Limoneira CO 10-Q

Item 1. Financial Statements LIMONEIRA COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) January 31, 2025 October 31, 2024 Assets Current assets: Cash $ 1,133 $ 2,996 Accounts receivable, net 15,927 14,734 Cultural costs 2,123 1,877 Prepaid expenses and other current assets 5,300 3,849 Receivables/other from related parties 3,986 2,390 Total current assets 28,469 25,846 Property, plant and equipment, net 163,854 162,046 Real estate development 10,306 10,201 Equity in investments 81,871 81,546 Goodwill 1,501 1,504 Intangible assets, net 4,796 5,221 Other assets 10,573 12,451 Total assets $ 301,370 $ 298,815 Liabilities, Convertible Preferred Stock and Stockholders’ Equity Current liabilities: Accounts payable $ 10,116 $ 7,260 Growers and suppliers payable 2,004 8,960 Accrued liabilities 9,195 12,483 Payables to related parties 5,806 5,542 Current portion of long-term debt 96 559 Total current liabilities 27,217 34,804 Long-term liabilities: Long-term debt, less current portion 57,868 40,031 Deferred income taxes 17,677 20,084 Other long-term liabilities 1,254 1,395 Total liabilities 104,016 96,314 Commitments and contingencies — — Series B Convertible Preferred Stock – $ 100.00 par value ( 50,000 shares authorized: 14,790 shares issued and outstanding at January 31, 2025 and October 31, 2024) ( 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 January 31, 2025 and October 31, 2024) ( 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 January 31, 2025 and October 31, 2024) — — Common Stock – $ 0.01 par value ( 39,000,000 shares authorized: 18,296,146 and 18,284,148 shares issued and 18,045,169 and 18,033,171 shares outstanding at January 31, 2025 and October 31, 2024, respectively) 180 180 Additional paid-in capital 169,951 170,243 Retained earnings 16,274 20,826 Accumulated other comprehensive loss ( 6,881 ) ( 6,614 ) Treasury stock, at cost, 250,977 shares at January 31, 2025 and October 31, 2024 ( 3,493 ) ( 3,493 ) Noncontrolling interest 10,513 10,549 Total stockholders’ equity 186,544 191,691 Total liabilities, convertible preferred stock and stockholders’ equity $ 301,370 $ 298,815 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended January 31, 2025 2024 Net revenues: Agribusiness $ 32,852 $ 38,339 Other operations 1,453 1,392 Total net revenues 34,305 39,731 Costs and expenses: Agribusiness 33,499 39,114 Other operations 1,171 1,182 Gain on sales of water rights ( 1,488 ) — Gain on disposal of assets, net ( 6 ) ( 165 ) Selling, general and administrative 6,475 7,345 Total costs and expenses 39,651 47,476 Operating loss ( 5,346 ) ( 7,745 ) Other (expense) income: Interest income 15 22 Interest expense, net of patronage dividends ( 260 ) ( 207 ) Equity in earnings of investments, net 102 41 Other income, net 11 22 Total other expense ( 132 ) ( 122 ) Loss before income tax benefit ( 5,478 ) ( 7,867 ) Income tax benefit 2,407 4,190 Net loss ( 3,071 ) ( 3,677 ) Net (gain) loss attributable to noncontrolling interest ( 3 ) 92 Net loss attributable to Limoneira Company ( 3,074 ) ( 3,585 ) Preferred dividends ( 125 ) ( 125 ) Net loss applicable to common stock $ ( 3,199 ) $ ( 3,710 ) Basic net loss per common share $ ( 0.18 ) $ ( 0.21 ) Diluted net loss per common share $ ( 0.18 ) $ ( 0.21 ) Weighted-average common shares outstanding-basic 17,791 17,627 Weighted-average common shares outstanding-diluted 17,791 17,627 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) (in thousands) Three Months Ended January 31, 2025 2024 Net loss $ ( 3,071 ) $ ( 3,677 ) Other comprehensive loss: Foreign currency translation adjustments ( 267 ) ( 467 ) Total other comprehensive loss ( 267 ) ( 467 ) Comprehensive loss ( 3,338 ) ( 4,144 ) Comprehensive (gain) loss attributable to noncontrolling interest ( 3 ) 92 Comprehensive loss attributable to Limoneira Company $ ( 3,341 ) $ ( 4,052 ) The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY (UNAUDITED) (in thousands, except share and per share data) Stockholders’ Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non- controlling Total Series B Preferred Series B-2 Preferred Shares Amount Capital Earnings Loss Stock Interest Equity Stock Stock Balance at October 31, 2024 18,033,171 $ 180 $ 170,243 $ 20,826 $ ( 6,614 ) $ ( 3,493 ) $ 10,549 $ 191,691 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,353 ) — — — ( 1,353 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 59,087 1 931 — — — — 932 — — Exchange of common stock ( 47,089 ) ( 1 ) ( 1,223 ) — — — — ( 1,224 ) — — Noncontrolling interest adjustment — — — — — — ( 39 ) ( 39 ) — — Net (loss) income — — — ( 3,074 ) — — 3 ( 3,071 ) — — Other comprehensive loss — — — — ( 267 ) — — ( 267 ) — — Balance at January 31, 2025 18,045,169 $ 180 $ 169,951 $ 16,274 $ ( 6,881 ) $ ( 3,493 ) $ 10,513 $ 186,544 $ 1,479 $ 9,331 Stockholders’ Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non- controlling Total Series B Preferred Series B-2 Preferred Shares Amount Capital Earnings Loss Stock Interest Equity Stock Stock Balance at October 31, 2023 17,941,032 $ 179 $ 168,441 $ 19,017 $ ( 5,666 ) $ ( 3,493 ) $ 11,209 $ 189,687 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,350 ) — — — ( 1,350 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 99,983 1 863 — — — — 864 — — Exchange of common stock ( 36,097 ) — ( 684 ) — — — — ( 684 ) — — Noncontrolling interest adjustment — — — — — — ( 60 ) ( 60 ) — — Net loss — — — ( 3,585 ) — — ( 92 ) ( 3,677 ) — — Other comprehensive loss, net of tax — — — — ( 467 ) — — ( 467 ) — — Balance at January 31, 2024 18,004,918 $ 180 $ 168,620 $ 13,957 $ ( 6,133 ) $ ( 3,493 ) $ 11,057 $ 184,188 $ 1,479 $ 9,331 The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Three Months Ended January 31, 2025 2024 Operating activities Net loss $ ( 3,071 ) $ ( 3,677 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,016 2,058 Gain on disposal of assets, net ( 6 ) ( 165 ) Gain on sales of water rights ( 1,488 ) — Stock compensation expense 932 864 Non-cash lease expense 479 420 Equity in earnings of investments, net ( 102 ) ( 41 ) Deferred income taxes ( 2,407 ) ( 4,190 ) Other, net ( 1 ) 2 Changes in operating assets and liabilities: Accounts receivable and receivables/other from related parties ( 1,083 ) ( 1,694 ) Cultural costs ( 247 ) ( 251 ) Prepaid expenses and other current assets ( 323 ) ( 196 ) Other assets 5 ( 85 ) Accounts payable and growers and suppliers payable ( 4,439 ) ( 2,709 ) Accrued liabilities and payables to related parties ( 3,069 ) ( 160 ) Other long-term liabilities ( 108 ) ( 447 ) Net cash used in operating activities ( 12,912 ) ( 10,271 ) Investing activities Capital expenditures ( 4,082 ) ( 2,240 ) Net proceeds from sales of assets 162 783 Proceeds from sales of water rights 600 — Cash distributions from Trapani Fresh 41 61 Collection on notes receivable — 66 Equity investment contributions and capitalized interest ( 204 ) ( 294 ) Investments in mutual water companies and water rights ( 9 ) ( 15 ) Net cash used in investing activities ( 3,492 ) ( 1,639 ) Financing activities Borrowings of long-term debt 41,040 37,524 Repayments of long-term debt ( 23,644 ) ( 26,429 ) Principal paid on finance leases and equipment financings ( 155 ) ( 121 ) Dividends paid – common ( 1,353 ) ( 1,350 ) Dividends paid – preferred ( 125 ) ( 125 ) Exchange of common stock ( 1,224 ) ( 684 ) Net cash provided by financing activities 14,539 8,815 Effect of exchange rate changes on cash 2 ( 9 ) Net decrease in cash ( 1,863 ) ( 3,104 ) Cash at beginning of period 2,996 3,631 Cash at end of period $ 1,133 $ 527 8 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) (in thousands) Three Months Ended January 31, 2025 2024 Supplemental disclosures of cash flow information Cash paid during the period for interest (net of amounts capitalized) $ 139 $ 156 Cash paid during the period for income taxes, net $ — $ — Non-cash investing and financing activities: Capital expenditures accrued but not paid at period-end $ 451 $ 116 Accrued contribution obligation of investment in water company $ 279 $ 450 Accrued water rights sale proceeds $ 1,140 $ — The accompanying notes are an integral part of these unaudited consolidated financial statements. 9 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Basis of Presentation Business Limoneira Company (together with its consolidated subsidiaries, the “Company”) engages primarily in growing citrus and avocados, harvesting citrus, and packing, marketing and selling citrus. The Company is also engaged in residential rentals and other rental operations and real estate development activities. The Company markets and sells citrus directly to food service, wholesale and retail customers throughout the United States, Canada, Asia and certain other international markets. Basis of Presentation and Preparation The accompanying unaudited interim consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and investments in which the Company holds a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company, the unaudited interim consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these unaudited interim consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. Because the consolidated financial statements do not include all of the information and notes required by GAAP for a complete set of consolidated financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K. 2. Summary of Significant Accounting Policies Comprehensive Loss Comprehensive loss represents all changes in a company’s net assets, except changes resulting from transactions with stockholders. Other comprehensive loss relates entirely to foreign currency translation items. Accumulated other comprehensive loss is reported as a component of the Company’s stockholders’ equity. 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. 10 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Recent Accounting Pronouncements (continued) 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 and ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date 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. The effective date of ASU 2024-03 was clarified by ASU 2025-01. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim periods within annual 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. Concentrations Concentrations of credit risk with respect to revenues and accounts receivable are limited due to a large, diverse customer base. One individual customer represented 16 % of revenue for the three months ended January 31, 2025. Two individual customers represented 21 % and 12 % of accounts receivable, net as of January 31, 2025. One individual vendor represented 11 % of accounts payable as of January 31, 2025. Lemons procured from third-party growers were 83 % and 84 % of the Company’s domestic lemon supply for the three months ended January 31, 2025 and 2024, respectively. Three third-party growers and suppliers represented 48 %, 16 % and 15 % of growers and suppliers payable as of January 31, 2025. The Company maintains its cash in federally insured financial institutions. The account balances at these institutions periodically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of risk related to amounts on deposit in excess of FDIC insurance coverage. 3. Asset Sales and Disposals 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 $ 187,000 during the quarter ended January 31, 2024. 11 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): January 31, 2025 October 31, 2024 Prepaid supplies and insurance $ 2,603 $ 1,986 Sales tax receivable 138 312 Lemon supplier advances 260 295 Other 2,299 1,256 $ 5,300 $ 3,849 5. Real Estate Development Real estate development assets are comprised primarily of land and land development costs for the East Area II property in the amount of $ 10,306,000 and $ 10,201,000 as of January 31, 2025 and October 31, 2024, 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. The Company and LLCB also entered into a Retained Property Development Agreement on the Transaction Date (the “Retained Property Agreement”). Under the terms of the Retained Property Agreement, LLCB transferred certain contributed East Area I property, which is entitled for commercial development, back to the Company (the “Retained Property”) and arranged for the design and construction of certain improvements to the Retained Property, 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 January 31, 2025 and October 31, 2024, which is included in payables to related parties. In January 2018, LLCB entered into a $ 45,000,000 unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A. to fund early development activities. Effective as of February 22, 2023, the Loan maturity date was extended to February 22, 2024, and the maximum borrowing amount was reduced to $ 35,000,000 . As of February 1, 2023, the interest rate on the Loan transitioned from the London Interbank Offered Rate (“LIBOR”) to the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus 2.85 % and was payable monthly. Effective as of February 22, 2024, the Loan maturity date was extended to August 22, 2024 and the interest rate transitioned from the BSBY to the Secured Overnight Financing Rate ("SOFR") plus 2.85 %. As of May 3, 2024, the Loan had no outstanding balance and was cancelled. As of January 31, 2025, LLCB had cash and cash equivalents of $ 62,368,000 . 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. 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 $ 100,000 and $ 200,000 to LLCB II during the three months ended January 31, 2025 and 2024, respectively. Through January 31, 2025, LLCB closed on lot sales representing 1,261 residential units since inception. In June 2024, the Company received a cash distribution of $ 15,005,000 from LLCB. 12 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. Equity in Investments Equity in investments consist of the following (in thousands): January 31, 2025 October 31, 2024 Limoneira Lewis Community Builders, LLC $ 67,962 $ 67,962 LLCB II, LLC 9,771 9,566 Limco Del Mar, Ltd. ("Del Mar") 2,296 2,198 Rosales 1,341 1,319 Romney Property Partnership 501 501 $ 81,871 $ 81,546 Unconsolidated Significant Subsidiary In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies to interim reports on Form 10-Q, the Company must determine if its equity method investees are considered “significant subsidiaries.” In evaluating its investments, there are two tests utilized to determine if equity method investees are considered significant subsidiaries: the income test and the investment test. Summarized income statement information of an equity method investee is required in an interim report if either of the two tests exceed 20% in the interim periods presented. During the year-to-date interim period for the three months ended January 31, 2025, this threshold was met for LLCB and thus summarized income statement information for LLCB is presented in this Quarterly Report on Form 10-Q. The full audited financial statements of LLCB for the years ended October 31, 2024, 2023 and 2022 were provided as exhibits to the Annual Report on Form 10-K for the fiscal year ended October 31, 2024. The following is unaudited summarized financial information for LLCB (in thousands): Three Months Ended January 31, 2025 2024 Revenues $ 80 $ 913 Cost of land sold ( 73 ) ( 800 ) Operating income (expenses) 547 ( 21 ) Net income $ 554 $ 92 Net income attributable to Limoneira Company $ — $ 92 7. Goodwill and Intangible Assets, Net A summary of the change in the carrying amount of goodwill is as follows (in thousands): Goodwill Carrying Amount Balance at October 31, 2024 $ 1,504 Foreign currency translation adjustment ( 3 ) Balance at January 31, 2025 $ 1,501 Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. There have been no impairment charges recorded against goodwill as of January 31, 2025. 13 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 7. Goodwill and Intangible Assets, Net (continued) Intangible assets consist of the following (in thousands): January 31, 2025 October 31, 2024 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 ( 1,359 ) 749 8 $ 2,108 $ ( 1,308 ) $ 800 8 Customer relationships 2,707 ( 1,921 ) 786 8 2,707 ( 1,842 ) 865 8 Non-competition agreement 437 ( 201 ) 236 8 437 ( 187 ) 250 8 Acquired water and mineral rights 3,025 — 3,025 Indefinite 3,306 — 3,306 Indefinite $ 8,277 $ ( 3,481 ) $ 4,796 $ 8,558 $ ( 3,337 ) $ 5,221 Amortization expense totaled $ 144,000 and $ 179,000 for the three months ended January 31, 2025 and 2024, respectively. In January 2025, the Company sold acquired water rights in the Santa Paula Basin for $ 30,000 per acre-foot in two transactions. The total selling price was $ 1,440,000 and the Company recorded a gain on sales of water rights of $ 1,200,000 . Estimated future amortization expense of intangible assets as of January 31, 2025 is as follows (in thousands): 2025 (remaining nine months) $ 433 2026 578 2027 294 2028 294 2029 172 Thereafter — $ 1,771 8. Other Assets Investments in Mutual Water Companies and Water Rights The Company’s investments in various not-for-profit mutual water companies provide it with the right to receive a proportionate share of water from each of the not-for-profit mutual water companies that the Company has invested in and do not constitute voting shares and/or rights. In January 2025, the Company sold water pumping rights in the Santa Paula Basin for $ 300,000 and the Company recorded a gain on sale of water rights of $ 288,000 . Investments in mutual water companies included in other assets in the consolidated balance sheets as of January 31, 2025 and October 31, 2024 were $ 6,506,000 and $ 6,229,000 , respectively. 9. Accrued Liabilities Accrued liabilities consist of the following (in thousands): January 31, 2025 October 31, 2024 Compensation $ 1,867 $ 4,147 Property taxes 585 820 Operating expenses 3,036 3,020 Leases 1,942 2,295 Income taxes payable 456 456 Other 1,309 1,745 $ 9,195 $ 12,483 14 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 10. Long-Term Debt Long-term debt is comprised of the following (in thousands): January 31, 2025 October 31, 2024 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 4.35 % at January 31, 2025, 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. $ 57,846 $ 40,000 Banco de Chile term loan: The interest rate was fixed at 6.48 %.The loan was repaid in January 2025. — 433 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. 118 157 Total long-term debt 57,964 40,590 Less current portion 96 559 Long-term debt, less current portion $ 57,868 $ 40,031 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. 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 January 31, 2025, the Company’s outstanding borrowings under the Supplements were $ 57,846,000 and it had $ 57,154,000 available to borrow. 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 is based on the SOFR plus or minus an applicable margin. The applicable margin ranges from 1.68 % to 2.28 % depending on the ratio of current assets, plus the remaining available commitment divided by current liabilities. On each anniversary of July 1, the Company has the option to convert the interest rate in use under the Revolving Credit Supplement from the preceding SOFR-based calculation to a variable interest rate. The Company may prepay any amounts outstanding under the Revolving Credit Supplement without penalty. The interest rate in effect under the Non-Revolving Credit Supplement is a fixed interest rate of 3.57 % per year until July 1, 2025 (the “Fixed Rate Term”). Thereafter, the interest rate will convert to a variable interest rate established by the Lender corresponding to the applicable interest rate group. The Company may not prepay any amounts under the outstanding Non-Revolving Credit Supplement during the Fixed Rate Term. Thereafter, the Company may prepay any amounts outstanding under the Non-Revolving Credit Supplement, provided that a fee equal to 0.50 % of the amount prepaid and any other cost or loss suffered by the Lender must be paid with any prepayment. All indebtedness under the MLA, including any indebtedness under the Supplements, is secured by a first lien on Company-owned stock or participation certificates, Company funds maintained with the Lender, the Lender’s unallocated surplus, certain of the Company’s agricultural properties, certain of the Company’s building fixtures and improvements, and investments in mutual water companies associated with the pledged agricultural properties. The MLA includes customary default provisions. Should an event of default occur, the Lender, at its option, may declare all or any portion of the indebtedness under the MLA to be immediately due and payable without demand, notice of nonpayment, protest or prior recourse to collateral, and terminate or suspend the Company’s right to draw or request funds on any loan or line of credit. The MLA subjects the Company to affirmative and restrictive covenants including, among other customary covenants, financial reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of the Company’s business. The Company is also subject to a financial covenant that requires it to maintain compliance with a specific debt service coverage ratio of 1.25 :1.0 on an annual basis. The Company was in compliance with the covenants as of October 31, 2024. 15 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 10. Long-Term Debt (continued) Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress. The Company capitalized interest of $ 332,000 and $ 56,000 during the three months ended January 31, 2025 and 2024, 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. 11. 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. The Company’s rental operations revenue consists of the following (in thousands): Three Months Ended January 31, 2025 2024 Operating lease revenue $ 1,328 $ 1,292 Variable lease revenue 125 100 Total lease revenue $ 1,453 $ 1,392 Lessee Arrangements The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are classified as either operating or finance leases. The Company’s lease contracts are generally for agricultural land, packinghouse facilities, equipment and vehicles with remaining lease terms ranging from one to four years , with various term extensions available. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Lease costs are primarily included in agribusiness costs and expenses in the Company's consolidated statements of operations. Lease costs consist of the following (in thousands): Three Months Ended January 31, 2025 2024 Operating lease costs $ 520 $ 499 Finance lease costs: Amortization of lease assets 61 47 Interest on lease liabilities 11 9 Variable lease costs 7 ( 18 ) Short-term lease costs 24 69 Total lease costs $ 623 $ 606 16 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 11. Leases (continued) Supplemental balance sheet information related to leases consists of the following (in thousands): Classification January 31, 2025 October 31, 2024 Assets Operating lease ROU assets Other assets $ 2,127 $ 2,416 Finance lease assets Other assets 711 772 $ 2,838 $ 3,188 Liabilities Current operating lease liabilities Accrued liabilities $ 1,722 $ 2,075 Current finance lease liabilities Accrued liabilities 220 220 Non-current operating lease liabilities Other long-term liabilities 433 400 Non-current finance lease liabilities Other long-term liabilities 374 418 $ 2,749 $ 3,113 Supplemental cash flow information related to leases consists of the following (in thousands): Three Months Ended January 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 549 $ 513 Operating cash outflows from finance leases $ 11 $ 9 Financing cash outflows from finance leases $ 44 $ 71 ROU assets obtained in exchange for new operating lease liabilities $ 186 $ 352 17 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 12. Earnings Per Share Basic net income or 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 or loss per common share is calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of unvested, restricted stock and conversion of preferred stock. The computations for basic and diluted net income or loss per common share are as follows (in thousands, except per share data): Three Months Ended January 31, 2025 2024 Basic net loss per common share: Net loss applicable to common stock $ ( 3,199 ) $ ( 3,710 ) Effect of unvested, restricted stock ( 20 ) ( 27 ) Numerator: Net loss for basic EPS ( 3,219 ) ( 3,737 ) Denominator: Weighted average common shares–basic 17,791 17,627 Basic net loss per common share $ ( 0.18 ) $ ( 0.21 ) Diluted net loss per common share: Net loss for basic EPS $ ( 3,219 ) $ ( 3,737 ) Effect of dilutive preferred stock — — Numerator: Net loss for diluted EPS ( 3,219 ) ( 3,737 ) Weighted average common shares–basic 17,791 17,627 Effect of dilutive preferred stock — — Denominator: Weighted average common shares–diluted 17,791 17,627 Diluted net loss per common share $ ( 0.18 ) $ ( 0.21 ) Diluted net income or loss per common share is computed using the more dilutive method of either the two-class method or the treasury stock method. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating shares are included in computing earnings per share. The Company’s unvested, restricted stock awards qualify as participating shares. Diluted net loss per common share was calculated under the two-class method for the three months ended January 31, 2025 and 2024. 13. Related-Party Transactions The Company has transactions with equity method investments and various related parties summarized in Note 6 - Equity in Investments and in the tables below (in thousands): January 31, 2025 October 31, 2024 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 $ — $ 288 $ 685 $ — $ 526 $ 105 5 YMIDD $ 105 $ — $ — $ 206 $ — $ — 6 FGF $ 3,881 $ 583 $ 837 $ 2,184 $ 2,383 $ 837 7 LLCB $ — $ — $ 3,444 $ — $ — $ 3,444 9 Rosales $ — $ — $ 840 $ — $ — $ 629 10 Del Mar $ — $ — $ — $ — $ — $ 527 18 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 13. Related-Party Transactions (continued) Three Months Ended January 31, 2025 Three Months Ended January 31, 2024 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 $ — $ 236 $ — $ — $ — $ 221 $ — $ — 2 Mutual water companies $ — $ — $ 654 $ — $ — $ — $ 549 $ — 3 Cooperative association $ — $ — $ — $ — $ — $ — $ 489 $ — 5 YMIDD $ 306 $ — $ 5 $ — $ 318 $ — $ — $ — 6 FGF $ 83 $ 50 $ — $ — $ 83 $ 50 $ — $ — 8 Principal Owner $ — $ — $ — $ 245 $ — $ — $ — $ 224 9 Rosales $ 1,355 $ — $ 44 $ — $ 1,323 $ — $ 49 $ — 10 Del Mar $ 43 $ — $ — $ — $ — $ — $ — $ — (1) Employees - The Company rents certain of its residential housing assets to employees on a month-to-month basis and recorded rental income from employees. (2) Mutual water companies - The Company has representation on the boards of directors of the mutual water companies in which the Company has investments, as well as other water districts. Refer to Note 8 - Other Assets. The Company recorded capital contributions, purchased water and water delivery services and had water payments due to the mutual water companies and districts. (3) Cooperative association - The Company has representation on the board of directors of a non-profit cooperative association that provides pest control services for the agricultural industry. The Company purchased services and supplies from and had immaterial payments due to the cooperative association. (5) 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. (6) FGF Trapani ("FGF") - FGF is a 49 % partner in Trapani Fresh joint venture in Argentina and 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. (7) LLCB - The Company entered into a joint venture with Lewis for the residential development of our East Area I real estate development project and formed LLCB as the development entity. Refer to Note 5 - Real Estate Development. (8) Principal owner - The Company has one principal owner with ownership shares over 10% and paid dividends to such owner. (9) Rosales - The Company has an equity interest in Rosales as noted in Note 6 - Equity in Investments. The Company recognizes lemon and orange sales to Rosales, procures lemons and oranges from Rosales and has amounts due from and due to Rosales for such sales and purchases. (10) Del Mar - The Company has an interest in Del Mar as a general partner and as a limited partner as noted in Note 6 - 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. 14. Income Taxes The effective tax rate for the three months ended January 31, 2025 was higher than the federal statutory tax rate of 21% mainly due to foreign jurisdictions that are taxed at different rates, state taxes, tax impact of stock-based compensation, executive compensation, nondeductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries. The Company has no material uncertain tax positions as of January 31, 2025. 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 January 31, 2025. 19 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 15. Commitments and Contingencies The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business. At this time, the Company is not aware of any pending or threatened litigation against it that it expects will have a material adverse effect on its business, financial condition, liquidity or operating results. Legal claims are inherently uncertain, however, and it is possible that the Company’s business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings. 16. Stock-based Compensation The Company has a stock-based compensation plan (the “Stock Plan”) that allows for the grant of common stock of the Company to members of management, key executives and non-employee directors. The fair value of such awards is based on the fair value of the Company’s common stock on the date of grant, and all are classified as equity awards. Management Performance Awards Certain time-based restricted stock grants are made to management under the Stock Plan and generally vest over a three-year period as service is provided. During November 2024, 20,555 shares of restricted stock with a per share price of $ 25.54 were granted to management. The related compensation expense of $ 525,000 will be recognized over three years as the shares vest. During December 2024, 6,194 shares of restricted stock with a per share price of $ 26.30 were granted to management. The related compensation expense of $ 163,000 will be recognized over three years as the shares vest. In November and December 2024, the Company entered into Performance Share-Based Award Agreements with members of management whereby the employees may be granted up to a maximum of 53,498 shares of common stock in the future based on the achievement of certain long-term performance goals over a three-year period. Executive Awards Certain time-based restricted stock grants are made to key executives under the Stock Plan and generally vest over a three-year period as service is provided. During November 2024, 29,366 shares of restricted stock with a per share price of $ 25.54 were granted to key executives. The related compensation expense of $ 750,000 will be recognized over three years as the shares vest. In fiscal year 2022, the Company entered into Retention Bonus Agreements with key executives (collectively, the “Retention Bonus Agreements”) whereby the executives will be eligible to receive cash and restricted stock grants upon the occurrence of certain events. During December 2024, the Company granted 2,972 shares of restricted stock with a per share price of $ 26.30 to key executives related to the Retention Bonus Agreements. The related compensation expense of $ 78,000 will be recognized over the next year as the shares vest. In November 2024, the Company entered into Performance Share-Based Award Agreements with key executives whereby the executives may be granted up to a maximum of 58,732 shares of common stock in the future based on the achievement of certain long-term performance goals over a three-year period. Director Awards Certain time-based restricted stock grants are made on an annual basis to non-employee directors under the Stock Plan and generally vest after a one-year period as service is provided. Exchange of Common Stock During the three months ended January 31, 2025 and 2024, members of management exchanged 47,089 and 36,097 shares of common stock with fair values totaling $ 1,224,000 and $ 684,000 , respectively, at the dates of the exchanges, for the payment of payroll taxes associated with the vesting of restricted stock under the Stock Plan. 20 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 17. 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, wine grapes, fallowing revenue, shipping revenue and shipping costs. 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, gain on disposal of assets, net, gain on sales of water rights, total other expense and income taxes, or specifically identify them to its operating segments. The lemon packing segment earns packing revenue for packing lemons grown on the Company's 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 the three months ended January 31, 2025 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 23,716 $ 4,545 $ — $ 162 $ 4,429 $ 32,852 $ 1,453 $ 34,305 Intersegment revenues — 7,270 ( 7,270 ) — — — — — Total net revenues 23,716 11,815 ( 7,270 ) 162 4,429 32,852 1,453 34,305 Costs and expenses 24,429 10,591 ( 7,270 ) 37 3,938 31,725 5,910 37,635 Depreciation and amortization — — — — — 1,774 242 2,016 Operating (loss) income $ ( 713 ) $ 1,224 $ — $ 125 $ 491 $ ( 647 ) $ ( 4,699 ) $ ( 5,346 ) Segment information for the three months ended January 31, 2024 is as follows (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 27,384 $ 5,592 $ — $ — $ 5,363 $ 38,339 $ 1,392 $ 39,731 Intersegment revenues — 6,716 ( 6,716 ) — — — — — Total net revenues 27,384 12,308 ( 6,716 ) — 5,363 38,339 1,392 39,731 Costs and expenses 28,841 10,718 ( 6,716 ) — 4,527 37,370 8,048 45,418 Depreciation and amortization — — — — — 1,744 314 2,058 Operating (loss) income $ ( 1,457 ) $ 1,590 $ — $ — $ 836 $ ( 775 ) $ ( 6,970 ) $ ( 7,745 ) Revenues related to rental operations are included in “Corporate and Other.” The detail of other agribusiness revenues is as follows (in thousands): Three Months Ended January 31, 2025 2024 Oranges $ 1,568 $ 1,141 Specialty citrus and wine grapes 503 1,086 Farm management 1,181 2,048 Other 1,177 1,088 Other agribusiness revenues $ 4,429 $ 5,363 21 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 18. Subsequent Events The Company evaluated events subsequent to January 31, 2025 through the date of this filing, to assess the need for potential recognition or disclosure in this Quarterly Report. Based upon this evaluation, except as described in the notes to consolidated financial statements, it was determined that no other subsequent events occurred that require recognition or disclosure in the unaudited consolidated financial statements. 22