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Item 2. Management’s Discussion and Analysis

2021-03-10 compared with 2020-09-09 · 187 added, 394 removed, 286 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Limoneira Company was incorporated in Delaware in 1990 as the successor to several businesses with operations in California since 1893.

Limoneira Company, a Delaware corporation, is the successor to several businesses with operations in California since 1893.

We are primarily an agribusiness company founded and based in Santa Paula, California, committed to responsibly using and managing our approximately 15,400 acres of land, water resources and other assets to maximize long-term stockholder value.

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We currently have an interest in three real estate development projects in California.

These projects include multi-family housing and single-family homes comprising approximately 260 completed rental units and another approximately 1,150 units in various stages of planning and development.

These projects include multi-family housing and single-family homes comprising 256 completed rental units and another approximately 1,100 units in various stages of planning and development.

Business Division Summary

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The agribusiness division is comprised of four reportable operating segments:

fresh lemons, lemon packing, avocados and other agribusiness, and includes our core operations of farming, harvesting, lemon packing and lemon sales operations.

fresh lemons, lemon packing, avocados and other agribusiness, which includes oranges, specialty citrus and other crops.

The agribusiness division includes our core operations of farming, harvesting, lemon packing and lemon sales operations.

The rental operations division includes our residential and commercial rentals, leased land operations and organic recycling.

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Financial information and discussion of our four reportable segments are contained in the notes to the accompanying consolidated financial statements of this Quarterly Report on Form 10-Q.

Agribusiness Division

The agribusiness division represented approximately 97%, 96% and 96% of our fiscal year 2019, 2018 and 2017 consolidated revenues, respectively, of which fresh lemons and lemon packing combined represented 87%, 80% and 78% of our fiscal year 2019, 2018 and 2017 consolidated revenues, respectively.

Our lemon farming is included in our “fresh lemons” and “lemon packing” reportable operating segments within our financial statements.

Agribusiness Summary

We market and sell lemons directly to our food service, wholesale and retail customers throughout the United States, Canada, Asia, Australia and certain other international markets.

We are one of the largest growers of lemons and avocados in the United States.

We market and sell lemons directly to our food service, wholesale and retail customers throughout the United States, Canada, Asia, Australia, Europe and certain other international markets.

We had approximately $2.1 million of lemon and orange sales in Chile by PDA and San Pablo and $12.1 million of lemon and orange sales in Argentina by Trapani Fresh in the nine months ended July 31, 2020.

We sell a majority of our avocados to Calavo.

Additionally, we sell our oranges and specialty citrus to Sunkist-licensed and other third-party packinghouses, our pistachios to a roaster, packager and marketer of nuts, and our wine grapes to various wine producers.

Historically, our agribusiness operations have been seasonal in nature with quarterly revenue fluctuating depending on the timing and variety of crops being harvested.

Cultural costs in our agribusiness tend to be higher in the first and second quarters and lower in the third and fourth quarters because of the timing of expensing cultural costs in the current year that were inventoried in the prior year.

Historically, our agribusiness division has been seasonal in nature with quarterly revenue fluctuating depending on the timing and variety of crops being harvested.

Cultural costs in our agribusiness division tend to be higher in the first and second quarters and lower in the third and fourth quarters because of the timing of expensing cultural costs in the current year that were inventoried in the prior year.

Our harvest costs generally increase in the second quarter and peak in the third quarter, coinciding with the increasing production and revenue.

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We carefully monitor the respective markets of specialty citrus and other crops and we believe that demand for the types and varieties of specialty citrus and other crops that we grow will continue to increase throughout the world.

Other Divisions

Rental Operations Summary

Our rental operations division includes our residential and commercial rentals, leased land operations and organic recycling.

Our rental operations division represented approximately 3%, 4% and 4% of our consolidated revenues in fiscal years 2019, 2018 and 2017, respectively.

Our residential rental units generate reliable cash flows, which we use to partially fund the operations of all three of our business divisions and provide affordable housing to many of our employees, including our agribusiness employees, a unique employment benefit that helps us maintain a dependable, long-term employee base.

Our residential rental units generate reliable cash flows that we use to partially fund the operating costs of our business and provide affordable housing to many of our employees, including our agribusiness employees.

This unique employment benefit helps us maintain a dependable, long-term employee base.

In addition, our leased land business provides us with a typically profitable diversification.

Revenue from rental operations is generally level throughout the year.

Our real estate development division includes our real estate development investments.

The real estate development division had no revenue in fiscal years 2019, 2018 or 2017.

We recognize that long-term strategies are required for successful real estate development activities.

Real Estate Development Summary

We invest in real estate investment projects and recognize that long-term strategies are required for successful real estate development activities.

Our goal is to redeploy real estate earnings and cash flow into the expansion of our agribusiness and other income producing real estate.

For real estate development projects and joint ventures, it is not unusual for the timing and amounts of revenues and costs, partner contributions and distributions, project loans and other financing assumptions and project cash flows to be impacted by government approvals, project revenue and cost estimates and assumptions, economic conditions, financing sources and product demand as well as other factors.

For real estate development projects and joint ventures, it is not unusual for the timing and amounts of revenues and costs, partner contributions and distributions, project loans, other financing assumptions and project cash flows to be impacted by government approvals, project revenue and cost estimates and assumptions, economic conditions, financing sources and product demand as well as other factors.

Such factors could affect our results of operations, cash flows and liquidity.

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Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run through, the land we own.

Water for our farming operations located in Ventura County, California is sourced from the existing water resources associated with our land, which includes approximately 8,600-acre feet of adjudicated water rights in the Santa Paula Basin (aquifer) and the un-adjudicated Fillmore Basin.

Water for our farming operations is sourced from the existing water resources associated with our land, which includes rights to water in the adjudicated Santa Paula Basin (aquifer) and the un-adjudicated Fillmore and Paso Robles Basins (aquifers).

We use ground water and water from local water districts in Tulare County and ground water in San Bernardino County.

Following our acquisition of Associated Citrus Packers, Inc.

("Associated"), we began using federal project water in Arizona from the Colorado River through the YMIDD.

We also have acquired water rights in Chile related to our acquisitions of PDA and San Pablo and in Argentina related to our acquisition of Trapani Fresh.

We use a combination of ground water provided by wells that derive water from the San Joaquin Valley Basin and water from various water districts and irrigation districts in Tulare County, California, which is in the agriculturally productive San Joaquin Valley.

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Our Windfall Farms property located in San Luis Obispo County, California obtains water from wells that derive water from the Paso Robles Basin.

Our Associated Citrus Packers, Inc.

("Associated") farming operations in Yuma, Arizona source water from the Colorado River through the YMIDD, where we have access to approximately 11,700-acre feet of Class 3 Colorado River water rights.

Our Associated farming operations in Yuma, Arizona source water from the Colorado River through the YMIDD, where we have access to approximately 11,700-acre feet of Class 3 Colorado River water rights.

We use ground water provided by wells and surface water for our PDA and San Pablo farming operations in La Serena, Chile and our Trapani Fresh farming operations in Argentina.

California has historically experienced periods of below average precipitation.

Precipitation in 2019 brought relief to California’s drought conditions, although the few years prior to 2019 were among the most severe droughts on record.

Rainfall, snow levels and water content of snow pack were significantly below historical averages.

These conditions resulted in reduced water levels in streams, rivers, lakes, aquifers and reservoirs.

Federal officials oversee the Central Valley Project, California’s largest water delivery system and 100% of the contracted amount of water was provided to San Joaquin Valley farmers in 2019, 2018 and 2017 compared to 75% in 2016 and zero in 2015.

California has experienced below average precipitation since 2018 and according to the U.S.

Drought Monitor, California is experiencing moderate drought conditions as of January 31, 2021.

Federal officials oversee the Central Valley Project, California’s largest water delivery system and 100% of the contracted amount of water was provided to San Joaquin Valley farmers in 2017 through 2020 compared to 75% in 2016 and zero in 2015 and 2014.

Recent Developments

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The first phase of the project broke ground to commence mass grading in November 2017.

The Joint Venture has closed on lot sales representing 354 units from inception through July 31, 2020.

The Joint Venture has closed on lot sales representing 398 units from inception through January 31, 2021, including 44 units in the first quarter of fiscal year 2021.

For further information see Note 5 – Real Estate Development of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

On May 30, 2019, we 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, we 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 our interest in Trapani Fresh was $15.0 million.

Subsequently, in February 2020, FGF agreed to a decrease in the purchase consideration of $0.2 million to reflect profits that Limoneira Argentina would have received had the transaction been consummated at the beginning of the 2019 lemon export season.

In the first quarter of fiscal year 2020, we entered into an agreement to sell our Sevilla property for $2.7 million.

After transaction and other costs, we expect to receive proceeds of approximately $2.6 million and recognize an insignificant gain.

At July 31, 2020, the $2.5 million carrying value of the property was classified as held for sale and included in prepaid expenses and other current assets.

In March 2020, we entered into a revolving equity line of credit promissory note and loan agreement with Farm Credit West for a $15.0 million 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.

In March 2020, we sold our remaining 200,000 shares of Calavo Growers, Inc.

("Calavo") common stock at an average price of $55.29 per share.

Net proceeds from the sale were $11.0 million and we recognized a loss of $6.3 million.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("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.

We have evaluated the impact on our consolidated financial statements and estimated the impact of approximately $2.0

million of income tax benefit and $6.4 million federal and California refunds in calendar year 2020.

We anticipate we 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.

In December 2020, we received $5.0 million of federal income tax refunds related to the Coronavirus Aid Relief and Economic Security Act and we expect to receive an additional $0.9 million of California state refunds in fiscal year 2021.

On March 12, 2020, the Board of Directors of our Company approved a share repurchase program authorizing us to repurchase up to $10.0 million of our outstanding shares of common stock through March 2021.

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The share repurchase program may be modified, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock.

During the quarter ended July 31, 2020, we repurchased 42,100 shares under the share repurchase program for approximately $0.6 million.

As of July 31, 2020, the remaining authorization under this program is approximately $9.4 million.

On June 30, 2020, we entered into a Conversion Agreement with Farm Credit West to convert our term loans to fixed interest rates effective July 1, 2020.

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

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 we may prepay any amounts without penalty.

In June 2020, we entered into an agreement to sell a property, located in Lindsay, California, for $6.0 million.

The transaction closed on August 26, 2020 with us receiving net proceeds of $6.0 million.

After transaction and other costs, we recorded a loss of approximately $0.3 million as of July 31, 2020.

For fiscal year 2019, we declared cash dividends to our stockholders totaling $0.30 per common share in the aggregate amount of $5.3 million.

On July 13, 2020, we declared a cash dividend of $0.075 per common share, which was paid on July 17, 2020, in the aggregate amount of $1.3 million to common stockholders of record as of July 6, 2020.

On April 15, 2020, we declared a cash dividend of $0.075 per common share, which was paid on April 19, 2020, in the aggregate amount of $1.3 million to common stockholders of record as of April 8, 2020.

On December 17, 2019, we declared a cash dividend of $0.075 per common share, which was paid on January 15, 2020, in the aggregate amount of $1.3 million to common stockholders of record as of December 30, 2019.

During fiscal year 2020, we purchased 250,977 shares under the share repurchase program for approximately $3.5 million.

As of January 31, 2021, the remaining authorization under this program is approximately $6.5 million.

On December 15, 2020, we declared a cash dividend of $0.075 per common share paid on January 15, 2021, in the aggregate amount of $1.3 million to stockholders of record as of December 28, 2020.

COVID-19 Pandemic

The global spread of the novel coronavirus (COVID-19) in recent months has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets.

The global spread of the novel coronavirus (COVID-19) in the past year has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets.

The impact of this pandemic has created significant uncertainty in the global economy and has affected our business, employees, suppliers, and customers.

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The export market for fresh product has also significantly declined due to COVID-19 impacts.

The decline in demand for our products beginning the second quarter of 2020, which we believe was a result of the COVID-19 pandemic, negatively impacted our sales and profitability for the second and third quarters of 2020.

The decline in demand for our products beginning the second quarter of fiscal year 2020, which we believe was a result of the COVID-19 pandemic, negatively impacted our sales and profitability for the second, third and fourth quarters of fiscal year 2020 and in the first quarter of fiscal year 2021.

We also expect an adverse impact on our sales and profitability in future periods.

These impacts are expected to be material.

However, the duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors, many of which are outside management’s control, including those presented in - Item 1A.

Risk Factors of this Quarterly Report.

Although subject to unforeseen changes that may arise as the COVID-19 pandemic continues to unfold, we currently expect improvement during the fourth quarter of fiscal year 2020 and into fiscal year 2021, specifically as restaurants and bars continue to reopen.

Risk Factors of our Annual Report on Form 10-K for the year ended October 31, 2020.

Although subject to unforeseen changes that may arise as the COVID-19 pandemic continues to unfold, we currently expect improvement in the second half of fiscal year 2021.

We took proactive actions early on to protect the health of our employees and their families, including curtailing business travel and encouraging video conferencing whenever possible.

In addition, as the COVID-19 pandemic worsened throughout March and into April and May 2020, we allowed personnel to work remotely to the extent possible.

While we believe we have taken appropriate measures to mitigate the impacts of the COVID-19 pandemic, as the situation evolves into what could be a more prolonged pandemic, we will continue to analyze additional mitigation measures that may be needed to preserve the health and safety of our workforce and our customers and the ongoing continuity of our business operations.

In addition, as the COVID-19 pandemic worsened throughout the spring of

2020, we allowed personnel to work remotely to the extent possible.

While we believe we have responded appropriately to mitigate the impacts of the COVID-19 pandemic, as the situation evolves, we will continue to analyze additional mitigation measures that may be needed to preserve the health and safety of our workforce and our customers and the ongoing continuity of our business operations.

Those measures might include modifying workspaces, continuing social distancing policies, implementing new personal protective equipment or health screening policies at our facilities, or such other industry best practices needed to continue to maintain a healthy and safe environment for our employees amidst the COVID-19 pandemic.

Given the economic uncertainty as a result of the COVID-19 pandemic, we have taken actions to improve our current liquidity position, including temporarily postponing capital expenditures, selling equity securities to increase cash, reducing operating costs, and substantially reducing discretionary spending.

In addition, in February 2021 the COVID-19 vaccine was offered to our employees.

Given the economic uncertainty as a result of the COVID-19 pandemic over the past year, we have taken actions to improve our current liquidity position, including temporarily postponing capital expenditures, selling equity securities to increase cash, reducing operating costs, and substantially reducing discretionary spending.

We are one of the largest growers of lemons and avocados in the United States and maintain our country's food chain infrastructure and thus are considered an essential business and permitted to remain open during the ongoing pandemic, be it at reduced volumes, in order to fulfill our customers' needs.

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economy, the ongoing business operations of our clients and our results of operations and financial condition.

While our management team is actively monitoring the impacts of the COVID-19 pandemic and may take further actions altering our business operations that we determine are in the best interests of our employees and clients or as required by federal, state, or local authorities, the full impact of the COVID-19 pandemic on our results of operations, financial condition, or liquidity for the remainder of fiscal year 2020 and beyond cannot be fully estimated at this point.

While our management team is actively monitoring the impacts of the COVID-19 pandemic and may take further actions altering our business operations that we determine are in the best interests of our employees and clients or as required by federal, state, or local authorities, the full impact of the COVID-19 pandemic on our results of operations, financial condition, or liquidity for fiscal year 2021 and beyond cannot be fully estimated at this point.

The following discussions are subject to the future effects of the COVID-19 pandemic on our ongoing business operations.

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

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

2020 2019 2020 2019

Three Months Ended January 31,

Agribusiness $ 37,137 $ 40,483

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Total costs and expenses 43,915 50,122

Operating income (loss):

Operating (loss) income:

Agribusiness 199 (2,060)

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Selling, general and administrative (5,895) (6,310)

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)

Non-GAAP Financial Measures

Due to significant depreciable assets associated with the nature of our operations and interest costs associated with our capital structure, management believes that earnings before interest, income taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA, which excludes LLCB earnings in equity investments, loss on stock in Calavo, disposals of assets and impairments on real estate development assets when applicable, is an important measure to evaluate our results of operations between periods on a more comparable basis.

Due to significant depreciable assets associated with the nature of our operations and interest costs associated with our capital structure, management believes that earnings before interest, income taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA, which excludes gain or loss on stock in Calavo and sale and disposal of property assets when applicable, is an important measure to evaluate our results of operations between periods on a more comparable basis.

Adjusted EBITDA in previous periods also excluded LLCB earnings in equity investment which is no longer excluded due to management’s anticipation of future cash distributions related to the investment in LLCB.

Adjusted EBITDA for prior periods has been restated to conform to the current presentation.

Such measurements are not prepared in accordance with U.S.

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EBITDA and adjusted EBITDA are summarized and reconciled to net loss attributable to Limoneira Company which management considers to be the most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):

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

2020 2019 2020 2019

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

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

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

Three Months Ended January 31,

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

Interest income (43) (225)

Interest expense, net of dividends (134) 170

Income tax benefit (1,187) (3,136)

Depreciation and amortization 2,501 2,565

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Loss on stock in Calavo Growers, Inc.

— 1,775 6,299 2,073

LLCB earnings in equity investment, net (668) (303) (607) (2,573)

Loss on asset disposals 255 — 769 —

Adjusted EBITDA $ (3,071) $ (5,029)

Three Months Ended July 31, 2020 Compared to the Three Months Ended July 31, 2019

Total net revenues for the third quarter of fiscal year 2020 were $53.6 million compared to $50.9 million for the same period of fiscal year 2019.

The 5% increase of $2.7 million was primarily the result of increased agribusiness revenues, as detailed below ($ in thousands):

Agribusiness Revenues for the Three Months Ended July 31,

Three Months Ended January 31, 2021 Compared to the Three Months Ended January 31, 2020

Total net revenues for the first quarter of fiscal year 2021 were $38.3 million compared to $41.7 million for the same period of fiscal year 2020.

The 8% decrease of $3.4 million was primarily the result of decreased agribusiness revenues, as detailed below ($ in thousands):

Agribusiness Revenues for the Three Months Ended January 31,

2021 2020 Change

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Agribusiness revenues $ 37,137 $ 40,483 $ (3,346) (8)%

The decrease in the third quarter of fiscal year 2020 was primarily the result of lower prices partially offset by increased volume of fresh lemons sold compared to the same period in fiscal year 2019.

During the third quarter of fiscal years 2020 and 2019, fresh lemon sales were $35.4 million and $35.8 million on, in aggregate, 1,979,000 and 1,876,000 cartons of lemons sold at average per carton prices of $17.91 and $19.09, respectively.

The decrease in the first quarter of fiscal year 2021 was primarily the result of lower prices partially offset by increased volume of fresh lemons sold compared to the same period in fiscal year 2020.

During the first quarter of fiscal years 2021 and 2020, fresh lemon sales were $25.0 million and $27.0 million, 1,320,000 and 1,280,000 cartons of lemons sold at average per carton prices of $18.91 and $21.12, respectively.

COVID-19 related food service closures reduced the demand for lemons in the food service marketplace and created an over-supply in the retail marketplace.

This oversupply of lemons resulted in lower average per carton prices in the third quarter of fiscal year 2020 compared to the same period in fiscal year 2019.

Lemon revenues in the third quarter of fiscal years 2020 and 2019 included $3.8 million and $5.2 million shipping and handling, $1.1 million and $3.6 million lemon by-products and $2.9 million and $1.8 million other lemon sales, respectively.

The increase in the third quarter of fiscal year 2020 was primarily the result of increased volume partially offset by lower prices of avocados sold compared to the same period in fiscal year 2019.

During the third quarter of fiscal years 2020 and 2019, we sold 6.1 million and 1.4 million pounds of avocados at an average per pound price of $1.00 and $1.80, respectively.

The increase in the third quarter of fiscal year 2020 was primarily the result of higher prices partially offset by decreased volume of oranges sold compared to the same period in fiscal year 2019.

In the third quarter of fiscal years 2020 and 2019, we sold 184,000 and 382,000 40-pound carton equivalents of oranges at an average per carton price of $12.13 and $1.86, respectively.

This oversupply of lemons resulted in lower average per carton prices in the first quarter of fiscal year 2021 compared to the same period in fiscal year 2020.

Lemon revenues in the first quarter of fiscal years 2021 and 2020 included $4.9 million and $4.1 million shipping and handling, $0.8 million and $1.0 million lemon by-products and $3.5 million and $4.0 million other lemon sales, respectively.

Due to harvest timing, no sales were recorded in the first quarter of fiscal year 2021 compared to sales of 125,000 pounds of avocados at an average per pound price of $1.34 in the first quarter of fiscal year 2020.

The decrease in the first quarter of fiscal year 2021 was primarily the result of decreased volume of oranges sold partially offset by higher prices compared to the same period in fiscal year 2020.

In the first quarter of fiscal years 2021 and 2020, we sold 119,000 and 196,000 40-pound carton equivalents of oranges at an average per carton price of $9.17 and $6.71, respectively.

Additionally, the fiscal year 2020 revenues included $0.1 million in Chile and $0.9 million of oranges purchased for resale.

• Specialty citrus and other crops:

During the third quarter of fiscal year 2020, we sold 72,000 40-pound carton equivalents of specialty citrus at an average per carton price of $10.94.

There were no sales in the third quarter of fiscal year 2019.

The slight decrease in the first quarter of fiscal year 2021 was primarily the result of decreased volume partially offset by increased prices of specialty citrus sold compared to the same period in fiscal year 2020.

During the first quarter of fiscal years 2021 and 2020, we sold 115,000 and 139,000 40-pound carton equivalents of specialty citrus at an average per carton price of $15.46 and $13.61, respectively.

Rental operations revenue in the first quarter of fiscal year 2021 was similar to the first quarter of fiscal year 2020.

Costs and Expenses

Our total costs and expenses in the third quarter of fiscal year 2020 were $51.7 million compared to $48.8 million in the same period of fiscal year 2019.

The 6% increase of $3.0 million was primarily attributable to increases in our agribusiness costs partially offset by decreases in selling, general and administrative expenses.

Our total costs and expenses in the first quarter of fiscal year 2021 were $43.9 million compared to $50.1 million in the same period of fiscal year 2020.

The 12% decrease of $6.2 million was primarily attributable to decreases in our agribusiness costs partially offset by increased packing costs.

Costs and expenses associated with our agribusiness include packing costs, harvest costs, growing costs, costs related to the fruit we procure and sell for third-party growers and depreciation and amortization expense, as detailed below ($ in thousands):

Agribusiness Costs and Expenses for the Three Months Ended July 31,

2020 2019 Change

Packing costs $ 16,993 $ 13,524 $ 3,469 26%

Harvest costs 6,698 6,296 402 6%

Growing costs 6,237 6,389 (152) (2)%

Third-party grower costs 14,627 14,715 (88) (1)%

Depreciation and amortization 2,271 1,823 448 25%

Agribusiness costs and expenses $ 46,826 $ 42,747 $ 4,079 10%

• Packing costs:

Packing costs primarily consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs.

In the third quarter of fiscal years 2020 and 2019, lemon packing costs excluding shipping costs were $15.9 million and $12.0 million, respectively.

During the third quarter of fiscal years 2020 and 2019, we packed and sold 1,979,000 and 1,876,000 cartons of lemons at average per carton costs of $8.05 and $6.41, respectively.

Additionally, packing costs included $1.1 million and $1.5 million of shipping costs in the third quarter of fiscal years 2020 and 2019, respectively.

• Harvest costs:

The increase in the third quarter of fiscal year 2020 was primarily the result of increased volume of avocados harvested compared to the same period in fiscal year 2019.

• Growing costs:

Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation.

In the third quarter of fiscal year 2020 growing costs were similar to the same period in fiscal year 2019.

Growing costs reflect farm management decisions based on weather, harvest timing and crop conditions.

• Third-party grower costs:

We sell fruit that we grow and fruit that we procure from other growers.

The cost of procuring fruit from other growers is referred to as third-party grower costs.

The decrease in the third quarter of fiscal year 2020 was primarily attributable to lower prices partially offset by increased volume of third-party grower fruit sold.

Of the 1,979,000 and 1,876,000 cartons of lemons packed and sold during the third quarter of fiscal years 2020 and 2019, respectively, 1,269,000 (64%) and 1,101,000 (59%) cartons were procured from third-party growers at average per carton prices of $8.78 and $11.65, respectively.

• Depreciation and amortization:

Depreciation and amortization expense for the third quarter of fiscal year 2020 was approximately $0.4 million higher than the same period of fiscal year 2019, primarily due to the acquisition of Trapani Fresh in May 2019 and increased assets placed into service.

Selling, general and administrative costs and expenses were $3.9 million in the three months ended July 31, 2020 compared to $5.0 million in the three months ended July 31, 2019.

The $1.1 million decrease was primarily the result of $0.9 million decrease in general and administrative expenses, including certain corporate overhead expenses and $0.2 million decrease in salaries, benefits and incentive compensation as of July 31, 2020 compared to July 31, 2019.

Other (Expense) Income

Other income for the three months ended July 31, 2020 was comprised primarily of $0.8 million of equity in earnings of investments partially offset by $0.1 million of interest expense, net.

Other expense for the three months ended July 31, 2019 was comprised primarily of $1.8 million loss on stock in Calavo Growers, Inc.

and $0.8 million of interest expense, net, partially offset by $0.5 million of equity in investments.

We recorded an estimated income tax provision of $0.8 million and $0.5 million in the third quarter of fiscal years 2020 and 2019 on pre-tax income of $2.6 million and $0.1 million, respectively.

The tax provision recorded for the third quarter of fiscal year 2020 differs from the U.S.

federal statutory tax rate of 21.0% due primarily to a $0.6 million discrete benefit related to the CARES Act.

Our projected annual effective blended tax rate for fiscal year 2020 excluding discrete items is approximately 25.9%.

Net Loss (Income) Attributable to Noncontrolling Interest

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

Nine Months Ended July 31, 2020 Compared to the Nine Months Ended July 31, 2019

Total net revenues were similar for the nine months ended July 31, 2020 at $134.8 million compared to $134.9 million for the nine months ended July 31, 2019, which was primarily the result of offsetting agribusiness revenues, as detailed below ($ in thousands):

Agribusiness Revenues for the Nine Months Ended July31,

2020 2019 Change

Lemons $ 111,983 $ 121,379 $ (9,396) (8)%

Avocados 8,323 3,062 5,261 172%

Oranges 7,171 3,794 3,377 89%

Specialty citrus and other crops 3,832 3,019 813 27%

Agribusiness revenues $ 131,309 $ 131,254 $ 55 —%

The decrease in the first nine months of fiscal year 2020 was primarily the result of lower prices partially offset by increased volume of fresh lemons sold compared to the same period in fiscal year 2019.

During the first nine months of fiscal years 2020 and 2019, fresh lemon sales were $87.8 million and $93.1 million on, in aggregate, 4,734,000 and 4,448,000 cartons of lemons sold at average per carton prices of $18.54 and $20.92, respectively.

COVID-19 related food service closures reduced the demand for lemons in the food service marketplace and created an over-supply in the retail marketplace.

This oversupply of lemons resulted in lower average per carton prices in the second and third quarters of fiscal year 2020 compared to the same periods in fiscal year 2019.

Lemon revenues included $11.8 million and $13.3 million shipping and handling, $3.7 million and $9.9 million lemon by-products and $8.8 million and $5.1 million other lemon sales during the first nine months of fiscal years 2020 and 2019, respectively.

The increase in the first nine months of fiscal year 2020 was primarily the result of increased volume partially offset by lower prices of avocados sold compared to the same period in fiscal year 2019.

During the first nine months of fiscal years 2020 and 2019, we sold 7.5 million and 1.8 million pounds of avocados at an average per pound price of $1.11 and $1.71, respectively.

The increase in the first nine months of fiscal year 2020 was primarily the result of higher prices partially offset by decreased volume of oranges sold compared to the same period in fiscal year 2019.

During the nine months of fiscal years 2020 and 2019, we sold 736,000 and 863,000 40-pound carton equivalents of oranges at average per carton prices of $9.74 and $4.40, respectively.

• Specialty citrus and other crops:

The increase in the first nine months of fiscal year 2020 was primarily the result of higher prices partially offset by decreased volume of specialty citrus sold compared to the same period in fiscal year 2019.

During the first nine months of fiscal years 2020 and 2019, we sold 328,000 and 358,000 40-pound carton equivalents of specialty citrus at an average per carton price of $11.68 and $8.43, respectively.

Costs and Expenses

Our total costs and expenses in the first nine months of fiscal year 2020 were $144.3 million compared to $136.8 million in the same period of fiscal year 2019.

The 5% increase of $7.4 million was primarily attributable to increases in our agribusiness and selling, general and administrative costs and expenses.

Costs and expenses associated with our agribusiness include packing costs, harvest

costs, growing costs, costs related to the fruit we procure and sell for third-party growers and depreciation and amortization expense, as detailed below ($ in thousands):

Agribusiness Costs and Expenses for the Nine Months Ended July 31,

Agribusiness Costs and Expenses for the Three Months Ended January 31,

2021 2020 Change

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Packing costs primarily consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs.

Lemon packing costs excluding shipping costs were $34.9 million and $30.2 million in the first nine months of fiscal years 2020 and 2019, respectively.

During the first nine months of fiscal years 2020 and 2019, we packed and sold 4,734,000 and 4,448,000 cartons of lemons at average per carton costs of $7.38 and $6.78, respectively.

Additionally, packing costs included $2.4 million and $2.8 million of shipping costs in the first nine months of fiscal years 2020 and 2019.

In the first quarter of fiscal years 2021 and 2020, lemon packing costs were $9.5 million and $8.6 million, respectively.

During the first quarter of fiscal years 2021 and 2020, we packed and sold 1,320,000 and 1,280,000 cartons of lemons at average per carton costs of $7.22 and $6.70, respectively.

Additionally, packing costs included $0.8 million and $0.6 million of shipping costs in the first quarter of fiscal years 2021 and 2020, respectively.

• Harvest costs:

The increase in the first nine months of fiscal year 2020 was primarily the result of increased volume of lemons and avocados harvested compared to the same period in fiscal year 2019.

The decrease in the first quarter of fiscal year 2021 was primarily the result of decreased volume of avocados, oranges and specialty citrus harvested compared to the same period in fiscal year 2020.

• Growing costs:

Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation.

The increase in the first nine months of fiscal year 2020 compared to the same period in fiscal year 2019 was primarily due to an increase in cultivation costs.

Growing costs reflect farm management decisions based on weather, harvest timing and crop conditions.

The decrease in the first quarter of fiscal year 2021 was primarily due to farm management decisions based on weather, harvest timing and crop conditions.

• Third-party grower costs:

We sell fruit that we grow and fruit that we procure from other growers.

The cost of procuring fruit from other growers is referred to as third-party grower costs.

The decrease in the first nine months of fiscal year 2020 is primarily attributable to lower prices partially offset by increased volume of third-party grower fruit sold.

Of the 4,734,000 and 4,448,000 cartons of lemons packed and sold during the first nine months of fiscal years 2020 and 2019, respectively, 2,856,000 (60%) and 2,628,000 (59%) cartons were procured from third-party growers at average per carton prices of $11.61 and $15.87, respectively.

We sell lemons that we grow and lemons that we procure from other growers.

The cost of procuring lemons from other growers is referred to as third-party grower costs.

The decrease in the first quarter of fiscal year 2021 was primarily due to lower prices and decreased volume of third-party grower lemons sold compared to the same period of fiscal year 2020.

Of the 1,320,000 and 1,280,000 cartons of lemons packed and sold during the first quarter of fiscal years 2021 and 2020, 637,000 (48%) and 706,000 (55%) were procured from third-party growers at average per carton prices of $14.63 and $16.58, respectively.

Additionally, in the first quarter of fiscal year 2021 and 2020 we incurred $2.0 million and $3.4 million, respectively of costs for purchased, packed fruit for resale.

• Depreciation and amortization:

Depreciation and amortization expense for the first nine months of fiscal year 2020 was approximately $1.2 million higher than the same period of fiscal year 2019, primarily due to the acquisition of Trapani Fresh in May 2019.

Selling, general and administrative costs and expenses were $15.6 million in the nine months ended July 31, 2020 compared to $14.8 million in the nine months ended July 31, 2019.

The $0.7 million increase was primarily the result of $0.5 million increase in training costs associated with an ERP implementation and $0.4 million increase of other selling, general and administrative expenses, including certain corporate overhead expenses, partially offset by $0.2 million decrease in salaries, benefits and incentive compensation.

Other (Expense) Income

Other expense for the nine months ended July 31, 2020 was comprised primarily of $6.3 million loss on stock in Calavo Growers, Inc.

and $1.1 million of interest expense, net, partially offset by $0.3 million of equity in earnings of investments.

Other expense for the nine months ended July 31, 2019 was comprised primarily of $2.1 million loss on stock in Calavo Growers, Inc.

and $1.3 million of interest expense, net, partially offset by $2.4 million of equity in earnings of investments.

We recorded an estimated income tax benefit of $5.9 million and $0.2 million in the first nine months of fiscal years 2020 and 2019 on pre-tax loss of $16.3 million and $2.5 million, respectively.

The tax benefit recorded for the first nine months of fiscal year 2020 differs from the U.S.

federal statutory tax rate of 21.0% due primarily to a $2.0 million discrete benefit related to the CARES Act.

Depreciation and amortization expense for the first quarter of fiscal year 2021 was approximately $0.1 million lower than the same period of fiscal year 2020.

Other operations expenses were $1.1 million and $1.3 million in the first quarter of fiscal years 2021 and 2020, respectively.

Selling, general and administrative costs and expenses were $5.9 million in the first quarter of fiscal year 2021 compared to $6.3 million in the first quarter of fiscal year 2020.

The 7% decrease of $0.4 million primarily consisted of the following:

• Labor, benefits and incentive compensation for the first quarter of fiscal year 2021 were $0.4 million lower than the first quarter of fiscal year 2020.

• Training, depreciation and other costs associated with an ERP software implementation for the first quarter of fiscal year 2021 were $0.3 million lower than the first quarter of fiscal year 2020.

• General and administrative expenses, including certain corporate overhead expenses for the first quarter of fiscal year 2021 were $0.1 million lower than the first quarter of fiscal year 2020.

• Audit, audit-related and income tax fees for the first quarter of fiscal year 2021 were $0.4 million higher than the first quarter of fiscal year 2020.

Other Income (Expense)

Other income for the three months ended January 31, 2021 was comprised primarily of $0.4 million of equity in earnings of investments and $0.2 million of net interest income.

Other expense for the three months ended January 31, 2020 was comprised primarily of $2.0 million loss on stock in Calavo Growers, Inc.

partially offset by $0.1 million of net interest income and $0.2 million of dividend income received from Calavo.

We recorded an estimated income tax benefit of $1.2 million and $3.1 million in the first quarter of fiscal years 2021 and 2020 on pre-tax loss of $5.1 million and $10.0 million, respectively.

The tax benefit recorded for the first quarter of fiscal year 2021 differs from the U.S.

federal statutory tax rate of 21.0% due primarily to foreign jurisdictions which are taxed at different rates, state taxes, and nondeductible tax items.

Our projected annual effective blended tax rate for fiscal year 2021, excluding discrete items, is approximately 24.8%.

Net Loss (Income) Attributable to Noncontrolling Interest

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

Net (Income) Loss Attributable to Noncontrolling Interest

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

Segment Results of Operations

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See Note 18 - Segment Information of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our operating segments.

Three Months Ended July 31, 2020 Compared to the Three Months Ended July 31, 2019

The following table shows the segment results of operations for the three months ended July 31, 2020 (in thousands):

Three Months Ended January 31, 2021 Compared to the Three Months Ended January 31, 2020

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

Packing Eliminations

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

The following table shows the segment results of operations 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

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

For the third quarter of fiscal years 2020 and 2019, our fresh lemons segment total net revenues were $39.5 million and $41.2 million, respectively.

The 4% decrease of $1.7 million was primarily due to decreases in fresh lemon carton sales of $0.4 million and lemon by-products of $2.5 million, partially offset by an increase in brokerage and other sales of $1.1 million.

Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs and costs of fruit we procure from third-party growers.

For the third quarter of fiscal years 2020 and 2019, our fresh lemons segment costs and expenses were $39.7 million and $35.7 million, respectively.

The 11% increase of $4.0 million primarily consisted of the following:

• Harvest costs for the third quarter of fiscal year 2020 were $0.3 million lower than the same period of fiscal year 2019.

• Growing costs for the third quarter of fiscal year 2020 were $2.3 million lower than the same period of fiscal year 2019.

• Third-party grower costs for the third quarter of fiscal year 2020 were $0.5 million lower than the same period of fiscal year 2019.

• Transportation costs for the third quarter of fiscal year 2020 were $1.1 million higher than the same period of fiscal year 2019.

• Intersegment costs and expenses for the third quarter of fiscal year 2020 were $6.1 million higher than the same period of fiscal year 2019.

Lemon Packing

Lemon packing segment revenue is comprised of intersegment packing revenue and shipping and handling revenue.

For the third quarter of fiscal years 2020 and 2019, our lemon packing segment total net revenues were $20.1 million and $15.5 million, respectively.

Costs and expenses associated with our lemon packing segment consist of the cost to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs.

For the third quarter of fiscal years 2020 and 2019, our lemon packing costs and expenses were $16.0 million and $13.5 million, respectively.

For the third quarter of fiscal years 2020 and 2019, lemon packing segment operating income per carton sold was $2.08 and $1.05, respectively.

In the third quarter of fiscal years 2020 and 2019, the lemon packing segment included $16.3 million and $10.3 million, respectively, of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale.

Such intersegment revenues and expenses are eliminated in our consolidated financial statements.

For the third quarter of fiscal years 2020 and 2019, our avocados segment had total net revenues of $6.1 million and $2.5 million, respectively.

Costs and expenses associated with our avocados segment include harvest and growing costs.

For the third quarter of fiscal years 2020 and 2019, our avocados segment costs and expenses were $2.5 million and $1.2 million, respectively.

The 114% increase of $1.4 million primarily consisted of the following:

• Harvest costs for the third quarter of fiscal year 2020 were $0.6 million higher than the same period of fiscal year 2019.

• Growing costs for the third quarter of fiscal year 2020 were $0.7 million higher than the same period of fiscal year 2019.

Other Agribusiness

For the third quarter of fiscal years 2020 and 2019, our other agribusiness segment total net revenues were $3.0 million and $0.7 million, respectively.

The 325% increase of $2.3 million primarily consisted of the following:

• Orange revenues for the third quarter of fiscal year 2020 were $1.5 million higher than the same period of fiscal year 2019.

• Specialty citrus and other crops revenues for the third quarter of fiscal year 2020 were $0.8 million higher than the same period of fiscal year 2019.

Costs and expenses associated with our other agribusiness segment include harvest costs, growing costs and purchased fruit costs.

For the third quarter of fiscal years 2020 and 2019, our other agribusiness costs and expenses were $2.7 million and $0.8 million, respectively.

The 223% increase of $1.8 million primarily consisted of the following:

• Harvest costs for the third quarter of fiscal year 2020 were $0.1 million higher than the same period of fiscal year 2019.

• Growing costs for the third quarter of fiscal year 2020 were $1.3 million higher than the same period of fiscal year 2019.

• Purchased fruit costs for the third quarter of fiscal year 2020 were $0.4 million higher than the same period of fiscal year 2019.

Total agribusiness depreciation and amortization expenses for the third quarter of fiscal year 2020 were $0.4 million higher than the same period of fiscal year 2019.

Corporate and Other

Our rental operations had total net revenues of approximately $1.2 million for the third quarter of fiscal years 2020 and 2019.

Costs and expenses in rental operations and real estate development for the third quarter of fiscal years 2020 and 2019 were similar at approximately $1.0 million.

Depreciation and amortization expenses for the third quarter of fiscal years 2020 and 2019 were similar at approximately $0.3 million.

Selling, general and administrative costs and expenses include other costs not allocated to the operating segments.

Selling, general and administrative costs and expenses for the third quarter of fiscal year 2020 were $1.1 million lower than the same period of fiscal year 2019.

Nine Months Ended July 31, 2020 Compared to the Nine Months Ended July 31, 2019

The following table shows the segment results of operations for the nine months ended July 31, 2020 (in thousands):

The following table shows the segment results of operations 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)

The following table shows the segment results of operations 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)

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

For the first nine months of fiscal years 2020 and 2019, our fresh lemons segment total net revenues were $100.2 million and $108.1 million, respectively.

The 7% decrease of $7.9 million was primarily due to decreases in fresh lemon carton sales of $5.3 million and lemon by-products of $6.3 million, partially offset by an increase in brokerage and other sales of $3.7 million.

Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs and costs of fruit we procure from third-party growers.

For the first nine months of fiscal years 2020 and 2019, our fresh lemons segment costs and expenses were $101.0 million and $95.7 million, respectively.

The 6% increase of $5.4 million primarily consisted of the following:

• Harvest costs for the first nine months of fiscal year 2020 were $1.1 million higher than the same period of fiscal year 2019

• Growing costs for the first nine months of fiscal year 2020 were $0.3 million higher than the same period of fiscal year 2019.

• Third-party grower costs for the first nine months of fiscal year 2020 were $4.9 million lower than the same period of fiscal year 2019.

• Transportation costs for the first nine months of fiscal year 2020 were $2.4 million higher than the same period of fiscal year 2019.

• Intersegment costs and expenses for the first nine months of fiscal year 2020 were $6.4 million higher than the same period of fiscal year 2019.

Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products and other lemon revenue such as purchased, packed fruit for resale.

For the first quarter of fiscal years 2021 and 2020, our fresh lemons segment total net revenues were $29.3 million and $32.1 million, respectively.

The 9% decrease of $2.8 million was primarily due to decreases in fresh lemon carton sales of $2.1 million, lemon by-products of $0.2 million and brokerage and other sales of $0.5 million.

Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs and costs of lemons we procure from third-party growers.

For the first quarter of fiscal years 2021 and 2020, our fresh lemons segment costs and expenses were $29.5 million and $34.4 million, respectively.

The 14% decrease of $4.8 million primarily consisted of the following:

• Harvest costs for the first quarter of fiscal year 2021 were $1.1 million lower than the same period of fiscal year 2020.

• Growing costs for the first quarter of fiscal year 2021 were $0.7 million lower than the same period of fiscal year 2020.

• Third-party grower costs for the first quarter of fiscal year 2021 were $2.9 million lower than the same period of fiscal year 2020.

• Transportation costs for the first quarter of fiscal year 2021 were $0.3 million higher than the same period of fiscal year 2020.

• Intersegment costs and expenses for the first quarter of fiscal year 2021 were $0.4 million lower than the same period of fiscal year 2020.

Lemon Packing

Lemon packing segment revenue is comprised of intersegment packing revenue and shipping and handling revenue.

For the first nine months of fiscal years 2020 and 2019, our lemon packing segment total net revenues were $43.6 million and $38.8 million, respectively.

For the first quarter of fiscal years 2021 and 2020, our lemon packing segment total net revenues were $11.6 million and $11.2 million, respectively.

The 3% increase of $0.4 million was primarily due to increased volume of lemons packed and sold.

For the first nine months of fiscal years 2020 and 2019, our lemon packing costs and expenses were $34.9 million and $33.0 million, respectively.

For the first nine months of fiscal years 2020 and 2019, lemon packing segment operating income per carton sold was $1.84 and $1.30, respectively.

In the first nine months of fiscal years 2020 and 2019, the lemon packing segment included $31.9 million and $25.5 million, respectively, of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale.

For the first quarter of fiscal years 2021 and 2020, our lemon packing costs and expenses were $9.5 million and $8.6 million, respectively.

The 11% increase of $0.9 million was primarily due to increased volume of lemons packed at higher average per carton costs.

For the first quarter of fiscal years 2021 and 2020, lemon packing segment operating income per carton sold was $1.55 and $2.02, respectively.

In the first quarter of fiscal years 2021 and 2020, the lemon packing segment included $6.7 million and $7.1 million, respectively, of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale.

Such intersegment revenues and expenses are eliminated in our consolidated financial statements.

For the first nine months of fiscal years 2020 and 2019, our avocados segment had total net revenues of $8.3 million and $3.1 million, respectively.

For the first quarter of fiscal year 2021, our avocados segment had no revenues, compared to $0.2 million in the same period of fiscal year 2020.

Costs and expenses associated with our avocados segment include harvest and growing costs.

For the first nine months of fiscal years 2020 and 2019, our avocados segment costs and expenses were $4.6 million and $2.8 million, respectively.

The 62% increase of $1.7 million primarily consisted of the following:

• Harvest costs for the first nine months of fiscal year 2020 were $0.8 million higher than the same period of fiscal year 2019.

• Growing costs for the first nine months of fiscal year 2020 were $1.0 million higher than the same period of fiscal year 2019.

For the first quarter of fiscal years 2021 and 2020, our avocados segment costs and expenses were zero and $0.5 million, respectively.

The 100% decrease of $0.5 million primarily consisted of growing costs.

Other Agribusiness

For the first nine months of fiscal years 2020 and 2019, our other agribusiness segment total net revenues were $11.0 million and $6.8 million, respectively.

The 62% increase of $4.2 million primarily consisted of the following:

• Orange revenues for the first nine months of fiscal year 2020 were $3.4 million higher than the same period of fiscal year 2019.

• Specialty citrus and other crops revenues for the first nine months of fiscal year 2020 were $0.8 million higher than the same period of fiscal year 2019.

For the first quarter of fiscal years 2021 and 2020, our other agribusiness segment total net revenues were $2.9 million and $4.2 million, respectively.

The 29% decrease of $1.2 million primarily consisted of the following:

• Orange revenues for the first quarter of fiscal year 2021 were $1.2 million lower than the same period of fiscal year 2020.

• Specialty citrus and other crops revenues for the first quarter of fiscal year 2021 were similar to the same period of fiscal year 2020.

Costs and expenses associated with our other agribusiness segment include harvest costs, growing costs and purchased fruit costs.

For the first nine months of fiscal years 2020 and 2019, our other agribusiness costs and expenses were $10.0 million and $7.2 million, respectively.

The 39% increase of $2.8 million primarily consisted of the following:

• Harvest costs for the first nine months of fiscal year 2020 were $0.1 million higher than the same period of fiscal year 2019.

• Growing costs for the first nine months of fiscal year 2020 were $0.9 million higher than the same period of fiscal year 2019.

• Purchased fruit costs for the first nine months of fiscal year 2020 were $1.8 million higher than the same period of fiscal year 2019.

Total agribusiness depreciation and amortization expenses for the first nine months of fiscal year 2020 were $1.2 million higher than the same period of fiscal year 2019.

For the first quarter of fiscal years 2021 and 2020, our other agribusiness costs and expenses were $2.4 million and $3.9 million, respectively.

The 40% decrease of $1.6 million primarily consisted of the following:

• Harvest costs for the first quarter of fiscal year 2021 were $0.2 million lower than the same period of fiscal year 2020.

• Growing costs for the first quarter of fiscal year 2021 were $0.5 million lower than the same period of fiscal year 2020.

• Purchased fruit costs for the first quarter of fiscal year 2021 were $0.9 million lower than the same period of fiscal year 2020.

Total agribusiness depreciation and amortization expenses for the first quarter of fiscal year 2021 were $0.1 million lower than the same period of fiscal year 2020.

Corporate and Other

Our rental operations had total net revenues of approximately $3.5 million and $3.7 million for the first nine months of fiscal years 2020 and 2019, respectively.

Costs and expenses in rental operations and real estate development for the first nine months of fiscal years 2020 and 2019 were $3.4 million and $3.3 million, respectively.

Depreciation and amortization expenses for the first nine months of fiscal years 2020 and 2019 were similar at approximately $0.8 million.

Selling, general and administrative costs and expenses include other costs not allocated to the operating segments.

Selling, general and administrative costs and expenses for the first nine months of fiscal year 2020 were $0.7 million higher than the same period of fiscal year 2019.

Our corporate and other operations had revenues of approximately $1.1 million and $1.2 million for the first quarter of fiscal years 2021 and 2020.

Costs and expenses in our corporate and other operations for the first quarter of fiscal years 2021 and 2020 were approximately $6.7 million and $7.3 million, respectively, and include selling, general and administrative costs and expenses not allocated to the operating segments.

Depreciation and amortization expenses for the first quarter of fiscal years 2021 and 2020 were similar at approximately $0.3 million.

Seasonal Operations

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Due to this seasonality and to avoid the inference that interim results are indicative of the estimated results for a full fiscal year, we present supplemental information for 12-month periods ended at the interim date for the current and preceding years.

Results of Operations for the Trailing Twelve Months Ended July 31, 2020 and 2019

Results of Operations for the Trailing Twelve Months Ended January 31, 2021 and 2020

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

Trailing Twelve Months Ended July 31,

Trailing Twelve Months Ended January 31,

Agribusiness $ 156,591 $ 166,232

4 unchanged sentences

Other operations 4,317 4,601

Impairment of real estate development assets — 1,558

Gain on sale of property assets (1,069) —

Loss on sale and disposal of property assets 502 —

Selling, general and administrative 20,865 22,465

2 unchanged sentences

Other (expense) income:

Interest expense, net (1,910) (1,381)

Interest income 180 393

Interest expense, net of dividends (1,744) (2,619)

Equity in earnings of investments, net 825 2,911

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

Loss on stock in Calavo Growers, Inc.

(4,275) (231)

Other income, net — 405

Other (expense) income, net (302) 340

Total other (expense) income (5,316) 794

2 unchanged sentences

Net loss (14,953) (8,763)

Loss (income) attributable to noncontrolling interest 1,547 (635)

Loss attributable to noncontrolling interest 737 17

Net loss attributable to Limoneira Company $ (14,216) $ (8,746)

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

• Total revenues increased $21.6 million in the twelve months ended July 31, 2020 compared to the twelve months ended July 31, 2019 primarily due to increased agribusiness revenues, particularly increased lemon, avocado and orange sales.

• Total costs and expenses increased $23.2 million in the twelve months ended July 31, 2020 compared to the twelve months ended July 31, 2019 primarily due to increases in our agribusiness costs and selling, general and administrative expenses.

The increase in agribusiness costs is associated with increased agribusiness production and the increase in selling, general and administrative expenses is primarily attributable to increased administrative personnel, salaries and benefits, and certain corporate expenses associated with our strategic initiatives.

• Total other expense increased $11.5 million in the twelve months ended July 31, 2020 compared to the twelve months ended July 31, 2019 primarily due to increased losses on stock in Calavo, decreased equity in earnings of investments and an increase in interest expense, net.

• Income tax benefit increased $4.9 million in the twelve months ended July 31, 2020 compared to the twelve months ended July 31, 2019 primarily due to a decrease in income before taxes as a result of decreased operating income and increased total other expense plus discrete items related to the CARES Act.

• Total revenues decreased $9.9 million in the twelve months ended January 31, 2021 compared to the twelve months ended January 31, 2020 primarily due to decreased agribusiness revenues, particularly decreased lemon sales.

• Total costs and expenses decreased $5.7 million in the twelve months ended January 31, 2021 compared to the twelve months ended January 31, 2020 primarily due to decreases in our agribusiness costs and selling, general and administrative expenses offset by increase in the loss on sale and disposal of property assets.

The decrease in agribusiness costs is associated with decreased agribusiness production and the decrease in selling, general and administrative expenses is primarily attributable to decreased administrative personnel, salaries and benefits, and certain corporate expenses associated with our strategic initiatives.

• Total other expense increased $6.1 million in the twelve months ended January 31, 2021 compared to the twelve months ended January 31, 2020 primarily due to increased loss on stock in Calavo and decreased equity in earnings of investments.

• Income tax benefit increased $4.1 million in the twelve months ended January 31, 2021 compared to the twelve months ended January 31, 2020 primarily due to the increase in pre-tax loss of $10.3 million.

Liquidity and Capital Resources

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Cash Flows from Operating Activities

For the nine months ended July 31, 2020, net cash used in operating activities was $11.4 million compared to net cash provided by operating activities of $4.3 million for the nine months ended July 31, 2019.

For the three months ended January 31, 2021 and 2020, net cash used in operating activities was $1.8 million and $12.2 million, respectively.

The significant components of our cash flows used in operating activities were as follows:

• Net loss for the nine months ended July 31, 2020 was $10.4 million compared to net loss of $2.3 million for the nine months ended July 31, 2019.

The components of net loss in the nine months ended July 31, 2020 compared to the same period in fiscal year 2019 consist of a decrease in operating income of $7.6 million, an increase in total other expense of $6.2 million and an increase in income tax benefit of $5.7 million.

• The adjustments to reconcile net loss to net cash (used in) provided by operating activities provided $15.4 million of cash in the nine months ended July 31, 2020 compared to providing $7.5 million of cash in the same period in fiscal year 2019, primarily due to significant changes in depreciation and amortization, loss on stock in Calavo and equity in earnings of investments.

• The changes in operating assets and liabilities used $16.4 million of operating cash in the nine months ended July 31, 2020 compared to using $0.9 million of operating cash in the same period in fiscal year 2019, primarily due to significant changes in accounts receivable, income tax receivable and accounts payable and growers payable.

• Net loss for the three months ended January 31, 2021 was $3.9 million compared to net loss of $6.9 million for the three months ended January 31, 2020.

The components of net loss in the three months ended January 31, 2021 compared to the same period in fiscal year 2020 consist of a decrease in operating loss of $2.8 million, an increase in total other income of $2.1 million and a decrease in income tax benefit of $1.9 million.

• The adjustments to reconcile net loss to net cash used in operating activities provided $2.3 million of cash in the three months ended January 31, 2021 compared to providing $2.2 million of cash in the same period in fiscal year 2020, primarily due to significant changes in deferred income taxes, loss on stock in Calavo and equity in earnings of investments.

• The changes in operating assets and liabilities used $0.2 million of operating cash in the three months ended January 31, 2021 compared to using $7.5 million of operating cash in the same period in fiscal year 2020, primarily due to significant changes in accounts receivable and receivables/other from related parties, income taxes receivable and accounts payable and growers payable.

Cash Flows from Investing Activities

For the nine months ended July 31, 2020, net cash provided by investing activities was $0.3 million compared to net cash used in investing activities of $31.4 million during the same period in fiscal year 2019.

Net cash provided by investing activities for the nine months ended July 31, 2020 was primarily comprised of proceeds from sale of stock in Calavo, offset by capital expenditures and investments.

Capital expenditures were $8.2 million in the nine months ended July 31, 2020, comprised of $7.9 million for property, plant and equipment primarily related to orchard and vineyard development and $0.3 million for real estate development projects.

Additionally, in the nine months ended July 31, 2020, we received proceeds from sale of stock in Calavo of $11.0 million, and contributed $2.8 million to the Joint Venture for the development of our East Area I real estate development project.

Capital expenditures were $12.6 million in the nine months ended July 31, 2019, comprised of $12.0 million for property, plant and equipment primarily related to orchard and vineyard development and the purchase of a photovoltaic solar array and $0.6 million for real estate development projects.

Additionally, in the nine months ended July 31, 2019, we purchased an agriculture property for $0.4 million, contributed $4.0 million to the Joint Venture for the development of our East Area I real estate development project and paid $15.0 million for the Trapani Fresh joint venture formation in Argentina.

Additionally, we sold 10,000 shares of Calavo stock for net proceeds of $1.0 million.

For the three months ended January 31, 2021 and 2020, net cash used in investing activities was $3.6 million and $6.5 million, respectively.

Net cash used in investing activities for the three months ended January 31, 2021 was primarily comprised of capital expenditures and investments.

• Capital expenditures were $3.4 million in the three months ended January 31, 2021, comprised of $3.1 million for property, plant and equipment primarily related to orchard and vineyard development and $0.3 million for real estate development projects.

• Capital expenditures were $3.7 million in the three months ended January 31, 2020, comprised of $3.5 million for property, plant and equipment primarily related to orchard and vineyard development and $0.2 million for real estate development projects.

Additionally, in the three months ended January 31, 2020, we contributed $2.8 million to the Joint Venture for the development of our East Area I real estate development project.

Cash Flows from Financing Activities

For the nine months ended July 31, 2020 and 2019, net cash financing activities was $11.5 million and $27.5 million, respectively.

The $11.5 million of cash provided by financing activities during the nine months ended July 31, 2020 was primarily comprised of net borrowings of long-term debt in the amount $16.7 million partially offset by common and preferred dividends, in aggregate, of $4.4 million and purchases of shares of our common stock of $0.6 million under our share repurchase program.

The $27.5 million of

cash provided by financing activities during the nine months ended July 31, 2019 was primarily comprised of net borrowings of long-term debt in the amount $32.2 million partially offset by common and preferred dividends, in aggregate, of $4.4 million.

For the three months ended January 31, 2021 and 2020, net cash provided by financing activities was $6.7 million and $19.1 million, respectively.

• The $6.7 million of cash provided by financing activities during the three months ended January 31, 2021 was primarily comprised of net borrowings of long-term debt in the amount $8.8 million partially offset by common and preferred dividends, in aggregate, of $1.4 million.

• The $19.1 million of cash provided by financing activities during the three months ended January 31, 2020 was primarily comprised of net borrowings of long-term debt in the amount $20.7 million partially offset by common and preferred dividends, in aggregate, of $1.5 million.

Transactions Affecting Liquidity and Capital Resources

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

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 we may prepay any amounts without penalty.

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

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The Supplements and RELOC provide aggregate borrowing capacity of $130.0 million comprised of $75.0 million under the Revolving Credit Supplement, $40.0 million under the Non-Revolving Credit Supplement and $15.0 million under the RELOC.

The borrowing capacity based on collateral value was $130.0 million at July 31, 2020.

The borrowing capacity based on collateral value was $130.0 million at January 31, 2021.

The interest rate for any amount outstanding under the Supplements is based on the one-month London Interbank Offered Rate (“LIBOR”) rate plus an applicable margin, which is subject to adjustment on a monthly basis.

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Under the Loan Agreement, we are 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.

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.

In February 2020, we received an annual patronage dividend of $1.0 million from Farm Credit West, of which $0.7 million was recorded as a reduction in interest expense and $0.3 million reduced our real estate development assets.

In July 2020, Farm Credit West declared an additional annual cash patronage dividend of $0.6 million received in August 2020, of which we recorded $0.4 million as a reduction in interest expense and $0.2 million reduction in our real estate development assets as of July 31, 2020.

In April 2020, we entered into a Promissory Note with City National Bank for a $3.6 million loan (the “PPP Loan”) pursuant to the Paycheck Protection Program under the CARES Act.

The PPP Loan had a two-year term, an interest rate of 1.0% per annum, and was able to be prepaid at any time prior to maturity with no prepayment penalties.

In April 2020, we returned the $3.6 million in proceeds from the PPP Loan.

We expect to be in compliance with these covenants in fiscal year 2021.

In February 2021, we received an annual patronage dividend of $1.2 million from Farm Credit West, of which $0.8 million was recorded as a reduction in interest expense and $0.4 million reduced our real estate development assets in the first quarter of fiscal year 2021.

We finance our working capital and other liquidity requirements primarily through cash from operations and our Farm Credit West Credit Facility, which includes the Loan Agreement, Supplements and RELOC.

In addition, we have Farm Credit West term loans, the Wells Fargo term loan, the Banco de Chile term loan and a note payable to the sellers of a land parcel.

Additional information regarding the Farm Credit West Credit Facility, the Farm Credit West term loans, the Wells Fargo term loan, the Banco de Chile term loan and the note payable can be found in the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

In addition, we have the Farm Credit West term loans, Wells Fargo term loan, Banco de Chile term loan and COVID-19 loans, and a note payable to the sellers of a land parcel.

Additional information regarding the Farm Credit West Credit Facility, Farm Credit West term loans, Wells Fargo term loan, Banco de Chile term loan and COVID-19 loans and the note payable can be found in the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

We believe that the cash flows from operations and available borrowing capacity from our existing credit facilities will be sufficient to satisfy our capital expenditures, debt service, working capital needs and other contractual obligations for the next twelve months.

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

The Joint Venture recorded a $39.4 million outstanding loan balance at July 31, 2020 related to this Loan.

The Joint Venture recorded a $17.4 million outstanding loan balance at January 31, 2021 related to this Loan.

The obligations under the Loan are guaranteed by certain principals from Lewis and by us.

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

Fixed Rate and Variable Rate Debt

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Off-Balance Sheet Arrangements

As discussed above and in Note 7 – Real Estate Development and Note 8 – Equity in Investments in the notes to consolidated financial statements included in our fiscal year 2019 Annual Report on Form 10-K, we have investments in joint ventures and partnerships that are accounted for using the equity method of accounting.

As discussed in Note 7 – Real Estate Development and Note 8 – Equity in Investments of the notes to consolidated financial statements included in our fiscal year 2020 Annual Report on Form 10-K, we have investments in joint ventures and partnerships that are accounted for using the equity method of accounting.

Historically, inflation has not had a material effect on our results of operations.

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We believe the following critical accounting policies reflect our more significant estimates and judgments used in the preparation of our consolidated financial statements.

Changes in Accounting Policies

On November 1, 2019, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No.

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.

We enter 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 our ordinary course of business, we enter into leases as a lessee generally for agricultural land and packinghouse equipment.

We determine 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 our 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 our leases provide an implicit rate, we use our 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 we have elected to recognize lease expense for these leases on a straight-line basis over the lease term.

We have material leases with related parties which are further described in Note 15 - Related-Party Transactions of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

Certain of our 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.

We account for the lease and non-lease components separately.

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

See Note 13 - Leases of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

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

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

Certain of our contracts contain non-lease components such as water, utilities and common area services.

We have elected to not separate lease and non-lease components for our lessor arrangements and the combined component is accounted for entirely under ASC 842.

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.

We recognize operating lease revenue on a straight-line basis over the lease term.

Revenue Recognition - We account for our agribusiness revenue in accordance with ASC 606, Revenue from Contracts with Customers.

The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Revenue Recognition - The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To achieve that core principle, an entity should apply the following steps:

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

We determine the appropriate method by which we recognize 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 our customers.

We determined the appropriate method by which we recognize 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 our customers.

We account 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.

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Our avocados, oranges, specialty citrus and other specialty crops are packed and sold by Calavo and other third-party packinghouses.

We deliver the majority of our avocado production from our 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.

Our arrangements with other third-party packinghouses related to our oranges, specialty citrus and other specialty crops are similar to our arrangement with Calavo.

Our arrangements with our third-party packinghouses are such that we are the producer and supplier of the product and the third-party packinghouses are our customers.

The revenues we recognize related to the fruits sold to the third-party packinghouses are based on the volume and quality of the fruits delivered, the market price for such fruit, less the packinghouses’ charges to pack and market the fruit.

Such packinghouse charges include the grading, sizing, packing, cooling, ripening and marketing of the related fruit.

We control the product until it is delivered to the third-party packinghouses at which time control of the product is transferred to the third-party packinghouses and revenue is recognized.

Such third-party packinghouse charges are recorded as a reduction of revenue as they are not for distinct services.

The identifiable benefit we receive from the third-party packinghouses for packaging and marketing services cannot be sufficiently separated from the third-party packinghouses’ purchase of our products.

In addition, we are not able to reasonably estimate the fair value of the benefit received from the third-party packinghouses for such services and as such, these costs are characterized as a reduction of revenue in our consolidated statements of operations.

Revenue from the sales of certain of our agricultural products is recorded based on estimated proceeds provided by certain of our sales and marketing partners (Calavo and other third-party packinghouses) due to the time between when the product is delivered by us and the closing of the pools for such fruits at the end of each month or harvest period.

Calavo and other third-party packinghouses are agricultural cooperatives or function in a similar manner as an agricultural cooperative.

We estimate the variable consideration using the most likely amount method, with the most likely amount being the quantities actually shipped extended by the prices reported by Calavo and other third-party packinghouses.

Revenue is recognized at time of delivery to the packinghouses relating to fruits that are in pools that have not yet closed at month end if:

(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, we have 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.

We do 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 packinghouses.

Historically, the revenue that is recorded based on the sales price information provided to us 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.

We have entered into brokerage arrangements with third-party international packinghouses.

In these arrangements, we have the exclusive ability to direct the use of, and obtain substantially all of the remaining benefits from the fruit, and are therefore acting as a principal.

As such, we record 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.

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

Contingent rental revenues are contractually defined as to the percentage of rent received by us and are based on fees collected by the lessee.

Such revenues are recognized when actual results, based on collected fees reported by the tenant, are received.

Our rental arrangements generally require payment on a monthly or quarterly basis.

Real Estate Development Costs - We capitalize the planning, entitlement, construction and development costs associated with our various real estate projects.

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Practical expedients and exemptions - Taxes collected from customers and remitted to government authorities and that are related to the sales of our products are excluded from revenues.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.

Foreign Currency Translation - PDA and San Pablo’s functional currency is the Chilean Peso.

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Impairment of Long-Lived Assets - We evaluate our long-lived assets including our real estate development projects for impairment when events or changes in circumstances indicate the carrying value of these assets may not be recoverable.

Defined Benefit Retirement Plan - As discussed in the notes to our consolidated financial statements, we sponsor a defined benefit retirement plan that was frozen in June 2004, and no future benefits accrued to participants subsequent to that time.

Ongoing accounting for this plan under FASB ASC 715 provides guidance as to, among other things, future estimated pension expense, pension liability and minimum funding requirements.

Third-party actuarial consultants provide this information to us.

In developing this data, certain estimates and assumptions are used, including among other things, discount rate, long-term rate of return and mortality tables.

Ongoing accounting for this plan under FASB ASC 715, Compensation – Retirement Benefits , provides guidance as to, among other things, future estimated pension expense, pension liability and minimum funding requirements.

This information is provided to us by third-party actuarial consultants.

In developing this data, certain estimates and assumptions are used, including among other things, discount rate, long-term rate of return on assets and mortality tables.

During 2020, the Society of Actuaries (SOA) released a new mortality improvement scale table, referred to as MP-2020, which is believed to better reflect mortality improvements and is to be used in calculating defined benefit pension obligations.

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

Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the disclosures discussed in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020 as filed with the SEC on January 14, 2020.

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 2. Management’s Discussion and Analysis