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Item 7. Management’s Discussion and Analysis

2023-12-21 compared with 2022-12-22 · 161 added, 158 removed, 177 unchanged (64% of the section changed)

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This section generally discusses the results of operations for fiscal year 2023 compared to fiscal year 2022.

For discussion related to the results of operations and changes in financial condition for fiscal year 2021 compared to fiscal year 2020 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2021 Form 10-K, which was filed with the United States Securities and Exchange Commission (SEC) on January 10, 2022.

For discussion related to the results of operations and changes in financial condition for fiscal year 2022 compared to fiscal year 2021 refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2022 Form 10-K, which was filed with the United States Securities and Exchange Commission (SEC) on December 22, 2022.

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

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The agribusiness division is comprised of four reportable operating segments:

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 citrus sales operations.

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

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

The rental operations division includes our residential and commercial rentals comprised of 238 completed rental units, leased land operations and organic recycling.

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Results of Operations

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

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

Years Ended October 31,

2023 2022 2021

Net revenues:

Agribusiness $ 174,381 97 % $ 179,281 97 % $ 161,381 97 %

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Other operations 4,612 3 % 4,438 2 % 4,332 3 %

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

(Gain) loss on disposal of assets, net (28,849) (17) % (4,500) (2) % 109 — %

Gain on legal settlement (2,269) (1) % — — % — — %

Selling, general and administrative 26,455 16 % 21,815 12 % 19,427 11 %

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Other operations 908 886 314

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

Gain (loss) on disposal of assets, net 28,849 4,500 (109)

Gain on legal settlement 2,269 — —

Selling, general and administrative (26,455) (21,815) (19,427)

Operating income (loss) 10,783 2,201 (6,333)

Other (expense) income:

Other income (expense):

Interest income 364 53 379

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Equity in earnings of investments, net 5,322 1,341 3,203

Loss on stock in Calavo Growers, Inc.

Other (expense) income, net (2,611) (955) 89

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

Total other income (expense) 2,581 (1,852) 2,170

Income (loss) before income tax (provision) benefit 13,364 349 (4,163)

Income tax (provision) benefit (4,247) (823) 266

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

Loss attributable to noncontrolling interest 238 456 1,506

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

Net income (loss) 9,117 (474) (3,897)

Net loss attributable to noncontrolling interest 283 238 456

Net income (loss) attributable to Limoneira Company $ 9,400 $ (236) $ (3,441)

Non-GAAP Financial Measures

("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.

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 stock-based compensation, named executive officer cash severance, pension settlement cost, (gain) loss on disposal of assets, net, cash bonus related to sale of assets and gain on legal settlement are important measures to evaluate our results of operations between periods on a more comparable basis.

Adjusted EBITDA in fiscal year 2021 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 fiscal year 2021 has been restated to conform to the current presentation.

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

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The non-GAAP information provided is unique to us and may not be consistent with methodologies used by other companies.

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

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

Years Ended October 31,

2023 2022 2021

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

Net income (loss) attributable to Limoneira Company $ 9,400 $ (236) $ (3,441)

Interest income (364) (53) (379)

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Stock-based compensation 3,841 2,732 2,582

Loss on stock in Calavo Growers, Inc.

Named executive officer cash severance — 432 —

Pension settlement cost 2,700 607 —

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

(Gain) loss on disposal of assets, net (28,849) (4,500) 109

Cash bonus related to sale of assets 2,000 — —

Gain on legal settlement (2,269) — —

Adjusted EBITDA $ (224) $ 11,894 $ 9,918

Fiscal Year 2023 Compared to Fiscal Year 2022

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

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,

Total net revenues for fiscal year 2023 were $179.9 million compared to $184.6 million for fiscal year 2022.

The 3% decrease of $4.7 million was primarily due to decreased avocados and oranges agribusiness revenues, partially offset by farm management agribusiness revenues, as detailed below (in thousands):

Years Ended October 31,

2023 2022 Change

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Specialty citrus and other crops 9,515 8,978 537 6%

Farm management 9,931 — 9,931 —%

Agribusiness revenues $ 174,381 $ 179,281 $ (4,900) (3)%

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 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 decrease in fiscal year 2023, compared to fiscal year 2022, was primarily due to decreased fresh lemon sales, partially offset by increased brokered lemons and other lemon sales.

During fiscal years 2023 and 2022, fresh lemon sales were $86.8 million and $92.9 million, in aggregate, on 4.8 million and 4.9 million cartons of lemons sold at average per carton prices of $18.24 and $18.77, respectively.

Lemon revenues in fiscal years 2023 and 2022 included brokered lemons and other lemon sales of $30.3 million and $24.5 million, shipping and handling of $20.6 million and $22.2 million, and lemon by-product sales of $3.0 million and $3.5 million, respectively.

In addition, lemon revenues included settlement proceeds of $1.4 million allocated to lemons in fiscal year 2023.

The decrease in fiscal year 2023, compared to fiscal year 2022 was primarily due to decreased volume and lower prices of avocados sold.

During fiscal years 2023 and 2022, 3.8 million and 8.2 million pounds of avocados were sold at an average per pound price of $1.06 and $2.08, respectively.

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

During fiscal years 2022 and 2021, 8.2 million and 5.7 million pounds of avocados were sold at average per pound prices of $2.08 and $1.20, respectively.

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

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.

In addition, avocado revenues included settlement proceeds of $2.4 million allocated to avocados and crop insurance proceeds of $0.7 million in fiscal year 2023.

The decrease in fiscal year 2023, compared to fiscal year 2022, was primarily due to decreased volume, mainly related to the Northern Properties sale.

During fiscal years 2023 and 2022, 292,000 and 676,000 cartons of oranges were sold at an average per carton price of $19.79 and $14.66, respectively.

• Specialty citrus and other crops:

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.

The increase in fiscal year 2023, compared to fiscal year 2022, was primarily due to higher prices, partially offset by decreased volume of specialty citrus sold.

During fiscal years 2023 and 2022, we sold 240,000 and 434,000 40-pound carton equivalents of specialty citrus at an average per carton price of $27.18 and $13.22, respectively.

Additionally, during fiscal years 2023 and 2022, we sold $2.9 million and $3.2 million of wine grapes, respectively.

• Farm management:

Farm management revenues in fiscal year 2023 were $9.9 million, primarily due to the Northern Properties farming, management and operations services.

There were no farm management revenues in fiscal year 2022.

Other operations revenue in fiscal years 2023 and 2022 was $5.5 million and $5.3 million, respectively.

The increase in fiscal year 2023, compared to fiscal year 2022, was primarily due to increased leased land revenue.

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% 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.

These costs are discussed further below ($ in thousands):

Agribusiness Costs and Expenses for the Years Ended October 31,

Our total costs and expenses in fiscal year 2023 were $169.1 million, compared to $182.4 million in the same period of fiscal year 2022.

The 7% decrease of $13.3 million was primarily due to increased gain on disposal of assets, mainly related to the Northern Properties sale, partially offset by the loss on disposal of Cadiz Ranch assets and increased agribusiness costs and expenses.

Agribusiness costs and expenses are detailed below (in thousands):

Years Ended October 31,

2023 2022 Change

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• Packing costs:

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

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

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 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.

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

In fiscal years 2023 and 2022, lemon packing costs were $45.7 million and $43.0 million, respectively.

The increase in fiscal year 2023 was primarily due to higher average per carton costs, partially offset by decreased volume of fresh lemons packed and sold compared to fiscal year 2022.

During fiscal years 2023 and 2022, we packed and sold 4.8 million and 4.9 million cartons of lemons at average per carton costs of $9.61 and $8.69, respectively.

The increase in average per carton costs in fiscal year 2023, compared to fiscal year 2022, was primarily due to increased labor and benefit costs.

Additionally, in fiscal years 2023 and 2022, packing costs included $2.9 million and $2.4 million of shipping costs, respectively.

• Harvest costs:

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

The decrease in harvest costs in fiscal year 2023, compared to fiscal year 2022, was primarily due to decreased volume of avocados, oranges and specialty citrus harvested, partially offset by increased volume of lemons harvested.

• Growing costs:

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

The decrease in fiscal year 2022, compared to fiscal year 2021, reflects farm management decisions based on weather, harvest timing and crop conditions.

The increase in fiscal year 2023, compared to fiscal year 2022, was primarily due to the Northern Properties farm management costs which were expensed in fiscal year 2023 and were capitalized as cultural costs in fiscal year 2022, as well as farm management decisions based on weather, harvest timing and crop conditions.

• Third-party grower and supplier costs:

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

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

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 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.

The cost of procuring fruit from other growers and suppliers as well as the cost of brokered fruit is referred to as third-party grower and supplier costs.

The increase in fiscal year 2023, compared to fiscal year 2022, was primarily due to increased costs incurred for brokered fruit, partially offset by decreased costs for third-party growers and suppliers' fruit.

In fiscal years 2023 and 2022, we incurred costs for purchased, packed fruit for resale of $29.4 million and $26.2 million, respectively.

In fiscal years 2023 and 2022, we incurred costs for third-party growers and suppliers' fruit of $31.9 million and $33.4 million, respectively.

During fiscal years 2023 and 2022 of the 4.8 million and 4.9 million cartons of lemons packed and sold, 2.6 million (54%) and 2.6 million (52%), were procured from third-party growers and suppliers at average per carton prices of $12.44 and $13.03, respectively.

• Depreciation and amortization:

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

Depreciation and amortization expense for fiscal years 2023 and 2022 was $7.3 million and $8.6 million, respectively.

The decrease in fiscal year 2023, compared to fiscal year 2022, was primarily due to the Northern Properties sale in fiscal year 2023.

Other operations expenses for fiscal years 2023 and 2022 were $4.6 million and $4.4 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.

Gain on disposal of assets, net in fiscal years 2023 and 2022 were $28.8 million and $4.5 million, respectively.

The change is primarily due to the gain on the sale of the Northern Properties, partially offset by the loss on disposal of Cadiz Ranch assets in fiscal year 2023.

Gain on legal settlement was $2.3 million in fiscal year 2023 due to the Settlement Agreement related to the Thomas fire.

Selling, general and administrative expenses for fiscal year 2023 were $26.5 million compared to $21.8 million for fiscal year 2022.

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;

The $4.7 million increase was primarily due to:

• $2.5 million net increase in salaries, benefits and incentive compensation;

• $0.7 million increase in tax, legal and consulting fees primarily related to disposals of Northern Properties and Cadiz;

• $0.2 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.

• $1.3 million net increase in other selling, general and administrative expenses, primarily associated with our strategic initiatives.

Other Income (Expense)

Total other income (expense) was $2.6 million and $(1.9) million for fiscal years 2023 and 2022, respectively.

The $4.4 million increase in total other income was primarily due to:

• $4.0 million increase of equity earnings in investments primarily due to LLCB;

• $1.8 million decrease of interest expense due to decreased long-term debt;

• $1.7 million increase of other expense primarily due to pension settlement cost.

We recorded for fiscal years 2023 and 2022 income tax provision of $4.2 million and $0.8 million on pre-tax income of $13.4 million and $0.3 million, respectively.

The tax provision recorded for fiscal year 2023 differs from the U.S.

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Our effective tax rate for fiscal years 2023 and 2022 was 31.8% and 234.8%, 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.

Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest represents 10% and 49% of the net loss of PDA and Trapani Fresh, respectively, for fiscal years 2023 and 2022.

Segment Results of Operations

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Segment information for fiscal year 2023 (in thousands):

Packing Eliminations Avocados Other

Packing Eliminations

Avocados Other

Agribusiness Total

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Revenues from external customers $ 121,537 $ 20,573 $ — $ 7,046 $ 25,225 $ 174,381 $ 5,520 $ 179,901

Intersegment revenues — 29,817 (29,817) — — — — —

Intersegment revenue — 31,081 (31,081) — — — — —

Total net revenues 121,537 51,654 (31,081) 7,046 25,225 174,381 5,520 179,901

Costs and expenses 115,119 43,017 (29,817) 5,524 18,204 152,047 20,559 172,606

Costs and expenses (gain) 120,494 45,689 (31,081) 4,034 22,710 161,846 (1,304) 160,542

Depreciation and amortization — — — — — 7,323 1,253 8,576

Operating income (loss) $ 5,766 $ 8,976 $ — $ 11,807 $ 685 $ 18,630 $ (16,429) $ 2,201

Operating income $ 1,043 $ 5,965 $ — $ 3,012 $ 2,515 $ 5,212 $ 5,571 $ 10,783

Segment information for fiscal year 2022 (in thousands):

Packing Eliminations Avocados Other

Packing Eliminations

Avocados Other

Agribusiness Total

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Revenues from external customers $ 120,885 $ 22,176 $ — $ 17,331 $ 18,889 $ 179,281 $ 5,324 $ 184,605

Intersegment revenues — 25,637 (25,637) — — — — —

Intersegment revenue — 29,817 (29,817) — — — — —

Total net revenues 120,885 51,993 (29,817) 17,331 18,889 179,281 5,324 184,605

1 unchanged sentence

Depreciation and amortization — — — — — 8,604 1,194 9,798

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

Operating income (loss) $ 5,766 $ 8,976 $ — $ 11,807 $ 685 $ 18,630 $ (16,429) $ 2,201

Fiscal Year 2023 Segment Information Compared to Fiscal Year 2022 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, 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 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.

For fiscal year 2022, our fresh lemon costs and expenses were $115.1 million compared to $116.1 million for fiscal year 2021.

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

• 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 2022 were $4.2 million higher than fiscal year 2021.

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

For fiscal years 2023 and 2022, our fresh lemons segment total net revenues were $121.5 million and $120.9 million, respectively.

The 1% increase of $0.6 million was primarily due to:

• Fresh lemon sales decrease of $6.2 million;

• Brokered lemons and other lemon sales increase of $5.8 million;

• Lemon by-products decrease of $0.4 million;

• Legal settlement proceeds in fiscal year 2023 allocated to fresh lemons of $1.4 million.

Costs and expenses associated with our fresh lemons segment include growing costs, harvest costs, cost of lemons 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.

For fiscal years 2023 and 2022, our fresh lemons segment costs and expenses were $120.5 million and $115.1 million, respectively.

The 5% increase of $5.4 million was primarily due to:

• Harvest costs increase of $0.3 million;

• Growing costs increase of $3.2 million;

• Third-party grower and supplier costs increase of $0.1 million;

• Transportation costs increase of $0.5 million;

• Intersegment costs and expenses increase of $1.3 million.

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 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 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 revenue is comprised of packing revenue, intersegment packing revenue and shipping and handling revenue.

For fiscal years 2023 and 2022, our lemon packing segment total net revenues were $51.7 million and $52.0 million, respectively, a 1% decrease of $0.3 million.

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

For fiscal years 2023 and 2022, our lemon packing costs and expenses were $45.7 million and $43.0 million, respectively.

The 6% increase of $2.7 million was primarily due to increased labor and benefit costs.

Lemon packing segment operating income per carton sold was $1.25 and $1.81 for fiscal years 2023 and 2022, respectively.

The lemon packing segment included $29.8 million and $25.6 million of intersegment revenues for fiscal years 2022 and 2021, respectively, which were charged to the fresh lemons segment to pack lemons for sale.

The lemon packing segment included $31.1 million and $29.8 million of intersegment revenues for fiscal years 2023 and 2022, respectively, that were charged to the fresh lemons segment to pack lemons for sale.

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

For 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 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.

Our avocados segment revenues were $7.0 million and $17.3 million for fiscal years 2023 and 2022, respectively, a 59% decrease of $10.3 million, due primarily to alternating years of high and low production due to plant physiology.

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

Our avocados segment costs and expenses were $4.0 million and $5.5 million for fiscal years 2023 and 2022, respectively.

The 27% decrease of $1.5 million primarily consisted of the following:

• Harvest costs decrease of $0.9 million;

• Growing costs decrease of $0.6 million.

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 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 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 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 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.

Our other agribusiness segment total net revenues were $25.2 million and $18.9 million for fiscal years 2023 and 2022, respectively.

The 34% increase of $6.3 million was primarily due to:

• Orange revenues decrease of $4.1 million;

• Specialty citrus and other revenues increase of $0.5 million;

• Farm management revenues in fiscal year 2023 were $9.9 million.

There were no farm management revenues in fiscal year 2022.

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

Our other agribusiness costs and expenses were $22.7 million and $18.2 million for fiscal years 2023 and 2022, respectively.

The 25% increase of $4.5 million was primarily due to:

• Harvest costs decrease of $1.5 million;

• Growing costs increase of $4.4 million;

• Purchased fruit costs increase of $1.6 million.

Total agribusiness depreciation and amortization expenses were $7.3 million and $8.6 million for fiscal years 2023 and 2022, respectively.

Corporate and Other

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.

Our corporate and other operations revenues were $5.5 million and $5.3 million for fiscal years 2023 and 2022, respectively.

Costs and expenses (gain) in our corporate and other operations were $(1.3) million and $20.6 million for fiscal years 2023 and 2022, respectively, and include selling, general and administrative costs and expenses, gain on disposal of assets, net and gain on legal settlement not allocated to the operating segments.

Depreciation and amortization expenses for fiscal years 2023 and 2022 were $1.3 million and $1.2 million, respectively.

Liquidity and Capital Resources

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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, 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, 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.

Material contractual obligations arising in the normal course of business consist primarily of purchase obligations, long-term fixed rate and variable rate debt and related interest payments and operating and finance leases.

See Note 11 - Long-Term Debt and Note 13 - Leases for amounts outstanding as of October 31, 2023, related to debt and leases.

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

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

We believe our revenue generating operations, distributions from equity investments and credit facilities will generate sufficient cash needed to operate beyond the next twelve months.

In addition, we have the ability to control a portion of our investing cash flows to the extent necessary based on our liquidity demands.

Cash Flows from Operating Activities

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.

Cash flow used in operations generally consists of agribusiness costs, rental operation costs, selling, general and administrative expenses.

The significant components of our cash flows provided by operating activities are as follows.

• 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 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.

Net cash (used in) provided by operating activities was $(15.9) million and $14.8 million for fiscal years 2023 and 2022, respectively.

The significant components of our cash flows (used in) provided by operating activities were as follows:

• Net income (loss) was $9.1 million and $(0.5) million for fiscal years 2023 and 2022, respectively.

The components of net income for fiscal year 2023, compared to net loss for fiscal year 2022, consists of an increase in operating income of $8.6 million and an increase in total other income of $4.4 million, offset by an increase in income tax provision of $3.4 million.

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

◦ Adjustments (used) provided $(22.5) million and $10.0 million for fiscal years 2023 and 2022, respectively, primarily related to depreciation and amortization, gain on disposal of assets, stock compensation expense, equity in earnings of investments, net and deferred income taxes.

◦ Changes in operating assets and liabilities (used in) provided by $(2.5) million and $5.3 million of operating cash for fiscal years 2023 and 2022, respectively, primarily related to cultural costs, prepaid expenses/other current assets, accounts payable/growers and suppliers payable, accrued liabilities/payables to related parties, and other long-term liabilities.

Cash Flows from Investing Activities

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.

▪ The $90.6 million of net cash provided by investing activities during fiscal year 2023 was comprised primarily of net proceeds from sales of assets of $98.5 million, net proceeds from the sale of real estate development assets of $2.6 million, partially offset by capital expenditures of $10.3 million, primarily related to orchard and vineyard development.

▪ The $19.4 million of net cash provided by investing activities during fiscal year 2022 was comprised primarily of net proceeds from sale of assets of $19.3 million, net proceeds from the sale of real estate development assets of $7.9 million, collection on notes receivable of $2.8 million, partially offset by capital expenditures of $10.1 million related to orchard and vineyard development.

Cash Flows from Financing Activities

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.

• The $71.9 million of net cash used in financing activities during fiscal year 2023 was comprised primarily of net repayments of long-term debt $65.0 million and common and preferred stock dividends of $5.9 million.

• The $33.5 million of net cash used in financing activities during fiscal year 2022 was comprised primarily of net repayments of long-term debt of $26.8 million, common and preferred stock dividends of $5.8 million and the exchange of common stock of $1.5 million, partially offset by proceeds from equipment financings of $1.0 million.

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 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.

We finance our working capital and other liquidity requirements primarily through cash from operations and from our AgWest Farm Credit Facility, which includes the Master Loan Agreement (the “MLA”) and Supplements.

In addition, we have Banco de Chile term loans and COVID-19 loans.

Additional information regarding these loans can be found in Note 11- 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.

In June 2021, we entered into the MLA with the Lender, 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 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.

As of October 31, 2022, our outstanding borrowings under the Farm Credit West Credit Facility were $88.5 million and we had $41.5 million of availability.

The Supplements provide aggregate borrowing capacity of $115.0 million, comprised of $75.0 million under the Revolving Credit Supplement and $40.0 million under the Non-Revolving Credit Supplement.

As of October 31, 2023, our outstanding borrowings under the AgWest Farm Credit Facility were $40.0 million and we had $75.0 million of availability.

On January 31, 2023, the Company sold the Northern Properties which resulted in total net proceeds of $98.4 million.

The proceeds were used to pay down all of the Company's domestic debt except the Non-Revolving Credit Supplement.

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 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.

We are also subject to a financial covenant that requires us to maintain compliance with a specific debt service coverage ratio on an annual basis.

In September 2023, the Lender modified the covenant to defer measurement as of October 31, 2023 and resume a debt service coverage ratio of 1.25:1.0 measured as of October 31, 2024.

In fiscal years 2023 and 2022 we received annual patronage dividends of $1.4 million and $1.6 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 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.

The holders of the Series B Convertible Preferred Stock (the “Series B Stock”) and the Series B-2 Preferred Stock (the “Series B-2 Preferred Stock”) are entitled to receive cumulative cash dividends.

Such preferred dividends paid totaled $0.5 million in each of the fiscal years 2023 and 2022.

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.

Cash dividends declared in each of the fiscal years 2023 and 2022 totaled $0.30 per common share and such dividends paid totaled $5.4 million in fiscal year 2023 and $5.3 million in fiscal year 2022.

In fiscal years 2023 and 2022 , we paid income taxes of $7.2 million and $0.1 million , respectively.

Real Estate Development Activities and Related Capital Resources

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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.

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

A total of 707 residential units have closed from the project's inception to October 31, 2023.

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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.

Since inception each partner has made funding contributions of $21.4 million to LLCB and $0.5 million to LLCB II.

We expect to receive approximately $123.0 million from LLCB, LLCB II and East Area II over the next seven years of the projects.

Trend Information

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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 our real estate development or b) determining if our equity in investment has incurred an other-than-temporary decline.

When events or changes in circumstances exist, we further evaluate the real estate development projects for impairment by a) comparing undiscounted future cash flows expected to be generated over the life of the real estate development projects 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.

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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.

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.

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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