Limoneira CO 10-K

Item 8. Financial Statements and Supplementary Data Limoneira Company Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 44 Consolidated Financial Statements of Limoneira Company Consolidated Balance Sheets as of October 31, 2024 and 2023 46 Consolidated Statements of Operations for the years ended October 31, 2024, 2023 and 2022 47 Consolidated Statements of Comprehensive Income (Loss) for the years ended October 31, 2024, 2023 and 2022 48 Consolidated Statements of Stockholders’ Equity and Temporary Equity for the years ended October 31, 2024, 2023 and 2022 49 Consolidated Statements of Cash Flows for the years ended October 31, 2024, 2023 and 2022 50 Notes to Consolidated Financial Statements 52 All schedules are omitted for the reason that they are not applicable or the required information is included in the Consolidated Financial Statements or the notes thereto. 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Limoneira Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Limoneira Company and subsidiaries (the “Company”) as of October 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and temporary equity, and cash flows, for each of the three years in the period ended October 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits and the report of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We did not audit the financial statements of Limoneira Lewis Community Builders, LLC (“LLCB”), the Company's investment in which is accounted for by use of the equity method. The accompanying consolidated financial statements of the Company include, before the basis difference and related amortization discussed in Note 7, its equity in investment in LLCB of $63,581,000 and $58,282,000 as of October 31, 2024 and 2023, respectively, and its equity earnings in LLCB of $20,304,000, $5,851,000, and $1,015,000 for the years ended October 31, 2024, 2023, and 2022, respectively. The financial statements of LLCB were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Company’s equity in investment and equity earnings in LLCB, is based solely on the report of the other auditors. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2024, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 23, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting based on our audit. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Real estate development assets held by the Company and equity in investment in LLCB – Impairment Indicators – Refer to Notes 2, 6, and 7 to the financial statements 44 Critical Audit Matter Description The Company’s evaluation of real estate development projects, held either by the Company or as included specifically within its investment in LLCB, for impairment involves an initial assessment of each real estate development project to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of, or investment in, real estate development projects are no longer recoverable. Possible indications of impairment may include events or changes in circumstances affecting the entitlement process, litigation, zoning, government regulation, geographical demand for new housing or commercial property, and market conditions related to residential or commercial land lots. When events or changes in circumstances exist, the Company further evaluates the real estate development projects for impairment by a) comparing undiscounted future cash flows expected to be generated over the life of the real estate development projects to the respective carrying amount for its real estate development or b) determining if its equity in investment has incurred an other-than-temporary decline in value. The Company makes significant judgments in evaluating each real estate development project as held by them or within its investment in LLCB, for possible indications of impairment. These judgments may relate to the identification of appropriate and comparable market prices, the consideration of changes to legal factors or the business climate, the likelihood of successfully completing the entitlement process, changes in zoning or government regulation, and demand for new housing. Changes in these judgments could have a significant impact on real estate development or equity in investments. Real estate development assets held by the Company were $10,201,000, and equity in investments was $81,546,000 as of October 31, 2024 of which $67,962,000 was related to LLCB. For the year ended October 31, 2024, no impairment loss has been recognized on any real estate development and no other-than-temporary-impairment has been recognized on the Company’s equity in LLCB. We identified the significant judgments made by management in evaluating real estate development assets held by the Company and equity in investment in LLCB, for possible indicators of impairment, as a critical audit matter. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions when determining whether events or changes in circumstances have occurred indicating that the carrying amount of real estate development assets held by the Company and equity in investment in LLCB may not be recoverable and whether management appropriately identified impairment indicators. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the evaluation of real estate development assets held by the Company and equity in investment in LLCB for possible indications of impairment included the following, among others: • We tested the effectiveness of the controls over management’s identification of possible circumstances that may indicate that real estate development assets held by the Company or equity in investment in LLCB is no longer recoverable, including controls over management’s evaluation of the entitlement process, litigation, zoning, government regulation, geographical demand and market conditions. • We evaluated management’s impairment analysis by: – Searching for adverse asset-specific and/or market conditions by reviewing publicly available information on land values in the surrounding regions of the development, periodicals and news information relating to the Southern California real estate market – Obtaining information from legal counsel and performing inquiries with management in order to evaluate any changes in the status of litigation matters affecting the real estate development assets and the potential impact on the ability to recover the accumulated costs, including any relevant government regulations and/or other matters impacting the entitlement process – Obtaining comparable land sales in the area and comparing such data to information used by management with the assistance of our fair value specialists – Developing an independent expectation of impairment indicators and comparing such expectation to management’s analysis /s/ Deloitte & Touche LLP Los Angeles, California December 23, 2024 We have served as the Company’s auditor since 2019. 45 LIMONEIRA COMPANY CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) October 31, 2024 2023 Assets Current assets: Cash $ 2,996 $ 3,631 Accounts receivable, net 14,734 14,458 Cultural costs 1,877 2,334 Prepaid expenses and other current assets 3,849 5,588 Receivables/other from related parties 2,390 4,214 Total current assets 25,846 30,225 Property, plant and equipment, net 162,046 160,631 Real estate development 10,201 9,987 Equity in investments 81,546 78,816 Goodwill 1,504 1,512 Intangible assets, net 5,221 6,657 Other assets 12,451 13,382 Total assets $ 298,815 $ 301,210 Liabilities, Convertible Preferred Stock and Stockholders’ Equity Current liabilities: Accounts payable $ 7,260 $ 9,892 Growers and suppliers payable 8,960 9,629 Accrued liabilities 12,483 8,651 Payables to related parties 5,542 4,805 Current portion of long-term debt 559 381 Total current liabilities 34,804 33,358 Long-term liabilities: Long-term debt, less current portion 40,031 40,628 Deferred income taxes 20,084 22,172 Other long-term liabilities 1,395 4,555 Total liabilities 96,314 100,713 Commitments and contingencies — — Series B Convertible Preferred Stock – $ 100.00 par value ( 50,000 shares authorized: 14,790 shares issued and outstanding at October 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 October 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 October 31, 2024 and October 31, 2023) — — Common Stock – $ 0.01 par value ( 39,000,000 shares authorized: 18,284,148 and 18,192,009 shares issued and 18,033,171 and 17,941,032 shares outstanding at October 31, 2024 and October 31, 2023, respectively) 180 179 Additional paid-in capital 170,243 168,441 Retained earnings 20,826 19,017 Accumulated other comprehensive loss ( 6,614 ) ( 5,666 ) Treasury stock, at cost, 250,977 shares at October 31, 2024 and October 31, 2023 ( 3,493 ) ( 3,493 ) Noncontrolling interest 10,549 11,209 Total stockholders’ equity 191,691 189,687 Total liabilities, convertible preferred stock and stockholders’ equity $ 298,815 $ 301,210 See Notes to Consolidated Financial Statements. 46 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended October 31, 2024 2023 2022 Net revenues: Agribusiness $ 185,923 $ 174,381 $ 179,281 Other operations 5,580 5,520 5,324 Total net revenues 191,503 179,901 184,605 Costs and expenses: Agribusiness 164,807 169,169 160,651 Other operations 5,274 4,612 4,438 Impairment of intangible asset 643 — — Gain on disposal of assets, net ( 507 ) ( 28,849 ) ( 4,500 ) Gain on legal settlement — ( 2,269 ) — Selling, general and administrative 27,464 26,455 21,815 Total costs and expenses 197,681 169,118 182,404 Operating (loss) income ( 6,178 ) 10,783 2,201 Other income (expense): Interest income 118 364 53 Interest expense, net of patronage dividends ( 961 ) ( 494 ) ( 2,291 ) Equity in earnings of investments, net 18,356 5,322 1,341 Other income (expense), net 212 ( 2,611 ) ( 955 ) Total other income (expense) 17,725 2,581 ( 1,852 ) Income before income tax provision 11,547 13,364 349 Income tax provision ( 4,373 ) ( 4,247 ) ( 823 ) Net income (loss) 7,174 9,117 ( 474 ) Net loss attributable to noncontrolling interest 542 283 238 Net income (loss) attributable to Limoneira Company 7,716 9,400 ( 236 ) Preferred dividends ( 501 ) ( 501 ) ( 501 ) Net income (loss) applicable to common stock $ 7,215 $ 8,899 $ ( 737 ) Basic net income (loss) per common share $ 0.40 $ 0.50 $ ( 0.04 ) Diluted net income (loss) per common share $ 0.40 $ 0.50 $ ( 0.04 ) Weighted-average common shares outstanding-basic 17,715 17,603 17,513 Weighted-average common shares outstanding-diluted 17,715 17,603 17,513 See Notes to Consolidated Financial Statements. 47 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended October 31, 2024 2023 2022 Net income (loss) $ 7,174 $ 9,117 $ ( 474 ) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ( 948 ) 518 ( 2,430 ) Minimum pension liability adjustments, net of tax of zero , $( 135 ) and $( 71 ) — ( 220 ) ( 183 ) Pension settlement cost, net of tax of zero , $ 756 and $ 169 — 1,944 438 Total other comprehensive (loss) income, net of tax ( 948 ) 2,242 ( 2,175 ) Comprehensive income (loss) 6,226 11,359 ( 2,649 ) Comprehensive loss attributable to noncontrolling interest 542 283 356 Comprehensive income (loss) attributable to Limoneira Company $ 6,768 $ 11,642 $ ( 2,293 ) See Notes to Consolidated Financial Statements. 48 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY (in thousands, except share data) Stockholders’ Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non-controlling Total Series B Convertible Preferred Series B-2 Convertible Preferred Shares Amount Capital Earnings (Loss) Income Stock Interest Equity Stock Stock Balance at October 31, 2021 17,685,400 $ 179 $ 163,965 $ 21,552 $ ( 5,733 ) $ ( 3,493 ) $ 11,965 $ 188,435 $ 1,479 $ 9,331 Dividends - common ($ 0.30 per share) — — — ( 5,315 ) — — — ( 5,315 ) — — Dividends - Series B ($ 8.75 per share) — — — ( 129 ) — — — ( 129 ) — — Dividends - Series B-2 ($ 40 per share) — — — ( 372 ) — — ( 372 ) — — Stock compensation 104,231 1 2,731 — — — — 2,732 — — Exchange of common stock ( 105,316 ) ( 3 ) ( 1,527 ) — — — — ( 1,530 ) — — Net loss — — — ( 236 ) — — ( 238 ) ( 474 ) — — Other comprehensive loss, net of tax — — — — ( 2,175 ) — ( 118 ) ( 2,293 ) — — 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 ($ 0.30 per share) — — — ( 5,382 ) — — — ( 5,382 ) — — Dividends - Series B ($ 8.75 per share) — — — ( 129 ) — — — ( 129 ) — — Dividends - Series B-2 ($ 40 per share) — — — ( 372 ) — — — ( 372 ) — — Stock compensation 296,189 3 3,838 — — — — 3,841 — — Exchange of common stock ( 39,472 ) ( 1 ) ( 566 ) — — — — ( 567 ) — — Noncontrolling interest adjustment — — — — — — ( 117 ) ( 117 ) — — Net income (loss) — — — 9,400 — — ( 283 ) 9,117 — — Other comprehensive income, net of tax — — — — 2,242 — — 2,242 — — 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 ($ 0.30 per share) — — — ( 5,406 ) — — — ( 5,406 ) — — Dividends - Series B ($ 8.75 per share) — — — ( 129 ) — — — ( 129 ) — — Dividends - Series B-2 ($ 40 per share) — — — ( 372 ) — — — ( 372 ) — — Stock compensation 210,036 2 4,114 — — — — 4,116 — — Exchange of common stock ( 117,897 ) ( 1 ) ( 2,312 ) — — — — ( 2,313 ) — — Noncontrolling interest adjustment — — — — — — ( 118 ) ( 118 ) — — Net income (loss) — — — 7,716 — — ( 542 ) 7,174 — — Other comprehensive loss — — — — ( 948 ) — — ( 948 ) — — Balance at October 31, 2024 18,033,171 $ 180 $ 170,243 $ 20,826 $ ( 6,614 ) $ ( 3,493 ) $ 10,549 $ 191,691 $ 1,479 $ 9,331 See Notes to Consolidated Financial Statements. 49 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended October 31, 2024 2023 2022 Operating activities Net income (loss) $ 7,174 $ 9,117 $ ( 474 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 8,374 8,576 9,798 Impairment of intangible asset 643 — — Gain on disposal of assets, net ( 507 ) ( 28,849 ) ( 4,500 ) Gain on legal settlement — ( 853 ) — Stock compensation expense 4,116 3,841 2,732 Non-cash lease expense 1,831 1,647 442 Equity in earnings of investments, net ( 18,356 ) ( 5,322 ) ( 1,341 ) Cash distributions from equity investments 15,005 220 483 Deferred income taxes ( 2,087 ) ( 1,947 ) 548 Other, net 1 168 1,831 Changes in operating assets and liabilities: Accounts receivable and receivables/other from related parties 1,105 815 1,845 Cultural costs 454 2,455 ( 1,148 ) Prepaid expenses and other current assets 353 1,487 ( 325 ) Other assets ( 160 ) 1,230 ( 134 ) Accounts payable and growers and suppliers payable ( 3,343 ) ( 1,772 ) 1,853 Accrued liabilities and payables to related parties 3,780 ( 2,921 ) 3,269 Income taxes payable 1,272 ( 1,035 ) — Other long-term liabilities ( 1,802 ) ( 2,727 ) ( 49 ) Net cash provided by (used in) operating activities 17,853 ( 15,870 ) 14,830 Investing activities Capital expenditures ( 9,413 ) ( 10,305 ) ( 10,066 ) Net proceeds from sales of assets 1,043 98,545 19,259 Net proceeds from legal settlement — 853 — Net proceeds from sale of real estate development assets — 2,577 7,917 Cash distributions from Trapani Fresh 122 122 122 Cash distributions from equity investment 148 — — Collection on notes receivable 132 155 2,755 Equity investment contributions and capitalized interest ( 693 ) ( 847 ) ( 48 ) Investments in mutual water companies and water rights ( 526 ) ( 523 ) ( 506 ) Net cash (used in) provided by investing activities ( 9,187 ) 90,577 19,433 Financing activities Borrowings of long-term debt 175,685 57,940 146,941 Repayments of long-term debt ( 176,057 ) ( 122,921 ) ( 173,755 ) Proceeds from equipment financings — — 1,020 Principal paid on finance leases and equipment financings ( 698 ) ( 491 ) ( 377 ) Dividends paid – common ( 5,406 ) ( 5,382 ) ( 5,315 ) Dividends paid – preferred ( 501 ) ( 501 ) ( 501 ) Exchange of common stock ( 2,313 ) ( 567 ) ( 1,530 ) Net cash used in financing activities ( 9,290 ) ( 71,922 ) ( 33,517 ) Effect of exchange rate changes on cash ( 11 ) ( 11 ) ( 328 ) Net (decrease) increase in cash ( 635 ) 2,774 418 Cash at beginning of period 3,631 857 439 Cash at end of period $ 2,996 $ 3,631 $ 857 50 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (in thousands) Years Ended October 31, 2024 2023 2022 Supplemental disclosures of cash flow information Cash paid during the period for interest (net of amounts capitalized) $ 971 $ 652 $ 2,064 Cash paid during the period for income taxes, net $ 5,194 $ 7,229 $ 83 Non-cash investing and financing activities: Contribution of real estate development to equity investment $ — $ — $ 7,975 Reduction of net payables to related parties $ — $ — $ 2,392 Reduction of note receivable $ — $ — $ 388 Capital expenditures accrued but not paid at period-end $ 382 $ 309 $ 430 Cancellation of loan guarantee related to equity investment $ 1,080 $ — $ — See Notes to Consolidated Financial Statements. 51 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. 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, and certain 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. 2. Summary of Significant Accounting Policies Principles of Consolidation The 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. The consolidated financial statements represent the consolidated balance sheets, statements of operations, statements of comprehensive income (loss), statements of stockholders’ equity and temporary equity and statements of cash flows of Limoneira Company and consolidated subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The Company considers the criteria established under the Financial Accounting Standards Board (“FASB”) – Accounting Standards Code (“ASC”) 810, Consolidations, and the effect of variable interest entities, in its consolidation process. Use of Estimates The preparation of financial statements 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. Accounts Receivable The Company grants credit in the course of its operations to cooperatives, companies and lessees of the Company’s facilities. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides allowances on its receivables as required based on accounts receivable aging and other factors. As of October 31, 2024 and 2023 the allowances totaled $ 355,000 and $ 260,000 , respectively. Credit losses were $ 235,000 for fiscal year 2024 and immaterial for fiscal years 2023 and 2022. Concentrations and Geographic Information Concentrations of credit risk with respect to revenues and accounts receivable are limited due to a large, diverse customer base. One individual customer represented 14 % of revenue for fiscal year 2024. One individual customer represented 20 % of accounts receivable, net as of October 31, 2024. No individual supplier represented 10% of accounts payable as of October 31, 2024. Lemons procured from third-party growers were 72 %, 54 % and 52 % of the Company's domestic lemon supply for fiscal years 2024, 2023 and 2022, respectively. Four third-party growers and suppliers were 27 %, 14 %, 11 %, and 11 % of growers and suppliers payable as of October 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. Cultural 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. Harvest costs are comprised of labor and equipment expenses incurred to harvest and deliver crops to the packinghouses. 52 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Cultural Costs (continued) Certain of the Company’s crops have distinct growing periods and distinct harvest and selling periods, each of which lasts approximately four to eight months . During the growing period, cultural costs are capitalized as they are associated with benefiting and preparing the crops for the harvest and selling period. During the harvest and selling period, harvest costs and cultural costs are expensed when incurred and capitalized cultural costs are amortized as components of agribusiness costs and expenses. Due to climate, growing conditions and the types of crops grown, certain of the Company’s other crops may be harvested and sold on a year-round basis. Accordingly, the Company does not capitalize cultural costs associated with these crops and therefore such costs, as well as harvest costs associated with these crops, are expensed to operations when incurred as components of agribusiness costs and expenses. Most cultural costs, including amortization of capitalized cultural costs, and harvest costs are associated with and charged to specific crops. Certain other costs, such as property taxes, indirect labor, including farm supervision and management, and irrigation that benefit multiple crops are allocated to crops on a per acre basis. Income Taxes Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Property, Plant and Equipment Property, plant and equipment is stated at original cost, net of accumulated depreciation. Depreciation is computed using the straight-line method at rates based upon the estimated useful lives of the related assets as follows (in years): Land improvements 10 – 30 Buildings and building improvements 10 – 50 Equipment 5 – 20 Orchards and vineyards 20 – 30 Costs of planting and developing orchards are capitalized until the orchards become commercially productive. Planting costs consist primarily of the costs to purchase and plant nursery stock. Orchard development costs consist primarily of maintenance costs of orchards such as cultivation, pruning, irrigation, labor, pest control and fertilization, and interest costs during the development period. The Company ceases the capitalization of costs and commences depreciation when the orchards become commercially productive and orchard maintenance costs are accounted for as cultural costs as described above. Capitalized Interest Interest is capitalized on real estate development projects and significant construction in progress using the weighted average interest rate during the fiscal year. Capitalized interest is included in property, plant, and equipment, equity in investments and real estate development assets in the Company’s consolidated balance sheets. 53 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Real Estate Development Costs The Company capitalizes the planning, entitlement, construction, development costs and interest associated with its various real estate projects. Costs that are not capitalized, which include property maintenance and repairs, general and administrative and marketing expenses, are expensed as incurred. A real estate development project is considered substantially complete upon the cessation of construction and development activities. Once a project is substantially completed, future costs are expensed as incurred. The Company capitalized costs related to its real estate projects of $ 214,000 and $ 281,000 for fiscal years 2024 and 2023, respectively. Equity in Investments Investments in unconsolidated joint ventures in which the Company has significant influence but less than a controlling interest, or is not the primary beneficiary if the joint venture is determined to be a Variable Interest Entity (“VIE”), are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions, distributions, capitalized interest and the Company’s equity in net earnings or loss of the respective joint venture. The Company evaluates equity method investments for impairment whenever events or changes in circumstances exist that may indicate the investments are no longer recoverable or have incurred an other-than-temporary decline in value. Long-Lived and Intangible Assets Intangible assets consist primarily of customer relationships, trade names and trademarks and a non-competition agreement. The Company’s definite-life intangible assets are being amortized on a straight-line basis over their estimated lives of eight years . Acquired water and mineral rights are indefinite-life assets not subject to amortization. Assets held for sale are carried at the lower of cost or fair value less estimated cost to sell. The Company evaluates long-lived assets, including its property and equipment, real estate development projects and definite-life intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated fair value or undiscounted future cash flows from the use of an asset are less than the carrying value of that asset, a write-down is recorded to reduce the carrying value of the asset to its estimated fair value. The Company evaluates its indefinite-life intangible assets annually or whenever events or changes in circumstances indicate an impairment of the assets’ value may exist. Goodwill 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. Goodwill impairment is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Goodwill impairment testing involves significant judgment and estimates. Fair Values of Financial Instruments Accounts receivable, accounts payable, growers and suppliers payable and accrued liabilities reported on the Company’s consolidated balance sheets approximate their fair values due to the short-term nature of the instruments. Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the fair value of long-term debt is approximately equal to its carrying amount as of October 31, 2024 and 2023. Reclassifications Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current presentation. The Company reclassified shipping and other revenue and shipping costs from the lemon packing reportable segment to the other agribusiness reportable segment. 54 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (continued) 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 the changes in other comprehensive (loss) income by component at October 31(in thousands): 2024 2023 2022 Pre-tax Amount Tax Expense Net Amount Pre-tax Amount Tax Benefit (Expense) Net Amount Pre-tax Amount Tax Benefit (Expense) Net Amount Foreign currency translation adjustments $ ( 948 ) $ — $ ( 948 ) $ 518 $ — $ 518 $ ( 2,430 ) $ — $ ( 2,430 ) Minimum pension liability adjustments: Other comprehensive (loss) income before reclassifications — — — ( 355 ) 135 ( 220 ) ( 254 ) 71 ( 183 ) Amounts reclassified to earnings included in “Other income (expense), net” — — — 2,700 ( 756 ) 1,944 607 ( 169 ) 438 Other comprehensive (loss) income $ ( 948 ) $ — $ ( 948 ) $ 2,863 $ ( 621 ) $ 2,242 $ ( 2,077 ) $ ( 98 ) $ ( 2,175 ) The following table summarizes the changes in accumulated other comprehensive (loss) income by component (in thousands): Foreign Currency Translation Loss Defined Benefit Pension Plan Accumulated Other Comprehensive (Loss) Income Balance as of October 31, 2021 $ ( 3,754 ) $ ( 1,979 ) $ ( 5,733 ) Other comprehensive (loss) income ( 2,430 ) 255 ( 2,175 ) Balance as of October 31, 2022 ( 6,184 ) ( 1,724 ) ( 7,908 ) Other comprehensive income 518 1,724 2,242 Balance as of October 31, 2023 ( 5,666 ) — ( 5,666 ) Other comprehensive loss ( 948 ) — ( 948 ) Balance as of October 31, 2024 $ ( 6,614 ) $ — $ ( 6,614 ) Foreign Currency The Company has foreign subsidiaries whose functional currencies are the Chilean Peso. Their balance sheets are translated to U.S. dollars at exchange rates in effect at the balance sheet date and their income statements are translated at average exchange rates during the reporting period. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive (loss) income. The Company’s foreign subsidiaries incurred aggregate foreign exchange transaction losses of approximately $ 123,000 for fiscal year 2024 and $ 204,000 for both fiscal years 2023 and 2022. These losses are included in selling, general and administrative expenses in the consolidated statements of operations. 55 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from contracts with customers , and recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps: • Identify the contract(s) with a customer; • Identify the performance obligations in the contract; • Determine the transaction price; • Allocate the transaction price to the performance obligations in the contract; • Recognize revenue when (or as) the entity satisfies a performance obligation. The Company determines the appropriate method by which it recognizes revenue by analyzing the nature of the products or services being provided as well as the terms and conditions of contracts or arrangements entered into with its customers. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. A contract’s transaction price is allocated to each distinct good or service (i.e., performance obligation) identified in the contract and each performance obligation is valued based on its estimated relative standalone selling price. The Company recognizes the majority of its revenue at a point in time when it satisfies a performance obligation and transfers control of the product to the respective customer. The amount of revenue that is recognized is based on the transaction price, which represents the invoiced amount and includes estimates of variable consideration such as allowances for estimated customer discounts or concessions, where applicable. The amount of variable consideration included in the transaction price may be constrained and is included only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Agribusiness revenue - Revenue from lemon sales is generally recognized at a point in time when the customer takes control of the fruit from the Company’s packinghouse, which aligns with the transfer of title to the customer. The Company has elected to treat any shipping and handling costs incurred after control of the goods has been transferred to the customer as agribusiness costs. The Company’s avocados are packed and sold by third-party packinghouses. The Company’s arrangements with its third-party packinghouses are such that the Company is the producer and supplier of the product, and the third-party packinghouses are the Company’s customers. The Company controls the product until it is delivered to the third-party packinghouses at which time control of the product is transferred to the third-party packinghouses and revenue is recognized. Farm management revenue is recorded when services are provided for farming, management, orchard development, accounting and operations. Revenue is recorded gross for all expense reimbursements plus a fee for the services provided. Revenue from crop insurance proceeds is recorded when the amount can be reasonably determined and upon establishment of the present right to payment. There were no agribusiness revenues from crop insurance proceeds for fiscal year 2024. The Company recorded agribusiness revenues from crop insurance proceeds of $ 769,000 and $ 449,000 for fiscal years 2023 and 2022, respectively. Advertising Expense Advertising costs are expensed as incurred. Advertising costs were immaterial for fiscal years 2024 and 2023 and $ 165,000 for fiscal year 2022. 56 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Leases Accounting for Leases as a Lessee - The Company enters into leases as a lessee generally for agricultural land, packinghouse facilities, equipment and vehicles. The Company determines if an arrangement is a lease or contains a lease at inception. Operating and finance leases are included in other assets, accrued liabilities and other long-term liabilities on its consolidated balance sheets. Lease right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease, measured on a discounted basis. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company uses either its incremental borrowing rate based on the information available at commencement date, or the rate implicit in the lease, if known, in determining the present value of future payments. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet as the Company has elected to recognize lease expense for these leases on a straight-line basis over the lease term. The Company had material leases with related parties which are further described in Note 15 - Related-Party Transactions. Certain of the Company’s agricultural land agreements contain variable costs based on a percentage of the operating results of the leased property. Such variable lease costs are expensed as incurred. These land agreements also contain costs for non-lease components, such as water usage, which the Company accounts for separately from the lease components. For all other agreements, the Company generally combines lease and non-lease components in calculating the ROU assets and lease liabilities. See Note 13 - Leases for additional information. Accounting for Leases as a Lessor - Leases in which the Company acts as the lessor include land, residential and commercial units and are all classified as operating leases. Certain of the Company’s contracts contain variable income based on a percentage of the operating results of the leased asset. Certain of the Company’s contracts contain non-lease components such as water, utilities and common area services. The Company has elected to not separate lease and non-lease components for its lessor arrangements and the combined component is accounted for entirely under ASC 842, Leases . The underlying asset in an operating lease arrangement is carried at depreciated cost within property, plant, and equipment, net on the consolidated balance sheets. Depreciation is calculated using the straight-line method over the useful life of the underlying asset. The Company recognizes operating lease revenue on a straight-line basis over the lease term. 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 conversion of unvested, restricted stock and preferred stock. Diluted net income (loss) per common share is calculated 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. Defined Benefit Retirement Plan The Company sponsored a defined benefit retirement plan (the “Plan”) that was frozen in June 2004, and no future benefits accrued to participants subsequent to that time. In fiscal year 2021, the Company terminated the Plan effective December 31, 2021. On November 4, 2022, the Company entered into an agreement with Principal Life Insurance Company for the purchase of an annuity contract in connection with the Plan termination. On November 10, 2022, the annuity contract was purchased for $ 12,617,000 , payable with Plan assets and a $ 2,500,000 cash payment from the Company. 57 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Recent Accounting Pronouncements 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. ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ASU 2024-03 requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Specific disclosures include the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption, as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Additionally, companies will need to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. This ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. A public business entity should apply ASU 2024-03 prospectively to financial statements issued for reporting periods beginning after the effective date but may elect to apply the ASU retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. 58 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. The Northern Properties component, including an allocation of interest expense related to the debt directly repaid through the transaction, had a pretax loss of $ 1,667,000 and $ 1,236,000 for fiscal years 2023 and 2022, respectively. 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. 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 fiscal year 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 fiscal year 2023. Oxnard Lemon In October 2022, the Company sold the Oxnard Lemon property and packing facility located in Ventura County, California. The Company received net proceeds of $ 19,144,000 and recognized a gain of approximately $ 846,000 during fiscal year 2022. Concurrent with the closing of the sale, the Company entered into a lease agreement to continue use of the property as a lessee for a period of 36 months from the closing date, with extension options for an additional 24 months. 59 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following as of October 31 (in thousands): 2024 2023 Prepaid supplies and insurance $ 1,986 $ 1,667 Assets held for sale — 535 Sales tax receivable 312 490 Income taxes receivable — 816 Lemon supplier advances 295 791 Other 1,256 1,289 $ 3,849 $ 5,588 5. Property, Plant and Equipment Property, plant and equipment consist of the following as of October 31 (in thousands): 2024 2023 Land $ 55,471 $ 55,974 Land improvements 30,715 29,925 Buildings and building improvements 37,105 36,983 Equipment 61,561 58,574 Orchards and vineyards 47,921 43,258 Construction in progress 15,832 16,977 248,605 241,691 Less accumulated depreciation ( 86,559 ) ( 81,060 ) $ 162,046 $ 160,631 Depreciation expense was $ 7,474,000 , $ 7,701,000 and $ 9,075,000 for fiscal years 2024, 2023 and 2022, respectively. Refer to Note 3 - Asset Sales and Disposals for discussion on the Company’s significant property, plant and equipment transactions. 6. Real Estate Development Real estate development assets are comprised of land and land development costs for the East Area II property in the amount of $ 10,201,000 and $ 9,987,000 as of October 31, 2024 and 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 was 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, 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 October 31, 2024 and 2023, which is included in payables to related parties. 60 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. Real Estate Development (continued) East Area I, Retained Property and East Area II (continued) 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 October 31, 2024, LLCB had cash and cash equivalents of $ 66,851,000 . 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 . After transaction costs, the Company received net proceeds of $ 7,917,000 and recorded a gain on the transaction of $ 4,652,000 , of which $ 465,000 was deferred and recognized in fiscal year 2024 and $ 4,187,000 was recognized in fiscal year 2022. 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 $ 480,000 and $ 525,000 to LLCB II in fiscal year 2024 and 2023, respectively. In April 2024, the Santa Paula City Council approved an amendment to increase the number of entitled lots at LLCB and LLCB II from 1,500 residential units to 2,050 residential units. Through October 31, 2024, LLCB closed on lot sales representing 1,261 residential units since inception, including 554 residential units in 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 for fiscal year 2023. In December 2017, the Company sold its Centennial property with a net book value of $ 2,983,000 for $ 3,250,000 . The Company received cash and a $ 3,000,000 promissory note secured by the property for the balance of the purchase. In fiscal year 2022, the promissory note was paid in full and the deferred gain of $ 161,000 was recorded in gain on disposal of assets, net. 7. Equity in Investments Limco Del Mar, Ltd. The Company has a 1.3 % interest in Limco Del Mar, Ltd. (“Del Mar”) as a general partner and a 26.8 % interest as a limited partner. Based on the terms of the partnership agreement, the Company may be removed as general partner without cause from the partnership upon the vote of the limited partners owning an aggregate of 50 % or more interest in the partnership. Since the Company has significant influence, but less than a controlling interest, the Company’s investment in Del Mar is accounted for using the equity method of accounting. 61 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Equity in Investments (continued) Limco Del Mar, Ltd. (continued) The Company provides Del Mar with farm management, orchard land development and accounting services and received farm management revenue and expense reimbursements of $ 128,000 , $ 206,000 and $ 202,000 for fiscal years 2024, 2023 and 2022, respectively. Del Mar markets lemons through the Company pursuant to its customary marketing agreements and the amount of lemons procured from Del Mar was $ 1,182,000 , $ 1,161,000 and $ 1,568,000 for fiscal years 2024, 2023 and 2022, respectively. Fruit proceeds due to Del Mar were $ 527,000 and $ 347,000 as of October 31, 2024 and 2023, respectively, and are included in payables to related parties and growers and suppliers payable in the accompanying consolidated balance sheets, respectively. Romney Property Partnership In May 2007, the Company and an individual formed the Romney Property Partnership (“Romney”) for the purpose of owning and leasing an office building and adjacent lot in Santa Paula, California. The Company paid $ 489,000 in 2007 for 75 % interest in Romney. The terms of the partnership agreement affirm the status of the Company as a noncontrolling investor in the partnership since the Company cannot exercise unilateral control over the partnership. Since the Company has significant influence, but less than a controlling interest, the Company’s investment in Romney is accounted for using the equity method of accounting. Net profits, losses and cash flows of Romney are shared by the Company, which receives 75 % and the individual, who receives 25 %. Rosales S.A. The Company currently has a 47 % equity interest in Rosales S.A. (“Rosales”) of which 35 % was acquired in fiscal year 2014 and an additional 12 % interest was acquired with the purchase of Fruticola Pan de Azucar S.A. (“PDA”) in fiscal year 2017. Rosales is a citrus packing, marketing and sales business located in La Serena, Chile. In addition, the Company has the right to acquire the interest of the majority shareholder of Rosales upon death or disability of Rosales’ general manager for the fair value of the interest on the date of the event as defined in the shareholders’ agreement. Since the Company has significant influence, but less than a controlling interest, the Company’s investment in Rosales is accounted for using the equity method of accounting. Rosales’ functional currency is the Chilean Peso. The following financial information has been translated to U.S. dollars. In addition, as a result of the Company’s acquisition of its equity interest, basis differences were identified between the historical cost of the net assets of Rosales and the proportionate fair value of the net assets acquired. Such basis differences aggregated to $ 1,683,000 on the acquisition date and are primarily comprised of intangible assets, including $ 343,000 of equity method goodwill. An additional $ 925,000 of basis differences were identified with the February 2017 PDA acquisition, including $ 143,000 of equity method goodwill. The $ 2,122,000 in basis differences exclusive of goodwill is being amortized over the estimated life of the underlying intangible assets as a reduction in the equity investment and an expense included in equity in earnings of investments. Amortization amounted to $ 76,000 , $ 87,000 and $ 118,000 for fiscal years 2024, 2023 and 2022, respectively, and is estimated to be immaterial thereafter. The Company recognized lemon and orange sales to Rosales of $ 4,541,000 , $ 4,581,000 and $ 3,615,000 for fiscal years 2024, 2023 and 2022, respectively. The aggregate amount of lemons and oranges procured from Rosales was $ 5,387,000 , $ 5,826,000 and $ 3,821,000 for fiscal years 2024, 2023 and 2022, respectively. Net amounts due (to) from Rosales were $( 629,000 ) and $ 626,000 as of October 31, 2024 and 2023, respectively, and are included in payables to related parties and in receivables/other from related parties. 62 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Equity in Investments (continued) Limoneira Lewis Community Builders, LLC (“LLCB”) As described in Note 6 – Real Estate Development, the Company has a joint venture with Lewis for the residential development of its East Area I real estate development project. In addition to the assessment performed by the Company of its investment in LLCB under the requirements of Regulation S-X Rule 4-08(g), the Company also assessed its investment in LLCB under the requirements of Regulation S-X Rule 3-09(b). LLCB was deemed significant for the years ended October 31, 2024 and 2023 but was not significant for the year ended October 31, 2022. Therefore, the audited financial statements of LLCB for the years ended October 31, 2024, 2023 and 2022 are provided as exhibits to this document to comply with this rule. Additionally, there is a basis difference between the Company’s historical investment in the project and the amount recorded in members’ capital by LLCB of $ 63,581,000 as of October 31, 2024. The basis difference of $ 4,381,000 as of October 31, 2024 was primarily comprised of capitalized interest and certain other costs incurred by Limoneira Company during the development period. This basis difference is being amortized as lots are sold utilizing the relative sales value method and the amount amortized totaled $ 2,545,000 , $ 717,000 and $ 77,000 for fiscal years 2024, 2023 and 2022, respectively. The Company’s share of LLCB’s net income prior to basis amortization was $ 20,304,000 , $ 5,851,000 and $ 1,015,000 for fiscal years 2024, 2023 and 2022, respectively. LLCB II, LLC (“LLCB II”) As described in Note 6 - Real Estate Development, in October 2022, the Company formed a joint venture with Lewis for the residential development of its Retained Property. Control is shared with Lewis, therefore the Company's investment in LLCB II is accounted for using the equity method of accounting. The following is financial information of the equity method investees for fiscal years 2024, 2023 and 2022 (in thousands): 2024 Del Mar Romney Rosales LLCB LLCB II Current assets $ 1,299 $ 6 $ 5,289 $ 141,660 $ 18,061 Non-current assets $ 790 $ 602 $ 2,455 $ — $ — Current liabilities $ — $ 3 $ 4,937 $ 15,461 $ — Non-current liabilities $ — $ — $ 650 $ — $ — Revenues $ 2,331 $ 26 $ 12,168 $ 87,100 $ — Operating income (loss) $ 1,305 $ ( 2 ) $ 985 $ 38,364 $ 7 Net income (loss) $ 1,305 $ ( 2 ) $ 646 $ 38,364 $ 7 2023 Current assets $ — $ 13 $ 3,637 $ 124,939 $ 17,094 Non-current assets $ 797 $ 597 $ 2,547 $ — $ — Current liabilities $ 13 $ 3 $ 3,032 $ 7,104 $ — Non-current liabilities $ — $ — $ 1,085 $ — $ — Revenues $ 1,434 $ 22 $ 10,903 $ 30,933 $ — Operating income (loss) $ 100 $ ( 4 ) $ 738 $ 11,770 $ ( 2 ) Net income (loss) $ 100 $ ( 4 ) $ 538 $ 11,770 $ ( 2 ) 2022 Revenues $ 2,882 $ 6 $ 7,177 $ 2,500 $ — Operating income (loss) $ 1,823 $ ( 1 ) $ 272 $ 1,809 $ — Net income (loss) $ 1,823 $ ( 1 ) $ 26 $ 1,809 $ — 63 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Equity in Investments (continued) The Company’s investment and equity in earnings (losses) of the equity method investees are as follows (in thousands): Del Mar Romney Rosales LLCB LLCB II Total Investment balance October 31, 2021 $ 1,997 $ 508 $ 1,351 $ 60,216 $ — $ 64,072 Equity earnings (losses) 510 ( 1 ) ( 106 ) 938 — 1,341 Cash distributions ( 483 ) — — — — ( 483 ) Investment contributions — — — — 8,023 8,023 Foreign currency adjustments — — ( 98 ) — — ( 98 ) Investment balance October 31, 2022 2,024 507 1,147 61,154 8,023 72,855 Equity earnings (losses) 28 ( 5 ) 166 5,134 ( 1 ) 5,322 Cash distributions ( 220 ) — — — — ( 220 ) Cash contributions — — — — 525 525 Capitalized interest — — — — 322 322 Foreign currency adjustments — — 12 — — 12 Investment balance October 31, 2023 1,832 502 1,325 66,288 8,869 78,816 Equity earnings (losses) 366 ( 1 ) 228 17,759 4 18,356 Cash distributions — — ( 148 ) ( 15,005 ) — ( 15,153 ) Cash contributions — — — — 480 480 Capitalized interest — — — — 213 213 Fair value of loan guarantee ( 1,080 ) — ( 1,080 ) Foreign currency adjustments — — ( 86 ) — — ( 86 ) Investment balance October 31, 2024 $ 2,198 $ 501 $ 1,319 $ 67,962 $ 9,566 $ 81,546 8. Goodwill and Intangible Assets A summary of the change in the carrying amount of goodwill is as follows (in thousands): Goodwill Carrying Amount Balance at October 31, 2022 $ 1,506 Foreign currency translation adjustment 6 Balance at October 31, 2023 $ 1,512 Foreign currency translation adjustment ( 8 ) Balance at October 31, 2024 $ 1,504 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. The Company concluded that no potential impairment indicators existed during any interim period and performed its annual assessment of goodwill impairment as of July 31, 2024 with no impairment noted. The Company did no t incur any goodwill impairment losses for fiscal years 2024, 2023 or 2022, as the estimated fair values of its reporting units were in excess of their carrying values. As of October 31, 2024, the Company allocated goodwill to its reportable segments as follows: Fresh Lemons $ 934,000 and Lemon Packing $ 570,000 , respectively. 64 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. Goodwill and Intangible Assets (continued) Intangible assets consist of the following as of October 31 (in thousands): 2024 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 ( 1,308 ) 800 8 $ 2,108 $ ( 1,104 ) $ 1,004 8 Customer relationships 2,707 ( 1,842 ) 865 8 4,037 ( 2,111 ) 1,926 9 Non-competition agreement 437 ( 187 ) 250 8 437 ( 132 ) 305 8 Acquired water and mineral rights 3,306 — 3,306 Indefinite 3,422 — 3,422 Indefinite $ 8,558 $ ( 3,337 ) $ 5,221 $ 10,004 $ ( 3,347 ) $ 6,657 Amortization expense totaled $ 677,000 , $ 730,000 , and $ 723,000 for fiscal years 2024, 2023 and 2022, 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. Estimated future amortization expense of intangible assets are as follows (in thousands): 2025 $ 578 2026 578 2027 294 2028 294 2029 171 Thereafter — $ 1,915 9. 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 have been 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 October 31, 2024 and 2023 were $ 6,229,000 and $ 5,703,000 , respectively. 10. Accrued Liabilities Accrued liabilities consist of the following as of October 31 (in thousands): 2024 2023 Compensation $ 4,147 $ 2,858 Property taxes 820 548 Operating expenses 3,020 2,223 Leases 2,295 2,150 Income taxes payable 456 — Other 1,745 872 $ 12,483 $ 8,651 65 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Long-Term Debt Long-term debt is comprised of the following as of October 31 (in thousands): 2024 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 4.84 % at October 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 principal is due January 2025. 433 583 Banco de Chile COVID-19 loans: The interest rates were fixed at 3.48 %. The loans were payable in monthly installments through September 2024. — 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. 157 314 Total long-term debt 40,590 41,009 Less current portion 559 381 Long-term debt, less current portion $ 40,031 $ 40,628 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 October 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. 66 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Long-Term Debt (continued) 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 of 1.25 :1.0 on an annual basis. The Company was in compliance as of October 31, 2024. The Company received annual cash patronage dividends from the Lender of $ 558,000 , $ 1,413,000 and $ 1,582,000 for fiscal years 2024, 2023 and 2022, respectively. Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress. The Company capitalized interest of $ 788,000 , $ 864,000 and $ 582,000 for fiscal years ended 2024, 2023 and 2022, 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. Principal payments on the Company’s long-term debt are due as follows (in thousands): 2025 $ 559 2026 40,031 $ 40,590 12. Other Long-Term Liabilities Other long-term liabilities consist of the following as of October 31 (in thousands): 2024 2023 Loan guarantee — 1,080 Leases 818 2,316 Other 577 1,159 $ 1,395 $ 4,555 13. 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 18 years with various renewal terms available. All of the residential rentals have month-to-month lease terms. 67 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. Leases (continued) Lessor Arrangements (continued) The following table presents the components of the Company’s operating lease portfolio included in property, plant and equipment, net as of October 31 (in thousands): 2024 2023 Land and land improvements $ 12,219 $ 12,333 Buildings, equipment and building improvements 20,671 20,729 Orchards 8,410 8,410 Less: accumulated depreciation ( 9,765 ) ( 8,931 ) Property, plant and equipment, net under operating leases $ 31,535 $ 32,541 Depreciation expense for assets under operating leases was approximately $ 962,000 and $ 1,005,000 for fiscal years 2024 and 2023, respectively. The Company's rental operations revenue consists of the following for the fiscal years ended October 31 (in thousands): 2024 2023 Operating lease revenue $ 5,255 $ 5,174 Variable lease revenue 325 346 Total lease revenue $ 5,580 $ 5,520 The future minimum lease payments to be received by the Company related to these operating lease agreements as of October 31, 2024 are as follows (in thousands): 2025 $ 1,245 2026 316 2027 160 2028 104 2029 49 Thereafter 641 Total $ 2,515 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. 68 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. Leases (continued) Lessee Arrangements (continued) Lease costs consist of the following for the fiscal years ended October 31 (in thousands): 2024 2023 Operating lease costs $ 2,050 $ 2,000 Finance lease costs: Amortization of lease assets 223 145 Interest on lease liabilities 43 32 Variable lease costs 319 — Short-term lease costs 208 600 Total lease costs $ 2,843 $ 2,777 Supplemental balance sheet information related to leases consists of the following as of October 31 (in thousands): Classification 2024 2023 Assets Operating lease ROU assets Other assets $ 2,416 $ 3,484 Finance lease assets Other assets 772 1,182 $ 3,188 $ 4,666 Liabilities Current operating lease liabilities Accrued liabilities $ 2,075 $ 1,831 Current finance lease liabilities Accrued liabilities 220 319 Non-current operating lease liabilities Other long-term liabilities 400 1,714 Non-current finance lease liabilities Other long-term liabilities 418 602 $ 3,113 $ 4,466 Weighted-average remaining lease term (in years): Operating leases 1.5 1.6 Finance leases 3.3 3.1 Weighted-average discount rate: Operating leases 6.8 % 4.9 % Finance leases 7.1 % 4.2 % Supplemental cash flow information related to leases consists of the following for the fiscal years ended October 31 (in thousands): 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 2,037 $ 1,931 Operating cash outflows from finance leases $ 43 $ 32 Financing cash outflows from finance leases $ 360 $ 297 ROU assets obtained in exchange for new operating lease liabilities $ 766 $ 138 Leased assets obtained in exchange for new finance lease liabilities $ 677 $ 235 Write off of ROU asset and operating lease liability $ — $ ( 1,206 ) 69 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. Leases (continued) Future minimum lease payments under non-cancellable leases are as follows (in thousands), which excludes $ 1,315,000 of operating and finance lease payments for leases that have been signed but not commenced: Operating Finance Total 2025 $ 2,075 $ 220 $ 2,295 2026 371 220 591 2027 138 196 334 2028 11 77 88 2029 3 — 3 Total lease payments 2,598 713 3,311 Less: Imputed interest ( 123 ) ( 75 ) ( 198 ) Present value of lease liabilities $ 2,475 $ 638 $ 3,113 In addition to operating and finance lease commitments, the Company also has financing transactions which do not meet the definition of a lease, with minimum future payments of $ 473,000 for fiscal year 2025, $ 452,000 for fiscal year 2026 and $ 37,000 for fiscal year 2027. 14. Earnings 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 conversion of unvested, restricted stock and preferred stock. The Series B and Series B-2 convertible preferred shares were anti-dilutive for fiscal years 2024, 2023 and 2022. The computations for basic and diluted net income (loss) per common share are as follows for the fiscal years ended October 31 (in thousands, except per share data): 2024 2023 2022 Basic net income (loss) per common share: Net income (loss) applicable to common stock $ 7,215 $ 8,899 $ ( 737 ) Effect of unvested, restricted stock ( 119 ) ( 146 ) ( 50 ) Numerator: Net income (loss) for basic EPS 7,096 8,753 ( 787 ) Denominator: Weighted average common shares–basic 17,715 17,603 17,513 Basic net income (loss) per common share $ 0.40 $ 0.50 $ ( 0.04 ) Diluted net income (loss) per common share: Net income (loss) for basic EPS $ 7,096 $ 8,753 $ ( 787 ) Effect of dilutive preferred stock — — — Numerator: Net income (loss) for diluted EPS 7,096 8,753 ( 787 ) Weighted average common shares–basic 17,715 17,603 17,513 Effect of dilutive preferred stock — — — Denominator: Weighted average common shares–diluted 17,715 17,603 17,513 Diluted net income (loss) per common share $ 0.40 $ 0.50 $ ( 0.04 ) Diluted net income (loss) per common share is calculated 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 fiscal years 2024, 2023 and 2022. 70 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. Related-Party Transactions The Company has transactions with equity method investments and various related parties summarized in Note 6 - Real Estate Development, Note 7 - Equity in Investments and in the tables below (in thousands): October 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 $ — $ 526 $ 105 $ — $ 523 $ 48 5 Cadiz / Fenner / WAM $ — $ — $ — $ — $ — $ 206 6 YMIDD $ 206 $ — $ — $ 571 $ — $ — 7 FGF $ 2,184 $ 2,383 $ 837 $ 2,681 $ 2,519 $ 837 8 LLCB $ — $ — $ 3,444 $ 66 $ — $ 3,444 10 Rosales $ — $ — $ 629 $ 896 $ — $ 270 11 Del Mar $ — $ — $ 527 $ — $ — $ — Year Ended October 31, 2024 Year Ended October 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 $ — $ 920 $ — $ — $ — $ 888 $ — $ — 2 Mutual water companies $ — $ — $ 1,032 $ — $ — $ — $ 1,306 $ — 3 Cooperative association $ — $ — $ 576 $ — $ — $ — $ 1,689 $ — 5 Cadiz / Fenner / WAM $ — $ — $ — $ 372 $ — $ — $ 2,074 $ — 6 YMIDD $ 1,273 $ — $ 139 $ — $ 1,080 $ — $ 134 $ — 7 FGF $ 330 $ 200 $ — $ — $ 330 $ 224 $ — $ — 9 Principal Owner $ — $ — $ — $ 938 $ — $ — $ — $ 867 10 Rosales $ 4,541 $ — $ 5,387 $ — $ 4,581 $ — $ 5,826 $ — 11 Del Mar $ 128 $ — $ 1,182 $ — $ 206 $ — $ 1,161 $ — Year Ended October 31, 2022 Consolidated Statement of Operations Ref Related-Party Net Revenue Agribusiness Net Revenue Other Operations Agribusiness Expense and Other Dividends Paid 1 Employees $ — $ 869 $ — $ — 2 Mutual water companies $ — $ — $ 1,454 $ — 3 Cooperative association $ — $ — $ 1,834 $ — 4 Calavo $ — $ 80 $ 2 $ 126 5 Cadiz / Fenner / WAM $ — $ — $ 1,467 $ — 6 YMIDD $ 225 $ — $ 142 $ — 7 FGF $ 673 $ 343 $ 25 $ — 9 Principal Owner $ — $ — $ — $ 593 10 Rosales $ 3,615 $ — $ 3,821 $ — 11 Del Mar $ 202 $ — $ 1,568 $ — (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 9 - 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. 71 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. Related-Party Transactions (continued) (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. (4) Calavo - Through January 2022, the Company had representation on the board of directors of Calavo. Calavo owned common stock of the Company, and the Company paid dividends on such common stock to Calavo. Additionally, the Company leases office space to Calavo. As of February 2022, Calavo is no longer a related-party. (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 6 - 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 7 - Equity in Investments. The Company recognizes lemon and orange sales to Rosales, procures lemons and oranges from Rosales and has amounts due to and due from Rosales for such sales and purchases. (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 7 - Equity in Investments. The Company provides Del Mar with farm management services and Del Mar markets lemons through the Company. The Company has a payable due to Del Mar for such lemon procurement. 16. Income Taxes A reconciliation of income before income taxes for domestic and foreign locations for the fiscal years ended October 31 are as follows (in thousands): 2024 2023 2022 United States $ 12,894 $ 14,395 $ 1,911 Foreign ( 1,347 ) ( 1,031 ) ( 1,562 ) Income before income taxes $ 11,547 $ 13,364 $ 349 72 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. Income Taxes (continued) The components of the provision for income taxes for the fiscal years ended October 31 are as follows (in thousands): 2024 2023 2022 Current: Federal $ ( 4,493 ) $ ( 5,696 ) $ ( 178 ) State ( 1,972 ) ( 498 ) ( 93 ) Foreign 5 — ( 4 ) Total current tax provision ( 6,460 ) ( 6,194 ) ( 275 ) Deferred: Federal 1,641 2,665 ( 477 ) State 446 ( 717 ) ( 127 ) Foreign — ( 1 ) 56 Total deferred tax (provision) benefit 2,087 1,947 ( 548 ) Total income tax provision $ ( 4,373 ) $ ( 4,247 ) $ ( 823 ) Deferred income taxes reflect the net of temporary differences between the carrying amount of the assets and liabilities for financial reporting and income tax purposes. The components of deferred income tax assets as of October 31 are as follows (in thousands): 2024 2023 Deferred income tax assets: Reserves and other accruals $ 1,233 $ 698 Net operating losses 1,645 1,970 Lease liabilities 679 951 Other assets 366 43 Stock-based compensation 1,761 1,320 Total deferred income tax assets 5,684 4,982 Valuation allowance ( 1,973 ) ( 2,299 ) Total net deferred income tax assets 3,711 2,683 Deferred income tax liabilities: Property taxes ( 193 ) ( 19 ) Depreciation ( 13,182 ) ( 13,335 ) Amortization ( 40 ) ( 107 ) Land and other indefinite life assets ( 4,207 ) ( 4,138 ) Investment in joint ventures and other basis adjustments ( 5,334 ) ( 6,119 ) Right-of-use assets ( 663 ) ( 935 ) Prepaids and receivables ( 174 ) ( 178 ) Other ( 2 ) ( 24 ) Total deferred income tax liabilities ( 23,795 ) ( 24,855 ) Net deferred income tax liabilities $ ( 20,084 ) $ ( 22,172 ) Deferred income taxes — noncurrent assets $ — $ — Deferred income taxes — noncurrent liabilities $ ( 20,084 ) $ ( 22,172 ) 73 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. Income Taxes (continued) The Company periodically evaluates the recoverability of the deferred tax assets. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company recorded a valuation allowance of $ 1,973,000 on the net deferred tax assets of its subsidiaries in Argentina, Chile and Holland as of October 31, 2024 as the Company does not believe it is more likely than not that these deferred tax assets will be realized due to the recent history of cumulative pre-tax book losses and lack of objectively verifiable future sources of taxable income. As of October 31, 2024, the Company recorded a deferred tax asset of $ 1,645,000 related to its state and foreign net operating loss carryforwards. The net operating losses begin to expire as follows (in thousands): Jurisdiction Gross Amount Begin to Expire State 866 10/31/2040 Chile 3,292 Indefinite Holland 171 10/31/2025 Argentina 2,703 10/31/2025 The provision for income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income tax rate to pretax income as a result of the following differences for the fiscal years ended October 31 (in thousands): 2024 2023 2022 Amount % Amount % Amount % Provision at statutory rates $ ( 2,425 ) ( 21.0 ) % $ ( 2,806 ) ( 21.0 ) % $ ( 73 ) ( 21.0 ) % State income tax, net of federal benefit ( 1,201 ) ( 10.4 ) % ( 814 ) ( 6.2 ) % ( 74 ) ( 21.1 ) % Share-based compensation 243 2.1 % 20 0.2 % ( 110 ) ( 31.2 ) % Executive compensation ( 561 ) ( 4.9 ) % ( 395 ) ( 3.0 ) % ( 98 ) ( 27.9 ) % Tax law change — — % 137 1.0 % — — % State rate adjustment ( 64 ) ( 0.6 ) % ( 95 ) ( 0.7 ) % ( 59 ) ( 16.9 ) % Valuation allowance ( 80 ) ( 0.7 ) % ( 436 ) ( 3.3 ) % ( 357 ) ( 101.8 ) % Foreign rate differential ( 85 ) ( 0.7 ) % 66 0.5 % 74 21.1 % Noncontrolling interest ( 114 ) ( 1.0 ) % ( 48 ) ( 0.4 ) % ( 41 ) ( 11.8 ) % Other permanent items ( 86 ) ( 0.7 ) % 247 1.9 % ( 12 ) ( 3.5 ) % Tax credit and others — — % ( 123 ) ( 0.8 ) % ( 73 ) ( 20.7 ) % Total income tax provision $ ( 4,373 ) ( 37.9 ) % $ ( 4,247 ) ( 31.8 ) % $ ( 823 ) ( 234.8 ) % As of October 31, 2024 and 2023, the Company had no unrecognized tax benefits. The Company files income tax returns in the U.S., California, Arizona, Chile, Argentina and Holland. The Company is no longer subject to significant U.S., state and Chilean income tax examinations for years prior to the statutory periods of three years for federal, four years for state and three years for Chilean tax jurisdictions. 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 October 31, 2024. 17. 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. 74 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Retirement Plans (continued) During fiscal year 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 cash. The following tables set forth the Plan’s net periodic benefit cost, changes in benefit obligation and Plan assets, funded status, amounts recognized in the Company’s consolidated balance sheets, additional year-end information and assumptions used in determining the benefit obligations and net periodic benefit cost. The components of net periodic benefit cost for the Plan consists of the following for the fiscal years ended October 31 (in thousands): 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 Following is a summary of the Plan’s funded status at October 31 (in thousands): 2024 2023 Change in benefit obligation: Benefit obligation at beginning of year $ — $ 14,607 Administrative expenses — 20 Plan settlements — ( 14,427 ) Interest cost — 35 Benefits paid — ( 100 ) Expenses paid — ( 220 ) Benefits and expenses payable — ( 198 ) Transfer in — 99 Actuarial loss (gain) — 184 Benefit obligation at end of year $ — $ — Change in plan assets: Fair value of plan assets at beginning of year $ — $ 12,335 Actual return on plan assets — 11 Plan settlements — ( 14,427 ) Employer contributions — 2,500 Benefits paid — ( 100 ) Expenses paid — ( 220 ) Benefits and expenses payable — ( 198 ) Transfer in — 99 Fair value of plan assets at end of year $ — $ — 75 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 17. Retirement Plans (continued) Presented below are changes in accumulated other comprehensive income, before tax, in the Plan at October 31, (in thousands): 2024 2023 Changes recognized in other comprehensive income: Net loss arising during the year $ — $ 190 Amortization of prior service cost — ( 54 ) Amortization of net loss — ( 2,649 ) Total recognized in other comprehensive income $ — $ ( 2,513 ) Total recognized in net periodic benefit and other comprehensive loss $ — $ 228 The Company has a 401(k) plan in which an employee can participate after one month of employment. Employees may elect to defer up to 100 % of their annual earnings subject to Internal Revenue Code limits. The Company makes a matching contribution on these deferrals up to 4 % of the employee’s annual earnings after one year of employment. Participants vest in any matching contribution at a rate of 20 % per year beginning after one year of employment. In addition, for calendar year 2024 and 2023, the Company contributed a discretionary profit sharing of 2 % of gross wages deposited into the 401(k) account of all eligible employees. During fiscal years 2024, 2023 and 2022, the Company contributed to the plan and recognized expenses of $ 915,000 , $ 676,000 and $ 445,000 , respectively. 18. Commitments and Contingencies Litigation and Legal Proceedings 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. 19. Series B and Series B-2 Preferred Stock Series B Convertible Preferred Stock In 1997, in connection with the acquisition of Ronald Michaelis Ranches, Inc., the Company issued 30,000 shares of Series B Convertible Preferred Stock at $ 100.00 par value (the “Series B Stock”). Dividends: The holders of shares of Series B Stock are entitled to receive cumulative cash dividends at an annual rate of 8.75 % of par value. Such dividends are payable quarterly on the first day of January, April, July and October in each year. Voting Rights: Each holder of Series B Stock is entitled to ten votes on all matters submitted to a vote of the stockholders of the Company. Redemption: The Company, at the option of the Board of Directors, may redeem the Series B Stock, as a whole or in part, at any time or from time to time on or after August 1, 2017 and before July 31, 2027, at a redemption price equal to the par value thereof, plus accrued and unpaid dividends thereon to the date fixed for redemption. Redemption by the Company of a portion of the Series B Stock totaling 14,790 shares is subject to certain conditions agreed upon between the Company and the holders of this portion of the Series B Stock. 76 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 19. Series B and Series B-2 Preferred Stock (continued) Series B Convertible Preferred Stock (continued) Conversion: The holders of Series B Stock have the right, at their option, to convert such shares into shares of Common Stock of the Company at any time prior to redemption. The conversion price is $ 8.00 per share of Common Stock. Pursuant to the terms of the Certificate of Designation, Preferences and Rights of the Series B Stock, the conversion price shall be adjusted to reflect any dividends paid in Common Stock of the Company, the subdivision of the Common Stock of the Company into a greater number of shares of Common Stock of the Company or upon the advice of legal counsel. Put: The holders of Series B Stock may at any time after July 1, 2017 and before June 30, 2027 cause the Company to repurchase such shares at a repurchase price equal to the par value thereof, plus accrued and unpaid dividends thereon to the date fixed for repurchase. The put features of a portion of the Series B Stock totaling 14,790 shares are subject to certain conditions agreed upon between the Company and the holders of this portion of the Series B Stock. Because the Series B Stock may be redeemed by holders of the shares at their discretion beginning July 1, 2017, the redemption is outside the control of the Company and accordingly, the Series B Stock has been classified as temporary equity. Series B-2 Convertible Preferred Stock During March and April of 2014, pursuant to a Series B-2 Stock Purchase Agreement dated March 21, 2014, the Company issued an aggregate of 9,300 shares of Series B-2, 4 % voting preferred stock with a par value of $ 100.00 per share (“Series B-2 Preferred Stock”) to WPI-ACP Holdings, LLC (“WPI”), an entity affiliated with WAM for total proceeds of $ 9,300,000 . The transactions were exempt from the registration requirements of the Securities Act of 1933, as amended. The Series B-2 Preferred Stock has the following rights, preferences, privileges, and restrictions: Conversion: Each share of Series B-2 Preferred Stock is convertible into common stock at a conversion price equal to the greater of (a) the then-market price of the Company’s common stock based upon the closing price of the Company’s common stock on The NASDAQ Stock Market, LLC or on such other principal market on which the Company’s common stock may be trading or (b) $ 15.00 per share of common stock. Shares of Series B-2 Preferred Stock may be converted into common stock (i) at any time prior to the redemption thereof, or (ii) in the event the Option Agreement (as defined below) is terminated without all of the shares of Series B-2 Preferred Stock having been redeemed, within 30 calendar days following such termination. Dividends: The holder of shares of the Series B-2 Preferred Stock is entitled to receive cumulative cash dividends at an annual rate of 4 % of the liquidation value of $ 1,000 per share. Such dividends are payable quarterly on the first day of January, April, July and October in each year. Liquidation Rights: In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holder of shares of the Series B-2 Preferred Stock is entitled to be paid out of the assets available for distribution, before any payment is made to the holders of the Company’s common stock or any other series or class of the Company’s shares ranking junior to the Series B-2 Preferred Stock, an amount equal to the liquidation value of $ 1,000 per share, plus an amount equal to all accrued and unpaid dividends. Voting Rights: Each share of Series B-2 Preferred Stock is entitled to one vote on all matters submitted to a vote of the Company’s stockholders. Redemption: The Company may redeem shares of Series B-2 Preferred Stock only (i) from WPI or its designee and (ii) upon, and to the extent of, an election to exercise the option pursuant to the Option Agreement, described below, at a redemption price equal to the liquidation value of $ 1,000 per share plus accrued and unpaid dividends. Because the Series B-2 Preferred Stock may be redeemed by WPI at its discretion with the exercise of the Option Agreement, the redemption is outside the control of the Company and accordingly, the Series B-2 Preferred Stock has been classified as temporary equity. In connection with the sale of the Series B-2 Preferred Stock, Associated Citrus Packers, Inc. (“Associated”) and another affiliate of WAM (“WPI-ACP”), entered into a series of agreements related to the future ownership and disposition of farmland with associated Colorado River water rights and other real estate that is held by Associated in Yuma, Arizona. The agreements allow the parties to explore strategies that will make the highest and best use of those assets, including but not limited to the sale or lease of assets or the expansion of a fallowing and water savings program in which a portion of Associated’s property is currently enrolled. 77 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 19. Series B and Series B-2 Preferred Stock (continued) Series B-2 Convertible Preferred Stock (continued) The net proceeds of any monetization event would be shared equally by the parties. The agreements entered into include a Water Development Agreement and an Option Agreement. Pursuant to the Water Development Agreement, Associated granted WPI-ACP exclusive rights to develop water assets attributable to the real estate owned by Associated for the mutual benefit of Associated and WAM. Pursuant to the Option Agreement, Associated granted WPI-ACP an option to purchase an undivided interest of up to one-half of the real estate owned by Associated in Yuma County, Arizona (the “Property”) and the water rights associated therewith until January 1, 2026. The purchase price for the Property subject to the Option Agreement will be paid via the redemption by the Company of a proportionate percentage of the Series B-2 Preferred Stock. Unless and until a definitive agreement or definitive agreements with respect to Associated’s real estate and water rights is entered into that would cause the cessation of farming operations, Associated expects to continue farming the Property and recognize all results of operations and retain all proceeds from such operations. 20. Stockholders’ Equity Series A Junior Participating Preferred Stock The Company has 20,000 shares of preferred stock authorized as Series A Junior Participating Preferred Stock at $ 0.01 par value (the “Series A Stock”). No shares are issued or outstanding. Stock-based Compensation The Company has a stock-based compensation 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 stock on the date of grant, and all are classified as equity awards. In fiscal year 2022, the 2010 Stock Plan terminated and was replaced by the 2022 Stock Plan (the “Stock Plan” and together with the 2010 Stock Plan, the "Stock Plans") with 500,000 initial authorized shares. In fiscal year 2024 an additional 1,000,000 shares were authorized. The Stock Plan had 944,544 remaining shares available to be issued as of October 31, 2024. Management Performance Awards Certain restricted stock grants are made to management under the Stock Plans ("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 is 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 fiscal year 2023, and the balance 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 up to a maximum of 71,558 shares of common stock in the future based on the achievement of certain long-term performance goals over a three-year period. The Company recorded $ 306,000 of stock compensation expense, based on the awards probable of vesting, during fiscal year 2024. Executive Awards Certain restricted stock grants are made to key executives under the Stock Plans (“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 common 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. 78 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 20. Stockholders’ Equity (continued) Stock-based Compensation (continued) Executive Awards (continued) In fiscal year 2022, the Company entered into Retention Bonus Agreements with key executives (collectively, the “Retention Bonus Agreements”) whereby the executives are eligible to receive cash and restricted stock grants. During December 2023, the Company granted 12,709 shares of common 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 for fiscal year 2023 and the balance 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 one 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 up to a maximum of 106,157 shares of common stock in the future based on the achievement of certain long-term performance goals over a three-year period. The Company recorded $ 454,000 of stock compensation expense, based on the awards probable of vesting, during fiscal year 2024. Director Awards The Company issues shares of restricted common stock 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 . Summary of Awards A summary of the Performance, Executive, and Director Awards granted under the Stock Plan, and the weighted average grant prices, during the fiscal years ended October 31, is as follows: 2024 2023 2022 Number of Shares Weighted-Average Grant Price Number of Shares Weighted-Average Grant Price Number of Shares Weighted-Average Grant Price Performance Awards 76,236 $ 19.80 79,972 $ 13.19 — $ — Executive Awards 106,713 $ 17.18 193,381 $ 14.87 70,000 $ 14.96 Director Awards 27,087 $ 19.28 22,836 $ 16.26 49,231 $ 13.55 Total 210,036 $ 18.40 296,189 $ 14.52 119,231 $ 14.38 The Company recognized $ 4,116,000 , $ 3,841,000 and $ 2,732,000 of stock-based compensation for fiscal years 2024, 2023 and 2022, respectively, of which the majority of the expense has been included in selling, general and administrative expenses for all years presented. Forfeitures are accounted for in the period that the forfeiture occurs. The income tax benefit recognized in the income statement for stock-based compensation arrangements was $ 1,451,000 , $ 1,075,000 and $ 604,000 for fiscal years 2024, 2023 and 2022, respectively. The total fair value of shares vested was $ 3,976,000 , $ 1,323,000 and $ 1,856,000 for fiscal years 2024, 2023 and 2022, respectively. The Company has unrecognized stock-based compensation expense of $ 1,700,000 as of October 31, 2024, which is expected to be recognized over the next one to two years as the shares vest. All unvested shares are expected to vest. Exchange of Common Stock During fiscal years 2024, 2023 and 2022 members of management exchanged 117,897 , 39,472 and 105,316 shares of common stock with fair values of $ 2,312,000 , $ 567,000 and $ 1,530,000 , respectively, at the dates of the exchanges, for the payment of payroll taxes associated with the vesting of shares under the Company’s stock-based compensation programs. 79 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 20. Stockholders’ Equity (continued) Stock-based Compensation (continued) Summary of Nonvested Shares A summary of the status of the Company’s nonvested shares as of October 31, 2024, and changes during fiscal year 2024, is presented below: Number of Shares Weighted-Average Grant Price Nonvested at October 31, 2023 314,522 $ 14.55 Granted 210,036 $ 18.40 Vested ( 264,411 ) $ 15.04 Nonvested at October 31, 2024 260,147 $ 17.16 Dividend On December 17, 2024, the Company declared a cash dividend of $ 0.075 per common share payable on January 15, 2025, in the aggregate amount of $ 1,357,000 to common stockholders of record as of December 30, 2024. 21. 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 years’ 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. Segment information for fiscal year 2024 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 119,044 $ 17,131 $ — $ 25,114 $ 24,634 $ 185,923 $ 5,580 $ 191,503 Intersegment revenue — 32,127 ( 32,127 ) — — — — — Total net revenues 119,044 49,258 ( 32,127 ) 25,114 24,634 185,923 5,580 191,503 Costs and expenses 116,308 42,751 ( 32,127 ) 7,334 23,424 157,690 31,617 189,307 Depreciation and amortization — — — — — 7,117 1,257 8,374 Operating (loss) income $ 2,736 $ 6,507 $ — $ 17,780 $ 1,210 $ 21,116 $ ( 27,294 ) $ ( 6,178 ) 80 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Segment Information (continued) Segment information for fiscal year 2023 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 117,445 $ 20,573 $ — $ 7,046 $ 29,317 $ 174,381 $ 5,520 $ 179,901 Intersegment revenue — 31,081 ( 31,081 ) — — — — — Total net revenues 117,445 51,654 ( 31,081 ) 7,046 29,317 174,381 5,520 179,901 Costs and expenses (gains) 117,602 45,689 ( 31,081 ) 4,034 25,602 161,846 ( 1,304 ) 160,542 Depreciation and amortization — — — — — 7,323 1,253 8,576 Operating income (loss) $ ( 157 ) $ 5,965 $ — $ 3,012 $ 3,715 $ 5,212 $ 5,571 $ 10,783 Segment information for fiscal year 2022 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 117,924 $ 22,176 $ — $ 17,331 $ 21,850 $ 179,281 $ 5,324 $ 184,605 Intersegment revenue — 29,817 ( 29,817 ) — — — — — Total net revenues 117,924 51,993 ( 29,817 ) 17,331 21,850 179,281 5,324 184,605 Costs and expenses 112,688 43,017 ( 29,817 ) 5,524 20,635 152,047 20,559 172,606 Depreciation and amortization — — — — — 8,604 1,194 9,798 Operating income (loss) $ 5,236 $ 8,976 $ — $ 11,807 $ 1,215 $ 18,630 $ ( 16,429 ) $ 2,201 Revenues related to rental operations are included in “Corporate and Other.” The detail of other agribusiness revenues for fiscal years ended October 31, is as follows (in thousands): 2024 2023 2022 Oranges $ 5,189 $ 5,779 $ 9,911 Specialty citrus and other crops 5,089 9,515 8,978 Farm management 10,212 9,931 — Other 4,144 4,092 2,961 Other agribusiness revenues $ 24,634 $ 29,317 $ 21,850 22. Subsequent Events The Company evaluated events subsequent to October 31, 2024 through the date of this filing, to assess the need for potential recognition or disclosure in this Annual 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 consolidated financial statements. 81 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.