What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-12-22 compared with 2022-01-10 · 123 added, 126 removed, 212 unchanged (54% of the section changed)

13 unchanged sentences

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

The rental operations division includes our residential and commercial rentals comprised of 257 completed rental units, leased land operations and organic recycling.

13 unchanged sentences

Other operations 4,438 2% 4,332 3% 4,504 2%

Loss (gain) on disposal of assets 109 — 502 — (1,069) (1)%

(Gain) loss on disposal of assets (4,500) (2)% 109 — 502 —%

Selling, general and administrative 21,815 12% 19,427 11% 21,280 12%

Total costs and expenses 182,404 100% 172,360 100% 183,567 100%

Operating loss:

Operating income (loss):

Agribusiness 18,630 12,889 2,656

Other operations 886 314 118

Loss (gain) on disposal of assets (109) (502) 1,069

Gain (loss) on disposal of assets 4,500 (109) (502)

Selling, general and administrative (21,815) (19,427) (21,280)

Operating loss (6,333) (19,008) (5,514)

Other income (expense):

Operating income (loss) 2,201 (6,333) (19,008)

Other (expense) income:

Interest income 53 379 362

2 unchanged sentences

Loss on stock in Calavo Growers, Inc.

— (6,299) (2,117)

Other income, net 89 219 129

Total other income (expense) 2,170 (7,427) (1,049)

Loss before income tax benefit (4,163) (26,435) (6,563)

Income tax benefit 266 8,494 1,097

Other (expense) income, net (955) 89 219

Total other (expense) income (1,852) 2,170 (7,427)

Income (loss) before income tax (provision) benefit 349 (4,163) (26,435)

Income tax (provision) benefit (823) 266 8,494

Net loss (474) (3,897) (17,941)

Loss (income) attributable to noncontrolling interest 456 1,506 (477)

Loss attributable to noncontrolling interest 238 456 1,506

Net loss attributable to Limoneira Company $ (236) $ (3,441) $ (16,435)

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 loss on stock in Calavo Growers, Inc.

("Calavo") and loss (gain) on disposal of assets, 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.

("Calavo"), named executive officer cash severance, pension settlement cost and (gain) loss on disposal of assets, is an important measure to evaluate our results of operations between periods on a more comparable basis.

Adjusted EBITDA in previous periods did not exclude stock-based compensation which has now been excluded as management believes this is a better representation of cash generated by operations and is consistent with peer company reporting.

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

8 unchanged sentences

Interest expense, net of patronage dividends 2,291 1,501 2,048

Income tax benefit (266) (8,494) (1,097)

Income tax provision (benefit) 823 (266) (8,494)

Depreciation and amortization 9,798 9,812 10,097

EBITDA 12,623 7,227 (13,146)

Stock-based compensation 2,732 2,582 2,044

Loss on stock in Calavo Growers, Inc.

— 6,299 2,054

Loss (gain) on disposal of assets 109 502 (991)

Named executive officer cash severance 432 — —

Pension settlement cost 607 — —

(Gain) loss on disposal of assets (4,500) 109 502

Adjusted EBITDA $ 11,894 $ 9,918 $ (4,301)

1 unchanged sentence

Total revenues for fiscal year 2022 were $184.6 million compared to $166.0 million for fiscal year 2021.

The 1% increase of $1.5 million was primarily the result of increased lemons and specialty citrus and other crops agribusiness revenues, partially offset by decreased avocados and oranges agribusiness revenues, as detailed below ($ in thousands):

The 11% increase of $18.6 million was primarily the result of increased avocados, oranges and specialty citrus and other crops agribusiness revenues, as detailed below ($ in thousands):

Agribusiness Revenues for the Years Ended October 31,

5 unchanged sentences

Agribusiness revenues $ 179,281 $ 161,381 $ 17,900 11%

The increase in fiscal year 2021 was primarily the result of increased brokered fruit and other lemon sales, partially offset by decreased fresh lemon sales, compared to fiscal year 2020.

Brokered fruit and other lemon sales for fiscal years 2021 and 2020 were $36.0 million and $18.9 million, respectively.

The increase in brokered fruit in fiscal year 2021 was primarily the result of higher volume and higher prices of brokered fruit sales, compared to fiscal year 2020.

During fiscal years 2021 and 2020, brokered fruit sales were $29.3 million and $12.2 million on 1.4 million and 0.6 million cartons of brokered fruit sold at average per carton prices of $21.63 and $19.82, respectively.

The decrease in fresh lemon sales in fiscal year 2021 was primarily the result of lower volume, partially offset by higher prices of fresh lemons sold, compared to fiscal year 2020.

Lemon revenues in fiscal year 2022 were similar to fiscal year 2021.

During fiscal years 2022 and 2021, fresh lemon sales were $92.9 million and $85.9 million on 4.9 million and 4.4 million cartons of fresh lemons packed and sold at average per carton prices of $18.77 and $19.60, respectively.

Lemon revenues in fiscal years 2021 and 2020 included shipping and handling of $17.5 million and $13.4 million and lemon by-products of $3.5 million and $4.1 million, respectively.

The decrease in fiscal year 2021 was primarily the result of lower volume, partially offset by higher prices of avocados sold, compared to fiscal year 2020.

Lemon revenues in fiscal years 2022 and 2021 included brokered fruit and other lemon sales of $24.5 million and $36.0 million, respectively, shipping and handling of $22.2 million and $17.5 million, respectively, and lemon by-products of $3.5 million in both fiscal years.

The increase in fiscal year 2022 was primarily the result of increased volume and higher prices of avocados sold compared to fiscal year 2021.

The California avocado crop typically experiences alternating years of high and low production due to plant physiology.

1 unchanged sentence

Higher prices in fiscal year 2022 were primarily related to lower supply of fruit in the marketplace.

The decrease in fiscal year 2021 was primarily due to lower prices and volume of oranges sold, compared to fiscal year 2020.

During fiscal years 2021 and 2020, sales consisted of 545,000 and 743,000 40-pound carton equivalents of oranges sold at average per carton prices of $8.04 and $10.39, respectively.

The increase in fiscal year 2022 was primarily due to increased brokered fruit sales and higher prices compared to fiscal year 2021.

Orange revenues in fiscal year 2022 included brokered fruit sales of $5.0 million, compared to immaterial brokered fruit sales in fiscal year 2021, sold at average per carton prices of $14.66 and $8.04, respectively.

• Specialty citrus and other crops:

The increase in fiscal year 2021 was primarily the result of higher volume of wine grapes sold, compared to fiscal year 2020.

In fiscal year 2021, we sold approximately 2,164 tons of wine grapes for $3.0 million compared to approximately 1,610 tons of wine grapes for $1.5 million in fiscal year 2020.

Other operations revenue in fiscal year 2021 was similar to fiscal year 2020.

The increase in fiscal year 2022 was primarily due to increased brokered fruit sales and higher prices of specialty citrus sold compared to fiscal year 2021.

Specialty citrus revenues in fiscal year 2022 included brokered fruit sales of $2.9 million, compared to immaterial brokered fruit sales in 2021, sold at an average per carton price of $13.22 and $11.20, respectively.

Other operations revenue in fiscal year 2022 and 2021 was $5.3 million and $4.6 million, respectively.

Costs and Expenses

Total costs and expenses for fiscal year 2022 were $182.4 million compared to $172.4 million for fiscal year 2021.

This 6% decrease of $11.2 million was primarily attributable to decreases in our agribusiness costs and selling, general and administrative expenses.

This 6% increase of $10.0 million was primarily attributable to increases in our agribusiness costs and selling, general and administrative expenses, partially offset by an increase in gain on disposal of assets.

Costs associated with our agribusiness division include packing costs, harvest costs, growing costs, costs related to the lemons we procure from third-party growers and suppliers and depreciation and amortization expense.

11 unchanged sentences

Lemon packing costs were $43.0 million and $36.0 million in fiscal years 2022 and 2021, respectively.

The decrease in fiscal year 2021 was primarily attributable to lower volume of fresh lemons packed and sold, partially offset by higher average per carton costs, compared to fiscal year 2020.

The increase in fiscal year 2022 was primarily attributable to increased volume of fresh lemons packed and sold and higher average per carton costs compared to fiscal year 2021.

In fiscal years 2022 and 2021, we packed and sold 4.9 million and 4.4 million cartons of lemons at average per carton costs of $8.69 and $8.22, respectively.

The increase in average per carton costs in fiscal year 2021, compared to fiscal year 2020, was primarily due to decreased volume of lemons packed and sold.

The increase in average per carton costs in fiscal year 2022, compared to fiscal year 2021, was primarily due to higher costs in labor and benefits, fruit treatments, cardboard cartons and packing and shipping supplies.

Additionally, in fiscal years 2022 and 2021, packing costs included $2.4 million and $2.7 million of shipping costs, respectively.

• Harvest costs:

The decrease in fiscal year 2021 was primarily attributable to decreased volume of lemons, avocados and oranges harvested compared to fiscal year 2020.

The increase in fiscal year 2022 was primarily attributable to increased volume of lemons and avocados harvested compared to fiscal year 2021.

• Growing costs:

4 unchanged sentences

The cost of procuring fruit from others is referred to as third-party grower and supplier costs.

The increase in fiscal year 2021 was primarily due to increased volume of fruit procured from suppliers, partially offset by decreased volume of fruit procured from third party growers, compared to fiscal year 2020.

The increase in fiscal year 2022 was primarily due to increased volume of fruit procured from third-party growers and suppliers compared to fiscal year 2021.

In fiscal years 2022 and 2021, costs for purchased, packed fruit for resale increased by $0.9 million;

we incurred costs of $26.2 million and $25.2 million, respectively.

During fiscal years 2021 and 2020, of the 4.4 million and 5.5 million lemon cartons sold, 2.3 million (52%) and 3.3 million (60%) were procured from third-party growers at average per carton prices of $13.83 and $11.71, respectively:

a decrease of $7.3 million.

During fiscal years 2022 and 2021, of the 4.9 million and 4.4 million lemon cartons sold, 2.6 million (52%) and 2.3 million (52%) were procured from third-party growers and suppliers at average per carton prices of $13.03 and $13.83, respectively:

an increase of $1.9 million.

• Depreciation and amortization:

Depreciation and amortization expense in fiscal year 2021 was $0.3 million lower than fiscal year 2020.

Depreciation and amortization expense in fiscal year 2022 was similar compared to fiscal year 2021.

Other operations expenses for fiscal years 2022 and 2021 were $4.4 million and $4.3 million, respectively.

Loss on disposal of assets for fiscal years 2021 and 2020 were $0.1 million and $0.5 million, respectively.

(Gain) loss on disposal of assets for fiscal years 2022 and 2021 were $(4.5) million and $0.1 million, respectively.

The change is primarily due to sales of East Area I Retained Property and Oxnard Lemon packing facility in fiscal year 2022.

Selling, general and administrative expenses for fiscal year 2022 were $21.8 million compared to $19.4 million for fiscal year 2021.

The $1.9 million decrease was primarily the result of:

• $0.7 million decrease in hardware, software and training costs associated with an ERP implementation

• $0.6 million decrease in selling expenses;

• $0.5 million decrease in other selling, general and administrative expenses, including certain corporate overhead expenses.

Other Income (Expense)

Other income (expense), for fiscal year 2021 was $2.2 million compared to $(7.4) million for fiscal year 2020.

The $9.6 million increase in other income (expense) was primarily the result of:

• $0.5 million decrease in interest expense as a result of increased amounts capitalized;

• $2.9 million increase in equity in earnings of investments primarily from LLCB;

• $6.3 million decrease in the loss on stock in Calavo.

We recorded for fiscal years 2021 and 2020 income tax benefit of $0.3 million and $8.5 million on pre-tax loss of $4.2 million and $26.4 million, respectively.

The $2.4 million increase was primarily the result of:

• $1.0 million increase in salaries, benefits and incentive compensation;

• $0.8 million increase in named executive officer severance;

• $0.4 million increase in selling expenses;

• $0.2 million increase in other selling, general and administrative expenses, including certain corporate overhead expenses.

Other (Expense) Income

Other (expense) income, for fiscal year 2022 was $(1.9) million compared to $2.2 million for fiscal year 2021.

The $4.0 million increase in other expenses was primarily the result of:

• $0.8 million increase in interest expense, net as a result of increased interest rates;

• $1.9 million decrease in equity in earnings of investments primarily from LLCB;

• $1.0 million increase in other expenses primarily from pension expense and pension settlement cost.

We recorded for fiscal years 2022 and 2021 income tax (provision) benefit of $(0.8) million and $0.3 million on pre-tax income (loss) of $0.3 million and $(4.2) million, respectively.

The tax provision recorded for fiscal year 2022 differs from the U.S.

federal statutory tax rate of 21% due primarily to foreign jurisdictions which are taxed at different rates, state taxes, nondeductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries.

federal statutory tax rate of 21% due primarily to foreign jurisdictions which are taxed at different rates, state taxes, tax impact of stock-based compensation, nondeductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries.

Our effective tax rate for fiscal years 2022 and 2021 was 234.8% and 6.4%, respectively.

Loss (Income) Attributable to Noncontrolling Interest

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

Loss Attributable to Noncontrolling Interest

Loss attributable to noncontrolling interest primarily represents 10% and 49% of the net losses of PDA and Trapani Fresh, respectively.

Segment Results of Operations

4 unchanged sentences

Each segment is subject to review and evaluations related to current market conditions, market opportunities and available resources.

See Note 22 - Segment Information of the notes to consolidated financial statements included in this Annual Report for additional information regarding our operating segments.

See Note 20 - Segment Information for additional information regarding our operating segments.

Segment information for fiscal year 2022 (in thousands):

20 unchanged sentences

Operating (loss) income $ 9,331 $ 7,133 $ — $ 2,573 $ 2,478 $ 12,889 $ (19,222) $ (6,333)

Fiscal Year 2021 Compared to Fiscal Year 2020

Fiscal Year 2022 Segment Information Compared to Fiscal Year 2021 Segment Information

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

Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products and brokered fruit other lemon revenue.

Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products, brokered fruit and other lemon revenue.

For fiscal year 2022, our fresh lemons segment revenue was $120.9 million compared to $125.4 million for fiscal year 2021.

The 1% increase of $1.3 million was primarily the result of higher prices partially offset by lower volume of fresh lemons sold, as discussed earlier.

The 4% decrease of $4.5 million was primarily the result of decreased brokered lemon sales, partially offset by increased fresh lemon sales, as discussed earlier.

Costs and expenses associated with our fresh lemons segment include harvest costs, growing costs, cost of fruit we procure from third-party growers and suppliers, transportation costs and packing service charges incurred from the lemon packing segment to pack lemons for sale.

1 unchanged sentence

The 1% decrease of $1.0 million primarily consisted of the following:

• Harvest costs for fiscal year 2021 were $2.8 million lower than fiscal year 2020.

• Growing costs for fiscal year 2021 were $0.7 million higher than fiscal year 2020.

• Third-party grower and supplier costs for fiscal year 2021 were $4.4 million higher than fiscal year 2020.

• Harvest costs for fiscal year 2022 were $2.9 million higher than fiscal year 2021;

• Growing costs for fiscal year 2022 were $2.2 million lower than fiscal year 2021;

• Third-party grower and supplier costs for fiscal year 2022 were $5.6 million lower than fiscal year 2021;

• Transportation costs for fiscal year 2022 were $0.3 million lower than fiscal year 2021;

• Intersegment costs and expenses for fiscal year 2021 were $11.2 million lower than fiscal year 2020.

L emon Packing

• Intersegment costs and expenses for fiscal year 2022 were $4.2 million higher than fiscal year 2021.

Lemon Packing

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

For fiscal year 2022, our lemon packing segment revenue was $52.0 million compared to $43.2 million for fiscal year 2021.

The 14% decrease of $7.1 million was primarily due to decreased volume of lemons packed.

The 20% increase of $8.8 million was primarily due to increased volume of lemons packed.

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 fiscal year 2022, our lemon packing costs and expenses were $43.0 million compared to $36.0 million for fiscal year 2021.

The 15% decrease of $6.5 million was primarily due to decreased volume of lemons packed.

The 19% increase of $7.0 million was primarily due to increased volume of lemons packed and higher costs in labor and benefits, cardboard cartons, fruit treatments and packing and shipping supplies.

Lemon packing segment operating income per carton sold was $1.81 and $1.63 for fiscal years 2022 and 2021, respectively.

1 unchanged sentence

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

For fiscal year 2021, our avocados segment revenue was $6.8 million compared to $8.8 million for fiscal year 2020, a 23% decrease of $2.0 million.

For fiscal year 2022, our avocados segment revenue was $17.3 million compared to $6.8 million for fiscal year 2021, a 155% increase of $10.5 million.

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

For fiscal year 2022, our avocado costs and expenses were $5.5 million compared to $4.2 million for fiscal year 2021.

The 19% decrease of $1.0 million primarily consisted of the following:

• Harvest costs for fiscal year 2021 were $0.4 million lower than fiscal year 2020.

• Growing costs for fiscal year 2021 were $0.5 million lower than fiscal year 2020.

The 31% increase of $1.3 million primarily consisted of the following:

• Harvest costs for fiscal year 2022 were $1.0 million higher than fiscal year 2021;

• Growing costs for fiscal year 2022 were $0.3 million higher than fiscal year 2021.

Other Agribusiness

For fiscal year 2022, our other agribusiness segment revenue was $18.9 million compared to $11.6 million for fiscal year 2021.

The 14% decrease of $1.9 million primarily consisted of the following:

• Orange revenue for fiscal year 2021 was $3.3 million lower than fiscal year 2020.

The 62% increase of $7.3 million primarily consisted of the following:

• Orange revenue for fiscal year 2022 was $5.5 million higher than fiscal year 2021;

• Specialty citrus and other crop revenue for fiscal year 2022 was $1.7 million higher than fiscal year 2021.

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

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

Our other agribusiness costs and expenses for fiscal year 2022 were $18.2 million compared to $9.2 million for fiscal year 2021.

The 24% decrease of $3.0 million primarily consisted of the following:

The 99% increase of $9.0 million primarily consisted of the following:

• Harvest costs for fiscal year 2022 were $0.4 million lower than fiscal year 2021;

• Growing costs for fiscal year 2021 were $0.8 million lower than fiscal year 2020.

• Purchased fruit costs for fiscal year 2021 were $1.9 million lower than fiscal year 2020.

Total agribusiness depreciation and amortization for fiscal year 2021 was $8.6 million compared to $8.9 million in fiscal year 2020.

The 4% decrease of $0.3 million was primarily due to reduced amortization as a result of selling and licensing certain intangible assets of Trapani Fresh to FGF in March 2021.

• Growing costs for fiscal year 2022 were $0.9 million higher than fiscal year 2021;

• Brokered fruit costs for fiscal year 2022 were $8.5 million higher than fiscal year 2021.

Total agribusiness depreciation and amortization for fiscal years 2022 and 2021 was $8.6 million.

Corporate and Other

Our corporate and other operations had rental revenues of approximately $4.6 million in fiscal years 2021 and 2020.

Costs and expenses in our corporate and other operations were approximately $22.7 million and $25.1 million in fiscal years 2021 and 2020, respectively, and include rental operations costs and selling, general and administrative expenses not allocated to the operating segments.

Our corporate and other operations had rental revenues of approximately $5.3 million and $4.6 million in fiscal years 2022 and 2021, respectively.

Costs and expenses in our corporate and other operations were approximately $20.6 million and $22.7 million in fiscal years 2022 and 2021, respectively, and include rental operations costs, selling, general and administrative expenses not allocated to the operating segments, and (gain) loss on disposal of assets.

Depreciation and amortization expenses were approximately $1.2 million in fiscal years 2022 and 2021.

Additionally, loss on disposal of assets for fiscal years 2021 and 2020 was $0.1 million and $0.5 million, respectively.

Liquidity and Capital Resources

4 unchanged sentences

Raw materials needed to propagate the various crops grown by us consist primarily of fertilizer, herbicides, insecticides, fuel and water, all of which are readily available from local sources.

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term fixed rate and variable rate debt and related interest payments, operating and finance leases and our noncontributory, defined benefit pension plan (“the Plan”).

Material contractual obligations arising in the normal course of business primarily consist of purchase obligations, long-term fixed rate and variable rate debt and related interest payments, operating and finance leases, financing transactions and our noncontributory, defined benefit pension plan (“the Plan”).

In fiscal year 2021, we decided to terminate the Plan effective December 31, 2021.

The liabilities disclosed as of October 31, 2021, reflect an estimate of the additional cost to pay lump sums to a portion of the active and vested terminated participants and purchase annuities for all remaining participants from an insurance company.

See Notes 12, 13 and 17 to the consolidated financial statements included in this Annual Report for amounts outstanding on October 31, 2021, related to debt, leases and the Plan.

The liabilities disclosed as of October 31, 2022 and 2021, reflect an estimate of the additional cost to pay lump sums to a portion of the active and vested terminated participants and purchase annuities for all remaining participants from an insurance company.

See Note 10 - Long-Term Debt, Note 12 - Leases and Note 16 - Retirement Plans for amounts outstanding on October 31, 2022, related to debt, leases and the Plan.

Purchase obligations consist of contracts primarily related to packing supplies and pollination services, the majority of which are due in the next three years.

2 unchanged sentences

Cash Flows from Operating Activities

For the fiscal years ended October 31, 2021, 2020 and 2019, net cash provided by (used in) operating activities was $9.6 million, $(11.3) million and $1.4 million, respectively.

For the fiscal years ended October 31, 2022 and 2021, net cash provided by operating activities was $14.8 million and $9.6 million, respectively.

Our cash flow provided by operating activities is primarily from agricultural sales and rental operations.

2 unchanged sentences

• Net loss was $0.5 million and $3.9 million for fiscal years 2022 and 2021, respectively.

The components of net loss in fiscal year 2021 compared to fiscal year 2020 consist of an decrease in operating loss of $12.7 million, an increase in total other income (expense) of $9.6 million and a decrease in income tax benefit of $8.2 million.

• The adjustments to reconcile net loss to net cash provided by (used in) operating activities provided $10.2 million of cash in fiscal year 2021 compared to providing $17.6 million of cash in fiscal year 2020, primarily due to significant changes in loss on stock in Calavo, equity in earnings of investments, net and deferred income taxes.

• The changes in operating assets and liabilities, net of business combinations provided $3.3 million of operating cash in fiscal year 2021 compared to using $11.0 million of operating cash in fiscal year 2020, primarily due to significant changes in accounts receivable and receivables/other from related parties, cultural costs, income tax receivable, and accounts payable and growers and suppliers payable.

The components of net loss in fiscal year 2022, compared to fiscal year 2021, consists of an increase in operating income of $8.5 million, an increase in total other expense of $4.0 million and an increase in income tax provision of $1.1 million.

• Adjustments to reconcile net loss to net cash provided by operating activities:

◦ Adjustments provided $10.0 million of operating cash in fiscal year 2022, compared to providing $10.2 million of operating cash in fiscal year 2021, primarily due to significant changes in (gain) loss on disposal of assets, equity in earnings of investments, net, and other, net, which primarily related to pension expense and pension settlement cost.

◦ Changes in operating assets and liabilities provided $5.3 million of operating cash in fiscal year 2022, compared to providing $3.3 million of operating cash in fiscal year 2021, primarily due to significant changes in accounts receivable and receivables/other from related parties, income taxes receivable, accounts payable and growers and suppliers payable and accrued liabilities and payables to related parties.

Cash Flows from Investing Activities

For the years ended October 31, 2021, 2020 and 2019, net cash (used in) provided by investing activities was $(10.2) million, $3.8 million and $(23.7) million, respectively, and is primarily comprised of capital expenditures, business acquisitions, sales of assets and investments.

• Capital expenditures for fiscal year 2021 were comprised of $9.8 million for property, plant and equipment primarily related to orchard and real estate development projects.

For the years ended October 31, 2022 and 2021, net cash provided by (used in) investing activities was $19.4 million and $(10.2) million, respectively, and is primarily comprised of capital expenditures, sales of assets, collection of notes receivable and investments.

• Capital expenditures for fiscal year 2022 were $10.1 million for property, plant and equipment, primarily related to orchards, and real estate development projects.

Additionally, in fiscal year 2022 we received $19.3 million in net proceeds from sales of assets, $7.9 million in net proceeds from sales of real estate development assets and $2.8 million in collection of loan and notes receivable.

• Capital expenditures for fiscal year 2021 were comprised of $9.8 million for property, plant and equipment, primarily related to orchards, and real estate development projects.

Additionally, in fiscal year 2021 we invested $0.7 million in mutual water companies and water rights.

• Capital expenditures for fiscal year 2020 were comprised of $10.6 million for property, plant and equipment primarily related to orchard and real estate development projects.

Additionally, in fiscal year 2020, we received proceeds from sale of stock in Calavo of $11.0 million, proceeds from sales of property assets of $6.3 million and contributed $2.8 million to LLCB for the development of our East Area I real estate development project.

Cash Flows from Financing Activities

For the years ended October 31, 2021, 2020 and 2019 net cash provided by financing activities was $0.5 million, $7.4 million and $22.4 million, respectively.

• The $0.5 million of cash provided by financing activities for fiscal year 2021 is primarily comprised of net borrowings of long-term debt in the amount of $7.1 million.

Additionally, we paid common and preferred dividends, in aggregate, of $5.8 million and paid $0.7 million for the exchange of common stock related to our employees restricted stock awards.

• The $7.4 million of cash provided by financing activities for fiscal year 2020 is primarily comprised of net borrowings of long-term debt in the amount of $17.0 million.

Additionally, we paid common and preferred dividends, in aggregate, of $5.9 million and purchases of shares of our common stock of $3.5 million under our share repurchase program in fiscal year 2020.

For the years ended October 31, 2022 and 2021, net cash (used in) provided by financing activities was $(33.5) million and $0.5 million, respectively.

• The $(33.5) million of cash used in financing activities for fiscal year 2022 was primarily comprised of net repayments of long-term debt in the amount of $26.8 million.

Additionally, in fiscal year 2022 we paid common and preferred dividends, in aggregate, of $5.8 million, paid $1.5 million for the exchange of common stock related to our employees restricted stock awards and received $1.0 million of proceeds from equipment financings.

• The $0.5 million of cash provided by financing activities for fiscal year 2021 was primarily comprised of net borrowings of long-term debt in the amount of $7.1 million.

Additionally, in fiscal year 2021 we paid common and preferred dividends, in aggregate, of $5.8 million and paid $0.7 million for the exchange of common stock related to our employees restricted stock awards.

Transactions Affecting Liquidity and Capital Resources

Credit Facilities and Long-Term Debt

We finance our working capital and other liquidity requirements primarily through cash from operations and our Farm Credit West Credit Facility, which includes the MLA, Supplements and Revolving Equity Line of Credit (the "RELOC").

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

Additional information regarding these loans and the note payable can be found in Note 12 to the consolidated financial statements included in this Annual Report.

In June 2021, we entered into the MLA with Lender dated June 1, 2021, together with the Supplements and a Fixed Interest Rate Agreement.

We finance our working capital and other liquidity requirements primarily through cash from operations and our Farm Credit West Credit Facility, which includes the Master Loan Agreement (the "MLA"), Supplements and Revolving Equity Line of Credit (the "RELOC").

In addition, we have the Farm Credit West term loans, Banco de Chile term loans and COVID-19 loans.

Additional information regarding these loans can be found in Note 10 - Long-Term Debt.

In June 2021, we entered into the MLA with Farm Credit West, PCA (the "Lender") dated June 1, 2021, together with the Supplements and a Fixed Interest Rate Agreement, which extends the principal repayment to July 1, 2026.

The MLA governs the terms of the Supplements.

The MLA amends and restates the previous Master Loan Agreement between our Company and the Lender, dated June 19, 2017, and extends the principal repayment to July 1, 2026.

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.

1 unchanged sentence

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

We are also subject to 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.

We are also subject to a financial covenant that requires us to maintain compliance with a specified debt service coverage ratio greater than or equal to 1:25:1.0 on an annual basis.

We were in compliance as of October 31, 2022.

In August 2021, we entered into the FCW term loan with the Lender and used the proceeds to pay off the Wells Fargo term loan.

The FCW term loan has a fixed interest rate of 3.19% and is payable in monthly installments through September 2026.

In fiscal years 2021 and 2020 we received annual patronage dividends of $1.2 million and $1.6 million, respectively, from Farm Credit West.

In fiscal years 2022 and 2021 we received annual patronage dividends of $1.6 million and $1.2 million, respectively, from the Lender.

Treasury Stock

In fiscal year 2021, our Company's Board of Directors approved a share repurchase program authorizing us to repurchase up to $10.0 million of our outstanding shares of common stock through September 2022;

no shares have been repurchased under this program.

no shares were repurchased under this program.

In fiscal year 2020, we repurchased 250,977 shares for $3.5 million under a program which expired in March 2021.

1 unchanged sentence

Such preferred dividends paid totaled $0.5 million in each of the fiscal years 2022 and 2021.

Cash dividends declared in each of the fiscal years 2021 and 2020 totaled $0.30 per common share and such dividends paid totaled $5.3 million and $5.4 million for fiscal years 2021 and 2020, respectively.

Cash dividends declared in each of the fiscal years 2022 and 2021 totaled $0.30 per common share and such dividends paid totaled $5.3 million.

Real Estate Development Activities and Related Capital Resources

4 unchanged sentences

To consummate the transaction, we formed LLCB as the development entity, contributed our East Area I property to the joint venture and sold a 50% interest in the joint venture to Lewis for $20.0 million.

We expect to receive approximately $100.0 million from LLCB over the estimated 10 to 12-year life of the project including $20.0 million received on the consummation of LLCB.

LLCB's partners will share in capital contributions to fund project costs until loan proceeds and/or revenues are sufficient to fund the project.

Since inception each partner has made funding contributions of $21.4 million, including $2.8 million in fiscal year 2020.

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

Project plans currently include approximately 1,500 residential units and site improvements to be completed.

Lot sales representing 232 and 144 residential units closed in fiscal years 2021 and 2020, respectively, and 586 residential units have closed from the project's inception to October 31, 2021.

Project plans currently include approximately 1,500 residential units and site improvements.

A total of 586 residential units have closed from the project's inception to October 31, 2022.

In October 2022, we entered into a joint venture with Lewis for the development of our 17-acre East Area I Retained Property.

We formed LLCB II as the development entity, contributed our Retained Property to the joint venture and sold a 50% interest to Lewis for approximately $8.0 million.

We recorded a gain on the transaction of approximately $4.7 million, of which $0.5 million was deferred.

The joint venture partners will share in the capital contributions to fund project costs until loan proceeds and/or revenues are sufficient to fund the projects.

Since inception each partner has made funding contributions of $21.4 million to LLCB.

We expect to receive approximately $115.0 million from LLCB and LLCB II over the seven remaining years of the projects, including the $8.0 million received in fiscal year 2022.

Trend Information

3 unchanged sentences

Health-conscious consumers are driving much of the growth in demand for fresh produce.

Over the past several decades, the benefits of natural,

preservative-free and organic foods have become an increasingly significant element of the public dialogue on health and nutrition.

Over the past several decades, the benefits of natural, preservative-free and organic foods have become an increasingly significant element of the public dialogue on health and nutrition.

As a result, consumption of fresh fruit and vegetables has markedly increased.

Conversely, a decrease in demand, as was seen during the COVID-19 pandemic as a result of restaurant closures, has the impact of reducing our pricing and therefore our revenues and margins.

Off-Balance Sheet Arrangements

As discussed in Note 7 – Real Estate Development and Note 8 – Equity in Investments of the notes to consolidated financial statements included in this Annual Report, we have investments in joint ventures and partnerships that are accounted for using the equity method of accounting.

Critical Accounting Estimates

2 unchanged sentences

Actual results may materially differ from these estimates under different assumptions or conditions as new or additional information become available in future periods.

For further information on significant accounting policies, see discussion in Note 2 to the consolidated financial statements included in this Annual Report.

Impairment of Real Estate Development Projects – We evaluate our real estate development projects, held either by us or as included specifically within our investment in LLCB, for impairment on an ongoing basis.

For further information on significant accounting policies, see discussion in Note 2 - Summary of Significant Accounting Policies.

Impairment of Real Estate Development Projects – We evaluate our real estate development projects, held either by us or as included specifically within our investments in LLCB and LLCB II, for impairment on an ongoing basis.

Our evaluation for impairment involves an initial assessment of each real estate development project to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of, or investment in, real estate development are no longer recoverable.

Possible indications of impairment may include events or changes in circumstances affecting the entitlement process, zoning, government regulation, geographical demand for new housing or commercial property, and market conditions related to residential or commercial land lots.

When events or changes in circumstances exist, we further evaluate the real estate development for impairment by a) comparing undiscounted future cash flows expected to be generated over the life of the real estate development to the respective carrying amount for its own real estate development or b) determining if its equity in investment has incurred an other-than-temporary decline.

We make significant judgments in evaluating each real estate development project, as held by us or within our investment in LLCB, for possible indications of impairment.

When events or changes in circumstances exist, we further evaluate the real estate development for impairment by a) comparing undiscounted future cash flows expected to be generated over the life of the real estate development to the respective carrying amount for our real estate development or b) determining if our equity in investment has incurred an other-than-temporary decline.

We make significant judgments in evaluating each real estate development project, as held by us or within our investments in LLCB and LLCB II, for possible indications of impairment.

These judgments may relate to the identification of appropriate and comparable market prices, the consideration of changes to legal factors or the business climate, the likelihood of successfully completing the entitlement process, changes in zoning or government regulation, and demand for new housing.

Changes in these judgments could have a significant impact on real estate development or equity in investments.

For fiscal years 2021, 2020 and 2019, no impairment loss has been recognized on any real estate development and no other-than-temporary-impairment has been recognized on our equity in LLCB.

For fiscal years 2022, 2021 and 2020, no impairment loss has been recognized on any real estate development and no other-than-temporary-impairment has been recognized on our equity in LLCB or LLCB II.

The impairment calculation for real estate developments held by us compares the carrying value of the asset to the asset’s estimated future cash flows (undiscounted).

5 unchanged sentences

If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to impairment losses that could be material to our results of operations.

Whenever events or changes in circumstances indicate that the carrying amount of our equity investment in LLCB might not be recoverable, then we determine whether an impairment is other-than-temporary.

Whenever events or changes in circumstances indicate that the carrying amount of our equity investments in LLCB and LLCB II might not be recoverable, then we determine whether an impairment is other-than-temporary.

If we conclude the impairment is other-than-temporary, we determine the estimated fair value of the investment by performing a discounted cash flow or market approach analysis and recognize an other-than-temporary impairment to reduce the investment to its estimated fair value.

We believe that the accounting estimate related to impairment of real estate development projects held by us, or other-than-temporary impairment of our equity investment in LLCB, is a critical accounting estimate because it is very susceptible to change from period to period;

it requires management to make assumptions about future prices, production, and costs, and the potential impact of a loss from impairment could be material to our earnings.

Management’s assumptions regarding future cash flows from

real estate development projects or return on equity of our investment in LLCB have fluctuated in the past due to changes in prices, production and costs and are expected to continue to do so in the future as market conditions change.

We believe that the accounting estimate related to impairment of real estate development projects held by us, or other-than-temporary impairment of our equity investments in LLCB and LLCB II, is a critical accounting estimate because it is very susceptible to change from period to period;

it requires management to make assumptions about future prices, production, and costs,

and the potential impact of a loss from impairment could be material to our earnings.

Management’s assumptions regarding future cash flows from real estate development projects or return on equity of our investments in LLCB and LLCB II have fluctuated in the past due to changes in prices, production and costs and are expected to continue to do so in the future as market conditions change.

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in this Annual Report for information concerning recent accounting pronouncements.

See Note 2 - Summary of Significant Accounting Policies for information concerning recent accounting pronouncements.

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 7. Management’s Discussion and Analysis