What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-01-14 compared with 2020-01-14 · 576 added, 557 removed, 910 unchanged (55% of the section changed)

2 unchanged sentences

Index to Consolidated Financial Statements

Management’s Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firms 60

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All schedules are omitted for the reason that they are not applicable or the required information is included in the Consolidated Financial Statements or the notes thereto.

Management’s Report on Internal Control over Financial Reporting

Management of Limoneira Company (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in the Exchange Act Rule 13a-15(f).

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management, including the principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of Limoneira Company’s internal control over financial reporting, based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on this evaluation, management concluded that internal control over financial reporting was effective as of October 31, 2019.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting and has issued a report on internal control over financial reporting, which is included herein.

The Company’s management excluded Trapani Fresh which was acquired as a business combination on May 30, 2019, from its assessment and management’s report on internal control over financial reporting at October 31, 2019, as they continue to evaluate their respective internal controls.

Trapani Fresh’s total assets and total revenues represent 9% and 9%, respectively, of its related consolidated financial statement amounts as of and for the year ended October 31, 2019.

This exclusion is in accordance with the general guidance issued by the Staff of the Securities and Exchange Commission that an assessment of a recent business combination may be omitted from management’s report on internal control over financial reporting in the first year of consolidation.

President and Chief Executive Officer

Mark Palamountain

Chief Financial Officer, Treasurer and Corporate Secretary

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Limoneira Company

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Limoneira Company and subsidiaries (the “Company”) as of October 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended October 31, 2019, of the Company and our report dated January 13, 2020 , expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of Accounting Standards Update (“ASU”) No.

2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, and the adoption of ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606).

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Trapani Fresh, which was acquired on May 30, 2019, and whose financial statements constitute 9% of total assets and 9% of revenues, of the consolidated financial statement amounts as of and for the year ended October 31, 2019.

Accordingly, our audit did not include the internal control over financial reporting at Trapani Fresh.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ Deloitte & Touche LLP

Los Angeles, California

January 13, 2020

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Limoneira Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Limoneira Company and subsidiaries (the "Company") as of October 31, 2019, the related consolidated statement of operations, the consolidated statement of comprehensive (loss) income, the consolidated statement of stockholders’ equity and temporary equity, and the consolidated statement of cash flows, for the year ended October 31, 2019, and the related notes (collectively referred to as the "financial statements").

In our opinion, based on our audit and the report of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2019, and the results of its operations and its cash flows for the year ended October 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Limoneira Company and subsidiaries (the "Company") as of October 31, 2020 and October 31, 2019, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and temporary equity, and cash flows, for each of the two years in the period ended October 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, based on our audits and the report of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2020 and October 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We did not audit the financial statements of Limoneira Lewis Community Builders, LLC (“LLCB”), the Company's investment which is accounted for by use of the equity method.

The accompanying financial statements of the Company include its equity investment in LLCB of $42,722,000 as of October 31, 2019, and its equity earnings in LLCB of $4,368,000 for the year ended October 31, 2019.

The accompanying financial statements of the Company include its equity investment in LLCB of $46,908,000 and $42,722,000 as of October 31, 2020 and 2019, respectively, and its equity earnings in LLCB of $1,386,000 and $4,368,000 000 for the years ended October 31, 2020 and 2019, respectively.

The financial statements of LLCB were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for LLCB, is based solely on the report of the other auditors.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 31, 2019, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 13, 2020 , expressed an unqualified opinion on the Company's internal control over financial reporting based on our audit.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 31, 2020, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 14, 2021, expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.

Change in Accounting Principles

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for certain equity investments by recognizing the change in fair value in net income effective November 1, 2018 due to the adoption of Accounting Standards Update (“ASU”) No.

2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers effective November 1, 2018 due to adoption of ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach.

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases effective November 1, 2019 due to adoption of Accounting Standards Update ("ASU") No.

2016-02, Leases .

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

We have served as the Company’s auditor since 2019.

Los Angeles, California

January 14, 2021

We have served as the Company’s auditor since 2019.

Report of Independent Registered Public Accounting Firm

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Limoneira Company (the Company) as of October 31, 2018, and the related consolidated statements of operations, comprehensive income, stockholders' equity and temporary equity, and cash flows for each of the two years in the period ended October 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 31, 2018, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 2018, in conformity with U.S.

We have audited the accompanying consolidated statements of operations, comprehensive (loss) income, stockholders' equity and temporary equity, and cash flows for the year ended October 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended October 31, 2018, in conformity with U.S.

generally accepted accounting principles.

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These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

6 unchanged sentences

Current assets:

Cash $ 501 $ 616

Accounts receivable, net 16,261 15,114

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Prepaid expenses and other current assets 10,688 8,153

Receivables/other from related parties 2,294 2,985

Income taxes receivable 5,911 979

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Investment in Calavo Growers, Inc.

Other intangible assets, net

Goodwill 1,535 1,839

Intangible assets, net 11,309 12,407

Other assets 8,737 9,266

Total assets $ 389,600 $ 399,867

Liabilities and Stockholders' Equity

3 unchanged sentences

Accrued liabilities 7,947 8,261

Payables to related parties 6,273 906

Current portion of long-term debt 3,277 3,023

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Other long-term liabilities 6,568 5,467

Sale-leaseback deferral

Total liabilities 183,030 167,369

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Common Stock – $ 0.01 par value ( 39,000,000 shares authorized:

17,756,180 and 17,647,135 shares issued and outstanding at October 31, 2019 and 2018, respectively)

17,857,707 and 17,756,180 shares issued and 17,606,730 and 17,756,180 shares outstanding at October 31, 2020 and 2019, respectively)

Additional paid-in capital 162,084 160,254

Retained earnings 30,797 53,089

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss ( 7,548 ) ( 7,255 )

Treasury stock, at cost, 250,977 shares at October 31, 2020

Noncontrolling interest 13,741 15,422

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Years Ended October 31,

2020 2019 2018

Net revenues:

Rental operations

Agribusiness $ 159,937 $ 166,549 $ 124,344

Other operations 4,622 4,849 5,048

Total net revenues 164,559 171,398 129,392

Costs and expenses:

Rental operations

Real estate development

Agribusiness 157,281 152,372 98,083

Other operations 4,504 4,439 4,212

Impairment of real estate development assets — — 1,558

Gain on sale of property assets

Loss (gain) on sale and disposal of property assets 502 ( 1,069 ) —

Selling, general and administrative 21,280 21,170 16,053

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Other (expense) income:

Interest expense, net

Equity in earnings of investments

(Loss) gain on sale of stock in Calavo Growers, Inc.

Net unrealized loss on stock in Calavo Growers, Inc.

Interest income 362 207 201

Interest expense ( 2,048 ) ( 2,341 ) ( 1,323 )

Equity in earnings of investments, net 339 3,073 583

(Loss) gain on stock in Calavo Growers, Inc.

( 6,299 ) ( 2,117 ) 4,223

Other income, net 219 129 313

Total other (expense) income ( 7,427 ) ( 1,049 ) 3,997

(Loss) income before income tax benefit (provision)

Income tax benefit (provision)

(Loss) income before income tax benefit ( 26,435 ) ( 6,563 ) 13,483

Income tax benefit 8,494 1,097 6,729

Net (loss) income ( 17,941 ) ( 5,466 ) 20,212

(Income) loss attributable to noncontrolling interest

Loss (income) attributable to noncontrolling interest 1,506 ( 477 ) ( 24 )

Net (loss) income attributable to Limoneira Company ( 16,435 ) ( 5,943 ) 20,188

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Years Ended October 31,

2020 2019 2018

Net (loss) income $ ( 17,941 ) $ ( 5,466 ) $ 20,212

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Minimum pension liability adjustments, net of tax of $( 69 ), $( 252 ) and $ 415

274 ( 607 ) 1,137

Residual state tax effects on sale of equity securities 140 — —

Unrealized holding gains on security available for sale, net of tax of $ 0 , $ 0 and $ 1,956

Reclassification of unrealized gain on security sold, net of tax of $ 0 , $ 0 and $( 1,160 )

— — ( 2,965 )

Unrealized gains from derivative instruments, net of tax of $ 0 , $ 0 and $ 79

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($ in thousands)

Stockholders’ Equity

Temporary Equity

Comprehensive

Noncontrolling

Income (Loss)

Stockholders’ Equity Temporary Equity

Common Stock Additional

Paid-In Retained Accumulated

Comprehensive Treasury Non-controlling Series B

Preferred Series B-2

Shares Amount Capital Earnings Income (Loss) Stock Interest Total Stock Stock

Balance at October 31, 2017 14,405,031 $ 144 $ 94,294 $ 34,692 $ 7,076 $ — $ 587 $ 136,793 $ 1,479 $ 9,331

Dividends - common ($ 0.25 per share)

— — — ( 4,025 ) — — — ( 4,025 ) — —

Dividends - Series B ($ 8.75 per share)

— — — ( 129 ) — — — ( 129 ) — —

Dividends - Series B-2 ($ 40 per share)

— — — ( 372 ) — — ( 372 ) — —

Stock compensation 145,324 1 1,367 — — — — 1,368 — —

Exchange of common stock ( 39,582 ) — ( 656 ) — — — — ( 656 ) — —

Conversion of Series B preferred stock

Acquired noncontrolling interest

Issuance of common stock 3,136,362 31 64,066 — — — — 64,097 — —

Noncontrolling interest — — — — — — ( 37 ) ( 37 ) — —

Net income — — — 20,188 — — 24 20,212 — —

Other comprehensive income, net of tax — — — — 1,889 — — 1,889 — —

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Dividends - common ($ 0.30 per share)

— — — ( 5,331 ) — — — ( 5,331 ) — —

Dividends - Series B ($ 8.75 per share)

— — — ( 129 ) — — — ( 129 ) — —

Dividends - Series B-2 ($ 40 per share)

— — — ( 372 ) — — — ( 372 ) — —

Stock compensation 145,737 2 1,789 — — — — 1,791 — —

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Issuance of common stock — — — — — — — — — —

Noncontrolling interest

Acquired noncontrolling interest — — — — — — 14,410 14,410 — —

Net (loss) income — — — ( 5,943 ) — — 477 ( 5,466 ) — —

Other comprehensive income, net of tax — — — — ( 1,710 ) — ( 39 ) ( 1,749 ) — —

Reclassification of unrealized gain on marketable securities upon adoption of ASU 2016-01 — — — 15,921 ( 15,921 ) — — — — —

Reclassification upon adoption of ASU 2018-02 — — — ( 1,411 ) 1,411 — — — — —

Balance at October 31, 2019 17,756,180 178 160,254 53,089 ( 7,255 ) — 15,422 221,688 1,479 9,331

Dividends - common ($ 0.30 per share)

— — — ( 5,356 ) — — — ( 5,356 ) — —

Dividends - Series B ($ 8.75 per share)

— — — ( 129 ) — — — ( 129 ) — —

Dividends - Series B-2 ($ 40 per share)

— — — ( 372 ) — — — ( 372 ) — —

Stock compensation 112,841 1 2,043 — — — — 2,044 — —

Exchange of common stock ( 11,314 ) — ( 213 ) — — — — ( 213 ) — —

Acquired noncontrolling interest

Noncontrolling interest adjustment — — — — — — ( 145 ) ( 145 ) — —

Treasury shares ( 250,977 ) — — — — ( 3,493 ) — ( 3,493 ) — —

Net loss — — — ( 16,435 ) — — ( 1,506 ) ( 17,941 ) — —

Other comprehensive income, net of tax — — — — ( 293 ) — ( 30 ) ( 323 ) — —

Reclassification of unrealized gain on marketable securities upon adoption of ASU 2016-01

Reclassification upon adoption of ASU 2018-02

Balance at October 31, 2020 17,606,730 $ 179 $ 162,084 $ 30,797 $ ( 7,548 ) $ ( 3,493 ) $ 13,741 $ 195,760 $ 1,479 $ 9,331

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Years Ended October 31,

2020 2019 2018

Operating activities

Net (loss) income $ ( 17,941 ) $ ( 5,466 ) $ 20,212

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization 10,097 8,633 7,275

Impairment of real estate development assets — — 1,558

(Gain) loss on disposals of assets

Gain on sales of real estate development assets

Loss (gain) on sale and disposals of property assets 502 ( 1,069 ) 153

Stock compensation expense 2,044 1,791 1,368

Non-cash lease expense 470 — —

Equity in earnings of investments ( 339 ) ( 3,073 ) ( 583 )

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Deferred income taxes ( 2,133 ) ( 773 ) ( 7,307 )

Amortization of deferred financing costs

Accrued interest on note receivable

Loss (gain) on sale of stock in Calavo Growers, Inc.

Unrealized loss on stock in Calavo Growers, Inc.

Loss (gain) on stock in Calavo Growers, Inc.

6,299 2,117 ( 4,223 )

Other, net 671 ( 393 ) ( 64 )

Changes in operating assets and liabilities, net of business combinations:

Account receivable, net

Account receivable and receivables/other from related parties ( 309 ) ( 4,012 ) ( 3,235 )

Cultural costs 359 1,447 ( 746 )

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Income taxes receivable ( 4,932 ) ( 601 ) 192

Other assets 411 ( 7 ) ( 134 )

Accounts payable and growers payable ( 5,545 ) 3,392 707

Accrued liabilities

Accrued liabilities and payables to related parties ( 685 ) 1,459 2,601

Other long-term liabilities ( 242 ) 117 ( 2 )

Net cash provided by operating activities

Net cash (used in) provided by operating activities ( 11,317 ) 1,365 18,397

Investing activities

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Net proceeds from sale of stock in Calavo Growers, Inc.

Collections of installments on note receivable

11,048 4,785 4,721

Loan to Limoneira Lewis Community Builders, LLC ( 1,800 ) — —

Collections on loan and note receivable 1,800 150 200

Equity investment contributions ( 2,800 ) ( 4,000 ) ( 3,500 )

1 unchanged sentence

Investments in mutual water companies and water rights ( 64 ) ( 472 ) ( 343 )

Net cash used in investing activities

Net cash provided by (used in) investing activities $ 3,846 $ ( 23,654 ) $ ( 50,807 )

LIMONEIRA COMPANY

2 unchanged sentences

Years Ended October 31,

2020 2019 2018

Financing activities

4 unchanged sentences

Exchange of common stock ( 213 ) ( 605 ) ( 656 )

Purchase of treasury stock ( 3,493 ) — —

Issuance of common stock — — 64,097

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Unrealized holding gain on Calavo investment $ — $ — $ ( 6,765 )

(Decrease) increase in real estate development and sale-leaseback deferral

Decrease in real estate development and sale-leaseback deferral $ — $ ( 58,330 ) $ 27,934

Increase in equity in investments and other long-term liabilities $ — $ — $ 1,080

2 unchanged sentences

Capital expenditures accrued but not paid at year-end $ 4,269 $ 1,333 $ 399

Accrued interest on note receivable

Conversion of preferred stock to common stock

Non-cash issuance of notes payable $ — $ — $ 1,435

1 unchanged sentence

As a result, the Company reduced its sale lease-back deferral and corresponding real estate development by $ 58,330,000 and reclassified $ 33,353,000 of the Company’s basis in the Joint Venture from real estate development to equity in investments as further described in Note 7 - Real Estate Development and Note 8 - Equity in Investments of the notes to consolidated financial statements included in this Annual Report on Form 10-K.

On July 24, 2018, the Company entered into an agreement to acquire assets from Oxnard Lemon Associates, Ltd.

for a purchase price of $25,000,000 in cash as further described in Note 3 – Acquisitions of the notes to consolidated financial statements included in this Annual Report on Form 10-K.

On July 18, 2018, the Company acquired Agricola San Pablo S.A.

(“San Pablo”) ranch for a total purchase price of $13,111,000 in cash as further described in Note 3 – Acquisitions of the notes to consolidated financial statements included in this Annual Report on Form 10-K.

In February 2013, the Company entered into an option agreement for the purchase of a 7 -acre parcel adjacent to its East Area II real estate development project.

In February 2018, the Company exercised its option and purchased the property for $ 3,145,000 , by making a cash payment of $ 1,444,000 and issuing a note payable for $ 1,435,000 .

In 2019 and 2018, the holder of the note receivable from a 2004 sale of property completed the drilling of a water well at the Company’s La Campana Ranch.

The fair value of the well drilling services were $89,000 and $79,000 , respectively, and the Company recorded a non-cash reduction of the note receivable.

During 2017, certain shares of Series B convertible preferred stock were converted into common stock as described in Note 21 – Series B and Series B-2 Preferred Stock of the notes to consolidated financial statements included in this Annual Report.

In October 2017, the Company entered an agreement to sell its Centennial Square (“Centennial”) real estate development property for $ 3,250,000 .

This transaction closed in December 2017 with the Company receiving net proceeds of $ 179,000 and received a $ 3,000,000 promissory note secured by the property for the balance of the purchase price.

On June 20, 2017, the Company entered into a Master Loan Agreement with Farm Credit West, FLCA and repaid $68,572,000 of outstanding debt under the Rabobank revolving credit facility as further described in Note 12 – Long-Term Debt of the notes to consolidated financial statements included in this Annual Report on Form 10-K.

On February 24, 2017, the Company acquired 90% of the outstanding stock of Fruticola Pan de Azucar S.A.

("PDA") for a purchase price of $5,706,000 in cash as further described in Note 3 – Acquisitions of the notes to consolidated financial statements included in this Annual Report on Form 10K.

See Notes to Consolidated Financial Statements.

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(“Sunkist”), an agricultural marketing cooperative, and sells its oranges, specialty citrus and other crops to Sunkist-licensed and other third-party packinghouses.

The Company sells all of its avocado production to Calavo Growers, Inc.

The Company sells the majority of its avocado production to Calavo Growers, Inc.

(“Calavo”), a packing and marketing company listed on the NASDAQ Global Select Market under the symbol CVGW.

Calavo’s customers include many of the largest retail and food service companies in the United States and Canada.

The Company’s avocados are packed by Calavo, which are then sold and distributed under Calavo brands to its customers.

Calavo packs the Company's avocados, which are then sold and distributed under Calavo brands to its customers.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and investments in which a controlling interest is held by the Company.

The consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and investments in which the Company holds a controlling interest.

The consolidated financial statements represent the consolidated balance sheets, statements of operations, statements of comprehensive income, statements of stockholders’ equity and temporary equity and statements of cash flows of Limoneira Company and consolidated subsidiaries.

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Concentrations and Geographic Information

The Company sells all of its avocado production to Calavo.

The Company sells the majority of its avocado production to Calavo.

Sales of avocados to Calavo were $ 8,806,000 , $ 3,080,000 and $ 6,576,000 in fiscal years 2020, 2019 and 2018, respectively.

The Company sells the majority of its oranges and specialty citrus to a third-party packinghouse.

Concentrations of credit risk with respect to revenues and trade receivable are limited due to a large, diverse customer base.

One individual customer represented 10% of revenue for the year ended October 31, 2020.

One individual customer represented more than 10% of accounts receivable, net as of October 31, 2020, respectively.

Lemons procured from third-party growers were approximately 60 %, 60 % and 45 % of the Company's lemon supply in fiscal years 2020, 2019 and 2018, respectively.

6 unchanged sentences

Concentrations and Geographic Information (continued)

During fiscal year 2019 , the Company had approximately $3.2 million of lemon and orange sales in Chile by PDA and San Pablo and $14.7 million of lemon sales in Argentina by Trapani Fresh.

During fiscal year 2018 , the Company had approximately $2.8 million of lemon and orange sales in Chile by PDA and San Pablo.

During fiscal year 2017 , the Company had approximately $1.1 million of lemon and orange sales in Chile by PDA.

During fiscal years 2020, 2019 and 2018, the Company had approximately $ 3,521,000 , $ 3,204,000 and $ 2,800,000 , respectively, of total sales in Chile by Fruticola Pan de Azucar S.A.

(“PDA”) and Agricola San Pablo SpA.

("San Pablo").

During fiscal years 2020 and 2019, the Company had approximately $ 14,150,000 and $ 14,651,000 , respectively, of total sales in Argentina by Trapani Fresh.

The majority of our avocados, oranges and specialty citrus and other crops are sold to packinghouses and processors located in the United States.

Most of its long-lived assets are located within the United States.

Long-lived assets, net of accumulated depreciation, located in Chile and Argentina were $15.6 million and $18.7 million , respectively, as of October 31, 2019 and $15.7 million in Chile as of October 31, 2018.

Most of our long-lived assets are located within the United States.

Long-lived assets, net of accumulated depreciation, located in Chile were $ 15,261,000 and $ 15,600,000 as of October 31, 2020 and 2019, respectively, and located in Argentina were $ 18,576,000 and $ 18,700,000 as of October 31, 2020 and 2019, respectively.

Cultural Costs

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Buildings and building improvements 10 – 50

Equipment 5 – 20

Orchards and vineyards 20 – 40

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Equity Securities

Effective November 1, 2019 upon the adoption of ASU 2016-01, the Company’s equity securities, previously referred to as available-for-sale marketable securities, are stated at fair value with unrealized gains (losses) reported in net income.

Previously the Company’s investments in marketable securities were stated at fair value with unrealized gains (losses), net of tax, reported as a component of accumulated other comprehensive income (loss) in the Company’s consolidated statement of comprehensive income.

At October 31, 2019 and 2018 , equity securities are comprised of the Company’s investment in Calavo.

The Company’s equity securities, are stated at fair value with unrealized gains (losses) reported in net income.

The Company has no equity securities as of October 31, 2020.

At October 31, 2019, equity securities were comprised of the Company’s investment in Calavo.

Long-Lived and Intangible Assets

Intangible assets consist primarily of customer relationships, trade names and trademarks and a non-competition agreement.

The Company’s definite-life intangible assets are being amortized on a straight-line basis over their estimated lives ranging from eight to ten years .

Acquired water and mineral rights are indefinite-life assets not subject to amortization and are included in Other Assets in the Consolidated Balance Sheets.

The Company’s definite-life intangible assets are being amortized on a straight-line basis over their estimated lives ranging from eight to nine years .

Acquired water and mineral rights are indefinite-life assets not subject to amortization.

Assets held for sale are carried at the lower of cost or fair value less estimated cost to sell.

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Goodwill impairment testing involves significant judgment and estimates.

The annual assessment of goodwill impairment was performed as of July 31, 2019 with no impairment noted.

The annual assessment of goodwill impairment was performed as of July 31, 2020 with no impairment recorded.

Fair Values of Financial Instruments

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The amount by which the fair value of consideration transferred as the purchase price exceeds the net fair value of assets acquired and liabilities assumed is recorded as goodwill.

Acquisitions that do not meet the definition of a business under the ASC are accounted for as asset acquisitions.

Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions.

Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis.

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Comprehensive (Loss) Income

Comprehensive (loss) income represents all changes in a company’s net assets, except changes resulting from transactions with shareholders, and is reported as a component of the Company’s stockholders’ equity.

As of October 31, 2019, accumulated other comprehensive loss consists of foreign currency translation items of $2,362,000 , pension liability items of $4,753,000 and security available for sale items of $140,000 .

Comprehensive (loss) income represents all changes in a company’s net assets, except changes resulting from transactions with shareholders.

Other comprehensive income or loss primarily includes foreign currency translation items, defined benefit pension items and unrealized gains or losses on available for sale securities.

Accumulated other comprehensive (loss) income is reported as a component of the Company's stockholders' equity.

The following table summarizes the changes in other comprehensive (loss) income by component (in thousands):

2020 2019 2018

Pre-tax Amount Tax (Expense) Benefit Net Amount Pre-tax Amount Tax (Expense) Benefit Net Amount Pre-tax Amount Tax (Expense) Benefit Net Amount

Foreign currency translation adjustments $ ( 707 ) $ — $ ( 707 ) $ ( 1,103 ) $ — $ ( 1,103 ) $ ( 1,255 ) $ — $ ( 1,255 )

Minimum pension liability adjustments:

Other comprehensive (loss) gain before reclassifications 205 69 274 ( 859 ) 252 ( 607 ) 1,552 ( 415 ) 1,137

Available-for-sale securities:

Other comprehensive (loss) gain before reclassifications — — — — — — 6,765 ( 1,956 ) 4,809

Amounts reclassified to earnings included in "Selling, general and administrative" — 140 140 — — — ( 4,125 ) 1,160 ( 2,965 )

Derivative instruments:

Other comprehensive gain before reclassifications — — — — — — 242 ( 79 ) 163

Other comprehensive (loss) income $ ( 502 ) $ 209 $ ( 293 ) $ ( 1,962 ) $ 252 $ ( 1,710 ) $ 3,179 $ ( 1,290 ) $ 1,889

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Summary of Significant Accounting Policies (continued)

Accumulated Other Comprehensive (Loss) Income

The following table summarizes the changes in accumulated other comprehensive (loss) income by component (in thousands):

Foreign Currency Translation Loss Defined Benefit Pension Plan Available-for-Sale Securities Other Accumulated Other Comprehensive (Loss) Income

Balance as of October 31, 2017 $ ( 2 ) $ ( 4,375 ) $ 11,591 $ ( 138 ) $ 7,076

Other comprehensive (loss) income ( 1,255 ) 1,137 1,844 163 1,889

Balance as of October 31, 2018 ( 1,257 ) ( 3,238 ) 13,435 25 8,965

Adoption of ASU 2016-01 — — ( 15,921 ) — ( 15,921 )

Adoption of ASU 2018-02 ( 2 ) ( 908 ) 2,346 ( 25 ) 1,411

Balance as of November 1, 2018 ( 1,259 ) ( 4,146 ) ( 140 ) — ( 5,545 )

Other comprehensive (loss) income ( 1,103 ) ( 607 ) — — ( 1,710 )

Balance as of October 31, 2019 ( 2,362 ) ( 4,753 ) ( 140 ) — ( 7,255 )

Other comprehensive (loss) income ( 707 ) 274 140 — ( 293 )

Balance as of October 31, 2020 $ ( 3,069 ) $ ( 4,479 ) $ — $ — $ ( 7,548 )

Foreign Currency Translation

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dollars at exchange rates in effect at the balance sheet date and their income statements are translated at average exchange rates during the reporting period.

The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income.

Trapani Fresh Consorcio de Cooperacion ("Trapani Fresh") functional currency is the U.S.

The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive (loss) income.

Revenue Recognition

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• Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company determined the appropriate method by which it recognizes revenue by analyzing the nature of the products or services being provided as well as the terms and conditions of contracts or arrangements entered into with its customers.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

A contract's transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract and each performance obligation is valued based on its estimated relative standalone selling price.

LIMONEIRA COMPANY

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Revenue Recognition (continued)

The Company recognizes the majority of its revenue at a point in time when it satisfies a performance obligation and transfers control of the product to the respective customer.

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The Company’s avocados, oranges, specialty citrus and other specialty crops are packed and sold by Calavo and other third-party packinghouses.

The Company delivers all of its avocado production from its orchards to Calavo.

The Company delivers the majority of its avocado production from its orchards to Calavo.

These avocados are then packed by Calavo at its packinghouse and sold and distributed under Calavo brands to its customers primarily in the United States and Canada.

The Company’s arrangements with other third-party packinghouses related to its oranges, specialty citrus and other specialty crops are similar to its arrangement with Calavo.

The Company’s arrangements with other third-party packinghouses related to the remaining avocados and its oranges, specialty citrus and other specialty crops are similar to its arrangement with Calavo.

The Company’s arrangements with its third-party packinghouses are such that the Company is the producer and supplier of the product and the third-party packinghouses are the Company’s customers.

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(a) the related fruits have been delivered to and accepted by Calavo and other third-party packinghouses (i.e., Calavo and other third-

party packinghouses obtain control) and (b) sales price information has been provided by Calavo and other third-party packinghouses (based on the marketplace activity for the related fruit) to estimate with reasonable certainty the final selling price for the fruit upon the closing of the pools.

In such instances the Company has the present right to payment and Calavo and other third-party packinghouses have the present right to direct the use of, and obtain substantially all of the remaining benefits from, the delivered fruit.

The Company does not expect that there is a high likelihood that a significant reversal in the amount of cumulative revenue recognized in the early periods of the pool will occur once the final pool prices have been reported by the

LIMONEIRA COMPANY

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Revenue Recognition (continued)

packinghouses.

Historically, the revenue that is recorded based on the sales price information provided to the Company by Calavo and other third-party packinghouses at the time of delivery, have not materially differed from the actual amounts that are paid after the monthly or harvest period pools are closed.

The Company has entered into brokerage arrangements with third-party international packinghouses.

In certain of these arrangements, the Company has the exclusive ability to direct the use of and obtains substantially all of the remaining benefits from the fruit, and therefore is acting as a principal.

As such, the Company records the related revenue and costs of the fruit gross in the consolidated statement of operations.

Revenue from crop insurance proceeds is recorded when the amount can be reasonably determined and upon establishment of the present right to payment.

The Company recorded agribusiness revenues from crop insurance proceeds of $2,311,000 , $54,000 and $74,000 in fiscal years 2019 , 2018 and 2017 , respectively.

The Company recorded agribusiness revenues from crop insurance proceeds of zero , $ 2,311,000 and $ 54,000 in fiscal years 2020, 2019 and 2018, respectively.

Rental Operations Revenue - Minimum rental revenues are generally recognized on a straight-line basis over the respective initial lease term.

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The Company's rental arrangements generally require payment on a monthly or quarterly basis.

Real Estate Development Revenue - The Company recognizes revenue on real estate development projects with customers at a point in time (i.e., the closing) when the Company satisfies the single performance obligation and transfers control of such real estate to a buyer.

The transaction price, which is the amount of consideration the Company receives upon delivery of the completed real estate to the buyer, is allocated to this single obligation and is received at closing.

Real estate development projects with non-customers are accounted for in accordance with Accounting Standards Code (“ASC”) 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.

Incidental operations may occur during the holding or development period of real estate development projects to reduce holding or development costs.

Incremental revenue from incidental operations in excess of incremental costs from incidental operations is accounted for as a reduction of development costs.

Incremental costs from incidental operations in excess of incremental revenue from incidental operations are charged to operations.

Advertising Expense

Advertising costs are expensed as incurred.

Advertising costs were not material in all years presented.

The Company records rent expense for its operating leases on a straight-line basis from the lease commencement date as defined in the lease agreement until the end of the base lease term.

Advertising costs were $ 239,000 in fiscal year 2020 and were not material in fiscal years 2019 and 2018.

Accounting for Operating Leases as a Lessee - In its ordinary course of business, the Company enters into leases as a lessee generally for agricultural land and packinghouse equipment.

The Company determines if an arrangement is a lease or contains a lease at inception.

Operating leases are included in other assets, accrued liabilities and other long-term liabilities on its consolidated balance sheets.

Operating lease right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease, measured on a discounted basis.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

As none of the Company’s leases provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet as the Company has elected to recognize lease expense for these leases on a straight-line basis over the lease term.

The Company has material leases with related parties which are further described in Note 15 - Related-Party Transactions.

Certain of the Company’s agricultural land agreements contain variable costs based on a percentage of the operating results of the leased property.

Such variable lease costs are expensed as incurred.

These land agreements also contain costs for non-lease components, such as water usage, which the Company accounts for separately from the lease components.

For all other agreements, the Company generally combines lease and non-lease components in calculating the ROU assets and lease liabilities.

See Note 13 - Leases for additional information.

Accounting for Leases as a Lessor - Leases in which the Company acts as the lessor include land, residential and commercial units and are all classified as operating leases.

Certain of the Company’s contracts contain variable income based on a percentage of the operating results of the leased asset.

Certain of the Company’s contracts contain non-lease components such as water, utilities and common area services.

The Company has elected to not separate lease and non-lease components for its lessor arrangements and the combined component is accounted for entirely under ASC 842, Leases .

The underlying asset in an operating lease arrangement is carried at depreciated cost within property, plant, and equipment, net on the consolidated balance sheets.

Depreciation is calculated using the straight-line method over the useful life of the underlying asset.

The Company recognizes operating lease revenue on a straight-line basis over the lease term.

Basic and Diluted Net (Loss) Income per Share

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The Series B and Series B-2 convertible preferred shares were anti-dilutive for fiscal years ended October 31, 2020 and 2019 and dilutive for fiscal year ended October 31, 2018.

Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating shares are included in computing earnings per share using the treasury stock method.

The Company’s unvested, restricted stock awards qualify as participating shares.

LIMONEIRA COMPANY

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Summary of Significant Accounting Policies (continued)

Basic and Diluted Net (Loss) Income per Share (continued)

Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating shares are included in computing earnings per share using the treasury stock method.

The Company’s unvested, restricted stock awards qualify as participating shares.

Reclassifications and Adjustments

Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the October 31, 2020 presentation.

The Company reclassified goodwill and other intangible assets of $1,431,000 and $6,225,000 , respectively, as of October 31, 2018, from other assets to goodwill and other intangible assets.

The Company reclassified receivables/other from related parties and payables to related parties of $ 2,985,000 and $ 906,000 , respectively, as of October 31, 2019, from accounts receivable, net, and accrued liabilities, respectively.

The Company reclassified certain components within cash provided by operating activities within the statements of cash flows.

Defined Benefit Retirement Plan

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Recent Accounting Pronouncements

FASB ASU 2016-01, Financial Instruments Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities

The amendments in ASU 2016-01, among other things, require equity securities (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.

Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e., securities or loans and receivables).

Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost.

ASU 2016-01 is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

The Company’s adoption of this ASU on November 1, 2018 resulted in a cumulative-effect adjustment to the statement of financial position, with the Company reclassifying unrealized holding gains of $15,921,000 , net of taxes, in Calavo common stock to retained earnings from accumulated other comprehensive income ("AOCI") at the date of adoption.

In addition, the change in the fair value of Calavo common stock has been disclosed as a separate line item in the statement of operations subsequent to the adoption of ASU 2016-01.

FASB ASU 2016-02, Leases (Topic 842) and related ASUs, including ASU 2018-11, Leases (Topic 842):

Targeted Improvements

Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;

A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged.

Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities.

Lessees will no longer be provided with a source of off-balance sheet financing.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified

In February 2016, the FASB issued ASU 2016-02, which requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.

ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions.

Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In July 2018, the FASB issued ASU 2018-11, which, among other things, provides administrative relief by allowing entities to implement the lease standard on a modified retrospective basis (the "Optional Transition Method").

Effectively, the Optional Transition Method permits companies to adopt the lease standard through a cumulative effect adjustment to their opening balance sheet on the date of adoption and report under the New Lease Standard on a post-adoption basis.

The Company adopted ASU 2016-02 effective November 1, 2019 using the Optional Transition Method.

The Company elected the package of practical expedients permitted under the transition guidance, which allows the Company to carry forward its historical lease classification, its assessment of whether a contract is or contains a lease, and its initial direct costs for any leases that existed prior to adoption of the New Lease Standard.

The Company elected the hindsight practical expedient, which permits the use of hindsight when determining lease term and impairment of ROU assets.

The Company did not elect to combine lease and non-lease components for land leases but elected to combine lease and non-lease components for all other asset classes.

The Company also elected to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The Company updated its accounting policies, processes and internal controls in order to meet the New Lease Standard's reporting and disclosure requirements.

The adoption of ASU 2016-02 had a material impact on the Company's consolidated balance sheets, but did not have a material impact on its consolidated statements of operations or its consolidated statements of cash flows.

Upon adoption as of November 1, 2019, the Company recorded ROU assets of $ 2,400,000 and lease liabilities of $ 2,500,000 for operating leases in which the Company is a lessee.

The adoption also included an immaterial reclassification of accrued rent liabilities against the ROU asset

LIMONEIRA COMPANY

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Recent Accounting Pronouncements (continued)

retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.

The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented.

The ASU will be effective for the Company beginning in the first quarter of its fiscal year ending October 31, 2020.

The Company is evaluating the effect these ASU's may have on its consolidated financial statements, however it expects to apply the practical expedients provided in the ASUs.

The Company expects that most of its operating lease commitments will be recognized as lease liabilities and right-of-use assets upon adoption of this guidance.

The Company’s leases primarily include agricultural land leases and equipment leases.

The Company will adopt the guidance as of November 1, 2019, and prior periods will not be adjusted.

The Company continues to implement changes to its systems, processes and controls in conjunction with its review of existing lease agreements.

The Company expects the adoption of this guidance will result in an increase in assets and liabilities in the range of $2.0 million to $3.0 million on its opening balance sheet as a result of recognizing new right-of-use assets and lease liabilities.

The Company does not expect the adoption of this guidance to have a material impact to its consolidated statements of operations or on its total cash flows from operating, investing or financing activities.

The ultimate impact of adopting this guidance will depend on the Company's lease portfolio and other factors as of the transition date.

As of November 1, 2019, there were no material finance leases for which the Company was a lessee.

The adoption of ASU 2016-02 did not change the Company’s accounting for its operating leases in which it acts as the lessor.

See Note 13 - Leases for additional information.

FASB ASU 2016-13, Financial Instruments -Credit Losses (Topic 326):

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ASU 2016-13 is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early application is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The Company is evaluating the effect this ASU may have on its consolidated financial statements.

2017-04 -Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment

This amendment eliminates Step 2 from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

ASU 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted.

The Company early adopted the standard as of May 1, 2019 and followed this guidance during its annual impairment testing performed during the third quarter.

The adoption did not have an impact on its financial position, results of operations, or cash flows.

FASB ASU 2017-07, Compensation - Retirement Benefits (Topic 715):

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

The amendment requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period.

The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.

If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described.

If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed.

The amendment is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods.

The Company’s adoption of this ASU during the first quarter of fiscal year 2019 had no material impact on its consolidated financial statements.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

FASB ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

This amendment provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (the "2017 Act") (or portion thereof) is recorded.

The amendment is effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Early adoption is permitted.

Organizations should apply the proposed amendment either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S.

federal corporate income tax rate in the 2017 Act is recognized.

The Company early adopted this ASU on November 1, 2018, and as a result recorded a cumulative-effect reclassification in the statement of financial position to retained earnings from AOCI at the date of adoption of $1,411,000 related to the investment in Calavo and pension liability.

The Company will adopt this ASU effective November 1, 2020 and the adoption is not expected to have a material impact on its consolidated financial statements.

FASB ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

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For public business entities, the amendments are effective for fiscal years ending after December 15, 2020.

The Company early adopted as of October 31, 2020 and there was no material impact on its consolidated financial statements other than the change in disclosures based on the new requirements.

FASB ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

This amendment removes specific exceptions to the general principles in Topic 740 in GAAP.

It eliminates the need for an organization to analyze whether certain exceptions apply in a given period.

The amendment also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP under certain situations.

ASU 2019-12 is effective for public business entities, for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

An entity that elects early adoption in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Additionally, an entity that elects early adoption should adopt all the amendments in the same period.

The Company early adopted this ASU as of November 1, 2019 and the adoption did not have a material impact on its consolidated financial statements.

FASB ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

This amendment simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted for fiscal years beginning after December 15, 2020.

The Company is evaluating the effect this ASU may have on its consolidated financial statements.

SEC Amendments to Certain Disclosure Requirements

In August 2018, the SEC adopted amendments to certain disclosure requirements for a number of SEC rules, including Rule 3-04 of Regulation S-X.

Rule 3-04 requires that a public registrant’s Form 10-Q include a reconciliation of changes in stockholders’ equity for each period for which a statement of comprehensive income is required to be filed.

These amendments are effective for interim periods beginning after November 5, 2018.

The Company adopted these amendments beginning in the first quarter of fiscal year 2019 and included a separate statement of stockholders’ equity and temporary equity in its Quarterly Reports on Form 10-Q.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

SEC Final Rule Release No.

33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses

On May 20, 2020, the SEC issued a final rule that amends the financial statement requirements for acquisitions and dispositions of businesses, including real estate operations, and related pro forma financial information.

As noted in the final rule, the amendments “are intended to improve for investors the financial information about acquired or disposed businesses, facilitate more timely access to capital, and reduce the complexity and costs to prepare the disclosure.” Among other changes, the final rule modifies the significance tests and improves the disclosure requirements for (1) acquired or to be acquired businesses, (2) real estate operations, and (3) pro forma financial information.

The final rule is applicable for a registrant’s fiscal year beginning after December 31, 2020 with early application permitted.

The Company early adopted the final rule effective July 31, 2020 and the adoption did not have a material impact on its consolidated financial statements.

Agriculture Property Acquisition

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Buildings and equipment 207

Orchards 2,058

Water rights 1,153

Total assets acquired $ 13,111

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquisitions (continued)

Agriculture Property Acquisition (continued)

The unaudited, pro forma consolidated statement of operations as if San Pablo had been included in the consolidated results of the Company for the year ended October 31, 2018 would have resulted in revenues of $ 130,262,000 and net income of $ 18,785,000 .

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Trapani Fresh controls the trust and grows, packs, markets and sells fresh citrus.

Total consideration paid for the Company’s interest in Trapani Fresh was $15,000,000 of which $7,500,000 was paid to FGF on May 30, 2019.

The remaining $7,500,000 was advanced to FGF, $4,000,000 in February 2019 and $3,500,000 in May 2019, as prepayments for the 25% interest in Santa Clara retained by FGF.

Transaction costs of approximately $654,000 were included in selling, general and administrative expense.

The Company has consolidated Trapani Fresh and has accounted for the acquisition of Trapani Fresh as a business combination, resulting in FGF’s 49% interest in Trapani Fresh being accounted for as a noncontrolling interest.

Below is a summary of the preliminary fair value of the net assets acquired on the acquisition date based on a third-party valuation which was updated during the fourth quarter of fiscal year 2019 due to changes in the enacted tax rates in Argentina which increased the customer relationships, trademarks and non-competition agreement and decreased goodwill (in thousands):

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquisitions (continued)

Business Combinations (continued)

Trapani Fresh (continued)

Total consideration paid for the Company’s interest in Trapani Fresh was $ 15,000,000 and transaction costs of approximately $ 654,000 were included in selling, general and administrative expense during fiscal year 2019.

The Company consolidated Trapani Fresh and accounted for the acquisition of Trapani Fresh as a business combination, resulting in FGF’s 49 % interest in Trapani Fresh being accounted for as a noncontrolling interest.

In February 2020, FGF agreed to a decrease in the purchase consideration of $ 152,000 to reflect profits that Limoneira Argentina would have received had the transaction been consummated at the beginning of the 2019 lemon export season.

The Company recorded a receivable from FGF, a decrease in noncontrolling interest and a decrease in goodwill.

Below is a summary of the fair value of the net assets acquired on the acquisition date based on a third-party valuation which was updated during the second quarter of fiscal year 2020 (in thousands):

Cultural costs $ 3,270

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Buildings and building improvements 870

Orchards 8,410

Customer relationships, trademarks and non-competition agreement ( 10 year useful life)

2 unchanged sentences

Net cash paid $ 14,848

Preliminary goodwill of $420,000 relates to synergies of the operations, has been allocated to the fresh lemons segment and is currently not expected to be deductible for tax purposes.

Revenue of $14,651,000 and net income of $999,000 of Trapani Fresh are included in the Company’s consolidated statement of operations from the acquisition date to the period ended October 31, 2019.

Goodwill of $ 123,000 relates to synergies of the operations, was allocated to the fresh lemons segment and is not deductible for tax purposes.

Revenue of $ 14,651,000 and net income of $ 999,000 of Trapani Fresh were included in the Company’s consolidated statement of operations from the acquisition date to the period ended October 31, 2019.

The unaudited, pro forma consolidated statement of operations as if Trapani Fresh had been included in the consolidated results of the Company for the years ended October 31, 2019 and 2018 would have resulted in revenues of $ 177,625,000 and $ 153,033,000 , respectively, and net (loss) income of $( 6,092,000 ) and $ 21,942,055 , respectively.

5 unchanged sentences

Transaction costs of $ 142,000 were included in selling, general and administrative expense.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquisitions (continued)

Business Combinations (continued)

Below is a summary of the fair value of the net assets acquired on the acquisition date based on a third-party valuation (in thousands):

3 unchanged sentences

Total assets acquired $ 25,000

The unaudited, pro forma consolidated statement of operations as if Oxnard Lemon had been included in the consolidated results of the Company for the year ended October 31, 2018 would have resulted in revenues of $142,253,000 and net income of $19,728,000 .

On February 24, 2017 (the “Acquisition Date”), the Company completed the acquisition of 90% of the outstanding stock of PDA, a privately-owned Chilean corporation, for $5,800,000 in cash (the “Acquisition”).

PDA also had approximately $1,700,000 in long-term debt on the Acquisition Date, which was assumed by the Company in the Acquisition.

A holdback of 10% of the purchase proceeds to be paid to the seller was withheld for a six -month period to allow for potential contingencies as defined in the purchase agreement.

PDA is a 200 -acre lemon and orange orchard located near La Serena, Chile.

PDA’s total assets of $9,451,000 on the Acquisition Date included a 13% equity interest in Rosales S.A.

(“Rosales”) in which the Company owns a 35% equity investment.

After the Acquisition, the Company owns 47% of Rosales and PDA’s 10% stockholder owns the remaining 53% of Rosales.

Rosales packs and sells all of PDA’s citrus production.

PDA had approximately $450,000 of net income on approximately $1,900,000 in sales for the year ended December 31, 2016.

Transactions costs incurred in connection with the Acquisition in 2017 were approximately $57,000 , which are included in selling, general and administrative expense.

In August 2017, a third-party valuation of the fair value of the net assets was finalized, which resulted in a $193,000 increase in the investment in Rosales with a corresponding decrease in goodwill and increase in deferred income taxes.

Additionally, a $94,000 reduction in the purchase price was agreed upon per the terms of the purchase agreement with corresponding decreases in goodwill and noncontrolling interest.

The Company received the $94,000 in August 2017.

Below is a summary of the fair value of the net assets acquired on the Acquisition Date based on the third-party valuation, which is considered a Level 3 fair value measurement under FASB ASC 820, Fair Value Measurements and Disclosures (in thousands):

Cultural costs

Other current assets

Land and land improvements

Buildings and equipment

Investment in Rosales

Deposit for land purchase

Total assets acquired

Current liabilities

Current and long-term debt

Deferred income taxes

Noncontrolling interest

Net cash paid

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquisitions (continued)

Business Combinations (continued)

Oxnard Lemon (continued)

Fair Value Measurements

1 unchanged sentence

A three-tiered hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

The following table sets forth the Company’s financial assets and liabilities as of October 31, 2019 and 2018 , which are measured on a reoccurring basis during the period, segregated by level within the fair value hierarchy (in thousands):

Assets at fair value:

Equity securities

The following table sets forth the Company’s financial assets and liabilities as of October 31, 2019, which were measured on a recurring basis during the period, segregated by level within the fair value hierarchy (in thousands):

2019 Level 1 Level 2 Level 3 Total

Assets at fair value:

1 unchanged sentence

Equity securities consist of marketable securities in Calavo common stock.

At October 31, 2019 and 2018 , the Company owned 200,000 and 250,000 shares, respectively, representing approximately 1.1% and 1.4% of Calavo’s outstanding common stock, respectively.

These securities are measured at fair value by quoted market prices and changes in fair value are included in the statement of operations subsequent to the adoption of ASU 2016-01 .

Calavo’s stock price at October 31, 2019 and 2018 was $86.73 and $97.00 per share, respectively.

Prior to the adoption of ASU 2016-01, these equity securities were classified as available-for-sale securities and changes in fair value were recorded in AOCI net of tax.

At October 31, 2019, the Company owned 200,000 shares representing approximately 1.1 % of Calavo’s outstanding common stock at a stock price of $ 86.73 per share.

These securities were measured at fair value by quoted market prices and changes in fair value are included in the statement of operations.

In fiscal year 2020, the Company sold all 200,000 shares of Calavo common stock for a total of $ 11,048,000 , recognizing a loss of $ 6,299,000 .

In fiscal year 2019, the Company sold 50,000 shares of Calavo common stock for a total of $ 4,785,000 recognizing a loss of $ 2,117,000 .

In fiscal year 2018, the Company sold 50,000 shares for a total of $ 4,721,000 , recognizing a gain of $ 4,223,000 .

These (losses) gains are included in other (expense) income in the consolidated statement of operations.

With the adoption of ASU 2016-01 on November 1, 2018, changes in the fair value of the equity securities result in gains or losses recognized in net income.

In fiscal year 2019 the Company recorded an unrealized loss of $2,054,000 which is included in other (expense) income in the consolidated statements of operations.

In fiscal year 2018, the Company recorded unrealized holding gains of $6,765,000 ( $4,809,000 net of tax) and reclassification of unrealized gain on securities sold of $4,125,000 ( $2,965,000 net of tax).

In fiscal year 2017, the Company recorded unrealized holding gains of $4,365,000 ( $2,643,000 net of tax), which were included in AOCI in the consolidated balance sheet.

Prepaid Expenses and Other Current Assets

3 unchanged sentences

Real estate development held for sale 2,543 2,543

Lemon supplier advances, deferred lease expense and other

Sales tax receivable 1,867 1,061

Lemon supplier advances and other 1,708 1,169

$ 10,688 $ 8,153

LIMONEIRA COMPANY

2 unchanged sentences

Property, plant and equipment consists of the following at October 31 (in thousands):

Land $ 96,334 $ 100,503

Land improvements 33,733 31,897

Buildings and building improvements 48,441 48,348

Equipment 60,124 56,709

Orchards 61,098 54,251

Construction in progress 20,469 26,934

320,199 318,642

Less accumulated depreciation ( 77,550 ) ( 70,528 )

$ 242,649 $ 248,114

Depreciation expense was $ 9,098,000 , $ 7,944,000 and $ 7,178,000 for fiscal years 2020, 2019 and 2018, respectively.

In August 2020, the Company sold property located in Lindsay, California.

The Company received net proceeds of $ 6,011,000 after transaction and other costs, and recorded a loss of approximately $ 424,000 , which is included in loss (gain) on sale and disposal of property assets in the consolidated statements of operations.

In September 2019, the Company sold its multi-use Mercantile property consisting of a retail convenience store, gas station, car wash and quick serve restaurant located in Santa Paula, California.

The Company received net proceeds of $4,000,000 and recognized a gain of approximately $586,000 , which is included in gain on sale of property assets in the consolidated statement of operations.

The Company received net proceeds of $ 4,000,000 and recognized a gain of approximately $ 586,000 , which is included in loss (gain) on sale and disposal of property assets in the consolidated statement of operations.

Real Estate Development

1 unchanged sentence

Retained property - East Area I $ 13,169 $ 11,943

East Areas I and II

East Area II 8,467 5,659

$ 21,636 $ 17,602

East Area I, Retained Property and East Area II

In fiscal year 2005, the Company began capitalizing the costs of two real estate development projects east of Santa Paula, California, for the development of 550 acres of land into residential units, commercial buildings and civic facilities.

On November 10, 2015 (the “Transaction Date”), the Company entered into a joint venture with The Lewis Group of Companies (“Lewis”) for the residential development of its East Area I real estate development project.

In November 2015, the Company entered into a joint venture with The Lewis Group of Companies (“Lewis”) for the residential development of its East Area I real estate development project.

To consummate the transaction, the Company formed Limoneira Lewis Community Builders, LLC (the “LLCB” or “Joint Venture”) as the development entity, contributed its East Area I property to the LLCB and sold a 50 % interest in the LLCB to Lewis for $ 20,000,000 .

The Company and the Joint Venture also entered into a Retained Property Development Agreement on the Transaction Date (the "Retained Property Agreement").

The Company and the Joint Venture also entered into a Retained Property Development Agreement (the "Retained Property Agreement").

Under the terms of the Retained Property Agreement, the Joint Venture will transfer certain contributed East Area I property, which is entitled for commercial development, back to the Company (the "Retained Property") and arrange for the design and construction of certain improvements to the Retained Property, subject to certain reimbursements by the Company.

In August 2018, the Retained Property was transferred back to the Company.

The net carrying value of the retained property as of October 31, 2019 and 2018 was $11,943,000 and $10,408,000 , respectively and classified as real estate development.

Such value as of October 31, 2019 includes $1,200,000 for estimated costs incurred by and reimbursable to LLCB, which is accrued in other long-term liabilities.

Further, on the Transaction Date, the Joint Venture and the Company entered into a Lease Agreement (the "Lease Agreement"), pursuant to which the Joint Venture would lease certain of the contributed East Area I property back to the Company for continuation of agricultural operations, and certain other permitted uses on the property until the Joint Venture required the property for development.

In December 2018, the Company terminated the Lease Agreement pursuant to the terms therein.

The balance includes estimated costs incurred by and reimbursable to LLCB of $ 5,300,000 at October 31, 2020, which is included in payables to related parties and $ 1,200,000 at October 31, 2019, which was included in other long-term liabilities.

LIMONEIRA COMPANY

2 unchanged sentences

East Areas I and II (continued)

The Company’s sale of an interest in the LLCB in which the Company’s contributed property comprises the LLCB’s primary asset, combined with the Lease Agreement was considered a sale-leaseback transaction under FASB ASC 840, Leases, because of the Company’s continuing involvement in the property in the form of its agricultural operations.

Accordingly, the property was carried on the consolidated balance sheet as real estate development, rather than being classified as an equity investment and a sale-leaseback deferral was recorded for the $20,000,000 payment made by Lewis for the purchase of the LLCB interest.

Lease expense associated with the Lease Agreement was not required under sale-leaseback accounting since the Company was treated as though it continued to own the property.

During the year ended October 31, 2018 , the Company recorded $27,934,000 of real estate development costs and corresponding increases in the sale-leaseback deferral to recognize real estate development costs capitalized by the LLCB.

When the Lease Agreement was terminated in December 2018, control of the property transferred to the Joint Venture and therefore, the Company reduced the sale and leaseback deferral and corresponding real estate development by $58,330,000 and reclassified $33,353,000 to equity in investments upon derecognition of the real estate development.

As the fair value of the Company's ownership interest in the Joint Venture approximated the Company's historical basis in the real estate development at the inception of the Joint Venture, no gain or loss was recorded.

In January 2018, the Joint Venture entered into a $ 45,000,000 unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A.

to fund early development activities.

The Loan matures in January 2020, with an option to extend the maturity date until 2021, subject to certain conditions.

The Loan originally was scheduled to mature in January 2020 and was extended to February 22, 2021 per the terms thereof.

The interest rate on the Loan is LIBOR plus 2.85 %, payable monthly.

The Loan contains certain customary default provisions and the Joint Venture may prepay any amounts outstanding under the Loan without penalty.

In February 2018, the obligations under the Loan were guaranteed by certain principals from Lewis and by the Company.

In February 2018, certain principals from Lewis and by the Company guaranteed the obligations under the Loan.

The guarantee shall continue in effect until all of the Loan obligations are fully paid and the guarantors are jointly and severally liable for all Loan obligations in the event of default by the Joint Venture.

1 unchanged sentence

The $ 1,080,000 estimated value of the guarantee was recorded in the Company’s consolidated balance sheets and is included in other long-term liabilities with a corresponding increase in equity in investments.

The extension had no impact on the Company's guarantee value.

Additionally, a Reimbursement Agreement was executed between the Lewis guarantors and the Company, which provides for unpaid liabilities of the Joint Venture to be shared pro-rata by the Lewis guarantors and the Company in proportion to their percentage interest in the Joint Venture.

In fiscal year 2019 , the Company announced that its Joint Venture closed the sales of the initial residential lots representing 210 residential units.

In February 2020 the Company and Lewis each loaned $ 1,800,000 to the Joint Venture at an interest rate of 4.6 %, which was repaid in June 2020.

In fiscal years 2020 and 2019, the Company announced that its Joint Venture closed the sales of residential lots representing 144 and 210 residential units, respectively.

Other Real Estate Development Projects

The real estate development parcels within the Templeton Santa Barbara, LLCB project are described as Centennial Square (“Centennial”), The Terraces at Pacific Crest (“Pacific Crest”), and Sevilla.

The Company's net carrying value of Sevilla was $2,543,000 and the net carrying values of Pacific Crest and Sevilla were $5,024,000 as of October 31, 2019 and 2018, respectively, which have been included in prepaid expenses and other current assets.

The expenses associated with these properties were immaterial.

The Company recognized impairment charges of $1,558,000 during fiscal year 2018 and an immaterial impairment charge related to the properties in fiscal year 2017.

In October 2019, the Company sold the Pacific Crest property with a net book value of $2,481,000 for approximately $3,000,000 .

The Company received net proceeds of $2,886,000 and recognized a gain of $405,000 , which has been included in gain on sale of property assets in the consolidated statements of operations.

The remaining real estate development parcel within the Templeton Santa Barbara, LLC project is described as Sevilla.

In the first quarter of fiscal year 2020, the Company entered into an agreement to sell its Sevilla property for $ 2,700,000 , which is expected to close in fiscal year 2021.

After transaction and other costs, the Company expects to receive cash proceeds of approximately $ 2,550,000 and recognize an immaterial gain upon closing.

At October 31, 2020 and 2019, the $ 2,543,000 carrying value of the property was classified as held for sale and included in prepaid expenses and other current assets.

During December 2017, the Company sold its Centennial property with a net book value of $ 2,983,000 for $ 3,250,000 .

The Company received cash and a $3,000,000 promissory note secured by the property for the balance of the purchase price.

After transaction costs, the sale resulted in a gain of $194,000 , that is being recognized under the installment method.

The promissory note was originally scheduled to mature in June 2018 but provided for three potential extensions to December 2019 which were exercised.

The holder of the promissory note made $200,000 and $150,000 of non-refundable principal payments during fiscal 2018 and 2019, respectively.

In August 2019, the holder of the note requested an extension of the maturity date of the promissory

The Company received cash and a $ 3,000,000 promissory note secured by the property for the balance of the purchase.

The promissory note was scheduled to mature in December 2019 but was extended to December 2020 and the interest was reset to equal to the 6-month LIBOR plus 2.75 % on the outstanding principal balance of the note, interest only paid monthly on the first day of each month beginning January 1, 2020.

In September 2020, the promissory note was further extended to June 15, 2021 on the same terms and conditions upon making a principal paydown of $ 25,000 on or before December 1, 2020 and an option to further extend the maturity date of the promissory note to December 15, 2021 on the same terms and conditions and upon making an additional principal paydown of $ 25,000 on or before June 1, 2021.

At October 31, 2020 the carrying value of the note was $ 2,650,000 and classified in prepaid expenses and other current assets.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Real Estate Development (continued)

Other Real Estate Development Projects (continued)

note to December 15, 2020 .

The Company extended the maturity date concurrently with resetting the interest rate to equal to the 6-month LIBOR plus 2.75% on the outstanding principal balance of the note, interest only paid monthly on the first day of each month beginning January 1, 2020 .

At October 31, 2019 the carrying value of the note was $2,650,000 and classified in other assets.

During November 2017, the Company sold the commercial portion of its Sevilla property with a net book value of $1,354,000 for $1,452,000 .

Net proceeds received, after transaction costs were $1,364,000 , and the resulting gain was immaterial.

Equity in Investments

23 unchanged sentences

The $ 2,122,000 in basis differences exclusive of goodwill is being amortized over the estimated life of the underlying intangible assets as a reduction in the equity investment and an expense included in equity in earnings (losses) of investments.

Amortization amounted to $298,000 , $337,000 and $290,000 for fiscal years 2019 , 2018 and 2017 , respectively, and is estimated to be approximately $179,000 per year for years ending October 31, 2020 and 2021 and $118,000 , $87,000 and $76,000 per year for years ending October 31, 2022 through October 31, 2024, respectively.

Amortization amounted to $ 180,000 , $ 298,000 and $ 337,000 for fiscal years 2020, 2019 and 2018, respectively, and is estimated to be approximately $ 179,000 , $ 118,000 , $ 87,000 , $ 76,000 and $ 32,000 per year for years ending October 31, 2021 through October 31, 2025, respectively, and $ 43,000 thereafter.

The Company recognized $ 3,975,000 , $ 3,741,000 and $ 3,849,000 of lemon sales to Rosales in fiscal years 2020, 2019 and 2018, respectively.

In fiscal years 2020, 2019 and 2018, the aggregate amount of lemons and oranges procured from Rosales was $ 3,190,000 , $ 4,315,000 and $ 7,658,000 , respectively.

Amounts due from (to) Rosales were $156,000 and $(65,000) at October 31, 2019 and 2018, respectively.

Amounts due (to) from Rosales were $( 954,000 ) and $ 156,000 at October 31, 2020 and 2019, respectively.

LIMONEIRA COMPANY

3 unchanged sentences

As described in Note 7 – Real Estate Development of the notes to consolidated financial statements included in this Annual Report, on November 10, 2015, the Company entered into a Joint Venture with Lewis for the residential development of its East Area I real estate development project.

In addition to the assessment performed by the Company of its investment in LLCB under the requirements of Regulation S-X Rule 4-08(g), the Company also assessed its investment in LLCB under the requirements of Regulation S-X Rule 3-09(b) for the year ended October 31, 2019 and determined it was required to provide audited financial statements of LLCB.

The audited financial statements of LLCB for the year ended October 31, 2019 and also the audited financial statements of LLCB for the years ended October 31, 2018 and 2017 are provided as exhibits to this document to comply with this rule.

Additionally, there is a basis difference between the Company’s historical investment in the project and the amount recorded in members’ capital by LLCB of $42,722,000 .

LLCB was not deemed significant for the year ended October 31, 2020 but was deemed significant for the year ended October 31, 2019.

Therefore, the audited financial statements of LLCB for the years ended October 31, 2020, 2019 and 2018 are provided as exhibits to this document to comply with this rule.

Additionally, there is a basis difference between the Company’s historical investment in the project and the amount recorded in members’ capital by LLCB of $ 46,908,000 as of October 31, 2020.

The basis difference of $ 10,234,000 at October 31, 2020 is primarily comprised of capitalized interest, amounts related to the loan guarantee and certain other costs incurred by Limoneira Company during the development period.

This basis difference is being amortized as lots are sold utilizing the relative sales value method and the amount amortized in fiscal year 2019 totaled $1,498,000 .

The Company's share of LLCB's net income for the fiscal year 2019 prior to basis amortization was $4,368,000 .

This basis difference is being amortized as lots are sold utilizing the relative sales value method and the amount amortized in fiscal years 2020 and 2019 totaled $ 1,060,000 and $ 1,498,000 , respectively.

The Company's share of LLCB's net income for fiscal years 2020 and 2019 prior to basis amortization was $ 1,386,000 and $ 4,368,000 , respectively.

The following is financial information of the equity method investees for fiscal years 2020, 2019 and 2018 (in thousands):

2020 Del Mar Romney Rosales LLCB

Current assets $ 270 $ — $ 4,564 $ 130,171

2 unchanged sentences

Non-current liabilities $ — $ — $ 1,449 $ —

Operating income (loss)

Net income (loss)

Revenues $ 930 $ 20 $ 10,097 $ 25,906

Operating (loss) income $ ( 109 ) $ ( 2 ) $ 1,216 $ 2,615

Net (loss) income $ ( 109 ) $ ( 2 ) $ 476 $ 2,615

Current assets $ 454 $ — $ 3,016 $ 138,170

2 unchanged sentences

Non-current liabilities $ — $ — $ 161 $ —

Revenues $ 2,290 $ 15 $ 8,898 $ 37,788

Operating income (loss) $ 1,299 $ ( 5 ) $ 403 $ 10,001

Net income (loss) $ 1,299 $ ( 5 ) $ 288 $ 10,001

Revenues $ 2,893 $ 21 $ 13,630 $ 40

Operating income (loss) $ 1,755 $ ( 4 ) $ 1,745 $ ( 154 )

3 unchanged sentences

Equity in Investments (continued)

Limoneira Lewis Community Builders, LLC (the “LLCB” or "Joint Venture") (continued)

The Company’s investment and equity in earnings (losses) of the equity method investees are as follows (in thousands):

Investment balance October 31, 2016

Equity earnings (losses)

Cash distributions

Investment contributions

Del Mar Romney Rosales LLCB Total

Investment balance October 31, 2017 $ 1,968 $ 515 $ 1,944 $ 9,634 $ 14,061

10 unchanged sentences

Investment balance October 31, 2019 1,950 512 1,745 54,016 58,223

Goodwill and Other Intangible Assets

Equity earnings (losses) ( 30 ) ( 1 ) 44 326 339

Investment contributions — — — 2,800 2,800

Foreign currency adjustments — — ( 148 ) — ( 148 )

Investment balance October 31, 2020 $ 1,920 $ 511 $ 1,641 $ 57,142 $ 61,214

Goodwill and Intangible Assets

A summary of the change in the carrying amount of goodwill is as follows (in thousands):

1 unchanged sentence

October 31, 2018 $ 1,431

Acquisition of Oxnard Lemon

Acquisition of Trapani Fresh 420

Foreign currency translation adjustment ( 12 )

October 31, 2019 1,839

Acquisition of Trapani Fresh

Trapani Fresh purchase price adjustment ( 297 )

Foreign currency translation adjustment ( 7 )

October 31, 2020 $ 1,535

See Note 3 - Acquisitions - of the notes to consolidated financial statements included in this Annual Report for additional information regarding the acquisitions of Oxnard Lemon and Trapani Fresh.

See Note 3 - Acquisitions - of the notes to consolidated financial statements included in this Annual Report for additional information regarding the acquisition of Trapani Fresh.

Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable.

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Goodwill and Other Intangible Assets (continued)

Other intangible assets which continue to be amortized as of October 31, 2019 and 2018 are as follows (in thousands):

October 31, 2019

October 31, 2018

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Weighted Average Useful Life in Years

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Weighted Average Useful Life in Years

Amortizable other intangible assets:

Goodwill and Intangible Assets (continued)

Intangible assets consisted of the following as of October 31, 2020 and 2019 (in thousands):

October 31, 2020 October 31, 2019

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life in Years

Intangible assets:

Trade names and trademarks $ 3,771 $ ( 947 ) $ 2,824 10 $ 3,786 $ ( 542 ) $ 3,244 10

1 unchanged sentence

Non-competition agreement 1,040 ( 147 ) 893 10 1,040 ( 42 ) 998 10

Acquired water and mineral rights

Other intangible assets

Acquired water and mineral rights 3,571 — 3,571 Indefinite $ 3,655 $ — $ 3,655 Indefinite

Intangible assets $ 13,392 $ ( 2,083 ) $ 11,309 $ 13,491 $ ( 1,084 ) $ 12,407

Amortization expense totaled $ 999,000 , $ 689,000 , and $ 84,000 for the years ended October 31, 2020, 2019 and 2018, respectively.

Estimated future amortization expense of other intangible assets for each of the next five fiscal years and thereafter are as follows (in thousands):

Estimated future amortization expense of intangible assets for each of the next five fiscal years and thereafter are as follows (in thousands):

Thereafter 2,763

Investments in Mutual Water Companies

3 unchanged sentences

Accrued liabilities consist of the following at October 31 (in thousands):

Compensation $ 2,275 $ 1,973

Property taxes 683 652

Lemon supplier payables

Capital expenditures, allowance and packing and harvest expenses

Payable to FGF

Lemon and orange supplier payables 1,346 899

Operating expenses 938 3,191

Leases 959 129

Other 1,746 1,417

$ 7,947 $ 8,261

LIMONEIRA COMPANY

4 unchanged sentences

The interest rate of the revolving line of credit is variable based on the one-month London Interbank Offered Rate (“LIBOR”), which was 0.15 % at October 31, 2020, plus 1.60 %.

Effective July 1, 2018, the interest rate for the $40.0 million outstanding balance of the non-revolving line of credit was fixed at 4.77%.

The interest rate for the $ 40.0 million outstanding balance of the non-revolving line of credit was fixed at 4.77 %.

Interest is payable monthly and the principal is due in full on July 1, 2022.

$ 102,251 $ 82,843

Farm Credit West term loan:

Effective October 1, 2019, the interest rate was fixed at 3.76%.

Effective July 1, 2020, the interest rate was fixed at 2.48 %.

The loan is payable in quarterly installments through November 2022.

Farm Credit West term loan:

Effective October 1, 2019, the interest rate was fixed at 4.14%.

Effective July 1, 2020, the interest rate was fixed at 3.24 %.

The loan is payable in monthly installments through October 2035.

Farm Credit West term loan:

Effective October 1, 2019, the interest rate was fixed at 4.17%.

Effective July 1, 2020, the interest rate was fixed at 3.24 %.

The loan is payable in monthly installments through March 2036.

Farm Credit West term loan:

the interest rate is fixed at 3.62% until March 2021, becoming variable for the remainder of the loan.

Effective July 1, 2020, the interest rate was fixed at 2.77 % until July 1, 2025, becoming variable for the remainder of the loan.

The loan is payable in monthly installments though March 2036.

8 unchanged sentences

The loan includes interest-only monthly payments and principal is due in February 2023.

Banco de Chile COVID-19 loans:

The interest rates are fixed at 3.48 %.

The loans are payable in monthly installments beginning February 2021 through September 2024.

Subtotal 126,024 109,077

Less deferred financing costs, net of accumulated amortization 176 162

2 unchanged sentences

Long-term debt, less current portion $ 122,571 $ 105,892

On September 26, 2019, the Company and Farm Credit West, FLCA ("Farm Credit West") entered into Rate Lock Agreements ("Rate Lock Agreements") which fixed the interest rates effective October 1, 2019 for the term loans noted above.

Conversion Agreements were also signed as of October 1, 2019 documenting the key terms of the modified lending arrangements.

No changes were made to the outstanding principal balances on the loans and no cash repayments of principal were made by the Company.

The rates are subject to a prepayment restriction period for a portion of the fixed rate term that will expire on March 1, 2020, after which the Company may prepay any amounts without penalty.

On June 20, 2017, the Company entered into a Master Loan Agreement (the “Loan Agreement”) with Farm Credit West that includes a Revolving Credit Supplement and a Non-Revolving Credit Supplement (the “Supplements”).

Proceeds from the Supplements were used to pay down all the remaining outstanding indebtedness under the revolving credit facility the Company had with Rabobank, N.A.

On January 29, 2018, the Company amended the Revolving Credit Supplement to increase the borrowing capacity from $60,000,000 to $75,000,000 .

The Supplements provide aggregate borrowing capacity of $115,000,000 comprised of $75,000,000 under the Revolving Credit Supplement and $40,000,000 under the Non-Revolving Credit Supplement.

The borrowing capacity based on collateral value was $115,000,000 at October 31, 2019 .

The Company and Farm Credit West, FLCA (“Farm Credit West”) are parties to that certain Master Loan Agreement (the “Loan Agreement”), dated June 20, 2017, which includes a Revolving Credit Supplement and a Non-Revolving Credit Supplement (together, the “Supplements”).

On June 30, 2020, the Company and Farm Credit West entered into a Conversion Agreement to convert the term loans noted above to fixed interest rate loans effective July 1, 2020.

No changes were made to the outstanding principal balances on the term loans and the Company made no cash repayments of principal.

The rates are subject to a prepayment restriction period for a portion of the fixed rate term that will expire on January 1, 2021, after which the Company may prepay any amounts without penalty.

LIMONEIRA COMPANY

1 unchanged sentence

Long-Term Debt (continued)

All indebtedness under the Loan Agreement, including any indebtedness under the Supplements, is secured by a first lien on certain of our agricultural properties in Tulare and Ventura counties in California and certain of the Company's building fixtures and improvements and investments in mutual water companies associated with the pledged agricultural properties.

The Loan Agreement includes customary default provisions that provide should an event of default occur.

Farm Credit West, at its option, may declare all or any portion of the indebtedness under the Loan Agreement to be immediately due and payable without demand, notice of non-payment, protest or prior recourse to collateral, and terminate or suspend the Company's right to draw or request funds on any loan or line of credit.

In March 2020, the Company entered into a revolving equity line of credit promissory note and loan agreement with Farm Credit West for a $ 15,000,000 Revolving Equity Line of Credit (the "RELOC") secured by a first lien on the Windfall Investors, LLC property.

The RELOC matures in 2043 and features a 3 -year draw period followed by 20 years of fully amortized loan payments.

The interest rate is variable with monthly interest-only payments during the 3 -year draw period and monthly principal and interest payments thereafter.

The Supplements and RELOC provide aggregate borrowing capacity of $ 130,000,000 comprised of $ 75,000,000 under the Revolving Credit Supplement, $ 40,000,000 under the Non-Revolving Credit Supplement and $ 15,000,000 under the RELOC.

The borrowing capacity based on collateral value was $ 130,000,000 at October 31, 2020, of which $ 27,749,000 was available to borrow.

All indebtedness under the Loan Agreement and RELOC with Farm Credit West, including any indebtedness under the Supplements, is secured by a first lien on certain of its agricultural properties in Tulare, Ventura and San Luis Obispo counties in California and certain of the Company's building fixtures and improvements and investments in mutual water companies associated with the pledged agricultural properties.

The Loan Agreement includes customary default provisions that provide should an event of default occur, Farm Credit West, at its option, may declare all or any portion of the indebtedness under the Loan Agreement to be immediately due and payable without demand, notice of non-payment, protest or prior recourse to collateral, and terminate or suspend the Company's right to draw or request funds on any loan or line of credit.

In December 2019, Farm Credit West declared an annual cash patronage dividend of 1.00 % of average eligible loan balances.

The Company received $ 966,000 in February 2020.

In July 2020, Farm Credit West declared an additional cash patronage dividend of $ 600,000 , which the Company received in August 2020.

In February 2019, the Company received an annual cash patronage dividend of $ 853,000 .

The Loan Agreement subjects the Company to affirmative and restrictive covenants including, among other customary covenants, financial reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of the Company's business.

The Company is also subject to a covenant that it will maintain a debt service coverage ratio greater than 1.25 :1.0 measured annually at October 31.

The Company was not in compliance with covenants at October 31, 2019 , but the non-compliance was waived by Farm Credit West and Wells Fargo.

In fiscal year 2019 the Company paid and capitalized debt financing costs of $35,000 related to the Rate Lock Agreements.

In fiscal year 2017 the Company paid and capitalized debt financing costs of $108,000 related to the Loan Agreement and expensed $45,000 of capitalized debt financing costs related to the Rabobank revolving credit facility.

In August 2020, Farm Credit West modified the covenant to defer measurement at October 31, 2020 and revert to a debt service coverage ratio of 1.25 :1.0 measured as of October 31, 2021.

The Company was not in compliance with the Wells Fargo covenant at October 31, 2020 and the non-compliance was waived.

This loan is secured by certain lemon packing equipment.

In July and September 2020, PDA and San Pablo entered into term loan agreements for an aggregate amount of approximately $ 522,000 .

These small business loans are guaranteed by the Chilean government in response to economic instability caused by the COVID-19 pandemic.

The unsecured loans mature in July and September 2024, bear interest at fixed rates of 3.48 % and 2.90 % and are payable in monthly installments beginning February and April 2021, respectively.

Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress.

The Company capitalized interest of $1,369,000 and $2,407,000 during the years ended October 31, 2019 and 2018 , respectively.

The Company capitalized interest of $ 921,000 and $ 1,369,000 during the fiscal years ended 2020 and 2019, respectively.

Capitalized interest is included in property, plant and equipment and real estate development assets in the Company’s consolidated balance sheets.

3 unchanged sentences

Principal payments on the Company’s long-term debt are due as follows (in thousands):

Thereafter 11,372

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Lessor Arrangements

The Company enters into leasing transactions in which it rents certain of its assets and the Company is the lessor.

These lease contracts are typically classified as operating leases with remaining terms ranging from one month to 22 years, with various renewal terms available.

All of the residential rentals have month-to-month lease terms.

The following table presents the components of the Company’s operating lease portfolio included in property, plant and equipment, net as of the dates indicated (in thousands):

October 31, 2020 October 31, 2019

Land $ 3,522 $ 1,279

Buildings, equipment and building improvements 18,516 22,841

accumulated depreciation ( 5,691 ) ( 7,551 )

Property, plant and equipment, net under operating leases $ 16,347 $ 16,569

Depreciation expense for assets under operating leases was approximately $ 664,000 for fiscal year 2020.

The Company’s rental operations revenue consists of the following (in thousands):

October 31, 2020

Operating lease payments $ 4,287

Variable lease payments 335

Total lease payments $ 4,622

The future minimum lease payments to be received by the Company related to these operating lease agreements as of October 31, 2020 are as follows (in thousands):

Thereafter 925

Total $ 2,639

The Company’s rental operations revenue included contingent rental revenue of $ 355,000 and $ 324,000 for fiscal years 2019 and 2018, respectively.

Lessee Arrangements

The Company enters into leasing transactions in which the Company is the lessee.

These lease contracts are typically classified as operating leases.

The Company’s lease contracts are generally for agricultural land and packinghouse equipment with remaining lease terms ranging from one to 17 years, with various term extensions available.

The Company’s lease agreements do not contain any residual value guarantees or material restrictive covenants.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

As of October 31, 2020, there were no material finance leases for which the Company was a lessee.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Leases (continued)

Operating lease costs were $ 559,000 for fiscal year 2020, which are primarily included in agribusiness costs and expenses in the Company’s consolidated statements of operations.

Variable and short term lease costs were immaterial.

Supplemental balance sheet information related to leases consists of the following (in thousands):

Classification October 31, 2020

Operating lease ROU assets Other assets $ 2,053

Liabilities and Stockholders' Equity

Current operating lease liabilities Accrued liabilities 521

Non-current operating lease liabilities Other long-term liabilities 1,610

Total operating lease liabilities $ 2,131

Weighted-average remaining lease term (in years) 11.0

Weighted-average discount rate 3.8 %

Supplemental cash flow information related to leases consists of the following (in thousands):

October 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases $ 559

ROU assets obtained in exchange for new operating lease liabilities $ 108

Future minimum lease payments under non-cancellable leases for each of the subsequent five fiscal years and thereafter are as follows (in thousands):

Thereafter 1,315

Total lease payments 2,649

Imputed interest ( 518 )

Total $ 2,131

In addition to operating lease commitments, the Company also has a contract for pollination services which does not meet the definition of a lease, with minimum future payments of $ 307,000 for each of the fiscal years 2021 and 2022 and $ 51,000 in fiscal year 2023.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Leases (continued)

A summary of the Company’s future minimum payments for obligations under non-cancellable operating leases as of October 31, 2019 was as follows (in thousands):

Thereafter 1,382

Total $ 3,141

Total lease expense for fiscal years 2019 and 2018 was $ 733,000 and $ 2,028,000 , respectively, which was included in agribusiness costs and expenses in the Company’s consolidated statements of operations.

In October 2018, the Company purchased a 1,000 KW photovoltaic generator for $ 1,125,000 that was previously under a 10-year operating lease agreement with Farm Credit West.

In December 2018, the Company purchased another 1,000 KW photovoltaic generator for $ 1,275,000 that was previously under a 10-year operating lease agreement with Farm Credit West.

Earnings Per Share

3 unchanged sentences

The computations for basic and diluted net (loss) income per common share are as follows (in thousands, except per share amounts):

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Earnings Per Share (continued)

Year ended October 31,

2020 2019 2018

Basic net (loss) income per common share:

14 unchanged sentences

The Company excluded 164,000 , 119,000 and 70,000 , unvested, restricted shares, as calculated under the treasury stock method, from its computation of diluted (losses) earnings per share for the fiscal years ended October 31, 2020, 2019 and 2018, respectively.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Related-Party Transactions

The Company has transactions with various related-parties as summarized in the tables below (in thousands):

As of and for the year ending October 31, 2019:

Balance Sheet

Consolidated Statement of Operations

Related Party

Accounts Receivable

Accounts Payable

Growers Payable

Dividends Paid

Net Revenue - Agribusiness

Net Revenue - Rental Operations

Agribusiness Expense and Other

Other Income, Net

October 31, 2020 October 31, 2019

Balance Sheet Balance Sheet

Ref Related-Party Receivables/Other from Related-Parties Other Assets Payables to Related-Parties Other Long-Term Liabilities Receivables/Other from Related-Parties Other Assets Accounts Payable Payables to Related-Parties Other Long-Term Liabilities

(2) Mutual water companies $ — $ 64 $ 64 $ — $ — $ 473 $ 11 $ — $ —

(3) Cooperative association $ — $ — $ 123 $ — $ — $ — $ 35 $ — $ —

Third party growers

(6) Cadiz / Fenner / WAM $ — $ 1,443 $ 182 $ 1,353 $ — $ — $ — $ — $ —

(7) Colorado River Growers $ 81 $ — $ — $ — $ 376 $ — $ — $ — $ —

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Related-Party Transactions (continued)

As of and for the year ending October 31, 2018:

Balance Sheet

Consolidated Statement of Operations

Related Party

Accounts Receivable

Accounts Payable

Growers Payable

Dividends Paid

Net Revenue - Agribusiness

Net Revenue - Rental Operations

Agribusiness Expense and Other

Other Income, Net

(9) FGF $ 2,213 $ — $ 604 $ — $ 2,609 $ — $ — $ 906 $ —

(10) LLCB $ — $ — $ 5,300 $ — $ — $ — $ — $ — $ 1,200

Year Ended October 31, 2020 Year Ended October 31, 2019

Consolidated Statement of Operations Consolidated Statement of Operations

Ref Related-Party Net Revenue - Agribusiness Net Revenue - Other Operations Agribusiness Expense and Other Other Income, Net Dividends Paid Net Revenue - Agribusiness Net Revenue - Other Operations Agribusiness Expense and Other Other Income, Net Dividends Paid

(1) Employees $ — $ 785 $ — $ — $ — $ — $ 744 $ — $ — $ —

(2) Mutual water companies $ — $ — $ 894 $ — $ — $ — $ — $ 838 $ — $ —

(3) Cooperative association $ — $ — $ 1,849 $ — $ — $ — $ — $ 1,687 $ — $ —

(4) Calavo $ 8,806 $ 330 $ 1,223 $ 220 $ 503 $ 3,080 $ 400 $ 1,096 $ 250 $ 506

(5) Third party growers $ — $ — $ — $ — $ — $ — $ — $ 10 $ — $ —

1 unchanged sentence

(7) Colorado River Growers $ 603 $ — $ 6,613 $ — $ — $ 306 $ — $ 5,476 $ — $ —

For the year ending October 31, 2017:

(8) YMIDD $ — $ — $ 139 $ — $ — $ — $ — $ 150 $ — $ —

(9) FGF $ 10,338 $ — $ 13,478 $ — $ — $ 14,471 $ — $ 10,300 $ — $ —

Year Ended October 31, 2018

Consolidated Statement of Operations

Related Party

Net Revenue - Agribusiness

Net Revenue - Rental Operations

Agribusiness Expense and Other

Other Income, Net

Ref Related-Party Net Revenue - Agribusiness Net Revenue - Rental Operations Agribusiness Expense and Other Other Income, Net Dividends Paid

(1) Employees $ — $ 706 $ — $ — $ —

(2) Mutual water companies $ — $ — $ 1,102 $ — $ —

(3) Cooperative association $ — $ — $ 1,869 $ — $ —

(4) Calavo $ 6,576 $ 293 $ 367 $ 285 $ 432

(5) Third party growers $ — $ — $ 2,279 $ — $ —

1 unchanged sentence

(7) Colorado River Growers $ 374 $ — $ 3,707 $ — $ —

(8) YMIDD $ — $ — $ 213 $ — $ —

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Related-Party Transactions (continued)

(1) Employees - The Company rents certain of its residential housing assets to employees on a month-to-month basis and recorded rental income from employees.

2 unchanged sentences

The Company recorded capital contributions, purchased water and water delivery services and had water payments due to the mutual water companies.

Refer to Note 10 - Other Assets.

(3) Cooperative association - The Company has representation on the board of directors of a non-profit cooperative association that provides pest control services for the agricultural industry.

The Company purchased services and supplies from and had payments due to the cooperative association.

(4) Calavo - The Company has an investment in and representation on the board of directors of Calavo and Calavo has an investment in and had representation on the board of directors of the Company through December 2018.

(4) Calavo - The Company had an investment in Calavo through March 2020 and has representation on the board of directors and Calavo has an investment in and had representation on the board of directors of the Company through December 2018.

The Company recorded dividend income on its investment in Calavo, paid dividends to Calavo and had avocado sales to Calavo.

Additionally, the Company leases office space to Calavo, purchases storage services from Calavo and had amounts due to Calavo for those services.

(5) Third party growers - Certain members of the Company’s board of directors, or entities owned or controlled by members of the board of directors, market lemons through the Company and the Company had payments due to them for such lemon procurement.

(5) Third party growers - A member of the Company’s board of directors markets lemon through the Company.

(6) Cadiz / Fenner / WAM - A member of the Company’s board of directors serves as the CEO, President and a member of the board of directors of Cadiz, Inc.

1 unchanged sentence

The annual base rental is equal to the sum of $ 200 per planted acre and 20 % of gross revenues from the sale of harvested lemons (less operating expenses), not to exceed $ 1,200 per acre per year.

In 2016, Cadiz assigned this lease to Fenner Valley Farms,

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Related-Party Transactions (continued)

LLC (“Fenner”), a subsidiary of Water Asset Management, LLC (“WAM”).

In 2016, Cadiz assigned this lease to Fenner Valley Farms, LLC (“Fenner”), a subsidiary of Water Asset Management, LLC (“WAM”).

An entity affiliated with WAM is the holder of 9,300 shares of Limoneira Company Series B-2 convertible preferred stock.

Upon the adoption of ASC 842 , the Company recorded a ROU asset and corresponding lease liability.

(7) Colorado River Growers, Inc.

3 unchanged sentences

The Company purchased water from YMIDD and had amounts payable to them for such purchases.

(9) FGF - The Company advances funds to FGF for fruit purchases which are recorded as an asset until the sales occur and the remaining proceeds become due to FGF.

Additionally, FGF provided farming, packing and administrative services to Trapani Fresh from acquisition to October 31, 2019.

(9) FGF - The Company advances funds to FGF for fruit purchases that are recorded as an asset until the sales occur and the remaining proceeds become due to FGF.

Additionally, FGF provided farming, by-product processing and administrative services to Trapani Fresh.

The Company had a payable due to FGF for such fruit purchases and services.

(10) LLCB - Refer to Note 7 - Real Estate Development.

A reconciliation of income before income taxes for domestic and foreign locations for the years ended October 31, 2020, 2019 and 2018 are as follows (in thousands):

2020 2019 2018

United States $ ( 23,195 ) $ ( 6,285 ) $ 13,099

Foreign ( 3,240 ) ( 278 ) 384

Income before income taxes $ ( 26,435 ) $ ( 6,563 ) $ 13,483

The components of the provisions for income taxes for fiscal years 2019 , 2018 and 2017 are as follows (in thousands):

Total current benefit (provision)

Total deferred benefit (provision)

Total benefit (provision)

The income tax provision differs from the amount which would result from the statutory federal income tax rate primarily as a result of remeasuring deferred tax assets and liabilities, the dividend exclusion and state income taxes.

LIMONEIRA COMPANY

1 unchanged sentence

Income Taxes (continued)

The components of the provisions for income taxes for fiscal years 2020, 2019 and 2018 are as follows (in thousands):

2020 2019 2018

Federal $ 5,835 $ ( 7 ) $ 35

State 332 563 ( 444 )

Foreign 194 ( 232 ) ( 169 )

Total current benefit (provision) 6,361 324 ( 578 )

Federal 640 998 7,393

State 1,177 ( 302 ) ( 212 )

Foreign 316 77 126

Total deferred benefit 2,133 773 7,307

Total income tax benefit $ 8,494 $ 1,097 $ 6,729

Deferred income taxes reflect the net of temporary differences between the carrying amount of the assets and liabilities for financial reporting and income tax purposes.

The components of deferred income tax assets (liabilities) at October 31, 2019 and 2018 are as follows (in thousands):

The components of deferred income tax assets at October 31, 2020 and 2019 are as follows (in thousands):

Deferred income tax assets:

Labor accruals

State income taxes

Reserve and other accruals $ 643 $ 823

Net operating losses 4,983 1,112

Prepaid insurance and other

Impairments of real estate development assets

Right-of-use asset 578 —

Minimum pension liability adjustment 962 820

Amortization 325 295

Interest expense limitation 306 —

Stock based compensation 549 554

Total deferred income tax assets 8,346 3,604

3 unchanged sentences

Property taxes ( 173 ) ( 150 )

Book and tax basis difference of acquired assets

Depreciation ( 16,930 ) ( 13,630 )

Land and other indefinite life assets ( 6,905 ) ( 6,887 )

Investment in joint ventures and other basis adjustments ( 4,097 ) ( 2,105 )

Right-of-use asset ( 557 ) —

Unrealized net gain on Calavo investment — ( 4,142 )

Other ( 1,241 ) ( 674 )

Total deferred income tax liabilities ( 29,903 ) ( 27,588 )

Net deferred income tax liabilities $ ( 22,097 ) $ ( 24,346 )

Deferred income taxes — noncurrent assets $ 333 $ —

Deferred income taxes — noncurrent liabilities $ ( 22,430 ) $ ( 24,346 )

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income Taxes (continued)

The Company periodically evaluates the recoverability of the deferred tax assets.

2 unchanged sentences

The Company has recorded a valuation allowance of $ 540,000 on two Chilean subsidiaries deferred tax assets as of October 31, 2020 as the Company does not believe it is more likely than not that these deferred tax assets will be realized due to the recent history of cumulative pre-tax book losses and lack of objectively verifiable future source of taxable income.

At October 31, 2019 , the Company had federal net operating loss carry-forwards of approximately $4,352,000 , state net operating loss of $350,000 and Chile net operating loss of $815,000 .

The federal net operating loss of $2,720,000 will be carried forward indefinitely without 80% taxable income limitation and $1,630,000 will be carried forward indefinitely with 80% limitation.

State net operating loss begins to expire in 2039.

Chilean net operating loss also can be carried forward indefinitely.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income Taxes (continued)

At October 31, 2020, the Company recorded a deferred tax asset of $ 4,983,000 related to its federal, state, and foreign net operating carryforwards.

The entire federal net operating loss is subject to the 80 % taxable income limitation.

The net operating losses begin to expire as follows (in thousands):

Jurisdiction Gross Amount Begin to Expire

Federal 12,161 Indefinite

State 15,190 10/31/2039

Chile 3,662 Indefinite

Argentina 1,684 10/31/2025

At October 31, 2020, the Company had disallowed federal and state interest expense carryforwards of approximately $ 1,442,000 and $ 2,454,000 , respectively, that do not expire.

Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of the domestic net operating loss and disallowed interest expense carryforwards may be limited in future periods.

Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

2020 2019 2018

Amount % Amount % Amount %

Provision at statutory rates $ 5,551 ( 21.0 ) % $ 1,351 ( 21.0 ) % $ ( 3,125 ) ( 23.3 ) %

3 unchanged sentences

Transaction costs — — ( 137 ) 2.1 % — —

Production deduction

Tax law change 1,948 ( 7.4 ) % — — 10,295 76.4 %

1 unchanged sentence

Valuation allowance ( 168 ) 0.6 % ( 393 ) 6.1 % — —

Minority interest

Noncontrolling interest ( 305 ) 1.1 % 116 ( 1.8 ) % — —

Other permanent items 110 ( 0.4 ) % 15 ( 0.3 ) % 278 2.1 %

Total income tax benefit (provision)

Total income tax benefit $ 8,494 ( 32.2 ) % $ 1,097 ( 17.1 ) % $ 6,729 49.9 %

At October 31, 2020 and 2019, the Company had no unrecognized tax benefits.

The Company reports accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company files income tax returns in the U.S., California, Arizona, Chile and Argentina.

The Company files income tax returns in the U.S., California, Arizona, Chile, Argentina and Holland.

The Company is no longer subject to significant U.S., state and Chilean income tax examinations for years prior to the statutory periods of three years for federal, four years for state and three years for Chilean tax jurisdictions.

1 unchanged sentence

There was no accrued interest or penalties associated with uncertain tax positions as of October 31, 2020.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income Taxes (continued)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

The CARES Act includes numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, the creation of certain refundable employee retention credits, and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property.

The Company evaluated the impact of the CARES Act and has recorded a tax benefit of $ 1,948,000 and an income tax refund of $ 5,801,000 due to our ability to carryback and obtain federal tax refund by utilizing net operating losses under the provisions of the CARES Act, of which $ 841,000 and $ 4,960,000 were received in October 2020 and December 2020, respectively.

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted into law.

2 unchanged sentences

(a) reducing the federal corporate income tax rate from 35% to a flat 21%, effective January 1, 2018, (b) including two new U.S.

tax base erosion provisions and the global intangible low-taxed income ("GILTI") provisions and (c) expanding the number of individuals whose compensation is subject to a $1.0 million cap on deductibility under Section 162(m) and includes performance-based compensation such as stock options and stock appreciation rights in the calculation.

As a result of the rate reduction, the Company recorded a provisional amount related to the remeasurement of the Company's deferred tax balance as of October 31, 2018 of $10,295,000 .

The Company applied the guidance in Staff Accounting Bulletin No.

118 (“SAB 118”) when accounting for the enactment-date effects of the 2017 Act throughout fiscal year 2018.

Upon further analysis of certain aspects of the 2017 Act and refinement of the calculations during the 12 months ended January 31, 2019, the Company completed its evaluation for all of the enactment-date income tax effects of the 2017 Act and no material adjustments were made on the provisional amounts recorded at January 31, 2018.

tax base erosion provisions and the global intangible low-taxed income ("GILTI") provisions and (c) expanding the number of individuals whose compensation is subject to a $1,000,000 cap on deductibility under Section 162(m) and includes performance-based compensation such as stock options and stock appreciation rights in the calculation.

As a result of the rate reduction, the Company recorded an income tax benefit of $ 10,295,000 related to the remeasurement of the Company's deferred tax balance as of October 31, 2018.

Retirement Plans

4 unchanged sentences

The Plan is funded consistent with the funding requirements of federal law and regulations.

There were funding contributions of $600,000 and $600,000 for fiscal years 2019 and 2018 , respectively.

There were funding contributions of zero and $ 600,000 for fiscal years 2020 and 2019, respectively.

Plan assets are invested in a group trust consisting primarily of pooled funds, mutual funds, short-term investment funds and cash.

1 unchanged sentence

The long-term target asset allocations are Domestic Equity 30 %, International Equity 10 % and Fixed Income 60 %.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Retirement Plans (continued)

The following tables set forth the Plan’s net periodic cost, changes in benefit obligation and Plan assets, funded status, amounts recognized in the Company’s consolidated balance sheets, additional year-end information and assumptions used in determining the benefit obligations and net periodic benefit cost.

6 unchanged sentences

Net periodic benefit cost $ 713 $ 375

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Retirement Plans (continued)

Following is a summary of the Plan’s funded status as of October 31 (in thousands):

4 unchanged sentences

Benefits paid ( 1,524 ) ( 1,453 )

Actuarial loss (gain)

Actuarial loss 1,236 3,063

Benefit obligation at end of year $ 22,898 $ 22,267

16 unchanged sentences

Prior service cost $ ( 144 ) $ ( 189 )

Net loss ( 6,162 ) ( 6,322 )

Accumulated other comprehensive loss ( 6,306 ) ( 6,511 )

1 unchanged sentence

Net deficit recognized in statements of financial position $ ( 3,546 ) $ ( 3,038 )

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Retirement Plans (continued)

Presented below are changes in accumulated other comprehensive income, before tax, in the Plan as of October 31, (in thousands):

Changes recognized in other comprehensive income:

Net loss (gain) arising during the year

Net loss arising during the year $ 579 $ 1,306

Amortization of prior service cost ( 45 ) ( 45 )

2 unchanged sentences

Total recognized in net periodic benefit and other comprehensive income $ 508 $ 1,234

Presented below is the October 31, year-ended estimated amount that will be amortized from accumulated other comprehensive income over the next fiscal year (in thousands):

Initial net asset (obligation)

Prior service cost

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Retirement Plans (continued)

The following assumptions, as of October 31, were used in determining benefit obligations and net periodic benefit cost ($ in thousands):

10 unchanged sentences

Next five years 6,569

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Retirement Plans (continued)

The following table sets forth the Plan’s assets as of October 31, 2020, segregated by level using the hierarchy established by FASB ASC 820, Fair Value Measurements and Disclosures (in thousands):

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 157 $ — $ — $ 157

Mutual funds 1,152 — — 1,152

Pooled funds — 18,043 — 18,043

$ 1,309 $ 18,043 $ — $ 19,352

The Company has a 401(k) plan in which it contributes an amount equal to 4 % of an eligible employee’s annual earnings beginning after one year of employment.

4 unchanged sentences

During fiscal years 2020, 2019 and 2018, the Company contributed to the plan and recognized expenses of $ 1,107,000 , $ 927,000 and $ 823,000 , respectively.

Operating Lease Income

The Company rents certain of its assets under net operating lease agreements ranging from one month to 18 years .

The cost of land subject to agricultural land leases was $1,279,000 at October 31, 2019 .

The total cost and accumulated depreciation of buildings, equipment and building improvements subject to leases was $22,841,000 and $7,551,000 , respectively, at October 31, 2019 .

The Company’s rental operations revenue includes contingent rental revenue of $355,000 , $324,000 and $251,000 for fiscal years 2019 , 2018 and 2017 , respectively.

The future minimum lease payments to be received by the Company related to these net operating lease agreements as of October 31, 2019 , are as follows (in thousands):

Commitments and Contingencies

Operating Leases

The Company has operating leases for agricultural land and packinghouse equipment.

Total lease expense for fiscal years 2019 , 2018 and 2017 was $733,000 , $2,028,000 and $1,878,000 , respectively, which is included in agribusiness costs and expenses in the Company’s consolidated statements of operations.

In October 2018, the Company purchased a 1,000 KW photovoltaic generator for $1,125,000 that was previously under a 10 -year operating lease agreement with Farm Credit West.

In December 2018, the Company purchased another 1,000 KW photovoltaic generator for $1,275,000 that was previously under a 10 -year operating lease agreement with Farm Credit West.

Minimum future lease payments are as follows (in thousands):

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Commitments and Contingencies (continued)

Operating Leases (continued)

In addition to operating lease commitments, the Company also has a contract for pollination services with minimum future payments of $325,000 for each of the years 2020 - 2022 and $54,000 in 2023.

Letters of Credit

The Company utilizes standby letters of credit to satisfy workers’ compensation insurance security deposit requirements.

At October 31, 2019 , there were no outstanding letters of credit.

Litigation and Legal Proceedings

2 unchanged sentences

Legal claims are inherently uncertain, however, and it is possible that the Company’s business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Series B and Series B-2 Preferred Stock

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Because the Series B Stock may be redeemed by holders of the shares at their discretion beginning July 1, 2017, the redemption is outside the control of the Company and accordingly, the Series B Stock has been classified as temporary equity.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Series B and Series B-2 Preferred Stock (continued)

Series B Convertible Preferred Stock (continued)

In fiscal year 2017, a total of 14,210 shares of Series B preferred stock were converted into 177,624 shares of common stock.

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In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holder of shares of the Series B-2 Preferred Stock is entitled to be paid out of the assets available for distribution, before any payment is made to the holders of the Company’s common stock or any other series or class of the Company’s shares ranking junior to the Series B-2 Preferred Stock, an amount equal to the liquidation value of $ 1,000 per share, plus an amount equal to all accrued and unpaid dividends.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Series B and Series B-2 Preferred Stock (continued)

Series B-2 Convertible Preferred Stock (continued)

Voting Rights:

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Unless and until a definitive agreement or definitive agreements with respect to Associated’s real estate and water rights is entered into that would cause the cessation of farming operations, Associated expects to continue farming the Property and recognize all results of operations and retain all proceeds from such operations.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stockholders’ Equity

Series A Junior Participating Preferred Stock and Shareholder Rights Agreement

During fiscal year 2007, the Company entered into a shareholder rights agreement with the Bank of New York acting as rights agent.

In connection with this agreement, on October 31, 2006, the Company designated 20,000 shares of preferred stock as Series A Junior Participating Preferred Stock at $0.01 par value (the “Series A Stock”).

Additionally, on October 31, 2006, the Company declared a dividend to be distributed on December 20, 2006, to each holder of record of the Company’s common stock the right to purchase one one-hundredth of a share of Series A Stock.

If a triggering event occurred, the Board of Directors had the option to allow rights holders to exercise their rights.

The shareholder rights agreement, and the rights thereunder, expired by its terms on December 19, 2016.

Series A Junior Participating Preferred Stock

The Company has 20,000 shares of preferred stock authorized as Series A Junior Participating Preferred Stock at $ 0.01 par value (the “Series A Stock”).

No shares are issued or outstanding.

Stock-based compensation

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The fair value of such awards is based on the fair value of the Company's stock on the date of grant and all are classified as equity awards.

The Stock Plan has 281,225 remaining shares available to be issued as of October 31, 2020.

Performance Awards

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The performance grants are based on a percentage of the employee’s base salary divided by the stock price on the grant date once the performance criteria has been met, and generally vest over a two-year period as service is provided.

During December 2019, there were no Performance Awards of restricted stock granted for fiscal year 2019 performance because the financial performance and other criteria were not met.

During December 2020 and 2019, there were no Performance Awards of restricted stock granted for fiscal year 2020 or 2019 performance because the financial performance and other criteria were not met.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stockholders’ Equity (continued)

Stock-based compensation (continued)

Executive Awards

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Year Ended October 31,

Number of Shares

Weighted-Average Grant Price

Number of Shares

Weighted-Average Grant Price

Number of Shares

Weighted-Average Grant Price

2020 2019 2018

Number of Shares Weighted-Average Grant Price Number of Shares Weighted-Average Grant Price Number of Shares Weighted-Average Grant Price

Performance Awards — $ — 40,095 $ 18.74 41,291 $ 22.86

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Director Awards 17,841 $ 20.05 15,642 $ 21.65 14,033 $ 22.00

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stockholders’ Equity (continued)

Stock-based compensation (continued)

Total 112,841 $ 19.06 145,737 $ 19.73 145,324 $ 22.36

The Company recognized $ 2,044,000 , $ 1,791,000 and $ 1,368,000 of stock-based compensation in fiscal years 2020, 2019 and 2018, respectively, of which substantially all of the expense has been included in selling, general and administrative expenses for all years presented.

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A summary of the status of the Company’s nonvested shares as of October 31, 2020, and changes during the year ended October 31, 2020, is presented below.

Number of Shares

Weighted-Average

Number of Shares Weighted-Average

Nonvested at October 31, 2019 171,106 $ 20.64

Vested ( 117,646 ) $ 20.20

Granted 95,000 $ 18.87

Nonvested at October 31, 2020 148,460 $ 19.85

On December 17, 2019 , the Company declared a $0.075 per share dividend which is to be paid on January 15, 2020 in the aggregate amount of $1,332,000 to common shareholders of record as of December 30, 2019 .

Public Offering of Common Stock

In June 2018, the Company completed the sale of an aggregate of 3,136,362 shares of our common stock, at a price of $22.00 per share, to a limited number of institutional and other investors in a registered offering under the shelf registration statement.

The offering represented 18% of our outstanding common stock on an after-issued basis as of June 25, 2018.

Upon completion of the offering and issuance of common stock, the Company had 17,669,314 shares of common stock outstanding.

The gross proceeds of the offering totaled $69,000,000 and after an underwriting discount of $4,485,000 and other offering expenses of $418,000 , the net proceeds received by the Company were $64,097,000 .

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stockholders’ Equity (continued)

Treasury Stock

Share Repurchase Program

On March 12, 2020, the Board of Directors of the Company approved a share repurchase program authorizing the Company to repurchase up to $ 10,000,000 of its outstanding shares of common stock through March 2021.

Under the share repurchase program, purchases of shares of common stock may be made from time to time in the open market or in privately negotiated transactions.

The share repurchase program may be modified, suspended or discontinued at any time and does not commit the Company to repurchase shares of its common stock.

During fiscal year 2020, the Company repurchased 250,977 shares under the share repurchase program for approximately $ 3,493,000 .

As of October 31, 2020, the remaining authorization under this program is approximately $ 6,507,000 .

On December 15, 2020, the Company declared a $ 0.075 per share dividend payable on January 15, 2021, in the aggregate amount of $ 1,324,000 to common shareholders of record as of December 28, 2020.

Fruit Growers Supply Cooperative

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The allocations may then be disbursed to members as dividends no less than five years after allocation.

As of October 31, 2019 and 2018 , the Company has been allocated $729,000 ;

however, the declaration of dividends is subject to approval by the FGS Board of Directors and members may receive amounts less than those originally allocated.

The declaration of dividends is subject to approval by the FGS Board of Directors and members may receive amounts less than those originally allocated.

The Company records allocations disbursed by FGS as reductions of agribusiness expenses.

As of October 31, 2020 and 2019, the Company had been allocated $ 729,000 , of which the Company received dividends of $ 513,000 in fiscal year 2020, leaving an ending allocation of $ 216,000 as of October 31, 2020.

The Company received no dividends in fiscal years 2019 or 2018.

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The Company assigned 50 % of future dividends it receives from FGS up to the amount of claim in the unconditional settlement of the claim.

The balance of the claim as of October 31, 2019 was $251,000 .

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The balance of the claim as of October 31, 2019 was $ 251,000 and the claim was paid in full in fiscal year 2020.

Segment Information

The Company operates in six reportable operating segments:

fresh lemons, lemon packing, avocados, other agribusiness, rental operations and real estate development.

The Company operates in four reportable operating segments:

fresh lemons, lemon packing, avocados and other agribusiness.

The Company’s operating segments of rental operations and real estate development are no longer disclosed as separate reportable operating segments and are included in the “Corporate and Other” category in the tables below as they do not meet the quantitative threshold and from a qualitative perspective are not a core focus of the Company's main agribusiness activities.

Prior years’ information has been restated to conform to the current year’s presentation.

The reportable operating segments of the Company are strategic business units with different products and services, distribution processes and customer bases.

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The lemon packing segment expenses are comprised of lemon packing costs.

The lemon packing segment revenues include inter-segment revenues between fresh lemons and lemon packing.

The inter-segment revenues are included gross in the segment note and a separate line item is shown as an elimination.

The lemon packing segment revenues include intersegment revenues between fresh lemons and lemon packing.

The intersegment revenues are included gross in the segment note and a separate line item is shown as an elimination.

The avocados segment includes sales, farming and harvest costs.

The other agribusiness segment includes sales, farming and harvest costs of oranges, specialty citrus and other crops.

The rental operations segment includes housing and commercial rental operations, leased land and organic recycling.

The real estate development segment includes real estate development operations.

Revenues related to rental operations are included in “Corporate and Other.”

The Company does not separately allocate depreciation and amortization to its fresh lemons, lemon packing, avocados and other agribusiness segments.

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Intersegment revenues represent packing revenues related to lemons grown on the Company’s orchards.

Prior to October 31, 2017, the Company combined its fresh lemons and lemon packing segments into one reportable segment called lemon operations.

During 2017, following the completion and start-up activities of its new lemon packinghouse in 2016, the Company and its chief operating decision maker have emphasized the strategic importance and financial performance of its lemon packing operations and expanded processing volume with a focus on increasing the quantity of lemons procured from third-party growers.

As a result, during the fourth quarter of 2017, the Company separated its lemon operations segment into two segments:

fresh lemons and lemon packing.

This change was made to align operating segments with the basis that the chief operating decision maker uses to review financial information to make decisions, assess performance, develop strategy and allocate capital resources.

Additionally, the Company determined that avocados, which was previously aggregated in the other agribusiness segment, should be a separate reportable segment based upon the Company’s chief operating decision maker’s review of its operating results.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Segment Information (continued)

Segment information for fiscal year 2020 (in thousands):

Packing Eliminations Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 124,150 $ 13,413 $ — $ 8,806 $ 13,568 $ 159,937 $ 4,622 $ 164,559

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Depreciation and amortization — — — — — 8,943 1,154 10,097

Operating income (loss)

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Segment Information (continued)

Operating (loss) income $ ( 1,155 ) $ 7,670 $ — $ 3,638 $ 1,446 $ 2,656 $ ( 21,664 ) $ ( 19,008 )

Segment information for fiscal year 2019 (in thousands):

Packing Eliminations Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 134,342 $ 15,629 $ — $ 5,391 $ 11,187 $ 166,549 $ 4,849 $ 171,398

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Depreciation and amortization — — — — — 7,623 1,010 8,633

Operating income

Operating income (loss) $ 13,344 $ 8,063 $ — $ 2,241 $ ( 1,848 ) $ 14,177 $ ( 19,691 ) $ ( 5,514 )

Segment information for fiscal year 2018 (in thousands):

Packing Eliminations Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 94,840 $ 8,990 $ — $ 6,576 $ 13,938 $ 124,344 $ 5,048 $ 129,392

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Depreciation and amortization — — — — — 6,244 1,031 7,275

Operating income

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Segment Information (continued)

The following table sets forth revenues by category, by segment for fiscal years 2019 , 2018 and 2017 (in thousands):

Operating income (loss) $ 20,031 $ 5,890 $ — $ 2,177 $ 4,407 $ 26,261 $ ( 16,775 ) $ 9,486

The following is a detail of other agribusiness revenues for fiscal years 2020, 2019 and 2018 (in thousands):

Year Ended October 31,

Lemon packing

Intersegment revenue

Lemon revenues

Navel and Valencia oranges

2020 2019 2018

Oranges $ 7,722 $ 6,022 $ 8,884

Specialty citrus and other crops 5,846 5,165 5,054

Other agribusiness revenues $ 13,568 $ 11,187 $ 13,938

Agribusiness revenues

Residential and commercial rentals

Organic recycling and other

Rental operations revenues

Real estate development revenues

Total revenues

(1) During the first quarter of fiscal 2019, the Company adopted a comprehensive new revenue recognition standard using a modified retrospective method that does not restate prior periods to be comparable to the current period presentation.

The adoption of this guidance primarily impacted the presentation of certain brokered fruit sales revenue received and the related cost of fruit incurred by us.

The adoption of this guidance resulted in additional revenue and costs and expenses within our fresh lemon segment of $8,800,000 , respectively, during the fiscal year 2019.

See Note 2 - Summary of Significant Accounting Policies for additional information.

Subsequent Events

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data