Limoneira CO 10-Q

Item 1. Financial Statements LIMONEIRA COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) July 31, 2024 October 31, 2023 Assets Current assets: Cash $ 1,090 $ 3,631 Accounts receivable, net 21,398 14,458 Cultural costs 3,302 2,334 Prepaid expenses and other current assets 5,593 5,588 Receivables/other from related parties 4,098 4,214 Total current assets 35,481 30,225 Property, plant and equipment, net 161,625 160,631 Real estate development 10,110 9,987 Equity in investments 80,375 78,816 Goodwill 1,505 1,512 Intangible assets, net 5,386 6,657 Other assets 12,831 13,382 Total assets $ 307,313 $ 301,210 Liabilities, Convertible Preferred Stock and Stockholders' Equity Current liabilities: Accounts payable $ 7,416 $ 9,892 Growers and suppliers payable 11,456 9,629 Accrued liabilities 12,665 8,651 Payables to related parties 6,080 4,805 Current portion of long-term debt 594 381 Total current liabilities 38,211 33,358 Long-term liabilities: Long-term debt, less current portion 40,049 40,628 Deferred income taxes 21,007 22,172 Other long-term liabilities 2,353 4,555 Total liabilities 101,620 100,713 Commitments and contingencies — — Series B Convertible Preferred Stock – $ 100.00 par value ( 50,000 shares authorized: 14,790 shares issued and outstanding at July 31, 2024 and October 31, 2023) ( 8.75 % coupon rate) 1,479 1,479 Series B-2 Convertible Preferred Stock – $ 100.00 par value ( 10,000 shares authorized: 9,300 shares issued and outstanding at July 31, 2024 and October 31, 2023) ( 4 % dividend rate on liquidation value of $ 1,000 per share) 9,331 9,331 Stockholders' equity: Series A Junior Participating Preferred Stock – $ 0.01 par value ( 20,000 shares authorized: zero issued or outstanding at July 31, 2024 and October 31, 2023) — — Common Stock – $ 0.01 par value ( 39,000,000 shares authorized: 18,302,878 and 18,192,009 shares issued and 18,051,901 and 17,941,032 shares outstanding at July 31, 2024 and October 31, 2023, respectively) 181 179 Additional paid-in capital 169,743 168,441 Retained earnings 24,164 19,017 Accumulated other comprehensive loss ( 6,380 ) ( 5,666 ) Treasury stock, at cost, 250,977 shares at July 31, 2024 and October 31, 2023 ( 3,493 ) ( 3,493 ) Noncontrolling interest 10,668 11,209 Total stockholders' equity 194,883 189,687 Total liabilities, convertible preferred stock and stockholders' equity $ 307,313 $ 301,210 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended July 31, Nine Months Ended July 31, 2024 2023 2024 2023 Net revenues: Agribusiness $ 61,849 $ 51,092 $ 143,445 $ 134,296 Other operations 1,456 1,405 4,197 4,172 Total net revenues 63,305 52,497 147,642 138,468 Costs and expenses: Agribusiness 45,437 46,845 124,987 126,275 Other operations 1,250 1,034 3,861 3,281 Impairment of intangible asset 643 — 643 — (Gain) loss on disposal of assets, net ( 12 ) 1,545 ( 129 ) ( 29,199 ) Gain on legal settlement — — — ( 2,269 ) Selling, general and administrative 6,994 4,622 21,707 19,907 Total costs and expenses 54,312 54,046 151,069 117,995 Operating income (loss) 8,993 ( 1,549 ) ( 3,427 ) 20,473 Other income (expense): Interest income 27 178 63 248 Interest expense, net of patronage dividends ( 273 ) ( 241 ) ( 831 ) ( 417 ) Equity in earnings of investments, net 483 199 17,116 514 Other income (expense), net 5 ( 215 ) 224 ( 2,627 ) Total other income (expense) 242 ( 79 ) 16,572 ( 2,282 ) Income (loss) before income tax (provision) benefit 9,235 ( 1,628 ) 13,145 18,191 Income tax (provision) benefit ( 3,019 ) 378 ( 4,051 ) ( 5,537 ) Net income (loss) 6,216 ( 1,250 ) 9,094 12,654 Net loss attributable to noncontrolling interest 377 87 481 201 Net income (loss) attributable to Limoneira Company 6,593 ( 1,163 ) 9,575 12,855 Preferred dividends ( 125 ) ( 125 ) ( 376 ) ( 376 ) Net income (loss) applicable to common stock $ 6,468 $ ( 1,288 ) $ 9,199 $ 12,479 Basic net income (loss) per common share $ 0.36 $ ( 0.07 ) $ 0.51 $ 0.70 Diluted net income (loss) per common share $ 0.35 $ ( 0.07 ) $ 0.51 $ 0.69 Weighted-average common shares outstanding-basic 17,756 17,621 17,701 17,597 Weighted-average common shares outstanding-diluted 18,363 17,621 17,701 18,381 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (in thousands) Three Months Ended July 31, Nine Months Ended July 31, 2024 2023 2024 2023 Net income (loss) $ 6,216 $ ( 1,250 ) $ 9,094 $ 12,654 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ( 10 ) ( 485 ) ( 714 ) 1,688 Minimum pension liability adjustments, net of tax of $( 135 ) for the nine months ended July 31, 2023 — — — ( 220 ) Pension settlement cost, net of tax of $ 756 for the nine months ended July 31, 2023 — — — 1,944 Total other comprehensive (loss) income, net of tax ( 10 ) ( 485 ) ( 714 ) 3,412 Comprehensive income (loss) 6,206 ( 1,735 ) 8,380 16,066 Comprehensive loss attributable to noncontrolling interest 377 87 481 201 Comprehensive income (loss) attributable to Limoneira Company $ 6,583 $ ( 1,648 ) $ 8,861 $ 16,267 The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND TEMPORARY EQUITY (UNAUDITED) (in thousands, except share and per share data) Stockholders' Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non- controlling Total Series B Preferred Series B-2 Preferred Shares Amount Capital Earnings Loss Stock Interest Equity Stock Stock Balance at October 31, 2023 17,941,032 $ 179 $ 168,441 $ 19,017 $ ( 5,666 ) $ ( 3,493 ) $ 11,209 $ 189,687 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,350 ) — — — ( 1,350 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 99,983 1 863 — — — — 864 — — Exchange of common stock ( 36,097 ) — ( 684 ) — — — — ( 684 ) — — Noncontrolling interest adjustment — — — — — — ( 60 ) ( 60 ) — — Net loss — — — ( 3,585 ) — — ( 92 ) ( 3,677 ) — — Other comprehensive loss, net of tax — — — — ( 467 ) — — ( 467 ) — — Balance at January 31, 2024 18,004,918 $ 180 $ 168,620 $ 13,957 $ ( 6,133 ) $ ( 3,493 ) $ 11,057 $ 184,188 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,348 ) — — — ( 1,348 ) — — Dividends Series B ($ 2.19 per share) — — — ( 33 ) — — — ( 33 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 30,808 1 1,070 — — — — 1,071 — — Exchange of common stock ( 63,070 ) ( 1 ) ( 1,150 ) — — — — ( 1,151 ) — — Net income (loss) — — — 6,567 — — ( 12 ) 6,555 — — Other comprehensive loss, net of tax — — — — ( 237 ) — — ( 237 ) — — Balance at April 30, 2024 17,972,656 $ 180 $ 168,540 $ 19,050 $ ( 6,370 ) $ ( 3,493 ) $ 11,045 $ 188,952 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,354 ) — — — ( 1,354 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 79,245 1 1,203 — — — — 1,204 — — Net income (loss) — — — 6,593 — — ( 377 ) 6,216 — — Other comprehensive loss, net of tax — — — — ( 10 ) — — ( 10 ) — — Balance at July 31, 2024 18,051,901 $ 181 $ 169,743 $ 24,164 $ ( 6,380 ) $ ( 3,493 ) $ 10,668 $ 194,883 $ 1,479 $ 9,331 7 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND TEMPORARY EQUITY (UNAUDITED) (in thousands, except share and per share data) Stockholders' Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non- controlling Total Series B Preferred Series B-2 Preferred Shares Amount Capital Earnings (Loss) Income Stock Interest Equity Stock Stock Balance at October 31, 2022 17,684,315 $ 177 $ 165,169 $ 15,500 $ ( 7,908 ) $ ( 3,493 ) $ 11,609 $ 181,054 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,337 ) — — — ( 1,337 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 146,289 1 1,063 — — — — 1,064 — — Noncontrolling interest adjustment — — — — — — ( 78 ) ( 78 ) — — Net income (loss) — — — 15,631 — — ( 97 ) 15,534 — — Other comprehensive income, net of tax — — — — 3,947 — — 3,947 — — Balance at January 31, 2023 17,830,604 $ 178 $ 166,232 $ 29,669 $ ( 3,961 ) $ ( 3,493 ) $ 11,434 $ 200,059 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,348 ) — — — ( 1,348 ) — — Dividends Series B ($ 2.19 per share) — — — ( 33 ) — — — ( 33 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 149,900 2 963 — — — — 965 — — Exchange of common stock ( 1,594 ) — ( 26 ) — — — — ( 26 ) — — Net loss — — — ( 1,613 ) — — ( 17 ) ( 1,630 ) — — Other comprehensive loss, net of tax — — — — ( 50 ) — — ( 50 ) — — Balance at April 30, 2023 17,978,910 $ 180 $ 167,169 $ 26,582 $ ( 4,011 ) $ ( 3,493 ) $ 11,417 $ 197,844 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,349 ) — — — ( 1,349 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation — — 756 — — — — 756 — — Net loss — — — ( 1,163 ) — — ( 87 ) ( 1,250 ) — — Other comprehensive loss, net of tax — — — — ( 485 ) — — ( 485 ) — — Balance at July 31, 2023 17,978,910 $ 180 $ 167,925 $ 23,945 $ ( 4,496 ) $ ( 3,493 ) $ 11,330 $ 195,391 $ 1,479 $ 9,331 The accompanying notes are an integral part of these unaudited consolidated financial statements. 8 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Nine Months Ended July 31, 2024 2023 Operating activities Net income $ 9,094 $ 12,654 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,273 6,510 Impairment of intangible asset 643 — Gain on disposal of assets, net ( 129 ) ( 29,199 ) Gain on legal settlement — ( 853 ) Stock compensation expense 3,139 2,785 Non-cash lease expense 1,361 1,226 Equity in earnings of investments, net ( 17,116 ) ( 514 ) Cash distributions from equity investments 15,005 220 Deferred income taxes 4,051 5,537 Other, net 14 161 Changes in operating assets and liabilities: Accounts receivable and receivables/other from related parties ( 7,125 ) ( 3,881 ) Cultural costs ( 973 ) 2,175 Prepaid expenses and other current assets ( 1,381 ) ( 336 ) Other assets ( 150 ) 19 Accounts payable and growers and suppliers payable ( 668 ) ( 4,442 ) Accrued liabilities and payables to related parties 2,913 ( 3,073 ) Income taxes payable ( 2,319 ) ( 330 ) Other long-term liabilities ( 1,366 ) ( 1,247 ) Net cash provided by (used in) operating activities 11,266 ( 12,588 ) Investing activities Capital expenditures ( 6,721 ) ( 8,960 ) Net proceeds from sales of assets 950 98,526 Net proceeds from legal settlement — 853 Net proceeds from sale of real estate development assets — 2,577 Cash distribution from Trapani Fresh 61 82 Collection on notes receivable 66 66 Equity investment contributions and capitalized interest ( 528 ) ( 275 ) Investments in mutual water companies and water rights ( 512 ) ( 511 ) Net cash (used in) provided by investing activities ( 6,684 ) 92,358 Financing activities Borrowings of long-term debt 115,202 57,940 Repayments of long-term debt ( 115,527 ) ( 122,827 ) Principal paid on finance leases and equipment financings ( 520 ) ( 323 ) Dividends paid – common ( 4,052 ) ( 4,034 ) Dividends paid – preferred ( 376 ) ( 376 ) Exchange of common stock ( 1,835 ) ( 26 ) Net cash used in financing activities ( 7,108 ) ( 69,646 ) Effect of exchange rate changes on cash ( 15 ) 26 Net (decrease) increase in cash ( 2,541 ) 10,150 Cash at beginning of period 3,631 857 Cash at end of period $ 1,090 $ 11,007 9 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) (in thousands) Nine Months Ended July 31, 2024 2023 Supplemental disclosures of cash flow information Cash paid during the period for interest (net of amounts capitalized) $ 808 $ 592 Cash paid during the period for income taxes, net $ 2,319 $ 330 Non-cash investing and financing activities: Capital expenditures accrued but not paid at period-end $ 348 $ — Cancellation of loan guarantee related to equity investment $ 1,080 $ — The accompanying notes are an integral part of these unaudited consolidated financial statements. 10 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Basis of Presentation Business Limoneira Company (together with its consolidated subsidiaries, the “Company”) engages primarily in growing citrus and avocados, harvesting citrus, and packing, marketing and selling citrus. The Company is also engaged in residential rentals and other rental operations and real estate development activities. The Company markets and sells citrus directly to food service, wholesale and retail customers throughout the United States, Canada, Asia, Australia and other international markets. Through fiscal year 2023, the Company was a member of Sunkist Growers, Inc., an agricultural marketing cooperative, and sold a portion of its oranges, specialty citrus and other crops to Sunkist-licensed and other third-party packinghouses. Basis of Presentation and Preparation The accompanying unaudited interim consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and investments in which the Company holds a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company, the unaudited interim consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these unaudited interim consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. Because the consolidated financial statements do not include all of the information and notes required by GAAP for a complete set of consolidated financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K. 2. Summary of Significant Accounting Policies Comprehensive Income (Loss) Comprehensive income (loss) represents all changes in a company’s net assets, except changes resulting from transactions with stockholders. Other comprehensive income or loss includes foreign currency translation items and defined benefit pension items. Accumulated other comprehensive loss is reported as a component of the Company's stockholders' equity. The following table summarizes other comprehensive (loss) income by component (in thousands): Three Months Ended July 31, 2024 2023 Pre-tax Amount Tax Expense Net Amount Pre-tax Amount Tax Expense Net Amount Foreign currency translation adjustments $ ( 10 ) $ — $ ( 10 ) $ ( 485 ) $ — $ ( 485 ) Other comprehensive loss $ ( 10 ) $ — $ ( 10 ) $ ( 485 ) $ — $ ( 485 ) Nine Months Ended July 31, 2024 2023 Pre-tax Amount Tax Expense Net Amount Pre-tax Amount Tax Benefit (Expense) Net Amount Foreign currency translation adjustments $ ( 714 ) $ — $ ( 714 ) $ 1,688 $ — $ 1,688 Minimum pension liability adjustments: Other comprehensive (loss) income before reclassifications — — — ( 355 ) 135 ( 220 ) Amounts reclassified to earnings included in “Other income (expense), net” — — — 2,700 ( 756 ) 1,944 Other comprehensive (loss) income $ ( 714 ) $ — $ ( 714 ) $ 4,033 $ ( 621 ) $ 3,412 11 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Comprehensive Income (Loss) (continued) The following table summarizes the changes in accumulated other comprehensive loss by component (in thousands): Foreign Currency Translation Loss Defined Benefit Pension Plan Accumulated Other Comprehensive Loss Balance at October 31, 2023 $ ( 5,666 ) $ — $ ( 5,666 ) Other comprehensive loss ( 714 ) — ( 714 ) Balance at July 31, 2024 $ ( 6,380 ) $ — $ ( 6,380 ) Foreign Currency Translation (Loss) Gain Defined Benefit Pension Plan Accumulated Other Comprehensive (Loss) Income Balance at October 31, 2022 $ ( 6,184 ) $ ( 1,724 ) $ ( 7,908 ) Other comprehensive income 1,688 1,724 3,412 Balance at July 31, 2023 $ ( 4,496 ) $ — $ ( 4,496 ) COVID-19 Pandemic The decline in demand for the Company's products as a result of the COVID-19 pandemic negatively impacted the Company's sales and profitability beginning in the second quarter of fiscal year 2020. The export market for fresh produce continues to experience decreased demand and the COVID-19 pandemic may continue to impact the Company's sales and profitability in future periods. The duration of these trends and the magnitude of such impacts are uncertain and therefore cannot be estimated at this time, as they are influenced by a number of factors, many of which are outside management’s control. Recent Accounting Pronouncements Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ASU 2023-07 is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses, the chief operating decision maker (“CODM”), and how the CODM uses the reported measure(s) of segment profit or loss. This amendment also requires that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB Accounting Standards Codification Topic 280, Segment Reporting, in interim periods. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for public business entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. SEC Release No. 33-11275: The Enhancement and Standardization of Climate-Related Disclosures for Investors In March 2024, the SEC adopted final rules under SEC Release No. 33-11275: The Enhancement and Standardization of Climate-Related Disclosures for Investors , which requires registrants to provide certain climate-related information in their registration statements and annual reports. The rules require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. These requirements are effective for the Company in various fiscal years, starting with its fiscal year beginning November 1, 2026. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. The Company is currently evaluating the impact of these final rules on its consolidated financial statements and disclosures. 12 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Concentrations Concentrations of credit risk with respect to revenues and accounts receivable are limited due to a large, diverse customer base. One individual customer represented 13 % of revenue for the nine months ended July 31, 2024. One individual customer represented 10 % of accounts receivable, net as of July 31, 2024. No individual vendor represented more than 10% of accounts payable as of July 31, 2024. Lemons procured from third-party growers were 73 % and 53 % of the Company's lemon supply for the nine months ended July 31, 2024 and 2023, respectively. One third-party grower was 14 % of the Company's lemon supply for the nine months ended July 31, 2024. The Company maintains its cash in federally insured financial institutions. The account balances at these institutions periodically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of risk related to amounts on deposit in excess of FDIC insurance coverage. 3. Asset Sales and Disposals Northern Properties In October 2022, the Company 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 a purchase price of approximately $ 100,405,000 . On January 25, 2023, the Board approved the Agreement creating a binding agreement of the Company to sell the Northern Properties and the transaction closed on January 31, 2023. During the quarter ended April 30, 2023, the purchase price was decreased by $ 397,000 for reimbursement of certain cultural costs and prepaid expenses, resulting in a final purchase price of $ 100,008,000 . After transaction costs the Company received net proceeds of $ 98,411,000 . The following is a summary of the transaction (in thousands): Net cash proceeds received $ 85,494 Debt directly repaid through the transaction 12,917 Total net proceeds received 98,411 Less: net book value of assets sold Cultural costs 3,853 Prepaid expenses and other current assets 155 Property, plant and equipment, net 53,144 Intangible assets, net 12 Other assets 1,320 Accrued liabilities ( 68 ) 58,416 Gain on disposal of assets $ 39,995 The proceeds were used to pay down all of the Company’s domestic debt except the AgWest Farm Credit $ 40,000,000 non-revolving line of credit. On January 31, 2023, the Company entered into a Farm Management Agreement (“FMA”) with an affiliate of PGIM to provide farming, management and operations services related to the Northern Properties. The FMA had an initial term expiring March 31, 2024, and thereafter continues from year to year unless earlier terminated under the terms of the FMA. Further, on January 31, 2023, the Company 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. 13 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. Asset Sales and Disposals (continued) Yuma Property In December 2023, the Company sold 12 acres of real property located in Yuma, Arizona for a sales price of $ 775,000 . After transaction and closing costs, the Company recorded a gain on disposal of assets of approximately $ 187,000 during the quarter ended January 31, 2024. Cadiz Ranch In April 2023, the Company determined that citrus farming operations were economically unviable on 670 acres of leased agricultural land at the Cadiz Ranch. As a result, the Company ceased farming operations at the Cadiz Ranch, disposed of the related property, plant and equipment and recorded a loss on disposal of assets of $ 9,012,000 during the quarter ended April 30, 2023. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): July 31, 2024 October 31, 2023 Prepaid supplies and insurance $ 2,630 $ 1,667 Assets held for sale — 535 Sales tax receivable 245 490 Income taxes receivable — 816 Lemon supplier advances 1,537 791 Other 1,181 1,289 $ 5,593 $ 5,588 5. Real Estate Development Real estate development assets are comprised primarily of land and land development costs for the East Area II property in the amount of $ 10,110,000 and $ 9,987,000 as of July 31, 2024 and October 31, 2023, respectively. East Area I, Retained Property and East Area II In fiscal year 2005, the Company began capitalizing the costs of two real estate development projects east of Santa Paula, California, for the development of 550 acres of land into residential units, commercial buildings and civic facilities. In November 2015 (the “Transaction Date”), the Company entered into a joint venture with The Lewis Group of Companies (“Lewis”) for the residential development of its East Area I real estate development project. To consummate the transaction, the Company formed Limoneira Lewis Community Builders, LLC (“LLCB”) as the development entity, contributed its East Area I property to LLCB, and sold a 50 % interest to Lewis for $ 20,000,000 . The Company and LLCB also entered into a Retained Property Development Agreement on the Transaction Date (the “Retained Property Agreement”). Under the terms of the Retained Property Agreement, LLCB transferred certain contributed East Area I property, which is entitled for commercial development, back to the Company (the “Retained Property”) and arranged for the design and construction of certain improvements to the Retained Property and East Area II, subject to certain reimbursements by the Company. The balance in East Area II includes estimated costs incurred by and reimbursable to LLCB of $ 3,444,000 as of July 31, 2024 and October 31, 2023, which is included in payables to related parties. In January 2018, LLCB entered into a $ 45,000,000 unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A. to fund early development activities. Effective as of February 22, 2023, the Loan maturity date was extended to February 22, 2024, and the maximum borrowing amount was reduced to $ 35,000,000 . As of February 1, 2023, the interest rate on the Loan transitioned from the London Interbank Offered Rate (“LIBOR”) to the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus 2.85 % and was payable monthly. Effective as of February 22, 2024, the Loan maturity date was extended to August 22, 2024 and the interest rate transitioned from the BSBY to the Secured Overnight Financing Rate ("SOFR") plus 2.85 %. As of May 3, 2024, the Loan had no outstanding balance and was cancelled. As of July 31, 2024, LLCB had unaudited cash and cash equivalents of $ 69,856,000 . 14 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. Real Estate Development (continued) East Area I, Retained Property and East Area II (continued) In February 2018, the Company and certain principals from Lewis guaranteed the obligations under the Loan. The guarantors were jointly and severally liable for all Loan obligations in the event of default by LLCB. Additionally, a Reimbursement Agreement was executed between the Lewis guarantors and the Company, which provided for unpaid liabilities of LLCB to be shared pro-rata by the Lewis guarantors and the Company in proportion to their percentage interest in LLCB. The guarantee continued in effect until all of the Loan obligations were fully paid and the Loan terminated. The $ 1,080,000 estimated value of the guarantee was recorded in the Company’s consolidated balance sheets and, upon cancellation of the Loan in May 2024, was removed from other long-term liabilities and the corresponding value in equity in investments. In October 2022, the Company entered into a joint venture with Lewis for the development of the Retained Property. The Company formed LLCB II, LLC (“LLCB II”) as the development entity, contributed the Retained Property to the joint venture and sold a 50 % interest to Lewis for $ 7,975,000 . The Company recorded a deferred gain of $ 465,000 on the transaction, which is included in other long-term liabilities as of July 31, 2024 and October 31, 2023. 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 project. The Company made contributions of $ 400,000 and $ 275,000 to LLCB II during the nine months ended July 31, 2024 and 2023, respectively. Through July 31, 2024, LLCB closed on lot sales representing 1,261 residential units since inception, including 554 residential units in the second quarter of fiscal year 2024. In June 2024, the Company received a cash distribution of $ 15,005,000 from LLCB. Other Real Estate Development Projects In fiscal year 2020, the Company entered into an agreement to sell its Sevilla property for $ 2,700,000 , which closed in November 2022. After transaction and other costs, the Company received cash proceeds of approximately $ 2,577,000 and recorded an immaterial loss on disposal of assets during the three months ended January 31, 2023. 6. Equity in Investments Equity in investments consist of the following (in thousands): July 31, 2024 October 31, 2023 Limoneira Lewis Community Builders, LLC $ 67,279 $ 66,288 LLCB II, LLC 9,399 8,869 Limco Del Mar, Ltd. ("Del Mar") 1,737 1,832 Rosales 1,459 1,325 Romney Property Partnership 501 502 $ 80,375 $ 78,816 Unconsolidated Significant Subsidiary In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies to interim reports on Form 10-Q, the Company must determine if its equity method investees are considered “significant subsidiaries.” In evaluating its investments, there are two tests utilized to determine if equity method investees are considered significant subsidiaries: the income test and the investment test. Summarized income statement information of an equity method investee is required in an interim report if either of the two tests exceed 20% in the interim periods presented. During the year-to-date interim period for the nine months ended July 31, 2024, this threshold was met for LLCB and thus summarized income statement information for LLCB is presented in this Quarterly Report on Form 10-Q. The full audited financial statements of LLCB for the years ended October 31, 2023, 2022 and 2021 were provided as exhibits to the Annual Report on Form 10-K for the fiscal year ended October 31, 2023. 15 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. Equity in Investments (continued) Unconsolidated Significant Subsidiary (continued) The following is unaudited summarized financial information for LLCB (in thousands): Nine Months Ended July 31, 2024 2023 Revenues $ 91,402 $ 1,086 Cost of land sold 50,246 — Operating expenses 276 414 Net income $ 40,880 $ 672 Net income attributable to Limoneira Company $ 19,765 $ 477 July 31, 2024 October 31, 2023 Cash and cash equivalents $ 69,856 $ 12,863 7. Goodwill and Intangible Assets, Net A summary of the change in the carrying amount of goodwill is as follows (in thousands): Goodwill Carrying Amount Balance at October 31, 2023 $ 1,512 Foreign currency translation adjustment ( 7 ) Balance at July 31, 2024 $ 1,505 Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. There have been no impairment charges recorded against goodwill as of July 31, 2024. Intangible assets consist of the following (in thousands): July 31, 2024 October 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life in Years Trade names and trademarks $ 2,108 ( 1,258 ) 850 8 $ 2,108 $ ( 1,104 ) $ 1,004 8 Customer relationships 2,707 ( 1,762 ) 945 8 4,037 ( 2,111 ) 1,926 9 Non-competition agreement 437 ( 173 ) 264 8 437 ( 132 ) 305 8 Acquired water and mineral rights 3,327 — 3,327 Indefinite 3,422 — 3,422 Indefinite $ 8,579 $ ( 3,193 ) $ 5,386 $ 10,004 $ ( 3,347 ) $ 6,657 Amortization expense totaled $ 177,000 and $ 178,000 for the three months ended July 31, 2024 and 2023, respectively. Amortization expense totaled $ 533,000 and $ 553,000 for the nine months ended July 31, 2024 and 2023, respectively. In July 2024, the Company determined that the carrying value of one of its customer relationships was not recoverable, recorded an impairment charge of $ 643,000 and wrote off the intangible asset. 16 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 7. Goodwill and Intangible Assets, Net (continued) Estimated future amortization expense of intangible assets as of July 31, 2024 is as follows (in thousands): 2024 (remaining three months) $ 144 2025 578 2026 578 2027 294 2028 294 Thereafter 171 $ 2,059 8. Other Assets Investments in Mutual Water Companies The Company’s investments in various not-for-profit mutual water companies provide it with the right to receive a proportionate share of water from each of the not-for-profit mutual water companies that the Company has invested in and do not constitute voting shares and/or rights. In January 2023, the Company sold an investment in a mutual water company with a net book value of $ 1,320,000 as part of the Northern Properties sale described in Note 3 - Asset Sales and Disposals. Amounts included in other assets in the consolidated balance sheets as of July 31, 2024 and October 31, 2023 were $ 6,215,000 and $ 5,703,000 , respectively. 9. Accrued Liabilities Accrued liabilities consist of the following (in thousands): July 31, 2024 October 31, 2023 Compensation $ 3,705 $ 2,858 Property taxes 451 548 Operating expenses 3,146 2,223 Leases 2,246 2,150 Income taxes payable 2,092 — Other 1,025 872 $ 12,665 $ 8,651 10. Long-Term Debt Long-term debt is comprised of the following (in thousands): July 31, 2024 October 31, 2023 AgWest Farm Credit revolving and non-revolving lines of credit: the interest rate of the revolving line of credit is variable based on the one-month SOFR, which was 5.34 % at July 31, 2024, plus 1.78 %. The interest rate for the $ 40.0 million outstanding balance of the non-revolving line of credit is fixed at 3.57 % through July 1, 2025 and variable thereafter. Interest is payable monthly and the principal is due in full on July 1, 2026. $ 40,000 $ 40,000 Banco de Chile term loan: The interest rate is fixed at 6.48 %. The loan is payable in annual installments through January 2025. 438 583 Banco de Chile COVID-19 loans: The interest rates are fixed at 3.48 %. The loans are payable in monthly installments through September 2024. 11 112 Banco de Chile COVID-19 loans: The interest rates are fixed at 3.48 % and 4.26 %. The loans are payable in monthly installments through September 2026. 194 314 Total long-term debt 40,643 41,009 Less current portion 594 381 Long-term debt, less current portion $ 40,049 $ 40,628 17 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 10. Long-Term Debt (continued) The Company entered into a Master Loan Agreement (the “MLA”) with AgWest Farm Credit, formerly known as Farm Credit West, (the “Lender”) dated June 1, 2021, together with a revolving credit facility supplement (the “Revolving Credit Supplement”), a non-revolving credit facility supplement (the “Non-Revolving Credit Supplement,” and together with the Revolving Credit Supplement, the “Supplements”) and an agreement to convert to a fixed interest rate for a period of time as described in the table above (“Fixed Interest Rate Agreement”). The MLA governs the terms of the Supplements. In March 2020, the Company entered into a revolving equity line of credit promissory note and loan agreement with the Lender for a $ 15,000,000 Revolving Equity Line of Credit (the “RELOC”) secured by a first lien on the Windfall Investors, LLC property. The RELOC featured a 3-year draw period followed by 20 years of fully amortized loan payments. On March 31, 2023, the draw period expired and the RELOC was closed as there was no balance outstanding. The Supplements provide aggregate borrowing capacity of $ 115,000,000 comprised of $ 75,000,000 under the Revolving Credit Supplement, and $ 40,000,000 under the Non-Revolving Credit Supplement. As of July 31, 2024, the Company's outstanding borrowings under the Supplements were $ 40,000,000 and it had $ 75,000,000 available to borrow. In January 2023, the Company used the proceeds from the Northern Properties sale as described in Note 3 - Asset Sales and Disposals to reduce the Company's long-term debt. The interest rate in effect under the Revolving Credit Supplement automatically adjusts on the first day of each month. The interest rate for any amount outstanding under the Revolving Credit Supplement was based on the one-month LIBOR plus or minus an applicable margin. As of January 1, 2023, the rate transitioned from LIBOR to SOFR. The applicable margin ranges from 1.68 % to 2.28 % depending on the ratio of current assets, plus the remaining available commitment divided by current liabilities. On each anniversary of July 1, the Company has the option to convert the interest rate in use under the Revolving Credit Supplement from the preceding SOFR-based calculation to a variable interest rate. The Company may prepay any amounts outstanding under the Revolving Credit Supplement without penalty. The interest rate in effect under the Non-Revolving Credit Supplement is a fixed interest rate of 3.57 % per year until July 1, 2025 (the “Fixed Rate Term”). Thereafter, the interest rate will convert to a variable interest rate established by the Lender corresponding to the applicable interest rate group. The Company may not prepay any amounts under the outstanding Non-Revolving Credit Supplement during the Fixed Rate Term. Thereafter, the Company may prepay any amounts outstanding under the Non-Revolving Credit Supplement, provided that a fee equal to 0.50 % of the amount prepaid and any other cost or loss suffered by the Lender must be paid with any prepayment. All indebtedness under the MLA, including any indebtedness under the Supplements, is secured by a first lien on Company-owned stock or participation certificates, Company funds maintained with the Lender, the Lender’s unallocated surplus, certain of the Company’s agricultural properties, certain of the Company’s building fixtures and improvements, and investments in mutual water companies associated with the pledged agricultural properties. The MLA includes customary default provisions. Should an event of default occur, the Lender, at its option, may declare all or any portion of the indebtedness under the MLA to be immediately due and payable without demand, notice of nonpayment, protest or prior recourse to collateral, and terminate or suspend the Company’s right to draw or request funds on any loan or line of credit. The MLA subjects the Company 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 the Company’s business. The Company is also subject to a financial covenant that requires it 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 the Company received $ 558,000 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 the Company received $ 1,413,000 in the second quarter of fiscal year 2023. Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress. The Company capitalized interest of $ 347,000 and $ 207,000 during the three months ended July 31, 2024 and 2023, and $ 501,000 and $ 513,000 for the nine months ended July 31, 2024 and 2023, respectively. Capitalized interest is included in property, plant and equipment, real estate development assets and equity in investments in the Company’s consolidated balance sheets. 18 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 11. Other Long-Term Liabilities Other long-term liabilities consist of the following (in thousands): July 31, 2024 October 31, 2023 Loan guarantee — 1,080 Leases 1,205 2,316 Other 1,148 1,159 $ 2,353 $ 4,555 12. Leases Lessor Arrangements The Company enters into leasing transactions in which it rents certain of its assets and the Company is the lessor. These lease contracts are typically classified as operating leases with remaining terms ranging from one month to 19 years with various renewal terms available. All of the residential rentals have month-to-month lease terms. The Company's rental operations revenue consists of the following (in thousands): Three Months Ended July 31, Nine Months Ended July 31, 2024 2023 2024 2023 Operating lease revenue $ 1,381 $ 1,308 $ 3,947 $ 3,872 Variable lease revenue 75 97 250 300 Total lease revenue $ 1,456 $ 1,405 $ 4,197 $ 4,172 Lessee Arrangements The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are classified as either operating or finance leases. The Company’s lease contracts are generally for agricultural land, packinghouse facilities, equipment and vehicles with remaining lease terms ranging from one to four years , with various term extensions available. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Lease costs are primarily included in agribusiness costs and expenses in the Company's consolidated statements of operations. Lease costs consist of the following (in thousands): Three Months Ended July 31, Nine Months Ended July 31, 2024 2023 2024 2023 Operating lease costs $ 517 $ 522 $ 1,535 $ 1,504 Finance lease costs: Amortization of lease assets 51 33 161 99 Interest on lease liabilities 10 7 31 23 Variable lease costs 54 78 22 ( 12 ) Short-term lease costs 48 155 148 493 Total lease costs $ 680 $ 795 $ 1,897 $ 2,107 19 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 12. Leases (continued) Lessee Arrangements (continued) Supplemental balance sheet information related to leases consists of the following (in thousands): Classification July 31, 2024 October 31, 2023 Assets Operating lease ROU assets Other assets $ 2,809 $ 3,484 Finance lease assets Other assets 714 1,182 $ 3,523 $ 4,666 Liabilities Current operating lease liabilities Accrued liabilities $ 2,053 $ 1,831 Current finance lease liabilities Accrued liabilities 193 319 Non-current operating lease liabilities Other long-term liabilities 811 1,714 Non-current finance lease liabilities Other long-term liabilities 394 602 $ 3,451 $ 4,466 Supplemental cash flow information related to leases consists of the following (in thousands): Nine Months Ended July 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 1,530 $ 1,459 Operating cash outflows from finance leases $ 31 $ 23 Financing cash outflows from finance leases $ 291 $ 178 ROU assets obtained in exchange for new operating lease liabilities $ 689 $ 138 Leased assets obtained in exchange for new finance lease liabilities $ 557 $ — 20 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 13. Basic and Diluted Net Income (Loss) Per Share Basic net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of conversion of preferred stock. Diluted net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of unvested, restricted stock and conversion of preferred stock. The computations for basic and diluted net income (loss) per common share are as follows (in thousands, except per share data): Three Months Ended July 31, Nine Months Ended July 31, 2024 2023 2024 2023 Basic net income (loss) per common share: Net income (loss) applicable to common stock $ 6,468 $ ( 1,288 ) $ 9,199 $ 12,479 Effect of unvested, restricted stock ( 95 ) ( 27 ) ( 153 ) ( 194 ) Numerator: Net income (loss) for basic EPS 6,373 ( 1,315 ) 9,046 12,285 Denominator: Weighted average common shares–basic 17,756 17,621 17,701 17,597 Basic net income (loss) per common share $ 0.36 $ ( 0.07 ) $ 0.51 $ 0.70 Diluted net income (loss) per common share: Net income (loss) for basic EPS $ 6,373 $ ( 1,315 ) $ 9,046 $ 12,285 Effect of dilutive preferred stock 125 — — 376 Numerator: Net income (loss) for diluted EPS 6,498 ( 1,315 ) 9,046 12,661 Weighted average common shares–basic 17,756 17,621 17,701 17,597 Effect of dilutive preferred stock 607 — — 784 Denominator: Weighted average common shares–diluted 18,363 17,621 17,701 18,381 Diluted net income (loss) per common share $ 0.35 $ ( 0.07 ) $ 0.51 $ 0.69 Diluted net income (loss) per common share is computed using the more dilutive method of either the two-class method or the treasury stock method. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating shares are included in computing earnings per share. The Company’s unvested, restricted stock awards qualify as participating shares. Diluted net income (loss) per common share was calculated under the two-class method for the three and nine months ended July 31, 2024 and 2023. 21 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 14. Related-Party Transactions The Company has transactions with equity method investments and various related parties summarized in Note 6 - Equity in Investments and in the tables below (in thousands): July 31, 2024 October 31, 2023 Balance Sheet Balance Sheet Ref Related-Party Receivables/Other from Related Parties Other Assets Payables to Related Parties Receivables/Other from Related Parties Other Assets Payables to Related Parties 2 Mutual water companies $ — $ 512 $ 207 $ — $ 523 $ 48 5 Cadiz / Fenner / WAM $ — $ — $ 206 $ — $ — $ 206 6 YMIDD $ 541 $ — $ — $ 571 $ — $ — 7 FGF $ 2,355 $ 2,452 $ 837 $ 2,681 $ 2,519 $ 837 8 LLCB $ — $ — $ 3,444 $ 66 $ — $ 3,444 10 Rosales $ 1,202 $ — $ 924 $ 896 $ — $ 270 11 Del Mar $ — $ — $ 462 $ — $ — $ — Three Months Ended July 31, 2024 Three Months Ended July 31, 2023 Consolidated Statement of Operations Consolidated Statement of Operations Ref Related-Party Net Revenue Agribusiness Net Revenue Other Operations Agribusiness Expense and Other Dividends Paid Net Revenue Agribusiness Net Revenue Other Operations Agribusiness Expense and Other Dividends Paid 1 Employees $ — $ 240 $ — $ — $ — $ 222 $ — $ — 2 Mutual water companies $ — $ — $ 138 $ — $ — $ — $ 201 $ — 3 Cooperative association $ — $ — $ 17 $ — $ — $ — $ 412 $ — 5 Cadiz / Fenner / WAM $ — $ — $ — $ 93 $ — $ — $ 359 $ — 6 YMIDD $ 311 $ — $ — $ — $ 135 $ — $ 70 $ — 7 FGF $ 83 $ 50 $ — $ — $ 132 $ 50 $ — $ — 9 Principal Owner $ — $ — $ — $ 240 $ — $ — $ — $ 446 10 Rosales $ 368 $ — $ 1,545 $ — $ — $ — $ — $ — Nine Months Ended July 31, 2024 Nine Months Ended July 31, 2023 Consolidated Statement of Operations Consolidated Statement of Operations Ref Related-Party Net Revenue Agribusiness Net Revenue Other Operations Agribusiness Expense and Other Dividends Paid Net Revenue Agribusiness Net Revenue Other Operations Agribusiness Expense and Other Dividends Paid 1 Employees $ — $ 695 $ — $ — $ — $ 666 $ — $ — 2 Mutual water companies $ — $ — $ 712 $ — $ — $ — $ 979 $ — 3 Cooperative association $ — $ — $ 576 $ — $ — $ — $ 1,278 $ — 5 Cadiz / Fenner / WAM $ — $ — $ — $ 279 $ — $ — $ 1,914 $ — 6 YMIDD $ 940 $ — $ 62 $ — $ 405 $ — $ 142 $ — 7 FGF $ 248 $ 150 $ — $ — $ 248 $ 174 $ — $ — 9 Principal Owner $ — $ — $ — $ 690 $ — $ — $ — $ 656 10 Rosales $ 3,552 $ — $ 1,594 $ — $ — $ — $ — $ — (1) Employees - The Company rents certain of its residential housing assets to employees on a month-to-month basis and recorded rental income from employees. (2) Mutual water companies - The Company has representation on the boards of directors of the mutual water companies in which the Company has investments, as well as other water districts. Refer to Note 8 - Other Assets. The Company recorded capital contributions, purchased water and water delivery services and had water payments due to the mutual water companies and districts. (3) Cooperative association - The Company has representation on the board of directors of a non-profit cooperative association that provides pest control services for the agricultural industry. The Company purchased services and supplies from and had immaterial payments due to the cooperative association. 22 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 14. Related-Party Transactions (continued) (5) Cadiz / Fenner / WAM - A member of the Company’s board of directors served as the CEO, President and a member of the board of directors of Cadiz, Inc. through December 31, 2023. As of January 1, 2024, Cadiz, Inc. is no longer a related-party. In 2013, the Company entered a long-term lease agreement (the “Lease”) with Cadiz Real Estate, LLC (“Cadiz”), a wholly owned subsidiary of Cadiz, Inc., and leased 670 acres located in eastern San Bernardino County, California. In 2016, Cadiz assigned this lease to Fenner Valley Farms, LLC (“Fenner”), a subsidiary of Water Asset Management, LLC (“WAM”). As of the date of the lease assignment, the Company no longer had any related-party transactions with Cadiz. An affiliate of WAM is the holder of 9,300 shares of the Company's Series B-2 convertible preferred stock and the Company paid dividends to such affiliate. The annual base rent was equal to the sum of $ 200 per planted acre and 20 % of gross revenues from the sale of harvested lemons (less operating expenses), not to exceed $ 1,200 per acre per year. Upon the adoption of ASC 842, the Company recorded a ROU asset and corresponding lease liability, which were written off in fiscal year 2023 upon cessation of farming operations. (6) Yuma Mesa Irrigation and Drainage District (“YMIDD”) - The Company has representation on the board of directors of YMIDD. The Company purchased water from YMIDD and had no amounts payable to them for such purchases. Additionally, the Company received fallowing revenue from YMIDD and has a receivable outstanding. (7) FGF - The Company has a receivable from FGF for lemon sales and the sale of packing supplies and a payable due to FGF for fruit purchases and services. The Company records revenue related to the licensing of intangible assets to FGF. The Company leases the Santa Clara ranch to FGF and records rental revenue related to the leased land. (8) LLCB - Refer to Note 5 - Real Estate Development. (9) Principal owner - The Company has one principal owner with ownership shares over 10% and paid dividends to such owner. (10) Rosales - The Company has an equity interest in Rosales as further described in Note 6 - Equity in Investments. The Company recognizes lemon sales to Rosales, procures lemons and oranges from Rosales and has amounts due to and due from Rosales for such sales and consignments. (11) Del Mar - The Company has an interest in Del Mar as a general partner and as a limited partner as further described in Note 6 - Equity in Investments. Del Mar markets lemons through the Company and the Company has a payable due to Del Mar for such lemon procurement. 15. Income Taxes The effective tax rate for the nine months ended July 31, 2024 was higher than the federal statutory tax rate of 21% mainly due to foreign jurisdictions that are taxed at different rates, state taxes, tax impact of stock-based compensation, executive compensation, nondeductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries. The Company has no material uncertain tax positions as of July 31, 2024. The Company recognizes interest expense and penalties related to income tax matters as a component of income tax expense. There was no accrued interest or penalties associated with uncertain tax positions as of July 31, 2024. 16. Retirement Plans The Limoneira Company Retirement Plan (the “Plan”) was a noncontributory, defined benefit, single employer pension plan, which provided retirement benefits for all eligible employees. Benefits paid by the Plan were calculated based on years of service, highest five-year average earnings, primary Social Security benefit and retirement age. Effective June 2004, the Company froze the Plan and no additional benefits accrued to participants subsequent to that date. The Plan was administered by Principal Bank and Mercer Human Resource Consulting. In fiscal year 2021, the Company terminated the Plan effective December 31, 2021. During the three months ended January 31, 2023, the Company made funding contributions of $ 2,500,000 to fully fund and settle the plan obligations. 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. The Plan was funded consistent with the funding requirements of federal law and regulations. Plan assets were invested in a group trust consisting primarily of pooled funds, mutual funds, cash and cash equivalents. 23 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 16. Retirement Plans (continued) The components of net periodic pension cost for the Plan were as follows (in thousands): Nine Months Ended July 31, 2024 2023 Administrative expenses $ — $ 20 Interest cost — 34 Expected return on plan assets — ( 17 ) Prior service cost — 4 Settlement loss recognized — 2,700 Net periodic benefit cost $ — $ 2,741 17. Commitments and Contingencies The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business. At this time, the Company is not aware of any pending or threatened litigation against it that it expects will have a material adverse effect on its business, financial condition, liquidity or operating results. Legal claims are inherently uncertain, however, and it is possible that the Company’s business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings. The Company was party to a lawsuit, initiated on March 27, 2018, against Southern California Edison in Superior Court of the State of California, County of Los Angeles whereby the Company claimed unspecified damages, attorneys’ fees and other costs, as a result of the Thomas Fire in fiscal year 2018. On April 18, 2023, the Company entered into a Confidential Settlement Agreement and Release (the “Settlement Agreement”) with Southern California Edison Company and Edison International to formally resolve any and all claims related to the fire. Under the terms of the Settlement Agreement, the Company was awarded a total settlement of $ 9,000,000 . On May 19, 2023, the Company received $ 6,109,000 , net of legal and related costs, of which $ 3,840,000 was recorded in agribusiness revenues and $ 2,269,000 was recorded in gain on legal settlement as of April 30, 2023. 18. Stock-based Compensation The Company has a stock-based compensation plan (the “Stock Plan”) that allows for the grant of common stock of the Company to members of management, key executives and non-employee directors. The fair value of such awards is based on the fair value of the Company’s common stock on the date of grant, and all are classified as equity awards. Management Performance Awards Certain restricted stock grants are made to management under the Stock Plan ("Performance Awards"). Historically the Company granted awards to management each December based on the achievement of certain annual financial performance and other criteria achieved during the previous fiscal year. These grants were based on a percentage of the employee’s base salary divided by the stock price on the grant date once the performance criteria were met, and generally vested over a two-year period as service was provided. During December 2023, 36,127 shares of stock with a per share price of $ 19.57 were granted to management for fiscal year 2023 performance, resulting in total compensation expense of approximately $ 707,000 , with $ 293,000 recognized in the fiscal year ended October 31, 2023, and the balance will be recognized over the next two years as the shares vest. During April 2024, 4,330 shares of stock with a weighted average per share price of $ 19.49 were granted to management and vested upon issuance. The related compensation expense of $ 84,000 was recognized upon vesting. During May 2024, 35,779 shares of stock with a per share price of $ 20.07 were granted to management. The related compensation expense of approximately $ 718,000 will be recognized over three years as the shares vest. In May 2024, the Company entered into Performance Share-Based Agreements with members of management whereby the employees may be granted common stock in the future based on the achievement of certain long-term performance goals. The Company recorded $ 197,000 of stock compensation expense related to these awards during the nine months ended July 31, 2024. 24 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 18. Stock-based Compensation (continued) Executive Awards Certain restricted stock grants are made to key executives under the Stock Plan (“Executive Awards”). These grants generally vest over a three-year period as service is provided. During November 2023, the Company granted 53,078 shares of stock with a per share price of $ 14.13 to key executives. The related compensation expense of approximately $ 750,000 will be recognized equally over the next three years as the shares vest. In fiscal year 2022, the Company entered into Retention Bonus Agreements with key executives (collectively, the “Retention Bonus Agreements”) whereby the executives will be eligible to receive cash and restricted stock grants. During December 2023, the Company granted 12,709 shares of stock with a per share price of $ 19.57 to key executives related to the Retention Bonus Agreements. The related compensation expense of approximately $ 249,000 had $ 115,000 recognized in the fiscal year ended October 31, 2023, and the balance will be recognized over the next year as the shares vest. During June 2024, the Company granted 40,926 shares of stock with a per share price of $ 20.36 . The related compensation expense of approximately $ 833,000 will be recognized over the next year as the shares vest. In November 2023, the Company entered into Performance Share-Based Award Agreements with key executives whereby the executives may be granted common stock in the future based on the achievement of certain long-term performance goals. The Company recorded $ 292,000 of stock compensation expense related to these awards during the nine months ended July 31, 2024. Director Awards Certain restricted stock grants are made to non-employee directors under the Stock Plan on an annual basis that generally vest after a one-year period (“Director Awards”). During January 2024, 609 shares of stock were granted as Director Awards with a per share price of $ 20.37 . During March 2024, an additional 26,478 shares of stock were granted as Director Awards with a per share price of $ 19.26 . Exchange of Common Stock During the nine months ended July 31, 2024 and 2023, members of management exchanged 99,167 and 1,594 shares of common stock with fair values totaling $ 1,835,000 and $ 26,000 , respectively, at the dates of the exchanges, for the payment of payroll taxes associated with the vesting of shares under the Stock Plan. 19. Segment Information The Company operates in four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness. The reportable operating segments of the Company are strategic business units with different products and services, distribution processes and customer bases. The fresh lemons segment includes sales, farming and harvest costs and third-party grower and supplier costs relative to fresh lemons. The lemon packing segment includes packing revenues and lemon packing costs. The lemon packing segment revenues include intersegment revenues between fresh lemons and lemon packing. The intersegment revenues are included gross in the segment note and a separate line item is shown as an elimination. The avocados segment includes sales, farming and harvest costs. The other agribusiness segment primarily includes sales, farm management, farming and harvest costs, brokered fruit costs of oranges and specialty citrus, other crops, fallowing revenue, shipping revenue and shipping costs. During fiscal year 2024, the Company changed its reporting of other revenue and other costs and includes these items in the other agribusiness segment instead of the fresh lemons segment. Prior year's information has been restated to conform to the current year's presentation. The Company does not separately allocate depreciation and amortization to its fresh lemons, lemon packing, avocados and other agribusiness segments. No asset information is provided for reportable operating segments, as these specified amounts are not included in the measure of segment profit or loss reviewed by the Company’s chief operating decision maker. The Company measures operating performance, including revenues and operating income, of its operating segments and allocates resources based on its evaluation. The Company does not allocate selling, general and administrative expense, impairment of intangible asset, gain or loss on disposal of assets, gain on legal settlement, total other income (expense) and income taxes, or specifically identify them to its operating segments. The lemon packing segment earns packing revenue for packing lemons grown on its orchards and lemons procured from third-party growers. Intersegment revenues represent packing revenues related to lemons grown on the Company’s orchards. 25 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 19. Segment Information (continued) Segment information for the three months ended July 31, 2024 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 36,746 $ 5,200 $ — $ 13,897 $ 6,006 $ 61,849 $ 1,456 $ 63,305 Intersegment revenue — 10,499 ( 10,499 ) — — — — — Total net revenues 36,746 15,699 ( 10,499 ) 13,897 6,006 61,849 1,456 63,305 Costs and expenses 32,977 11,144 ( 10,499 ) 4,104 5,912 43,638 8,559 52,197 Depreciation and amortization — — — — — 1,799 316 2,115 Operating income (loss) $ 3,769 $ 4,555 $ — $ 9,793 $ 94 $ 16,412 $ ( 7,419 ) $ 8,993 Segment information for the three months ended July 31, 2023 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 32,739 $ 5,472 $ — $ 3,462 $ 9,419 $ 51,092 $ 1,405 $ 52,497 Intersegment revenue — 9,684 ( 9,684 ) — — — — — Total net revenues 32,739 15,156 ( 9,684 ) 3,462 9,419 51,092 1,405 52,497 Costs and expenses 30,118 13,140 ( 9,684 ) 3,030 8,506 45,110 6,917 52,027 Depreciation and amortization — — — — — 1,735 284 2,019 Operating income (loss) $ 2,621 $ 2,016 $ — $ 432 $ 913 $ 4,247 $ ( 5,796 ) $ ( 1,549 ) Segment information for the nine months ended July 31, 2024 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 94,971 $ 15,756 $ — $ 16,245 $ 16,473 $ 143,445 $ 4,197 $ 147,642 Intersegment revenue — 28,129 ( 28,129 ) — — — — — Total net revenues 94,971 43,885 ( 28,129 ) 16,245 16,473 143,445 4,197 147,642 Costs and expenses 90,687 35,450 ( 28,129 ) 5,529 16,119 119,656 25,140 144,796 Depreciation and amortization — — — — — 5,331 942 6,273 Operating income (loss) $ 4,284 $ 8,435 $ — $ 10,716 $ 354 $ 18,458 $ ( 21,885 ) $ ( 3,427 ) Segment information for the nine months ended July 31, 2023 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 92,002 $ 17,543 $ — $ 7,065 $ 17,686 $ 134,296 $ 4,172 $ 138,468 Intersegment revenue — 27,356 ( 27,356 ) — — — — — Total net revenues 92,002 44,899 ( 27,356 ) 7,065 17,686 134,296 4,172 138,468 Costs and expenses (gains) 91,651 36,568 ( 27,356 ) 4,053 15,749 120,665 ( 9,180 ) 111,485 Depreciation and amortization — — — — — 5,610 900 6,510 Operating income $ 351 $ 8,331 $ — $ 3,012 $ 1,937 $ 8,021 $ 12,452 $ 20,473 Revenues related to rental operations are included in “Corporate and Other.” The detail of other agribusiness revenues is as follows (in thousands): Three Months Ended July 31, Nine Months Ended July 31, 2024 2023 2024 2023 Oranges $ 1,160 $ 1,290 $ 3,461 $ 3,825 Specialty citrus and other crops 550 1,900 2,475 4,163 Farm management 3,202 5,383 7,296 6,787 Other 1,094 846 3,241 2,911 Other agribusiness revenues $ 6,006 $ 9,419 $ 16,473 $ 17,686 26 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 20. Subsequent Events The Company evaluated events subsequent to July 31, 2024 through the date of this filing, to assess the need for potential recognition or disclosure in this Quarterly Report. Based upon this evaluation, except as described in the notes to consolidated financial statements, it was determined that no other subsequent events occurred that require recognition or disclosure in the unaudited consolidated financial statements. 27