What changed in this filing

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Item 1A. Risk Factors

2022-01-10 compared with 2021-01-14 · 51 added, 53 removed, 343 unchanged (23% of the section changed)

20 unchanged sentences

ACP is a federal action quarantine pest subject to interstate and international quarantine restrictions by the United States Department of Agriculture (“USDA”), including a prohibition on the movement of nursery stock out of quarantine areas and a requirement that all citrus fruit be cleaned of leaves and stems prior to movement out of the quarantine area.

ACP and HLB exist domestically in Florida, Louisiana, Georgia, South Carolina and Texas and internationally in countries such as Mexico.

ACP exists in California, including in our orchards.

To date, HLB has also been detected in Los Angeles, Orange, Riverside and San Bernardino Counties in California.

There can be no assurance that HLB will not be further detected in the future.

ACP and HLB exist domestically in California, Florida, Louisiana, Georgia, South Carolina and Texas and internationally in countries such as Mexico.

Due to the discovery of ACP in our orchards, we have experienced costs related to the quarantine and treatment of ACP and incurred approximately $0.5 million of costs in fiscal year 2021 related to pest control efforts targeted against ACP.

To date, there has been no HLB detected in our orchards.

There are a number of registered insecticides known to be effective against ACP.

However, certain markets and customer responses to the discovery of ACP and the related quarantine could result in a significant decline in revenue due to restrictions on where our lemons can be sold and lower demand for our lemons.

To date, HLB has been detected in Los Angeles, Orange, Riverside, San Bernardino and San Diego Counties in California, however there has been no HLB detected in our orchards.

There can be no assurance that HLB will not be further detected in the future.

There are a number of registered insecticides known to be effective against ACP, however, certain markets and customer responses to the discovery of ACP and the related quarantine could result in a significant decline in revenue due to restrictions on where our lemons can be sold and lower demand for our lemons.

Additional government regulations and other quarantine requirements or customer handling and inspection requirements could increase agribusiness costs to us.

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Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest.

Some items, such as avocados, oranges and specialty citrus, must be sold more quickly, while other items, such as lemons, can be held in cold storage for longer periods of time.

Some items, such as avocados, oranges and specialty citrus, must be sold more quickly, while other items, such as lemons, can be held in cold storage for

longer periods of time.

The selling price received for each type of produce depends on all of these factors, including the availability and quality of the produce item in the market and the availability and quality of competing types of produce.

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Our lemons are generally grown and marketed throughout the year.

Our Navel oranges are sold generally from January through April and our Valencia oranges are sold generally from June through September.

Our avocados are sold generally from January through August.

Our specialty citrus is sold generally from November through June and our pistachios and wine grapes are sold generally in September and October.

Our Navel oranges are primarily sold from January through April and our Valencia oranges are primarily sold from June through September.

Our avocados are primarily sold from January through August.

Our specialty citrus is primarily sold from November through June and our pistachios and wine grapes are primarily sold in September and October.

Increases in commodity or raw product costs, such as fuel and paper, could adversely affect our operating results.

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For example, the State of California, where a substantial number of our labor contractors are located, passed regulations that increased minimum wage rates from $13.00 per hour to $14.00 per hour, effective January 1, 2021, and will increase to $15.00 per hour in 2022.

The State of Arizona also increased minimum wage rates from $11.00 per hour to $12.00 per hour, effective January 1, 2020, and effective January 1, 2021 the wage rates will rise each year based on the annual cost of living.

The State of Arizona wage rates rise each year based on the annual cost of living and increased from $12.00 per hour to $12.15 per hour, effective January 1, 2021, and will increase to $12.80 per hour in 2022.

In addition, current or future federal or state healthcare legislation and regulation, including the Affordable Care Act, may increase our medical costs or the medical costs of our labor contractors that could be passed on to us.

14 unchanged sentences

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 we use ground water in San Bernardino County.

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, 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.

California has historically experienced periods of below average precipitation.

The governor of California declared a drought State of Emergency in February 2014 and the next few years 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.

Precipitation in 2017 brought relief to California’s drought conditions and the State of Emergency was lifted in April 2017.

California has experienced below average precipitation two of the last three years and according to the US Drought Monitor, the 2020 season ended with California experiencing abnormally dry drought conditions.

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.

For fiscal year 2020, irrigation costs for our agricultural operations were $0.1 million lower than fiscal year 2019.

California has experienced below average precipitation in the 2019 - 2020 and 2020 - 2021 rainfall season and above average precipitation in the first three months of the current rainfall season as of December 31, 2021.

According to the U.S.

Drought Monitor, California is experiencing severe drought conditions as of December 31, 2021.

In October 2021, the California Governor declared a drought state of emergency statewide.

Federal officials who oversee the Central Valley Project, California’s largest water delivery system, allocated 5% of the contracted amount of water to San Joaquin Valley farmers in 2021 compared to 100% in 2017 through 2020.

We are assessing the impact these reductions may have on our California orchards.

In August 2021, the U.S.

Bureau of Reclamation declared a Level 1 Shortage Condition at Lake Mead in the Lower Colorado River Basin for the first time ever, requiring shortage reductions and water savings contributions for states in the southwest.

Beginning January 1, 2022, Arizona will see water releases from Lake Mead reduced by approximately 18% of the state’s annual apportionment.

We are assessing the impact these reductions may have on our Arizona orchards.

For fiscal year 2021, irrigation costs for our agricultural operations were $0.7 million higher than fiscal year 2020.

Costs may increase as we pump more water than our historical averages and federal, state and local water delivery infrastructure costs may increase to access these limited water supplies.

We have an ongoing plan for irrigation improvements in fiscal year 2021 that includes drilling new wells and upgrading existing wells and irrigation systems.

We have an ongoing plan for irrigation improvements continuing in fiscal year 2022 that includes drilling new wells and upgrading existing wells and irrigation systems.

We believe we have access to adequate supplies of water for our agricultural operations as well as our real estate development and rental operations and currently do not anticipate that future drought conditions will have a material impact on our operating results.

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A global economic downturn may have an adverse impact on participants in our industry, which cannot be fully predicted.

The full impact of a global economic downturn on customers, vendors and other business partners such as seen with the COVID-19 pandemic cannot be anticipated.

The full impact of a global economic downturn on customers, vendors and other business partners, such as that seen with the COVID-19 pandemic, cannot be anticipated.

For example, major customers or vendors may have financial challenges unrelated to us that could result in a decrease in their business with us or, in extreme cases, cause them to file for bankruptcy protection.

Similarly, parties to contracts may be forced to breach their obligations under those contracts.

Although we exercise prudent oversight of the credit ratings and financial strength of our major business partners and seek to diversify our risk to any single business partner, there can be no assurance that there will not be a bank, insurance company, supplier, customer or other financial partner that is unable to meet

its contractual commitments to us.

Similarly, stresses and pressures in the industry may result in impacts on our business partners and competitors, which could have wide-ranging impacts on the future of the industry.

8 unchanged sentences

An extended interruption in our ability to ship our products could have a material adverse effect on our business, financial condition and results of operations.

Similarly, any extended disruption in the distribution of our products could have a material adverse effect on our business, financial condition and results of operations.

Similarly, any extended disruption in the distribution of our products or supply chain issues could have a material adverse effect on our business, financial condition and results of operations.

While we believe we are adequately insured and would attempt to transport our products by alternative means if we were to experience an interruption due to strike, natural disasters or otherwise, we cannot be sure that we would be able to do so or be successful in doing so in a timely and cost-effective manner.

Events or rumors relating to LIMONEIRA or our other trademarks and related brands could significantly impact our business.

Consumer and institutional recognition of the LIMONEIRA, Santa®, Paula®, Bridal Veil®, Fountain®, Golden Bowl®, Level®, Kiva®, Kachina®, Oxnard Lemon, Uno, Sunny, Trapani, Argentinian Beauty, Natural and Trapani Fresh trademarks and related brands and the association of these brands with high quality and safe food products are an integral part of our business.

Consumer and institutional recognition of the LIMONEIRA, One World of Citrus®, Santa®, Paula®, Bridal Veil®, Fountain®, Golden Bowl®, Level®, Kiva®, Kachina®, Oxnard Lemon, Uno, Sunny, Trapani, Argentinian Beauty, Natural and Trapani Fresh trademarks and related brands and the association of these brands with high quality and safe food products are an integral part of our business.

The occurrence of any events or rumors that cause consumers and/or institutions to no longer associate these brands with high quality and safe food products may materially adversely affect the value of our brand names and demand for our products.

38 unchanged sentences

• transfer and sell assets.

Our revolving and non-revolving credit facility with the Farm Credit West Credit Facility and our Wells Fargo Term Loan contain a financial covenant that requires us to maintain compliance with a specified debt service coverage ratio on an annual basis.

In August 2020, Farm Credit West modified the covenant to defer measurement at October 31, 2020 with measurement resuming as of October 31, 2021.

At October 31, 2020, we were not in compliance with the debt service coverage ratio for Wells Fargo and the non-compliance was waived.

Our failure to comply with this covenant in the future may result in the declaration of an event of default under our Farm Credit West Credit Facility and Wells Fargo Term Loan.

Our revolving and non-revolving credit facility with the Farm Credit West Credit Facility contain a financial covenant that requires us to maintain compliance with a specified debt service coverage ratio on an annual basis.

In December 2021, the Lender modified the covenant to defer measurement at October 31, 2021 and revert to a debt service coverage ratio of 1.25:1.0 measured as of October 31, 2022.

Our failure to comply with this covenant in the future may result in the declaration of an event of default under our Farm Credit West Credit Facility.

Any or all of these covenants could have a material adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities and to fund our operations.

2 unchanged sentences

Upon the occurrence of an event of default under any of our credit facilities, the applicable lender(s) could elect to declare all amounts outstanding to be immediately due and payable and, with respect to our revolving credit facility, terminate all commitments to extend further credit.

If we were unable to repay those amounts, our lenders could proceed against the collateral granted to them to

secure the indebtedness.

If we were unable to repay those amounts, our lenders could proceed against the collateral granted to them to secure the indebtedness.

If the lenders under our current or future indebtedness were to accelerate the payment of the indebtedness, we cannot assure you that our assets or cash flow would be sufficient to repay in full our outstanding indebtedness.

3 unchanged sentences

If new debt is added to our current debt levels, the related risks that we now face could increase.

In January 2018, the Joint Venture entered into a $45.0 million unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A.

In January 2018, LLCB entered into a $45.0 million unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A.

to fund early development activities.

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

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

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

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

Defaults by the Joint Venture could increase our indebtedness.

The Loan, as modified and extended, matures February 22, 2023 and has a one-year extension option through February 22, 2024 subject to terms and conditions as defined in the agreement, with the maximum borrowing amount reduced to $35.0 million during the extension period.

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

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

Defaults by LLCB could increase our indebtedness.

Some of our debt is based on variable rates of interest, which could result in higher interest expenses in the event of an increase in the interest rates.

1 unchanged sentence

We bear the risk that the rates we are charged by our lender will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our Farm Credit West Credit Facility, which could materially adversely affect our business, financial condition and results of operations.

Several of the Company’s debt agreements use LIBOR as a reference rate.

The expected discontinuation of LIBOR after 2021 could have a significant impact on the Company if we cannot replace LIBOR with alternative reference rates at or below the current LIBOR rate.

Several of our Company’s debt agreements use LIBOR as a reference rate.

The expected discontinuation of LIBOR after 2021 could have a significant impact on us if we cannot replace LIBOR with alternative reference rates at or below the current LIBOR rate.

Global capital and credit market issues affect our liquidity, increase our borrowing costs and may affect the operations of our suppliers and customers.

23 unchanged sentences

Any decrease in demand will negatively impact our proposed developments.

Since the most recent recession, the U.S.

Federal Reserve has taken actions that have resulted in low interest rates prevailing in the marketplace for a historically long period of time.

Since the most recent recession, the Board of Governors of the Federal Reserve System has taken actions that have resulted in low interest rates prevailing in the marketplace for a historically long period of time.

Market interest rates may increase in the future and the increase may materially and negatively affect us.

10 unchanged sentences

Moreover, the statutes, regulations and ordinances governing the approval processes provide third parties the opportunity to challenge the proposed plans and approvals.

As a result, the prospect of third-party challenges to planned real estate developments provides additional uncertainties in real estate development planning and entitlements.

As a result, the prospect of third-party challenges to planned real estate developments provides

additional uncertainties in real estate development planning and entitlements.

Third-party challenges in the form of litigation would, by their nature, adversely affect the length of time and the cost required to obtain the necessary approvals.

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Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes.

Delayed sales, lower margins or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.

Delayed sales,

lower margins or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.

The acquisition of other businesses could pose risks to our operating income.

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The risks described here are not the only ones we will face.

If any of these risks or other risks actually occurs, our business, financial condition, results of operations or future prospects could be materially and adversely

If any of these risks or other risks actually occurs, our business, financial condition, results of operations or future prospects could be materially and adversely affected.

In such event, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.

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As a Company with publicly traded securities, we have incurred, and will continue to incur, significant legal, accounting and other expenses.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules promulgated by the SEC and NASDAQ, require us to adopt corporate governance practices applicable to U.S.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules promulgated by the SEC and NASDAQ, require us to adopt

corporate governance practices applicable to U.S.

public companies.

These rules and regulations may increase our legal and financial compliance costs, which could adversely affect the trading price of our common stock.

We have identified a material weakness in our internal control over financial reporting which existed as of October 31, 2020.

If we fail to properly remediate this or any future weaknesses or fail to maintain effective internal controls, there could be an adverse impact on our operations or the market price of our common stock.

In our Annual Report for fiscal year ended October 31, 2020 we identified a material weakness in our internal control over financial reporting.

If we fail to properly remediate any weaknesses or fail to maintain effective internal controls, there could be an adverse impact on our operations or the market price of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our annual reports on Form 10-K our assessment of the effectiveness of our internal control over financial reporting.

As of October 31, 2020, a material weakness was detected related to an acquired foreign subsidiary in the first year the subsidiary was included in management's evaluation of the effectiveness of the Company's internal control over financial reporting.

We are actively engaged in remediation activities designed to address the material weakness, but our remediation efforts are not complete and are ongoing.

There can be no assurance that we will be able to implement fully our plan and controls to address this material weakness or that the plan and controls, if implemented, will be successful in remediating this material weakness.

In addition, we may in the future identify further material weaknesses in our internal control over financial reporting that we have not discovered to date.

As previously disclosed in our Annual Report for fiscal year ended October 31, 2020, we identified a material weakness in our internal control over financial reporting related to an acquired foreign subsidiary in the first year the subsidiary was included in management’s evaluation of the effectiveness of our internal control over financial reporting.

In fiscal year 2021, we remediated the material weakness and the remediation measures have strengthened the design and operating effectiveness of our internal control over financial reporting.

We may in the future identify further material weaknesses in our internal control over financial reporting that we have not discovered to date.

If we cannot adequately maintain the effectiveness of our internal control over financial reporting, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors