What changed in this filing

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Item 1. Financial Statements

2021-03-10 compared with 2020-09-09 · 185 added, 432 removed, 454 unchanged (58% of the section changed)

3 unchanged sentences

($ in thousands, except share amounts)

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Current assets:

9 unchanged sentences

Equity in investments 61,580 61,214

Investment in Calavo Growers, Inc.

Goodwill 1,544 1,535

17 unchanged sentences

Series B Convertible Preferred Stock – $ 100.00 par value ( 50,000 shares authorized:

14,790 shares issued and outstanding at July 31, 2020 and October 31, 2019) ( 8.75 % coupon rate)

14,790 shares issued and outstanding at January 31, 2021 and October 31, 2020) ( 8.75 % coupon rate)

Series B-2 Convertible Preferred Stock – $ 100.00 par value ( 10,000 shares authorized:

9,300 shares issued and outstanding at July 31, 2020 and October 31, 2019) ( 4 % dividend rate on liquidation value of $ 1,000 per share)

9,300 shares issued and outstanding at January 31, 2021 and October 31, 2020) ( 4 % dividend rate on liquidation value of $ 1,000 per share)

Stockholders' Equity:

Series A Junior Participating Preferred Stock – $ 0.01 par value ( 20,000 shares authorized:

zero issued or outstanding at July 31, 2020 and October 31, 2019)

zero issued or outstanding at January 31, 2021 and October 31, 2020)

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

17,857,707 and 17,756,180 shares issued and 17,815,607 and 17,756,180 shares outstanding at July 31, 2020 and October 31, 2019, respectively)

17,935,904 and 17,857,707 shares issued and 17,684,927 and 17,606,730 shares outstanding at January 31, 2021 and October 31, 2020, respectively)

Additional paid-in capital 162,450 162,084

1 unchanged sentence

Accumulated other comprehensive loss ( 6,619 ) ( 7,548 )

Treasury stock, at cost, 42,100 shares at July 31, 2020

Treasury stock, at cost, 250,977 shares at January 31, 2021 and October 31, 2020

( 3,493 ) ( 3,493 )

Noncontrolling interest 14,072 13,741

Total stockholders’ equity 207,552 221,688

Total equity 191,729 195,760

Total liabilities and stockholders' equity $ 391,812 $ 389,600

4 unchanged sentences

Three Months Ended

July 31, Nine Months Ended

2020 2019 2020 2019

Net revenues:

7 unchanged sentences

Total costs and expenses 43,915 50,122

Operating income (loss) 1,814 2,118 ( 9,485 ) ( 1,907 )

Operating loss ( 5,640 ) ( 8,466 )

Other income (expense):

Interest expense, net ( 92 ) ( 774 ) ( 1,089 ) ( 1,313 )

Equity in earnings of investments, net 832 480 341 2,449

Interest income 43 225

Interest expense, net of dividends 134 ( 170 )

Equity in earnings (losses) of investments, net 366 ( 120 )

Loss on stock in Calavo Growers, Inc.

— ( 1,775 ) ( 6,299 ) ( 2,073 )

Other income, net 11 15 246 375

Other (expense) income, net ( 6 ) 515

Total other income (expense) 537 ( 1,574 )

Income (loss) before income tax (provision) benefit 2,565 64 ( 16,286 ) ( 2,469 )

Income tax (provision) benefit ( 765 ) ( 461 ) 5,876 216

Net income (loss) 1,800 ( 397 ) ( 10,410 ) ( 2,253 )

Net loss (income) attributable to noncontrolling interest 509 ( 593 ) 1,409 ( 615 )

Net income (loss) attributable to Limoneira Company 2,309 ( 990 ) ( 9,001 ) ( 2,868 )

Loss before income tax benefit ( 5,103 ) ( 10,040 )

Income tax benefit 1,187 3,136

Net loss ( 3,916 ) ( 6,904 )

Net (income) loss attributable to noncontrolling interest ( 292 ) 477

Net loss attributable to Limoneira Company ( 4,208 ) ( 6,427 )

Preferred dividends ( 125 ) ( 125 )

Net income (loss) attributable to common stock $ 2,184 $ ( 1,115 ) $ ( 9,377 ) $ ( 3,244 )

Basic net income (loss) per common share $ 0.12 $ ( 0.06 ) $ ( 0.54 ) $ ( 0.19 )

Diluted net income (loss) per common share $ 0.12 $ ( 0.06 ) $ ( 0.54 ) $ ( 0.19 )

Net loss attributable to common stock $ ( 4,333 ) $ ( 6,552 )

Basic net loss per common share $ ( 0.25 ) $ ( 0.37 )

Diluted net loss per common share $ ( 0.25 ) $ ( 0.37 )

Weighted-average common shares outstanding-basic 17,405,000 17,579,000

2 unchanged sentences

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

(In thousands)

Three Months Ended July 31, Nine Months Ended July 31,

2020 2019 2020 2019

Net income (loss) $ 1,800 $ ( 397 ) $ ( 10,410 ) $ ( 2,253 )

Three Months Ended January 31,

Net loss $ ( 3,916 ) $ ( 6,904 )

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 795 ( 1,267 )

Minimum pension liability adjustment, net of tax of $ 50 , $ 28 , $ 150 and $ 83 for the three and nine months ended July 31, 2020 and 2019, respectively.

135 72 330 218

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

Minimum pension liability adjustment, net of tax of $ 51 and $ 50 for the three months ended January 31, 2021 and 2020, respectively.

Total other comprehensive income (loss), net of tax 929 ( 1,132 )

Comprehensive income (loss) 3,345 ( 884 ) ( 10,416 ) ( 2,151 )

Comprehensive loss attributable to noncontrolling interest 544 575 1,431 576

Comprehensive income (loss) attributable to Limoneira Company $ 3,889 $ ( 309 ) $ ( 8,985 ) $ ( 1,575 )

Comprehensive loss ( 2,987 ) ( 8,036 )

Comprehensive (income) loss attributable to noncontrolling interest ( 331 ) 465

Comprehensive loss attributable to Limoneira Company $ ( 3,318 ) $ ( 7,571 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5 unchanged sentences

Paid-In Retained Accumulated

Comprehensive Treasury Non- controlling Series B

Comprehensive Treasury Non- controlling Total Series B

Preferred Series B-2

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

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

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

7 unchanged sentences

Exchange of common stock ( 46,993 ) ( 1 ) ( 700 ) — — — — ( 701 ) — —

Net loss — — — ( 6,427 ) — — ( 477 ) ( 6,904 ) — —

Other comprehensive (loss) income, net of tax — — — — ( 1,132 ) — 12 ( 1,120 ) — —

Net (loss) income — — — ( 4,208 ) — — 292 ( 3,916 ) — —

Other comprehensive income, net of tax — — — — 929 — 39 968 — —

Balance at January 31, 2021 17,684,927 $ 179 $ 162,450 $ 25,140 $ ( 6,619 ) $ ( 3,493 ) $ 14,072 $ 191,729 $ 1,479 $ 9,331

Dividends Common ($ 0.075 per share)

— — — ( 1,341 ) — — — ( 1,341 ) — —

Dividends Series B ($ 2.19 per share)

— — — ( 32 ) — — — ( 32 ) — —

Dividends Series B-2 ($ 10 per share)

— — — ( 93 ) — — — ( 93 ) — —

Stock compensation — — 358 — — — — 358 — —

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

Net loss — — — ( 4,883 ) — — ( 423 ) ( 5,306 ) — —

Other comprehensive (loss) income, net of tax — — — — ( 419 ) — 1 ( 418 ) — —

Balance at April 30, 2020 17,857,707 $ 179 $ 161,227 $ 38,850 $ ( 8,806 ) $ — $ 14,390 $ 205,840 $ 1,479 $ 9,331

Dividends Common ($ 0.075 per share)

— — — ( 1,338 ) — — — ( 1,338 ) — —

Dividends Series B ($ 2.19 per share)

— — — ( 33 ) — — — ( 33 ) — —

Dividends Series B-2 ($ 10 per share)

— — — ( 93 ) — — — ( 93 ) — —

Stock compensation — — 428 — — — — 428 — —

Treasury shares ( 42,100 )

— — — — — ( 562 ) — ( 562 ) — —

Net income (loss) — — — 2,309 — — ( 509 ) 1,800 — —

Other comprehensive income (loss), net of tax — — — — 1,545 — ( 35 ) 1,510 — —

Balance at July 31, 2020 17,857,707 $ 179 $ 161,655 $ 39,695 $ ( 7,261 ) $ ( 562 ) $ 13,846 $ 207,552 $ 1,479 $ 9,331

LIMONEIRA COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY (CONTINUED)

($ in thousands)

Stockholders' Equity Temporary Equity

1 unchanged sentence

Paid-In Retained Accumulated

Comprehensive Non- controlling Series B

Comprehensive Treasury Non- controlling Total Series B

Preferred Series B-2

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

Shares Amount Capital Earnings Loss Stock Interest Equity Stock Stock

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

7 unchanged sentences

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

Net (loss) income — — — ( 4,693 ) — 17 ( 4,676 ) — —

Other comprehensive income (loss), net of tax — — — — 969 ( 12 ) 957 — —

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

Reclassification upon adoption of ASU 2018-02 — — — ( 1,724 ) 1,724 — — — —

Net loss — — — ( 6,427 ) — — ( 477 ) ( 6,904 ) — —

Other comprehensive (loss) income, net of tax — — — — ( 1,132 ) — 12 ( 1,120 ) — —

Balance at January 31, 2020 17,857,707 $ 179 $ 160,869 $ 45,199 $ ( 8,387 ) $ — $ 14,957 $ 212,817 $ 1,479 $ 9,331

Dividends Common ($ 0.075 per share)

— — — ( 1,333 ) — — ( 1,333 ) — —

Dividends Series B ($ 2.19 per share)

— — — ( 33 ) — — ( 33 ) — —

Dividends Series B-2 ($ 10 per share)

— — — ( 93 ) — — ( 93 ) — —

Stock compensation — — 437 — — — 437 — —

Net income — — — 2,815 — 5 2,820 — —

Other comprehensive loss, net of tax — — — — ( 380 ) ( 9 ) ( 389 ) — —

Balance at April 30, 2019 17,772,753 $ 178 $ 159,992 $ 59,757 $ ( 4,643 ) $ 575 $ 215,859 $ 1,479 $ 9,331

Dividends Common ($ 0.075 per share)

— — — ( 1,333 ) — — ( 1,333 ) — —

Dividends Series B ($ 2.19 per share)

— — — ( 32 ) — — ( 32 ) — —

Dividends Series B-2 ($ 10 per share)

— — — ( 93 ) — — ( 93 ) — —

Stock compensation — — 208 — — — 208 — —

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

Net (loss) income — — — ( 990 ) — 593 ( 397 ) — —

Other comprehensive loss, net of tax — — — — ( 487 ) ( 18 ) ( 505 ) — —

Balance at July 31, 2019 17,772,753 $ 178 $ 160,200 $ 57,309 $ ( 5,130 ) $ 15,560 $ 228,117 $ 1,479 $ 9,331

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)

Nine Months Ended

Three Months Ended

Operating activities

Net loss $ ( 3,916 ) $ ( 6,904 )

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 2,501 2,565

Loss (gain) on disposals of assets 519 ( 11 )

Gain on disposals of assets — ( 250 )

Stock compensation expense 1,066 829

1 unchanged sentence

Equity in earnings of investments ( 366 ) 120

Cash distributions from equity investments — 458

Deferred income taxes ( 1,187 ) ( 3,136 )

Accrued interest on notes receivable ( 19 ) ( 146 )

Loss on stock in Calavo Growers, Inc.

Other, net 142 14

Changes in operating assets and liabilities:

Accounts receivable ( 6,367 ) ( 10,014 )

Accounts receivable and receivables/other from related parties ( 6,115 ) ( 8,433 )

Cultural costs 2,918 3,746

3 unchanged sentences

Accounts payable and growers payable ( 307 ) ( 2,314 )

Accrued liabilities ( 1,472 ) ( 3,206 )

Accrued liabilities and payables to related parties ( 1,116 ) ( 267 )

Other long-term liabilities ( 185 ) 171

Net cash (used in) provided by operating activities ( 11,394 ) 4,274

Net cash used in operating activities ( 1,790 ) ( 12,209 )

Investing activities

Capital expenditures ( 3,415 ) ( 3,672 )

Agriculture property acquisition — ( 397 )

Business combination — ( 15,000 )

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

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

Collections on loan and note receivable 1,800 150

Collection on note receivable 25 —

Equity investment contributions — ( 2,800 )

Investments in mutual water companies ( 55 ) ( 472 )

Insurance proceeds received 250 —

Net cash provided by (used in) investing activities 254 ( 31,380 )

Investments in mutual water companies and water rights ( 190 ) ( 43 )

Net cash used in investing activities ( 3,580 ) ( 6,515 )

Financing activities

4 unchanged sentences

Exchange of common stock ( 700 ) ( 213 )

Purchase of treasury stock ( 562 ) —

Payments of deferred financing costs ( 70 ) —

Net cash provided by financing activities 6,685 19,060

6 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended

Supplemental disclosures of cash flow information

2 unchanged sentences

Non-cash investing and financing activities:

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

Reclassification from real estate development to equity in investments $ — $ ( 33,353 )

Capital expenditures accrued but not paid at period-end $ — $ 119

In December 2018, the Company terminated its lease agreement with the Joint Venture (as defined herein) that is developing the East Area I real estate development project.

As a result, the Company reduced its sale leaseback 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 Quarterly Report on Form 10-Q.

In February 2020, the Company received an annual patronage dividend of $ 966,000 from Farm Credit West, FLCA ("Farm Credit West"), of which $ 667,000 was recorded as a reduction in interest expense and $ 299,000 reduced the Company's real estate development assets.

In July 2020, Farm Credit West declared an additional annual cash patronage dividend of $ 600,000 received in August 2020, of which the Company recorded $ 400,000 as a reduction in interest expense and $ 200,000 as a reduction in the Company's real estate development assets as of July 31, 2020.

Accrued contribution obligation of investment in water company $ — $ 450

The accompanying notes are an integral part of these unaudited consolidated financial statements.

20 unchanged sentences

Summary of Significant Accounting Policies

Changes in Accounting Policies

On November 1, 2019, the Company adopted Financial Accounting Standards Board ("FASB") - Accounting Standards Update ("ASU") 2016-02, Leases (as amended, "ASU 2016-02" or the "New Lease Standard").

A lease is defined as a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company enters into contracts that are, or contain, leases as both a lessee and a lessor.

The following accounting policies have been updated as part of the adoption of the New Lease Standard.

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 .

Comprehensive Loss

Comprehensive loss 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 and defined benefit pension items.

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 income (loss) by component (in thousands):

Three Months Ended January 31,

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

Foreign currency translation adjustments $ 795 $ — $ 795 $ ( 1,267 ) $ — $ ( 1,267 )

Minimum pension liability adjustments:

Other comprehensive gain before reclassifications 185 ( 51 ) 134 185 ( 50 ) 135

Other comprehensive income (loss) $ 980 $ ( 51 ) $ 929 $ ( 1,082 ) $ ( 50 ) $ ( 1,132 )

LIMONEIRA COMPANY

1 unchanged sentence

Summary of Significant Accounting Policies (continued)

Leases (continued)

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 Accounting Standards Codification ("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.

Comprehensive Income (Loss)

Comprehensive income (loss) 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 July 31, 2020, the components of accumulated other comprehensive loss, net of tax, consist of accumulated foreign currency translation losses of $ 2,838,000 and accumulated pension losses of $ 4,423,000 .

As of October 31, 2019, accumulated other comprehensive loss consisted of accumulated foreign currency translation losses of $ 2,362,000 , accumulated pension losses of $ 4,753,000 and accumulated losses related to available for sale securities of $ 140,000 .

Reclassifications and Adjustments

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

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 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 Accumulated Other Comprehensive (Loss) Income

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

Other comprehensive income 795 134 — 929

Balance as of January 31, 2021 $ ( 2,274 ) $ ( 4,345 ) $ — $ ( 6,619 )

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

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

Other comprehensive (loss) income ( 1,267 ) 135 — ( 1,132 )

Balance as of January 31, 2020 $ ( 3,629 ) $ ( 4,618 ) $ ( 140 ) $ ( 8,387 )

Recent Accounting Pronouncements

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

Targeted Improvements

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

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

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 balance.

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):

4 unchanged sentences

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 does not expect this ASU to have a material impact on its consolidated financial statements.

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

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

This amendment adds, removes and clarifies the disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans.

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

Early adoption is permitted.

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

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.

The Company adopted this ASU effective November 1, 2020 and the adoption did not have a material impact on its consolidated financial statements.

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

4 unchanged sentences

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

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

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.

1 unchanged sentence

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

Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")

On March 27, 2020, the CARES Act was signed into law.

The CARES Act provides 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 has evaluated the impact on its consolidated financial statements at July 31, 2020 and has recorded a discrete tax benefit of $ 1,950,000 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.

The Company anticipates it will benefit from the utilization of net operating losses, the technical correction for qualified leasehold improvements eligible for 100% tax bonus depreciation and potentially other provisions within the CARES Act.

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.

Business Combination

Trapani Fresh

On May 30, 2019, the Company acquired a 51 % interest in a joint venture, Trapani Fresh, formed with FGF Trapani (“FGF”), a multi-generational, family-owned citrus operation in Argentina.

To consummate the transaction, the Company formed a subsidiary under the name Limoneira Argentina S.A.U.

(“Limoneira Argentina”) as the managing partner and acquired a 51 % interest in an Argentine Trust that holds a 75 % interest in Finca Santa Clara (“Santa Clara”), a ranch with approximately 1,200 acres of planted lemons.

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

Total consideration paid for the Company’s interest in Trapani Fresh was $ 15,000,000 and transaction costs of approximately $ 654,000 were included in selling, general and administrative expense during the fiscal year ended October 31, 2019.

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 has recorded a receivable from FGF, a decrease in non-controlling 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 finalized during the second quarter of fiscal year 2020 (in thousands):

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Business Combination (continued)

Cultural costs $ 3,270

Land and land improvements 9,520

Buildings and improvements 870

Orchards 8,410

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

Total assets acquired 29,113

Noncontrolling interest ( 14,265 )

Net cash paid $ 14,848

Goodwill of $ 123,000 relates to synergies of the operations, has been 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 $ 21,942,000 , respectively.

Fair Value Measurements

Under the FASB ASC 820, Fair Value Measurement and Disclosures, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability.

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

The following table sets forth the Company’s financial assets 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):

October 31, 2019 Level 1 Level 2 Level 3 Total

Assets at fair value:

Equity securities $ 17,346 $ — $ — $ 17,346

Equity securities consisted of marketable securities in Calavo common stock.

At October 31, 2019, the Company owned 200,000 shares which represented approximately 1.1 % of Calavo’s outstanding common stock at a stock price of $ 97.00 per share.

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

In March 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 for the nine months ended July 31, 2020.

Concentrations and Geographic Information

Lemons procured from third-party growers were 64 % and 59 % of the Company's lemon supply in the three months ended July 31, 2020 and 2019, respectively.

Lemons procured from third-party growers were 60 % and 59 % of the Company's lemon supply in the nine months ended July 31, 2020 and 2019, respectively.

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

One individual customer represented 11 % of accounts receivable, net as of July 31, 2020.

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

Lemons procured from third-party growers were 48 % and 55 % of the Company's lemon supply in the three months ended January 31, 2021 and 2020, respectively, of which one third-party grower was 26 % of the lemon supply for the three months ended January 31, 2021.

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

Sales of avocados to Calavo were insignificant for the three months ended January 31, 2021 and 2020, respectively.

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

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Concentrations and Geographic Information (continued)

During the three and nine months ended July 31, 2020, the Company had approximately $ 643,000 and $ 2,103,000 , respectively, of lemon and orange sales in Chile by PDA and San Pablo and $ 9,626,000 and $ 12,105,000 , respectively, of lemon and orange sales in Argentina by Trapani Fresh.

During the three and nine months ended July 31, 2019, the Company had approximately $ 1,053,000 and $ 2,598,000 , respectively, of lemon and orange sales in Chile by PDA and San Pablo.

In addition, during the three and nine months ended July 31, 2019, the Company had approximately $ 11,685,000 of lemon sales in Argentina by Trapani Fresh.

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

One individual customer represented 23 % of revenues for the three months ended January 31, 2021.

One individual customer represented 12 % of accounts receivable, net as of January 31, 2021.

During the three months ended January 31, 2021 and 2020, the Company had approximately $ 1,027,000 and $ 539,000 , respectively, of total sales in Chile by Fruticola Pan de Azucar S.A.

("PDA") and Agricola San Pablo SpA ("San Pablo").

During the three months ended January 31, 2021 and 2020, the Company had approximately $ 1,671,000 and $ 199,000 , respectively, of total sales in Argentina by Trapani Fresh.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Prepaid supplies and insurance $ 2,569 $ 2,080

1 unchanged sentence

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

Property held for sale 5,982 —

Sales tax receivable 1,549 1,867

Lemon supplier advances and other 2,181 1,708

$ 11,312 $ 10,688

In June 2020, the Company entered into an agreement to sell a property, located in Lindsay, California, for $ 6,000,000 .

The transaction closed on August 26, 2020 with the Company receiving net proceeds of $ 6,011,000 .

After transaction and other costs, the Company recorded a loss of approximately $ 300,000 and classified the $ 5,982,000 carrying value of the property as held for sale as of July 31, 2020.

Real Estate Development

Real estate development assets are comprised primarily of land and land development costs and consist of the following (in thousands):

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Retained Property - East Area I $ 12,698 $ 13,169

7 unchanged sentences

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

The balance includes estimated costs incurred by and reimbursable to LLCB of $ 3,675,000 at July 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.

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 originally was scheduled to mature in January

The balance in Retained Property and East Area II includes estimated costs incurred by and reimbursable to LLCB of $ 5,300,000 at January 31, 2021 and October 31, 2020, which is included in payables to related parties.

LIMONEIRA COMPANY

2 unchanged sentences

East Area I, Retained Property and East Area II (continued)

2020 and was extended to February 22, 2021 per the terms thereof.

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 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 % and is payable monthly.

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

The extension had no impact on the Company's Loan guarantee $ 1,080,000 value as of July 31, 2020.

In February 2021, this loan was extended to February 22, 2023 with an option to extend to February 22, 2024, subject to certain conditions.

The Joint Venture recorded the Loan balance of $ 17,411,000 as of January 31, 2021.

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.

The Joint Venture recorded the Loan balance of $ 39,404,000 as of July 31, 2020.

The Company made contributions to the Joint Venture of $ 2,800,000 and $ 4,000,000 in the nine months ended July 31, 2020 and 2019, respectively.

Additionally, in February 2020 the Company and Lewis each loaned $ 1,800,000 to the Joint Venture at an interest rate of 4.6 % originally due May 31, 2020 and extended to August 31, 2020, which was repaid in June 2020.

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

The extension had no impact on the Company's Loan 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.

The Company made contributions to the Joint Venture of zero and $ 2,800,000 in the three months ended January 31, 2021 and 2020, respectively.

Through January 31, 2021, the Joint Venture has closed the sales of the initial residential lots representing 398 residential units.

Other Real Estate Development Projects

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

In 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 the first quarter of fiscal year 2021.

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

At January 31, 2021, 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 .

1 unchanged sentence

The promissory note was originally scheduled to mature in December 2019 but was extended to December 15, 2020 and the interest rate 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.

At July 31, 2020, the net carrying value of the note was $ 2,490,000 and classified in prepaid expenses and other current assets.

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 , which was paid in November 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 January 31, 2021, the net carrying value of the note was $ 2,625,000 and classified in prepaid expenses and other current assets.

Equity in Investments

Equity in investments consist of the following (in thousands):

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Limoneira Lewis Community Builders, LLC $ 57,574 $ 57,142

4 unchanged sentences

Unconsolidated Significant Subsidiary

In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies to interim reports on Form 10-Q, the Company must determine if its equity method investees are considered “significant subsidiaries." In evaluating its investments, there are two tests utilized to determine if equity method investees are considered significant subsidiaries:

the income test and the investment test.

Summarized income statement information of an equity method investee is required in an interim report if either of the two tests exceed 20% in the interim periods presented.

During the year-to-date interim period for the nine months ended July 31, 2019, this threshold was met for LLCB and thus summarized income statement information is presented in this Quarterly Report on Form 10-Q.

LIMONEIRA COMPANY

1 unchanged sentence

Equity in Investments (continued)

the income test and the investment test.

Summarized income statement information of an equity method investee is required in an interim report if either of the two tests exceed 20% in the interim periods presented.

During the year-to-date interim periods for the three months ended January 31, 2021 and 2020, this threshold was not met for any of the Company's equity investments.

Although not required for the three months ended January 31, 2021, the Company included the LLCB summarized income statement information in this Quarterly Report on Form 10-Q since it anticipates it will be required in the second quarter of 2021.

The following is unaudited summarized financial information for LLCB (in thousands):

Nine Months Ended

Three Months Ended

Revenues $ 7,341 $ 4,743

5 unchanged sentences

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

Goodwill Net Carrying Amount

October 31, 2019 $ 1,839

Trapani Fresh purchase price adjustment ( 297 )

Goodwill Carrying Amount

Balance at October 31, 2020 $ 1,535

Foreign currency translation adjustment 9

July 31, 2020 $ 1,538

See Note 3 - Acquisitions for additional information regarding the acquisition of Trapani Fresh.

Balance at January 31, 2021 $ 1,544

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.

There have been no impairment charges recorded against goodwill as of July 31, 2020.

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

July 31, 2020 October 31, 2019

There have been no impairment charges recorded against goodwill as of January 31, 2021.

During the three months ended January 31, 2021, the Company acquired additional water rights in Chile for $ 186,000 .

Intangible assets consisted of the following as of January 31, 2021 and October 31, 2020 (in thousands):

January 31, 2021 October 31, 2020

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

4 unchanged sentences

$ 13,686 $ ( 2,346 ) $ 11,340 $ 13,392 $ ( 2,083 ) $ 11,309

Amortization expense totaled $ 262,000 and $ 205,000 for the three months ended July 31, 2020 and 2019, respectively.

Amortization expense totaled $ 752,000 and $ 383,000 for the nine months ended July 31, 2020 and 2019, respectively.

Amortization expense totaled $ 263,000 and $ 285,000 for the three months ended January 31, 2021 and 2020, respectively.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Goodwill and Intangible Assets (continued)

Estimated future amortization expense of intangible assets as of July 31, 2020 are as follows (in thousands):

2020 (excluding the nine months ended July 31, 2020) $ 285

Goodwill and Intangible Assets

Estimated future amortization expense of intangible assets as of January 31, 2021 are as follows (in thousands):

2021 (excluding the three months ended January 31, 2021) $ 777

Thereafter 2,763

1 unchanged sentence

The Company’s investments in various not-for-profit mutual water companies provide the Company with the right to receive a proportionate share of water from each of the not-for-profit mutual water companies that have been invested in and do not constitute voting shares and/or rights.

Amounts included in other assets in the consolidated balance sheets as of July 31, 2020 and October 31, 2019 were $ 5,554,000 and $ 5,499,000 , respectively.

Amounts included in other assets in the consolidated balance sheets as of January 31, 2021 and October 31, 2020 were $ 5,567,000 and $ 5,563,000 , respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Compensation $ 2,890 $ 2,275

2 unchanged sentences

Operating expenses 1,455 938

Leases 966 959

Other 1,357 1,746

4 unchanged sentences

Long-term debt is comprised of the following (in thousands):

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Farm Credit West revolving and non-revolving lines of credit:

the interest rate of the revolving line of credit is variable based on the one-month London Interbank Offered Rate (“LIBOR”), which was 0.18 % at July 31, 2020, plus 1.60 %.

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 January 31, 2021, plus 1.60 %.

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

20 unchanged sentences

Note Payable:

the interest rate ranges from 5.00 % to 7.00 % and was 6.00 % at July 31, 2020.

the interest rate ranges from 5.00 % to 7.00 % and was 6.00 % at January 31, 2021.

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 % and 2.90 %.

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

Subtotal 134,946 126,024

4 unchanged sentences

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 rates effective July 1, 2020.

No changes were made to the outstanding principal balances on the term 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 January 1, 2021, after which the Company may prepay any amounts without penalty.

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 were subject to a prepayment restriction period for a portion of the fixed rate term that expired on January 1, 2021.

The Company may prepay any amounts without penalty.

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

2 unchanged sentences

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 July 31, 2020.

The borrowing capacity based on collateral value was $ 130,000,000 at January 31, 2021, of which $ 17,980,000 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.

LIMONEIRA COMPANY

1 unchanged sentence

Long-Term Debt (continued)

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 2020, Farm Credit West declared an annual cash patronage dividend of 1.50 % of average eligible loan balances.

The Company received $ 966,000 in February 2020.

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

Under the Loan Agreement the Company is required to comply with a minimum debt service coverage ratio (as calculated in accordance with the Loan Agreement) of 1.25 :1.0 measured as of October 31 each year.

On May 29, 2020, the Loan Agreement was amended to adjust the debt service ratio to 1.00 :1.0 for October 31, 2020.

The Company accrued the $ 1,170,000 dividend receivable in prepaid expenses and other current assets at January 31, 2021, which was received in February 2021.

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.

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.

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

The Company capitalized interest of zero and $ 89,000 during the three months ended January 31, 2021 and 2020, respectively.

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

The Company capitalized interest of $ 353,000 and $ 366,000 during the three months ended July 31, 2020 and 2019, respectively, and $ 797,000 and $ 977,000 during the nine months ended July 31, 2020 and 2019, respectively.

Lessor Arrangements

2 unchanged sentences

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):

July 31, 2020 October 31, 2019

Land $ 1,234 $ 1,279

Buildings, equipment and building improvements 18,478 22,841

Less accumulated depreciation ( 5,512 ) ( 7,551 )

Property, plant and equipment, net under operating leases $ 14,200 $ 16,569

Depreciation expense for assets under operating leases was approximately $ 159,000 and $ 485,000 for the three and nine months ended July 31, 2020.

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

Three Months Ended

July 31, 2020 Nine Months Ended

July 31, 2020

Operating lease revenue $ 1,059 $ 1,096

1 unchanged sentence

Total lease revenue $ 1,138 $ 1,173

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

2020 (excluding the nine months ended July 31, 2020) $ 309

Thereafter 758

Total $ 2,697

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Leases (continued)

Lessee Arrangements

4 unchanged sentences

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

Operating lease costs were $ 143,000 and $ 417,000 for the three and nine months ended July 31, 2020, respectively, which are primarily included in agribusiness costs and expenses in the Company’s consolidated statements of operations.

As of January 31, 2021, there were no material finance leases for which the Company was a lessee.

Operating lease costs were $ 142,000 and $ 137,000 for the three months ended January 31, 2021 and 2020, respectively, 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.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Leases (continued)

Lessee Arrangements (continued)

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

Classification July 31, 2020

Classification January 31, 2021 October 31, 2020

Operating lease ROU assets Other assets $ 2,203 $ 2,053

3 unchanged sentences

Total operating lease liabilities $ 2,234 $ 2,131

Weighted-average remaining lease term (in years) 10.8

Weighted-average discount rate 3.8 %

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

Three Months Ended

July 31, 2020 Nine Months Ended

July 31, 2020

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

1 unchanged sentence

ROU assets obtained in exchange for new operating lease liabilities $ 271 $ —

Future minimum lease payments under non-cancellable leases for the remainder of fiscal year 2020, each of the subsequent four fiscal years and thereafter are as follows (in thousands):

2020 (excluding the nine months ended July 31, 2020) $ 128

Thereafter 1,449

Total lease payments 2,777

Imputed interest ( 540 )

Total $ 2,237

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Leases (continued)

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 $ 77,000 for the remainder of fiscal year 2020, $ 307,000 for each of the fiscal years 2021 and 2022 and $ 51,000 in fiscal year 2023.

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

Basic and Diluted Net Income (Loss) per Share

Basic net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of conversion of preferred stock.

Diluted net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of conversion of unvested, restricted stock and preferred stock.

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

Basic and Diluted Net Loss per Share

Basic net loss per common share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of conversion of preferred stock.

Diluted net loss per common share is calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of conversion of unvested, restricted stock and preferred stock.

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

Three Months Ended

July 31, Nine Months Ended

2020 2019 2020 2019

Basic net income (loss) per common share:

Net income (loss) applicable to common stock $ 2,184 $ ( 1,115 ) $ ( 9,377 ) $ ( 3,244 )

Basic net loss per common share:

Net loss applicable to common stock $ ( 4,333 ) $ ( 6,552 )

Effect of unvested, restricted stock ( 18 ) ( 17 )

Net income (loss) for basic EPS 2,167 ( 1,131 ) ( 9,427 ) ( 3,293 )

Net loss for basic EPS ( 4,351 ) ( 6,569 )

Weighted average common shares-basic 17,405 17,579

Basic net income (loss) per common share $ 0.12 $ ( 0.06 ) $ ( 0.54 ) $ ( 0.19 )

Diluted net income (loss) per common share:

Net income (loss) for diluted EPS $ 2,309 $ ( 1,131 ) $ ( 9,427 ) $ ( 3,293 )

Basic net loss per common share $ ( 0.25 ) $ ( 0.37 )

Diluted net loss per common share:

Net loss for diluted EPS $ ( 4,351 ) $ ( 6,569 )

Weighted average common shares–basic 17,405 17,579

1 unchanged sentence

Weighted average common shares–diluted 17,405 17,579

Diluted net income (loss) per common share $ 0.12 $ ( 0.06 ) $ ( 0.54 ) $ ( 0.19 )

Diluted net loss per common share $ ( 0.25 ) $ ( 0.37 )

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Basic and Diluted Net Loss per Share (continued)

Diluted earnings (losses) per common share are computed using the more dilutive method of either the two-class method or the treasury stock method.

1 unchanged sentence

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

The Company excluded 225,000 and 149,000 , unvested, restricted shares, as calculated under the treasury stock method, from its computation of diluted earnings (losses) per share for the three months ended July 31, 2020 and 2019, respectively, and 187,000 and 135,000 for the nine months ended July 31, 2020 and 2019, respectively.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

The Company excluded 226,000 and 149,000 , unvested, restricted shares, as calculated under the treasury stock method, from its computation of diluted earnings (losses) per share for the three months ended January 31, 2021 and 2020, respectively.

Related-Party Transactions

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

July 31, 2020 October 31, 2019

January 31, 2021 October 31, 2020

Balance Sheet Balance Sheet

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

1 Employees $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

Ref Related Party Receivable/Other from Related Parties Other Assets Payables to Related Parties Other Long-Term Liabilities Receivable/Other from Related Parties Other Assets Payables to Related Parties Other Long-Term Liabilities

2 Mutual water companies $ — $ 4 $ 68 $ — $ — $ 64 $ 64 $ —

3 Cooperative association $ — $ — $ 15 $ — $ — $ — $ 123 $ —

4 Calavo $ 2,701 $ — $ 1 $ — $ — $ — $ — $ — $ — $ —

5 Third-party growers $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

5 Cadiz / Fenner / WAM $ — $ 1,424 $ 241 $ 1,335 $ — $ 1,443 $ 182 $ 1,353

6 Colorado River Growers $ 157 $ — $ — $ — $ 81 $ — $ — $ —

8 YMIDD $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

8 FGF $ 3,850 $ — $ 604 $ — $ 2,213 $ — $ 604 $ —

9 LLCB $ — $ — $ 5,300 $ — $ — $ — $ 5,300 $ —

Three Months Ended July 31, 2020 Three Months Ended July 31, 2019

Consolidated Statement of Operations Consolidated Statement of Operations

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

1 Employees $ — $ 195 $ — $ — $ — $ — $ 190 $ — $ — $ —

2 Mutual water companies $ — $ — $ 211 $ — $ — $ — $ — $ 195 $ — $ —

3 Cooperative association $ — $ — $ 353 $ — $ — $ — $ — $ 302 $ — $ —

4 Calavo $ 4,724 $ 84 $ 23 $ — $ 126 $ 2,519 $ 81 $ 261 $ — $ 126

5 Third-party growers $ — $ — $ — $ — $ — $ — $ — $ 6 $ — $ —

6 Cadiz / Fenner / WAM $ — $ — $ 1 $ — $ — $ — $ — $ 42 $ — $ —

7 Colorado River Growers $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

8 YMIDD $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

9 FGF $ 9,626 $ — $ 10,508 $ — $ — $ 11,685 $ — $ 8,798 $ — $ —

Nine Months Ended July 31, 2020 Nine Months Ended July 31, 2019

Three Months Ended January 31, 2021 Three Months Ended January 31, 2020

Consolidated Statement of Operations Consolidated Statement of Operations

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

1 Employees $ — $ 198 $ — $ — $ — $ 197 $ — $ — $ —

2 unchanged sentences

4 Calavo $ — $ 79 $ 1 $ 126 $ 32 $ 81 $ 118 $ 220 $ 126

5 Third-party growers $ — $ — $ — $ — $ — $ — $ — $ 386 $ — $ —

5 Cadiz / Fenner / WAM $ — $ — $ 150 $ — $ — $ — $ 102 $ — $ —

2 unchanged sentences

8 FGF $ 1,671 $ — $ 288 $ — $ 199 $ — $ 163 $ — $ —

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (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.

There were no rental payments due from employees at July 31, 2020 and October 31, 2019.

There were no rental payments due from employees at January 31, 2021 and October 31, 2020.

(2) Mutual water companies - The Company has representation on the boards of directors of the mutual water companies in which the Company has investments, refer to Note 8 - Other Assets.

3 unchanged sentences

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

Calavo 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, purchased storage services from Calavo and had amounts due to Calavo for those services.

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

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

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Related-Party Transactions (continued)

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

11 unchanged sentences

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

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

The Company had a receivable from FGF for lemon sales and a payable due to FGF for fruit purchases and services.

(9) LLCB - Refer to Note 5 - Real Estate Development.

The effective tax rate for the nine months ended July 31, 2020 was higher than the federal statutory tax rate of 21% mainly due to a $ 1,950,000 discrete benefit recorded as a result of the carryback of federal net operating losses to previous years when the federal income tax rate was 34 %.

The effective tax rate for the nine months ended July 31, 2019 was lower than the federal statutory tax rate of 21.0% primarily due to income attributable to foreign jurisdictions which is taxed at different rates, state taxes, and nondeductible tax items.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

The effective tax rate for the three months ended January 31, 2021 was higher than the federal statutory tax rate of 21% mainly due to foreign jurisdictions which are taxed at different rates, state taxes, and nondeductible tax items.

The Company has no material uncertain tax positions as of January 31, 2021.

The Company recognizes interest expense and penalties related to income tax matters as a component of income tax expense.

There was no accrued interest or penalties associated with uncertain tax positions as of January 31, 2021.

Retirement Plans

3 unchanged sentences

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

There were funding contributions of zero and $ 150,000 during the three months ended July 31, 2020 and 2019, respectively.

There were funding contributions of zero and $ 450,000 during the nine months ended July 31, 2020 and 2019, respectively.

The components of net periodic pension cost for the Plan for the three and nine months ended July 31, 2020 and 2019 were as follows (in thousands):

There were no funding contributions during the three months ended January 31, 2021 and 2020.

The components of net periodic pension cost for the Plan for the three months ended January 31, 2021 and 2020 were as follows (in thousands):

Three Months Ended

July 31, Nine Months Ended

2020 2019 2020 2019

Administrative expenses $ 69 $ 70

4 unchanged sentences

Net periodic benefit cost $ 166 $ 178

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Commitments and Contingencies

15 unchanged sentences

The related compensation expense of approximately $ 1,450,000 will be recognized equally over the next three years as the shares vest.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Stock-based Compensation and Treasury Stock (continued)

Director Awards

1 unchanged sentence

During January 2021 and 2020, 27,815 and 17,841 shares, respectively, of common stock were granted as Director Awards.

The Company recognized $ 358,000 and $ 339,000 of stock-based compensation to non-employee directors during the nine months ended July 31, 2020 and 2019, respectively.

The Company recognized $ 469,000 and $ 358,000 of stock-based compensation to non-employee directors during the three months ended January 31, 2021 and 2020, respectively.

During the three months ended January 31, 2021 and 2020, members of management exchanged 46,993 and 11,314 shares, respectively, of common stock with fair values of $ 701,000 and $ 213,000 , respectively, at the date of the exchanges, for the payment of payroll taxes associated with the vesting of shares under the Company’s stock-based compensation programs.

4 unchanged sentences

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.

See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” in this Quarterly Report on Form 10-Q for additional information on the share repurchase program.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Segment Information

1 unchanged sentence

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.

6 unchanged sentences

The other agribusiness segment includes sales, farming and harvest costs of oranges, specialty citrus and other crops.

Revenues related to rental operations are included in “Corporate and Other.” Other agribusiness revenues for the three and nine months ended July 31, 2020, consists of oranges of $ 2,232,000 and $ 7,171,000 , respectively, and specialty citrus and other crops of $ 788,000 and $ 3,832,000 , respectively.

Other agribusiness revenues for the three and nine months ended July 31, 2019, consists of oranges of $ 711,000 and $ 3,794,000 , respectively, and specialty citrus and other crops of zero and $ 3,019,000 , respectively.

Revenues related to rental operations are included in “Corporate and Other.” Other agribusiness revenues consist of oranges of $ 1,091,000 and specialty citrus and other crops of $ 1,849,000 for the three months ended January 31, 2021 and oranges of $ 2,272,000 and specialty citrus and other crops of $ 1,892,000 for the three months ended January 31, 2020.

The Company does not separately allocate depreciation and amortization to its fresh lemons, lemon packing, avocados and other agribusiness segments.

1 unchanged sentence

The Company measures operating performance, including revenues and operating income, of its operating segments and allocates resources based on its evaluation.

The Company does not allocate selling, general and administrative expense, other income, interest expense and income taxes, or specifically identify them to its operating segments.

The Company does not allocate selling, general and administrative expense, total other income (expense) and income taxes, or specifically identify them to its operating segments.

The Company earns packing revenue for packing lemons grown on its orchards and lemons procured from third-party growers.

Intersegment revenues represent packing revenues related to lemons grown on the Company’s orchards.

LIMONEIRA COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Segment Information (continued)

Segment information for the three months ended July 31, 2020 (in thousands):

Segment information for the three months ended January 31, 2021 (in thousands):

Packing Eliminations

9 unchanged sentences

Operating (loss) income $ ( 207 ) $ 2,051 $ — $ — $ 567 $ 199 $ ( 5,839 ) $ ( 5,640 )

Segment information for the three months ended July 31, 2019 (in thousands):

Packing Eliminations

Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 41,169 $ 5,232 $ — $ 2,519 $ 711 $ 49,631 $ 1,238 $ 50,869

Intersegment revenue — 10,263 ( 10,263 ) — — — — —

Total net revenues 41,169 15,495 ( 10,263 ) 2,519 711 49,631 1,238 50,869

Costs and expenses 35,653 13,524 ( 10,263 ) 1,185 825 40,924 5,747 46,671

Depreciation and amortization — — — — — 1,823 257 2,080

Operating income (loss) $ 5,516 $ 1,971 $ — $ 1,334 $ ( 114 ) $ 6,884 $ ( 4,766 ) $ 2,118

Segment information for the nine months ended July 31, 2020 (in thousands):

Segment information for the three months ended January 31, 2020 (in thousands):

Packing Eliminations

9 unchanged sentences

Operating (loss) income $ ( 2,294 ) $ 2,590 $ — $ ( 305 ) $ 233 $ ( 2,060 ) $ ( 6,406 ) $ ( 8,466 )

Segment information for the nine months ended July 31, 2019 (in thousands):

Packing Eliminations

Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 108,090 $ 13,289 $ — $ 3,062 $ 6,813 $ 131,254 $ 3,668 $ 134,922

Intersegment revenue — 25,464 ( 25,464 ) — — — — —

Total net revenues 108,090 38,753 ( 25,464 ) 3,062 6,813 131,254 3,668 134,922

Costs and expenses 95,650 32,972 ( 25,464 ) 2,822 7,210 113,190 17,312 130,502

Depreciation and amortization — — — — — 5,551 776 6,327

Operating income (loss) $ 12,440 $ 5,781 $ — $ 240 $ ( 397 ) $ 12,513 $ ( 14,420 ) $ ( 1,907 )

Subsequent Events

The Company has evaluated events subsequent to July 31, 2020 through the date of this filing, to assess the need for potential recognition or disclosure in this Quarterly Report on Form 10-Q.

Based upon this evaluation, except as described in the notes to the interim consolidated financial statements, it was determined that no other subsequent events occurred that require recognition or disclosure in the unaudited consolidated financial statements.

Except as described in the notes to the interim consolidated financial statements, no other subsequent events occurred that require recognition or disclosure in the unaudited consolidated financial statements.

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-Q

Item 1. Financial Statements