit payments are expected to be paid over the next 10 fiscal years as follows (in thousands):
2022
2023
2024 - 2026
Next five years
2021
2020
2.58 %
2.50 %
2.50 %
5.05 %
3.00 %
5.66 %
$
$
$
21,417
21,417
20,570
$
$
$
22,898
22,898
19,352
$
$
1,120
20,835
—
—
21,955
The following table sets forth the Plan’s assets as of October 31, 2021, segregated by level using the hierarchy established by
FASB ASC 820, Fair Value Measurements and Disclosures (in thousands):
Cash and cash equivalents
Pooled funds
Level 1
Level 2
Level 3
Total
$
$
250 $
—
250 $
— $
20,320
20,320 $
— $
—
— $
250
20,320
20,570
The Company has a 401(k) plan in which an employee can participate after one year of employment. Employees may elect to
defer up to 100% of their annual earnings subject to Internal Revenue Code limits. The Company makes a matching
contribution on these deferrals up to 4% of the employee’s annual earnings. Participants vest in any matching contribution at a
rate of 20% per year beginning after one year of employment. During fiscal years 2021, 2020 and 2019, the Company
contributed to the plan and recognized expenses of $546,000, $1,107,000 and $927,000, respectively.
77
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Commitments and Contingencies
Litigation and Legal Proceedings
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.
19. Series B and Series B-2 Preferred Stock
Series B Convertible Preferred Stock
In 1997, in connection with the acquisition of Ronald Michaelis Ranches, Inc., the Company issued 30,000 shares of Series B
Convertible Preferred Stock at $100.00 par value (the “Series B Stock”).
Dividends: The holders of shares of Series B Stock are entitled to receive cumulative cash dividends at an annual rate of 8.75%
of par value. Such dividends are payable quarterly on the first day of January, April, July and October in each year.
Voting Rights: Each holder of Series B Stock is entitled to ten votes on all matters submitted to a vote of the stockholders of the
Company.
Redemption: The Company, at the option of the Board of Directors, may redeem the Series B Stock, as a whole or in part, at
any time or from time to time on or after August 1, 2017 and before July 31, 2027, at a redemption price equal to the par value
thereof, plus accrued and unpaid dividends thereon to the date fixed for redemption. Redemption by the Company of a portion
of the Series B Stock totaling 14,790 shares is subject to certain conditions agreed upon between the Company and the holders
of this portion of the Series B Stock.
Conversion: The holders of Series B Stock have the right, at their option, to convert such shares into shares of Common Stock
of the Company at any time prior to redemption. The conversion price is $8.00 per share of Common Stock. Pursuant to the
terms of the Certificate of Designation, Preferences and Rights of the Series B Stock, the conversion price shall be adjusted to
reflect any dividends paid in Common Stock of the Company, the subdivision of the Common Stock of the Company into a
greater number of shares of Common Stock of the Company or upon the advice of legal counsel.
Put: The holders of Series B Stock may at any time after July 1, 2017 and before June 30, 2027 cause the Company to
repurchase such shares at a repurchase price equal to the par value thereof, plus accrued and unpaid dividends thereon to the
date fixed for repurchase. The put features of a portion of the Series B Stock totaling 14,790 shares are subject to certain
conditions agreed upon between the Company and the holders of this portion of the Series B Stock.
Because the Series B Stock may be redeemed by holders of the shares at their discretion beginning July 1, 2017, the redemption
is outside the control of the Company and accordingly, the Series B Stock has been classified as temporary equity.
During fiscal years 2015 thru 2017, a total of 15,210 shares of Series B preferred stock were converted into 190,124 shares of
common stock.
Series B-2 Convertible Preferred Stock
During March and April of 2014, pursuant to a Series B-2 Stock Purchase Agreement dated March 21, 2014, the Company
issued an aggregate of 9,300 shares of Series B-2, 4% voting preferred stock with a par value of $100.00 per share (“Series B-2
Preferred Stock”) to WPI-ACP Holdings, LLC (“WPI”), an entity affiliated with WAM for total proceeds of $9,300,000. The
transactions were exempt from the registration requirements of the Securities Act of 1933, as amended. The Series B-2
Preferred Stock has the following rights, preferences, privileges, and restrictions:
Conversion: Each share of Series B-2 Preferred Stock is convertible into common stock at a conversion price equal to the
greater of (a) the then-market price of the Company’s common stock based upon the closing price of the Company’s common
stock on The NASDAQ Stock Market, LLC or on such other principal market on which the Company’s common stock may be
trading or (b) $15.00 per share of common stock. Shares of Series B-2 Preferred Stock may be converted into common stock (i)
at any time prior to the redemption thereof, or (ii) in the event the Option Agreement (as defined below) is terminated without
all of the shares of Series B-2 Preferred Stock having been redeemed, within 30 calendar days following such termination.
Dividends: The holder of shares of the Series B-2 Preferred Stock is entitled to receive cumulative cash dividends at an annual
rate of 4% of the liquidation value of $1,000 per share. Such dividends are payable quarterly on the first day of January, April,
July and October in each year.
78
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. Series B and Series B-2 Preferred Stock (continued)
Series B-2 Convertible Preferred Stock
Liquidation Rights: In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the
holder of shares of the Series B-2 Preferred Stock is entitled to be paid out of the assets available for distribution, before any
payment is made to the holders of the Company’s common stock or any other series or class of the Company’s shares ranking
junior to the Series B-2 Preferred Stock, an amount equal to the liquidation value of $1,000 per share, plus an amount equal to
all accrued and unpaid dividends.
Voting Rights: Each share of Series B-2 Preferred Stock is entitled to one vote on all matters submitted to a vote of the
Company’s stockholders.
Redemption: The Company may redeem shares of Series B-2 Preferred Stock only (i) from WPI or its designee and (ii) upon,
and to the extent of, an election to exercise the option pursuant to the Option Agreement, described below, at a redemption price
equal to the liquidation value of $1,000 per share plus accrued and unpaid dividends.
Because the Series B-2 Preferred Stock may be redeemed by WPI at its discretion with the exercise of the Option Agreement,
the redemption is outside the control of the Company and accordingly, the Series B-2 Preferred Stock has been classified as
temporary equity.
In connection with the sale of the Series B-2 Preferred Stock, Associated Citrus Packers, Inc. (“Associated”) and another
affiliate of WAM (“WPI-ACP”), entered into a series of agreements related to the future ownership and disposition of farmland
with associated Colorado River water rights and other real estate that is held by Associated in Yuma, Arizona. The agreements
allow the parties to explore strategies that will make the highest and best use of those assets, including but not limited to the
sale or lease of assets or the expansion of a fallowing and water savings program in which a portion of Associated’s property is
currently enrolled.
The net proceeds of any monetization event would be shared equally by the parties. The agreements entered into include a
Water Development Agreement and an Option Agreement. Pursuant to the Water Development Agreement, Associated granted
WPI-ACP exclusive rights to develop water assets attributable to the real estate owned by Associated for the mutual benefit of
Associated and WAM. Pursuant to the Option Agreement, Associated granted WPI-ACP an option to purchase an undivided
interest of up to one-half of the real estate owned by Associated in Yuma County, Arizona (the “Property”) and the water rights
associated therewith until January 1, 2026. The purchase price for the Property subject to the Option Agreement will be paid via
the redemption by the Company of a proportionate percentage of the Series B-2 Preferred Stock. Unless and until a definitive
agreement or definitive agreements with respect to Associated’s real estate and water rights is entered into that would cause the
cessation of farming operations, Associated expects to continue farming the Property and recognize all results of operations and
retain all proceeds from such operations.
20. Stockholders’ Equity
Series A Junior Participating Preferred Stock
The Company has 20,000 shares of preferred stock authorized as Series A Junior Participating Preferred Stock at $0.01 par
value (the “Series A Stock”). No shares are issued or outstanding.
Stock-based compensation
The Company has a stock-based compensation plan (the “Stock Plan”) that allows for the grant of common stock of the
Company to members of management, key executives and non-employee directors. The fair value of such awards is based on
the fair value of the Company's stock on the date of grant and all are classified as equity awards. The Stock Plan has 156,036
remaining shares available to be issued as of October 31, 2021.
Performance Awards
Certain restricted stock grants are made to management each December under the Stock Plan based on the achievement of
certain annual financial performance and other criteria achieved during the previous fiscal year (“Performance Awards”). The
performance grants are based on a percentage of the employee’s base salary divided by the stock price on the grant date once
the performance criteria has been met, and generally vest over a two-year period as service is provided. During December 2021,
2020 and 2019, there were no Performance Awards of restricted stock granted for fiscal year 2021, 2020 or 2019 performance
because the financial performance and other criteria were not met.
79
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Stockholders’ Equity (continued)
Stock-based compensation
Executive Awards
Certain restricted stock grants are made to key executives under the Stock Plan (“Executive Awards”). These grants generally
vest over a three to five-year period as service is provided. During December 2021, subsequent to fiscal year 2021, the
Company granted 70,000 shares of common stock with a per share price of $14.96 to key executives under the Stock Plan. The
related compensation expense of approximately $1,047,000 will be recognized equally over the next three years as the shares
vest.
Director Awards
The Company issues shares of common stock to non-employee directors under the Stock Plan on an annual basis that vest upon
grant (“Director Awards”).
A summary of the Performance, Executive, and Director awards granted under the Stock Plan during fiscal years 2021, 2020
and 2019, and the weighted average grant price is as follows:
2021
Year Ended October 31,
2020
2019
Performance Awards
Executive Awards
Director Awards
Total
Number of
Shares
Weighted-Average
Grant Price
Number of
Shares
Weighted-Average
Grant Price
Number of
Shares
Weighted-Average
Grant Price
— $
95,000 $
30,663 $
125,663 $
—
15.26
16.85
15.65
— $
95,000 $
17,841 $
112,841 $
—
18.87
20.05
19.06
40,095 $
90,000 $
15,642 $
145,737 $
18.74
19.84
21.65
19.73
The Company recognized $2,582,000, $2,044,000 and $1,791,000 of stock-based compensation in fiscal years 2021, 2020 and
2019, respectively, of which substantially all of the expense has been included in selling, general and administrative expenses
for all years presented. Forfeitures are accounted for in the period that the forfeiture occurs. The income tax benefit recognized
in the income statement for stock-based compensation arrangements was $476,000, $400,000 and $324,000 for fiscal years
2021, 2020 and 2019, respectively. The total fair value of shares vested during the years ended October 31, 2021, 2020 and
2019 was $2,951,000, $2,365,000 and $1,788,000 respectively. The Company has unrecognized stock-based compensation
expense of $1,963,000 as of October 31, 2021, which is expected to be recognized over the next two years as the shares vest.
All unvested shares are expected to vest.
During fiscal years 2021, 2020 and 2019, respectively, members of management exchanged 46,993, 11,314 and 36,627 shares
of common stock with fair values of $701,000, $213,000 and $606,000, at the dates of the exchanges, for the payment of
payroll taxes associated with the vesting of shares under the Company’s stock-based compensation programs.
A summary of the status of the Company’s nonvested shares as of October 31, 2021, and changes during the year ended
October 31, 2021, is presented below:
Nonvested at October 31, 2020
Granted
Vested
Nonvested at October 31, 2021
Treasury Stock
Share Repurchase Program
Number of Shares
Weighted-Average
Grant Price
148,460 $
125,663 $
(161,123) $
113,000 $
19.85
15.65
18.31
17.38
In fiscal year 2021, the Company's Board of Directors approved a share repurchase program authorizing it to repurchase up to
$10,000,000 of its outstanding shares of common stock through September 2022; no shares have been repurchased under this
program. In fiscal year 2020, the Company repurchased 250,977 shares for $3,493,000 under a program which expired in
March 2021.
80
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Stockholders’ Equity (continued)
Dividend
On December 14, 2021, the Company declared a $0.075 per share dividend payable on January 14, 2022, in the aggregate
amount of $1,328,000 to common shareholders of record as of December 27, 2021.
21. Fruit Growers Supply Cooperative
The Company is a member of Fruit Growers Supply (“FGS”), a cooperative supply corporation. FGS is the manufacturing and
supply affiliate of Sunkist and allocates after-tax earnings derived from non-member business to members. The Company
records allocations disbursed by FGS as reductions of agribusiness expenses. The Company had been allocated $729,000, of
which the Company received dividends of $216,000, $513,000 and zero in fiscal years 2021, 2020 and 2019, respectively, and
there are no remaining allocations outstanding as of October 31, 2021.
22. Segment Information
The Company operates in four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness.
The reportable operating segments of the Company are strategic business units with different products and services, distribution
processes and customer bases. The fresh lemons segment includes sales, farming and harvesting expenses and third-party
grower and supplier costs relative to fresh lemons. The lemon packing segment includes packing revenues and shipping and
handling revenues relative to lemon packing. The lemon packing segment expenses are comprised of lemon packing costs. The
lemon packing segment revenues include intersegment revenues between fresh lemons and lemon packing. The intersegment
revenues are included gross in the segment note and a separate line item is shown as an elimination. The avocados segment
includes sales, farming and harvest costs. The other agribusiness segment includes sales, farming and harvest costs of oranges,
specialty citrus and other crops. Revenues related to rental operations are included in “Corporate and Other.”
The Company does not separately allocate depreciation and amortization to its fresh lemons, lemon packing, avocados and
other agribusiness segments. No asset information is provided for reportable operating segments, as these specified amounts are
not included in the measure of segment profit or loss reviewed by the Company’s chief operating decision maker. The Company
measures operating performance, including revenues and operating income, of its operating segments and allocates resources
based on its evaluation. The Company does not allocate selling, general and administrative expense, total other income
(expense) and income taxes, or specifically identify them to its operating segments. The Company earns packing revenue for
packing lemons grown on its orchards and lemons procured from third-party growers and suppliers. Intersegment revenues
represent packing revenues related to lemons grown on the Company’s orchards.
Segment information for fiscal year 2021 (in thousands):
Revenues from external customers
Intersegment revenue
Total net revenues
Costs and expenses
Depreciation and amortization
Operating income (loss)
Fresh
Lemons
125,448
$
$
—
125,448
116,117
—
$
9,331
$
Lemon
Packing
17,514 $
25,637
43,151
36,018
—
7,133 $
Segment information for fiscal year 2020 (in thousands):
Revenues from external customers
Intersegment revenue
Total net revenues
Costs and expenses
Depreciation and amortization
Operating (loss) income
Fresh
Lemons
124,150
$
$
—
124,150
125,305
—
(1,155) $
$
Lemon
Packing
13,413 $
36,820
50,233
42,563
—
7,670 $
(25,637)
(25,637)
(25,637)
—
— $
(36,820)
(36,820)
(36,820)
—
— $
Eliminations Avocados
— $
Other
Agribusiness
11,635 $
—
11,635
9,157
—
2,478 $
6,784 $
—
6,784
4,211
—
2,573 $
Total
Agribusiness Corporate
and Other
$
161,381
—
161,381
139,866
8,626
12,889
$
4,646 $
—
4,646
22,682
1,186
(19,222) $
Eliminations Avocados
— $
Other
Agribusiness
13,568 $
—
13,568
12,122
—
1,446 $
8,806 $
—
8,806
5,168
—
3,638 $
Total
Agribusiness
159,937
$
Corporate
and Other
—
159,937
148,338
8,943
2,656
$
4,622 $
—
4,622
25,132
1,154
(21,664) $
Total
166,027
—
166,027
162,548
9,812
(6,333)
Total
164,559
—
164,559
173,470
10,097
(19,008)
81
LIMONEIRA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
22. Segment Information (continued)
Segment information for fiscal year 2019 (in thousands):
Revenues from external customers
Intersegment revenue
Total net revenues
Costs and expenses
Depreciation and amortization
Operating income (loss)
Fresh
Lemons
134,342
$
$
—
134,342
120,998
—
$
13,344
$
Lemon
Packing
15,629 $
30,073
45,702
37,639
—
8,063 $
(30,073)
(30,073)
(30,073)
—
— $
Eliminations Avocados
— $
Other
Agribusiness
11,187 $
—
11,187
13,035
—
(1,848) $
5,391 $
—
5,391
3,150
—
2,241 $
Total
Agribusiness Corporate
and Other
$
166,549
4,849 $
—
4,849
23,530
1,010
(19,691) $
Total
171,398
—
171,398
168,279
8,633
(5,514)
—
166,549
144,749
7,623
14,177
$
The following is a detail of other agribusiness revenues for fiscal years 2021, 2020 and 2019 (in thousands):
Oranges
Specialty citrus and other crops
Other agribusiness revenues
23. Subsequent Events
Year Ended October 31,
2020
2019
2021
$
$
4,382 $
7,253
11,635 $
7,722 $
5,846
13,568 $
6,022
5,165
11,187
The Company has evaluated events subsequent to October 31, 2021 through the date of this filing, to assess the need for
potential recognition or disclosure in this Annual Report. Based upon this evaluation, except as disclosed in the notes to
consolidated financial statements, it was determined that no other subsequent events occurred that require recognition or
disclosure in the consolidated financial statements.
82
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures. As of October 31, 2021, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under
the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Remediation of Material Weakness. As previously disclosed in our Annual Report for the fiscal year ended October 31, 2020,
although there were no material errors that resulted from control deficiencies, we identified a material weakness in our internal
control over financial reporting related to the inadequate design and operating effectiveness of certain controls in the areas of
journal entries and agribusiness revenues and expenses related to an acquired foreign subsidiary in the first year the subsidiary
was included in management’s evaluation of the effectiveness of the Company’s internal control over financial reporting.
We have remediated this material weakness by implementing new policies and procedures to enhance (a) the design of our
process level controls over the recording of journal entries and controls over revenues and expenses at the foreign subsidiary
where we identified the control deficiencies and (b) management’s review controls over financial information of the foreign
subsidiary. Our implementation of the new policies and procedures included the hiring of new resources, establishment of clear
responsibilities to comply with the new policies and procedures, and testing sufficient occurrences of these newly designed and
implemented controls to evaluate its operating effectiveness. The remediation measures have strengthened the design and
operating effectiveness of our internal control over financial reporting.
We assessed the impact of the remediated material weakness to the consolidated financial statements to ensure that the
Company’s consolidated financial statements were prepared in accordance with GAAP and accurately reflect its financial
position and results of operation for the year ended October 31, 2021. As a result, management concluded that the consolidated
financial statements included in this Annual Report present fairly, in all material respects, the Company’s financial position,
results of operations and cash flows for the periods presented in conformity with GAAP.
Internal Control over Financial Reporting. Refer to “Management’s Report on Internal Control over Financial Reporting” and
“Report of Independent Registered Public Accounting Firm” below.
Management’s Report on Internal Control over Financial Reporting
Management of Limoneira Company (the “Company”) is responsible for establishing and maintaining adequate internal control
over financial reporting as such term is defined in the Exchange Act Rule 13a-15(f). Internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, including the principal executive officer and principal financial officer, conducted an evaluation
of the effectiveness of Limoneira Company’s internal control over financial reporting, based on the framework in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that internal control over financial reporting was effective as of October 31,
2021. Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s
internal control over financial reporting and has issued a report on internal control over financial reporting, which is included
herein.
Harold S. Edwards
President and Chief Executive Officer
Mark Palamountain
Chief Financial Officer, Treasurer and Corporate Secretary
83
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Limoneira Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Limoneira Company and subsidiaries (the “Company”) as of
October 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of October 31, 2021, based on criteria established in Internal
Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended October 31, 2021, of the Company and our report
dated January 10, 2022, expressed an unqualified opinion on those financial statements based on our audit and the report of the
other auditors.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Los Angeles, California
January 10, 2022
84
Changes in Internal Control over Financial Reporting. There have been no significant changes in our internal control over
financial reporting during the quarter ended October 31, 2021 or, to our knowledge, in other factors that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls. Control systems, no matter how well conceived and operated, are designed to
provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Certain information required by Part III is omitted from this Annual Report because we will file a definitive Proxy Statement
for the Annual Meeting of Stockholders pursuant to Regulation 14A of the Exchange Act (the “Proxy Statement”), not later than
120 days after the end of the fiscal year covered by this Annual Report, and the applicable information included in the Proxy
Statement is incorporated herein by reference.
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this item is incorporated herein by reference to the Proxy Statement.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the Proxy Statement.
85
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements of Limoneira Company
Consolidated Balance Sheets at October 31, 2021 and 2020
Consolidated Statements of Operations for the years ended October 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Loss for the years ended October 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity and Temporary Equity for the years ended October 31, 2021, 2020 and
2019
Consolidated Statements of Cash Flows for the years ended October 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Per Item 15(a)(2), list the following documents filed as part of the report: those financial statements required to be filed
by Item 8 of this Form 10-K, and by paragraph (b) below.
(b)
Exhibits
See “Exhibit Index” set forth on page 88.
(c)
Financial Statement Schedules
Per Item 15(c), registrants shall file, as financial statement schedules to this Form 10-K, the financial statements
required by Regulation S-X (17 CFR 210) which are excluded from the annual report to shareholders by Rule 14a-3(b)
including: (1) separate financial statements of subsidiaries not consolidated and fifty percent or less owned persons; (2)
separate financial statements of affiliates whose securities are pledged as collateral; and (3) schedules.
Item 16. Form 10-K Summary
None
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on January 10, 2022.
LIMONEIRA COMPANY
By:
/s/ Harold S. Edwards
Harold S. Edwards
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below on
January 10, 2022, by the following persons on behalf of the registrant and in the capacities indicated:
Signature
/s/ Gordon E. Kimball
Gordon E. Kimball
/s/ Harold S. Edwards
Harold S. Edwards
/s/ Mark Palamountain
Mark Palamountain
/s/ Amy Fukutomi
Amy Fukutomi
/s/ Donald R. Rudkin
Donald R. Rudkin
/s/ Edgar Terry
Edgar Terry
/s/ Elizabeth Blanchard Chess
Elizabeth Blanchard Chess
/s/ Elizabeth Mora
Elizabeth Mora
/s/ Jesus Loza
Jesus Loza
/s/ John W.H. Merriman
John W.H. Merriman
/s/ Robert M. Sawyer
Robert M. Sawyer
/s/ Scott S. Slater
Scott S. Slater
87
Title
Chairman of the Board of Directors
Director, President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer, Treasurer
and Corporate Secretary
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
EXHIBIT INDEX
88
Exhibit
No.
Description
2.1
2.2
2.3
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
Certificate of Merger of Limoneira Company and The Samuel Edwards Associates into Limoneira Company,
dated October 31, 1990 (Incorporated by reference to exhibit 3.2 to the Company’s Registration Statement on
Form 10, and amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Certificate of Merger of McKevett Corporation into Limoneira Company dated December 31, 1994
(Incorporated by reference to exhibit 3.3 to the Company’s Registration Statement on Form 10, and amendments
thereto, declared effective April 13, 2010 (File No. 000-53885))
Agreement of Merger Between Ronald Michaelis Ranches, Inc. and Limoneira Company, dated June 24, 1997
(Incorporated by reference to exhibit 3.6 to the Company’s Registration Statement on Form 10, and amendments
thereto, declared effective April 13, 2010 (File No. 000-53885))
Restated Certificate of Incorporation of Limoneira Company, dated July 5, 1990 (Incorporated by reference to
exhibit 3.1 to the Company’s Registration Statement on Form 10, and amendments thereto, declared effective
April 13, 2010 (File No. 000-53885))
Certificate of Amendment of Certificate of Incorporation of Limoneira Company, dated April 22, 2003
(Incorporated by reference to exhibit 3.7 to the Company’s Registration Statement on Form 10, and amendments
thereto, declared effective April 13, 2010 (File No. 000-53885))
Certificate of Amendment of Certificate of Incorporation of Limoneira Company, dated March 24, 2010
(Incorporated by reference to exhibit 3.9 to the Company’s Registration Statement on Form 10, and amendments
thereto, declared effective April 13, 2010 (File No. 000-53885))
Certificate of Amendment of Certificate of Incorporation of Limoneira Company, dated March 29, 2017
(Incorporated by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K, filed March 31, 2017
(File No. 001-34755))
Amended and Restated Bylaws of Limoneira Company (Incorporated by reference to exhibit 3.1 to the
Company's Current Report on Form 8-K, filed October 27, 2021 (File No. 001-34755))
Specimen Certificate representing shares of Common Stock, par value $0.01 per share (Incorporated by
reference to exhibit 4.1 to the Company’s Registration Statement on Form 10, and amendments thereto, declared
effective April 13, 2010 (File No. 000-53885))
Rights Agreement dated December 20, 2006 between Limoneira Company and The Bank of New York, as
Rights Agent (Incorporated by reference to exhibit 4.2 to the Company’s Registration Statement on Form 10,
and amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, $.01 Par
Value, of Limoneira Company, dated November 21, 2006 (Incorporated by reference to exhibit 3.8 to the
Company’s Registration Statement on Form 10, and amendments thereto, declared effective April 13, 2010 (File
No. 000-53885))
Certificate of Designation, Preferences and Rights of $8.75 Voting Preferred Stock, $100.00 Par Value, Series B
of Limoneira Company, dated May 21, 1997 (Incorporated by reference to exhibit 3.4 to the Company’s
Registration Statement on Form 10, and amendments thereto, declared effective April 13, 2010 (File No. 000-
53885))
Amended Certificate of Designation, Preferences and Rights of $8.75 Voting Preferred Stock, $100.00 Par
Value, Series B of Limoneira Company, dated May 21, 1997 (Incorporated by reference to exhibit 3.5 to the
Company’s Registration Statement on Form 10, and amendments thereto, declared effective April 13, 2010 (File
No. 000-53885))
89
Exhibit
No.
4.6
4.7*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Description
Certificate of Designation, Preferences and Rights of 4% Voting Preferred Stock, $100.00 Par Value, Series B-2
of Limoneira Company, dated March 20, 2014 (Incorporated by reference to exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed March 24, 2014 (File No. 001-34755))
Description of Securities
Real Estate Advisory Management Consultant Agreement dated April 1, 2004, by and between Limoneira
Company and Parkstone Companies (Incorporated by reference to exhibit 10.1 of the Company’s Current
Report on Form 8-K, filed August 25, 2010 (File No. 001-34755))
Amendment No. 1 to Real Estate Advisory Management Consultant Agreement dated August 24, 2010, by and
between Limoneira Company and Parkstone Companies (Incorporated by reference to exhibit 10.2 of the
Company’s Current Report on Form 8-K, filed August 25, 2010 (File No. 001-34755))
Avocado Marketing Agreement effective February 8, 2003, by and between Calavo Growers, Inc. and
Limoneira Company, as amended (Incorporated by reference to exhibit 10.2 to the Company’s Registration
Statement on Form 10, and amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Stock Purchase Agreement dated June 1, 2005, between Limoneira Company and Calavo Growers, Inc.
(Incorporated by reference to exhibit 10.3 to the Company’s Registration Statement on Form 10, and
amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Standstill Agreement dated June 1, 2005, between Limoneira Company and Calavo Growers, Inc. (Incorporated
by reference to exhibit 10.4 to the Company’s Registration Statement on Form 10, and amendments thereto,
declared effective April 13, 2010 (File No. 000-53885))
Standstill Agreement dated June 1, 2005 between Calavo Growers, Inc. and Limoneira Company (Incorporated
by reference to exhibit 10.5 to the Company’s Registration Statement on Form 10, and amendments thereto,
declared effective April 13, 2010 (File No. 000-53885))
Lease Agreement dated February 15, 2005, between Limoneira Company and Calavo Growers, Inc.
(Incorporated by reference to exhibit 10.6 to the Company’s Registration Statement on Form 10, and
amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Revolving Equity Line of Credit Promissory Note and Loan Agreement, dated October 28, 1997, between
Limoneira Company and Farm Credit West, FLCA (as successor by merger to Central Coast Federal Land Bank
Association) (Incorporated by reference to exhibit 10.9 to the Company’s Registration Statement on Form 10,
and amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Promissory Note and Loan Agreement, dated April 23, 2007, between Farm Credit West, FLCA and Limoneira
Company (Incorporated by reference to exhibit 10.10 to the Company’s Registration Statement on Form 10, and
amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Promissory Note and Loan Agreement, dated September 23, 2005, among Farm Credit West, FLCA and
Windfall Investors, LLC (Incorporated by reference to exhibit 10.12 to the Company’s Registration Statement
on Form 10, and amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Master Loan Agreement, dated May 1, 2012, between Limoneira Company and Farm Credit West, PCA
(Incorporated by reference to exhibit 10.2 to the Company’s Current Report on Form 8-K, filed May 2, 2012
(File No. 001-34755))
Promissory Note and Supplement to Master Loan Agreement, dated May 1, 2012, between Limoneira Company
and Farm Credit West, PCA (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on
Form 8-K filed, May 2, 2012 (File No. 001-34755))
90
Exhibit
No.
10.13†
10.14†
10.15†
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
Description
Limoneira Company Amended and Restated 2010 Omnibus Incentive Plan, as amended on March 28, 2017
(Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 31, 2017
(File No. 001-34755))
Limoneira Company Management Incentive Plan 2009-2010 (Incorporated by reference to exhibit 10.16 of the
Company’s Form 10-K, filed January 26, 2011 (File No. 001-34755))
Limoneira Stock Grant Performance Bonus Plan (Incorporated by reference to exhibit 10.15 to the Company’s
Registration Statement on Form 10, and amendments thereto, declared effective April 13, 2010 (File No. 000-
53885))
Pre-Annexation and Development Agreement, dated March 3, 2008, by and between the City of Santa Paula and
Limoneira Company (Incorporated by reference to exhibit 10.20 to the Company’s Registration Statement on
Form 10, and amendments thereto, declared effective April 13, 2010 (File No. 000-53885))
Judgment, dated March 7, 1996, United Water Conservation Dist. v. City of San Buenaventura, et al., Case No.
115611, Superior Court of the State of California, Ventura County (Incorporated by reference to exhibit 10.24 to
the Company’s Registration Statement on Form 10, and amendments thereto, declared effective April 13, 2010
(File No. 000-53885))
Option Agreement, dated February 27, 2013, by and among the Company, Jason B. Rushing as Trustee of the
Jason B. Rushing Trust, Jennifer R. Rushing as trustee for the Jennifer R. Rushing Revocable trust, Zella A.
Rushing as trustee of the 1988 Zella Rushing Trust (Incorporated by reference to exhibit 10.1 of the Company’s
Quarterly Report on Form 10-Q, filed June 10, 2013 (File No. 001-34755))
Purchase and Sale Agreement and Escrow Instructions, dated April 8, 2013, by and among HM East Ridge LLC,
Limoneira Company and IPDC construction, Inc., (Incorporated by reference to exhibit 10.1 to the Current
Report on Form 8-K, filed April 12, 2013 (File No. 001-34755))
Lease Agreement, dated July 1, 2013, by and between the Company and Cadiz, Inc. (Incorporated by reference
to exhibit 10.1 to the Current Report on Form 8-K, filed July 2, 2013 (File No. 001-34755))
Cadiz-Limoneira Amended and Restated Lease, dated February 3, 2015, by and between Cadiz Real Estate LLC
and Limoneira Company (Incorporated by reference to exhibit 10.1 of the Company’s Quarterly Report on Form
10-Q, filed March 9, 2015 (File No. 001-34755)).
Agreement and Plan of Merger, dated September 6, 2013, by and among Limoneira Company, ACP Merger Sub,
Inc., Associated Citrus Packers, Inc., and Mark Spencer, as the Shareholder Representative defined therein
(Incorporated by reference to exhibit 10.1 to the Current Report on form 8-K, filed September 12, 2013 (File
No. 001-34755))
Purchase and Sale Agreement and Joint Escrow Instructions, dated September 27, 2013, by and between Sun
World International, LLC and Limoneira Company (Incorporated by reference to exhibit 10.1 to the Current
Report on Form 8-K, filed October 15, 2013 (File No. 001-34755))
Construction Contract and Agreement, dated October 1, 2013, by and between Limoneira Company and
NEXGEN Builders, Inc. (Incorporated by reference to exhibit 10.1 to the Current Report on Form 8-K, filed
December 4, 2013 (File No. 001-34755))
General Conditions of the Contract and Agreement, dated October 1, 2013, by and between Limoneira company
and NEXGEN Builders, Inc. (Incorporated by reference to exhibit 10.2 to the Current Report on Form 8-K, filed
December 4, 2013 (File No. 001-34755))
91
Exhibit
No.
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37†
10.38
Description
Purchase and Sale Agreement and Escrow Instructions, dated November 29, 2013, by and between Templeton
Santa Barbara, LLC and MI Land, LLC related to the sale of the Sevilla Property (Incorporated by reference to
exhibit 10.3 to the Current Report on Form 8-K, filed December 4, 2013 (File No. 001-34755))
Purchase and Sale Agreement and Escrow Instructions, dated November 29, 2013, by and between Templeton
Santa Barbara, LLC and MI Land, LLC related to the sale of the Pacific Crest Property (Incorporated by
reference to exhibit 10.4 to the Current Report on Form 8-K, filed December 4, 2013 (File No. 001-34755))
Series B-2 Preferred Stock Purchase Agreement, dated March 21, 2014, by and between Limoneira Company
and WPI-ACP Holdings, LLC (Incorporated by reference to exhibit 10.1 to the Current Report on Form 8-K,
filed March 24, 2014 (File No. 001-34755))
Contribution Agreement, dated September 4, 2015, by and among Limoneira Company and Lewis Santa Paula
Member, LLC (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed
September 10, 2015 (File No. 001-34755))
First Amended and Restated Limited Liability Company Agreement of Limoneira Lewis Community Builders,
LLC, dated November 10, 2015, by and among Limoneira EA1 Land LLC and Lewis Santa Paula Member,
LLC (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November
16, 2015 (File No. 001-34755))
Interim Funding Agreement, dated December 1, 2015, between Limoneira and Wells Fargo Equipment Finance,
Inc. (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December
22, 2015 (File No. 001-34755))
Master Loan and Security Agreement, dated December 1, 2015, between Limoneira Company and Wells Fargo
Equipment Finance, Inc. (Incorporated by reference to exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q, filed March 10, 2016 (File No. 001- 34755))
Loan Schedule to Master Loan and Security Agreement, dated January 20, 2016, between Limoneira Company
and Wells Fargo Equipment Finance, Inc. (Incorporated by reference to exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q, filed March 10, 2016 (File No. 001-34755))
Promissory Note and Loan Agreement, dated February 11, 2016, between Limoneira Company and Farm Credit
West, FLCA (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed
February 18, 2016 (File No. 001-34755))
Lease Agreement, dated November 10, 2015, by and among Limoneira Company and Limoneira Lewis
Community Builders, LLC (Incorporated by reference to exhibit 10.2 to the Company’s Current Report on Form
8-K, filed November 16, 2015 (File No. 001-34755)
Retained Property Development Agreement, dated November 10, 2015, by and among Limoneira Company and
Limoneira Lewis Community Builders, LLC (Incorporated by reference to exhibit 10.3 to the Company’s
Current Report on Form 8-K filed, November 16, 2015 (File No. 001-34755)
Form of Award Agreement under the Limoneira Company 2010 Amended and Restated Omnibus Incentive Plan
(Incorporated by reference to exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q, filed March 10,
2016 (File No. 001-34755))
Master Loan Agreement, dated June 19, 2017, between Limoneira Company and Farm Credit West, FLCA
(Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, file June 21, 2017
(File No. 001-34755))
92
Exhibit
No.
10.39†
10.40
10.41†
10.42
10.43
10.44
10.45
10.46†
10.47
10.48
10.49
10.50
Description
Revolving Credit Facility Promissory Note and Supplement to Master Loan Agreement, dated June 19, 2017,
between Limoneira Company and Farm Credit West FLCA (Incorporated by reference to exhibit 10.2 to the
Company’s Current Report on Form 8-K, filed June 21, 2017 (File No. 001-34755))
Non-revolving Credit Facility Promissory Note and Supplement to Master Loan Agreement, dated June 19,
2017, between Limoneira Company and Farm Credit West FLCA (Incorporated by reference to exhibit 10.3 to
the Company’s Current Report on Form 8-K, filed June 21, 2017 (File No. 001-24755))
Form of Award Agreement under the Limoneira Company 2010 Amended and Restated Omnibus Incentive Plan
(Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 29,
2018 (File No. 001-34755))
Revolving Credit Facility Supplement, dated January 29, 2018, between Limoneira Company and Farm Credit
West, PCA (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed
February 1, 2018 (File No. 001-34755))
Line of Credit Loan Agreement, dated February 22, 2018, by and between Limoneira Lewis Community
Builders, LLC and Bank of America, N.A. (Incorporated by reference to exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed March 2, 2018 (File No. 001-34755))
Unsecured Line of Credit Promissory Note, dated February 22, 2018, by and between Limoneira Lewis
Community Builders, LLC and Bank of America, N.A. (Incorporated by reference to exhibit 10.2 to the
Company’s Current Report on Form 8-K, filed March 2, 2018 (File No. 001-34755))
Guaranty Agreement, dated February 22, 2018, by and among Richard A. Lewis, individually and as Trustee of
the Richard A. Lewis Revocable Trust u/d/t dated August 16, 2004 , Robert E. Lewis, individually and as
Trustee of the Robert E. Lewis Revocable Trust u/d/t dated August 17, 2004, Roger G. Lewis, individually and
as Trustee of the Roger G. Lewis Revocable Trust u/d/t dated August 20, 2004, Randall W. Lewis, individually
and as Trustee of the Randall W. Lewis Revocable Trust u/d/t dated September 1, 2006, and Limoneira
Company (Incorporated by reference to exhibit 10.3 to the Company’s Current Report on Form 8-K, filed
March 2, 2018 (File No. 001-34755))
Form of Restricted Share Award Agreement under the Limoneira Company 2010 Amended and Restated
Omnibus Incentive Plan (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-
K, filed April 11, 2018 (File No. 001-34755))
Asset Purchase Agreement, dated July 24, 2018, by and between Limoneira Company and Oxnard Lemon
Associates, Ltd. (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K, filed
July 26, 2018 (File No. 001-34755))
Master Loan Agreement, dated June 1, 2021, between Limoneira Company and Farm Credit West, PCA
(Incorporated by reference to exhibit 10.1 of the Company’s Current Report on Form 8-K, filed June 17, 2021
(File No. 001-34755))
Promissory Note and Revolving Credit Facility Supplement to Master Loan Agreement, dated June 1, 2021,
between Limoneira Company and Farm Credit West, PCA (Incorporated by reference to exhibit 10.2 of the
Company’s Current Report on Form 8-K, filed June 17, 2021 (File No. 001-34755))
Promissory Note and Non-Revolving Credit Facility Supplement to Master Loan Agreement, dated June 1,
2021, between Limoneira Company and Farm Credit West, PCA (Incorporated by reference to exhibit 10.3 of
the Company’s Current Report on Form 8-K, filed June 17, 2021 (File No. 001-34755))
93
Exhibit
No.
10.51
16.1
21.1*
Description
Agreement to Convert to Fixed Interest Rate, dated June 8, 2021, between Limoneira Company and Farm Credit
West, PCA (Incorporated by reference to exhibit 10.4 of the Company’s Current Report on Form 8-K, filed June
17, 2021 (File No. 001-34755))
Letter from Ernst & Young LLP, dated March 14, 2019 (Incorporated by reference to exhibit 16.1 to the
Company's Current Report on Form 8-K, filed March 14, 2019 (File No. 001-34755))
Subsidiaries of Limoneira Company
23.1*
Consent of Independent Registered Public Accounting Firm - Deloitte & Touche LLP
23.2*
Consent of Independent Registered Public Accounting Firm - Ernst & Young LLP
31.1*
Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a)
31.2*
32.1*
32.2*
99.1*
Certification of the Principal Financial and Accounting Officer pursuant to Exchange Act Rule 13a-14(a) and
15d-14(a)
Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Limoneira Lewis Community Builders, LLC - Financial Statements as of October 31, 2021 and 2020
101.INS*
XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
* Filed or furnished herewith. In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and
34-47986, Final Rule: Management's Report on Internal Control Over Financial Reporting and Certification of Disclosure
in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany
this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such
certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange
Act, except to the extent that the registrant specifically incorporates it by reference.
† Denotes management contracts and compensatory plans or arrangements.
94
(cid:47)(cid:76)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:47)(cid:76)(cid:80)(cid:82)(cid:81)(cid:72)(cid:76)(cid:85)(cid:68)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)
(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:18)(cid:50)(cid:85)(cid:74)(cid:68)(cid:81)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)
(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:21)(cid:20)(cid:17)(cid:20)(cid:3)
Associated Citrus Packers, Inc.
Limoneira EA1 Land LLC
Limoneira EA1 Management LLC
Limoneira EA2 LLC
Limoneira Energy Company LLC
Limoneira International Division, LLC
Limoneira Lewis Community Builders, LLC
Limoneira Mercantile, L.L.C.
Windfall Investors, LLC
Templeton Santa Barbara, LLC
6037 East Donna Circle Drive LLC
6146 East Cactus Wren Road LLC
Limoneira Chile SpA
Limoneira SA
Fruticola Pan de Azucar S.A.
Agricola San Pablo SpA
Limoneira Argentina S.A.U.
Trapani Fresh Consorcio de Cooperacion
Limoneira Holland B.V.
Arizona
Delaware
Delaware
Delaware
California
California
Delaware
California
California
Nevada
Arizona
Arizona
Chile
Republic of South Africa
Chile
Chile
Argentina
Argentina
Holland
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statement Form S-8 No. 333-171934 and Form S-3 No. 333-
239061 of our reports dated January 10, 2022, relating to the consolidated financial statements of Limoneira Company and
subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in
this Annual Report on Form 10-K of the Company for the year ended October 31, 2021.
Exhibit 23.1
Los Angeles, California
January 10, 2022
/s/ Deloitte & Touche LLP
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)(cid:3) Registration Statement (Form S-8 No. 333-171934) pertaining to the Limoneira Company 2010 Omnibus
Incentive Plan, and
(2)(cid:3) Registration Statement (Form S-3 No. 333-239061) of Limoneira Company;
of our report dated December 20, 2021, with respect to the financial statements of Limoneira Lewis Community Builders, LLC
included in this Annual Report (Form 10-K) of Limoneira Company for the year ended October 31, 2021.
/s/ Ernst & Young LLP
Irvine, California
January 10, 2022
Exhibit 31.1
Certification of the Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a)
I, Harold S. Edwards, certify that:
1. I have reviewed this annual report on Form 10-K of Limoneira Company (the “Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)(cid:3) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b)(cid:3) designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c)(cid:3) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d)(cid:3) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control
over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons
performing the equivalent functions):
(a)(cid:3) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and
(b)(cid:3) any fraud, whether or not material, that involves management or other employees who have a significant role in
the Registrant’s internal control over financial reporting.
Dated January 10, 2022.
By:
/s/ Harold S. Edwards
Harold S. Edwards
Director, President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certification of the Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a)
I, Mark Palamountain, certify that:
1. I have reviewed this annual report on Form 10-K of Limoneira Company (the “Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods
presented in this report;
4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)(cid:3) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b)(cid:3) designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c)(cid:3) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d)(cid:3) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control
over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons
performing the equivalent functions):
(a)(cid:3) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and
(b)(cid:3) any fraud, whether or not material, that involves management or other employees who have a significant role in
the Registrant’s internal control over financial reporting.
Dated January 10, 2022.
By:
/s/ Mark Palamountain
Mark Palamountain
Chief Financial Officer, Treasurer and Corporate
Secretary
(Principal Financial Officer and Accounting Officer)
Exhibit 32.1
Certification of the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Annual Report on Form 10-K for the year ended October 31, 2021 (the “Report”) of Limoneira
Company (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Harold S. Edwards,
Director, President and Chief Executive Officer of the Registrant, hereby certify that:
(1)(cid:3) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2)(cid:3) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
Dated January 10, 2022.
By:
/s/ Harold S. Edwards
Harold S. Edwards
Director, President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
Certification of the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Annual Report on Form 10-K for the year ended October 31, 2021 (the “Report”) of Limoneira
Company (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Mark Palamountain,
Chief Financial Officer, Treasurer and Corporate Secretary of the Registrant, hereby certify that:
(1)(cid:3) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2)(cid:3) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
Dated January 10, 2022.
By:
/s/ Mark Palamountain
Mark Palamountain
Chief Financial Officer, Treasurer and Corporate
Secretary
(Principal Financial Officer and Accounting Officer)
Exhibit 99.1
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Financial Statements
October 31, 2021
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Table of Contents
Report of Independent Registered Public Accounting Firm
Financial Statements
Balance Sheets
Statements of Operations
Statements of Members’ Capital
Statements of Cash Flows
Notes to Financial Statements
1
4
5
6
7
8
Report of Independent Registered Public Accounting Firm
To the Members of Limoneira Lewis Community Builders, LLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Limoneira Lewis Community Builders,
LLC (the Company) as of October 31, 2021 and 2020, the related statements of operations,
members’ capital and cash flows for each of the three years in the period ended October 31, 2021,
and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company
at October 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
three years in the period ended October 31, 2021, in conformity with U.S. generally accepted
accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the Company’s financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with
auditing standards generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
(cid:3)
Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
Critical Audit Matters
(cid:3)
The critical audit matters communicated below are matters arising from the current period audit
of the financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.
(cid:3)
(cid:47)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:53)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
Description of
the Matter
For the year ended October 31, 2021, the Company’s revenues from land sales
totaled $42.9 million. As more fully described in Note 2 to the financial
statements, the Company evaluates each of its land sale contracts to identify
the related performance obligations, determines and allocates the overall
transaction price to the identified performance obligations, and recognizes
revenue based on the extent to which the performance obligations have been
satisfied. The Company also evaluates the terms of variable consideration
attributable to each land sale contract, including factors indicating the need to
apply a revenue constraint, and evaluates any other unique contract terms
which may otherwise impact revenue recognition under Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers (ASC 606).
Auditing the Company’s recognition and measurement of land sales revenue is
especially challenging because the application of the ASC 606 revenue
recognition model to land sale transactions is complex and involves significant
judgments related to the identification of performance obligations within the
context of each contract; the determination of overall transaction price,
including estimates of variable consideration and determining the need to apply
a revenue constraint; and evaluation of any unique contract terms which could
impact revenue recognition.
How We
Addressed the
Matter in Our
Audit
To test the land sales revenue recognized by the Company, our audit
procedures included, among others, testing each land sale transaction and
assessing the methodologies and evaluating the significant judgments used by
the Company in applying the ASC 606 revenue recognition model to its land
sales contracts. We tested each of the Company’s land sale transactions in the
current year through inspection of the terms of the purchase and sale
agreements and other relevant agreements, inspection of closing statements,
vouching of significant cash proceeds received, and recalculation of revenue
recognized. We evaluated the methodology utilized and significant judgments
made by management in the application of the ASC 606 revenue recognition
model
identification of
performance obligations within the context of each contract; the determination
of the overall transaction price, including variable consideration, and related
judgments involved in determining whether to constrain revenue related to
variable consideration; and the evaluation of any unique contract terms and
related impact on the overall recognition or measurement of revenue. We also
performed inquiries of operational personnel outside the accounting function
and performed a physical site inspection to corroborate our inquiries of
management and to identify any contrary information toward the satisfaction of
performance obligations and overall recognition and measurement of revenue
within the ASC 606 model.
transaction, including:
land sale
to each
the
Description of
the Matter
(cid:51)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:37)(cid:88)(cid:71)(cid:74)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:47)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:68)(cid:79)(cid:72)(cid:86)
As discussed in Note 2 to the financial statements, cost of land sales is
determined based on an allocation of costs to individual land parcels sold based
on specific identification, if practicable, or an allocation based on a method
which approximates relative fair value. Costs allocated to land parcels sold
include actual development costs incurred and estimates of future development
costs, including common costs and amenities within the project. For purposes
of allocating development costs, estimates of future sales prices and
development costs reflected in the project budget are reevaluated throughout
the year, with adjustments being allocated prospectively to the remaining
parcels available for sale.
Auditing the Company’s cost of land sales is especially challenging as it
involves significant management estimation related to projecting future
development costs and land sales prices and involves judgment and complexity
in applying the appropriate costing methodology to each land sale.
How We
Addressed the
Matter in Our
Audit
To test cost of land sales recorded by the Company, our audit procedures
included, among others, evaluating management’s methodology for estimating
future costs and sales prices associated with the project and allocating such
costs to individual land sales, as well as evaluating the underlying data and
assumptions used by management. We tested projected future sales prices by
comparing against actual historical sales and evaluating underlying
assumptions against market data. We tested projected future development costs
by comparing against development obligations in contractual agreements to
determine completeness and accuracy, comparing cost projections to historical
actuals for similar work performed at the project, and comparing projected
costs to current commitments in place on a sample basis. We also evaluated
changes in budgeted revenue and cost amounts from previous periods for
reasonableness relative to changes in the project development and other
factors. Further, we performed inquiries with operational personnel outside the
accounting function to corroborate information obtained from management and
performed a site visit to the project to compare the overall status of the
development to information reflected in the project budget.
(cid:3)
(cid:3)
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Irvine, California
December 20, 2021
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Balance Sheets
(in thousands)
Assets
Land held for development and sale
Cash and cash equivalents
Due from affiliates (Note 7)
Refundable deposits and other assets
Note receivable – land sale
Contract assets
Total assets
Liabilities and members’ capital
Unsecured line of credit, net of unamortized
loan costs (Note 5)
Accounts payable and accrued expenses
Unearned revenue (Note 3)
Due to affiliates (Note 7)
Commitments and contingencies (Note 8)
Members’ capital:
Limoneira EA1 Land, LLC
Lewis Santa Paula Member, LLC
Total liabilities and members’ capital
$
See accompanying notes.
October 31,
2021
2020
$
$
98,951
2,736
5,771
945
—
561
108,964
$
$
$
— $
4,657
—
51
4,708
122,206
668
—
792
6,084
421
130,171
30,368
3,843
696
95
35,002
51,416
52,840
104,256
108,964 $
46,908
48,261
95,169
130,171
4
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Statements of Operations
(in thousands)
Revenues:
Land sales
Cost of sales:
Cost of land sales
Gross profit
Sales and marketing expenses
General and administrative expenses
Abandoned development costs
Other (income) expense
2021
Year Ended October 31,
2020
2019
$
42,853
$
25,906
$
37,788
(32,735)
10,118
(21,791)
4,115
(27,204)
10,584
984
88
—
(41)
1,071
217
316
(104)
601
81
(cid:237)
(99)
Net income
$
9,087
$
2,615
$
10,001
See accompanying notes.
5
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Statements of Members’ Capital
(in thousands)
Limoneira EA1
Land, LLC
Lewis
Santa Paula
Member, LLC
Total
Members' Capital
$
$
34,354 $
4,000
4,368
42,722
2,800
1,386
46,908
—
4,508
51,416 $
34,599 $
4,000
5,633
44,232
2,800
1,229
48,261
—
4,579
52,840 $
68,953
8,000
10,001
86,954
5,600
2,615
95,169
—
9,087
104,256
Balance at October 31, 2018
Contributions
Net income
Balance at October 31, 2019
Contributions
Net income
Balance at October 31, 2020
Contributions
Net income
Balance at October 31, 2021
See accompanying notes.
6
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Statements of Cash Flows
(in thousands)
Operating activities
Net income
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Land held for development and sale
Refundable deposits and other assets
Note receivable – land sale
Due from affiliates
Contract assets
Accounts payable and accrued expenses
Unearned revenue
Due to affiliates
Net cash provided by (used in) operating activities
Financing activities
Borrowings from line of credit
Principal repayments on line of credit
Payment of deferred loan costs
Loan from members
Principal repayments on loan from members
Contributions from members
Net cash (used in) provided by financing activities
Year ended October 31,
2020
2021
2019
$
9,087 $
2,615 $
10,001
23,255
72
6,084
(5,771)
(140)
814
(696)
(44)
32,661
$
5,812 $
(36,180)
(225)
—
—
—
(30,593)
13,267
(60)
(6,084)
—
74
(3,742)
238
80
6,388
13,193 $
(25,992)
(90)
3,600
(3,600)
5,600
(7,289)
(14,459)
(502)
—
—
(495)
(6,657)
(5,792)
(13)
(17,917)
37,646
(30,700)
—
—
—
8,000
14,946
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
2,068
668
2,736 $
(901)
1,569
668 $
(2,971)
4,540
1,569
Supplemental disclosure of cash flow information
Cash paid for interest (including amounts capitalized to
the Project)
$
398 $
1,707 $
1,844
See accompanying notes.
7
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements
October 31, 2021
1.(cid:3) Organization
Organization and Business
Limoneira Lewis Community Builders, LLC (“Limoneira Lewis” or the “Company”), a Delaware
Limited Liability Company, is a joint venture between Lewis Santa Paula Member, LLC
(“Lewis”) and Limoneira EA1 Land, LLC (“Limoneira”) (together, the “Members”) to develop a
501 acre area of land in Santa Paula, California into residential properties (the “Project”).
Limoneira Lewis was formed on November 3, 2015 and began operations on November 10, 2015
in conjunction with the contribution of land and related entitlements for an agreed-upon value of
$40,000,000 by Limoneira (the “Property”) to the Company and a concurrent assignment of a
50% interest in the Company to Lewis for $20,000,000 cash consideration, which were reflected
as initial capital contributions from the Members. Initial capital contributions of the Members
also included the value of certain pre-formation development costs and expenses (“Pre-
Assignment Expenses”) incurred by Limoneira of $1,374,279 and Lewis of $217,774.
The terms of the Company are governed pursuant to the Limited Liability Company Agreement,
as amended (the “LLC Agreement”). Each Member’s liability is limited pursuant to the Delaware
Limited Liability Company Act. The term of the Company shall continue until the Company is
dissolved pursuant to the provisions of the LLC Agreement.
Lewis is the designated manager of the Company (“Manager”) and manages the business
activities of the Company pursuant to the terms of the LLC Agreement through an affiliated
entity, Lewis Management Corp., a California Corporation (the “Manager Affiliate”). All major
decisions, as defined by the LLC Agreement, are decided by an executive committee consisting of
two representatives each from Lewis and Limoneira.
Capital contributions are made by the Members for funding of Project Costs pursuant to terms of
the LLC Agreement. Through October 31, 2021, the Members’ capital contributions include the
Members’ initial capital contributions representing the value of the contributed property and Pre-
Assignment Expenses and additional contributions totaling $82,799,000 in the aggregate.
On March 3, 2008, Limoneira entered into a Development Agreement with the City of Santa
Paula (the “City”) to develop the property which was transferred to the Company on November
10, 2015. The Development Agreement was amended and restated on February 26, 2015. The
Amended Development Agreement currently provides for up to 1,500 total residential units, an
estimated 240,000 square feet of office, retail, light industrial and assisted living facilities,
approximately 19 acres for educational and other civic facilities and approximately 223 acres of
undeveloped land, including open space and agricultural preserves, parks and greenways.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
8
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
(cid:3)
1.(cid:3) Organization (continued)
Distributions
Pursuant to the LLC Agreement, distributions of Net Cash Flow, as defined, shall be distributed to
the Members in the following order of priority (using terms as defined in the LLC Agreement):
(a)(cid:3) First, to the Members in proportion to their respective Additional Capital Contribution
IRR Deficiencies, until each Member’s Additional Contribution IRR Deficiency is
reduced to zero, representing a 12% return, compounded annually;
(b)(cid:3)Second, 48% to Limoneira and 52% to Lewis until Lewis’ Initial Contribution IRR
Deficiency is reduced to zero, representing a 12% return, compounded annually;
(c)(cid:3) Third, 25% to Limoneira and 75% to Lewis until aggregate distributions on this tier equal
$10,000,000;
(d)(cid:3)Fourth, 60% to Limoneira and 40% to Lewis until aggregate distributions on this tier
equal $20,000,000;
(e)(cid:3) Fifth, 50% to Limoneira and 50% to Lewis until aggregate distributions on this tier equal
$20,000,000;
(f)(cid:3) Sixth, 78% to Limoneira and 22% to Lewis until aggregate distributions on this tier equal
$25,000,000;
(g)(cid:3)Seventh, 95% to Limoneira and 5% to Lewis until aggregate distributions on this tier
equal $20,000,000;
(h)(cid:3)Thereafter, 70% to Limoneira and 30% to Lewis.
(cid:3)
Allocations of Income and Losses
Net income and losses each period are allocated to the Members in respect of how such income or
loss would affect related cash distributions that would be made to the Members if the Company
were to be liquidated as of the reporting date and proceeds equal to the book value of members’
capital were to be distributed pursuant to the cash distribution priorities of the LLC Agreement.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
9
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
(cid:3)
9.(cid:3) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting
principles generally accepted in the United States (“GAAP”). All references to authoritative
accounting literature in the Company’s financial statements were referenced in accordance with
the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”), which is the single source of authoritative nongovernmental GAAP in the United States.
(cid:3)
Acreage, square footage, number of units or lots, and other similar non-financial measures
included in these notes to the financial statements are presented on an unaudited basis.
Cash and Cash Equivalents
All highly liquid investments with a remaining maturity of three months or less when purchased
are considered to be cash equivalents. No cash balances held by the Company during the periods
presented were legally restricted as to use.
Financial instruments that potentially subject the Company to concentrations of credit risk consist
of demand deposits with a financial institution. The Company’s cash balances exceed federally
insurable limits. However, the Company believes there is minimal credit risk relative to its cash
balances.
Land Held for Development and Sale and Cost of Land Sales
Land held for development and sale consists of unimproved land and costs related to
improvements including infrastructure and other capitalizable project costs. Capitalized costs
include direct and indirect land costs, development and construction costs, direct labor, real estate
taxes, and interest related to development and construction. Capitalized costs also include
prepaid insurance policies and other similar costs which do not extend beyond the projected
development period of the related project components.
(cid:3)
Cost of land sales is determined based on an allocation of costs to individual land parcels sold
based on specific identification, if practicable, or an allocation based on a method which
approximates relative fair value in accordance with ASC 970, Real Estate - General. Costs
allocated to land parcels sold include actual development costs incurred and estimates of future
development costs, including common costs and amenities within the Project. For purposes of
allocating development costs, estimates of future sales prices and development costs reflected in
the project budget are reevaluated throughout the year, with adjustments being allocated
prospectively to the remaining parcels available for sale.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
10
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)(cid:3)
Land held for development and sale is carried at cost, unless the carrying amount is determined
not to be recoverable, in which case the real estate inventory balance is written down to fair value
in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires
that real estate assets be tested for impairment whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable.
(cid:3)
Impairment of real estate inventories is measured by comparing the carrying amount of the asset
to the undiscounted future net cash flows expected to be generated from the project. These
evaluations for impairment are significantly impacted by estimates of the amounts and timing of
revenues, costs and expenses, and other factors. If real estate assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying
value of the assets exceeds the fair value of the asset. Fair value is determined based on estimated
future cash flows discounted for inherent risks associated with the real estate asset, or other
valuation techniques.
(cid:3)
Revenue Recognition
(cid:3)
Land sale transactions are made pursuant to contracts under which the Company typically has a
performance obligation to deliver specified land parcels to the buyer when closing conditions are
met. The Company evaluates each land sale contract to determine its performance obligations
under the contract, including whether there is a distinct promise to perform post-closing land
development work that is material within the context of the contract, and uses objective criteria to
determine the completion of the applicable performance obligations, whether at a point in time or
over time. Revenues from land sales are recognized when the Company has satisfied the
performance obligations within the sales contract. Under its land sale contracts, the Company
typically receives an initial cash deposit from the buyer at the time the contract is executed and
receives the remaining fixed price consideration, through a third-party escrow agent, at closing
when title and control of the land transfers to the buyer.
(cid:3)
In instances where the Company has one or more performance obligations to perform land
development work after the closing date, a portion of the transaction price under the land sale
contract is allocated to such performance obligations and is recognized as revenue over time
based upon the estimated progress toward the satisfaction of the related performance obligation,
which is generally measured based on costs incurred relative to the total costs expected to satisfy
the performance obligation.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
11
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)(cid:3)
The Company’s land sales contracts to homebuilders also generally provide for additional
variable consideration in the form of a marketing fee based on a percentage of the sales prices of
homes built and sold on the land as well as the ability to receive future profit participation
payments on profitability above specified thresholds achieved on sales of the homes by the
homebuilder. The Company’s performance obligations related to these fees are generally satisfied
as of or in advance of when payments for such fees are received, which may result in the
recognition of a contract asset for the estimated future variable consideration expected to be
received. In determining the amount of revenue to recognize related to these fees, the Company
estimates the total variable consideration it expects to receive utilizing the expected value
approach and constrains the amount to be recognized to the extent such variable consideration is
subject to a risk of significant revenue reversal. The Company considers various factors in
determining whether a constraint is necessary, including its experience to date and degree to
which the variable consideration is susceptible to factors outside its influence.
(cid:3)
The amount and timing of revenue and cash flows related to marketing fee and profit
participation payments are impacted by the ultimate timing and sales prices of homes sold by
homebuilders.
(cid:3)
The Company also evaluates the terms of anti-speculation or similar clauses contained in its land
sales contracts which may provide the Company the contingent right to repurchase such land if
the buyer fails to comply with provisions of the sales contract to determine whether the customer
under its contracts has obtained control of the land in determining satisfaction of the related
performance obligation.
(cid:3)
Deposits received under customer contracts prior to closing of land sales, or other payments
received under a contract for which related performance obligation is not yet complete, represent
contract liabilities and are recorded as unearned revenue. Contract assets are recognized to the
extent revenues are recorded but the related amounts are not yet receivable under the terms of the
contract. Trade receivables are recorded to the extent amounts are receivable from the customer
and the Company’s right to the consideration is no longer conditional. Contract assets and trade
receivables are evaluated for impairment or collectability in accordance with respective guidance.
All of the Company’s contracts with its customers and the related performance obligations have
an original expected duration of one year or less.
(cid:3)
Line of Credit
(cid:3)
The Company’s line of credit is recorded at amortized cost. Loan costs associated with securing
the line of credit are deferred and are recognized as a component of interest cost over the term of
the line of credit and are presented as a reduction of the line of credit balance on the
accompanying balance sheets. In periods where there are no balances outstanding on the line of
credit, unamortized loan costs are reclassified to other assets. Interest costs are capitalized to the
Project during periods in which development activities are ongoing.
(cid:3)
(cid:3)
12
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
(cid:3)
Income Taxes
As a limited liability company, the Company is subject to certain minimal taxes and fees;
however, no provision for income taxes has been made in the accompanying financial statements
as the Members are individual responsible for reporting their respective share of the Company’s
income or loss.
Based on its evaluation under ASC 740, Income Taxes, the Company has concluded that there
are no significant tax positions requiring recognition in its financial statements, nor has the
Company been assessed interest or penalties by any tax jurisdictions.
Other Income and Expenses
Other income and expenses are recorded in the period earned or incurred. Selling costs and costs
related to marketing of the community are generally recorded to sales and marketing expenses as
incurred.
Comprehensive Income and Loss
For all periods presented, comprehensive income is the same as net income reported for the
respective period.
Use of Estimates
The preparation of these financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the revenues and expenses for the periods presented. Actual
amounts and results could differ from those estimates.
(cid:3)
(cid:3)
(cid:3)
13
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09”). ASU 2014-09 supersedes the revenue guidance in Accounting Standards Codification
(“ASC”) Topic 605, Revenue Recognition, and most industry-specific revenue and cost
guidance in the accounting standards codification, including some cost guidance related to
construction-type and production-type contracts. The core principle of ASU 2014-09 is that an
entity should recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. This update creates a five-step model that requires entities to
exercise judgment when considering the terms of the contract(s) which include (i) identifying the
contract(s) with the customer, (ii) identifying the separate performance obligations in the contract,
(iii) determining the transaction price, (iv) allocating the transaction price to the separate
performance obligations, and (v) recognizing revenue when each performance obligation is
satisfied.
(cid:3)
On November 1, 2018, the Company adopted ASU 2014-09 and its related amendments
(collectively, “ASC 606”), using the modified retrospective method applied to contracts that were
not completed as of the adoption date. Results for reporting periods beginning November 1, 2018
are presented under ASC 606. The initial adoption of ASC 606 did not impact the Company’s
financial statements as there were no land sales which had closed prior to the adoption date and
no other balances which were required to be expensed or reclassified upon adoption pursuant to
the provisions of ASC 606.
(cid:3)
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (including related
amendments, “ASC 842”). ASC 842 requires organizations that lease assets to recognize on the
balance sheet the assets and liabilities for the rights and obligations created by those leases. Under
ASC 842, a lessee is required to recognize assets and liabilities for leases with lease terms of
more than 12 months. Lessor accounting remains substantially similar to current GAAP. In
addition, ASC 842 provides for expanded disclosures of leasing activities including qualitative
along with specific quantitative information. ASC 842 was adopted by the Company effective
November 1, 2019, and the Company elected the package of practical expedients offered under
the standard. The adoption of ASC 842 did not have a material impact on the Company’s
financial statements or disclosures.
(cid:3)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). This
amendment requires the measurement of all expected credit losses for financial assets held at the
reporting date based on historical experience, current conditions, and forward-looking estimates.
ASC 326 was adopted by the Company effective November 1, 2020. The adoption of ASC 326
did not have a material impact on the Company’s financial statements or disclosures.
(cid:3)
14
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
3. Land Held for Development and Sale(cid:3)
Activity related to the Company’s land held for development and sale for the years ended October
31, 2021 and 2020 is as follows:
Beginning balance
Additional costs incurred
CFD reimbursements (Note 8)
Cost of land sales
$
2021
122,206,000 $
12,679,000
(3,199,000)
(32,735,000)
2020
135,374,000
23,345,000
(14,722,000)
(21,791,000)
Ending balance
$
98,951,000 $
122,206,000
Management concluded that no impairment charges were warranted related to land held for
development and sale through October 31, 2021.
During the year ended October 31, 2019, the Company closed on the sale of 210 lots in land sale
transactions with three homebuilders and recognized total land sale revenues of $37,788,000.
During the year ended October 31, 2020, the Company closed on the sale of 144 lots in land sale
transactions with three homebuilders and recognized total land sale revenues of $25,906,000.
During the year ended October 31, 2021, the Company closed on the sale of 232 lots in land sale
transactions with three homebuilders and recognized total land sale revenues of $42,853,000.
Land sale revenues for these periods include related deposit amounts received and reflected as
unearned revenue in previous periods.
In connection with one of the land sales closed in June 2020, the Company provided seller
financing in the form of a promissory note to the buyer for $6,000,000. The note accrued interest
at a fixed rate of 5.0% per annum and was due and payable, along with accrued interest, on the
earlier of January 12, 2021 or sale of the first residence from the community, as defined. During
the year ended October 31, 2020, the Company recognized $84,000 of accrued interest on the
note, which was included with the note receivable balance on the accompanying balance sheet.
The note was subsequently repaid, along with accrued interest, in November 2020.
Included in land sales revenues for the years ended October 31, 2021, 2020 and 2019 were
marketing fee revenues of $1,176,000, $745,000 and $879,000. As of October 31, 2021 and
2020, $561,000 and $421,000 of contract assets were recorded representing estimated future
variable consideration to be received related to marketing fee revenues. Additionally, land sales
revenues for the year ended October 31, 2021 included revenues from profit participation
arrangements totaling $413,000, of which $208,000 was receivable at October 31, 2021 and
included in other assets on the accompanying balance sheet. No amounts from profit participation
arrangements were recognized as revenues in the years ended October 31, 2020 and 2019.
15
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
3.(cid:3) Land Held for Development and Sale (continued)
As of October 31, 2021 and 2020, the Company had substantially completed all performance
obligations related to the land sale transactions that closed during the respective years then ended.
As of October 31, 2021, the Company had no deposits related to future lot sale transactions. As
of October 31, 2020, the Company had received $696,000 of deposits related to lot sales
transactions which closed and were recognized as land sales revenues during the year ended
October 31, 2021.
During the year ended October 31, 2020, the Company expensed $316,000 related to abandoned
project costs which were incurred related to a potential apartment development within the Project
which was no longer being pursued. There were no similar charges for the years ended October
31, 2021 or 2019.
4.(cid:3) Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities includes the following as of October 31, 2021 and 2020:
Trade accounts payable
Retentions payable
Accrued liabilities
Environmental remediation obligation (Note 8)
2021
2020
$
113,000 $
2,096,000
2,448,000
—
75,000
2,055,000
1,642,000
71,000
$
4,657,000 $
3,843,000
16
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
5.(cid:3) Line of Credit
In February 2018, the Company entered into an unsecured revolving line of credit facility with a
third-party lender to provide development financing for the Project. The line of credit, as
modified and extended, has a maximum borrowing amount of $45,000,000 and matures February
22, 2023, The line of credit bears interest, payable monthly, at an annual rate of one-month
LIBOR plus 2.85% (3.00% at October 31, 2021) plus an unused commitment fee of 0.20% per
year, payable quarterly. The line of credit has a one-year extension option through February 22,
2024 subject to terms and conditions as defined in the agreement, with the maximum borrowing
amount reduced to $35,000,000 during the extension period.
(cid:3)
As of October 31, 2021 and 2020, the Company had outstanding borrowings of $0 and
$30,390,000 under the line of credit, respectively. Unamortized loan costs totaling $66,000 as of
October 31, 2021 were classified as other assets as the line of credit had no outstanding
borrowings as of that date. Unamortized loan costs totaling $22,000 as of October 31, 2020 were
presented as a reduction of the outstanding loan balance. Loan costs amortized as interest costs
during the years ended October 31, 2021 and 2020 totaled $159,000 and $99,000, respectively, all
of which were capitalized to the Project. During the years ended October 31, 2021, 2020 and
2019, the Company recorded interest and unused commitment fees on the line of credit of
$398,000, $1,736,000 and $2,015,000, respectively, all of which were capitalized to the Project.
(cid:3)
The line of credit is guaranteed by Limoneira and certain owners of Lewis. The loan also
requires compliance with certain financial covenants, including liquid asset and tangible net
worth requirements of the guarantors, all of which were in compliance as of October 31, 2021.
17
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
6.(cid:3) Fair Value Disclosures
ASC Topic 820, Fair Value Measurement, provides a framework for measuring fair value and
has established a fair value hierarchy which prioritizes the inputs used in measuring fair value.
The hierarchy is summarized as follows:
Level 1 – Fair value determined based on quoted prices in active markets for identical assets.
Level 2 – Fair value determined using significant observable inputs, such as those principally
derived from or corroborated by observable market data, by correlation or other means.
Level 3 – Fair value determined using significant unobservable inputs, such as pricing models,
discounted cash flows, or similar techniques.
GAAP requires the measurement of certain financial instruments at fair value on a recurring
basis, and certain other financial and non-financial assets at fair value on a nonrecurring basis.
Additionally, GAAP requires fair value disclosures for certain assets and liabilities.
(cid:3)
There were no recurring or nonrecurring fair value measurements made in the periods presented
in the accompanying financial statements through October 31, 2021. The following table
presents the carrying amounts and estimated fair values of the Company’s financial liabilities as
of October 31, 2021 and 2020:
October 31, 2021
October 31, 2020
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Financial liabilities:
Line of credit
$
— $
— $
30,368,000 $
30,481,000
The fair value of the Company’s line of credit was estimated using a discounted cash flow
analysis based on management’s estimates of current market interest rates for instruments with
similar characteristics including remaining loan term and other credit enhancements. The
Company classifies these inputs as Level 3 inputs.
18
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
7.(cid:3) Related Party Transactions
Cost Reimbursements to Members
The Company reimburses for approved costs and expenses incurred by the Manager and
Limoneira, or their affiliates, on behalf of the Company, including for employees providing
services in conjunction with development activities for the Project. For the years ended October
31, 2021, 2020 and 2019, $1,597,000, $1,533,000 and $1,753,000, respectively, of such costs
were incurred by the Members on behalf of the Company, all of which were capitalized to the
Project. During the years ended October 31, 2021, 2020 and 2019, certain additional reimbursable
employee costs of $119,000, $71,000, and $51,000, respectively, were incurred by the Company
for employees of the Manager providing services for the Project which were recorded as sales and
marketing expenses. As of October 31, 2021 and 2020, $51,000 and $95,000, respectively, of
such cost reimbursements remained payable by the Company to the Members, which are included
in due to affiliates on the accompanying balance sheets.
During the years ended October 31, 2021 and 2020, the Company received $3,199,000 and
$15,042,000, respectively, in total CFD reimbursement proceeds (Note 8). Of the amount
received during the year ended October 31, 2020, $320,000 was remitted to Limoneira related to
proceeds pertaining to adjacent land owned by Limoneira, which was accounted for as a
reduction in CFD reimbursements due to and received by the Company.
Additionally, during the year ended October 31, 2020, the Company reimbursed an affiliate of the
Manager $1,272,000 for pre-development costs incurred by such affiliate on behalf of the
Company. There were no similar affiliated reimbursements during the year ended October 31,
2021 or 2019.
Loans from Members
During the year ended October 31, 2020, the Members made a short-term loan to the Company of
$3,600,000 which was repaid during the year. Interest costs incurred and paid on the Member
loans of $55,000 were capitalized to the Project.
Retained Land and Infrastructure Cost Reimbursements
In conjunction with Limoneira’s initial contribution of land to the Company, certain additional
land (referred to as the “Retained Land”) was legally conveyed to the Company for which
Limoneira retained beneficial ownership. The land was transferred back to Limoneira in August
2018 for no consideration upon recording of a revised tract map that subdivided the Retained
Property as a legal parcel.
19
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
7. Related Party Transactions (continued)
Limoneira has agreed to reimburse the Company for certain allocated infrastructure costs incurred
by the Company which benefit the Retained Property and certain adjacent real property owned by
Limoneira commonly referred to as East Area 2, as defined in the Retained Property
Development Agreement between the Company and Limoneira. As of October 31, 2021,
estimated such reimbursements from Limoneira totaled $5,771,000 which are reflected as due
from affiliates on the accompanying balance sheet.
Leasing Transactions with Related Parties
The Company has agreed to lease two offices from Limoneira in two office buildings in Santa
Paula, California. The leases are month-to-month leases at a rate of $472 and $1,350 per month
and may be terminated by either party with 30 days’ notice.
The Company has agreed to lease property from Limoneira in Santa Paula, California. The lease
is a ten-year lease at a rate of $250 per month. The Company can terminate the lease with 30
days’ notice following the 3rd anniversary of the effective date of the lease.
The Company had agreed to lease to Limoneira certain agricultural land contained within the
Property for nominal consideration until the Company required such land to commence
development activities on such land. This lease was terminated during the year ending October
31, 2019.
(cid:3)
8. Commitments and Contingencies(cid:3)
(cid:3)
The Company’s commitments and contingencies include the usual litigation and obligations
incurred by real estate owners, developers and operators in the normal course of business, none of
which, in the opinion of management, are expected to have a material adverse effect on the
Company’s financial position or results of operations.
(cid:3)
During the year ended October 31, 2018, the Company identified environmental contamination
affecting soils throughout various parts of the Project related to leakage of fuel on the land prior
to the Company’s ownership of the property. The Company recorded an initial obligation of
$12,100,000 during the year ended October 31, 2018 related to the estimated costs to remediate of
such costs on an undiscounted basis in accordance with ASC 410-30, Environmental
Obligations. As of October 31, 2021 and 2020, the remaining liability related to such estimated
remediation costs was $0 and $71,000, respectively, and was included in accounts payable and
accrued liabilities. All such costs were capitalized to the Project.
20
LIMONEIRA LEWIS COMMUNITY BUILDERS, LLC
(a Delaware Limited Liability Company)
Notes to Financial Statements (continued)
8. Commitments and Contingencies (continued)
(cid:3)
Although there can be no assurance, the Company is not aware of any other material
environmental liability that could have a material adverse effect on its financial condition or
results of operations. However, identification of additional contamination affecting the Project,
changes in applicable environmental laws and regulations, the uses and conditions of properties in
the vicinity of the Project, the activities of entities who may purchase from the Company land
within the project and other environmental conditions of which the Company is unaware with
respect to the Project could result in future environmental liabilities.
(cid:3)
Limoneira is required to transfer sufficient groundwater production and/or water rights to the City
to allow the Company to satisfy the requirements of the Development Agreement and any other
groundwater protection and/or water rights required by the City or other governmental agency in
connection with existing or future entitlements for the Project.
(cid:3)
Currently, there are no guarantees by any of the Members or their affiliates in place on any of the
obligations of the Company, except as related to the line of credit as described in Note 5. The
Company is also required to complete development obligations related to the Project pursuant to
the Development Agreement as well as pursuant to the terms of contracts with individual
homebuilders and other parties.
The Company expects to be reimbursed for certain infrastructure costs it incurs related to the
Project from the proceeds of bonds to be issued from one or more communities facilities districts
(“CFDs”). Through October 31, 2021, the Company had received $17,921,000 in net CFD
reimbursements. As of October 31, 2021, there were $19,380,000 in total bonds issued and
outstanding by the CFDs associated with the Project. These bond obligations are not recorded as
liabilities of the Company as the estimated payments associated with the bonds are not fixed and
determinable. Additionally, the Company is not liable to satisfy shortfalls in annual debt service
obligations and has not pledged assets or provided other credit enhancements in support of the
bond obligations.
9. Subsequent Events(cid:3)
The Company has evaluated events subsequent to October 31, 2021 through December 20, 2021,
the date the financial statements were available to be issued, for their impact on the financial
statements and disclosures.
(cid:3)
21
Corporate Information
Limoneira Company
Headquarters
1141 Cummings Road
Santa Paula, CA 93060
(805) 525-5541
2022 Annual Meeting
The Company’s 2022 annual meeting of
shareholders will be held on March 22, 2022,
at 10:00 a.m. Pacific Time. The meeting will
be a virtual meeting conducted solely online
via live webcast. The meeting can be attended
via webcast by visiting the following address:
https://edge.media-server.com/mmc/p/d7o7c65g.(cid:3)
To participate in the meeting, registered
stockholders will need the control number
included on their proxy card and will need to
follow the instructions that accompany their
proxy materials.
Stock Listing
The Company’s common stock is listed on
the NASDAQ® stock exchange under the
symbol LMNR.
Investor Relations
Analysts, portfolio managers and other
information
investors seeking additional
about Limoneira stock should contact John
Mills, Partner, ICR, 685 Third Avenue, 2nd
Floor, New York, New York 10017 P: (646)
277-1254, John.mills@icrinc.com. Answers
to
frequently addressed
questions can also be found by visiting
http://investor.limoneira.com.
shareholders'
Customers
For assistance with Limoneira Company’s
products and services, please call (805) 525-
5541 or visit www.limoneira.com for toll free
numbers for specific products and services.
News Media
News media seeking information should visit
www.limoneira.com
releases,
presentations and other items related to the
Company.
for news
Company.
Shareholder Services
Computershare is the transfer agent for
Limoneira
inquiries
concerning dividend checks, tax statements,
ownership transfers, address changes or lost
contact
or
Computershare at:
certificates,
stolen
For
Shareholder correspondence should be mailed to:
Computershare
PO BOX 505000
Louisville, KY 40233-5000
Overnight correspondence should be mailed to:
Computershare
462 South 4th Street
Suite 1600 Louisville, KY 40202
Shareholder website:
www.computershare.com/investor
Shareholder online inquiries:
www-us.computershare.com/investor/Contact
Customer Service by Phone:
Toll Free (Domestic callers): 1-866-234-1382
International Callers: 1-201-680-6578
Please recycle. This annual report is printed
on recycled paper.
Continued Growth
is as
Limoneira
forward-thinking as ever
with a clear vision for increasing value and
revenue through a diversi(cid:192)ed approach. With
farm acquisitions and industry consolidation
expected ahead, its rich water rights spanning
many states and in key global agriculture
markets, as well as its many diversi(cid:192)ed real
estate holdings, Limoneira is poised for, and
expects greater (cid:192)nancial and industry success
in the years to come. Additionally, technology is
allowing for even new ef(cid:192)ciencies in both sales
and operations, and Limoneira is adapting to
realize the upside of far-reaching technology
advancements.
Although the last 129 years of business have
been effective, Limoneira also recognizes how
technical innovation provides a transformational
opportunity
increase both operational
ef(cid:192)ciencies and company revenue. Limoneira
has changed its procedures and processes
to better (cid:192)t new available technologies, and
to
this has resulted in more cost-ef(cid:192)cient irrigation
and fertilization, as well as more accurate
forecasting and sales opportunities. Predictive
models now pinpoint when each piece of fruit
will be ready to harvest, as well as its unique
grade and size, allowing Limoneira to construct
very speci(cid:192)c operational procedures as well
as sales programs tailored to foodservice and
retail clients. Limoneira as a result is realizing new
economic bene(cid:192)ts – from operations to sales.
to
In addition
staying abreast of new
technologies, Limoneira watches the agricultural
landscape closely, identifying opportunities to
acquire more valuable land. In fact, Limoneira
has completed nine acquisitions within the
last eight years, all successfully integrated into
its current operations. However, many other
targets have been identi(cid:192)ed and are currently
in its pipeline. This is an attainable, exciting goal
aimed to help increase global lemon market
share worldwide.
Furthermore, the farm consolidation planned
within the next 3-5 years is substantial. With
87% of US farms owned by families with their
subsequent generations choosing not to be
farmers, Limoneira plans to carefully embrace
these future opportunities in order to increase
its agricultural and (cid:192)nancial holdings.
Water is a valuable resource as well, especially
with environmental challenges
suspected
to increase. However, Limoneira has water
resources, which include approximately 28,000-
acre feet of water rights, usage rights, and
pumping rights associated with Limoneira land.
Additionally, real estate is multi-purpose to
Limoneira as it both increases opportunity
for expansion as well as provides homes for
valuable farm workers.
The company cherishes its employees and offers
256 farm worker housing units for employees,
providing a positive home environment not only
that is helpful and attractive to workers and their
families alike, but also helps create a steady work
base for Limoneira. Understanding that having
long-term employees is key to overall success
and growth, Limoneira goes beyond simply
assisting its employees with their families’ housing
needs – additionally providing scholarships,
transportation to schools, and even offering
medical care throughout the year as part of
initiating wellness company-wide. A vibrant,
healthy community for all is critical to the culture
of Limoneira, and although the results may often
be intangible, it is priceless in terms of providing
a happy, healthy, and thriving environment.
Along with other rental properties, which help
to provide cash (cid:193)ow for further expansion of
Limoneira crops, improvements, and operations,
Limoneira has also provided additional real estate
development in this area, such as the Harvest at
Limoneira development, which enhances overall
company value, favorability of the community,
and new revenue to the bottom line.
Harvest
Harvest at Limoneira is a unique community
within Santa Paula that offers single-family
homes as well as diverse services and outdoor
experiences situated near the Paci(cid:192)c Ocean.
This is the result of our real estate development
(cid:77)oint venture with The Lewis Group of Companies.
Harvest has become a well-sought out area of
single-family homes surrounded by beautiful
parks with shopping, dining and entertainment.
Phase 1 of this development is now complete
with the closing of 586 residential unit sales, of
which 232 happened in (cid:192)scal 2021, and Phase
2 of Harvest at Limoneira has begun. Here at
Harvest at Limoneira residents en(cid:77)oy 225 acres of
open space that includes bike paths and hiking
trails, and soon there will be a new Sports Park,
which will more than double the space and offer
socializing opportunities and popular activities.
Residents will (cid:192)nd an amphitheater for concerts
and live performances, gazebos available for
private events, additional softball and baseball
diamonds, basketball courts, barbecue
pavilions, and more. A quick trip downtown
offers cultural attractions, museums and schools.
Plus, it’s only a short drive to neighboring cities,
beaches and the Los Padres National Forest.
Recently, we announced a letter of intent for
the sale of 25 strategically located acres of our
real estate asset referred to as “East Area 2” for
the development of a state-of-the-art medical
campus that will bene(cid:192)t both the residents of
Santa Paula as well as all of Ventura County.
The planned establishment of a medical
campus on this land will be another large
attraction for Harvest at Limoneira, adding to
the long-term success of this pro(cid:77)ect and to the
residents of Santa Paula and Ventura County.
Sustainability
Limoneira Company recognizes the importance
of environmental, social and governance
sustainability programs and has
(“ESG”)
embodied these efforts in every
embodied these efforts in every
aspect of its operations. The
aspect of its operations. The
health of the planet and well-
health of the planet and well-
being of Limoneira’s teams are
being of Limoneira’s teams are
at the crux of
at the crux of
its business and
its business and
culture. Through
culture. Through
commitment to
commitment to
environmentally
environmentally
practices,
sound
embraces
stewardship and sustainability and has invested
resources in taking these initiatives to new heights.
Limoneira
Ongoing ESG efforts include managing water
Ongoing ESG efforts include managing water
sustainably and reducing water use, decreasing
sustainably and reducing water use, decreasing
reliance on fossil fuels and increasing renewable
reliance on fossil fuels and increasing renewable
energy by
renewable
renewable
energy by
including
energy pro(cid:77)ects
large solar and
including large solar and
energy pro(cid:77)ects
recycling programs, reducing greenhouse gas
recycling programs, reducing greenhouse gas
emissions and offering composting over adding
emissions and offering composting over adding
in various
in various
investing
investing
to land(cid:192)lls, as well as adopting Integrated
ed
is
Pest Management.
In
is
one of the founders of the Integrated Pest
st
Management program in Ventura County.
fact, Limoneira
As a leader for Ventura County in the use of
responsible water management practices,
Limoneira focuses on clean, safe water and
its conservation, and employs a network of
systems – micro sprinklers, water and soil probes
es
and other sensors – to determine ef(cid:192)ciency
cy
of irrigation systems and soil’s water levels.
ls.
Furthermore, a natural wastewater system uses
patented technology which both circulates
and cleans 30 million gallons of water annually
through natural vegetation, local plants and
(cid:192)ne gravels, even killing bacteria through an
Ultraviolet system (UV rays). Within the orchards,
water quality and ef(cid:192)ciency are maintained
through rigorous lab testing, (cid:192)ltration systems,
and a network of micro sprinklers. All of this
works together to help uphold our commitment
impact on the
to actively
environment by managing water sustainably.
reducing our
Through solar power and with Tesla’s 400kWh
scalable energy storage, Limoneira is currently
50% off the grid and has aggressive plans to be
solar
2030.
2030.
f
f
grid
grid
100%
11100%
o f
o f
the
the
by
by
L i m o n e i r a
L i m o n e i r a
i n s t a l l a t i o n s
currently has 7
its operations producing 7M KW
across
annually, enabling Limoneira
reduce
86,830 tons of CO2 over a 25-year period. The
Company’s latest pro(cid:77)ect was installing solar
modules on the roof of its new packinghouse,
which offsets approximately 680 tons of CO2
and 420lbs of NOX annually. Limoneira has
not only been generating clean energy but
its savings to the Company.
is
increasing
to
Land(cid:192)ll gases contribute greenhouse gases
(CO2 and methane), both of which are 25
times more detrimental to the atmosphere
than carbon dioxide. To protect the planet
itself, Limoneira developed a 10-acre facility
that receives over 200 tons per day of organic
green waste. Rather than sending it to land(cid:192)lls
and contributing to the problem, this waste is
converted into mulch that is spread in Limoneira
orchards to curb erosion, signi(cid:192)cantly reduce the
use of water, herbicides and fertilizers, reduce
weeds and moderate soil temperatures. Also, a
corporate recycling program was developed
in the early 2000’s and is going strong as ever.
Diversity, Human Rights and Inclusion drive the
paramount Social Responsibility mission, as
Limoneira believes whole-heartedly that it is
its teams’ unique differences that contribute
to the success as a whole. Respecting and
appreciating its work force has in fact bene(cid:192)tted
to a positive and fresh, innovative environment,
and Limoneira is committed to maintaining a
workforce that is respected, safe, and valued.
Embracing an internal practice to continually
assess diversity, inclusion, and belonging efforts
and programs, Limoneira prioritizes employees’
company satisfaction and well-being. Most
recently, as employees and management
alike navigated
the
COVID-19 pandemic, several on-site mobile
medical clinics were offered to distribute
vaccines for all of those who were interested.
the challenges of
respects
its communities and
Limoneira
participates as volunteers, advisors, and
sponsors events most central to its Limoneira
employees and community. Whether
it’s
working with non-pro(cid:192)t groups such as Boys and
Girls Club of Santa Clara Valley, Ventura County
Food Safety Association, COLAB – Coalition
of Labor Agriculture and Business, Students
for Eco Education and Agriculture (SEAAG),
California Women
(CWA),
and others, or funding children’s agricultural
education, college scholarships, health and
human services, or events, Limoneira values its
role as a leader in the community, region and
industry, and takes these opportunities to heart.
for Agriculture
Limoneira’s unwavering commitment
to
food safety and traceability continues to
instill trust and con(cid:192)dence in its customers,
and Limoneira follows a science-based plan
offering transparency through an in-depth
environment to the highest degree, and
uphold the
rights and well-being of the
community and all those touched by Limoneira.
y
environmental monitoring program, pest
control program, internal inspections, as well as
other key programs. Limoneira believes
y p g
in continuous
in continuous
re(cid:192)nes
re(cid:192)nes
Food
Food
Traceability
Traceability
and
and
mandates
mandates
Safety, Quality and
Safety, Quality and
Government
Government
Industry guidelines or
Industry guidelines or
change.
change.
improvement and
improvement and
whenever
whenever
programs
programs
may
may
Overall,
Limoneira
Limoneira
Overall,
continues to honor
continues to honor
stewardship of the
stewardship of the
land, protect the
land, protect the
®
Limoneira Company (cid:335) 1141 Cummings Road, Santa Paula, CA 93060
Phone: 805.525.5541(cid:335) Fax: 805.525.8211 (cid:335) www.Limoneira.com