Limoneira(LMNR) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited statements detail the company's financial position, performance, and cash flows for the period ended April 30, 2022 Consolidated Balance Sheets Total assets slightly decreased to $390.7 million, while increased liabilities led to a decline in stockholders' equity to $180.0 million Consolidated Balance Sheet Highlights (in thousands) | Metric | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :----- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $392,276 | $390,744 | $(1,532) | | Total Liabilities | $193,031 | $199,958 | $6,927 | | Total Stockholders' Equity | $188,435 | $179,976 | $(8,459) | | Cash | $439 | $960 | $521 | | Accounts Receivable, net | $17,483 | $22,139 | $4,656 | | Current Portion of Long-Term Debt | $2,472 | $3,678 | $1,206 | | Long-Term Debt, less current portion | $130,353 | $135,575 | $5,222 | Consolidated Statements of Operations For the six-month period, a 3% revenue increase was offset by a 7% rise in costs, widening the net loss to $5.0 million Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | 3 Months Ended Apr 30, 2022 | 3 Months Ended Apr 30, 2021 | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Net Revenues | $46,750 | $45,132 | $86,024 | $83,407 | | Total Costs and Expenses | $44,164 | $42,748 | $92,996 | $86,663 | | Operating Income (Loss) | $2,586 | $2,384 | $(6,972) | $(3,256) | | Net Income (Loss) | $1,572 | $1,513 | $(5,034) | $(2,403) | | Net Income (Loss) Attributable to Limoneira Company | $1,561 | $1,933 | $(4,957) | $(2,275) | | Basic Net Income (Loss) per Common Share | $0.08 | $0.10 | $(0.30) | $(0.15) | | Diluted Net Income (Loss) per Common Share | $0.08 | $0.10 | $(0.30) | $(0.15) | Consolidated Statements of Comprehensive Income (Loss) Comprehensive loss widened to $5.8 million for the six-month period, driven primarily by negative foreign currency translation adjustments Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | 3 Months Ended Apr 30, 2022 | 3 Months Ended Apr 30, 2021 | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (Loss) | $1,572 | $1,513 | $(5,034) | $(2,403) | | Foreign currency translation adjustments | $(1,006) | $577 | $(951) | $1,372 | | Minimum pension liability adjustment | $73 | $134 | $145 | $268 | | Total other comprehensive (loss) income | $(933) | $711 | $(806) | $1,640 | | Comprehensive income (loss) | $639 | $2,224 | $(5,840) | $(763) | Consolidated Statements of Stockholders' Equity and Temporary Equity Total stockholders' equity decreased by $8.5 million to $180.0 million, primarily due to the net loss and other comprehensive loss Consolidated Stockholders' Equity Highlights (in thousands) | Metric | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :----- | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $188,435 | $179,976 | $(8,459) | | Retained Earnings | $21,552 | $13,691 | $(7,861) | | Accumulated Other Comprehensive Loss | $(5,733) | $(6,539) | $(806) | | Common Stock Shares Outstanding | 17,685,400 | 17,721,551 | 36,151 | Consolidated Statements of Cash Flows Net cash used in operations was $1.2 million, a significant reversal from the $4.6 million provided in the prior-year period Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Net cash (used in) provided by operating activities | $(1,160) | $4,643 | $(5,803) | | Net cash used in investing activities | $(442) | $(5,501) | $5,059 | | Net cash provided by financing activities | $2,326 | $1,908 | $418 | | Net increase in cash | $521 | $1,089 | $(568) | | Cash at end of period | $960 | $1,590 | $(630) | Notes to Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, segment information, debt, and other key financial items 1. Organization and Basis of Presentation Limoneira is an agribusiness focused on citrus and avocados, with additional operations in real estate development and rentals - Limoneira Company's core business involves growing citrus (lemons, oranges, specialty citrus) and avocados, along with packing, marketing, and selling these products[27] - The company terminated its Avocado Marketing Agreement with Calavo Growers, Inc. in February 2022 to pursue new packing and marketing opportunities[29] 2. Summary of Significant Accounting Policies This section outlines key accounting policies and highlights the ongoing negative financial impact of the COVID-19 pandemic - The COVID-19 pandemic has negatively impacted the company's sales and profitability since Q2 fiscal year 2020 and is expected to continue affecting future periods, with the full impact remaining uncertain[35] - The company adopted ASU 2020-06 (Accounting for Convertible Instruments and Contracts in an Entity's Own Equity) effective November 1, 2021, which did not have a material impact on its consolidated financial statements[37] 3. Concentrations and Geographic Information The company has diversified revenue streams but relies on two key customers for a significant portion of revenue and third-party growers for lemon supply - Two customers accounted for 13% and 11% of total revenue for the six months ended April 30, 2022[39] - Third-party growers supplied 54% of the company's lemon supply for the six months ended April 30, 2022[40] - The company leased its 1,200-acre lemon ranch in Argentina (Finca Santa Clara) to FGF Trapani for a fixed sum of $400,000 over 14 months, effective November 1, 2021[42] 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets remained stable, with a notable increase in lemon supplier advances offset by a note receivable collection Prepaid Expenses and Other Current Assets (in thousands) | Item | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :--- | :-------------------------- | :-------------------------- | :-------------------- | | Prepaid supplies and insurance | $2,521 | $3,030 | $509 | | Note receivable and related interest | $2,438 | $0 | $(2,438) | | Lemon supplier advances | $676 | $3,073 | $2,397 | | Total | $10,709 | $10,648 | $(61) | 5. Real Estate Development The company's real estate joint venture continues to close residential unit sales, and proceeds from property sales have been collected - The joint venture Limoneira Lewis Community Builders, LLC (LLCB) has closed sales for 586 residential units in the East Area I project through April 30, 2022[52] - The company received full payment of a $2.35 million promissory note from the sale of its Centennial property in April 2022, recognizing a deferred gain of $161,000[54] - The sale of the Sevilla property for $2.7 million is expected to close in fiscal year 2022, with an immaterial gain[53] 6. Equity in Investments Equity in investments remained stable, though net income attributable from the LLCB joint venture decreased significantly Equity in Investments (in thousands) | Investment | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :--------- | :-------------------------- | :-------------------------- | :-------------------- | | Limoneira Lewis Community Builders, LLC | $60,216 | $60,479 | $263 | | Total Equity in Investments | $64,072 | $64,290 | $218 | LLCB Summarized Financial Information (in thousands) | LLCB Financials | 6 Months Ended Apr 30, 2021 | 6 Months Ended Apr 30, 2022 | Change | | :-------------- | :-------------------------- | :-------------------------- | :----- | | Revenues | $19,827 | $865 | $(18,962) | | Net income attributable to Limoneira Company | $2,005 | $287 | $(1,718) | 7. Goodwill and Intangible Assets, Net Goodwill and intangible assets decreased slightly due to foreign currency adjustments and amortization, with no impairment charges recorded Goodwill and Intangible Assets, Net (in thousands) | Metric | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :----- | :-------------------------- | :-------------------------- | :-------------------- | | Goodwill | $1,527 | $1,520 | $(7) | | Intangible Assets, Net | $8,329 | $7,873 | $(456) | - Amortization expense for intangible assets totaled $361,000 for the six months ended April 30, 2022, down from $526,000 in the prior year[63] 8. Other Assets Investments in mutual water companies, which provide rights to water shares, increased during the period Investments in Mutual Water Companies (in thousands) | Item | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :--- | :-------------------------- | :-------------------------- | :-------------------- | | Investments in Mutual Water Companies | $5,994 | $6,484 | $490 | 9. Accrued Liabilities Accrued liabilities increased slightly, driven by higher compensation and operating expense accruals Accrued Liabilities (in thousands) | Item | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :--- | :-------------------------- | :-------------------------- | :-------------------- | | Compensation | $2,112 | $2,392 | $280 | | Property taxes | $676 | $14 | $(662) | | Operating expenses | $1,203 | $2,343 | $1,140 | | Total Accrued Liabilities | $6,542 | $6,802 | $260 | 10. Long-Term Debt Total long-term debt increased to $139.3 million, with the company expecting to remain in compliance with its debt covenants Long-Term Debt (in thousands) | Debt Type | Oct 31, 2021 (in thousands) | Apr 30, 2022 (in thousands) | Change (in thousands) | | :-------- | :-------------------------- | :-------------------------- | :-------------------- | | Farm Credit West revolving and non-revolving lines of credit | $111,293 | $114,797 | $3,504 | | Farm Credit West revolving equity line of credit | $0 | $4,305 | $4,305 | | Total Long-Term Debt, Net | $132,825 | $139,253 | $6,428 | - The company has an aggregate borrowing capacity of $130 million under its Farm Credit West Credit Facility and RELOC, with $10.9 million available as of April 30, 2022[70][201] - The company expects to maintain compliance with its debt service coverage ratio covenant of 1.25:1.0, measured annually as of October 31, 2022[76][202] 11. Leases The company's lease activities as both lessor and lessee expanded, with increases in lease revenue, assets, and liabilities Total Lease Revenue (in thousands) | Metric | 6 Months Ended Apr 30, 2021 | 6 Months Ended Apr 30, 2022 | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Total Lease Revenue (Lessor) | $2,281 | $2,572 | $291 | Lease Assets and Liabilities (in thousands) | Lease Item | Oct 31, 2021 | Apr 30, 2022 | Change | | :--------- | :----------- | :----------- | :----- | | Total Lease Assets | $3,183 | $4,213 | $1,030 | | Total Lease Liabilities | $3,269 | $4,198 | $929 | 12. Basic and Diluted Net Income (Loss) per Share Net loss per common share doubled to $(0.30) for the six-month period, reflecting the increased net loss attributable to common stock Basic and Diluted Net Income (Loss) per Common Share | Metric | 3 Months Ended Apr 30, 2022 | 3 Months Ended Apr 30, 2021 | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic Net Income (Loss) per Common Share | $0.08 | $0.10 | $(0.30) | $(0.15) | | Diluted Net Income (Loss) per Common Share | $0.08 | $0.10 | $(0.30) | $(0.15) | 13. Related Party Transactions The company engages in transactions with related parties, including joint ventures, and terminated its relationship with Calavo Growers - Calavo Growers, Inc. is no longer considered a related party as of February 2022[94] - The company has a new lease agreement with FGF Trapani for its Finca Santa Clara lemon ranch in Argentina, generating rental revenue[94] 14. Income Taxes The company recorded a $1.9 million income tax benefit for the six-month period, with an effective tax rate higher than the federal statutory rate - The effective tax rate for the six months ended April 30, 2022, exceeded the 21% federal statutory rate due to foreign taxes, state taxes, stock-based compensation, and nondeductible items[95] Income Tax (Expense) Benefit (in thousands) | Metric | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | | :----- | :-------------------------- | :-------------------------- | | Income tax (expense) benefit | $1,928 | $213 | 15. Retirement Plans The company terminated its defined benefit pension plan at the end of 2021, though net periodic benefit costs increased year-over-year - The Limoneira Company Retirement Plan, a defined benefit pension plan, was terminated effective December 31, 2021[96] Net Periodic Pension Cost (in thousands) | Metric | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Net periodic benefit cost | $585 | $331 | $254 | 16. Commitments and Contingencies The company is involved in ordinary course litigation, including a notable lawsuit against Southern California Edison related to the Thomas Fire - The company is a party to a lawsuit against Southern California Edison for unspecified damages from the Thomas Fire in fiscal year 2018, believing its claim is valid[102] 17. Stock-based Compensation and Treasury Stock The company manages stock-based compensation programs and has an authorized but unused share repurchase program - No Performance Awards were granted for fiscal year 2021 due to the financial performance and other criteria not being met[104] - The company granted 70,000 shares of common stock to key executives in December 2021, with 15,000 shares forfeited in February 2022[105] - A $10 million share repurchase program was approved in fiscal year 2021, but no shares have been repurchased under this program as of April 30, 2022[109][204] 18. Segment Information Agribusiness revenue increased to $83.5 million for the six-month period, but operating income declined significantly to $4.6 million - The company's agribusiness division comprises four reportable segments: fresh lemons, lemon packing, avocados, and other agribusiness (oranges, specialty citrus, and other crops)[110] Agribusiness Segment Performance (in thousands) | Metric | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Agribusiness Revenues from external customers | $83,452 | $81,126 | $2,326 | | Agribusiness Operating Income (Loss) | $4,609 | $7,746 | $(3,137) | 19. Subsequent Events No material subsequent events requiring disclosure were identified after the reporting period - No material subsequent events requiring disclosure occurred between April 30, 2022, and the filing date[118] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes financial performance for the period, discussing operational results, liquidity, and the impact of the COVID-19 pandemic Overview Limoneira is a diversified agribusiness and real estate company with extensive land and water resources across the Americas - Limoneira Company is a long-standing agribusiness company (since 1893) focused on fruit production (lemons, avocados, oranges, specialty citrus), sales, marketing, rental operations, real estate, and capital investments[119][120] - The company manages approximately 15,400 acres of land and water resources across California, Arizona, Chile, and Argentina[119][120] Business Division Summary The company's operations are structured across three primary divisions: agribusiness, rental operations, and real estate development - The company's operations are structured into three divisions: agribusiness, rental operations, and real estate development[123] - The agribusiness division includes fresh lemons, lemon packing, avocados, and other agribusiness (oranges, specialty citrus, other crops)[123] Agribusiness Summary The agribusiness division operates seasonally, focusing on high-quality citrus for export and managing cyclical avocado production - Agribusiness operations are seasonal, with cultural costs higher in the first and second quarters and harvest costs peaking in the third quarter[125] - The company focuses orange production on high-quality late season Navel oranges primarily for export to profitable niche markets like Japan, China, and Korea[129] - Avocado production is cyclical (bi-annual bearing) and faces growth constraints due to limited suitable land and water in Southern California[128] Rental Operations Summary Rental operations provide stable cash flows and support employee retention through affordable housing options - Rental operations generate reliable cash flows, partially funding business operating costs and providing affordable housing for employees, which helps maintain a dependable, long-term employee base[130] Real Estate Development Summary The company's long-term real estate projects aim to generate capital for reinvestment into its core agribusiness operations - The company's real estate development strategy aims to redeploy earnings and cash flow into expanding its agribusiness and other income-producing real estate[131] - Real estate project financials are influenced by government approvals, economic conditions, financing, and product demand[131] Water and Mineral Rights The company manages diverse water resources but faces significant challenges from severe drought conditions in California and Arizona - The company's water resources include rights to aquifers and canals in California, ground water in Arizona (Colorado River), and wells/surface water in Chile and Argentina[132][133] - California and Arizona are experiencing severe to extreme drought conditions, resulting in significant water allocation reductions (e.g., 0% for San Joaquin Valley farmers in 2022, 18% reduction from Lake Mead for Arizona), which may impact the company's orchards[134][135] Recent Developments Key recent activities include progress in real estate, new strategic alliances, and changes to marketing and international operations - The LLCB joint venture has closed sales for 586 residential units[136] - An alliance was formed with Wileman Bros. & Elliott, Inc. to sell combined citrus volumes under Limoneira's "One World of Citrus" trademark, effective November 1, 2021[137] - The Avocado Marketing Agreement with Calavo was terminated in February 2022 to pursue other packing and marketing opportunities[138] - The company leased its 1,200-acre lemon ranch in Argentina to FGF Trapani for a fixed sum of $400,000 over 14 months, retroactive to November 1, 2021[140] - The promissory note for the Centennial property sale was paid in full in April 2022, recognizing a $161,000 deferred gain[141] - A cash dividend of $0.075 per common share was declared on March 23, 2022, totaling $1.3 million[141] COVID-19 Pandemic The pandemic continues to negatively affect sales and profitability due to suppressed lemon demand, though recovery is underway - The COVID-19 pandemic caused a significant decline in U.S. lemon market volume and export demand, negatively impacting sales and profitability through Q2 fiscal year 2022[142][144] - Demand is recovering but has not returned to pre-pandemic levels, and future impacts on sales and profitability are uncertain[143][144] - The company implemented measures to improve liquidity, such as postponing capital expenditures, selling equity, and reducing operating and discretionary spending[145] Results of Operations For the six-month period, revenue grew 3% to $86.0 million, but a 7% increase in costs led to a wider operating loss of $7.0 million Results of Operations Highlights (in thousands) | Metric | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | Change (in thousands) | Change (%) | | :----- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Net Revenues | $86,024 | $83,407 | $2,617 | 3% | | Total Costs and Expenses | $92,996 | $86,663 | $6,333 | 7% | | Operating Income (Loss) | $(6,972) | $(3,256) | $(3,716) | (114)% | | Net Income (Loss) Attributable to Limoneira Company | $(4,957) | $(2,275) | $(2,682) | (118)% | Non-GAAP Financial Measures Non-GAAP measures like EBITDA and Adjusted EBITDA show a significant decline in profitability compared to the prior year - EBITDA and adjusted EBITDA are used as non-GAAP measures to evaluate results, excluding depreciation, amortization, interest, income taxes, executive severance, and asset disposal gains/losses[148] EBITDA and Adjusted EBITDA (in thousands) | Metric | 3 Months Ended Apr 30, 2022 | 3 Months Ended Apr 30, 2021 | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | EBITDA | $5,435 | $6,056 | $(1,489) | $2,985 | | Adjusted EBITDA | $5,781 | $6,040 | $(458) | $2,969 | Three Months Ended April 30, 2022 Compared to the Three Months Ended April 30, 2021 Quarterly revenue increased 4% to $46.8 million, driven by strong avocado and orange sales, though lemon revenue declined Agribusiness Revenues (Three Months Ended April 30, in thousands) | Agribusiness Revenue | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------------- | :----------- | :----------- | :-------------------- | :--------- | | Lemons | $37,735 | $38,703 | $(968) | (3)% | | Avocados | $3,576 | $2,707 | $869 | 32% | | Oranges | $2,617 | $1,404 | $1,213 | 86% | | Specialty citrus and other crops | $1,441 | $1,175 | $266 | 23% | | Total Agribusiness Revenues | $45,369 | $43,989 | $1,380 | 3% | Agribusiness Costs and Expenses (Three Months Ended April 30, in thousands) | Agribusiness Costs | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :----------------- | :----------- | :----------- | :-------------------- | :--------- | | Packing costs | $12,277 | $11,653 | $624 | 5% | | Growing costs | $7,997 | $6,713 | $1,284 | 19% | | Third-party grower and supplier costs | $9,572 | $10,271 | $(699) | (7)% | Six Months Ended April 30, 2022 Compared to the Six Months Ended April 30, 2021 Six-month revenue grew 3% to $86.0 million, but a 7% rise in costs across packing, growing, and third-party supply drove higher losses Agribusiness Revenues (Six Months Ended April 30, in thousands) | Agribusiness Revenue | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------------- | :----------- | :----------- | :-------------------- | :--------- | | Lemons | $73,303 | $72,900 | $403 | 1% | | Avocados | $4,342 | $2,707 | $1,635 | 60% | | Oranges | $3,490 | $2,495 | $995 | 40% | | Specialty citrus and other crops | $2,317 | $3,024 | $(707) | (23)% | | Total Agribusiness Revenues | $83,452 | $81,126 | $2,326 | 3% | Agribusiness Costs and Expenses (Six Months Ended April 30, in thousands) | Agribusiness Costs | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :----------------- | :----------- | :----------- | :-------------------- | :--------- | | Packing costs | $23,557 | $22,030 | $1,527 | 7% | | Harvest costs | $10,812 | $10,443 | $369 | 4% | | Growing costs | $16,275 | $14,825 | $1,450 | 10% | | Third-party grower and supplier costs | $23,827 | $21,585 | $2,242 | 10% | Income Taxes The company recorded a $1.9 million tax benefit on its pre-tax loss, with a projected annual effective tax rate of 32.5% - The company recorded an income tax benefit of $1.9 million for the six months ended April 30, 2022, on a pre-tax loss of $7.0 million[165] - The projected annual effective blended tax rate for fiscal year 2022, excluding discrete items, is approximately 32.5%[165] Net (Income) Loss Attributable to Noncontrolling Interest The net loss attributable to noncontrolling interests in PDA and Trapani Fresh decreased compared to the prior year - Noncontrolling interest represents 10% of PDA and 49% of Trapani Fresh's net income/loss[166] Net (Income) Loss Attributable to Noncontrolling Interest (in thousands) | Metric | 6 Months Ended Apr 30, 2022 | 6 Months Ended Apr 30, 2021 | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Net (income) loss attributable to noncontrolling interest | $77 | $128 | $(51) | Segment Results of Operations Agribusiness segment performance was mixed, with strong avocado results offset by a significant decline in fresh lemons operating income - The company evaluates segment performance based on revenues and operating income, allocating resources accordingly[112] Segment Operating Income (Loss) (Six Months Ended April 30, in thousands) | Segment Operating Income (Loss) | Apr 30, 2022 | Apr 30, 2021 | Change | | :------------------------------ | :----------- | :----------- | :----- | | Fresh Lemons | $1,209 | $3,764 | $(2,555) | | Lemon Packing | $6,455 | $6,562 | $(107) | | Avocados | $1,948 | $1,274 | $674 | | Other Agribusiness | $(631) | $643 | $(1,274) | Three Months Ended April 30, 2022 Compared to the Three Months Ended April 30, 2021 Quarterly segment results showed strong performance in Avocados and Other Agribusiness, while Fresh Lemons operating income declined Fresh Lemons Fresh lemons segment revenue and costs both decreased by 5%, resulting in a slight decline in operating income Fresh Lemons Segment Performance (Three Months Ended April 30, in thousands) | Fresh Lemons | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------- | :----------- | :----------- | :-------------------- | :--------- | | Total Net Revenues | $30,992 | $32,600 | $(1,608) | (5)% | | Costs and Expenses | $27,222 | $28,629 | $(1,407) | (5)% | | Operating Income (Loss) | $3,770 | $3,971 | $(201) | (5)% | Lemon Packing Lemon packing revenue grew 5%, but a 7% increase in costs due to inflation led to a slight decrease in operating income Lemon Packing Segment Performance (Three Months Ended April 30, in thousands) | Lemon Packing | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------ | :----------- | :----------- | :-------------------- | :--------- | | Total Net Revenues | $16,116 | $15,385 | $731 | 5% | | Costs and Expenses | $11,662 | $10,874 | $788 | 7% | | Operating Income (Loss) | $4,454 | $4,511 | $(57) | (1)% | | Operating income per carton sold | $2.87 | $2.95 | $(0.08) | (3)% | - Increased costs for labor, cardboard, fruit treatments, and packing/shipping supplies due to inflation and supply chain issues drove up packing costs[172] Avocados The avocado segment saw a 33% revenue increase, which outpaced a 42% rise in costs, leading to higher operating income Avocados Segment Performance (Three Months Ended April 30, in thousands) | Avocados | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :--------- | :----------- | :----------- | :-------------------- | :--------- | | Revenues | $3,576 | $2,707 | $869 | 32% | | Costs and Expenses | $2,073 | $1,433 | $640 | 45% | | Operating Income (Loss) | $1,503 | $1,274 | $229 | 18% | - Harvest costs for avocados increased by $0.1 million, and growing costs increased by $0.5 million in Q2 fiscal year 2022 compared to the prior year[175] Other Agribusiness Other agribusiness revenue grew 57%, driven by orange and specialty citrus sales, resulting in a significant increase in operating income Other Agribusiness Segment Performance (Three Months Ended April 30, in thousands) | Other Agribusiness | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :----------------- | :----------- | :----------- | :-------------------- | :--------- | | Total Net Revenues | $4,058 | $2,579 | $1,479 | 57% | | Costs and Expenses | $3,828 | $2,503 | $1,325 | 53% | | Operating Income (Loss) | $230 | $76 | $154 | 203% | - Orange revenues increased by $1.2 million, and specialty citrus revenues increased by $0.3 million in Q2 fiscal year 2022[175] - Growing costs for other agribusiness increased by $1.0 million in Q2 fiscal year 2022[175] Corporate and Other Corporate and other revenues increased, while costs and expenses also rose, keeping the operating loss relatively stable Corporate and Other Segment Performance (Three Months Ended April 30, in thousands) | Corporate and Other | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------------ | :----------- | :----------- | :-------------------- | :--------- | | Revenues | $1,381 | $1,143 | $238 | 21% | | Costs and Expenses | $6,269 | $6,039 | $230 | 4% | | Operating Income (Loss) | $(5,184) | $(5,163) | $(21) | (0)% | Six Months Ended April 30, 2022 Compared to the Six Months Ended April 30, 2021 For the six-month period, strong avocado performance was offset by a sharp decline in Fresh Lemons operating income and a loss in Other Agribusiness Fresh Lemons Fresh lemons revenue decreased 2% while costs rose 2%, leading to a significant 68% decline in operating income Fresh Lemons Segment Performance (Six Months Ended April 30, in thousands) | Fresh Lemons | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------- | :----------- | :----------- | :-------------------- | :--------- | | Total Net Revenues | $60,592 | $61,900 | $(1,308) | (2)% | | Costs and Expenses | $59,383 | $58,136 | $1,247 | 2% | | Operating Income (Loss) | $1,209 | $3,764 | $(2,555) | (68)% | - Third-party grower and supplier costs for fresh lemons increased by $1.5 million in the first six months of fiscal year 2022[181] Lemon Packing Lemon packing revenue grew 6%, but a 9% cost increase due to inflation and supply chain issues resulted in a slight operating income decline Lemon Packing Segment Performance (Six Months Ended April 30, in thousands) | Lemon Packing | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------ | :----------- | :----------- | :-------------------- | :--------- | | Total Net Revenues | $28,673 | $26,967 | $1,706 | 6% | | Costs and Expenses | $22,218 | $20,405 | $1,813 | 9% | | Operating Income (Loss) | $6,455 | $6,562 | $(107) | (2)% | | Operating income per carton sold | $2.34 | $2.30 | $0.04 | 2% | - Increased costs for labor, cardboard, fruit treatments, and packing/shipping supplies from inflation and supply chain issues drove up packing costs[184] Avocados The avocado segment delivered strong growth, with a 60% revenue increase driving a 53% rise in operating income despite higher costs Avocados Segment Performance (Six Months Ended April 30, in thousands) | Avocados | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :--------- | :----------- | :----------- | :-------------------- | :--------- | | Revenues | $4,342 | $2,707 | $1,635 | 60% | | Costs and Expenses | $2,394 | $1,433 | $961 | 67% | | Operating Income (Loss) | $1,948 | $1,274 | $674 | 53% | - Harvest costs for avocados increased by $0.2 million, and growing costs increased by $0.8 million in the first six months of fiscal year 2022[186] Other Agribusiness Other agribusiness revenue grew 5%, but a 32% surge in costs pushed the segment from an operating profit to a loss Other Agribusiness Segment Performance (Six Months Ended April 30, in thousands) | Other Agribusiness | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :----------------- | :----------- | :----------- | :-------------------- | :--------- | | Total Net Revenues | $5,807 | $5,519 | $288 | 5% | | Costs and Expenses | $6,438 | $4,876 | $1,562 | 32% | | Operating Income (Loss) | $(631) | $643 | $(1,274) | (198)% | - Orange revenues increased by $1.0 million, while specialty citrus revenues decreased by $0.7 million in the first six months of fiscal year 2022[186] - Growing costs for other agribusiness increased by $1.0 million, and purchased fruit costs increased by $0.7 million in the first six months of fiscal year 2022[186] Corporate and Other Corporate and other revenues increased, but higher costs led to a slightly larger operating loss for the six-month period Corporate and Other Segment Performance (Six Months Ended April 30, in thousands) | Corporate and Other | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :------------------ | :----------- | :----------- | :-------------------- | :--------- | | Revenues | $2,572 | $2,281 | $291 | 13% | | Costs and Expenses | $13,562 | $12,727 | $835 | 7% | | Operating Income (Loss) | $(11,581) | $(11,002) | $(579) | (5)% | Seasonal Operations Agribusiness operations are seasonal, with revenue and cost fluctuations throughout the fiscal year based on crop cycles - Agribusiness operations are seasonal, with cultural costs higher in the first and second quarters and harvest costs peaking in the third quarter[189] Results of Operations for the Trailing Twelve Months Ended April 30, 2022 and 2021 On a trailing twelve-month basis, revenue and costs both increased by 1%, resulting in a slight improvement in the operating loss Results of Operations (Trailing Twelve Months Ended April 30, in thousands) | Metric | Apr 30, 2022 | Apr 30, 2021 | Change (in thousands) | Change (%) | | :----- | :----------- | :----------- | :-------------------- | :--------- | | Total Revenues | $168,644 | $166,739 | $1,905 | 1% | | Total Costs and Expenses | $178,693 | $177,704 | $989 | 1% | | Operating Loss | $(10,049) | $(10,965) | $916 | 8% | | Net Loss Attributable to Limoneira Company | $(6,123) | $(7,400) | $1,277 | 17% | - The increase in agribusiness costs was primarily due to higher growing and third-party grower and supplier fruit costs, partially offset by decreased packing and harvest costs[192] Liquidity and Capital Resources The company relies on cash from operations and its credit facility for liquidity and expects these sources to be sufficient for the next year - Primary liquidity sources are cash from operations and the Farm Credit West Credit Facility[193][199] - The company believes current liquidity will be sufficient to meet capital expenditures, debt service, working capital, and other obligations for the next twelve months[195] Cash Flow Summary (Six Months Ended April 30, in thousands) | Cash Flow | Apr 30, 2022 | Apr 30, 2021 | Change | | :---------- | :----------- | :----------- | :----- | | Net cash (used in) provided by operating activities | $(1,160) | $4,643 | $(5,803) | | Net cash provided by financing activities | $2,326 | $1,908 | $418 | Overview Liquidity needs fluctuate seasonally, with the company using its revolving credit facility to fund agricultural and real estate activities - Liquidity and capital position fluctuate seasonally, with higher working capital demand in the first and last fiscal quarters[193] - The company utilizes its revolving credit facility to fund agricultural inputs and real estate development projects[193] - The defined benefit pension plan was terminated effective December 31, 2021[194] Cash Flows from Operating Activities Net cash used in operating activities was $1.2 million, a reversal from the prior year due to a higher net loss and working capital changes Operating Cash Flow (Six Months Ended April 30, in thousands) | Operating Cash Flow | Apr 30, 2022 | Apr 30, 2021 | Change | | :------------------ | :----------- | :----------- | :----- | | Net cash (used in) provided by operating activities | $(1,160) | $4,643 | $(5,803) | - The shift to net cash used in operating activities was driven by an increased net loss and changes in accounts receivable, cultural costs, and prepaid expenses[197] Cash Flows from Investing Activities Net cash used in investing activities decreased significantly to $0.4 million, reflecting lower capital expenditures Investing Cash Flow (Six Months Ended April 30, in thousands) | Investing Cash Flow | Apr 30, 2022 | Apr 30, 2021 | Change | | :------------------ | :----------- | :----------- | :----- | | Net cash used in investing activities | $(442) | $(5,501) | $5,059 | | Capital expenditures | $4,123 | $5,409 | $(1,286) | Cash Flows from Financing Activities Net cash from financing activities increased to $2.3 million, driven by higher net borrowings on long-term debt Financing Cash Flow (Six Months Ended April 30, in thousands) | Financing Cash Flow | Apr 30, 2022 | Apr 30, 2021 | Change | | :------------------ | :----------- | :----------- | :----- | | Net cash provided by financing activities | $2,326 | $1,908 | $418 | | Net borrowings of long-term debt | $6,485 | $5,510 | $975 | | Dividends paid – common | $(2,653) | $(2,651) | $(2) | | Dividends paid – preferred | $(251) | $(251) | $0 | Transactions Affecting Liquidity and Capital Resources The company maintains a $130 million credit facility and a $10 million share repurchase program while continuing to pay dividends - The Farm Credit West Credit Facility provides $130 million in aggregate borrowing capacity, with $10.9 million available as of April 30, 2022[201] - The company expects to comply with its debt service coverage ratio covenant of 1.25:1.0 by October 31, 2022[202] - A $10 million share repurchase program was approved in fiscal year 2021, but no shares have been repurchased to date[204] Dividends Paid (Six Months Ended April 30, in thousands) | Dividends Paid | Apr 30, 2022 | Apr 30, 2021 | Change | | :------------- | :----------- | :----------- | :----- | | Preferred dividends | $251 | $251 | $0 | | Common dividends | $2,653 | $2,651 | $2 | Off-Balance Sheet Arrangements The company holds investments in joint ventures and partnerships that are accounted for using the equity method - The company holds investments in joint ventures and partnerships accounted for using the equity method[206] Critical Accounting Estimates There have been no material changes to the company's critical accounting policies and estimates since its last annual report - Critical accounting policies and estimates have not materially changed since the October 31, 2021, Annual Report on Form 10-K[207] Recent Accounting Pronouncements Information regarding recent accounting pronouncements is detailed in Note 2 to the consolidated financial statements - Refer to Note 2 for details on recent accounting pronouncements[208] Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the company's market risk disclosures since its fiscal year 2021 annual report - No material changes in quantitative and qualitative disclosures about market risk since the October 31, 2021, Annual Report on Form 10-K[210] Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed effective, with no material changes to internal controls during the period - Disclosure controls and procedures were effective as of April 30, 2022[211] - No material changes in internal control over financial reporting occurred during the period[212] - Control systems have inherent limitations, providing reasonable but not absolute assurance[213] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information on legal proceedings is provided in Note 16 to the consolidated financial statements - Legal proceedings information is incorporated by reference from Note 16 of the financial statements[215] Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the company's fiscal year 2021 annual report - No material changes in risk factors since the October 31, 2021, Annual Report on Form 10-K[216] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company acquired shares from a retired employee for tax purposes but made no repurchases under its public buyback program Issuer Purchases of Equity Securities (Q2 Fiscal Year 2022) | Period | Total Number of Shares Purchased | Weighted Average Price Paid per Share | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :----- | :------------------------------- | :------------------------------------ | :------------------------------------------------------------------------------------------------------- | | Feb 1, 2022 - Feb 28, 2022 | 12,718 | $14.69 | — | | Total | 12,718 | | $10,000,000 (remaining authorization) | - Shares were acquired from a retired employee for payroll taxes related to restricted stock vesting, not under the public repurchase program[217] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - No defaults upon senior securities[219] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[219] Item 5. Other Information The company reports no other information for this period - No other information to report[220] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents and required certifications - The exhibits include corporate organizational documents, stock-related agreements, and certifications required by the Exchange Act[221][222] SIGNATURES Signatures The report was duly signed by the company's Chief Executive Officer and Chief Financial Officer on June 7, 2022 - The report was signed by the CEO and CFO on June 7, 2022[226]