LIMONEIRA COMPANY Overview
Limoneira Company , aDelaware corporation, is the successor to several businesses with operations inCalifornia since 1893. We are primarily an agribusiness company founded and based inSanta Paula, California , committed to responsibly using and managing our approximately 15,400 acres of land, water resources and other assets to maximize long-term stockholder value. Our current operations consist of fruit production, sales and marketing, rental operations, real estate and capital investment activities. We are one ofCalifornia's oldest citrus growers. According toSunkist Growers, Inc. ("Sunkist"), we are one of the largest growers of lemons inthe United States and, according to theCalifornia Avocado Commission , one of the largest growers of avocados inthe United States . In addition to growing lemons and avocados, we grow oranges and a variety of specialty citrus and other crops. We have agricultural plantings throughoutVentura ,Tulare ,San Luis Obispo andSan Bernardino Counties inCalifornia ,Yuma County inArizona ,La Serena, Chile and Jujuy,Argentina , which collectively consist of approximately 6,100 acres of lemons, 800 acres of avocados, 1,000 acres of oranges and 900 acres of specialty citrus and other crops. We also operate our own packinghouses inSanta Paula andOxnard, California andYuma, Arizona , where we process, pack and sell lemons that we grow, as well as lemons grown by others. We have a 47% interest inRosales S.A. ("Rosales"), a citrus packing, marketing and sales business, a 90% interest inFruticola Pan de Azucar S.A. ("PDA"), a lemon and orange orchard and 100% interest in Agricola San Pablo, SpA ("San Pablo"), a lemon and orange orchard, all of which are located nearLa Serena, Chile . We have a 51% interest in a joint venture,Trapani Fresh Consorcio de Cooperacion ("Trapani Fresh"), a lemon orchard inArgentina . Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run through, the land we own. Water for our farming operations is sourced from the existing water resources associated with our land, which includes rights to water in the adjudicatedSanta Paula Basin (aquifer) and the un-adjudicatedFillmore and Paso Robles Basins (aquifers). We use ground water from theSan Joaquin Valley Basin and water from local water and irrigation districts inTulare County , which is inCalifornia's San Joaquin Valley . We also use ground water from theCadiz Valley Basin inCalifornia's San Bernardino County and surface water inArizona from theColorado River through the Yuma MesaIrrigation and Drainage District ("YMIDD"). We use ground water provided by wells and surface water for our PDA andSan Pablo farming operations inChile and ourTrapani Fresh farming operations inArgentina . For more than 100 years, we have been making strategic investments inCalifornia agriculture and real estate. We currently have an interest in three real estate development projects inCalifornia . These projects include multi-family housing and single-family homes of approximately 900 units in various stages of planning and development. Business Division Summary We have three business divisions: agribusiness, rental operations and real estate development. The agribusiness division is comprised of four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness, which includes oranges, specialty citrus and other crops. The agribusiness division includes our core operations of farming, harvesting, lemon packing and lemon sales operations. The rental operations division includes our residential and commercial rentals, leased land operations and organic recycling. The real estate development division includes our investments in real estate development projects. Financial information and discussion of our four reportable segments are contained in the notes to the accompanying consolidated financial statements of this Quarterly Report on Form 10-Q.
Agribusiness Summary
We market and sell citrus directly to our food service, wholesale and retail customers throughoutthe United States ,Canada ,Asia ,Australia ,Europe and certain other international markets. We are one of the largest growers of lemons and avocados inthe United States . In fiscal year 2021, we sold a majority of our avocados to Calavo Growers, Inc. ("Calavo"). Additionally, we sell our pistachios to a roaster, packager and marketer of nuts, and our wine grapes to various wine producers. Historically, our agribusiness division has been seasonal in nature with quarterly revenue fluctuating depending on the timing and variety of crops being harvested. Cultural costs in our agribusiness division tend to be higher in the first and second quarters and lower in the third and fourth quarters because of the timing of expensing cultural costs in the current year that were inventoried in the prior year. Our harvest costs generally increase in the second quarter and peak in the third quarter, coinciding with the increasing production and revenue.
Fluctuations in price are a function of global supply and demand with weather conditions, such as unusually low temperatures, typically having the most dramatic effect on the amount of lemons supplied in any individual growing season. We believe we have a
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competitive advantage by maintaining our own lemon packing operations, even
though a significant portion of the costs related to these operations are fixed.
As a result, cost per carton is a function of fruit throughput. While we
regularly monitor our costs for redundancies and opportunities for cost
reductions, we also supplement the number of lemons we pack in our packinghouse
with additional lemons procured from other growers. Because the fresh
utilization rate for our lemons, or percentage of lemons we harvest and pack
that are sold to the fresh market, is directly related to the quality of lemons
we pack and, consequently, the price we receive per 40-pound box, we only pack
lemons from other growers if we determine their lemons are of good quality.
Our avocado producing business is important to us, yet it faces constraints on
growth as there is little additional land with sufficient water that can be
cost-effectively acquired to support new avocado orchards in Southern
California . Therefore, we are currently assessing all of our farmland in Ventura
County for opportunities to expand our plantings of avocados. While avocado
production is cyclical as avocados typically bear fruit on a bi-annual basis,
the profitability and cash flow realized from our avocados helps to diversify
our fruit production base.
In addition to growing lemons and avocados, we grow oranges, specialty citrus
and other crops, typically utilizing land not suitable for growing high quality
lemons. We regularly monitor the demand for the fruit we grow in the
ever-changing marketplace to identify trends. For instance, while per capita
consumption of oranges in the United States has been decreasing since 2000
primarily as a result of consumers increasing their consumption of mandarin
oranges and other specialty citrus, the international market demand for U.S.
oranges has increased. As a result, we have focused our orange production on
high quality late season Navel oranges primarily for export to Japan , China and
Korea , which are typically highly profitable niche markets. We produce our
specialty citrus and other crops in response to identified consumer trends and
believe that we are a leader in the niche production and sale of certain of
these high margin fruits. We carefully monitor the respective markets of
specialty citrus and other crops and we believe that demand for the types and
varieties of specialty citrus and other crops that we grow will continue to
increase throughout the world.
Rental Operations Summary
Our rental operations include our residential and commercial rentals, leased land operations and organic recycling. Our residential rental units generate reliable cash flows that we use to partially fund the operating costs of our business and provide affordable housing to many of our employees, including our agribusiness employees. This unique employment benefit helps us maintain a dependable, long-term employee base. In addition, our leased land business provides us with a typically profitable diversification. Revenue from rental operations is generally level throughout the year.
Real Estate Development Summary
We invest in real estate investment projects and recognize that long-term strategies are required for successful real estate development activities. Our goal is to redeploy real estate earnings and cash flow into the expansion of our agribusiness and other income producing real estate. For real estate development projects and joint ventures, it is not unusual for the timing and amounts of revenues and costs, partner contributions and distributions, project loans, other financing assumptions and project cash flows to be impacted by government approvals, project revenue and cost estimates and assumptions, economic conditions, financing sources and product demand as well as other factors. Such factors could affect our results of operations, cash flows and liquidity.
Water and Mineral Rights
Our water resources include water rights, usage rights and pumping rights to the water in aquifers under, and canals that run through, the land we own. Water for our farming operations is sourced from the existing water resources associated with our land, which includes rights to water in the adjudicatedSanta Paula Basin (aquifer) and the un-adjudicatedFillmore and Paso Robles Basins (aquifers). We use ground water and water from local water districts inTulare County and ground water inSan Bernardino County . Following our acquisition ofAssociated Citrus Packers, Inc. ("Associated"), we began using federal project water inArizona from theColorado River through the YMIDD. We also have acquired water rights inChile related to our acquisitions of PDA andSan Pablo . 27 -------------------------------------------------------------------------------- We use a combination of ground water provided by wells that derive water from theSan Joaquin Valley Basin and water from various water districts and irrigation districts inTulare County, California , which is in the agriculturally productiveSan Joaquin Valley . We use ground water provided by wells which derive water from theCadiz Valley Basin at theCadiz Ranch inSan Bernardino County, California . OurWindfall Farms property located inSan Luis Obispo County, California obtains water from wells that derive water from thePaso Robles Basin . Our Associated farming operations inYuma, Arizona source water from theColorado River through the YMIDD, where we have access to approximately 11,700-acre feet of Class 3Colorado River water rights. We use ground water provided by wells and surface water for our PDA andSan Pablo farming operations inLa Serena, Chile and ourTrapani Fresh farming operations inArgentina .California has experienced below average precipitation since 2018. According to theU.S. Drought Monitor,Ventura andSan Bernardino Counties were experiencing severe drought conditions andTulare County was experiencing extreme drought conditions as ofJuly 31, 2022 . InOctober 2021 , theCalifornia Governor declared a drought state of emergency statewide. Federal officials who oversee theCentral Valley Project ,California's largest water delivery system, allocated 0% of the contracted amount of water toSan Joaquin Valley farmers in 2022 compared to 5% in 2021 and 100% in 2017 through 2020. We are assessing the impact these reductions may have on ourCalifornia orchards. InAugust 2021 , theU.S. Bureau of Reclamation declared a Level 1 Shortage Condition atLake Mead in theLower Colorado River Basin for the first time ever, requiring shortage reductions and water savings contributions for states in the southwest. InJanuary 2022 ,Arizona experienced water releases fromLake Mead reduced by approximately 18% of the state's annual apportionment. InAugust 2022 , theU.S. Bureau of Reclamation announcedLake Mead to operate in a Tier-2a shortage, which increases water restrictions for states in the southwest. InJanuary 2023 ,Arizona will forfeit an additional 80,000-acre feet of water fromLake Mead . In response, we entered into a fallowing agreement and we are assessing the impact these additional reductions may have on ourArizona orchards.
Recent Developments
We are equal partners in a joint venture withThe Lewis Group of Companies ("Lewis") for the residential development of our East Area I real estate development project and formedLimoneira Lewis Community Builders, LLC ("LLCB") as the development entity. LLCB has closed on lot sales representing 586 units from inception throughJuly 31, 2022 . For further information see Note 5 - Real Estate Development of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q. InSeptember 2021 , we signed a Memorandum of Understanding withWileman Bros. & Elliott, Inc. ("Wileman"), to form an alliance to sell their combined citrus volumes underLimoneira's One World of Citrus trademark. Wileman is a 95-year-old citrus business located inCalifornia's Central Valley with a focus on oranges, mandarins and specialty citrus. EffectiveNovember 1, 2021 , the majority of our oranges and certain specialty citrus are packed by Wileman. InJanuary 2022 , we were notified ofAlex M. Teague's decision to retire as Senior Vice President and Chief Operating Officer of our Company, effectiveFebruary 1, 2022 . In connection with his retirement, we entered into a separation agreement withMr. Teague whereas, (i)Mr. Teague was paid one year of his annual base salary, which was paid in one lump sum within ninety (90) business days ofJanuary 12, 2022 ; (ii) twenty-three thousand nine hundred ninety-nine (23,999) shares of our common stock granted toMr. Teague pursuant to the Limoneira Company Omnibus Incentive Plan fully vested; and (iii)Mr. Teague will receive certain other benefits as set forth in the agreement. As ofJuly 31, 2022 , we paid$0.4 million cash severance and recognized$0.3 million accelerated vesting of stock-based compensation.
In
InMarch 2022 , we signed an agreement to lease Finca Santa Clara, our 1,200-acre lemon ranch inArgentina , to FGF Trapani ("FGF"), our 49% partner inTrapani Fresh . The lease is retroactive beginningNovember 1, 2021 , with a term of 14 months at a fixed sum of$0.4 million , payable in five equal, monthly installments beginningAugust 2022 untilDecember 2022 . InApril 2022 , the promissory note previously received for the sale of our Centennial property, with a net carrying value of$2.4 million , was paid in full and the deferred gain of$0.2 million was recognized in the second quarter of fiscal year 2022. InJune 2022 , we engaged with YMIDD in a two-year fallowing and forbearance program at ourAssociated Citrus Packers ranch inYuma, Arizona . We expect to receive payments totaling approximately$1.3 million during the program. With the fallowing program in place, this ranch will have approximately 700 acres of productive lemons, 400 fallowed acres and 200 acres of other crops. 28 -------------------------------------------------------------------------------- OnJune 28, 2022 , we declared a cash dividend of$0.075 per common share paid onJuly 15, 2022 , in the aggregate amount of$1.3 million to stockholders of record as ofJuly 11, 2022 . InSeptember 2022 , we entered into an agreement with LLCB to sell our East Area 1 - Retained Property to potentially develop additional residential units. We expect to close the transaction in the fourth quarter of fiscal year 2022, receive approximately$8.0 million in cash proceeds and record an estimated gain of approximately$4.7 million .
COVID-19 Pandemic
The COVID-19 pandemic has had an adverse impact on the industries and markets in which we conduct business. In particular,the United States lemon market saw a significant decline in volume, with lemon demand falling since widespread shelter in place orders were issued inMarch 2020 , resulting in a significant market oversupply. The export market for fresh produce also significantly declined due to the COVID-19 pandemic impacts. As ofJuly 31, 2022 , the demand within both markets is recovering but has not yet returned to pre-pandemic levels. The decline in demand for our products beginning the second quarter of fiscal year 2020, which we believe was due to the COVID-19 pandemic, negatively impacted our sales and profitability for the last three quarters of fiscal year 2020, all of fiscal year 2021, and the first three quarters of fiscal year 2022. We also expect the COVID-19 pandemic to impact our sales and profitability in future periods. The duration of these trends and the magnitude of such impacts cannot be estimated at this time, as they are influenced by a number of factors, many of which are outside management's control, including, but not limited, to those presented in Item 1A Risk Factors of our Annual Report on Form 10-K for the year endedOctober 31, 2021 . Notwithstanding the adverse impacts and subject to unforeseen changes that may arise as the COVID-19 pandemic continues, we currently expect improvement in fiscal year 2022 compared to fiscal year 2021. Given the economic uncertainty as a result of the COVID-19 pandemic over the past two years, we have taken actions to improve our current liquidity position, including temporarily postponing capital expenditures, selling equity securities to increase cash, reducing operating costs, and substantially reducing discretionary spending. Although we are considered an essential business, there is significant uncertainty around the breadth and duration of our business disruptions related to the COVID-19 pandemic, as well as its impact on theU.S. economy, the ongoing business operations of our customers and our results of operations and financial condition. Our management team is actively monitoring the impacts of the COVID-19 pandemic and may take further actions altering our business operations that we determine are in the best interests of our employees and customers or as required by federal, state, or local authorities. The full impact of the COVID-19 pandemic on our results of operations, financial condition, or liquidity for fiscal year 2022 and beyond cannot be fully estimated at this point. The following discussions are subject to the future effects of the COVID-19 pandemic on our ongoing business operations. 29 --------------------------------------------------------------------------------
Results of Operations
The following table shows the results of operations (in thousands):
Three Months Ended Nine Months Ended
July 31, July 31,
2022 2021 2022 2021
Net revenues:
Agribusiness $ 57,594 $ 47,954 $ 141,046 $ 129,080
Other operations 1,329 1,171 3,901 3,452
Total net revenues 58,923 49,125 144,947 132,532
Costs and expenses:
Agribusiness 41,463 40,691 120,306 114,071
Other operations 1,127 1,017 3,294 3,189
Loss on disposal of assets, net 242 - 503 -
Selling, general and administrative 5,031 4,043 16,756 15,154
Total costs and expenses 47,863 45,751 140,859 132,414
Operating income:
Agribusiness 16,131 7,263 20,740 15,009
Other operations 202 154 607 263
Loss on disposal of assets, net (242) - (503) -
Selling, general and administrative (5,031) (4,043) (16,756) (15,154)
Operating income 11,060 3,374 4,088 118
Other (expense) income:
Interest income 6 211 54 279
Interest expense, net of patronage dividends (772) (574) (1,253) (1,062)
Equity in earnings of investments, net 331 1,462 681 2,471
Other income, net 13 32 106 83
Total other (expense) income (422) 1,131 (412) 1,771
Income before income tax provision 10,638 4,505 3,676 1,889
Income tax provision (3,313) (1,335) (1,385) (1,122)
Net income 7,325 3,170 2,291 767
Net loss attributable to noncontrolling interest 52 535 129 663
Net income attributable to
3,705$ 2,420 $ 1,430 Non-GAAP Financial Measures Due to significant depreciable assets associated with the nature of our operations and interest costs associated with our capital structure, management believes that earnings before interest, income taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA, which excludes named executive officer severance and loss (gain) on disposal of assets, are important measures to evaluate our results of operations between periods on a more comparable basis. Such measurements are not prepared in accordance withU.S. generally accepted accounting principles ("GAAP") and should not be construed as an alternative to reported results determined in accordance with GAAP. The non-GAAP information provided is unique to us and may not be consistent with methodologies used by other companies.
EBITDA and adjusted EBITDA are summarized and reconciled to net income
attributable to
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Three Months Ended Nine Months Ended
July 31, July 31,
2022 2021 2022 2021
Net income attributable to
$ 2,420 $ 1,430 Interest income (6) (211) (54) (279) Interest expense, net of patronage dividends 772 574 1,253 1,062 Income tax provision 3,313 1,335 1,385 1,122 Depreciation and amortization 2,469 2,437 7,432 7,490 EBITDA$ 13,925 $ 7,840 $ 12,436 $ 10,825 Named executive officer severance - - 770 - Loss (gain) on disposal of assets, net 242 (4) 503 (20) Adjusted EBITDA$ 14,167 $ 7,836 $ 13,709 $ 10,805
Three Months Ended
Revenues Total net revenues for the three months endedJuly 31, 2022 were$58.9 million , compared to$49.1 million for the three months endedJuly 31, 2021 . The 20% increase of$9.8 million was primarily the result of increased avocados and oranges agribusiness revenues, partially offset by decreased lemon agribusiness revenues, as detailed below ($ in thousands): Agribusiness Revenues for
the Three Months Ended
2022 2021 Change
Lemons $ 40,160 $ 40,835 $ (675) (2)%
Avocados 12,578 4,073 8,505 209%
Oranges 3,736 1,981 1,755 89%
Specialty citrus and other crops 1,120 1,065 55 5%
Agribusiness revenues $ 57,594 $ 47,954 $ 9,640 20%
•Lemons: The decrease in the third quarter of fiscal year 2022 was primarily the
result of decreased brokered fruit and other lemon sales, partially offset by
increased fresh lemon sales and shipping and handling compared to the same
period of fiscal year 2021. During the third quarter of fiscal years 2022 and
2021, fresh lemon sales were $27.8 million and $24.4 million , in aggregate, on
1,512,000 and 1,144,000 cartons of lemons sold at average per carton prices of
$18.39 and $21.34 , respectively. Lemon revenues in the third quarter of fiscal
years 2022 and 2021 included shipping and handling of $6.3 million and $4.5
million , brokered fruit and other lemon sales of $5.0 million and $11.2 million ,
and lemon by-product sales of $1.1 million and $0.6 million , respectively.
•Avocados: The increase in the third quarter of fiscal year 2022 was primarily
the result of increased volume and higher prices of avocados sold, compared to
the same period of fiscal year 2021. During the third quarter of fiscal years
2022 and 2021, 5,694,000 and 3,513,000 pounds of avocados were sold at an
average per pound price of $2.21 and $1.16 , respectively.
•Oranges: The increase in the third quarter of fiscal year 2022 was primarily
the result of higher prices, partially offset by decreased volume of oranges
sold, compared to the same period of fiscal year 2021. In the third quarter of
fiscal years 2022 and 2021, we sold 209,000 and 259,000 40-pound carton
equivalents of oranges at an average per carton price of $17.88 and $7.65 ,
respectively.
•Specialty citrus and other crops: The increase in the third quarter of fiscal
year 2022 was primarily the result of increased volume and higher prices of
specialty citrus sold, compared to the same period of fiscal year 2021. During
the third quarter of fiscal years 2022 and 2021, we sold 61,000 and 45,000
40-pound carton equivalents of specialty citrus at an average per carton price
of $18.34 and $14.04 , respectively.
Other operations revenue in the third quarter of fiscal years 2022 and 2021 was
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--------------------------------------------------------------------------------Costs and Expenses
Our total costs and expenses in the third quarter of fiscal year 2022 were$47.9 million , compared to$45.8 million in the same period of fiscal year 2021. The 5% increase of$2.1 million was primarily attributable to increases in packing costs, harvest costs and selling, general and administrative expenses, partially offset by decreases in our growing and third-party grower and supplier costs. Costs and expenses associated with our agribusiness division include packing costs, harvest costs, growing costs, costs related to the fruit we procure and sell for third-party growers and suppliers and depreciation and amortization expense, as detailed below ($ in thousands): Agribusiness Costs and
Expenses for the Three Months Ended
2022 2021 Change
Packing costs $ 12,463 $ 9,864 $ 2,599 26%
Harvest costs 6,219 3,383 2,836 84%
Growing costs 4,965 7,522 (2,557) (34)%
Third-party grower and supplier costs 15,644 17,828 (2,184) (12)%
Depreciation and amortization 2,172 2,094 78 4%
Agribusiness costs and expenses $ 41,463 $
40,691
•Packing costs: Packing costs primarily consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. In the third quarter of fiscal years 2022 and 2021, lemon packing costs were$12.0 million and$9.3 million , respectively. During the third quarter of fiscal years 2022 and 2021, we packed and sold 1,512,000 and 1,144,000 cartons of lemons at average per carton costs of$7.91 and$8.11 , respectively. Additionally, in the third quarter of fiscal years 2022 and 2021, packing costs included$0.5 million and$0.6 million of shipping costs, respectively.
•Harvest costs: Harvest costs increased in the third quarter of fiscal year 2022 primarily as a result of increased volume of lemons and avocados harvested compared to the same period in fiscal year 2021.
•Growing costs: Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation. The decrease in the third quarter of fiscal year 2022 was primarily due to the lease of Finca Santa Clara inArgentina and farm management decisions based on weather, harvest timing and crop conditions. •Third-party grower and supplier costs: We sell fruit that we grow and fruit that we procure from other growers and suppliers. The cost of procuring fruit from other growers is referred to as third-party grower and supplier costs. The decrease in the third quarter of fiscal year 2022 was primarily due to lower prices, partially offset by increased volume of third-party grower fruit sold, compared to the same period of fiscal year 2021. Of the 1,512,000 and 1,144,000 cartons of lemons packed and sold during the third quarter of fiscal years 2022 and 2021, 695,000 (46%) and 655,000 (57%) were procured from third-party growers at average per carton prices of$12.42 and$14.88 , respectively. Additionally, in the third quarter of fiscal years 2022 and 2021, we incurred$7.0 million and$8.1 million , respectively, of costs for purchased, packed fruit for resale. •Depreciation and amortization: Depreciation and amortization expense for the third quarter of fiscal years 2022 and 2021 was$2.2 million and$2.1 million , respectively.
Other operations expenses were
Loss on disposal of assets, net was
Selling, general and administrative costs and expenses were$5.0 million and$4.0 million in the third quarter of fiscal years 2022 and 2021, respectively. The 24% increase of$1.0 million primarily consisted of the following: •Salaries, benefits and incentive compensation in the third quarter of fiscal year 2022 was$1.0 million higher than the same period of fiscal year 2021. •Other selling, general and administrative expenses, including certain corporate overhead expenses in the third quarter of fiscal year 2022 were$0.1 million higher than the same period of fiscal year 2021. 32 --------------------------------------------------------------------------------
Other (Expense) Income
Other expense in the third quarter of fiscal year 2022 was comprised primarily of$(0.8) million of net interest expense, partially offset by$0.3 million of equity in earnings of investments. Other income in the third quarter of fiscal year 2021 was comprised primarily of$1.5 million of equity in earnings of investments, partially offset by$(0.4) million of net interest expense.
Income Taxes
We recorded an estimated income tax provision of$3.3 million and$1.3 million in the third quarter of fiscal years 2022 and 2021 on pre-tax income of$10.6 million and$4.5 million , respectively. The tax provision recorded for the third quarter of fiscal year 2022 differs from theU.S. federal statutory tax rate of 21.0% due primarily to foreign jurisdictions which are taxed at different rates, state taxes, tax impact of stock-based compensation, and nondeductible tax items. Our projected annual effective blended tax rate for fiscal year 2022, excluding discrete items, is approximately 41.3%.
Net Loss Attributable to Noncontrolling Interest
Net loss attributable to noncontrolling interest represents 10% and 49% of the
net loss of PDA and
Nine Months Ended
Revenues
Total net revenues for the nine months endedJuly 31, 2022 were$144.9 million , compared to$132.5 million for the nine months endedJuly 31, 2021 . The 9% increase of$12.4 million was primarily the result of increased avocados and oranges agribusiness revenues, partially offset by decreased lemons and specialty citrus and other crops agribusiness revenues, as detailed below ($ in thousands): Agribusiness Revenues
for the Nine Months Ended
2022 2021 Change
Lemons $ 113,463 $ 113,735 $ (272) -%
Avocados 16,920 6,780 10,140 150%
Oranges 7,226 4,476 2,750 61%
Specialty citrus and other crops 3,437 4,089 (652) (16)%
Agribusiness revenues $ 141,046 $ 129,080 $ 11,966 9%
•Lemons: The decrease in the first nine months of fiscal year 2022 was primarily
the result of decreased brokered fruit and other lemon sales, partially offset
by increased fresh lemon and shipping and handling sales compared to the same
period of fiscal year 2021. During the first nine months of fiscal years 2022
and 2021, fresh lemon sales were $79.8 million and $78.1 million , in aggregate,
on 4,271,000 and 3,992,000 cartons of lemons sold at average per carton prices
of $18.68 and $19.56 , respectively. Lemon revenues in the first nine months of
fiscal years 2022 and 2021 included shipping and handling of $19.0 million and
$15.5 million , brokered fruit and other lemon sales of $11.5 million and $17.0
million , respectively, and lemon by-product sales of $3.1 million in both fiscal
years.
•Avocados: The increase in the first nine months of fiscal year 2022 was
primarily the result of increased volume and higher prices of avocados sold,
compared to the same period of fiscal year 2021. During the first nine months of
fiscal years 2022 and 2021, 7,936,000 and 5,655,000 pounds of avocados were sold
at an average per pound price of $2.13 and $1.20 , respectively.
•Oranges: The increase in the first nine months of fiscal year 2022 was
primarily the result of increased volume and higher prices of oranges sold,
compared to the same period of fiscal year 2021. In the first nine months of
fiscal years 2022 and 2021, we sold 590,000 and 533,000 40-pound carton
equivalents of oranges at an average per carton price of
•Specialty citrus and other crops: The decrease in the first nine months of fiscal year 2022 was primarily the result of lower prices, partially offset by increased volume of specialty citrus sold, compared to the same period of fiscal year 2021. During the first nine months of fiscal years 2022 and 2021, we sold 366,000 and 289,000 40-pound carton equivalents of specialty citrus at an average per carton price of$9.26 and$12.40 , respectively.
Other operations revenue in the first nine months of fiscal years 2022 and 2021
was
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--------------------------------------------------------------------------------Costs and Expenses
Our total costs and expenses in the first nine months of fiscal year 2022 were$140.9 million , compared to$132.4 million in the same period of fiscal year 2021. The 6% increase of$8.4 million was primarily attributable to increases in our packing costs, harvest costs and selling, general and administrative expenses, partially offset by decreases in our growing costs. Costs and expenses associated with our agribusiness division include packing costs, harvest costs, growing costs, costs related to the fruit we procure and sell for third-party growers and suppliers and depreciation and amortization expense, as detailed below ($ in thousands): Agribusiness Costs and
Expenses for the Nine Months Ended
2022 2021 Change
Packing costs $ 36,020 $ 31,894 $ 4,126 13%
Harvest costs 17,031 13,826 3,205 23%
Growing costs 21,240 22,348 (1,108) (5)%
Third-party grower and supplier costs 39,471 39,412 59 -%
Depreciation and amortization 6,544 6,591 (47) (1)%
Agribusiness costs and expenses $ 120,306 $
114,071
•Packing costs: Packing costs primarily consist of the costs to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. In the first nine months of fiscal years 2022 and 2021, lemon packing costs were$34.2 million and$29.7 million , respectively. During the first nine months of fiscal years 2022 and 2021, we packed and sold 4,271,000 and 3,992,000 cartons of lemons at average per carton costs of$8.00 and$7.44 , respectively. Additionally, in the first nine months of fiscal years 2022 and 2021, packing costs included$1.8 million and$2.2 million of shipping costs, respectively. •Harvest costs: Harvest costs increased in the first nine months of fiscal year 2022 primarily as a result of increased volume of lemons and avocados harvested compared to the same period in fiscal year 2021. •Growing costs: Growing costs, also referred to as cultural costs, consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation. The decrease in the first nine months of fiscal year 2022 was primarily due to the lease of Finca Santa Clara inArgentina , partially offset by increases related to farm management decisions based on weather, harvest timing and crop conditions. •Third-party grower and supplier costs: We sell fruit that we grow and fruit that we procure from other growers and suppliers. The cost of procuring fruit from other growers is referred to as third-party grower and supplier costs. The increase in the first nine months of fiscal year 2022 was primarily due to increased volume, partially offset by lower prices of third-party grower fruit sold, compared to the same period of fiscal year 2021. Of the 4,271,000 and 3,992,000 cartons of lemons packed and sold during the first nine months of fiscal years 2022 and 2021, 2,183,000 (51%) and 2,048,000 (51%) were procured from third-party growers at average per carton prices of$12.81 and$14.08 , respectively. Additionally, in the first nine months of fiscal years 2022 and 2021, we incurred$11.5 million and$10.6 million , respectively, of costs for purchased, packed fruit for resale.
•Depreciation and amortization: Depreciation and amortization expense for the
first nine months of fiscal years 2022 and 2021 was
Other operations expenses were
Loss on disposal of assets, net was
Selling, general and administrative costs and expenses were$16.8 million in the first nine months of fiscal year 2022 compared to$15.2 million in the first nine months of fiscal year 2021. The 11% increase of$1.6 million primarily consisted of the following: •Salaries, benefits and incentive compensation for the first nine months of fiscal year 2022 were$1.1 million higher than the same period of fiscal year 2021. •Named executive officer severance for the first nine months of fiscal year 2022 was$0.8 million compared to zero in the same period of fiscal year 2021.
•Other selling, general and administrative expenses, including certain corporate
overhead expenses, for the first nine months of fiscal year 2022 were
34
--------------------------------------------------------------------------------Other (Expense) Income
Other expense in the first nine months of fiscal year 2022 was comprised primarily of$(1.2) million of net interest expense, partially offset by$0.7 million of equity in earnings of investments. Other income in the first nine months of fiscal year 2021 was comprised primarily of$2.5 million of equity in earnings of investments, partially offset by$(0.8) million of net interest expense.
Income Taxes
We recorded an estimated income tax provision of$1.4 million and$1.1 million in the first nine months of fiscal years 2022 and 2021 on pre-tax income of$3.7 million and$1.9 million , respectively. The tax provision recorded for the first nine months of fiscal year 2022 differs from theU.S. federal statutory tax rate of 21.0% due primarily to foreign jurisdictions which are taxed at different rates, state taxes, tax impact of stock-based compensation, and nondeductible tax items. Our projected annual effective blended tax rate for fiscal year 2022, excluding discrete items, is approximately 41.3%.
Net Loss Attributable to Noncontrolling Interest
Net loss attributable to noncontrolling interest represents 10% and 49% of the
net loss of PDA and
Segment Results of Operations
We operate in four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness. Our reportable operating segments are strategic business units with different products and services, distribution processes and customer bases. We evaluate the performance of our operating segments separately to monitor the different factors affecting financial results. Each segment is subject to review and evaluations related to current market conditions, market opportunities and available resources. See Note 18 - Segment Information of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our operating segments.
Three Months Ended
The following table shows the segment results of operations for the three months
ended
Fresh Lemon Other Total Corporate
Lemons Packing Eliminations Avocados Agribusiness Agribusiness and Other Total
Revenues from external customers $ 33,823 $ 6,337 $ - $ 12,578 $ 4,856 $ 57,594 $ 1,329 $ 58,923
Intersegment revenue - 9,696 (9,696) - - - - -
Total net revenues 33,823 16,033 (9,696) 12,578 4,856 57,594 1,329 58,923
Costs and expenses 32,600 11,953 (9,696) 3,154 1,280 39,291 6,103 45,394
Depreciation and amortization - - - - - 2,172 297 2,469
Operating income (loss) $ 1,223 $ 4,080 $ - $ 9,424 $ 3,576 $ 16,131 $ (5,071) $ 11,060 The following table shows the segment results of operations for the three months
ended
Fresh Lemon Other Total Corporate
Lemons Packing Eliminations Avocados Agribusiness Agribusiness and Other Total
Revenues from external customers $ 36,295 $ 4,540 $ - $ 4,073 $ 3,046 $ 47,954 $ 1,171 $ 49,125
Intersegment revenue - 7,192 (7,192) - - - - -
Total net revenues 36,295 11,732 (7,192) 4,073 3,046 47,954 1,171 49,125
Costs and expenses 31,846 9,279 (7,192) 2,708 1,956 38,597 4,717 43,314
Depreciation and amortization - - - - - 2,094 343 2,437
Operating income (loss) $ 4,449 $ 2,453 $ - $ 1,365 $ 1,090 $ 7,263 $ (3,889) $ 3,374 The following analysis should be read in conjunction with the previous section "Results of Operations."
Fresh Lemons
Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon
by-products and brokered fruit and other lemon revenue such as purchased, packed
fruit for resale. For the third quarter of fiscal years 2022 and 2021, our fresh
lemons segment total net
35
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revenues were $33.8 million and $36.3 million , respectively. The 7% decrease of
$2.5 million was primarily due to a net decrease in brokered fruit and other
lemon sales of $6.3 million , partially offset by increased fresh lemon sales of
$3.4 million .
Costs and expenses associated with our fresh lemons segment include growing
costs, harvest costs and costs of lemons we procure from third-party growers and
suppliers. For the third quarter of fiscal years 2022 and 2021, our fresh lemons
segment costs and expenses were $32.6 million and $31.8 million , respectively.
The 2% increase of $0.8 million primarily consisted of the following:
•Harvest costs for the third quarter of fiscal year 2022 were
•Growing costs for the third quarter of fiscal year 2022 were
•Third-party grower and supplier costs for the third quarter of fiscal year 2022
were
•Intersegment costs and expenses for the third quarter of fiscal year 2022 were
Lemon Packing
Lemon packing segment revenue is comprised of packing revenue, intersegment packing revenue and shipping and handling revenue. For the third quarter of fiscal years 2022 and 2021, our lemon packing segment total net revenues were$16.0 million and$11.7 million , respectively. The 37% increase of$4.3 million was primarily due to increased volume of lemons packed and sold. Costs and expenses associated with our lemon packing segment consist of the cost to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. For the third quarter of fiscal years 2022 and 2021, our lemon packing costs and expenses were$12.0 million and$9.3 million , respectively. The 29% increase of$2.7 million was primarily due to increased volume of lemons packed and sold.
For the third quarter of fiscal years 2022 and 2021, lemon packing segment
operating income per carton sold was
In the third quarter of fiscal years 2022 and 2021, the lemon packing segment included$9.7 million and$7.2 million , respectively, of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale. Such intersegment revenues and expenses are eliminated in our consolidated financial statements. Avocados
For the third quarter of fiscal year 2022 and 2021, our avocados segment had
revenues of
Costs and expenses associated with our avocados segment include growing and harvest costs. For the third quarter of fiscal years 2022 and 2021, our avocados segment costs and expenses were$3.2 million and$2.7 million , respectively. The increase of$0.4 million primarily consisted of the following:
•Harvest costs for the third quarter of fiscal year 2022 were
•Growing costs for the third quarter of fiscal year 2022 were
Other Agribusiness
For the third quarter of fiscal years 2022 and 2021, our other agribusiness
segment total net revenues were
•Orange revenues for the third quarter of fiscal year 2022 were
•Specialty citrus and other crops revenues for the third quarter of fiscal year
2022 were
Costs and expenses associated with our other agribusiness segment include growing costs, harvest costs and purchased fruit costs. For the third quarter of fiscal years 2022 and 2021, our other agribusiness costs and expenses were$1.3 million and$2.0 million , respectively. The 35% decrease of$0.7 million primarily consisted of the following: 36 --------------------------------------------------------------------------------
•Harvest costs for the third quarter of fiscal year 2022 were
•Growing costs for the third quarter of fiscal year 2022 were
•Purchased fruit costs for the third quarter of fiscal year 2022 were
Total agribusiness depreciation and amortization expenses for the third quarter of fiscal year 2022 were$0.1 million higher than the same period of fiscal year 2021. Corporate and Other
Our corporate and other operations had revenues of
Costs and expenses in our corporate and other operations for the third quarter of fiscal years 2022 and 2021 were approximately$6.1 million and$4.7 million , respectively, and include selling, general and administrative costs and expenses not allocated to the operating segments. Depreciation and amortization expenses for the third quarter of fiscal years 2022 and 2021 were similar at$0.3 million .
Nine Months Ended
The following table shows the segment results of operations for the nine months
ended
Fresh Lemon Other Total Corporate
Lemons Packing Eliminations Avocados Agribusiness Agribusiness and Other
Total
Revenues from external customers$ 94,415 $ 19,048 $ -$ 16,920 $ 10,663 $ 141,046 $ 3,901 $ 144,947 Intersegment revenue - 25,658 (25,658) - - - - - Total net revenues 94,415 44,706 (25,658) 16,920 10,663 141,046 3,901 144,947 Costs and expenses 91,983 34,171 (25,658) 5,548 7,718 113,762 19,665 133,427 Depreciation and amortization - - - - - 6,544 888 7,432 Operating income (loss)$ 2,432 $ 10,535 $ -$ 11,372 $ 2,945 $ 20,740 $ (16,652) $ 4,088
The following table shows the segment results of operations for the nine months
ended
Fresh Lemon Other Total Corporate
Lemons Packing Eliminations Avocados Agribusiness Agribusiness and Other
Total
Revenues from external customers$ 98,195 $ 15,540 $ -$ 6,780 $ 8,565 $ 129,080 $ 3,452 $ 132,532 Intersegment revenue - 23,159 (23,159) - - - - - Total net revenues 98,195 38,699 (23,159) 6,780 8,565 129,080 3,452 132,532 Costs and expenses 89,982 29,684 (23,159) 4,141 6,832 107,480 17,444 124,924 Depreciation and amortization - - - - - 6,591 899 7,490 Operating income (loss)$ 8,213 $ 9,015 $ -$ 2,639 $ 1,733 $ 15,009 $ (14,891) $ 118
The following analysis should be read in conjunction with the previous section "Results of Operations."
Fresh Lemons Fresh lemons segment revenue is comprised of sales of fresh lemons, lemon by-products and brokered fruit and other lemon revenue such as purchased, packed fruit for resale. For the first nine months of fiscal years 2022 and 2021, our fresh lemons segment total net revenues were$94.4 million and$98.2 million , respectively. The 4% decrease of$3.8 million was primarily due to a decrease in brokered fruit and other lemon sales of$5.5 million , partially offset by increased fresh lemon sales of$1.7 million . Costs and expenses associated with our fresh lemons segment include growing costs, harvest costs and costs of lemons we procure from third-party growers and suppliers. For the first nine months of fiscal years 2022 and 2021, our fresh lemons segment costs and expenses were$92.0 million and$90.0 million , respectively. The 2% increase of$2.0 million primarily consisted of the following:
•Harvest costs for the first nine months of fiscal year 2022 were
•Growing costs for the first nine months of fiscal year 2022 were
37
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•Third-party grower and supplier costs for the first nine months of fiscal year
2022 were
•Transportation costs for the first nine months of fiscal year 2022 were
•Intersegment costs and expenses for the first nine months of fiscal year 2022
were
Lemon Packing
Lemon packing segment revenue is comprised of packing revenue, intersegment packing revenue and shipping and handling revenue. For the first nine months of fiscal years 2022 and 2021, our lemon packing segment total net revenues were$44.7 million and$38.7 million , respectively. The 16% increase of$6.0 million was primarily due to increased volume of lemons packed and sold. Costs and expenses associated with our lemon packing segment consist of the cost to pack lemons for sale such as labor and benefits, cardboard cartons, fruit treatments, packing and shipping supplies and facility operating costs. For the first nine months of fiscal years 2022 and 2021, our lemon packing costs and expenses were$34.2 million and$29.7 million , respectively. The 15% increase of$4.5 million was primarily due to increased volume of lemons packed and sold.
For the first nine months of fiscal years 2022 and 2021, lemon packing segment
operating income per carton sold was
In the first nine months of fiscal years 2022 and 2021, the lemon packing segment included$25.7 million and$23.2 million , respectively, of intersegment revenues that were charged to the fresh lemons segment to pack lemons for sale. Such intersegment revenues and expenses are eliminated in our consolidated financial statements.
Avocados
For the first nine months of fiscal years 2022 and 2021, our avocados segment
had revenues of
Costs and expenses associated with our avocados segment include growing and
harvest costs. For the first nine months of fiscal years 2022 and 2021, our
avocados segment costs and expenses were
•Harvest costs for the first nine months of fiscal year 2022 were
•Growing costs for the first nine months of fiscal year 2022 were
Other Agribusiness
For the first nine months of fiscal years 2022 and 2021, our other agribusiness segment total net revenues were$10.7 million and$8.6 million , respectively. The 24% increase of$2.1 million primarily consisted of the following:
•Orange revenues for the first nine months of fiscal year 2022 were
•Specialty citrus and other crops revenues for the first nine months of fiscal
year 2022 were
Costs and expenses associated with our other agribusiness segment include
growing costs, harvest costs and purchased fruit costs. For the first nine
months of fiscal years 2022 and 2021, our other agribusiness costs and expenses
were
•Harvest costs for the first nine months of fiscal year 2022 were
•Growing costs for the first nine months of fiscal year 2022 were
•Purchased fruit costs for the first nine months of fiscal year 2022 were
38
--------------------------------------------------------------------------------Total agribusiness depreciation and amortization expenses for the first nine months of fiscal year 2022 were similar to the same period of fiscal year 2021.
Corporate and Other
Our corporate and other operations had revenues of
Costs and expenses in our corporate and other operations for the first nine months of fiscal years 2022 and 2021 were approximately$19.7 million and$17.4 million , respectively, and include selling, general and administrative costs and expenses not allocated to the operating segments. Depreciation and amortization expenses for the first nine months of fiscal years 2022 and 2021 were similar at$0.9 million . Seasonal Operations Historically, our agribusiness operations have been seasonal in nature with quarterly revenue fluctuating depending on the timing and the variety of crops being harvested. Cultural costs in our agribusiness tend to be higher in the first and second quarters and lower in the third and fourth quarters because of the timing of expensing cultural costs in the current year that were inventoried in the prior year. Our harvest costs generally increase in the second quarter and peak in the third quarter coinciding with the increasing production and revenue. Due to this seasonality and to avoid the inference that interim results are indicative of the estimated results for a full fiscal year, we present supplemental information for 12-month periods ended at the interim date for the current and preceding years. 39
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Results of Operations for the Trailing Twelve Months Ended
The following table shows the unaudited results of operations (in thousands):
Trailing Twelve Months Ended July
31,
2022 2021
Net revenues:
Agribusiness $ 173,347 $ 157,708
Other operations 5,095 4,597
Total net revenues 178,442 162,305
Costs and expenses:
Agribusiness 154,727 146,034
Other operations 4,437 4,297
Loss on disposal of assets, net 612 502
Selling, general and administrative 21,028 20,877
Total costs and expenses 180,804 171,710
Operating loss (2,362) (9,405)
Other (expense) income:
Interest income 154 641
Interest expense, net of patronage dividends (1,692) (2,021)
Equity in earnings of investments, net 1,413 2,469
Other income, net 112 56
Total other (expense) income (13) 1,145
Loss before income tax benefit (2,375) (8,260)
Income tax benefit 3 1,496
Net loss (2,372) (6,764)
(Income) loss attributable to noncontrolling interest (78) 760
Net loss attributable to Limoneira Company $
(2,450)
The following analysis should be read in conjunction with the previous section "Results of Operations."
•Total revenues increased$16.1 million in the twelve months endedJuly 31, 2022 compared to the twelve months endedJuly 31, 2021 , primarily due to increased agribusiness revenues, particularly increased avocado sales. •Total costs and expenses increased$9.1 million in the twelve months endedJuly 31, 2022 compared to the twelve months endedJuly 31, 2021 , primarily due to increases in our agribusiness costs.
•Total other income decreased
•Income tax benefit decreased$1.5 million in the twelve months endedJuly 31, 2022 compared to the twelve months endedJuly 31, 2021 , primarily due to the decrease in pre-tax loss of$5.9 million . 40 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash and cash flows generated from our
operations and use of our revolving credit facility. Our liquidity and capital
position fluctuates during the year depending on seasonal production cycles,
weather events and demand for our products. Typically, our first and last fiscal
quarters coincide with the fall and winter months during which we are growing
crops that are harvested and sold in the spring and summer, which are our second
and third quarters. To meet working capital demand and investment requirements
of our agribusiness and real estate development projects and to supplement
operating cash flows, we utilize our revolving credit facility to fund
agricultural inputs and farm management practices until sufficient returns from
crops allow us to repay amounts borrowed. Raw materials needed to propagate the
various crops grown by us consist primarily of fertilizer, herbicides,
insecticides, fuel and water, all of which are readily available from local
sources.
Material contractual obligations arising in the normal course of business
primarily consist of purchase obligations, long-term fixed rate and variable
rate debt and related interest payments, operating and finance leases and our
noncontributory, defined benefit pension plan ("the Plan"). In fiscal year 2021,
we decided to terminate the Plan effective December 31, 2021 . The liabilities
disclosed as of July 31, 2022 , reflect an estimate of the additional cost to pay
lump sums to a portion of the active and vested terminated participants and
purchase annuities for all remaining participants from an insurance company. See
Note 10 - Long-Term Debt, Note 11 - Leases and Note 15 - Retirement Plans to the
consolidated financial statements in this Quarterly Report on Form 10-Q for
amounts outstanding as of July 31, 2022 , related to debt, leases and the Plan.
Purchase obligations consist of contracts primarily related to packing supplies
and pollination services, the majority of which are due in the next three years.
We believe that the cash flows from operations and available borrowing capacity
from our existing credit facilities will be sufficient to satisfy our capital
expenditures, debt service, working capital needs and other contractual
obligations for the next twelve months. In addition, we have the ability to
control a portion of our investing cash flows to the extent necessary based on
our liquidity demands.
Cash Flows from Operating Activities
For the nine months ended
•Net income for the nine months endedJuly 31, 2022 and 2021 was$2.3 million and$0.8 million , respectively. The components of net income in the nine months endedJuly 31, 2022 , compared to the net income in the same period in fiscal year 2021 consist of an increase in operating income of$4.0 million , a decrease in total other income of$2.2 million and an increase in income tax expense of$0.3 million .
•Adjustments to reconcile net income to net cash provided by operating activities:
•Adjustments provided
•Changes in operating assets and liabilities (used) provided$(3.3) million and$7.3 million of operating cash in the nine months endedJuly 31, 2022 and 2021, respectively, primarily due to accounts receivables/other from related parties, cultural costs, prepaid expenses and other current assets and accrued liabilities and payables to related parties.
Cash Flows from Investing Activities
For the nine months ended
•Capital expenditures were$7.7 million in the nine months endedJuly 31, 2022 , comprised of$7.3 million for property, plant and equipment primarily related to orchard development and$0.4 million for real estate development projects. •Capital expenditures were$8.3 million in the nine months endedJuly 31, 2021 , comprised of$8.0 million for property, plant and equipment primarily related to orchard and vineyard development and$0.3 million for real estate development projects. 41
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Cash Flows from Financing Activities
For the nine months ended
•The$4.8 million of cash used in financing activities during the nine months endedJuly 31, 2022 was primarily comprised of common and preferred dividends, in aggregate, of$4.4 million , the exchange of common stock of$1.1 million and proceeds from equipment financings of$1.0 million . •The$7.8 million of cash used in financing activities during the nine months endedJuly 31, 2021 was primarily comprised of net repayments of long-term debt in the amount of$2.8 million and common and preferred dividends, in aggregate, of$4.4 million .
Transactions Affecting Liquidity and Capital Resources
Credit Facilities and Long-Term Debt
We finance our working capital and other liquidity requirements primarily through cash from operations and our Farm Credit West Credit Facility, which includes the MLA, Supplements and Revolving Equity Line of Credit (the "RELOC"). In addition, we have theFarm Credit West term loans, Banco de Chile term loans and COVID-19 loans, and a note payable to the sellers of a land parcel. Additional information regarding these loans and the note payable can be found in Note 10 - Long-Term Debt to the consolidated financial statements included in this Quarterly Report on Form 10-Q.
In
The Supplements and RELOC provide aggregate borrowing capacity of$130.0 million , comprised of$75.0 million under the Revolving Credit Supplement,$40.0 million under the Non-Revolving Credit Supplement and$15.0 million under the RELOC. As ofJuly 31, 2022 , our outstanding borrowings under the Farm Credit West Credit Facility and RELOC were$113.0 million and we had$17.0 million of availability. The MLA subjects us to affirmative and restrictive covenants including, among other customary covenants, financial reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of our business. We are also subject to a financial covenant that requires us to maintain compliance with a specified debt service coverage ratio on an annual basis. InDecember 2021 , the Lender modified the covenant to defer measurement atOctober 31, 2021 and revert to a debt service coverage ratio of 1.25:1.0 measured as ofOctober 31, 2022 . We expect to be in compliance with these covenants in fiscal year 2022. In the first quarter of fiscal years 2022 and 2021,Farm Credit West declared an annual patronage dividend of$1.6 million and$1.2 million , respectively, which we received in the second quarter of fiscal years 2022 and 2021, respectively.
Treasury Stock
In fiscal year 2021, our Company's Board of Directors approved a share
repurchase program authorizing us to repurchase up to
Dividends
The holders of the Series B Convertible Preferred Stock (the "Series B Stock") and the Series B-2 Preferred Stock (the "Series B-2 Preferred Stock") are entitled to receive cumulative cash dividends. Such preferred dividends paid were$0.4 million in the nine months endedJuly 31, 2022 and 2021, respectively. Cash dividends declared in the nine months endedJuly 31, 2022 and 2021 were$0.23 per common share and such dividends paid were$4.0 million in the nine months endedJuly 31, 2022 and 2021. 42 --------------------------------------------------------------------------------
Off-Balance Sheet Arrangements
As discussed in Note 7 - Real Estate Development and Note 8 - Equity in Investments of the notes to consolidated financial statements included in our fiscal year 2021 Annual Report on Form 10-K, we have investments in joint ventures and partnerships that are accounted for using the equity method of accounting.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires us to develop critical accounting policies and make certain estimates, assumptions and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates and judgments on historical experience, available relevant data and other information that we believe to be reasonable under the circumstances, and we continue to review and evaluate these estimates. Actual results may materially differ from these estimates under different assumptions or conditions as new or additional information become available in future periods. During the nine months endedJuly 31, 2022 , our critical accounting policies and estimates have not changed since the filing of our Annual Report on Form 10-K as ofOctober 31, 2021 . Please refer to that filing for a description of our critical accounting policies and estimates.
Recent Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in this Quarterly Report on Form 10-Q for information concerning recent accounting pronouncements.
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