What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-03-07 compared with 2023-09-07 · 163 added, 345 removed, 228 unchanged (69% of the section changed)

6 unchanged sentences

In addition to growing lemons and avocados, we grow oranges and other crops.

We have agricultural plantings throughout Ventura, San Luis Obispo and San Bernardino Counties in California, Yuma County in Arizona, La Serena, Chile and Jujuy, Argentina, which collectively consist of approximately 3,800 acres of lemons, 1,000 acres of avocados, 100 acres of oranges and 300 acres of other crops.

We have agricultural plantings throughout Ventura and San Luis Obispo Counties in California, Yuma County in Arizona, La Serena, Chile and Jujuy, Argentina, which collectively consist of approximately 3,400 acres of lemons, 1,200 acres of avocados, 100 acres of oranges and 400 acres of wine grapes.

We also operate our own packinghouses in Santa Paula, California and Yuma, Arizona, where we process, pack and sell lemons that we grow, as well as lemons grown by others.

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We also use surface water in Arizona from the Colorado River through the Yuma Mesa Irrigation and Drainage District (“YMIDD”).

We used ground water from the San Joaquin Valley Basin and water from local water and irrigation districts in Tulare County, which is in California’s San Joaquin Valley.

We also used ground water from the Cadiz Valley Basin in California's San Bernardino County.

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

We use ground water from the San Joaquin Valley Basin and water from local water and irrigation districts in Tulare County, which is in California’s San Joaquin Valley.

For more than 100 years, we have been making strategic investments in California agriculture and real estate.

5 unchanged sentences

The agribusiness division is comprised of four reportable operating segments:

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

fresh lemons, lemon packing, avocados and other agribusiness, which primarily 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.

4 unchanged sentences

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

We sell our avocados and oranges, and sold our specialty citrus, to third-party packinghouses.

Additionally, we sell our wine grapes to various wine producers, and sold our pistachios to a roaster, packager and marketer of nuts.

We sell our avocados and oranges to third-party packinghouses.

Additionally, we sell our wine grapes to various wine producers.

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

8 unchanged sentences

While avocado production is cyclical as avocados typically bear fruit on a bi-annual basis, the profitability and cash flow realized from our avocados helps to diversify our fruit production base.

In addition to growing lemons and avocados, we grow oranges and other crops typically utilizing land not suitable for growing high quality lemons.

In addition to growing lemons and avocados, we grow oranges and other crops.

We regularly monitor the demand for the fruit we grow in the current marketplace to identify trends.

1 unchanged sentence

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

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

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

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

We believe that this unique employment benefit helps us maintain a dependable, long-term employee base.

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

9 unchanged sentences

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

We used ground water provided by wells that derive water from the Cadiz Valley Basin at the Cadiz Ranch in San Bernardino County, California.

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

Our Associated Citrus Packers, Inc.

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

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

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

California experienced above average precipitation during the first ten months of the 2022 - 2023 rainfall season after experiencing the three driest years on record.

The above average precipitation this season helped to alleviate the drought conditions in California.

As of July 31, 2023, the state was free from severe drought conditions and Ventura County was free from any drought conditions.

California experienced above average precipitation during the 2022 - 2023 rainfall season after experiencing three years of below average precipitation and drought conditions.

The above average precipitation helped to alleviate the drought conditions in California.

As of January 31, 2024, the state was free from moderate drought conditions and Ventura County was free from any drought conditions.

We continue to assess the impact drought conditions may have on our California orchards.

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As a result, in January 2023, Arizona forfeited approximately 21% of the state's yearly allotment of water from Lake Mead.

The Federal Government responded in April 2023 by proposing options for managing the Colorado River water shortage and a final decision is anticipated later this year.

In response to these water shortages, we entered into fallowing agreements in fiscal years 2023 and 2022 and continue to assess the impact these reductions may have on our Arizona orchards.

In August 2023, the Bureau announced Lake Mead will operate in a Tier 1 shortage in 2024, which requires Arizona to forfeit approximately 18% of the state's yearly allotment of water from Lake Mead.

In response to these water shortages, we entered into fallowing agreements during fiscal years 2023 and 2022 and continue to assess the impact these reductions may have on our Arizona orchards.

Recent Developments

On October 10, 2022, we entered into a Purchase and Sale Agreement, as amended (the “Agreement”), with PGIM Real Estate Finance, LLC (“PGIM”) to sell 3,537 acres of land and citrus orchards in Tulare County, California (the “Northern Properties”) for an adjusted purchase price of approximately $100.0 million.

The agreement became effective on January 25, 2023, when the Board of Directors approved the Agreement, binding us to sell the Northern Properties and the transaction closed on January 31, 2023.

We received net cash proceeds of approximately $98.4 million and recorded a gain of approximately $40.0 million.

The proceeds were used primarily to pay down debt.

On January 31, 2023, we entered into a Farm Management Agreement (the “FMA”) with an affiliate of PGIM to provide farming, management and operations services related to the Northern Properties.

The FMA has an initial term expiring March 31, 2024, and thereafter continuing from year to year unless earlier terminated under the terms of the FMA.

Further, on January 31, 2023, we entered into a Grower Packing and Marketing Agreement to provide packing, marketing and selling services for lemons harvested on the Northern Properties for a minimum five-year term, subject to certain benchmarking standards.

During the three months ended January 31, 2023, the Company made funding contributions of $2.6 million to fully fund and settle the plan obligations of the Limoneira Company Retirement Plan.

Lump sum payments were made to a portion of the active and vested terminated participants and annuities were purchased for all remaining participants from an insurance company.

There are no remaining benefit obligations or plan assets and the remaining accumulated other comprehensive loss was fully recognized.

On November 30, 2022, we sold our Sevilla property, received net proceeds of $2.6 million and recorded an immaterial loss in the first quarter of fiscal year 2023.

On June 27, 2023, we declared a cash dividend of $0.075 per common share paid on July 14, 2023, in the aggregate amount of $1.3 million to stockholders of record as of July 11, 2023.

On April 18, 2023, we entered into a Confidential Settlement Agreement and Release (the “Settlement Agreement”) with Southern California Edison and Edison International to formally resolve any and all claims related to the Thomas Fire in fiscal year 2018.

Under the terms of the Settlement Agreement, the Company was awarded a total settlement of $9.0 million.

On May 19, 2023, the Company received approximately $6.1 million, net of legal and related costs.

In April 2023, we determined that citrus farming operations were economically unviable on 670 acres of leased agricultural land at the Cadiz Ranch.

As a result, we ceased farming operations, disposed of the related property, plant and equipment and recorded a loss on disposal of assets of $9.0 million in the second quarter of fiscal year 2023.

In August 2023, we engaged with YMIDD and the United States Bureau of Reclamation in a fallowing and forbearance program at our Associated ranch in Yuma, Arizona.

We expect to receive approximately $1.3 million annually, paid in quarterly installments, for fallowing approximately 600 acres out of 1,300 acres of farmland through calendar year 2025.

On December 1, 2023, we announced the commencement of a strategic review process to explore potential alternatives aimed at maximizing stockholder value.

Potential strategic alternatives could include, but not be limited to, a sale of all or parts of the Company and its assets, a merger or other transaction.

The Board has not set a timetable for completion of the review and no transaction or other outcome is guaranteed to take place.

At this time, we cannot predict the impact that such strategic alternatives might have on our business, operations or financial condition.

In December 2023, we sold 12 acres of real property located in Yuma, Arizona for a sales price of $0.8 million.

After transaction and closing costs, we recorded a gain on sale of approximately $0.2 million.

On December 19, 2023, we declared a cash dividend of $0.075 per common share paid on January 12, 2024, in the aggregate amount of approximately $1.3 million to stockholders of record as of January 2, 2024.

COVID-19 Pandemic

The COVID-19 pandemic has had an adverse impact on the industries and markets in which we conduct business.

In particular, the United States lemon market saw a significant decline in volume, with lemon demand falling since widespread shelter in place orders were issued in March 2020, resulting in a significant market oversupply.

The export market for fresh produce also significantly declined due to the COVID-19 pandemic impacts.

As of July 31, 2023, the demand within both markets is recovering but has not yet returned to pre-pandemic levels.

The decline in demand for the Company's products beginning the second quarter of fiscal year 2020, has negatively impacted our sales and profitability for the last four fiscal years.

In particular, the export market for fresh produce significantly declined due to the COVID-19 pandemic impacts and continues to experience decreased demand.

The decline in demand for the Company's products negatively impacted our sales and profitability for the last four fiscal years.

The COVID-19 pandemic may continue to impact our sales and profitability in future periods.

2 unchanged sentences

Given the economic uncertainty as a result of the COVID-19 pandemic over the past four fiscal years, we have taken actions to improve our current liquidity position, including strategically selling certain assets, temporarily postponing capital expenditures and substantially reducing discretionary spending.

There is continued uncertainty around the breadth and duration of our business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S.

economy and the ongoing business operations of our customers.

There is continued uncertainty around the breadth and duration of our export market business disruptions related to the COVID-19 pandemic.

The ongoing impact of the COVID-19 pandemic on our results of operations, financial condition, or liquidity for fiscal year 2024 and beyond cannot be estimated at this time.

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

Results of Operations

1 unchanged sentence

Three Months Ended

July 31, Nine Months Ended

2023 2022 2023 2022

Net revenues:

5 unchanged sentences

Other operations 1,182 1,238

Loss (gain) on disposal of assets, net 1,545 242 (29,199) 503

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

Gain on disposal of assets, net (165) (39,742)

Selling, general and administrative 7,345 9,280

3 unchanged sentences

Other operations 210 135

(Loss) gain on disposal of assets, net (1,545) (242) 29,199 (503)

Gain on legal settlement — — 2,269 —

Gain on disposal of assets, net 165 39,742

Selling, general and administrative (7,345) (9,280)

4 unchanged sentences

Equity in earnings of investments, net 41 253

Other (expense) income, net (215) 13 (2,627) 106

Other income (expense), net 22 (2,612)

Total other expense (122) (3,523)

5 unchanged sentences

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

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

3 unchanged sentences

Three Months Ended

July 31, Nine Months Ended

2023 2022 2023 2022

Net (loss) income attributable to Limoneira Company $ (3,585) $ 15,631

5 unchanged sentences

Stock-based compensation 864 1,064

Named executive officer cash severance — — — 432

Pension settlement cost — 2,741

Loss (gain) on disposal of assets, net 1,545 242 (29,199) 503

Gain on disposal of assets, net (165) (39,742)

Cash bonus related to sale of assets — 2,000

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

Adjusted EBITDA $ (4,833) $ (7,868)

Three Months Ended July 31, 2023 Compared to the Three Months Ended July 31, 2022

Total net revenues for the three months ended July 31, 2023 were $52.5 million, compared to $58.9 million for the three months ended July 31, 2022.

The 11% decrease of $6.4 million was primarily the result of decreased avocados, oranges and lemons agribusiness revenues, partially offset by increases in farm management and specialty citrus and other agribusiness revenues, as detailed below (in thousands):

Agribusiness Revenues for the Three Months Ended July 31,

Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023

Total net revenues for the three months ended January 31, 2024 were $39.7 million, compared to $37.9 million for the three months ended January 31, 2023.

The 5% increase of $1.8 million was primarily due to farm management revenues from our relationship with PGIM.

Agribusiness revenues are detailed below (in thousands):

Three Months Ended January 31,

2024 2023 Change

2 unchanged sentences

Oranges 1,141 1,152 (11) (1)%

Specialty citrus and other 1,900 1,120 780 70%

Specialty citrus and other crops 1,086 1,247 (161) (13)%

Farm management 2,048 — 2,048 —%

Other 1,088 1,160 (72) (6)%

Agribusiness revenues $ 38,339 $ 36,528 $ 1,811 5%

The decrease in the third quarter of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily related to decreased volume and lower prices of fresh lemons sold.

During the third quarter of fiscal years 2023 and 2022, fresh lemon sales were $24.2 million and $27.8 million, in aggregate, on 1,352,000 and 1,512,000 cartons of lemons sold at average per carton prices of $17.92 and $18.39, respectively.

Lemon revenues in the third quarter of fiscal years 2023 and 2022 included shipping and handling of $5.5 million and $6.3 million, brokered lemons and other lemon sales of $8.8 million and $5.0 million, and lemon by-product sales of $0.6 million and $1.1 million, respectively.

The decrease in the third quarter of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of decreased volume and lower prices of avocados sold, partially offset by crop insurance proceeds in fiscal year 2023.

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

During the third quarter of fiscal years 2023 and 2022, 2,822,000 and 5,694,000 pounds of avocados were sold at an average per pound price of $0.99 and $2.21, respectively.

Avocados agribusiness revenue in the third quarter of fiscal year 2023 included $0.7 million from crop insurance proceeds.

The decrease in the third quarter of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of decreased volume of oranges sold due to the sale of the Northern Properties in fiscal year 2023.

During the third quarter of fiscal years 2023 and 2022, we sold 71,000 and 209,000 cartons of oranges at an average per carton price of $18.17 and $17.88, respectively.

• Specialty citrus and other:

The increase in the third quarter of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of increased volume and higher prices of specialty citrus sold.

During the third quarter of fiscal years 2023 and 2022, we sold 70,000 and 61,000 40-pound carton equivalents of specialty citrus at an average per carton price of $25.88 and $18.34, respectively.

Revenues in the first quarter of fiscal year 2024 were similar to the same period of fiscal year 2023.

During the first quarter of fiscal years 2024 and 2023, fresh lemon sales were $23.9 million and $24.7 million, in aggregate, on 1,137,000 and 1,308,000 cartons of lemons sold at average per carton prices of $21.06 and $18.88, respectively.

Lemon revenues in the first quarter of fiscal years 2024 and 2023 included brokered lemons and other lemon sales of $2.9 million and $1.4 million, shipping and handling of $5.6 million and $5.6 million and lemon by-product sales of $0.5 million and $1.2 million, respectively.

Due to harvest timing, no sales were recorded for the first quarters of fiscal years 2024 and 2023.

Revenues in the first quarter of fiscal year 2024 were similar to the same period of fiscal year 2023.

During the first quarter of fiscal years 2024 and 2023, we sold 80,000 and 64,000 cartons of oranges at an average per carton price of $14.26 and $18.00, respectively.

• Specialty citrus and other crops:

The decrease in the first quarter of fiscal year 2024, compared to the same period of fiscal year 2023, was primarily due to a decrease in specialty citrus revenue of $0.8 million, partially offset by wine grapes revenue of $0.6 million.

During the first quarter of fiscal years 2024 and 2023, we sold 17,000 and 54,000 40-pound carton equivalents of specialty citrus at an average per carton price of $28.88 and $23.09, respectively.

• Farm management:

Farm management revenues in the third quarter of fiscal year 2023 were $5.4 million, primarily related to the Northern Properties farming, management and operations services.

There were no farm management revenues in the third quarter of fiscal year 2022.

Other operations revenue in the third quarter of fiscal years 2023 and 2022 was $1.4 million and $1.3 million, respectively.

Farm management revenues in the first quarter of fiscal year 2024 were $2.0 million, primarily related to the Northern Properties farming, management and operations services.

There were no farm management revenues in the first quarter of fiscal year 2023.

Other revenue is comprised primarily of fallowing and freight revenue.

Other revenues in the first quarter of fiscal year 2024 were similar to the same period of fiscal year 2023.

Other operations revenue in the first quarters of fiscal years 2024 and 2023 were $1.4 million.

Costs and Expenses

Total costs and expenses in the third quarter of fiscal year 2023 were $54.0 million, compared to $47.9 million in the same period of fiscal year 2022.

The 13% increase of $6.1 million was primarily related to increases in growing costs and packing costs, partially offset by decreases in third-party grower and supplier costs and depreciation and amortization.

Total costs and expenses in the first quarter of fiscal year 2024 were $47.5 million, compared to $12.0 million in the same period of fiscal year 2023.

The 295% increase of $35.4 million was primarily related to the gain on the sale of the Northern Properties in the first quarter of fiscal year 2023, partially offset by decreases in agribusiness costs and expenses and selling, general and administrative expenses.

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

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

Three Months Ended January 31,

2024 2023 Change

3 unchanged sentences

Third-party grower and supplier costs 17,723 15,018 2,705 18%

Other costs 804 986 (182) (18)%

Depreciation and amortization 1,744 2,135 (391) (18)%

1 unchanged sentence

• Packing costs:

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 the third quarter of fiscal years 2023 and 2022, lemon packing costs were $13.1 million and $12.0 million, respectively.

During the third quarter of fiscal years 2023 and 2022, we packed and sold 1,352,000 and 1,512,000 cartons of lemons at average per carton costs of $9.72 and $7.91, respectively.

The increase in per carton packing costs was primarily related to increased labor and benefit costs.

Additionally, in the third quarter of fiscal years 2023 and 2022, packing costs included $0.6 million and $0.5 million of shipping costs, respectively.

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

During the first quarter of fiscal years 2024 and 2023, we packed and sold 1,137,000 and 1,308,000 cartons of lemons at average per carton costs of $9.43 and $8.68, respectively.

The increase in per carton packing costs was primarily due to decreased volume packed and sold.

• Harvest costs:

Harvest costs in the third quarter of fiscal year 2023 were similar to the same period of fiscal year 2022.

The decrease in the first quarter of fiscal year 2024, compared to the same period of fiscal year 2023, was primarily due to decreased volume of lemons harvested due to rainfall delaying harvest.

• Growing costs:

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

The increase in the third quarter of fiscal year 2023, compared to the same period in fiscal year 2022, was primarily related 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.

The decrease in the first quarter of fiscal year 2024, compared to the same period in fiscal year 2023, was primarily due to the Northern Properties sale in the first quarter of fiscal year 2023.

• Third-party grower and supplier costs:

1 unchanged sentence

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

The decrease in the third quarter of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of decreased volume and lower prices of third-party grower fruit sold.

Of the 1,352,000 and 1,512,000 cartons of lemons packed and sold during the third quarter of fiscal years 2023 and 2022, 594,000 (44%) and 695,000 (46%), respectively, were procured from third-party growers at average per carton prices of $10.78 and $12.42.

In the third quarter of fiscal years 2023 and 2022, we incurred $8.2 million and $7.0 million, respectively, of costs for purchased, packed fruit for resale.

The increase in the first quarter of fiscal year 2024, compared to the same period of fiscal year 2023, was primarily due to increased volume and prices for third-party grower fruit.

In the first quarter of fiscal years 2024 and 2023, we incurred costs for third-party grower fruit of $14.7 million and $11.8 million, respectively.

Of the 1,137,000 and 1,308,000 cartons of lemons packed and sold during the first quarter of fiscal years 2024 and 2023, 952,000 (84%) and 866,000 (66%), were procured from third-party growers at average per carton prices of $15.41 and $13.60, respectively.

The increased volume for third-party grower fruit was primarily due to Northern Properties fruit that was Limoneira fruit in the first quarter of fiscal year 2023 and third-party grower fruit in the first quarter of fiscal year 2024.

In the first quarter of fiscal years 2024 and 2023, we incurred costs for third-party supplier fruit of $3.0 million and $3.2 million, respectively.

• Other costs:

The decrease in the first quarter of fiscal year 2024, compared to the same period of fiscal year 2023, was primarily due to decreased freight costs.

• Depreciation and amortization:

Depreciation and amortization expense for the third quarter of fiscal years 2023 and 2022 was $1.7 million and $2.2 million, respectively.

The decrease in the third quarter of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily related to the Northern Properties sale in fiscal year 2023.

Other operations expenses were $1.0 million and $1.1 million in the third quarter of fiscal years 2023 and 2022, respectively.

Loss on disposal of assets, net was $1.5 million and $0.2 million in the third quarter of fiscal years 2023 and 2022, respectively.

The increase is primarily related to the loss on disposal of assets in preparation for the Yuma, Arizona fallowing program and other orchard disposals.

Selling, general and administrative costs and expenses were $4.6 million and $5.0 million in the third quarter of fiscal years 2023 and 2022, respectively.

The 8% decrease of $0.4 million was primarily the result of:

• $0.8 million net decrease in salaries, benefits and incentive compensation;

• $0.2 million decrease in selling expenses;

Depreciation and amortization expense for the first quarter of fiscal years 2024 and 2023 was $1.7 million and $2.1 million, respectively.

The decrease in the first quarter of fiscal year 2024, compared to the same period of fiscal year 2023, was primarily due to the Northern Properties sale in the first quarter of fiscal year 2023.

Other operations expenses were $1.2 million in the first quarters of fiscal years 2024 and 2023.

Gain on disposal of assets, net was $0.2 million and $39.7 million in the first quarter of fiscal years 2024 and 2023, respectively.

The decrease was primarily due to the Northern Properties sale in the first quarter of fiscal year 2023.

Selling, general and administrative costs and expenses were $7.3 million and $9.3 million in the first quarter of fiscal years 2024 and 2023, respectively.

The 21% decrease of $1.9 million was primarily due to:

• $2.0 million net decrease in salaries, benefits and incentive compensation, primarily due to the Northern Properties sale;

• $0.1 million net increase in other selling, general and administrative expenses, primarily associated with our strategic initiatives.

Other (Expense) Income

Total other expense was $0.1 million and $0.4 million in the third quarter of fiscal years 2023 and 2022, respectively.

The decrease of $0.3 million in total other expense was primarily the result of:

Total other expense was $0.1 million and $3.5 million in the first quarter of fiscal years 2024 and 2023, respectively.

The decrease of $3.4 million in total other expense was primarily due to:

• $1.0 million decrease in interest expense as a result of decreased long-term debt;

• $0.2 million increase in other expense.

We recorded an estimated income tax benefit (provision) of $0.4 million and $(3.3) million in the third quarter of fiscal years 2023 and 2022 on pre-tax (loss) income of $(1.6) million and $10.6 million, respectively.

The tax benefit recorded for the third quarter of fiscal year 2023 differs from the U.S.

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

Our projected annual effective blended tax rate for fiscal year 2023, excluding discrete items, is approximately 33.5%.

Net Loss Attributable to Noncontrolling Interest

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

Nine Months Ended July 31, 2023 Compared to the Nine Months Ended July 31, 2022

Total net revenues for the nine months ended July 31, 2023 were $138.5 million, compared to $144.9 million for the nine months ended July 31, 2022.

The 4% decrease of $6.4 million was primarily the result of decreased avocados, oranges and lemons agribusiness revenues, partially offset by increases in farm management and specialty citrus and other agribusiness revenues, as detailed below (in thousands):

Agribusiness Revenues for the Nine Months Ended July 31,

2023 2022 Change

Lemons $ 112,456 $ 113,463 $ (1,007) (1)%

Avocados 7,065 16,920 (9,855) (58)%

Oranges 3,825 7,226 (3,401) (47)%

Specialty citrus and other 4,163 3,437 726 21%

Farm management 6,787 — 6,787 —%

Agribusiness revenues $ 134,296 $ 141,046 $ (6,750) (5)%

The decrease in the first nine months of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily related to decreased volume and lower prices of fresh lemons sold.

During the first nine months of fiscal years 2023 and 2022, fresh lemon sales were $75.6 million and $79.8 million, in aggregate, on 4,206,000 and 4,271,000 cartons of lemons sold at average per carton prices of $17.96 and $18.68, respectively.

Lemon revenues in the first nine months of fiscal years 2023 and 2022 included shipping and handling of $17.5 million and $19.0 million, brokered lemons and other lemon sales of $14.8 million and $11.5 million, and lemon by-product sales of $3.1 million and $3.1 million, respectively, and included legal settlement proceeds of $1.4 million allocated to lemons in fiscal year 2023.

The decrease in the first nine months of fiscal year 2023, compared to the same period in fiscal year 2022, was primarily the result of decreased volume and lower prices of avocados sold, partially offset by legal settlement proceeds and crop insurance proceeds in fiscal year 2023.

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

During the first nine months of fiscal years 2023 and 2022, 3,763,000 and 7,936,000 pounds of avocados were sold at an average per pound price of $1.06 and $2.13, respectively.

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

The decrease in the first nine months of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of decreased volume due to the sale of the Northern Properties in fiscal year 2023.

During the first nine months of fiscal years 2023 and 2022, 223,000 and 590,000 cartons of oranges were sold at an average per carton price of $17.15 and $12.25, respectively.

• Specialty citrus and other:

The increase in the first nine months of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of higher prices, partially offset by decreased volume of specialty citrus sold.

During the first nine months of fiscal years 2023 and 2022, we sold 165,000 and 366,000 40-pound carton equivalents of specialty citrus at an average per carton price of $24.70 and $9.26, respectively.

• Farm management:

Farm management revenues in the first nine months of fiscal year 2023 were $6.8 million, primarily related to the Northern Properties farming, management and operations services.

There were no farm management revenues in the first nine months of fiscal year 2022.

Other operations revenue in the first nine months of fiscal years 2023 and 2022 was $4.2 million and $3.9 million , respectively.

The increase in the first nine months of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily related to an increase in leased land revenue.

Costs and Expenses

Total costs and expenses in the first nine months of fiscal year 2023 were $118.0 million, compared to $140.9 million in the same period of fiscal year 2022.

The 16% decrease of $22.9 million was primarily the result of increased gain on disposal of assets, primarily 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):

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

2023 2022 Change

Packing costs $ 38,952 $ 36,020 $ 2,932 8%

Harvest costs 16,574 17,031 (457) (3)%

Growing costs 24,186 21,240 2,946 14%

Third-party grower and supplier costs 40,953 39,471 1,482 4%

Depreciation and amortization 5,610 6,544 (934) (14)%

Agribusiness costs and expenses $ 126,275 $ 120,306 $ 5,969 5%

• Packing costs:

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 the first nine months of fiscal years 2023 and 2022, lemon packing costs were $36.6 million and $34.2 million, respectively.

During the first nine months of fiscal years 2023 and 2022, we packed and sold 4,206,000 and 4,271,000 cartons of lemons at average per carton costs of $8.69 and $8.00, respectively.

The increase in per carton packing costs was primarily related to increased labor and benefit costs.

Additionally, in the first nine months of fiscal years 2023 and 2022, packing costs included $2.4 million and $1.8 million of shipping costs, respectively.

• Harvest costs:

The decrease in harvest costs in the first nine months of fiscal year 2023, compared to the same period in fiscal year 2022, was primarily the result of 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 increase in the first nine months of fiscal year 2023, compared to the same period in fiscal year 2022, was primarily related 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 other growers and suppliers is referred to as third-party grower and supplier costs.

The increase in the first nine months of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily the result of increased volume, partially offset by lower prices of third-party grower fruit sold.

Of the 4,206,000 and 4,271,000 cartons of lemons packed and sold during the first nine months of fiscal years 2023 and 2022, 2,224,000 (53%) and 2,183,000 (51%), respectively, were procured from third-party growers at average per carton prices of $12.11 and $12.81.

Additionally, in the first nine months of fiscal years 2023 and 2022, we incurred $14.0 million and $11.5 million, respectively, of costs for purchased, packed fruit for resale.

• Depreciation and amortization:

Depreciation and amortization expense for the first nine months of fiscal years 2023 and 2022 was $5.6 million and $6.5 million, respectively.

The decrease in the first nine months of fiscal year 2023, compared to the same period of fiscal year 2022, was primarily related to the Northern Properties sale in fiscal year 2023.

Other operations expenses were $3.3 million in the first nine months of fiscal years 2023 and 2022.

(Gain) loss on disposal of assets, net was $(29.2) million and $0.5 million in the first nine months of fiscal years 2023 and 2022, respectively.

The change is primarily related 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 the first nine months of fiscal year 2023 due to the Settlement Agreement related to the Thomas fire.

Selling, general and administrative costs and expenses were $19.9 million and $16.8 million in the first nine months of fiscal years 2023 and 2022, respectively.

The 19% increase of $3.2 million was primarily the result of:

• $1.8 million net increase in salaries, benefits and incentive compensation;

• $0.2 million increase in selling expenses;

• $1.2 million net increase in other selling, general and administrative expenses, primarily associated with our strategic initiatives.

Other (Expense) Income

Total other expense was $2.3 million and $0.4 million in the first nine months of fiscal years 2023 and 2022, respectively.

The increase of $1.9 million in total other expense was primarily the result of:

• $0.8 million decrease of interest expense as a result of decreased long-term debt;

• $2.7 million increase of other expense;

primarily as a result of pension settlement costs

We recorded an estimated income tax provision of $5.5 million and $1.4 million in the first nine months of fiscal years 2023 and 2022 on pre-tax income of $18.2 million and $3.7 million, respectively.

The tax provision recorded for the first nine months of fiscal year 2023 differs from the U.S.

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

• $2.6 million decrease in other expense, net, primarily related to the pension plan settlement.

We recorded an estimated income tax benefit (provision) of $4.2 million and $(6.8) million in the first quarter of fiscal years 2024 and 2023 on pre-tax (loss) income of $(7.9) million and $22.4 million, respectively.

The tax benefit recorded for the first quarter of fiscal year 2024 differs from the U.S.

federal statutory tax rate of 21.0% due primarily to foreign jurisdictions which are taxed at different rates, state taxes, tax impact of stock-based compensation, nondeductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries.

Our projected annual effective blended tax rate for fiscal year 2024, excluding discrete items, is approximately 45.2%.

Net Loss Attributable to Noncontrolling Interest

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

Net loss attributable to noncontrolling interest represents 10% and 49% of PDA and Trapani Fresh, respectively, of the net loss in the first quarter of fiscal years 2024 and 2023, respectively.

Segment Results of Operations

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See Note 19 - Segment Information for additional information regarding our operating segments.

Three Months Ended July 31, 2023, Compared to the Three Months Ended July 31, 2022

The following table shows the segment results of operations for the three months ended July 31, 2023 (in thousands):

Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023

The following table shows the segment results of operations for the three months ended January 31, 2024 (in thousands):

Packing Eliminations

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Operating (loss) income $ (1,457) $ 1,590 $ — $ — $ 836 $ (775) $ (6,970) $ (7,745)

The following table shows the segment results of operations for the three months ended July 31, 2022 (in thousands):

Packing Eliminations

Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 33,823 $ 6,337 $ — $ 12,578 $ 4,856 $ 57,594 $ 1,329 $ 58,923

Intersegment revenue — 9,696 (9,696) — — — — —

Total net revenues 33,823 16,033 (9,696) 12,578 4,856 57,594 1,329 58,923

Costs and expenses 32,600 11,953 (9,696) 3,154 1,280 39,291 6,103 45,394

Depreciation and amortization — — — — — 2,172 297 2,469

Operating income (loss) $ 1,223 $ 4,080 $ — $ 9,424 $ 3,576 $ 16,131 $ (5,071) $ 11,060

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 lemons and other lemon revenue.

For the third quarter of fiscal years 2023 and 2022, our fresh lemons segment total net revenues were $33.6 million and $33.8 million, respectively.

The 1% decrease of $0.2 million was primarily the result of:

• Fresh lemon sales decreased $3.6 million;

• Lemon by-products sales decreased $0.5 million;

• Brokered lemons and other lemon sales increased $3.8 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 the third quarter of fiscal years 2023 and 2022, our fresh lemons segment costs and expenses were $30.8 million and $32.6 million, respectively.

The 6% decrease of $1.8 million was primarily the result of:

• Harvest costs increased $1.0 million;

• Growing costs increased $0.6 million;

• Third-party grower and supplier costs decreased $3.5 million;

• Transportation costs increased $0.1 million.

Lemon Packing

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

For the third quarter of fiscal years 2023 and 2022, our lemon packing segment total net revenues were $15.2 million and $16.0 million, respectively.

The 5% decrease of $0.8 million was primarily the result of decreased volume of lemons packed.

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 the third quarter of fiscal years 2023 and 2022, our lemon packing costs and expenses were $13.1 million and $12.0 million, respectively.

The 10% increase of $1.1 million was primarily the result of increased labor and benefit costs.

For the third quarter of fiscal years 2023 and 2022, lemon packing segment operating income per carton sold was $1.49 and $2.70, respectively.

In the third quarter of fiscal years 2023 and 2022, the lemon packing segment included $9.7 million of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale.

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

For the third quarter of fiscal years 2023 and 2022, our avocados segment had revenues of $3.5 million and $12.6 million, respectively.

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

For the third quarter of fiscal years 2023 and 2022, our avocados segment costs and expenses were $3.0 million and $3.2 million, respectively.

The decrease of $0.2 million primarily consists of the following:

• Harvest costs decreased $0.7 million;

• Growing costs increased $0.5 million.

Other Agribusiness

For the third quarter of fiscal years 2023 and 2022, our other agribusiness segment total net revenues were $8.6 million and $4.9 million, respectively.

The 77% increase of $3.7 million was primarily the result of:

• Orange revenues decreased $2.4 million;

• Specialty citrus and other revenues increased $0.8 million;

• Farm management revenues for the third quarter of fiscal year 2023 were $5.4 million.

There were no farm management revenues in the third quarter of fiscal year 2022.

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

For the third quarter of fiscal years 2023 and 2022, our other agribusiness costs and expenses were $7.9 million and $1.3 million, respectively.

The 515% increase of $6.6 million was primarily the result of:

• Harvest costs decreased $0.4 million;

• Growing costs increased $4.5 million;

• Purchased fruit costs increased $2.5 million.

Total agribusiness depreciation and amortization expenses for the third quarter of fiscal years 2023 and 2022 were $1.7 million and $2.2 million, respectively.

Corporate and Other

Our corporate and other operations had revenues of $1.4 million and $1.3 million for the third quarter of fiscal years 2023 and 2022, respectively.

Costs and expenses in our corporate and other operations for the third quarter of fiscal years 2023 and 2022 were approximately $6.9 million and $6.1 million, respectively, and include selling, general and administrative costs and expenses and loss on disposal of assets, net.

Depreciation and amortization expenses for the third quarter of fiscal years 2023 and 2022 were similar at $0.3 million.

Nine Months Ended July 31, 2023, Compared to the Nine Months Ended July 31, 2022

The following table shows the segment results of operations for the nine months ended July 31, 2023 (in thousands):

Packing Eliminations

Avocados Other

Agribusiness Total

Agribusiness Corporate

and Other Total

Revenues from external customers $ 94,913 $ 17,543 $ — $ 7,065 $ 14,775 $ 134,296 $ 4,172 $ 138,468

Intersegment revenue — 27,356 (27,356) — — — — —

Total net revenues 94,913 44,899 (27,356) 7,065 14,775 134,296 4,172 138,468

Costs and expenses (gain) 94,035 36,568 (27,356) 4,053 13,365 120,665 (9,180) 111,485

Depreciation and amortization — — — — — 5,610 900 6,510

Operating income $ 878 $ 8,331 $ — $ 3,012 $ 1,410 $ 8,021 $ 12,452 $ 20,473

The following table shows the segment results of operations for the nine months ended July 31, 2022 (in thousands):

The following table shows the segment results of operations for the three months ended January 31, 2023 (in thousands):

Packing Eliminations

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Depreciation and amortization — — — — — 2,135 312 2,447

Operating income (loss) $ 2,432 $ 10,535 $ — $ 11,372 $ 2,945 $ 20,740 $ (16,652) $ 4,088

Operating (loss) income $ (4,993) $ 1,658 $ — $ — $ 757 $ (4,713) $ 30,597 $ 25,884

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 lemons and other lemon revenue.

For the first nine months of fiscal years 2023 and 2022, our fresh lemons segment total net revenues were $94.9 million and $94.4 million, respectively.

The 1% increase of $0.5 million was primarily the result of:

• Fresh lemon sales decreased $4.2 million;

• Brokered lemons and other lemon sales increased $3.3 million;

• Legal settlement proceeds allocated to fresh lemons for the first nine months of fiscal year 2023 was $1.4 million.

For the first nine months of fiscal years 2023 and 2022, our fresh lemons segment costs and expenses were $94.0 million and $92.0 million, respectively.

The 2% increase of $2.0 million was primarily the result of:

• Harvest costs increased $1.7 million;

• Growing costs increased $1.8 million;

• Third-party grower and supplier costs decreased $3.6 million;

• Transportation costs increased $0.5 million;

• Intersegment costs and expenses increased $1.7 million.

For the first quarter of fiscal years 2024 and 2023, our fresh lemons segment total net revenues were $27.4 million and $27.3 million, respectively.

The increase of $0.1 million was primarily due to:

• Fresh lemon sales decrease of $0.8 million;

• Lemon by-products sales decrease of $0.7 million;

• Brokered lemons and other lemon sales increase of $1.6 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 and packing service charges incurred from the lemon packing segment to pack lemons for sale.

For the first quarter of fiscal years 2024 and 2023, our fresh lemons segment costs and expenses were $28.8 million and $32.3 million, respectively.

The 11% decrease of $3.5 million was primarily due to:

• Harvest costs decrease of $2.2 million;

• Growing costs decrease of $3.5 million;

• Third-party grower and supplier costs increase of $2.9 million;

• Intersegment costs and expenses decrease of $0.7 million.

Lemon Packing

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

For the first nine months of fiscal years 2023 and 2022, our lemon packing segment total net revenues were $44.9 million and $44.7 million, respectively.

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

For the first quarter of fiscal years 2024 and 2023, our lemon packing segment total net revenues were $12.3 million and $13.0 million, respectively.

The 5% decrease of $0.7 million was primarily due to decreased volume of lemons packed.

For the first nine months of fiscal years 2023 and 2022, our lemon packing costs and expenses were $36.6 million and $34.2 million, respectively.

The 7% increase of $2.4 million was primarily the result of increased labor and benefit costs.

For the first nine months of fiscal years 2023 and 2022, lemon packing segment operating income per carton sold was $1.98 and $2.47, respectively.

In the first nine months of fiscal years 2023 and 2022, the lemon packing segment included $27.4 million and $25.7 million, respectively, of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale.

For the first quarter of fiscal years 2024 and 2023, our lemon packing costs and expenses were $10.7 million and $11.4 million, respectively.

The 6% decrease of $0.6 million was primarily due to decreased volume packed and sold.

For the first quarter of fiscal years 2024 and 2023, lemon packing segment operating income per carton sold was $1.40 and $1.27, respectively.

The lemon packing segment included $6.7 million and $7.4 million of intersegment revenues for the first quarter of fiscal years 2024 and 2023, 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 the first nine months of fiscal years 2023 and 2022, our avocados segment had revenues of $7.1 million and $16.9 million, respectively.

Our avocados segment had no revenues for the first quarters of fiscal years 2024 and 2023.

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

For the first nine months of fiscal years 2023 and 2022, our avocados segment costs and expenses were $4.1 million and $5.5 million, respectively.

The decrease of $1.4 million primarily consisted of the following:

• Harvest costs decreased $0.9 million;

• Growing costs decreased $0.6 million.

Our avocados segment had no costs and expenses for the first quarters of fiscal years 2024 and 2023.

Other Agribusiness

For the first nine months of fiscal years 2023 and 2022, our other agribusiness segment total net revenues were $14.8 million and $10.7 million, respectively.

The 39% increase of $4.1 million was primarily the result of:

• Orange revenues decreased $3.4 million;

• Specialty citrus and other revenues increased $0.7 million;

• Farm management revenues for the first nine months of fiscal year 2023 were $6.8 million.

There were no farm management revenues in the first nine months of fiscal year 2022.

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

For the first nine months of fiscal years 2023 and 2022, our other agribusiness costs and expenses were $13.4 million and $7.7 million, respectively.

The 73% increase of $5.6 million was primarily the result of:

• Harvest costs decreased $1.2 million;

• Growing costs increased $1.7 million;

• Purchased fruit costs increased $5.1 million.

Total agribusiness depreciation and amortization expenses for the first nine months of fiscal years 2023 and 2022 were $5.6 million and $6.5 million, respectively.

Our other agribusiness segment total net revenues were $5.4 million and $3.6 million for the first quarter of fiscal years 2024 and 2023, respectively.

The 51% increase of $1.8 million was primarily due to:

• Specialty citrus and other crops revenues decrease of $0.2 million;

• Farm management revenues for the first quarter of fiscal year 2024 were $2.0 million.

There were no farm management revenues in the first quarter of fiscal year 2023.

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

Our other agribusiness costs and expenses were $4.5 million and $2.8 million for the first quarter of fiscal years 2024 and 2023, respectively.

The 62% increase of $1.7 million was primarily due to:

• Harvest costs increase of $0.1 million;

• Growing costs increase of $2.0 million;

• Purchased fruit costs decrease of $0.2 million;

• Freight costs decrease of $0.2 million.

Total agribusiness depreciation and amortization expenses were $1.7 million and $2.1 million for the first quarter of fiscal years 2024 and 2023, respectively.

Corporate and Other

Our corporate and other operations had revenues of $4.2 million and $3.9 million for the first nine months of fiscal years 2023 and 2022, respectively.

Costs and expenses (gain) in our corporate and other operations for the first nine months of fiscal years 2023 and 2022 were approximately $(9.2) million and $19.7 million, respectively, and include selling, general and administrative costs and expenses, (gain) loss on disposal of assets, net and gain on legal settlement not allocated to the operating segments.

Depreciation and amortization expenses for the first nine months of fiscal years 2023 and 2022 were similar at $0.9 million.

Our corporate and other operations had revenues of $1.4 million for the first quarters of fiscal years 2024 and 2023.

Costs and expenses in our corporate and other operations were approximately $8.0 million and $(29.5) million for the first quarter of fiscal years 2024 and 2023, respectively, and include selling, general and administrative costs and expenses and gain on disposal of assets, net.

Depreciation and amortization expenses for the first quarters of fiscal years 2024 and 2023 were similar at $0.3 million.

Seasonal Operations

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

Results of Operations for the Trailing Twelve Months Ended July 31, 2023 and 2022

Results of Operations for the Trailing Twelve Months Ended January 31, 2024 and 2023

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

Trailing Twelve Months Ended July 31,

Trailing Twelve Months Ended January 31,

Net revenues:

5 unchanged sentences

Other operations 4,556 4,602

(Gain) loss on disposal of assets (34,202) 612

Loss (gain) on disposal of assets 10,728 (44,157)

Gain on legal settlement (2,269) —

1 unchanged sentence

Total costs and expenses 204,577 145,589

Operating income (loss) 18,586 (2,362)

Other (expense) income:

Operating (loss) income (22,847) 37,643

Other income (expense):

Interest income 378 40

1 unchanged sentence

Equity in earnings of investments, net 5,110 1,543

Other (expense) income, net (3,688) 112

Total other expense (3,722) (13)

Income (loss) before income tax (provision) benefit 14,864 (2,375)

Income tax (provision) benefit (4,975) 3

Net income (loss) 9,889 (2,372)

Loss (income) attributable to noncontrolling interest 310 (78)

Net income (loss) attributable to Limoneira Company $ 10,199 $ (2,450)

Other income (expense), net 23 (3,582)

Total other income (expense) 5,982 (5,677)

(Loss) income before income tax benefit (provision) (16,865) 31,966

Income tax benefit (provision) 6,770 (10,300)

Net (loss) income (10,095) 21,666

Loss attributable to noncontrolling interest 278 247

Net (loss) income attributable to Limoneira Company $ (9,817) $ 21,913

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

• Total revenues decreased $0.3 million, primarily the result of decreased avocados agribusiness revenues, partially offset by farm management agribusiness revenues.

• Total costs and expenses decreased $21.3 million, primarily the result of gain on disposal of assets and gain on legal settlement, partially offset by increased agribusiness costs and selling, general and administrative expenses.

• Total other expense increased $3.7 million, primarily the result of increased other expense related to pension settlement costs.

• Income tax provision increased $5.0 million, primarily the result of increased pre-tax income of $17.2 million.

• Total revenues decreased $1.5 million, primarily due to decreased avocados and oranges agribusiness revenues, partially offset by increased farm management revenues.

• Total costs and expenses increased $59.0 million, primarily due to loss (gain) on disposal of assets and increased agribusiness costs and selling, general and administrative expenses.

• Total other income decreased $11.7 million, primarily due to decreased interest expense, increased equity in earnings of investments, net and decreased other expense related to pension settlement costs.

• Income tax benefit increased $17.1 million, primarily due to increased pre-tax loss of $48.8 million.

Liquidity and Capital Resources

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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 10 - Long-Term Debt and Note 12 - Leases for amounts outstanding as of July 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.

See Note 10 - Long-Term Debt and Note 12 - Leases for amounts outstanding as of January 31, 2024, related to debt and leases.

Purchase obligations consist of contracts primarily related to packing supplies, the majority of which are due in the next 5 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.

2 unchanged sentences

Cash Flows from Operating Activities

For the nine months ended July 31, 2023, net cash used in operating activities was $12.6 million, compared to net cash provided by operating activities of $10.9 million for the nine months ended July 31, 2022.

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

• Net income for the nine months ended July 31, 2023 and 2022 was $12.7 million and $2.3 million, respectively.

The components of net income in the nine months ended July 31, 2023, compared to the net income in the same period in fiscal year 2022 consist of an increase in operating income of $16.4 million, an increase in total other expense of $1.9 million and an increase in income tax provision of $4.2 million.

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

◦ Adjustments used $14.1 million and provided $11.9 million in the nine months ended July 31, 2023 and 2022, respectively, primarily related to depreciation and amortization, gain on disposal of assets, stock compensation expense and deferred income taxes.

◦ Changes in operating assets and liabilities used $11.1 million and $3.3 million of operating cash in the nine months ended July 31, 2023 and 2022, respectively, primarily related to accounts receivables/other from related parties, cultural costs, prepaid expenses/other current assets, accounts payable/growers and suppliers payable and accrued liabilities/payables to related parties.

Net cash used in operating activities was $10.3 million and $21.2 million for the three months ended January 31, 2024 and 2023, respectively.

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

• Net (loss) income was $(3.7) million and $15.5 million for the three months ended January 31, 2024 and 2023, respectively.

The components of net loss in the three months ended January 31, 2024, compared to the net income in the same period in fiscal year 2023 consist of a decrease in operating income of $33.6 million primarily due to the Northern Properties sale, a decrease in total other expense of $3.4 million and an increase in income tax benefit of $11.0 million.

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

◦ Adjustments used $1.1 million and $29.1 million in the three months ended January 31, 2024 and 2023, respectively, primarily related to depreciation and amortization, gain on disposal of assets and deferred income taxes.

◦ Changes in operating assets and liabilities used $5.5 million and $7.6 million of operating cash in the three months ended January 31, 2024 and 2023, respectively, primarily related to accounts receivables and receivables/other from related parties and accounts payable and growers and suppliers payable.

Cash Flows from Investing Activities

For the nine months ended July 31, 2023 and 2022, net cash provided by (used in) investing activities was $92.4 million and $(5.3) million, respectively.

• The $92.4 million of cash provided by investing activities during the nine months ended July 31, 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 $9.0 million, primarily related to orchard and vineyard development.

• The $5.3 million of cash used in investing activities during the nine months ended July 31, 2022 was comprised primarily of capital expenditures of $7.7 million related to orchard and vineyard development and investments in mutual water companies and water rights of $0.5 million, partially offset by collection of note receivable of $2.8 million.

Net cash (used in) provided by investing activities was $(1.6) million and $99.1 million for the three months ended January 31, 2024 and 2023, respectively.

▪ The $1.6 million of cash used in investing activities during the three months ended January 31, 2024 was comprised primarily of capital expenditures of $2.2 million, primarily related to orchard and vineyard development, and equity investment contributions and capitalized interest of $0.3 million, partially offset by net proceeds from sales of assets of $0.8 million.

▪ The $99.1 million of cash provided by investing activities during the three months ended January 31, 2023 was comprised primarily of net proceeds from sales of assets of $98.9 million and net proceeds from the sale of real estate development assets of $2.6 million, partially offset by capital expenditures of $2.2 million, primarily related to orchard and vineyard development.

Cash Flows from Financing Activities

For the nine months ended July 31, 2023 and 2022, net cash used in financing activities was $69.6 million and $4.8 million, respectively.

• The $69.6 million of cash used in financing activities during the nine months ended July 31, 2023 was comprised primarily of net repayments of long-term debt of $64.9 million and common and preferred stock dividends of $4.4 million.

• The $4.8 million of cash used in financing activities during the nine months ended July 31, 2022 was comprised primarily of common and preferred dividends of $4.4 million and the exchange of common stock of $1.1 million, partially offset by proceeds from equipment financings of $1.0 million.

Net cash provided by (used in) financing activities was $8.8 million and $(66.3) million for the three months ended January 31, 2024 and 2023, respectively.

• The $8.8 million of cash provided by financing activities during the three months ended January 31, 2024 was comprised primarily of net borrowings of long-term debt of $11.1 million, partially offset by common and preferred stock dividends of $1.5 million and exchange of common stock of $0.7 million.

• The $66.3 million of cash used in financing activities during the three months ended January 31, 2023 was comprised primarily of net repayments of long-term debt of $64.8 million and common and preferred dividends of $1.5 million.

Transactions Affecting Liquidity and Capital Resources

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

In June 2021, we entered into the MLA with AgWest Farm Credit, formerly known as Farm Credit West, PCA (the “Lender”), 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 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 July 31, 2023, our outstanding borrowings under the AgWest Farm Credit Facility were $40.0 million and we had $75.0 million of availability.

As of January 31, 2024, our outstanding borrowings under the AgWest Farm Credit Facility were $51.3 million and we had $63.7 million of availability.

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

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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 with the covenants as of October 31, 2022.

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

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 December 2023, the Lender declared an annual cash patronage dividend of 1.25% of average eligible loan balances and we received $0.3 million in the second quarter of fiscal year 2024.

In February 2023, the Lender declared an annual cash patronage dividend of 1.25% of average eligible loan balances and we received $1.4 million in the second quarter of fiscal year 2023.

In the first quarter of fiscal year 2022, the Lender declared an annual patronage dividend of $1.6 million, which we received in the second quarter of fiscal year 2022.

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

Such preferred dividends paid were $0.4 million in the nine months ended July 31, 2023 and 2022.

Cash dividends declared in the nine months ended July 31, 2023 and 2022 were $0.225 per common share and such dividends paid were $4.0 million in the nine months ended July 31, 2023 and 2022.

Such preferred dividends paid were $0.1 million in the three months ended January 31, 2024 and 2023.

Cash dividends declared in the three months ended January 31, 2024 and 2023 were $0.075 per common share and such dividends paid were $1.4 million and $1.3 million in the three months ended January 31, 2024 and 2023, respectively.

Critical Accounting Estimates

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

During the nine months ended July 31, 2023, our critical accounting policies and estimates have not changed since the filing of our Annual Report on Form 10-K as of October 31, 2022.

During the three months ended January 31, 2024, our critical accounting policies and estimates have not changed since the filing of our Annual Report on Form 10-K as of October 31, 2023.

Please refer to that filing for a description of our critical accounting policies and estimates.

Recent Accounting Pronouncements

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

Quantitative and Qualitative Disclosures about Market Risk

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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-Q

Item 2. Management’s Discussion and Analysis