What changed in this filing

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Item 1A. Risk Factors

2022-12-22 compared with 2022-01-10 · 52 added, 77 removed, 317 unchanged (29% of the section changed)

4 unchanged sentences

In extreme cases, entire harvests may be lost in some geographic areas.

All of our crops are subject to damage from frosts and freezes, and this has happened periodically in the recent past.

We purchase crop insurance for certain crops which partially mitigates our exposure.

All of our crops are subject to damage from frosts and freezes, and this has happened periodically in the past.

In some cases, the fruit is damaged or ruined;

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Our agricultural plantings are potentially subject to damage from disease and pests, which could impose losses on our business and the prevention of which could impose significant additional costs on us.

Fresh produce is also vulnerable to crop disease and to pests, e.g., Mediterranean Fruit Fly and the Asian Citrus Psyllid (“ACP”), which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions.

One such pest is ACP, an aphid–like insect that is a serious pest to all citrus plants because it can transmit the disease, Huanglongbing (“HLB”), when it feeds on the plants’ leaves and trees.

By itself, ACP causes only minor cosmetic damage to citrus trees.

HLB, however, is considered one of the most devastating diseases of citrus in the world.

Trees infected with HLB decline in health, produce inedible fruit and eventually die, usually in 3 to 5 years after becoming infected.

Currently, there is no cure for the disease and infected trees must be removed and destroyed to prevent further spreading.

Fresh produce is vulnerable to crop disease and to pests (e.g., Mediterranean Fruit Fly and the Asian Citrus Psyllid (“ACP”)), which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions.

ACP is an aphid-like insect that is a serious pest to all citrus plants because it can transmit the disease Huanglongbing ("HLB") when it feeds on the plants' leaves and trees.

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 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, 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.

Due to the discovery of ACP in our orchards, we have experienced costs related to the quarantine and treatment of ACP.

To date, HLB has been detected 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.

Our citrus orchards could be at risk if ACP starts to transmit the HLB disease to our trees.

Agribusiness costs could also increase significantly as a result of HLB.

For example, a study in Florida indicated the presence of HLB has increased citrus production costs by as much as 40%.

The costs to control these diseases and other infestations vary depending on the severity of the damage and the extent of the plantings affected.

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Industry consolidation (horizontally and vertically) and other factors have increased the buying leverage of the major grocery retailers in our markets, which may put further downward pressure on our pricing and volume and could adversely affect our results of operations.

We depend on our relationship with Calavo and their ability to sell our avocados.

Any disruption in this relationship could harm our sales.

We sell a majority of the avocados we grow to Calavo and depend on their willingness and ability to market and sell our avocados to consumers.

Calavo sources its avocados from many growers and we cannot control who they will purchase from and how large their orders may be.

Should there be any change in our current relationship structure, whereby they buy a majority of our avocado crop, we would need to find replacement buyers to purchase our remaining crop, which could take time and expense and may result in less favorable terms of sale.

Any loss of Calavo as a customer on a whole may cause a material loss in our profits, as it may take time to fill any such void.

Our earnings are sensitive to fluctuations in market supply and prices and demand for our products.

Excess supplies often cause severe price competition in our industry.

Excess supply often causes severe price competition in our industry.

Growing conditions in various parts of the world, particularly weather conditions such as windstorms, floods, droughts and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the supply and quality of product.

The ongoing COVID-19 pandemic has also reduced the demand for our products resulting in excess supplies.

The ongoing COVID-19 pandemic has also reduced the demand for our products resulting in excess supply.

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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• the timing and effects of ripening and perishability.

Our lemons are generally grown and marketed throughout the year.

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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The lack of sufficient water would severely impact our ability to produce crops or develop real estate.

The average rainfall in Ventura, Tulare, San Luis Obispo and San Bernardino Counties in California is substantially below amounts required to grow crops and therefore we are dependent on our rights to pump water from underground aquifers.

Extended periods of drought in California may put additional pressure on the use and availability of water for agricultural uses, and in some cases, governmental authorities have diverted water to other uses.

4 unchanged sentences

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 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.

We use federal project water in Arizona from the Colorado River through the YMIDD.

We also have acquired water rights in Chile.

California has experienced below average precipitation since the 2019 - 2020 rainfall season.

According to the U.S.

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

Drought Monitor, San Bernardino County was experiencing severe drought conditions, Ventura County was experiencing extreme drought conditions and Tulare County was experiencing exceptional drought conditions as of October 31, 2022.

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

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

Federal officials who oversee the Central Valley Project, California’s largest water delivery system, allocated 0% of the contracted amount of water to San Joaquin Valley farmers in 2022, compared to 5% in 2021 and 100% in 2017 through 2020.

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

1 unchanged sentence

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.

In January 2022, Arizona experienced water releases from Lake Mead reduced by approximately 18% of the state’s annual apportionment.

In August 2022, the U.S.

Bureau of Reclamation announced Lake Mead to operate in a Tier 2 shortage, which increases water restrictions for states in the southwest.

In January 2023, Arizona will forfeit approximately 21% of the state's yearly allotment of water from Lake Mead.

In response, we entered into a fallowing agreement and we are assessing the impact these additional reductions may have on our Arizona orchards.

For fiscal year 2022, irrigation costs for our agricultural operations were $1.9 million higher than fiscal year 2021.

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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.

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.

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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, 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.

Consumer and institutional recognition of the LIMONEIRA, One World of Citrus®, Santa®, Paula®, Bridal Veil®, Fountain®, Golden Bowl®, Level®, Kiva®, Kachina®, Oxnard Lemon 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.

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• transfer and sell assets.

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.

At October 31, 2022, we were in compliance with such debt service coverage ratio.

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.

12 unchanged sentences

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.

In December 2022, LLCB exercised the extension option.

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

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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 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.

Several of our Company’s debt agreements use LIBOR as a reference rate, which will be converted to the Secure Overnight Financing Rate ("SOFR") on January 1, 2023.

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

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We are involved in a cyclical industry and are affected by changes in general and local economic conditions.

The real estate development industry is cyclical and is significantly affected by changes in general and local economic conditions, including:

The real estate development industry is cyclical and is affected by changes in general and local economic conditions, including:

• employment levels;

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A recession in the global economy, or a downturn in national or regional economic conditions, could adversely impact our real estate development business.

Future economic instability or tightening in the credit markets could lead to another housing market collapse, which could adversely affect our real estate development operations.

Our future real estate sales, revenues, financial condition and results of operations could suffer as a result.

Our business is especially sensitive to economic conditions in California and Arizona, where our properties are located.

Future economic instability or tightening in the credit markets could lead to another housing market collapse, which could adversely affect our real estate development operations and those of our equity method investments.

Future real estate sales, revenues, financial condition, results of operations and equity in earnings of investments could suffer as a result.

Our business is sensitive to economic conditions in California, where our real estate development properties are located.

Higher interest rates and lack of available financing can have significant impacts on the real estate industry.

1 unchanged sentence

Any decrease in demand will negatively impact our proposed developments.

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.

In 2022, the Board of Governors of the Federal Reserve System took actions in tightening the monetary policy that resulted in higher interest rates prevailing in the marketplace.

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

Lack of available credit to finance real estate purchases can also negatively impact demand.

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In addition, in the past, many states, cities and counties (including Ventura County) have approved various “slow growth” or “urban limit line” measures.

If unforeseen regulatory challenges with East Areas I and II occur, we may not be able to develop these projects as planned and the approximately $83.0 million investment we have in the projects could be impaired in the future.

If unforeseen regulatory challenges with East Areas I and II occur, we may not be able to develop these projects as planned.

Third-party litigation could increase the time and cost of our real estate development efforts.

1 unchanged sentence

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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Recent concerns over the impact of development on water availability and global warming increases the breadth of potential obstacles that our developments face.

Our developable land is concentrated entirely in California and Arizona.

All of our developable land is located in California and Arizona, and our business is especially sensitive to the economic conditions within California.

Any adverse change in the economic climate of California, Arizona, or our regions of those states, and any adverse change in the political or regulatory climate of California or Arizona, or the counties where our land is located in such states, could adversely affect our real estate development activities.

Our real estate development projects are concentrated entirely in California.

All of our real estate development projects are located in California, and our business is especially sensitive to the economic conditions within California.

Any adverse change in the economic climate of California, and any adverse change in the political or

regulatory climate of California or Ventura County, could adversely affect our real estate development activities.

Ultimately, our ability to sell or lease lots may decline as a result of weak economic conditions or restrictive regulations.

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Although we believe that internally generated funds and current and available borrowing capacity will be sufficient to fund our capital and other expenditures, including additional land acquisition, development and construction activities, and the amounts available from such sources may not be adequate to meet our needs.

If such sources were insufficient, we would seek additional capital in the form of debt from a variety of potential sources, including bank financing.

If such sources

were insufficient, we would seek additional capital in the form of debt from a variety of potential sources, including bank financing.

The availability of borrowed funds to be used for additional land acquisition, development and construction may be greatly reduced, and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with new loans.

The failure to obtain sufficient capital to fund our planned expenditures could have a material adverse effect on our business and operations and our results of operations in future periods.

We may encounter risks associated with the real estate joint venture we entered into in November 2015 with the Lewis Group of Companies including:

• the joint venture may not perform financially or operationally as expected;

• land values, project costs, sales absorption or other assumptions included in the development plans may cause the joint venture’s operating results to be less than expected;

• the joint venture may not be able to obtain project loans on acceptable terms;

• the joint venture partners may not be able to provide capital to the joint venture in the event external financing or project cash flows are not sufficient to finance the joint venture’s operations;

We may encounter risks associated with the real estate joint ventures we entered into in November 2015 and October 2022 with the Lewis Group of Companies including:

• the joint ventures may not perform financially or operationally as expected;

• land values, project costs, sales absorption or other assumptions included in the development plans may cause the joint ventures’ operating results to be less than expected;

• the joint ventures may not be able to obtain project loans on acceptable terms;

• the joint venture partners may not be able to provide capital to the joint ventures in the event external financing or project cash flows are not sufficient to finance the joint ventures’ operations;

• the joint venture partners may not manage the project properly;

• disagreements could occur between the joint venture partners that could affect the operating results of the joint venture or could result in a sale of a partner’s interest or the joint venture at undesirable values.

• disagreements could occur between the joint venture partners that could affect the operating results of the joint ventures or could result in a sale of a partner’s interest or the joint ventures at undesirable values.

We may encounter other risks that could impact our ability to develop our land.

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We currently depend heavily on the services of our key management personnel.

The loss of any key personnel could materially and adversely affect our results of operations, financial condition, or our ability to pursue land development.

The loss of any key personnel could materially and adversely affect our results of operations or financial condition.

Our success will also depend in part on our ability to attract and retain additional qualified management personnel.

Inflation can have a significant adverse effect on our operations.

Inflation can have a major impact on our farming operations.

Inflation can have a major impact on our agribusiness operations.

The farming operations are most affected by escalating costs and unpredictable revenues (due to an oversupply of certain crops) and very high irrigation water costs.

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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.

We intend to continue to consider acquisition prospects that we think complement our business.

We intend to continue to consider acquisition prospects that complement our business.

While we are not currently a party to any agreement with respect to any acquisitions, we may acquire other businesses in the future.

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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.

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 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.

Any such action could adversely affect our financial results, cause investors to lose confidence in the reliability of our financial statements and result in a decrease in the value of our common stock.

Unresolved Staff Comments

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