LIMONEIRA CO Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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 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.

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 Quarterly Report on Form 10-Q.

Agribusiness Summary


We market and sell citrus 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 growers of lemons
and avocados in the United States. In fiscal year 2021, we sold a majority of
our avocados to Calavo Growers, Inc. ("Calavo"). Additionally, we sell our
pistachios to a roaster, packager and marketer of nuts, and our wine grapes to
various wine producers.

Historically, our agribusiness division has been seasonal in nature with
quarterly revenue fluctuating depending on the timing and variety of crops being
harvested. Cultural costs in our agribusiness division tend to be higher in the
first and second quarters and lower in the third and fourth quarters because of
the timing of expensing cultural costs in the current year that were inventoried
in the prior year. Our harvest costs generally increase in the second quarter
and peak in the third quarter, coinciding with the increasing production and
revenue.

Fluctuations in price are a function of global supply and demand with weather
conditions, such as unusually low temperatures, typically having the most
dramatic effect on the amount of lemons supplied in any individual growing
season. We believe we have a

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competitive advantage by maintaining our own lemon packing operations, even
though a significant portion of the costs related to these operations are fixed.
As a result, cost per carton is a function of fruit throughput. While we
regularly monitor our costs for redundancies and opportunities for cost
reductions, we also supplement the number of lemons we pack in our packinghouse
with additional lemons procured from other growers. Because the fresh
utilization rate for our lemons, or percentage of lemons we harvest and pack
that are sold to the fresh market, is directly related to the quality of lemons
we pack and, consequently, the price we receive per 40-pound box, we only pack
lemons from other growers if we determine their lemons are of good quality.

Our avocado producing business is important to us, yet it faces constraints on
growth as there is little additional land with sufficient water that can be
cost-effectively acquired to support new avocado orchards in Southern
California. Therefore, we are currently assessing all of our farmland in Ventura
County for opportunities to expand our plantings of avocados. While avocado
production is cyclical as avocados typically bear fruit on a bi-annual basis,
the profitability and cash flow realized from our avocados helps to diversify
our fruit production base.

In addition to growing lemons and avocados, we grow oranges, specialty citrus
and other crops, typically utilizing land not suitable for growing high quality
lemons. We regularly monitor the demand for the fruit we grow in the
ever-changing marketplace to identify trends. For instance, while per capita
consumption of oranges in the United States has been decreasing since 2000
primarily as a result of consumers increasing their consumption of mandarin
oranges and other specialty citrus, the international market demand for U.S.
oranges has increased. As a result, we have focused our orange production on
high quality late season Navel oranges primarily for export to Japan, China and
Korea, which are typically highly profitable niche markets. We produce our
specialty citrus and other crops in response to identified consumer trends and
believe that we are a leader in the niche production and sale of certain of
these high margin fruits. We carefully monitor the respective markets of
specialty citrus and other crops and we believe that demand for the types and
varieties of specialty citrus and other crops that we grow will continue to
increase throughout the world.

Rental Operations Summary


Our rental operations include our residential and commercial rentals, leased
land operations and organic recycling. Our residential rental units generate
reliable cash flows that we use to partially fund the operating costs of our
business and provide affordable housing to many of our employees, including our
agribusiness employees. This unique employment benefit helps us maintain a
dependable, long-term employee base. In addition, our leased land business
provides us with a typically profitable diversification. Revenue from rental
operations is generally level throughout the year.

Real Estate Development Summary


We invest in real estate investment 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.

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. 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 Citrus Packers, Inc. ("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.

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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 which 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.

California has experienced below average precipitation since 2018. According to
the U.S. Drought Monitor, Ventura and San Bernardino Counties were experiencing
severe drought conditions and Tulare County was experiencing extreme drought
conditions as of July 31, 2022. 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 0% of the contracted amount of water to San Joaquin Valley farmers in
2022 compared to 5% in 2021 and 100% in 2017 through 2020. We are assessing the
impact these reductions may have on our California orchards.

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. In January 2022, Arizona experienced water releases from Lake
Mead reduced by approximately 18% of the state's annual apportionment. In August
2022, the U.S. Bureau of Reclamation announced Lake Mead to operate in a Tier-2a
shortage, which increases water restrictions for states in the southwest. In
January 2023, Arizona will forfeit an additional 80,000-acre feet of water from
Lake Mead. In response, we entered into a fallowing agreement and we are
assessing the impact these additional reductions may have on our Arizona
orchards.

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 and formed Limoneira Lewis Community Builders, LLC ("LLCB")
as the development entity. LLCB has closed on lot sales representing 586 units
from inception through July 31, 2022. For further information see Note 5 - Real
Estate Development of the notes to consolidated financial statements included in
this Quarterly Report on Form 10-Q.

In September 2021, we signed a Memorandum of Understanding with Wileman Bros. &
Elliott, Inc. ("Wileman"), to form an alliance to sell their combined citrus
volumes under Limoneira's One World of Citrus trademark. Wileman is a
95-year-old citrus business located in California's Central Valley with a focus
on oranges, mandarins and specialty citrus. Effective November 1, 2021, the
majority of our oranges and certain specialty citrus are packed by Wileman.

In January 2022, we were notified of Alex M. Teague's decision to retire as
Senior Vice President and Chief Operating Officer of our Company, effective
February 1, 2022. In connection with his retirement, we entered into a
separation agreement with Mr. Teague whereas, (i) Mr. Teague was paid one year
of his annual base salary, which was paid in one lump sum within ninety (90)
business days of January 12, 2022; (ii) twenty-three thousand nine hundred
ninety-nine (23,999) shares of our common stock granted to Mr. Teague pursuant
to the Limoneira Company Omnibus Incentive Plan fully vested; and (iii) Mr.
Teague will receive certain other benefits as set forth in the agreement. As of
July 31, 2022, we paid $0.4 million cash severance and recognized $0.3 million
accelerated vesting of stock-based compensation.

In February 2022, we terminated our Avocado Marketing Agreement and the
associated Letter Agreement Regarding Fruit Commitment with Calavo to pursue
opportunities with other packing and marketing companies.


In March 2022, we signed an agreement to lease Finca Santa Clara, our 1,200-acre
lemon ranch in Argentina, to FGF Trapani ("FGF"), our 49% partner in Trapani
Fresh. The lease is retroactive beginning November 1, 2021, with a term of 14
months at a fixed sum of $0.4 million, payable in five equal, monthly
installments beginning August 2022 until December 2022.

In April 2022, the promissory note previously received for the sale of our
Centennial property, with a net carrying value of $2.4 million, was paid in full
and the deferred gain of $0.2 million was recognized in the second quarter of
fiscal year 2022.

In June 2022, we engaged with YMIDD in a two-year fallowing and forbearance
program at our Associated Citrus Packers ranch in Yuma, Arizona. We expect to
receive payments totaling approximately $1.3 million during the program. With
the fallowing program in place, this ranch will have approximately 700 acres of
productive lemons, 400 fallowed acres and 200 acres of other crops.

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On June 28, 2022, we declared a cash dividend of $0.075 per common share paid on
July 15, 2022, in the aggregate amount of $1.3 million to stockholders of record
as of July 11, 2022.

In September 2022, we entered into an agreement with LLCB to sell our East Area
1 - Retained Property to potentially develop additional residential units. We
expect to close the transaction in the fourth quarter of fiscal year 2022,
receive approximately $8.0 million in cash proceeds and record an estimated gain
of approximately $4.7 million.

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 saw a
significant decline in volume, with lemon demand falling since widespread
shelter in place orders were issued in March 2020, resulting in a significant
market oversupply. The export market for fresh produce also significantly
declined due to the COVID-19 pandemic impacts. As of July 31, 2022, 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, all of fiscal year 2021, and the first three quarters of fiscal year 2022.
We also expect the COVID-19 pandemic to impact 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 our Annual Report on Form 10-K for
the year ended October 31, 2021. 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.




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Results of Operations

The following table shows the results of operations (in thousands):


                                                            Three Months Ended                     Nine Months Ended
                                                                 July 31,                              July 31,
                                                          2022               2021               2022               2021
Net revenues:
Agribusiness                                          $   57,594          $ 47,954          $ 141,046          $ 129,080
Other operations                                           1,329             1,171              3,901              3,452

Total net revenues                                        58,923            49,125            144,947            132,532
Costs and expenses:
Agribusiness                                              41,463            40,691            120,306            114,071
Other operations                                           1,127             1,017              3,294              3,189

Loss on disposal of assets, net                              242                 -                503                  -
Selling, general and administrative                        5,031             4,043             16,756             15,154
Total costs and expenses                                  47,863            45,751            140,859            132,414
Operating income:
Agribusiness                                              16,131             7,263             20,740             15,009
Other operations                                             202               154                607                263
Loss on disposal of assets, net                             (242)                -               (503)                 -
Selling, general and administrative                       (5,031)           (4,043)           (16,756)           (15,154)
Operating income                                          11,060             3,374              4,088                118
Other (expense) income:
Interest income                                                6               211                 54                279
Interest expense, net of patronage dividends                (772)             (574)            (1,253)            (1,062)
Equity in earnings of investments, net                       331             1,462                681              2,471

Other income, net                                             13                32                106                 83
Total other (expense) income                                (422)            1,131               (412)             1,771
Income before income tax provision                        10,638             4,505              3,676              1,889
Income tax provision                                      (3,313)           (1,335)            (1,385)            (1,122)
Net income                                                 7,325             3,170              2,291                767
Net loss attributable to noncontrolling interest              52               535                129                663

Net income attributable to Limoneira Company $ 7,377 $

 3,705          $   2,420          $   1,430



Non-GAAP Financial Measures

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 named executive
officer severance and loss (gain) on disposal of assets, are important measures
to evaluate our results of operations between periods on a more comparable
basis. 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.

EBITDA and adjusted EBITDA are summarized and reconciled to net income
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):

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                                                   Three Months Ended            Nine Months Ended
                                                        July 31,                     July 31,
                                                   2022           2021          2022           2021

Net income attributable to Limoneira Company $ 7,377 $ 3,705

  $   2,420      $  1,430
Interest income                                         (6)        (211)           (54)         (279)
Interest expense, net of patronage dividends           772          574          1,253         1,062
Income tax provision                                 3,313        1,335          1,385         1,122
Depreciation and amortization                        2,469        2,437          7,432         7,490
EBITDA                                         $    13,925      $ 7,840      $  12,436      $ 10,825

Named executive officer severance                        -            -            770             -
Loss (gain) on disposal of assets, net                 242           (4)           503           (20)
Adjusted EBITDA                                $    14,167      $ 7,836      $  13,709      $ 10,805


Three Months Ended July 31, 2022 Compared to the Three Months Ended July 31,
2021


Revenues

Total net revenues for the three months ended July 31, 2022 were $58.9 million,
compared to $49.1 million for the three months ended July 31, 2021. The 20%
increase of $9.8 million was primarily the result of increased avocados and
oranges agribusiness revenues, partially offset by decreased lemon agribusiness
revenues, as detailed below ($ in thousands):

                                                  Agribusiness Revenues for 

the Three Months Ended July 31,

                                                2022                  2021                        Change
Lemons                                    $      40,160          $    40,835          $      (675)        (2)%
Avocados                                         12,578                4,073                8,505         209%
Oranges                                           3,736                1,981                1,755          89%
Specialty citrus and other crops                  1,120                1,065                   55          5%
Agribusiness revenues                     $      57,594          $    47,954          $     9,640          20%




•Lemons: The decrease in the third quarter of fiscal year 2022 was primarily the
result of decreased brokered fruit and other lemon sales, partially offset by
increased fresh lemon sales and shipping and handling compared to the same
period of fiscal year 2021. During the third quarter of fiscal years 2022 and
2021, fresh lemon sales were $27.8 million and $24.4 million, in aggregate, on
1,512,000 and 1,144,000 cartons of lemons sold at average per carton prices of
$18.39 and $21.34, respectively. Lemon revenues in the third quarter of fiscal
years 2022 and 2021 included shipping and handling of $6.3 million and $4.5
million, brokered fruit and other lemon sales of $5.0 million and $11.2 million,
and lemon by-product sales of $1.1 million and $0.6 million, respectively.

•Avocados: The increase in the third quarter of fiscal year 2022 was primarily
the result of increased volume and higher prices of avocados sold, compared to
the same period of fiscal year 2021. During the third quarter of fiscal years
2022 and 2021, 5,694,000 and 3,513,000 pounds of avocados were sold at an
average per pound price of $2.21 and $1.16, respectively.

•Oranges: The increase in the third quarter of fiscal year 2022 was primarily
the result of higher prices, partially offset by decreased volume of oranges
sold, compared to the same period of fiscal year 2021. In the third quarter of
fiscal years 2022 and 2021, we sold 209,000 and 259,000 40-pound carton
equivalents of oranges at an average per carton price of $17.88 and $7.65,
respectively.

•Specialty citrus and other crops: The increase in the third quarter of fiscal
year 2022 was primarily the result of increased volume and higher prices of
specialty citrus sold, compared to the same period of fiscal year 2021. During
the third quarter of fiscal years 2022 and 2021, we sold 61,000 and 45,000
40-pound carton equivalents of specialty citrus at an average per carton price
of $18.34 and $14.04, respectively.

Other operations revenue in the third quarter of fiscal years 2022 and 2021 was
$1.3 million and $1.2 million, respectively.

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Costs and Expenses


Our total costs and expenses in the third quarter of fiscal year 2022 were $47.9
million, compared to $45.8 million in the same period of fiscal year 2021. The
5% increase of $2.1 million was primarily attributable to increases in packing
costs, harvest costs and selling, general and administrative expenses, partially
offset by decreases in our growing and third-party grower and supplier costs.
Costs and expenses associated with our agribusiness division include packing
costs, harvest costs, growing costs, costs related to the fruit we procure and
sell for third-party growers and suppliers and depreciation and amortization
expense, as detailed below ($ in thousands):

                                              Agribusiness Costs and 

Expenses for the Three Months Ended July 31,

                                                 2022                 2021                        Change
Packing costs                              $      12,463          $    9,864          $     2,599          26%
Harvest costs                                      6,219               3,383                2,836          84%
Growing costs                                      4,965               7,522               (2,557)        (34)%
Third-party grower and supplier costs             15,644              17,828               (2,184)        (12)%
Depreciation and amortization                      2,172               2,094                   78          4%
Agribusiness costs and expenses            $      41,463          $   

40,691 $ 772 2%




•Packing costs: Packing costs primarily 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. In the third quarter of
fiscal years 2022 and 2021, lemon packing costs were $12.0 million and $9.3
million, respectively. During the third quarter of fiscal years 2022 and 2021,
we packed and sold 1,512,000 and 1,144,000 cartons of lemons at average per
carton costs of $7.91 and $8.11, respectively. Additionally, in the third
quarter of fiscal years 2022 and 2021, packing costs included $0.5 million and
$0.6 million of shipping costs, respectively.

•Harvest costs: Harvest costs increased in the third quarter of fiscal year 2022
primarily as a result of increased volume of lemons and avocados harvested
compared to the same period in fiscal year 2021.


•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 the third
quarter of fiscal year 2022 was primarily due to the lease of Finca Santa Clara
in Argentina and farm management decisions based on weather, harvest timing and
crop conditions.

•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 other growers is referred to as third-party grower and supplier costs. The
decrease in the third quarter of fiscal year 2022 was primarily due to lower
prices, partially offset by increased volume of third-party grower fruit sold,
compared to the same period of fiscal year 2021. Of the 1,512,000 and 1,144,000
cartons of lemons packed and sold during the third quarter of fiscal years 2022
and 2021, 695,000 (46%) and 655,000 (57%) were procured from third-party growers
at average per carton prices of $12.42 and $14.88, respectively. Additionally,
in the third quarter of fiscal years 2022 and 2021, we incurred $7.0 million and
$8.1 million, respectively, of costs for purchased, packed fruit for resale.

•Depreciation and amortization: Depreciation and amortization expense for the
third quarter of fiscal years 2022 and 2021 was $2.2 million and $2.1 million,
respectively.

Other operations expenses were $1.1 million and $1.0 million in the third
quarter of fiscal years 2022 and 2021, respectively.

Loss on disposal of assets, net was $0.2 million and zero in the third quarter
of fiscal years 2022 and 2021, respectively.


Selling, general and administrative costs and expenses were $5.0 million and
$4.0 million in the third quarter of fiscal years 2022 and 2021, respectively.
The 24% increase of $1.0 million primarily consisted of the following:

•Salaries, benefits and incentive compensation in the third quarter of fiscal
year 2022 was $1.0 million higher than the same period of fiscal year 2021.
•Other selling, general and administrative expenses, including certain corporate
overhead expenses in the third quarter of fiscal year 2022 were $0.1 million
higher than the same period of fiscal year 2021.




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Other (Expense) Income


Other expense in the third quarter of fiscal year 2022 was comprised primarily
of $(0.8) million of net interest expense, partially offset by $0.3 million of
equity in earnings of investments. Other income in the third quarter of fiscal
year 2021 was comprised primarily of $1.5 million of equity in earnings of
investments, partially offset by $(0.4) million of net interest expense.

Income Taxes


We recorded an estimated income tax provision of $3.3 million and $1.3 million
in the third quarter of fiscal years 2022 and 2021 on pre-tax income of $10.6
million and $4.5 million, respectively. The tax provision recorded for the third
quarter of fiscal year 2022 differs from the U.S. federal statutory tax rate of
21.0% due primarily to foreign jurisdictions which are taxed at different rates,
state taxes, tax impact of stock-based compensation, and nondeductible tax
items. Our projected annual effective blended tax rate for fiscal year 2022,
excluding discrete items, is approximately 41.3%.

Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest represents 10% and 49% of the
net loss of PDA and Trapani Fresh, respectively.

Nine Months Ended July 31, 2022 Compared to the Nine Months Ended July 31, 2021

Revenues


Total net revenues for the nine months ended July 31, 2022 were $144.9 million,
compared to $132.5 million for the nine months ended July 31, 2021. The 9%
increase of $12.4 million was primarily the result of increased avocados and
oranges agribusiness revenues, partially offset by decreased lemons and
specialty citrus and other crops agribusiness revenues, as detailed below ($ in
thousands):

                                                   Agribusiness Revenues 

for the Nine Months Ended July 31,

                                                2022                  2021                        Change
Lemons                                    $     113,463          $   113,735          $      (272)          -%
Avocados                                         16,920                6,780               10,140          150%
Oranges                                           7,226                4,476                2,750          61%
Specialty citrus and other crops                  3,437                4,089                 (652)        (16)%
Agribusiness revenues                     $     141,046          $   129,080          $    11,966           9%




•Lemons: The decrease in the first nine months of fiscal year 2022 was primarily
the result of decreased brokered fruit and other lemon sales, partially offset
by increased fresh lemon and shipping and handling sales compared to the same
period of fiscal year 2021. During the first nine months of fiscal years 2022
and 2021, fresh lemon sales were $79.8 million and $78.1 million, in aggregate,
on 4,271,000 and 3,992,000 cartons of lemons sold at average per carton prices
of $18.68 and $19.56, respectively. Lemon revenues in the first nine months of
fiscal years 2022 and 2021 included shipping and handling of $19.0 million and
$15.5 million, brokered fruit and other lemon sales of $11.5 million and $17.0
million, respectively, and lemon by-product sales of $3.1 million in both fiscal
years.

•Avocados: The increase in the first nine months of fiscal year 2022 was
primarily the result of increased volume and higher prices of avocados sold,
compared to the same period of fiscal year 2021. During the first nine months of
fiscal years 2022 and 2021, 7,936,000 and 5,655,000 pounds of avocados were sold
at an average per pound price of $2.13 and $1.20, respectively.

•Oranges: The increase in the first nine months of fiscal year 2022 was
primarily the result of increased volume and higher prices of oranges sold,
compared to the same period of fiscal year 2021. In the first nine months of
fiscal years 2022 and 2021, we sold 590,000 and 533,000 40-pound carton
equivalents of oranges at an average per carton price of $12.25 and $8.40,
respectively.


•Specialty citrus and other crops: The decrease in the first nine months of
fiscal year 2022 was primarily the result of lower prices, partially offset by
increased volume of specialty citrus sold, compared to the same period of fiscal
year 2021. During the first nine months of fiscal years 2022 and 2021, we sold
366,000 and 289,000 40-pound carton equivalents of specialty citrus at an
average per carton price of $9.26 and $12.40, respectively.

Other operations revenue in the first nine months of fiscal years 2022 and 2021
was $3.9 million and $3.5 million, respectively.

                                       33
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Costs and Expenses


Our total costs and expenses in the first nine months of fiscal year 2022 were
$140.9 million, compared to $132.4 million in the same period of fiscal year
2021. The 6% increase of $8.4 million was primarily attributable to increases in
our packing costs, harvest costs and selling, general and administrative
expenses, partially offset by decreases in our growing costs. Costs and expenses
associated with our agribusiness division include packing costs, harvest costs,
growing costs, costs related to the fruit we procure and sell for third-party
growers and suppliers and depreciation and amortization expense, as detailed
below ($ in thousands):

                                              Agribusiness Costs and 

Expenses for the Nine Months Ended July 31,

                                                 2022                 2021                        Change
Packing costs                              $      36,020          $   31,894          $     4,126          13%
Harvest costs                                     17,031              13,826                3,205          23%
Growing costs                                     21,240              22,348               (1,108)        (5)%
Third-party grower and supplier costs             39,471              39,412                   59          -%
Depreciation and amortization                      6,544               6,591                  (47)        (1)%
Agribusiness costs and expenses            $     120,306          $  

114,071 $ 6,235 5%




•Packing costs: Packing costs primarily 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. In the first nine months of
fiscal years 2022 and 2021, lemon packing costs were $34.2 million and $29.7
million, respectively. During the first nine months of fiscal years 2022 and
2021, we packed and sold 4,271,000 and 3,992,000 cartons of lemons at average
per carton costs of $8.00 and $7.44, respectively. Additionally, in the first
nine months of fiscal years 2022 and 2021, packing costs included $1.8 million
and $2.2 million of shipping costs, respectively.

•Harvest costs: Harvest costs increased in the first nine months of fiscal year
2022 primarily as a result of increased volume of lemons and avocados harvested
compared to the same period in fiscal year 2021.

•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 the first nine
months of fiscal year 2022 was primarily due to the lease of Finca Santa Clara
in Argentina, partially offset by increases related to farm management decisions
based on weather, harvest timing and crop conditions.

•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 other growers is referred to as third-party grower and supplier costs. The
increase in the first nine months of fiscal year 2022 was primarily due to
increased volume, partially offset by lower prices of third-party grower fruit
sold, compared to the same period of fiscal year 2021. Of the 4,271,000 and
3,992,000 cartons of lemons packed and sold during the first nine months of
fiscal years 2022 and 2021, 2,183,000 (51%) and 2,048,000 (51%) were procured
from third-party growers at average per carton prices of $12.81 and $14.08,
respectively. Additionally, in the first nine months of fiscal years 2022 and
2021, we incurred $11.5 million and $10.6 million, respectively, of costs for
purchased, packed fruit for resale.

•Depreciation and amortization: Depreciation and amortization expense for the
first nine months of fiscal years 2022 and 2021 was $6.5 million and $6.6
million
, respectively.

Other operations expenses were $3.3 million and $3.2 million in the first nine
months of fiscal years 2022 and 2021, respectively.

Loss on disposal of assets, net was $0.5 million and zero in the first nine
months of fiscal years 2022 and 2021, respectively.


Selling, general and administrative costs and expenses were $16.8 million in the
first nine months of fiscal year 2022 compared to $15.2 million in the first
nine months of fiscal year 2021. The 11% increase of $1.6 million primarily
consisted of the following:

•Salaries, benefits and incentive compensation for the first nine months of
fiscal year 2022 were $1.1 million higher than the same period of fiscal year
2021.
•Named executive officer severance for the first nine months of fiscal year 2022
was $0.8 million compared to zero in the same period of fiscal year 2021.

•Other selling, general and administrative expenses, including certain corporate
overhead expenses, for the first nine months of fiscal year 2022 were $0.3
million
lower than the same period of fiscal year 2021.

                                       34
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Other (Expense) Income


Other expense in the first nine months of fiscal year 2022 was comprised
primarily of $(1.2) million of net interest expense, partially offset by $0.7
million of equity in earnings of investments. Other income in the first nine
months of fiscal year 2021 was comprised primarily of $2.5 million of equity in
earnings of investments, partially offset by $(0.8) million of net interest
expense.

Income Taxes


We recorded an estimated income tax provision of $1.4 million and $1.1 million
in the first nine months of fiscal years 2022 and 2021 on pre-tax income of $3.7
million and $1.9 million, respectively. The tax provision recorded for the first
nine months of fiscal year 2022 differs from the U.S. federal statutory tax rate
of 21.0% due primarily to foreign jurisdictions which are taxed at different
rates, state taxes, tax impact of stock-based compensation, and nondeductible
tax items. Our projected annual effective blended tax rate for fiscal year 2022,
excluding discrete items, is approximately 41.3%.

Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest represents 10% and 49% of the
net loss 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 18 - Segment Information of the
notes to consolidated financial statements included in this Quarterly Report on
Form 10-Q for additional information regarding our operating segments.

Three Months Ended July 31, 2022 Compared to the Three Months Ended July 31,
2021

The following table shows the segment results of operations for the three months
ended July 31, 2022 (in thousands):

                                             Fresh      Lemon                                     Other            Total        Corporate
                                            Lemons     Packing    Eliminations    Avocados     Agribusiness     Agribusiness    and Other      Total
Revenues from external customers          $ 33,823    $ 6,337    $          -    $ 12,578    $       4,856    $      57,594    $   1,329    $ 58,923
Intersegment revenue                             -      9,696          (9,696)          -                -                -            -           -
Total net revenues                          33,823     16,033          (9,696)     12,578            4,856           57,594        1,329      58,923
Costs and expenses                          32,600     11,953          (9,696)      3,154            1,280           39,291        6,103      45,394
Depreciation and amortization                    -          -               -           -                -            2,172          297       2,469
Operating income (loss)                   $  1,223    $ 4,080    $          -    $  9,424    $       3,576    $      16,131    $  (5,071)   $ 11,060


The following table shows the segment results of operations for the three months
ended July 31, 2021 (in thousands):

                                             Fresh      Lemon                                     Other            Total        Corporate
                                            Lemons     Packing    Eliminations    Avocados     Agribusiness     Agribusiness    and Other      Total
Revenues from external customers          $ 36,295    $ 4,540    $          -    $  4,073    $       3,046    $      47,954    $   1,171    $ 49,125
Intersegment revenue                             -      7,192          (7,192)          -                -                -            -           -
Total net revenues                          36,295     11,732          (7,192)      4,073            3,046           47,954        1,171      49,125
Costs and expenses                          31,846      9,279          (7,192)      2,708            1,956           38,597        4,717      43,314
Depreciation and amortization                    -          -               -           -                -            2,094          343       2,437
Operating income (loss)                   $  4,449    $ 2,453    $          -    $  1,365    $       1,090    $       7,263    $  (3,889)   $  3,374


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 and other lemon revenue such as purchased, packed
fruit for resale. For the third quarter of fiscal years 2022 and 2021, our fresh
lemons segment total net
                                       35
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revenues were $33.8 million and $36.3 million, respectively. The 7% decrease of
$2.5 million was primarily due to a net decrease in brokered fruit and other
lemon sales of $6.3 million, partially offset by increased fresh lemon sales of
$3.4 million.

Costs and expenses associated with our fresh lemons segment include growing
costs, harvest costs and costs of lemons we procure from third-party growers and
suppliers. For the third quarter of fiscal years 2022 and 2021, our fresh lemons
segment costs and expenses were $32.6 million and $31.8 million, respectively.
The 2% increase of $0.8 million primarily consisted of the following:

•Harvest costs for the third quarter of fiscal year 2022 were $2.2 million
higher than the same period of fiscal year 2021.

•Growing costs for the third quarter of fiscal year 2022 were $1.7 million lower
than the same period of fiscal year 2021.

•Third-party grower and supplier costs for the third quarter of fiscal year 2022
were $2.3 million lower than the same period of fiscal year 2021.

•Intersegment costs and expenses for the third quarter of fiscal year 2022 were
$2.5 million higher than the same period of fiscal year 2021.

Lemon Packing


Lemon packing segment revenue is comprised of packing revenue, intersegment
packing revenue and shipping and handling revenue. For the third quarter of
fiscal years 2022 and 2021, our lemon packing segment total net revenues were
$16.0 million and $11.7 million, respectively. The 37% increase of $4.3 million
was primarily due to increased volume of lemons packed and sold.

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 the
third quarter of fiscal years 2022 and 2021, our lemon packing costs and
expenses were $12.0 million and $9.3 million, respectively. The 29% increase of
$2.7 million was primarily due to increased volume of lemons packed and sold.

For the third quarter of fiscal years 2022 and 2021, lemon packing segment
operating income per carton sold was $2.70 and $2.14, respectively.


In the third quarter of fiscal years 2022 and 2021, the lemon packing segment
included $9.7 million and $7.2 million, respectively, of intersegment revenues
that 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 the third quarter of fiscal year 2022 and 2021, our avocados segment had
revenues of $12.6 million and $4.1 million, respectively.


Costs and expenses associated with our avocados segment include growing and
harvest costs. For the third quarter of fiscal years 2022 and 2021, our avocados
segment costs and expenses were $3.2 million and $2.7 million, respectively. The
increase of $0.4 million primarily consisted of the following:

•Harvest costs for the third quarter of fiscal year 2022 were $0.8 million
higher than the same period of fiscal year 2021.

•Growing costs for the third quarter of fiscal year 2022 were $0.4 million lower
than the same period of fiscal year 2021.

Other Agribusiness

For the third quarter of fiscal years 2022 and 2021, our other agribusiness
segment total net revenues were $4.9 million and $3.0 million, respectively. The
59% increase of $1.8 million primarily consisted of the following:

•Orange revenues for the third quarter of fiscal year 2022 were $1.8 million
higher than the same period of fiscal year 2021.

•Specialty citrus and other crops revenues for the third quarter of fiscal year
2022 were $0.1 million higher than the same period of fiscal year 2021.


Costs and expenses associated with our other agribusiness segment include
growing costs, harvest costs and purchased fruit costs. For the third quarter of
fiscal years 2022 and 2021, our other agribusiness costs and expenses were $1.3
million and $2.0 million, respectively. The 35% decrease of $0.7 million
primarily consisted of the following:

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•Harvest costs for the third quarter of fiscal year 2022 were $0.2 million lower
than the same period of fiscal year 2021.

•Growing costs for the third quarter of fiscal year 2022 were $0.5 million lower
than the same period of fiscal year 2021.

•Purchased fruit costs for the third quarter of fiscal year 2022 were $0.1
million
higher than the same period of fiscal year 2021.


Total agribusiness depreciation and amortization expenses for the third quarter
of fiscal year 2022 were $0.1 million higher than the same period of fiscal year
2021.

Corporate and Other

Our corporate and other operations had revenues of $1.3 million and $1.2 million
for the third quarter of fiscal years 2022 and 2021, respectively.


Costs and expenses in our corporate and other operations for the third quarter
of fiscal years 2022 and 2021 were approximately $6.1 million and $4.7 million,
respectively, and include selling, general and administrative costs and expenses
not allocated to the operating segments. Depreciation and amortization expenses
for the third quarter of fiscal years 2022 and 2021 were similar at $0.3
million.

Nine Months Ended July 31, 2022 Compared to the Nine Months Ended July 31, 2021

The following table shows the segment results of operations for the nine months
ended July 31, 2022 (in thousands):


                                              Fresh       Lemon                                     Other            Total        Corporate
                                             Lemons      Packing    

Eliminations Avocados Agribusiness Agribusiness and Other

Total

Revenues from external customers           $ 94,415    $ 19,048    $          -    $ 16,920    $      10,663    $     141,046    $   3,901    $ 144,947
Intersegment revenue                              -      25,658         (25,658)          -                -                -            -            -
Total net revenues                           94,415      44,706         (25,658)     16,920           10,663          141,046        3,901      144,947
Costs and expenses                           91,983      34,171         (25,658)      5,548            7,718          113,762       19,665      133,427
Depreciation and amortization                     -           -               -           -                -            6,544          888        7,432
Operating income (loss)                    $  2,432    $ 10,535    $          -    $ 11,372    $       2,945    $      20,740    $ (16,652)   $   4,088


The following table shows the segment results of operations for the nine months
ended July 31, 2021 (in thousands):


                                              Fresh       Lemon                                     Other            Total        Corporate
                                             Lemons      Packing    

Eliminations Avocados Agribusiness Agribusiness and Other

Total

Revenues from external customers           $ 98,195    $ 15,540    $          -    $  6,780    $       8,565    $     129,080    $   3,452    $ 132,532
Intersegment revenue                              -      23,159         (23,159)          -                -                -            -            -
Total net revenues                           98,195      38,699         (23,159)      6,780            8,565          129,080        3,452      132,532
Costs and expenses                           89,982      29,684         (23,159)      4,141            6,832          107,480       17,444      124,924
Depreciation and amortization                     -           -               -           -                -            6,591          899        7,490
Operating income (loss)                    $  8,213    $  9,015    $          -    $  2,639    $       1,733    $      15,009    $ (14,891)   $     118



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 and other lemon revenue such as purchased, packed
fruit for resale. For the first nine months of fiscal years 2022 and 2021, our
fresh lemons segment total net revenues were $94.4 million and $98.2 million,
respectively. The 4% decrease of $3.8 million was primarily due to a decrease in
brokered fruit and other lemon sales of $5.5 million, partially offset by
increased fresh lemon sales of $1.7 million.

Costs and expenses associated with our fresh lemons segment include growing
costs, harvest costs and costs of lemons we procure from third-party growers and
suppliers. For the first nine months of fiscal years 2022 and 2021, our fresh
lemons segment costs and expenses were $92.0 million and $90.0 million,
respectively. The 2% increase of $2.0 million primarily consisted of the
following:

•Harvest costs for the first nine months of fiscal year 2022 were $2.6 million
higher than the same period of fiscal year 2021.

•Growing costs for the first nine months of fiscal year 2022 were $2.0 million
lower than the same period of fiscal year 2021.

                                       37
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•Third-party grower and supplier costs for the first nine months of fiscal year
2022 were $0.7 million lower than the same period of fiscal year 2021.

•Transportation costs for the first nine months of fiscal year 2022 were $0.4
million
lower than the same period of fiscal year 2021.

•Intersegment costs and expenses for the first nine months of fiscal year 2022
were $2.5 million higher than the same period of fiscal year 2021.

Lemon Packing


Lemon packing segment revenue is comprised of packing revenue, intersegment
packing revenue and shipping and handling revenue. For the first nine months of
fiscal years 2022 and 2021, our lemon packing segment total net revenues were
$44.7 million and $38.7 million, respectively. The 16% increase of $6.0 million
was primarily due to increased volume of lemons packed and sold.

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 the
first nine months of fiscal years 2022 and 2021, our lemon packing costs and
expenses were $34.2 million and $29.7 million, respectively. The 15% increase of
$4.5 million was primarily due to increased volume of lemons packed and sold.

For the first nine months of fiscal years 2022 and 2021, lemon packing segment
operating income per carton sold was $2.47 and $2.26, respectively.


In the first nine months of fiscal years 2022 and 2021, the lemon packing
segment included $25.7 million and $23.2 million, respectively, of intersegment
revenues that 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 the first nine months of fiscal years 2022 and 2021, our avocados segment
had revenues of $16.9 million and $6.8 million, respectively.

Costs and expenses associated with our avocados segment include growing and
harvest costs. For the first nine months of fiscal years 2022 and 2021, our
avocados segment costs and expenses were $5.5 million and $4.1 million,
respectively. The increase of $1.4 million primarily consisted of the following:

•Harvest costs for the first nine months of fiscal year 2022 were $1.0 million
higher than the same period of fiscal year 2021.

•Growing costs for the first nine months of fiscal year 2022 were $0.4 million
higher than the same period of fiscal year 2021.

Other Agribusiness


For the first nine months of fiscal years 2022 and 2021, our other agribusiness
segment total net revenues were $10.7 million and $8.6 million, respectively.
The 24% increase of $2.1 million primarily consisted of the following:

•Orange revenues for the first nine months of fiscal year 2022 were $2.8 million
higher than the same period of fiscal year 2021.

•Specialty citrus and other crops revenues for the first nine months of fiscal
year 2022 were $0.7 million lower than the same period of fiscal year 2021.

Costs and expenses associated with our other agribusiness segment include
growing costs, harvest costs and purchased fruit costs. For the first nine
months of fiscal years 2022 and 2021, our other agribusiness costs and expenses
were $7.7 million and $6.8 million, respectively. The 13% increase of $0.9
million
primarily consisted of the following:

•Harvest costs for the first nine months of fiscal year 2022 were $0.4 million
lower than the same period of fiscal year 2021.

•Growing costs for the first nine months of fiscal year 2022 were $0.5 million
higher than the same period of fiscal year 2021.

•Purchased fruit costs for the first nine months of fiscal year 2022 were $0.8
million
higher than the same period of fiscal year 2021.

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Total agribusiness depreciation and amortization expenses for the first nine
months of fiscal year 2022 were similar to the same period of fiscal year 2021.

Corporate and Other

Our corporate and other operations had revenues of $3.9 million and $3.5 million
for the first nine months of fiscal years 2022 and 2021, respectively.


Costs and expenses in our corporate and other operations for the first nine
months of fiscal years 2022 and 2021 were approximately $19.7 million and $17.4
million, respectively, and include selling, general and administrative costs and
expenses not allocated to the operating segments. Depreciation and amortization
expenses for the first nine months of fiscal years 2022 and 2021 were similar at
$0.9 million.

Seasonal Operations

Historically, our agribusiness operations have been seasonal in nature with
quarterly revenue fluctuating depending on the timing and the variety of crops
being harvested. Cultural costs in our agribusiness tend to be higher in the
first and second quarters and lower in the third and fourth quarters because of
the timing of expensing cultural costs in the current year that were inventoried
in the prior year. Our harvest costs generally increase in the second quarter
and peak in the third quarter coinciding with the increasing production and
revenue. Due to this seasonality and to avoid the inference that interim results
are indicative of the estimated results for a full fiscal year, we present
supplemental information for 12-month periods ended at the interim date for the
current and preceding years.


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Results of Operations for the Trailing Twelve Months Ended July 31, 2022 and
2021

The following table shows the unaudited results of operations (in thousands):

Trailing Twelve Months Ended July

                                                                                         31,
                                                                               2022                2021
Net revenues:
Agribusiness                                                              $   173,347          $ 157,708
Other operations                                                                5,095              4,597
Total net revenues                                                            178,442            162,305
Costs and expenses:
Agribusiness                                                                  154,727            146,034
Other operations                                                                4,437              4,297

Loss on disposal of assets, net                                                   612                502
Selling, general and administrative                                            21,028             20,877
Total costs and expenses                                                      180,804            171,710
Operating loss                                                                 (2,362)            (9,405)
Other (expense) income:
Interest income                                                                   154                641
Interest expense, net of patronage dividends                                   (1,692)            (2,021)
Equity in earnings of investments, net                                          1,413              2,469

Other income, net                                                                 112                 56
Total other (expense) income                                                      (13)             1,145
Loss before income tax benefit                                                 (2,375)            (8,260)
Income tax benefit                                                                  3              1,496
Net loss                                                                       (2,372)            (6,764)
(Income) loss attributable to noncontrolling interest                             (78)               760
Net loss attributable to Limoneira Company                                $ 

(2,450) $ (6,004)

The following analysis should be read in conjunction with the previous section
“Results of Operations.”


•Total revenues increased $16.1 million in the twelve months ended July 31, 2022
compared to the twelve months ended July 31, 2021, primarily due to increased
agribusiness revenues, particularly increased avocado sales.

•Total costs and expenses increased $9.1 million in the twelve months ended July
31, 2022 compared to the twelve months ended July 31, 2021, primarily due to
increases in our agribusiness costs.

•Total other income decreased $1.2 million in the twelve months ended July 31,
2022
compared to the twelve months ended July 31, 2021, primarily due to
decreased equity in earnings of investments.


•Income tax benefit decreased $1.5 million in the twelve months ended July 31,
2022 compared to the twelve months ended July 31, 2021, primarily due to the
decrease in pre-tax loss of $5.9 million.


                                       40
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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.

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 July 31, 2022, 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
Note 10 - Long-Term Debt, Note 11 - Leases and Note 15 - Retirement Plans to the
consolidated financial statements in this Quarterly Report on Form 10-Q for
amounts outstanding as of July 31, 2022, 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.

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 nine months ended July 31, 2022, net cash provided by operating
activities was $10.9 million, compared to net cash provided by operating
activities of $16.8 million for the nine months ended July 31, 2021. The
significant components of our cash flows provided by operating activities were
as follows:


•Net income for the nine months ended July 31, 2022 and 2021 was $2.3 million
and $0.8 million, respectively. The components of net income in the nine months
ended July 31, 2022, compared to the net income in the same period in fiscal
year 2021 consist of an increase in operating income of $4.0 million, a decrease
in total other income of $2.2 million and an increase in income tax expense of
$0.3 million.

•Adjustments to reconcile net income to net cash provided by operating
activities:

•Adjustments provided $11.9 million and $8.7 million in the nine months ended
July 31, 2022 and 2021, respectively, primarily due to depreciation and
amortization, stock compensation expense and deferred income taxes.


•Changes in operating assets and liabilities (used) provided $(3.3) million and
$7.3 million of operating cash in the nine months ended July 31, 2022 and 2021,
respectively, primarily due to accounts receivables/other from related parties,
cultural costs, prepaid expenses and other current assets and accrued
liabilities and payables to related parties.

Cash Flows from Investing Activities

For the nine months ended July 31, 2022 and 2021, net cash used in investing
activities was $5.3 million and $8.7 million, respectively.


•Capital expenditures were $7.7 million in the nine months ended July 31, 2022,
comprised of $7.3 million for property, plant and equipment primarily related to
orchard development and $0.4 million for real estate development projects.

•Capital expenditures were $8.3 million in the nine months ended July 31, 2021,
comprised of $8.0 million for property, plant and equipment primarily related to
orchard and vineyard development and $0.3 million for real estate development
projects.





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Cash Flows from Financing Activities

For the nine months ended July 31, 2022 and 2021, net cash used in financing
activities was $4.8 million and $7.8 million, respectively.


•The $4.8 million of cash used in financing activities during the nine months
ended July 31, 2022 was primarily comprised of common and preferred dividends,
in aggregate, of $4.4 million, the exchange of common stock of $1.1 million and
proceeds from equipment financings of $1.0 million.

•The $7.8 million of cash used in financing activities during the nine months
ended July 31, 2021 was primarily comprised of net repayments of long-term debt
in the amount of $2.8 million and common and preferred dividends, in aggregate,
of $4.4 million.


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 10 - Long-Term Debt to the consolidated financial statements included in
this Quarterly Report on Form 10-Q.

In June 2021, we entered into the MLA with the 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 us and the Lender, dated June 19, 2017, and
extends the principal repayment to July 1, 2026.


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 July 31, 2022, our outstanding borrowings under the Farm Credit
West Credit Facility and RELOC were $113.0 million and we had $17.0 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. We expect to be in compliance with these
covenants in fiscal year 2022.

In the first quarter of fiscal years 2022 and 2021, Farm Credit West declared an
annual patronage dividend of $1.6 million and $1.2 million, respectively, which
we received in the second quarter of fiscal years 2022 and 2021, respectively.

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.

Dividends


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
were $0.4 million in the nine months ended July 31, 2022 and 2021, respectively.

Cash dividends declared in the nine months ended July 31, 2022 and 2021 were
$0.23 per common share and such dividends paid were $4.0 million in the nine
months ended July 31, 2022 and 2021.


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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 our
fiscal year 2021 Annual Report on Form 10-K, 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. During the nine months ended
July 31, 2022, our critical accounting policies and estimates have not changed
since the filing of our Annual Report on Form 10-K as of October 31, 2021.
Please refer to that filing for a description of our critical accounting
policies and estimates.

Recent Accounting Pronouncements

See Note 2 – Summary of Significant Accounting Policies of the notes to
consolidated financial statements included in this Quarterly Report on Form 10-Q
for information concerning recent accounting pronouncements.

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